<PAGE>
- -------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-K
--------------------
(Mark One)
[x] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (fee required)
For the fiscal year ended December 31, 1997
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (no fee required)
Commission file number 0-26190
AMERICAN ONCOLOGY RESOURCES, INC.
(Exact name of registrant as specified in its charter)
--------------------
Delaware 84-1213501
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)
16825 Northchase Drive, Suite 1300, Houston, Texas 77060
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (281) 873-2674
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock ($.01 par value)
(Title of class)
Series A Preferred Stock Purchase Rights
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulations S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. _____
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 10, 1998 was $487,827,443.
There were 31,121,368 shares of the Registrant's Common Stock outstanding on
March 10, 1998. In addition, as of March 10, 1998, the Registrant had agreed to
deliver 17,219,632 shares of its Common Stock on certain future dates for no
additional consideration.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement issued in connection with the
Registrant's 1998 Annual Meeting of Stockholders are incorporated by reference
into Part III hereof.
- -------------------------------------------------------------------------------
<PAGE>
PART I
ITEM 1. BUSINESS
American Oncology Resources, Inc. (together with its subsidiaries, "AOR" or
the "Company") is a national physician practice management company focusing
exclusively on oncology. As of December 31, 1997, the Company provided
comprehensive management services under long-term agreements to oncology
practices comprised of 304 physicians in 16 states. Affiliated physicians
provide a broad range of medical services to cancer patients, integrating the
specialties of medical and gynecological oncology, hematology, radiation
oncology, stem cell transplantation and diagnostic radiology. The Company
believes that the coordinated delivery of comprehensive cancer care in an
outpatient setting offers high quality care that is more cost-effective than
traditional approaches and is increasingly preferred by patients, payors and
physicians. The Company's affiliation strategy is designed to enhance the
affiliated physician groups' competitiveness while preserving their autonomy
regarding medical practice decisions.
The Company was incorporated in October 1992 under the laws of the state of
Delaware. The Company's principal executive offices are located at 16825
Northchase Drive, Suite 1300, Houston, Texas, and its telephone number is (281)
873-2674.
Cancer and Its Treatment
Cancer is a group of more than 100 complex diseases characterized by the
uncontrolled growth and spread of abnormal cells. Cancer treatment is provided
primarily by physicians utilizing chemotherapy, radiation therapy, surgery and
immunotherapy. Due to cancer's complexity and the variety of cancer treatment
therapies, physicians who treat cancer typically have had extensive, highly-
specialized training. Chemotherapy and immunotherapy are typically provided
under the care of a medical oncologist or hematologist, typically an internist
with additional subspecialty training in oncology. Radiation therapy is
typically provided under the care of a radiation oncologist, a physician with
additional subspecialty training in radiation oncology. The Company estimates
that at least 6,000 community-based physicians in the United States specialize
in oncology.
Because the treatment of cancer requires a multidisciplinary approach,
numerous health care professionals with different medical and surgical
specialties are involved in treating cancer patients. In addition, cancer
patients typically receive treatment in a variety of settings, including
hospitals, outpatient facilities and physicians' offices. The Company believes
that this system can result in uncoordinated treatment and is inherently
inefficient. In the Company's view, oncology group practices that provide
comprehensive, coordinated oncology services in outpatient facilities offer
high-quality, low-cost and convenient medical care to cancer patients.
Traditionally, most oncologists in the United States have practiced
individually or in small groups of two to five physicians, offering their
services to cancer patients in hospitals and, to a lesser extent, in outpatient
facilities. In recent years, however, there has been a trend among oncologists
to form larger group practices that provide a broader range of services to
cancer patients in outpatient settings, rather than in hospitals or other
inpatient settings. The Company believes this trend is attributable to several
factors, including (i) initiatives by governmental and private payors to contain
health care expenditures, (ii) the competitiveness and rising costs of medical
practice generally, (iii) advances in cancer therapies that permit treatment in
outpatient settings and (iv) patients' desire to receive treatment outside the
hospital. The Company believes that many of these large oncology practices
recognize the need for outside managerial, financial and business expertise to
more efficiently manage the increasingly complex, burdensome and time-consuming
nonmedical aspects of their practice. Such management relationships free
oncologists to practice medicine without sacrificing autonomy and control over
the medical aspects of their practices. The Company believes that these
physicians will seek long-term relationships with a management entity that
endeavors to (i) promote and facilitate the consolidation of physicians and
resources into regional group practices providing comprehensive, outpatient
oncology services, (ii) assist in strategic and financial planning, (iii)
develop and expand managed care relationships, (iv) provide strategic
information systems
1
<PAGE>
and administrative policies and procedures, (v) assist in managing the
practices' expenditures, (vi) provide a source of capital to support practice
expansion and (vii) assist in physician recruitment and other significant
strategic decisions.
Growth Strategy
The Company's objective is to be the leading national physician practice
management company providing comprehensive services to an integrated network of
affiliated oncology physician groups. The Company intends to achieve this
objective by (i) focusing exclusively on oncology, (ii) affiliating with leading
oncology groups throughout the United States, (iii) expanding each affiliated
physician groups presence in its market by affiliating with additional
physician groups in that market and recruiting new physicians, (iv) assisting
affiliated physician groups in offering coordinated, comprehensive cancer care
by adding new services (for example, gynecological oncology, diagnostic
radiology and stem cell transplantation), (v) negotiating and expanding managed
care relationships on behalf of the affiliated physician groups and improving
reimbursement from payors and (vi) expanding the clinical research operations of
the affiliated physician groups. Based on the Companys success in expanding its
business to date, the Company believes that it has effective strategies for
achieving its objective of becoming the leading national oncology practice
management company.
Management Services
The Company provides management services that extend to all business aspects
of an oncology group s operations. After establishing an oncology group
affiliation, the Company begins implementing the following policies, procedures
and systems necessary to provide the management services contemplated by its
management agreement with the group:
STRATEGIC SERVICES. At each affiliated practice, a policy board composed of
equal representation from the Company and affiliated physicians is created to
develop and adopt a strategic plan designed to improve the performance of the
practice by (i) outlining physician recruiting goals, (ii) identifying services
and equipment to be added, (iii) identifying desirable payor relationships and
other oncology groups that are possible affiliation candidates and (iv)
facilitating communication with other affiliated physician groups in the AOR
network.
FINANCIAL SERVICES. The Company provides comprehensive financial analysis to
each affiliated physician group in connection with managed care contracting and
billing, collection, reimbursement, tax and accounting services and also
implements its cash management system. In addition, the Company and the
affiliated physician group jointly develop a comprehensive budget that involves
the adoption of financial controls and cost containment measures.
MANAGEMENT INFORMATION SYSTEMS. The Company implements its management
information system to facilitate and organize the exchange of clinical and
operational information among the Company's affiliated physicians. The Company
believes that an integrated information system will enable the Company and its
affiliated physicians to identify effective protocols and manage the costs of
cancer care in future years. The Company intends to significantly expand its
clinical information system in 1998 and 1999, with the goal of better
understanding and analyzing the means of providing high-quality, cost effective
cancer care.
ADMINISTRATIVE SERVICES. The Company manages the facilities used by the
affiliated physicians and, in consultation with the physicians, determines the
number and location of practice sites. The Company is implementing its
integrated management information system to support practice management, billing
functions and patient record keeping. The Company also provides comprehensive
purchasing services for drugs, supplies, equipment, insurance and other costs.
In addition, the Company provides the regulatory expertise to assist the group
in complying with increasingly complex laws and regulations applicable to
oncology practices.
2
<PAGE>
PERSONNEL MANAGEMENT. The Company employs and manages all nonmedical
personnel of the physician group, including the executive director, controller
and other administrative personnel. The Company evaluates these employees,
makes staffing recommendations, provides and manages employee benefits and
implements personnel policies and procedures. The Company also provides similar
administrative services to the physician group's employees.
CLINICAL RESEARCH SERVICES. Through its clinical research network, the
Company facilitates clinical research conducted by its affiliated physician
groups and markets the groups' ability to perform and manage clinical trials to
pharmaceutical and biotechnology companies. Clinical research conducted by the
oncology groups focuses on (i) improving cancer survival rates, (ii) enhancing
the cancer patient's quality of life, (iii) reducing the costs of cancer care
and (iv) developing new approaches to cancer diagnosis, treatment and post-
treatment monitoring. The Company believes that a well-managed clinical
research program enhances its affiliated oncologists' reputations and the
Company's ability to recruit new physicians.
CLINICAL INITIATIVES AND STANDARDS. The Company organizes clinical
conferences for its affiliated physicians to discuss and identify clinical care,
research and educational strategies for the Company's network of affiliated
physicians. The Company also assists its affiliated physicians in developing
clinical practice guidelines for the different types of cancer and in operating
in accordance with standards of care required for accreditation by the Joint
Committee on Accreditation of Health Care Organizations and other managed care
accreditation bodies. The Company is also implementing a clinical information
system with the goal of facilitating the exchange of information among
affiliated physicians, permitting them to share clinical data and treatment
patterns and allowing ready access to current patient care as well as studies
regarding cancer therapies and research developments.
Operations of Oncology Groups
Since the Company's incorporation in October 1992, the Company has grown
rapidly from managing a single practice comprised of six physicians in one state
to managing multiple oncology practices comprised of 304 physicians in 16 states
as of December 31, 1997.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Affiliated physicians..................... 304 227 148 42 9
States.................................... 16 15 14 6 1
</TABLE>
The Company estimates that most of the affiliated physician groups are among
the largest group practices providing medical oncology services in their
markets. The physician members of these groups have staff privileges at most
private hospitals in their markets and have long-standing relationships with
governmental and private payors.
The oncologists are employed by the affiliated physician group, not the
Company, and maintain control over all aspects of the provision of medical care
to their patients. The Company does not provide medical care to patients or
employ any of the non-physician personnel of its affiliated physician groups who
provide medical care. However, under the terms of the management agreements
with the affiliated physician groups, the Company is responsible for the
compensation and benefits of the groups' non-physician medical personnel, and
the financial statements of the Company reflect the costs of such compensation
and benefits.
The affiliated physician groups offer a wide array of services to cancer
patients in outpatient settings, including professional medical services,
chemotherapy infusion, radiation oncology services, stem cell transplantation,
clinical laboratory, diagnostic radiology, pharmacy services and patient
education. The groups employ a range of personnel to provide these services,
including medical assistants, nurses (including oncology certified nurses),
radiation therapy technicians, physicists and laboratory and pharmacy
technicians. The practice sites are generally located in close proximity to
other health care providers and typically are equipped to provide the outpatient
services necessary to treat and care for cancer patients and their families.
3
<PAGE>
Affiliation Structure
The Company's structure enables its affiliated physicians to retain their
autonomy through ownership and participation in their local professional
corporation or other entity, thereby maintaining local authority and control
over medical practice decisions. The Company believes that this local
governance structure is critical to its success.
Identifying appropriate physician groups and proposing, negotiating and
implementing economically attractive affiliations with them is a lengthy,
complex and costly process, typically requiring three to six months. In
connection with affiliating with an oncology group, the Company enters into a
management agreement with the group and purchases the group's nonmedical assets.
In consideration of these arrangements, the Company typically pays cash and
promissory notes and agrees to deliver shares of its Common Stock at specified
future dates (typically on the third through fifth anniversaries of the closing
date). In addition, each affiliated physician enters into an employment
agreement with the physician group containing non-competition terms. The
Company believes that the delivery of shares on a delayed basis, the Company's
affiliation structure and the compensation formulas defined in the management
agreements all serve to align the long-term interests of the affiliated
physicians with those of the Company.
All of the management agreements with the affiliated physician groups have
contractual terms of 40 years. These agreements cannot be terminated by the
physician groups without cause. As consideration for the Company's management
services, each management agreement provides for payment to the Company of a
management fee, which typically includes all practice costs (other than amounts
retained by physicians), a fixed fee, an amount equal to a percentage of the
affiliated physician group's net revenue (in most states) and, if certain
financial and performance criteria are satisfied, a performance fee. In the
event the physician group breaches the agreement, the physician group must
purchase the related assets owned by the Company, including the unamortized
portion of the management agreement asset, at book value.
Competition
The business of providing health care services generally, and of managing and
providing oncology services specifically, is intensely competitive. The Company
is aware of several competitors specializing in the management of oncology
practices; in addition, several health care companies with established operating
histories and significantly greater resources than the Company are also
providing at least some management services to oncologists. Furthermore, the
Company believes that others in the health care industry may adopt strategies
similar to those of the Company. The Company's revenues depend on the continued
success of its affiliated physician groups. These physician groups face
competition from several sources, including sole practitioners, single and
multi-specialty groups, hospitals and managed care organizations.
Regulation
General. The health care industry is highly regulated, and there can be no
assurance that the regulatory environment in which the Company and its
affiliated physician groups operate will not change significantly and adversely
in the future. In general, regulation of health care providers and companies is
increasing.
There are currently several federal and state initiatives designed to amend
regulations relating to the provision of health care services, the access to
health care, the costs of health care and the manner in which health care
providers are reimbursed for their services. It is not possible to predict
whether any such initiatives will be enacted as legislation or, if enacted, what
their form, effective dates or impact on the Company will be.
The Company's affiliated physician groups are intensely regulated at the
federal, state and local levels. Although these regulations often do not
directly apply to the Company, to the extent an affiliated physician group is
4
<PAGE>
found to have violated any of these regulations and, as a result, suffers a
decrease in its revenues or an increase in costs, the Company's results of
operations might be materially and adversely affected.
Every state imposes licensing requirements on individual physicians and on
facilities and services operated or provided by physicians. Many states require
regulatory approval, including certificates of need, before establishing certain
types of health care facilities, offering certain services or making
expenditures in excess of statutory thresholds for health care equipment,
facilities or programs. The execution of a management agreement with a
physician group currently does not require any health care regulatory approval
on the part of the Company or the physician group. However, in connection with
the expansion of existing operations and the entry into new markets, the Company
and its affiliated physician groups may become subject to additional regulation.
Fee-Splitting; Corporate Practice of Medicine. The laws of many states
prohibit physicians from splitting professional fees with non-physicians and
prohibit non-physician entities, such as the Company, from practicing medicine
and from employing physicians to practice medicine. The laws in most states
regarding the corporate practice of medicine have been subjected to relatively
limited judicial and regulatory interpretation. The Company believes its
current and planned activities do not constitute fee-splitting or the practice
of medicine as contemplated by these statutes and interpretations. However,
there can be no assurance that future interpretations of such laws will not
require structural and organizational modifications of the Company's existing
relationships with the affiliated physician groups. In addition, statutes in
some states in which the Company does not currently operate could require the
Company to modify its affiliation structure.
Medicare Fraud and Abuse Provisions. Federal law prohibits the offer,
payment, solicitation or receipt of any form of remuneration in return for the
referral of Medicare or state health program patients or patient care
opportunities, or in return for the purchase, lease or order of any item or
service that is covered by Medicare or a state health program. Pursuant to this
law, the federal government has pursued a policy of increased scrutiny of joint
ventures and other transactions among health care providers in an effort to
reduce potential fraud and abuse relating to Medicare costs. The applicability
of these provisions to many business practices in the health care industry,
including the Company's arrangements with its affiliated physician groups, has
not been subject to judicial and regulatory interpretation.
The Medicare and Medicaid anti-kickback amendments (the "Anti-Kickback
Amendments") provide criminal penalties for individuals or entities
participating in the Medicare or Medicaid programs who knowingly and willfully
offer, pay, solicit or receive remuneration in order to induce referrals for
items or services reimbursed under such programs. In addition to federal
criminal penalties, the Social Security Act also establishes the intermediate
sanction of excluding violators from participation in the Medicare or Medicaid
programs.
A violation of the Anti-Kickback Amendments requires several elements: (i) the
offer, payment, solicitation or receipt of remuneration; (ii) the intent to
induce referrals; (iii) the ability of the parties to make or influence
referrals of patients; (iv) the provision of services that are reimbursable
under Medicare or state health programs; and (v) patient coverage under the
Medicare program or a state health program. Management believes that the
Company is receiving compensation under the management agreements for management
services. The Company also believes that it is not in a position to make or
influence referrals of patients or services reimbursed under Medicare or state
health programs to its affiliated physician groups. Consequently, the Company
does not believe that the management fees payable to it should be viewed as
remuneration for referring or influencing referrals of patients or services
covered by such programs as prohibited by the Anti-Kickback Amendments. The
Company is not a provider or supplier of services or items reimbursed by
Medicare or state health programs.
In 1991, the Inspector General of the United States Department of Health and
Human Services published "Safe Harbor Regulations," defining safe harbors for
certain arrangements that do not violate the Anti-Kickback Amendments. One of
the safe harbors specifically provided is a safe harbor for personal services
and management contracts. Under this safe harbor, "remuneration" prohibited by
the Anti-Kickback Amendments will not include any payment made by a principal to
an agent as compensation for services of the agent as long as certain standards
are
5
<PAGE>
met. To the Company's knowledge, there have been no agency interpretations or
case law decisions of management agreements similar to the Company's that would
indicate that such agreements do not fall within a safe harbor. Further, the
Company believes that since it is not a provider of medical services, and is not
in a position to refer patients to any particular medical practice, the
remuneration it receives for providing services does not violate the Anti-
Kickback Amendments.
Prohibitions on Certain Referrals. The Omnibus Budget Reconciliation Act of
1993 ("OBRA") includes a provision that significantly expands the scope of the
Ethics in Patient Referral Act, also known as the "Stark Bill." The Stark Bill
originally prohibited a physician from referring a Medicare or Medicaid patient
to any entity for the provision of clinical laboratory services if the physician
or a family member of the physician had an ownership interest or compensation
relationship with the entity. The revisions to the Stark Bill included in OBRA
prohibit a referral to an entity in which the physician or a family member has
an ownership interest or compensation relationship if the referral is for any of
a list of "designated health services." In January 1998, the Health Care
Financing Administration issued proposed regulations to the Stark Bill. The
proposed regulations, if enacted, would limit reimbursement for pharmaceutical
expenses, would classify chemotherapy as a "designated health service" and would
restrict the manner in which health care services are provided. It is not yet
possible to predict whether these proposed regulations will be adopted or, if
adopted, what their final form, effective dates and impact on the Company will
be.
Prohibitions on Certain Compensation Arrangements. The OBRA legislation also
prohibits physician group practices from developing compensation or bonus
arrangements that are directly related to the volume or value of referrals by a
physician in the group for designated health services. The Company believes
that the compensation arrangements of the affiliated physician groups
administered by the Company are in compliance with the OBRA requirements.
Reimbursement Requirements. In order to participate in the Medicare and
Medicaid programs, the Company's affiliated physicians must comply with
stringent reimbursement regulations, including those that require many health
care services to be conducted "incident to" a physician's supervision.
Satisfaction of these reimbursement requirements is an integral component the
Company's compliance program. The Company believes that its affiliated
physicians are in compliance with the reimbursement requirements; however,
affiliated physicians' failure to comply with these requirements could
negatively affect the Company's results of operations.
Antitrust. The Company and its affiliated physician groups are subject to a
range of antitrust laws that prohibit anti-competitive conduct, including price
fixing, concerted refusals to deal and division of market. The Company believes
it is in compliance with such federal and state laws, but there can be no
assurance that a review of the Company's business would not result in a
determination that could adversely affect the operations of the Company and its
affiliated physician groups.
Regulatory Compliance. The Company recognizes that health care regulations
will continue to change and, as a result, regularly monitors developments in
health care law. The Company expects to modify its agreements and operations
from time to time as the business and regulatory environment changes. While the
Company believes it will be able to structure all of its agreements and
operations in accordance with applicable law, there can be no assurance that its
arrangements will not be successfully challenged.
Employees
As of December 31, 1997, the Company employed 1,162 people. In addition, as
of December 31, 1997, the affiliated physician groups employed 1,601 people
(excluding the affiliated physicians). Under the terms of the management
agreements with the affiliated physician groups, the Company is responsible for
the practice compensation and benefits of the groups' non-physician medical
personnel. No employee of the Company or of any affiliated physician group is a
member of a labor union or subject to a collective bargaining agreement. The
Company considers its relations with its employees to be good.
6
<PAGE>
Service Marks
The Company has registered the service marks "American Oncology Resources" and
"AOR" with the United States Patent and Trademark Office.
ITEM 2. PROPERTIES
The Company leases 45,750 square feet of space at 16825 Northchase Drive,
Suite 1300, in Houston, Texas, where the Company's headquarters are located.
The Company or its affiliated physician groups also own, lease, sublease or
occupy the facilities where the affiliated physician groups provide medical
services. In connection with the development of integrated cancer centers, the
Company has acquired land valued at approximately $2.2 million. The Company
anticipates that, as its affiliated group practices grow, expanded facilities
will be required.
ITEM 3. LEGAL PROCEEDINGS
The provision of medical services by the affiliated physicians with which
the Company contracts entails an inherent risk of professional liability
claims. The Company does not control the practice of medicine by physicians or
the compliance with certain regulatory and other requirements directly
applicable to physicians and physician groups. Because the practices purchase
and resell pharmaceutical products, they face the risk of product liability
claims. Although the Company has not been a party to any claims, suits or
complaints relating to services and products provided by the Company, or
physicians affiliated with the Company, there can be no assurances that such
claims will not be asserted against the Company in the future. The Company
maintains insurance coverage that it believes to be adequate both as to risks
and amounts. In addition, pursuant to the management services agreements with
the affiliated physician groups, the affiliated practices and the Company are
required to maintain comprehensive professional liability insurance. Successful
malpractice claims asserted against the Company or one of the affiliate
physician groups could, however, have a material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1997.
7
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the Nasdaq Stock Market's National
Market under the symbol AORI. The high and low closing sale prices of the
Common Stock, as reported by Nasdaq, were as follows for the quarterly periods
indicated. All stock prices have been adjusted to reflect a 2-for-1 split of
the Company's Common Stock that was effected as a stock dividend on June 10,
1996.
Year Ended December 31, 1996
High Low
------ ------
Fiscal Quarter Ended March 31, 1996 $24.81 $18.19
Fiscal Quarter Ended June 30, 1996 $26.00 $20.06
Fiscal Quarter Ended September 30, 1996 $22.25 $ 6.25
Fiscal Quarter Ended December 31, 1996 $11.25 $ 7.31
Year Ended December 31, 1997
Fiscal Quarter Ended March 31, 1997 $11.00 $ 8.75
Fiscal Quarter Ended June 30, 1997 $16.88 $ 7.44
Fiscal Quarter Ended September 30, 1997 $17.38 $13.31
Fiscal Quarter Ended December 31, 1997 $19.00 $12.75
As of March 10, 1998, there were approximately 5,810 holders of the Common
Stock. The Company has not declared or paid any cash dividends on its Common
Stock. The payment of cash dividends in the future will depend on the Company's
earnings, financial condition, capital needs and other factors deemed pertinent
by the Company's board of directors, including the limitations, if any, on the
payment of dividends under state law and then-existing credit agreements. It is
the present policy of the Company's board of directors to retain earnings, if
any, to finance the operations and expansion of the Company's business. The
Company's credit facility currently requires creditor approval for the payment
of cash dividends. See "Management Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources."
RECENT SALES OF UNREGISTERED SECURITIES
In connection with each affiliation transaction between the Company and an
oncology group, the Company purchases the nonmedical assets of, and enters into
a long-term management agreement with, that oncology group. In consideration for
that arrangement, the Company typically pays cash, issues subordinated
promissory notes (in general, payable on each of the third through seventh
anniversaries of the closing date at an annual interest rate of seven percent)
and unconditionally agrees to deliver shares of Common Stock at specified future
dates (in general, on each of the third through fifth anniversaries of the
closing date).
The following table describes all private placements by the Company of the
Company's securities during 1997. Each sale was a private placement made in
connection with a physician transaction, described in general in the preceding
paragraph, to affiliated oncologists, the overwhelming majority of whom are
accredited investors. No underwriter was involved in any such sale, and no
commission or similar fee was paid with respect thereto. Each sale was not
registered under the Securities Act of 1933 in reliance on Section 4(2) of such
Act and Rule 506 enacted thereunder.
8
<PAGE>
<TABLE>
<CAPTION>
Number of Shares of Common Aggregate Principal Amount of
Date of Transaction Number of Physicians Stock (1) Notes
<S> <C> <C> <C>
1/97 2 94,452 $ 1,620,000
1/97 2 67,022 859,000
3/97 1 25,134 470,000
3/97 8 514,124 6,006,000
4/97 4 342,632 4,223,000
4/97 4 253,385 600,000
4/97 1 12,717 149,000
4/97 1 30,088 646,000
6/97 2 28,658 420,000
9/97 2 28,230 602,000
11/97 5 155,396 1,240,000
11/97 3 397,947 2,200,000
11/97 23 1,117,074 19,925,000
</TABLE>
(1) In connection with each affiliation transaction, the Company
unconditionally agrees to deliver shares of Common Stock at specified
future dates (typically on each of the third through fifth anniversaries of
the closing date).
9
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial information of the Company set forth below
is qualified by reference to, and should be read in conjunction with,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and notes thereto included
elsewhere in this report.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1997 1996 1995 1994 1993
--------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(in thousands, except per share data)
STATEMENT OF OPERATIONS DATA:
Revenue................................................ $321,840 $205,460 $ 99,174 $20,410 $ 7,177
-------- -------- -------- ------- -------
Operating expenses:
Pharmaceuticals and supplies.......................... 144,890 85,210 35,763 7,575 2,461
Practice compensation and benefits.................... 61,296 41,350 19,766 4,001 1,809
Other practice costs.................................. 35,090 23,495 12,032 2,258 885
General and administrative............................ 21,174 14,095 9,406 4,367 2,076
Depreciation and amortization......................... 14,177 9,343 4,655 746 219
-------- -------- -------- ------- -------
276,627 173,493 81,622 18,947 7,450
-------- -------- -------- ------- -------
Income (loss) from operations.......................... 45,213 31,967 17,552 1,463 (273)
Interest income........................................ 348 1,062 2,007 143 52
Interest expense....................................... (8,715) (4,307) (3,690) (237) (96)
Other, net............................................. 1,600(1)
-------- -------- -------- ------- -------
Income (loss) before taxes............................. 36,846 28,722 17,469 1,369 (317)
Income taxes (2)....................................... 13,979 11,072 5,852 126
-------- -------- -------- ------- -------
Net income (loss)...................................... $ 22,867 $ 17,650 $ 11,617 $ 1,243 $ (317)
======== ======== ======== ======= =======
Net income (loss) per share - basic.................... $0.50 $0.40 $0.33 $0.08 $ (0.04)
======== ======== ======== ======= =======
Shares used in per share computations - basic (3)...... 45,571 44,228 35,559 15,926 7,734
======== ======== ======== ======= =======
Net income (loss) per share - diluted.................. $0.48 $0.37 $0.30 $0.07 $(0.04)
======== ======== ======== ======= =======
Shares used in per share computations - diluted (3).... 48,100 47,549 39,318 16,995 7,734
======== ======== ======== ======= =======
DECEMBER 31,
------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- ------- -------
(in thousands)
BALANCE SHEET DATA:
Working capital (deficit)............................ $ 43,864 $ 42,972 $ 59,724 $ 6,653 $(1,175)
Management service agreements, net................... 326,295 240,034 164,522 40,444 1,545
Total assets......................................... 483,893 339,400 272,359 55,709 5,413
Long-term debt....................................... 139,716 81,707 44,190 18,703 79
Stockholders' equity................................. 263,994 221,854 191,180 30,977 1,288
</TABLE>
- ----------------
(1) Consists of life insurance proceeds of $2,091,000, less lease termination
costs of $491,000.
(2) No taxes are provided for 1993 due to operating losses.
(3) See Note 1 to the Company's Consolidated Financial Statements. For
information concerning the number of shares of Common Stock that the Company
is obligated to issue at specified future dates to physicians whose groups
have affiliated with the Company, see Note 7 to the Company's Consolidated
Financial Statements.
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
AOR provides comprehensive management services under long-term agreements to
oncology practices that provide a broad range of medical services to cancer
patients, integrating the specialties of medical and gynecological oncology,
hematology, radiation oncology, diagnostic radiology and stem cell
transplantation. Since the Company's incorporation in October 1992, it has
grown rapidly from managing six affiliated physicians in one state to 311
affiliated physicians in 16 states as of March 10, 1998:
<TABLE>
<CAPTION>
MARCH 10, December 31,
------------ -------------------------------------------
1998 1997 1996 1995
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Affiliated physicians............................ 311 304 227 148
States........................................... 16 16 15 14
</TABLE>
The Company enters into management agreements with, and purchases the
nonmedical assets of, oncology practices. Under the terms of the management
agreements, the Company provides comprehensive management services to its
affiliated physician groups, including operational and administrative services,
and furnishes personnel, facilities, supplies and equipment. The physician
groups, in return, agree to practice medicine exclusively in affiliation with
the Company under the management agreements. Substantially all of the Company's
revenue consists of management fees paid under the terms of the management
agreements. Management fees include all practice costs (other than amounts
retained by physicians), a fixed monthly fee, an amount equal to a percentage of
each affiliated physician group's net revenue (in most states) and, if certain
financial criteria are satisfied, a performance fee. For the year ended
December 31, 1997, none of the Company's affiliated physician groups contributed
more than 10% of the Company's revenue. For the year ended December 31, 1996,
only one of the Company's affiliated physician groups contributed more than 10%
of the Company's revenue. For the year ended December 31, 1995, two of the
Company's affiliated physician groups contributed more than 10% of the Company's
revenue.
In 1997, the payor mix of the affiliated physician groups' medical practice
revenue, expressed as a percentage, was 33% for Medicare and Medicaid, 47% for
managed care and 20% for private insurance and other payors. In 1996, the payor
mix was 33% for Medicare and Medicaid, 45% for managed care and 22% for private
insurance and other payors. In 1995, the payor mix was 27% for Medicare and
Medicaid, 51% for managed care and 22% for private insurance and other payors.
The payor mix varies from physician group to physician group and changes as a
result of new practice affiliations.
11
<PAGE>
Results of Operations
The following table sets forth the percentages of revenue represented by
certain items reflected in the Company's Statement of Operations. The
information that follows should be read in conjunction with the Company's
Consolidated Financial Statements and notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
1997 1996 1995
------ ------ -----
<S> <C> <C> <C>
Revenue................................. 100.0% 100.0% 100.0%
----- ----- -----
Operating expenses:
Pharmaceuticals and supplies...... 45.0 41.5 36.1
Practice compensation and benefits 19.0 20.1 19.9
Other practice costs.............. 10.9 11.4 12.1
General and administrative........ 6.6 6.9 9.5
Depreciation and amortization..... 4.4 4.5 4.7
Net interest............................ 2.6 1.6 1.7
Other income............................ ____. (1.6)
-----
Income before income taxes.............. 11.5 14.0 17.6
Income taxes............................ 4.4 5.4 5.9
----- ----- -----
Net income.............................. 7.1% 8.6% 11.7%
===== ===== =====
</TABLE>
1997 COMPARED TO 1996
The Company affiliated with thirteen and seventeen oncology groups in 1997
and 1996, respectively, the results of which are included in the Company's
operating results from the dates of affiliation. Changes in results of
operations year to year were caused in part by affiliations with these oncology
practices.
Overall, the Company experienced a decrease in operating margins from 1996 to
1997, with earnings before taxes, interest, depreciation and amortization
("EBITDA"), as a percentage of revenue, declining from 20.1% to 18.5%. A number
of factors contributed to the decrease in operating margins, including (i) the
introduction of a number of chemotherapy agents that are used in combination
with or in addition to existing therapies, some of which have significantly
lower margins than existing chemotherapy regimens, (ii) difficulty in
efficiently integrating practices that affiliated with the Company in late 1996
and 1997 and (iii) higher discounts to managed care payors. The Company
benefited, however, from lower general and administrative costs, practice
compensation and benefits and other practice costs, in each case as a percentage
of revenue. To address the decline in margins, the Company has adopted a number
of strategies, including enhancing purchasing power by initiating preferred
pharmaceutical relationships on behalf of its affiliated physician groups.
Revenue. Revenue increased from $205.5 million in 1996 to $321.8 million in
1997, an increase of $116.3 million, or 57%. Revenue for markets under
management in 1996 and 1997 increased $85.5 million or 42% over the same period
from the prior year. The methodology for calculating same market growth is a
change from the same practice growth disclosed in prior periods. The Company
changed the methodology to more accurately reflect the revenue growth of a
market from period to period as well as the changing structure of new physician
transactions in 1997. Under the new method, revenue growth for all practices
within a metropolitan service area in which the Company has operations in both
periods is treated as same market growth. Under the old methodology, the same
practice growth for 1997 over the comparable period in 1996 would have been a
25% increase in revenue. This growth was the result of expansion of services,
increases in patient volume, recruitment of or affiliation with additional
physicians and, to a lesser extent, increases in charges for certain physician
services. The remaining $30.8 million was attributable to affiliations with
oncology practices in new markets.
Pharmaceuticals and Supplies. Pharmaceuticals and supplies, which include
drugs, medications and other supplies used by the affiliated physician groups,
increased from $85.2 million for 1996 to $144.9 million for 1997, an
12
<PAGE>
increase of $59.7 million, or 70%. This increase was principally attributable to
the same factors that caused revenue to increase. As a percentage of revenue,
pharmaceuticals and supplies increased from 41.5% for 1996 to 45.0% for 1997.
This increase was primarily due to a shift in the revenue mix to a higher
percentage of drug revenue, the introduction of a number of new chemotherapy
agents and, to a lesser extent, lower reimbursement from payors. Management
expects that third-party payors will continue to negotiate the reimbursement
rate for medical services, pharmaceuticals (including chemotherapy drugs) and
other supplies, with the goal of lowering reimbursement and utilization rates,
and that such lower reimbursement and utilization rates as well as shifts in
revenue mix may continue to adversely impact the Company's margins with respect
to such items. The Company has adopted a number of strategies to address this
matter, including initiating preferred pharmaceutical relationships.
Practice Compensation and Benefits. Practice compensation and benefits, which
include the salaries, wages and benefits of the affiliated physician groups'
employees (excluding affiliated physicians) and the Company's employees located
at the affiliated physician practice sites and business offices, increased from
$41.4 million in 1996 to $61.3 million in 1997, an increase of $19.9 million or
48%. This increase was principally attributable to the same factors that caused
revenue to increase. As a percentage of revenue, practice compensation and
benefits decreased from 20.1% for 1996 to 19.0% for 1997, primarily as a result
of economies of scale.
Other Practice Costs. Other practice costs, which consist of rent, utilities,
repairs and maintenance, insurance and other direct practice costs, increased
from $23.5 million in 1996 to $35.1 million in 1997, an increase of $11.6
million or 49%. This increase was principally attributable to the same factors
that caused revenue to increase. As a percentage of revenue, other practice
costs decreased from 11.4% for 1996 to 10.9% for 1997, primarily as a result of
economics of scale.
General and Administrative. General corporate expenses increased from $14.1
million in 1996 to $21.2 million in 1997, an increase of $7.1 million or 50%.
This increase was primarily attributable to the addition of personnel and
greater support costs associated with the Company's growth since December 31,
1996. As a percentage of revenue, general and administrative expenses decreased
from 6.9% for 1996 to 6.6% for 1997, primarily as a result of economies of
scale.
Depreciation and Amortization. Depreciation and amortization expenses
increased from $9.3 million in 1996 to $14.2 million in 1997, an increase of $
4.9 million or 53%. This increase was primarily attributable to the new
physician groups with which the Company affiliated as well as investments in
equipment, leasehold improvements and management information systems during
1997.
Interest. Net interest expense increased from $3.2 million in 1996 to $8.4
million in 1997, an increase of $5.2 million or 163%. The increase was the
result of higher levels of debt, principally incurred to finance transactions
with thirteen oncology groups during 1997. As a percentage of revenue, net
interest expense increased from 1.6% in 1996 to 2.6% in 1997. Indebtedness to
physicians increased from approximately $66 million at December 31, 1996 to
approximately $ 94.7 million at December 31, 1997. In the future, management
expects that net interest expense as a percentage of revenue will continue to
increase due to anticipated debt related to medical practice transactions.
Income Taxes. Income tax expense increased from the prior year as a result of
the Company's increased profitability. For 1997, the Company recognized a tax
provision of $14.0 million resulting in an effective rate of 38% as compared to
a rate of 38.5% for 1996. The decrease in the effective rate is due primarily
to a change in the Company's composition of revenue by state since 1996.
1996 COMPARED TO 1995
The Company affiliated with seventeen and fifteen oncology groups in 1996 and
1995, respectively, the results of which are included in the Company's operating
results from the dates of affiliation. Changes in results of operations year to
year were caused primarily by affiliations with these oncology practices.
13
<PAGE>
Revenue. Revenue increased from $99.2 million in 1995 to $205.5 million in
1996, an increase of $106.3 million or 107%. Of this increase, $32.0 million
was attributable to same market growth. This growth was the result of expansion
of services, increases in patient volume, recruitment of or affiliation with
additional physicians and, to a lesser extent, increases in charges for certain
physician services. The remainder of the growth was attributable to
affiliations with oncology practices in new markets.
Pharmaceuticals and Supplies. Pharmaceuticals and supplies increased from
$35.8 million for 1995 to $85.2 million for 1996, an increase of $49.4 million
or 138%. This increase was principally attributable to the same factors that
caused revenue to increase. As a percentage of revenue, pharmaceuticals and
supplies increased from 36.1% for 1995 to 41.5% for 1996. This increase was
primarily due to a shift in the revenue mix to a higher percentage of drug
revenue, the introduction of a number of new chemotherapy agents and, to a
lesser extent, lower reimbursement from payors.
Practice Compensation and Benefits. Practice compensation and benefits
increased from $19.8 million in 1995 to $41.4 million in 1996, an increase of
$21.6 million or 109%. This increase was principally attributable to the same
factors that caused revenue to increase. As a percentage of revenue, practice
compensation and benefits increased from 19.9% for 1995 to 20.1% for 1996.
Practice compensation and benefit costs relative to patient volumes decreased as
a result of economies of scale. However, these improvements were offset by
lower reimbursement rates caused by a shift in payor mix, higher discounts to
payors and practice integration factors resulting from the Company's rapid
growth.
Other Practice Costs. Other practice costs increased from $12.0 million in
1995 to $23.5 million in 1996, an increase $11.5 million or 96%. This increase
was principally attributable to the same factors that caused revenue to
increase. As a percentage of revenue, other practice costs decreased from 12.1%
for 1995 to 11.4% for 1996, primarily as a result of economies of scale.
General and Administrative. General corporate expenses increased from $9.4
million in 1995 to $14.1 million in 1996, an increase of $4.7 million or 50%.
This increase was primarily attributable to the addition of personnel and
greater support costs associated with the Company's rapid growth since December
31, 1995. As a percentage of revenue, general and administrative expenses
decreased from 9.5% for 1995 to 6.9% for 1996, primarily as a result of
economies of scale.
Depreciation and Amortization. Depreciation and amortization expenses
increased from $4.7 million in 1995 to $9.3 million in 1996, an increase of $4.6
million or 98%. This increase was primarily attributable to the new physician
groups with which the company affiliated as well as investments in equipment,
leasehold improvements and management information systems during 1996.
Interest. Net interest expense increased from $1.7 million in 1995 to $3.2
million in 1996, an increase of $1.5 million or 88%. The increase was the
result of higher levels of debt, principally incurred to finance transactions
with seventeen oncology practices during 1996. As a percentage of revenue, net
interest expense decreased from 1.7% in 1995 to 1.6% in 1996. Indebtedness to
physicians increased from approximately $57 million at December 31, 1995 to
approximately $66 million at December 31, 1996.
Income Taxes. Income tax expense increased from the prior year as a result of
the Company's increased profitability as well as a change in the Company's
composition of revenue by state since 1995. For 1996, the Company recognized a
tax provision of $11.1 million resulting in an effective rate of 38.5% compared
to 38% for 1995 adjusted for non-taxable, non-recurring life insurance proceeds
of $2.1 million.
14
<PAGE>
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
This Annual Report on Form 10-K includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements
other than statements of historical fact included in this report are forward-
looking statements and, although the Company believes that the expectations
reflected in such forward looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct. The following
are certain important factors that could cause actual results to differ
materially from the Company's expectations ("Cautionary Statements"). All
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements. The Company does not undertake to update
any forward-looking statement that may be made from time to time on behalf of
the Company.
Growth Strategy; Rapid Growth. One of the Company's strategies is to grow
through transactions with additional oncology groups and through the expansion
of its affiliated physician groups. Identifying appropriate physician groups
and proposing, negotiating and implementing economically attractive affiliations
with them can be a lengthy, complex and costly process. There can be no
assurance that the Company will continue to be successful in identifying and
establishing relationships with additional oncology groups. The Company has
experienced rapid growth in its business and staff. Continued rapid growth may
impair the Company's ability to efficiently provide its management services to
its affiliated physician groups and to adequately manage and supervise its
employees. The Company's future results could be materially adversely affected
if it is unable to manage growth effectively.
In the event that the Company is successful in establishing relationships with
additional physician groups, there can be no assurance that the Company will be
able to successfully integrate the operations of such groups or to institute
Company-wide systems and procedures to operate as a combined enterprise with
such groups. In addition, a strategy of growth by acquisition or affiliation
involves the risk of assuming unknown or contingent liabilities of the
affiliated physician groups, which could be material, individually or in the
aggregate. Any failure by the Company to successfully integrate newly
affiliated physician groups or to effectively insulate itself from unwanted
liabilities of such groups may have a material, adverse effect on the Company's
business, financial condition and results of operations.
Another strategy of the Company is to develop integrated cancer centers. The
development of integrated cancer centers is subject to a number of risks,
including (i) obtaining regulatory approval, including certificates of need (in
some states), (ii) delays that often accompany construction of facilities and (
iii) environmental liabilities that attach to ownership, lease or operation of
real property. Any failure or delay by the Company to successfully build and
operate integrated cancer centers or to effectively insulate itself from
liabilities arising from operating these centers may have a material, adverse
effect on the Company's business, financial condition and results of operation.
Dependence on Affiliated Physician Groups. The Company's revenue depends on
revenue generated by the Company's affiliated physician groups. There can be
no assurance that existing and future physician groups with which the Company
affiliates will maintain successful medical practices, that the management
agreements with the affiliated physician groups will not be terminated or that
any of the key members of a particular physician group will continue practicing
with such group. Loss of revenue by the affiliated physician groups could have
a material adverse effect on the Company.
Competition. The business of providing health care related services is
intensely competitive. The Company is aware of a number of competitors
specializing in the management of oncology practices, and several health care
companies with established operating histories and significant resources are
currently providing at least some management services to oncologists. In
addition, there are other companies with substantial resources that
may decide to enter the oncology practice management business. The Company's
revenues depend on the continued success of its affiliated physician groups.
The physician groups face competition from several sources, including sole
15
<PAGE>
practitioners, single and multi-specialty groups, hospitals and managed care
organizations. See "Business - Competition."
Reductions in Third-Party Reimbursement. Physician groups typically bill
various third-party payors, such as governmental programs (e.g., Medicare and
Medicaid), private insurance plans and managed care plans, for the health care
services provided to their patients. These third-party payors are increasingly
negotiating or legislating the prices charged for medical services,
pharmaceuticals and other supplies, with the goal of lowering reimbursement and
utilization rates. For example, the proposed Stark II regulations would, if
enacted, limit the reimbursement of pharmaceuticals expenses. Third-party
payors can also deny reimbursement for medical services, pharmaceuticals and
other supplies if they determine that a treatment was not performed in
accordance with treatment protocols established by such payors or for other
reasons. Loss of revenue by the Company's affiliated physician groups caused by
cost containment efforts could have a material adverse effect on the Company.
To the extent that patients or enrollees covered by a contract require more
frequent or extensive care than is anticipated by the physician groups, the
revenue to the affiliated physician groups derived from such contract may be
insufficient to cover the costs of the services provided.
Health Care Regulation. The health care industry is highly regulated at the
federal and state levels. The Company believes its business and the practices
of its affiliated physician groups are in material compliance with applicable
law. The relationships between the Company and its affiliated physician groups,
however, are unique and many aspects of these relationships have not been the
subject of judicial or regulatory interpretation. There can be no assurance
that a review of the Company's business or its affiliated physician groups by
courts or by health care, tax, labor or other regulatory authorities would not
result in determinations that could adversely affect the Company's operations or
that the health care regulatory environment will not change so as to restrict
the Company's existing operations or potential for expansion. There are
currently several federal and state initiatives designed to amend regulations
relating to the provision of health care services, the access to health care,
the costs of health care and the manner in which health care providers are
reimbursed for their services. However, it is not possible to predict whether
any such initiatives will be enacted as legislation or, if enacted, what their
form, effective dates or impact on the Company will be. See
"Business Regulation."
Risks Inherent in Provision of Medical Services. The Company's affiliated
physician groups are involved in the delivery of health care services to the
public and are exposed to the risk of professional liability claims. Claims of
this nature, if successful, could result in damage awards to the claimants in
excess of the limits of any applicable insurance coverage. Insurance against
losses related to claims of this type can be expensive and varies widely from
state to state. The Company and its affiliated physician groups maintain
liability insurance in amounts and coverages believed to be usual and customary.
Nevertheless, successful malpractice claims asserted against the physician
groups or the Company could have a material adverse effect on the Company. See
"Legal Proceedings."
Dependence on Key Personnel. The Company depends on the services of its
executive officers for the management of the Company and the implementation of
its business strategy. The Company has obtained key man life insurance on its
chief executive officer and its president. Nevertheless, the Company could be
materially adversely affected if the chief executive officer, president or other
executive officers were unwilling or unable to continue in the Company's employ.
See "Directors and Executive Officers of the Registrant."
16
<PAGE>
Risk of Applicability of Insurance Regulations. The Company and its
affiliated groups may in the future enter into contracts with managed care
organizations whereby the Company and its affiliated groups would assume risk in
connection with providing healthcare services under capitation arrangements. If
the Company or its affiliated groups are considered to be in the business of
insurance as a result of entering into such risk sharing arrangements, the
Company and such groups could become subject to a variety of regulatory and
licensing requirements applicable to insurance companies which could have a
material adverse effect upon the Company's business, financial condition and
results of operations.
Volatility of Stock Price. From time to time, there may be significant
volatility in the market price for the Common Stock. Quarterly results of the
Company, changes in earnings estimates by analysts, changes in general
conditions in the economy, the financial markets or the health care industry,
reimbursement trends or other developments affecting the Company or its
competitors could cause the market price of the Common Stock to fluctuate
substantially. Any shortfall in revenue, earnings or other financial results
from levels expected by analysts could have an immediate and significant adverse
effect on the market price of the Common Stock. In this regard the Company
neither endorses nor accepts any responsibility for the estimates or
recommendations issued by stock research analysts from time to time. In
addition, in recent years, the stock market has experienced extreme price and
volume fluctuations. This volatility has had a significant effect on the market
prices of securities issued by many companies for reasons unrelated to their
operating performance. See "Market for Registrant's Common Equity and Related
Stockholder Matters."
Shareholder Rights Plan; Anti-Takeover Provisions. Certain provisions of the
Company's Certificate of Incorporation and certain provisions of the General
Corporation Law of Delaware (the state in which the Company is incorporated) may
make it difficult to change control of the Company and to replace incumbent
management. For example, the Company's Certificate of Incorporation permits the
Board of Directors, without stockholder approval, to issue additional shares of
Common Stock or to establish one or more classes or series of Preferred Stock
having the number of shares, designations, relative voting rights, dividend
rates, liquidation and other rights, preferences and limitations that the Board
of Directors can establish. The Company has also adopted a Shareholder Rights
Plan, which would materially inhibit the ability of another entity to acquire
control of the Company through a tender offer or otherwise without the approval
of the Company's board of directors. These provisions could limit the price
that certain investors might be willing to pay in the future for shares of
Common Stock.
SUMMARY OF OPERATIONS BY QUARTER
The following table presents unaudited quarterly operating results for 1997
and 1996. The Company believes that all necessary adjustments have been
included in the amounts stated below to present fairly the quarterly results
when read in conjunction with the Consolidated Financial Statements. Results of
operations for any particular quarter are not necessarily indicative of results
of operations for a full year or predictive of future periods.
<TABLE>
<CAPTION>
1997 QUARTER ENDED 1996 QUARTER ENDED
-------------------------------------- -----------------------------------------
DEC 31 SEP 30 JUN 30 MAR 31 Dec 31 SEP 30 JUN 30 MAR 31
-------- ------- ------- -------- -------- -------- ------- ----------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue.................. $89,626 $82,293 $79,525 $70,396 $63,635 $53,701 $47,374 $40,750
Income from operations....... 12,468 11,513 11,343 9,889 9,259 7,782 7,297 7,629
Net income................... 6,166 5,910 5,719 5,072 4,840 4,303 4,060 4,447
Net income per share-basic .13 .13 .13 .11 .11 .10 .09 .10
Net income per share-diluted .13 .12 .12 .11 .10 .09 .09 .09
</TABLE>
17
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital primarily to enter into management agreements
with, and to purchase the nonmedical assets of, oncology medical practices.
During 1996, the Company paid total consideration of $91 million in connection
with affiliations with seventeen physician groups, including cash and
transaction costs of $46 million. During 1997, the Company paid total
consideration of $102 million in connection with affiliations with thirteen
physician groups, including cash and transaction costs of $33 million.
To fund this rapid growth and development, the Company has satisfied its
transaction and working capital needs through debt and equity financings and
borrowings under a $150 million syndicated revolving credit facility ("Credit
Facility") with First Union National Bank of North Carolina ("First Union"), as
agent for the various lenders. In addition, as part of the Credit Facility, the
Company has recently obtained a $75 million end-loaded leasing facility, which
will principally be used to finance the purchase of property and construction of
integrated cancer centers. The Company has relied primarily on management fees
received from its affiliated physician groups to fund its operations. Cash
derived from operations was $33.4 million in 1997, an increase of $26.4 million
from 1996. The increase was due to increased income from operations as well as
improvements in cash management through vendor payment terms.
During 1997, the Company borrowed $43 million, net, under the Credit Facility
to fund medical practice transactions, development of integrated cancer centers
and the purchase of its common stock under the Company's stock repurchase
program. Borrowings under the Credit Facility bear interest at a rate equal to
a rate based on prime rate or the London Interbank Offer Rate, based on a
defined formula. The Credit Facility contains affirmative and negative
covenants, including the maintenance of certain ratios, restrictions on sales,
leases or other dispositions of properties, restrictions on other indebtedness
and on the payment of dividends. The Company's management services agreements
and the capital stock of the Company's subsidiaries are pledged as security
under the Credit Facility. The Company is currently in compliance with the
Credit Facility covenants, with additional capacity under the Credit Facility of
$62.5 million at December 31, 1997.
At December 31, 1997, the Company had working capital of $43.9 million and
cash and equivalents of $5.0 million. The Company also had $71.2 million of
current liabilities, including approximately $22.6 million of short-term notes
and long-term indebtedness maturing before December 31, 1998. The Company
currently expects that its principal use of funds in the near future will be in
connection with future transactions with oncology groups, the purchase of
medical equipment, investment in information systems and the acquisition or
lease of real estate for the development of integrated cancer centers. The
Company expects that cash generated from operations and amounts available under
the Credit Facility will be adequate to satisfy the Company's cash requirements
for the next 12 months.
YEAR 2000 ISSUE
The Year 2000 issue (i.e., the ability of computer systems to accurately
identify and process dates beginning with year 2000 and beyond) affects
virtually all companies and organizations. Recognizing the need to limit
problems associated with year 2000 software failures, the Company has developed
plans to address this potential exposure. Key financial information and
operational systems are being assessed, detailed plans have been developed and
initial conversion efforts are underway. The Company recognizes that
information systems are integral to its operations, and in 1998 and 1999 the
Company intends to make significant capital investments in developing an
integrated clinical and financial information system throughout its network of
affiliated physicians. As a result of these investments, the Company believes
that the year 2000 issue will not pose significant internal problems for the
Company's business. The Company is also communicating with suppliers, financial
institutions and, most importantly, third-party payors (such as managed care
companies and governmental payors) to determine their plans to limit problems
associated with the year 2000 issue. Despite these efforts, the year 2000 issue
is complex and may present unforeseen problems in the Company's systems and from
third parties with which the Company deals, such as third party payors. Failure
18
<PAGE>
of the Company's or third parties' computer systems could materially and
adversely impact the Company's operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the Index to Consolidated Financial Statements,
which appears on page 22 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Proxy Statement issued in connection with the Annual Meeting of
Stockholders to be held o n May 14, 1998, to be filed with the Securities and
Exchange Commission pursuant to Rule 14a-6(c), contains under the caption,
"Election of Directors" information required by Item 10 of Form 10-K as to
directors and certain executive officers of the Company and is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The Proxy Statement issued in connection with the Annual Meeting of
Stockholders to be held on May 14, 1998, to be filed with the Securities and
Exchange Commission pursuant to Rule 14a-6(c), contains under the caption,
"Compensation of Executive Officers" information required by Item 11 of Form 10-
K as to directors and certain executive officers of the Company and is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Proxy Statement issued in connection with the Annual Meeting of
Stockholders to be held on May 14, 1998, to be filed with the Securities and
Exchange Commission pursuant to Rule 14a-6(c), contains under the caption,
"Beneficial Ownership of Common Stock of Directors, Nominees and Executive
Officers" information required by Item 12 of Form 10-K as to directors, certain
executive officers and certain beneficial owners of the Company and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Proxy Statement issued in connection with the Annual Meeting of
Stockholders to be held on May 14, 1998, to be filed with the Securities and
Exchange Commission pursuant to Rule 14a-6(c), contains under the caption,
"Certain Relationships and Related Transactions" information required by Item 13
of Form 10-K as to directors and certain executive officers of the Company and
is incorporated herein by reference.
19
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
1. Financial Statements: See Item 8 of this report.
2. Financial Statement Schedules: See Item 8 of this report.
3. Exhibit Index
Exhibit No. Description
----------- -----------
3.1 Certificate of Incorporation of the Company, as
amended (filed as Exhibit 3.1 to Form 10-Q for the
quarter ended March 31, 1997 and incorporated herein by
reference)
3.2 By-Laws of the Company, as amended (filed as Exhibit
3.2 to Form 10-Q for the quarter ended March 31, 1997
and incorporated herein by reference)
4.1 Rights Agreement between the Company and American
Stock Transfer & Trust Company (incorporated by
reference from Form 8-A filed June 2, 1997)
10.1 Third Amended and Restated Loan Agreement among the
Company and First Union National Bank, as agent
10.2 Participation Agreement among AOR Synthetic Real
Estate, Inc., the Company, First Union National Bank
and the other parties identified therein
10.3 Credit Agreement among the Company, First Security
Bank, First Union National Bank and the other parties
identified therein
10.4 Chief Executive Officer Stock Option Plan and
Agreement (filed as an exhibit to the Registration
Statement on Form S-1 (Registration No. 33-90634) and
incorporated herein by reference)
10.5 Everson Stock Option Plan and Agreement (filed as an
exhibit to the Registration Statement on Form S-1
(Registration No. 33-90634) and incorporated herein by
reference)
10.6 Non-Employee Director Stock Option Plan (filed as an
exhibit to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996 and incorporated
herein by reference)
10.7 Key Employee Stock Option Plan, as amended (filed as
an exhibit to the Registration Statement on Form S-8
(Registration No. 333-30057) and incorporated herein by
reference)
20
<PAGE>
10.8 Affiliate Stock Option Plan (filed as an exhibit to
the Registration Statement on Form S-1 (Registration
No. 33-90634) and incorporated herein by reference)
11 Statement Re - Computation of Per Share Earnings
21.1 Subsidiaries of the Registrant
23(a) Consent of Independent Accountants
27 Financial Data Schedule
(b) Reports on Form 8-K.
During the fiscal quarter ended December 31, 1997, the Registrant filed no
reports on Form 8-K.
21
<PAGE>
AMERICAN ONCOLOGY RESOURCES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements as of December 31, 1997 and 1996 and for the
three years ended December 31, 1997:
Page
----
Report of Independent Accountants................ 23
Consolidated Balance Sheet....................... 24
Consolidated Statements of Operations............ 25
Consolidated Statements of Stockholders' Equity.. 26
Consolidated Statements of Cash Flows............ 27
Notes to Consolidated Financial Statements....... 28
Financial statement schedules have been omitted because they are not applicable
or the required information is shown in the consolidated financial statements or
notes thereto.
22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
American Oncology Resources, Inc.
In our opinion, the consolidated financial statements listed in the index on
page 22 present fairly, in all material respects, the financial position of
American Oncology Resources, Inc. and its subsidiaries at December 31, 1997 and
1996, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Houston, Texas
March 11, 1998
23
<PAGE>
AMERICAN ONCOLOGY RESOURCES, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
December 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents..................................................... $ 5,000 $ 3,429
Accounts receivable...................................................... 92,038 61,183
Prepaids and other current assets........................................ 10,149 5,775
Due from affiliated physician groups..................................... 7,904 5,356
-------- --------
Total current assets................................................... 115,091 75,743
-------- --------
Property and equipment:
Land..................................................................... 2,229 1,336
Computers and software................................................... 11,617 6,200
Equipment, furniture and fixtures........................................ 20,578 13,169
Buildings and leasehold improvements..................................... 16,685 4,439
-------- --------
51,109 25,144
Less - accumulated depreciation and amortization......................... (12,545) (6,201)
-------- --------
38,564 18,943
Management service agreements, net of amortization of $15,589 and $8,343.. 326,295 240,034
Other assets.............................................................. 3,943 4,680
-------- --------
$483,893 $339,400
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term notes payable................................................. $ 14,011 $ 4,219
Current maturities of long-term indebtedness............................. 8,628 5,564
Accounts payable......................................................... 38,870 15,148
Due to affiliated physician groups....................................... 289 616
Accrued compensation costs............................................... 2,783 1,806
Accrued interest payable................................................. 2,804 2,325
Income taxes payable..................................................... 8 641
Other accrued liabilities................................................ 3,834 2,452
-------- --------
Total current liabilities.............................................. 71,227 32,771
Deferred income taxes..................................................... 8,956 3,068
Long-term indebtedness.................................................... 139,716 81,707
-------- --------
Total liabilities...................................................... 219,899 117,546
-------- --------
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized,
none issued and outstanding
Series A Preferred Stock, $.01 par value, 500,000 shares
authorized and reserved, none issued and outstanding
Common stock, $.01 par value, 80,000,000 shares authorized,
29,721,754 and 28,369,482 shares issued and
29,721,754 and 27,371,422 shares outstanding............................ 297 284
Additional paid-in capital............................................... 138,381 139,804
Common stock to be issued, 17,937,752 and 17,462,782 shares.............. 74,757 61,225
Treasury stock, 998,060 shares........................................... (8,530)
Retained earnings........................................................ 50,559 29,071
-------- --------
Total stockholders' equity............................................. 263,994 221,854
-------- --------
Commitments and contingencies (Note 9)....................................
-------- --------
$483,893 $339,400
======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
24
<PAGE>
AMERICAN ONCOLOGY RESOURCES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------
1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
Revenue.......................................... $321,840 $205,460 $99,174
-------- -------- -------
Operating expenses:
Pharmaceuticals and supplies................... 144,890 85,210 35,763
Practice compensation and benefits............. 61,296 41,350 19,766
Other practice costs........................... 35,090 23,495 12,032
General and administrative..................... 21,174 14,095 9,406
Depreciation and amortization.................. 14,177 9,343 4,655
-------- -------- -------
276,627 173,493 81,622
-------- -------- -------
Income from operations........................... 45,213 31,967 17,552
Other income (expense):
Interest income................................ 348 1,062 2,007
Interest expense............................... (8,715) (4,307) (3,690)
Other, net..................................... 1,600
-------- -------- -------
Income before income taxes....................... 36,846 28,722 17,469
Income taxes..................................... 13,979 11,072 5,852
-------- -------- -------
Net income....................................... $ 22,867 $ 17,650 $11,617
======== ======== =======
Net income per share - basic..................... $0.50 $0.40 $0.33
======== ======== =======
Shares used in per share calculations - basic.... 45,571 44,228 35,559
======== ======== =======
Net income per share - diluted................... $0.48 $0.37 $0.30
======== ======== =======
Shares used in per share calculations - diluted.. 48,100 47,549 39,318
======== ======== =======
</TABLE>
The accompanying notes are an integral part of this statement.
25
<PAGE>
AMERICAN ONCOLOGY RESOURCES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Common Stock Additional Common Treasury Stockholder
---------------------- paid-in Stock to Stock Retained notes
Shares Par Value capital be issued Cost earnings receivable Total
---------- --------- ----------- ---------- -------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994......... 15,266 $ 153 $ 22,085 $ 8,811 $ 28 $ (100) $ 30,977
Issuances of Common Stock............ 12,199 122 110,875 110,997
Medical practice transactions -
value of 9,628,388 shares to
be issued............................ 37,207 37,207
Compensation value of non-employee
options to purchase Common Stock.. 250 250
Exercise of options to purchase
Common Stock...................... 12 32 32
Repayment of promissory notes........ 100 100
Net income........................... 11,617 11,617
---------- --------- ----------- ---------- -------- --------- ---------- --------
Balance at December 31, 1995......... 27,477 275 133,242 46,018 11,645 0 191,180
Medical practice transactions -
value of 2,313,250 shares to
be issued......................... 15,312 15,312
Purchase of 1,110,500 shares of
Treasury Stock.................... $ (9,414) (9,414)
Delivery of 112,440 shares of
Common Stock to be issued from
Treasury.......................... (555) (105) 884 (224)
Exercise of options to purchase
Common Stock...................... 892 9 1,116 1,125
Tax benefit from exercise of
non-qualified stock options....... 6,001 6,001
Net income........................... 17,650 17,650
---------- --------- ----------- ---------- -------- --------- ---------- --------
Balance at December 31, 1996......... 28,369 284 139,804 61,225 (8,530) 29,071 0 221,854
Medical practice transactions -
value of 3,066,859 shares to
be issued......................... 22,355 22,355
Purchase of 657,000 shares of
Treasury Stock.................... (6,418) (6,418)
Delivery of 1,650,064 shares of
Common Stock to be issued from
Treasury.......................... (7,981) (5,540) 14,900 (1,379)
Delivery of 941,825 shares from
issuance of Common Stock.......... 942 9 3,274 (3,283)
Exercise of options to purchase
Common Stock...................... 411 4 1,242 48 1,294
Tax benefit from exercise of
non-qualified stock options....... 2,042 2,042
Net income........................... 22,867 22,867
---------- --------- ----------- ---------- -------- --------- ---------- --------
Balance at December 31, 1997......... 29,722 $ 297 $ 138,381 $ 74,757 $ 0 $ 50,559 $ 0 $263,994
========== ========= =========== ========== ======== ========= ========== ========
</TABLE>
The accompanying notes are an integral part of this statement.
26
<PAGE>
AMERICAN ONCOLOGY RESOURCES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------
1997 1996 1995
--------- --------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................. $ 22,867 $ 17,650 $ 11,617
Noncash adjustments:
Depreciation and amortization............................ 14,177 9,343 4,655
Deferred income taxes.................................... 5,916 2,130 876
Imputed interest on medical practice transactions........ 248 122 315
Cash provided (used), net of effects of
medical practice transactions, by changes in:
Accounts receivable...................................... (26,392) (24,084) (9,190)
Prepaids and other current assets........................ (4,342) (2,088) (2,566)
Other assets............................................. 252
Accounts payable......................................... 22,064 1,670 3,033
Due from/to affiliated physician groups.................. (2,636) (2,524) (873)
Income taxes payable..................................... 1,409 2,672 4,186
Other accrued liabilities................................ 71 2,068 2,059
-------- -------- ---------
Net cash provided by operating activities.............. 33,382 6,959 14,364
-------- -------- ---------
Cash flows from investing activities:
Sales of short-term investments............................ 44,967 323,991
Purchases of short-term investments........................ (368,100)
Acquisition of property and equipment...................... (22,538) (10,030) (3,705)
Net payments in medical practice transactions.............. (33,228) (46,221) (51,312)
Other...................................................... 1,188 (3,052)
-------- -------- ---------
Net cash used by investing activities.................. (54,578) (14,336) (99,126)
-------- -------- ---------
Cash flows from financing activities:
Proceeds from Credit Facility.............................. 142,000 23,000 35,000
Repayment of Credit Facility............................... (99,000) (35,000)
Repayment of other indebtedness............................ (14,549) (17,444) (14,489)
Debt financing costs....................................... (560) (1,277) (411)
Proceeds from exercise of stock options.................... 1,294 1,125 32
Purchase of Treasury Stock................................. (6,418) (9,414)
Net proceeds from issuance of Common Stock................. 110,997
Collection of promissory notes............................. 100
-------- -------- ---------
Net cash provided (used) by financing activities....... 22,767 (4,010) 96,229
-------- -------- ---------
Increase (decrease) in cash and equivalents................. 1,571 (11,387) 11,467
Cash and equivalents:
Beginning of period........................................ 3,429 14,816 3,349
-------- -------- ---------
End of period.............................................. $ 5,000 $ 3,429 $ 14,816
======== ======== =========
Interest paid............................................... $ 7,894 $ 3,735 $ 2,104
Taxes paid.................................................. 6,380 6,567 790
Noncash transactions:
Tax benefit from exercise of non-qualified stock options... 2,042 6,001
Value of Common Stock to be issued in medical practice
transactions............................................. 22,355 15,312 37,207
Delivery of Common Stock to be issued in medical practice
transactions............................................. 18,183 884
Debt issued in medical practice transactions............... 37,860 25,295 50,817
Debt assumed in medical practice transactions.............. 4,554 684 4,712
</TABLE>
The accompanying notes are an integral part of this statement.
27
<PAGE>
AMERICAN ONCOLOGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
American Oncology Resources, Inc., a Delaware corporation (the "Company"),
is a physician practice management company focusing exclusively on oncology.
The Company provides comprehensive management services under long-term
agreements to oncology practices comprised of 304 physicians in 16 states at
December 31, 1997. These practices provide a comprehensive range of medical
services to cancer patients, integrating the multiple specialties of cancer
care, including medical and gynecological oncology, hematology, radiation
oncology, diagnostic radiology and stem cell transplantation.
The following is a summary of the Company's significant accounting
policies:
Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All intercompany transactions and balances
have been eliminated.
Use of estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses, as well as disclosures of contingent assets and
liabilities. Because of inherent uncertainties in this process, actual future
results could differ from those expected at the reporting date.
Cash equivalents and investments
The Company considers all highly liquid debt securities with original
maturities of three months or less to be cash equivalents. At December 31,
1995, the Company considered all investments in debt securities as available for
use in current operations and therefore classified them as available for sale.
Revenue recognition
Substantially all of the Company's revenues represent the contractual fees
earned under its long-term management service agreements with affiliated
physician groups. Under the agreements, the Company is contractually
responsible and at risk for the operating costs of the affiliated physician
groups, except for amounts retained by physicians. The Company's revenues
include the reimbursement of all affiliated physician group operating costs and
the fixed and variable contractual management fees as defined in the management
services agreements. Contractual fees are accrued when collection is probable.
Property and equipment
Property and equipment is stated at cost. Depreciation of property and
equipment is provided using the straight-line method over the estimated useful
lives of three to ten years for equipment, computers and software, furniture and
fixtures, the lesser of ten years or the remaining lease term for leasehold
improvements and twenty years for buildings.
28
<PAGE>
AMERICAN ONCOLOGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Management service agreements
Management service agreements consist of the costs of purchasing the rights
to manage oncology groups. These costs are amortized on a straight-line basis
over the initial noncancelable 40-year terms of the related management service
agreements. Under the long-term agreements, the affiliated physician groups
have agreed to provide medical services on an exclusive basis only through
facilities managed by the Company. The agreements are noncancelable except for
performance defaults. In the event an affiliated physician group breaches the
agreement, or if the Company terminates with cause, the physician group is
required to purchase all related tangible and intangible assets, including the
unamortized portion of the management service agreement, at the then net book
value.
The carrying value of the management service agreements is reviewed for
impairment when events or changes in circumstances indicate their recorded cost
may not be recoverable. If the review indicates that the undiscounted cash
flows from operations of the related management service agreement over the
remaining amortization period is expected to be less than the recorded amount of
the management service agreement, the Company's carrying value of the
management service agreement will be reduced to its estimated fair value.
Other assets
The costs associated with obtaining long-term financing are capitalized and
amortized over the terms of the related debt agreements.
Income taxes
Deferred tax assets and liabilities are determined based on the temporary
differences between the financial statement carrying amounts and the tax bases
of assets and liabilities using the enacted tax rates in effect in the years in
which the differences are expected to reverse. In estimating future tax
consequences, all expected future events are considered other than enactments of
changes in the tax law or rates.
Fair Value of Financial Instruments
The Company's receivables, payables, prepaids and accrued liabilities are
current and on normal terms and, accordingly, are believed by management to
approximate fair value. Management also believes that subordinated notes issued
to affiliated physicians approximate fair value when current interest rates for
similar debt securities are applied.
Earnings per share
During 1997, the Company adopted the provisions of Financial Accounting
Standards Board (FASB) Statement No. 128, "Earnings Per Share," (FAS 128) which
requires the Company to disclose "basic" and "diluted" EPS and to restate all
prior periods presented for comparative purposes. In addition, the Securities
and Exchange Commission recently issued Staff Accounting Bulletin No. 98 (SAB
98) which eliminates the impact of "cheap stock" issued prior to an initial
public offering. The Company has restated all periods presented to comply with
the provisions of FAS 128 and SAB 98.
The computation of basic earnings per share is based on a weighted average
number of Common Stock and Common Stock to be issued shares outstanding during
the periods. The computation of the diluted earnings per share is based on a
weighted average number of Common Stock and Common Stock to be issued shares
outstanding during the periods as well as all dilutive potential Common Stock
calculated under the treasury stock method. The diluted
29
<PAGE>
AMERICAN ONCOLOGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
EPS amount currently approximates the primary EPS amount which would previously
have been reported due to the adoption of this Statement.
The following table summarizes the determination of shares used in per
share calculations (in thousands):
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Basic
Outstanding at end of period:
Common Stock...................................... 29,722 27,371 27,476
Common Stock to be issued......................... 17,938 17,463 15,262
------ ------ ------
47,660 44,834 42,738
Effect of weighting................................. (2,089) (606) (7,179)
------ ------ ------
Shares used in per share calculation............. 45,571 44,228 35,559
====== ====== ======
Diluted
Outstanding at end of period:
Common Stock...................................... 29,722 27,371 27,476
Common Stock to be issued......................... 17,938 17,463 15,262
------ ------ ------
47,660 44,834 42,738
Effect of weighting and assumed share equivalents
for grants of stock options and issuances of stock
at less than the weighted-average price............. 440 2,715 (3,420)
------ ------ ------
Shares used in diluted share calculation.......... 48,100 47,549 39,318
====== ====== ======
</TABLE>
Reclassifications
Certain amounts previously reported have been reclassified to conform with
their 1997 presentation.
Accounting Pronouncements for Future Adoption
The FASB recently issued Statement No. 130, "Comprehensive Income," which
is effective for the Company's financial statements as of and for the year
ending December 31, 1998. In addition to net income, comprehensive income is
comprised of "other comprehensive income" which includes all charges and credits
to equity that are not the result of transactions with owners of the Company's
Common Stock. This Statement is not anticipated to materially affect the
Company's financial statements.
The FASB recently issued statement No. 131, "Disclosures About Segments of
an Enterprise and Related Information," which is effective for the Company's
financial statements as of and for the year ending December 31, 1998. This
Statement requires reporting of summarized financial results for operating
segments as well as established standards for related disclosures about products
and services, geographic areas and major customers. Primary disclosure
requirements include total segment revenues, total segment profit or loss and
total segment assets. The Company has not yet completed its evaluation of the
impact of this Statement on the Company's financial statements.
30
<PAGE>
AMERICAN ONCOLOGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE 2 - REVENUE
Medical service revenue for services to patients by the physician groups
affiliated with the Company is recorded when services are rendered based on
established or negotiated charges reduced by contractual adjustments and
allowances for doubtful accounts. Differences between estimated contractual
adjustments and final settlements are reported in the period when final
settlements are determined. Medical service revenue of the affiliated physician
groups is reduced by the contractual amounts retained by the physician groups to
arrive at the Company's revenue.
The following presents the amounts included in the determination of the
Company's revenues (in thousands):
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
Medical service revenue.......................... $424,446 $269,380 $129,709
Amounts retained by affiliated physician groups.. 102,606 63,920 30,535
-------- -------- --------
Revenue.......................................... $321,840 $205,460 $ 99,174
======== ======== ========
</TABLE>
In 1997, none of the Company's affiliated physician groups provided more
than 10% of revenues. In 1996, 11% of the Company's revenues were derived from
one affiliated physician group, which was the only group that provided 10% or
more of revenues. In 1995, 15% and 11% of the Company's revenues were derived
from two affiliated physician groups.
For the years ended December 31, 1997, 1996 and 1995, the affiliated
physician groups derived approximately 33%, 33% and 27%, respectively, of their
medical service revenue from services provided under the Medicare and state
Medicaid programs and 47%, 45% and 51%, respectively, from contractual, fee-for-
service arrangements with managed care programs, none of which individually
aggregated more than 10% of medical service revenue. The remaining 20%, 22% and
22%, respectively, was derived from various non-contracted fee-for-service
payors. Capitation revenues were less than 1% of total revenue in 1997, 1996
and 1995. Changes in the payor reimbursement rates, particularly Medicare due to
its concentration, or affiliated physician groups' payor mix can materially and
adversely affect the Company's revenues.
Under its management service agreements, receivables generated by
affiliated physician groups from patient services are purchased at their net
collectible value on a full recourse basis by the Company; thus, the Company
does not have an allowance for doubtful accounts. As a result, the Company's
accounts receivable are a function of medical service revenue of the affiliated
physician groups rather than the Company's revenue. Such receivables are
recorded by the affiliated physician groups net of contractual adjustments and
allowances for doubtful accounts. Receivables from the Medicare and state
Medicaid programs are considered to have minimal credit risk, and no other payor
comprised more than 10% of accounts receivable at December 31, 1997.
31
<PAGE>
AMERICAN ONCOLOGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE 3 - MEDICAL PRACTICE TRANSACTIONS
From January 1995 through December 31, 1997, the Company affiliated with
oncology groups comprised of 262 physicians.
The consideration paid for the physician groups to enter into long-term
management service agreements and for the nonmedical assets of the physician
groups, primarily receivables and fixed assets, has been accounted as asset
purchases. Total consideration includes the assumption by the Company of
specified liabilities, the estimated value of nonforfeitable commitments by the
Company to issue Common Stock at specified future dates for no additional
consideration, short-term and subordinated notes, cash payments and related
transaction costs as follows (in thousands):
<TABLE>
<CAPTION>
Year ended
December 31,
---------------------------------------------
1997 1996 1995
-------------- -------------- -------------
<S> <C> <C> <C>
Cash and transaction costs.......................... $ 33,228 $46,221 $ 51,312
Short-term and subordinated notes................... 37,860 25,295 50,817
Common Stock to be issued........................... 22,355 15,312 37,207
Liabilities assumed................................. 8,252 3,794 11,014
-------- ------- --------
Total costs......................................... $101,695 $90,622 $150,350
======== ======= ========
</TABLE>
During 1997, the Company affiliated with 13 oncology physician groups on
the effective dates indicated as follows: January 10, Williamsburg Hematology
and Oncology of Virginia, total consideration of $4,566,000 including 94,452
shares of Common Stock to be issued with a value of $588,000; March 14, Virginia
Oncology Associates, P.C., of Norfolk, Virginia, total consideration of
$21,085,000 including 514,124 shares of Common Stock to be issued with a value
of $3,239,000; April 1, Central Indiana Radiation Oncology, P.S.C. of Indiana,
total consideration of $4,622,000, including 253,385 shares of Common Stock to
be issued with a value of $1,393,000; March 24, Texas Radiation Oncology Group,
L.L.P. of Austin, Texas, total consideration of $12,065,000, including 342,632
shares of Common Stock to be issued with a value of $1,754,000; November 1,
Hematology Associates of South Texas, P.A., total consideration of $6,082,000,
including 155,396 shares of Common Stock to be issued with a value of
$1,366,000; November 1, Clinical Hematology Oncology Associates, P.C. of
Arizona, total consideration of $9,855,000, including 397,947 shares of Common
Stock to be issued with a value of $3,767,000; November 17, Florida Community
Cancer Centers, P.A. of Tampa, Florida, total consideration of $34,846,000
including 1,117,074 shares of Common Stock to be issued with a value of
$8,964,000; and in January through September of 1997, six smaller transactions
with physician groups in Tulsa, Oklahoma; Las Vegas, Nevada; Portland, Oregon;
Fairfax, Virginia; Vancouver, Washington; and Franklin Pennsylvania; for total
consideration of $8,574,000 which includes 191,849 shares of Common Stock to be
issued with a value of $1,284,000.
During 1996, the Company affiliated with 17 oncology physician groups on
the effective dates indicated as follows: March 1, Cancer Center of Kansas, P.A.
of Wichita, Kansas, total consideration of $12,547,000 including 163,676 shares
of Common Stock to be issued with a value of $1,926,000; March 1, Coram
Physician Services of Fairfax, Virginia, total consideration of $15,518,000
including 116,298 shares of Common Stock to be issued with a value of
$1,375,000; May 1, San Antonio Tumor and Blood Clinic, P.A. and Drs. Cohen,
Gordon and Lopez, P.A. of San Antonio, Texas, total consideration of $12,479,000
including 210,048 shares of Common
32
<PAGE>
AMERICAN ONCOLOGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Stock to be issued with a value of $1,980,000; September 1, Central Texas
Diagnostic Center, P.A. of Austin, Texas, total consideration of $18,863,000
including 770,589 shares of Common Stock to be issued with a value of
$4,157,000; November 1, Hematology-Oncology Associates, P.A. of Jacksonville,
Florida, total consideration of $8,012,000 including 258,992 shares of Common
Stock to be issued with a value of $1,113,000; and, in January through November
of 1996, twelve smaller transactions with physician groups in Durham, North
Carolina; Denver, Colorado; Portland, Oregon; Tucson, Arizona; San Antonio,
Texas; Independence, Missouri; Flagstaff, Arizona and Orange Park, St. Augustine
and Ocala, Florida; for total consideration of $23,203,000 which includes
793,647 shares of Common Stock to be issued with a value of $4,761,000.
During 1995, the Company affiliated with 16 oncology physician groups on
the effective dates indicated as follows: January 1, Southwestern Radiation
Oncology, Ltd. and Miked, Inc. of Tucson, Arizona, total consideration of
$10,249,000 including 1,378,000 shares of Common Stock to be issued with a value
of $2,897,000; March 1, Pikes Peak Cancer Specialists, P.C. and Paul N.
Anderson, M.D., P.C. of Colorado Springs, Colorado, total consideration of
$8,799,000 including 910,000 shares of Common Stock to be issued with a value of
$1,916,000; March 1, Cancer Care Associates, P.A. of Tulsa, Oklahoma, total
consideration of $26,309,000 including 2,888,000 shares of Common Stock to be
issued with a value of $6,431,000; March 15, Hematology and Oncology
Associates, P.A. of Greenville, South Carolina, total consideration of
$9,587,000 including 1,098,000 shares of Common Stock to be issued with a value
of $2,580,000; April 1, Hematology-Oncology Medical Associates, Inc. of
Pittsburgh, Pennsylvania, total consideration of $18,205,000 including 1,622,000
shares of Common Stock to be issued with a value of $8,072,000; August 1, James
River Clinic, P.C. and Mattern, Schultz & Booth Company of Hampton, Virginia,
total consideration of $7,602,000 including 172,000 shares of Common Stock to be
issued with a value of $1,517,000; October 1, Riverview Cancer Care Medical
Associates, P.C. of Rexford, New York, total consideration of $9,101,000
including 206,000 shares of Common Stock to be issued with a value of
$2,774,000; October 1, Capital District Hematology Oncology Associates, P.C. of
Latham, New York, total consideration of $16,060,000 including 308,000 shares of
Common Stock to be issued with a value of $4,203,000; December 1, Triad
Hematology-Oncology Associates, P.L.L.C. of Winston-Salem, North Carolina, total
consideration of $4,185,000 including 64,000 shares of Common Stock to be issued
with a value of $663,000 and, in September through December of 1995, the
following seven smaller transactions in Raleigh, North Carolina; Asheville,
North Carolina; Boulder, Colorado; Jacksonville, Florida; Las Vegas, Nevada;
Winston-Salem, North Carolina and Pittsburgh, Pennsylvania, for total
consideration of $40,253,000 which includes 626,000 shares of Common Stock to be
issued with a value of $6,154,000.
In conjunction with five medical practice transactions occurring in 1996
and 1997, the Company is contingently obligated to pay up to an additional
$3,870,000 in future years, depending on the achievement of certain financial
objectives. Such liability, if any, will be recorded in the period in which the
outcome of the contingency becomes probable. Any payment made will be allocated
to the affiliated long-term management services agreements and will be amortized
over the remaining life of that asset.
The accompanying financial statements include the results of operations
derived from the management services agreements from their respective effective
dates. The following unaudited pro forma information presents the results of
operations of the Company for the year ended December 31, 1996 as if the 1997
and 1996 transactions had been consummated on January 1, 1996 and for the year
ended December 31, 1997 as if the 1997 transactions were consummated on January
1, 1997. Such pro forma information is based on the historical financial
information of the physician groups and does not include operational or other
changes which might have been affected pursuant to the Company's management of
the nonmedical aspects of such groups.
33
<PAGE>
AMERICAN ONCOLOGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The unaudited pro forma information presented below is for illustrative
information only and is not necessarily indicative of results which would have
been achieved or results which may be achieved in the future (in thousands,
except per share amounts):
Pro forma (unaudited)
Year Ended December 31,
-----------------------
1997 1996
---- ----
Revenue....................... $355,201 $269,870
Net income.................... 24,234 20,533
Net income per share-basic.... 0.51 0.43
Net income per share-diluted.. 0.49 0.40
NOTE 4 - INDEBTEDNESS
Short-term notes payable
Short-term notes payable bear interest at 7% and have original maturities
of less than one year. The notes are payable to physicians with whom the
Company entered into long-term management agreements and relate to medical
practice transactions.
Long-term indebtedness
Long-term indebtedness consists of the following (in thousands):
December 31,
-------------------
1997 1996
--------- --------
Subordinated notes................... 80,710 62,113
Credit Facility...................... 66,000 23,000
Capital lease obligations and other.. 1,634 2,158
-------- -------
148,344 87,271
Less - current maturities............ (8,628) (5,564)
-------- -------
$139,716 $81,707
======== =======
Subordinated notes
The subordinated notes are issued in substantially the same form in
different series and are payable to the physicians with whom the Company entered
into management agreements. Substantially all of the notes outstanding at
December 31, 1997 and 1996 bear interest at 7%, are due in installments through
2004 and are subordinated to senior bank and certain other debt. If the Company
fails to make payment under any of the notes, the respective physician group can
terminate the related management service agreement for cause.
Credit Facility
The Company has a loan agreement and revolving credit/term facility (Credit
Facility) with First Union National Bank of North Carolina (First Union)
individually and as Agent for twelve additional lenders (Lenders),
34
<PAGE>
AMERICAN ONCOLOGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
which was amended as of December 29, 1997 to improve certain terms and
covenants. Under the terms of the agreement, the amount available for borrowing
is $150 million through October 31, 2002. Proceeds of loans may be used to
finance medical group transactions, provide working capital or for other general
corporate uses. At December 31, 1997, the Company had an outstanding balance of
$66 million under the Credit Facility. The Company has classified this facility
as long term due to its ability and intent to maintain the borrowings past 1998.
Borrowings under the Credit Facility are secured by capital stock of the
Company's subsidiaries and all material contracts, including management service
agreements. At the Company's option, funds may be borrowed at the Base
interest rate or the London Interbank Offer Rate (LIBOR) up to London Interbank
Offer Rate plus an amount determined under a defined formula. The Base rate is
selected by First Union and is defined as their prime rate or Federal Funds Rate
plus 1/2%. Interest on amounts outstanding under Base rate loans is due
quarterly while interest on London Interbank Offer Rate related loans is due at
the end of each applicable interest period or quarterly, if earlier. As of
December 31, 1997, the interest on all outstanding draws was 8.5%, which
represented borrowings at the Base rate which were converted to LIBOR loans at
a rate of 6.6% in January 1998.
The Company is subject to restrictive covenants under the facility,
including the maintenance of certain financial ratios. The agreement limits
certain activities such as additional indebtedness, sales of assets,
investments, capital expenditures, mergers and consolidations and the payment of
dividends. Under certain circumstances, additional medical practice
transactions may require First Union and the Lenders' consent.
Capital lease obligations and other
Leases for medical and office equipment are capitalized using effective
interest rates between 7.5% and 11.5%. At December 31, 1997 and 1996, the gross
amount of assets recorded under the capital leases was $3,239,000 and $3,710,000
and the related accumulated amortization was $1,945,000 and $1,431,000.
Amortization expense is included with depreciation. Total future capital lease
payments are $1,548,288. Other indebtedness consists principally of installment
notes and bank debt, with varying interest rates, assumed in medical practice
transactions.
Maturities
Future principal maturities of long-term indebtedness, including capital
lease obligations, is $8,628,000 in 1998, $13,525,000 in 1999, $16,099,000 in
2000, $15,774,000 in 2001, $80,795,000 in 2002 and $13,523,000 thereafter.
35
<PAGE>
AMERICAN ONCOLOGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE 5 - INCOME TAXES
The Company's income tax provision consists of the following (in
thousands):
Year ended December 31,
--------------------------------
1997 1996 1995
---- ---- -----
Federal:
Current...................... $ 8,137 $ 7,787 $4,352
Deferred..................... 4,592 1,914 815
State:
Current...................... 896 1,155 701
Deferred..................... 354 216 61
------- ------- ------
13,979 11,072 5,929
Reversal of valuation allowance
due to net operating loss
utilization................... (77)
------- ------- ------
$13,979 $11,072 $5,852
======= ======= ======
The difference between the effective income tax rate and the amount which
would be determined by applying the statutory U.S. income tax rate before income
taxes is as follows:
Year ended December 31,
------------------------------
1997 1996 1995
---- ---- ----
Provision for income taxes at U.S. 35.0% 35.0% 35.0%
statutory rates..............
State income taxes, net of 3.0 3.5 3.0
federal benefit..............
Nontaxable life insurance (4.2)
proceeds.....................
Nondeductible items and other.... .1
Reversal of valuation allowance
due to net operating loss
utilization.................. (.4)
------ ------- ------
38.0% 38.5% 33.5%
====== ======= ======
Deferred income taxes are comprised of the following (in thousands):
December 31,
--------------
1997 1996
------ ------
Deferred tax assets:
Deferred rent.................................. $ 101 $ 48
Accrued expenses............................... 24
Other.......................................... 175 111
------ ------
$ 300 $ 159
====== ======
Deferred tax liabilities:
Amortization of management service agreements.. $7,909 $2,973
Depreciation................................... 457 140
Prepaid expenses............................... 890 86
------ ------
$9,256 $3,199
====== ======
36
<PAGE>
AMERICAN ONCOLOGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE 6 - OTHER INCOME, NET
Other income, net in 1995 consists of a gain from life insurance proceeds
of $2,090,000 less lease termination costs of $490,000.
NOTE 7 - STOCKHOLDERS' EQUITY
Effective May 16, 1997, the Board of Directors of the Company adopted a
shareholders rights plan and in connection therewith, declared a dividend of one
Series A Preferred Share Purchase Right for each outstanding share of Common
Stock. For a more detailed description of the shareholders rights plan, refer
to the Company's Form 8-A filed with the Securities and Exchange Commission on
June 2, 1997.
Effective May 8, 1997, the Company's stockholders approved an increase in
the number of shares of Common Stock authorized to be issued to 80,000,000
shares
On August 13, 1996, the Board of Directors of the Company authorized the
purchase of up to 3,000,000 shares of the Company's Common Stock in public or
private transactions.
On May 16, 1996, the Board of Directors of the Company declared a two-for-
one stock split of the Company's Common Stock which was paid on June 10, 1996 to
stockholders of record on May 31, 1996. All references herein to the number of
shares and per share amounts have been adjusted to reflect the effect of the
split.
In June 1995, the Company consummated its initial public offering of
10,925,000 shares of Common Stock. Proceeds from the offering were
$105,743,000, net of commissions and expenses of $8,970,000. Of this amount,
$35,000,000 was used to repay amounts outstanding under the Company's credit
facility. The remainder was used for general corporate purposes and working
capital needs, including medical practice transactions.
In February 1995, the Company issued for cash 1,273,642 shares of Common
Stock for $4.13 per share, of which 1,209,192 shares were purchased by the
Company's major stockholder and certain executive officers, directors and
employees.
As part of entering into long-term management services agreements with
physician practices described in Note 3, the Company has made nonforfeitable
commitments to issue shares of Common Stock at specified future dates for no
further consideration. Common Stock to be issued is shown as a separate
component in stockholders' equity. The amounts, upon issuance of the shares,
are reclassified to other equity accounts as appropriate.
The shares of Common Stock to be issued at specified future dates were
valued at a discount from the estimated fair value of a delivered share after
considering all relevant factors, including normal discounts for marketability
due to the time delay in delivery of the shares, estimates of the value of the
respective management service agreements and proximate sales of Common Stock for
cash. The Common Stock in the transactions is to be delivered under the terms
of the respective agreements for periods up to seven years. The Common Stock to
be delivered is discounted at weighted-averages of 39%, 39% and 38% for 1997,
1996 and 1995 respectively, from comparable cash sales of Common Stock.
For transactions completed through December 31, 1997, the scheduled
issuance of the shares of Common Stock that the Company is committed to deliver
over the passage of time are 2,940,618 in 1998, 5,244,319 in 1999, 5,491,405 in
2000, 1,694,212 in 2001, 1,934,599 in 2002 and 632,599 thereafter.
37
<PAGE>
AMERICAN ONCOLOGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE 8 - STOCK OPTIONS
The Company's 1993 Key Employee Stock Option Plan, as amended, provides
that employees may be granted options to purchase Common Stock. Total shares
available for grant are limited to 7% of the outstanding common shares plus the
shares to be issued to physician groups at specified future dates. Individual
option vesting and related terms are determined by the Compensation Committee of
the Board of Directors. However, the stock option plan provides that the
options granted may be incentive options at an exercise price no less than fair
value at the grant date or 85% of fair value in the case of nonqualified
options. Option terms may not exceed ten years. Individual option grants vest
ratably over time, generally five years. Effective November 7, 1996, the Board
of Directors exchanged 626,100 options with exercise prices of $18.10 to $24.18
for new options with an exercise price of $8.79, which approximated fair value
on the date of grant.
Under the terms of the Company's Chief Executive Officer Stock Option Plan
and Agreement and the Everson Stock Option Plan and Agreement, two executives
were granted 3,693,798 non-qualified options to purchase Common Stock with an
exercise price effectively equal to the fair market value at the date of grant.
The options vested on the date of the Company's initial public offering and
expire between 2000 and 2003. The Company's ability to grant further options
under these plans ceased on the date of the Company's initial public stock
offering. At December 31, 1997, 2,218,428 Common Stock options with a weighted-
average exercise price of $3.33 per share were outstanding and exercisable under
the terms of these plans.
The Company's 1993 Non-Employee Director Stock Option Plan provides that up
to 200,400 options to purchase Common Stock can be granted. The options vest in
6 months or ratably over 4 years, have a term of 10 years and exercise prices
effectively equal to the fair market value at the date of grant. As of December
31, 1997, 104,000 options were outstanding , all of which were vested and
exercisable.
The Company's 1993 Affiliate Stock Option Plan, as amended, provides that
options to purchase up to 1,000,000 shares of Common Stock can be granted.
Options under the plan have a term of 10 years. All individual option grants
vest ratably over the vesting periods of 3 to 5 years. Effective November 7,
1996, the Board of Directors exchanged 61,500 options with exercise prices of
$18.10 to $24.18 for new options with an exercise price of $8.79 which
approximated fair value on the date of grant. Of the outstanding options to
purchase shares of Common Stock granted under this plan, 324,000 were granted to
physician employees of the affiliated physician groups and 24,250 were granted
to other employees of the affiliated physician groups. In 1997 and 1996, the
fair value of the options granted to non-employees was $8.21 and $13.06,
respectively. Compensation expense will be recognized over the respective
vesting periods. Expense of $270,000 and $106,000 was recognized in 1997 and
1996, respectively.
All of the Company's Common Stock options vest automatically upon a change
in control of the Company, as defined in such stock option plans.
38
<PAGE>
AMERICAN ONCOLOGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The following summarizes the activity for all option plans:
Weighted
Average
Shares Exercise Price
----------- --------------
Balance, December 31, 1994.. 3,298,000 $ 2.28
Granted................... 2,549,000 8.78
Exercised................. (12,000) 2.67
Canceled.................. (49,000) 3.17
----------
Balance, December 31, 1995.. 5,786,000 5.14
Granted................... 1,080,000 13.53
Exercised................. (893,000) 1.70
Canceled.................. (1,154,000) 19.09
----------
Balance, December 31, 1996.. 4,819,000 4.30
Granted 1,440,000 12.73
Exercised................. (415,000) 3.14
Canceled.................. (135,000) 10.68
----------
Balance, December 31, 1997.. 5,709,000 $ 6.36
==========
The following table summarizes information about the Company's stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------------ ---------------------------------------
Number Weighted-Average Weighted Number Weighted
Range of Outstanding Remaining Contractual Average Exercisable at Average
Exercise Prices at 12/31/97 Life Exercise Price 12/31/97 Exercise Price
- ----------------- ------------- ---------------------- ------------------ ----------------- --------------------
<S> <C> <C> <C> <C> <C>
$ 1 to 3 1,774,000 3.8 years $ 2.25 1,616,000 $ 2.26
4 to 9 3,220,000 6.5 6.49 1,764,000 4.80
15 to 24 715,000 9.6 16.00 16,000 24.18
----------- -----------
1 to 24 5,709,000 6.1 $ 6.36 3,396,000 $ 3.68
=========== ===========
</TABLE>
39
<PAGE>
AMERICAN ONCOLOGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 ("SFAS No. 123"), "Accounting for Stock-
Based Compensation. " Accordingly, no compensation cost has been recognized for
fixed options granted to Company employees. Had compensation cost for the
Company's five stock option plans been determined based on the fair value at the
grant date for awards in 1996 and 1995 consistent with the provisions of SFAS
No. 123, the Company's pro forma net income and net income per share would have
been as follows:
Pro forma
Year Ended December 31,
-----------------------
1997 1996
------------ ---------
Net income............ $21,102 $16,656
Net income per share.. $ 0.44 $ 0.35
During the initial phase-in of SFAS No. 123, this pro forma is not likely
to be representative of the effects on reported net income for future years as
options granted prior to 1995 are not included in the calculation.
Options granted in 1997 and 1996 had weighted-average fair values of $9.11
and $6.04, respectively. The fair value of each Common Stock option grant is
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted-average assumptions used for grants from all plans in
1997 and 1996:
1997 1996
----- -----
Expected life (years)........... 5 5
Risk-free interest rate......... 5.2% 5.1%
Expected volatility (post IPO).. 81% 87%
Expected dividend yield......... 0% 0%
40
<PAGE>
AMERICAN ONCOLOGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE 9 - COMMITMENTS AND CONTINGENCIES
The Company leases office space and certain equipment under noncancelable
operating lease agreements. Total future minimum lease payments, including
escalation provisions and leases with entities affiliated with physician groups,
are $12,315,000 in 1998, $11,074,000 in 1999, $9,686,000 in 2000, $8,649,000 in
2001, $7,064,000 in 2002 and $11,417,000 thereafter. Rental expense under
noncancelable operating leases was $12,274,000 in 1997, $8,565,000 in 1996 and
$4,459,000 in 1995.
In December 1997, the Company entered into a $75,000,000 master lease
agreement for the purpose of financing property and construction of integrated
cancer centers. Under the agreement, the lessor purchases the properties, pays
for the construction costs and thereafter leases the facilities to the Company.
The initial term of the lease is for five years and can be renewed in one year
increments if approved by the lessor. The lease provides for substantial
residual value guarantees and includes purchase options at original cost on each
option.
The Company and its affiliated physician groups maintain insurance with
respect to medical malpractice risks on a claims-made basis in amounts believed
to be customary and adequate. Management is not aware of any outstanding claims
or unasserted claims probable of assertion against it or its affiliated
physician groups which would have a material impact on the Company's financial
position or results of operations.
NOTE 10 - RELATED PARTIES
The management services agreement activity between the Company and the
affiliated physician groups is reflected in the due to/from affiliated physician
groups components on the consolidated balance sheet.
The Company leases a portion of its medical office space and equipment, at
rates which the Company believes approximate fair market value, from entities
affiliated with certain of the stockholders of physician groups affiliated with
the Company. Payments under these leases were $2,621,000 in 1997, $2,296,000 in
1996 and $1,854,000 in 1995 and total future commitments are $12,649,000.
The subordinated notes are payable to the persons or entities which are
also stockholders or holders of rights to receive Common Stock at specified
future dates. Total interest expense to these parties was $5,186,000 in 1997,
$3,885,000 in 1996 and $1,909,000 in 1995.
A director and a stockholder is a partner of a law firm utilized by the
Company. The Company incurred $584,000 in 1997, $651,000 in 1996 and $904,000
in 1995 for legal services provided by the firm.
Three of the Company's directors are practicing physicians with physician
groups affiliated with the Company. In 1997, the three physician groups
generated total medical service revenues of $40,378,000 of which $8,484,000 was
retained by the groups and $31,894,000 was included in the Company's revenue. In
1996, the three physician groups generated total medical service revenues of
$37,725,000 of which $8,218,000 was retained by the groups and $29,507,000 was
included in the Company's revenue. In 1995, three physician groups generated
total medical service revenues of $31,782,000 of which $6,694,000 was retained
by the groups and $25,088,000 was included in the Company's revenue.
41
<PAGE>
AMERICAN ONCOLOGY RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE 11 - QUARTERLY FINANCIAL DATA
The following table presents the Company's unaudited quarterly information
(in thousands, except per share amounts):
<TABLE>
<CAPTION>
1997 Quarter Ended 1996 Quarter Ended
------------------------------ --------------------------------------
Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31
------ ------ ------ ------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................... 89,626 82,293 79,525 70,396 $63,635 $53,701 $47,374 $40,750
Income from operations.... 12,468 11,513 11,343 9,889 9,259 7,782 7,297 7,629
Net income................ 6,166 5,910 5,719 5,072 4,840 4,303 4,060 4,447
Net income per share
(Basic).................. 0.13 0.13 0.13 0.11 0.11 0.10 0.09 0.10
Net income per share
(Diluted)................ 0.13 0.12 0.12 0.11 0.10 0.09 0.09 0.09
</TABLE>
42
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 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.
AMERICAN ONCOLOGY RESOURCES, INC.
By: /s/ R. DALE ROSS
--------------------------------
R. Dale Ross
Chairman of the Board and
Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ R. DALE ROSS Chairman of the Board, March 19, 1998
- ----------------------------------- Chief Executive Officer
R. Dale Ross and Director
/s/ LLOYD K. EVERSON, M.D. President and Director March 19, 1998
- -----------------------------------
Lloyd K. Everson, M.D.
/s/ L. FRED POUNDS Vice President of Finance, March 19, 1998
- ----------------------------------- Chief Financial Officer
L. Fred Pounds and Treasurer
/s/ RUSSELL L. CARSON Director March 19, 1998
- -----------------------------------
Russell L. Carson
Director
- -----------------------------------
Kyle M. Fink, M.D.
/s/ RICHARD B. MAYOR Director March 17, 1998
- -----------------------------------
Richard B. Mayor
/s/ MAGARAL S. MURALI, M.D. Director March 18, 1998
- -----------------------------------
Magaral S. Murali, M.D.
/s/ ROBERT A. ORTENZIO Director March 19, 1998
- -----------------------------------
Robert A. Ortenzio
/s/ EDWARD E. ROGOFF, M.D. Director March 18, 1998
- -----------------------------------
Edward E. Rogoff, M.D.
</TABLE>
43
<PAGE>
EXHIBIT 10.1
THIRD AMENDED AND RESTATED
LOAN AGREEMENT
AMONG
FIRST UNION NATIONAL BANK
AS AGENT
VARIOUS LENDERS
AND
AMERICAN ONCOLOGY RESOURCES, INC.
AS BORROWER
$150,000,000 Revolving Credit Facility
DECEMBER 29, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
Recitals...................................................................... 1
ARTICLE I.
DEFINITIONS
1.1 Defined Terms............................................................ 2
1.2 Accounting Terms.........................................................22
1.3 Singular/Plural..........................................................23
1.4 Other Terms..............................................................23
ARTICLE II.
AMOUNT AND TERMS OF THE LOANS
2.1 Commitments; Loans.......................................................23
2.2 Committed Borrowings.....................................................24
2.3 Bid Borrowings...........................................................25
2.4 Disbursements; Funding Reliance; Domicile of Loans.......................29
2.5 Notes....................................................................30
2.6 Termination and Reduction of Commitments.................................30
2.7 Payments; Voluntary, Mandatory...........................................31
2.8 Interest.................................................................32
2.9 Fees.....................................................................33
2.10 Interest Periods.........................................................34
2.11 Conversions and Continuations............................................35
2.12 Method of Payments; Computations.........................................36
2.13 Increased Costs, Change in Circumstances, etc............................38
2.14 Taxes....................................................................40
2.15 Compensation.............................................................42
2.16 Use of Proceeds..........................................................43
2.17 Recovery of Payments.....................................................43
2.18 Pro Rata Borrowings......................................................43
2.19 Substitution of Lender...................................................44
2.20 Letters of Credit........................................................44
ARTICLE III.
CLOSING; CONDITIONS OF CLOSING AND BORROWING
3.1 Conditions of Initial Borrowing..........................................51
3.2 Conditions of All Borrowings.............................................54
i
<PAGE>
3.3 Waiver of Conditions Precedent...........................................54
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
4.1 Corporate Organization and Power.........................................55
4.2 Litigation; Government Regulation........................................55
4.3 Taxes....................................................................55
4.4 Enforceability of Loan Documents; Compliance with Other Instruments......56
4.5 Governmental Authorization...............................................56
4.6 Event of Default.........................................................57
4.7 Margin Securities........................................................57
4.8 Full Disclosure..........................................................57
4.9 Principal Places of Business.............................................57
4.10 ERISA; Employee Benefits.................................................58
4.11 Subsidiaries.............................................................59
4.12 Financial Statements.....................................................59
4.13 Title to Assets..........................................................59
4.14 Solvency.................................................................60
4.15 Use of Proceeds..........................................................60
4.16 Assets for Conduct of Business...........................................60
4.17 Compliance with Laws.....................................................60
4.18 Environmental Matters....................................................60
4.19 First Priority...........................................................61
4.20 Contracts; Labor Disputes................................................61
4.21 Insurance................................................................61
4.22 Reimbursement from Third Party Payors....................................61
4.23 Fraud and Abuse..........................................................61
4.24 Single Business Enterprise...............................................62
4.25 Continuing Security Interest.............................................62
ARTICLE V.
AFFIRMATIVE COVENANTS
5.1 Financial and Business Information about the Borrower....................63
5.2 Notice of Certain Events.................................................64
5.3 Corporate Existence and Maintenance of Properties........................65
5.4 Payment of Debt..........................................................65
5.5 Maintenance of Insurance.................................................66
5.6 Maintenance of Books and Records; Inspection.............................66
5.7 COBRA....................................................................66
5.8 Payment of Taxes.........................................................66
5.9 Compliance with Laws.....................................................67
5.10 Name Change..............................................................67
ii
<PAGE>
5.11 Creation or Acquisition of New Subsidiaries..............................67
5.12 Recoveries in Bankruptcy Proceedings.....................................68
5.13 Solvency of Subsidiaries.................................................68
5.14 Certain Physician Transactions...........................................68
5.15 Year 2000 Compatibility..................................................69
ARTICLE VI.
NEGATIVE COVENANTS
6.1 Merger, Consolidation....................................................70
6.2 Physician Transactions...................................................70
6.3 Debt.....................................................................70
6.4 Contingent Obligations...................................................71
6.5 Liens and Encumbrances...................................................71
6.6 Disposition of Assets....................................................72
6.7 Transactions with Related Persons........................................72
6.8 Restricted Investments; Loans............................................73
6.9 Restricted Payments......................................................73
6.10 Capital Expenditures.....................................................73
6.11 Consolidated Net Worth...................................................73
6.12 EBITDA to Interest Expense...............................................74
6.13 Annualized EBITDAR to Debt Service Ratio.................................74
6.14 Consolidated Debt to Annualized EBITDA...................................74
6.15 Consolidated Debt to Consolidated Total Capital..........................74
6.16 Sale and Leaseback.......................................................74
6.17 New Business.............................................................74
6.18 Subsidiaries or Partnerships.............................................74
6.19 Transactions Affecting the Collateral....................................74
6.20 Hazardous Wastes.........................................................74
6.21 Fiscal Year..............................................................75
6.22 Amendments; Prepayments of Subordinated Debt or Permitted Subordinated
Debt, etc................................................................75
6.23 Fraud and Abuse..........................................................75
ARTICLE VII.
EVENTS OF DEFAULT
7.1 Events of Default........................................................76
ARTICLE VIII.
RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT
8.1 Remedies: Termination of Commitments, Acceleration, etc..................79
iii
<PAGE>
8.2 Right of Setoff.........................................................80
8.3 Rights and Remedies Cumulative; Non-Waiver; etc.........................80
ARTICLE IX.
THE AGENT
9.1 Appointment.............................................................80
9.2 Nature of Duties........................................................80
9.3 Exculpatory Provisions..................................................81
9.4 Reliance by Agent.......................................................81
9.5 Non-Reliance on Agent and Other Lenders.................................82
9.6 Notice of Default.......................................................82
9.7 Indemnification.........................................................82
9.8 The Agent in its Individual Capacity....................................83
9.9 Successor Agent.........................................................83
9.10 Collateral Matters......................................................84
9.11 Applicable Parties......................................................84
ARTICLE X.
MISCELLANEOUS
10.1 Survival................................................................84
10.2 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial............85
10.3 Arbitration; Preservation and Limitation of Remedies....................86
10.4 Notice..................................................................87
10.5 Assignments, Participations.............................................88
10.6 Fees and Expenses.......................................................91
10.7 Indemnification.........................................................91
10.8 Amendments, Waivers, etc................................................92
10.9 Rights and Remedies Cumulative, Non-Waiver, etc.........................93
10.10 Binding Effect, Assignment..............................................93
10.11 Severability............................................................93
10.12 Entire Agreement........................................................93
10.13 Interpretation..........................................................94
10.14 Counterparts, Effectiveness.............................................94
10.15 Conflict of Terms.......................................................94
10.16 Injunctive Relief.......................................................94
10.17 Confidentiality.........................................................94
10.18 Post-Closing Matters....................................................95
EXHIBITS
Exhibit A-1 - Form of Committed Loan Note
iv
<PAGE>
Exhibit A-2 - Form of Bid Loan Note
Exhibit B-1 - Form of Notice of Borrowing
Exhibit B-2 - Form of Notice of Conversion/Continuation
Exhibit B-3 - Form of Letter of Credit Request
Exhibit C-1 - Form of Bid Request
Exhibit C-2 - Form of Invitation for Bids
Exhibit C-3 - Form of Bid
Exhibit D - Form of Guaranty Agreement
Exhibit E-1 - Form of Security Agreement
Exhibit E-2 - Form of Guarantors' Security Agreement
Exhibit F - Form of Compliance Certificate
Exhibit G - Form of Assignment and Acceptance
SCHEDULES
Schedule 1.1(a) Existing Liens
Schedule 1.1(b) Example of Permitted Subordinated Debt Instrument
Schedule 4.1 Corporate Organization
Schedule 4.2 Litigation; Government Regulation
Schedule 4.3 Taxes
Schedule 4.4 Defaults
Schedule 4.9 Principal Places of Business
Schedule 4.10 ERISA Matters
Schedule 4.11 Subsidiaries
Schedule 4.13 Exceptions to Title to Assets
Schedule 4.21 Insurance
Schedule 6.8 Investments; Loans
v
<PAGE>
EXECUTION - 12/31/97
THIRD AMENDED AND RESTATED LOAN AGREEMENT
THIS THIRD AMENDED AND RESTATED LOAN AGREEMENT, dated as of the 29th day of
December, 1997 (the "Loan Agreement" or "Agreement"), is made among AMERICAN
ONCOLOGY RESOURCES, INC., a Delaware corporation (the "Borrower") with its
principal offices in Houston, Texas, the banks and other financial institutions
from time to time parties hereto (each, a "Lender," and collectively, the
"Lenders"), and FIRST UNION NATIONAL BANK , as Agent (the "Agent").
RECITALS
A. The Borrower, certain Lenders, and the Agent are parties to a Loan
Agreement, dated as of December 5, 1994, as amended by (i) a First Amendment to
Loan Agreement, dated as of March 23, 1995, (ii) a First Amended and Restated
Loan Agreement, dated as of January 31, 1996, (iii) a First Amendment to First
Amended and Restated Loan Agreement, dated as of September 24, 1996, (iv) a
Second Amended and Restated Loan Agreement, dated as of October 30, 1996 and (v)
a First Amendment to Second Amended and Restated Loan Agreement, dated as of
April 17, 1997 (such agreement, as heretofore amended and restated, the
"Original Agreement"), pursuant to which the Lenders have made a reducing
revolving credit facility (including a letter of credit subfacility) available
to the Borrower in the principal amount of $150,000,000.
B. The Borrower, the Lenders and the Agent have agreed to amend and
restate the Original Agreement to, among other things, (i) provide for a
competitive bid borrowing option under the reducing revolving credit facility
and (ii) allow the Borrower to enter into an End Loaded Lease Facility (the
"ELLF") in an amount not to exceed $75,000,000 for the synthetic lease financing
of the acquisition or construction of certain health care facilities.
C. The Subsidiaries of the Borrower have jointly and severally guaranteed
all of the obligations of the Borrower under the Original Agreement and the loan
documents relating thereto and have further guaranteed the Borrower's Swingline
Note (as defined below) to the Agent in the maximum principal amount of
$5,000,000. Such Subsidiaries have consented to this Loan Agreement, and their
guarantees shall relate to the Obligations (defined below) of the Borrower
hereunder and under the other Loan Documents (defined below).
D. The parties acknowledge that this Loan Agreement and each of the other
Loan Documents have been negotiated and delivered in Charlotte, North Carolina.
E. The Lenders are willing to make the Loans described herein based on the
terms and conditions set forth herein.
<PAGE>
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower, the Lenders and the
Agent hereby agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Defined Terms. For purposes of this Loan Agreement, in addition to the
terms defined elsewhere in this Loan Agreement, the following terms shall have
the meanings set forth below:
"Absolute Rate" shall have the meaning given to such term in SECTION
2.3(C)(V).
"Absolute Rate Auction" shall mean a solicitation of Bids setting forth
Absolute Rates pursuant to SECTION 2.3.
"Absolute Rate Loan" shall mean, at any time, any Bid Loan that bears
interest at such time at an Absolute Rate established pursuant to an Absolute
Rate Auction.
"Account Designation Letter" shall mean a letter from the Borrower to the
Agent, duly completed and signed by an Authorized Officer of the Borrower and in
form and substance satisfactory to the Agent, listing any one or more accounts
to which the Borrower may from time to time request the Agent to forward the
proceeds of any Loans made hereunder.
"Adjusted LIBOR Rate" shall mean, at any time with respect to any LIBOR
Committed Loan, a rate per annum equal to the LIBOR Rate plus the Applicable
Margin for LIBOR Loans, each as in effect at such time.
"Affiliate" shall mean, as to any Person, each of the Persons that directly
or indirectly, through one or more intermediaries, owns or controls, or is
controlled by or under common control with, such Person. For the purpose of
this definition, "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of management and policies, whether
through the ownership of voting securities, by contract or otherwise.
"Agent" shall mean First Union, in its capacity as appointed in ARTICLE IX
hereof, and its permitted successors and assigns.
"Agreement" or "this Agreement" or "Loan Agreement" shall mean this Loan
Agreement and any amendments, modifications and supplements hereto, any
replacements, renewals, extensions and restatements hereof, and any substitutes
herefor, in whole or in part and all Schedules and Exhibits hereto, and shall
refer to this Agreement as the same may be in effect at the time such reference
becomes operative.
2
<PAGE>
"Annualized EBITDA" shall mean, with respect to the Borrower and its
Subsidiaries, on a consolidated basis, as of the last day of any fiscal quarter,
the product of (a) EBITDA for the fiscal quarter ending on such date, multiplied
by (b) four (4).
"Annualized EBITDAR" shall mean, with respect to the Borrower and its
Subsidiaries, on a consolidated basis, as of the last day of any fiscal quarter,
the product of (a) the sum of (i) EBITDA for the fiscal quarter ending on such
date, plus (ii) Lease Expense for the fiscal quarter ending on such date,
multiplied by (b) four (4).
"Applicable Margin" shall mean, at any time with respect to any LIBOR
Committed Loan, the applicable percentage points as determined under the
following matrix with reference to the ratio of Consolidated Debt to Annualized
EBITDA calculated as provided below:
Ratio of Consolidated
Debt to Annualized EBITDA Applicable Margin
-------------------------
Greater than 3.00 to 1.0 0.875%
Greater than 2.50 to 1.0 0.800%
but less than or equal
to 3.00 to 1.0
Greater than 2.00 to 1.0 0.550%
but less than or equal
to 2.50 to 1.0
Greater than 1.50 to 1.0 0.450%
but less than or equal
to 2.00 to 1.0
Less than or equal to 0.325%
1.50 to 1.0
From the Closing Date until the fifth (5th) day after receipt by the Agent
of the December 1, 1997 financial statements pursuant to SECTION 5.1(B) below,
the Applicable Margin shall be 0.80%. The Applicable Margin shall be reset from
time to time in accordance with the above matrix on the fifth (5th) day after
receipt by the Agent in accordance with SECTIONS 5.1(A) and (B) of financial
statements together with a Compliance Certificate (reflecting the computation of
the ratio of Consolidated Debt to Annualized EBITDA as of the last day of the
preceding fiscal quarter or fiscal year, as appropriate).
"Assignment and Acceptance" shall mean an Assignment and Acceptance
Agreement entered into between a Lender and an Eligible Assignee, and accepted
by the Agent, in substantially the form of EXHIBIT G.
3
<PAGE>
"Assignment Restrictions" shall mean, with respect to any contracts or
agreements assigned to the Agent, on behalf of the Lenders, as Collateral by the
Borrower or any Subsidiary, any restriction or prohibition on assignment that
has not been waived or consented to by the Person for whose benefit such
restriction or prohibition exists with respect to which the Agent has waived the
requirement of such waiver or consent.
"Authorized Officer" shall mean any officer of the Borrower authorized by
resolution of the board of directors of the Borrower to take the action
specified herein with respect to such officer and whose signature and incumbency
shall have been certified to the Agent by the secretary or an assistant
secretary of the Borrower.
"Bankruptcy Code" shall mean 11 U.S.C. (S) 101 et seq., as amended, and any
successor statute or statute having substantially the same function.
"Base Rate" shall mean, at any time, a rate per annum equal to the higher
of (i) the per annum interest rate publicly announced from time to time by First
Union in Charlotte, North Carolina, to be its prime or base rate (which may not
necessarily be its best lending rate), as adjusted to conform to changes as of
the opening of business on the date of any such change in such prime or base
rate, or (ii) one-half percentage point (0.5%) per annum in excess of the
Federal Funds Rate, as adjusted to conform to changes as of the opening of
business on the date of any such change in the Federal Funds Rate.
"Base Rate Loan" shall mean, at any time, any Committed Loan that bears
interest at such time at the Base Rate.
"Bid" shall mean an offer by a Lender to make one or more Bid Loans in
accordance with the provisions of SECTION 2.3.
"Bid Borrowing" shall mean the incurrence by the Borrower on a single date
of any one or more Bid Loans of a single Type and as to which a single Interest
Period is in effect, in accordance with the provisions of SECTION 2.3.
"Bid Loan Notes" shall mean the promissory notes of the Borrower in
substantially the form of EXHIBIT A-2, together with any amendments,
modifications and supplements thereto, substitutions therefor and restatements
thereof.
"Bid Loans" shall have the meaning given to such term in SECTION 2.1(B).
"Bid Request" shall have the meaning given to such term in SECTION 2.3(A).
"Bloodborne Pathogens Standard" shall mean the Final Standard for
Occupational Exposure to Bloodborne Pathogens promulgated by OSHA at 56 Federal
Register 64004 et seq. (December 6, 1991) and codified at 29 C.F.R. (S)
1910.1030, or any similar regulation promulgated by any Governmental Authority.
4
<PAGE>
"Borrower" shall mean American Oncology Resources, Inc., a Delaware
corporation, and its successors and assigns.
"Borrowing" shall mean a Committed Borrowing or a Bid Borrowing on a given
date.
"Borrowing Date" shall mean a Business Day on which a Borrowing is made.
"Business Day" shall mean (i) any day other than a Saturday or Sunday, a
legal holiday or a day on which commercial banks in Charlotte, North Carolina
or, in respect of any determination relevant to a Loan, New York City are
required by law to be closed and (ii) in respect of any determination relevant
to a LIBOR Loan, any such day that is also a day on which tradings are conducted
in the London interbank Eurodollar market.
"Capital Asset" shall mean any asset that would, in accordance with
Generally Accepted Accounting Principles, be required to be classified and
accounted for as a capital asset.
"Capital Expenditures" shall mean the aggregate amount of all expenditures
and liabilities (including, without limitation, Capital Lease Obligations) made
and incurred in respect of the acquisition by the Borrower or any Subsidiary of
Capital Assets.
"Capital Lease" shall mean (i) any lease of any property that would, in
accordance with Generally Accepted Accounting Principles, be required to be
classified and accounted for as a capital lease on the balance sheet of the
lessee and (ii) any lease entered into pursuant to the ELLF and any other tax
retention operating lease or synthetic lease that is treated as a capital lease
of the lessee or its consolidated group for tax purposes.
"Capital Lease Obligation" shall mean, with respect to any Capital Lease,
the amount of the obligation of the lessee thereunder that would, in accordance
with Generally Accepted Accounting Principles, appear on a balance sheet as a
liability of such lessee in respect of such Capital Lease (or such amount
similarly calculated for any Capital Lease that does not appear on a balance
sheet), net of any government grant applicable to such Capital Lease.
"Cash Collateral Account" shall have the meaning given to such term in
SECTION 2.20(J).
"Cash Investments" shall mean (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or issued by any
agency thereof and backed by the full faith and credit of the United States of
America, in each case maturing within one year from the date of acquisition
thereof; (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 maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having the highest rating obtainable
from either Standard & Poor's Ratings Services or Moody's Investors Service,
Inc.; (iii) marketable commercial paper maturing no more than one year from the
date of creation thereof and, at the time of acquisition, having a rating of at
least A-1 or the equivalent thereof by Standard & Poor's Ratings Services or at
least P-1 or the equivalent thereof by Moody's Investors Service, Inc.; (iv)
demand deposits, time deposits and certificates of deposit maturing within one
(1) year from the date of issuance thereof and issued by a bank or trust company
organized under the laws of the United States of America or any state
5
<PAGE>
thereof and having a long term debt rating by Standard & Poor's Ratings Services
of A or higher and (v) any mutual fund that invests solely in any of the items
described in clauses (i), (ii), (iii) and (iv) of this paragraph.
"Change of Control" shall mean the occurrence of any one or more of the
following: (i) the Borrower shall merge or consolidate with or into another
corporation with the effect that the Persons who were the shareholders of the
Borrower immediately prior to the effective time of such merger or consolidation
hold less than 51% of the combined voting power of the outstanding securities of
the surviving corporation of such merger or the corporation resulting from such
consolidation ordinarily (and apart from rights accruing under special
circumstances) having the right to vote in the election of directors, or (ii)
any Person or "group" (within the meaning of Section 13(d)(3) of the Exchange
Act), other than the Welsh, Carson, Anderson and Stowe group or any of its
affiliates, shall, directly or indirectly, as a result of a tender or exchange
offer, open market purchases, privately negotiated purchases or otherwise, have
become, after the Closing Date, the "beneficial owner" (within the meaning of
Rule 13d-3 under the Exchange Act) of securities of the Borrower representing
49% or more of the combined voting power of the then outstanding securities of
the Borrower ordinarily (and apart from rights accruing under special
circumstances) having the right to vote in the election of directors.
"Closing" shall mean the closing of the initial transactions contemplated
by this Agreement.
"Closing Date" shall mean the date upon which the Closing takes place.
"Collateral" shall mean all right, title and interest of the Borrower and
each Guarantor in (i) its Management Services Agreements and the proceeds
thereof, (ii) the Securities (as defined in the Security Agreements) owned by
such Borrower or Guarantor and the proceeds thereof, and (iii) all other
property and interests in property that shall, from time to time, be
collaterally assigned to secure the Obligations or the obligations of any
Guarantor under the Guaranty Agreement, in each case whether now owned or
existing or hereafter acquired or arising and whether in the possession or
control of the Borrower, any Guarantor or the Agent, for the benefit of the
Lenders, or any Lender.
"Committed Borrowing" shall mean the incurrence by the Borrower (including
as a result of conversions and continuations of outstanding Committed Loans
pursuant to SECTION 2.11) on a single date of a group of Committed Loans of a
single Type and, in the case of LIBOR Committed Loans, as to which a single
Interest Period is in effect.
"Committed Loan Notes" shall mean the promissory notes of the Borrower in
substantially the form of EXHIBIT A-1, together with any amendments,
modifications and supplements thereto, substitutions therefor and restatements
thereof.
"Committed Loans" shall have the meaning given to such term in SECTION
2.1(A).
"Commitment" shall mean, with respect to any Lender at any time, the amount
set forth opposite such Lender's name on its signature page hereto under the
caption "Commitment" or, if
6
<PAGE>
such Lender has entered into one or more Assignment and Acceptances, the amount
set forth for such Lender at such time in the Register maintained by the Agent
pursuant to SECTION 10.5(B) as such Lender's "Commitment," as such amount may be
reduced at or prior to such time pursuant to the terms hereof.
"Compliance Certificate" shall mean a fully completed certificate in the
form of EXHIBIT F.
"Consolidated Debt" shall mean, at any time, the aggregate (without
duplication) of all Debt of the Borrower and its Subsidiaries as of such date,
determined on a consolidated basis.
"Consolidated Net Income" shall mean, for any period, the net income (or
loss) of the Borrower and its Subsidiaries, on a consolidated basis and
excluding intercompany items, for such period, determined in accordance with
Generally Accepted Accounting Principles, but excluding as income: (a) gains on
the sale, conversion or other disposition of Capital Assets, (b) gains on the
acquisition, retirement, sale or other disposition of Stock of the Borrower or
any Subsidiary, (c) gains on the collection of life insurance proceeds, (d) any
write-up of any asset, and (e) any other gain or credit of an extraordinary
nature.
"Consolidated Net Revenue" shall mean, for any period, the revenues of the
Borrower and its Subsidiaries, on a consolidated basis and excluding
intercompany items, for such period, determined in accordance with Generally
Accepted Accounting Principles, but excluding as revenue: (a) the sale or other
disposition of Capital Assets, (b) the sale or other disposition of Stock of the
Borrower or any Subsidiary, (c) the collection of life insurance proceeds, (d)
any write-up of any asset, and (e) any other source of revenue of an
extraordinary nature.
"Consolidated Net Worth" shall mean, as of the last day of any fiscal
quarter, the net worth of the Borrower and its Subsidiaries as of such date,
determined on a consolidated basis in accordance with Generally Accepted
Accounting Principles.
"Consolidated Total Capital" shall mean, with respect to the Borrower and
its Subsidiaries, at any time, the sum of Consolidated Net Worth and
Consolidated Debt.
"Contingent Obligation" shall mean, with respect to any Person, any direct
or indirect liability of such Person with respect to any Debt, lease, dividend,
guaranty, letter of credit or other obligation (the "primary obligation") of
another Person (the "primary obligor"), whether or not contingent, (a) to
purchase, repurchase or otherwise acquire such primary obligations or any
property constituting direct or indirect security therefor, (b) to advance or
provide funds (i) for the payment or discharge of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet item, level
of income or financial condition of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor in respect
thereof to make payment of such primary obligation or (d) otherwise to assure or
hold harmless the owner of any such primary obligation against loss or failure
or inability to perform in respect thereof. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or
7
<PAGE>
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by such Person
in good faith.
"Covenant Compliance Worksheet" shall mean a fully completed certificate in
the form of Attachment A to EXHIBIT F.
"Credit Parties" shall have the meaning given to such term in the
Participation Agreement.
"Debt" shall mean, with respect to any Person, without duplication, (i) all
indebtedness of such Person for money borrowed, (ii) all reimbursement
obligations of such Person with respect to surety bonds, letters of credit and
bankers' acceptances (in each case, whether or not matured), (iii) all
obligations of such Person evidenced by notes, bonds, debentures or similar
instruments, (iv) all obligations of such Person to pay the deferred purchase
price of property or services (including seller subordinated notes, contingent
or otherwise), other than trade payables, (v) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property), (vi) all Capital Lease Obligations of
such Person, (vii) all obligations of such Person to purchase, redeem, retire,
defease or otherwise make any payment in respect of any capital stock or other
equity securities that, by their stated terms (or by the terms of any equity
securities issuable upon conversion thereof or in exchange therefor), or upon
the occurrence of any event, mature or are mandatorily redeemable, or are
redeemable at the option of the holder thereof, in whole or in part, (viii) all
indebtedness referred to in clauses (i) through (vii) above to the extent
secured by any lien on any property or asset owned or held by such Person
regardless of whether the indebtedness secured thereby shall have been assumed
by such Person or is nonrecourse to the credit of such Person and (x) any
Contingent Obligation of such Person.
"Debt Service" shall mean, with respect to the Borrower and its
Subsidiaries on a consolidated basis as of the last day of any fiscal quarter,
the sum of (a) Fixed Charges for the fiscal quarter ending on such date
multiplied by four (4) plus (b) current maturities (due within twelve months) of
all Debt (provided that the amount outstanding under the Facility shall not be
considered a current maturity of Debt solely by reason of the Maturity Date
falling within such twelve month period).
"Default" shall mean any event that, with the passage of time or giving of
notice, or both, would constitute an Event of Default.
"Dollars" or "$" shall mean dollars of the United States of America.
"EBITDA" shall mean, for any period, an amount equal to, without
duplication, the sum of (a) net income (determined in accordance with Generally
Accepted Accounting Principles) earned in such period, plus (b) to the extent
net income has been reduced thereby, the sum of (i) depreciation and
amortization expense, plus (ii) Interest Expense, plus (iii) federal and state
income taxes.
8
<PAGE>
"Eligible Assignee" shall mean (i) a commercial bank organized under the
laws of the United States or any state thereof and having total assets in excess
of $5,000,000,000, (ii) a commercial bank organized under the laws of any other
country that is a member of the OECD or a political subdivision of any such
country and having total assets in excess of $5,000,000,000, provided that such
bank is acting through a branch or agency located in the United States, in the
country under the laws of which it is organized or in another country that is
also a member of the OECD, (iii) the central bank of any country that is a
member of the OECD, (iv) a finance company, mutual fund, insurance company or
other financial institution that is engaged in making, purchasing or otherwise
investing in commercial loans in the ordinary course of its business and having
total assets in excess of $500,000,000, (v) any Affiliate of an existing Lender
or (vi) any other Person (other than an Affiliate of the Borrower) approved by
the Agent and the Borrower, which approval shall not be unreasonably withheld;
provided, however, that in no event shall the withholding of approval by the
Borrower under this definition or SECTION 10.5 be considered unreasonable if (i)
the Borrower has had prior dealings with such Person which the Borrower regards
as unfavorable or (ii) such Person provides banking or other financial services
to any of the Borrower's competitors.
"ELLF shall mean the End Loaded Lease Facility as embodied in the
Participation Agreement and the other Operative Agreements (as defined in the
Participation Agreement).
"Employee Plan" shall mean any "employee benefit plan" within the meaning
of Section 3(3) of ERISA maintained by the Borrower or any Subsidiary.
"Environmental Claims" shall mean any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations (other than internal reports prepared
by the Borrower or any Subsidiary solely in the ordinary course of its business
and not in response to any third party action or request of any kind) or
proceedings relating in any way to any Environmental Law or any permit issued,
or any approval given, under any such Environmental Law (hereinafter, "Claims"),
including, without limitation, (i) any and all Claims by Governmental
Authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law and (ii) any and
all Claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from Hazardous
Substances or arising from alleged injury or threat of injury to health or the
environment.
"Environmental Laws" shall mean any and all applicable laws, subsequent
enactments, amendments and modifications, including, without limitation,
federal, state and local laws, statutes, ordinances, rules, regulations,
permits, licenses, approvals, interpretations and orders of courts or
Governmental Authorities, relating to the protection of the environment (and
related human health issues), including, but not limited to, requirements
pertaining to the manufacture, processing, distribution, use, treatment,
storage, disposal, transportation, handling, reporting, licensing, permitting,
investigation or remediation of Hazardous Substances. Environmental Laws
include, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. (S) 9601 et seq.) ("CERCLA"), the
Hazardous Material Transportation Act (49 U.S.C. (S) 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. (S) 6901 et seq.) ("RCRA"), the Federal
Water Pollution Control Act (33 U.S.C. (S) 1251 et
9
<PAGE>
seq.), the Clean Air Act (42 U.S.C. (S) 7401 et seq.), the Toxic Substances
Control Act (15 U.S.C. (S) 2601 et seq.), the Safe Drinking Water Act (42 U.S.C.
(S) 300, et seq.), the Environmental Protection Agency's regulations relating to
underground storage tanks (40 C.F.R. Parts 280 and 281), and the Occupational
Safety and Health Act (29 U.S.C. (S) 651 et seq.) ("OSHA"), as such laws have
been amended or supplemented and any analogous federal, state or local, statutes
and the rules and regulations promulgated thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and all rules and regulations from time to time
promulgated thereunder.
"ERISA Affiliate" shall mean any Person that would be deemed to be under
"common control" with, or a member of the same "controlled group" as, the
Borrower or any of its Subsidiaries within the meaning of Section 414(b), (c),
(m) or (o) of the Internal Revenue Code or Section 4001 of ERISA.
"ERISA Event" means (a) a Reportable Event with respect to a Qualified Plan
(as defined in SECTION 4.10(C)); (b) a withdrawal by any ERISA Affiliate from
a Qualified Plan subject to Section 4063 of ERISA during a plan year in which it
was a substantial employer (as defined in Section 4001(a)(2) of ERISA); (c) a
complete or partial withdrawal by any ERISA Affiliate from a Multiemployer Plan;
(d) the filing of a notice of intent to terminate, the treatment of a plan
amendment as a termination under Section 4041 or 4041A of ERISA or the
commencement of proceedings by the Pension Benefit Guaranty Corporation to
terminate a Qualified Plan or Multiemployer Plan subject to Title IV of ERISA;
(e) a failure to make required contributions to a Qualified Plan or
Multiemployer Plan; (f) an event or condition which might reasonably be expected
to constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Qualified Plan or Multiemployer
Plan; (g) the imposition of any liability under Title IV of ERISA, other than
Pension Benefit Guaranty Corporation premiums due but not delinquent under
Section 4007 of ERISA, upon any ERISA Affiliate; (h) an application for a
funding waiver or an extension of any amortization period pursuant to Section
412 of the Internal Revenue Code with respect to any Qualified Plan; (i) any
ERISA Affiliate engages in or otherwise becomes liable for a non-exempt
prohibited transaction; or (j) a violation of the applicable requirements of
Section 404 or 405 of ERISA or the exclusive benefit rule under Section 401(a)
of the Internal Revenue Code by any fiduciary with respect to any Qualified Plan
for which any ERISA Affiliate may be directly or indirectly liable.
"Event of Default" shall have the meaning specified in ARTICLE VII hereof.
"Facility" shall mean the reducing revolving line of credit facility
established by the Lenders under SECTION 2.1.
"Federal Funds Rate" shall mean, for any day, the interest rate per annum
equal to the weighted average of the rates of 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 Richmond, or
if such rate is not so published on the relevant Business Day, the average of
the
10
<PAGE>
quotations for such day on such transactions received by the Agent from three
federal funds brokers of recognized standing selected by the Agent.
"Financials" or "Financial Statements" shall mean the audited consolidated
financial statements of the Borrower and its Subsidiaries for the fiscal years
ended December 31, 1995 and December 31, 1996; the unaudited consolidated
interim financial statements of the Borrower and its Subsidiaries for the nine
months ended September 30, 1997; and all other financial statements of the
Borrower and its Subsidiaries subsequent to December 31, 1995 that have
previously been delivered by the Borrower or any Subsidiary to the Agent or any
Lender in connection with this Agreement, including without limitation interim
financial statements.
"Financing Statements" shall mean financing statements approved for filing
in accordance with the applicable adopted version of the Uniform Commercial Code
and all other titles, documents, and certificates that the Agent may require
from the Borrower or any Guarantor to describe and perfect the security
interests created hereunder or under the other Loan Documents, and all
assignments thereof and amendments thereto, in form and substance satisfactory
to the Agent.
"First Union" shall mean First Union National Bank, a national banking
association, and its successors and assigns.
"Fixed Charges" shall mean at any time, with respect to the Borrower and
its Subsidiaries on a consolidated basis as of the last day of any fiscal
quarter, without duplication, the sum of Interest Expense and Lease Expense for
such fiscal quarter.
"Generally Accepted Accounting Principles" shall mean generally accepted
accounting principles, as recognized by the American Institute of Certified
Public Accountants, consistently applied and maintained on a consistent basis
for the Borrower and its Subsidiaries on a consolidated basis throughout the
period indicated and consistent with the financial practice of the Borrower and
its Subsidiaries after the date hereof.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof and any central bank thereof, any municipal,
local, city or county government, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guarantors" shall mean AOR, Inc., AOR Management Company of Indiana, Inc.,
AOR Holding Company of Indiana, Inc., AOR Management Company of Oregon, Inc.,
AOR Management Company of Oklahoma, Inc., AOR Management Company of
Pennsylvania, Inc., AOR Management Company of Missouri, Inc., AOR Management
Company of Arizona, Inc., AOR Management Company of South Carolina, Inc., AOR
Management Company of Virginia, Inc., AOR Management Company of North Carolina,
Inc., AOR Management Company of New York, Inc., AOR Management Company of
Florida, Inc., AOR Management Company of Nevada, Inc., AOR Management Company of
Texas, Inc., AOR Real Estate, Inc., AORT Holding Company, Inc., RMCC Cancer
Center, Inc., AORIP. Inc. (each of the foregoing a Delaware corporation and a
direct or indirect wholly-owned Subsidiary of the Borrower), AOR
11
<PAGE>
of Texas Management Limited Partnership and AOR of Indiana Management
Partnership, their successors and assigns, each future direct and indirect
Subsidiary and any other Person that guarantees the Obligations of the Borrower
and the obligations of the other Guarantors under the Guaranty Agreement;
provided, that unless requested by the Required Lenders AOR Synthetic Real
Estate, Inc. shall not be required to become a Guarantor so long as it (i) is
the Lessee (as defined in the Participation Agreement) under the ELLF, (ii) is
not a party to any Management Services Agreements and (iii) does not have any
Subsidiaries.
"Guarantors' Security Agreement" shall mean the Third Amended and Restated
Guarantors' Security Agreement, substantially in the form of EXHIBIT E-2,
together with any amendments, modifications and supplements thereto, any
replacements, renewals, extensions and restatements thereof, and any substitutes
therefor, in whole or in part.
"Guaranty Agreement" shall mean the Second Amended and Restated Guaranty
Agreement substantially in the form of EXHIBIT D, together with accessions
thereto at various dates thereafter, and all other similar guaranty agreements
and accessions executed and delivered from time to time by any Guarantor or
future Guarantor in form and substance satisfactory to the Lenders, together
with any amendments, modifications, supplements and accessions thereto, any
replacements, renewals, extensions and restatements thereof, and any substitutes
therefor, in whole or in part.
"HCFA" shall mean the United States Health Care Financing Administration
and any successor agency.
"Hazardous Substances" means any substances or materials (i) that are or
become defined as hazardous wastes, hazardous substances, pollutants,
contaminants or toxic substances under any Environmental Law, including, without
limitation, underground or above ground storage tanks; (ii) that are toxic,
explosive, corrosive, flammable, infectious, radioactive, mutagenic or otherwise
hazardous and that, in each case, are or become regulated under any
Environmental Law by any Governmental Authority; or (iii) the presence of which
requires investigation or remediation under any Environmental Law.
"IRS" shall mean the Internal Revenue Service and any successor thereto.
"Indemnified Costs" shall have the meaning assigned to such term in SECTION
10.7.
"Indemnified Person" shall have the meaning assigned to such term in
SECTION 10.7.
"Interest Expense" shall mean, for any period, total interest expense of
the Borrower and its Subsidiaries on a consolidated basis for such period
(including, without limitation, capitalized interest expense and interest
expense attributable to Capital Lease Obligations), determined in accordance
with Generally Accepted Accounting Principles, and all lease payments made by
the Borrower and its Subsidiaries pursuant to the ELLF.
"Interest Period" shall have the meaning set forth in SECTION 2.10 hereof.
12
<PAGE>
"Interest Rate Protection Agreements" shall mean all interest rate swap
agreements, interest rate cap agreements, interest rate collar agreements,
interest rate insurance or other hedging arrangements and all other similar
agreements or arrangements designed to protect against fluctuations in interest
rates.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Invitation for Bids" shall have the meaning given to such term in SECTION
2.3(B).
"Issuing Bank" shall mean First Union in its capacity as issuer of Letters
of Credit, and its successors or assigns in such capacity.
"L/C Participant" shall have the meaning assigned to such term in SECTION
2.20(C) hereof.
"Lease Expense" shall mean, for any period, all amounts paid, payable or
accrued during such period by the Borrower and its Subsidiaries on a
consolidated basis with respect to all leases of real and personal property,
excluding Capital Leases and intercompany items.
"Lender" shall mean each financial institution signatory hereto and each
other financial institution that becomes a "Lender" hereto pursuant to SECTION
10.5, and their permitted successors and assigns.
"Lending Office" shall mean, with respect to any Lender, the office of such
Lender designated as its "Lending Office" on its signature page hereto or in an
Assignment and Acceptance, or such other office as may be otherwise designated
in writing from time to time by such Lender to the Borrower and the Agent. A
Lender may designate separate Lending Offices as provided in the foregoing
sentence for the purposes of making or maintaining different Types of Loans,
and, with respect to LIBOR Loans, such office may be a domestic or foreign
branch or Affiliate of such Lender.
"Letter of Credit Outstandings" shall mean, at any time, the sum of (i) the
aggregate Stated Amount of all outstanding Letters of Credit at such time and
(ii) the aggregate amount of all Reimbursement Obligations at such time
(exclusive of Reimbursement Obligations that are repaid with the proceeds of,
and simultaneously with the incurrence of, Loans).
"Letter of Credit Request" shall have the meaning assigned to such term in
SECTION 2.20(B) hereof.
"Letters of Credit" shall have the meaning set forth in SECTION 2.20(A)
hereof.
"LIBOR Auction" shall mean a solicitation of Bids setting forth LIBOR Bid
Margins pursuant to SECTION 2.3.
"LIBOR Bid Loan" shall mean, at any time, any Bid Loan that bears interest
at such time at a rate equal to the LIBOR Rate as in effect at such time plus
(or minus) a LIBOR Bid Margin established pursuant to a LIBOR Auction.
13
<PAGE>
"LIBOR Bid Margin" shall have the meaning given to such term in SECTION
2.3(C)(IV).
"LIBOR Committed Loan" shall mean, at any time, any outstanding Committed
Loan that bears interest at such time at the Adjusted LIBOR Rate as in effect at
such time.
"LIBOR Loan" shall mean any LIBOR Bid Loan or any LIBOR Committed Loan.
"LIBOR Rate" shall mean, with respect to each LIBOR Loan comprising part of
the same borrowing for any Interest Period, an interest rate per annum equal to
(i) the rate of interest appearing on Telerate Page 3750 (or any successor page)
or (ii) if no such rate is available, the rate of interest determined by the
Agent to be the rate or the arithmetic mean of rates (rounded upward, if
necessary to the nearest 1/16 of one percentage point) at which Dollar deposits
in immediately available funds are offered by First Union to first-tier banks in
the London interbank Eurodollar market, in each case under (i) and (ii) above at
approximately 11:00 a.m., London time, two (2) Business Days prior to the first
day of such Interest Period for a period substantially equal to such Interest
Period and in an amount substantially equal to the amount of First Union's Loan
comprising part of such LIBOR Loan. For purposes of this definition, with
respect to LIBOR Bid Loans comprising a Bid Borrowing in which First Union is
not participating, the LIBOR Rate shall be determined as if such LIBOR Bid Loans
were LIBOR Committed Loans.
"Loan" or "Loans" shall mean and collectively refer to the Committed Loans
and the Bid Loans.
"Loan Documents" shall mean and collectively refer to this Agreement, the
Notes, the Security Agreements, the Guaranty Agreement, the Financing
Statements, Interest Rate Protection Agreements (if any) with any Lenders
relating to the Notes, and any and all agreements, instruments and documents,
including, without limitation, notes, guaranties, mortgages, deeds to secure
debt, deeds of trust, chattel mortgages, pledges, powers of attorney, consents,
assignments, contracts, notices, security agreements, trust account agreements
and all other written matters, whether heretofore, now or hereafter, executed by
or on behalf of the Borrower or any Subsidiary and delivered to the Agent or any
Lender, with respect to this Agreement or with respect to the transactions
contemplated by this Agreement, and in each case, together with any amendments,
modifications and supplements thereto, any replacements, renewals, extensions
and restatements thereof, and any substitutes therefor, in whole or in part.
"Management Services Agreements" shall mean the management services
agreements of Borrower and its Subsidiaries, whether now existing or hereafter
acquired or arising, together with any and all extensions, modifications,
amendments, renewals, substitutions or replacements thereof.
"Margin Stock" shall have the meaning given to such term in Regulation U or
Regulation G.
"Material Adverse Effect" or "Material Adverse Change" shall mean, in the
good faith and reasonable opinion of the Required Lenders, a material adverse
effect upon, or a material adverse change in, any of (a) the financial
condition, operations, business or properties of the
14
<PAGE>
Borrower and its Subsidiaries, taken as a whole; or (b) the ability of the
Borrower and its Subsidiaries, taken as a whole, to perform under the Loan
Documents.
"Maturity Date" shall mean December 31, 2002.
"Medicaid Certification" shall mean, with respect to any health care
facility, certification by HCFA or another Governmental Authority, or any Person
under contract with HCFA, that such health care facility is in compliance with
all conditions of participation set forth in the Medicaid Regulations, except
where the failure to so comply would not have a Material Adverse Effect.
"Medicaid Provider Agreement" shall mean an agreement entered into between
any Person administering the Medicaid program and a health care facility under
which the health care facility agrees to provide services for Medicaid patients
in accordance with the terms of the agreement and Medicaid Regulations.
"Medicaid Regulations" shall mean, collectively, (i) all federal statutes
(whether set forth in Title XIX of the Social Security Act, 42 USC (S)(S) 1396
et seq., or elsewhere) affecting the medical assistance program established by
Title XIX of the Social Security Act, and any statutes succeeding thereto; (ii)
all applicable provisions of all federal rules, regulations, manuals having the
force of law and orders of all Governmental Authorities promulgated pursuant to
or in connection with the statutes described in clause (i) above and all federal
administrative, reimbursement and other guidelines of all Governmental
Authorities having the force of law promulgated pursuant to or in connection
with the statutes described in clause (i) above; (iii) all state statutes and
plans for medical assistance enacted in connection with the statutes and
provisions described in clauses (i) and (ii) above; and (iv) all applicable
provisions of all rules, regulations, manuals and orders of all Governmental
Authorities promulgated pursuant to or in connection with the statutes described
in clause (iii) above and all state administrative, reimbursement and other
guidelines of all Governmental Authorities having the force of law promulgated
pursuant to or in connection with the statutes described in clause (iii) above,
in each case as may be amended, supplemented or otherwise modified from time to
time.
"Medicare Certification" shall mean, with respect to any health care
facility, certification by HCFA or any other Governmental Authority, or any
Person under contract with HCFA, that such health care facility is in compliance
with all the conditions of participation set forth in the Medicare Regulations,
except where the failure to so comply would not have a Material Adverse Effect.
"Medicare Provider Agreement" shall mean an agreement entered into between
any Person administering the Medicare program and a health care facility under
which the health care facility agrees to provide services for Medicare patients
in accordance with the terms of the agreement and Medicare Regulations.
"Medicare Regulations" shall mean, collectively, all federal statutes
(whether set forth in Title XVIII of the Social Security Act, 42 USC (S)(S) 1396
et seq., or elsewhere) affecting the health insurance program for the aged and
disabled established by Title XVIII of the Social Security Act
15
<PAGE>
and any statutes succeeding thereto; together with all applicable provisions of
all rules, regulations, manuals having the force of law and orders and
administrative, reimbursement and other guidelines having the force of law of
all Governmental Authorities (including without limitation, Health and Human
Services ("HHS"), HCFA, the Office of the Inspector General for HHS, or any
Person succeeding to the functions of any of the foregoing) promulgated pursuant
to or in connection with any of the foregoing having the force of law, in each
case as may be amended, supplemented or otherwise modified from time to time.
"Multiemployer Plan" shall mean any "multiemployer plan" within the meaning
of Section 4001(a)(3) of ERISA to which any Borrower or any Subsidiary is
required to make contributions.
"Notes" shall mean the Committed Loan Notes and the Bid Loan Notes.
"Notice of Committed Borrowing" shall have the meaning assigned to such
term in SECTION 2.2(A).
"Notice of Conversion/Continuation" shall have the meaning assigned to such
term in SECTION 2.11B).
"OECD" shall mean the Organization for Economic Cooperation and Development
and any successor thereto.
"OSHA" shall mean the Occupational Safety and Health Act, as amended from
time to time, and all rules and regulations from time to time promulgated
thereunder.
"Obligations" shall mean (i) the Loans and Reimbursement Obligations and
all other loans, advances, indebtedness, liabilities, obligations, covenants and
duties owing, arising, due or payable from the Borrower to the Agent or any
Lender or Issuing Bank of any kind or nature, present or future, howsoever
evidenced, created, incurred, acquired or owing, arising under this Agreement,
the Notes or the other Loan Documents or in any other way related to this
Agreement, whether direct or indirect (including those acquired by an Assignment
and Acceptance), absolute or contingent, primary or secondary, due or to become
due, now existing or hereafter arising and however acquired, (ii) all interest
(including, to the extent permitted by law, all post-petition interest),
charges, expenses, fees, attorneys' fees and any other sums payable by the
Borrower to the Agent or any Lender under this Agreement or any of the other
Loan Documents, (iii) all obligations to any Lender pursuant to any Interest
Rate Protection Agreement (if any) in respect of the Notes, (iv) the obligations
of the Borrower to First Union arising pursuant to the Swingline Note, and, (v)
for purposes of Sections 4.19, 7.1(q) and 9.10(b), the obligations of the
Borrower and its Subsidiaries as Credit Parties under the ELLF.
"Participant" shall mean any Person, now or at any time hereafter,
participating with any Lender in the Loans pursuant to this Agreement, and its
permitted successors and assigns.
"Participation Agreement" shall mean the Participation Agreement, dated as
of a date on or about the date hereof (together with any amendments,
modifications, replacements, substitutes
16
<PAGE>
and supplements thereto and any renewals or extensions thereof, in whole or in
part), among the Borrower, First Security Bank, National Association, as owner
trustee, and First Union, as agent.,
"Partnership Interests" shall mean all ownership or profit-sharing
interests (howsoever designated) in any general or limited partnership, limited
liability company or other non-corporate company or entity and all agreements,
instruments and documents convertible, in whole or in part, into any one or more
or all of the foregoing.
"Pension Plan" shall mean any "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA maintained by the Borrower or any Subsidiary
(other than any Multiemployer Plan that is subject to the provisions of Title IV
of ERISA).
"Percentage" shall mean, with respect to any Lender at any time, a fraction
(expressed as a percentage) the numerator of which is the Commitment of such
Lender at such time and the denominator of which is the Total Commitment at such
time; provided that if the Percentage of any Lender is to be determined after
the Commitments have been terminated, then such Percentage shall be determined
immediately prior (and without giving effect) to such termination.
"Permitted Liens" shall mean any of the following liens, restrictions or
encumbrances securing any liability or indebtedness of the Borrower or any
Subsidiary on, or otherwise affecting, any of the Borrower's or such
Subsidiary's property, real or personal, whether now owned or hereafter
acquired:
(a) Liens granted to the Agent, for the benefit of the Lenders;
(b) Liens imposed by mandatory provisions of law of carriers, warehousemen,
mechanics, repairmen and materialmen and other like liens required by provisions
of law and incurred in the ordinary course of business for sums not yet due and
payable (or with respect to any obligation not greater than $50,000, not more
than sixty (60) days past the date of service) or that are being contested in
good faith and with due diligence by appropriate proceedings;
(c) Liens incurred in the ordinary course of business in connection with
worker's compensation, unemployment insurance or other forms of governmental
insurance or benefits, or liens arising from good faith deposits in connection
with letters of credit, bids, tenders, statutory obligations, leases and
contracts (other than for borrowed money) entered into in the ordinary course of
business, or to secure obligations on surety or appeal bonds provided that all
such liens in the aggregate have no Material Adverse Effect;
(d) Liens for current taxes, assessments or other governmental charges that
are not delinquent or remain payable without any penalty or that are being
contested in good faith and with due diligence by appropriate proceedings,
provided that all such liens in the aggregate have no Material Adverse Effect
and, if reasonably requested by the Agent, the Borrower or such Subsidiary has
established reserves reasonably satisfactory to the Agent with respect thereto;
(e) Liens upon property leased under a Capital Lease and either (i) placed
upon such property at the time of, or within ten (10) days after, the
commencement of the lease thereof to
17
<PAGE>
secure the lease payments under such Capital Lease, provided that any such lien
(A) shall not encumber any other property of the Borrower or any Subsidiary and
(B) shall not exceed the total of such lease payments, or (ii) entered into or
arising in compliance with the terms of the ELLF;
(f) Liens set forth on SCHEDULE 1.1(A) attached hereto, provided that such
liens are not renewed, extended or increased;
(g) Purchase money liens (x) incurred in the purchase of equipment
permitted under SECTION 6.10 hereof, provided that any such lien (i) attaches to
such asset concurrently with or within ten (10) days after the acquisition
thereof, (ii) shall not encumber any other property of the Borrower or any
Subsidiary and (iii) shall not exceed the purchase price of such asset or (y)
that have been disclosed to the Agent and the Lenders and assumed in any
Permitted Physician Transaction in accordance with SECTION 5.14 or Physician
Transaction approved in accordance with SECTION 6.2 hereof;
(h) Other liens disclosed to the Agent and Lenders and incurred, assumed or
otherwise acquired in connection with any Permitted Physician Transaction or
permitted in connection with any Physician Transaction approved under SECTION
6.2;
(i) Assignment Restrictions;
(j) Easements, rights of way, zoning restrictions and other similar
encumbrances on real estate that do not materially impair the value of the
property to which they relate;
(k) Any other liens or encumbrances as the Required Lenders may approve in
writing from time to time;
(l) Liens on Margin Stock, to the extent the value thereof exceeds 25% of
the value of the total assets of the Borrower and its Subsidiaries (including
Margin Stock); and
(m) Liens granted pursuant to the ELLF.
"Permitted Physician Transaction" shall mean a Physician Transaction that,
upon satisfaction of all of the following conditions, may be consummated without
the consent of the Agent or the Lenders: (A) the assets acquired, or the
business of the Person whose stock is acquired, shall be of an oncology,
hematology or radiation oncology physician practice; (B) those Physician
Transactions that are structured as asset acquisitions shall be for an entire
business, division, facility, operation or product line of such Person,
excluding medical assets not acquired by the Borrower or Subsidiary; (C) those
Physician Transactions that are structured as stock acquisitions shall be
effected through a purchase of 100% of the capital stock of such Person by the
Borrower or through a merger between such Person and the Borrower or a direct
wholly-owned Subsidiary of the Borrower, as the case may be, so that after
giving effect to such merger 100% of the capital stock of the surviving
corporation of such merger is owned by the Borrower or a direct wholly-owned
Subsidiary of the Borrower; (D) the Transaction Amount for such Physician
Transaction shall not exceed $75,000,000 (subject to the proviso below); and (E)
in the fiscal year of such Physician Transaction, the aggregate Transaction
Amount for all Permitted Physician Transactions in such year shall not exceed
$120,000,000; provided, that within 45 days
18
<PAGE>
following receipt by the Lenders of documentation (pursuant to SECTION 5.14(E))
of any Permitted Physician Transaction with a Transaction Amount in excess of
$30,000,000, the Required Lenders in their sole discretion may by notice to the
Borrower from and after the date of delivery of such notice reduce the
individual Permitted Physician Transaction limit in clause (D) above to
$30,000,000. Notwithstanding anything to the contrary contained in the
immediately preceding sentence, a Physician Transaction shall be a Permitted
Physician Transaction only if, in addition to the foregoing, all requirements of
SECTIONS 5.11 (if any new Subsidiaries are acquired or created in connection
with such Physician Transaction) and 5.14 are met with respect thereto.
"Permitted Subordinated Debt" shall mean any Debt of the Borrower or any
Subsidiary incurred in respect of a Permitted Physician Transaction and
evidenced by a written instrument. The terms and conditions of any Permitted
Subordinated Debt shall be substantially similar to those shown on SCHEDULE
1.1(B), including, without limitation, (i) an express statement of subordination
to the payment and performance of the Obligations, (ii) an interest rate not
exceeding the greater of 7% per annum and three percentage points per annum over
the Base Rate (other than upon a default), (iii) a term for repayment that
provides for no more than 20% of the total original principal amount of such
Permitted Subordinated Debt to be repaid in any fiscal year, (iv) a final
maturity of such Permitted Subordinated Debt not less than five (5) years from
the date of the Permitted Physician Transaction and (v) a payment blockage on
such Permitted Subordinated Debt in the event of a payment default on any senior
debt or an event of default allowing senior creditors to accelerate such senior
debt (provided that such payment blockage may expire if the senior debt has not
been accelerated within at least ninety (90) days from the commencement of such
blockage).
"Person" shall mean a corporation, an association, a joint venture, a
partnership, an organization, a business, an individual, a trust or a government
or political subdivision thereof or any government agency or any other legal
entity.
"Physician Transaction" shall mean any bona fide transaction or series of
related transactions, consummated after the date hereof, by which the Borrower
or any Subsidiary (i) acquires all or part of the assets, or a going business or
division, of any Person, whether through purchase of assets or securities,
merger or otherwise, (ii) directly or indirectly acquires control of any Person
or (iii) acquires the right to manage the non-medical aspects of the business of
any Person. For the purpose of this definition, "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
management and non-medical policies, whether through the ownership of voting
securities, by contract or otherwise. Notwithstanding the above, "control"
shall not include, and shall not be implied to include, the power to direct any
physician's practice of medicine or the power to interfere in any
physician/patient relationship.
"Practice" shall have the meaning assigned to such term in SECTION
5.14(C)(I).
"Pro Rata Share" of any amount shall mean, with respect to any Lender at
any time, the product of (i) such amount, multiplied by (ii) such Lender's
Percentage at such time.
19
<PAGE>
"Prohibited Transaction" shall mean any transaction described in (i)
Section 406 of ERISA that is not exempt by reason of Section 408 of ERISA or
(ii) Section 4975(c) of the Internal Revenue Code that is not exempt by reason
of Section 4975(c) or 4975(d).
"Regulations D, G, T, U and X" shall mean Regulations D, G, T, U and X,
respectively, of the Federal Reserve Board and any successor regulations.
"Reimbursement Obligations" shall have the meaning set forth in SECTION
2.20(D) hereof.
"Reportable Event" shall mean a reportable event as defined in Section
4043(b) of ERISA (other than an event for which notice is waived under the ERISA
regulations).
"Required Lenders" shall mean, at any time, the Lenders with 66-2/3% or
more of the aggregate of all Commitments at such time or, if the Commitments
have been terminated, Lenders owning or holding 66-2/3% or more of the then
aggregate principal amount of the Loans and Letter of Credit Outstandings then
outstanding.
"Requirement of Law" means, as to any Person, the charter, articles or
certificate of incorporation and bylaws or other organizational or governing
documents of such Person, and any statute, law, treaty, rule, regulation, order,
decree, writ, injunction or determination of any arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
"Reserve Requirement" shall mean, with respect to any Interest Period, the
reserve percentage (expressed as a decimal) in effect from time to time during
such Interest Period, as provided by the Board of Governors of the Federal
Reserve System (or any successor governmental body), applied for determining the
reserve requirement (including, without limitation, basic, supplemental,
marginal and emergency reserves) applicable to First Union under Regulation D
with respect to "Eurocurrency liabilities" within the meaning of Regulation D,
or under any similar or successor regulation with respect to Eurocurrency
liabilities or Eurocurrency funding.
"Security Agreement" shall mean the Third Amended and Restated Security
Agreement, substantially in the form of EXHIBIT E-1, together with any
amendments, modifications and supplements thereto, any replacements, renewals,
extensions and restatements thereof, and any substitutes therefor, in whole or
in part.
"Security Agreements" shall mean the Security Agreement and the Guarantors'
Security Agreement.
"Solvent" shall mean, as to any Person on any particular date, that such
Person (i) has capital sufficient to carry on its business and transactions and
all business and transactions in which it is about to engage, (ii) is able to
pay its debts as they mature, (iii) owns property having a fair saleable value
greater than the amount required to pay its probable liability on existing debts
as they mature (including known reasonable contingencies and contingencies that
should be included in notes of the Financial Statements pursuant to Generally
Accepted Accounting
20
<PAGE>
Principles), and (iv) does not intend to, and does not believe that it will,
incur debts or probable liabilities beyond its ability to pay such debts or
liabilities as they mature.
"Stated Amount" shall mean, with respect to any Letter of Credit at any
time, the maximum amount available to be drawn thereunder at such time
(regardless of whether any conditions for drawing could then be met).
"Stock" shall mean all shares, interests, rights to purchase, options,
participations or other equivalents of or interests in (howsoever designated)
the equity of any Person, whether voting or non-voting, including, without
limitation, common stock, warrants, preferred stock, convertible debentures and
all agreements, instruments and documents convertible, in whole or in part, into
any one or more or all of the foregoing.
"Subordinated Debt" shall mean any Debt of the Borrower or any Subsidiary
to the extent such Debt is expressly subordinated and made junior to the payment
and performance of the Obligations and evidenced as such by a written instrument
the terms and conditions (including, without limitation, subordination
provisions) of which are satisfactory in form and substance to the Required
Lenders and are approved in writing by the Agent in accordance with SECTION 6.2
or 6.3 hereof.
"Subsidiary" shall mean any corporation of which more than fifty percent
(50%) of the outstanding Stock having ordinary voting power to elect a majority
of the board of directors, or other entity of which more than fifty percent
(50%) of the Partnership Interest or voting power, is at the time, directly or
indirectly, owned by any Person or one or more of its Subsidiaries (irrespective
of whether, at the time, the ownership interests or Stock of any other class or
classes of such entity or corporation shall have or might have voting power by
reason of the happening of any contingency). When used without reference to a
parent, the term "Subsidiary" shall be deemed to refer to a Subsidiary of the
Borrower.
"Swingline Note" shall mean the note from Borrower to First Union in a
principal amount of $5,000,000 delivered in connection with the Borrower's cash
management facility.
"Taxes" shall have the meaning assigned to such term in SECTION 2.12(A).
"Termination Date" shall mean the Maturity Date, or such earlier date of
termination of the Total Commitment in accordance with SECTION 2.6 or SECTION
8.1.
"Total Commitment" shall mean, at any time, the sum of the Commitments of
each Lender at such time.
"Total Unutilized Commitment" shall mean, at any time, the sum of the
Unutilized Commitments of each Lender at such time.
"Transaction Amount" shall mean, with respect to any Physician Transaction,
the sum (without duplication) of the following, in each case determined in
accordance with Generally Accepted Accounting Principles: (i) the aggregate
original principal amount of all Loans the proceeds of which are utilized to
finance such Physician Transaction, in part or in whole, (ii) the
21
<PAGE>
amount of cash paid by the Borrower and its Subsidiaries in connection with such
Physician Transaction, (iii) the fair market value of all capital stock or other
ownership interests of the Borrower or any Subsidiary issued or given (or to be
issued or given in the future) to the seller in connection with such Physician
Transaction, (iv) the outstanding principal amount of all Debt incurred, assumed
or acquired in connection with such Physician Transaction, (v) all additional
purchase price amounts in the form of notes and other contingent obligations, as
recorded or disclosed on the financial statements (including the notes to such
statements) of the Borrower and its Subsidiaries, (vi) all amounts paid in
consideration of parties' entering into covenants not to compete and consulting
agreements in connection with such Physician Transaction and (vii) the aggregate
fair market value of all other consideration given by the Borrower and its
Subsidiaries in connection with such Physician Transaction.
"Type" shall have the meaning assigned to such term in SECTION 2.1(D).
"Uniform Commercial Code" shall mean the Uniform Commercial Code of the
State of North Carolina, as amended from time to time, unless in any particular
instance the Uniform Commercial Code of another state is applicable, in which
case it shall mean the Uniform Commercial Code of such state.
"Unutilized Commitment" shall mean, with respect to any Lender at any time,
such Lender's Commitment at such time less (i) the aggregate principal amount of
all Committed Loans made by such Lender that are outstanding at such time, (ii)
such Lender's Pro Rata Share of Letter of Credit Outstandings and (iii) such
Lender's Pro Rata Share of all Bid Loans outstanding at such time (even though
such Lender may not have made some or all of the Bid Loans).
1.2 Accounting Terms. Any accounting terms used in this Agreement that are
not specifically defined shall have the meanings customarily given them in
accordance with Generally Accepted Accounting Principles; provided, however,
that, in the event that changes in Generally Accepted Accounting Principles
shall be mandated by the Financial Accounting Standards Board, or any similar
accounting body of comparable standing, or shall be recommended by the
Borrower's certified public accountants, to the extent that such changes would
modify or could modify such accounting terms (including accounting terms
otherwise defined in this Agreement) or the interpretation or computation
thereof, such changes shall be followed in defining such accounting terms only
from and after the date this Agreement shall have been amended to the extent
necessary to reflect any such changes in the financial covenants and other terms
and conditions of this Agreement.
1.3 Singular/Plural. Unless the context otherwise requires, words in the
singular include the plural and words in the plural include the singular.
1.4 Other Terms. The terms "Lease Agreement", "Agency Agreement", "Credit
Agreement", "Tranche A Obligations", and "Operative Agreements" have the
meanings set forth in Appendix A to the Participation Agreement. All other terms
contained in this Agreement shall, when the context so indicates, have the
meanings provided for by the Uniform Commercial Code of the State of North
Carolina to the extent the same are used or defined therein.
22
<PAGE>
ARTICLE II.
AMOUNT AND TERMS OF THE LOANS
2.1 Commitments; Loans.
(a) Each Lender severally agrees, subject to and on the terms and
conditions of this Agreement, to make loans (each, a "Committed Loan," and
collectively, the "Committed Loans") to the Borrower, from time to time on any
Business Day during the period from the date hereof to but not including the
Termination Date; provided, that no Lender shall make any Committed Loan in an
amount that would exceed such Lender's Unutilized Commitment at such time.
Subject to and on the terms and conditions of this Agreement, the Borrower may
borrow, repay and reborrow Committed Loans.
(b) In addition to Committed Loans, each Lender severally agrees that the
Borrower may, subject to and on the terms and conditions of this Agreement and
as more particularly set forth in SECTION 2.3, request the Lenders to submit
offers to make loans (each, a "Bid Loan," and collectively, the "Bid Loans") to
the Borrower, from time to time on any Business Day during the period from the
date hereof to but not including the earlier of (i) the date that is one (1)
Business Day prior to the seventh (7th) day prior to the Maturity Date or (ii)
the Termination Date; provided, that the Lenders may, but shall have no
obligation to, submit such offers and the Borrower may, but shall have no
obligation to, accept any such offers.
(c) No Borrowing (i) shall be made if, immediately after giving effect
thereto, the sum of (y) the aggregate principal amount of Loans outstanding at
such time (exclusive of Loans that are repaid with the proceeds of, and
simultaneously with the incurrence of, a Borrowing) plus (z) the aggregate
Letter of Credit Outstandings at such time (exclusive of Reimbursement
Obligations that are repaid with the proceeds of, and simultaneously with the
incurrence of, a Borrowing) would exceed the Total Commitment and (ii) shall be
required of any Lender if, immediately after giving effect thereto, a Default or
Event of Default would exist.
(d) The Loans shall, at the option of the Borrower and subject to the
terms and conditions of this Agreement, be (i) in the case of Committed Loans,
either Base Rate Loans or LIBOR Committed Loans, or (ii) in the case of Bid
Loans, either Absolute Rate Loans or LIBOR Bid Loans (Base Rate Loans, LIBOR
Committed Loans, Absolute Rate Loans and LIBOR Bid Loans, each, a "Type" of
Loan), provided that all Loans comprising the same Borrowing shall, unless
otherwise specifically provided herein, be of the same Type.
(e) Any Loans made on the Closing Date shall be made initially as Base Rate
Loans.
(f) Any borrowings outstanding under the Original Agreement shall not be
continued as Loans under this Agreement and shall be repaid, together with all
interest and fees accrued thereon (including the accrued commitment fee pursuant
to SECTION 2.7(A) of the Original Agreement and all amounts required to be paid
pursuant to SECTION 2.13 of the Original Agreement), on or prior to the Closing
Date.
23
<PAGE>
2.2 Committed Borrowings.
(a) Whenever the Borrower desires to make a Committed Borrowing hereunder
(other than continuations or conversions of outstanding Loans pursuant to
SECTION 2.11 or any Borrowing pursuant to SECTION 2.20), the Borrower will give
the Agent written notice (by telecopier or otherwise), prior to 9:00 a.m.,
Charlotte time, at least two (2) Business Days prior to each Borrowing to be
comprised of LIBOR Committed Loans and on the same Business Day of each
Borrowing to be comprised of Base Rate Loans; provided, that Base Rate Loans may
be borrowed upon written notice delivered prior to 12:00 p.m. (noon), Charlotte
time, on the same Business Day of the proposed Borrowing Date for any Bid
Borrowing of Absolute Rate Loans duly requested in accordance with SECTION 2.3.
Each such notice (each, a "Notice of Committed Borrowing") shall be irrevocable,
shall be given in the form of EXHIBIT B-1 and shall be appropriately completed
to specify (i) the aggregate principal amount and Type of the Loans to be made
pursuant to such Borrowing (and, in the case of LIBOR Committed Loans, the
initial Interest Period to be applicable thereto) and (ii) the requested date of
the Borrowing (the "Borrowing Date"), which shall be a Business Day.
Notwithstanding anything to the contrary contained herein:
(i) the aggregate principal amount of each Borrowing hereunder (y)
in the case of Borrowings comprised of Base Rate Loans, shall not be less
than $2,000,000 and, if greater, shall be in an integral multiple of
$500,000 in excess thereof and (z) in the case of Borrowings comprised of
LIBOR Committed Loans, shall not be less than $3,000,000 and, if greater,
shall be in an integral multiple of $1,000,000 in excess thereof;
(ii) if the Borrower shall have failed to designate the Type of
Loans comprising a Borrowing, the Borrower shall be deemed to have
requested a Borrowing comprised of Base Rate Loans;
(iii) if the Borrower shall have failed to select the duration of
the Interest Period to be applicable to any Borrowing of LIBOR Committed
Loans, then the Borrower shall be deemed to have selected an Interest
Period with a duration of one month; and
(iv) LIBOR Committed Loans under the Facility may not be outstanding
under more than ten (10) separate Interest Periods at any one time, less
the number of Bid Loans outstanding at such time.
(b) Upon its receipt of a Notice of Committed Borrowing, the Agent will
promptly notify each Lender of the proposed Borrowing, of such Lender's Pro Rata
Share thereof and of the other matters specified in the Notice of Committed
Borrowing. Each such Lender will make the amount of its Pro Rata Share of such
Borrowing available to the Agent at its office referred to in SECTION 10.4, for
the account of the Borrower, in Dollars and in immediately available funds,
prior to 2:00 p.m., Charlotte time, on the Borrowing Date. To the extent the
relevant Lenders have made such amounts available to the Agent as provided
hereinabove, the Agent will make the aggregate of such amounts available to the
Borrower in accordance with SECTION 2.4(A) below and in like funds as received
by the Agent, as soon as practicable prior to 3:30 p.m., Charlotte time, on the
Borrowing Date.
24
<PAGE>
2.3 Bid Borrowings.
(a) In order to request the Lenders to submit Bids to make Bid Loans
hereunder, the Borrower will give the Agent written notice not later than 11:00
a.m., Charlotte time, (y) four (4) Business Days prior to the requested Bid
Borrowing, in the case of a LIBOR Auction, or (z) two (2) Business Days prior to
the requested Bid Borrowing, in the case of an Absolute Rate Auction. The
Borrower may request offers to make Bid Loans for up to three (3) separate
Interest Periods in a single notice, and each such request for offers for a
separate Interest Period shall be deemed a request for a separate Bid Borrowing.
Each such notice (each, a "Bid Request") shall be given in the form of EXHIBIT
C-1 and shall specify, with respect to each requested Bid Borrowing for a
particular Interest Period:
(i) the Interest Period to be applicable to such Bid Borrowing;
(ii) the aggregate amount of such requested Bid Borrowing, which
shall not (with respect to any single Interest Period) be less than
$5,000,000 or, if greater, an integral multiple of $1,000,000 in excess
thereof, but shall not cause the limits specified in Section 2.1(c) to be
exceeded as of the proposed Borrowing Date of the Bid Borrowing;
(iii) whether the Bid Borrowing requested for a particular Interest
Period is to be comprised of LIBOR Bid Loans or Absolute Rate Loans; and
(iv) the requested Borrowing Date, which shall be a Business Day;
provided, however, that (w) no Interest Period applicable to any Bid Borrowing
shall expire on a date later than the Business Day prior to the Maturity Date,
(x) the Borrower may not submit a Bid Request within five (5) Business Days
after the date of submission of any previous Bid Request, (y) the Borrower may
not submit more than three (3) Bid Requests in any calendar month, and (z) no
Bid Borrowing shall be made if, immediately after giving effect thereto, there
would be outstanding Bid Loans having more than four (4) separate Interest
Periods or outstanding LIBOR Committed Loans and Bid Loans together having more
than ten (10) separate Interest Periods (for which purpose Interest Periods
applicable to LIBOR Committed Loans and Interest Periods applicable to LIBOR Bid
Loans shall be deemed to be separate Interest Periods even if they are
coterminous). A Bid Request not given in the form of EXHIBIT C-1 or otherwise
not given in compliance with the requirements of this subsection (a) may be
rejected by the Agent in its sole discretion, and the Agent shall promptly
notify the Borrower of any such rejection.
(b) Upon receipt of a Bid Request that is not rejected as aforesaid, the
Agent will promptly deliver to the Lenders a notice in substantially the form of
EXHIBIT C-2 (each such notice, an "Invitation for Bids"), the delivery of which
shall constitute an invitation by the Borrower to each Lender to submit Bids, on
the terms and subject to the conditions of this Agreement, offering to make Bid
Loans pursuant to such Bid Request.
(c) Each Lender may, at its discretion, submit a Bid containing an offer or
offers to make Bid Loans in response to any Invitation for Bids; provided that
such Lender may submit a
25
<PAGE>
single Bid containing an offer or offers to make up to three separate Bid Loans
for each Interest Period specified in the relevant Bid Request. Each Bid must
comply with the requirements of this subsection (c) and must be submitted to the
Agent in writing (by facsimile transmission or otherwise) not later than 10:30
a.m., Charlotte time, (y) two (2) Business Days prior to the requested Borrowing
Date, in the case of a LIBOR Auction, or (z) on the requested Borrowing Date, in
the case of an Absolute Rate Auction; provided, however, that Bids submitted by
the Agent (or any Affiliate of the Agent) in its capacity as a Lender may be
submitted only if the Agent or such Affiliate notifies the Borrower of the terms
of the offer or offers contained therein not later than 10:15 a.m., Charlotte
time, (y) two (2) Business Days prior to the requested Bid Borrowing, in the
case of a LIBOR Auction, or (z) on the requested Borrowing Date, in the case of
an Absolute Rate Auction. Each Bid by a Lender shall (subject to the conditions
of Article III and Section 7.1) be irrevocable, shall be submitted in
substantially the form of EXHIBIT C-3 and shall specify:
(i) the identity of such Lender;
(ii) the Interest Period with respect to each Bid Loan for which
such Bid is being made;
(iii) with respect to each such Interest Period, the principal
amount of each Bid Loan for which such Bid is being made, which principal
amounts shall, in the aggregate with respect to each such Interest Period,
be not less than $5,000,000 or, if greater, in an integral multiple of
$1,000,000 in excess thereof, provided that (y) the aggregate principal
amount of all Bid Loans for which a Bid is submitted may be equal to,
greater than or less than the Commitment of such Lender, and (z) the
aggregate principal amount of all Bid Loans offered by such Lender for a
single Interest Period shall not exceed the requested principal amount of
the Bid Borrowing for such Interest Period;
(iv) in the case of a LIBOR Auction, the margin above or below the
applicable LIBOR Rate (the "LIBOR Bid Margin") offered for each such Bid
Loan, expressed as a percentage (rounded to the nearest 1/1000 of 1%) to be
added to or subtracted from the applicable LIBOR Rate;
(v) in the case of an Absolute Rate Auction, the fixed rate of
interest per annum (rounded to the nearest 1/1000th of 1%) offered for each
such Bid Loan (the "Absolute Rate"); and
(vi) the proposed Borrowing Date.
A Bid shall be disregarded by the Agent if it (w) is not given
substantially in the form of EXHIBIT C-3 or fails to specify all of the
information required by this subsection (c), (x) contains qualifying,
conditional or similar language, (y) proposes terms other than or in addition to
those set forth in the applicable Invitation for Bids (other than setting forth
separate offers for any Interest Period as contemplated by the preceding
sentence), or (z) is submitted to the Agent after 10:30 a.m., Charlotte time,
(i) two (2) Business Days prior to the requested Borrowing Date, in the case of
a LIBOR Auction, or (ii) on the requested Borrowing Date, in the case of an
Absolute Rate Auction.
26
<PAGE>
(d) Promptly upon receipt thereof and in any event not later than 11:00
a.m., Charlotte time, (y) two (2) Business Days prior to the requested Borrowing
Date, in the case of a LIBOR Auction, or (z) on the requested Borrowing Date, in
the case of an Absolute Rate Auction, the Agent will notify the Borrower of the
terms (i) of each Bid, if any, submitted by a Lender in compliance with the
provisions of subsection (c) above, and (ii) of each Bid, if any, submitted by a
Lender that amends, modifies or is otherwise inconsistent with a previous Bid
submitted by such Lender with respect to the same Bid Request. Any such
subsequent Bid shall be disregarded by the Agent unless such subsequent Bid is
submitted solely to correct a manifest error in such former Bid and is timely
received as provided in subsection (c) above. The Agent's notice to the
Borrower shall specify the aggregate principal amount of each Bid Borrowing in
respect of which Bids were made for each Interest Period specified in the
relevant Bid Request, the respective principal amounts and LIBOR Bid Margins or
Absolute Rates, as the case may be, so offered, and the identity of the Lender
that made each such Bid.
(e) Not later than 11:30 a.m., Charlotte time, (y) two (2) Business Days
prior to the requested Borrowing Date, in the case of a LIBOR Auction, or (z) on
the requested Borrowing Date, in the case of an Absolute Rate Auction, the
Borrower will notify the Agent of its acceptance or rejection of the offers
referred to in subsection (d) above. The Borrower shall be under no obligation
to accept any offer and may choose in its discretion to reject all offers,
provided that the failure by the Borrower to give such notice in a timely manner
shall be deemed to constitute a rejection of all Bids. In the case of
acceptance, such notice shall specify the aggregate principal amount of offers
for each Interest Period that are accepted. The Borrower may accept any Bid in
whole or in part, subject to the limitations on the aggregate outstanding
principal amount of Bid Loans set forth in Section 2.1(b) and provided that:
(i) the aggregate principal amount of each Bid Borrowing with regard
to each Interest Period shall not exceed the applicable amount set forth in
the related Bid Request;
(ii) the aggregate principal amount of each Bid Borrowing shall not
be less than $5,000,000 or, if greater, an integral multiple of $1,000,000
in excess thereof (subject to the provisions of clause (v) below);
(iii) acceptance of Bids may be made only on the basis of ascending
(i.e., from the lowest effective yield to the highest) LIBOR Bid Margins or
Absolute Rates within each Interest Period, as the case may be (subject to
clause (v) below);
(iv) the Borrower may not accept any Bid that has been disregarded
under the provisions of subsection (c) above or that otherwise fails to
comply with the terms and conditions of this Section 2.3; and
(v) if offers are made by two or more Lenders with the same LIBOR
Bid Margins or Absolute Rates, as the case may be, for a greater aggregate
principal amount than the amount in respect of which such offers are
permitted to be accepted for the related Interest Period, then if the
Borrower elects to accept any such offers, the aggregate principal amount
of Bid Loans in respect of which such offers are accepted shall be
allocated by the Borrower among such Lenders (after consultation with the
Agent) as nearly as practicable
27
<PAGE>
(in such integral multiples of not less than $1,000,000 as the Borrower,
after consultation with the Agent, may deem appropriate) in proportion to
the respective aggregate principal amounts of such offers. Determinations
by the Borrower and the Agent of the amounts of Bid Loans shall be
conclusive absent manifest error.
(f) The Agent will promptly notify each Lender having submitted a Bid
whether its offer has been accepted or rejected and, if accepted, with regard to
each applicable Interest Period, of the amount and Absolute Rate or LIBOR Bid
Margin, as the case may be). Not later than 2:00 p.m., Charlotte time, on the
requested Borrowing Date, each Lender that has received such notice of an
accepted Bid will make available to the Agent at its office referred to in
SECTION 10.4 (or at such other location as the Agent may designate) an amount,
in Dollars and in immediately available funds, equal to the amount of the Bid
Loan or Bid Loans required to be made by such Lender. To the extent the
relevant Lenders have made such amounts available to the Agent as provided
hereinabove, the Agent will make the aggregate of such amounts available to the
Borrower by 3:30 p.m. Charlotte time in accordance with SECTION 2.4(A) and in
like funds as received by the Agent. The Agent, in its discretion, may provide
details of the Bids to the Lenders.
(g) In respect of each Bid Request received by the Agent hereunder
(regardless of whether any Bid Loans shall be offered or made in response
thereto), the Borrower will pay to the Agent, on the date of receipt by the
Agent of such Bid Request, a fee of $1,500.
(h) Notwithstanding the foregoing provisions of this SECTION 2.3, if on the
last day of any Interest Period applicable to one or more Bid Loans the Borrower
is unable to make a Committed Borrowing or Bid Borrowing because of the
Borrower's inability to meet the conditions of SECTION 3.2(B) or (C), any Lender
of one or more such Bid Loans may in its sole discretion agree (but in no event
more than one time with respect to any Bid Loan) in writing to extend the
Interest Period applicable to any such Bid Loan for no more than thirty (30)
days at an Absolute Rate equal to the Base Rate or, if applicable, the interest
rate on Committed Loans then in effect pursuant to SECTION 2.8(B). An extension
of any Bid Loan as provided herein shall require the agreement and consent only
of the extending Lender and the Borrower. On or prior to the Business Day
following any such extension, the Borrower and extending Lender each shall give
written notice of the terms thereof to the Agent, which shall give prompt
notice thereof to the Lenders.
2.4 Disbursements; Funding Reliance; Domicile of Loans.
(a) The Borrower hereby authorizes the Agent to disburse the proceeds of
each Borrowing in accordance with the terms of any written instructions from any
of the Authorized Officers, provided that the Agent shall not be obligated under
any circumstances to forward amounts to any account not listed in an Account
Designation Letter. The Borrower may at any time deliver to the Agent an
Account Designation Letter listing any additional accounts or deleting any
accounts listed in a previous Account Designation Letter.
(b) Unless the Agent has received, prior to 1:00 p.m., Charlotte time, on
any Borrowing Date, written notice from a Lender that such Lender will not make
available to the Agent its Bid Loan or Pro Rata Share of the relevant Committed
Loan, the Agent may assume
28
<PAGE>
that such Lender has made its Loan available to the Agent on such Borrowing Date
in accordance with the terms of this Agreement, and the Agent may, in reliance
upon such assumption, make a corresponding amount available to the Borrower on
such Borrowing Date. If and to the extent that such Lender shall not have made
such Loan available to the Agent, and the Agent shall have made such
corresponding amount available to the Borrower, such Lender, on the one hand,
and the Borrower, on the other, severally agree to pay to the Agent forthwith on
demand such corresponding amount, together with interest thereon for each day
from the date such amount is made available to the Borrower until the date such
amount is repaid to the Agent, (i) if recovered from such Lender, at the Federal
Funds Rate, and (ii) if recovered from the Borrower, at the rate of interest
applicable to Loans comprising such Borrowing, as determined under SECTION 2.8.
If such Lender shall repay to the Agent such corresponding amount, such amount
so repaid shall constitute such Lender's Loan as part of such Borrowing for
purposes of this Agreement.
(c) The failure of any Lender to make any Loan required to be made by it as
part of any Borrowing shall not relieve any other Lender of its obligation
hereunder to make its Loan on the respective Borrowing Date, but no Lender shall
be responsible for the failure of any other Lender to make the Loan to be made
by such other Lender as part of any Borrowing.
(d) Each Lender may, at its option, make and maintain any Loan at, to or
for the account of any of its Lending Offices, provided that any exercise of
such option shall not increase or otherwise adversely affect the obligation of
the Borrower to compensate or otherwise make additional payments to such Lender
or to repay such Loan to or for the account of such Lender in accordance with
the terms of this Agreement.
2.5 Notes
(a) The Loans made by each Lender shall be evidenced by a Note
appropriately completed in substantially the form of EXHIBIT A-1, with respect
to Committed Loans and EXHIBIT A-2 with respect to the Bid Loans. The Notes
issued to each Lender shall (i) be executed by the Borrower, (ii) be payable to
the order of such Lender, (iii) be dated as of the date hereof (or, in the case
of Notes issued pursuant to an Assignment and Acceptance, as of the effective
date thereof), (iv) bear interest in accordance with the provisions of SECTION
2.8, as the same may be applicable to the Loans made by such Lender from time to
time, and (v) be entitled to all of the benefits of this Agreement and the other
Loan Documents and subject to the provisions hereof and thereof. Committed Loan
Notes shall be in a stated principal amount equal to such Lender's Commitment
and Bid Loan Notes shall be in a stated principal amount equal to the Total
Commitment.
(b) Each Lender will record on its internal records the amount of each Loan
made by it and each payment received by it in respect thereof and will, in the
event of any transfer of any of its Notes, either endorse on the reverse side
thereof the outstanding principal amount of the Loans evidenced thereby as of
the date of transfer or provide such information on Annex I to the Assignment
and Acceptance relating to such transfer; provided, however, that the failure of
any Lender to make any such recordation or provide any such information, or any
error in such recordation or information, shall not affect the Borrower's
obligations in respect of such Loans.
29
<PAGE>
2.6 Termination and Reduction of Commitments.
(a) The Commitments shall be automatically and permanently terminated on
the Maturity Date unless sooner terminated pursuant to subsection (B) or (C)
below or SECTION 8.1.
(b) On each date set forth below, the Total Commitment shall automatically
be permanently reduced by the amount set forth below opposite such date):
Amount of Reduction in
Date Aggregate Commitments
---- ----------------------
December 31, 2000 $37,500,000
December 31, 2001 37,500,000
December 31, 2002 75,000,000
(c) At any time and from time to time, upon at least five (5) Business
Days' prior written notice to the Agent, the Borrower may terminate in whole or
reduce in part the Total Commitment, provided that the amount of any partial
reduction (i) may not exceed the Total Unutilized Commitment at such time (after
taking into account any prepayments to be made at such time) and (ii) shall be
in an aggregate amount of not less than $5,000,000 or integral multiples
thereof. The amount of any termination or reduction made under this subsection
(C) may not thereafter be reinstated.
(d) The Total Commitment shall automatically be permanently reduced by the
amount of the proceeds of sales to physicians as described in SECTION 6.6 (III).
(e) Each reduction of the Total Commitment under this Section shall be
applied ratably to the Commitments of the Lenders according to their respective
Percentages. After any such reduction, the fee provided for in SECTION 2.9
shall be calculated with respect to the reduced Commitments. Each reduction of
the Total Commitment under subsections (C) and (D) of this Section shall be
applied to reduce the scheduled reduction amounts in subsection (B) in
chronological order.
2.7 Payments; Voluntary, Mandatory.
(a) The Borrower shall have the right from time to time to prepay the
Loans, in whole or in part, without premium or penalty, upon written notice to
the Agent prior to 9:00 a.m., Charlotte time, at least two (2) Business Days'
prior to each intended prepayment of LIBOR Loans and on the same Business Day of
each intended prepayment of Base Rate Loans or Absolute Rate Loans, provided
that (i) each partial prepayment of Committed Loans shall be in an aggregate
principal amount of no less than $2,000,000 and, if greater, in an integral
multiple of $500,000 in excess thereof, (ii) each partial prepayment of Bid
Loans shall be in an aggregate principal amount of no less than $5,000,000 and,
if greater, in an integral multiple of $1,000,000 in excess thereof, (iii) no
partial prepayment of LIBOR Loans made pursuant to any single Borrowing shall
reduce the outstanding principal amount of the remaining LIBOR Loans under such
Borrowing to less than $3,000,000 or to any greater amount not an integral
multiple of
30
<PAGE>
$1,000,000 in excess thereof, and (iv) unless made together with all amounts
required under SECTION 2.15 to be paid as a consequence of such prepayment, a
prepayment of a LIBOR Loan or Absolute Rate Loan may be made only on the last
day of the Interest Period applicable thereto. Each such notice shall specify
(y) the proposed date of such prepayment and (z) the aggregate principal amount
and the Types of the Loans to be prepaid (and, in the case of LIBOR Loans and
Absolute Rate Loans, the specific Borrowing or Borrowings pursuant to which
made) and shall be irrevocable and shall bind the Borrower to make such
prepayment on the terms specified therein. Amounts prepaid pursuant to this
subsection (A) may be reborrowed, subject to the terms and conditions of this
Agreement.
(b) In the event that the aggregate principal amount of the Loans
outstanding plus Letter of Credit Outstandings on any date exceeds the Total
Commitment as of such date (after giving effect to any termination or reduction
thereof as of such date), the Borrower will repay the principal amount of the
Loans on such date in the amount of such excess; provided that, to the extent
such excess amount is greater than the aggregate principal amount of Loans
outstanding immediately prior to the application of such prepayment, the amount
so prepaid shall be retained by the Agent and held in the Cash Collateral
Account as collateral for the Letter of Credit Outstandings, as more
particularly described in SECTION 2.20(J), and thereupon such cash shall be
deemed to reduce the aggregate Letter of Credit Outstandings by an equivalent
amount. Each such Prepayment shall be applied (i) first, to the outstanding
principal amount of the Committed Loans, ratably among the Lenders based upon
their Percentages and (ii) second, to the outstanding principal amount of the
Bid Loans, ratably among the Lenders holding Bid Loans in proportion to the
aggregate principal amount of Bid Loans held by each. Such payment shall be
accompanied by all amounts required under SECTION 2.15 if applied to a LIBOR
Loan or Absolute Rate Loan and such payment is not made on the last day of the
Interest Period applicable thereto.
(c) The Borrower shall repay the Notes in full on the Termination Date.
2.8 Interest.
(a) The Borrower will pay interest in respect of the unpaid principal
amount of each Loan, from the date of Borrowing thereof until such principal
amount shall be paid in full,
(i) in respect of each Committed Loan, (y) at the Base Rate, as in
effect from time to time during such periods as such Loan is a Base Rate
Loan, and (z) at the Adjusted LIBOR Rate, as in effect from time to time
during such periods as such Loan is a LIBOR Loan, and
(ii) in respect of each Bid Loan, (y) at the applicable Absolute
Rate established in accordance with the provisions of SECTION 2.3, if such
Loan is an Absolute Rate Loan, and (z) at a rate per annum equal to the
LIBOR Rate, as in effect from time to time during the applicable Interest
Period, plus (or minus) the applicable LIBOR Bid Margin, if such Loan is a
LIBOR Bid Loan.
(b) Upon the occurrence and during the continuance of an Event of Default
under SECTION 7.1(A), (I) or (J), and (at the election of the Required Lenders)
upon the occurrence and
31
<PAGE>
during the continuance of any other Event of Default, all outstanding principal
amounts of the Loans and, to the greatest extent permitted by law, all interest
accrued on the Loans and all other fees and amounts not paid when due hereunder,
shall bear interest at a rate per annum equal to the interest rate applicable
from time to time thereafter to such Loans plus 2% (or, in the case of fees and
other amounts, at the Base Rate plus 2%), and, in each case, such default
interest shall be payable on demand. To the greatest extent permitted by law,
interest shall continue to accrue after the filing by or against the Borrower of
any petition seeking any relief in bankruptcy or under any law pertaining to
insolvency or debtor relief.
(c) Accrued (and theretofore unpaid) interest shall be payable as follows:
(i) in respect of each Base Rate Loan (including any Base Rate Loan
or portion thereof paid or prepaid pursuant to the provisions of SECTION
2.7, except as provided in the proviso hereinbelow), in arrears on the last
Business Day of each calendar quarter; provided, that in the event the Base
Rate Loans are repaid or prepaid in full and the Commitments have been
terminated, then accrued interest in respect of all Base Rate Loans shall
be payable together with such repayment or prepayment on the date thereof;
(ii) in respect of each LIBOR Loan (including any LIBOR Committed
Loan or portion thereof paid or prepaid pursuant to the provisions of
SECTION 2.7, except as provided in the proviso hereinbelow), in arrears (y)
on the last Business Day of the Interest Period applicable thereto (subject
to the provisions of clause (iv) in SECTION 2.10) and (z) in the case of a
LIBOR Loan having an Interest Period of six months, on the date three
months after the first day of such Interest Period; provided, that in the
event all LIBOR Loans made pursuant to a single Borrowing are repaid or
prepaid in full, then accrued interest in respect of such LIBOR Loans shall
be payable together with such repayment or prepayment on the date thereof;
(iii) in respect of each Absolute Rate Loan, (y) in arrears on the
last day of the Interest Period applicable thereto, and (2) on the date of
any repayment or prepayment thereof in full; and
(iv) in respect of any Loan, at maturity (whether pursuant to
acceleration or otherwise) and, after maturity, on demand.
(d) Nothing contained in this Agreement or in any other Loan Document shall
be deemed to establish or require the payment of interest to any Lender at a
rate in excess of the maximum rate permitted by applicable law. If the amount
of interest payable for the account of any Lender on any interest payment date
would exceed the maximum amount permitted by applicable law to be charged by
such Lender, the amount of interest payable for its account on such interest
payment date shall be automatically reduced to such maximum permissible amount.
In the event of any such reduction affecting any Lender, if from time to time
thereafter the amount of interest payable for the account of such Lender on any
interest payment date would be less than the maximum amount permitted by
applicable law to be charged by such Lender, then the amount of interest payable
for its account on such subsequent interest payment date shall be automatically
increased to such maximum permissible amount, provided that at no time shall the
32
<PAGE>
aggregate amount by which interest paid for the account of any Lender has been
increased pursuant to this sentence exceed the aggregate amount by which
interest paid for its account has theretofore been reduced pursuant to the
previous sentence.
(e) The Agent shall promptly notify the Borrower and the Lenders upon
determining the interest rate for each Borrowing after its receipt of the
relevant Notice of Committed Borrowing, Notice of Conversion/Continuation or
Bid; provided, however, that the failure of the Agent to provide the Borrower or
the Lenders with any such notice shall neither affect any obligations of the
Borrower or the Lenders hereunder nor result in any liability on the part of the
Agent to the Borrower or any Lender. Each such determination (including each
determination of the Reserve Requirement in connection with a Borrowing of LIBOR
Loans) shall, absent manifest error, be final and conclusive and binding on all
parties hereto.
2.9 Fees.
(a) The Borrower agrees to pay the Agent, for the ratable benefit of each
Lender, a facility fee per annum determined pursuant to the following table, for
the period from the Closing Date to the Termination Date.
Ratio of Consolidated
Debt to Annualized EBITDA Facility Fee
------------------------- ------------
Greater than 3.0 to 1.0 0.250%
Greater than 2.0 to 1.0 0.200%
but less than or equal
to 3.0 to 1.0
Less than or equal to 0.175%
2.0 to 1.0
The facility fee shall be applied to the average daily Total Commitment,
payable in arrears on the last Business Day of each fiscal quarter, commencing
with the fiscal quarter ending March 31, 1998, and calculated on the basis of
actual days elapsed over a year of 360 days. From the Closing Date until the
fifth (5th) day after receipt by the Agent of the March 31, 1998 financial
statements pursuant to SECTION 5.1(A) below, the facility fee shall be .20% per
annum. The facility fee shall be reset from time to time in accordance with the
above matrix on the fifth (5th) day after receipt by the Agent in accordance
with SECTIONS 5.1(A) and (B) of financial statements together with a Compliance
Certificate (reflecting the computation of the ratio of Consolidated Debt to
Annualized EBITDA as of the last day of the preceding fiscal quarter or fiscal
year, as appropriate).
(b) The Borrower agrees to pay to the Agent, for its own account, an annual
administrative fee of $40,000, payable quarterly in advance on the last Business
Day of each fiscal quarter.
33
<PAGE>
2.10 Interest Periods. Concurrently with the giving of any Notice of
Committed Borrowing or Notice of Conversion/Continuation in respect of any
Borrowing comprised of LIBOR Committed Loans and concurrently with the giving of
a Bid Request in respect of any requested Bid Loans, the Borrower shall have the
right to elect, pursuant to such notice, the interest period (each, an "Interest
Period") to be applicable to such Loans, which Interest Period, (x) in the case
of any LIBOR Committed Loan and at the option of the Borrower, shall be a one,
two, three or six (subject to availability for all Lenders) month period, (y) in
the case of any LIBOR Bid Loan and as agreed to by the Borrower and the Lender
making such LIBOR Bid Loan, shall be a one, two, three or six month period, or
(z) in the case of any Absolute Rate Loan and as agreed to by the Borrower and
the Lender making such Absolute Rate Loan, shall be a period of not less than
seven (7) nor more than one hundred eighty (180) days; provided, however, that:
(i) all LIBOR Loans comprising a single Borrowing shall at all times
have the same Interest Period;
(ii) the initial Interest Period for any LIBOR Loan shall commence
on the date of the Borrowing of such Loan (including the date of any
continuation of, or conversion into, such LIBOR Loan), and each successive
Interest Period applicable to such LIBOR Loan shall commence on the day
following the day on which the next preceding Interest Period applicable
thereto expires;
(iii) the Borrower may not select any Interest Period that expires
after the Maturity Date;
(iv) if any Interest Period would expire on a day that is not a
Business Day, such Interest Period shall expire on the next succeeding
Business Day unless such next succeeding Business Day falls in another
calendar month, in which case such Interest Period shall expire on the next
preceding Business Day;
(v) if any Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month during which such
Interest Period would otherwise expire, such Interest Period shall expire
on the last Business Day of such calendar month; and
(vi) if, upon the expiration of any Interest Period applicable to
Committed LIBOR Loans, the Borrower shall have failed to elect a new
Interest Period to be applicable to such LIBOR Loans, then the Borrower
shall be deemed to have elected to convert such LIBOR Loans into Base Rate
Loans as of the expiration of the then current Interest Period applicable
thereto.
2.11 Conversions and Continuations.
(a) The Borrower shall have the right, on any Business Day, to elect (y) to
convert all (or a portion in an amount not less than (A) in the case of Base
Rate Loans, $2,000,000 or, if greater, an integral multiple of $500,000 in
excess thereof and (B) in the case of LIBOR Committed Loans, $3,000,000 or, if
greater, an integral multiple of $1,000,000 in excess thereof)
34
<PAGE>
of the outstanding principal amount of any such Committed Loans of one Type made
pursuant to one or more Borrowings (and, in the case of LIBOR Committed Loans,
having the same Interest Period) into a Borrowing or Borrowings of Committed
Loans of the other Type, or (z) to continue all (or a portion, subject to the
restrictions as to amount set forth in clause (B) of the parenthetical in clause
(y) above) of the outstanding principal amount of any LIBOR Committed Loans made
pursuant to one or more Borrowings (having the same Interest Period) for an
additional Interest Period, provided that (i) except as otherwise provided for
in SECTION 2.13(D), LIBOR Committed Loans may be converted into Base Rate Loans
only on the last day of the Interest Period applicable thereto (and, in any
event, if a LIBOR Committed Loan is converted into a Base Rate Loan on any day
other than the last day of the Interest Period applicable thereto, the Borrower
will pay, upon such conversion, all amounts required under SECTION 2.15 to be
paid as a consequence thereof), (ii) if any partial conversion of LIBOR
Committed Loans into Base Rate Loans shall have reduced the outstanding
principal amount of the remaining LIBOR Committed Loans made pursuant to a
single Borrowing (and thereby continued) to less than $3,000,000, such remaining
LIBOR Committed Loans shall be converted immediately into Base Rate Loans and
may not thereafter be converted into or continued as LIBOR Committed Loans
unless the requirements of clause (y) above are satisfied, (iii) no conversion
of Base Rate Loans into LIBOR Committed Loans or continuation of LIBOR Committed
Loans shall be permitted during the continuance of an Event of Default and (iv)
no conversion or continuation under this Section shall result in a greater
number of separate Interest Periods in respect of LIBOR Loans than is permitted
under SECTION 2.2(A)(IV).
(b) The Borrower shall make each such election by delivering written notice
to the Agent prior to 9:00 a.m., Charlotte time, at least two (2) Business Days
prior to the effective date of any conversion of Base Rate Loans into, or
continuation of, LIBOR Committed Loans and on the same Business Day of any
conversion of LIBOR Committed Loans into Base Rate Loans. Each such notice
(each, a "Notice of Conversion/Continuation") shall be irrevocable, shall be
given in the form of EXHIBIT B-2 and shall be appropriately completed to specify
(x) the date of such conversion or continuation, (y) in the case of a conversion
into, or a continuation of, LIBOR Committed Loans, the Interest Period to be
applicable thereto and (z) the aggregate amount and Type of the Committed Loans
being converted or continued. Upon the receipt of a Notice of
Conversion/Continuation, the Agent will promptly notify each Lender having a
Commitment of the proposed conversion or continuation, of such Lender's Pro Rata
Share thereof and of the other matters specified in the Notice of
Conversion/Continuation. In the event that the Borrower shall fail to deliver a
Notice of Conversion/Continuation as provided hereinabove with respect to any
Borrowing of LIBOR Committed Loans, such LIBOR Committed Loans shall
automatically be converted to Base Rate Loans upon the expiration of the then
current Interest Period applicable thereto.
2.12 Method of Payments; Computations.
(a) All payments by the Borrower hereunder and under the Notes shall be
made without setoff, counterclaim or other defense, in Dollars and in
immediately available funds to the Agent, for the account of the Lenders (except
as otherwise provided herein as to payments required to be made to the Agent or
Issuing Bank for its own account or directly to the Lenders) at its office
referred to in SECTION 10.4, prior to 12:00 noon, Charlotte time, on the date
payment
35
<PAGE>
is due. Any payment made as required hereinabove, but after 12:00 noon,
Charlotte time, shall be deemed to have been made on the next succeeding
Business Day. If any payment falls due on a day that is not a Business Day, then
such due date shall be extended to the next succeeding Business Day (except that
in the case of LIBOR Loans to which the provisions of clause (iv) in SECTION
2.10 are applicable, such due date shall be the next preceding Business Day),
and such extension of time shall then be included in the computation of payment
of interest, fees or other applicable amounts.
(b) The Agent will distribute payments made to the Agent for the account of
the Lenders as follows: (i) with respect to fees and Committed Loans, to each
Lender such Lender's Pro Rata Share of such payment and (ii) with respect to Bid
Loans, to each Lender participating in such Bid Loan, its pro rata share based
on its respective principal amount of the relevant Bid Loans. If any such
payment is received by 12:00 noon, Charlotte time, in immediately available
funds, the Agent will make available on the same date, by wire transfer of
immediately available funds, the amounts to each Lender as provided in the
foregoing sentence. If such payment is received after 12:00 noon, Charlotte
time, or in other than immediately available funds, the Agent will make
available to each such Lender its respective payment by wire transfer of
immediately available funds on the next succeeding Business Day (or in the case
of uncollected funds, as soon as practicable after collected). If the Agent
shall not have made a required distribution to the appropriate Lenders as
required hereinabove after receiving a payment for the account of such Lenders,
the Agent will pay to each such Lender, on demand, the principal amount of its
respective payment with interest thereon at the Federal Funds Rate for each day
from the date such amount was required to be disbursed by the Agent until the
date repaid to such Lender.
(c) Unless the Agent shall have received notice from the Borrower prior to
the date on which any payment is due to any Lender hereunder that such payment
will not be made in full, the Agent may assume that the Borrower has made such
payment in full to the Agent on such date, and the Agent may, in reliance on
such assumption, cause to be distributed to each Lender on such due date an
amount equal to the amount then due to each such Lender. If and to the extent
the Borrower shall not have so made such payment in full to the Agent, and
without limiting the obligation of the Borrower to make such payment in
accordance with the terms hereof, each such Lender shall repay to the Agent
forthwith on demand such amount so distributed to such Lender, together with
interest thereon for each day from the date such amount is so distributed to
such Lender until the date repaid to the Agent, at the Federal Funds Rate.
(d) The Borrower hereby authorizes each Lender, if and to the extent that
any payment owed to such Lender is not made to the Agent or such Lender when due
hereunder or under any Note held by such Lender, to charge from time to time
against any or all of the accounts of the Borrower with such Lender any amount
so due in accordance with SECTION 8.2 hereof (with prompt notice to the Agent
and the Borrower); provided that the failure to give such notice shall not
affect the validity of such debit by such Lender.
(e) With respect to each payment on the Loans hereunder, except as
specifically provided otherwise herein or in any of the other Loan Documents,
the Borrower may designate by written notice to the Agent prior to or
concurrently with such payment the Types of Loans that
36
<PAGE>
are to be repaid or prepaid and, in the case of LIBOR Loans and Absolute Rate
Loans, the specific Borrowing or Borrowings pursuant to which made, provided
that (i) unless made together with all amounts required under SECTION 2.15 to be
paid as a consequence thereof, a prepayment of a LIBOR Loan or Absolute Rate
Loan may be made only on the last day of the Interest Period applicable thereto,
(ii) if any partial prepayment of LIBOR Loans made pursuant to any single
Borrowing shall reduce the outstanding principal amount of the remaining LIBOR
Loans under such Borrowing to less than $3,000,000, such remaining LIBOR Loans
shall be converted immediately into Base Rate Loans and (iii) each prepayment of
Loans comprising a single Borrowing shall be applied pro rata among such Loans.
In the absence of any such designation by the Borrower, or if an Event of
Default has occurred and is continuing, the Agent shall, subject to the
foregoing, make such designation in its sole discretion or as the Required
Lenders may direct, subject to the foregoing and the other provisions of this
Agreement.
(f) All computations of interest and fees hereunder (including computations
of the Reserve Requirement) shall be made on the basis of a year consisting of
360 days and the actual number of days (including the first day, but excluding
the last day) elapsed for LIBOR Loans and Absolute Rate Loans and of 365/366
days and the actual number of days (including the first day, but excluding the
last day) elapsed for Base Rate Loans.
2.13 Increased Costs, Change in Circumstances, etc.
(a) If, at any time after the Closing Date and from time to time, the
adoption or modification of any applicable law, rule or regulation, or any
interpretation or administration thereof by any Governmental Authority or
central bank (whether or not having the force of law) charged with the
interpretation, administration or compliance of the Lenders with any of such
requirements, in each case affecting banking institutions generally shall:
(i) subject any Lender to, or increase the net amount of, any tax,
impost, duty, charge or withholding with respect to any amount received or
to be received hereunder in connection with LIBOR Loans (other than taxes
imposed on net income or profits of, or any branch or franchise tax
applicable to, such Lender or a Lending Office of such Lender);
(ii) change the basis of taxation of payments to any Lender in
connection with LIBOR Loans (other than changes in taxes on the net income
or profits of, or any branch or franchise tax applicable to, such Lender or
a Lending Office of such Lender);
(iii) impose, increase or render applicable any reserve (other than
the Reserve Requirement), capital adequacy, special deposit or similar
requirement against assets of, deposits with or for the account of, or
loans, credit or commitments extended by, any Lender or a Lending Office of
such Lender; or
(iv) impose on any Lender or in the London interbank Eurodollar
market any other condition or requirement affecting this Agreement or LIBOR
Loans;
37
<PAGE>
and the result of any of the foregoing is to increase the costs to any Lender of
agreeing to make, making, funding or maintaining any LIBOR Loans or to reduce
the yield or rate of return of such Lender on any LIBOR Loans to a level below
that which such Lender could have achieved but for the adoption or modification
of any such requirements, the Borrower will, within fifteen (15) days after
delivery to the Borrower by such Lender of written demand therefor (with a copy
thereof to the Agent), pay to such Lender such additional amounts as shall
compensate such Lender for such increase in costs or reduction in return.
(b) If, at any time after the Closing Date and from time to time, any
Lender shall have determined that the adoption or modification of any applicable
federal, state or local law, rule or regulation regarding such Lender's required
level of capital (including any allocation of capital requirements or
conditions, but excluding federal, state or local income tax liability), or the
implementation of any such requirements previously adopted but not implemented
prior to the Closing Date, or any interpretation or administration thereof by
any Governmental Authority (whether or not having the force of law) charged with
the interpretation, administration or compliance of such Lender with any of such
requirements, in each case affecting banking institutions generally, has or
would have the effect of reducing the rate of return on such Lender's capital as
a consequence of its Commitment or Loans hereunder to a level below that which
such Lender could have achieved but for such adoption, modification,
implementation or interpretation (taking into account such Lender's policies
with respect to capital adequacy), the Borrower will, within fifteen (15) days
after delivery to the Borrower by such Lender of written demand therefor (with a
copy thereof to the Agent), pay to such Lender such additional amounts as will
compensate such Lender for such reduction in return.
(c) If, on or prior to the first day of any Interest Period, (i) the Agent
shall have received written notice from any Lender of such Lender's
determination that Dollar deposits in the amount of such Lender's required LIBOR
Committed Loan pursuant to such Borrowing are not generally available in the
London interbank Eurodollar market or that the rate at which such Dollar
deposits are being offered will not adequately and fairly reflect the cost to
such Lender of making or maintaining its LIBOR Committed Loan during such
Interest Period or (ii) the Agent shall have determined that adequate and
reasonable means do not exist for ascertaining the applicable LIBOR Rate for
such Interest Period, the Agent will forthwith so notify the Borrower and the
Lenders, whereupon the obligation of (y) in the case of clause (i) above, each
such affected Lender, and (z) in the case of clause (ii) above, all Lenders, in
each case to make, to convert Base Rate Loans into, or to continue, LIBOR
Committed Loans shall be suspended (including pursuant to the Borrowing to which
such Interest Period applies), and any Notice of Borrowing or Notice of
Conversion/Continuation given at any time thereafter with respect to LIBOR
Committed Loans shall be deemed to be a request for Base Rate Loans (but in the
case of clause (i) above, only to the extent of such affected Lender's Pro Rata
Share thereof) until the Agent or the affected Lender, as the case may be, shall
have determined that the circumstances giving rise to such suspension no longer
exist.
(d) Notwithstanding any other provision in this Agreement, if, at any time
after the Closing Date and from time to time, any Lender shall have determined
that the adoption or modification of any applicable law, rule or regulation, or
any interpretation or administration thereof by any Governmental Authority or
central bank (whether or not having the force of law)
38
<PAGE>
charged with the interpretation, administration or compliance of such Lender
with any of such requirements, has or would have the effect of making it
unlawful for such Lender to honor its obligation to make LIBOR Loans or to
continue to make or maintain LIBOR Loans, such Lender will forthwith so notify
the Agent and the Borrower, whereupon (i) each of such Lender's outstanding
LIBOR Loans shall automatically, on the expiration date of the respective
Interest Period applicable thereto or, to the extent any such LIBOR Loan may not
lawfully be maintained as a LIBOR Loan until such expiration date, upon such
notice, be converted into a Base Rate Loan and (ii) the obligation of such
Lender to make, to convert Base Rate Loans into, or to continue, LIBOR Loans
shall be suspended, and any Notice of Borrowing or Notice of
Conversion/Continuation given at any time thereafter with respect to LIBOR
Committed Loans shall, as to such Lender, be deemed to be a request for Base
Rate Loans, until such Lender shall have determined that the circumstances
giving rise to such suspension no longer exist.
(e) Determinations by the Agent or any Lender for purposes of this Section
of any increased costs, reduction in return, market contingencies, illegality or
any other matter shall, absent manifest error, be conclusive, provided that such
determinations are made reasonably and in good faith. Each Lender agrees that,
upon the occurrence of any event giving rise to the operation of this Section
with respect to such Lender, it will, if requested by the Borrower and to the
extent permitted by law, endeavor in good faith to designate another Lending
Office for its LIBOR Loans, but only if such designation would make it lawful
for such Lender to continue to make or maintain LIBOR Loans hereunder; provided
that such designation is made on such terms that such Lender, in its good faith
determination, suffers no increased cost or economic, legal or regulatory
disadvantage, with the object of avoiding the consequence of the event giving
rise to the operation of this Section.
(f) Each demand for payment under this Section shall be preceded by a
notice to the Borrower of such anticipated demand, which notice shall specify in
reasonable detail the basis for such demand and the calculation of the amount
requested hereunder, but the failure to provide such advance notice shall not
relieve the Borrower of any of its obligations hereunder. No failure by the
Agent or any Lender to demand payment of any amounts payable under this Section
shall constitute a waiver of its right to demand payment of any additional
amounts arising at any subsequent time. Nothing in this Section shall be
construed or so operate as to require the Borrower to pay any interest, fees,
costs or charges in excess of that permitted by applicable law.
2.14 Taxes.
(a) Any and all payments by the Borrower hereunder or under any Note shall
be made, in accordance with the terms hereof and thereof, free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto
(other than taxes imposed on the net income or profit of, or any branch or
franchise tax applicable to, the Agent or any Lender) (y) by the jurisdiction
under the laws of which the Agent or such Lender, as the case may be, is
organized or any political subdivision thereof and (z) in the case of each
Lender, by the jurisdiction in which any Lending Office of such Lender is
located or any political subdivision thereof (all such nonexcluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law
to deduct any Taxes from or in respect of any
39
<PAGE>
sum payable hereunder or under any Note to the Agent or any Lender, (i) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section), the Agent or such Lender, as the case may be, receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
the Borrower will make such deductions and (iii) the Borrower will pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) The Borrower will indemnify the Agent and each Lender for the full
amount of Taxes (including, without limitation, any Taxes imposed by any
jurisdiction on amounts payable under this Section) paid by the Agent or such
Lender, as the case may be, and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
were correctly or legally asserted. This indemnification shall be made within
thirty (30) days from the date the Agent or any Lender, as the case may be,
makes written demand therefor. Within thirty (30) days after the date of any
payment of Taxes pursuant to this Section, the Borrower will furnish to the
Agent or the relevant Lender, as the case may be, the original or a certified
copy of a receipt evidencing payment thereof.
(c) If any Lender is a "foreign corporation, partnership or trust" within
the meaning of the Code, and such Lender claims exemption from United States
withholding tax under Section 1441 or 1442 of the Code, such Lender will deliver
to the Agent and the Borrower:
(i) if such Lender claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, properly completed IRS
Forms 1001 and W-8 before the payment of any interest in the first calendar
year, and before the payment of any interest in each third succeeding
calendar year, during which interest may be paid to such Lender under this
Agreement;
(ii) if such Lender claims that interest paid under this Agreement
is exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Lender, two
properly completed and executed copies of IRS Form 4224 before the payment
of any interest is due in the first taxable year of such Lender, and in
each succeeding taxable year of such Lender, during which interest may be
paid to such Lender under this Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required under the Code or
other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Each such Lender will promptly notify the Agent and the Borrower of any
changes in circumstances that would modify or render invalid any claimed
exemption or reduction.
(d) If any Lender is entitled to a reduction in the applicable withholding
tax, the Agent may withhold from any interest payment to such Lender an amount
equivalent to the applicable withholding tax after taking into account such
reduction. If the forms or other documentation required under subsection (C)
above are not delivered to the Agent, then the Agent
40
<PAGE>
may withhold from any interest payment to such Lender not providing such forms
or other documentation an amount equivalent to the applicable withholding tax.
For purposes of this Section, a distribution hereunder by the Agent to or for
the account of any Lender shall be deemed a payment by the Borrower.
(e) If at any time the Borrower requests any Lender to deliver any forms or
other documentation pursuant to subsection (C) above, then the Borrower shall,
upon demand of such Lender, reimburse such Lender for any reasonable costs or
expenses incurred by such Lender in the preparation or delivery of such forms or
other documentation.
(f) Each Lender agrees that, upon the occurrence of any event giving rise
to the Borrower's obligation to make any payments or incur any other expenses in
respect of any Taxes under this SECTION 2.14 with respect to such Lender, it
will, if requested by the Borrower and to the extent permitted by law, endeavor
in good faith to designate another Lending Office for its Loans, but only if
such designation would relieve the Borrower from or lessen the amount of any
further such payments or expenses; provided that such designation is made on
such terms that such Lender, in its good faith determination, suffers no
increased cost or economic, legal or regulatory disadvantage.
2.15 Compensation.
(a) The Borrower will compensate each Lender, upon its written request
(which request shall set forth the basis for requesting such compensation and
shall be copied to the Agent), for all losses, expenses and liabilities
(including, without limitation, any loss, expense or liability incurred by
reason of the liquidation or reemployment of deposits or other funds required by
such Lender to fund its LIBOR Loans or Absolute Rate Loans) that such Lender may
sustain (i) if for any reason (other than a default by such Lender or the Agent
or, with respect to any Borrowing, a change in law described in SECTION 2.13 or
any Taxes payable as described in SECTION 2.14 or additional costs under SECTION
2.15(B), in each such case arising during the two (2) Business Days after a
Notice of Borrowing and of which the Borrower did not have knowledge at the time
the Borrower submitted such Notice of Borrowing; provided further that the
Lenders shall not be required to extend such Borrowing as a LIBOR Committed Loan
if such extension would create undue hardship for such Lender) a Borrowing of,
or conversion of or into, LIBOR Loans or Absolute Rate Loans does not occur on a
date specified therefor in a Notice of Borrowing, Invitation for Bids or Notice
of Conversion/Continuation, (ii) if any repayment, prepayment or conversion of
any of its LIBOR Loans or Absolute Rate Loans occurs on a date other than the
last day of an Interest Period applicable thereto (other than a conversion of a
LIBOR Loan pursuant to SECTIONS 2.13(C) or (D)), (iii) if any prepayment of any
of its LIBOR Loans or Absolute Rate Loans is not made on any date specified in a
notice of prepayment given by the Borrower or (iv) as a consequence of any other
failure by the Borrower to make any payments with respect to LIBOR Loans or
Absolute Rate Loans when due hereunder, including as a consequence of
acceleration of the maturity of such Loans pursuant to SECTION 8.1. In
addition, the Borrower will pay to the Agent, for its own account, an
administrative fee of $1,000 concurrently with any payments made in respect of
any single occurrence pursuant to this Section. Calculation of all amounts
payable to a Lender under this Section with respect to LIBOR Loans shall be made
as though such Lender had actually funded its relevant LIBOR Loan
41
<PAGE>
through the purchase of a Eurodollar deposit bearing interest at the LIBOR Rate
in an amount equal to the amount of such LIBOR Loan, having a maturity
comparable to the relevant Interest Period and through the transfer of such
Eurodollar deposit from an offshore Lending Office of such Lender to a Lending
Office of such Lender in the United States; provided, however, that each Lender
may fund each of its LIBOR Loans in any manner it sees fit and the foregoing
assumption shall be utilized only for the calculation of amounts payable under
this Section.
(b) Each Lender may require the Borrower to pay, contemporaneously with
each payment of interest on LIBOR Committed Loans, additional interest at a rate
per annum equal to the excess of (i) (A) the applicable LIBOR Rate divided by
(B) one minus the Reserve Requirement for such Lender over (ii) the rate
specified in clause (i)(A). Any Lender electing to require payment of such
additional interest (x) shall so notify the Borrower and the Agent, in which
case such additional interest on the LIBOR Committed Loans of such Lender shall
be payable to such Lender with respect to each Interest Period commencing at
least four (4) Business Days after the giving of such notice and (y) shall
notify the Borrower at least five (5) Business Days prior to each date on which
interest is payable on the LIBOR Committed Loans of the amount then due it under
this subparagraph (b); provided that, if the original notice from such Lender
indicates that such additional interest shall continue to be due on each LIBOR
Committed Loan until such Lender withdraws its notice, then no further notice
shall be due.
2.16 Use of Proceeds. The proceeds of the Loans shall be used by the
Borrower and its Subsidiaries (i) to finance Physician Transactions made
pursuant to SECTION 5.14 or SECTION 6.2 hereof, together with legal and
accounting fees and other transaction costs incurred in connection therewith,
(ii) to pay certain fees and expenses in connection with this Facility, and
(iii) to provide working capital for, and to finance, the Borrower's and its
Subsidiaries' general business purposes. The Borrower will not use any of the
proceeds of the Loans or any advances under the Swingline Note to purchase or
carry Margin Stock, or to extend credit to others for that purpose and will at
all times be in compliance with Section 4.7.
2.17 Recovery of Payments.
(a) The Borrower agrees that to the extent the Borrower makes a payment or
payments to or for the account of the Agent or the Lenders, which payment or
payments or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
receiver or any other party under any bankruptcy, insolvency or similar state or
federal law, or otherwise at law or equity, then, to the extent of such payment
or repayment, the Obligation intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been received.
(b) If any amounts distributed by the Agent to a Lender are subsequently
returned or repaid by the Agent to the Borrower or its representative or
successor in interest, whether by court order or by settlement approved by the
Lender in question, such Lender will, promptly upon receipt of notice thereof
from the Agent, pay the Agent such amount. If any such amounts are recovered by
the Agent from the Borrower or its representative or successor in interest, the
Agent shall redistribute such amounts to the Lenders on the same basis as such
amounts were originally distributed.
42
<PAGE>
2.18 Pro Rata Borrowings.
(a) All Borrowings, continuations and conversions of Committed Loans shall
be made by the Lenders pro rata on the basis of their respective Percentages, as
appropriate from time to time, rounded to the nearest penny.
(b) Each Lender agrees that if it shall receive any amount hereunder
(whether by voluntary payment, realization upon security, exercise of the right
of setoff or banker's lien, counterclaim or cross action, enforcement of any
right under the Loan Documents, or otherwise) applicable to the payment of any
of the Obligations (other than Bid Loans or obligations arising under the
Swingline Note) that exceeds its Pro Rata Share of payments on account of such
Obligations then or therewith obtained by all the Lenders to which such payments
are required to have been made, such Lender shall forthwith purchase from the
other Lenders such participations in such Obligations as shall be necessary to
cause such purchasing Lender to share the excess payment or other recovery
ratably with each of them; provided, however, that if all or any portion of such
excess payment is thereafter recovered from such purchasing Lender, such
purchase from each such other Lender shall be rescinded and each such other
Lender shall repay to the purchasing Lender the purchase price to the extent of
such recovery together with an amount equal to such other Lender's ratable share
(according to the proportion of (i) the amount of such other Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to the provisions of
this Section may, to the fullest extent permitted by law, exercise any and all
rights of payment (including, without limitation, setoff, banker's lien or
counterclaim) with respect to such participation as fully as if such participant
were a direct creditor of the Borrower in the amount of such participation. If
any Lender receives an amount (as described in the first sentence of this
section) applicable to the payment of any Bid Loans that exceeds its ratable
share of payments on account of such Bid Loans, then the foregoing provisions of
this section shall be applied with respect to those Lenders also participating
in such Bid Loans.
2.19 Substitution of Lender. If (i) the obligation of any Lender to make
LIBOR Committed Loans has been suspended pursuant to SECTION 2.13 or (ii) any
Lender has demanded compensation under SECTION 2.13 or SECTION 2.15(B), or if
any Lender has notified the Borrower to make any payments under SECTION 2.14,
the Borrower shall have the right, with the assistance of the Agent, to seek a
substitute bank or banks (which may be one or more of the Lenders), each of
which must be an Eligible Assignee, acceptable to the Borrower and the Agent, to
purchase the Note and assume the Commitment of such Lender in accordance with
SECTION 10.5 hereof by executing an Assignment and Acceptance.
2.20 Letters of Credit.
(a) Issuance. Subject to and upon the terms and conditions herein set
forth, so long as no Default or Event of Default has occurred and is continuing,
the Issuing Bank will, at any time and from time to time on and after the
Closing Date and prior to the earlier of (i) the seventh day prior to the
Maturity Date and (ii) the Termination Date, upon request by the Borrower in
43
<PAGE>
accordance with the provisions of SECTION 2.20(B), issue for the account of the
Borrower one or more irrevocable standby letters of credit denominated in
Dollars and in a form customarily used or otherwise reasonably approved by the
Issuing Bank (together with all amendments, modifications and supplements
thereto, substitutions therefor and renewals and restatements thereof,
collectively, the "Letters of Credit"). The Stated Amount of each Letter of
Credit shall not be less than such amount as may be acceptable to the Issuing
Bank but in all events any amount greater than or equal to $5,000 shall be
deemed acceptable. Notwithstanding the foregoing:
(i) No Letter of Credit shall be issued the Stated Amount upon
issuance of which (i) when added to all other Letter of Credit Outstandings
at such time, would exceed $5,000,000 or (ii) when added to all other
Letter of Credit Outstandings at such time and the aggregate principal
amount of all Loans then outstanding, would exceed the Total Commitment at
such time;
(ii) No Letter of Credit shall be issued that by its terms expires
later than the seventh day prior to the Maturity Date or, in any event,
more than one (1) year after its date of issuance (subject to renewal as
provided below); provided, however, that a Letter of Credit may, if
requested by the Borrower, provide by its terms, and on terms acceptable to
the Issuing Bank, for renewal for successive periods of one year or less
(but not beyond the seventh day prior to the Maturity Date), unless and
until the Issuing Bank shall have delivered a notice of nonrenewal to the
beneficiary of such Letter of Credit; and
(iii) The Issuing Bank shall be under no obligation to issue any
Letter of Credit if, at the time of such proposed issuance, (A) any order,
judgment or decree of any Governmental Authority or arbitrator shall
purport by its terms to enjoin or restrain the Issuing Bank from issuing
such Letter of Credit, or any Requirement of Law applicable to the Issuing
Bank or any request or directive (whether or not having the force of law)
from any Governmental Authority with jurisdiction over the Issuing Bank
shall prohibit, or request that the Issuing Bank refrain from, the issuance
of letters of credit generally or such Letter of Credit in particular or
shall impose upon the Issuing Bank with respect to such Letter of Credit
any restriction or reserve or capital requirement (for which the Issuing
Bank is not otherwise compensated) not in effect on the Closing Date, or
any unreimbursed loss, cost or expense that was not applicable or in effect
as of the Closing Date and that the Issuing Bank reasonably deems material
to it, or (B) the Issuing Bank shall have actual knowledge, or shall have
received notice from any Lender, prior to the issuance of such Letter of
Credit that one or more of the conditions specified in ARTICLE III are not
then satisfied or that the issuance of such Letter of Credit would violate
the provisions of subsection (I) above.
(b) Notices. Whenever the Borrower desires the issuance of a Letter of
Credit, the Borrower will notify the Issuing Bank (with copies to the Agent) in
writing, by 11:00 a.m., Charlotte, North Carolina local time, at least three (3)
Business Days (or such shorter period as is acceptable to the Issuing Bank in
any given case) prior to the requested date of issuance thereof. Each such
request (each, a "Letter of Credit Request") shall be irrevocable, shall be
given in the form of EXHIBIT B-3 and shall be appropriately completed to specify
(i) the proposed date of
44
<PAGE>
issuance (which shall be a Business Day), (ii) the proposed Stated Amount and
expiry date of the Letter of Credit, and (iii) the name and address of the
proposed beneficiary or beneficiaries of the Letter of Credit. The Borrower will
also complete any application procedures and documents required by the Issuing
Bank in connection with the issuance of any Letter of Credit; provided, however,
that the terms of this Agreement shall govern in the event that there is any
inconsistency between the terms of such application and any of the terms and
conditions hereof and, without limiting the generality of the foregoing, no
provision in any letter of credit application or agreement shall give the
Issuing Bank, the Agent or any Lender any rights that are in addition to or
greater than the rights such Person would otherwise have under this Agreement.
The Agent will, promptly upon its receipt thereof, notify each Lender of the
Letter of Credit Request. Upon its issuance of any Letter of Credit, the Issuing
Bank will promptly notify each Lender of such issuance and the amount of its
participation therein under SECTION 2.20(C).
(c) Participations. Immediately upon the issuance of any Letter of Credit,
the Issuing Bank shall be deemed to have sold and transferred to each Lender,
and each Lender (each, in such capacity, an "L/C Participant") shall be deemed
irrevocably and unconditionally to have purchased and received from the Issuing
Bank, without recourse or warranty, an undivided interest and participation, pro
rata to the extent of its Percentage at such time, in such Letter of Credit,
each drawing made thereunder, and the obligations of the Borrower under this
Agreement with respect thereto and any security therefor (including the
Collateral) or guaranty pertaining thereto; provided, however, that the fees and
other charges relating to Letters of Credit described in SECTIONS 2.20(L)(II)
and 2.20(L)(III) shall be payable directly to the Issuing Bank as provided
therein, and the L/C Participants shall have no right to receive any portion
thereof. Upon any change in the Commitments of any of the Lenders pursuant to
SECTION 10.5, with respect to all outstanding Letters of Credit and
Reimbursement Obligations there shall be an automatic adjustment to the
participations pursuant to this Section to reflect the new Percentages of the
assigning Lender and the Eligible Assignee.
(d) Reimbursement. The Borrower hereby agrees to reimburse the Issuing
Bank for any drawing made under any Letter of Credit and, subject to SECTION
2.20(E), shall make payment to the Agent, for the account of the Issuing Bank,
in immediately available funds, for any payment made by the Issuing Bank under
any Letter of Credit (each such amount so paid until reimbursed (including by a
loan under SECTION 2.20(E)), together with interest thereon payable as provided
hereinbelow, a "Reimbursement Obligation") immediately after, and in any event
within one (1) Business Day after its receipt of notice of, such payment,
together with interest on the amount so paid by the Issuing Bank, to the extent
not reimbursed prior to 1:00 p.m., Charlotte time, on the date of such payment
or disbursement, for the period from the date of the respective payment to the
date the Reimbursement Obligation created thereby is satisfied, at the Base Rate
as in effect from time to time during such period, such interest also to be
payable on demand. The Issuing Bank will provide the Agent and the Borrower
with prompt notice of any payment or disbursement made under any Letter of
Credit, although the failure to give, or any delay in giving, any such notice
shall not release, diminish or otherwise affect the Borrower's obligations under
this Section or any other provision of this Agreement. The Agent will promptly
pay to the Issuing Bank any such amounts received by it under this Section.
45
<PAGE>
(e) Payment by Loans. In the event that the Issuing Bank makes any payment
under any Letter of Credit and the Borrower shall not have timely satisfied in
full its Reimbursement Obligation to the Issuing Bank pursuant to SECTION
2.20(D), and to the extent that any amounts then held in the Cash Collateral
Account established pursuant to SECTION 2.20(J) shall be insufficient to satisfy
such Reimbursement Obligation in full, the Issuing Bank will promptly notify the
Agent, and the Agent will promptly notify each L/C Participant, of such failure.
If the Agent gives such notice prior to 11:00 a.m., Charlotte, North Carolina
local time, on any Business Day to any L/C Participant, such L/C Participant
will make available to the Agent, for the account of the Issuing Bank, its Pro
Rata Share (based on its Percentage) of the amount of such payment on such
Business Day in immediately available funds. If the Agent gives such notice
after 11:00 a.m., Charlotte, North Carolina local time, on any Business Day to
any such L/C Participant, such L/C Participant shall make its Pro Rata Share of
such amount available to the Agent on the next succeeding Business Day. If and
to the extent such L/C Participant shall not have so made its Pro Rata Share of
the amount of such payment available to the Agent, such L/C Participant agrees
to pay to the Agent, for the account of the Issuing Bank, forthwith on demand
such amount, together with interest thereon, for each day from such date until
the date such amount is paid to the Agent at the Federal Funds Rate. The failure
of any L/C Participant to make available to the Agent its Pro Rata Share of any
payment under any Letter of Credit shall not relieve any other L/C Participant
of its obligation hereunder to make available to the Agent its Pro Rata Share of
any payment under any Letter of Credit on the date required, as specified above,
but no L/C Participant shall be responsible for the failure of any other L/C
Participant to make available to the Agent such other L/C Participant's Pro Rata
Share of any such payment. Each such payment by an L/C Participant under this
SECTION 2.20(E) of its Pro Rata Share of an amount paid by the Issuing Bank
shall constitute a Loan by such Lender (the Borrower being deemed to have given
a timely Notice of Borrowing therefor) and shall be treated as such for all
purposes of this Agreement; provided that for purposes of determining the Total
Unutilized Commitment immediately prior to giving effect to the application of
the proceeds of such Loans, the Reimbursement Obligation being satisfied thereby
shall be deemed not to be outstanding at such time.
(f) Payment to L/C Participants. Whenever the Issuing Bank receives a
payment in respect of a Reimbursement Obligation as to which the Agent has
received, for the account of the Issuing Bank, any payments from the L/C
Participants pursuant to SECTION 2.20(E), the Issuing Bank will promptly pay to
the Agent, and the Agent will promptly pay to each L/C Participant that has paid
its Pro Rata Share thereof, in immediately available funds, an amount equal to
such L/C Participant's ratable share (based on the proportionate amount funded
by such L/C Participant to the aggregate amount funded by all L/C Participants)
of such Reimbursement Obligation.
(g) Obligations Absolute. The Reimbursement Obligations of the Borrower,
and the obligations of the L/C Participants to make payments to the Agent, for
the account of the Issuing Bank, with respect to Letters of Credit, shall be
irrevocable, shall remain in effect until the Issuing Bank shall have no further
obligations to make any payments or disbursements under any circumstances with
respect to any Letter of Credit, and, shall not be subject to counterclaim,
setoff or other defense or any other qualification or exception whatsoever and
shall be made in accordance with the terms and conditions of this Agreement
under all circumstances, including,
46
<PAGE>
without limitation, any of the following circumstances; provided, that the
making of such reimbursement payments shall not affect the rights of the
Borrower or the L/C Participants to seek damages or other remedies arising from
any breach of the Issuing Bank's standard of care as set forth in the final
paragraph of this subsection (G):
(i) Any lack of validity or enforceability of this Agreement, any of
the other Loan Documents or any documents or instruments relating to any
Letter of Credit;
(ii) Any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations in respect of any Letter
of Credit or any other amendment, modification or waiver of or any consent
to departure from any Letter of Credit or any documents or instruments
relating thereto, in each case whether or not the Borrower has notice or
knowledge thereof;
(iii) The existence of any claim, setoff, defense or other right
that the Borrower may have at any time against a beneficiary named in a
Letter of Credit, any transferee of any Letter of Credit (or any Person for
whom any such transferee may be acting), the Agent, the Issuing Bank, any
Lender or other Person, whether in connection with this Agreement, any
Letter of Credit, the transactions contemplated hereby or any unrelated
transactions (including any underlying transaction between the Borrower and
the beneficiary named in any such Letter of Credit);
(iv) Any draft, certificate or any other document presented under
the Letter of Credit proving to be forged, fraudulent or invalid in any
respect or any statement therein being untrue or inaccurate in any respect,
any errors, omissions, interruptions or delays in transmission or delivery
of any messages, by mail, telecopier or otherwise, or any errors in
translation or in interpretation of technical terms;
(v) Any defense based upon the failure of any drawing under a Letter
of Credit to conform to the terms of the Letter of Credit, any
nonapplication or misapplication by the beneficiary or any transferee of
the proceeds of such drawing or any other act or omission of such
beneficiary or transferee in connection with such Letter of Credit;
(vi) The exchange, release, surrender or impairment of any
Collateral or other security for the Obligations;
(vii) The occurrence of any Default or Event of Default; or
(viii) Any other circumstance or event whatsoever, including,
without limitation, any other circumstance that might otherwise constitute
a defense available to, or a discharge of, the Borrower or a guarantor.
None of the foregoing shall impair, prevent or otherwise affect any of the
rights and powers granted to the Issuing Bank hereunder. Any action taken or
omitted to be taken by the Issuing Bank under or in connection with any Letter
of Credit, if taken or omitted in accordance with the Uniform Commercial Code
and the Uniform Customs and Practice for Documentary Credits (1993 Revision), to
the extent applicable, and in the absence of fraud, gross negligence or
47
<PAGE>
willful misconduct, shall be binding upon Borrower and each L/C Participant and
shall not create or result in any liability of the Issuing Bank to the Borrower
or any L/C Participant. It is expressly understood and agreed that, for
purposes of determining whether a wrongful payment under a Letter of Credit
resulted from the Issuing Bank's gross negligence or willful misconduct, (i) the
Issuing Bank's acceptance of documents that appear on their face to comply with
the terms of such Letter of Credit, without responsibility for further
investigation, regardless of any notice or information to the contrary, (ii) the
Issuing Bank's exclusive reliance on the documents presented to it under such
Letter of Credit as to any and all matters set forth therein, including the
amount of any draft presented under such Letter of Credit, whether or not the
amount due to the beneficiary thereunder equals the amount of such draft and
whether or not any document presented pursuant to such Letter of Credit proves
to be insufficient in any respect (so long as such document appears on its face
to comply with the terms of such Letter of Credit), and whether or not any other
statement or any other document presented pursuant to such Letter of Credit
proves to be forged or invalid or any statement therein proves to be inaccurate
or untrue in any respect whatsoever, and (iii) any noncompliance in any
immaterial respect of the documents presented under such Letter of Credit with
the terms thereof shall, in each case, be deemed not to constitute gross
negligence or willful misconduct of the Issuing Bank.
(h) Increased Costs. If at any time after the Closing Date the Issuing
Bank or any L/C Participant determines that the introduction of or any change in
any applicable law, rule, regulation, order, guideline or request or in the
interpretation or administration thereof by any Governmental Authority charged
with the interpretation or administration thereof, or compliance by the Issuing
Bank or any L/C Participant with any request or directive after the Closing Date
by any such authority (whether or not having the force of law) shall either (i)
impose, modify or make applicable any reserve, deposit, capital adequacy or
similar requirement against Letters of Credit issued by the Issuing Bank or
participated in by any L/C Participant or (ii) impose on the Issuing Bank or any
L/C Participant any other conditions relating, directly or indirectly, to this
Agreement or any Letter of Credit, and the result of any of the foregoing is to
increase the cost to the Issuing Bank or L/C Participant of issuing, maintaining
or participating in any Letter of Credit, or to reduce the amount of any sum
received or receivable by the Issuing Bank or such L/C Participant hereunder or
reduce the rate of return on its capital with respect to Letters of Credit, then
the Borrower will, within fifteen (15) days after delivery to the Borrower by
the Issuing Bank or such L/C Participant of written demand therefor (with a copy
thereof to the Agent), pay to the Issuing Bank or such L/C Participant such
additional amounts as shall compensate the Issuing Bank or such L/C Participant
for such increase in costs or reduction in return. A certificate submitted to
the Borrower by the Issuing Bank or such L/C Participant, as the case may be (a
copy of which certificate shall be sent by the Issuing Bank or such L/C
Participant to the Agent), setting forth a reasonably detailed calculation of
such additional amount and the basis for the determination of such additional
amount or amounts necessary to compensate the Issuing Bank or such L/C
Participant as aforesaid, shall be presumptively correct.
(i) INTENTIONALLY OMITTED.
(j) Cash Collateral Account. At any time and from time to time (i) during
the continuance of an Event of Default, the Agent, at the direction, or with the
consent, of the Required Lenders, may require the Borrower to deliver to the
Agent such additional amount of
48
<PAGE>
cash as is equal to the aggregate Stated Amount of all Letters of Credit at any
time outstanding (whether or not any beneficiary under any Letter of Credit
shall have drawn or be entitled at such time to draw thereunder) and (ii) in the
event of a prepayment under SECTION 2.5(B), the Agent will retain such amount as
may then be required to be retained under the proviso in SECTION 2.5(B), such
amounts in each case under clauses (i) and (ii) above to be held by the Agent in
a cash collateral account (the "Cash Collateral Account") as security for, and
for application to, the Borrower's Reimbursement Obligations as and when the
same shall arise. The Agent shall have exclusive dominion and control, including
the exclusive right of withdrawal, over such account. Other than any interest on
the investment of such amounts in Cash Equivalents, which investments shall be
made at the direction of the Borrower (unless a Default or Event of Default
shall have occurred and be continuing, in which case the determination as to
which investments shall be made shall be at the option and in the discretion of
the Agent; provided that the Agent shall have no liability with respect
thereto), amounts in the Cash Collateral Account shall not bear interest.
Interest and profits, if any, on such investments shall accumulate in such
account. In the event of a drawing, and subsequent payment by the Issuing Bank,
under any Letter of Credit at any time during which any amounts are held in the
Cash Collateral Account, the Agent will deliver to the Issuing Bank an amount
equal to the Reimbursement Obligation created as a result of such payment (or,
if the amounts so held are less than such Reimbursement Obligation, all of such
amounts) to reimburse the Issuing Bank therefor. Any amounts remaining in the
Cash Collateral Account after the expiration of all Letters of Credit and
reimbursement in full of the Issuing Bank for all of its obligations thereunder
shall be held by the Agent (i) in the case of funds held pursuant to clause (i)
above during the continuance of an Event of Default, for the benefit of the
Borrower, to be applied against the Obligations then or as they become due and
payable in such order as the Agent may direct and (ii) in the event funds held
pursuant to clause (ii) above, where the Borrower is required to provide cash
collateral pursuant to SECTION 2.5(B), such amount (to the extent not applied as
aforesaid) shall be returned to the Borrower on demand, provided that after
giving effect to such return (i) the sum of (y) the aggregate principal amount
of all Loans outstanding at such time and (z) the aggregate Letter of Credit
Outstandings at such time would not exceed the Total Commitment at such time and
(ii) no Default or Event of Default shall have occurred and be continuing at
such time. If the Borrower is required to provide cash collateral as a result of
an Event of Default, such amount (to the extent not applied as aforesaid) shall
be returned to the Borrower within two (2) Business Days after all Events of
Default have been cured or waived.
(k) Effectiveness. Notwithstanding any termination of the Commitments or
repayment of the Loans, or both, the obligations of the Borrower under this
SECTION 2.18 shall remain in full force and effect until the Issuing Bank and
the L/C Participants shall have no further obligations to make any payments or
disbursements under any circumstances with respect to any Letter of Credit.
(l) Fees. In connection with the Letters of Credit, the Borrower agrees to
pay:
(i) To the Agent, for the account of each Lender, a letter of credit
fee in respect of each Letter of Credit for the period from the date of its
issuance to the date of its termination, at a rate per annum equal to the
Applicable Margin in effect from time to time during such period on the
daily average Stated Amount thereof, payable in arrears
49
<PAGE>
(x) on the last Business Day of each fiscal quarter, beginning with the
last Business Day of the fiscal quarter ending March 31, 1998, and (y) on
the later of the Termination Date and the date of termination of the last
outstanding Letter of Credit, in each case calculated on the basis of
actual days elapsed over a year of 360 days;
(ii) To the Issuing Bank, for its own account, a facing fee in
respect of each Letter of Credit for the period from the date of its
issuance to the date of its termination, at the rate of 0.125% per annum on
the daily average Stated Amount thereof, payable in arrears (i) on the last
Business Day of each fiscal quarter, beginning with the last Business Day
of the fiscal quarter ending March 31, 1998, and (ii) on the later of the
Termination Date and the date of termination of the last outstanding Letter
of Credit; and
(iii) To the Issuing Bank, for its own account, such reasonable
commissions, issuance fees, transfer fees and other fees and charges
incurred in connection with the issuance and administration of each Letter
of Credit as are customarily charged from time to time by the Issuing Bank
for the performance of such services in connection with similar letters of
credit, or as may be otherwise agreed to by the Issuing Bank, but without
duplication of amounts payable under subsection (II) above.
ARTICLE III.
CLOSING; CONDITIONS OF CLOSING AND BORROWING
3.1 Conditions of Initial Borrowing. The obligation of each Lender to make
Loans in connection with the initial Borrowing hereunder, and the obligation of
the Issuing Bank to issue Letters of Credit hereunder, is subject to the
satisfaction of the following conditions precedent:
(a) The Agent shall have received the following, each dated as of the
Closing Date (unless otherwise specified) and, except for the Notes and the
certificates and instruments required to be delivered under the Security
Agreements, in sufficient copies for each Lender:
(i) counterparts hereof signed by each of the parties hereto;
(ii) a Committed Loan Note and Bid Loan Note for the account of each
Lender that is a party hereto as of the Closing Date, in the amount of such
Lender's Commitment and duly completed and executed by the Borrower;
(iii) the Guaranty, duly completed and executed by the Guarantors;
(iv) the Security Agreements, duly completed and executed by the
Borrower and the Guarantors owning any property of the type covered
thereby, together with all certificates evidencing the capital stock being
pledged thereunder and undated stock powers for each such certificate, duly
executed in blank, and any promissory notes being pledged thereunder, duly
endorsed in blank;
50
<PAGE>
(v) an acknowledgment copy, or other evidence satisfactory to the
Agent, of the proper filing or recording of each document (including
Financing Statements) required by law or reasonably requested by the Agent
to be filed or recorded in each jurisdiction in which the filing or
recording is so required or requested in order to create in favor of the
Agent, for the benefit of the Lenders, a valid, legal and perfected first
priority security interest in or lien on the Collateral that is the subject
of the Security Agreements, subject only to Permitted Liens;
(vi) a certificate, signed by the chief executive officer or chief
financial officer of the Borrower, in form and substance satisfactory to
the Agent, certifying that (A) all representations and warranties of the
Borrower contained in this Agreement and the other Loan Documents are true
and correct as of the Closing Date, both immediately before and after
giving effect to any Loans to be made on the Closing Date hereunder and the
application of the proceeds thereof, (B) no Default or Event of Default has
occurred and is continuing, both immediately before and after giving effect
to any Loans to be made on the Closing Date hereunder and the application
of the proceeds thereof, (C) both immediately before and after giving
effect to the consummation of the transactions contemplated by this
Agreement, no Material Adverse Change has occurred since December 31, 1996,
and there exists no event, condition or state of facts related to the
business of the Borrower and its Subsidiaries that could reasonably be
expected to result in a Material Adverse Change and (D) the Borrower has
satisfied each of the conditions set forth in this Section applicable to
the Borrower and its Subsidiaries;
(vii) a certificate of the secretary or an assistant secretary of
each of the Borrower and its Subsidiaries, in form and substance
satisfactory to the Agent, certifying (A) that attached thereto is a true
and complete copy of the articles or certificate of incorporation and all
amendments thereto of the Borrower or such Subsidiary, as the case may be,
certified as of a recent date by the Secretary of State (or comparable
Governmental Authority) of its jurisdiction of organization, and that the
same has not been amended since the date of such certification, (B) that
attached thereto is a true and complete copy of the bylaws of the Borrower
or such Subsidiary, as the case may be, as then in effect and as in effect
at all times from the date on which the resolutions referred to in clause
(C) below were adopted to and including the date of such certificate, and
(C) that attached thereto is a true and complete copy of resolutions
adopted by the board of directors of the Borrower or such Subsidiary, as
the case may be, authorizing the execution, delivery and performance of the
Loan Documents to which it is a party, and as to the incumbency and
genuineness of the signature of each officer of the Borrower or such
Subsidiary executing any of such Loan Documents, and attaching all such
copies of the documents described above; provided, that non-corporate
Subsidiaries shall provide comparable documentation as appropriate and
reasonably satisfactory to the Agent.
(viii) certificates as of a recent date of (A) the good standing of
each of the Borrower and its Subsidiaries under the laws of its
jurisdiction of organization, from the Secretary of State (or comparable
Governmental Authority) of such jurisdiction, (B) the qualification of each
of the Borrower and its Subsidiaries to conduct business as foreign
corporations in the states where each is qualified to conduct business and,
(C) where
51
<PAGE>
reasonably available from the department of revenue or other appropriate
Governmental Authority, that the Borrower and each Subsidiary has filed all
required tax returns and owes no delinquent taxes; provided, that non-
corporate Subsidiaries shall provide comparable certificates to the extent
available and such other documentation reasonably requested by the Agent.
(ix) the favorable opinion of Mayor, Day, Caldwell & Keeton, L.L.P.,
counsel to the Borrower, addressed to the Agent and the Lenders, in form
and substance satisfactory to the Agent and each Lender;
(x) certificates, and copies of policies, of insurance, in form and
substance satisfactory to the Agent, upon the Collateral and the business
of the Borrower and each Guarantor.
(b) All legal matters, documentation and corporate or other proceedings
incident to the transactions contemplated hereby shall be reasonably acceptable
to the Agent; all approvals, permits and consents of any Governmental
Authorities or other Persons required in connection with the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby shall have been obtained (without the imposition of conditions that are
not reasonably acceptable to the Agent), and all related filings, if any, shall
have been made, and all such approvals, permits, consents and filings shall be
in full force and effect and the Agent shall have received such copies thereof
as it shall have requested; all applicable waiting periods shall have expired
without any adverse action being taken by any Governmental Authority having
jurisdiction; and no action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before, and no
order, injunction or decree shall have been entered by, any court or other
Governmental Authority, in each case to enjoin, restrain or prohibit, to obtain
substantial damages in respect of, or that is otherwise related to or arises out
of, this Agreement or the consummation of the transactions contemplated hereby,
or that, in the opinion of the Agent, would otherwise be reasonably likely to
have a Material Adverse Effect.
(c) Since December 31, 1996, both immediately before and after giving
effect to the consummation of the transactions contemplated by this Agreement,
there shall not have occurred any Material Adverse Change or any event,
condition or state of facts relating to the business of the Borrower and its
Subsidiaries that could reasonably be expected to result in a Material Adverse
Change, other than as specifically contemplated by this Agreement and the other
Loan Documents.
(d) The Borrower shall have paid (i) to the Agent, the initial quarterly
installment of the annual administrative fee described in SECTION 2.9(B), and
(ii) all other fees and expenses of the Agent and the Lenders for which the
Borrower has received an invoice required hereunder or under any other Loan
Document to be paid on or prior to the Closing Date (including fees and expenses
of counsel) in connection with this Agreement and the transactions contemplated
hereby.
52
<PAGE>
(e) The Agent shall have received an Account Designation Letter, together
with written instructions from an Authorized Officer of the Borrower, including
wire transfer information, directing the payment of the proceeds of the initial
Loans to be made hereunder.
(f) The Lenders shall have received the Financial Statements from the
Borrower, in form and substance satisfactory to the Lenders.
(g) All taxes, fees and other charges in connection with the execution,
delivery, recording, filing and registration of any of the Loan Documents shall
have been paid by the Borrower.
(h) The Agent and each Lender shall have received such other documents,
certificates, and instruments as the Agent or any Lender shall have reasonably
requested.
3.2 Conditions of All Borrowings. The obligation of the Lenders to make
any Loans hereunder, including the initial Loans, and the obligation of the
Issuing Bank to issue any Letters of Credit hereunder, is subject to the
satisfaction of the following conditions precedent on the relevant Borrowing
Date or date of issuance:
(a) The Agent shall have received a Notice of Borrowing, if required, in
accordance with SECTION 2.2(A), a Bid Request in accordance with SECTION 2.3(A)
or a Letter of Credit Request in accordance with SECTION 2.18(B), as applicable;
(b) Each of the representations and warranties made by the Borrower
contained in ARTICLE IV shall be true and correct on and as of such Borrowing
Date for new Borrowings (other than conversions with no new funds advanced),
with the same effect as if made on and as of the Borrowing Date, except to the
extent the facts upon which such representation and warranty are based may be
changed as a result of transactions permitted or contemplated hereby or such
representation or warranty relates solely to a prior date and except for new
Subsidiaries for whom the representations and warranties shall apply only as of
the date of representation;
(c) No Default or Event of Default shall have occurred and be continuing on
such date, both immediately before and after giving effect to the Loans to be
made or Letter of Credit to be issued on such date; and
(d) The security interests in the Collateral previously pledged to the
Agent, for the benefit of the Lenders, pursuant to the Loan Documents shall
remain in full force and effect.
Each giving of a Notice of Borrowing or a Letter of Credit Request, and the
consummation of each Borrowing or issuance of a Letter of Credit, shall be
deemed to constitute a representation by the Borrower that the statements
contained in subsections (B) and (C) above are true, both as of the date of such
notice or request and as of the relevant Borrowing Date or date of issuance.
3.3 Waiver of Conditions Precedent. If any Lender makes any Loan
hereunder, prior to the fulfillment of any of the conditions precedent set forth
in this ARTICLE III, the making of such Loan or the issuance of such Letter of
Credit shall constitute only an extension of time for
53
<PAGE>
the fulfillment of such condition and not a waiver thereof, and unless the
Required Lenders indicate otherwise in writing, the Borrower shall thereafter
use its best efforts to fulfill each such condition promptly. No failure by the
Borrower to fulfill any such condition precedent shall constitute a Default or
an Event of Default hereunder, except to the extent any such failure is
continuing after the expiration of any period within which such condition is
specifically required to be fulfilled.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this Loan Agreement and extend
the credit contemplated hereby, the Borrower makes the following warranties and
representations to the Agent and each Lender:
4.1 Corporate Organization and Power. The Borrower and each Subsidiary (a)
is a corporation duly organized, validly existing and in good standing or other
legal entity duly organized and validly existing under the laws of the
jurisdiction set forth opposite its name on SCHEDULE 4.1; (b) is qualified to do
business and is in good standing in every other jurisdiction where the nature of
its business or the ownership of its properties requires it to be so qualified
and where the failure to be so qualified would have a Material Adverse Effect,
which jurisdictions are set forth on SCHEDULE 4.1; (c) except as set forth on
SCHEDULE 4.1, has no Subsidiaries or Affiliates (other than its officers,
directors and shareholders and other than the physician groups not owned by the
Borrower or a Subsidiary to which the Borrower or its Subsidiaries provide
management services) and is not a partner or joint venturer in any partnerships
or joint ventures; (d) has the power (corporate or otherwise) to own and give a
lien on and security interest in its respective Collateral and to engage in the
transactions contemplated hereby; and (e) has the full power (corporate or
otherwise), authority and legal right to execute and deliver this Agreement and
the other Loan Documents to which it is a party and to perform and observe the
terms and provisions thereof. Neither the Borrower nor any of its Subsidiaries
has, during the preceding five (5) years, been known as or used any other
corporate, fictitious or trade names in the United States other than as set
forth on SCHEDULE 4.1.
4.2 Litigation; Government Regulation. Except as set forth in SCHEDULE
4.2, (a) there are no judgments, injunctions or similar orders or decrees and no
actions, suits, investigations or proceedings pending (pursuant to which the
Borrower or any Subsidiary has been served) or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or any Subsidiary or its
business that is reasonably likely to have a Material Adverse Effect, or that
question the validity of this Agreement or any of the Loan Documents, at law or
in equity before any court, arbitrator or Governmental Authority, and (b)
neither the Borrower nor any Subsidiary is in violation of or in default under
any Requirement of Law where such violation could reasonably be expected to have
a Material Adverse Effect.
4.3 Taxes. Except as set forth in SCHEDULE 4.3, neither the Borrower nor
any Subsidiary is delinquent in the payment of any taxes that have been levied
or assessed by any
54
<PAGE>
Governmental Authority against it or its assets. Except as set forth in SCHEDULE
4.3, the Borrower and each Subsidiary (a) has timely filed all tax returns that
are required by law to be filed prior to the date hereof, and has paid all taxes
shown on said returns and all other assessments or fees levied upon it or upon
its properties to the extent that such taxes, assessments or fees have become
due, and if not due, such taxes have been adequately provided for and sufficient
reserves therefor established on its books of account, and (b) is current with
respect to payment of all federal and state withholding taxes, social security
taxes and other payroll taxes.
4.4 Enforceability of Loan Documents; Compliance with Other
Instruments. Each of the Loan Documents to which the Borrower or any Guarantor
is a party, as the case may be, has been duly authorized by all necessary
corporate action on the part of the Borrower or such Guarantor, has been validly
executed and delivered by the Borrower or such Guarantor and is the legal, valid
and binding obligation of the Borrower or such Guarantor, enforceable against
the Borrower or such Guarantor in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditor's rights
generally or by general principles of equity. Except as set forth in SCHEDULE
4.4, neither the Borrower nor any Subsidiary is in default with respect to any
indenture, loan agreement, mortgage, lease, deed or similar agreement related to
the borrowing of monies to which it is a party or by which it, or any of its
property, is bound except where such default would not have a Material Adverse
Effect. Neither the execution, delivery or performance of the Loan Documents by
the Borrower and the Guarantors, nor compliance by the Borrower and the
Guarantors therewith: (a) conflicts or will conflict with or results or will
result in any breach of, or constitutes or will constitute with the passage of
time or the giving of notice or both, a default under, (i) any Requirement of
Law or (ii) any written or oral agreement or instrument to which the Borrower or
any Guarantor is a party or by which it, or any of its property, is bound,
except where such conflict, breach or default would not have a Material Adverse
Effect, or (b) results or will result in the creation or imposition of any lien,
charge or encumbrance upon the properties of the Borrower or any Subsidiary
pursuant to any such agreement or instrument, except for Permitted Liens.
4.5 Governmental Authorization. No authorization, consent or approval of,
notice to, or declaration or filing with, any Governmental Authority is required
for the valid execution, delivery and performance by the Borrower or any
Guarantor of the Loan Documents to which it is a party or the consummation by
the Borrower or any Guarantor of the transactions contemplated thereby, except
for the filing of Financing Statements. The Borrower and each Subsidiary has,
and is in good standing with respect to, all material licenses, approvals,
permits, certificates, inspections, consents and franchises of Governmental
Authorities and other Persons necessary to continue to conduct its business as
heretofore conducted and to own or lease and operate its respective properties
as now owned or leased by it, except where the failure to be in good standing
would not have a Material Adverse Effect. Without limitation of the foregoing,
the Borrower and each Subsidiary has, to the extent applicable, (i) obtained (or
been duly assigned) all required certificates of need or determinations of need,
as required by the relevant state Governmental Authority, for the acquisition,
construction, expansion of, investment in or operation of its businesses as
currently operated; (ii) obtained and maintains in good standing all required
licenses, except where the failure to do so would not have a Material Adverse
Effect; and (iii) to the extent prudent and customary in the industry in which
the Borrower or such
55
<PAGE>
Subsidiary is engaged, obtained and maintains accreditation from all generally
recognized accrediting agencies for the Borrower and its Subsidiaries. No
Medicaid Certification or Medicare Certification is required for the operation
of the business) of the Borrower or any Guarantor and neither the Borrower nor
any Guarantor is required to have entered into Medicare Provider Agreement or
Medicaid Provider Agreement for the operation of its business).
4.6 Event of Default. No Default or Event of Default has occurred and is
continuing.
4.7 Margin Securities. No proceeds of the Loans or advances under the
Swingline Note will be used, directly or indirectly, to purchase or carry any
Margin Stock, to extend credit for such purpose or for any other purpose that
would violate or be inconsistent with Regulations G, T, U or X. As of the date
hereof and at all times during the term of this Agreement, including following
the application of the proceeds of each Loan and each advance under the
Swingline Note, the Borrower will conduct its business and cause its
Subsidiaries to conduct their respective businesses such that not more than 25%
of the value of the assets of the Borrower will consist of assets which are
Margin Stock and such that not more than 25% of the value of the assets of the
Borrower and its Subsidiaries will consist of assets which are Margin Stock.
4.8 Full Disclosure. The written estimates, projections and forecasts
provided to the Lenders and the Agent with the syndication materials dated
December 1997 were prepared, at the request of the Agent, on the basis of the
assumption that the Borrower would not consummate any additional Physician
Transactions after December 31, 1998, and on the basis of the good faith
estimate of the Borrower's senior management concerning probable financial
condition and performance based on other assumptions, data, tests or conditions
believed to be reasonable or to represent industry conditions existing at the
time such estimates, projections or forecasts were made. All other written
estimates, projections and forecasts furnished by or on behalf of the Borrower
or any Subsidiary to the Agent or any Lender for purposes of or in connection
with this Agreement, or in connection with any extension of credit hereunder,
were and will be prepared on the basis of the good faith estimate of the
Borrower's senior management concerning probable financial condition and
performance based on assumptions, data, tests or conditions believed to be
reasonable or to represent industry conditions existing at the time such
estimates, projections or forecasts were made. None of (i) the other statements
furnished to the Agent or any Lender by or on behalf of the Borrower or any
Subsidiary in connection with the Loan Documents or (ii) the Loan Documents, as
of the date furnished, contained any untrue statement of a material fact or, to
the Borrower's knowledge, omitted to state a material fact necessary to make the
statements contained therein or herein, in light of the circumstances under
which they were made, not misleading. To the Borrower's knowledge, there is no
fact related to the business of the Borrower and its Subsidiaries that the
Borrower has not disclosed to the Agent or the Lenders that may reasonably be
expected to result in a Material Adverse Effect.
4.9 Principal Places of Business. SCHEDULE 4.9 lists the chief executive
office and principal place of business, as provided in the Uniform Commercial
Code, of the Borrower and each Subsidiary as of the Closing Date.
56
<PAGE>
4.10 ERISA; Employee Benefits.
(a) SCHEDULE 4.10 (i) lists, as of the Closing Date, all material Employee
Plans and Pension Plans ("Plans") maintained or sponsored by the Borrower and
its Subsidiaries or to which the Borrower or any Subsidiary is obligated to
contribute and (ii) separately identifies all Qualified Plans (as defined below)
and all Multiemployer Plans.
(b) Each such Plan is in compliance in all material respects (or may be
brought into compliance without a Material Adverse Effect) with the applicable
provisions of ERISA, the Internal Revenue Code and other federal or state law,
including all requirements under the Internal Revenue Code or ERISA for filing
reports (which are true and correct in all material respects as of the date
filed), and benefits have been paid in accordance with the provisions of each
such Plan.
(c) The form of each Plan intended to be qualified under Section 401 of the
Internal Revenue Code ("Qualified Plan") in the opinion of Borrower qualifies
under Section 401 of the Internal Revenue Code, and any trust or trusts created
thereunder are, in the opinion of the Borrower, exempt from tax under the
provisions of Section 501 of the Internal Revenue Code, and to the knowledge of
the Borrower nothing has occurred that would cause the loss of such
qualification or tax-exempt status.
(d) There is no outstanding liability under Title IV of ERISA with respect
to any Qualified Plan maintained or sponsored by the Borrower and its
Subsidiaries (as to which the Borrower or any Subsidiary is or may be liable),
nor to the knowledge of the Borrower with respect to any Plan to which the
Borrower or any Subsidiary (wherein the Borrower or any Subsidiary is or may be
liable) contributes or is obligated to contribute.
(e) None of the Qualified Plans subject to Title IV of ERISA has any
unfunded benefit liability, as defined in Section 4001(a)(18) of ERISA (as to
which the Borrower or any Subsidiary is or may be liable).
(f) No Plan maintained or sponsored by the Borrower or any Subsidiary
provides medical or other welfare benefits or extends coverage relating to such
benefits beyond the date of a participant's termination of employment with the
Borrower or such Subsidiary, except to the extent required by Section 4980B of
the Internal Revenue Code and at the sole expense of the participant or the
beneficiary of the participant to the fullest extent permissible under such
Section of the Internal Revenue Code. The Borrower and its Subsidiaries have
complied in all material respects with the notice and continuation coverage
requirements of Section 4980B of the Internal Revenue Code.
(g) No ERISA Event has occurred or is reasonably expected to occur with
respect to any Plan maintained or sponsored by the Borrower and its Subsidiaries
or to the knowledge of the Borrower, to which the Borrower or any Subsidiaries
is obligated to contribute.
(h) As of the Closing Date, there are no pending or, to the knowledge of
the Borrower, threatened claims, actions or lawsuits, other than routine claims
for benefits in the
57
<PAGE>
usual and ordinary course, asserted or instituted against (i) any Plan
maintained or sponsored by the Borrower and its Subsidiaries or their assets, or
(ii) any fiduciary with respect to any Plan for which the Borrower or any
Subsidiary may be directly or indirectly liable, through indemnification
obligations or otherwise.
(i) Neither the Borrower nor any Subsidiary has incurred or, to the
knowledge of the Borrower, reasonably expects to incur (i) any liability (and no
event has occurred that, with the giving of notice under Section 4219 of ERISA,
would result in such liability) under Section 4201 or 4243 of ERISA with respect
to a Multiemployer Plan or (ii) any liability under Title IV of ERISA (other
than premiums due and not delinquent under Section 4007 of ERISA) with respect
to a Plan.
(j) Neither the Borrower nor any Subsidiary has engaged, directly or
indirectly, in a non-exempt prohibited transaction (as defined in Section 4975
of the Internal Revenue Code or Section 406 of ERISA) in connection with any
Plan maintained or sponsored by the Borrower that has a Material Adverse Effect.
4.11 Subsidiaries. SCHEDULE 4.11 contains a complete and accurate list of
the Subsidiaries of the Borrower as of the Closing Date, showing, as to each
Subsidiary, the number of shares of each class of capital stock or the amount
and type of other equity interests authorized and outstanding, if applicable.
Except as expressly set forth on SCHEDULE 1.1(A) as an encumbrance on stock or
equity interest, all of such issued and outstanding shares of capital stock or
other equity interests of all of the Borrower's Subsidiaries have been duly
authorized and validly issued, are, in the case of Subsidiaries that are
corporations, fully paid and nonassessable and are owned by the Borrower, free
and clear of any liens, charges, encumbrances, security interests, claims or
restrictions of any nature whatsoever, except for liens in favor of the Agent,
for the benefit of the Lenders, granted under the Loan Documents, except for
Permitted Liens, and there are no other equity securities of any Subsidiary
issued and outstanding or reserved for any purpose.
4.12 Financial Statements. The Financial Statements delivered to the
Lenders have been prepared by the Borrower and its Subsidiaries and, in the case
of the annual Financial Statements, audited in accordance with Generally
Accepted Accounting Principles by Price Waterhouse LLP, independent certified
public accountants, contain no material misstatement or omission and fairly
present the financial position, assets and liabilities of the Borrower and its
Subsidiaries on a consolidated basis as of the respective dates thereof and the
consolidated results of operations of the Borrower and its Subsidiaries for the
respective periods then ended. Except for the transactions contemplated by the
Loan Documents, since the date of the most recent audited Financial Statements
there has been no Material Adverse Change.
4.13 Title to Assets. Except as set forth on SCHEDULE 4.13, (a) the
Borrower and each Subsidiary holds interests as lessee under leases in full
force and effect with respect to all leased real and personal property used in
connection with its business, and has good and indefeasible title to the
Collateral and the other assets owned by it that are reflected in the most
recent Financial Statements, in each case free and clear of all liens, claims,
security interests and encumbrances except Permitted Liens; and (b) no financing
statement that names the Borrower
58
<PAGE>
or any Subsidiary as debtor has been filed and is still in effect or has been
authorized to be filed, other than Financing Statements evidencing Permitted
Liens.
4.14 Solvency. The Borrower and each Subsidiary (i) is Solvent, and (ii)
after giving effect to the transactions contemplated hereby, will be Solvent.
4.15 Use of Proceeds. The Borrower's use of the proceeds of any Loans made
by the Lenders to the Borrower pursuant to this Agreement are and will be legal
and proper corporate uses, duly authorized by the Board of Directors of the
Borrower, and such uses are and will be consistent in all material respects with
all applicable laws and statutes, as in effect from time to time.
4.16 Assets for Conduct of Business. The Borrower and each Subsidiary
possess adequate assets, licenses and trade names to continue to conduct its
business as heretofore conducted without any material conflict with the rights
of other Persons.
4.17 Compliance with Laws. The Borrower and each Subsidiary have duly
complied with, and their business operations and leaseholds are in compliance in
all material respects with, all Requirements of Law other than those failures to
comply which would not have a Material Adverse Effect.
4.18 Environmental Matters. Except where failure to comply with the
following provisions of this SECTION 4.18 would not have a Material Adverse
Effect:
(a) All activities and operations of the Borrower and its Subsidiaries are
in material compliance with all applicable Environmental Laws.
(b) Neither the Borrower nor any Subsidiary is involved in any suit or
proceeding, or has received any notice from any Governmental Authority, with
respect to a release of Hazardous Substances or has received notice of any
claims against the Borrower or any of its Subsidiaries from any Person relating
to personal injuries from exposure to Hazardous Substances.
(c) The Borrower and each Subsidiary has timely filed all reports required
to be filed, has acquired all necessary certificates, approvals and permits and
has generated and maintained in all material respects all required data,
documentation and records under all applicable Environmental Laws.
(d) To the knowledge of the Borrower, neither the Borrower nor any
Subsidiary has ever sent a Hazardous Substance to a site that, pursuant to any
Environmental Law, (1) has been placed on the "National Priorities List" or
"CERCLIS List" of hazardous waste sites (or any similar state list) or (2) that
is subject to a claim, an administrative order or other request to take
"removal" or "remedial" action (as defined under CERCLA) or to pay for the costs
of cleaning up such a site.
4.19 First Priority. Except for Permitted Liens, when the initial Loans
are made hereunder, this Agreement, together with the other Loan Documents, will
create valid and perfected first priority security interests and liens in and
upon the Collateral covered thereby, in
59
<PAGE>
each case enforceable against the Borrower or a Subsidiary and all other Persons
in all relevant jurisdictions and securing the payment of all Obligations
purported to be secured thereby.
4.20 Contracts; Labor Disputes. Neither the Borrower nor any Subsidiary is
a party to any contract or agreement, or subject to any charge, corporate
restriction, judgment, injunction, decree, rule, regulation or order of any
court or other Governmental Authority, that has or could reasonably be expected
to have a Material Adverse Effect. Neither the Borrower nor any Subsidiary is a
party to, and there is not pending or, to the Borrower's knowledge, threatened,
any labor dispute, strikes, lock-out, grievance, work stoppage or walkouts
relating to any labor contract to which the Borrower or any Subsidiary is a
party, in each case, which could reasonably be expected to have a Material
Adverse Effect.
4.21 Insurance. SCHEDULE 4.21 accurately summarizes all insurance policies
or programs of the Borrower and its Subsidiaries in effect as of the Closing
Date, and indicates the insurer's name, policy number, expiration date, amount
of coverage, type of coverage, annual premiums, exclusions and deductibles, and
also indicates any self-insurance program that is in effect.
4.22 Reimbursement from Third Party Payors. The accounts receivable for
the physician groups for which the Borrower and its Subsidiaries provide
management services have been and will continue to be adjusted to reflect
reimbursement policies of third party payors such as Medicare, Medicaid, Blue
Cross/Blue Shield, private insurance companies, health maintenance
organizations, preferred provider organizations, alternative delivery systems,
managed care systems and other third party payors. In particular, the accounts
receivable relating to such third party payors do not and shall not exceed
amounts the relevant physician group is entitled to receive under any capitation
arrangement, fee schedule, discount formula, cost-based reimbursement or other
adjustment or limitation to the usual charges of such physician group.
4.23 Fraud and Abuse. Neither the Borrower nor any Subsidiary, nor any of
their respective stockholders, officers or directors have engaged on behalf of
Borrower or any Subsidiary in any of the following: (i) knowingly and willfully
making or causing to be made a false statement or representation of a material
fact in any applications for any benefit or payment under the Medicare or
Medicaid program; (ii) knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in determining
rights to any benefit or payment under the Medicare or Medicaid program; (iii)
failing to disclose knowledge by a claimant of the occurrence of any event
affecting the initial or continued right to any benefit or payment under the
Medicare or Medicaid program on its own behalf or on behalf of another, with
intent to secure such benefit or payment fraudulently; (iv) knowingly and
willfully soliciting or receiving any remuneration (including any kickback,
bribe or rebate), directly or indirectly, overtly or covertly, in cash or in
kind or offering to pay such remuneration (a) in return for referring an
individual to a Person for the furnishing or arranging for the furnishing of any
item or service for which payment may be made in whole or in part by Medicare or
Medicaid, or (b) in return for purchasing, leasing or ordering or arranging for
or recommending the purchasing, leasing or ordering of any good, facility,
service, or item for which payment may be made in whole or in part by Medicare
or Medicaid. With respect to this Section, knowledge by an individual
stockholder, director or officer of the Borrower or a Subsidiary of any of the
events
60
<PAGE>
described in this Section shall not be imputed to the Borrower or such
Subsidiary unless such knowledge was obtained or learned by the stockholder,
director or officer in his or her official capacity as a stockholder, director
or officer of the Borrower or such Subsidiary. No activity of the Borrower or
any Subsidiary shall be considered to be a breach of this Section, except in the
case of a knowing and willful violation thereof, until the Borrower or such
Subsidiary has received notification, written or oral, by a Governmental
Authority of competent jurisdiction as to any such violation. The provisions of
SUBSECTION (III) hereof shall not require the Borrower or any Subsidiary (unless
otherwise required by law) to disclose to the Agent, Lenders or any other Person
any activity or omission by a third party (including associated physician
groups) unless such activity or omission (x) constitutes willful fraud or abuse,
(y) would reasonably be likely to have a Material Adverse Effect or (z) is not
being corrected, cured or remedied by the Borrower and any other relevant
Persons diligently, in good faith and in the exercise of sound business
judgment.
4.24 Single Business Enterprise. The Borrower and the Guarantors have
historically operated as, and intend to continue operating as, a single business
enterprise. Although separate entities, the Borrower and the Guarantors operate
under a common business plan. Each of the Borrower and the Guarantors will
accordingly benefit from the financing arrangement established by this
Agreement. The Borrower acknowledges that, but for the agreement by each
Guarantor to execute and deliver the Guaranty and Guarantors' Security
Agreement, the Borrower would not have qualified separately for the total amount
of the credit facilities established hereby.
4.25 Continuing Security Interest. All Loans to and other Obligations of
the Borrower under the Loan Agreement and the Notes will continue to be secured
by the Agent's security interest in all of the Collateral granted under the Loan
Documents. Such security interest will relate back to the date of initial
perfection of the security interests under the Loan Documents, and nothing
herein will affect the validity, perfection or enforceability of such security
interests.
ARTICLE V.
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, until the termination of the
Commitments and all Letters of Credit and the payment in full of all principal
and interest with respect to the Loans and Letter of Credit Outstandings
together with all other amounts then due and owing hereunder, it will, and will
cause each of its Subsidiaries to comply with the following covenants.
5.1 Financial and Business Information about the Borrower. The Borrower
shall deliver to the Agent and the Lenders:
(a) Within forty-five (45) days after the end of each of the first three
fiscal quarters of each fiscal year of the Borrower, beginning with the fiscal
quarter ending March 31, 1998, the unaudited consolidated and consolidating
balance sheets of the Borrower and its Subsidiaries as of the close of such
fiscal quarter and unaudited consolidated and consolidating statements of
income, retained earnings and cash flows for the Borrower and its Subsidiaries
for the fiscal
61
<PAGE>
quarter then ended and for that portion of the fiscal year then ended, all
prepared in accordance with Generally Accepted Accounting Principles (subject to
the absence of notes required by Generally Accepted Accounting Principles and
subject to normal and reasonable year-end audit adjustment) applied on a basis
consistent with that of the preceding quarter or containing disclosure of the
effect on the financial position or results of operation of any change in the
application of accounting principles and practices during the quarter, certified
by the Chief Executive Officer or Chief Financial Officer of the Borrower to
fairly present, in all material respects, the financial condition of the
Borrower and its Subsidiaries on a consolidated basis as of the date thereof or
the results of operation of the Borrower and its Subsidiaries on a consolidated
basis for the period covered thereby;
(b) Within one hundred (100) days after the close of each fiscal year of
the Borrower, beginning with the fiscal year ending December 31, 1997, an
audited consolidated and unaudited consolidating balance sheet of the Borrower
and its Subsidiaries as of the close of such fiscal year and audited
consolidated and unaudited consolidating statements of income, retained earnings
and cash flows for the Borrower and its Subsidiaries for the fiscal year then
ended, including the notes to each, prepared by Price Waterhouse or any other
independent certified public accountant reasonably acceptable to the Required
Lenders, in accordance with Generally Accepted Accounting Principles applied on
a basis consistent with that of the preceding year or containing disclosure of
the effect on the financial position or results of operation of any change in
the application of accounting principles and practices during the year, and
accompanied by a report thereon by such certified public accountants, containing
an opinion that is not qualified with respect to scope limitations imposed by
the Borrower or its Subsidiaries or with respect to accounting principles
followed by the Borrower or its Subsidiaries not in accordance with Generally
Accepted Accounting Principles;
(c) Concurrently with the delivery of the financial statements described in
subsection (B) above, a report from the independent certified public accountant
that in making its audit of the consolidated financial statements of the
Borrower and its Subsidiaries, that nothing came to their attention regarding
any Event of Default, or Default under SECTIONS 6.11 through 6.15 as of December
31 of the fiscal year subject to audit or a statement specifying the nature and
period of existence of any such Default or Event of Default disclosed by their
examination, it being understood that such audit was not performed primarily for
the purpose of obtaining knowledge of noncompliance with this Agreement or the
Loan Documents;
(d) Concurrently with the delivery of the financial statements described in
subsections (A) and (B) above, a Compliance Certificate with respect to the
period covered by the financial statements then being delivered, attaching a
Covenant Compliance Worksheet reflecting the computation of the financial
covenants set forth in ARTICLE VI as of the last day of the period covered by
such financial statements;
(e) As soon as practicable and in any event within thirty (30) days after
the close of each fiscal year of the Borrower, beginning with the current fiscal
year, an annual operating budget and capital budget prepared on a quarterly
basis for the Borrower and its Subsidiaries on a consolidated basis, in form and
detail reasonably acceptable to the Agent;
62
<PAGE>
(f) Promptly upon their becoming available, copies of (i) all financial
statements, reports, notices and proxy statements that the Borrower or any
Subsidiary shall send or make available generally to its stockholders, (ii) all
regular, periodic and special reports, registration statements and prospectuses
that the Borrower or any Subsidiary shall render to or file with the Securities
and Exchange Commission, the National Association of Securities Dealers or any
national securities exchange, (iii) all material reports and other statements
(other than routine reports prepared in the ordinary course of business that
would not result in any adverse action) that the Borrower or any Subsidiary may
render to or file with any other Governmental Authority, including, without
limitation, HCFA, the Environmental Protection Agency, OSHA and state
environmental and health authorities and agencies, (iv) all press releases and
other statements that the Borrower or any Subsidiary shall make available
generally to the public concerning developments in the business of the Borrower
or any of its Subsidiaries, other than press releases or statements issued in
the ordinary course of business, and (v) all material consulting reports and
other similar business reports that the Borrower or any Subsidiary shall request
of any Person from time to time, other than routine reports received in the
ordinary course of business;
(g) Promptly after review by the Borrower's Board of Directors, but in any
event within thirty (30) days after the Borrower's receipt thereof, copies of
any management letters from certified public accountants;
(h) Concurrently with each delivery of the financial statements described
in subsections (A) and (B) an aging of the accounts receivable of the Borrower
and its Subsidiaries by payor class as of the end of such fiscal quarter; and
(i) Upon the Agent's or any Lender's request, such other information about
the Collateral or the financial condition and operations of the Borrower and its
Subsidiaries as the Agent or any Lender may from time to time reasonably
request.
5.2 Notice of Certain Events. The Borrower shall promptly, but in no event
later than five (5) Business Days after the Borrower obtains knowledge thereof
(or in the shorter period required by subsection (G) below), give written notice
to the Agent and the Lenders of:
(a) Any litigation or proceeding brought against the Borrower or any
Subsidiary that could reasonably be expected to have a Material Adverse Effect;
(b) Any written notice of a violation received by the Borrower or any
Subsidiary from any Governmental Authority that, if such violation were
established and not promptly corrected, could reasonably be expected to have a
Material Adverse Effect;
(c) Any attachment, judgment, lien, levy or order in excess of $100,000
that may be placed on, assessed against or threatened against the Borrower or
any Subsidiary or any of the Collateral, except for Permitted Liens;
(d) Any Default or Event of Default;
(e) Any material default or event of default under any agreement or
instrument to which the Borrower or any Subsidiary is a party or by which the
Borrower or any Subsidiary, or
63
<PAGE>
any of their respective property, is bound, the termination of which could
reasonably be expected to have a Material Adverse Effect;
(f) Any other matter that has resulted in a Material Adverse Change;
(g) Any default on any Subordinated Debt or Permitted Subordinated Debt
(notice of which shall be delivered to the Agent and Lenders within one Business
Day following any such default); and
(h) Any default under any Management Services Agreement.
(i) In addition, the Borrower shall give the notice to the Agent required
by Section 4.4(h) of the Security Agreement concerning disputes, waivers,
defaults or terminations of Management Services Agreements and shall cause the
Subsidiaries to give the equivalent notices required by Section 4.4(h) of the
Guarantors' Security Agreement.
5.3 Corporate Existence and Maintenance of Properties. The Borrower shall,
and shall cause each of its Subsidiaries to:
(a) Maintain and preserve in full force and effect (i) its corporate
existence, except as otherwise permitted by SECTION 6.1 and (ii) all material
rights, privileges and franchises;
(b) Conduct its business in an orderly and efficient manner, keep its
properties in good working order and condition (normal wear and tear excepted)
and from time to time make all needed repairs to, renewals of or replacements of
its properties (except to the extent that any of such properties are obsolete or
are being replaced) so that the efficiency of its business operations shall be
fully maintained and preserved; and
(c) File or cause to be filed in a timely manner all reports, applications,
estimates and licenses required by any Governmental Authority that, if not
timely filed, could reasonably be expected to have a Material Adverse Effect.
5.4 Payment of Debt. The Borrower shall, and shall cause each of its
Subsidiaries to, pay all Debt when due and all other obligations in accordance
with customary trade practices.
5.5 Maintenance of Insurance.
(a) The Borrower shall, and shall cause each of its Subsidiaries to,
maintain and pay for insurance on its properties, assets and business, now owned
or hereafter acquired, against such casualties, risks and contingencies, and in
such types and amounts and with such insurance companies, as shall be reasonably
satisfactory to the Agent and deliver certificates and copies of policies of
such insurance to the Agent, provided, however, that such types and amounts of
insurance in effect at the Closing Date shall continue to be satisfactory for
the business of the Borrower and its Subsidiaries (in existence as of the date
hereof) as currently conducted.
(b) If the Borrower or any Subsidiary fails to obtain and maintain any of
the policies of insurance required to be maintained hereunder or to pay any
premium in whole or in part, then
64
<PAGE>
the Agent may, at the Borrower's expense, without waiving or releasing any
obligation or Default by the Borrower hereunder, procure the same, but shall not
be required to do so. All sums so disbursed by the Agent, including reasonable
attorneys' fees, court costs, expenses and other charges related thereto, shall
be payable on demand by the Borrower to the Lenders and shall be additional
Obligations hereunder, secured by the Collateral.
(c) Upon the reasonable request of the Agent from time to time, the
Borrower shall deliver to the Agent evidence that the insurance required to be
maintained pursuant to this Agreement is in effect.
5.6 Maintenance of Books and Records; Inspection. The Borrower shall,
and shall cause each of its Subsidiaries to, maintain adequate books, accounts
and records, and prepare all financial statements required under this Agreement
in accordance with Generally Accepted Accounting Principles (except as set forth
in SECTION 5.1 and in material compliance with the regulations of any
Governmental Authority having jurisdiction over it. The Borrower shall, upon
request, permit employees or agents of the Agent or any Lender to inspect the
properties of the Borrower and any of its Subsidiaries and to examine or audit
the books, records, working papers and accounts of the Borrower and any
Subsidiary and make copies and memoranda of them, and to discuss the affairs,
finances and accounts of the Borrower and any Subsidiary with its officers and,
upon notice to the Borrower, and (at the Borrower's option) in the presence of
the Borrower, with the independent public accountants of the Borrower or its
Subsidiaries (and by this provision the Borrower and each Subsidiary authorize
such accountants to so discuss the finances and affairs of the Borrower or any
Subsidiary), all at such times and from time to time during business hours as
may be reasonably requested.
5.7 COBRA. The Employee Plans of the Borrower and its Subsidiaries shall
be operated in such a manner that neither the Borrower nor any Subsidiary will
incur any material tax liability under Section 4980B of the Internal Revenue
Code or any material liability to any qualified beneficiary as defined in
Section 4980B.
5.8 Payment of Taxes. The Borrower shall, and shall cause each of its
Subsidiaries to, pay and discharge all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits, or upon any
properties belonging to it, prior to the date on which penalties would attach
thereto, and all lawful claims when due that, if unpaid, might become a lien or
charge upon any of its properties; provided, however, that the Borrower or any
Subsidiary may in good faith by appropriate proceedings and with due diligence
contest any such tax, assessment, charge, levy or claim if the Borrower or such
Subsidiary establishes any reserves reasonably requested by the Agent with
respect thereto in accordance with Generally Accepted Accounting Principles.
5.9 Compliance with Laws. The Borrower shall, and shall cause each of its
Subsidiaries to, (i) have all material licenses, permits, certifications,
approvals and authorizations required by Governmental Authorities necessary to
the ownership, occupation or use of its properties or the conduct of its
business, including, without limitation, certificates of need, and maintain the
same at all times in full force and effect for so long as is required, and (ii)
comply with all Requirements of Law in respect of the conduct of its business,
the ownership of its
65
<PAGE>
property and the Collateral, including, without limitation, Titles XVIII and XIX
of the Social Security Act, Medicare Regulations, Medicaid Regulations, ERISA,
OSHA, Environmental Laws and the Bloodborne Pathogens Standard, other than
those, in the case of each of clauses (i) and (ii), the failure to have or
comply with which would not have a Material Adverse Effect.
5.10 Name Change. The Borrower shall notify the Agent and the Lenders at
least thirty (30) days prior to the effective date of any change of its name or
the name of any Subsidiary, and prior to such effective date the Borrower or
such Subsidiary shall have executed any required amended or new Financing
Statements and other Loan Documents necessary to maintain and continue the
perfected security interest of the Agent in all of its Collateral and shall have
taken such other actions and executed such documents as the Agent shall
reasonably require.
5.11 Creation or Acquisition of New Subsidiaries. The Borrower and its
Subsidiaries may from time to time create or acquire new Subsidiaries, provided
that, at any time promptly upon request by the Agent (and in any event, with
respect to any new Subsidiary that is created or acquired in connection with a
Physician Transaction or that receives proceeds of any Borrowings, prior to or
concurrently with satisfaction of the conditions set forth in clauses (y) and
(z) of clause (i) below or, if earlier, the consummation of such Physician
Transaction), (i) each such new Subsidiary (y) having assets with a gross value
(determined in accordance with Generally Accepted Accounting Principles) in
excess of $100,000, and (z) having commenced the conduct of an active business,
will execute and deliver to the Agent (with sufficient copies for each Lender)
an amendment or supplement to the Guaranty Agreement, Guarantors' Security
Agreement if such Subsidiary owns any property of the type covered thereby and
such other documents to effectuate the foregoing as may be reasonably requested
by the Required Lenders, including without limitation Financing Statements, each
in form and substance satisfactory to the Agent, pursuant to which such new
Subsidiary shall become a party thereto, (ii) the Borrower will execute and
deliver to the Agent (with sufficient copies for each Lender) an amendment or
supplement to the Security Agreement, in form and substance satisfactory to the
Agent, pursuant to which all of the capital stock or other ownership interests
of such new Subsidiary that is directly or indirectly owned by the Borrower
shall be pledged to the Agent under the Security Agreement, together with the
certificates representing such capital stock or other ownership interests and
stock powers duly executed in blank, and (iii) the Borrower will cause each such
new Subsidiary to execute and deliver, and will cause to be delivered, all
documentation of the type described in SECTIONS 3.1(A)(VII) and (VIII) as such
new Subsidiary would have had to deliver were it a Subsidiary on the Closing
Date.
5.12 Recoveries in Bankruptcy Proceedings. Should any Subsidiary become a
debtor under the Bankruptcy Code, the Agent, on behalf of the Lenders, is
authorized, but not required, to file proofs of claim on the Borrower's behalf
and vote the rights of the Borrower in any plan of reorganization, in each case
with respect to such advances and other amounts owed by any Subsidiary of the
Borrower to the Borrower. The Agent, on behalf of the Lenders, is further
empowered to demand, sue for, collect and receive every payment and distribution
on such Debt owing to the Borrower in such Subsidiary's bankruptcy proceeding.
5.13 Solvency of Subsidiaries. The Borrower shall cause each of its
Subsidiaries to remain Solvent (taking into account rights of contribution).
66
<PAGE>
5.14 Certain Physician Transactions.
(a) Subject to the remaining provisions of this SECTION 5.14 applicable
thereto and the requirements contained in the definition of Permitted Physician
Transaction, as the case may be, the Borrower may from time to time after the
Closing Date effect Physician Transactions approved by the Required Lenders
pursuant to SECTION 6.2 and Permitted Physician Transactions, so long as with
respect to each Physician Transaction, no Default or Event of Default shall have
occurred or be continuing at the time of the consummation of such Physician
Transaction or would exist after giving effect thereto.
(b) At the time of each Physician Transaction involving the creation or
acquisition of a Subsidiary, or the acquisition of capital stock or other equity
interest of any Person, all capital stock or other interest thereof created or
acquired in connection with such Physician Transaction shall be directly or
indirectly owned by the Borrower, and the Borrower and each new Subsidiary shall
have complied with SECTION 5.11.
(c) Not less than five (5) days prior to the consummation of any Permitted
Physician Transaction financed in part or in full by a Borrowing, the Borrower
shall deliver to the Agent and the Lenders the following items, each in form and
substance reasonably satisfactory to the Agent:
(i) a description of the practice whose stock, equity interests or
assets are to be acquired ("Practice");
(ii) a description of the material terms of such Permitted Physician
Transaction known as of such date (including, without limitation, the
purchase price and method and structure of payment), provided that a
description of any additional or changed material terms of such Permitted
Physician Transaction shall be disclosed to the Agent within five (5) days
of such addition or change;
(iii) projected revenue and EBITDA contribution levels with respect
to the Practice to be acquired, prepared on a quarterly basis for the two-
year period following the consummation of such Permitted Physician
Transaction, in reasonable detail;
(iv) confirmation, supported by reasonably detailed calculations, of
projected covenant compliance over the four quarter period following such
Permitted Physician Transaction after giving effect to the pro forma
consolidation of the Practice to be acquired with the Borrower and its
Subsidiaries; and
(v) a description of any Liens to be incurred or assumed in
connection with such Permitted Physician Transaction, which Liens would not
be Permitted Liens without such disclosure.
(d) Within thirty (30) days after the closing of any Permitted Physician
Transaction not financed by a Borrowing and having an Transaction Amount greater
than $2,500,000, the Borrower shall deliver to the Lenders the items listed in
clauses (i), (ii) and (iii) of the above subsection (C).
67
<PAGE>
(e) Within thirty (30) days after the closing of each Physician
Transaction, the Borrower shall deliver to the Agent a copy of the form of each
material Physician Transaction document, including any purchase agreement,
master transaction agreement or Management Services Agreement relating to such
Physician Transaction.
(f) The consummation of each Physician Transaction shall be deemed to be a
representation and warranty by the Borrower that all conditions thereto have
been satisfied, that the same is permitted in accordance with the terms of this
Loan Agreement and that the information submitted by the Borrower pursuant to
subsections (C) and (D) above, as appropriate, is true and correct in all
material respects as of the date submitted, which representation and warranty
shall be deemed to be a representation and warranty for all purposes hereunder.
5.15 Year 2000 Compatibility. Borrower shall take all reasonable action
necessary to assure that Borrower's computer based systems are able to operate
and effectively process dates on and after January 1, 2000. At the reasonable
request of the Agent or the Required Lenders, Borrower shall provide the Lenders
with evidence of its Year 2000 compatibility.
ARTICLE VI.
NEGATIVE COVENANTS
The Borrower covenants and agrees that, until the termination of the
Commitments and all Letters of Credit and the payment in full of all principal
and interest with respect to the Loans and all Letter of Credit Outstandings
together with all other amounts then due and owing hereunder, it will not, and
will not permit any of its Subsidiaries to, individually or in the aggregate:
6.1 Merger, Consolidation. Liquidate, wind up or dissolve, or enter into
any consolidation, merger or other combination, or agree to do any of the
foregoing; provided, however, that:
(i) the Borrower may merge or consolidate with another Person so
long as (x) the Borrower is the surviving corporation, (y) the applicable
conditions of SECTIONS 5.11, 5.14 and 6.2 shall be satisfied and (z)
immediately after giving effect thereto, no Default or Event of Default
would exist; and
(ii) any Subsidiary may merge or consolidate with another Person so
long as (w) the Person surviving such merger or consolidation is the
Borrower or a Guarantor, (y) the applicable conditions of SECTIONS 5.11,
5.14 and 6.2 shall be satisfied and (z) immediately after giving effect
thereto, no Default or Event of Default would exist.
6.2 Physician Transactions. Make any Physician Transaction, other than a
Permitted Physician Transaction in compliance with SECTION 5.14, without the
prior written consent of the Required Lenders. In connection with any proposed
Physician Transaction that is not a Permitted Physician Transaction, as soon as
practicable prior to the proposed consummation of such
68
<PAGE>
Physician Transaction the Borrower shall deliver to the Agent and each Lender
(i) a description of any proposed Capital Expenditures related to such Physician
Transaction, (ii) the items described in SECTION 5.14(C) if the proposed
Physician Transaction is of an oncology, hematology or radiation oncology
physician practice and (iii) such other information as the Lenders may
reasonably request if the proposed Physician Transaction is for anything other
than an oncology, hematology or radiation oncology physician practice. The
Lenders shall use their best commercially reasonable efforts to respond to a
request from the Borrower for approval of a Physician Transaction (including
requests for Capital Expenditures and Subordinated Debt or Permitted
Subordinated Debt) within five (5) Business Days after receipt of the
information required by this Section; provided, however, the failure to approve
or disapprove a Physician Transaction during such period shall not constitute
approval.
6.3 Debt. Create, incur, assume or suffer to exist any Debt other than:
(i) Debt incurred pursuant to this Agreement;
(ii) unsecured Subordinated Debt and Permitted Subordinated Debt;
(iii) accrued expenses, current trade payables and other current
liabilities arising in the ordinary course of business and not incurred
through the borrowing of money;
(iv) unsecured Debt (x) of any Subsidiary to the Borrower (y) of any
Subsidiary to a Subsidiary and (z) of the Borrower to any Subsidiary,
provided that any such Debt under this clause (iv) is incurred in the
ordinary course of business consistent with past practice and is evidenced
by one or more promissory notes pledged to the Agent pursuant to the
Security Agreements;
(v) Contingent Obligations permitted by SECTION 6.4;
(vi) other Consolidated Debt (including, without limitation, Debt
secured by liens described in clauses (E) and (G) of the definition of
Permitted Liens and Capital Lease Obligations) in an aggregate principal
amount at any time outstanding not to exceed $30,000,000 for the Borrower
and its Subsidiaries;
(vii) Debt of the Borrower under any Interest Rate Protection
Agreements (if any) entered into with one or more Lenders in respect of the
Debt incurred pursuant to this Agreement; provided that the notional
amount of all such agreements at any time shall not exceed the aggregate
amount of the Commitments at such time;
(viii) Debt incurred pursuant to the Swingline Note; and
(ix) Debt incurred pursuant to the ELLF.
The Lenders shall use their best commercially reasonable efforts to respond
to a request from the Borrower for approval of Subordinated Debt (on terms
acceptable to the Required Lenders in their sole discretion) within five (5)
Business Days after the Agent's and the Lender's
69
<PAGE>
receipt of information regarding the amount and material terms thereof;
provided, however, the failure to approve or disapprove such Subordinated Debt
during such period shall not constitute approval.
6.4 Contingent Obligations. Create, incur, assume or suffer to exist any
Contingent Obligation other than:
(i) endorsements of instruments or items of payment for deposit or
collection in the ordinary course of business;
(ii) Contingent Obligations incurred pursuant to the Guaranty
Agreements;
(iii) guarantees by the Borrower or any Subsidiary of obligations
of the Borrower or any of its Subsidiaries under leases permitted
hereunder;
(iv) guarantees by the Borrower or any Subsidiary of any other Debt
permitted under SECTION 6.3; and
(v) guarantees by the Borrower of the obligations of any Subsidiary
under any Management Services Agreement to which such Subsidiary is a
party, provided that such guaranteed obligations are incurred in the
ordinary course of business of the Borrower and are consistent with the
obligations under the Management Services Agreements otherwise entered into
by the Borrower or its Subsidiaries.
6.5 Liens and Encumbrances. Create, assume or suffer to exist any deed of
trust, mortgage or encumbrance, lien (including a lien of attachment, judgment
or execution) or security interest (including the interest of a conditional
seller of goods), securing a charge or obligation, in or on any of its property,
real or personal, whether now owned or hereafter acquired, except for Permitted
Liens.
6.6 Disposition of Assets. Sell, lease, transfer, convey or otherwise
dispose of any of its assets or property, including, without limitation, the
Collateral, except for (i) sales of inventory in the ordinary course of
business; (ii) the sale or exchange of used equipment, to the extent the
proceeds of such sale are applied towards, or such equipment is exchanged for,
similar replacement equipment or the sale or exchange of obsolete equipment;
(iii) the sale of assets to physicians in accordance with Part II of SCHEDULE
1.1(A); provided that the Total Commitments shall be reduced by the amount of
the proceeds of such sales and such proceeds shall be used to make any repayment
required pursuant to SECTION 2.5(B) to the extent that (a) such sale arises from
the termination of any Management Services Agreement for cause by such
physicians or (b) the aggregate proceeds of sales under this subsection (III)
exceed the aggregate Transaction Amounts of Physician Transactions during any
period of two consecutive fiscal quarters following the Closing Date; (iv) other
dispositions not exceeding $1,000,000 in the aggregate, for the Borrower and its
Subsidiaries, for any fiscal year; (v) any sale, lease, transfer or conveyance
from one Subsidiary to another Subsidiary or to the Borrower or from the
Borrower to any Subsidiary in accordance with SECTION 6.7, provided that, with
respect to this clause (v), (y) immediately after giving effect thereto, no
Default or Event of Default would exist, and
70
<PAGE>
(z) with respect to any transfer from the Borrower or a Guarantor to a
Subsidiary that is not a Guarantor, the Borrower shall notify the Agent and the
Lenders thereof and, at the request of the Required Lenders, shall cause the
transferee Subsidiary to comply with the provisions of SECTION 5.11; (vi) the
sale or other disposition of any Margin Stock; and (vii) dispositions made in
compliance with the terms of the ELLF of property (y) financed with the proceeds
of the ELLF or (z) conveyed to the Trust (as defined in the Participation
Agreement) by the Borrower or any Subsidiary.
6.7 Transactions with Related Persons. Except as otherwise permitted by
SECTIONS 6.1, 6.3, 6.4, 6.6 and 6.8, directly or indirectly make any loan or
advance to, or purchase, assume or guarantee any Debt to or from, any of its
officers, directors, stockholders or Affiliates, or subcontract any operations
to any Affiliate, or enter into any transaction with any Affiliate, except (a)
in the ordinary course of and pursuant to the reasonable requirements of the
Borrower's or such Subsidiary's business and (b) upon fair and reasonable terms
no less favorable to the Borrower or such Subsidiary than would obtain in a
comparable arm's-length transaction with a Person not an Affiliate; provided,
that the Borrower or any of its Subsidiaries may (i) provide legal and
accounting services to their officers, directors and employees in the ordinary
course of business and consistent with past practice, (ii) provide
indemnification to their officers, directors and employees to the extent
permitted by applicable law, (iii) pay reasonable and customary fees to
directors, and (iv) provide other corporate management, cash management, back-
office, legal, accounting and consulting services to Affiliates who are not
Subsidiaries, provided, that the aggregate fair market value of such services
pursuant to this subsection (IV) (and not otherwise covered by subsections (I),
(II) OR (III)) shall not exceed $250,000 in any calendar year.
6.8 Restricted Investments; Loans. Purchase, own, invest in or otherwise
acquire, directly or indirectly, any Stock, Debt, evidence of indebtedness or
other obligation or security or any interest whatsoever in any other Person, or
make or permit to exist any loans, advances or extensions of credit to, or any
investment in cash or by delivery of property in, any Person, or make a
commitment or otherwise agree to do any of the foregoing, except for (a)
investments in Cash Investments, (b) loans and advances to employees for
reasonable travel and business expenses in the ordinary course of business, (c)
prepaid expenses incurred in the ordinary course of business, (d) accounts
receivable created in the ordinary course of business (e) investments in
Subsidiaries in existence as of the Closing Date or in new Subsidiaries created
or acquired in compliance with the applicable provisions of SECTIONS 5.11, 5.14,
6.2 and 6.18, (f) investments and loans set forth on SCHEDULE 6.8 attached
hereto, as renewed or extended, and (g) other investments not covered in clauses
(a) through (e) having an aggregate cost to the Borrower and its Subsidiaries
not to exceed $15,000,000 at any time. If any Person would become a Subsidiary
(but not a wholly-owned Subsidiary) of the Borrower or any Subsidiary solely by
reason of an investment made pursuant to SUBSECTION (G) hereof, then such Person
shall not be considered a Subsidiary for purposes of this Agreement or any Loan
document; provided, that if Generally Accepted Accounting Principles require
such Person to be included in the Borrower's consolidated financial statements,
then such Person shall be so included in the financial statements for all
purposes including the calculation of the financial covenants in SECTIONS 6.11
through 6.15.
71
<PAGE>
6.9 Restricted Payments. (a) Declare or pay any dividends upon any of its
Stock (other than dividends paid in Stock and dividends paid to the Borrower or
by a Subsidiary to another Subsidiary), or (b) (in the case of the Borrower)
purchase, redeem, retire or otherwise acquire, directly or indirectly, any
shares of its Stock, or any option, warrant or other right to acquire shares of
its Stock or make any distribution of cash, property or assets other than Stock
among the holders of shares of its Stock; provided, however, that so long as no
Default or Event of Default shall have occurred and be continuing or would occur
after giving effect thereto, the Borrower may expend an aggregate amount up to
$25,000,000 to repurchase shares of its Stock.
6.10 Capital Expenditures. Make any Capital Expenditures (other than in
connection with a Physician Transaction allowed under SECTIONS 5.14 or 6.2
hereof) if, after giving effect to such Capital Expenditures, the aggregate
amount of all such Capital Expenditures made by the Borrower and its
Subsidiaries during any fiscal quarter, beginning with the current fiscal
quarter, shall exceed the amount equal to ten percent (10%) of Consolidated Net
Revenue for such fiscal quarter; provided, however, that in addition to the
foregoing permitted Capital Expenditures, the Borrower and its Subsidiaries may
make additional Capital Expenditures during the term of the Facility in
connection with and as permitted under the ELLF.
6.11 Consolidated Net Worth. Permit Consolidated Net Worth at the end of
any fiscal quarter, beginning with the fiscal quarter ending December 31, 1996,
to be less than (i) $200,000,000, increased by 80% of Consolidated Net Income
(if positive) for each fiscal quarter thereafter, plus (ii) 90% of the positive
amount of all increases in capital stock and additional paid-in capital from
issuances of equity securities or other capital investments.
6.12 EBITDA to Interest Expense. Permit the ratio of EBITDA for the
relevant fiscal quarter to Interest Expense for the relevant fiscal quarter at
the end of any fiscal quarter to be less than 3.5 to 1.0.
6.13 Annualized EBITDAR to Debt Service Ratio. Permit the ratio of
Annualized EBITDAR to Debt Service at the end of any fiscal quarter to be less
than 1.35 to 1.0.
6.14 Consolidated Debt to Annualized EBITDA. Permit the ratio of
Consolidated Debt to Annualized EBITDA as of the end of any fiscal quarter to be
greater than 3.50 to 1.0.
6.15 Consolidated Debt to Consolidated Total Capital. Permit the ratio of
Consolidated Debt to Consolidated Total Capital as of the end of any fiscal
quarter to be greater than 0.55 to 1.0.
6.16 Sale and Leaseback. Enter into any arrangement with any Person (other
than the Borrower or any Subsidiary, provided the provisions of SECTION 6.7 are
satisfied) providing for the leasing by the Borrower or any Subsidiary of any
asset that has been sold or transferred by the Borrower or such Subsidiary to
such Person, other than a lease pursuant to the ELLF of property transferred as
permitted under SECTION 6.6(VII).
6.17 New Business. Engage in any business other than the business in which
the Borrower or such Subsidiary is currently engaged or a business reasonably
related thereto
72
<PAGE>
(including without limitation the development of radiation and medical oncology
facilities and the acquisition and construction of properties in connection
therewith) or make any material change in any of its business objectives,
purposes and operations that would be reasonably likely to materially adversely
affect the repayment of the Obligations.
6.18 Subsidiaries or Partnerships. Except as otherwise permitted by
SECTION 6.8, (a) become a partner or joint venturer in any partnership or joint
venture, or (b) create or acquire any new Subsidiary; provided that the Borrower
or any Subsidiary may (i) create or acquire one or more Subsidiaries in
connection with a Permitted Physician Transaction or an approved Physician
Transaction consummated in compliance with SECTION 5.14 or 6.2, respectively, of
this Agreement, and (ii) create a direct or indirect wholly-owned Subsidiary de
novo; provided further that, in any such instance, the created or acquired
Subsidiary complies with the provisions of SECTION 5.11.
6.19 Transactions Affecting the Collateral. Enter into any transaction
that materially adversely affects a material portion of the Collateral.
Notwithstanding the foregoing, the Borrower and its Subsidiaries may sell
certain assets as provided in SECTION 6.6(III) hereof.
6.20 Hazardous Wastes. Permit any Hazardous Substances the removal of
which is required or the maintenance of which is restricted, prohibited or
penalized by any Governmental Authority, to be unlawfully brought on to any real
property owned or leased by the Borrower or any Subsidiary, or if so brought or
found located thereon, fail to promptly commence and continue removal of such
materials, with proper disposal, in accordance with required cleanup procedures
under applicable Environmental Laws, except where any of the foregoing would not
have a Material Adverse Effect.
6.21 Fiscal Year. Change its fiscal year from a December 31 year end.
6.22 Amendments; Prepayments of Subordinated Debt or Permitted
Subordinated Debt, etc. (a) Amend or modify (or permit the amendment or
modification of) any of the terms or provisions of any Subordinated Debt or
Permitted Subordinated Debt or any agreement related thereto or (b) make any
voluntary or optional payment or prepayment or redemption or acquisition for
value of (including, without limitation, by way of depositing with any trustee
with respect thereto money or securities before due for the purpose of paying
when due), or exchange, any Subordinated Debt or Permitted Subordinated Debt;
provided, that the terms or provisions of any Permitted Subordinated Debt may be
amended or modified if (i) such Permitted Subordinated Debt, as amended or
modified, complies with the conditions set forth in the definition of "Permitted
Subordinated Debt" and (ii) such amendment or modification does not adversely
effect the rights or interests of the Agent or Lenders.
6.23 Fraud and Abuse. Neither the Borrower nor any Subsidiary, nor any of
their respective officers or directors, shall engage on behalf of Borrower or
any Subsidiary in any of the following: (i) knowingly and willfully making or
causing to be made a false statement or representation of a material fact in any
applications for any benefit or payment under Medicare or Medicaid programs;
(ii) knowingly and willfully making or causing to be made any false statement or
representation of a material fact for use in determining rights to any benefit
or
73
<PAGE>
payment under Medicare or Medicaid programs; (iii) failing to disclose knowledge
by a claimant of the occurrence of any event affecting the initial or continued
right to any benefit or payment under Medicare or Medicaid programs on its own
behalf or on behalf of another, with intent to secure such benefit or payment
fraudulently; (iv) knowingly and willfully soliciting or receiving any
remuneration (including any kickback, bribe or rebate), directly or indirectly,
overtly or covertly, in cash or in kind or offering to pay such remuneration (a)
in return for referring an individual to a person for the furnishing or
arranging for the furnishing of any item or service for which payment may be
made in whole or in part by Medicare or Medicaid, or (b) in return for
purchasing, leasing or ordering or arranging for or recommending the purchasing,
leasing or order of any good, facility, service, or item for which payment may
be made in whole or in part by Medicare or Medicaid. With respect to this
Section, knowledge by an individual director or officer of the Borrower or a
Subsidiary of any of the event described in this Section shall not be imputed to
the Borrower or such Subsidiary unless such knowledge was obtained or learned by
the director or officer in his or her official capacity as a director or officer
of the Borrower or such Subsidiary. Neither the Borrower nor any Subsidiary
shall be considered to have breached this Section, except in the case of a
knowing and willful violation thereof, until the Borrower or such Subsidiary has
received notification, written or oral, by a Governmental Authority of competent
jurisdiction as to any such violation. The provisions of SUBSECTION (III) hereof
shall not require the Borrower or any Subsidiary (unless otherwise required by
law) to disclose to the Agent, Lenders or any other Person any activity or
omission by a third party (including associated physician groups) unless such
activity or omission (x) constitutes willful fraud or abuse, (y) would
reasonably be likely to have a Material Adverse Effect or (z) is not being
corrected, cured or remedied by the Borrower and any other relevant Persons
diligently, in good faith and in the exercise of sound business judgment.
ARTICLE VII.
EVENTS OF DEFAULT
7.1 Events of Default. The occurrence of any one or more of the following
events shall constitute an "Event of Default":
(a) The Borrower fails to pay when due any principal of any Note when the
same becomes due or fails to pay any fees or interest or other Obligations under
this Agreement or any other Loan Document within three (3) days of when due;
(b) The Borrower or any Subsidiary fails or neglects to observe, perform or
comply with any term, provision, condition or covenant contained in SECTIONS
2.14, 5.1, 5.2, 5.3(A)(I) or ARTICLE VI (except, in the case of SECTION 6.5, to
the extent permitted under SECTION 7.1(S) below);
(c) The Borrower or any Subsidiary fails or neglects to observe, perform or
comply with any term, provision, condition or covenant contained herein except
those specified in subsections (A) and (B) above (and except to the extent that
violations of any such provisions or covenants otherwise trigger an Event of
Default under any of the other subparagraphs of this
74
<PAGE>
SECTION 7.1), and the same is not cured to the Required Lenders' satisfaction
within thirty (30) Business Days after the earlier of (i) notice thereof from
the Agent or (ii) Borrower or such Subsidiary acquires knowledge thereof;
(d) If any representation or warranty made in writing by or on behalf of
the Borrower or any Subsidiary in this Agreement, in the other Loan Documents or
in any other agreement now existing or hereafter executed between the Borrower
or any Subsidiary and the Agent or any Lender in connection with any Loan
Document, or in connection with the transactions contemplated hereby or thereby,
shall prove to have been false or misleading in any material respect when made;
(e) The occurrence of any default or event of default on the part of the
Borrower or any Subsidiary (including specifically, but without limitation,
defaults due to nonpayment) under the terms of any agreement, document or
instrument (including, without limitation, the Operative Documents (as defined
in the definition of "ELLF" herein)) pursuant to which the Borrower or such
Subsidiary has incurred any Debt having an aggregate outstanding principal
amount of greater than $250,000 (other than the intercompany loans), which
default would permit acceleration of such Debt;
(f) The termination of any one or more agreements, contracts or instruments
to which a Borrower or any Subsidiary is a party or by which it or any of its
properties are bound, and such termination or aggregate terminations results in
a Material Adverse Effect;
(g) The occurrence of an "Event of Default" under any of the Loan
Documents;
(h) The occurrence of any material uninsured damage to or loss, theft or
destruction of the Collateral or other assets of the Borrower or any Subsidiary
that has a Material Adverse Effect;
(i) The Borrower or any of its Subsidiaries shall (i) file a voluntary
petition or commence a voluntary case seeking liquidation, winding-up,
reorganization, dissolution, arrangement, readjustment of debts or any other
relief under the Bankruptcy Code or under any other applicable bankruptcy,
insolvency or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to controvert in a timely and appropriate manner, any
petition or case of the type described in subsection (J) below, (iii) apply for
or consent to the appointment of or taking possession by a custodian, trustee,
receiver or similar official for or of itself or all or a substantial part of
its properties or assets, (iv) fail generally, to pay its debts generally as
they become due, or (v) make a general assignment for the benefit of creditors;
(j) Any involuntary petition or case shall be filed or commenced against
the Borrower or any of its Subsidiaries seeking liquidation, winding-up,
reorganization, dissolution, arrangement, readjustment of debts, the appointment
of a custodian, trustee, receiver or similar official for it or all or a
substantial part of its properties or any other relief under the Bankruptcy Code
or under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, and such petition or case shall continue undismissed and
unstayed for a period of sixty
75
<PAGE>
(60) days; or an order, judgment or decree approving or ordering any of the
foregoing shall be entered in any such proceeding;
(k) (i) The Borrower ceases to be Solvent (taking into account any rights
of contribution), or (ii) the Borrower or any of its Subsidiaries (x) ceases to
conduct its business as now conducted or (y) is enjoined, restrained or in any
way prevented by court order from conducting all or any material part of its
business affairs, except as otherwise specifically permitted under SECTION 6.1
or except where such cessation, injunction, restraint or order would not have a
Material Adverse Effect;
(l) A notice of lien, levy or assessment in excess of $250,000 is filed of
record against any portion of the assets of the Borrower or any Subsidiary by
the United States, or any department, agency or instrumentality thereof, or by
any other Governmental Authority, including, without limitation, the Pension
Benefit Guaranty Corporation, or if any taxes or debts in excess of $250,000
owing at any time or times hereafter to any one of them becomes a lien or
encumbrance (other than a Permitted Lien) upon the Collateral or any other asset
of the Borrower or any Subsidiary, and the same is not dismissed, released,
discharged or stayed pending appeal within thirty (30) days after the same
becomes a lien or encumbrance or, in the case of ad valorem taxes, prior to the
last day when payment may be made without penalty;
(m) The entry of a judgment or the issuance of a warrant of attachment,
execution or similar process against the Borrower or any Subsidiary or any of
their respective assets that are $200,000 or more in excess of proceeds of
insurance which shall not be dismissed, discharged, stayed pending appeal or
bonded within sixty (60) days after entry unless the Borrower or its Subsidiary
is diligently contesting such judgment in good faith by appropriate proceedings
with adequate funded reserves being set aside on its books in accordance with
Generally Accepted Accounting Principles;
(n) The occurrence of any of the following events: (i) the happening of a
Reportable Event that could give rise to liability (that is not waived by the by
the Pension Benefit Guaranty Corporation or by the Required Lenders, or if such
liability can be avoided by any corrective action of the Borrower, such
corrective action is not completed within ninety (90) days after the occurrence
of such Reportable Event) with respect to any Pension Plan; (ii) the termination
of any Pension Plan in a "distress termination" under the provisions of Section
4041 of ERISA; (iii) the appointment of a trustee by an appropriate United
States District Court to administer any Pension Plan; (iv) the institution of
any proceedings by the Pension Benefit Guaranty Corporation to terminate any
Pension Plan or to appoint a trustee to administer any such plan; and (v) the
failure of the Borrower to notify the Lenders promptly upon receipt by the
Borrower of any notice of the institution of any proceeding or any other actions
that may result in the termination of any such plan;
(o) The Borrower or any Subsidiary, to the extent, if any, presently
participating or required by law to participate, in Medicaid or Medicare
programs shall fail to be eligible for any reason to participate in Medicaid or
Medicare programs or to accept assignments or rights to reimbursement under
Medicaid Regulations or Medicare Regulations and such failure shall have
76
<PAGE>
a Material Adverse Effect and such failure shall also continue beyond the
completion of any appeal process diligently pursued by the Borrower or such
Subsidiary in good faith;
(p) For any reason other than the satisfaction in full of all Obligations
and termination of this Agreement or the release of any relevant Subsidiary from
its Obligations under the Guaranty Agreement in accordance with the terms
thereof, (i) the guaranty given by any Subsidiary of the Borrower under the
Guaranty Agreement shall cease to be in full force and effect at any time or is
declared to be null and void or (ii) any such Subsidiary denies that it has any
further liability under the Guaranty Agreement or gives notice to such effect,
and such denial or notice is not revoked within one Business Day after the
earlier of (A) receipt by the Borrower of notice from the Agent or any Lender of
such denial or notice or (B) the Borrower becomes aware of such denial or notice
being made or given, as the case may be;
(q) For any reason other than the satisfaction in full of all Obligations
and termination of this Agreement and termination of the ELLF, the release of
any relevant Subsidiary from its Obligations under the Guarantors Security
Agreement in accordance with the terms thereof or hereof, or the release of any
Collateral under either Security Agreement in accordance with the terms thereof
or hereof, (i) either Security Agreement shall cease to be in full force and
effect at any time or is declared to be null and void with respect to any
material portion of the Collateral, (ii) the Agent ceases to have a perfected,
first priority security interest in any material portion of the Collateral
(subject to Permitted Liens), (iii) the Borrower denies that it has any further
liability under the Security Agreement or gives notice to such effect or (iv)
any Subsidiary denies that it has any further liability under the Guarantors'
Security Agreement or gives notice to such effect, and such denial or notice is
not revoked within one Business Day after the earlier of (A) receipt by the
Borrower of notice from the Agent or any Lender of such denial or notice or (B)
the Borrower becomes aware of such denial or notice being made or given, as the
case may be;
(r) The occurrence of any Material Adverse Change;
(s) Change of Control shall occur; or
(t) The existence of any security interests, liens or other encumbrances in
excess of $250,000 in the aggregate at any time, arising from or relating to any
Physician Transaction or Subsidiary acquired in such Physician Transaction,
other than Permitted Liens.
ARTICLE VIII.
RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT
8.1 Remedies: Termination of Commitments, Acceleration, etc. Upon and
at any time after the occurrence and during the continuance of any Event of
Default, the Agent shall at the direction, or may with the consent, of the
Required Lenders, take any or all of the following actions at the same or
different times:
77
<PAGE>
(a) Declare the Commitments of each Lender and the Issuing Bank's
obligations to issue Letters of Credit to be terminated, whereupon the same
shall terminate (provided that, upon the occurrence of an Event of Default
pursuant to SECTIONS 7.1(I) or (J), all of the Commitments shall automatically
be terminated);
(b) Declare all or any part of the outstanding principal amount of the
Loans, all unpaid interest accrued thereon, and all other amounts (excluding
unearned interest) payable under this Agreement, the Notes and the other Loan
Documents to be immediately due and payable, whereupon such outstanding
principal amounts, accrued interest and other such amounts shall become
immediately due and payable without presentment, demand, protest, notice of
intent to accelerate or other notice or legal process of any kind, all of which
are hereby knowingly and expressly waived by the Borrower (provided that, upon
the occurrence of an Event of Default pursuant to SECTIONS 7.1(I) or (J), all of
such outstanding principal amounts, accrued interest and other such amounts
shall automatically become immediately due and payable);
(c) Direct the Borrower to deposit (and the Borrower hereby agrees,
forthwith upon receipt of notice of such direction from the Agent, to deposit)
with the Agent from time to time such additional amount of cash as is equal to
the aggregate Stated Amount of all Letters of Credit then outstanding (whether
or not any beneficiary under any Letter of Credit shall have drawn or be
entitled at such time to draw thereunder), such amount to be held by the Agent
in the Cash Collateral Account as security for the Letter of Credit Outstandings
as described in SECTION 2.20(J); and
(d) Exercise all rights and remedies available to it under this
Agreement, the other Loan Documents and applicable law.
8.2 Right of Setoff. The Agent and each Lender (including, without
limitation, the Issuing Bank and the L/C Participants) may, and are hereby
authorized by the Borrower, at any time and from time to time, to the fullest
extent permitted by applicable law, without advance notice to the Borrower (any
such notice being expressly waived by the Borrower) and irrespective of demand
for payment, to set off and apply any and all deposits (general or special, time
or demand, provisional or final) at any time held in other than a fiduciary
account and any other indebtedness at any time owing by such Lender to or for
the credit or the account of the Borrower against any or all of the Obligations
now or hereafter existing, which are then due and payable. The Agent agrees to
notify the Borrower after any such setoff or application, provided that the
failure to give such notice shall not affect the validity of such setoff and
application.
8.3 Rights and Remedies Cumulative; Non-Waiver; etc. The enumeration
of the Agent's and the Lenders' rights and remedies set forth in this Agreement
is not intended to be exhaustive, and the exercise by the Agent or any Lender of
any right or remedy shall not preclude the exercise of any other rights or
remedies, all of which shall be cumulative, and shall be in addition to any
other right or remedy given hereunder, under the Loan Documents or under any
other agreement between the Borrower or any Subsidiary and the Agent or the
Lenders or that may now or hereafter exist in law or in equity or by suit or
otherwise. No delay or failure to take
78
<PAGE>
action on the part of the Agent or any Lender in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be construed to be a waiver of any Event of Default. No course of dealing
between the Borrower or any Subsidiary and the Agent or the Lenders or their
agents or employees shall be effective to change, modify or discharge any
provision of this Agreement or any of the other Loan Documents or to constitute
a waiver of any Event of Default.
ARTICLE IX.
THE AGENT
9.1 Appointment. Each Lender hereby irrevocably appoints and
authorizes First Union to act as Agent hereunder and under the other Loan
Documents and to take such actions as agent on its behalf hereunder and under
the other Loan Documents, and to exercise such powers and to perform such
duties, as are specifically delegated to the Agent by the terms hereof or
thereof, together with such other powers and duties as are reasonably incidental
thereto.
9.2 Nature of Duties. The Agent shall have no duties or
responsibilities other than those expressly set forth in this Agreement and the
other Loan Documents. The Agent shall not have, by reason of this Agreement or
any other Loan Document, a fiduciary relationship in respect of any Lender; and
nothing in this Agreement or any other Loan Document, express or implied, is
intended to or shall be so construed as to impose upon the Agent any obligations
or liabilities in respect of this Agreement or any other Loan Document except as
expressly set forth herein or therein. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents or
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any agents or attorneys-in-fact that it selects with reasonable care. The
Agent shall be entitled to consult with legal counsel, independent public
accountants and other experts selected by it with respect to all matters
pertaining to this Agreement and the other Loan Documents and its duties
hereunder and thereunder and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts. The Lenders hereby acknowledge that the Agent shall not
be under any duty to take any discretionary action permitted to be taken by it
pursuant to the provisions of this Agreement or any other Loan Document unless
it shall be requested in writing to do so by the Required Lenders (or, where a
higher percentage of the Lenders is expressly required hereunder, such Lenders).
9.3 Exculpatory Provisions. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be
(i) liable to any Lender for any action taken or omitted to be taken by it or
such Person under or in connection with the Loan Documents, except for its or
such Person's own gross negligence or willful misconduct, (ii) responsible in
any manner to any Lender for any recitals, statements, information,
representations or warranties herein or in any other Loan Document or in any
document, instrument, certificate, report or other writing delivered in
connection herewith or therewith, for
79
<PAGE>
the execution, effectiveness, genuineness, validity, enforceability or
sufficiency of this Agreement or any other Loan Document, or for the financial
condition of the Borrower, its Subsidiaries or any other Person, or (iii)
required to ascertain or make any inquiry concerning the performance or
observance of any of the terms, provisions or conditions of this Agreement or
any other Loan Document or the existence or possible existence of any Default or
Event of Default, or to inspect the properties, books or records of the Borrower
or any of its Subsidiaries.
9.4 Reliance by Agent. The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any notice, statement, consent or other
communication (including, without limitation, any thereof by telephone,
telecopy, telex, telegram or cable) believed by it in good faith to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons. The Agent may deem and treat each Lender as the owner of its interest
hereunder for all purposes hereof unless and until a written notice of the
assignment, negotiation or transfer thereof shall have been given to the Agent
in accordance with the provisions of this Agreement. The Agent shall be entitled
to refrain from taking or omitting to take any action in connection with this
Agreement or any other Loan Document (i) if such action or omission would, in
the reasonable opinion of the Agent, violate any applicable law or any provision
of this Agreement or any other Loan Document or (ii) unless and until it shall
have received such advice or concurrence of the Required Lenders (or, where a
higher percentage of the Lenders is expressly required hereunder, such Lenders)
as it deems appropriate or it shall first have been indemnified to its
satisfaction by the Lenders against any and all liability and expense (other
than liability and expense arising from its own gross negligence or willful
misconduct) that may be incurred by it by reason of taking, continuing to take
or omitting to take any such action. Without limiting the foregoing, no Lender
shall have any right of action whatsoever against the Agent as a result of the
Agent's acting or refraining from acting hereunder or under any other Loan
Document in accordance with the instructions of the Required Lenders (or, where
a higher percentage of the Lenders is expressly required hereunder, such
Lenders), and such instructions and any action taken or failure to act pursuant
thereto shall be binding upon all of the Lenders (including all subsequent
Lenders).
9.5 Non-Reliance on Agent and Other Lenders. Each Lender
expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any
representation or warranty to it and that no act by the Agent or any such Person
hereafter taken, including any review of the affairs of the Borrower and its
Subsidiaries, shall be deemed to constitute any representation or warranty by
the Agent to any Lender. Each Lender represents to the Agent that (i) it has,
independently and without reliance upon the Agent or any other Lender and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, prospects, operations,
properties, financial and other condition and creditworthiness of the Borrower
and its Subsidiaries and made its own decision to enter into this Agreement and
extend credit to the Borrower hereunder, and (ii) it will, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
hereunder and under the other Loan Documents and to make such investigation as
it deems necessary to inform itself as to the business, prospects, operations,
properties, financial and other condition and
80
<PAGE>
creditworthiness of the Borrower and its Subsidiaries. Except as expressly
provided in this Agreement and the other Loan Documents, the Agent shall have no
duty or responsibility, either initially or on a continuing basis, to provide
any Lender with any credit or other information concerning the business,
prospects, operations, properties, financial or other condition or
creditworthiness of the Borrower, its Subsidiaries or any other Person that may
at any time come into the possession of the Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates.
9.6 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default unless
the Agent shall have received written notice from the Borrower or a Lender
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default." In the event that the Agent
receives such a notice, the Agent will give prompt notice thereof to the
Lenders; provided, however, that if any such notice has also been furnished to
the Lenders, the Agent shall have no obligation to notify the Lenders with
respect thereto. The Agent shall (subject to SECTIONS 9.4 and 10.8) take such
action with respect to such Default or Event of Default as shall reasonably be
directed by the Required Lenders; provided that, unless and until the Agent
shall have received such directions, the Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interests of
the Lenders.
9.7 Indemnification. To the extent the Agent is not reimbursed by or
on behalf of the Borrower, and without limiting the obligation of the Borrower
to do so, the Lenders agree (i) to indemnify the Agent and its officers,
directors, employees, agents, attorneys-in-fact and Affiliates, ratably in
proportion to their respective Percentages as used in determining the Required
Lenders as of the date of determination, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including, without limitation, attorneys' fees and expenses) or
disbursements of any kind or nature whatsoever that may at any time (including
at any time following the repayment in full of the Loans and the termination of
the Commitments) be imposed on, incurred by or asserted against the Agent in any
way relating to or arising out of this Agreement or any other Loan Document or
any documents contemplated by or referred to herein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent under
or in connection with any of the foregoing, and (ii) to reimburse the Agent upon
demand, ratably in proportion to their respective Percentages as used in
determining the Required Lenders as of the date of determination, for any
expenses incurred by the Agent in connection with the preparation, negotiation,
execution, delivery, administration, amendment, modification, waiver or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement
or any of the other Loan Documents (including, without limitation, reasonable
attorneys' fees and expenses and compensation of agents and employees paid for
services rendered on behalf of the Lenders); provided, however, that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
to the extent resulting from the gross negligence or willful misconduct of the
party to be indemnified.
81
<PAGE>
9.8 The Agent in its Individual Capacity. With respect to its
Commitment, the Loans made by it, the Letters of Credit issued by it and the
Note or Notes issued to it, the Agent in its individual capacity and not as
Agent shall have the same rights and powers under the Loan Documents as any
other Lender and may exercise the same as though it were not performing the
agency duties specified herein; and the terms "Lenders," "Required Lenders,"
"holders of Notes" and any similar terms shall, unless the context clearly
otherwise indicates, include the Agent in its individual capacity. The 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 the
Borrower, any of its Subsidiaries or any of their respective Affiliates as if
the Agent were not performing the agency duties specified herein, and may accept
fees and other consideration from any of them for services in connection with
this Agreement and otherwise without having to account for the same to the
Lenders.
9.9 Successor Agent. The Agent may resign at any time by giving
thirty (30) days' prior written notice to the Borrower and the Lenders. Upon any
such notice of resignation, the Required Lenders will, with the prior written
consent of the Borrower (which consent shall not be unreasonably withheld),
appoint from among the Lenders a successor to the Agent (provided that the
Borrower's consent shall not be required in the event a Default or Event of
Default shall have occurred and be continuing). If no successor to the Agent
shall have been so appointed by the Required Lenders and shall have accepted
such appointment within such thirty-day period, then the retiring Agent may, on
behalf of the Lenders and after consulting with the Lenders and the Borrower,
appoint a successor Agent from among the Lenders. Upon the acceptance of any
appointment as Agent by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations hereunder and under the other Loan Documents. After any
retiring Agent's resignation as Agent, the provisions of this Article shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent. If no successor to the Agent has accepted appointment as Agent by
the thirtieth (30th) day following a retiring Agent's notice of resignation, the
retiring Agent's resignation shall nevertheless thereupon become effective, and
the Lenders shall thereafter perform all of the duties of the Agent hereunder
and under the other Loan Documents until such time, if any, as the Required
Lenders appoint a successor Agent as provided for hereinabove.
9.10 Collateral Matters.
(a) The Agent is hereby authorized on behalf of the Lenders, without
the necessity of any notice to or further consent from the Lenders, from time to
time (but without any obligation) to take any action with respect to the
Collateral and the Security Documents that may be necessary to perfect and
maintain perfected the Liens upon the Collateral granted pursuant to the
Security Documents.
(b) The Lenders hereby irrevocably authorize the Agent, at its option
and in its discretion, to release any Lien granted to or held by the Agent upon
any Collateral (i) upon termination of the Commitments and payment in full of
all of the Obligations and termination of the ELLF, (ii) constituting property
sold or to be sold or disposed of as part of or in connection
82
<PAGE>
with any disposition that may be permitted hereunder or under any other Loan
Document or (iii) otherwise pursuant to and in accordance with the provisions of
SECTION 10.8(B) or any applicable Loan Document. Upon request by the Agent at
any time, the Lenders will confirm in writing the Agent's authority to release
Collateral pursuant to this subsection (B).
9.11 Applicable Parties. The provisions of this ARTICLE IX, other
than the provisions of SECTION 9.9, are solely for the benefit of the Agent and
the Lenders, and the Borrower shall not have any rights as a third party
beneficiary or otherwise or any obligations under any of the provisions of this
ARTICLE IX, other than as provided in SECTION 9.9. In performing functions and
duties hereunder and under the other Loan Documents, the Agent shall act solely
as the Agent of the Lenders and does not assume, nor shall be deemed to have
assume, any obligation or relationship of trust or agency with or for the
Borrower or any legal representative, successor and assign of the Borrower.
ARTICLE X.
MISCELLANEOUS
10.1 Survival. The representations and warranties made by or on
behalf of the Borrower or any Subsidiary in this Agreement and in each other
Loan Document shall survive the execution and delivery of this Agreement and
each such other Loan Document until the satisfaction of all of Obligations and
the termination of the Commitments. Notwithstanding any other provision herein
or anything provided or implied by law to the contrary, no termination or
cancellation (regardless of cause or procedure) of the Commitments, this
Agreement or any of the other Loan Documents shall in any way affect or impair
the rights and obligations of the parties hereto with respect to any of the
provisions of (i) SECTION 2.17 or (ii) this Agreement and the other Loan
Documents relating to indemnification or payment of costs and expenses,
including, without limitation, all of the provisions of SECTIONS 2.13(A),
2.13(B), 2.14, 2.15, 9.7, 10.3, 10.6 and 10.7, and, in each case, such
provisions shall survive any such termination or cancellation and the making and
repayment of the Loans.
10.2 Governing Law; Consent to Jurisdiction; Waiver of Jury
Trial. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS HAVE BEEN EXECUTED, DELIVERED
AND ACCEPTED IN, AND SHALL BE DEEMED TO HAVE BEEN MADE IN, NORTH CAROLINA AND
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NORTH CAROLINA (WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS
THEREOF); PROVIDED THAT EACH LETTER OF CREDIT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF
CREDIT OR, IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND
PRACTICES FOR DOCUMENTARY CREDITS, INTERNATIONAL CHAMBER OF COMMERCE, AS IN
EFFECT FROM TIME TO TIME (THE "UNIFORM CUSTOMS"), AND, AS TO MATTERS NOT
GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE
83
<PAGE>
STATE OF NORTH CAROLINA (WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS
THEREOF). THE BORROWER HEREBY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF ANY
STATE COURT WITHIN MECKLENBURG COUNTY, NORTH CAROLINA OR ANY FEDERAL COURT
LOCATED WITHIN THE WESTERN DISTRICT OF THE STATE OF NORTH CAROLINA FOR ANY
PROCEEDING INSTITUTED HEREUNDER OR UNDER ANY OF THE OTHER LOAN DOCUMENTS, OR
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS, OR ANY PROCEEDING TO WHICH THE AGENT OR ANY LENDER OR THE BORROWER IS
A PARTY, INCLUDING ANY ACTIONS BASED UPON, ARISING OUT OF, OR IN CONNECTION
WITH, ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER ORAL OR
WRITTEN) OR ACTIONS OF THE AGENT OR ANY LENDER OR THE BORROWER. THE BORROWER
IRREVOCABLY AGREES TO BE BOUND (SUBJECT TO ANY AVAILABLE RIGHT OF APPEAL) BY ANY
JUDGMENT RENDERED OR RELIEF GRANTED THEREBY AND FURTHER WAIVES ANY OBJECTION
THAT IT MAY HAVE BASED ON LACK OF JURISDICTION OR IMPROPER VENUE OR FORUM NON
CONVENIENS TO THE CONDUCT OF ANY SUCH PROCEEDING. THE BORROWER CONSENTS THAT ALL
SERVICE OF PROCESS BE MADE BY REGISTERED OR CERTIFIED MAIL DIRECTED TO IT AT ITS
ADDRESS SET FORTH HEREINBELOW, AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER
DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID AND PROPERLY
ADDRESSED. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT TO SERVE LEGAL PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF ANY PARTY TO BRING
ANY ACTION OR PROCEEDING AGAINST ANY OTHER PARTY IN THE COURTS OF ANY OTHER
JURISDICTION. THE BORROWER, BY ITS ACCEPTANCE OF THE BENEFITS HEREOF, AND THE
AGENT AND EACH LENDER, HEREBY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
10.3 Arbitration; Preservation and Limitation of Remedies.
(a) Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding (subject to the following limitation),
any dispute, claim or controversy arising out of, connected with or relating to
this Agreement or any other Loan Document ("Disputes") between or among the
Borrower, the Agent and the Lenders, or any of them, shall be resolved by
binding arbitration as provided herein; provided, however, that no party may
demand arbitration in any judicial proceeding to which it is a party more than
90 days from the later of (i) its commencement of such proceeding or (ii) the
date it is served with a complaint, counterclaim or third-party claim in such
proceeding. Disputes may include, without limitation, tort claims,
counterclaims, claims brought as class actions, claims arising from Loan
Documents executed in the future, or claims arising out of or connected with the
transactions contemplated by this
84
<PAGE>
Agreement and the other Loan Documents. Arbitration shall be conducted under and
governed by the Commercial Financial Disputes Arbitration Rules (the
"Arbitration Rules") of the American Arbitration Association (the "AAA"), as in
effect from time to time, and Title 9 of the U.S. Code, as amended. All
arbitration hearings shall be conducted in the city in which the principal
office of either the Agent or the Borrower is located. The expedited procedures
set forth in Rule 51 et seq. of the Arbitration Rules shall be applicable to
claims of less than $1,000,000. All applicable statutes of limitation shall
apply to any Dispute. All arbitrations commenced with respect to any of the Loan
Documents shall be consolidated for hearing before the same panel of arbitrators
as prescribed herein. Any attorney-client privilege or other protection against
disclosure of confidential information, including, without limitation, any
protection afforded the work product of any attorney, that would otherwise be
claimed by any party shall be available to and may be claimed by any such party
in any arbitration proceeding. A judgment upon the award may be entered in any
court having jurisdiction. The panel from which all arbitrators are selected
shall be comprised of licensed attorneys. The single arbitrator selected for
expedited procedure shall be a retired judge from the highest court of general
jurisdiction, state or federal, of the state where the hearing will be
conducted. Notwithstanding the foregoing, this arbitration provision does not
apply to Disputes under or related to Interest Rate Protection Agreements. An
arbitration arising from an Interest Rate Protection Agreement shall not be
consolidated with any other arbitration hereunder without the consent of all
parties to the arbitrations that are proposed to be consolidated.
(b) Notwithstanding the preceding binding arbitration provisions, the
parties hereto agree to preserve, without diminution, certain remedies that any
party hereto may employ or exercise freely, either alone, in conjunction with or
during a Dispute. Any party hereto shall have the right to proceed in any court
of proper jurisdiction or by self-help to exercise or prosecute the following
remedies, as applicable: (i) all rights to foreclose against any Collateral by
exercising a power of sale granted pursuant to any of the Loan Documents or
under applicable law other than judicial foreclosure and sale, including a
proceeding to confirm the sale; (ii) all rights of self-help, including peaceful
occupation of real property and collection of rents, setoff, and peaceful
possession of personal property; (iii) obtaining provisional or ancillary
remedies, including injunctive relief, sequestration, garnishment, attachment,
appointment of a receiver and filing an involuntary bankruptcy proceeding; and
(iv) when applicable, a judgment by confession of judgment. Preservation of
these remedies does not limit the power of an arbitrator to grant similar
remedies that may be requested by a party in a Dispute.
10.4 Notice. All notices and other communications provided for
hereunder or in connection herewith shall be in writing (including telegraphic,
telex, facsimile transmission or cable communication) and mailed, telegraphed,
telexed, telecopied, cabled or delivered to the party to be notified at the
following addresses:
85
<PAGE>
If to the Borrower: American Oncology Resources, Inc.
16825 Northchase Drive
Suite 1300
Houston, Texas 77060
Attention: L. Fred Pounds, Chief Financial Officer
Telephone: (713) 873-2674
Telecopier: (713) 873-7762
With copies to: Mayor, Day, Caldwell & Keeton, L.L.P.
700 Louisiana, Suite 1900
Houston, Texas 77002
Attention: Diana M. Hudson
Telephone: (713) 225-7020
Telecopier: (713) 225-7047
If to the Agent: First Union National Bank
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Telephone: (704) 383-0281
Telecopier: (704) 383-0288
with a copy to: Robinson, Bradshaw & Hinson, P.A.
101 North Tryon Street
Suite 1900
Charlotte, North Carolina 28246
Attention: Stokely G. Caldwell, Jr.
Telephone: (704) 377-2536
Telecopier: (704) 378-4000
If to any Lender: At the address set forth on its signature page hereto (or
if to any Lender not a party hereto as of the date
hereof, at the address for notices set forth in its
Assignment and Acceptance);
or to such other address as any party may designate for itself by like notice to
all other parties hereto. All such notices and communications shall be deemed
to have been given (i) if mailed as provided above by any method other than
overnight delivery service, on the third Business Day after deposit in the
mails, (ii) telegraphed, telexed, telecopied or cabled, when delivered to the
telegraph company, confirmed by telex answerback, transmitted by telecopier or
delivered to the cable company, respectively, or (iii) if delivered by hand, or
mailed by overnight delivery services upon delivery; provided that notices and
communications to the Agent shall not be effective until received by the Agent.
86
<PAGE>
10.5 Assignments, Participations.
(a) Each Lender may assign to one or more other Eligible Assignees (each,
an "Assignee") all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment,
the outstanding Loans made by it, the Note or Notes held by it and its
participations in Letters of Credit); provided, however, that (i) so long as
First Union remains the Agent, it will retain a Commitment of ten percent (10%)
of the Total Commitment, up to a total exposure of $15,000,000 (including the
Commitment, Swingline Note and any commitment under the ELLF) at all times (free
of participation), (ii) each such assignment shall be of an equal percentage of
such Lender's rights and obligations (including its Commitment, the outstanding
Loans made by it, the Note or Notes held by it, its participations in Letters of
Credit and its commitment and loans as a Lender (as defined in the Participation
Agreement) under the ELLF), (iii) any such assignment (other than an assignment
to a Lender or an Affiliate of a Lender) shall not be made without the prior
written consent of the Agent and the Borrower (to be evidenced by their
counterexecution of the relevant Assignment and Acceptance), which consent shall
not be unreasonably withheld, (iv) except in the case of an assignment to a
Lender or an Affiliate of a Lender, the amount of the Commitment of the
assigning Lender being assigned pursuant to each such assignment (determined as
of the date of the Assignment and Acceptance with respect to each such
assignment) shall in no event be less than the lesser of (y) the entire
Commitment of such Lender immediately prior to such assignment or (z)
$5,000,000, and (v) the parties to each such assignment will execute and deliver
to the Agent, for its acceptance and recording in the Register, an Assignment
and Acceptance, together with any Note or Notes subject to such assignment, and
the assigning Lender will pay a nonrefundable processing fee of $3,000 to the
Agent for its own account. Upon such execution, delivery, acceptance and
recording of the Assignment and Acceptance, from and after the effective date
specified therein, which effective date shall be at least five (5) Business Days
after the execution and delivery to the Agent thereof (unless the Agent shall
otherwise agree), (A) 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 and Acceptance, shall have the rights and
obligations of the assigning Lender hereunder with respect thereto and (B) the
assigning Lender shall, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such Assignment and Acceptance, and from and
after such assignment, relinquish its rights (other than rights under the
provisions of this Agreement and the other Loan Documents relating to
indemnification or payment of fees, costs and expenses, to the extent such
rights relate to the time prior to the effective date of such Assignment and
Acceptance) and be released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all or the remaining portion
of such assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto). The terms and provisions of each
Assignment and Acceptance shall, upon the effectiveness thereof, be incorporated
into and made a part of this Agreement, and the covenants, agreements and
obligations of each Lender set forth therein shall be deemed made to and for the
benefit of the Agent and the other parties hereto as if set forth at length
herein.
(b) The Agent will maintain at its address for notices referred to herein a
copy of each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of
87
<PAGE>
the names and addresses of the Lenders and the Commitments of, and principal
amount of the Loans owing to, each Lender from time to time (the "Register").
The entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and the Borrower, the Agent and the Lenders may treat
each Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower and each Lender at any reasonable time and from time to time upon
reasonable prior notice.
(c) Upon its receipt of a duly completed Assignment and Acceptance executed
by an assigning Lender and an Assignee and counterexecuted by the Borrower (if
required above), together with any Note or Notes subject to such assignment and
the processing fee referred to in subsection (A) above, the Agent will (i)
accept such Assignment and Acceptance, (ii) on the effective date thereof,
record the information contained therein in the Register and (iii) give notice
thereof to the Borrower and the Lenders. Within five (5) Business Days after
its receipt of such notice, the Borrower, at its own expense, will execute and
deliver to the Agent in exchange for the surrendered Note or Notes a new Note or
Notes to the order of such Assignee in an aggregate principal amount equal to
the principal amount of the Commitment (or, if the Commitments have been
terminated, the principal amount of the Loans) assumed by it pursuant to such
Assignment and Acceptance and, to the extent the assigning Lender has retained
its Loans and/or Commitment hereunder, a new Note or Notes to the order of the
assigning Lender in an aggregate principal amount equal to the principal amount
of the Commitment (or, if the Commitments have been terminated, the principal
amount of the Loans) retained by it hereunder. Such new Note or Notes shall be
dated the effective date of such Assignment and Acceptance and shall otherwise
be in substantially the form of EXHIBITS A-1 and A-2. The Agent will return
canceled Notes to the Borrower.
(d) Subject to SECTION 10.5(A)(I), Each Lender may, without the consent of
the Borrower, the Agent or any other Lender, sell to one or more other Persons
engaged in making, purchasing or otherwise investing in commercial loans in the
ordinary course of its business (each, a "Participant") participations in any
portion comprising less than all of its rights and obligations under this
Agreement (including, without limitation, a portion of its Commitment, the
outstanding Loans made by it, the Note or Notes held by it and its
participations in Letters of Credit); provided, however, that (i) such Lender's
obligations under this Agreement shall remain unchanged and such Lender shall
remain solely responsible for the performance of such obligations, (ii) no
Lender shall sell any participation that, when taken together with all other
participations, if any, sold by such Lender, covers all of such Lender's rights
and obligations under this Agreement, except that the foregoing shall not
prohibit a Lender from selling to an Affiliate of such Lender a participation in
all of such Lender's rights and obligations under this Agreement so long as
after reasonable investigation by such Lender (including due inquiry of the
Borrower, if necessary or advisable), such participation would not give rise to
a "prohibited transaction" under ERISA with respect to the Borrower, (iii) the
amount of the participation shall in no event be less than $3,000,000, (iv) the
Borrower, the Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, and no Lender shall permit any Participant to
have any voting rights or any right to control the vote of such Lender with
respect to any amendment,
88
<PAGE>
modification, waiver, consent or other action hereunder or under any other Loan
Document (except as to actions (to the extent such actions affect the rights of
such Participant) that would (x) reduce or forgive the principal amount of, or
rate of interest on, any Loan, or reduce or forgive any fees or other
Obligations, (y) extend any date (including the Maturity Date and any scheduled
date for the mandatory reduction of the Commitments) fixed for the payment of
any principal of or interest on any Loan, any fees or any other Obligations, or
(z) increase any Commitment of any Lender (it being understood that a waiver of
any Default or Event of Default or of any mandatory reduction of the Total
Commitment shall not constitute such an increase), and (v) no Participant shall
have any rights under this Agreement or any of the other Loan Documents, each
Participant's rights against the granting Lender in respect of any participation
to be those set forth in the participation agreement, and all amounts payable by
the Borrower hereunder shall be determined as if such Lender had not granted
such participation. Notwithstanding the foregoing, subject to SECTION 2.19
hereof each Participant shall have the rights of a Lender for purposes of
SECTIONS 2.13(A), 2.13(B), 2.14, 2.15 and 9.3, and shall be entitled to the
benefits thereto, to the extent that the Lender granting such participation
would be entitled to such benefits if the participation had not been made, but
only by acts and notices taken by the granting Lender provided that no
Participant shall be entitled to receive any greater amount pursuant to any of
such Sections than the Lender granting such participation would have been
entitled to receive in respect of the amount of the participation made by such
Lender to such Participant had such participation not been made.
(e) Nothing in this Agreement shall be construed to prohibit any Lender
from pledging or assigning all or any portion of its rights and interest
hereunder or under any Note to any Federal Reserve Bank as security for
borrowings therefrom; provided, however, that no such pledge or assignment shall
release a Lender from any of its obligations hereunder.
(f) Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section, disclose to the
Assignee or Participant or proposed Assignee or Participant any information
relating to the Borrower and its Subsidiaries furnished to it by or on behalf of
any other party hereto, provided that such Assignee or Participant or proposed
Assignee or Participant agrees in writing with the Agent and the Borrower to
keep such information confidential to the same extent required of the Lenders
under SECTION 10.17.
10.6 Fees and Expenses. The Borrower agrees (i) whether or not the
transactions contemplated by this Agreement shall be consummated, to pay upon
demand all reasonable out-of-pocket costs and expenses of the Agent (including,
without limitation, reasonable attorneys' fees, but excluding salaries of the
Agent's regularly employed personnel and overhead incurred or paid by the Agent)
in connection with the preparation, negotiation, execution, delivery and
syndication of this Agreement and the other Loan Documents, and any amendment,
modification or waiver hereof or thereof or consent with respect hereto or
thereto, (ii) to pay upon demand all reasonable out-of-pocket costs and expenses
of the Agent and (upon the occurrence and during the continuance of an Event of
Default) each Lender (including, without limitation, reasonable attorneys' fees,
but excluding salaries of any Lender's or the Agent's regularly employed
personnel and overhead incurred or paid by any Lender or the Agent) in
connection with (y) any
89
<PAGE>
refinancing or restructuring of the credit arrangement provided under this
Agreement, whether in the nature of a "work-out," in any insolvency or
bankruptcy proceeding or otherwise and whether or not consummated, and (z) the
enforcement, attempted enforcement or preservation of any rights or remedies
under this Agreement or any of the other Loan Documents, whether in any action,
suit or proceeding (including any bankruptcy or insolvency proceeding) or
otherwise, and (iii) to pay and hold harmless the Agent and each Lender from and
against all liability for any intangibles, documentary, stamp or other similar
taxes, fees and excises, if any, including any interest and penalties, and any
finder's or brokerage fees, commissions and expenses (other than any fees,
commissions or expenses of finders or brokers engaged by the Agent or any
Lender), that may be payable in connection with the transactions contemplated by
this Agreement and the other Loan Documents.
10.7 Indemnification. From and at all times after the date of this
Agreement, and in addition to the costs and expenses payable under SECTION 10.6
and all of the Agent's and the Lenders' other rights and remedies against the
Borrower, the Borrower agrees to indemnify and hold harmless the Agent and each
Lender and each of their directors, officers, employees, agents and Affiliates
(each, an "Indemnified Person") against any and all claims, losses, damages,
liabilities, costs and expenses of any kind or nature whatsoever, including,
without limitation, reasonable attorneys' fees, costs and expenses
(collectively, "Indemnified Costs") incurred by or asserted against any such
Indemnified Person from and after the date hereof, whether direct or indirect,
as a result of or arising from or in any way relating to any suit, action or
proceeding (including any inquiry or investigation) by any Person, whether
threatened or initiated, asserting a claim for any legal or equitable remedy
under any statute or regulation, including, without limitation, any federal or
state securities laws, or under any common law or equitable cause or otherwise,
arising from or in connection with the negotiation, preparation, execution,
performance or enforcement of this Agreement or the other Loan Documents or any
of the transactions contemplated herein or therein, and including, without
limitation, Environmental Claims and any matters arising from the Borrower's
violation of SECTION 4.7, whether or not such Indemnified Person is a party to
any such action, proceeding or suit or the target of any such inquiry or
investigation; provided, however, that no Indemnified Person shall have the
right to be indemnified hereunder for any Indemnified Costs resulting primarily
from the fraud, gross negligence, willful misconduct or violation of law of such
Indemnified Person (as finally determined by a court of competent jurisdiction
or arbitration as provided herein). All of the foregoing losses, damages, costs
and expenses of any Indemnified Person shall be payable by the Borrower, as and
when incurred and upon demand, and shall be additional Obligations hereunder.
In the event that the foregoing indemnity is unavailable or insufficient to hold
each Indemnified Person harmless, then the Borrower will contribute to amounts
paid or payable by such Indemnified Persons in respect of their losses, claims,
damages or liabilities in such proportions as appropriately reflect the relative
benefits received by and fault of the Borrower and such Indemnified Persons in
connection with the matters as to which such losses, claims, damages or
liabilities relate and other equitable considerations. Neither the Borrower nor
any Subsidiary shall be liable to the Agent or any Lender or any other
Indemnified Person for any consequential damages. Neither the Agent nor any
Lender shall be liable to the Borrower or any Subsidiary or any of their
Affiliates for any consequential damages.
90
<PAGE>
10.8 Amendments, Waivers, etc. Except as may be otherwise specifically set
forth in this Agreement or the other Loan Documents, neither this Agreement nor
any other Loan Document nor any provision hereof or thereof may be amended,
modified, waived, discharged or terminated, and no consent to any departure by
the Borrower from any provision hereof or thereof may be given, except in a
writing signed by the Required Lenders; provided, however, that:
(a) no such amendment, modification, waiver, discharge, termination or
consent shall, without the consent of each Lender holding Obligations directly
affected thereby, (i) reduce the principal amount of, or rate of interest on,
any Loan, or reduce any fees or other monetary Obligations (other than fees
payable to the Agent for its own account) or any monetary obligations of any
Person now or hereafter primarily or contingently liable with respect to the
Obligations or (ii) extend any date fixed for any payment of principal, interest
(other than additional interest payable under SECTION 2.6(B) during the
continuance of an Event of Default), fees (other than fees payable to the Agent
for its own account) or any other monetary Obligations;
(b) no such amendment, modification, waiver, discharge, termination or
consent shall, without the consent of all Lenders, (i) increase the Commitments
of any Lender (it being understood that a waiver of any Default or Event of
Default or of any mandatory reduction in the Total Commitment shall not
constitute such an increase), (ii) change the definition of "Required Lenders"
or otherwise change the number or percentage of Lenders that shall be required
for the Lenders or any of them to take or approve, or direct the Agent to take,
any action hereunder, (iii) amend, modify or waive any of the provisions for
extending, or take action to extend, the term of the Facility, (iv) amend any
provision of this Section, (v) release all or substantially all of the
Collateral, (vi) release all or substantially all of the Guarantors from their
obligations under the Guaranty Agreement or (vii) consent to the assignment or
transfer by the Borrower, or by any other Person now or hereafter primarily or
contingently liable with respect to the Obligations, of any of its rights and
obligations under this Agreement or any of the other Loan Documents; and
(c) no provision relating to the rights or obligations of the Agent or
Issuing Bank under this Agreement or any of the other Loan Documents may be
amended, modified or waived without the consent of the Agent or Issuing Bank, as
applicable.
10.9 Rights and Remedies Cumulative, Non-Waiver, etc."-""" The
enumeration of the Agent's and the Lenders' rights and remedies set forth in
this Agreement and the other Loan Documents is not intended to be exhaustive,
and the exercise by the Agent or any Lender of any right or remedy shall not
preclude the exercise of any other rights or remedies, all of which shall be
cumulative, and shall be in addition to any other right or remedy given
hereunder, under the other Loan Documents or under any other agreement between
the Borrower and the Lenders, or any of them (or the Agent on their behalf), or
that may now or hereafter exist in law or in equity or by suit or otherwise. No
delay or failure to take action on the part of the Agent or any Lender in
exercising any right, power or privilege shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power or privilege
preclude other or further exercise thereof or the exercise of any other right,
power or privilege or shall be construed to be a waiver of any
91
<PAGE>
Event of Default. No course of dealing between any of the Borrower and the Agent
or the Lenders or their agents or employees shall be effective to change, modify
or discharge any provision of this Agreement or to constitute a waiver of any
Event of Default. No notice to or demand upon the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the right of the Agent or any
Lender to exercise any right or remedy or take any other or further action in
any circumstances without notice or demand.
10.10 Binding Effect, Assignment. All of the terms of this Agreement shall
be binding upon, inure to the benefit of and be enforceable by the respective
successors and assigns of the Borrower, the Agent and each Lender; provided,
however, that (i) the Borrower may not sell, assign or transfer this Agreement
or any portion hereof or thereof, including, without limitation, any of its
rights, title, interests, remedies, powers and duties hereunder or thereunder
and (ii) any assignees and participants shall have such rights and obligations
with respect to this Agreement and the other Loan Documents as are provided for
in and pursuant to SECTION 10.5.
10.11 Severability. To the extent any provision of this Agreement is
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
10.12 Entire Agreement. THIS AGREEMENT AND THE DOCUMENTS AND INSTRUMENTS
EXECUTED AND DELIVERED CONTEMPORANEOUSLY HEREWITH EMBODY THE ENTIRE AGREEMENT
AND UNDERSTANDING BETWEEN THE PARTIES HERETO AND SUPERSEDE ALL PRIOR AGREEMENTS
AND UNDERSTANDINGS OF SUCH PERSONS, VERBAL OR WRITTEN, RELATING TO THE SUBJECT
MATTER HEREOF EXCEPT FOR ANY AGENCY FEE LETTER, IF ANY, EXECUTED BY THE AGENT
AND THE BORROWER, THE PROVISIONS OF WHICH FEE LETTER ARE HEREBY INCORPORATED
INTO THIS AGREEMENT BY THIS REFERENCE. THIS AGREEMENT, THE NOTES, THE OTHER LOAN
DOCUMENTS AND THE INSTRUMENTS AND DOCUMENTS EXECUTED IN CONNECTION HEREWITH
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
10.13 Interpretation. The captions to the various sections and subsections
of this Agreement have been inserted for convenience only and shall not limit or
affect any of the terms hereof. Unless the context otherwise requires, words in
the singular include the plural and words in the plural include the singular,
and the use of any gender shall be applicable to all genders.
10.14 Counterparts, Effectiveness. This Agreement may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each of which, when so executed and delivered, shall be an original, but all of
which shall together constitute one and the
92
<PAGE>
same instrument. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto.
10.15 Conflict of Terms. The provisions of the Exhibits and Schedules
hereto and the other Loan Documents are incorporated in this Agreement by this
reference thereto. Except as otherwise provided in this Agreement and except as
otherwise provided in the other Loan Documents, if any provision contained in
this Agreement is in conflict with, or inconsistent with, any provision of the
other Loan Documents, the provision contained in this Agreement shall control.
10.16 Injunctive Relief. The Borrower recognizes that in the event it
fails to perform, observe or discharge any of its obligations or liabilities
under this Agreement, any remedy of law may prove to be inadequate relief to the
Agent and the Lenders. The Borrower therefore agrees that the Agent and the
Lenders, if the Agent so requests, shall be entitled to temporary and permanent
injunctive relief without the necessity of proving actual damages in any case
where a remedy at law, would prove to be inadequate relief.
10.17 Confidentiality. Each of the Agent, the Issuing Bank and each Lender
agrees to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all non-public confidential information provided
in connection with this Agreement or any other Loan Document and agrees and
undertakes that it shall not use any such information for any purpose or in any
manner other than pursuant to the terms contemplated by this Agreement. Any
Lender may disclose such information (i) at the request of any bank regulatory
authority or in connection with an examination of such Lender by any such
authority, (ii) pursuant to subpoena or other court process, (iii) when required
to do so in accordance with the provisions of any applicable law or regulation,
(iv) at the express direction of any agency of any State of the United States of
America or of any other jurisdiction in which such Lender conducts its business,
(v) to such Lender's independent auditors and other professional advisors that
have a reasonable need or basis for access thereto, (vi) to such Lender's
Affiliates, provided that such Affiliates shall be bound by the provisions of
this SECTION 10.17 and the Lender shall remain liable for any breach hereof by
such Affiliate and (vii) in connection with any proceeding to enforce its rights
hereunder or under any other Loan document or any other litigation or proceeding
related hereto; provided, however, Agent or such Lender shall instruct such
independent auditors or other professional advisors to keep such information
confidential in accordance with the terms of this SECTION 10.17; provided
further, that in the event of any disclosure of non-public information pursuant
to any of clauses (ii), (iii), (iv) and (vii) of this SECTION 10.17, the Agent
or such Lender shall make a good faith attempt, to the extent practicable, to
notify Borrower of any such disclosure of non-public information at least three
(3) Business Days prior to disclosing such information, and in any event shall
notify Borrower of such disclosure as soon as practicable.
10.18 Post-Closing Matters. The Borrower will, and will cause each of its
Subsidiaries to, cooperate to assist the Agent in the syndication of the
Facilities and the resultant addition of Lenders after the Closing Date.
93
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their corporate names by their duly authorized corporate officers as
of the date first above written.
AMERICAN ONCOLOGY RESOURCES, INC.
By:
-------------------------------------------
L. Fred Pounds, Vice President of Finance
ATTEST:
By:
--------------------------
Leo E. Sands, Secretary
FIRST UNION NATIONAL BANK, AS AGENT
By:
-------------------------------------------
Ann M. Dodd, Senior Vice President
S-1
<PAGE>
FIRST UNION NATIONAL BANK
By:
-----------------------------------------
Ann M. Dodd, Senior Vice President
Commitment: $14,309,900
Address:
First Union National Bank
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Telephone: (704) 383-0281
Telecopier: (704) 383-0288
Wiring Instructions:
First Union National Bank
Charlotte, North Carolina
ABA #053000219
Account #: 465906 RC5007
Reference: American Oncology
Resources, Inc.
Attention: Syndication Agency Services
S-2
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Commitment: $13,468,000
Address:
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, NY 10019
Attention: Martin Golden
Christophe Choquart
Telephone: (212) 261-7791
Telecopier: (212) 261-7259
Wiring Instructions:
Credit Lyonnais New York Branch
New York, NY
ABA: 0260-0807-3
Account: 01-88179-3701
Reference: American Oncology Resources, Inc.
Attention: Loan Servicing
S-3
<PAGE>
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Commitment: $11,447,800
Address:
Wells Fargo Bank (Texas) National Association
1000 Louisiana Avenue, 3rd Floor
Houston, TX 77002
Attention: David Anderson or
Christopher King
Telephone: 713-250-2339/713-250-7150
Telecopier: 713-250-7029
Wiring Instructions:
Wells Fargo Bank (Texas) National Association
ABA: 121000248
Account: #2712-507201
Attention: Commercial Banking Services
Reference: American Oncology Resources, Inc.
S-4
<PAGE>
SUNTRUST BANK, TAMPA BAY
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Commitment: $8,080,800
Address:
SunTrust Bank, Tampa Bay
Commercial Banking Office
2520 Countryside Boulevard
Clearwater, FL 33763.
Attention: Charles T. Falk
Telephone: 813-892-4037
Telecopier: 813-725-2315
Wiring Instructions:
SunTrust Bank, Tampa Bay
ABA: 063106569
Ref: G/L #9656004210
Reference: American Oncology Resources, Inc.
Attention: Commercial Loan Operations
S-5
<PAGE>
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A.
"RABOBANK NEDERLAND",
NEW YORK BRANCH
By:
--------------------------------------
Title:
By:
--------------------------------------
Title:
Commitment: $13,299,650
Address:
Lending Office:
245 Park Avenue
New York, NY 10167
Attention: Corporate Services Department
Telephone: 212/916-7800
Telecopier: 212/818-0233
Wiring Instructions:
Bank of New York
ABA: 021000018
A/C Rabobank New York
Account: 802-6002533
Reference: American Oncology Resources, Inc.
S-6
<PAGE>
ABN AMRO BANK N.V. ATLANTA AGENCY
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
Commitment: $13,299,650
Address:
<TABLE>
<S> <C>
(Loan Administration and Credit Contacts and (Credit Contacts and Financial Information)
Financial Information) ABN AMRO BANK N.V.
ABN AMRO BANK N.V. 1 Ravinia Drive, Suite 1200
136 South LaSalle Street Atlanta, GA 30346
Chigaco, IL 60603 Attention: Thomas Thornhill
Attention: Loan Administration Telephone: 770/396-0066 (Ext. 140)
Telephone: 312/804-8865 Telecopier: 770/399-7397
Telecopier: 312-904-8893
</TABLE>
Wiring Instructions:
ABN AMRO Bank, New York
ABA: 26029530
Account: 650-001-1789-41
F/O: ABN AMRO Bank N.V. Chicago CPU
Reference: American Oncology Resources
Attention: Chicago CPU
S-7
<PAGE>
CORESTATES BANK, N.A.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Commitment: $13,468,000
Address:
Corestates Bank, N.A.
1339 Chestnut Street
(Post Office Box 7618)
F.C. 1-8-3-22
Philadelphia, PA 19101-7618
Attention: Deidre L. McAleer
Telephone: 215/786-4363
Telecopier: 215/973-2738
Wiring Instructions:
Corestates Bank, N.A.
Philadelphia, PA
ABA: 031000011
Account: 132-0452
Reference: American Oncology Resources, Inc.
Attention: RC2490
S-8
<PAGE>
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Commitment: $12,962,950
Address:
Texas Commerce Bank National Assoc.
6550 Fannin, Suite 237
Houston, TX 77030
Attention: Jerry L. Boyd
Telephone: 713/795-7344
Telecopier: 713/795-7309
Wiring Instructions:
Texas Commerce Bank, N.A.
ABA: 113000609
Account: G/L #13681-7800
Loan Acct. #4004-004-0317305
Reference: American Oncology Resources Inc.
S-9
<PAGE>
THE LONG TERM CREDIT BANK OF JAPAN, LIMITED
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Commitment: $8,080,800
Address:
<TABLE>
<S> <C>
The Long Term Credit Bank of Japan, Ltd. The Long Term Credit Bank of Japan, Ltd.
N.Y. Branch Dallas Representative Office
165 Broadway, 49th Floor 2200 Ross Avenue, Suite 4700 West
New York, NY 10006 Dallas, TX 75201
Attention: Kathleen Dorsch-Santiago Attention: R. Bruce Frey
Telephone: 212/335-4553 Telephone: 214/969-5352
Telecopier: 212/608-2371 Telecopier: 214-969-5357
LTCB NY Branch
Finance Operations Division
165 Broadway
New York, NY 10006
Attention: Robert Pacifici
Telephone: 212/335-4801
Telecopier: 212/608-3452
</TABLE>
Wiring Instructions:
Chase Manhattan Bank, NY.
ABA: 021000021
For the Account of: The Long Term Credit Bank
of Japan, Ltd., New York Branch
Account: 544-7-75066
Attention: Mr. Robert Pacifici
Reference: American Oncology - $150mm RC
S-10
<PAGE>
NATIONSBANK OF TEXAS, N.A.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Commitment: $13,468,000
Address:
NationsBank of Texas, N.A. NationsBank of Texas, N.A.
700 Louisiana Street, 8th Floor 901 Main Street
Houston, TX 77002 TX1-492-14-05
Attention: Larry Gordon Dallas, TX 75202
Telephone: 713/247-6619 Attention: Chris Bertel
Telecopier: 713/247-6719 Telephone: 214/508-2354
Telecopier: 214/508-1215
Wiring Instructions:
NationsBank of Texas
ABA: 111000025
Further Credit: 1292000883
Attention: Corporate Loans
Reference: American Oncology Resources Inc.
Attn: Chris Bertel
S-11
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Commitment: $13,299,650
<TABLE>
Address:
<S> <C>
The First National Bank of Chicago The First National Bank of Chicago
One First National Plaza, Suite 0091 One First National Plaza, Suite 0091
Chicago, IL 60607 Chicago, IL 60607
Attention: Richard L. Schiller, Vice Attention: Ken Fecko
President Telephone: 312/732-4616
Telephone: 312/732-5932 Telecopier: 312/732-4303
Telecopier: 312/732-2016
</TABLE>
Wiring Instructions:
First National Bank of Chicago
ABA: 071000013
For Further Credit: DES Incoming Clearing
Account # 7521765
Reference: American Oncology Resources Inc.
S-12
<PAGE>
NATIONAL CITY BANK OF KENTUCKY
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Commitment: $8,080,800
Address:
National City Bank of Kentucky
101 South 5th Street
Louisville, KY 40202
Attention: Roderic M. Brown
Tami Boston
Telephone: 502-581-4369/502-581-4376
Telecopier: 502-581-4424/502-581-4079
Wiring Instructions:
National City Bank of Kentucky
ABA 083 000 056
Louisville, KY
Commercial Loan Operations
Attention: Tami Boston
Reference: American Oncology Resources Inc.
S-13
<PAGE>
THE FUJI BANK, LIMITED,
HOUSTON AGENCY
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Commitment: $6,734,000
Address:
The Fuji Bank Limited Houston Agency Fuji Bank and Trust Company
One Houston Center Two World Trade Center
1221 McKinney Street, Suite 4100 79th Floor
Houston, TX 77010 New York, NY 10048
Attention: Phillip C. Lauinger, III Attention: Carl Marcantonio
Telephone: 713/759-0717 Telephone: 212/898-2439
Telecopier: 713/650-7852 Telecopier: 212-775-7276
Wiring Instructions:
Texas Commerce Bank, N.A., Houston, Texas
ABA: 113000609
Account: 0010-197-3098
Beneficiary: The Fuji Bank, Ltd., Houston Agency
Reference: American Oncology Resources, Inc.
Attention: Loan Administrator
S-14
<PAGE>
EXHIBIT 10.2
- --------------------------------------------------------------------------------
PARTICIPATION AGREEMENT
Dated as of December 30, 1997
among
AOR SYNTHETIC REAL ESTATE, INC.,
as the Construction Agent, as the Lessee and as a Tranche A Guarantor,
AMERICAN ONCOLOGY RESOURCES, INC.,
as the Guarantor and as a Tranche A Guarantor,
THE VARIOUS PARTIES HERETO FROM TIME TO TIME,
as the other Tranche A Guarantors,
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, except as expressly
stated herein, but solely as the Owner Trustee
under the AOR Trust 1997-1,
THE VARIOUS BANKS AND OTHER LENDING INSTITUTIONS WHICH ARE
PARTIES HERETO FROM TIME TO TIME, as the Holders,
THE VARIOUS BANKS AND OTHER LENDING INSTITUTIONS WHICH ARE
PARTIES HERETO FROM TIME TO TIME, as the Lenders,
and
FIRST UNION NATIONAL BANK,
as the Agent for the Lenders
and respecting the Security Documents,
as the Agent for the Lenders and the Holders,
to the extent of their interests
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
SECTION 1. THE LOANS................................................................2
SECTION 2. HOLDER ADVANCES..........................................................3
SECTION 3. SUMMARY OF TRANSACTIONS..................................................3
3.1. Operative Agreements.......................................................3
3.2. Property Purchase..........................................................3
3.3. Construction of Improvements; Commencement of Basic Rent...................4
SECTION 4. THE CLOSINGS.............................................................4
4.1. Initial Closing Date.......................................................4
4.2. Initial Closing Date; Property Closing Dates; Acquisition Advances;
Construction Advances......................................................4
SECTION 5. FUNDING OF ADVANCES; CONDITIONS PRECEDENT; REPORTING REQUIREMENTS ON
COMPLETION DATE; THE LESSEE'S DELIVERY OF NOTICES; RESTRICTIONS ON
LIENS....................................................................4
5.1. General....................................................................4
5.2. Procedures for Funding.....................................................5
5.3. Conditions Precedent for the Lessor, the Agent, the Lenders and the
Holders Relating to the Initial Closing Date and the Advance of Funds
for the Acquisition of a Property..........................................7
5.4. Conditions Precedent for the Lessor, the Agent, the Lenders and the
Holders Relating to the Advance of Funds after the Acquisition Advance....12
5.5. Additional Reporting and Delivery Requirements on Completion Date and
on Construction Period Termination Date...................................13
5.6. The Construction Agent Delivery of Construction Budget Modifications......14
5.7. Restrictions on Liens.....................................................14
5.8. Accession Agreement Requirements - New Tranche A Guarantors...............14
5.9. Maintenance of AOR Synthetic Real Estate, Inc. as a Wholly-Owned
Entity....................................................................15
5.10. Post-Closing Requirements Regarding Certain Properties for Which
Advances are Made on the Initial Closing Date............................15
SECTION 6. REPRESENTATIONS AND WARRANTIES..........................................15
6.1. Representations and Warranties of the Borrower............................15
6.2. Representations and Warranties of Each Credit Party.......................18
SECTION 7. PAYMENT OF CERTAIN EXPENSES..............................................23
7.1. Transaction Expenses......................................................23
7.2. Brokers' Fees.............................................................24
7.3. Certain Fees and Expenses.................................................25
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
7.4. Facility Fee..............................................................25
7.5. Administrative Fee........................................................26
SECTION 8. OTHER COVENANTS AND AGREEMENTS..........................................26
8.1. Cooperation with the Construction Agent or the Lessee.....................26
8.2. Covenants of the Owner Trustee and the Holders............................26
8.3. Credit Party Covenants, Consent and Acknowledgment........................28
8.4. Sharing of Certain Payments...............................................31
8.5. Grant of Easements, etc...................................................32
8.6. Appointment of the Agent by the Lenders, the Holders and the Owner
Trustee...................................................................32
8.6B. Appointment of the Lessor by the Lenders and the Holders.................33
8.7. Collection and Allocation of Payments and Other Amounts...................33
8.8. Release of Properties, etc................................................36
SECTION 9. CREDIT AGREEMENT AND TRUST AGREEMENT....................................37
9.1. The Construction Agent's and the Lessee's Credit Agreement Rights.........37
9.2. The Construction Agent's and the Lessee's Trust Agreement Rights..........37
SECTION 10. TRANSFER OF INTEREST...................................................38
10.1. Restrictions on Transfer.................................................38
10.2. Effect of Transfer.......................................................39
SECTION 11. INDEMNIFICATION........................................................39
11.1. General Indemnity........................................................39
11.2. General Tax Indemnity....................................................42
11.3. Increased Costs, Illegality, etc.........................................46
11.4. Funding/Contribution Indemnity...........................................48
11.5 EXPRESS INDEMNIFICATION FOR ORDINARY NEGLIGENCE, STRICT LIABILITY,
ETC......................................................................49
SECTION 12. MISCELLANEOUS..........................................................50
12.1. Survival of Agreements...................................................50
12.2. Notices..................................................................50
12.3. Counterparts.............................................................53
12.4. Terminations, Amendments, Waivers, Etc.; Unanimous Vote Matters..........53
12.5. Headings, etc............................................................54
12.6. Parties in Interest......................................................55
12.7. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL;
VENUE; ARBITRATION.......................................................55
12.8. Severability.............................................................57
12.9. Liability Limited........................................................57
12.10. Rights of the Lessee....................................................58
12.11. Further Assurances......................................................58
12.12. Calculations under Operative Agreements.................................59
12.13. Confidentiality.........................................................59
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
12.14. Financial Reporting/Tax Characterization................................59
12.16 USURY SAVINGS PROVISION..................................................60
12.17 Chapter 346 of the Texas Finance Code....................................61
</TABLE>
EXHIBITS
A - Form of Requisition - Sections 4.2, 5.2, 5.3 and 5.4
B - Form of Outside Counsel Opinion for the Lessee - Section 5.3(j)
C -[Intentionally Omitted]
D - Form of Officer's Certificate - Section 5.3(z)
E- Form of Officer's Certificate - Section 5.3(aa)
F - Form of Officer's Certificate - Section 5.3(bb)
G - Form of Officer's Certificate - Section 5.3(cc)
H - Form of Outside Counsel Opinion for the Owner Trustee - Section 5.3(dd)
I - Form of Outside Counsel Opinion for the Lessee - Section 5.3(ee)
J - Form of Officer's Certificate - Section 5.5
K - Form of Accession Agreement - Section 5.8
L - Description of Material Litigation - Section 6.2(d)
M - States of Incorporation/Formation and Principal Place of Business of each
Tranche A Guarantor - Section 6.3(i)
N - Form of Compliance Certificate and Covenant Compliance Worksheet - Section
8.3(l)
Appendix A - Rules of Usage and Definitions
iv
<PAGE>
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT dated as of December 30, 1997 (as amended,
modified, extended, supplemented, restated and/or replaced from time to time,
this "Agreement") is by and among AOR SYNTHETIC REAL ESTATE, INC., a Delaware
corporation (the "Lessee" or the "Construction Agent" or a "Tranche A
Guarantor"); AMERICAN ONCOLOGY RESOURCES, INC., a Delaware corporation, (the
"Guarantor" or a "Tranche A Guarantor"), the various entities which are parties
hereto from time to time as guarantors of the Tranche A Loans (subject to the
definition of Tranche A Guarantors in Appendix A hereto, individually a "Tranche
A Guarantor" and collectively, the "Tranche A Guarantors"), FIRST SECURITY BANK,
NATIONAL ASSOCIATION, a national banking association, not individually (in its
individual capacity, the "Trust Company"), except as expressly stated herein,
but solely as the Owner Trustee under the AOR Trust 1997-1 (the "Owner Trustee",
the "Borrower" or the "Lessor"); the various banks and other lending
institutions which are parties hereto from time to time as lenders (subject to
the definition of Lenders in Appendix A hereto, individually, a "Lender" and
collectively, the "Lenders"); FIRST UNION NATIONAL BANK, a national banking
association, as the agent for the Lenders and respecting the Security Documents,
as the agent for the Lenders and the Holders, to the extent of their interests
(in such capacity, the "Agent"); the various banks and other lending
institutions which are parties hereto from time to time as holders of
certificates issued with respect to the AOR Trust 1997-1 (subject to the
definition of Holders in Appendix A hereto, individually, a "Holder" and
collectively, the "Holders"). Capitalized terms used but not otherwise defined
in this Agreement shall have the meanings set forth in Appendix A hereto.
In consideration of the mutual agreements herein contained and other good
and valuable consideration, the receipt of which is hereby acknowledged, the
parties hereto hereby agree as follows:
SECTION 1. THE LOANS.
Subject to the terms and conditions of this Agreement and in reliance on
the representations and warranties of each of the parties hereto contained
herein or made pursuant hereto, the Lenders have agreed to make Loans to the
Lessor from time to time in an aggregate principal amount of up to the aggregate
amount of the Commitments of the Lenders in order for the Lessor to acquire the
Properties and certain Improvements, to develop and construct certain
Improvements in accordance with the Agency Agreement and the terms and
provisions hereof and for the other purposes described herein, and in
consideration of the receipt of proceeds of the Loans, the Lessor will issue the
Notes. The Loans shall be made and the Notes shall be issued pursuant to the
Credit Agreement. Pursuant to Section 5 of this Agreement and Section 2 of the
Credit Agreement, the Loans will be made to the Lessor from time to time at the
request of the Construction Agent in consideration for the Construction Agent
agreeing for the benefit of the Lessor, pursuant to the Agency Agreement, to
acquire the Properties, to acquire the Equipment, to construct certain
Improvements and to cause the Lessee to lease the Properties, each in
2
<PAGE>
accordance with the Agency Agreement and the other Operative Agreements. The
Loans and the obligations of the Lessor under the Credit Agreement shall be
secured by the Collateral.
SECTION 2. HOLDER ADVANCES.
Subject to the terms and conditions of this Agreement and in reliance on
the representations and warranties of each of the parties hereto contained
herein or made pursuant hereto, on each date Advances are requested to be made
in accordance with Section 5 hereof, each Holder shall make a Holder Advance on
a pro rata basis to the Lessor with respect to the AOR Trust 1997-1 based on its
Holder Commitment in an amount in immediately available funds such that the
aggregate of all Holder Advances on such date shall be three percent (3%) of the
amount of the Requested Funds on such date; provided, that no Holder shall be
obligated for any Holder Advance in excess of its pro rata share of the
Available Holder Commitment. The aggregate amount of Holder Advances shall be up
to the aggregate amount of the Holder Commitments. No prepayment or any other
payment with respect to any Advance shall be permitted such that the Holder
Advance with respect to such Advance is less than three percent (3%) of the
outstanding amount of such Advance, except in connection with termination or
expiration of the Term or in connection with the exercise of remedies relating
to the occurrence of a Lease Event of Default. The representations, warranties,
covenants and agreements of the Holders herein and in the other Operative
Agreements are several, and not joint or joint and several.
SECTION 3. SUMMARY OF TRANSACTIONS.
3.1. OPERATIVE AGREEMENTS.
On the date hereof, each of the respective parties hereto and thereto shall
execute and deliver this Agreement, the Lease, each applicable Ground Lease, the
Agency Agreement, the Credit Agreement, the Notes, the Trust Agreement, the
Certificates, the Security Agreement, each applicable Mortgage Instrument and
such other documents, instruments, certificates and opinions of counsel as
agreed to by the parties hereto.
3.2. PROPERTY PURCHASE.
On each Property Closing Date and subject to the terms and conditions of
this Agreement (a) the Holders will each make a Holder Advance in accordance
with Sections 2 and 5 of this Agreement and the terms and provisions of the
Trust Agreement, (b) the Lenders will each make Loans in accordance with
Sections 1 and 5 of this Agreement and the terms and provisions of the Credit
Agreement, (c) the Lessor will purchase and acquire good and marketable title to
or ground lease pursuant to a Ground Lease, the applicable Property, each to be
within an Approved State, identified by the Construction Agent, in each case
pursuant to a Deed, Bill of Sale or Ground Lease, as the case may be, and grant
the Agent a lien on such Property by execution of the required Security
Documents, (d) the Agent, the Lessee and the Lessor shall execute and
3
<PAGE>
deliver a Lease Supplement relating to such Property and (e) the Term shall
commence with respect to such Property.
3.3. CONSTRUCTION OF IMPROVEMENTS; COMMENCEMENT OF BASIC RENT.
Construction Advances will be made with respect to particular Improvements
to be constructed and with respect to ongoing Work regarding the Equipment and
construction of particular Improvements, in each case, pursuant to the terms and
conditions of this Agreement and the Agency Agreement. The Construction Agent
will act as a construction agent on behalf of the Lessor respecting the Work
regarding the Equipment, the construction of such Improvements and the
expenditures of the Construction Advances related to the foregoing. The
Construction Agent shall promptly notify the Lessor upon Completion of the
Improvements and the Lessee shall commence to pay Basic Rent as of the Rent
Commencement Date.
SECTION 4. THE CLOSINGS.
4.1. INITIAL CLOSING DATE.
All documents and instruments required to be delivered on the Initial
Closing Date shall be delivered at the offices of Moore & Van Allen, PLLC,
Charlotte, North Carolina, or at such other location as may be determined by the
Lessor, the Agent and the Lessee.
4.2. INITIAL CLOSING DATE; PROPERTY CLOSING DATES; ACQUISITION ADVANCES;
CONSTRUCTION ADVANCES.
The Construction Agent shall deliver to the Agent a requisition (a
"Requisition"), in the form attached hereto as EXHIBIT A or in such other form
as is satisfactory to the Agent, in its reasonable discretion, in connection
with (a) the Transaction Expenses and other fees, expenses and disbursements
payable, pursuant to Section 7.1, by the Lessor and (b) each Acquisition Advance
pursuant to Section 5.3 and (c) each Construction Advance pursuant to Section
5.4.
SECTION 5. FUNDING OF ADVANCES; CONDITIONS PRECEDENT;
REPORTING REQUIREMENTS ON COMPLETION DATE;
THE LESSEE'S DELIVERY OF NOTICES; RESTRICTIONS ON LIENS.
5.1. GENERAL.
(a) To the extent funds have been advanced to the Lessor as Loans by
the Lenders and to the Lessor as Holder Advances by the Holders, the Lessor
will use such funds from time to time in accordance with the terms and
conditions of this Agreement and the other Operative Agreements (i) at the
direction of the Construction Agent to acquire the Properties in accordance
with the terms of this Agreement, the Agency Agreement and the other
Operative Agreements, (ii) to make Advances to the
4
<PAGE>
Construction Agent to permit the acquisition, testing, engineering,
installation, development, construction, modification, design, and
renovation, as applicable, of the Properties (or components thereof) in
accordance with the terms of the Agency Agreement and the other Operative
Agreements, and (iii) to pay Transaction Expenses, fees, expenses and other
disbursements payable by the Lessor under Sections 7.1(a) and 7.1(b).
(b) In lieu of the payment of interest on the Loans and Holder Yield
on the Holder Advances on any Scheduled Interest Payment Date with respect
to any Property during the period prior to the Rent Commencement Date with
respect to such Property, (i) each Lender's Loan shall automatically be
increased by the amount of interest accrued and unpaid on such Loan for
such period (except to the extent that at any time such increase would
cause such Lender's Loan to exceed such Lender's Available Commitment, in
which case the Lessee shall pay such excess amount to such Lender in
immediately available funds on the date such Lender's Available Commitment
was exceeded), and (ii) each Holder's Holder Advance shall automatically be
increased by the amount of Holder Yield accrued and unpaid on such Holder
Advance for such period (except to the extent that at any time such
increase would cause the Holder Advance of such Holder to exceed such
Holder's Available Holder Commitment, in which case the Lessee shall pay
such excess amount to such Holder in immediately available funds on the
date the Available Holder Commitment of such Holder was exceeded). Such
increases in a Lender's Loan and a Holder's Holder Advance shall occur
without any disbursement of funds by any Person.
5.2. PROCEDURES FOR FUNDING.
(a) The Construction Agent shall designate the date for Advances
hereunder in accordance with the terms and provisions hereof; provided,
however, it is understood and agreed that no more than two (2) Advances
(excluding any conversion and/or continuation of any Loan or Holder
Advance) may be requested during any calendar month; provided, further,
each such Advance shall include all disbursements made on a given day under
any Requisition and may relate to one or more Properties. Not less than
(i) three (3) Business Days prior to the Initial Closing Date and (ii)
three (3) Business Days prior to the date on which any Acquisition Advance
or Construction Advance is to be made, the Construction Agent shall deliver
to the Agent, (A) with respect to the Initial Closing Date and each
Acquisition Advance, a Requisition as described in Section 4.2 hereof
(including without limitation a legal description of the Land in the case
of a Requisition for an Acquisition Advance for the acquisition of such
Land), a schedule of the Improvements, if any, and a schedule of the
Equipment, if any, acquired or to be acquired on such date, and a schedule
of the Work, if any, to be performed, each of the foregoing in a form
reasonably acceptable to the Agent) and (B) with respect to each
Construction Advance, a Requisition identifying (among other things) the
Property to which such Construction Advance relates.
5
<PAGE>
(b) Each Requisition shall: (i) be irrevocable, (ii) request funds in
an amount that is not in excess of the total aggregate of the Available
Commitments plus the Available Holder Commitments at such time, and (iii)
request that the Holders make Holder Advances and that the Lenders make
Loans to the Lessor for the payment of Transaction Expenses, Property
Acquisition Costs (in the case of an Acquisition Advance) or other Property
Costs (in the case of a Construction Advance) that have previously been
incurred or are to be incurred on the date of such Advance to the extent
such were not subject to a prior Requisition, in each case as specified in
the Requisition.
(c) Subject to the satisfaction of the conditions precedent set forth
in Sections 5.3 or 5.4, as applicable, on each Property Closing Date or the
date on which the Construction Advance is to be made, as applicable, (i)
the Lenders shall make Loans based on their respective Lender Commitments
to the Lessor in an aggregate amount equal to ninety-seven percent (97%) of
the Requested Funds specified in any Requisition, (ratably between the
Tranche A Lenders and the Tranche B Lenders with the Tranche A Lenders
funding eighty-five percent (85%) of the Requested Funds and the Tranche B
Lenders funding twelve percent (12%) of the Requested Funds) up to an
aggregate principal amount equal to the aggregate of the Available
Commitments, (ii) each Holder shall make a Holder Advance based on its
Holder Commitment in an amount such that the aggregate of all Holder
Advances at such time shall be three percent (3%) of the balance of the
Requested Funds specified in such Requisition, up to the aggregate advanced
amount equal to the aggregate of the Available Holder Commitments; and
(iii) the total amount of such Loans and Holder Advances made on such date
shall (x) be used by the Lessor to pay Property Costs and/or Transaction
Expenses within three (3) Business Days of the receipt by the Lessor of
such Advance or (y) be advanced by the Lessor on the date of such Advance
to the Construction Agent or the Lessee to pay Property Costs, as
applicable. Notwithstanding that the Operative Agreements state that
Advances shall be directed to the Lessor, each Advance shall in fact be
directed to the Agent (for the benefit of the Lessor) and applied by the
Agent (for the benefit of the Lessor) pursuant to the requirements imposed
on the Lessor under the Operative Agreements.
(d) With respect to an Advance obtained by the Lessor to pay for
Property Costs and/or Transaction Expenses and not expended by the Lessor
for such purpose on the date of such Advance, such amounts shall be held by
the Lessor (or the Agent on behalf of the Lessor) until the applicable
closing date or, if such closing date does not occur within three (3)
Business Days of the date of the Lessor's receipt of such Advance, shall be
applied regarding the applicable Advance to repay the Lenders and the
Holders and, subject to the terms hereof, and of the Credit Agreement and
the Trust Agreement, shall remain available for future Advances. Any such
amounts held by the Lessor (or the Agent on behalf of the Lessor) shall be
subject to the lien of the Security Agreement.
(e) All Operative Agreements which are to be delivered to the Lessor,
the Agent, the Lenders or the Holders shall be delivered to the Agent, on
behalf of the Lessor, the Agent, the Lenders or the Holders, and such items
(except for Notes,
6
<PAGE>
Certificates, Bills of Sale, the Ground Leases and chattel paper originals,
with respect to which in each case there shall be only one original) shall
be delivered with originals sufficient for the Lessor, the Agent, each
Lender and each Holder. All other items which are to be delivered to the
Lessor, the Agent, the Lenders or the Holders shall be delivered to the
Agent, on behalf of the Lessor, the Agent, the Lenders or the Holders, and
such other items shall be held by the Agent. To the extent any such other
items are requested in writing from time to time by the Lessor, any Lender
or any Holder, the Agent shall provide a copy of such item to the party
requesting it.
(f) Notwithstanding the completion of any closing under this Agreement
pursuant to Sections 5.3 or 5.4, each condition precedent waived in
connection with any such closing may be subsequently enforced by the Agent
(unless such has been expressly waived in writing by the Agent).
5.3. CONDITIONS PRECEDENT FOR THE LESSOR, THE AGENT, THE LENDERS AND
THE HOLDERS RELATING TO THE INITIAL CLOSING DATE AND THE ADVANCE OF
FUNDS FOR THE ACQUISITION OF A PROPERTY.
The obligations (i) on the Initial Closing Date of the Lessor, the Agent,
the Lenders and the Holders to enter into the transactions contemplated by this
Agreement, including without limitation the obligation to execute and deliver
the applicable Operative Agreements to which each is a party on the Initial
Closing Date, (ii) on the Initial Closing Date of the Holders to make Holder
Advances, and of the Lenders to make Loans in order to pay Transaction Expenses
and (iii) on a Property Closing Date for the purpose of providing funds to the
Lessor necessary to pay the Transaction Expenses and to acquire or ground lease
a Property (an "Acquisition Advance"), in each case (with regard to the
foregoing Sections 5.3(i), (ii) and (iii)) are subject to the satisfaction or
waiver of the following conditions precedent on or prior to the Initial Closing
Date or the applicable Property Closing Date, as the case may be (To the extent
such conditions precedent require the delivery of any agreement, certificate,
instrument, memorandum, legal or other opinion, appraisal, commitment, title
insurance commitment, lien report or any other document of any kind or type,
such shall be in form and substance satisfactory to the Agent, in its reasonable
judgment. Notwithstanding the foregoing, the obligations of each party shall not
be subject to any conditions contained in this Section 5.3 which are required to
be performed by such party.):
(a) the correctness of the representations and warranties of the
parties to this Agreement contained herein, in each of the other Operative
Agreements and each certificate delivered pursuant to any Operative
Agreement (including without limitation the Incorporated Representations
and Warranties) on each such date;
(b) the performance by the parties to this Agreement of their
respective agreements contained herein and in the other Operative
Agreements to be performed by them on or prior to each such date;
7
<PAGE>
(c) the Agent shall have received a fully executed counterpart copy of
the Requisition, appropriately completed;
(d) title to each such Property shall conform to the representations
and warranties set forth in Section 6.2(l) hereof;
(e) the Construction Agent shall have delivered to the Agent a good
standing certificate for the Construction Agent in the state where each
such Property is located, the Deed with respect to the Land and existing
Improvements (if any), a copy of the Ground Lease (if any), and a copy of
the Bill of Sale with respect to the Equipment (if any), respecting such of
the foregoing as are being acquired or ground leased on each such date with
the proceeds of the Loans and Holder Advances or which have been previously
acquired or ground leased with the proceeds of the Loans and Holder
Advances and such Land, existing Improvements (if any) and Equipment (if
any) shall be located in an Approved State;
(f) there shall not have occurred and be continuing any Default or
Event of Default under any of the Operative Agreements and no Default or
Event of Default under any of the Operative Agreements will have occurred
after giving effect to the Advance requested by each such Requisition;
(g) the Construction Agent shall have delivered to the Agent title
insurance commitments to issue policies respecting each such Property in
favor of the Lessor and the Agent from a title insurance company reasonably
acceptable to the Agent, with such title exceptions thereto as are
reasonably acceptable to the Agent;
(h) the Construction Agent shall have delivered to the Agent an
environmental site assessment respecting each such Property prepared by an
independent recognized professional reasonably acceptable to the Agent;
(i) the Construction Agent shall have delivered to the Agent a survey
(with a flood hazard certification) respecting each such Property prepared
by an independent recognized professional reasonably acceptable to the
Agent;
(j) unless such an opinion has previously been delivered with respect
to a particular state, the Construction Agent shall have caused to be
delivered to the Agent a legal opinion in the form attached hereto as
EXHIBIT B or in such other form as is acceptable to the Agent with respect
to local law real property issues respecting the state in which each such
Property is located addressed to the Lessor, the Agent, the Lenders and the
Holders, from counsel located in the state where each such Property is
located, prepared by counsel reasonably acceptable to the Agent;
(k) [Intentionally Omitted]
8
<PAGE>
(l) the Construction Agent shall have delivered to the Agent invoices
for, or other reasonably satisfactory evidence of, the various Transaction
Expenses;
(m) the Construction Agent shall have caused to be delivered to the
Agent a Mortgage Instrument (in such form as is reasonably acceptable to
the Agent, with revisions as necessary to conform to applicable state law),
Lessor Financing Statements and Lender Financing Statements respecting each
such Property, all fully executed and in recordable form;
(n) the Lessee shall have delivered to the Agent with respect to each
such Property a Lease Supplement and a memorandum (or short form lease)
regarding the Lease and such Lease Supplement (such memorandum or short
form lease to be in the form attached to the Lease as EXHIBIT B or in such
other form as is reasonably acceptable to the Agent, with modifications as
necessary to conform to applicable state law, and in form suitable for
recording);
(o) with respect to each Acquisition Advance, the sum of the Available
Commitment plus the Available Holder Commitment (after deducting the
Unfunded Amount, if any, and after giving effect to the Acquisition
Advance) will be sufficient to pay all amounts payable therefrom;
(p) if any such Property is subject to a Ground Lease, the
Construction Agent shall have caused a lease memorandum (or short form
lease) to be delivered to the Agent for such Ground Lease and, if requested
by the Agent, a landlord waiver and a mortgagee waiver (in each case, in
such form as is reasonably acceptable to the Agent);
(q) [Intentionally Omitted];
(r) the Construction Agent shall have delivered to the Agent a
preliminary Construction Budget for each such Property, if applicable;
(s) the Construction Agent shall have provided evidence to the Agent
of insurance with respect to each such Property as provided in the Lease;
(t) the Construction Agent shall have caused an Appraisal regarding
each such Property to be provided to the Agent from an appraiser reasonably
satisfactory to the Agent until such time as Appraisals for Properties then
subject to the Lease have been submitted to the Agent and evidence an
aggregate value of all such Properties of at least the Base Amount;
(u) the Construction Agent shall cause (i) Uniform Commercial Code
lien searches, tax lien searches and judgment lien searches regarding the
Lessee to be conducted (and copies thereof to be delivered to the Agent) in
such jurisdictions as reasonably determined by the Agent by a nationally
recognized search company reasonably acceptable to the Agent and (ii) the
liens referenced in such lien searches
9
<PAGE>
which are objectionable to the Agent to be either removed or otherwise
handled in a manner reasonably satisfactory to the Agent;
(v) all taxes, fees and other charges in connection with the
execution, delivery, recording, filing and registration of the Operative
Agreements and/or documents related thereto shall have been paid or
provisions for such payment shall have been made to the reasonable
satisfaction of the Agent;
(w) in the opinion of the Agent and its respective counsel, the
transactions contemplated by the Operative Agreements do not and will not
subject the Lessor, the Lenders, the Agent or the Holders to any adverse
regulatory prohibitions, constraints, penalties or fines;
(x) each of the Operative Agreements to be entered into on such date
shall have been duly authorized, executed and delivered by the parties
thereto, and shall be in full force and effect, and the Agent shall have
received a fully executed copy of each of the Operative Agreements;
(y) since the date of the most recent audited financial statements of
AOR delivered pursuant to Section 5.1(b) of the Lessee Credit Agreement,
there shall not have occurred any event, condition or state of facts which
shall have or could reasonably be expected to have a Material Adverse
Effect, other than as specifically contemplated by the Operative
Agreements;
(z) as of the Initial Closing Date only, the Agent shall have received
an Officer's Certificate, dated as of the Initial Closing Date, of the
Lessee in the form attached hereto as EXHIBIT D or in such other form as is
reasonably acceptable to the Agent stating that (i) each and every
representation and warranty of each Credit Party contained in the Operative
Agreements to which it is a party is true and correct on and as of the
Initial Closing Date; (ii) no Default or Event of Default has occurred and
is continuing under any Operative Agreement; and (iii) each Operative
Agreement to which any Credit Party is a party is in full force and effect
with respect to it;
(aa) as of the Initial Closing Date only, the Agent shall have
received (i) a certificate of the Secretary or an Assistant Secretary of
each Credit Party, dated as of the Initial Closing Date, in the form
attached hereto as EXHIBIT E or in such other form as is reasonably
acceptable to the Agent attaching and certifying as to (1) the resolutions
of the Board of Directors of such Credit Party duly authorizing the
execution, delivery and performance by such Credit Party of each of the
Operative Agreements to which it is or will be a party, (2) the articles of
incorporation of such Credit Party certified as of a recent date by the
Secretary of State of its state of incorporation and its by-laws and (3)
the incumbency and signature of persons authorized to execute and deliver
on behalf of such Credit Party the Operative Agreements to which it is or
will be a party and (ii) a good standing certificate (or local equivalent)
from the appropriate office of the respective states where such Credit
Party is incorporated and where the principal place of
10
<PAGE>
business of such Credit Party is located as to its good standing in each
such state (To the extent any Credit Party is a partnership, a limited
liability company or is otherwise organized, such Credit Party shall
deliver to the Agent (in form and substance reasonably satisfactory to the
Agent) as of the Initial Closing Date (A) a certificate regarding such
Credit Party and any corporate general partners covering the matters
described in EXHIBIT E and (B) a good standing certificate, a certificate
of limited partnership or a local equivalent of either of the foregoing, as
applicable.);
(bb) as of the Initial Closing Date only, the Agent shall have
received an Officer's Certificate of the Lessor dated as of the Initial
Closing Date in the form attached hereto as EXHIBIT F or in such other form
as is reasonably acceptable to the Agent, stating that (i) each and every
representation and warranty of the Lessor contained in the Operative
Agreements to which it is a party is true and correct on and as of the
Initial Closing Date, (ii) each Operative Agreement to which the Lessor is
a party is in full force and effect with respect to it and (iii) the Lessor
has duly performed and complied with all covenants, agreements and
conditions contained herein or in any Operative Agreement required to be
performed or complied with by it on or prior to the Initial Closing Date;
(cc) as of the Initial Closing Date only, the Agent shall have
received (i) a certificate of the Secretary, an Assistant Secretary, Trust
Officer or Vice President of the Trust Company in the form attached hereto
as EXHIBIT G or in such other form as is reasonably acceptable to the
Agent, attaching and certifying as to (A) the signing resolutions duly
authorizing the execution, delivery and performance by the Lessor of each
of the Operative Agreements to which it is or will be a party, (B) its
articles of association or other equivalent charter documents and its by-
laws, as the case may be, certified as of a recent date by an appropriate
officer of the Trust Company and (C) the incumbency and signature of
persons authorized to execute and deliver on its behalf the Operative
Agreements to which it is a party and (ii) a good standing certificate from
the Office of the Comptroller of the Currency;
(dd) as of the Initial Closing Date only, counsel for the Lessor
reasonably acceptable to the Agent shall have issued to the Lessee, the
Holders, the Lenders and the Agent its opinion in the form attached hereto
as EXHIBIT H or in such other form as is reasonably acceptable to the
Agent;
(ee) as of the Initial Closing Date only, the Construction Agent shall
have caused to be delivered to the Agent a legal opinion in the form
attached hereto as EXHIBIT I or in such other form as is reasonably
acceptable to the Agent, addressed to the Lessor, the Agent, the Lenders
and the Holders, from counsel reasonably acceptable to the Agent; and
(ff) as of the Initial Closing Date only, the Construction Agent shall
cause (i) tax lien searches and judgment lien searches regarding each
Credit Party to be conducted (and copies thereof to be delivered to the
Agent) in such jurisdictions as determined by the Agent by a nationally
recognized search company acceptable to the Agent and (ii) the
11
<PAGE>
liens referenced in such lien searches which are objectionable to the Agent
to be either removed or otherwise handled in a manner satisfactory to the
Agent; provided this Section 5.3(ff) shall not be interpreted to limit or
to contradict the requirements of Section 5.3(u).
5.4. CONDITIONS PRECEDENT FOR THE LESSOR, THE AGENT, THE LENDERS AND
THE HOLDERS RELATING TO THE ADVANCE OF FUNDS AFTER THE ACQUISITION
ADVANCE.
The obligations of the Holders to make Holder Advances, and the Lenders to
make Loans in connection with all requests for Advances subsequent to the
acquisition of a Property (and to pay the Transaction Expenses in connection
therewith) are subject to the satisfaction or waiver of the following conditions
precedent (To the extent such conditions precedent require the delivery of any
agreement, certificate, instrument, memorandum, legal or other opinion,
appraisal, commitment, title insurance commitment, lien report or any other
document of any kind or type, such shall be in form and substance satisfactory
to the Agent, in its reasonable discretion. Notwithstanding the foregoing, the
obligations of each party shall not be subject to any conditions contained in
this Section 5.4 which are required to be performed by such party.):
(a) the correctness on such date of the representations and warranties
of the parties to this Agreement contained herein, in each of the other
Operative Agreements and each certificate delivered pursuant to any
Operative Agreement (including without limitation the Incorporated
Representations and Warranties);
(b) the performance by the parties to this Agreement of their
respective agreements contained herein and in the other Operative
Agreements to be performed by them on or prior to each such date;
(c) the Agent shall have received a fully executed counterpart of the
Requisition, appropriately completed;
(d) based upon the applicable Construction Budget which shall satisfy
the requirements of this Agreement, the Available Commitments and the
Available Holder Commitment (after deducting the Unfunded Amount) will be
sufficient to complete the Improvements;
(e) there shall not have occurred and be continuing any Default or
Event of Default under any of the Operative Agreements and no Default or
Event of Default under any of the Operative Agreements will have occurred
after giving effect to the Construction Advance requested by the applicable
Requisition;
(f) the title insurance policy delivered in connection with the
requirements of Section 5.3(g) shall provide for (or shall be endorsed to
provide for) insurance in an amount at least equal to the maximum total
Property Cost indicated by the Construction Budget referred to in
subparagraph (d) above and there shall be no title change or exception
objectionable to the Agent;
12
<PAGE>
(g) the Construction Agent shall have delivered to the Agent copies of
the Plans and Specifications for the applicable Improvements;
(h) the Construction Agent shall have delivered to the Agent invoices
for, or other reasonably satisfactory evidence of, any Transaction Expenses
and other fees, expenses and disbursements referenced in Section 7.1(b)
that are to be paid with the Advance;
(i) the Construction Agent shall have delivered, or caused to be
delivered to the Agent, copies of invoices, Bills of Sale or other
documents reasonably acceptable to the Agent, in each case with regard to
any Equipment or other components of such Property then being acquired with
the proceeds of the Loans and Holder Advances and naming the Lessor as
purchaser and transferee;
(j) all taxes, fees and other charges in connection with the
execution, delivery, recording, filing and registration of the Operative
Agreements shall have been paid or provisions for such payment shall have
been made to the reasonable satisfaction of the Agent;
(k) since the date of the most recent audited Financial Statements
(as such term is defined in the Lessee Credit Agreement) of the Lessee,
there shall not have occurred any event, condition or state of facts which
shall have or could reasonably be expected to have a Material Adverse
Effect, other than as specifically contemplated by the Operative
Agreements; and
(l) in the opinion of the Agent and its counsel, the transactions
contemplated by the Operative Agreements do not and will not subject the
Lessor, the Lenders, the Agent or the Holders to any adverse regulatory
prohibitions, constraints, penalties or fines arising out of any change in,
or re-interpretation of, law or regulation since the Initial Closing Date.
5.5. ADDITIONAL REPORTING AND DELIVERY REQUIREMENTS ON COMPLETION DATE
AND ON CONSTRUCTION PERIOD TERMINATION DATE.
Within 10 days after the Completion Date (but in no event later than the
Construction Period Termination Date) for each Property, the Construction Agent
shall deliver to the Agent an Officer's Certificate in the form attached hereto
as EXHIBIT J or in such other form as is reasonably acceptable to the Agent
specifying (a) the address for such Property, (b) the Completion Date for such
Property, (c) the aggregate Property Cost for such Property and (d) detailed,
itemized documentation supporting the asserted Property Cost figures. The Agent
shall have the right to contest on reasonable grounds the information contained
in such Officer's Certificate. Furthermore, on or prior to the Completion Date
for each Property, the Construction Agent shall deliver or cause to be delivered
to the Agent (unless previously delivered to the Agent) originals of the
following, each of which shall be in form and substance acceptable to the
13
<PAGE>
Agent, in its reasonable judgment: (u) a title insurance endorsement regarding
the title insurance policy delivered in connection with the requirements of
Section 5.3(g), but only to the extent such endorsement is necessary to provide
for insurance in an amount at least equal to the maximum total Property Cost
and, if endorsed, the endorsement shall not include a title change or exception
objectionable to the Agent; (v) an as-built survey for such Property, (w)
insurance certificates respecting such Property as required hereunder and under
the Lease Agreement, (x) a memorandum (or short form) of the Lease and such
Lease Supplement (in form suitable for recording) and (y) if requested by the
Agent, amendments to the Lessor Financing Statements executed by the appropriate
parties. In addition, on the Completion Date for such Property the Construction
Agent covenants and agrees that the recording fees, documentary stamp taxes or
similar amounts required to be paid in connection with the related Mortgage
Instrument shall be or have been paid in an amount required by applicable law,
subject, however, to the obligations of the Lenders and the Holders to fund such
costs to the extent required pursuant to Section 7.1.
5.6. THE CONSTRUCTION AGENT DELIVERY OF CONSTRUCTION BUDGET
MODIFICATIONS.
The Construction Agent covenants and agrees to deliver to the Agent each
month notification of any modification to any Construction Budget regarding any
Property if such modification materially increases the cost to construct such
Property; provided, no Construction Budget may be increased unless (a) the title
insurance policies referenced in Section 5.3(g) are also modified or endorsed,
if necessary, to provide for insurance in an amount that satisfies the
requirements of Section 5.4(f) of this Agreement and (b) after giving effect to
any such amendment, the Construction Budget remains in compliance with the
requirements of Section 5.4(d) of this Agreement.
5.7. RESTRICTIONS ON LIENS.
On each Property Closing Date, the Construction Agent shall cause each
Property acquired by the Lessor on such date to be free and clear of all Liens
except those referenced in Sections 6.2(r)(i) and 6.2(r)(ii). On each date a
Property is either sold to a third party in accordance with the terms of the
Operative Agreements or, pursuant to Section 22.1(a) of the Lease Agreement,
retained by the Lessor, the Lessee shall cause such Property to be free and
clear of all Liens (other than Lessor Liens and such other Liens that are
expressly set forth as title exceptions on the title commitment issued under
Section 5.3(g) with respect to such Property, to the extent such title
commitment has been approved by the Agent).
5.8. ACCESSION AGREEMENT REQUIREMENTS - NEW TRANCHE A GUARANTORS.
AOR and its Subsidiaries may from time to time create or acquire new
Subsidiaries, provided, that at any time promptly upon request by the Agent (and
in any event, with respect to any new Subsidiary that is created or acquired in
connection with a Physician Transaction or that is requested or required to
become a guarantor under the Lessee Credit Agreement prior to or concurrently
with satisfaction of the conditions set forth in clauses (y) and (z) of clause
(i) below or, if earlier, the consummation of such Physician Transaction), (i)
each such new Subsidiary (y) having assets with a gross value (determined in
accordance with GAAP) in excess of $100,000,
14
<PAGE>
and (z) having commenced the conduct of an active business, will execute and
deliver to the Agent (with sufficient copies for each Financing Party) an
Accession Agreement in the form of Exhibit K and such other documents to
effectuate the foregoing as may be reasonably requested by the Majority Secured
Parties, and (ii) AOR will cause each such new Subsidiary to execute and
deliver, and will cause to be delivered, all documentation of the type described
in Section 5.3 as such new Subsidiary would have had to deliver were it a
Tranche A Guarantor on the Initial Closing Date.
5.9. MAINTENANCE OF AOR SYNTHETIC REAL ESTATE, INC. AS A WHOLLY-OWNED
ENTITY.
From the Initial Closing Date and thereafter until such time as all
obligations of all Credit Parties under the Operative Agreements have been
satisfied and performed in full, AOR shall retain the Lessee as a Wholly-Owned
Entity of AOR.
5.10. POST-CLOSING REQUIREMENTS REGARDING CERTAIN PROPERTIES FOR
WHICH ADVANCES ARE MADE ON THE INITIAL CLOSING DATE.
With respect to all Properties to which the Owner Trustee holds title on or
prior to the Initial Closing Date and for which Advances are made on the Initial
Closing Date, within forty-five (45) days after the Initial Closing Date, and to
the extent not delivered with respect to the Initial Closing Date, the
Construction Agent shall deliver to the Agent any and all items specified in
Section 5.3 with respect to such Properties including without limitation surveys
(with flood hazard certificates), title insurance endorsements, appraisals and
opinions. All such items shall be in form and substance reasonably satisfactory
to the Agent.
To the extent the requirements of Section 5.3 are not satisfied with
respect to such Properties within forty-five (45) days after the Initial Closing
Date, the Agent (upon direction from the Majority Secured Parties) may require
the Lessee to purchase, and the Agent shall purchase, all such Properties on a
Business Day specified by the Agent for an amount equal to the Termination Value
with respect to such Properties and otherwise in accordance with Sections 20.1
through 20.2 of the Lease (as if such date specified by the Agent were an
Election Date).
Unless the Financing Parties otherwise agree, the Financing Parties shall
have no obligation to make any additional Advances with respect to such
Properties until such time as the requirements of Section 5.3 are satisfied with
respect to such Properties.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
6.1. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
Effective as of the Initial Closing Date, the date of each Advance and the
Rent Commencement Date, the Trust Company in its individual capacity and as the
Borrower, as indicated, represents and warrants to each of the other parties
hereto as follows, provided, that
15
<PAGE>
the representations in the following paragraphs (h), (j) and (k) are made solely
in its capacity as the Borrower:
(a) It is a national banking association and is duly organized and
validly existing and in good standing under the laws of the United States
of America and has the power and authority to enter into and perform its
obligations under the Trust Agreement and (assuming due authorization,
execution and delivery of the Trust Agreement by the Holders) has the
corporate and trust power and authority to act as the Owner Trustee and to
enter into and perform the obligations under each of the other Operative
Agreements to which the Trust Company or the Owner Trustee, as the case may
be, is or will be a party and each other agreement, instrument and document
to be executed and delivered by it on or before such Closing Date in
connection with or as contemplated by each such Operative Agreement to
which the Trust Company or the Owner Trustee, as the case may be, is or
will be a party;
(b) The execution, delivery and performance of each Operative
Agreement to which it is or will be a party, either in its individual
capacity or (assuming due authorization, execution and delivery of the
Trust Agreement by the Holders) as the Owner Trustee, as the case may be,
has been duly authorized by all necessary action on its part and neither
the execution and delivery thereof, nor the consummation of the
transactions contemplated thereby, nor compliance by it with any of the
terms and provisions thereof (i) does or will require any approval or
consent of any trustee or holders of any of its indebtedness or
obligations, (ii) does or will contravene any Legal Requirement, (iii) does
or will contravene or result in any breach of or constitute any default
under, or result in the creation of any Lien upon any of its property
under, (A) its charter or by-laws, or (B) any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, bank loan or credit
agreement or other agreement or instrument to which it is a party or by
which it or its properties may be bound or affected, which contravention,
breach, default or Lien under clause (B) would materially and adversely
affect its ability, in its individual capacity or as the Owner Trustee, to
perform its obligations under the Operative Agreements to which it is a
party or (iv) does or will require any Governmental Action by any
Governmental Authority;
(c) The Trust Agreement and, assuming the Trust Agreement is the
legal, valid and binding obligation of the Holders, each other Operative
Agreement to which the Trust Company or the Owner Trustee, as the case may
be, is or will be a party have been, or on or before such Closing Date will
be, duly executed and delivered by the Trust Company or the Owner Trustee,
as the case may be, and the Trust Agreement and each such other Operative
Agreement to which the Trust Company or the Owner Trustee, as the case may
be, is a party constitutes, or upon execution and delivery will constitute,
a legal, valid and binding obligation enforceable against the Trust Company
or the Owner Trustee, as the case may be, in accordance with the terms
thereof;
(d) There is no action or proceeding pending or, to its knowledge,
threatened to which it is or will be a party, either in its individual
capacity or as the Owner Trustee,
16
<PAGE>
before any Governmental Authority that, if adversely determined, would
materially and adversely affect its ability, in its individual capacity or
as the Owner Trustee, to perform its obligations under the Operative
Agreements to which it is a party or would question the validity or
enforceability of any of the Operative Agreements to which it is or will
become a party;
(e) It has not assigned or transferred any of its right, title or
interest in or under the Lease, the Agency Agreement or its interest in any
Property or any portion thereof, except in accordance with the Operative
Agreements;
(f) No Default of Event of Default under the Operative Agreements
attributable to it has occurred and is continuing;
(g) Except as otherwise contemplated in the Operative Agreements, the
proceeds of the Loans and Holder Advances shall not be applied by the Owner
Trustee for any purpose other than the repayment of the Bridge Financing,
the purchase and/or lease of the Properties, the acquisition, installation
and testing of the Equipment, the construction of Improvements and the
payment of Transaction Expenses, in each case which accrue prior to the
Rent Commencement Date with respect to a particular Property and in each
case in accordance with the Agency Agreement;
(h) Neither the Owner Trustee nor any Person authorized by the Owner
Trustee to act on its behalf has offered or sold any interest in the Trust
Estate or the Notes, or in any similar security relating to a Property, or
in any security the offering of which for the purposes of the Securities
Act would be deemed to be part of the same offering as the offering of the
aforementioned securities to, or solicited any offer to acquire any of the
same from, any Person other than, in the case of the Notes, the Agent, and
neither the Owner Trustee nor any Person authorized by the Owner Trustee to
act on its behalf will take any action which would subject, as a direct
result of such action alone, the issuance or sale of any interest in the
Trust Estate or the Notes to the provisions of Section 5 of the Securities
Act or require the qualification of any Operative Agreement under the Trust
Indenture Act of 1939, as amended;
(i) The Owner Trustee's principal place of business, chief executive
office and office where the documents, accounts and records relating to the
transactions contemplated by this Agreement and each other Operative
Agreement are kept are located at 79 South Main Street, Salt Lake City,
Utah 84111;
(j) The Owner Trustee is not engaged principally in, and does not have
as one (1) of its important activities, the business of extending credit
for the purpose of purchasing or carrying any margin stock (within the
meaning of Regulation U of the Board of Governors of the Federal Reserve
System of the United States), and no part of the proceeds of the Loans or
the Holder Advances will be used by it to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or
carrying any such margin stock or for any purpose that violates, or is
inconsistent with, the
17
<PAGE>
provisions of Regulations G, T, U, or X of the Board of Governors of the
Federal Reserve System of the United States;
(k) The Owner Trustee is not an "investment company" or a company
controlled by an "investment company" within the meaning of the Investment
Company Act;
(l) Each Property is free and clear of all Lessor Liens attributable
to the Owner Trustee in its individual capacity; and
(m) The Owner Trustee, in its trust capacity, is a party to no
documents, instruments or agreements other than documents in connection
with the Bridge Financing and the Operative Agreements to which it is a
party and any other documents delivered by the Owner Trustee in connection
with the Operative Agreements.
Effective as of the Initial Closing Date, the date of each Advance and the Rent
Commencement Date, the Owner Trustee represents and warrants that each Property
is free and clear of all Lessor Liens.
6.2. REPRESENTATIONS AND WARRANTIES OF EACH CREDIT PARTY.
Effective as of the Initial Closing Date, the date of each Advance, the
date each Wholly-Owned Entity delivers an Accession Agreement and the Rent
Commencement Date, each Credit Party represents and warrants to each of the
other parties hereto that:
(a) The Incorporated Representations and Warranties are true and
correct (unless such relate solely to an earlier point in time) and the
Lessee has delivered to the Agent the financial statements and other
reports referred to in Section 5.1 of the Lessee Credit Agreement;
(b) The execution and delivery by each Credit Party of this Agreement
and the other applicable Operative Agreements as of such date and the
performance by each Credit Party of its respective obligations under this
Agreement and the other applicable Operative Agreements are within the
corporate, partnership or limited liability company (as the case may be)
powers of each Credit Party, have been duly authorized by all necessary
corporate, partnership or limited liability company (as the case may be)
action on the part of each Credit Party (including without limitation any
necessary shareholder, partnership or limited liability company action),
have been duly executed and delivered, have received all necessary
governmental approval required to be obtained by each Credit Party, and do
not and will not (i) violate any Legal Requirement which is binding on any
Credit Party or any of their Subsidiaries, (ii) contravene or conflict
with, or result in a breach of, any provision of (A) the Articles of
Incorporation, By-Laws or other organizational documents of any Credit
Party or any of their Subsidiaries or (B) any agreement, indenture,
instrument or other document which is binding on any Credit Party or any of
their Subsidiaries (excepting such contravention of, conflict with or
breach
18
<PAGE>
thereof which shall not have or could not reasonably be expected to have a
Material Adverse Effect) or (iii) result in, or require, the creation or
imposition of any Lien (other than pursuant to the terms of the Operative
Agreements) on any asset of any Credit Party or any of their Subsidiaries;
(c) This Agreement and the other applicable Operative Agreements to
which any Credit Party is a party, executed prior to and as of such date,
constitute the legal, valid and binding obligation of each Credit Party, as
applicable, enforceable against each Credit Party, as applicable, in
accordance with their terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditor's rights generally or by general principles
of equity. Each Credit Party has executed the various Operative Agreements
required to be executed as of such date;
(d) Except as described in EXHIBIT L, there are no material actions,
suits or proceedings pending or, to the knowledge of any Credit Party,
threatened against any Credit Party in any court or before any Governmental
Authority (nor shall any order, judgment or decree have been issued or to
the knowledge of any Credit Party, proposed to be issued by any
Governmental Authority to set aside, restrain, enjoin or prevent the full
performance of any Operative Agreement or any transaction contemplated
thereby) that (i) concern any Property or any Credit Party's interest
therein, (ii) question the validity or enforceability of any Operative
Agreement or any transaction contemplated by the Operative Agreements or
(iii) shall have or could reasonably be expected to have a Material Adverse
Effect;
(e) No Governmental Action by any Governmental Authority or other
authorization, registration, consent, approval, waiver, notice or other
action by, to or of any other Person (x) pursuant to any Legal Requirement
or (y) pursuant to any contract, indenture, instrument or agreement (the
failure of which to obtain in the case of this clause (y) shall not have or
could not reasonably be expected to have a Material Adverse Effect) is
required to have been obtained on the part of any Credit Party to authorize
or is required in connection with (i) the execution, delivery or
performance of any Operative Agreement, (ii) the legality, validity,
binding effect or enforceability of any Operative Agreement, (iii) the
acquisition, ownership, construction, completion, occupancy, operation,
leasing or subleasing of any Property except for those that may
appropriately be obtained at a later date or (iv) any Advance, in each
case, except those which have been obtained and are in full force and
effect;
(f) Upon the execution and delivery of each Lease Supplement to the
Lease, (i) the Lessee will have unconditionally accepted the Property
subject to the Lease Supplement and will have a valid and subsisting
leasehold interest in such Property, subject only to the Permitted Liens,
and (ii) no offset will exist with respect to any Rent or other sums
payable under the Lease;
19
<PAGE>
(g) Except as otherwise contemplated by the Operative Agreements, the
Construction Agent shall not use the proceeds of any Holder Advance or Loan
for any purpose other than the purchase and/or lease of the Properties, the
acquisition, installation and testing of the Equipment, the construction of
Improvements and the payment of Transaction Expenses, in each case which
accrue prior to the Rent Commencement Date with respect to a particular
Property;
(h) All information heretofore or contemporaneously herewith furnished
by any Credit Party or any of their Subsidiaries to the Agent, the Owner
Trustee, any Lender or any Holder for purposes of or in connection with
this Agreement and the transactions contemplated hereby is, and all
information hereafter furnished by or on behalf of any Credit Party or any
of their Subsidiaries to the Agent, the Owner Trustee, any Lender or any
Holder pursuant hereto or in connection herewith will be, true and accurate
in all material respects on the date as of which such information is dated
or certified, and such information, taken as a whole, does not and will not
omit to state any material fact necessary to make such information, taken
as a whole, not misleading;
(i) The Lessee is duly incorporated under the laws of the State of
Delaware. The principal place of business, chief executive office and
office of the Construction Agent and the Lessee where the documents,
accounts and records relating to the transactions contemplated by this
Agreement and each other Operative Agreement are kept are located at
Houston, Harris County, Texas. The states of incorporation/formation and
the principal place of business of the Tranche A Guarantors are located in
the states set forth in EXHIBIT M;
(j) The representations and warranties of each Credit Party set forth
in any of the Operative Agreements are true and correct in all material
respects on and as of each such date as if made on and as of such date
(unless expressly referring to another date and in each case, such
representations and warranties shall have been true and correct on and as
of such earlier date). There exists no Default or Event of Default under
any of the Operative Agreements which is continuing and which has not been
cured within any cure period expressly granted under the terms of the
applicable Operative Agreement or otherwise waived in accordance with the
applicable Operative Agreement. No Default or Event of Default will occur
under any of the Operative Agreements as a result of, or after giving
effect to, the Advance requested by the Requisition on the date of such
Advance;
(k) As of each Property Closing Date and the date of each subsequent
Advance and the Rent Commencement Date only, each Property then being
financed consists of (i) unimproved Land or (ii) Land and existing
Improvements thereon which Improvements are either suitable for occupancy
at the time of acquisition, ground leasing or at the Rent Commencement Date
or will be renovated and/or modified in accordance with the terms of this
Agreement on or prior to the Rent Commencement Date. Each Property then
being financed is located at the location set forth on the applicable
Requisition, each of which is in one (1) of the Approved States;
20
<PAGE>
(l) As of each Property Closing Date, the date of each subsequent
Advance and the Rent Commencement Date only, the Lessor has good and
indefeasible fee simple title to each Property, or, if any Property is the
subject of a Ground Lease, the Lessor will have a valid ground leasehold
interest enforceable against the ground lessor of such Property in
accordance with the terms of such Ground Lease, subject only to (i) such
Liens referenced in Sections 6.2(r)(i) and 6.2(r)(ii) on the applicable
Property Closing Date and (ii) subject to Section 5.7, Permitted Liens
after the applicable Property Closing Date;
(m) As of each Property Closing Date, the date of each subsequent
Advance and the Rent Commencement Date only, no portion of any Property is
located in an area identified as a special flood hazard area by the Federal
Emergency Management Agency or other applicable agency, or if any such
Property is located in an area identified as a special flood hazard area by
the Federal Emergency Management Agency or other applicable agency, then
flood insurance has been obtained for such Property in accordance with
Section 14.2(b) of the Lease and in accordance with the National Flood
Insurance Act of 1968, as amended;
(n) As of each Property Closing Date, the date of each subsequent
Advance and the Rent Commencement Date only, each Property complies with
all Insurance Requirements and in all material respects with all standards
of the Credit Parties with respect to similar properties owned by any
Credit Party;
(o) As of each Property Closing Date, the date of each subsequent
Advance and the Rent Commencement Date only, each Property complies with
all Legal Requirements as of such date (including without limitation all
zoning and land use laws and Environmental Laws), except to the extent that
failure to comply therewith, individually or in the aggregate, shall not
have and could not reasonably be expected to have a Material Adverse
Effect;
(p) As of each Property Closing Date, the date of each subsequent
Advance and the Rent Commencement Date only, all utility services and
facilities necessary for the construction and operation of the Improvements
and the installation and operation of the Equipment regarding each Property
(including without limitation gas, electrical, water and sewage services
and facilities) are available at the applicable Land and will be
constructed prior to the Completion Date for such Property;
(q) As of each Property Closing Date, the date of each subsequent
Advance and the Rent Commencement Date only, acquisition, installation and
testing of the Equipment (if any) and construction of the Improvements (if
any) to such date shall have been performed in a good and workmanlike
manner, substantially in accordance with the applicable Plans and
Specifications;
(r) (i) The Security Documents create, as security for the
Obligations (as such term is defined in the Security Agreement), valid and
enforceable security interests
21
<PAGE>
in, and Liens on, all of the Collateral, in favor of the Agent, for the
ratable benefit of the Lenders and the Holders, as their respective
interests appear in the Operative Agreements, and such security interests
and Liens are subject to no other Liens (subject to Liens for Taxes not yet
due and payable) other than Liens that are expressly set forth as title
exceptions on the title commitment issued under Section 5.3(g) with respect
to the applicable Property, to the extent such title commitment has been
approved by the Agent. Upon recordation of the Mortgage Instrument in the
real estate recording office in the applicable Approved State identified by
the Construction Agent or the Lessee, the Lien created by the Mortgage
Instrument in the real property described therein shall be a perfected
first priority mortgage Lien on such real property in favor of the Agent,
for the ratable benefit of the Lenders and the Holders, as their respective
interests appear in the Operative Agreements subject to no other Liens
(subject to Liens for Taxes not yet due and payable) other than Liens that
are expressly set forth as title exceptions on the title commitment issued
under Section 5.3(g) with respect to the applicable Property, to the extent
such title commitment has been approved by the Agent. To the extent that
the security interests in the portion of the Collateral comprised of
personal property can be perfected by filing in the filing offices in the
applicable Approved States or elsewhere identified by the Construction
Agent or the Lessee, upon filing of the Lender Financing Statements in such
filing offices, the security interests created by the Security Agreement
shall be perfected first priority security interests (subject to Liens for
Taxes not yet due and payable) in such personal property in favor of the
Agent, for the ratable benefit of the Lenders and the Holders, as their
respective interests appear in the Operative Agreements to the extent that
perfection may be accomplished by the filing of financing statements;
(ii) The Lease Agreement creates, as security for the obligations of
the Lessee under the Lease Agreement, valid and enforceable security
interests in, and Liens on, each Property leased thereunder, in favor of
the Lessor, and such security interests and Liens are subject to no other
Liens (subject to Liens for Taxes not yet due and payable) other than Liens
that are expressly set forth as title exceptions on the title commitment
issued under Section 5.3(g) with respect to the applicable Property, to the
extent such title commitment has been approved by the Agent. Upon
recordation of the memorandum of the Lease Agreement and the memorandum of
a Ground Lease (or, in either case, a short form lease) in the real estate
recording office in the applicable Approved State identified by the
Construction Agent or the Lessee, the Lien created by the Lease Agreement
in the real property described therein shall be a perfected first priority
mortgage Lien (subject to Liens for Taxes not yet due and payable) on such
real property in favor of the Agent, for the ratable benefit of the Lenders
and the Holders, as their respective interests
22
<PAGE>
appear in the Operative Agreements. To the extent that the security
interests in the portion of any Property comprised of personal property can
be perfected by the filing in the filing offices in the applicable Approved
State or elsewhere identified by the Construction Agent or the Lessee upon
filing of the Lessor Financing Statements in such filing offices, a
security interest created by the Lease Agreement shall be a perfected first
priority security interest (subject to Liens for Taxes not yet due and
payable) in such personal property in favor of the Lessor, which rights
pursuant to the Lessor Financing Statements are assigned to the Agent, for
the ratable benefit of the Lenders and the Holders, as their respective
interests appear in the Operative Agreements to the extent perfection may
be accomplished by the filing of financing statements;
(s) The Plans and Specifications for each Property will be prepared
prior to the commencement of construction in accordance with all applicable
Legal Requirements (including without limitation all applicable
Environmental Laws and building, planning, zoning and fire codes), except
to the extent the failure to comply therewith, individually or in the
aggregate, shall not have and could not reasonably be expected to have a
Material Adverse Effect. Upon completion of the Improvements for each
Property in accordance with the applicable Plans and Specifications, such
Improvements will be within any building restriction lines and will not
encroach in any manner onto any adjoining land (except as permitted by
express written easements, which have been approved by the Agent);
(t) As of the Rent Commencement Date only, each Property shall be
improved in accordance with the applicable Plans and Specifications in a
good and workmanlike manner, shall be operational and shall constitute all
the equipment, facilities, rights, other personal property and other real
property necessary to operate, utilize and maintain such Property for its
originally intended purpose in a commercially reasonable manner and on an
independent, stand alone basis;
(u) As of each Property Closing Date only, each Property has been
acquired or ground leased pursuant to a Ground Lease at a price that is not
in excess of fair market value or fair market rental value, as the case may
be; and
(v) As of the Initial Closing Date only, each Wholly-Owned Entity
(formed or acquired prior to or on such date) shall have executed this
Agreement and the Credit Agreement in its capacity as a Tranche A Guarantor
and, as to AOR, in its capacity as the Guarantor and as a Tranche A
Guarantor.
SECTION 7. PAYMENT OF CERTAIN EXPENSES.
7.1. TRANSACTION EXPENSES.
(a) The Lessor agrees on the Initial Closing Date, to pay, or cause to
be paid, all Transaction Expenses arising from the Initial Closing Date,
including without limitation all reasonable fees, expenses and
disbursements of the various legal counsels for the Lessor and the Agent in
connection with the transactions contemplated by the Operative Agreements
and incurred in connection with such Initial Closing Date, the initial fees
and expenses of the Owner Trustee due and payable on such Initial Closing
Date, all fees, taxes and expenses for the recording, registration and
filing of documents and all other reasonable fees, expenses and
disbursements incurred in connection with such Initial Closing Date;
provided, however, the Lessor shall pay such amounts described in this
Section 7.1(a) only if (i) such amounts are properly described in a
23
<PAGE>
Requisition delivered on or before the Initial Closing Date, and (ii) funds
are made available by the Lenders and the Holders in connection with such
Requisition in an amount sufficient to allow such payment. On the Initial
Closing Date after delivery and receipt of the Requisition referenced in
Section 4.2(a) hereof and satisfaction of the other conditions precedent
for such date, the Holders shall make Holder Advances and the Lenders shall
make Loans to the Lessor to pay for the Transaction Expenses. The Lessee
agrees to timely pay all amounts referred to in this Section 7.1(a) to the
extent not paid by the Lessor.
(b) Assuming no Default or Event of Default shall have occurred and be
continuing and only for the period prior to the Rent Commencement Date, the
Lessor agrees on each Property Closing Date, on the date of any
Construction Advance and on the Completion Date to pay, or cause to be
paid, all Transaction Expenses including without limitation all reasonable
fees, expenses and disbursements of the various legal counsels for the
Lessor and the Agent in connection with the transactions contemplated by
the Operative Agreements and billed in connection with such Advance or such
Completion Date, all Transaction Expenses arising from the Initial Closing
Date which have not been previously paid by the Lessor, the annual fees and
reasonable out-of-pocket expenses of the Owner Trustee, all fees, expenses
and disbursements incurred with respect to the various items referenced in
Sections 5.3, 5.4 and/or 5.5 (including without limitation any premiums for
title insurance policies and charges for any updates to such policies), all
other reasonable fees, expenses and disbursements in connection with such
Advance or such Completion Date and all other Transaction Expenses
theretofore incurred and not paid by the Lessor, including without
limitation all expenses relating to and all fees, taxes and expenses for
the recording, registration and filing of documents and during the
Commitment Period, all fees, expenses and costs referenced in Sections
7.3(a), 7.3(b), 7.3(d) and 7.4; provided, however, the Lessor shall pay
such amounts described in this Section 7.1(b) on the applicable Business
Day only if (i) such amounts are properly described in a Requisition
delivered on the applicable date and (ii) funds are made available by the
Lenders and the Holders in connection with such Requisition in an amount
sufficient to allow such payment. On each Property Closing Date, on the
date of any Construction Advance or any Completion Date, after delivery of
the applicable Requisition and satisfaction of the other conditions
precedent for such date, the Holders shall make a Holder Advance and the
Lenders shall make Loans to the Lessor to pay for the Transaction Expenses
referenced in this Section 7.1(b). The Lessee agrees to timely pay all
amounts referred to in this Section 7.1(b) to the extent not paid by the
Lessor.
7.2. BROKERS' FEES.
The Lessee agrees to pay or cause to be paid any and all brokers' fees, if
any, including without limitation any interest and penalties thereon, which are
payable in connection with the transactions contemplated by this Agreement and
the other Operative Agreements.
24
<PAGE>
7.3. CERTAIN FEES AND EXPENSES.
The Lessee agrees to pay or cause to be paid (a) the initial and annual
Owner Trustee's fee and all reasonable expenses of the Owner Trustee and any co-
trustees (including without limitation reasonable counsel fees and expenses) or
any successor owner trustee and/or co-trustee, for acting as the owner trustee
under the Trust Agreement, (b) all reasonable out-of-pocket costs and expenses
incurred by the Credit Parties, the Agent, the Lenders, the Holders or the
Lessor in entering into any Lease Supplement and any future amendments,
modifications, supplements, restatements and/or replacements with respect to any
of the Operative Agreements, whether or not such Lease Supplement, amendments,
modifications, supplements, restatements and/or replacements are ultimately
entered into, or giving or withholding of waivers of consents hereto or thereto,
which have been requested by the Credit Parties, the Agent, the Lenders, the
Holders or the Lessor, (c) all reasonable out-of-pocket costs and expenses
incurred by the Construction Agent, the Lessee, the Agent, the Lenders, the
Holders or the Lessor in connection with any exercise of remedies under any
Operative Agreement or any purchase of any Property by the Construction Agent,
the Lessee or any third party and (d) all reasonable out-of-pocket costs and
expenses incurred by the Credit Parties, the Agent, the Lenders, the Holders or
the Lessor in connection with any transfer or conveyance of any Property,
whether or not such transfer or conveyance is ultimately accomplished.
7.4. FACILITY FEE.
Until the Maturity Date, the Lessee agrees to pay or to cause to be paid to
the Agent for the account of (a) the Lenders, respectively, a facility fee (the
"Lender Facility Fee") equal to the product of either (i) the average daily
Commitment of each Lender (for Tranche A Loans and Tranche B Loans) during the
Commitment Period or (ii) after the Commitment Period, the average daily
aggregate amount of the Advances of such Lender outstanding until the Maturity
Date, in each case multiplied by the applicable percentage set forth in the
matrix below per annum and (b) the Holders, respectively, a facility fee (the
"Holder Facility Fee") equal to the product of either (i) the average daily
Holder Commitment of each Holder during the Commitment Period or (ii) after the
Commitment Period, the average daily aggregate amount of the Advances of such
Holder outstanding until the Maturity Date, in each case multiplied by the
applicable percentage set forth in the matrix below per annum. From the Initial
Closing Date until the fifth (5th) day after delivery of the December 31, 1997
financial statements pursuant to Section 28.1 of the Lease, such applicable
percentage shall be 0.200% for both the Lender Facility Fee and for the Holder
Facility Fee. Such Facility Fees shall be calculated on the basis of a year of
three hundred sixty (360) days for the actual days elapsed and shall be payable
in arrears on the last Business Day of each fiscal quarter of the Lessee,
commencing with the fiscal quarter ending December 31, 1997. The Facility Fees
shall be reset from time to time at the time of the resetting of the Applicable
Margin. If all or a portion of any such Facility Fee shall not be paid when due,
such overdue amount shall bear interest, payable by the Lessee on demand, at a
rate per annum equal to the ABR (or in the case of Holder Yield, the ABR plus
the Applicable Margin for Eurodollar Holder Advances) plus two percent (2%) from
the date of such non-payment until such amount is paid in full (as well as
before judgment).
25
<PAGE>
<TABLE>
<CAPTION>
Ratio of Consolidated Lender Holder
Debt to Annualized EBITDA Facility Fee Facility Fee
- ------------------------- ------------ ------------
<S> <C> <C>
Greater than 3.0 to 1.0 0.250% 0.250%
Greater than 2.0 to 1.0 but less 0.200% 0.200%
than or equal to 3.0 to 1.0
Less than or equal to 2.0 to 1.0 0.175% 0.175%
</TABLE>
7.5. ADMINISTRATIVE FEE.
During the Term, the Lessee agrees to pay or to cause to be paid to the
Agent (for the account of the Agent) the administrative fee contemplated by to
the terms of the engagement letter dated October 24, 1997, as supplemented from
time to time, from First Union Capital Markets Corp. to AOR.
SECTION 8. OTHER COVENANTS AND AGREEMENTS.
8.1. COOPERATION WITH THE CONSTRUCTION AGENT OR THE LESSEE.
The Holders, the Lenders, the Lessor (at the direction of the Majority
Secured Parties) and the Agent shall, at the expense of and to the extent
reasonably requested by the Construction Agent or the Lessee (but without
assuming additional liabilities on account thereof and only to the extent such
additional liabilities are acceptable to the Agent in its reasonable judgment),
cooperate with the Construction Agent or the Lessee in connection with the
Construction Agent or the Lessee satisfying its covenant obligations contained
in the Operative Agreements including without limitation at any time and from
time to time, promptly and duly executing and delivering any and all such
further instruments, documents and financing statements (and continuation
statements related thereto) as the Construction Agent or the Lessee may
reasonably request.
8.2. COVENANTS OF THE OWNER TRUSTEE AND THE HOLDERS.
Each of the Owner Trustee and the Holders hereby agrees that so long as
this Agreement is in effect:
(a) Neither the Owner Trustee (in its trust capacity or in its
individual capacity) nor any Holder will create or permit to exist at any
time, and each of them will, at its own cost and expense, promptly take
such action as may be necessary duly to discharge, or to cause to be
discharged, all Lessor Liens on the Properties attributable to it;
provided, however, that the Owner Trustee and the Holders shall not be
required to so
26
<PAGE>
discharge any such Lessor Lien while the same is being contested in good
faith by appropriate proceedings diligently prosecuted so long as such
proceedings shall not involve any material danger of impairment of the
Liens of the Security Documents or involve any danger of the sale,
forfeiture or loss of, and shall not interfere with the use or disposition
of, any material part of any Property or title thereto or any interest
therein or the payment of Rent;
(b) Without prejudice to any right under the Trust Agreement of the
Owner Trustee to resign (subject to requirement set forth in the Trust
Agreement that such resignation shall not be effective until a successor
shall have agreed to accept such appointment), or the Holders' rights under
the Trust Agreement to remove the institution acting as the Owner Trustee
(after consent to such removal by the Agent as provided in the Trust
Agreement and by the Lessee as provided in the succeeding paragraph (c)
below), each of the Owner Trustee and the Holders hereby agrees with the
Lessee, the Construction Agent and the Agent (i) not to terminate or revoke
the trust created by the Trust Agreement except as permitted by Article
VIII of the Trust Agreement, (ii) not to amend, supplement, terminate or
revoke or otherwise modify any provision of the Trust Agreement in such a
manner as to adversely affect the rights of any such party without the
prior written consent of such party and (iii) to comply with all of the
terms of the Trust Agreement, the nonperformance of which would adversely
affect any such party;
(c) The Owner Trustee or any successor may resign or be removed by the
Holders as the Owner Trustee, a successor Owner Trustee may be appointed
and a corporation may become the Owner Trustee under the Trust Agreement,
only in accordance with the provisions of Article IX of the Trust Agreement
and, with respect to such appointment, with the consent of the Lessee,
which consent shall not be unreasonably withheld or delayed;
(d) The Owner Trustee, in its capacity as the Owner Trustee under the
Trust Agreement, and not in its individual capacity, shall not contract
for, create, incur or assume any Indebtedness, or enter into any business
or other activity or enter into any contracts or agreements, other than
pursuant to or under (i) documents executed prior to the Initial Closing
Date with respect to the Bridge Financing or (ii) the Operative Agreements;
(e) The Holders will not instruct the Owner Trustee to take any action
in violation of the terms of any Operative Agreement;
(f) Neither any Holder nor the Owner Trustee shall (i) commence any
case, proceeding or other action with respect to the Owner Trustee under
any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, arrangement, winding-
up, liquidation, dissolution, composition or other relief with respect to
it or its debts, or (ii) seek appointment of a receiver, trustee, custodian
or other similar official with respect to the Owner Trustee or for all or
any substantial benefit of the creditors of the Owner Trustee; and neither
any Holder nor the
27
<PAGE>
Owner Trustee shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in
this paragraph;
(g) The Owner Trustee shall give prompt notice to the Lessee, the
Holders and the Agent if the Owner Trustee's principal place of business or
chief executive office, or the office where the records concerning the
accounts or contract rights relating to any Property are kept, shall cease
to be located at 79 South Main Street, Salt Lake City, Utah 84111, or if it
shall change its name; and
(h) The Owner Trustee shall take or refrain from taking such actions
and grant or refrain from granting such approvals with respect to the
Operative Agreements and/or relating to any Property in each case as
directed in writing by the Agent (until such time as the Loans are paid in
full, and then by the Majority Holders) or, in connection with Sections 8.5
and 9.2 hereof, the Lessee; provided, however, that notwithstanding the
foregoing provisions of this subparagraph (h) the Owner Trustee, the Agent,
the Lenders and the Holders each acknowledge, covenant and agree that
neither the Owner Trustee nor the Agent shall act or refrain from acting,
regarding each Unanimous Vote Matter, until such party has received the
approval of each Lender and each Holder affected by such matter.
8.3. CREDIT PARTY COVENANTS, CONSENT AND ACKNOWLEDGMENT.
(a) Each Credit Party acknowledges and agrees that the Owner Trustee,
pursuant to the terms and conditions of the Security Agreement and the
Mortgage Instruments, shall create Liens respecting the various personal
property, fixtures and real property described therein in favor of the
Agent. Each Credit Party hereby irrevocably consents to the creation,
perfection and maintenance of such Liens. Each Credit Party shall, to the
extent reasonably requested by any of the other parties hereto, cooperate
with the other parties to satisfy their covenants herein or in the other
Operative Agreements, including without limitation at any time and from
time to time promptly and duly executing and delivering any and all such
future instruments, documents and financing statements (and continuation
statements related thereto) as any other party hereto may reasonably
request.
(b) The Lessor hereby instructs each Credit Party, and each Credit
Party hereby acknowledges and agrees, that until such time as the Loans and
the Holder Advances are paid in full and the Liens evidenced by the
Security Agreement and the Mortgage Instruments have been released (i) any
and all Rent (excluding Excepted Payments which shall be payable to each
Holder or other Person as appropriate) and any and all other amounts of any
kind or type under any of the Operative Agreements due and owing or payable
to any Person shall instead be paid directly to the Agent (excluding
Excepted Payments which shall be payable to each Holder or other Person as
appropriate) or as the Agent may direct from time to time for allocation
and distribution in accordance with the procedures set forth in Section 8.7
hereof, (ii) all rights of the Lessor under the Lease shall be exercised by
the Agent and (iii) each Credit Party shall cause all notices,
28
<PAGE>
certificates, financial statements, communications and other information
which are delivered, or are required to be delivered, to the Lessor, also
to be delivered at the same time to the Agent.
(c) No Credit Party shall consent to or permit any amendment,
supplement or other modification of the terms or provisions of any
Operative Agreement except in accordance with Section 12.4 of this
Agreement.
(d) The Lessee hereby covenants and agrees to cause an Appraisal or
reappraisal (in form and substance satisfactory to the Agent and from an
appraiser selected by the Agent) to be issued respecting any Property as
requested by the Agent (i) at each and every time as such shall be required
to satisfy any regulatory requirements imposed on the Agent, the Lessor,
the Trust Company, any Lender and/or any Holder and (ii) from time to time
after the occurrence and during the continuance of an Event of Default.
(e) Each Credit Party hereby covenants and agrees that, except for
amounts payable as Basic Rent, any and all payment obligations owing from
time to time under the Operative Agreements by any Person to the Agent, any
Lender, any Holder or any other Person shall (without further action) be
deemed to be Supplemental Rent obligations payable by the Lessee. Without
limitation, such obligations shall include without limitation arrangement
fees, administrative fees, participation fees, facility fees, unused fees,
prepayment penalties, breakage costs, indemnities, trustee fees and
transaction expenses incurred by the parties hereto in connection with the
transactions contemplated by the Operative Agreements.
(f) At any time the Lessor or the Agent is entitled under the
Operative Agreements to possession of a Property or any component thereof,
each of the Construction Agent and the Lessee hereby covenants and agrees,
at its own cost and expense, to assemble (in the case of tangible personal
property) and make the same available to the Agent (on behalf of the
Lessor).
(g) The Lessee hereby covenants and agrees that respecting all
Properties in the aggregate subject to the Lease at any time (and without
respect to analysis on a Property by Property basis), (i) Non-Integral
Equipment financed under the Operative Agreements may constitute up to, but
not to exceed, fifteen percent (15%) of the aggregate Advances extended at
or prior to such time and (ii) Equipment (including without limitation such
Non-Integral Equipment) financed under the Operative Agreements may
constitute up to, but not to exceed fifty percent (50%) of the aggregate
Advances extended at or prior to such time.
(h) The Lessee hereby covenants and agrees that as of Completion (i)
the Property Cost for each individual parcel of the Property shall be no
less than $2,000,000 and (ii) each parcel of the Property shall be a
Permitted Facility.
29
<PAGE>
(i) The Lessee hereby covenants and agrees that it shall give prompt
notice to the Agent if the Lessee's principal place of business or chief
executive office, or the office where the records concerning the accounts
or contract rights relating to any Property are kept, shall cease to be
located at Houston, Harris County, Texas or if it shall change its name.
(j) The Lessee hereby covenants and agrees that the aggregate Property
Cost of Properties purchased for any reason by the Lessee pursuant to its
Purchase Option prior to the Expiration Date shall not exceed ten percent
(10%) of the aggregate Property Cost for all Properties funded during the
Commitment Period.
(k) The Lessee hereby covenants and agrees that the rights of the
Lessee under this Agreement and the Lease shall not impair or in any way
diminish the obligations of the Construction Agent and/or the rights of the
Lessor under the Agency Agreement.
(l) Within forty-five (45) days after the end of each of the first
three fiscal quarters of each fiscal year of the Lessee (beginning with the
fiscal quarter ending March 31, 1998) and within one-hundred (100) days
after the close of each fiscal year of the Lessee (beginning with the
fiscal year ending December 31, 1997), the Lessee hereby covenants and
agrees to deliver to the Agent, the Lenders and the Holders a Compliance
Certificate and a Covenant Compliance Worksheet reflecting the computation
of the financial covenants incorporated by reference into the Lease
pursuant to Section 28.1 of the Lease as of the last day of the period
covered by such financial statements.
(m) Each Credit Party agrees that the Tranche A Loans, the Tranche B
Loans and the Certificates will be treated as debt of AOR for purposes of
calculating financial covenants.
(n) Each Credit Party shall promptly notify the Agent, or cause the
Agent to be promptly notified, upon such Credit Party gaining knowledge of
the occurrence of any Default or Event of Default which is continuing at
such time. In any event, such notice shall be provided to the Agent within
ten (10) days of when an officer of such Credit Party gains such knowledge.
(o) Until all of the obligations under the Operative Agreements have
been finally and indefeasibly paid and satisfied in full and the
Commitments and the Holder Commitments terminated unless consent has been
obtained from the Majority Secured Parties, each Credit Party will:
(i) except as permitted by the express provisions of the Lessee
Credit Agreement, preserve and maintain its separate legal existence
and all rights, franchises, licenses and privileges necessary to the
conduct of its business, and qualify and remain qualified as a foreign
corporation (or partnership, limited liability company or other such
similar entity, as the case may be) and authorized
30
<PAGE>
to do business in each jurisdiction in which the failure to do so
qualify shall have or could reasonably be expected to have a Material
Adverse Effect;
(ii) pay and perform all obligations of the Credit Parties under
the Operative Agreements and pay or perform (A) all taxes, assessments
and other governmental charges that may be levied or assessed upon it
or any of its property, and (B) all other indebtedness, obligations
and liabilities in accordance with customary trade practices, which in
the case of each of (A) and (B) if not paid shall have or could
reasonably be expected to have a Material Adverse Effect; provided,
that any Credit Party may contest any item described in this Section
8.3(o)(ii) in good faith so long as adequate reserves are maintained
with respect thereto in accordance with GAAP;
(iii) do each of the following to the extent failure to do so
shall have or could reasonably be expected to have a Material Adverse
Effect: observe and remain in compliance with all applicable Laws and
maintain in full force and effect all Governmental Actions, in each
case applicable to the conduct of its business; keep or cause to be
kept in full force and effect all licenses, certifications or
accreditations necessary for any Permitted Facility to carry on its
business; and
(iv) provided, that the Agent, the Lenders and the Holders use
reasonable efforts to minimize disruption to the business of the
Credit Parties, permit representatives of the Agent or any Lender or
any Holder, from time to time upon reasonable notice and during normal
banking hours to do each of the following: to visit and inspect its
properties; inspect, audit and make extracts from its books, records
and files, including without limitation management letters prepared by
independent accountants; and discuss with its principal officers, and
(in the presence of its officers) its independent accountants, its
business, assets, liabilities, financial condition, results of
operations and business prospects.
8.4. SHARING OF CERTAIN PAYMENTS.
Except for Excepted Payments, the parties hereto acknowledge and agree that
all payments due and owing by any Credit Party to the Lessor under the Lease or
any of the other Operative Agreements shall be made by such Credit Party
directly to the Agent as more particularly provided in Section 8.3 hereof. The
Lessor, the Holders, the Agent, the Lenders and the Credit Parties acknowledge
the terms of Section 8.7 of this Agreement regarding the allocation of payments
and other amounts made or received from time to time under the Operative
Agreements and agree, that all such payments and amounts are to be allocated as
provided in Section 8.7 of this Agreement.
31
<PAGE>
8.5. GRANT OF EASEMENTS, ETC.
The Agent, the Lenders and the Holders hereby agree that, so long as no
Event of Default shall have occurred and be continuing, the Owner Trustee shall,
from time to time at the request of the Lessee (and with the prior consent of
the Agent), in connection with the transactions contemplated by the Agency
Agreement, the Lease or the other Operative Agreements, (i) grant easements and
other rights in the nature of easements with respect to any Property, (ii)
release existing easements or other rights in the nature of easements which are
for the benefit of any Property, (iii) execute and deliver to any Person any
instrument appropriate to confirm or effect such grants or releases, and (iv)
execute and deliver to any Person such other documents or materials in
connection with the acquisition, development, construction, testing or operation
of any Property, including without limitation reciprocal easement agreements,
construction contracts, operating agreements, development agreements, plats,
replats or subdivision documents; provided, that each of the agreements referred
to in this Section 8.5 shall be of the type normally executed by the Lessee or
its Affiliates or other Persons operating businesses similar to the businesses
of Lessee and/or its Affiliates and similarly situated to Lessee and/or its
Affiliates in the ordinary course of such firm's business and shall be on
commercially reasonable terms so as not to diminish the value of any Property in
any material respect.
8.6. APPOINTMENT OF THE AGENT BY THE LENDERS, THE HOLDERS AND THE OWNER
TRUSTEE.
The Holders hereby appoint the Agent to act as collateral agent for the
Holders in connection with the Lien granted by the Security Documents to secure
the Holder Amount. The Lenders and the Holders acknowledge and agree and direct
that the rights and remedies of the beneficiaries of the Lien of the Security
Documents shall be exercised by the Agent on behalf of the Lenders and the
Holders as directed from time to time by the Majority Secured Parties or,
pursuant to Sections 8.2(h) and 12.4, all of the Lenders and the Holders, as the
case may be; provided, in all cases, the Agent shall allocate payments and other
amounts received in accordance with Section 8.7; provided, further, the Agent
shall take directions with respect to the guaranty provisions of (a) Sections
8B.1 through 8B.8 of the Credit Agreement from the Tranche A Lenders holding
sixty-six and two thirds percent (66 2/3%), of the aggregate Tranche A Loans
outstanding and (b) Sections 8C.1 through 8C.8 of the Credit Agreement from the
Majority Secured Parties. The Agent is further appointed to provide notices
under the Operative Agreements on behalf of the Owner Trustee (as determined by
the Agent, in its reasonable discretion), to receive notices under the Operative
Agreements on behalf of the Owner Trustee and (subject to Sections 8.5 and 9.2)
to take such other action which the Owner Trustee is entitled to take under the
Operative Agreements on behalf of the Owner Trustee as the Agent shall determine
in its reasonable discretion from time to time. The Agent hereby accepts such
appointments. For purposes hereof, the provisions of Section 7 of the Credit
Agreement, together with such other terms and provisions of the Credit Agreement
and the other Operative Agreements as required for the full interpretation and
operation of Section 7 of the Credit Agreement are hereby incorporated by
reference as if restated herein for the mutual benefit of the Agent and each
Holder as if each Holder were a Lender thereunder. Outstanding Holder Advances
and outstanding Loans shall each be taken into account for purposes of
determining
32
<PAGE>
Majority Secured Parties. Further, the Agent shall be entitled to take such
action on behalf of the Owner Trustee as is delegated to the Agent under any
Operative Agreement (whether express or implied) as may be reasonably incidental
thereto. The parties hereto hereby agree to the provisions contained in this
Section 8.6. Any appointment of a successor agent under Section 7.9 of the
Credit Agreement shall also be effective as an appointment of a successor agent
for purposes of this Section 8.6.
8.6B. APPOINTMENT OF THE LESSOR BY THE LENDERS AND THE HOLDERS.
The Lenders and the Holders hereby appoint the Lessor to act as collateral
agent for the Lenders and the Holders in connection with the Lien granted by the
Lease to secure the obligations of each Credit Party under any and all Operative
Agreements. The Lessor accepts such appointment. The Lessor hereby agrees, and
the Lenders and the Holders hereby acknowledge, that (to the extent not
otherwise set forth in any other Operative Agreement) all right, title and
interest of the Lessor in, to and under the Lease is hereby further assigned to
the Agent, for the benefit of the Lenders and the Holders, as collateral to
secure the obligations of the Lessor and each Credit Party under any and all
Operative Agreements.
8.7. COLLECTION AND ALLOCATION OF PAYMENTS AND OTHER AMOUNTS.
(a) Each Credit Party has agreed pursuant to the terms of this
Agreement to pay to (i) the Agent any and all Rent (excluding Excepted
Payments) and any and all other amounts of any kind or type under any of
the Operative Agreements due and owing or payable to any Person and (ii)
each Person as appropriate the Excepted Payments. Promptly after receipt,
the Agent shall apply and allocate, in accordance with the terms of this
Section 8.7, such amounts received from any Credit Party and all other
payments, receipts and other consideration of any kind whatsoever received
by the Agent pursuant to the Security Agreement or otherwise received by
the Agent, the Holders or any of the Lenders in connection with the
Collateral, the Security Documents or any of the other Operative
Agreements. Ratable distributions among the Lenders and the Holders under
this Section 8.7 shall be made based on (in the case of the Lenders) the
ratio of the outstanding Loans to the aggregate Property Cost and (in the
case of the Holders) the ratio of the outstanding Holder Advances to the
aggregate Property Cost. Ratable distributions among the Tranche A Lenders
under this Section 8.7 shall be made based on the ratio of the individual
Tranche A Lender's Commitment for Tranche A Loans to the aggregate of all
the Tranche A Lenders' Commitments for Tranche A Loans. Ratable
distributions among the Tranche B Lenders under this Section 8.7 shall be
made based on the ratio of the individual Tranche B Lender's Commitment for
Tranche B Loans to the aggregate of all the Tranche B Lenders' Commitments
for Tranche B Loans. Ratable distributions among the Lenders (in situations
where the Tranche A Lenders are not differentiated from the Tranche B
Lenders) shall be made based on the ratio of the individual Lender's
Commitment to the aggregate of all the Lenders' Commitments. Ratable
distributions among the Holders under this Section 8.7 shall be based on
the ratio of the individual Holder's Holder Commitment to the aggregate of
all the Holders' Holder Commitments.
33
<PAGE>
(b) Payments and other amounts received by the Agent from time to time
in accordance with the terms of subparagraph (a) shall be applied and
allocated as follows:
(i) Any such payment or amount identified as or deemed to be
Basic Rent shall be applied and allocated by the Agent first, ratably
to the Lenders and the Holders for application and allocation to the
payment of interest on the Loans and thereafter the principal of the
Loans which is due and payable on such date and to the payment of
accrued Holder Yield with respect to the Holder Advances and
thereafter the portion of the Holder Advances which is due on such
date; and second, if no Default or Event of Default is in effect, any
excess shall be paid to such Person or Persons as the Lessee may
designate; provided, that if a Default or Event of Default is in
effect, such excess (if any) shall instead be held by the Agent until
the earlier of (I) the first date thereafter on which no Default or
Event of Default shall be in effect (in which case such payments or
returns shall then be made to such other Person or Persons as the
Lessee may designate) and (II) the Maturity Date or the Expiration
Date, as the case may be (or, if earlier, the date of any
Acceleration), in which case such amounts shall be applied and
allocated in the manner contemplated by Section 8.7(b)(iv).
(ii) If on any date the Agent or the Lessor shall receive any
amount in respect of (A) any Casualty or Condemnation pursuant to
Sections 15.1(a) or 15.1(g) of the Lease (excluding any payments in
respect thereof which are payable to the Lessee in accordance with the
Lease), or (B) the Termination Value in connection with the delivery
of a Termination Notice pursuant to Article XVI of the Lease, or (C)
the Termination Value in connection with the exercise of the Purchase
Option under Section 20.1 of the Lease or the exercise of the option
of the Lessor to transfer the Properties to the Lessee pursuant to
Section 20.3 of the Lease, or (D) any payment required to be made or
elected to be made by the Construction Agent to the Lessor pursuant to
the terms of the Agency Agreement, then in each case, the Lessor shall
be required to pay such amount received (1) if no Acceleration has
occurred, to prepay the principal balance of the Loans and the Holder
Advances, on a pro rata basis, a portion of such amount to be
distributed to the Lenders and the Holders or (2) if an Acceleration
has occurred, to apply and allocate the proceeds respecting Sections
8.7(b)(ii)(A) through 8.7(b)(ii)(D) in accordance with Section
8.7(b)(iii) hereof.
(iii) Subject to Section 8.7(c), an amount equal to any payment
identified as proceeds of the sale or other disposition (or lease upon
the exercise of remedies) of the Properties or any portion thereof,
whether pursuant to Article XXII of the Lease or the exercise of
remedies under the Security Documents or otherwise, the execution of
remedies set forth in the Lease and any payment in respect of excess
wear and tear pursuant to Section 22.3 of the Lease (whether such
payment relates to a period before or after the Construction Period
Termination Date) shall be applied and allocated by the Agent first,
ratably to the
34
<PAGE>
payment of the principal and interest of the Tranche B Loans then
outstanding, second, ratably to the payment to the Holders of the
outstanding principal balance of all Holder Advances plus all
outstanding Holder Yield with respect to such outstanding Holder
Advances, third, to the extent such amount exceeds the maximum amount
to be returned pursuant to the foregoing provisions of this paragraph
(iii), ratably to the payment of the principal and interest of the
Tranche A Loans then outstanding, fourth, to any and all other amounts
owing under the Operative Agreements to the Lenders under the Tranche
B Loans, fifth, to any and all other amounts owing under the Operative
Agreements to the Holders, sixth, to any and all other amounts owing
under the Operative Agreements to the Lenders under the Tranche A
Loans, and seventh, to the extent moneys remain after application and
allocation pursuant to clauses first through sixth above, to the Owner
Trustee for application and allocation to any and all other amounts
owing to the Holders or the Owner Trustee and as the Holders shall
determine; provided, where no Event of Default shall exist and be
continuing and a prepayment is made for any reason with respect to
less than the full amount of the outstanding principal amount of the
Loans and the outstanding Holder Advances, the proceeds shall be
applied and allocated ratably to the Lenders and to the Holders.
(iv) Subject to Section 8.7(c), an amount equal to (A) any such
payment identified as a payment pursuant to Section 22.1(b) of the
Lease (or otherwise) of the Maximum Residual Guarantee Amount (and any
such lesser amount as may be required by Section 22.1(b) of the Lease)
in respect of the Properties, (B) any other amount payable upon any
exercise of remedies after the occurrence of an Event of Default not
covered by Sections 8.7(b)(i) or 8.7(b)(iii) above (including without
limitation any amount received in connection with an Acceleration
which does not represent proceeds from the sale or liquidation of the
Properties), (C) any amount paid by the Tranche A Guarantors pursuant
to Sections 8B.1 - 8B.8 of the Credit Agreement and/or by the
Guarantor pursuant to Sections 8C.1 - 8C.8 of the Credit Agreement and
(D) any amount received with respect to the collateral which secures
both the Lessee Credit Agreement and any obligations under the
Operative Agreements, shall be applied and allocated by the Agent
first, ratably, to the payment of the principal and interest balance
of Tranche A Loans then outstanding, second, ratably to the payment of
the principal and interest balance of the Tranche B Loans then
outstanding, third, ratably to the payment of the principal balance of
all Holder Advances plus all outstanding Holder Yield with respect to
such outstanding Holder Advances, fourth, to the payment of any other
amounts owing to the Lenders hereunder or under any of the other
Operative Agreement, and fifth, to the extent moneys remain after
application and allocation pursuant to clauses first through fourth
above, to the Owner Trustee for application and allocation to Holder
Advances and Holder Yield and any other amounts owing to the Holders
or the Owner Trustee as the Holders shall determine.
35
<PAGE>
(v) An amount equal to any such payment identified as
Supplemental Rent shall be applied and allocated by the Agent to the
payment of any amounts then owing to the Agent, the Lenders, the
Holders and the other parties to the Operative Agreements (or any of
them) (other than any such amounts payable pursuant to the preceding
provisions of this Section 8.7(b)) as shall be determined by the Agent
in its reasonable discretion; provided, however, that Supplemental
Rent received upon the exercise of remedies after the occurrence and
continuance of an Event of Default in lieu of or in substitution of
the Maximum Residual Guarantee Amount or as a partial payment thereon
shall be applied and allocated as set forth in Section 8.7(b)(iv).
(vi) The Agent in its reasonable judgment shall identify the
nature of each payment or amount received by the Agent and apply and
allocate each such amount in the manner specified above.
(c) Upon the termination of the Commitments and the Holder Commitments
and the indefeasible payment in full of all Loans, all Holder Advances and
all other amounts owing by the Owner Trustee or any Credit Party in
accordance with any Operative Agreement, any excess moneys remaining with
the Agent with regard to one or more of the Properties shall be returned to
the Lessee. In the event of an Acceleration it is agreed that, prior to
the application and allocation of amounts received by the Agent in the
order described in Section 8.7(b) above, any such amounts shall first be
applied and allocated to the payment of (i) any and all sums advanced by
the Agent in order to preserve the Collateral or to preserve its Lien
thereon, (ii) the expenses of retaking, holding, preparing for sale or
lease, selling or otherwise disposing or realizing on the Collateral, or of
any exercise by the Agent of its rights under the Security Documents,
together with reasonable attorneys' fees and expenses and court costs and
(iii) any and all other amounts reasonably owed to the Agent in accordance
with the transactions contemplated by the Operative Agreements (including
without limitation any accrued and unpaid administration fees).
8.8. RELEASE OF PROPERTIES, ETC.
If the Lessee shall at any time purchase any Property pursuant to the
Lease, or the Construction Agent shall purchase any Property pursuant to the
Agency Agreement, or if any Property shall be sold in accordance with Article
XXII of the Lease, then, upon satisfaction by the Owner Trustee of its
obligation to prepay the Loans, Holder Advances and all other amounts owing to
the Lenders and the Holders under the Operative Agreements, the Agent is hereby
authorized and directed to release such Properties from the Liens created by the
Security Documents to the extent of its interest therein. In addition, upon the
termination of the Commitments and the Holder Commitments and the payment in
full of the Loans, the Holder Advances and all other amounts owing by the Owner
Trustee hereunder or under any other Operative Agreement, the Agent is hereby
authorized and directed to release all of the Properties from the Liens created
by the Security Documents to the extent of its interest therein. Upon request of
the Owner Trustee or the Lessee following any such release, the Agent shall, at
the
36
<PAGE>
sole cost and expense of the Lessee, execute and deliver to the Owner Trustee
and the Lessee such documents as the Owner Trustee or the Lessee shall
reasonably request to evidence such release.
SECTION 9. CREDIT AGREEMENT AND TRUST AGREEMENT.
9.1. THE CONSTRUCTION AGENT'S AND THE LESSEE'S CREDIT AGREEMENT RIGHTS.
Notwithstanding anything to the contrary contained in the Credit Agreement,
the Agent, the Lenders, the Holders, the Credit Parties and the Owner Trustee
hereby agree that, prior to the occurrence and continuation of any Default
(except with respect to subsections (a), (b), (d) or (g) which shall apply in
the case of a Default) or Event of Default (except with respect to subsections
(a), (b), (d) or (g) which shall apply in the case of an Event of Default), the
Construction Agent or the Lessee, as the case may be, shall have the following
rights:
(a) the right to designate an account to which amounts funded under
the Operative Agreements shall be credited pursuant to Section 2.3(a) of
the Credit Agreement;
(b) the right to terminate or reduce the Commitments pursuant to
Section 2.5(a) of the Credit Agreement;
(c) the right to exercise the conversion and continuation options
pursuant to Section 2.7 of the Credit Agreement;
(d) the right to receive any notice and any certificate, in each case
issued pursuant to Sections 2.9(c) and/or 2.11(a) of the Credit Agreement;
(e) the right to replace any Lender pursuant to Section 2.11(b) of the
Credit Agreement;
(f) the right to approve any successor agent pursuant to Section 7.9
of the Credit Agreement; and
(g) the right to consent to any assignment by a Lender to which the
Lessor has the right to consent pursuant to Section 9.8 of the Credit
Agreement.
9.2. THE CONSTRUCTION AGENT'S AND THE LESSEE'S TRUST AGREEMENT RIGHTS.
Notwithstanding anything to the contrary contained in the Trust Agreement,
the Credit Parties, the Owner Trustee and the Holders hereby agree that, prior
to the occurrence and continuation of any Default (except with respect to
subsection (b) which shall apply in the case of a Default) or Event of Default
(except with respect to subsection (b) which shall apply in the
37
<PAGE>
case of an Event of Default), the Construction Agent or the Lessee, as the case
may be, shall have the following rights:
(a) the right to exercise the conversion and continuation options
pursuant to Section 3.8 of the Trust Agreement;
(b) the right to receive any notice and any certificate, in each case
issued pursuant to Section 3.9(a) of the Trust Agreement;
(c) the right to replace any Holder pursuant to Section 3.9(b) of the
Trust Agreement;
(d) the right to exercise the removal options contained in Section 3.9
of the Trust Agreement; and
(e) no removal of the Owner Trustee and appointment of a successor
Owner Trustee pursuant to Section 9.1 of the Trust Agreement shall be made
without the prior written consent (not to be unreasonably withheld or
delayed) of the Lessee.
SECTION 10. TRANSFER OF INTEREST.
10.1. RESTRICTIONS ON TRANSFER.
Each Lender may participate, assign or transfer all or a portion of its
interest hereunder and under the other Operative Agreements in accordance with
Sections 9.7 and 9.8 of the Credit Agreement; provided, at such time each
participant, assignee or transferee must obtain the same ratable interest in
Tranche A Loans, the Tranche B Loans and the Lessee Credit Agreement. The
Holders may, directly or indirectly, assign, convey or otherwise transfer any of
their right, title or interest in or to the Trust Estate or the Trust Agreement
with the prior written consent of the Agent and the Lessee (which consent shall
not be unreasonably withheld or delayed) and in accordance with the terms of
Section 11.8(b) of the Trust Agreement. The Owner Trustee may, subject to the
rights of the Lessee under the Lease and the other Operative Agreements and to
the Lien of the applicable Security Documents but only with the prior written
consent of the Agent (which consent may be withheld by the Agent in its sole
discretion) and (provided, no Default or Event of Default has occurred and is
continuing) with the consent of the Lessee, directly or indirectly, assign,
convey, appoint an agent with respect to enforcement of, or otherwise transfer
any of its right, title or interest in or to any Property, the Lease, the Trust
Agreement and the other Operative Agreements (including without limitation any
right to indemnification thereunder), or any other document relating to a
Property or any interest in a Property as provided in the Trust Agreement and
the Lease. The provisions of the immediately preceding sentence shall not apply
to the obligations of the Owner Trustee to transfer Property to the Lessee or a
third party purchaser pursuant to Article XXII of the Lease upon payment for
such Property in accordance with the terms and conditions of the Lease. No
Credit Party may assign any of the Operative Agreements or any of their
respective rights or obligations thereunder or with respect
38
<PAGE>
to any Property in whole or in part to any Person without the prior written
consent of the Agent, the Lenders, the Holders and the Lessor.
10.2. EFFECT OF TRANSFER.
From and after any transfer effected in accordance with this Section 10,
the transferor shall be released, to the extent of such transfer, from its
liability hereunder and under the other documents to which it is a party in
respect of obligations to be performed on or after the date of such transfer;
provided, however, that any transferor shall remain liable hereunder and under
such other documents to the extent that the transferee shall not have assumed
the obligations of the transferor thereunder. Upon any transfer by the Owner
Trustee, a Holder or a Lender as above provided, any such transferee shall
assume the obligations of the Owner Trustee, the Holder or the Lender, as the
case may be, and shall be deemed an "Owner Trustee", "Holder", or "Lender", as
the case may be, for all purposes of such documents and each reference herein to
the transferor shall thereafter be deemed a reference to such transferee for all
purposes, except as provided in the preceding sentence. Notwithstanding any
transfer of all or a portion of the transferor's interest as provided in this
Section 10, the transferor shall be entitled to all benefits accrued and all
rights vested prior to such transfer including without limitation rights
theretofore accrued to indemnification under any such document.
SECTION 11. INDEMNIFICATION.
11.1. GENERAL INDEMNITY.
Whether or not any of the transactions contemplated hereby shall be
consummated, the Indemnity Provider hereby assumes liability for and agrees to
defend, indemnify and hold harmless each Indemnified Person on an After Tax
Basis from and against any Claims, which may be imposed on, incurred by or
asserted against an Indemnified Person by any third party, including without
limitation Claims arising from the negligence of an Indemnified Person (but not
to the extent such Claims arise from the gross negligence or willful misconduct
of such Indemnified Person itself, as determined by a court of competent
jurisdiction) in any way relating to or arising or alleged to arise out of the
execution, delivery, performance or enforcement of this Agreement, the Lease or
any other Operative Agreement or on or with respect to any Property or any
component thereof, including without limitation Claims in any way relating to or
arising or alleged to arise out of (a) the financing, refinancing, purchase,
acceptance, rejection, ownership, design, construction, refurbishment,
development, delivery, acceptance, nondelivery, leasing, subleasing, possession,
use, occupancy, operation, maintenance repair, modification, transportation,
condition, sale, return, repossession (whether by summary proceedings or
otherwise), or any other disposition of any Property or any part thereof,
including without limitation the acquisition, holding or disposition of any
interest in the Property, lease or agreement comprising a portion of any
thereof; (b) any latent or other defects in any Property or any portion thereof
whether or not discoverable by an Indemnified Person or the Indemnity Provider;
(c) a violation of Environmental Laws, Environmental Claims or other loss of or
39
<PAGE>
damage to any property or the environment relating to the Property, the Lease,
the Agency Agreement or the Indemnity Provider; (d) the Operative Agreements, or
any transaction contemplated thereby; (e) any breach by the Indemnity Provider
of any of its representations or warranties under the Operative Agreements to
which the Indemnity Provider is a party or failure by the Indemnity Provider to
perform or observe any covenant or agreement to be performed by it under any of
the Operative Agreements; (f) the transactions contemplated hereby or by any
other Operative Agreement, in respect of the application of Parts 4 and 5 of
Subtitle B of Title I of ERISA; and (g) personal injury, death or property
damage, including without limitation Claims based on strict or absolute
liability in tort. All Claims relating to Impositions which otherwise would be
subject to this Section 11.1 shall instead be subject to the provisions of
Section 11.2.
If a written Claim is made against any Indemnified Person or if any
proceeding shall be commenced against such Indemnified Person (including without
limitation a written notice of such proceeding), for any Claim, such Indemnified
Person shall promptly notify the Indemnity Provider in writing and shall not
take action with respect to such Claim without the consent of the Indemnity
Provider for thirty (30) days after the receipt of such notice by the Indemnity
Provider; provided, however, that in the case of any such Claim, if action shall
be required by law or regulation to be taken prior to the end of such period of
thirty (30) days, such Indemnified Person shall endeavor to, in such notice to
the Indemnity Provider, inform the Indemnity Provider of such shorter period,
and no action shall be taken with respect to such Claim without the consent of
the Indemnity Provider before seven (7) days before the end of such shorter
period; provided, further, that the failure of such Indemnified Person to give
the notices referred to in this sentence shall not diminish the Indemnity
Provider's obligation hereunder except to the extent such failure precludes the
Indemnity Provider from contesting such Claim and then only to the extent of
such actual preclusion.
If, within thirty (30) days of receipt of such notice from the Indemnified
Person (or such shorter period as the Indemnified Person has notified the
Indemnity Provider is required by law or regulation for the Indemnified Person
to respond to such Claim), the Indemnity Provider shall request in writing that
such Indemnified Person respond to such Claim, the Indemnified Person shall, at
the expense of the Indemnity Provider, in good faith conduct and control such
action (including without limitation by pursuit of appeals) (provided, however,
that (A) at the Indemnity Provider's request, shall allow the Indemnity Provider
to conduct and control the response to such Claim and (B) in the case of any
Claim (and notwithstanding the provisions of the foregoing subsection (A)), the
Indemnified Person may request the Indemnity Provider to conduct and control the
response to such Claim (with counsel to be selected by the Indemnity Provider
and consented to by such Indemnified Person, such consent not to be unreasonably
withheld; provided, however, that any Indemnified Person may retain separate
counsel at the expense of the Indemnity Provider in the event of a conflict of
interest between such Indemnified Person and the Indemnity Provider)) by, in the
sole discretion of the Person conducting and controlling the response to such
Claim (1) resisting payment thereof, (2) not paying the same except under
protest, if protest is necessary and proper, (3) if the
40
<PAGE>
payment be made, using reasonable efforts to obtain a refund thereof in
appropriate administrative and judicial proceedings, or (4) taking such other
action as is reasonably requested by the Indemnity Provider from time to time.
The party controlling the response to any Claim shall consult in good faith
with the non-controlling party and shall keep the non-controlling party
reasonably informed as to the conduct of the response to such Claim; provided,
that all decisions ultimately shall be made in the discretion of the controlling
party. The parties agree that an Indemnified Person may at any time decline to
take further action with respect to the response to such Claim and may settle
such Claim if such Indemnified Person shall waive its rights to any indemnity
from the Indemnity Provider that otherwise would be payable in respect of such
Claim (and any future Claim, the pursuit of which is precluded by reason of such
resolution of such Claim) and shall pay to the Indemnity Provider any amount
previously paid or advanced by the Indemnity Provider pursuant to this Section
11.1 by way of indemnification or advance for the payment of an amount regarding
such Claim.
Notwithstanding the foregoing provisions of this Section 11.1, an
Indemnified Person shall not be required to take any action (except to consult
with the Indemnity Provider and to keep the Indemnity Provider reasonably
informed as set forth above unless such Indemnified Person determines in good
faith that there exists a conflict of interest between such Indemnified Person
and the Indemnity Provider) and no Indemnity Provider shall be permitted to
respond to any Claim in its own name or that of the Indemnified Person unless
(A) the Indemnity Provider shall have agreed to pay and shall pay to such
Indemnified Person on demand and on an After Tax Basis all reasonable costs,
losses and expenses that such Indemnified Person actually incurs in connection
with such Claim, including without limitation all reasonable legal, accounting
and investigatory fees and disbursements and, if the Indemnified Person has
informed the Indemnity Provider that it intends to contest such Claim (whether
or not the control of the contest is then assumed by the Indemnity Provider),
the Indemnity Provider shall have agreed that the Claim is an indemnifiable
Claim hereunder, (B) in the case of a Claim that must be pursued in the name of
an Indemnified Person (or an Affiliate thereof), the amount of the potential
indemnity (taking into account all similar or logically related Claims that have
been or could be raised for which the Indemnity Provider may be liable to pay an
indemnity under this Section 11.1) exceeds $25,000 (or such lesser amount as may
be subsequently agreed between the Indemnity Provider and the Indemnified
Person), (C) the Indemnified Person shall have reasonably determined that the
action to be taken will not result in any material danger of sale, forfeiture or
loss of the Property, or any part thereof or interest therein, will not
interfere with the payment of Rent, and will not result in risk of criminal
liability, (D) if such Claim shall involve the payment of any amount prior to
the resolution of such Claim, the Indemnity Provider shall provide to the
Indemnified Person an interest-free advance in an amount equal to the amount
that the Indemnified Person is required to pay (with no additional net after-tax
cost to such Indemnified Person) prior to the date such payment is due, (E) in
the case of a Claim that must be pursued in the name of an Indemnified Person
(or an Affiliate thereof), the Indemnity Provider shall have provided to such
Indemnified Person an opinion of independent counsel selected by the Indemnity
Provider and
41
<PAGE>
reasonably satisfactory to the Indemnified Person stating that a reasonable
basis exists to contest such Claim (or, in the case of an appeal of an adverse
determination, an opinion of such counsel to the effect that the position
asserted in such appeal will more likely than not prevail) and (F) no Event of
Default shall have occurred and be continuing. In no event shall an Indemnified
Person be required to appeal an adverse judicial determination to the United
States Supreme Court. In addition, an Indemnified Person shall not be required
to contest any Claim in its name (or that of an Affiliate) if the subject matter
thereof shall be of a continuing nature and shall have previously been decided
adversely by a court of competent jurisdiction pursuant to the contest
provisions of this Section 11.1, unless there shall have been a change in law
(or interpretation thereof) and the Indemnified Person shall have received, at
the Indemnity Provider's expense, an opinion of independent counsel selected by
the Indemnity Provider and reasonably acceptable to the Indemnified Person
stating that as a result of such change in law (or interpretation thereof), it
is more likely than not that the Indemnified Person will prevail in such
contest. In no event shall the Indemnity Provider be permitted to negotiate or
settle any Claim without the consent of the Indemnified Person to the extent any
loss, adjustment or settlement involves, or is reasonably likely to involve, any
performance by or adverse admission by or with respect to the Indemnified
Person.
11.2. GENERAL TAX INDEMNITY.
(a) Subject to the following paragraph (b), the Indemnity Provider
shall pay and assume liability for, and does hereby agree to indemnify,
protect and defend each Property and all Indemnified Persons, and hold them
harmless against, all Impositions on an After Tax Basis, and all payments
pursuant to the Operative Agreements shall be made free and clear of and
without deduction for any and all present and future Impositions.
(b) Notwithstanding anything to the contrary in Section 11.2(a)
hereof, the following shall be excluded from the indemnity required by
Section 11.2(a):
(i) Taxes (other than Taxes that are, or are in the nature
of, sales, use, rental, value added, transfer or property taxes) that
are imposed on a Indemnified Person (other than the Lessor, the Owner
Trustee and the Trust except to the extent of fees and compensation
paid to the Trust Company for acting as Owner Trustee under the
Operative Agreements) by the United States federal government that are
based on or measured by the net income or capital (including without
limitation taxes based on capital gains and minimum taxes) of such
Person; provided, that this clause (i) shall not be interpreted to
prevent a payment from being made on an After Tax Basis if such
payment is otherwise required to be so made;
(ii) Taxes (other than Taxes that are, or are in the nature
of, sales, use, rental, value added, transfer or property taxes) that
are imposed on any
42
<PAGE>
Indemnified Person (other than the Lessor, the Owner Trustee and the
Trust except to the extent of fees and compensation paid to the Trust
Company for acting as Owner Trustee under the Operative Agreements) by
any state or local jurisdiction or taxing authority within any state
or local jurisdiction and that are based upon or measured by the net
income or capital (including without limitation taxes based on capital
gains and minimum taxes) of such Person; provided, that this clause
(ii) shall not be interpreted to prevent a payment from being made on
an After Tax Basis if such payment is otherwise required to be so
made;
(iii) any Tax to the extent it relates to any act, event or
omission that occurs after the termination of the Lease and redelivery
or sale of the Property in accordance with the terms of the Lease (but
not any Tax that relates to such termination, redelivery or sale
and/or to any period prior to such termination, redelivery or sale);
and
(iv) any Taxes which are imposed on an Indemnified Person as
a result of the gross negligence or willful misconduct of such
Indemnified Person itself, as determined by a court of competent
jurisdiction, but not Taxes imposed as a result of ordinary negligence
of such Indemnified Person;
(c) (i) Subject to the terms of Section 11.2(f), the Indemnity
Provider shall pay or cause to be paid all Impositions required to be
paid under or pursuant to Section 11.2(a) directly to the taxing
authorities where feasible and otherwise to the Indemnified Person, as
appropriate, and the Indemnity Provider shall at its own expense, upon
such Indemnified Person's reasonable request, furnish to such
Indemnified Person copies of official receipts or other satisfactory
proof evidencing such payment.
(ii) In the case of Impositions for which no contest is conducted
pursuant to Section 11.2(f) and which the Indemnity Provider pays
directly to the taxing authorities, the Indemnity Provider shall pay
such Impositions prior to the latest time permitted by the relevant
taxing authority for timely payment. In the case of Impositions for
which the Indemnity Provider reimburses an Indemnified Person, the
Indemnity Provider shall do so within thirty (30) days after receipt
by the Indemnity Provider of demand by such Indemnified Person
describing in reasonable detail the nature of the Imposition and the
basis for the demand (including without limitation the computation of
the amount payable), accompanied by receipts or other reasonable
evidence of such demand. In the case of Impositions for which a
contest is conducted pursuant to Section 11.2(f), the Indemnity
Provider shall pay such Impositions or reimburse such Indemnified
Person for such Impositions, to the extent not previously paid or
reimbursed pursuant to subsection (a), prior to the latest time
permitted by the relevant taxing
43
<PAGE>
authority for timely payment after conclusion of all contests under
Section 11.2(f).
(iii) At the Indemnity Provider's request, the amount of any
indemnification payment by the Indemnity Provider pursuant to
subsection (a) shall be verified and certified by an independent
public accounting firm mutually acceptable to the Indemnity Provider
and the Indemnified Person. The fees and expenses of such independent
public accounting firm shall be paid by the Indemnity Provider unless
such verification shall result in an adjustment in the Indemnity
Provider's favor of fifteen percent (15%) or more of the payment as
computed by the Indemnified Person, in which case such fee shall be
paid by the Indemnified Person.
(d) The Indemnity Provider shall be responsible for preparing and
filing any real and personal property or ad valorem tax returns in respect
of each Property and any other tax returns required for the Owner Trustee
respecting the transactions described in the Operative Agreements. The
Indemnity Provider shall undertake reasonable diligence to determine if any
other report or tax return shall be required to be made with respect to any
obligations of the Indemnity Provider under or arising out of subsection
(a) and, with respect to such other reports or tax returns of which the
Indemnity Provider has knowledge, the Indemnity Provider, at its sole cost
and expense, shall notify the relevant Indemnified Person of such
requirement and (except if such Indemnified Person notifies the Indemnity
Provider that such Indemnified Person intends to prepare and file such
report or return) (A) to the extent required or permitted by and consistent
with Legal Requirements, make and file in the Indemnity Provider's name
such return, statement or report; and (B) in the case of any other such
return, statement or report required to be made in the name of such
Indemnified Person, advise such Indemnified Person of such fact and prepare
such return, statement or report for filing by such Indemnified Person or,
where such return, statement or report shall be required to reflect items
in addition to any obligations of the Indemnity Provider under or arising
out of subsection (a), provide such Indemnified Person at the Indemnity
Provider's expense with information sufficient to permit such return,
statement or report to be properly made with respect to any obligations of
the Indemnity Provider under or arising out of subsection (a). Such
Indemnified Person shall, upon the Indemnity Provider's request and at the
Indemnity Provider's expense, provide any data maintained by such
Indemnified Person with respect to each Property which the Indemnity
Provider may reasonably require to prepare any required tax returns or
reports.
(e) As between the Indemnity Provider on one hand, and each Financing
Party on the other hand, the Indemnity Provider shall be responsible for,
and the Indemnity Provider shall indemnify and hold harmless each Financing
Party (without duplication of any indemnification required by subsection
(a)) on an After Tax Basis against, any obligation for United States or
foreign withholding taxes or
44
<PAGE>
similar levies, imposts, charges, fees, deductions or withholdings
(collectively, "Withholdings") imposed in respect of the interest payable
on the Notes, Holder Yield payable on the Certificates or with respect to
any other payments under the Operative Agreement (all such payments being
referred to herein as "Exempt Payments" to be made without deduction,
withholding or set off) (and, if any Financing Party receives a demand for
such payment from any taxing authority or a Withholding is otherwise
required with respect to any Exempt Payment, the Indemnity Provider shall
discharge such demand on behalf of such Financing Party); provided,
however, that the obligation of the Indemnity Provider under this Section
11.2(e) shall not apply to:
(i) Withholdings on any Exempt Payment to any Financing Party
which is a non-U.S. Person unless such Financing Party is, on the date
hereof (or on the date it becomes a Financing Party hereunder) and on
the date of any change in the principal place of business or the
lending office of such Financing Party, entitled to submit a Form 1001
(relating to such Financing Party and entitling it to a complete
exemption from Withholding on such Exempt Payment) or Form 4224 or is
otherwise subject to exemption from Withholding with respect to such
Exempt Payment (except where the failure of the exemption results from
a change in the principal place of business of the Lessee; provided,
if a failure of exemption for any Financing Party results from a
change in the principal place of business or lending office of any
other Financing Party, then such other Financing Party shall be liable
for any Withholding or indemnity with respect thereto), or
(ii) Any U.S. Taxes imposed solely by reason of the failure by a
non-U.S. Person to comply with applicable certification, information,
documentation or other reporting requirements concerning the
nationality, residence, identity or connections with the United States
of America of such non-U.S. Person if such compliance is required by
statute or regulation of the United States of America as a
precondition to relief or exemption from such U.S. Taxes.
For the purposes of this Section 11.2(e), (A) "U.S. Person" shall mean a
citizen, national or resident of the United States of America, a
corporation, partnership or other entity created or organized in or under
any laws of the United States of America or any State thereof, or any
estate or trust that is subject to Federal income taxation regardless of
the source of its income, (B) "U.S. Taxes" shall mean any present or future
tax, assessment or other charge or levy imposed by or on behalf of the
United States of America or any taxing authority thereof or therein, (C)
"Form 1001" shall mean Form 1001 (Ownership, Exemption, or Reduced Rate
Certificate) of the Department of the Treasury of the United States of
America and (D) "Form 4224" shall mean Form 4224 (Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States) of the Department of Treasury of
the United States of America (or in relation to
45
<PAGE>
either such Form such successor and related forms as may from time to time
be adopted by the relevant taxing authorities of the United States of
America to document a claim to which such Form relates). Each of the Forms
referred to in the foregoing clauses (C) and (D) shall include such
successor and related forms as may from time to time be adopted by the
relevant taxing authorities of the United States of America to document a
claim to which such Form relates.
If a Financing Party or an Affiliate with whom such Financing Party
files a consolidated tax return (or equivalent) subsequently receives the
benefit in any country of a tax credit or an allowance resulting from U.S.
Taxes with respect to which it has received a payment of an additional
amount under this Section 11.2(e), such Financing Party will pay to the
Indemnity Provider such part of that benefit as in the reasonable opinion
of such Financing Party will leave it (after such payment) in a position no
more and no less favorable than it would have been in if no additional
payment had been required to be paid, provided, always that (i) such
Financing Party will be the sole judge of the amount of any such benefit
and of the date on which it is received, (ii) such Financing Party will
have the absolute discretion as to the order and manner in which it employs
or claims tax credits and allowances available to it and (iii) such
Financing Party will not be obliged to disclose to the Borrower any
information regarding its tax affairs or tax computations.
Each non-U.S. Person that shall become a Financing Party after the
date hereof shall, upon the effectiveness of the related transfer or
otherwise upon becoming a Financing Party hereunder, be required to provide
all of the forms and statements referenced above or other evidences of
exemption from Withholdings.
(f) If a written Claim is made against any Indemnified Person or if
any proceeding shall be commenced against such Indemnified Person
(including without limitation a written notice of such proceeding), for any
Impositions, the provisions in Section 11.1 relating to notification and
rights to contest shall apply; provided, however, that the Indemnity
Provider shall have the right to conduct and control such contest only if
such contest involves a Tax other than a Tax on net income of the
Indemnified Person and can be pursued independently from any other
proceeding involving a Tax liability of such Indemnified Person.
11.3. INCREASED COSTS, ILLEGALITY, ETC.
(a) If, due to either (i) the introduction of, or any change in or in
the interpretation of, any law or regulation or (ii) the compliance with
any guideline or request hereafter adopted, promulgated or made by any
central bank or other governmental authority (whether or not having the
force of law), there shall be any increase in the cost to any Financing
Party of agreeing to make or making, funding or maintaining Advances, then
the Lessee shall from time to time, promptly after demand by such Financing
Party (with a copy of such demand to the Agent but
46
<PAGE>
subject to the terms of Section 2.11 of the Credit Agreement and 3.9 of the
Trust Agreement, as the case may be), pay to the Agent for the account of
such Financing Party additional amounts sufficient to compensate such
Financing Party for such increased cost. A certificate setting forth in
reasonable detail the amount of such increased cost and the basis therefor,
submitted to the Lessee and the Agent by such Financing Party, shall be
presumptively correct for all purposes, absent manifest error.
(b) If any Financing Party determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law, which in
the case of all of the foregoing in this sentence is promulgated or made
after the date hereof) affects or would affect the amount of capital
required or expected to be maintained by such Financing Party or any
corporation controlling such Financing Party and that the amount of such
capital is increased by or based upon the existence of such Financing
Party's commitment to make Advances or upon the Advances, then, promptly
after demand by such Financing Party (with a copy of such demand to the
Agent but subject to the terms of Section 2.11 of the Credit Agreement and
3.9 of the Trust Agreement), the Lessee shall pay to the Agent for the
account of such Financing Party, from time to time as specified by such
Financing Party, additional amounts sufficient to compensate such Financing
Party or such corporation in the light of such circumstances, to the extent
that such Financing Party reasonably determines such increase in capital to
be allocable to the existence of such Financing Party's commitment to make
such Advances. A certificate setting forth in reasonable detail such
amounts and the basis therefor submitted to the Lessee and the Agent by
such Financing Party shall be presumptively correct for all purposes,
absent manifest error.
(c) Without limiting the effect of the foregoing, the Lessee shall pay
to each Financing Party on the last day of the Interest Period therefor so
long as such Financing Party is maintaining reserves against "Eurocurrency
liabilities" under Regulation D an additional amount (determined by such
Financing Party and notified to the Lessee through the Agent) equal to the
product of the following for each Eurodollar Loan or Eurodollar Holder
Advance, as the case may be, for each day during such Interest Period:
(i) the principal amount of such Eurodollar Loan or Eurodollar
Holder Advance, as the case may be, outstanding on such day; and
(ii) the remainder of (x) a fraction the numerator of which is
the rate (expressed as a decimal) at which interest accrues on such
Eurodollar Loan or Eurodollar Holder Advance, as the case may be, for
such Interest Period as provided in the Credit Agreement or the Trust
Agreement, as the case may be (less the Applicable Margin), and the
denominator of which is one (1) minus the effective rate (expressed as
a decimal) at which such
47
<PAGE>
reserve requirements are imposed on such Financing Party on such day
minus (y) such numerator; and
(iii) 1/360.
(d) Without affecting its rights under Sections 11.3(a), 11.3(b) or
11.3(c) or any other provision of any Operative Agreement, each Financing
Party agrees that if there is any increase in any cost to or reduction in
any amount receivable by such Financing Party with respect to which the
Lessee would be obligated to compensate such Financing Party pursuant
to Sections 11.3(a) or 11.3(b), such Financing Party shall use reasonable
efforts to select an alternative office for Advances which would not result
in any such increase in any cost to or reduction in any amount receivable
by such Financing Party; provided, however, that no Financing Party shall
be obligated to select an alternative office for Advances if such Financing
Party determines that (i) as a result of such selection such Financing
Party would be in violation of any applicable law, regulation, treaty, or
guideline, or would incur additional costs or expenses or (ii) such
selection would be inadvisable for regulatory reasons or materially
inconsistent with the interests of such Financing Party.
(e) With reference to the obligations of the Lessee set forth in
Sections 11.3(a) through 11.3(d), the Lessee shall not have any obligation
to pay to any Financing Party amounts owing under such Sections for any
period which is more than one (1) year prior to the date upon which the
request for payment therefor is delivered to the Lessee.
(f) Notwithstanding any other provision of this Agreement, if any
Financing Party shall notify the Agent that the introduction of or any
change in or in the interpretation of any law or regulation makes it
unlawful, or any central bank or other governmental authority asserts that
it is unlawful, for any Financing Party to perform its obligations
hereunder to make or maintain Eurodollar Loans or Eurodollar Holder
Advances, as the case may be, then (i) each Eurodollar Loan or Eurodollar
Holder Advance, as the case may be, will automatically, at the earlier of
the end of the Interest Period for such Eurodollar Loan or Eurodollar
Holder Advance, as the case may be, or the date required by law, convert
into an ABR Loan or an ABR Holder Advance, as the case may be, and (iii)
the obligation of the Financing Parties to make, convert or continue
Eurodollar Loans or Eurodollar Holder Advances, as the case may be, shall
be suspended until the Agent shall notify the Lessee that such Financing
Party has determined that the circumstances causing such suspension no
longer exist.
11.4. FUNDING/CONTRIBUTION INDEMNITY.
Subject to the provisions of Section 2.11(a) of the Credit Agreement and
3.9(a) of the Trust Agreement, as the case may be, the Lessee agrees to
indemnify each Financing Party
48
<PAGE>
and to hold each Financing Party harmless from any l oss or reasonable expense
which such Financing Party may sustain or incur as a consequence of (a) any
default not attributable to such Financing Party in connection with the drawing
of funds for any Advance, (b) any default in making any prepayment after a
notice thereof has been given in accordance with the provisions of the Operative
Agreements or (c) the making of a voluntary or involuntary prepayment of
Eurodollar Loans or Eurodollar Holder Advances, as the case may be, on a day
which is not the last day of an Interest Period with respect thereto. Such
indemnification shall be in an amount equal to the excess, if any, of (x) the
amount of interest or Holder Yield, as the case may be, which would have accrued
on the amount so prepaid, or not so borrowed, accepted, converted or continued
for the period from the date of such prepayment or of such failure to borrow,
accept, convert or continue to the last day of such Interest Period (or, in the
case of a failure to borrow, accept, convert or continue, the Interest Period
that would have commenced on the date of such failure) in each case at the
applicable Eurodollar Rate plus the Applicable Margin for such Loan or Holder
Advance, as the case may be, for such Interest Period over (y) the amount of
interest (as determined by such Financing Party in its reasonable judgment)
which would have accrued to such Financing Party on such amount by (i) (in the
case of the Lenders) reemploying such funds in loans of the same type and amount
during the period from the date of prepayment or failure to borrow to the last
day of the then applicable Interest Period (or, in the case of a failure to
borrow, the Interest Period that would have commenced on the date of such
failure) and (ii) (in the case of the Holders) placing such amount on deposit
for a comparable period with leading banks in the relevant interest rate market.
This covenant shall survive the termination of the Operative Agreements and the
payment of all other amounts payable hereunder.
11.5 EXPRESS INDEMNIFICATION FOR ORDINARY NEGLIGENCE, STRICT LIABILITY,
ETC.
WITHOUT LIMITING THE GENERALITY OF THE INDEMNIFICATION PROVISIONS OF ANY
AND ALL OF THE OPERATIVE AGREEMENTS, EACH PERSON PROVIDING INDEMNIFICATION OF
ANOTHER PERSON UNDER ANY OPERATIVE AGREEMENT HEREBY FURTHER EXPRESSLY RELEASES
EACH BENEFICIARY OF ANY SUCH INDEMNIFICATION FROM ALL CLAIMS FOR LOSS OR DAMAGE,
DESCRIBED IN ANY OPERATIVE AGREEMENT, CAUSED BY ANY ACT OR OMISSION ON THE PART
OF ANY SUCH BENEFICIARY ATTRIBUTABLE TO THE ORDINARY NEGLIGENCE (WHETHER SOLE OR
CONTRIBUTORY) OR STRICT LIABILITY OF ANY SUCH BENEFICIARY, AND INDEMNIFIES,
EXONERATES AND HOLDS EACH SUCH BENEFICIARY FREE AND HARMLESS FROM AND AGAINST
ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS, CLAIMS, LOSSES, COSTS,
LIABILITIES, DAMAGES AND EXPENSES (INCLUDING WITHOUT LIMITATION ATTORNEY'S FEES
AND EXPENSES), DESCRIBED ABOVE, INCURRED BY ANY SUCH BENEFICIARY (IRRESPECTIVE
OF WHETHER ANY SUCH BENEFICIARY IS A PARTY TO THE ACTION FOR WHICH
INDEMNIFICATION UNDER THIS AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT IS SOUGHT)
ATTRIBUTABLE TO THE ORDINARY NEGLIGENCE
49
<PAGE>
(WHETHER SOLE OR CONTRIBUTORY) OR STRICT LIABILITY OF ANY SUCH BENEFICIARY.
SECTION 12. MISCELLANEOUS.
12.1. SURVIVAL OF AGREEMENTS.
The representations, warranties, covenants, indemnities and agreements of
the parties provided for in the Operative Agreements, and the parties'
obligations under any and all thereof, shall survive the execution and delivery
of this Agreement, the transfer of any Property to the Owner Trustee, the
acquisition of any Property (or any of its components), the construction of any
Improvements, the Completion of any Property, any disposition of any interest of
the Owner Trustee in any Property or any interest of the Holders in the Trust
Estate, the payment of the Notes and any disposition of the Notes and shall be
and continue in effect notwithstanding any investigation made by any party and
the fact that any party may waive compliance with any of the other terms,
provisions or conditions of any of the Operative Agreements. Except as otherwise
expressly set forth herein or in other Operative Agreements, the indemnities of
the parties provided for in the Operative Agreements shall survive the
expiration or termination of any thereof.
12.2. NOTICES.
All notices required or permitted to be given under or otherwise given in
connection with any Operative Agreement shall be in writing. Notices may be
served by certified or registered mail, postage paid with return receipt
requested; by private courier, prepaid; by telex, facsimile, or other
telecommunication device capable of transmitting or creating a written record;
or personally. Mailed notices shall be deemed delivered five (5) days after
mailing, properly addressed. Couriered notices shall be deemed delivered when
delivered as addressed, or if the addressee refuses delivery, when presented for
delivery notwithstanding such refusal. Telex or telecommunicated notices shall
be deemed delivered when receipt is either confirmed by confirming transmission
equipment or acknowledged by the addressee or its office. Personal delivery
shall be effective when accomplished. Unless a party changes its address by
giving notice to the other party as provided herein, notices shall be delivered
to the parties at the following addresses:
50
<PAGE>
If to the Construction Agent or the Lessee, to such entity at the
following address:
AOR Synthetic Real Estate, Inc.
c/o American Oncology Resources, Inc.
16825 Northchase Drive
Suite 1300
Houston, Texas 77060
Attention: L. Fred Pounds,
Chief Financial Officer
Telephone: (713) 873-2674
Telecopy: (713) 873-7762
If to the Guarantor, to such entity at the following address:
American Oncology Resources, Inc.
16825 Northchase Drive
Suite 1300
Houston, Texas 77060
Attention: L. Fred Pounds,
Chief Financial Officer
Telephone: (713) 873-2674
Telecopy: (713) 873-7762
If to any Tranche A Guarantor, to such entity c/o AOR at the
following address:
[Name of applicable Tranche A Guarantor]
c/o American Oncology Resources, Inc.
16825 Northchase Drive
Suite 1300
Houston, Texas 77060
Attention: L. Fred Pounds,
Chief Financial Officer
Telephone: (713) 873-2674
Telecopy: (713) 873-7762
51
<PAGE>
with a copy to:
Mayor, Day, Caldwell & Keeton, L.L.P.
700 Louisiana, Suite 1900
Houston, Texas 77002
Attention: Geoffrey K. Walker
Telephone: (713) 225-7020
Telecopy: (713) 225-7047
If to the Owner Trustee, to it at the
following address:
First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Val T. Orton,
Vice President
Telephone: (801) 246-5300
Telecopy: (801) 246-5053
If to the Holders, to each such Holder at the address set forth for
such Holder on Schedule I of the Trust Agreement.
If to the Agent, to it at the following address:
First Union National Bank
c/o First Union Capital Markets Group
DC-6
301 South College Street
Charlotte, North Carolina 28288-0166
Attention: Jane O. Hurley,
Capital Markets Services
Telephone: (704) 383-3812
Telecopy: (704) 383-7989
If to any Lender, to it at the address set forth for such Lender
in Schedule 1.1 of the Credit Agreement.
From time to time any party may designate additional parties and/or
another address for notice purposes by notice to each of the other parties
hereto. Each notice hereunder shall be effective upon receipt or refusal
thereof.
52
<PAGE>
12.3. COUNTERPARTS.
This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one (1) and the same
instrument.
12.4. TERMINATIONS, AMENDMENTS, WAIVERS, ETC.; UNANIMOUS VOTE MATTERS.
Each Operative Agreement may be terminated, amended, supplemented, waived
or modified only by an instrument in writing signed by, subject to Article VIII
of the Trust Agreement regarding termination of the Trust Agreement, the
Majority Secured Parties and each Credit Party (to the extent such Credit Party
is a party to such Operative Agreement); provided, to the extent no Default or
Event of Default shall have occurred and be continuing, the Majority Secured
Parties shall not amend, supplement, waive or modify any provision of any
Operative Agreement in such a manner as to adversely affect the rights of any
Credit Party without the prior written consent (to be determined in good faith
with such determination not to be unreasonably delayed) of such Credit Party. In
addition, (a) the Unanimous Vote Matters shall require the consent of each
Lender and each Holder affected by such matter and (b) any provision of any
Operative Agreement incorporated by reference or otherwise referenced in a
second Operative Agreement shall remain, respecting such second Operative
Agreement, in its original form without regard to any such termination,
amendment, supplement, waiver or modification in the first Operative Agreement
except if such termination, amendment, supplement, waiver or modification has
been agreed to by an instrument in writing signed by, subject to Article VIII of
the Trust Agreement regarding termination of the Trust Agreement, the Majority
Secured Parties and each Credit Party (to the extent such Credit Party is a
party to such Operative Agreement).
Notwithstanding the foregoing, no such termination, amendment, supplement,
waiver or modification shall, without the consent of the Agent and, to the
extent affected thereby, each Lender and each Holder (collectively, the
"Unanimous Vote Matters") (i) reduce the amount of any Note or any Certificate,
extend the scheduled date of maturity of any Note, extend the scheduled
Expiration Date, extend any date of payment of any Note or Certificate, reduce
the stated rate of interest payable on any Note or reduce the stated Holder
Yield payable on any Certificate (other than as a result of waiving the
applicability of any post-default increase in interest rates or Holder Yields),
modify the priority of any Lien in favor of the Agent under any Security
Document, subordinate any obligation owed to any Lender or Holder, reduce any
Lender Facility Fees or any Holder Facility Fees payable under the Participation
Agreement, extend the scheduled date of payment of any Lender Facility Fees or
any Holder Facility Fees or increase the amount or extend the expiration date of
any Lender's Commitment or the Holder Commitment of any Holder, or (ii)
terminate, amend, supplement, waive or modify any provision of this Section 12.4
or reduce the percentages specified in the definitions of Majority Lenders,
Majority Holders or Majority Secured Parties, or consent to the assignment or
transfer by the Owner Trustee of any of its rights and obligations under any
Credit Document or release a material portion of the Collateral (except in
accordance with Section 8.8) or release the Construction Agent, the Lessee or
AOR from their respective obligations under any Operative Agreement, release all
or substantially all of the Tranche A Guarantors from their obligations
53
<PAGE>
under Section 8B of the Credit Agreement or consent to the assignment or
transfer by any Credit Party (except with respect to the rights of Lessee under
Section 25.2 of the Lease) of its rights or obligations under the Operative
Agreements, or (iii) terminate, amend, supplement, waive or modify any provision
of Section 7 of the Credit Agreement, or (iv) permit Advances for Work in excess
of the Construction Budget, or (v) eliminate the automatic option under Section
5.3(b) of the Agency Agreement requiring that the Construction Agent pay certain
liquidated damages in exchange for the conveyance of a Property to the
Construction Agent. Any such termination, amendment, supplement, waiver or
modification shall apply equally to each of the Lenders and the Holders and
shall be binding upon all the parties to this Agreement. In the case of any
waiver, each party to this Agreement shall be restored to its former position
and rights under the Operative Agreements prior to the event or condition so
waived, and any Default or Event of Default waived shall be deemed to be cured
and not continuing; but no such waiver shall extend to any subsequent or other
Default or Event of Default, or impair any right consequent thereon.
If at a time when the conditions precedent set forth in the Operative
Agreements to any Loan are, in the opinion of the Majority Lenders, satisfied,
any Lender shall fail to fulfill its obligations to make such Loan (any such
Lender, a "Defaulting Lender") then, for so long as such failure shall continue,
the Defaulting Lender shall (unless the Lessee and the Construction Agent and
the Majority Lenders, determined as if the Defaulting Lender were not a
"Lender", shall otherwise consent in writing) be deemed for all purposes
relating to terminations, amendments, supplements, waivers or modifications
under the Operative Agreements to have no Loans, shall not be treated as a
"Lender" when performing the computation of Majority Lenders or Majority Secured
Parties, and shall have no rights under this Section 12.4; provided, that any
action taken pursuant to the second paragraph of this Section 12.4 shall not be
effective as against the Defaulting Lender unless it otherwise consents.
If at a time when the conditions precedent set forth in the Operative
Agreements to any Holder Advance are, in the opinion of the Majority Holders,
satisfied, any Holder shall fail to fulfill its obligations to make such Holder
Advance (any such Holder, a "Defaulting Holder") then, for so long as such
failure shall continue, the Defaulting Holder shall (unless the Lessee and the
Construction Agent and the Majority Holders, determined as if the Defaulting
Holder were not a "Holder", shall otherwise consent in writing) be deemed for
all purposes relating to terminations, amendments, supplements, waivers or
modifications under the Operative Agreements to have no Holder Advances, shall
not be treated as a "Holder" when performing the computation of Majority Holders
or Majority Secured Parties, and shall have no rights under this Section 12.4;
provided, that any action taken pursuant to the second paragraph of this Section
12.4 shall not be effective as against the Defaulting Holder unless it otherwise
consents.
12.5. HEADINGS, ETC.
The Table of Contents and headings of the various Articles and Sections of
this Agreement are for convenience of reference only and shall not modify,
define, expand or limit any of the terms or provisions hereof.
54
<PAGE>
12.6. PARTIES IN INTEREST.
Except as expressly provided herein, none of the provisions of this
Agreement are intended for the benefit of any Person except the parties hereto.
12.7. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL; VENUE; ARBITRATION.
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA. Any legal
action or proceeding with respect to this Agreement or any other Operative
Agreement may be brought in the courts of the State of North Carolina in
Mecklenburg County or of the United States for the Western District of the
State of North Carolina, and, by execution and delivery of this Agreement,
each of the parties to this Agreement hereby irrevocably accepts for itself
and in respect of its property, generally and unconditionally, the
nonexclusive jurisdiction of such courts. Each of the parties to this
Agreement further irrevocably consents to the service of process out of any
of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid,
to it at the address set out for notices pursuant to Section 12.2, such
service to become effective three (3) days after such mailing. Nothing
herein shall affect the right of any party to serve process in any other
manner permitted by Law or to commence legal proceedings or to otherwise
proceed against any party in any other jurisdiction.
(b) EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY, TO THE
FULLEST EXTENT ALLOWED BY APPLICABLE LAW, WAIVES TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, ANY OTHER OPERATIVE
AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
(c) To the fullest extent allowed by applicable law, each of the
parties to this Agreement hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement
or any other Operative Agreement brought in the courts referred to in
subsection (a) above and hereby further irrevocably waives and agrees not
to plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient forum.
(d) Notwithstanding the provisions of Section 12.7(a) or of any other
Operative Agreement to the contrary, upon demand of any party hereto,
whether made before or after institution of any judicial proceeding
(subject to the following limitation), any dispute, claim or controversy
arising out of, connected with or relating to this Agreement or any other
Operative Agreement ("Disputes") between or among parties to this Agreement
and/or any other Operative Agreement, or any of them, shall be resolved
55
<PAGE>
by binding arbitration as provided herein; provided, however, that no party
may demand arbitration in any judicial proceeding to which it is a party
more than ninety (90) days from the later of (i) its commencement of such
proceeding or (ii) the date it is served with a complaint, counterclaim or
third-party claim in such proceeding. Disputes may include, without
limitation, tort claims, counterclaims, claims brought as class actions,
claims arising from this Agreement and/or any other Operative Agreement
executed in the future, or claims arising out of or connected with the
transactions contemplated by this Agreement and/or any other Operative
Agreement. Arbitration shall be conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules")
of the American Arbitration Association (the "AAA"), as in effect from time
to time, and Title 9 of the U.S. Code, as amended. All arbitration hearings
shall be conducted in the city in which the principal office of either the
Agent or the Borrower is located. The expedited procedures set forth in
Rule 51 et seq. of the Arbitration Rules shall be applicable to claims of
less than $1,000,000. All applicable statutes of limitation shall apply to
any Dispute. All arbitrations commenced with respect to any of the
Operative Agreements shall be consolidated for hearing before the same
panel of arbitrators as prescribed herein. Any attorney-client privilege or
other protection against disclosure of confidential information, including
without limitation any protection afforded the work product of any
attorney, that would otherwise be claimed by any party shall be available
to and may be claimed by any such party in any arbitration proceeding. A
judgment upon the award may be entered in any court having jurisdiction.
The panel from which all arbitrators are selected shall be comprised of
licensed attorneys. The single arbitrator selected for expedited procedure
shall be a retired judge from the highest court of general jurisdiction,
state or federal, of the state where the hearing will be conducted.
Notwithstanding the foregoing, this arbitration provision does not apply to
Disputes under or related to Interest Rate Protection Agreements. An
arbitration arising from an Interest Rate Protection Agreement shall not be
consolidated with any other arbitration hereunder without the consent of
all parties to the arbitrations that are proposed to be consolidated.
Notwithstanding the preceding binding arbitration provisions, the
parties hereto agree to preserve, without diminution, certain remedies that
any party hereto may employ or exercise freely, either alone, in
conjunction with or during a Dispute. Any party hereto shall have the
right to proceed in any court of proper jurisdiction or by self-help to
exercise or prosecute the following remedies, as applicable: (a) all rights
to foreclose against any Collateral by exercising a power of sale granted
pursuant to any of the Operative Agreements or under applicable law other
than judicial foreclosure and sale, including a proceeding to confirm the
sale; (b) all rights of self-help, including peaceful occupation of real
property and collection of rents, setoff, and peaceful possession of
personal property; (c) obtaining provisional or ancillary remedies,
including injunctive relief, sequestration, garnishment, attachment,
appointment of a receiver and filing an involuntary bankruptcy proceeding;
and (d) when applicable, a judgment by confession of judgment.
Preservation of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a Dispute.
56
<PAGE>
12.8. SEVERABILITY.
Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
12.9. LIABILITY LIMITED.
(a) The Lenders, the Agent, the Credit Parties, the Owner Trustee
and the Holders each acknowledge and agree that the Owner Trustee is
(except as otherwise expressly provided herein or therein) entering into
this Agreement and the other Operative Agreements to which it is a party
(other than the Trust Agreement and to the extent otherwise provided in
Section 6.1 of this Agreement), solely in its capacity as trustee under the
Trust Agreement and not in its individual capacity and that the Trust
Company shall not be liable or accountable under any circumstances
whatsoever in its individual capacity for or on account of any statements,
representations, warranties, covenants or obligations stated to be those of
the Owner Trustee, except for its own gross negligence or willful
misconduct and as otherwise expressly provided herein or in the other
Operative Agreements.
(b) Anything to the contrary contained in this Agreement, the Credit
Agreement, the Notes or in any other Operative Agreement notwithstanding,
no officer, director or shareholder (other than any Credit Party) of any
party to any Operative Agreement (but excluding all Credit Parties which
shall be fully liable for all their obligations under the Operative
Agreements) shall be personally liable in any respect for any liability or
obligation arising hereunder or in any other Operative Agreement including
without limitation the payment of the principal of, or interest on, the
Notes, or for monetary damages for the breach of performance of any of the
covenants contained in the Credit Agreement, the Notes, this Agreement, the
Security Agreement or any of the other Operative Agreements. The Lenders,
the Holders and the Agent agree that, in the event any remedies under any
Operative Agreement are pursued, neither the Lenders, the Holders nor the
Agent shall have any recourse against any officer, director or shareholder
(other than any Credit Party) of any party to any Operative Agreement (but
excluding all Credit Parties which shall be fully liable for all their
obligations under the Operative Agreements), for any deficiency, loss or
Claim for monetary damages or otherwise resulting therefrom and recourse
shall be had solely and exclusively against the Trust Estate (excluding
Excepted Payments) and the Credit Parties (with respect to the Credit
Parties' obligations under the Operative Agreements); but nothing contained
herein shall be taken to prevent recourse against or the enforcement of
remedies against the Trust Estate (excluding Excepted Payments) in respect
of any and all liabilities, obligations and undertakings contained herein
and/or in any other Operative Agreement. Notwithstanding the provisions of
this Section, nothing in any Operative Agreement shall: (i) constitute a
waiver, release or discharge of any indebtedness or obligation
57
<PAGE>
evidenced by the Notes and/or the Certificates arising under any Operative
Agreement or secured by any Operative Agreement, but the same shall
continue until paid or discharged; (ii) relieve any Exculpated Person from
liability and responsibility for (but only to the extent of the damages
arising by reason of): active waste knowingly committed by any Exculpated
Person with respect to any Property, any fraud, gross negligence or willful
misconduct on the part of any Exculpated Person; (iii) relieve any
Exculpated Person from liability and responsibility for (but only to the
extent of the moneys misappropriated, misapplied or not turned over) (A)
except for Excepted Payments, misappropriation or misapplication by the
Lessor (i.e., application in a manner contrary to any of the Operative
Agreements) of any insurance proceeds or condemnation award paid or
delivered to the Lessor by any Person other than the Agent, (B) except for
Excepted Payments, any deposits or any escrows or amounts owed by the
Construction Agent under the Agency Agreement held by the Lessor or (C)
except for Excepted Payments, any rent or other income received by the
Lessor from any Credit Party that is not turned over to the Agent; or (iv)
affect or in any way limit the Agent's rights and remedies under any
Operative Agreement with respect to the Rents and rights and powers of the
Agent under the Operative Agreements or to obtain a judgment against the
Lessee's interest in the Properties or the Agent's rights and powers to
obtain a judgment against the Lessor or any Credit Party (provided, that no
deficiency judgment or other money judgment shall be enforced against any
Exculpated Person except to the extent of the Lessor's interest in the
Trust Estate (excluding Excepted Payments) or to the extent the Lessor may
be liable as otherwise contemplated in clauses (ii) and (iii) of this
Section 12.9(b)).
12.10. RIGHTS OF THE LESSEE.
If at any time all obligations (i) of the Owner Trustee under and in
accordance with the Credit Agreement, the Security Documents and the other
Operative Agreements and (ii) of the Credit Parties under the Operative
Agreements have in each case been satisfied or discharged in full, then the
Credit Parties shall be entitled to (a) terminate the Lease and the guaranty
obligations of the Guarantor and the Tranche A Guarantors arising under and in
accordance with the Credit Agreement and (b) receive all amounts then held under
the Operative Agreements and all proceeds with respect to any of the Properties.
Upon the termination of the Lease and the guaranty obligations of the Guarantor
and the Tranche A Guarantors pursuant to the foregoing clause (a), the Lessor
shall transfer to the Lessee or its designee all of its right, title and
interest free and clear of the Lien of the Lease, the Lien of the Security
Documents and all Lessor Liens in and to any Properties then subject to the
Lease and any amounts or proceeds referred to in the foregoing clause (b) shall
be paid over to the Lessee.
12.11. FURTHER ASSURANCES.
The parties hereto shall promptly cause to be taken, executed, acknowledged
or delivered, at the sole expense of the Lessee, all such further acts,
conveyances, documents and assurances as the other parties may from time to time
reasonably request in order to carry out and effectuate the intent and purposes
of this Participation Agreement, the other Operative Agreements and the
58
<PAGE>
transactions contemplated hereby and thereby (including without limitation the
preparation, execution and filing of any and all Uniform Commercial Code
financing statements, filings of Mortgage Instruments and other filings or
registrations which the parties hereto may from time to time reasonably request
to be filed or effected). The Lessee, at its own expense, shall take such action
(including without limitation any action specified in the preceding sentence),
as the Owner Trustee shall so request in order to maintain and protect all
security interests provided for hereunder or under any other Operative
Agreement.
12.12. CALCULATIONS UNDER OPERATIVE AGREEMENTS.
The parties hereto agree that all calculations and numerical determinations
to be made under the Operative Agreements by the Owner Trustee shall be made by
the Agent and that such calculations and determinations shall be presumptively
correct on the parties hereto in the absence of manifest error.
12.13. CONFIDENTIALITY.
Each of the Agent, the Lessor, each Lender and each Holder agrees to take
normal and reasonable precautions and exercise due care to maintain the
confidentiality of all non-public confidential information provided in
connection with this Agreement or any other Operative Agreement and agrees and
undertakes that it shall not use any such information for any purpose or in any
manner other than pursuant to the terms contemplated by this Agreement. The
Agent, the Lessor, any Lender or any Holder may disclose such information (a) at
the request of any bank regulatory authority or in connection with an
examination of the Agent, the Lessor, such Lender or such Holder by any such
authority, (b) pursuant to subpoena or other court process, (c) when required to
do so in accordance with the provisions of any applicable law or regulation, (d)
at the express direction of any agency of any State of the United States of
America or of any other jurisdiction in which the Agent, the Lessor, such Lender
or such Holder conducts its business, (e) to the Agent's, the Lessor's, such
Lender's or such Holder's independent auditors and other professional advisors
that have a reasonable need or basis for access thereto and (f) in connection
with any proceeding to enforce its rights hereunder or under any other Operative
Agreement or any other litigation or proceeding related hereto; provided,
however, the Agent, the Lessor, such Lender or such Holder shall instruct such
independent auditors or other professional advisors to keep such information
confidential in accordance with the terms of this Section 12.13; provided,
further, that in the event of any disclosure of non-public information pursuant
to any of clauses (b), (c), (d), and (f) of this Section 12.13, the Agent, the
Lessor, such Lender or such Holder shall make a good faith attempt, to the
extent practicable, to notify AOR of any such disclosure of non-public
information at least three (3) Business Days prior to disclosing such
information, and in any event shall notify AOR of such disclosure as soon as
practicable.
12.14. FINANCIAL REPORTING/TAX CHARACTERIZATION.
Lessee agrees to obtain advice from its own accountants and tax counsel
regarding the financial reporting treatment and the tax characterization of the
transactions described in the Operative Agreements. Lessee further agrees that
Lessee shall not rely upon any statement of
59
<PAGE>
any Financing Party or any of their
respective Affiliates and/or Subsidiaries regarding any such financial reporting
treatment and/or tax characterization.
12.15. SET-OFF.
In addition to any rights now or hereafter granted under applicable Law and
not by way of limitation of any such rights, upon and after the occurrence of
any Event of Default and during the continuance thereof, each Lender, each
Holder and any assignee of a Lender or a Holder in accordance with the
applicable provisions of the Operative Agreements is hereby authorized by each
Credit Party at any time or from time to time, without notice to any Credit
Party or to any other Person, any such notice being hereby expressly waived to
the extent permitted by applicable law, to set-off and to appropriate and to
apply any and all deposits (general or special, time or demand, including
without limitation indebtedness evidenced by certificates of deposit, whether
matured or unmatured) and any other indebtedness at any time held or owing by
such Lender, such Holder or any such assignee of a Lender or a Holder in
accordance with the applicable provisions of the Operative Agreements to or for
the credit or the account of any Credit Party against and on account of the
obligations of any Credit Party under the Operative Agreements irrespective of
whether or not (a) the Lenders or the Holders shall have made any demand under
any Operative Agreement or (b) the Agent shall have declared any or all of the
obligations of any Credit Party under the Operative Agreements to be due and
payable and although such obligations shall be contingent or unmatured.
12.16 USURY SAVINGS PROVISION.
NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT OR ANY OTHER
OPERATIVE AGREEMENT, IT IS THE INTENT OF THE PARTIES HERETO TO CONFORM TO AND
CONTRACT IN STRICT COMPLIANCE WITH APPLICABLE USURY LAW FROM TIME TO TIME IN
EFFECT. ANY PAYMENTS HEREUNDER OR UNDER ANY OPERATIVE AGREEMENT CONSTITUTING
INTEREST UNDER ANY APPLICABLE LAW FROM TIME TO TIME IN EFFECT MAY BE REFERRED TO
HEREIN AS "INTEREST." ALL AGREEMENTS AMONG THE PARTIES HERETO (INCLUDING ALL OF
THE OPERATIVE AGREEMENTS) ARE HEREBY LIMITED BY THE PROVISIONS OF THIS PARAGRAPH
WHICH SHALL OVERRIDE AND CONTROL ALL SUCH AGREEMENTS, WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER WRITTEN OR ORAL. IN NO WAY, NOR IN ANY EVENT OR
CONTINGENCY (INCLUDING WITHOUT LIMITATION PREPAYMENT OR ACCELERATION OF THE
MATURITY OF ANY OBLIGATION OR THE EARLY TERMINATION OF THE LEASE FOR ANY
REASON), SHALL ANY INTEREST TAKEN, RESERVED, CONTRACTED FOR, CHARGED, OR
RECEIVED UNDER THIS AGREEMENT OR UNDER ANY OPERATIVE AGREEMENT OR OTHERWISE,
EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMISSIBLE UNDER APPLICABLE LAW NOR SHALL
ANY PROVISION CREATE AN OBLIGATION TO PAY UNEARNED INTEREST IN VIOLATION OF
APPLICABLE LAW. IF, FROM ANY POSSIBLE CONSTRUCTION OF ANY OF THE OPERATIVE
AGREEMENTS OR ANY OTHER DOCUMENT OR AGREEMENT, UNEARNED INTEREST WOULD BE
PAYABLE OR
60
<PAGE>
INTEREST WOULD OTHERWISE BE PAYABLE IN EXCESS OF THE MAXIMUM NONUSURIOUS AMOUNT,
ANY SUCH CONSTRUCTION SHALL BE SUBJECT TO THE PROVISIONS OF THIS PARAGRAPH AND
SUCH AMOUNTS UNDER SUCH DOCUMENTS OR AGREEMENTS SHALL BE AUTOMATICALLY REDUCED
TO THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED UNDER APPLICABLE LAW, WITHOUT THE
NECESSITY OF EXECUTION OF ANY AMENDMENT OR NEW DOCUMENT OR AGREEMENT. IF THE
AGENT, ANY LENDER OR ANY OTHER FINANCING PARTY SHALL EVER RECEIVE ANYTHING OF
VALUE WHICH CONSTITUTES INTEREST UNDER ANY APPLICABLE LAW FROM TIME TO TIME WITH
RESPECT TO THE OBLIGATIONS OWED HEREUNDER OR UNDER ANY OPERATIVE AGREEMENT OR
UNDER APPLICABLE LAW AND WHICH WOULD, APART FROM THIS PROVISION, BE IN EXCESS OF
THE MAXIMUM LAWFUL AMOUNT, AN AMOUNT EQUAL TO THE AMOUNT WHICH WOULD HAVE BEEN
EXCESSIVE INTEREST SHALL, WITHOUT PENALTY, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, BE APPLIED TO THE REDUCTION OF THE COMPONENT OF PAYMENTS DEEMED TO BE
PRINCIPAL AND NOT TO THE PAYMENT OF INTEREST, OR REFUNDED TO THE BORROWER OR ANY
OTHER PAYOR THEREOF, IF AND TO THE EXTENT SUCH AMOUNT WHICH WOULD HAVE BEEN
EXCESSIVE EXCEEDS THE COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL. THE RIGHT TO
DEMAND PAYMENT OF ANY AMOUNTS EVIDENCED BY ANY OF THE OPERATIVE AGREEMENTS DOES
NOT INCLUDE THE RIGHT TO RECEIVE ANY INTEREST WHICH HAS NOT OTHERWISE ACCRUED ON
THE DATE OF SUCH DEMAND, AND NEITHER THE AGENT NOR ANY LENDER NOR ANY HOLDER NOR
ANY OTHER FINANCING PARTY INTENDS TO CHARGE OR RECEIVE ANY UNEARNED INTEREST IN
THE EVENT OF SUCH DEMAND. ALL INTEREST PAID OR AGREED TO BE PAID TO THE AGENT OR
ANY LENDER OR ANY HOLDER OR ANY OTHER FINANCING PARTY SHALL, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, BE AMORTIZED, PRORATED, ALLOCATED, AND SPREAD
THROUGHOUT THE FULL TERM (INCLUDING WITHOUT LIMITATION ANY RENEWAL OR EXTENSION)
OF THIS AGREEMENT SO THAT THE AMOUNT OF INTEREST ON ACCOUNT OF SUCH PAYMENTS
DOES NOT EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED BY APPLICABLE LAW.
12.17 CHAPTER 346 OF THE TEXAS FINANCE CODE.
In the event the laws of the State of Texas are applicable to any of the
Operative Agreements or any of the obligations thereunder, to the extent a
higher maximum lawful rate of interest would result from the parties hereto
agreeing that the provisions of Chapter 346 of the Texas Finance Code (relating
to certain revolving credit accounts), as amended, shall not apply to the
Operative Agreements or any of the obligations thereunder, the parties hereto so
agree that the provisions of such Chapter 346 shall not apply.
[signature pages follow]
61
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
AOR SYNTHETIC REAL ESTATE, INC., as the Construction Agent, as the
Lessee and as a Tranche A Guarantor
AMERICAN ONCOLOGY RESOURCES, INC.,
as the Guarantor and as a Tranche A Guarantor
AOR REAL ESTATE, INC., as a Tranche A Guarantor
AOR, INC., as a Tranche A Guarantor
RMCC CANCER CENTER, INC., as a Tranche A Guarantor
AOR MANAGEMENT COMPANY OF OREGON, INC.,
as a Tranche A Guarantor
AOR MANAGEMENT COMPANY OF INDIANA, INC.,
as a Tranche A Guarantor
AOR MANAGEMENT COMPANY OF MISSOURI, INC.,
as a Tranche A Guarantor
AOR MANAGEMENT COMPANY OF ARIZONA, INC.,
as a Tranche A Guarantor
AOR MANAGEMENT COMPANY OF SOUTH CAROLINA, INC.,
as a Tranche A Guarantor
AOR MANAGEMENT COMPANY OF OKLAHOMA, INC.,
as a Tranche A Guarantor
AOR MANAGEMENT COMPANY OF PENNSYLVANIA, INC.,
as a Tranche A Guarantor
AOR MANAGEMENT COMPANY OF VIRGINIA, INC.,
as a Tranche A Guarantor
AOR MANAGEMENT COMPANY OF NORTH CAROLINA, INC.,
as a Tranche A Guarantor
AOR MANAGEMENT COMPANY OF NEW YORK, INC.,
as a Tranche A Guarantor
AOR MANAGEMENT COMPANY OF FLORIDA, INC.
as a Tranche A Guarantor
AOR MANAGEMENT COMPANY OF NEVADA, INC.
as a Tranche A Guarantor
AOR HOLDING COMPANY OF INDIANA, INC.,
as a Tranche A Guarantor
[SIGNATURE PAGES CONTINUED]
<PAGE>
AOR MANAGEMENT COMPANY OF TEXAS, INC.
as a Tranche A Guarantor
AORT HOLDING COMPANY, INC., as a Tranche A Guarantor
AORIP, INC., as a Tranche A Guarantor
By:____________________________________
Name: L. Fred Pounds
Title: Treasurer of each of the foregoing Entities
AOR OF TEXAS MANAGEMENT LIMITED PARTNERSHIP,
a Texas limited partnership, as a Tranche A Guarantor
By: AOR MANAGEMENT COMPANY OF TEXAS, INC.,
a Delaware corporation, as general partner
By:____________________________________
Name: L. Fred Pounds
Title: Treasurer
AOR OF INDIANA MANAGEMENT PARTNERSHIP,
an Indiana general partnership, as a Tranche A
Guarantor
By: AOR MANAGEMENT COMPANY OF INDIANA, INC., a
Delaware corporation, as general partner
By:____________________________________
Name: L. Fred Pounds
Title: Treasurer
By: AOR HOLDING COMPANY OF INDIANA, INC., a
Delaware corporation, as general partner
By:____________________________________
Name: L. Fred Pounds
Title: Treasurer
[SIGNATURE PAGES CONTINUED]
<PAGE>
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, but solely as Owner Trustee under the AOR Trust
1997-1
By:_________________________________
Name:_______________________________
Title:______________________________
FIRST UNION NATIONAL BANK, as Agent, as a Lender,
and as a Holder
By:_________________________________
Name:_______________________________
Title:______________________________
[SIGNATURE PAGES CONTINUED]
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO, as a Lender and
as a Holder
By:_________________________________
Name:_______________________________
Title:______________________________
[SIGNATURE PAGES CONTINUED]
<PAGE>
ABN AMRO BANK N.V., as a Lender and as a Holder
By:_________________________________
Name:_______________________________
Title:______________________________
By:_________________________________
Name:_______________________________
Title:______________________________
[SIGNATURE PAGES CONTINUED]
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as a
Lender and as a Holder
By:_________________________________
Name:_______________________________
Title:______________________________
[SIGNATURE PAGES CONTINUED]
<PAGE>
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH, as a Lender and as a Holder
By:_________________________________
Name:_______________________________
Title:______________________________
By:_________________________________
Name:_______________________________
Title:______________________________
[SIGNATURE PAGES CONTINUED]
<PAGE>
SUNTRUST BANK, TAMPA BAY, as a Lender
By:_________________________________
Name:_______________________________
Title:______________________________
[SIGNATURE PAGES CONTINUED]
<PAGE>
THE FUJI BANK, LIMITED, as a Lender
By:_________________________________
Name:_______________________________
Title:______________________________
[SIGNATURE PAGES CONTINUED]
<PAGE>
WELLS FARGO BANK (TEXAS) NATIONAL ASSOCIATION,
as a Lender
By:_________________________________
Name:_______________________________
Title:______________________________
[SIGNATURE PAGES CONTINUED]
<PAGE>
NATIONAL CITY BANK OF KENTUCKY, as a Lender
By:_________________________________
Name:_______________________________
Title:______________________________
[SIGNATURE PAGES CONTINUED]
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH, as a Lender
By:_________________________________
Name:_______________________________
Title:______________________________
[SIGNATURE PAGES CONTINUED]
<PAGE>
THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED,
as a Lender
By:_________________________________
Name:_______________________________
Title:______________________________
[SIGNATURE PAGES CONTINUED]
<PAGE>
CORESTATES BANK, N.A., as a Lender
By:_________________________________
Name:_______________________________
Title:______________________________
[SIGNATURE PAGES CONTINUED]
<PAGE>
NATIONSBANK OF TEXAS, N.A., as a Lender
By:_________________________________
Name:_______________________________
Title:______________________________
<PAGE>
______________________________________________________________________________
Appendix A
Rules of Usage and Definitions
______________________________________________________________________________
I. Rules of Usage
The following rules of usage shall apply to this Appendix A and the Operative
Agreements (and each appendix, schedule, exhibit and annex to the foregoing)
unless otherwise required by the context or unless otherwise defined therein:
(a) Except as otherwise expressly provided, any definitions set forth
herein or in any other document shall be equally applicable to the singular and
plural forms of the terms defined.
(b) Except as otherwise expressly provided, references in any document to
articles, sections, paragraphs, clauses, annexes, appendices, schedules or
exhibits are references to articles, sections, paragraphs, clauses, annexes,
appendices, schedules or exhibits in or to such document.
(c) The headings, subheadings and table of contents used in any document
are solely for convenience of reference and shall not constitute a part of any
such document nor shall they affect the meaning, construction or effect of any
provision thereof.
(d) References to any Person shall include such Person, its successors,
permitted assigns and permitted transferees.
(e) Except as otherwise expressly provided, reference to any agreement
means such agreement as amended, modified, extended, supplemented, restated
and/or replaced from time to time in accordance with the applicable provisions
thereof.
(f) Except as otherwise expressly provided, references to any law includes
any amendment or modification to such law and any rules or regulations issued
thereunder or any law enacted in substitution or replacement therefor.
(g) When used in any document, words such as "hereunder", "hereto",
"hereof" and "herein" and other words of like import shall, unless the context
clearly indicates to the contrary, refer to the whole of the applicable document
and not to any particular article, section, subsection, paragraph or clause
thereof.
(h) References to "including" means including without limiting the
generality of any description preceding such term and for purposes hereof the
rule of ejusdem generis shall not be applicable to the term "including" or other
similar terms to limit a general statement, followed by
<PAGE>
or referable to an enumeration of specific matters, to matters similar to those
specifically mentioned.
(i) References herein to "attorney's fees", "legal fees", "costs of
counsel" or other such references shall be deemed to include the allocated cost
of in-house counsel.
(j) Each of the parties to the Operative Agreements and their counsel have
reviewed and revised, or requested revisions to, the Operative Agreements, and
the usual rule of construction that any ambiguities are to be resolved against
the drafting party shall be inapplicable in the construing and interpretation of
the Operative Agreements and any amendments or exhibits thereto.
(k) Capitalized terms used in any Operative Agreements which are not
defined in this Appendix A but are defined in another Operative Agreement shall
have the meaning so ascribed to such term in the applicable Operative Agreement.
(l) If any obligation under the Operative Agreements is required to be
performed on a day that is not a Business Day, such obligation shall be required
to be performed on the next succeeding Business Day (unless otherwise provided
in the Operative Agreements) so long as there shall be no such postponement
beyond the Maturity Date or the Expiration Date.
II. Definitions
"AAA" shall have the meaning given to such term in Section 12.7(d) of the
Participation Agreement.
"ABR" shall mean, for any day, a rate per annum equal to the greater of (a)
the Prime Lending Rate in effect on such day, and (b) the Federal Funds
Effective Rate in effect on such day plus one-half of one percent (0.5%). For
purposes hereof: "Prime Lending Rate" shall mean the rate which the Agent
announces from time to time as its prime lending rate as in effect from time to
time. The Prime Lending Rate is a reference rate and does not necessarily
represent the lowest or best rate actually charged to any customer. Any Lender
may make commercial loans or other loans at rates of interest at, above or below
the Prime Lending Rate. The Prime Lending Rate shall change automatically and
without notice from time to time as and when the prime lending rate of the Agent
changes. "Federal Funds Effective Rate" shall mean, for any period, a
fluctuating interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions with
members or 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 the Agent from three
(3) Federal funds brokers of recognized standing selected by it. Any change in
the ABR due to a change in the Prime Lending Rate or the Federal Funds Effective
Rate shall be effective as of the opening of business on the effective day of
such change in the Prime Lending Rate or the Federal Funds Effective Rate,
respectively.
Appendix A-2
<PAGE>
"ABR Holder Advance" shall mean a Holder Advance bearing a Holder
Yield based on the ABR.
"ABR Loans" shall mean Loans the rate of interest applicable to which
is based upon the ABR.
"Acceleration" shall have the meaning given to such term in Section 6
of the Credit Agreement.
"Accession Agreement" shall mean each Accession Agreement executed
from time to time by Tranche A Guarantors pursuant to Section 5.8 of the
Participation Agreement, in the form attached to the Participation Agreement as
Exhibit K.
"Accounts" shall have the meaning given to such term in Section 1 of
the Security Agreement.
"Acquisition Advance" shall have the meaning given to such term in
Section 5.3 of the Participation Agreement.
"Acquisition Loan" shall mean any Loan made in connection with an
Acquisition Advance.
"Additional Incorporated Terms" shall have the meaning given to such
term in Section 28.1 of the Lease.
"Advance" shall mean a Construction Advance or an Acquisition Advance.
"Affiliate" shall mean, with respect to any Person, any Person or
group acting in concert in respect of the Person in question that, directly or
indirectly, controls or is controlled by or is under common control with such
Person. For the purpose of this definition, "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
management and policies, whether through the ownership of voting securities, by
contract or otherwise.
"After Tax Basis" shall mean, with respect to any payment to be
received, the amount of such payment increased so that, after deduction of the
amount of all taxes required to be paid by the recipient calculated at the then
maximum marginal rates generally applicable to Persons of the same type as the
recipients with respect to the receipt by the recipient of such amounts (less
any tax savings realized as a result of the payment of the indemnified amount),
such increased payment (as so reduced) is equal to the payment otherwise
required to be made.
"Agency Agreement" shall mean the Agency Agreement, dated on or about
the Initial Closing Date between the Construction Agent and the Lessor.
Appendix A-3
<PAGE>
"Agency Agreement Event of Default" shall mean an "Event of Default"
as defined in Section 5.1 of the Agency Agreement.
"Agent" shall mean First Union National Bank, as agent for the Lenders
pursuant to the Credit Agreement, or any successor agent appointed in accordance
with the terms of the Credit Agreement and respecting the Security Documents,
for the Lenders and the Holders, to the extent of their interests.
"Anniversary Date" shall have the meaning given to such term in
Section 2.2 of the Lease.
"Annualized EBITDA" shall mean, with respect to AOR and its
Subsidiaries, on a consolidated basis, as of the last day of any fiscal quarter,
the product of (a) EBITDA for the fiscal quarter ending on such date, multiplied
by (b) four (4).
"AOR" shall mean American Oncology Resources, Inc., a Delaware
corporation, and its successors and permitted assigns.
"AOR Trust 1997-1" shall mean the grantor trust created pursuant to
the terms and conditions of the Trust Agreement.
"Applicable Margin" shall mean, at any time with respect to any
Eurodollar Loan or any Eurodollar Holder Advances, the applicable percentage
points as determined under the following matrix with reference to the ratio of
Consolidated Debt to Annualized EBITDA calculated as provided below:
<TABLE>
<CAPTION>
Ratio of Consolidated Applicable Margin for Applicable Margin for Applicable Margin for
Debt to Annualized EBITDA Eurodollar Tranche A Loans Eurodollar Tranche B Loans Eurodollar Holder Advances
- ------------------------- -------------------------- -------------------------- --------------------------
<S> <C> <C> <C>
Greater than 3.00 to 1.00 0.875% 1.250% 1.635%
Greater than 2.50 to 1.00 but 0.800% 1.175% 1.550%
less than or equal to 3.00 to
1.00
Greater than 2.00 to 1.00 but 0.550% 0.925% 1.300%
less than or equal to 2.50 to
1.00
Greater than 1.50 to 1.00 but 0.450% 0.825% 1.200%
less than or equal to 2.00 to
1.00
Less than or equal to 1.50 to 0.325% 0.700% 1.075%
1.00
</TABLE>
From the Initial Closing Date until the fifth (5th) day after receipt
by the Agent of the December 31, 1997 financial statements pursuant to Section
28.1 of the Lease, the Applicable
Appendix A-4
<PAGE>
Margin shall be 0.800% (for the Eurodollar Tranche A Loans), 1.175% (for the
Eurodollar Tranche B Loans) and 1.550% (for the Eurodollar Holder Advances). The
Applicable Margin shall be reset from time to time in accordance with the above
matrix on the fifth (5th) day after receipt by the Agent in accordance with
Section 28.1 of the Lease of financial statements together with a Compliance
Certificate (reflecting the computation of the ratio of Consolidated Debt to
Annualized EBITDA as of the last day of the preceding fiscal quarter or fiscal
year, as appropriate).
"Appraisal" shall mean, with respect to any Property, an appraisal to
be delivered in connection with the Participation Agreement or in accordance
with the terms of the Lease, in each case prepared by a reputable appraiser
reasonably acceptable to the Agent, which in the judgment of counsel to the
Agent, complies with all of the provisions of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, as amended, the rules and regulations
adopted pursuant thereto, and all other applicable Legal Requirements.
"Appraisal Procedure" shall have the meaning given such term in
Section 22.4 of the Lease.
"Approved State" shall mean each of the following: Colorado, Florida,
Indiana, Oklahoma and Texas and any other state within the continental United
States proposed by the Lessee and consented to in writing by the Agent.
"Appurtenant Rights" shall mean (a) all agreements, easements, rights
of way or use, rights of ingress or egress, privileges, appurtenances,
tenements, hereditaments and other rights and benefits at any time belonging or
pertaining to the Land underlying the Improvements or the Improvements,
including without limitation the use of any streets, ways, alleys, vaults or
strips of land adjoining, abutting, adjacent or contiguous to the Land and (b)
all permits, licenses and rights, whether or not of record, appurtenant to such
Land or the Improvements.
"Arbitration Rules" shall have the meaning given to such term in
Section 12.7(d) of the Participation Agreement.
"Assignment and Acceptance" shall mean the Assignment and Acceptance
in the form attached to the Credit Agreement as EXHIBIT B.
"Available Commitment" shall mean, as to any Lender at any time, an
amount equal to the excess, if any, of (a) the amount of such Lender's
Commitment over (b) the aggregate principal amount of all Loans made by such
Lender as of such date after giving effect to Section 5.2(d) of the
Participation Agreement (but without giving effect to any other repayments or
prepayments of any Loans hereunder).
"Available Holder Commitments" shall mean an amount equal to the
excess, if any, of (a) the aggregate amount of the Holder Commitments over (b)
the aggregate amount of the Holder Advances made since the Initial Closing Date
after giving effect to Section 5.2(d) of the
Appendix A-5
<PAGE>
Participation Agreement (but without giving effect to any other repayments or
prepayments of any Holder Advances).
"Bankruptcy Code" shall mean Title 11 of the U. S. Code entitled
"Bankruptcy," as now or hereafter in effect or any successor thereto.
"Base Amount" shall have the meaning specified in Section 10.1(e) of
the Lease.
"Basic Rent" shall mean, the sum of (a) the Loan Basic Rent and (b)
the Lessor Basic Rent, calculated as of the applicable date on which Basic Rent
is due.
"Benefitted Lender" shall have the meaning specified in Section
9.10(a) of the Credit Agreement.
"Bill of Sale" shall mean a Bill of Sale regarding Equipment in form
and substance satisfactory to the Agent.
"Board" shall mean the Board of Governors of the Federal Reserve
System of the United States (or any successor).
"Borrower" shall mean the Owner Trustee, not in its individual
capacity but as Borrower under the Credit Agreement.
"Borrowing Date" shall mean any Business Day specified in a notice
delivered pursuant to Section 2.3 of the Credit Agreement as a date on which the
Lessor requests the Lenders to make Loans hereunder.
"Bridge Financing" shall mean the financing provided in favor of the
Owner Trustee by AOR with respect to various properties prior to the Initial
Closing Date.
"Budgeted Total Property Cost" shall mean, at any date of
determination with respect to any Construction Period Property, an amount equal
to the aggregate amount which the Construction Agent in good faith expects to be
expended in order to achieve Completion with respect to such Property.
"Business Day" shall mean a day other than a Saturday or Sunday, a
legal holiday or other day on which commercial banks in Charlotte, North
Carolina or, in respect of any determination relevant to an Advance, New York,
New York are required by law to close; provided, however, that when used in
connection with a Eurodollar Loan, the term "Business Day" shall also exclude
any day on which banks are not open for dealings in dollar deposits in the
London interbank market.
"Capital Lease" shall mean (a) any lease of any property that would,
in accordance with GAAP, be required to be classified and accounted for as a
capital lease on the balance sheet of
Appendix A-6
<PAGE>
the lessee and (b) the Lease and any other tax retention operating lease or
synthetic lease that is treated as a capital lease of the lessee or its
consolidated group for tax purposes.
"Capital Lease Obligation" shall mean, with respect to any Capital
Lease, the amount of the obligation of the lessee thereunder that would, in
accordance with GAAP, appear on a balance sheet as a liability of such lessee in
respect of such Capital Lease (or such amount similarly calculated for any
Capital Lease that does not appear on a balance sheet), net of any government
grant applicable to such Capital Lease.
"Capital Stock" shall mean any nonredeemable capital stock of the
Lessee or any of its Subsidiaries, whether common or preferred.
"Capitalized Lease" shall mean, as applied to any Person, any lease of
property (whether real, personal, tangible, intangible or mixed of such Person)
by such Person as the lessee which would be capitalized on a balance sheet of
such Person prepared in accordance with GAAP.
"Casualty" shall mean any damage or destruction of all or any portion
of the Property as a result of a fire or other casualty.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, 42 U.S.C. (S) 9601 et seq., as amended
by the Superfund Amendments and Reauthorization Act of 1986.
"Certificate" shall mean a Certificate in favor of each Holder
regarding the Holder Commitment of such Holder issued pursuant to the terms and
conditions of the Trust Agreement in favor of each Holder.
"Change of Control" shall mean the occurrence of any one or more of
the following: (i) AOR shall merge or consolidate with or into another
corporation with the effect that the Persons who were the shareholders of AOR
immediately prior to the effective time of such merger or consolidation hold
less than 51% of the combined voting power of the outstanding securities of the
surviving corporation of such merger or the corporation resulting from such
consolidation ordinarily (and apart from rights accruing under special
circumstances) having the right to vote in the election of directors, or (ii)
any Person or "group" (within the meaning of Section 13(d)(3) of the Exchange
Act), other than the Welsh, Carson, Anderson and Stowe group or any of its
affiliates, shall, directly or indirectly, as a result of a tender or exchange
offer, open market purchases, privately negotiated purchases or otherwise, have
become, after the Closing Date, the "beneficial owner" (within the meaning of
Rule 13d-3 under the Exchange Act) of securities of AOR representing 49% or more
of the combined voting power of the then outstanding securities of AOR
ordinarily (and apart from rights accruing under special circumstances) having
the right to vote in the election of directors.
"Chattel Paper" shall have the meaning given to such term in Section 1
of the Security Agreement.
Appendix A-7
<PAGE>
"Claims" shall mean any and all obligations, liabilities, losses,
actions, suits, penalties, claims, demands, costs and expenses (including
without limitation reasonable attorney's fees and expenses) of any nature
whatsoever.
"Closing Date" shall mean the Initial Closing Date and each Property
Closing Date.
"Code" shall mean the Internal Revenue Code of 1986 together with
rules and regulations promulgated thereunder, as amended from time to time, or
any successor statute thereto.
"Collateral" shall mean all assets of the Lessor, the Construction
Agent and the Lessee, now owned or hereafter acquired, upon which a Lien is
purported to be created by one or more of the Security Documents.
"Commencement Date" shall have the meaning specified in Section 2.2 of
the Lease.
"Commitment" shall mean, as to any Lender, the obligation of such
Lender to make the portion of the Loans to the Lessor in an aggregate principal
amount at any time outstanding not to exceed the amount set forth opposite such
Lender's name on Schedule 1.1 of the Credit Agreement, as such amount may be
reduced from time to time in accordance with the provisions of the Credit
Agreement.
"Commitment Percentage" shall mean, as to any Lender at any time, the
percentage which such Lender's Commitment then constitutes of the aggregate
Commitments (or, at any time after the Commitments shall have expired or
terminated, the percentage which the aggregate principal amount of such Lender's
Loans then outstanding constitutes of the aggregate principal amount of all of
the Loans then outstanding), and such Commitment Percentage shall take into
account both the Lender's Tranche A Commitment and the Lender's Tranche B
Commitment.
"Commitment Period" shall mean the period from and including the
Initial Closing Date to and including the Construction Period Termination Date,
or such earlier date as the Commitments shall terminate as provided in the
Credit Agreement or the Holder Commitment shall terminate as provided in the
Trust Agreement.
"Company Obligations" shall mean the obligations of AOR Synthetic Real
Estate, Inc. in any and all capacities, under and with respect to the Operative
Agreements and/or each Property.
"Completion" shall mean, with respect to a Property, such time as the
acquisition, installation, testing and final completion of the Improvements on
such Property has been achieved in accordance with the Plans and Specifications,
the Agency Agreement and/or the Lease, and in compliance with all Legal
Requirements and Insurance Requirements and a certificate of occupancy has been
issued with respect to such Property by the appropriate governmental entity
(except if non-compliance, individually or in the aggregate, shall not have and
could not reasonably be expected to have a Material Adverse Effect). If the
Lessor purchases a Property that includes existing Improvements that are to be
immediately occupied by the Lessee, the date of Completion for such Property
shall be the Property Closing Date.
Appendix A-8
<PAGE>
"Completion Date" shall mean, with respect to a Property, the earlier
of (a) the date on which Completion for such Property has occurred or (b) the
Construction Period Termination Date.
"Compliance Certificate" shall mean a fully completed certificate in
the form of Exhibit N to the Participation Agreement.
"Condemnation" shall mean any taking or sale of the use, access,
occupancy, easement rights or title to any Property or any part thereof, wholly
or partially (temporarily or permanently), by or on account of any actual or
threatened eminent domain proceeding or other taking of action by any Person
having the power of eminent domain, including without limitation an action by a
Governmental Authority to change the grade of, or widen the streets adjacent to,
any Property or alter the pedestrian or vehicular traffic flow to any Property
so as to result in a change in access to such Property, or by or on account of
an eviction by paramount title or any transfer made in lieu of any such
proceeding or action.
"Consolidated Debt" shall mean, at any time, the aggregate (without
duplication) of all Debt of AOR and its Subsidiaries as of such date, determined
on a consolidated basis.
"Consolidated Subsidiary" shall mean, as to any Person, any Subsidiary
of such Person which under the rules of GAAP consistently applied should have
its financial results consolidated with those of such Person for purposes of
financial accounting statements.
"Construction Advance" shall mean an advance of funds to pay Property
Costs pursuant to Section 5.4 of the Participation Agreement.
"Construction Agent" shall mean AOR Synthetic Real Estate, Inc., a
Delaware corporation, as the construction agent under the Agency Agreement.
"Construction Budget" shall mean the cost of acquisition,
installation, testing, constructing and developing any Property as determined by
the Construction Agent in its reasonable, good faith judgment.
"Construction Commencement Date" shall mean, with respect to
Improvements, the date on which construction of such Improvements commences
pursuant to the Agency Agreement.
"Construction Contract" shall mean any contract entered into between
the Construction Agent or the Lessee with a Contractor for the construction of
Improvements or any portion thereof on the Property.
"Construction Loan" shall mean any Loan made in connection with a
Construction Advance.
Appendix A-9
<PAGE>
"Construction Loan Property Cost" shall mean with respect to each
Construction Period Property at the date of determination, an amount equal to
(a) the aggregate principal amount of Construction Loans made on or prior to
such date with respect to the Property minus (b) the aggregate principal amount
of prepayments or repayments of the Loans allocated to reduce the Construction
Loan Property Cost of such Property pursuant to Section 2.6(c) of the Credit
Agreement.
"Construction Period" shall mean, with respect to a Property, the
period commencing on the Construction Commencement Date for such Property and
ending on the Completion Date for such Property.
"Construction Period Property" means, at any date of determination,
any Property as to which the Rent Commencement Date has not occurred on or prior
to such date.
"Construction Period Termination Date" shall mean (a) the earlier of
(i) the date that the Commitments have been terminated in their entirety in
accordance with the terms of Section 2.5(a) of the Credit Agreement, or (ii) the
second anniversary of the Initial Closing Date or (b) such later date as shall
be agreed to by the Majority Secured Parties.
"Contingent Obligation" shall mean, with respect to any Person, any
direct or indirect liability of such Person with respect to any Debt, lease,
dividend, guaranty, letter of credit or other obligation (the "primary
obligation") of another Person (the "primary obligor"), whether or not
contingent, (a) to purchase, repurchase or otherwise acquire such primary
obligations or any property constituting direct or indirect security therefor,
(b) to advance or provide funds (i) for the payment or discharge of any such
primary obligation or (ii) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet item, level of income or financial condition of the primary
obligor, (c) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor in respect thereof to make payment of such primary
obligation or (d) otherwise to assure or hold harmless the owner of any such
primary obligation against loss or failure or inability to perform in respect
thereof. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as
determined by such Person in good faith
"Contractor" shall mean each entity with whom the Construction Agent
or the Lessee contracts to construct any Improvements or any portion thereof on
the Property.
"Controlled Group" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with AOR, are treated as a single employer under
Section 414 of the Code.
"Co-Owner Trustee" shall have the meaning specified in Section 9.2 of
the Trust Agreement.
Appendix A-10
<PAGE>
"Covenant Compliance Worksheet" shall mean a fully completed
certificate in the form of Attachment A to EXHIBIT L to the Participation
Agreement.
"Credit Agreement" shall mean the Credit Agreement, dated on or about
the Initial Closing Date, among the Lessor, the Agent, the Lenders, as specified
therein, AOR and the other Tranche A Guarantors.
"Credit Agreement Default" shall mean any event or condition which,
with the lapse of time or the giving of notice, or both, would constitute a
Credit Agreement Event of Default.
"Credit Agreement Event of Default" shall mean any event or condition
defined as an "Event of Default" in Section 6 of the Credit Agreement.
"Credit Documents" shall mean the Participation Agreement, the Credit
Agreement, the Notes and the Security Documents.
"Credit Parties" shall mean, collectively, the Construction Agent, the
Lessee, the Guarantor and each Tranche A Guarantor.
"Debt" shall mean, with respect to any Person, without duplication,
(a) all indebtedness of such Person for money borrowed, (b) all reimbursement
obligations of such Person with respect to surety bonds, letters of credit and
bankers' acceptances (in each case, whether or not matured), (c) all obligations
of such Person evidenced by notes, bonds, debentures or similar instruments, (d)
all obligations of such Person to pay the deferred purchase price of property or
services (including seller subordinated notes, contingent or otherwise), other
than trade payables, (e) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (f) all Capital Lease Obligations of such Person, (g)
all obligations of such Person to purchase, redeem, retire, defease or otherwise
make any payment in respect of any capital stock or other equity securities
that, by their stated terms (or by the terms of any equity securities issuable
upon conversion thereof or in exchange therefor), or upon the occurrence of any
event, mature or are mandatorily redeemable, or are redeemable at the option of
the holder thereof, in whole or in part, (h) all indebtedness referred to in
clauses (a) through (g) above to the extent secured by any lien on any property
or asset owned or held by such Person regardless of whether the indebtedness
secured thereby shall have been assumed by such Person or is nonrecourse to the
credit of such Person and (i) any Contingent Obligation of such Person.
"Deed" shall mean a warranty deed regarding the Land and/or
Improvements in form and substance reasonably satisfactory to the Agent.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
Appendix A-11
<PAGE>
"Defaulting Holder" shall have the meaning given to such term in
Section 12.4 of the Participation Agreement.
"Defaulting Lender" shall have the meaning given to such term in
Section 12.4 of the Participation Agreement.
"Deficiency Balance" shall have the meaning given in Section 22.1(b)
of the Lease Agreement.
"Disputes" shall have the meaning given to such term in Section
12.7(d) of the Participation Agreement.
"Documents" shall have the meaning given to such term in Section 1 of
the Security Agreement.
"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
"EBITDA" shall mean, for any period, an amount equal to, without
duplication, the sum of (a) net income (determined in accordance with GAAP)
earned in such period, plus (b) to the extent net income has been reduced
thereby, the sum of (i) depreciation and amortization expense, plus (ii)
Interest Expense, plus (iii) federal and state income taxes.
"Effective Date" shall mean December 31, 1997.
"Election Date" shall have the meaning given to such term in Section
20.1 of the Lease.
"Election Notice" shall have the meaning given to such term in Section
20.1 of the Lease.
"Eligible Assignee" shall mean (i) a commercial bank organized under
the laws of the United States or any state thereof and having total assets in
excess of $5,000,000,000, (ii) a commercial bank organized under the laws of any
other country that is a member of the OECD or a political subdivision of any
such country and having total assets in excess of 5,000,000,000, provided, that
such bank is acting through a branch or agency located in the United States, in
the country under the laws of which it is organized or in another country that
is also a member of the OECD, (iii) the central bank of any country that is a
member of the OECD, (iv) a finance company, mutual fund, insurance company or
other financial institution that is engaged in making, purchasing or otherwise
investing in commercial loans in the ordinary course of its business and having
total assets in excess of $500,000,000, (v) any Affiliate of an existing Lender
or (vi) any other Person (other than an Affiliate of AOR) approved by the Agent
and AOR, which approval shall not be unreasonably withheld; provided, however,
that in no event shall the withholding of approval by AOR under this definition
be considered unreasonable if (i) AOR has had prior dealings with such Person
which AOR regards as unfavorable or (ii) such Person provides banking or other
financial services to any of AOR's competitors.
Appendix A-12
<PAGE>
"Employee Benefit Plan" or "Plan" shall mean an employee benefit plan
(within the meaning of Section 3(3) of ERISA, including without limitation any
Multiemployer Plan), or any "plan" as defined in Section 4975(e)(1) of the Code
and as interpreted by the Internal Revenue Service and the Department of Labor
in rules, regulations, releases or bulletins in effect on any Closing Date.
"Environmental Claims" shall mean any investigation, notice,
violation, demand, allegation, action, suit, injunction, judgment, order,
consent decree, penalty, fine, lien, proceeding, or claim (whether
administrative, judicial, or private in nature) arising (a) pursuant to, or in
connection with, an actual or alleged violation of, any Environmental Law, (b)
in connection with any Hazardous Substance, (c) from any abatement, removal,
remedial, corrective, or other response action in connection with a Hazardous
Substance, Environmental Law, or other order of a Tribunal or (d) from any
actual or alleged damage, injury, threat, or harm to health, safety, natural
resources, or the environment.
"Environmental Laws" shall mean any Law, permit, consent, approval,
license, award, or other authorization or requirement of any Tribunal relating
to emissions, discharges, releases, threatened releases of any Hazardous
Substance into ambient air, surface water, ground water, publicly owned
treatment works, septic system, or land, or otherwise relating to the handling,
storage, treatment, generation, use, or disposal of Hazardous Substances,
pollution or to the protection of health or the environment, including without
limitation CERCLA, the Resource Conservation and Recovery Act, 42 U.S.C. (S)
6901, et seq., and state statutes analogous thereto.
"Environmental Violation" shall mean any activity, occurrence or
condition that violates or threatens (if the threat then requires remediation
under any Environmental Law and is not remediated during any grace period
allowed under such Environmental Law) to violate or results in or threatens (if
the threat then requires remediation under any Environmental Law and is not
remediated during any grace period allowed under such Environmental Law) to
result in noncompliance with any Environmental Law.
"Equipment" shall mean equipment, apparatus, furnishings, fittings and
personal property of every kind and nature whatsoever purchased, leased or
otherwise acquired using the proceeds of the Loans or the Holder Advances by the
Construction Agent, the Lessee or the Lessor and all improvements and
modifications thereto and replacements thereof, whether or not now owned or
hereafter acquired or now or subsequently attached to, contained in or used or
usable in any way in connection with any operation of any Improvements or other
improvements to real property, including but without limiting the generality of
the foregoing, all equipment described in the Appraisal including without
limitation all heating, electrical, and mechanical equipment, lighting,
switchboards, plumbing, ventilation, air conditioning and air-cooling apparatus,
refrigerating, and incinerating equipment, escalators, elevators, loading and
unloading equipment and systems, cleaning systems (including without limitation
window cleaning apparatus), telephones, communication systems (including without
limitation satellite dishes and antennae), televisions, computers, sprinkler
systems and other fire prevention and extinguishing apparatus and materials,
security systems, motors, engines, machinery, pipes, pumps, tanks, conduits,
appliances, fittings and fixtures of every kind and description.
Appendix A-13
<PAGE>
"Equipment Schedule" shall mean (a) each Equipment Schedule attached
to the applicable Requisition and (b) each Equipment Schedule attached to the
applicable Lease Supplement.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean each entity required to be aggregated
with any Credit Party pursuant to the requirements of Section 414(b) or (c) of
the Code.
"Eurocurrency Reserve Requirements" shall mean for any day as applied
to a Eurodollar Loan, the aggregate (without duplication) of the maximum rates
(expressed as a decimal) of reserve requirements in effect on such day
(including without limitation basic, supplemental, marginal and emergency
reserves under any regulations of the Board or other Governmental Authority
having jurisdiction with respect thereto) dealing with reserve requirements
prescribed on eurocurrency funding (currently referred to as "Eurocurrency
liabilities" in Regulation D) maintained by a member bank of the Federal Reserve
System.
"Eurodollar Holder Advance" shall mean a Holder Advance bearing a
Holder Yield based on the Eurodollar Rate.
"Eurodollar Loans" shall mean Loans the rate of interest applicable to
which is based upon the Eurodollar Rate.
"Eurodollar Rate" shall mean for the Interest Period for each
Eurodollar Loan or Eurodollar Holder Advance comprising part of the same
borrowing or advance (including without limitation conversions, extensions and
renewals), a per annum interest rate equal to the per annum rate determined by
the Agent on the basis of the offered rates for deposits in dollars for a period
of time corresponding to such Interest Period (and commencing on the first day
of such Interest Period), which appear on the Reuters Screen LIBO Page as of
11:00 a.m. (London time) two (2) Business Days before the first day of such
Interest Period (provided, that if at least two (2) such offered rates appear on
the Reuters Screen LIBO Page, the rate in respect of such Interest Period will
be the arithmetic mean of such offered rates). As used herein, "Reuters Screen
LIBO Page" means the display designated as page "LIBO" on the Reuters Monitor
Money Rates Service (or such other page as may replace the LIBO page on that
service for the purpose of displaying London interbank offered rates of major
banks) ("RMMRS"). In the event the RMMRS is not then quoting such offered
rates, "Eurodollar Rate" shall mean for the Interest Period for each Eurodollar
Loan or Eurodollar Holder Advance comprising part of the same borrowing or
advance (including without limitation conversions, extensions and renewals), the
average (rounded upward to the nearest one-hundredth (1/100) of one percent
(1%)) per annum rate of interest determined by the office of the Agent (each
such determination to be presumptively correct) as of two (2) Business Days
prior to the first day of such Interest Period, as the effective rate at which
deposits in immediately available funds in U.S. dollars are being, have been, or
would be offered or quoted by the Agent to major banks in the applicable
interbank
Appendix A-14
<PAGE>
market for Eurodollar deposits at any time during the Business Day which is the
second Business Day immediately preceding the first day of such Interest Period,
for a term comparable to such Interest Period and in the amount of the requested
Eurodollar Loan and/or Eurodollar Holder Advance. If no such offers or quotes
are generally available for such amount, then the Agent shall be entitled to
determine the Eurodollar Rate by estimating in its reasonable judgment the per
annum rate (as described above) that would be applicable if such quote or offers
were generally available.
"Event of Default" shall mean a Lease Event of Default, an Agency
Agreement Event of Default or a Credit Agreement Event of Default.
"Excepted Payments" shall mean: (a) all indemnity payments (including
without limitation indemnity payments made pursuant to Section 11 of the
Participation Agreement), whether made by adjustment to Basic Rent or otherwise,
to which the Owner Trustee, any Holder or any of their respective Affiliates,
agents, officers, directors or employees is entitled;
(b) any amounts (other than Basic Rent or Termination Value) payable
under any Operative Agreement to reimburse the Owner Trustee, any Holder or any
of their respective Affiliates (including without limitation the reasonable
expenses of the Owner Trustee, the Trust Company and the Holders incurred in
connection with any such payment) for performing or complying with any of the
obligations of any Credit Party under and as permitted by any Operative
Agreement;
(c) any amount payable to a Holder by any transferee of such interest
of a Holder as the purchase price of such Holder's interest in the Trust Estate
(or a portion thereof);
(d) any insurance proceeds (or payments with respect to risks self-
insured or policy deductibles) under liability policies other than such proceeds
or payments payable to the Agent or any Lender;
(e) any insurance proceeds under policies maintained by the Owner
Trustee or any Holder;
(f) Transaction Expenses or other amounts, fees, disbursements or
expenses paid or payable to or for the benefit of the Owner Trustee or any
Holder under any Operative Agreement;
(g) all right, title and interest of any Holder or the Owner Trustee
to any Property or any portion thereof or any other property to the extent any
of the foregoing has been released from the Liens of the Security Documents and
the Lease pursuant to the terms thereof;
(h) upon termination of the Credit Agreement pursuant to the terms
thereof, all remaining property covered by the Lease or Security Documents
unless such is payable to another Person pursuant to an express provision of any
Operative Agreement;
(i) all payments in respect of the Holder Yield;
Appendix A-15
<PAGE>
(j) any payments in respect of interest to the extent attributable to
payments referred to in clauses (a) through (i) above; and
(k) any rights of either the Owner Trustee or the Trust Company to
demand, collect, sue for or otherwise receive and enforce payment of any of the
foregoing amounts, provided, that such rights shall not include the right to
terminate the Lease.
"Excess Proceeds" shall mean the excess, if any, of the aggregate of
all awards, compensation or insurance proceeds payable in connection with a
Casualty or Condemnation over the Termination Value paid by the Lessee pursuant
to the Lease with respect to such Casualty or Condemnation.
"Exculpated Persons" shall mean the Borrower, the Holders, the Lessor,
their officers, directors, shareholders and partners.
"Exempt Payments" shall have the meaning specified in Section 11.2(e)
of the Participation Agreement.
"Expiration Date" shall mean the last day of the Term; provided, in no
event shall the Expiration Date be later than the fifth annual anniversary of
the Initial Closing Date, unless such later date has been expressly agreed to in
writing by each of the Lessor, the Lessee, the Agent, the Lenders and the
Holders.
"Extension Option" shall mean the meaning given to such term in
Section 20.1 of the Lease.
"Facility Fee" shall mean, collectively, the Holder Facility Fee and
the Lender Facility Fee.
"Fair Market Sales Value" shall mean, with respect to any Property,
the amount, which in any event, shall not be less than zero (0), that would be
paid in cash in an arms-length transaction between an informed and willing
purchaser and an informed and willing seller, neither of whom is under any
compulsion to purchase or sell, respectively, such Property. Fair Market Sales
Value of any Property shall be determined based on the assumption that, except
for purposes of Section 17 of the Lease, such Property is in the condition and
state of repair required under Section 10.1 of the Lease and each Credit Party
is in compliance with the other requirements of the Operative Agreements.
"Federal Funds Effective Rate" shall have the meaning given to such
term in the definition of ABR.
"Financing Party" shall mean the Lessor, the Owner Trustee, in its
trust capacity, the Agent, the Holders, the Lenders.
Appendix A-16
<PAGE>
"Fixtures" shall mean all fixtures relating to the Improvements,
including without limitation all components thereof, located in or on the
Improvements, together with all replacements, modifications, alterations and
additions thereto.
"Force Majeure Event" shall mean any event beyond the control of the
Construction Agent, other than a Casualty or Condemnation, including without
limitation strikes, lockouts, adverse soil conditions, acts of God, adverse
weather conditions, inability to obtain labor or materials, governmental
activities, civil commotion and enemy action; but excluding any event, cause or
condition that results from the Construction Agent's financial condition.
"Form 1001" shall have the meaning specified in Section 11.2(e) of the
Participation Agreement.
"Form 4224" shall have the meaning specified in Section 11.2(e) of the
Participation Agreement.
"GAAP" shall mean generally accepted accounting principles set forth
in the 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, that are applicable to the circumstances as of the
date of determination.
"Governmental Action" shall mean all permits, authorizations,
registrations, consents, approvals, waivers, exceptions, variances, orders,
judgments, written interpretations, decrees, licenses, exemptions, publications,
filings, notices to and declarations of or with, or required by, any
Governmental Authority, or required by any Legal Requirement, and shall include,
without limitation, all environmental and operating permits and licenses that
are required for the full use, occupancy, zoning and operating of the Property.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Ground Lease" shall mean a ground lease respecting any Property which
is in form and substance reasonably satisfactory to the Agent.
"Guarantor" shall mean AOR.
"Hard Costs" shall mean all costs and expenses payable for supplies,
materials, labor and profit with respect to the Improvements under any
Construction Contract.
"Hazardous Substance" shall mean any of the following: (a) any
petroleum or petroleum product, explosives, radioactive materials, asbestos,
formaldehyde, polychlorinated biphenyls, lead and radon gas to the extent any of
the foregoing are harmful or hazardous to the
Appendix A-17
<PAGE>
environment or human health or safety as determined in accordance with any
Environmental Law or otherwise constitute an Environmental Violation; (b) any
substance, material, product, derivative, compound or mixture, mineral,
chemical, waste, gas, medical waste, or pollutant, in each case whether
naturally occurring, man-made or the by-product of any process, that is toxic,
harmful or hazardous to the environment or human health or safety as determined
in accordance with any Environmental Law; or (c) any substance, material,
product, derivative, compound or mixture, mineral, chemical, waste, gas, medical
waste or pollutant that would support the assertion of any claim under any
Environmental Law, whether or not defined as hazardous as such under any
Environmental Law.
"Holder Advance" shall mean any advance made by any Holder to the
Owner Trustee pursuant to the terms of the Trust Agreement or the Participation
Agreement.
"Holder Amount" shall mean as of any date, the aggregate amount of
Holder Advances made by each Holder to the Trust Estate pursuant to Section 2 of
the Participation Agreement and Section 3.1 of the Trust Agreement less any
payments of any Holder Advances received by the Holders pursuant to Section 3.4
of the Trust Agreement.
"Holder Commitments" shall mean $2,250,000; provided, if there shall
be more than one (1) Holder, the Holder Commitment of each Holder shall be as
set forth in Schedule I to the Trust Agreement as such Schedule I may be amended
and replaced from time to time, as such amount may be increased or reduced from
time to time in accordance with the provisions of the Operative Agreements.
"Holder Construction Property Cost" shall mean, with respect to each
Construction Period Property, at any date of determination, an amount equal to
the outstanding Holder Advances made with respect thereto under the Trust
Agreement.
"Holder Facility Fee" shall have the meaning given to such term in
Section 7.4 of the Participation Agreement.
"Holder Overdue Rate" shall mean the lesser of (a) the then current
rate of Holder Yield respecting the particular amount in question plus two
percent (2%) and (b) the highest rate permitted by applicable law.
"Holder Property Cost" shall mean with respect to a Property an amount
equal to the outstanding Holder Advances with respect thereto.
"Holder Yield" shall mean with respect to Holder Advances from time to
time either the Eurodollar Rate plus the Applicable Margin or the ABR as elected
by the Owner Trustee from time to time with respect to such Holder Advances in
accordance with the terms of the Trust Agreement; provided, however, (a) upon
delivery of the notice described in Section 3.7(c) of the Trust Agreement, the
outstanding Holder Advances of each Holder shall bear a yield at the ABR
applicable from time to time from and after the dates and during the periods
specified in Section 3.7(c) of the Trust Agreement, and (b) upon the delivery by
a Holder of the notice described in
Appendix A-18
<PAGE>
Section 11.3(f) of the Participation Agreement, the Holder Advances of such
Holder shall bear a yield at the ABR applicable from time to time after the
dates and during the periods specified in Section 11.3(f) of the Participation
Agreement.
"Holders" shall mean First Union National Bank and shall include the
other banks and financial institutions which may be from time to time holders of
Certificates in connection with the AOR Trust 1997-1.
"Impositions" shall mean, except to the extent described in the
following sentence, any and all liabilities, losses, expenses, costs, charges
and Liens of any kind whatsoever for fees, taxes, levies, imposts, duties,
charges, assessments or withholdings ("Taxes") including but not limited to (i)
real and personal property taxes, including without limitation personal property
taxes on any property covered by the Lease that is classified by Governmental
Authorities as personal property, and real estate or ad valorem taxes in the
nature of property taxes; (ii) sales taxes, use taxes and other similar taxes
(including rent taxes and intangibles taxes); (iii) excise taxes; (iv) real
estate transfer taxes, conveyance taxes, stamp taxes and documentary recording
taxes and fees; (v) taxes that are or are in the nature of franchise, income,
value added, privilege and doing business taxes, license and registration fees;
(vi) assessments on any Property, including without limitation all assessments
for public Improvements or benefits, whether or not such improvements are
commenced or completed within the Term; and (vii) taxes, Liens, assessments or
charges asserted, imposed or assessed against the Lessee or any of its
Affiliates by the PBGC or any governmental authority succeeding to or performing
functions similar to, the PBGC; and in each case all interest, additions to tax
and penalties thereon, which at any time prior to, during or with respect to the
Term or in respect of any period for which the Lessee shall be obligated to pay
Supplemental Rent, may be levied, assessed or imposed by any Governmental
Authority upon or with respect to (a) any Property or any part thereof or
interest therein; (b) the leasing, financing, refinancing, demolition,
construction, substitution, subleasing, assignment, control, condition,
occupancy, servicing, maintenance, repair, ownership, possession, activity
conducted on, delivery, insuring, use, operation, improvement, sale, transfer of
title, return or other disposition of such Property or any part thereof or
interest therein; (c) the Notes, other indebtedness with respect to any
Property, or the Certificates, or any part thereof or interest therein; (d) the
rentals, receipts or earnings arising from any Property or any part thereof or
interest therein; (e) the Operative Agreements, the performance thereof, or any
payment made or accrued pursuant thereto; (f) the income or other proceeds
received with respect to any Property or any part thereof or interest therein
upon the sale or disposition thereof; (g) any contract (including the Agency
Agreement) relating to the construction, acquisition or delivery of the
Improvements or any part thereof or interest therein; (h) the issuance of the
Notes or the Certificates; (i) the Owner Trustee, the Trust or the Trust Estate;
or (j) otherwise in connection with the transactions contemplated by the
Operative Agreements.
"Improvements" shall mean, with respect to the construction,
renovations and/or Modifications on any Land, all buildings, structures,
Fixtures, and other improvements of every kind existing at any time and from
time to time on or under the Land purchased, leased or otherwise acquired using
the proceeds of the Loans or the Holder Advances, together with any and all
appurtenances to such buildings, structures or improvements, including without
limitation
Appendix A-19
<PAGE>
sidewalks, utility pipes, conduits and lines, parking areas and roadways, and
including without limitation all Modifications and other additions to or changes
in the Improvements at any time, including without limitation (a) any
Improvements existing as of the Property Closing Date as such Improvements may
be referenced on the applicable Requisition and (b) any Improvements made
subsequent to such Property Closing Date.
"Incorporated Covenants" shall have the meaning given to such term in
Section 28.1 of the Lease.
"Incorporated Representations and Warranties" shall have the meaning
given to such term in Section 28.1 of the Lease.
"Indebtedness" of a Person shall mean, without duplication, such
Person's:
(a) obligations for borrowed money;
(b) obligations representing the deferred purchase price of Property
(whether real, personal, tangible, intangible or mixed) or services (other
than accounts payable arising in the ordinary course of such Person's
business );
(c) obligations, whether or not assumed, secured by liens or payable
out of the proceeds or production from property now or hereafter owned or
acquired by such Person;
(d) obligations which are evidenced by notes, acceptances or other
instruments;
(e) Capital Lease Obligations;
(f) net liabilities under Interest Rate Protection Agreements; and
(g) contingent obligations, to the extent such guarantee, affirm or
otherwise are in support of the types of obligations referenced in the
preceding sections (a) through (f).
"Indemnified Person" shall mean the Lessor, the Owner Trustee, in its
individual and its trust capacity, the Trust, the Trust Company, the Agent, the
Holders, the Lenders and their respective successors, assigns, directors,
shareholders, partners, officers, employees, agents and Affiliates.
"Indemnity Provider" shall mean, respecting each Property, the Lessee.
"Initial Closing Date" shall mean December 31, 1997 .
Appendix A-20
<PAGE>
"Initial Construction Advance" shall mean any initial Advance to pay
for: (a) Property Costs for construction of any Improvements; and (b) the
Property Costs of restoring or repairing any Property which is required to be
restored or repaired in accordance with Section 15.1(e) of the Lease.
"Instruments" shall have the meaning given to such term in Section 1
of the Security Agreement.
"Insurance Requirements" shall mean all terms and conditions of any
insurance policy either required by the Lease to be maintained by the Lessee or
required by the Agency Agreement to be maintained by the Construction Agent, and
all requirements of the issuer of any such policy and, regarding self insurance,
any other requirements of the Lessee.
"Interest Expense" shall mean, for any period, total interest expense
of AOR and its Subsidiaries on a consolidated basis for such period (including
without limitation capitalized interest expense and interest expense
attributable to Capital Lease Obligations), determined in accordance with GAAP.
"Interest Period" shall mean (a) during the Commitment Period and
thereafter as to any Eurodollar Loan or Eurodollar Holder Advance (i) with
respect to the initial Interest Period, the period beginning on the date of the
first Eurodollar Loan and Eurodollar Holder Advance and ending one (1) month,
two (2) months, three (3) months or (subject to availability for all Lenders and
Holders) six (6) months thereafter, as selected by the Lessor (in the case of a
Eurodollar Loan) or the Owner Trustee (in the case of a Eurodollar Holder
Advance) in its applicable notice given with respect thereto and (ii)
thereafter, each period commencing on the last day of the next preceding
Interest Period applicable to such Eurodollar Loan or Eurodollar Holder Advance
and ending one (1) month, two (2) months or three (3) months thereafter, as
selected by the Lessor by irrevocable notice to the Agent (in the case of a
Eurodollar Loan) or by the Owner Trustee (in the case of a Eurodollar Holder
Advance) in each case not less than three (3) Business Days prior to the last
day of the then current Interest Period with respect thereto; provided, however,
that all of the foregoing provisions relating to Interest Periods are subject to
the following: (A) if any Interest Period would end on a day which is not a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day (except that where the next succeeding Business Day falls in the
next succeeding calendar month, then on the next preceding Business Day), (B) no
Interest Period shall extend beyond the Maturity Date or the Expiration Date, as
the case may be, (C) where an Interest Period begins on a day for which there is
no numerically corresponding day in the calendar month in which the Interest
Period is to end, such Interest Period shall end on the last Business Day of
such calendar month, (D) there shall not be more than four (4) Interest Periods
outstanding at any one (1) time.
"Interest Rate Protection Agreements" shall mean all interest rate
swap agreements, interest rate cap agreements, interest rate collar agreements,
interest rate insurance or other hedging arrangements and all other similar
agreements or arrangements designed to protect against fluctuations in interest
rates.
Appendix A-21
<PAGE>
"Investment Company Act" shall mean the Investment Company Act of
1940, as amended, together with the rules and regulations promulgated
thereunder.
"Land" shall mean a parcel of real property described on (a) the
Requisition issued by the Construction Agent on the Property Closing Date
relating to such parcel and (b) the schedules to each applicable Lease
Supplement executed and delivered in accordance with the requirements of Section
2.4 of the Lease.
"Law" shall mean any statute, law, ordinance, regulation, rule,
directive, order, writ, injunction or decree of any Tribunal.
"Lease" or "Lease Agreement" shall mean the Lease Agreement dated on
or about the Initial Closing Date, between the Lessor and the Lessee, together
with any Lease Supplements thereto.
"Lease Default" shall mean any event or condition which, with the
lapse of time or the giving of notice, or both, would constitute a Lease Event
of Default.
"Lease Event of Default" shall have the meaning specified in Section
17.1 of the Lease.
"Lease Supplement" shall mean each Lease Supplement substantially in
the form of EXHIBIT A to the Lease, together with all attachments and schedules
thereto.
"Legal Requirements" shall mean all foreign, federal, state, county,
municipal and other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions applicable to the Owner Trustee,
any Holder, the Lessor, the Lessee, the Agent, any Lender or any Property, Land,
Improvement, Equipment or the taxation, demolition, construction, use or
alteration of such Improvements, whether now or hereafter enacted and in force,
including without limitation any that require repairs, modifications or
alterations in or to any Property or in any way limit the use and enjoyment
thereof (including without limitation all building, zoning and fire codes and
the Americans with Disabilities Act of 1990, 42 U.S.C. (S) 12101 et. seq., and
any other similar federal, state or local laws or ordinances and the regulations
promulgated thereunder) and any that may relate to environmental requirements
(including without limitation all Environmental Laws), and (to the extent
required by Law) all permits, certificates of occupancy, licenses, authoriza
tions and regulations relating thereto, and all covenants, agreements,
restrictions and encumbrances contained in any instruments which are either of
record or known to the Lessee affecting any Property or the Appurtenant Rights.
"Lender Commitments" shall mean $72,750,000; provided, if there shall
be more than one (1) Lender, the Lender Commitment of each Lender shall be as
set forth in Schedule 1.1 to the Credit Agreement as such Schedule 1.1 may be
amended and replaced from time to time, as such amount may be increased or
reduced from time to time in accordance with the provisions of the Operative
Agreements.
Appendix A-22
<PAGE>
"Lender Facility Fee" shall have the meaning given to such term in
Section 7.4 of the Participation Agreement.
"Lender Financing Statements" shall mean UCC financing statements and
fixture filings appropriately completed and executed for filing in the
applicable jurisdiction in order to procure a security interest in favor of the
Agent in the Collateral subject to the Security Documents.
"Lenders" shall mean First Union National Bank and shall include the
other banks and financial institutions which may be from time to time party to
the Participation Agreement and the Credit Agreement.
"Lessee" shall have the meaning set forth in the Lease.
"Lessee Assets" shall mean all right, title and interest of Lessee in
and to any and all real and personal properties and fixtures, of every kind and
description, tangible or intangible, whether now owned or hereafter existing or
acquired, and wherever located, and all products and proceeds (both cash and
non-cash) thereof, including without limitation all of the following (each of
the following being listed without limiting the generality of any other of the
following listed items): all of the Lessee's right, title and interest, whether
now owned or hereafter acquired or existing, in and to all books and records;
and in and to all of the following (each such term as defined in the Uniform
Commercial Code): all accounts, chattel paper, documents, instruments, general
intangibles, investment property, goods, equipment, inventory and fixtures; and
in and to all insurance premiums; and further in and to all of the Lessee's
other rights, remedies, obligations or other property of every kind and
description including without limitation all rights of Lessee to the payment of
money, causes of action or choses in action and all rights to recovery
therefrom; and in and to all consents, licenses, certificates and other
governmental approvals; and in and to all money, cash or cash equivalents and
bank accounts; and in and to all proceeds of letters of credit issued in favor
of Lessee; and including without limitation such properties and other assets
leased or otherwise subject to the Lease (including without limitation all
right, title and interest of Lessee, now owned or hereafter acquired, and
wherever located, in, to and under (a) all Properties including without
limitation all Equipment and all Fixtures, (b) all substitutions, modifications
and replacements of, and all additions, accessions and improvements to, the
Fixtures and Equipment, (c) all books and records relating to or kept in
connection with Lessee's operation of the Properties or any part thereof, (d)
all insurance premiums under insurance policies now or subsequently obtained by
Lessee including without limitation such premiums relating to the Properties or
any part thereof, (e) all awards and other compensation, including without
limitation the interest payable thereon and any right to collect and receive the
same for the taking by eminent domain, condemnation or otherwise of any and all
property including without limitation the Properties or any part thereof, (f)
all consents, licenses, certificates and other governmental approvals relating
to the construction, completion, use or operation of any and all property
including without limitation the Properties or any part thereof, (g) all Plans
and Specifications relating to any and all property including without limitation
the Properties or any part thereof, (h) all "instruments" (as defined in the
Uniform Commercial Code) relating to the Properties or any part thereof, (i) all
"documents" (as such term is defined in the Uniform Commercial Code) relating to
the Properties or any part thereof, (j) all "general intangibles" (as
Appendix A-23
<PAGE>
such term is defined in the Uniform Commercial Code) relating to the Properties
or any part thereof, (k) all "chattel paper" (as such term is defined in the
Uniform Commercial Code) relating to the Properties or any part thereof, (l) all
"accounts" (as such term is defined in the Uniform Commercial Code) relating to
the Properties or any part thereof, and (m) all proceeds, both cash and non-cash
of any of the foregoing).
"Lessee Credit Agreement" shall mean that certain Third Amended and
Restated Loan Agreement dated as of December 29, 1997 among AOR, the various
lenders parties thereto from time to time and First Union National Bank, as the
agent thereunder, as such may hereafter be amended, modified, supplemented,
restated and/or refinanced or otherwise replaced from time to time.
"Lessee Credit Agreement Event of Default" shall mean an Event of
Default as defined in Article VII of the Lessee Credit Agreement.
"Lessor" shall mean the Owner Trustee, not in its individual capacity,
but as the Lessor under the Lease.
"Lessor Basic Rent" shall mean the scheduled Holder Yield accrued,
outstanding and due on the Holder Advances on any Scheduled Interest Payment
Date pursuant to the Trust Agreement (but not including interest on (a) any such
scheduled Holder Yield due on the Holder Advances prior to the Rent Commencement
Date with respect to the Property to which such Holder Advances relate or (b)
overdue amounts under the Trust Agreement or otherwise).
"Lessor Financing Statements" shall mean UCC financing statements and
fixture filings appropriately completed and executed for filing in the
applicable jurisdictions in order to protect the Lessor's interest under the
Lease to the extent the Lease is a security agreement or a mortgage.
"Lessor Lien" shall mean any Lien, true lease or sublease or
disposition of title arising as a result of (a) any claim against the Lessor or
the Trust Company, in its individual capacity, not resulting from the
transactions contemplated by the Operative Agreements, (b) any act or omission
of the Lessor or the Trust Company, in its individual capacity, which is not
required by the Operative Agreements or is in violation of any of the terms of
the Operative Agreements, (c) any claim against the Lessor or the Trust Company,
in its individual capacity, with respect to Taxes or Transaction Expenses
against which the Lessee is not required to indemnify the Lessor or the Trust
Company, in its individual capacity, pursuant to Section 11 of the Participation
Agreement or (d) any claim against the Lessor arising out of any transfer by the
Lessor of all or any portion of the interest of the Lessor in the Properties,
the Trust Estate or the Operative Agreements other than the transfer of title to
or possession of any Properties by the Lessor pursuant to and in accordance with
the Lease, the Credit Agreement, the Security Agreement or the Participation
Agreement or pursuant to the exercise of the remedies set forth in Article XVII
of the Lease.
Appendix A-24
<PAGE>
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien, option or charge of any kind.
"Limited Recourse Amount" shall mean with respect to all the
Properties on an aggregate basis, an amount equal to the sum of the Termination
Values with respect to all the Properties on an aggregate basis on each Payment
Date, less the Maximum Residual Guarantee Amount as of such date with respect to
all the Properties on an aggregate basis.
"Loan Basic Rent" shall mean the scheduled interest accrued,
outstanding and due on the Loans on any Scheduled Interest Payment Date pursuant
to the Credit Agreement (but not including interest on (a) any such Loan due
prior to the Rent Commencement Date with respect to the Property to which such
Loan relates or (b) any overdue amounts under Section 2.8(c) of the Credit
Agreement or otherwise).
"Loan Property Cost" shall mean, with respect to each Property at any
date of determination, an amount equal to (a) the aggregate principal amount of
all Loans (including without limitation all Acquisition Loans and Construction
Loans) made on or prior to such date with respect to such Property minus (b) the
aggregate amount of prepayments or repayments as the case may be of the Loans
allocated to reduce the Loan Property Cost of such Property pursuant to Section
2.6(c) of the Credit Agreement.
"Loans" shall mean the loans extended pursuant to the Credit Agreement
and shall include both the Tranche A Loans and the Tranche B Loans.
"Majority Holders" shall mean at any time, Holders whose Holder
Advances outstanding represent at least sixty-six and two thirds percent
(66 2/3%) of the aggregate Holder Advances outstanding.
"Majority Lenders" shall mean at any time, Lenders whose Loans
outstanding represent at least sixty-six and two thirds percent (66 2/3%) of the
aggregate Loans outstanding.
"Majority Secured Parties" shall mean at any time, Lenders and Holders
whose Loans and Holder Advances outstanding represent at least sixty-six and two
thirds percent (66 2/3%) of the aggregate Advances outstanding.
"Marketing Period" shall mean, if the Lessee has given a Sale Notice
in accordance with Section 20.1 of the Lease, the period commencing on the date
such Sale Notice is given and ending on the Expiration Date.
"Material Adverse Effect" shall, mean a material adverse effect on (a)
the business, condition (financial or otherwise), assets, liabilities or
operations of the Credit Parties (on a consolidated basis), (b) the ability of
the Credit Parties (on a consolidated basis) to perform their collective
obligations under or in connection with the Operative Agreements, (c) the
validity, priority or enforceability of any Lien on any Property created by any
of the Operative Agreements (except this subsection (c) shall not limit the
rights of Lessee, or impose additional
Appendix A-25
<PAGE>
obligations on Lessee, relating to Permitted Liens and/or Lessor Liens), or (d)
the value, utility or useful life of any material portion of any Property or the
use, or ability of the Lessee to use, any material portion of any Property for
the purpose for which it was intended.
"Maturity Date" shall mean the Expiration Date.
"Maximum Residual Guarantee Amount" shall mean an amount equal to the
product of the aggregate Property Cost for all of Properties times eighty-five
percent (85%).
"Modifications" shall have the meaning specified in Section 11.1(a) of
the Lease.
"Mortgage Instrument" shall mean any mortgage, deed of trust or any
other instrument executed by the Owner Trustee and the Lessee (or regarding any
Property subject to a Ground Lease, the applicable Affiliate of the Lessee) in
favor of the Agent (for the benefit of the Lenders and the Holders) and
evidencing a Lien on the Property, in form and substance reasonably acceptable
to the Agent.
"Multiemployer Plan" shall mean any plan described in Section
4001(a)(3) of ERISA to which contributions are or have been made or required by
any Credit Party or any of its Subsidiaries or ERISA Affiliates.
"Multiple Employer Plan" shall mean a plan to which any Credit Party
or any ERISA Affiliate and at least one (1) other employer other than an ERISA
Affiliate is making or accruing an obligation to make, or has made or accrued an
obligation to make, contributions.
"New Facility" shall have the meaning given to such term in Section
28.1 of the Lease.
"Non-Integral Equipment" shall mean Equipment constituting solely
personal property which (a) is not and shall at no time during the Term become a
fixture or otherwise be deemed to constitute real property, (b) is not integral
to the operations of the Property and (c) is not radiation equipment, including
without limitation, linear accelerators, treatment simulators and other related
equipment used in the planning and delivery of external beam radiation therapy
or cancer cases that benefit from precision delivery of ionizing radiation.
"Notes" shall mean those notes issued to the Lenders pursuant to the
Credit Agreement and shall include both the Tranche A Notes and the Tranche B
Notes.
"Obligations" shall have the meaning given to such term in Section 1
of the Security Agreement.
"OECD" shall mean the Organization for Economic Cooperation and
Development and any successor thereto.
"Officer's Certificate" with respect to any Person shall mean a
certificate executed on behalf of such Person by a Responsible Officer who has
made or caused to be made such
Appendix A-26
<PAGE>
examination or investigation as is necessary to enable such Responsible Officer
to express an informed opinion on behalf of such Person with respect to the
subject matter of such Officer's Certificate.
"Operative Agreements" shall mean the following: the Participation
Agreement, the Agency Agreement, the Trust Agreement, the Certificates, the
Credit Agreement, the Notes, the Lease, the Lease Supplements (and memoranda of
the Lease and each Lease Supplement in a form reasonably acceptable to the
Agent), the Accession Agreements, the Security Agreement, the Mortgage
Instruments, the other Security Documents, the Ground Leases, the Deeds and the
Bills of Sale and any and all other agreements, documents and instruments
executed in connection with any of the foregoing.
"Original Executed Counterpart" shall have the meaning given to such
term in Section 5 of EXHIBIT A to the Lease.
"Overdue Interest" shall mean any interest payable pursuant to Section
2.8(c) of the Credit Agreement.
"Overdue Rate" shall mean (a) with respect to the Loan Basic Rent, and
any other amount owed under or with respect to the Credit Agreement or the
Security Documents, the rate specified in Section 2.8(b) of the Credit
Agreement, (b) with respect to the Lessor Basic Rent, the Holder Yield and any
other amount owed under or with respect to the Trust Agreement, the Holder
Overdue Rate, and (c) with respect to any other amount, the amount referred to
in clause (y) of Section 2.8(b) of the Credit Agreement.
"Owner Trustee," "Borrower" or "Lessor" shall mean First Security
Bank, National Association, not individually, except as expressly stated in the
various Operative Agreements, but solely as the Owner Trustee under the AOR
Trust 1997-1, and any successor or replacement Owner Trustee expressly permitted
under the Operative Agreements.
"Participant" shall have the meaning given to such term in Section 9.7
of the Credit Agreement.
"Participation Agreement" shall mean the Participation Agreement dated
on or about the Initial Closing Date, among the Lessee, AOR, the various
entities which are parties thereto from time to time, as the other Tranche A
Guarantors, the Owner Trustee, not in its individual capacity except as
expressly stated therein, the Holders, the Lenders and the Agent.
"Payment Date" shall mean any Scheduled Interest Payment Date and any
date on which interest or Holder Yield in connection with a prepayment of
principal on the Loans or of the Holder Advances is due under the Credit
Agreement or the Trust Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation created by
Section 4002(a) of ERISA or any successor thereto.
Appendix A-27
<PAGE>
"Pension Plan" shall mean a "pension plan", as such term is defined in
section 3(2) of ERISA, which is subject to title IV of ERISA (other than a
Multiemployer Plan), and to which the Lessee or any ERISA Affiliate may have any
liability, including without limitation any liability by reason of having been a
substantial employer within the meaning of section 4063 of ERISA at any time
during the preceding five (5) years, or by reason of being deemed to be a
contributing sponsor under section 4069 of ERISA.
"Permitted Facility" shall mean a cancer treatment facility of the
type and size customarily used and operated by a medical practice group that is
managed or controlled by AOR and/or any of its Wholly-Owned Entities in the
ordinary course of its business as of the Initial Closing Date. For the purpose
of this definition, "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of management and non-medical
policies, whether through the ownership of voting securities, by contract or
otherwise. Notwithstanding the above, control shall not include, and shall not
be implied to include, the power to direct any physician's practice of medicine
or the power to interfere in any physician/patient relationship.
"Permitted Liens" shall mean:
(a) the respective rights and interests of the parties to the
Operative Agreements as provided in the Operative Agreements;
(b) the rights of any sublessee or assignee under a sublease or an
assignment expressly permitted by the terms of the Lease for no longer than
the duration of the Lease;
(c) Liens for Taxes that either are not yet due or are being contested
in accordance with the provisions of Section 13.1 of the Lease;
(d) Liens arising by operation of law, materialmen's, mechanics',
workmen's, repairmen's, employees', carriers', warehousemen's and other
like Liens relating to the construction of the Improvements or in
connection with any Modifications or arising in the ordinary course of
business for amounts that either are not more than thirty (30) days past
due or are being diligently contested in good faith by appropriate
proceedings, so long as such proceedings satisfy the conditions for the
continuation of proceedings to contest Taxes set forth in Section 13.1 of
the Lease;
(e) Liens of any of the types referred to in clause (d) above that
have been bonded for not less than the full amount in dispute (or as to
which other security arrangements satisfactory to the Lessor and the Agent
have been made), which bonding (or arrangements) shall comply with
applicable Legal Requirements, and shall have effectively stayed any
execution or enforcement of such Liens;
(f) Liens arising out of judgments or awards with respect to which
appeals or other proceedings for review are being prosecuted in good faith
and for the payment of
Appendix A-28
<PAGE>
which adequate reserves have been provided as required by GAAP or other
appropriate provisions have been made, so long as such proceedings have the
effect of staying the execution of such judgments or awards and satisfy the
conditions for the continuation of proceedings to contest Taxes set forth
in Section 13.1 of the Lease;
(g) Liens in favor of municipalities to the extent agreed to by the
Lessor; and
(h) Liens appearing on title insurance policies in favor of the Lessor
and the Agent delivered pursuant to the Participation Agreement with
respect to the various Properties, to the extent such Liens are reasonably
acceptable to the Agent.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
governmental authority or any other entity.
"Physician Transaction" shall mean any bona fide transaction or series
of related transactions, consummated after the date hereof, by which AOR or any
Subsidiary (a) acquires all or part of the assets, or a going business or
division, of any Person, whether through purchase of assets or securities,
merger or otherwise, (b) directly or indirectly acquires control of any Person
or (c) acquires the right to manage the non-medical aspects of the business of
any Person. For the purpose of this definition, "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
management and non-medical policies, whether through the ownership of voting
securities, by contract or otherwise. Notwithstanding the above, control shall
not include, and shall not be implied to include, the power to direct any
physician's practice of medicine or the power to interfere in any
physician/patient relationship.
"Plans and Specifications" shall mean, with respect to Improvements,
the plans and specifications for such Improvements to be constructed or already
existing, as such Plans and Specifications may be amended, modified or
supplemented from time to time in accordance with the terms of the Operative
Agreements.
"Prime Lending Rate" shall have the meaning given to such term in the
definition of ABR.
"Property" shall mean, with respect to each Permitted Facility that is
(or is to be) acquired, constructed and/or renovated pursuant to the terms of
the Operative Agreements, the Land and each item of Equipment and the various
Improvements, in each case located on such Land, including without limitation
each Construction Period Property, each Property subject to a Ground Lease and
each Property for which the Term has commenced.
"Property Acquisition Cost" shall mean the cost to the Lessor to
purchase a Property on a Property Closing Date.
Appendix A-29
<PAGE>
"Property Closing Date" shall mean the date on which the Lessor
purchases a Property or, with respect to the first Advance, the date on which
the Lessor seeks reimbursement for Property previously purchased by the Lessor.
"Property Cost" shall mean with respect to a Property the aggregate
amount (and/or the various items and occurrences giving rise to such amounts) of
the Loan Property Cost plus the Holder Property Cost for such Property (as such
amounts shall be increased equally among all Properties respecting the Holder
Advances and the Loans extended from time to time to pay for the Transaction
Expenses, fees, expenses and other disbursements referenced in Sections 7.1(a)
and 7.1(b) of the Participation Agreement).
"Purchase Option" shall have the meaning given to such term in Section
20.1 of the Lease.
"Purchasing Lender" shall have the meaning given to such term in
Section 9.8(a) of the Credit Agreement.
"Register" shall have the meaning given to such term in Section 9.9(a)
of the Credit Agreement.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System (or any successor), as the same may be modified and
supplemented and in effect from time to time.
"Release" shall mean any release, pumping, pouring, emptying,
injecting, escaping, leaching, dumping, seepage, spill, leak, flow, discharge,
disposal or emission of a Hazardous Substance.
"Rent" shall mean, collectively, the Basic Rent and the Supplemental
Rent, in each case payable under the Lease.
"Rent Commencement Date" shall mean, regarding each Property, the
earlier to occur of the Construction Period Termination Date and the Completion
Date.
"Reportable Event" shall have the meaning specified in ERISA.
"Requested Funds" shall mean any funds requested by the Lessee or the
Construction Agent, as applicable, in accordance with Section 5 of the
Participation Agreement.
"Requisition" shall have the meaning specified in Section 4.2 of the
Participation Agreement.
"Responsible Officer" shall mean the Chairman or Vice Chairman of the
Board of Directors, the Chairman or Vice Chairman of the Executive Committee of
the Board of Directors, the President, any Senior Vice President or Executive
Vice President, any Vice
Appendix A-30
<PAGE>
President, the Secretary, any Assistant Secretary, the Treasurer, or any
Assistant Treasurer, except that when used with respect to the Trust Company or
the Owner Trustee, "Responsible Officer" shall also include the Cashier, any
Assistant Cashier, any Trust Officer or Assistant Trust Officer, the Controller
and any Assistant Controller or any other officer of the Trust Company or the
Owner Trustee customarily performing functions similar to those performed by any
of the above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Sale Date" shall have the meaning given to such term in Section
20.3(a) of the Lease.
"Sale Notice" shall mean a notice given to the Lessor in connection
with the election by the Lessee of its Sale Option.
"Sale Option" shall have the meaning given to such term in Section
20.1 of the Lease.
"Sale Proceeds Shortfall" shall mean the amount by which the proceeds
of a sale described in Section 22.1 of the Lease are less than the Limited
Recourse Amount with respect to the Properties if it has been determined that
the Fair Market Sales Value of the Properties at the expiration of the term of
the Lease has been impaired by greater than expected wear and tear during the
Term of the Lease.
"Scheduled Interest Payment Date" shall mean (a) as to any Eurodollar
Loan or Eurodollar Holder Advance, the last day of the Interest Period
applicable to such Eurodollar Loan or Eurodollar Holder Advance (provided with
respect to any Eurodollar Loan or Eurodollar Holder Advance having an Interest
Period of six (6) months, the day which is three (3) months after the first day
of such Interest Period), (b) as to any ABR Loan or any ABR Holder Advance, the
fifteenth day of each month and (c) as to all Loans and Holder Advances, the
date of any voluntary or involuntary payment, prepayment, return or redemption,
and the Maturity Date or the Expiration Date, as the case may be.
"Secured Parties" shall have the meaning given to such term in the
Security Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
"Security Agreement" shall mean the Security Agreement dated on or
about the Initial Closing Date between the Lessor and the Agent, for the benefit
of the Secured Parties and accepted and agreed to by Lessee.
"Security Documents" shall mean the collective reference to the
Security Agreement, the Mortgage Instruments, (to the extent the Lease is
construed as a security instrument) the Lease and all other security documents
hereafter delivered to the Agent granting a lien on any asset or assets
of any Person to secure the obligations and liabilities of the Lessor under the
Credit
Appendix A-31
<PAGE>
Agreement and/or under any of the other Credit Documents or to secure any
guarantee of any such obligations and liabilities.
"Soft Costs" shall mean all costs which are ordinarily and reasonably
incurred in relation to the acquisition, development, installation,
construction, improvement and testing of the Properties other than Hard Costs,
including without limitation structuring fees, administrative fees, legal fees,
upfront fees, fees and expenses related to appraisals, title examinations, title
insurance, document recordation, surveys, environmental site assessments,
geotechnical soil investigations and similar costs and professional fees
customarily associated with a real estate closing, the Lender Facility Fee, the
Holder Facility Fee, fees and expenses of the Owner Trustee payable or
reimbursable under the Operative Agreements and costs and expenses incurred
pursuant to Sections 7.3(a) and 7.3(b) of the Participation Agreement.
"Subsidiary" shall mean, as to any Person, any corporation of which at
least a majority of the outstanding stock having by the terms thereof ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person, or by one (1)
or more Subsidiaries, or by such Person and one (1) or more Subsidiaries.
"Supplemental Amounts" shall have the meaning given to such term in
Section 9.18 of the Credit Agreement.
"Supplemental Rent" shall mean all amounts, liabilities and
obligations (other than Basic Rent) which the Lessee assumes or agrees to pay to
the Lessor, the Trust Company, the Holders, the Agent, the Lenders or any other
Person under the Lease or under any of the other Operative Agreements including
without limitation payments of the Termination Value, the Maximum Residual
Guarantee Amount, Facility Fees, Owner Trustee fees, break-funding amounts and
all indemnification amounts, liabilities and obligations.
"Taxes" shall have the meaning specified in the definition of
"Impositions".
"Term" shall have the meaning specified in Section 2.2 of the Lease.
"Termination Date" shall have the meaning specified in Section 16.2(a)
of the Lease.
"Termination Event" shall mean (a) with respect to any Pension Plan,
the occurrence of a Reportable Event or an event described in Section 4062(e) of
ERISA, (b) the withdrawal of the Lessee or any ERISA Affiliate from a Multiple
Employer Plan during a plan year in which it was a substantial employer (as such
term is defined in Section 4001(a)(2) of ERISA), or the termination of a
Multiple Employer Plan, (c) the distribution of a notice of intent to terminate
a Plan or Multiemployer Plan pursuant to Section 4041(a)(2) or 4041A of ERISA,
(d) the institution of proceedings to terminate a Plan or Multiemployer Plan by
the PBGC under Section 4042 of ERISA, (e) any other event or condition which
might constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any Plan or
Appendix A-32
<PAGE>
Multiemployer Plan, or (f) the complete or partial withdrawal of any Credit
Party or any ERISA Affiliate from a Multiemployer Plan.
"Termination Notice" shall have the meaning specified in Section 16.1
of the Lease.
"Termination Value" shall mean at any date the sum of (a) either (i)
with respect to all Properties, an amount equal to the aggregate outstanding
Property Cost for all the Properties, in each case as of the last occurring
Payment Date, or (ii) with respect to a particular Property, an amount equal to
the product of the Termination Value of all the Properties times a fraction, the
numerator of which is the Property Cost allocable to the particular Property in
question and the denominator of which is the aggregate Property Cost for all the
Properties, in each case as of the last occurring Payment Date, plus (b)
respecting the amounts described in each of the foregoing subclause (i) or (ii),
as applicable, any and all accrued but unpaid interest to such date on the Loans
and any and all Holder Yield on the Holder Advances related to the applicable
Property Cost, plus (c) to the extent the same is not duplicative of the amounts
payable under clause (b) above, all other Rent and other amounts then due and
payable or accrued to such date under the Agency Agreement, Lease and/or under
any other Operative Agreement (including without limitation amounts under
Sections 11.1 and 11.2 of the Participation Agreement and all costs and expenses
referred to in clause FIRST of Section 22.2 of the Lease).
"Tranche A Commitments" shall mean the obligation of the Tranche A
Lenders to make the Tranche A Loans to the Lessor in an aggregate principal
amount at any one (1) time outstanding not to exceed the aggregate of the
amounts set forth opposite each Tranche A Lender's name on Schedule 1.1 to the
Credit Agreement, as such amount may be reduced from time to time in accordance
with the provisions of the Operative Agreements; provided, no Tranche A Lender
shall be obligated to make Tranche A Loans in excess of such Tranche A Lender's
share of the Tranche A Commitments as set forth adjacent to such Tranche A
Lender's name on Schedule 1.1 to Credit Agreement.
"Tranche A Guarantors" shall mean those parties to the Credit
Agreement from time to time as guarantors of the Tranche A Obligations,
including without limitation the Lessee and such other parties executing
Accession Agreements from time to time.
"Tranche A Lenders" shall mean First Union National Bank and shall
include the several banks and other financial institutions from time to time
party to the Credit Agreement that commit to make the Tranche A Loans.
"Tranche A Loans" shall mean the Loans made pursuant to the Tranche A
Commitment.
"Tranche A Note" shall have the meaning given to it in Section 2.2 of
the Credit Agreement.
"Tranche A Obligations" shall mean any and all obligations of the
Owner Trustee to pay any and all amounts and perform any and all obligations
regarding the Tranche A Notes,
Appendix A-33
<PAGE>
including without limitation to pay the principal amount, all amounts of
interest and all other amounts owing with respect thereto on the Maturity Date
or upon any earlier due date therefor.
"Tranche B Commitments" shall mean the obligation of the Tranche B
Lenders to make the Tranche B Loans to the Lessor in an aggregate principal
amount at any one (1) time outstanding not to exceed the aggregate of the
amounts set forth opposite each Tranche B Lender's name on Schedule 1.1 to the
Credit Agreement, as such amount may be reduced from time to time in accordance
with the provisions of the Operative Agreements; provided, no Tranche B Lender
shall be obligated to make Tranche B Loans in excess of such Tranche B Lender's
share of the Tranche B Commitments as set forth adjacent to such Tranche B
Lender's name on Schedule 1.1 to Credit Agreement.
"Tranche B Lenders" shall mean First Union National Bank and shall
include the several banks and other financial institutions from time to time
party to the Credit Agreement that commit to make the Tranche B Loans.
"Tranche B Loan" shall mean the Loans made pursuant to the Tranche B
Commitment.
"Tranche B Note" shall have the meaning given to it in Section 2.2 of
the Credit Agreement.
"Transaction Expenses" shall mean all Soft Costs and all other costs
and expenses incurred in connection with the preparation, execution and delivery
of the Operative Agreements and the transactions contemplated by the Operative
Agreements including without limitation all costs and expenses described in
Sections 7.1 and 7.3 of the Participation Agreement and the following:
(a) the reasonable fees, out-of-pocket expenses and disbursements of
counsel in negotiating the terms of the Operative Agreements and the other
transaction documents, preparing for the closings under, and rendering
opinions in connection with, such transactions and in rendering other
services customary for counsel representing parties to transactions of the
types involved in the transactions contemplated by the Operative
Agreements;
(b) the reasonable fees, out-of-pocket expenses and disbursements of
accountants for any Credit Party in connection with the transaction
contemplated by the Operative Agreements;
(c) any and all other reasonable fees, charges or other amounts
payable to the Lenders, the Agent, the Holders, the Owner Trustee or any
broker which arises under any of the Operative Agreements;
(d) any other reasonable fee, out-of-pocket expenses, disbursement or
cost of any party to the Operative Agreements or any of the other
transaction documents; and
Appendix A-34
<PAGE>
(e) any and all Taxes and fees incurred in recording or filing any
Operative Agreement or any other transaction document, any deed,
declaration, mortgage, security agreement, notice or financing statement
with any public office, registry or governmental agency in connection with
the transactions contemplated by the Operative Agreement;
provided, however, the foregoing shall not provide for the payment of fees and
expenses of counsel to any of the Holders or the Lenders (excepting the Agent)
other than (i) after the occurrence and during the continuance of any Event of
Default and (ii) as provided for in the indemnification provisions of the
Operative Agreements (including without limitation Sections 11.1 through 11.4 of
the Participation Agreement).
"Tribunal" shall mean any state, commonwealth, federal, foreign,
territorial, or other court or government body, subdivision agency, department,
commission, board, bureau or instrumentality of a governmental body.
"Trust" shall mean the AOR Trust 1997-1.
"Trust Agreement" shall mean the Trust Agreement dated on or about the
Initial Closing Date between the Holders and the Owner Trustee.
"Trust Company" shall mean First Security Bank, National Association,
in its individual capacity, and any successor owner trustee under the Trust
Agreement in its individual capacity.
"Trust Estate" shall have the meaning specified in Section 2.2 of the
Trust Agreement.
"Type" shall mean, as to any Loan, whether it is an ABR Loan or a
Eurodollar Loan.
"UCC Financing Statements" shall mean collectively the Lender
Financing Statements and the Lessor Financing Statements.
"Unanimous Vote Matters" shall have the meaning given it in Section
12.4 of the Participation Agreement.
"Unfunded Amount" shall have the meaning specified in Section 3.2 of
the Agency Agreement.
"Unfunded Liability" shall mean, with respect to any Plan, at any
time, the amount (if any) by which (a) the present value of all benefits under
such Plan exceeds (b) the fair market value of all Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plan, but only to the extent that such excess represents a potential liability
of the Company or any member of the Controlled Group to the PBGC or such Plan
under Title IV of ERISA.
"Uniform Commercial Code" and "UCC" shall mean the Uniform Commercial
Code as in effect in any applicable jurisdiction.
Appendix A-35
<PAGE>
"United States Bankruptcy Code" shall mean Title 11 of the United
States Code.
"U.S. Person" shall have the meaning specified in Section 11.2(e) of
the Participation Agreement.
"U.S. Taxes" shall have the meaning specified in Section 11.2(e) of
the Participation Agreement.
"Wholly-Owned Entity" shall mean a Person all of the shares of capital
stock or other ownership interest of which are owned by AOR and/or one of its
wholly-owned Subsidiaries or other wholly-owned entities.
"Withholdings" shall have the meaning specified in Section 11.2(e) of
the Participation Agreement.
"Work" shall mean the furnishing of labor, materials, components,
furniture, furnishings, fixtures, appliances, machinery, equipment, tools,
power, water, fuel, lubricants, supplies, goods and/or services with respect to
any Property.
Appendix A-36
<PAGE>
EXHIBIT 10.3
CREDIT AGREEMENT
Dated as of December 30, 1997
among
First Security Bank, National Association,
not individually, except as
expressly stated herein,
but solely as the Owner Trustee
under the AOR Trust 1997-1,
as the Borrower,
The Several Lenders
from Time to Time Parties Hereto,
and
FIRST UNION NATIONAL BANK,
as the Agent,
AMERICAN ONCOLOGY RESOURCES, INC.,
as the Guarantor and as a Tranche A Guarantor,
and
The Various Parties Hereto from time to time,
as the other Tranche A Guarantors
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS........................................................1
1.1 Definitions...........................................................1
1.2 Interpretation........................................................1
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS....................................2
2.1 Commitments...........................................................2
2.2 Notes.................................................................2
2.3 Procedure for Borrowing...............................................3
2.4 Lender Facility Fees..................................................3
2.5 Termination or Reduction of Commitments...............................3
2.6 Prepayments and Payments..............................................4
2.7 Conversion and Continuation Options...................................5
2.8 Interest Rates and Payment Dates......................................6
2.9 Computation of Interest...............................................6
2.10 Pro Rata Treatment and Payments......................................7
2.11 Notice of Amounts Payable; Mandatory Assignment......................8
SECTION 3. REPRESENTATIONS AND WARRANTIES.....................................8
SECTION 4. CONDITIONS PRECEDENT...............................................9
4.1 Conditions to Effectiveness...........................................9
4.2 Conditions to Each Loan...............................................9
SECTION 5. COVENANTS..........................................................9
5.1 Other Activities......................................................9
5.2 Ownership of Properties, Indebtedness.................................9
5.3 Disposition of Assets................................................10
5.4 Compliance with Operative Agreements.................................10
5.5 Further Assurances...................................................10
5.6 Notices..............................................................10
5.7 Discharge of Liens...................................................10
5.8 Trust Agreement......................................................11
SECTION 6. EVENTS OF DEFAULT.................................................11
SECTION 7. THE AGENT.........................................................14
7.1 Appointment..........................................................14
7.2 Delegation of Duties.................................................14
7.3 Exculpatory Provisions...............................................14
7.4 Reliance by the Agent................................................15
7.5 Notice of Default....................................................15
7.6 Non-Reliance on the Agent and Other Lenders..........................15
i
<PAGE>
7.7 Indemnification......................................................16
7.8 The Agent in Its Individual Capacity.................................16
7.9 Successor Agent......................................................17
7.10 Actions of the Agent on Behalf of Holders...........................17
7.11 The Agent's Duty of Care............................................17
7.12 Applicable Parties..................................................18
SECTION 8. MATTERS RELATING TO PAYMENT AND COLLATERAL........................18
8.1 Collection and Allocation of Payments and Other Amounts..............18
8.2 Certain Remedial Matters.............................................18
8.3 Excepted Payments....................................................18
SECTION 8B. MATTERS RELATING TO GUARANTY OF TRANCHE A OBLIGATIONS............19
8B.1. Tranche A Guaranty of Payment and Performance......................19
8B.2. Obligations Unconditional..........................................19
8B.3. Modifications......................................................20
8B.4. Waiver of Rights...................................................21
8B.5. Reinstatement......................................................21
8B.6. Remedies...........................................................21
8B.7. Limitation of Tranche A Guaranty...................................22
8B.8. Payment of Amounts to the Agent....................................22
SECTION 8C. MATTERS RELATING TO GUARANTY OF COMPANY OBLIGATIONS..............22
8C.1. Guaranty of Payment and Performance of Company Obligations.........22
8C.2. Obligations Unconditional..........................................23
8C.3. Modifications......................................................24
8C.4. Waiver of Rights...................................................24
8C.5. Reinstatement......................................................25
8C.6. Remedies...........................................................25
8C.7. Limitation of Guaranty.............................................25
8C.8. Payment of Amounts to the Agent....................................25
SECTION 9. MISCELLANEOUS......................................................26
9.1 Amendments and Waivers...............................................26
9.2 Notices..............................................................26
9.3 No Waiver; Cumulative Remedies.......................................26
9.4 Survival of Representations and Warranties...........................26
9.5 Payment of Expenses and Taxes........................................26
9.6 Successors and Assigns; Participations and Assignments...............27
9.7 Participations.......................................................27
9.8 Assignments..........................................................28
9.9 The Register; Disclosure; Pledges to Federal Reserve Banks...........30
9.10 Adjustments; Set-off................................................30
ii
<PAGE>
9.11 Counterparts........................................................31
9.12 Severability........................................................31
9.13 Integration.........................................................31
9.14 GOVERNING LAW.......................................................32
9.15 SUBMISSION TO JURISDICTION; VENUE; ARBITRATION......................32
9.16 Acknowledgements....................................................32
9.17 WAIVERS OF JURY TRIAL...............................................32
9.18 Nonrecourse.........................................................32
9.19 USURY SAVINGS PROVISION.............................................33
9.20 Acceptances and Agreements..........................................34
iii
<PAGE>
SCHEDULES
Schedule 1.1 Commitments and Addresses of Lenders
EXHIBITS
EXHIBIT A-1 FORM OF TRANCHE A NOTE
EXHIBIT A-2 FORM OF TRANCHE B NOTE
EXHIBIT B FORM OF ASSIGNMENT AND ACCEPTANCE
iv
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of December 30, 1997 (as amended, modified,
extended, supplemented, restated and/or replaced from time to time, the
"Agreement") is among FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
individually, except as expressly stated herein, but solely as the Owner Trustee
under the AOR Trust 1997-1 (the "Owner Trustee" or the "Borrower"), the several
banks and other financial institutions from time to time parties to this
Agreement (the "Lenders") and FIRST UNION NATIONAL BANK, a national banking
association, as a Lender and as the agent for the Lenders (the "Agent") and
AMERICAN ONCOLOGY RESOURCES, INC., a Delaware corporation, as the Guarantor and
as a Tranche A Guarantor, and the various other entities from time to time
parties to the Agreement, as the other Tranche A Guarantors.
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINITIONS.
For purposes of this Agreement, capitalized terms used in this Agreement
and not otherwise defined herein shall have the meanings assigned to them in
Appendix A to that certain Participation Agreement dated as of December 30, 1997
(as amended, modified, extended, supplemented, restated and/or replaced from
time to time in accordance with the applicable provisions thereof, the
"Participation Agreement") among the Lessee, AOR, the various entities which are
parties thereto from time to time, as the other Tranche A Guarantors, the
Borrower, the various banks and other lending institutions which are parties
thereto from time to time, as the Holders, the various banks and other lending
institutions which are parties thereto from time to time, as the Lenders, and
First Union National Bank, as agent for the Lenders and respecting the Security
Documents, as the agent for the Lenders and the Holders, to the extent of their
interests. Unless otherwise indicated, references in this Agreement to
articles, sections, paragraphs, clauses, appendices, schedules and exhibits are
to the same contained in this Agreement.
1.2 INTERPRETATION.
The rules of usage set forth in Appendix A to the Participation Agreement
shall apply to this Agreement.
<PAGE>
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 COMMITMENTS.
(a) Subject to the terms and conditions hereof, each of the Lenders
severally agrees to make the portion of the Tranche A Loans and the Tranche B
Loans to the Borrower from time to time during the Commitment Period in an
amount up to such Lender's Commitment as is set forth adjacent to such Lender's
name in Schedule 1.1 hereto for the purpose of enabling the Borrower to purchase
the Properties and to pay Property Acquisition Costs, Property Costs and
Transaction Expenses, provided, that the aggregate principal amount at any one
(1) time outstanding with respect to each of the Tranche A Loans and the Tranche
B Loans shall not exceed the amount of the Tranche A Commitments and the Tranche
B Commitments respectively. Any prepayments of the Loans, whether mandatory or
at the Borrower's election, shall not be subject to reborrowing except as set
forth in Section 5.2(d) of the Participation Agreement.
(b) The Loans may from time to time be (i) Eurodollar Loans, (ii) ABR
Loans, or (iii) a combination thereof, as determined by the Borrower and
notified to the Agent in accordance with Sections 2.3 and 2.7. In the event the
Borrower fails to provide notice pursuant to Section 2.3, the Loan shall be an
ABR Loan. Further, any Loan by any Lender in an amount less than $100,000 shall
be an ABR Loan, unless the remaining Available Commitment for such Lender is
less than $100,000, in which case, the Borrower may elect a Eurodollar Loan for
such remaining amount.
2.2 NOTES.
The Loans made by each Lender shall be evidenced by promissory notes of the
Borrower, substantially in the form of EXHIBIT A-1 in the case of the Tranche A
Loans (each, a "Tranche A Note") or EXHIBIT A-2 in the case of the Tranche B
Loans (each, a "Tranche B Note," and with the Tranche A Notes, the "Notes"),
with appropriate insertions as to payee, date and principal amount, payable to
the order of such lender and in a principal amount equal to the Tranche A
Commitment or Tranche B Commitment, as the case may be, of such lender. Each
Lender is hereby authorized to record the date, Type and amount of each Loan
made by such Lender, each continuation thereof, each conversion of all or a
portion thereof to another Type, and the date and amount of each payment or
prepayment of principal thereof on the schedule annexed to and constituting a
part of its Note, and any such recordation shall constitute prima facie evidence
of the accuracy of the information so recorded, provided, that the failure to
make any such recordation or any error in such recordation shall not affect the
borrower's obligations hereunder or under such Note. Each Note shall (i) be
dated on or about the Initial Closing Date, (ii) be stated to mature on the
Maturity Date and (iii) provide for the payment of principal in accordance with
Section 2.6(d) and the payment of interest in accordance with Section 2.8.
2
<PAGE>
2.3 PROCEDURE FOR BORROWING.
(a) The Borrower may borrow under the Commitments during the Commitment
Period on any Business Day that an Advance may be requested pursuant to the
terms of Section 5.2 of the Participation Agreement, provided, that the Borrower
shall give the Agent irrevocable notice (which must be received by the Agent
prior to 12:00 Noon, Charlotte, North Carolina time, at least three (3) Business
Days prior to the requested Borrowing Date specifying (i) the amount to be
borrowed (which on any date shall not be in excess of the then Available
Commitments), (ii) the requested Borrowing Date, (iii) whether the borrowing is
to be of Eurodollar Loans, ABR Loans or a combination thereof, (iv) if the
borrowing is to be a combination of Eurodollar Loans and ABR Loans, the
respective amounts of each Type of Loan and (v) the Interest Period applicable
to each Eurodollar Loan. Pursuant to the terms of the Participation Agreement,
the Borrower shall be deemed to have delivered such notice upon the delivery of
a notice by the Construction Agent or the Lessee containing such required
information. Upon receipt of any such notice from the Borrower, the Agent shall
promptly notify each Lender thereof. Each Lender will make the amount of its
pro rata share of each borrowing available to the Agent for the account of the
Borrower at the office of the Agent specified in Section 9.2 prior to 12:00
Noon, Charlotte, North Carolina time, on the Borrowing Date requested by the
Borrower in funds immediately available to the Agent. Such borrowing will then
be made available to the Borrower by the Agent crediting an account designated,
subject to Section 9.1 of the Participation Agreement, by the Borrower on the
books of such office with the aggregate of the amounts made available to the
Agent by the Lenders and in like funds as received by the Agent. No amount of
any Loan which is repaid or prepaid by the Borrower may be reborrowed hereunder,
except as set forth in Section 5.2(d) of the Participation Agreement.
(b) Interest accruing on each Loan during the Construction Period with
respect to any Property shall, subject to the limitations set forth in Section
5.1(b) of the Participation Agreement, be added to the principal amount of such
Loan on the relevant Scheduled Interest Payment Date. On each such Scheduled
Interest Payment Date, the Loan Property Cost and Construction Loan Property
Cost shall be increased by the amount of interest added to the Loans.
2.4 LENDER FACILITY FEES.
Promptly after receipt from the Lessee of the payment of the Lender
Facility Fee payable pursuant to Section 7.4 of the Participation Agreement, the
Agent shall distribute such payments to the Lenders pro rata in accordance with
their respective Commitments.
2.5 TERMINATION OR REDUCTION OF COMMITMENTS.
(a) The Borrower shall have the right, upon not less than three (3)
Business Days' written notice to the Agent, to terminate the Commitments or,
from time to time, to reduce the amount of the Commitments, provided, that (i)
after giving effect to such reduction, the aggregate outstanding principal
amount of the Loans shall not exceed the aggregate Commitments and (ii) such
notice shall be accompanied by a certificate of the Construction
3
<PAGE>
Agent stating that the amount equal to ninety-seven percent (97%) of aggregate
Budgeted Total Property Costs as of the date of such reduction does not exceed
the aggregate amount of Available Commitments as of such date after giving
effect to such reduction. Any such reduction (A) shall be in an amount equal to
the lesser of (1) $1,000,000 (or an even multiple thereof) or (2) the remaining
Available Commitments, (B) shall reduce permanently the Commitments then in
effect and (C) shall be pro rata for the Commitments of all Lenders and pro rata
between the Tranche A Loans and the Tranche B Loans.
(b) The Commitments respecting any particular Property shall automatically
be reduced to zero (0) upon the occurrence of the Rent Commencement Date
respecting such Property. On any date on which the Commitments shall
automatically be reduced to zero (0) pursuant to Section 6, the Borrower shall
prepay all outstanding Loans, together with accrued unpaid interest thereon and
all other amounts owing thereunder.
2.6 PREPAYMENTS AND PAYMENTS.
(a) Subject to Sections 11.2(e), 11.3 and 11.4 of the Participation
Agreement, the Borrower may at any time and from time to time prepay the Loans,
in whole or in part, without premium or penalty, upon at least three (3)
Business Days' (in the case of Eurodollar Loans) and at least one (1) Business
Day's (in the case of ABR Loans) irrevocable notice to the Agent, specifying the
date and amount of prepayment and whether the prepayment is of Eurodollar Loans,
ABR Loans or a combination thereof, and, if a combination thereof, the amount
allocable to each. Upon receipt of any such notice the Agent shall promptly
notify each Lender thereof. If any such notice is given, the amount specified
in such notice shall be due and payable on the date specified therein. Amounts
prepaid may not be reborrowed, except as set forth in Section 5.2(d) of the
Participation Agreement.
(b) If on any date the Agent or the Lessor shall receive any payment in
respect of (i) any Casualty, Condemnation or Environmental Violation pursuant to
Sections 15.1(a) or 15.1(g) or Article XVI of the Lease (excluding any payments
in respect thereof which are payable to the Lessee in accordance with the
Lease), or (ii) the Termination Value of any Property in connection with the
delivery of a Termination Notice pursuant to Article XVI of the Lease, or (iii)
the Termination Value of any Property in connection with the exercise of the
Purchase Option under Article XX of the Lease or the exercise of the option of
the Lessor to transfer the Properties to the Lessee pursuant to Section 20.3 of
the Lease, or (iv) any payment required to be made or elected to be made by the
Construction Agent to the Lessor pursuant to the terms of the Agency Agreement,
then in each case, the Borrower shall pay such amounts to the Agent and the
Agent shall be required to apply and pay such amounts in accordance with the
provisions of Section 8.7(b) of the Participation Agreement.
(c) Each prepayment of the Loans pursuant to Section 2.6(a) shall be
allocated to reduce the respective Loan Property Costs of all Properties pro
rata according to the Loan Property Costs of such Properties immediately before
giving effect to such prepayment. Each prepayment of the Loans pursuant to
Section 2.6(b) shall be allocated to reduce the Loan Property Cost of the
Property or Properties subject to the respective Casualty, Condemnation,
4
<PAGE>
Environmental Violation, termination, purchase, transfer or other circumstance
giving rise to such prepayment. Any amounts applied to reduce the Loan Property
Cost of any Construction Period Property pursuant to this paragraph (c) shall
also be applied to reduce the Construction Loan Property Cost of such Property
until such Construction Loan Property Cost has been reduced to zero (0).
(d) The outstanding principal balance of the Loans and all other amounts
then due and owing under this Agreement or otherwise with respect to the Loans
shall be due and payable in full on the Maturity Date.
2.7 CONVERSION AND CONTINUATION OPTIONS.
(a) The Borrower may elect from time to time to convert Eurodollar Loans to
ABR Loans by giving the Agent (subject to the last proviso of Section 2.7(b)) at
least one (1) Business Day's prior irrevocable notice of such election,
provided, that any such conversion of Eurodollar Loans may only be made on the
last day of an Interest Period with respect thereto, and provided, further, to
the extent an Event of Default has occurred and is continuing on the last day of
any such Interest Period, the applicable Eurodollar Loan shall automatically be
converted to an ABR Loan. The Borrower may elect from time to time to convert
ABR Loans to Eurodollar Loans by giving the Agent at least three (3) Business
Days' prior irrevocable notice of such election. Upon receipt of any such
notice, the Agent shall promptly notify each Lender thereof. All or any part of
outstanding Eurodollar Loans or ABR Loans may be converted as provided herein,
provided, that (i) no ABR Loan may be converted into a Eurodollar Loan after the
date that is one (1) month prior to the Maturity Date and (ii) such notice of
conversion regarding any Eurodollar Loan shall contain an election by the
Borrower of an Interest Period for such Eurodollar Loan to be created by such
conversion and such Interest Period shall be in accordance with the terms of the
definition of the term "Interest Period" including without limitation
subparagraphs (A) through (D) thereof.
(b) Subject to the restrictions set forth in Section 2.3 hereof, any
Eurodollar Loan may be continued as such upon the expiration of the current
Interest Period with respect thereto by the Borrower giving irrevocable notice
to the Agent, in accordance with the applicable notice provision for the
conversion of ABR Loans to Eurodollar Loans set forth herein, of the length of
the next Interest Period to be applicable to such Loans, provided, that no
Eurodollar Loan may be continued as such after the date that is one (1) month
prior to the Maturity Date, and provided further no Eurodollar Loans may be
continued as such if an Event of Default has occurred and is continuing as of
the last day of the Interest Period for such Eurodollar Loan, and provided,
further, that if the Borrower shall fail to give any required notice as
described above or otherwise herein, or if such continuation is not permitted
pursuant to the proceeding proviso, such Loan shall automatically be converted
to an ABR Loan on the last day of such then expiring Interest Period.
5
<PAGE>
2.8 INTEREST RATES AND PAYMENT DATES.
(a) Subject to Section 9.19, the Loans outstanding hereunder from time to
time shall bear interest at a rate per annum equal to either (i) with respect to
a Eurodollar Loan, the Eurodollar Rate determined for the applicable Interest
Period plus the Applicable Margin or (ii) with respect to an ABR Loan, the ABR,
as selected by the Borrower in accordance with the provisions hereof; provided,
however, (A) upon delivery by the Agent of the notice described in Section
2.9(c), the Loans of each of the Lenders shall bear interest at the ABR
applicable from time to time from and after the dates and during the periods
specified in Section 2.9(c), (B) upon the delivery by a Lender of the notice
described in Section 11.3(f) of the Participation Agreement, the Loans of such
Lender shall bear interest at the ABR applicable from time to time from and
after the dates and during the periods specified in Section 11.3(f) of the
Participation Agreement and (C) in such other circumstances as expressly
provided herein, the Loans shall bear interest at the ABR.
(b) If all or a portion of (i) the principal amount of any Loan, (ii) any
interest payable thereon or (iii) any other amount payable hereunder shall not
be paid when due (whether at the stated maturity, by acceleration or otherwise),
such overdue amount shall bear interest at a rate per annum which is the lesser
of (x) the then current rate of interest respecting such payment plus two
percent (2%) and (y) the highest interest rate permitted by applicable law, in
each case from the date of such non-payment until such amount is paid in full
(whether after or before judgment).
(c) Interest shall be payable in arrears on the applicable Scheduled
Interest Payment Date, provided, that (i) interest accruing pursuant to
paragraph (b) of this Section 2.8 shall be payable from time to time on demand
and (ii) each prepayment of the Loans shall be accompanied by accrued interest
to the date of such prepayment on the amount prepaid.
2.9 COMPUTATION OF INTEREST.
(a) Whenever it is calculated on the basis of the Prime Lending Rate,
interest shall be calculated on the basis of a year of three hundred sixty-five
(365) days (or three hundred sixty-six (366) days, as the case may be) for the
actual days elapsed; and, otherwise, interest shall be calculated on the basis
of a year of three hundred sixty (360) days for the actual days elapsed. The
Agent shall as soon as practicable notify the Borrower and the Lenders of each
determination of a Eurodollar Rate. Any change in the interest rate on a Loan
resulting from a change in the ABR or the Eurocurrency Reserve Requirements
shall become effective as of the day on which such change becomes effective. The
Agent shall as soon as practicable notify the Borrower and the Lenders of the
effective date and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Agent pursuant to any
provision of this Agreement shall be conclusive and binding on the Borrower and
the Lenders in the absence of manifest error.
6
<PAGE>
(c) If the Eurodollar Rate cannot be determined by the Agent in the manner
specified in the definition of the term "Eurodollar Rate", the Agent shall give
telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as
practicable thereafter. Until such time as the Eurodollar Rate can be
determined by the Agent in the manner specified in the definition of such term,
no further Eurodollar Loans shall be made or shall be continued as such at the
end of the then current Interest Period nor shall the Borrower have the right to
convert ABR Loans to Eurodollar Loans.
2.10 PRO RATA TREATMENT AND PAYMENTS.
(a) Each borrowing by the Borrower from the Lenders hereunder and any
reduction of the Commitments of the Lenders shall be made pro rata according to
their respective Commitments. Subject to the provisions of Section 8.7 of the
Participation Agreement and Section 2.11(b) hereof, each payment (including
without limitation each prepayment) by the Borrower on account of principal of
and interest on the Loans shall be made pro rata according to the respective
outstanding principal amounts on the Loans then held by the Lenders. All
payments (including without limitation prepayments) to be made by the Borrower
hereunder and under the Notes, whether on account of principal, interest or
otherwise, shall be made without setoff or counterclaim and shall be made prior
to 12:00 Noon, Charlotte, North Carolina time, on the due date thereof to the
Agent, for the account of the Lenders, at the Agent's office specified in
Section 9.2, in Dollars and in immediately available funds. The Agent shall
distribute such payments to the Lenders promptly upon receipt in like funds as
received. If any payment hereunder becomes due and payable on a day other than
a Business Day, such payment shall be extended to the next succeeding Business
Day; provided, however, if such payment includes an amount of interest
calculated with reference to the Eurodollar Rate and the result of such
extension would be to extend such payment into another calendar month, then such
payment shall be made on the immediately preceding Business Day. In the case of
any extension of any payment of principal pursuant to the preceding two (2)
sentences, interest thereon shall be payable at the then applicable rate during
such extension.
(b) Unless the Agent shall have been notified in writing by any Lender
prior to a borrowing that such Lender will not make its share of such borrowing
available to the Agent, the Agent may assume that such Lender is making such
amount available to the Agent, and the Agent may, in reliance upon such
assumption, make available to the Borrower a corresponding amount. If such
amount is not made available to the Agent by the required time on the Borrowing
Date therefor, such Lender shall pay to the Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate for the period until such Lender makes such amount immediately available to
the Agent. A certificate of the Agent submitted to any Lender with respect to
any amounts owing under this Section 2.10(b) shall be conclusive in the absence
of manifest error. If such Lender's share of such borrowing is not made
available to the Agent by such Lender within three (3) Business Days of such
Borrowing Date, the Agent shall also be entitled to recover such amount with
interest thereon at the rate as set forth above on demand from the Borrower.
7
<PAGE>
2.11 NOTICE OF AMOUNTS PAYABLE; MANDATORY ASSIGNMENT.
(a) In the event that any Lender becomes aware that any amounts are or will
be owed to it pursuant to Sections 11.2(e), 11.3 or 11.4 of the Participation
Agreement or that it is unable to make Eurodollar Loans for any of the reasons
set forth in Section 11.3(f) of the Participation Agreement, then it shall
promptly notify the Borrower, the Lessee and the Agent thereof and, as soon as
possible thereafter, such Lender shall submit to the Borrower (with a copy to
the Agent) a certificate indicating the amount owing to it and the calculation
thereof. The amounts set forth in such certificate shall be prima facie
evidence of the obligations of the Borrower hereunder.
(b) In the event that any Lender delivers to the Borrower a certificate in
accordance with Section 2.11(a) in connection with amounts payable pursuant to
Sections 11.2(e), 11.3 or 11.4 of the Participation Agreement or such Lender is
required to make Loans as ABR Loans in accordance with Section 11.3(d) of the
Participation Agreement then, subject to Section 9.1 of the Participation
Agreement, the Borrower may, at its own expense (provided, such amounts shall be
reimbursed or paid entirely (as elected by the Borrower) by the Lessee, as
Supplemental Rent) and in the discretion of the Borrower, (i) require such
Lender to transfer or assign, in whole or (with such Lender's consent) in part,
without recourse (in accordance with Section 9.8), all or (with such Lender's
consent) part of its interests, rights (except for rights to be indemnified for
actions taken while a party hereunder) and obligations under this Agreement from
and after the effective date of such transfer or assignment to a replacement
bank or institution if the Borrower (subject to Section 9.1 of the Participation
Agreement and with the full cooperation of such Lender) can identify a Person
who is ready, willing and able to be such replacement bank or institution with
respect thereto and such replacement bank or institution (which may be another
Lender) shall assume such assigned obligations, or (ii) terminate the Commitment
of such Lender and prepay all outstanding Loans of such Lender; provided,
however, that (x) subject to Section 9.1 of the Participation Agreement, the
Borrower or such replacement bank or institution, as the case may be, shall have
paid to such Lender in immediately available funds the principal of and interest
accrued to the date of such payment on the Loans made by it hereunder and all
other amounts owed to it hereunder (and, if such Lender is also a Holder, all
Holder Advances and Holder Yield accrued and unpaid thereon), (y) any
termination of Commitments shall be subject to the terms of Section 2.5(a) and
(z) such assignment or termination of the Commitment of such Lender and
prepayment of Loans does not conflict with any law, rule or regulation or order
of any court or Governmental Authority.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this Agreement and to
make the Loans, each of the Trust Company and the Owner Trustee hereby makes and
affirms the representations and warranties set forth in Section 6.1 of the
Participation Agreement to the same extent as if such representations and
warranties were set forth in this Agreement in their entirety.
8
<PAGE>
SECTION 4. CONDITIONS PRECEDENT
4.1 CONDITIONS TO EFFECTIVENESS.
The effectiveness of this Agreement is subject to the satisfaction of all
conditions precedent set forth in Section 5.3 of the Participation Agreement
required by said Section to be satisfied on or prior to the Initial Closing
Date.
4.2 CONDITIONS TO EACH LOAN.
The agreement of each Lender to make any Loan requested to be made by it on
any date is subject to the satisfaction of all conditions precedent set forth in
Section 5.3 and 5.4 of the Participation Agreement required by said Sections to
be satisfied on or prior to the date of the applicable Loan; provided, that a
request for any conversion or extension of any then outstanding Loan (in each
case, only to the extent no new funds are advanced) shall only require the
delivery of the applicable notice (if any) required therefor, that no Default or
Event of Default shall have occurred and be continuing on such date, both
immediately before and after giving effect to the Loan to be made on such date
and that the security interest in the Collateral previously pledged to the
Agent, for the benefit of the Lenders and the Holders, pursuant to the Operative
Agreements shall remain in full force and effect.
Each borrowing by the Borrower hereunder shall constitute a representation and
warranty by the Borrower as of the date of such Loan that the conditions
contained in this Section 4.2 have been satisfied.
SECTION 5. COVENANTS
So long as any Loan or Note remains outstanding and unpaid or any other
amount is owing to any Lender or the Agent hereunder:
5.1 OTHER ACTIVITIES.
The Borrower shall not conduct, transact or otherwise engage in, or commit
to transact, conduct or otherwise engage in, any business or operations other
than the entry into, and exercise of rights and performance of obligations in
respect of, the Bridge Financing and/or the Operative Agreements and other
activities incidental or related to the foregoing.
5.2 OWNERSHIP OF PROPERTIES, INDEBTEDNESS.
The Borrower shall not own, lease, manage or otherwise operate any
properties or assets other than in connection with the activities described in
Section 5.1, or incur, create, assume or suffer to exist any Indebtedness or
other consensual liabilities or financial obligations other than as may be
incurred, created or assumed or as may exist in connection with the activities
9
<PAGE>
described in Section 5.1 (including without limitation the Loans and other
obligations incurred by the Borrower hereunder).
5.3 DISPOSITION OF ASSETS.
The Borrower shall not convey, sell, lease, assign, transfer or otherwise
dispose of any of its property, business or assets, whether now owned or
hereafter acquired, except to the extent expressly contemplated by the Operative
Agreements or as may otherwise be necessary with regard to properties subject to
the Bridge Financing to the extent such properties are not financed under the
Operative Agreements.
5.4 COMPLIANCE WITH OPERATIVE AGREEMENTS.
The Borrower shall at all times (a) observe and perform all of the
covenants, conditions and obligations required to be performed by it (whether in
its capacity as the Lessor, the Owner Trustee or otherwise) under each Operative
Agreement to which it is a party and (b) observe and perform, or cause to be
observed and performed, all of the covenants, conditions and obligations of the
Lessor under the Lease, even in the event that the Lease is terminated at stated
expiration following a Lease Event of Default or otherwise.
5.5 FURTHER ASSURANCES.
At any time and from time to time, upon the written request of the Agent,
and at the expense of the Borrower (provided, such amounts shall be reimbursed
or paid entirely (as elected by the Borrower) by the Lessee, as Supplemental
Rent), the Borrower will promptly and duly execute and deliver such further
instruments and documents and take such further action as the Agent or the
Majority Lenders may reasonably request for the purpose of carrying out and
effectuating the intent and purpose of this Agreement and the other Operative
Agreements and of the rights and powers herein or therein granted.
5.6 NOTICES.
If on any date, a Responsible Officer of the Borrower shall obtain actual
knowledge of the occurrence of a Default or Event of Default, the Borrower will
give written notice thereof to the Agent within five (5) Business Days after
such date.
5.7 DISCHARGE OF LIENS.
Neither the Borrower nor the Trust Company will create or permit to exist
at any time, and will, at its own expense, promptly take such action as may be
necessary duly to discharge, or cause to be discharged, all Lessor Liens,
provided, that the Borrower and the Trust Company shall not be required to
discharge any Lessor Lien while the same is being contested in good faith by
appropriate proceedings diligently prosecuted so long as such proceedings shall
not involve any material danger of impairment of any of the Liens contemplated
by the Security Documents or involving any danger of the sale, forfeiture or
loss of, and shall not materially interfere with
10
<PAGE>
the disposition of, any material part of any Property or title thereto or any
interest therein or the payment of Rent.
5.8 TRUST AGREEMENT.
Without prejudice to any right under the Trust Agreement of the Owner
Trustee to resign, the Owner Trustee (a) agrees not to terminate or revoke the
trust created by the Trust Agreement except as permitted by Article VIII of the
Trust Agreement, (b) agrees not to amend, supplement, terminate, revoke or
otherwise modify any provision of the Trust Agreement in any manner which could
reasonably be expected to have an adverse effect on the rights or interests of
the Agent or the Lenders hereunder or under the other Operative Agreements and
(c) agrees to comply with all of the terms of the Trust Agreement.
SECTION 6. EVENTS OF DEFAULT
Upon the occurrence of any of the following specified events (each an
"Event of Default"):
(a) Except as provided in Sections 6(c), the Borrower shall default in the
payment when due of any principal on the Loans or default in the payment when
due of any interest on the Loans, and in either such case, such default shall
continue for three (3) or more days; or
(b) Except as provided in paragraphs (a) and (c), the Borrower shall
default, and such default shall continue for three (3) or more days, in the
payment of any amount owing under any Credit Document; or
(c) (i) The Borrower shall default in the payment of any amount due on the
Maturity Date owing under any Credit Document or (ii) the Borrower shall default
in the payment when due of any principal or interest on the Loans payable with
regard to any obligation of Lessee to pay Termination Value when due or to pay
Basic Rent or Supplemental Rent at such time as any Termination Value is due; or
(d) The Borrower shall default in the due performance or observance by it
of any term, covenant or agreement contained in any Credit Document to which it
is a party (other than those referred to in paragraphs (a), (b) and (c) above),
provided, that in the case of any such default under Sections 5.4, 5.5 or
5.8(c), such default shall have continued unremedied for a period of at least
thirty (30) days after notice to the Borrower by the Agent or the Majority
Lenders, provided, further, if any such default under Sections 5.4, 5.5 or
5.8(c) is not capable of remedy within such thirty (30) day period but may be
remedied with further diligence and if the Borrower has and continues to pursue
diligently such remedy, then the Borrower shall be granted additional time to
pursue such remedy but in no event more than an additional thirty (30) days.
(e) Any representation, warranty or statement made or deemed made by the
Borrower herein or in any other Credit Document or by the Borrower or any Credit
Party in the
11
<PAGE>
Participation Agreement, or in any statement or certificate required to be
delivered pursuant hereto or thereto, shall prove to be untrue in any material
respect on the date as of which made or deemed made; or
(f) (i) Any Lease Event of Default shall have occurred and be continuing,
or (ii) the Owner Trustee shall default in the due performance or observance by
it of any term, covenant or agreement contained in the Participation Agreement
or in the Trust Agreement to or for the benefit of the Agent or a Lender,
provided, that in the case of this clause (ii) such default shall have continued
unremedied for a period of at least thirty (30) days after notice to the Owner
Trustee and Lessee by the Agent or the Majority Lenders, provided, further, that
in the case of this clause (ii), such default is not capable of remedy within
such thirty (30) day period but may be remedied with further diligence and if
the Borrower has and continues to pursue diligently such remedy, then the
Borrower shall be granted additional time to pursue such remedy but in no event
more than an additional thirty (30) days; or
(g) The Borrower shall commence a voluntary case concerning itself under
the Bankruptcy Code or an involuntary case is commenced against the Borrower and
the petition is not contravened within ten (10) days after commencement of the
case or an involuntary case is commenced against the Borrower and the petition
is not dismissed within ninety (90) days after commencement of the case; or a
custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge
of, all or substantially all of the property of the Borrower; or the Borrower
commences any other proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar
law of any jurisdiction whether now or hereafter in effect relating to the
Borrower, or there is commenced against the Borrower any such proceeding which
remains undismissed for a period of ninety (90) days; or the Borrower is
adjudicated insolvent or bankrupt, or any order of relief or other order
approving any such case or proceeding is entered; or the Borrower suffers any
appointment of any custodian or the like for it or any substantial part of its
property to continue undischarged or unstayed for a period of ninety (90) days;
or the Borrower makes a general assignment for the benefit of creditors; or any
corporate or partnership action is taken by the Borrower for the purpose of
effecting any of the foregoing; or
(h) Any Security Document shall cease to be in full force and effect, or
the Agent ceases to have a perfected first priority security interest in any
material portion of the Collateral (subject to Permitted Liens); or
(i) The Lease shall cease to be enforceable against the Lessee; or
(j) One (1) or more judgments or decrees shall be entered against the
Borrower involving a liability of $100,000 or more in the aggregate for all such
judgments and decrees for the Borrower and any such judgments or decrees shall
not have been vacated, discharged, satisfied or stayed or bonded pending appeal
within sixty (60) days from the entry thereof or any greater time period
required by law,
12
<PAGE>
then, and in any such event, (A) if such event is an Event of Default specified
in paragraph (g) above with respect to the Borrower, automatically the
Commitments shall immediately terminate and the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this Agreement and the Notes
shall immediately become due and payable, and (B) if such event is any other
Event of Default, either or both of the following actions may be taken: (i)
with the consent of the Majority Lenders, the Agent may, or upon the request of
the Majority Lenders, the Agent shall, by notice to the Borrower declare the
Commitments to be terminated forthwith, whereupon the Commitments shall
immediately terminate; and (ii) with the consent of the Majority Lenders, the
Agent may, or upon the request of the Majority Lenders, the Agent shall, by
notice to the Borrower, declare the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement and the Notes to be
due and payable forthwith, whereupon the same shall immediately become due and
payable (any of the foregoing occurrences or actions referred to in clause (A)
or (B) above, an "Acceleration"). Except as expressly provided above in this
Section 6, presentment, demand, protest and all other notices of any kind are
hereby expressly waived to the extent permitted by law.
Upon the occurrence of any Event of Default and at any time thereafter so
long as any Event of Default shall be continuing, the Agent shall, upon the
written instructions of the Majority Secured Parties, exercise any or all of the
rights and powers and pursue any and all of the remedies available to it
hereunder and (subject to the terms thereof) under the other Credit Documents,
the Lease and the other Operative Agreements and shall have any and all rights
and remedies available under the Uniform Commercial Code or any provision of
law.
Upon the occurrence of any Event of Default and at any time thereafter so
long as any Event of Default shall be continuing, the Agent may, and upon
request of the Majority Secured Parties shall, proceed to protect and enforce
this Agreement, the Notes, the other Credit Documents and the Lease by suit or
suits or proceedings in equity, at law or in bankruptcy, and whether for the
specific performance of any covenant or agreement herein contained or in
execution or aid of any power herein granted, or for foreclosure hereunder, or
for the appointment of a receiver or receivers for the Property or for the
recovery of judgment for the indebtedness secured thereby or for the enforcement
of any other proper, legal or equitable remedy available under applicable laws.
The Borrower shall be liable for any and all accrued and unpaid amounts due
hereunder before, after or during the exercise of any of the foregoing remedies,
including without limitation all reasonable legal fees and other reasonable
costs and expenses incurred by the Agent or any Lender by reason of the
occurrence of any Event of Default or the exercise of remedies with respect
thereto.
13
<PAGE>
SECTION 7. THE AGENT
7.1 APPOINTMENT.
Each Lender hereby irrevocably designates and appoints the Agent as the
agent of such Lender under this Agreement and the other Operative Agreements,
and each such Lender irrevocably authorizes the Agent, in such capacity, to
execute the Operative Agreements as agent for and on behalf of such Lender, to
take such action on behalf of such Lender under the provisions of this Agreement
and the other Operative Agreements and to exercise such powers and perform such
duties as are expressly delegated to the Agent by the terms of this Agreement
and other Operative Agreements, together with such other powers as are
reasonably incidental thereto. Without limiting the generality of the
foregoing, each of the Lenders hereby specifically acknowledges the terms and
provisions of the Participation Agreement and directs the Agent to exercise such
powers, make such decisions and otherwise perform such duties as are delegated
to the Agent thereunder without being required to obtain any specific consent
with respect thereto from any Lender, unless the matter under consideration is a
Unanimous Vote Matter or otherwise requires the consent of the Majority Lenders
and/or the Majority Secured Parties. Notwithstanding any provision to the
contrary elsewhere in this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Operative Agreement or otherwise exist against the Agent.
7.2 DELEGATION OF DUTIES.
The Agent may execute any of its duties under this Agreement and the other
Operative Agreements by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
The Agent shall not be responsible for the negligence or misconduct of any
agents or attorneys-in-fact selected by it with reasonable care.
7.3 EXCULPATORY PROVISIONS.
Neither the Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates shall be (a) liable to any of the Lenders for
any action lawfully taken or omitted to be taken by it or such Person under or
in connection with this Agreement or any other Operative Agreement (except for
its or such Person's own gross negligence or willful misconduct) or (b)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrower or any Credit Party or any
officer thereof contained in this Agreement or any other Operative Agreement or
in any certificate, report, statement or other document referred to or provided
for in, or received by the Agent under or in connection with, this Agreement or
any other Operative Agreement or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other
Operative Agreement or for any failure of the Borrower or any Credit Party to
perform its obligations hereunder or thereunder. The Agent shall not be under
any obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
14
<PAGE>
Agreement or any other Operative Agreement, or to inspect the properties, books
or records of the Borrower or any Credit Party.
7.4 RELIANCE BY THE AGENT.
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any Note, writing, resolution, notice, consent, certificate,
affidavit, letter, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it in good faith to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons
and upon advice and statements of legal counsel (including without limitation
counsel to the Borrower or the Credit Parties), independent accountants and
other experts selected with due care by the Agent. The Agent may deem and treat
the payee of any Note as the owner thereof for all purposes unless a written
notice of assignment, negotiation or transfer thereof shall have been filed with
the Agent. The Agent shall be fully justified in failing or refusing to take
any action under this Agreement or any other Operative Agreement unless it shall
first receive such advice or concurrence of the Majority Lenders, the Majority
Secured Parties or all Secured Parties, as the case may be, as it reasonably
deems appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall in all
cases be fully protected from the Lenders in acting, or in refraining from
acting, under this Agreement and the other Operative Agreements in accordance
with a request of the Majority Lenders, the Majority Secured Parties or all
Secured Parties, as the case may be, and such and any action taken or failure to
act pursuant thereto shall be binding upon all the Lenders and all future
holders of the Notes (or all Secured Parties, as the case may be).
7.5 NOTICE OF DEFAULT.
The Agent shall not be deemed to have knowledge or notice of the occurrence
of any Default or Event of Default hereunder unless the Agent has received
written notice from a Lender or the Borrower referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default". In the event that the Agent receives such a notice, the
Agent shall give notice thereof to the Lenders. The Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Majority Secured Parties; provided, that unless and until the
Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Secured Parties; provided, further, the foregoing shall not
limit (a) the rights of the Majority Secured Parties to elect remedies as set
forth in Section 6 and/or (b) the rights of the Majority Secured Parties or all
Secured Parties, as the case may be, as described in the Participation Agreement
(including without limitation Sections 8.2(h) and 8.6 of the Participation
Agreement).
7.6 NON-RELIANCE ON THE AGENT AND OTHER LENDERS.
Each Lender expressly acknowledges that neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates has made
any representations or
15
<PAGE>
warranties to it and that no act by the Agent hereinafter taken, including
without limitation any review of the affairs of the Borrower or the Credit
Parties, shall be deemed to constitute any representation or warranty by the
Agent to any Lender. Each Lender represents to the Agent that it has,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Borrower and the
Credit Parties and made its own decision to make its Loans hereunder and enter
into this Agreement. Each Lender also represents that it will, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement and the other Operative Agreements, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrower and the Credit Parties. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Agent hereunder, the
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, operations, property,
condition (financial or otherwise), prospects or creditworthiness of the
Borrower or the Credit Parties which may come into the possession of the Agent
or any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
7.7 INDEMNIFICATION.
THE LENDERS AGREE TO INDEMNIFY THE AGENT, IN ITS CAPACITY AS SUCH (TO THE
EXTENT NOT REIMBURSED BY THE BORROWER AND WITHOUT LIMITING THE OBLIGATION OF THE
BORROWER TO DO SO), RATABLY ACCORDING TO THEIR RESPECTIVE COMMITMENT PERCENTAGES
IN EFFECT ON THE DATE ON WHICH INDEMNIFICATION IS SOUGHT UNDER THIS SECTION 7.7
(OR, IF INDEMNIFICATION IS SOUGHT AFTER THE DATE UPON WHICH THE COMMITMENTS
SHALL HAVE TERMINATED AND THE LOANS SHALL HAVE BEEN PAID IN FULL, RATABLY IN
ACCORDANCE WITH THEIR COMMITMENT PERCENTAGES IMMEDIATELY PRIOR TO SUCH DATE),
FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY
KIND WHATSOEVER WHICH MAY AT ANY TIME (INCLUDING WITHOUT LIMITATION AT ANY TIME
FOLLOWING THE PAYMENT OF THE NOTES) BE IMPOSED ON, INCURRED BY OR ASSERTED
AGAINST ANY OF THEM IN ANY WAY RELATING TO OR ARISING OUT OF, THE COMMITMENTS,
THIS AGREEMENT, ANY OF THE OTHER OPERATIVE AGREEMENTS OR ANY DOCUMENTS
CONTEMPLATED BY OR REFERRED TO HEREIN OR THEREIN OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY OR ANY ACTION TAKEN OR OMITTED BY ANY OF THEM
UNDER OR IN CONNECTION WITH ANY OF THE FOREGOING; PROVIDED, THAT NO LENDER SHALL
BE LIABLE FOR THE PAYMENT OR ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS
RESULTING SOLELY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE AGENT.
THE AGREEMENTS IN THIS SECTION 7.7 SHALL SURVIVE THE PAYMENT OF THE NOTES AND
ALL OTHER AMOUNTS PAYABLE HEREUNDER.
7.8 THE AGENT IN ITS INDIVIDUAL CAPACITY.
The Agent and its Affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Borrower or the Credit Parties
as though the Agent were
16
<PAGE>
not the Agent hereunder and under the other Operative Agreements. With respect
to its Loans made or renewed by it and any Note issued to it, the Agent shall
have the same rights and powers under this Agreement and the other Operative
Agreements as any Lender and may exercise the same as though it were not the
Agent, and the terms "Lender" and "Lenders" shall include the Agent in its
individual capacity.
7.9 SUCCESSOR AGENT.
The Agent may resign at any time as the Agent upon thirty (30) days' notice
to the Lenders, the Borrower and, so long as no Lease Event of Default shall
have occurred and be continuing, the Lessee. If the Agent shall resign as the
Agent under this Agreement, the Majority Lenders shall appoint from among the
Lenders a successor Agent which successor Agent shall be subject to the approval
of the Borrower and, so long as no Lease Event of Default shall have occurred
and be continuing, the Lessee, such approval not to be unreasonably withheld or
delayed. If no successor Agent is appointed prior to the effective date of the
resignation of the resigning Agent, the Agent may appoint, after consulting with
the Lenders and subject to the approval of the Borrower and, so long as no Lease
Event of Default shall have occurred and be continuing, the Lessee, such
approval not to be unreasonably withheld or delayed, a successor Agent from
among the Lenders. If no successor Agent has accepted appointment as the Agent
by the date which is thirty (30) days following a retiring Agent's notice of
resignation, the retiring Agent's notice of resignation shall nevertheless
thereupon become effective and the Lenders shall perform all of the duties of
the Agent until such time, if any, as the Majority Lenders appoint a successor
Agent, as provided for above. Upon the effective date of such resignation, only
such successor Agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor agent and the
retiring Agent's rights, powers and duties in such capacity shall be terminated.
After any retiring Agent resigns hereunder as the Agent, the provisions of this
Article VII and Section 9.5 shall inure to their respective benefit as to any
actions taken or omitted to be taken by it while it was the Agent under this
Agreement.
7.10 ACTIONS OF THE AGENT ON BEHALF OF HOLDERS.
The parties hereto specifically acknowledge and consent to the Agent's
acting on behalf of the Holders as provided in the Participation Agreement, and,
in any such case, the Lenders acknowledge that the Holders shall be entitled to
vote as "Secured Parties" hereunder to the extent required or permitted by the
Operative Agreements (including without limitation Sections 8.2(h) and 8.6 of
the Participation Agreement).
7.11 THE AGENT'S DUTY OF CARE.
Other than the exercise of reasonable care to assure the safe custody of
the Collateral while being held by the Agent hereunder or under any other
Operative Agreement, the Agent shall have no duty or liability to preserve
rights pertaining thereto, it being understood and agreed that the Lessee shall
be responsible for preservation of all rights in the Collateral, and the Agent
shall be relieved of all responsibility for the Collateral upon surrendering it
or tendering the surrender of it to the Lessee. The Agent shall be deemed to
have exercised reasonable care in
17
<PAGE>
the custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which the Agent
accords its own property, which shall be no less than the treatment employed by
a reasonable and prudent agent in the industry, it being understood that the
Agent shall not have responsibility for taking any necessary steps to preserve
rights against any parties with respect to any of the Collateral.
7.12 APPLICABLE PARTIES.
The provisions of Section 7, other than the provisions of Section 7.9, are
solely for the benefit of the Agent and the Lenders, and the Borrower shall not
have any rights as a third party beneficiary or otherwise or any obligations
under any provision of Section 7, other than as provided in Section 7.9.
SECTION 8. MATTERS RELATING TO PAYMENT AND COLLATERAL
8.1 COLLECTION AND ALLOCATION OF PAYMENTS AND OTHER AMOUNTS.
The Credit Parties, the Agent, the Lenders, the Holders and the Borrower
have agreed pursuant to the terms of Section 8.7 of the Participation Agreement
to a procedure for the allocation and distribution of certain payments and
distributions, including without limitation the proceeds of Collateral.
8.2 CERTAIN REMEDIAL MATTERS.
Notwithstanding any other provision of this Agreement or any other Credit
Document:
(a) the Borrower shall at all times retain to the exclusion of all other
parties, all rights to Excepted Payments payable to it and to demand, collect or
commence an action at law to obtain such payments and to enforce any judgment
with respect thereto; and
(b) the Borrower and each Holder shall at all times retain the right, but
not to the exclusion of the Agent, (i) to retain all rights with respect to
insurance that Article XIV of the Lease specifically confers upon the "Lessor",
(ii) to provide such insurance as the Lessee shall have failed to maintain or as
the Borrower or any Holder may desire, and (iii) to enforce compliance by the
Lessee with the provisions of Articles VIII, IX, X, XI, XIV and XVII of the
Lease.
8.3 EXCEPTED PAYMENTS.
Notwithstanding any other provision of this Agreement or the Security
Documents, any Excepted Payment received at any time by the Agent shall be
distributed promptly to the Person entitled to receive such Excepted Payment.
18
<PAGE>
SECTION 8B. MATTERS RELATING TO GUARANTY OF TRANCHE A OBLIGATIONS
8B.1. TRANCHE A GUARANTY OF PAYMENT AND PERFORMANCE.
Subject to Section 8B.7, the Tranche A Guarantors hereby unconditionally
guarantee on a joint and several basis to the Tranche A Lenders the prompt
payment and performance of the Tranche A Obligations in full when due (whether
at stated maturity, as a mandatory prepayment, by acceleration or otherwise) or
when such is otherwise to be performed. This Section 8B is a guaranty of
payment and performance and not of collection and is a continuing guaranty and
shall apply to all Tranche A Obligations whenever arising. All rights granted
to the Tranche A Lenders under this Section 8B shall be subject to the
provisions of Sections 8.2(h) and 8.6 of the Participation Agreement.
8B.2. OBLIGATIONS UNCONDITIONAL.
The Tranche A Guarantors agree, to the extent permitted by law, that the
obligations of the Tranche A Guarantors under this Section 8B are absolute and
unconditional, irrespective of the value, genuineness, validity, regularity or
enforceability of any of the Operative Agreements, or any other agreement or
instrument referred to therein, or any substitution, release or exchange of any
other guarantee of or security for any of the Tranche A Obligations, and, to the
fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever which might otherwise constitute a legal or equitable
discharge or defense of a surety, guarantor or co-obligor, it being the intent
of this Section 8B.2 that the obligations of the Tranche A Guarantors hereunder
shall be absolute and unconditional under any and all circumstances. The
Tranche A Guarantors agree that this Section 8B may be enforced by the Agent on
behalf of the Tranche A Lenders without the necessity at any time of resorting
to or exhausting any other security or collateral and without the necessity at
any time of having recourse to the Tranche A Notes or any other of the Operative
Agreements or any collateral, if any, hereafter securing the Tranche A
Obligations or otherwise and the Tranche A Guarantors hereby waive the right to
require the Agent on behalf of the Tranche A Lenders to proceed against any
Person (including without limitation any co-guarantor) or to require the Agent
on behalf of the Tranche A Lenders to pursue any other remedy or enforce any
other right. Each Tranche A Guarantor further agrees not to exercise any right
of subrogation, indemnity, reimbursement or contribution against any Person for
amounts paid under this Section 8B until such time as the Tranche A Loans,
accrued but unpaid interest thereon and all other amounts owing under the
Operative Agreements have been paid in full. Without limiting the generality of
the waiver provisions of this Section 8B, the Tranche A Guarantors hereby waive
any rights to require the Agent on behalf of the Tranche A Lenders to proceed
against any Person or to require the Agent on behalf of the Tranche A Lenders to
pursue any other remedy or enforce any other right, including without limitation
any and all rights under N.C. Gen, Stat. (S) 26-7 through 26-9. The Tranche A
Guarantors further agree that nothing contained in this Section 8B shall prevent
the Agent on behalf of the Tranche A Lenders from suing on any Operative
Agreement or foreclosing any security interest in or Lien on any collateral, if
any, securing the Tranche A Obligations or from exercising any other rights
available to the Agent on behalf of the Tranche A Lenders under any Operative
19
<PAGE>
Agreement, or any other instrument of security, if any, and the exercise of any
of the aforesaid rights and the completion of any foreclosure proceedings shall
not constitute a discharge of the Tranche A Guarantors' obligations hereunder;
it being the purpose and intent of the Tranche A Guarantors that their
obligations hereunder shall be absolute, independent and unconditional under any
and all circumstances; provided, that any amounts due under this Section 8B
which are paid to or for the benefit of any Tranche A Lender shall reduce the
Tranche A Obligations by a corresponding amount (unless required to be rescinded
at a later date). To the extent permitted by law, neither the Tranche A
Guarantors' obligations under this Section 8B nor any remedy for the enforcement
thereof shall be impaired, modified, changed or released in any manner
whatsoever by an impairment, modification, change, release or limitation of the
liability of any firm or by reason of the bankruptcy or insolvency of any
Person. The Tranche A Guarantors waive any and all notice of the creation,
renewal, extension or accrual of any of the Tranche A Obligations and notice of
or proof of reliance by the Agent or any Tranche A Lender upon this Section 8B
or acceptance of this Section 8B. The Tranche A Obligations shall conclusively
be deemed to have been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon this Section 8B. All dealings between any or
all of the Credit Parties, on the one hand, and the Agent or the Tranche A
Lenders, on the other hand, likewise shall be conclusively presumed to have been
had or consummated in reliance upon this Section 8B.
8B.3. MODIFICATIONS.
The Tranche A Guarantors agree that (a) all or any part of the security now
or hereafter held for the Tranche A Obligations, if any, may be exchanged,
compromised or surrendered from time to time; (b) neither the Agent nor any
Tranche A Lender shall have any obligation to protect, perfect, secure or insure
any such security interests, liens or encumbrances now or hereafter held, if
any, for the Tranche A Obligations or the properties subject thereto; (c) the
time or place of payment of the Tranche A Obligations may be changed or
extended, in whole or in part, to a time certain or otherwise, and may be
renewed or accelerated, in whole or in part; (d) any or all of the Credit
Parties and any other party liable for payment under the Operative Agreements
may be granted indulgences generally; (e) any of the provisions of the Notes,
the Certificates or any of the other Operative Agreements may be modified,
amended or waived; (f) any party (including without limitation any co-guarantor)
liable for the payment thereof may be granted indulgences or be released; and
(g) any deposit balance for the credit any or all of the Credit Parties or any
other party liable for the payment of the Tranche A Obligations or liable upon
any security therefor may be released, in whole or in part, at, before or after
the stated, extended or accelerated maturity of the Tranche A Obligations, all
without notice to or further assent by any Tranche A Guarantor, which shall
remain bound thereon, notwithstanding any such exchange, compromise, surrender,
extension, renewal, acceleration, modification, indulgence or release (except to
the extent any such exchange, compromise, surrender, extension, renewal,
acceleration, modification, indulgence or release is expressly for the benefit
of such Tranche A Guarantor).
20
<PAGE>
8B.4. WAIVER OF RIGHTS.
Each Tranche A Guarantor expressly waives to the fullest extent permitted
by applicable law: (a) notice of acceptance of this Section 8B by the Agent and
any Tranche A Lender and of all extensions of credit or other Advances to any
Credit Party by any Tranche A Lender pursuant to the terms of the Operative
Agreements; (b) presentment and demand for payment or performance of any of the
Tranche A Obligations; (c) protest and notice of dishonor or of default with
respect to the Tranche A Obligations or with respect to any security therefor;
(d) notice of the Agent on behalf of the Tranche A Lenders obtaining, amending,
substituting for, releasing, waiving or modifying any security interest, lien or
encumbrance, if any, hereafter securing the Tranche A Obligations, or the Agent
on behalf of the Tranche A Lenders subordinating, compromising, discharging or
releasing such security interests, liens or encumbrances, if any; and (e) all
other notices to which the Tranche A Guarantors might otherwise be entitled.
Notwithstanding anything to the contrary herein, (i) the Tranche A Guarantors'
payments hereunder shall be due three (3) days after written demand by the Agent
for such payment (unless the Tranche A Obligations are automatically accelerated
pursuant to the applicable provisions of the Operative Agreements in which case
the Tranche A Guarantors' payments shall be automatically due) and (ii) any
modification of the Operative Agreements which has the effect of increasing the
Tranche A Obligations shall not be enforceable against the Tranche A Guarantors
unless each Tranche A Guarantors executes the document evidencing such
modification or otherwise reaffirms its guaranty in writing in connection with
such modification.
8B.5. REINSTATEMENT.
The obligations of the Tranche A Guarantors under this Section 8B shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Tranche A Obligations is rescinded
or must be otherwise restored by any holder of any of the Tranche A Obligations,
whether as a result of any proceedings in bankruptcy or reorganization or
otherwise, and the Tranche A Guarantors agree that each of them will indemnify
the Agent and each Tranche A Lender on demand for all reasonable costs and
expenses (including, without limitation, reasonable fees of counsel) incurred by
the Agent and/or any Tranche A Lender in connection with such rescission or
restoration, including without limitation any such costs and expenses incurred
in defending against any claim alleging that such payment constituted a
preference, fraudulent transfer or similar payment under any bankruptcy,
insolvency or similar law.
8B.6. REMEDIES.
The Tranche A Guarantors agree that, as between the Tranche A Guarantors,
on the one hand, and the Agent and each Tranche A Lender, on the other hand, the
Tranche A Obligations may be declared to be forthwith due and payable as
provided in the applicable provisions of the Operative Agreements (and shall be
deemed to have become automatically due and payable in the circumstances
provided therein) notwithstanding any stay, injunction or other prohibition
preventing such declaration (or preventing such Tranche A Obligations from
becoming automatically due and payable) as against any other Person and that, in
the event of such
21
<PAGE>
declaration (or such Tranche A Obligations being deemed to have become
automatically due and payable), such Tranche A Obligations (whether or not due
and payable by any other Person) shall forthwith become due and payable by the
Tranche A Guarantors in accordance with the applicable provisions of the
Operative Agreements.
8B.7. LIMITATION OF TRANCHE A GUARANTY.
Notwithstanding any provision to the contrary contained herein or in any of
the other Operative Agreements, to the extent the Tranche A Obligations shall be
adjudicated to be invalid or unenforceable for any reason (including without
limitation because of any applicable state or federal law relating to fraudulent
conveyances or transfers) then the obligations of the Tranche A Guarantors
hereunder shall be limited to the maximum amount that is permissible under
applicable law (whether federal or state and including without limitation the
Bankruptcy Code).
Subject to Section 8B.5, upon the satisfaction of the Tranche A Obligations in
full, regardless of the source of payment, the Tranche A Guarantors' obligations
hereunder shall be deemed satisfied, discharged and terminated other than
indemnifications set forth herein that expressly survive.
8B.8. PAYMENT OF AMOUNTS TO THE AGENT.
Each Tranche A Lender hereby instructs the Tranche A Guarantors, and the
Tranche A Guarantors hereby acknowledge and agree, that until such time as the
Tranche A Loans are paid in full and the Liens evidenced by the Security
Agreement and the Mortgage Instruments have been released any and all Rent
(excluding Excepted Payments which shall be payable to each Holder or other
Person as appropriate) and any and all other amounts of any kind or type under
any of the Operative Agreements due and owing or payable to any Person shall
instead be paid directly to the Agent (excluding Excepted Payments which shall
be payable to each Holder or other Person as appropriate) or as the Agent may
direct from time to time for allocation and distribution in accordance with the
procedures set forth in Section 8.7 of the Participation Agreement.
SECTION 8C. MATTERS RELATING TO GUARANTY OF COMPANY OBLIGATIONS
8C.1. GUARANTY OF PAYMENT AND PERFORMANCE OF COMPANY OBLIGATIONS.
Subject to Section 8C.7, AOR hereby unconditionally guarantees to the
Financing Parties the prompt payment and performance of the Company Obligations
in full when due (whether at stated maturity, as a mandatory prepayment, by
acceleration or otherwise) or when such is otherwise to be performed. This
Section 8C is a guaranty of payment and performance and not of collection and is
a continuing guaranty and shall apply to all Company Obligations whenever
22
<PAGE>
arising. All rights granted to the Financing Parties under this Section 8C
shall be subject to the provisions of Sections 8.2(h) and 8.6 of the
Participation Agreement.
8C.2. OBLIGATIONS UNCONDITIONAL.
AOR agrees, to the extent permitted by law, that the obligations of AOR
under this Section 8C are absolute and unconditional, irrespective of the value,
genuineness, validity, regularity or enforceability of any of the Operative
Agreements, or any other agreement or instrument referred to therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Company Obligations, and, to the fullest extent permitted by applicable
law, irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety, guarantor or
co-obligor, it being the intent of this Section 8B.2 that the obligations of AOR
hereunder shall be absolute and unconditional under any and all circumstances.
AOR agrees that this Section 8C may be enforced by the Agent on behalf of the
Financing Parties without the necessity at any time of resorting to or
exhausting any other security or collateral and without the necessity at any
time of having recourse to the Notes, the Certificates or any other of the
Operative Agreements or any collateral, if any, hereafter securing the Company
Obligations or otherwise and AOR hereby agrees not to exercise the right to
require the Agent on behalf of the Financing Parties to proceed against any
Person (including without limitation any co-guarantor) or to require the Agent
on behalf of the Financing Parties to pursue any other remedy or enforce any
other right. AOR further agrees not to exercise any right of subrogation,
indemnity, reimbursement or contribution against any Person for amounts paid
under this Section 8C until such time as the Loans, Holder Advances accrued but
unpaid interest thereon, accrued but unpaid Holder Yield and all other amounts
owing under the Operative Agreements have been paid in full. Without limiting
the generality of the waiver provisions of this Section 8C, AOR hereby waives
any rights to require the Agent on behalf of the Financing Parties to proceed
against any Person or to require the Agent on behalf of the Financing Parties to
pursue any other remedy or enforce any other right, including without limitation
any and all rights under N.C. Gen, Stat. (S) 26-7 through 26-9. AOR further
agrees that nothing contained in this Section 8C shall prevent the Agent on
behalf of the Financing Parties from suing on any Operative Agreement or
foreclosing any security interest in or Lien on any collateral, if any, securing
the Company Obligations or from exercising any other rights available to the
Agent on behalf of the Financing Parties under any Operative Agreement, or any
other instrument of security, if any, and the exercise of any of the aforesaid
rights and the completion of any foreclosure proceedings shall not constitute a
discharge of AOR's obligations hereunder; it being the purpose and intent of AOR
that its obligations hereunder shall be absolute, independent and unconditional
under any and all circumstances; provided, that any amounts due under this
Section 8C which are paid to or for the benefit of any Financing Party shall
reduce the Company Obligations by a corresponding amount (unless required to be
rescinded at a later date). To the extent permitted by law, neither AOR's
obligations under this Section 8C nor any remedy for the enforcement thereof
shall be impaired, modified, changed or released in any manner whatsoever by an
impairment, modification, change, release or limitation of the liability of any
firm or by reason of the bankruptcy or insolvency of any Person. AOR waives any
and all notice of the creation, renewal, extension or accrual of any of the
Company Obligations and notice of or proof of reliance by the Agent or any
Financing Party upon this
23
<PAGE>
Section 8C or acceptance of this Section 8C. The Company Obligations shall
conclusively be deemed to have been created, contracted or incurred, or renewed,
extended, amended or waived, in reliance upon this Section 8C. All dealings
between any or all of the Credit Parties, on the one hand, and the Agent or the
Financing Parties, on the other hand, likewise shall be conclusively presumed to
have been had or consummated in reliance upon this Section 8C (except to the
extent any such exchange, compromise, surrender, extension, renewal,
acceleration, modification, indulgence or release is expressly for the benefit
of AOR).
8C.3. MODIFICATIONS.
AOR agrees that (a) all or any part of the security now or hereafter held
for the Company Obligations, if any, may be exchanged, compromised or
surrendered from time to time; (b) neither the Agent nor any Financing Party
shall have any obligation to protect, perfect, secure or insure any such
security interests, liens or encumbrances now or hereafter held, if any, for the
Company Obligations or the properties subject thereto; (c) the time or place of
payment of the Company Obligations may be changed or extended, in whole or in
part, to a time certain or otherwise, and may be renewed or accelerated, in
whole or in part; (d) any or all of the Credit Parties and any other party
liable for payment under the Operative Agreements may be granted indulgences
generally; (e) any of the provisions of the Notes, the Certificates or any of
the other Operative Agreements may be modified, amended or waived; (f) any party
(including without limitation any co-guarantor) liable for the payment thereof
may be granted indulgences or be released; and (g) any deposit balance for the
credit of any or all of the Credit Parties or any other party liable for the
payment of the Company Obligations or liable upon any security therefor may be
released, in whole or in part, at, before or after the stated, extended or
accelerated maturity of the Company Obligations, all without notice to or
further assent by AOR, which shall remain bound thereon, notwithstanding any
such exchange, compromise, surrender, extension, renewal, acceleration,
modification, indulgence or release.
8C.4. WAIVER OF RIGHTS.
AOR expressly waives to the fullest extent permitted by applicable law: (a)
notice of acceptance of this Section 8C by the Agent and any Financing Party and
of all extensions of credit or other Advances to any Credit Party by any
Financing Party pursuant to the terms of the Operative Agreements; (b)
presentment and demand for payment or performance of any of the Company
Obligations; (c) protest and notice of dishonor or of default with respect to
the Company Obligations or with respect to any security therefor; (d) notice of
the Agent on behalf of the Financing Parties obtaining, amending, substituting
for, releasing, waiving or modifying any security interest, lien or encumbrance,
if any, hereafter securing the Company Obligations, or the Agent on behalf of
the Financing Parties subordinating, compromising, discharging or releasing such
security interests, liens or encumbrances, if any; and (e) all other notices to
which AOR might otherwise be entitled. Notwithstanding anything to the contrary
herein, (i) AOR's payments hereunder shall be due three (3) days after written
demand by the Agent for such payment (unless the Company Obligations are
automatically accelerated pursuant to the applicable provisions of the Operative
Agreements in which case AOR's payments shall be automatically due) and (ii) any
modification of the Operative Agreements which has the effect of
24
<PAGE>
increasing the Company Obligations shall not be enforceable against the AOR
unless AOR executes the document evidencing such modification or otherwise
reaffirms its guaranty in writing in connection with such modification.
8C.5. REINSTATEMENT.
The obligations of AOR under this Section 8C shall be automatically
reinstated if and to the extent that for any reason any payment by or on behalf
of any Person in respect of the Company Obligations is rescinded or must be
otherwise restored by any holder of any of the Company Obligations, whether as a
result of any proceedings in bankruptcy or reorganization or otherwise, and AOR
agrees that AOR will indemnify the Agent and each Financing Party on demand for
all reasonable costs and expenses (including, without limitation, reasonable
fees of counsel) incurred by the Agent and/or any Financing Party in connection
with such rescission or restoration, including without limitation any such costs
and expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.
8C.6. REMEDIES.
AOR agrees that, as between AOR, on the one hand, and the Agent and each
Financing Party, on the other hand, the Company Obligations may be declared to
be forthwith due and payable as provided in the applicable provisions of the
Operative Agreements (and shall be deemed to have become automatically due and
payable in the circumstances provided therein) notwithstanding any stay,
injunction or other prohibition preventing such declaration (or preventing such
Company Obligations from becoming automatically due and payable) as against any
other Person and that, in the event of such declaration (or such Company
Obligations being deemed to have become automatically due and payable), such
Company Obligations (whether or not due and payable by any other Person) shall
forthwith become due and payable by AOR in accordance with the applicable
provisions of the Operative Agreements.
8C.7. LIMITATION OF GUARANTY.
Notwithstanding any provision to the contrary contained herein or in any of
the other Operative Agreements, to the extent the Company Obligations shall be
adjudicated to be invalid or unenforceable for any reason (including without
limitation because of any applicable state or federal law relating to fraudulent
conveyances or transfers) then the obligations of AOR hereunder shall be limited
to the maximum amount that is permissible under applicable law (whether federal
or state and including without limitation the Bankruptcy Code).
Subject to Section 8C.5, upon the satisfaction of the Company Obligations
in full, regardless of the source of payment, AOR's obligations hereunder shall
be deemed satisfied, discharged and terminated other than indemnifications set
forth herein that expressly survive.
8C.8. PAYMENT OF AMOUNTS TO THE AGENT.
25
<PAGE>
Each Financing Party hereby instructs AOR, and AOR hereby acknowledges and
agrees, that until such time as the Loans, Holder Advances, and all other
amounts due and payable under the Operative Agreements are paid in full and the
Liens evidenced by the Security Agreement and the Mortgage Instruments have been
released any and all Rent (excluding Excepted Payments which shall be payable to
each Holder or other Person as appropriate) and any and all other amounts of any
kind or type under any of the Operative Agreements due and owing or payable to
any Person shall instead be paid directly to the Agent (excluding Excepted
Payments which shall be payable to each Holder or other Person as appropriate)
or as the Agent may direct from time to time for allocation and distribution in
accordance with the procedures set forth in Section 8.7 of the Participation
Agreement.
SECTION 9 MISCELLANEOUS
9.1 AMENDMENTS AND WAIVERS.
None of the terms or provisions of this Agreement may be terminated,
amended, supplemented, waived or modified except in accordance with the terms of
Section 12.4 of the Participation Agreement.
9.2 NOTICES.
All notices required or permitted to be given under this Agreement shall be
given in accordance with Section 12.2 of the Participation Agreement.
9.3 NO WAIVER; CUMULATIVE REMEDIES.
No failure to exercise and no delay in exercising, on the part of the Agent
or any Lender, any right, remedy, power or privilege hereunder or under the
other Credit Documents shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder preclude
any other or future exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties made by the Borrower under the Operative
Agreements shall survive the execution and delivery of this Agreement and the
Notes and the making of the Loans hereunder.
9.5 PAYMENT OF EXPENSES AND TAXES.
The Borrower agrees to (with funds provided by the Lessee as Supplemental
Rent): (a) pay all reasonable out-of-pocket costs and expenses of (i) the Agent
whether or not the transactions herein contemplated are consummated, in
connection with the negotiation,
26
<PAGE>
preparation, execution and delivery of the Operative Agreements and the
documents and instruments referred to therein (including without limitation the
reasonable fees and disbursements of Moore & Van Allen, PLLC) and any amendment,
waiver or consent relating thereto (including without limitation the reasonable
fees and disbursements of counsel to the Agent) and (ii) the Agent and upon the
occurrence and during the continuance of an Event of Default each of the Lenders
in connection with the enforcement of the Operative Agreements and the documents
and instruments referred to therein (including without limitation the reasonable
fees and disbursements of counsel for the Agent and for each of the Lenders) and
(b) pay and hold each of the Lenders harmless from and against any and all
present and future stamp and other similar taxes with respect to the foregoing
matters and save each of the Lenders harmless from and against any all
liabilities with respect to or resulting from any delay or omission (other than
to the extent attributable to such Lender) to pay such stamp or similar taxes.
9.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS.
This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Agent, all future holders of the Notes and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of each Lender.
9.7 PARTICIPATIONS.
Subject to and in accordance with Section 10.1 of the Participation
Agreement, any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time sell to one (1) or more Persons
engaged in making, purchasing or otherwise investing in commercial loans in the
ordinary course of its business (each, a "Participant") participating interests
in any Loan owing to such Lender, any Note held by such Lender, any Commitment
of such Lender or any other interest of such Lender hereunder and under the
other Operative Agreements; provided, that any such sale of a participating
interest shall be in a principal amount of at least $2,000,000 or such lesser
amount (to the extent such Lender's interest in this Agreement and the Notes is
less than $2,000,000) which may be sold without violating the provisions of the
following proviso; provided, further, no Lender shall sell any participating
interest, when taken together with all other participating interests, if any,
sold by such Lender or such lesser amount constitutes such Lender's entire
interest in this Agreement and the Notes. In the event of any such sale by a
Lender of a participating interest to a Participant, such Lender's obligations
under this Agreement to the other parties to this Agreement shall remain
unchanged, such Lender shall remain solely responsible for the performance
thereof, such Lender shall remain the holder of any such Note for all purposes
under this Agreement and the Notes, and the Borrower and the Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and the Notes. In no event
shall any Participant have any right to approve any amendment or waiver of any
provision of this Agreement or any other Operative Agreement, or any consent to
any departure by the Borrower or any other Person therefrom, except to the
extent that such amendment, waiver or consent would (a) reduce the principal of,
or interest on, any Loan or Note, or postpone the date of the final maturity of
any Loan or Note, or reduce the amount of any Lender Facility Fee, in each case
27
<PAGE>
to the extent subject to such participation or (b) release all or substantially
all of the Collateral. The Borrower agrees that, while an Event of Default shall
have occurred and be continuing, if amounts outstanding under this Agreement and
the Notes are due or unpaid, or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall, to the maximum extent
permitted by applicable law, be deemed to have the right of setoff in respect of
its participating interests in amounts owing directly to it as a Lender under
this Agreement or any Note, provided, that in purchasing such participating
interest, such Participant shall be deemed to have agreed to share with the
Lenders the proceeds thereof as provided in Section 9.10(a) as fully as if it
were a Lender hereunder. The Borrower also agrees that each Participant shall be
entitled to the benefits of Sections 11.2(e), 11.3 and 11.4 of the Participation
Agreement with respect to its participation in the Commitments and the Loans
outstanding from time to time as if it was a Lender; provided, that such
Participant shall have complied with the requirements of said Sections and
provided, further, that no Participant shall be entitled to receive any greater
amount pursuant to any such Section than the transferor Lender would have been
entitled to receive in respect of the amount of the participation transferred by
such transferor Lender to such Participant had no such transfer occurred.
9.8 ASSIGNMENTS.
(a) Subject to and in accordance with Sections 9.1 and 10.1 of the
Participation Agreement, any Lender may, in the ordinary course of its business
and in accordance with applicable law, at any time and from time to time assign
to any Eligible Assignee (each, a "Purchasing Lender") all or any part of its
rights and obligations under this Agreement and the other Operative Agreements
pursuant to an Assignment and Acceptance, substantially in the form of EXHIBIT
B, executed by such Purchasing Lender, such assigning Lender (and, in the case
of a Purchasing Lender that is not a Lender or an affiliate thereof, subject to
Section 9.1 of the Participation Agreement, by the Borrower and the Agent) and
delivered to the Agent for its acceptance and recording in the register;
provided, that no such assignment to a Purchasing Lender (other than any Lender
or any affiliate thereof) shall be in an aggregate principal amount less than
$5,000,000 (other than in the case of an assignment of all of a Lender's
interests under this Agreement and the Notes). Upon such execution, delivery,
acceptance and recording, from and after the effective date determined pursuant
to such Assignment and Acceptance, (x) the Purchasing Lender thereunder shall be
a party hereto and, to the extent provided in such Assignment and Acceptance,
have the rights and obligations of a Lender hereunder with a Commitment as set
forth therein, and (y) the assigning Lender thereunder shall, to the extent
provided in such Assignment and Acceptance, be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance covering
all of the remaining portion of an assigning Lender's rights and obligations
under this Agreement, such assigning Lender shall cease to be a party hereto).
notwithstanding anything to the contrary in this Agreement, no such assignment
shall be made to a Purchasing Lender without the prior written consent of the
Borrower, not to be unreasonably withheld, and, unless requested by the rekevant
Purchasing Lender and/or Assigning Lender, new Notes shall not be required to be
executed and delivered by the Borrower, for any assignment which occurs at any
time when any of the events described in Section 6(g) shall have occurred and be
continuing.
28
<PAGE>
(b) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and a Purchasing Lender (and, in the case of a Purchasing
Lender that is not a lender or an affiliate thereof, by the Borrower and the
Agent) together with payment to the Agent of a registration and processing fee
of $2,500 (which shall not be payable by the Borrower or the Lessee, except as
otherwise provided in connection with an assignment requested in accordance with
Section 2.11(b)), the Agent shall (i) promptly accept such Assignment and
Acceptance and (ii) promptly after the effective date determined pursuant
thereto, record the information contained therein in the Register and give
notice of such acceptance and recordation to the Lenders and the Borrower. On or
prior to such effective date, the Borrower, at its own expense, shall execute
and deliver to the Agent new Notes (in exchange for the Notes of the assigning
Lender), each in an amount equal to the Commitment assumed or Loans purchased by
the relevant Purchasing Lender pursuant to such Assignment and Acceptance, and,
if the assigning Lender has retained a Commitment or any Loan hereunder, new
Notes to the order of the assigning Lender, each in an amount equal to the
Commitment or Loans retained by it hereunder. Such new Notes shall be dated the
effective date of the applicable Assignment and Acceptance and shall otherwise
be in the form of the notes replaced thereby.
(c) Each Purchasing Lender (other than any Lender organized and existing
under the laws of the U.S. or any political subdivision in or of the U.S.), by
executing and delivering an Assignment and Acceptance,
(i) agrees to execute and deliver to the Agent, as promptly as
practicable, four (4) signed copies (two (2) for the Agent and two (2) for
delivery by the Agent to the Borrower) of form 1001 or form 4224 (or any
successor form or comparable form) (it being understood that if the applicable
form is not so delivered, payments under or in respect of this Agreement may be
subject to withholding and deduction);
(ii) represents and warrants to the Borrower and the Agent that the
form so delivered is true and accurate and that, as of the effective date of the
applicable Assignment and Acceptance, each of such Purchasing Lender's lending
offices is entitled to receive payments of principal and interest under or in
respect of this Agreement without withholding or deduction for or on account of
any taxes imposed by the U.S. Federal government;
(iii) agrees to annually hereafter deliver to each of the
Borrower and the Agent not later than December 31 of the year preceding the year
to which it will apply, two (2) further properly completed signed copies of Form
1001 or Form 4224 (or any successor form or comparable form), as appropriate,
unless an event has occurred which renders the relevant form inapplicable (it
being understood that if the applicable form is not so delivered, payments under
or in respect of this Agreement may be subject to withholding and deduction);
(iv) agrees to promptly notify the Borrower and the Agent in
writing if it ceases to be entitled to receive payments of principal and
interest under or in respect of this Agreement without withholding or deduction
for or on account of any taxes imposed by the U.S. or any political subdivision
in or of the U.S. (it being understood that payments under or in respect of this
Agreement may be subject to withholding and deduction in such event);
29
<PAGE>
(v) acknowledges that in the event it ceases to be exempt from
withholding and/or deduction of such taxes, the Agent may withhold and/or deduct
the applicable amount from any payments to which such assignee Lender would
otherwise be entitled, without any liability to such assignee Lender therefor;
and
(vi) agrees to indemnify the Borrower and the Agent from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs or expenses that result from such assignee
lender's breach of any such representation, warranty or agreement.
(d) Any Lender party to this Agreement may, from time to time and
without the consent of the Borrower or any other Person, pledge or assign for
security purposes any portion of its loans or any other interests in this
Agreement and the other Credit Documents to any Federal Reserve Bank.
9.9 THE REGISTER; DISCLOSURE; PLEDGES TO FEDERAL RESERVE BANKS.
(a) The Agent shall maintain for the benefit of the Lenders at its
address referred to in Section 9.2 a copy of each Assignment and Acceptance
delivered to it and a register (the "Register") for the recordation of the names
and addresses of the Lenders, the Commitments of the Lenders, and the principal
amount of the Loans owing to each Lender from time to time. The entries in the
Register shall be conclusive, in the absence of clearly demonstrable error, and
the Borrower, the Agent and the Lenders may treat each Person whose name is
recorded in the Register as the owner of the Loan recorded therein for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower or any Lender at any reasonable time and from time to time upon
reasonable notice.
(b) Nothing herein shall prohibit any Lender from pledging or assigning
any Note to any Federal Reserve Bank in accordance with applicable law.
9.10 ADJUSTMENTS; SET-OFF.
(a) Except as otherwise expressly provided in Section 8.1 hereof and
Section 8.7 of the Participation Agreement where, and to the extent, one (1)
Lender is entitled to payments prior to other Lenders, if any Lender (a
"Benefitted Lender") shall at any time receive any payment of all or part of its
Loans, or interest thereon, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in Section 6(g), or otherwise), in a
greater proportion than any such payment to or collateral received by any other
Lender, if any, in respect of such other Lender's Loans, or interest thereon,
such Benefitted Lender shall purchase for cash from the other Lenders a
participating interest in such portion of each such other Lender's Loan, or
shall provide such other Lenders with the benefits of any such collateral, or
the proceeds thereof, as shall be necessary to cause such Benefitted Lender to
share the excess payment or benefits of such collateral or proceeds ratably with
each of the Lenders; provided, however, that if all or any portion of such
excess payment or
30
<PAGE>
benefits is thereafter recovered from such Benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the event
of such recovery, but without interest.
(b) In addition to any rights now or hereafter granted under applicable
law or otherwise, and not by way of limitation of any such rights, upon the
occurrence of an Event of Default, each of the Agent and each Lender is hereby
authorized at any time or from time to time, without presentment, demand,
protest or other notice of any kind to the Borrower or to any other Person, any
such notice being hereby expressly waived (to the extent permitted by law), to
set off and to appropriate and apply any and all deposits (general or special)
and any other Indebtedness at any time held or owing by the Agent or such Lender
(including without limitation by branches and agencies of the Agent or such
Lender wherever located) to or for the credit or the account of the Borrower
against and on account of the obligations and liabilities of the Borrower to the
Agent or such Lender under this Agreement or under any of the other Operative
Agreements, including without limitation all interests in obligations of the
Borrower purchased by any such Lender pursuant to Section 9.10(a), and all other
claims of any nature or description arising out of or connected with this
Agreement or any other Operative Agreement, irrespective of whether or not the
Agent or such Lender shall have made any demand and although said obligations,
liabilities or claims, or any of them, shall be contingent or unmatured.
9.11 COUNTERPARTS.
This Agreement may be executed by one (1) or more of the parties to this
Agreement on any number of separate counterparts (including without limitation
by telecopy), and all of said counterparts taken together shall be deemed to
constitute one (1) and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Borrower and the
Agent.
9.12 SEVERABILITY.
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
9.13 INTEGRATION.
This Agreement and the other Credit Documents represent the agreement of
the Borrower, the Agent, and the Lenders with respect to the subject matter
hereof and thereof, and there are no promises, undertakings, representations or
warranties by the Agent or any Lender relative to subject matter hereof not
expressly set forth or referred to herein or in the other Credit Documents.
31
<PAGE>
9.14 GOVERNING LAW.
THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED,
INTERPRETED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NORTH
CAROLINA.
9.15 SUBMISSION TO JURISDICTION; VENUE; ARBITRATION.
THE PROVISIONS OF THE PARTICIPATION AGREEMENT RELATING TO SUBMISSION TO
JURISDICTION, VENUE AND ARBITRATION ARE HEREBY INCORPORATED BY REFERENCE HEREIN,
MUTATIS MUTANDIS.
9.16 ACKNOWLEDGEMENTS.
The Borrower hereby acknowledges that:
(a) neither the Agent nor any Lender has any fiduciary relationship with
or duty to the Borrower arising out of or in connection with this Agreement or
any of the other Credit Documents, and the relationship between the Agent and
the Lenders, on one (1) hand, and the Borrower, on the other hand, in connection
herewith or therewith is solely that of debtor and creditor; and
(b) no joint venture is created hereby or by the other Credit Documents
or otherwise exists by virtue of the transactions contemplated hereby among the
Lenders or among the Borrower and the Lenders.
9.17 WAIVERS OF JURY TRIAL.
THE BORROWER, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW, TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
9.18 NONRECOURSE.
In addition to and not in limitation of Section 12.9 of the Participation
Agreement, anything to the contrary contained in this Agreement or in any other
Operative Agreement notwithstanding, no officer, director or shareholder (other
than a Credit Party) of any party to any Operative Agreement shall be personally
liable in any respect for any liability or obligation hereunder or under any
other Operative Agreement including without limitation the payment of the
principal of, or interest on, the Notes, or for monetary damages for the breach
of performance of any of the covenants contained in this Agreement, the Notes or
any of the other Operative Agreements. The Agent and the Lenders agree that, in
the event any of them pursues any
32
<PAGE>
remedies available to them under this Agreement, the Notes or any other
Operative Agreement, neither the Agent nor the Lenders shall have any recourse
against the Borrower, nor any officer, director or shareholder (other than a
Credit Party) of any party to any Operative Agreement, for any deficiency, loss
or claim for monetary damages or otherwise resulting therefrom and recourse
shall be had solely and exclusively against the Trust Estate and the Credit
Parties; but nothing contained herein shall be taken to prevent recourse against
or the enforcement of remedies against the Trust Estate in respect of any and
all liabilities, obligations and undertakings contained in this Agreement, the
Notes or any other Operative Agreement. The Agent and the Lenders further agree
that the Borrower shall not be responsible for the payment of any amounts owing
hereunder (excluding principal and interest (other than Overdue Interest) in
respect of the Loans) (such non-excluded amounts, "Supplemental Amounts") except
to the extent that payments of Supplemental Rent designated by the Lessee for
application to such Supplemental Amounts shall have been paid by the Lessee
pursuant to the Lease (it being understood that the failure by the Lessee for
any reason to pay any Supplemental Rent in respect of such Supplemental Amounts
shall nevertheless be deemed to constitute a default by the Borrower for the
purposes of Section 6). Notwithstanding the foregoing provisions of this Section
9.18, nothing in this Agreement or any other Operative Agreement shall (a)
constitute a waiver, release or discharge of any obligation evidenced or secured
by this Agreement or any other Credit Document, (b) limit the right of the Agent
or any Lender to name the Borrower as a party defendant in any action or suit
for judicial foreclosure and sale under any Security Document, or (c) affect in
any way the validity or enforceability of any guaranty (whether of payment
and/or performance) given to the Lessor, the Agent or the Lenders, or of any
indemnity agreement given by the Borrower, in connection with the Loans made
hereunder.
9.19 USURY SAVINGS PROVISION.
NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT OR ANY OTHER
OPERATIVE AGREEMENT, IT IS THE INTENT OF THE PARTIES HERETO TO CONFORM TO AND
CONTRACT IN STRICT COMPLIANCE WITH APPLICABLE USURY LAW FROM TIME TO TIME IN
EFFECT. ANY PAYMENTS HEREUNDER CONSTITUTING INTEREST UNDER ANY APPLICABLE LAW
FROM TIME TO TIME IN EFFECT MAY BE REFERRED TO HEREIN AS "INTEREST." ALL
AGREEMENTS AMONG THE PARTIES HERETO (INCLUDING ALL OF THE OPERATIVE AGREEMENTS)
ARE HEREBY LIMITED BY THE PROVISIONS OF THIS PARAGRAPH WHICH SHALL OVERRIDE AND
CONTROL ALL SUCH AGREEMENTS, WHETHER NOW EXISTING OR HEREAFTER ARISING AND
WHETHER WRITTEN OR ORAL. IN NO WAY, NOR IN ANY EVENT OR CONTINGENCY (INCLUDING
WITHOUT LIMITATION PREPAYMENT OR ACCELERATION OF THE MATURITY OF ANY OBLIGATION
OR THE EARLY TERMINATION OF THE LEASE FOR ANY REASON), SHALL ANY INTEREST TAKEN,
RESERVED, CONTRACTED FOR, CHARGED, OR RECEIVED UNDER THIS AGREEMENT OR
OTHERWISE, EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMISSIBLE UNDER APPLICABLE
LAW NOR SHALL ANY PROVISION CREATE AN OBLIGATION TO PAY UNEARNED INTEREST IN
VIOLATION OF APPLICABLE LAW. IF, FROM ANY POSSIBLE CONSTRUCTION OF ANY OF THE
OPERATIVE AGREEMENTS OR ANY OTHER DOCUMENT OR
33
<PAGE>
AGREEMENT, UNEARNED INTEREST WOULD BE PAYABLE OR INTEREST WOULD OTHERWISE BE
PAYABLE IN EXCESS OF THE MAXIMUM NONUSURIOUS AMOUNT, ANY SUCH CONSTRUCTION SHALL
BE SUBJECT TO THE PROVISIONS OF THIS PARAGRAPH AND SUCH AMOUNTS UNDER SUCH
DOCUMENTS OR AGREEMENTS SHALL BE AUTOMATICALLY REDUCED TO THE MAXIMUM
NONUSURIOUS AMOUNT PERMITTED UNDER APPLICABLE LAW, WITHOUT THE NECESSITY OF
EXECUTION OF ANY AMENDMENT OR NEW DOCUMENT OR AGREEMENT. IF THE AGENT, ANY
LENDER OR ANY OTHER FINANCING PARTY SHALL EVER RECEIVE ANYTHING OF VALUE WHICH
CONSTITUTES INTEREST UNDER ANY APPLICABLE LAW FROM TIME TO TIME WITH RESPECT TO
THE OBLIGATIONS OWED HEREUNDER OR UNDER APPLICABLE LAW AND WHICH WOULD, APART
FROM THIS PROVISION, BE IN EXCESS OF THE MAXIMUM LAWFUL AMOUNT, AN AMOUNT EQUAL
TO THE AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE INTEREST SHALL, WITHOUT PENALTY,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, BE APPLIED TO THE REDUCTION OF THE
COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL AND NOT TO THE PAYMENT OF INTEREST,
OR REFUNDED TO THE BORROWER OR ANY OTHER PAYOR THEREOF, IF AND TO THE EXTENT
SUCH AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE EXCEEDS THE COMPONENT OF PAYMENTS
DEEMED TO BE PRINCIPAL. THE RIGHT TO DEMAND PAYMENT OF ANY AMOUNTS EVIDENCED BY
ANY OF THE OPERATIVE AGREEMENTS DOES NOT INCLUDE THE RIGHT TO RECEIVE ANY
INTEREST WHICH HAS NOT OTHERWISE ACCRUED ON THE DATE OF SUCH DEMAND, AND NEITHER
THE AGENT NOR ANY LENDER INTENDS TO CHARGE OR RECEIVE ANY UNEARNED INTEREST IN
THE EVENT OF SUCH DEMAND. ALL INTEREST PAID OR AGREED TO BE PAID TO THE AGENT OR
ANY LENDER SHALL, TO THE EXTENT PERMITTED BY APPLICABLE LAW, BE AMORTIZED,
PRORATED, ALLOCATED, AND SPREAD THROUGHOUT THE FULL TERM (INCLUDING WITHOUT
LIMITATION ANY RENEWAL OR EXTENSION) OF THIS AGREEMENT SO THAT THE AMOUNT OF
INTEREST ON ACCOUNT OF SUCH PAYMENTS DOES NOT EXCEED THE MAXIMUM NONUSURIOUS
AMOUNT PERMITTED BY APPLICABLE LAW.
9.20 ACCEPTANCES AND AGREEMENTS.
Each of the Credit Parties (other than AOR) executing this Agreement as a
Tranche A Guarantor is doing so for the sole purpose of accepting and agreeing
to the provisions of Sections 8B.1 through 8B.8, and AOR is executing this
Agreement for the sole purposes set forth above its signature hereto.
34
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
individually, except as expressly stated herein,
but solely as the Owner Trustee under the AOR
Trust 1997-1
By:_____________________________________
Name:___________________________________
Title:__________________________________
FIRST UNION NATIONAL BANK, as the Agent and a
Lender
By:_____________________________________
Name:___________________________________
Title:__________________________________
AOR HAS EXECUTED THIS AGREEMENT FOR THE PURPOSE OF ACCEPTING AND AGREEING TO THE
PROVISIONS OF SECTIONS 8B.1 THROUGH 8B.8 AND SECTIONS 8C.1 THROUGH 8C.8 OF THIS
AGREEMENT AND HEREBY CONFIRMS THAT THIS AGREEMENT SHALL BE DEEMED A CREDIT
AGREEMENT OF AOR. THE OBLIGATION OF AOR PURSUANT TO SECTIONS 8B.1 THROUGH 8B.8
AND 8C.1 THROUGH 8C.8 CONSTITUTE OBLIGATIONS UNDER THE LESSEE CREDIT AGREEMENT.
AMERICAN ONCOLOGY RESOURCES, INC.,
as the Guarantor and as a Tranche A Guarantor
AOR SYNTHETIC REAL ESTATE, INC., as a Tranche A Guarantor
AOR REAL ESTATE, INC., as a Tranche A Guarantor
AOR, INC., as a Tranche A Guarantor
RMCC CANCER CENTER, INC., as a Tranche A Guarantor
AOR MANAGEMENT COMPANY OF OREGON, INC., as a Tranche A Guarantor
AOR MANAGEMENT COMPANY OF INDIANA, INC., as a Tranche A Guarantor
AOR MANAGEMENT COMPANY OF MISSOURI, INC., as a Tranche A Guarantor
AOR MANAGEMENT COMPANY OF ARIZONA, INC., as a Tranche A Guarantor
AOR MANAGEMENT COMPANY OF SOUTH CAROLINA, INC., as a Tranche A Guarantor
AOR MANAGEMENT COMPANY OF OKLAHOMA, INC., as a Tranche A Guarantor
<PAGE>
[SIGNATURE PAGES CONTINUED]
AOR MANAGEMENT COMPANY OF PENNSYLVANIA, INC., as a Tranche A Guarantor
AOR MANAGEMENT COMPANY OF VIRGINIA, INC., as a Tranche A Guarantor
AOR MANAGEMENT COMPANY OF NORTH CAROLINA, INC., as a Tranche A Guarantor
AOR MANAGEMENT COMPANY OF NEW YORK, INC., as a Tranche A Guarantor
AOR MANAGEMENT COMPANY OF FLORIDA, INC., as a Tranche A Guarantor
AOR MANAGEMENT COMPANY OF NEVADA, INC., as a Tranche A Guarantor
AOR HOLDING COMPANY OF INDIANA, INC., as a Tranche A Guarantor
AOR MANAGEMENT COMPANY OF TEXAS, INC., as a Tranche A Guarantor
AORT HOLDING COMPANY, INC., as a Tranche A Guarantor
AORIP, INC., as a Tranche A Guarantor
By:____________________________
Name: L. Fred Pounds
Title: Treasurer of each of the foregoing Entities
AOR OF TEXAS MANAGEMENT LIMITED
PARTNERSHIP, A TEXAS LIMITED PARTNERSHIP, as a Tranche A Guarantor
BY: AOR MANAGEMENT COMPANY OF TEXAS, INC.,
a Delaware corporation, as general partner
BY:____________________________
Name: L. Fred Pounds
Title: Treasurer
AOR OF INDIANA MANAGEMENT PARTNERSHIP,
an Indiana General Partnership, as a Tranche A Guarantor
BY: AOR MANAGEMENT COMPANY OF INDIANA, INC.,
a Delaware Corporation, as general partner
BY:____________________________
Name: L. Fred Pounds
Title: Treasurer
BY: AOR HOLDING COMPANY OF INDIANA, INC.,
a Delaware Corporation, as general partner
BY:____________________________
Name: L. Fred Pounds
Title: Treasurer
[SIGNATURE PAGES CONTINUED]
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO, as a Lender
By:______________________________________
Name:____________________________________
Title:___________________________________
[SIGNATURE PAGES CONTINUED]
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH, as a Lender
By:______________________________________
Name:____________________________________
Title:___________________________________
[SIGNATURE PAGES CONTINUED]
<PAGE>
THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED,
as a Lender
By:______________________________________
Name:____________________________________
Title:___________________________________
[SIGNATURE PAGES CONTINUED]
<PAGE>
SUNTRUST BANK, TAMPA BAY, as a Lender
By:______________________________________
Name:____________________________________
Title:___________________________________
[SIGNATURE PAGES CONTINUED]
<PAGE>
WELLS FARGO BANK (TEXAS) NATIONAL ASSOCIATION, as a Lender
By:______________________________________
Name:____________________________________
Title:___________________________________
[SIGNATURE PAGES CONTINUED]
<PAGE>
CORESTATES BANK, N.A., as a Lender
By:______________________________________
Name:____________________________________
Title:___________________________________
[SIGNATURE PAGES CONTINUED]
<PAGE>
THE FUJI BANK, LIMITED, as a Lender
By:______________________________________
Name:____________________________________
Title:___________________________________
[SIGNATURE PAGES CONTINUED]
<PAGE>
NATIONAL CITY BANK OF KENTUCKY, as a Lender
By:______________________________________
Name:____________________________________
Title:___________________________________
[SIGNATURE PAGES CONTINUED]
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
as a Lender
By:______________________________________
Name:____________________________________
Title:___________________________________
[SIGNATURE PAGES CONTINUED]
<PAGE>
ABN AMRO BANK N.V., as a Lender
By:______________________________________
Name:____________________________________
Title:___________________________________
[SIGNATURE PAGES CONTINUED]
<PAGE>
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH, as a Lender
By:______________________________________
Name:____________________________________
Title:___________________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
[SIGNATURE PAGES CONTINUED]
<PAGE>
NATIONSBANK OF TEXAS, N.A.,
as a Lender
By:______________________________________
Name:____________________________________
Title:___________________________________
<PAGE>
Schedule 1.1
------------
<TABLE>
<CAPTION>
Tranche A Tranche B
Commitment Commitment
-------------- ----------------
Name and Address of Lenders Amount Percentage Amount Percentage
- --------------------------- ------ ---------- -------- ----------
<S> <C> <C> <C> <C>
First Union National Bank $6,080,700 9.538% $859,400 9.549%
c/o First Union Capital Markets Group
DC-6
301 South College Street
Charlotte, North Carolina 28288-0166
Attention: Ms. Jane O. Hurley,
Capital Markets Services
Telephone: (704) 383-3812
Telecopy: (704) 383-7989
The First National Bank of Chicago $5,652,450 8.867% $797,900 8.866%
One First National Plaza
Suite 0091
Chicago, Illinois 60670
Attention: Richard L. Schiller
Vice President
Telephone: (312) 732-5932
Telecopy: (312) 732-2016
Credit Lyonnais New York Branch $5,724,000 8.979% $808,000 8.978%
1301 Avenue of the Americas
New York, New York 10019
Attention: Martin Golden
Vice President
Telephone: (212) 261-7791
Telecopy: (212) 261-3440
The Long -Term Credit Bank of Japan, Limited $3,434,400 5.387% $484,800 5.387%
N.Y. Branch - BP II
165 Broadway, 49th Floor
New York, New York 10006
Attention: Kathleen Dorsch-Santiago
Telephone: (212) 3335-4553
Telecopy: (212) 608-2371
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CoreStates Bank, N.A. $5,724,000 8.979% $808,000 8.978%
FC 1-8-3-22
1339 Chestnut Street
Philadelphia, Pennsylvania 19107
Attention: Dierdre McAleer
Vice President
Telephone: (215) 973-7560
Telecopy: (215) 973-2738
ABN AMRO Bank N.V. $5,652,450 8.867% $797,000 8.866%
One Ravinia Drive, Suite 1200
Atlanta, Georgia 30346
Attention: Thomas Thornhill
Senior Vice President and
Managing Director
Telephone: (770) 396-0066
Telecopy: (770) 399-7397
NationsBank of Texas, N.A. $5,724,000 8.979% $808,000 8.978%
700 Louisiana Street, 8th Floor
Houston, Texas 77002-2700
Attention: Larry Gordon
Corporate Banking Officer
Telephone: (713) 247-6619
Telecopy: (713) 247-6719
The Fuji Bank, Limited $2,862,000 4.489% $404,000 4.489%
One Houston Center
1221 McKinney, Suite 4100
Houston, Texas 77010
Attention: Philip C. Lauinger III
Vice President and Manager
Telephone: (713) 759-0717
Telecopy: (713) 650-7852
Wells Fargo Bank (Texas) National Association $4,865,400 7.632% $686,800 7.631%
1000 Louisiana, 3rd Floor
Houston, Texas 77002
Attention: Christopher King
Assistant Vice President
Telephone: (713) 250-7150
Telecopy: (713) 250-7029
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
National City Bank of Kentucky $3,434,400 5.387% $484,800 5.387%
101 South Fifth Street
Louisville, Kentucky 40202
Attention: Roderic M. Brown
Vice President
Telephone: (502) 581-4369
Telecopy: (502) 581-4424
SunTrust Bank, Tampa Bay $3,434,400 5.387% $484,800 5.387%
2520 Countryside Boulevard
Clearwater, Florida 33763
Attention: Charles T. Falk
First Vice President
Telephone: (813) 892-4037
Telecopy: (813) 752-2315
Cooperatieve Centrale Raiffeisen- $5,652,450 8.867% $797,900 8.866%
Boerenleenbank B.A., "Rabobank"
Nederland", New York Branch
13355 Noel Road, Suite 1000
Dallas, Texas 75240-6645
Attention: J. David Thomas
Vice President
Telephone: (972) 419-5266
Telecopy: (972) 419-6315
Texas Commerce Bank National Association $5,509,350 8.642% $777,700 8.641%
6550 Fannin, Suite 237
Houston, TX 77030
Attention: Jerry Boyd
Vice President
Telephone: (713) 795-7344
Telecopy: (713) 795-7309
TOTAL $63,750,000 100% $9,000,000 100%
</TABLE>
<PAGE>
Exhibit 11
AMERICAN ONCOLOGY RESOURCES, INC.
STATEMENT RE-COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
NET INCOME $22,867 $17,650 $11,617
======= ======= =======
OUTSTANDING AT END OF PERIOD
Shares of Common Stock 29,722 27,371 27,476
Commitments to issue Common Stock at specific future dates 17,938 17,463 15,262
Effects of weighting (2,089) (606) (7,179)
------- ------- -------
Total Shares Used in per share calculation - basic 45,571 44,228 35,559
======= ======= =======
Net Income per share - basic $ 0.50 $ 0.40 $ 0.33
======= ======= =======
ASSUMING DILUTION
Outstanding per above 45,571 44,228 35,559
Options to purchase Common Stock 5,709 4,819 5,532
Effects of treasury stock method (3,180) (1,498) (1,773)
------- ------- -------
Total Shares Used in per share calculation - diluted 48,100 47,549 39,318
======= ======= =======
Net income per share - diluted $ 0.48 $ 0.37 $ 0.30
======= ======= =======
</TABLE>
<PAGE>
Exhibit 21.1
AMERICAN ONCOLOGY RESOURCES, INC.
LIST OF SUBSIDIARIES
AOR, Inc. - incorporated in Delaware
AORIP, Inc. - incorporated in Delaware
RMCC Cancer Center, Inc. - incorporated in Delaware
AOR Management Company of Arizona, Inc. - incorporated in Delaware
AOR Management Company of Florida, Inc. - incorporated in Delaware
AOR Management Company of Central Florida, Inc. - incorporated in Delaware
AOR Management Company of Indiana, Inc. - incorporated in Delaware
AOR Holding Company of Indiana, Inc. - incorporated in Delaware
AOR of Indiana Management Partnership - organized in Indiana
AOR Management Company of Missouri, Inc. - incorporated in Delaware
AOR Management Company of North Carolina, Inc. - incorporated in Delaware
AOR Management Company of Nevada, Inc. - incorporated in Delaware
AOR Management Company of New York, Inc. - incorporated in Delaware
AOR Management Company of Oklahoma, Inc. - incorporated in Delaware
AOR Management Company of Ohio, Inc. - incorporated in Delaware
AOR Management Company of Oregon, Inc. - incorporated in Delaware
AOR Management Company of Pennsylvania, Inc. - incorporated in Delaware
AOR Management Company of South Carolina, Inc. - incorporated in Delaware
AOR Management Company of Virginia, Inc. - incorporated in Delaware
AOR Management Company of Texas, Inc. - incorporated in Delaware
AORT Holding Company, Inc. - incorporated in Delaware
AOR of Texas Management Limited Partnership - organized in Texas
AOR Real Estate, Inc. - incorporated in Delaware
AOR Synthetic Real Estate, Inc. - incorporated in Delaware
Greenville Radiation Care, Inc. - incorporated in Delaware
<PAGE>
Exhibit 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No.'s 333-778, 333-780, 333-782, 333-784, 333-786 and
333-30057) of American Oncology Resources, Inc. of our report dated March 11,
1998 appearing on page 23 of this Form 10-K.
PRICE WATERHOUSE LLP
Houston, Texas
March 11, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 5,000
<SECURITIES> 0
<RECEIVABLES> 92,038
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 115,091
<PP&E> 51,109
<DEPRECIATION> 12,545
<TOTAL-ASSETS> 483,893
<CURRENT-LIABILITIES> 71,227
<BONDS> 0
0
0
<COMMON> 297
<OTHER-SE> 263,697
<TOTAL-LIABILITY-AND-EQUITY> 483,893
<SALES> 0
<TOTAL-REVENUES> 321,840
<CGS> 0
<TOTAL-COSTS> 276,627
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,715
<INCOME-PRETAX> 36,846
<INCOME-TAX> 13,979
<INCOME-CONTINUING> 22,867
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,867
<EPS-PRIMARY> .50
<EPS-DILUTED> .48
</TABLE>
