Exhibit 8
UHS Acquisition Corp.
c/o ▇.▇. Childs Associates, L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
November 25, 1997
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Universal Hospital Services, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear ▇▇. ▇▇▇▇▇▇▇▇▇:
Reference is made to the Agreement and Plan of Merger
of even date herewith (the "Merger Agreement"), by and among ▇.▇. Childs
Equity Partners, L.P. ("Holdings"), UHS Acquisition Corp., a Minnesota
corporation and a wholly owned subsidiary of Holdings ("Merger Sub"), and
Universal Hospital Services, Inc., a Minnesota corpora tion ("UHS"). As
you know, subject to the terms and conditions of the Merger Agreement,
Merger Sub will merge with and into UHS (the "Merger"), with UHS to be
the surviving entity (UHS, in its capacity as the corporation surviving
the Merger, is sometimes hereinafter referred to as the "Company").
You currently serve as Vice President of Finance and
Chief Financial Officer of UHS, and this Employment Agreement is being
entered into as inducement for Holdings and Merger Sub to enter into the
Merger Agreement and to consummate the Merger and the other transactions
contemplated by the Merger Agreement, for other good and valuable
consideration and to provide for your services to the Company following
the Merger as follows:
1. Position; Duties. From and after the date of the
Merger, the Company shall employ you, and you agree to serve and accept
employment, for the Term (as defined herein), as President and Chief
Executive Officer of the Company, subject to the direction and control of
the Board of Directors of the Company (the "Board"), and, in connection
therewith, to reside in the United States, to oversee and direct the
operations of the Company and to perform such other duties as the Board
may from time to time reasonably direct. Your place of employment shall
be in the Minneapolis, Minnesota area. During the Term, you shall also be
a member of the Board of Directors of the Company. During the Term, you
agree to devote all of your time, energy, experience and talents during
regular business hours, and as otherwise reason ably necessary, to such
employment, to devote your best efforts to advance the interests of the
Company and not to engage in any other business activities of a material
nature, as an employee, director (except as a director of ▇▇▇▇
International Holdings), consultant or in any other capacity, whether or
not you receive any compensation therefor, without the prior written
consent of the Board. You shall not be given duties inconsistent with
your executive position.
2. Term of Employment Agreement. The term of your
employment hereunder shall begin as of the Effective Time (as defined in
the Merger Agreement) and end as of the close of business on the date
which is three years from the Effective Time, subject to earlier
termination pursuant to the terms hereof (the "Term"). Following the
Term, this Agreement shall automatically be renewed for successive
one-year terms (each a "Renewal Term") unless notice of termination is
given by either party upon not less than 30 days' written notice prior to
the date on which such renewal would otherwise occur. In the event that
your employment is not renewed following the expiration of the Term or
following the expiration of the first Renewal Term immediately succeeding
the Term, the Company shall pay to you your base salary and provide you
with the benefits provided hereunder for eighteen months following such
non-renewal.
3. Compensation and Benefits.
(a) Base Salary. Your base salary shall
be at the annual rate of $200,000, payable in equal bi-weekly
installments. Such base salary shall be adjusted annually based on
changes in the consumer price index (all urban consumers, U.S. city
average). The Board will annually review your base salary beginning in
1999. Necessary withholding taxes, FICA contributions and the like shall
be deducted from your base salary.
(b) Bonus; Options. In addition to your
base salary, you shall be entitled to receive a bonus of up to 100% of
your base salary, based on the achievement of the annual EBITDA targets
contained in Exhibit A (such targets to be subject to adjustment by the
Board of Directors of the Company, in good faith, to reflect any
acquisitions, dispositions and material changes to capital spending).
The amount of such bonus would rise linearly from 0% of base salary to
100% of base salary based on achievement of EBITDA of 90% to 110% of
target EBITDA. No bonus shall be payable if EBITDA is 90% or less of
target EBITDA. You will also be entitled to receive certain stock options
pursuant to one or more executive or employee stock option plans to be
adopted by the Company; the basic terms of such stock options are
contained in Exhibit A attached hereto.
(c) Other. You shall be entitled to such
health, life, disability, vacation, pension, sick leave and other
benefits as are generally made available by the Company to its executive
employees. Your benefits will also consist of five weeks paid vacation
time, club membership, an annual physical exam and reimbursement for tax
preparation costs.
4. Termination.
(a) Death. This Employment Agreement
shall automatically terminate upon your death. In the event of such
termination, the Company shall pay to your legal representatives your
base salary in monthly installments and continue to provide the benefits
provided hereunder, in each case for eighteen months following such
termination.
(b) Disability. If during the Term you
become physically or mentally disabled, whether totally or partially,
either permanently or so that you are unable substantially and
competently to perform your duties hereunder for a period of 90
consecutive days or for 90 days during any six-month period during the
Term (a "Disability"), the Company may terminate your employment
hereunder by written notice to you. In the event of such termination, the
Company shall pay to you your base salary in monthly installments and
continue to provide the benefits provided hereunder, in each case for
eighteen months following such termination.
(c) Cause. Your employment hereunder may
be terminated at any time by the Company for Cause (as defined herein) by
written notice to you. In the event of such termination, all of your
rights to payments (other than payment for services already rendered) and
any other benefits otherwise due hereunder shall cease immediately. The
Company shall have "Cause" for termination of your employment hereunder
if any of the following has occurred:
(i) your continued failure,
whether willful, intentional or grossly negligent, after written notice,
to perform substantially your duties hereunder (other than as a result of
a Disability);
(ii) dishonesty in the perfor-
▇▇▇▇▇ of your duties hereunder;
(iii) conviction or confession of
an act or acts on your part constituting a felony under the laws of the United
States or any state thereof;
(iv) any other willful act or
omission on your part which is materially injurious to the financial
condition or business reputation of the Company or any of its subsidiaries;
or
(v) you have breached any
provision of this Employment Agreement contained in Paragraphs 6, 7 or 8
hereof; or
(vi) you have breached any
provision of this Employment Agreement (other than Paragraph 6, 7, or 8
hereof) and such breach shall not have been cured within sixty (60) days
after notice thereof from the Company to you.
(d) Without Cause. Your employment
hereunder may be terminated at any time by the Company without Cause by
written notice to you. In the event of such termination, the Company
shall continue to pay you your base salary through the date which is
eighteen months from the Date of Termination (as defined herein). It is
acknowledged and agreed that termination of your employment upon
expiration of the Term, or any Renewal Term, shall not be deemed to
constitute a termination without Cause for purposes of this Employment
Agreement or for any other purpose.
(e) Resignation Without Good Reason. You
may terminate your employment hereunder upon sixty days' written notice
to the Company, without Good Reason (as defined herein). In the event of
such termination, all of your rights to payment (other than payment for
services already rendered) and any other benefits otherwise due
hereunder shall cease immediately. It is acknowledged and agreed that
termination of your employment upon expiration of the Term or any Renewal
Term shall not be deemed to constitute resignation without Good Reason
for purposes of this Employment Agreement or any other purpose.
(f) Resignation For Good Reason. You may
terminate your employment hereunder at any time upon thirty days' written
notice to the Company, for Good Reason. In the event of such termination,
the Company shall continue to pay you your base salary through the date
which is eighteen months from the Date of Termination.
You shall have "Good Reason" for termination of your
employment hereunder if, other than for Cause, any of the following has
occurred:
(i) your base salary has been
reduced other than in connection with an across-the-board reduction of
executive compensation imposed by the Board in response to negative
financial results or other adverse circumstances affecting the Company;
or
(ii) the Company has reduced or
reassigned a material portion of your duties hereunder or has required
you to relocate outside the greater Minneapolis, Minnesota area; or
(iii) your illness, that in the
good faith determination of the Board of Directors of the Company is
likely to result in you becoming disabled and unable to continue your
employment with the Company; or
(iv) the Company has breached
this Employment Agreement in any material respect.
(g) Date and Effect of Termination. The
date of termination of your employment hereunder, pursuant to this
▇▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇, (▇) in the case of Paragraph 4(a), the date of
your death, (ii) in the case of Paragraphs 4(b), (c) or (d), the date
specified in the Company's notice to you of such termination or (iii) in
the case of Paragraph 4(e) or 4(f), the date specified in your notice to
the Company of such termination (in each case, the "Date of
Termination"). Upon any termination of your employment hereunder pursuant
to this Paragraph 4, you shall not be entitled to any further payments or
benefits of any nature pursuant to this Employment Agreement, or as a
result of such termination, except as specifically provided for in this
Employment Agreement, in any stock option plans adopted by the Company in
accordance with Paragraph 3(b) hereof, or as may be required by law.
(h) Other Employment. Notwithstanding
anything in this Employment Agreement to the contrary, if your employment
hereunder is terminated pursuant to Paragraph 4(d) or (f), and if prior
to the date which is eighteen months after the Date of Termination you
find other employment, the amount of payments or benefits payable to you
after such termination in accordance with the terms of this Employment
Agreement shall be reduced by the value of your compensation in your new
employment through the date which is eighteen months after the Date of
Termination.
5. Acknowledgment. You agree and acknowledge that in
the course of rendering services to the Company and its clients and
customers, you will have access to and become acquainted with
confidential information about the professional, business and financial
affairs of the Company and its affiliates. You acknowledge that the
Company is engaged and will be engaged in a highly competitive business,
and the success of the Company in the marketplace depends upon its good
will and reputation for quality and dependability. You agree and
acknowledge that reasonable limits on your ability to engage in
activities competitive with the Company are warranted to protect its
substantial investment in developing and maintaining its status in the
marketplace, reputation and good will. You recognize that in order to
guard the legitimate interests of the Company and its affiliates, it is
necessary for the Company to protect all confidential information. The
existence of any claim or cause of action by you against the Company
shall not constitute and shall not be asserted as a defense to the
enforcement by the Company of this Employment Agreement. You further
agree that your obligations under Paragraphs 6, 7 and 8 hereof shall be
absolute and unconditional.
6. Confidentiality. You agree that during and at all
times after the Term, you will keep secret all confidential matters and
materials of the Company (including its subsidiaries and affiliates),
including, without limitation, know-how, trade secrets, real estate plans
and practices, individual office results, customer lists, pricing
policies, operational methods, any information relating to the Company
(including any of its subsidiaries and affiliates) products, processes,
customers and services and other business and financial affairs of the
Company (including its subsidiaries and affiliates) (collectively, the
"Confidential Information"), to which you had or may have access and will
not disclose such Confidential Information to any person other than
Holdings or the Company, their respective authorized employees and such
other persons to whom you have been instructed to make disclosure by the
Board, in each case only to the extent required in the course of your
service to the Company hereunder or as otherwise expressly required in
connection with court process. "Confidential Information" shall not
include any information which is in the public domain during or after the
Term, provided such information is not in the public domain as a conse-
quence of disclosure by you in violation of this Employment Agreement.
7. Non-competition. During the Prohibition Period (as
hereinafter defined), you will not, in any capacity, whether for your own
account or for any other person or organization, directly or indirectly,
(i) within the United States and Canada (a) own, operate, manage or
control, (b) serve as an officer, director, partner, employee, agent,
consultant, advisor or developer or in any similar capacity to, or (c)
have any financial interest in, or aid or assist anyone else in the
conduct of, any person or enterprise which is engaged in the moveable
medical equipment rental business. As used herein, "Prohibition Period"
means the period from and after the Effective Time to and including (i)
the date which is eighteen months from the Date of Termination, if your
employment hereunder is terminated by the Company without Cause or by you
for Good Reason or (ii) the date which is twelve months from the Date of
Termination, if your employment hereunder is terminated other than as
set forth in the preceding clause (i).
8. Non-solicitation. During the Prohibition Period, you
will not, directly or indirectly, hire, recruit, solicit, call upon,
divert, take away, entice or in any other manner persuade or attempt to
do any of the foregoing with respect to, any employee, independent
contractor, dealer, supplier, client, customer or business contact of
the Company or any of its subsidiaries to discontinue his or her position
or relationship, or violate any agreement, with the Company or any of
its subsidiaries as employee, independent contractor, dealer, supplier,
client, customer or business contact, except with the prior written
consent of the Board, which consent shall be given at the sole
discretion of the Board.
9. Modification. You agree and acknowledge that the
duration, scope and geographic area of the covenants described in
Paragraphs 6, 7 and 8 are fair, reasonable and necessary in order to
protect the good will and other legitimate interests of the Company and
its subsidiaries, that adequate consideration has been received by you
for such obligations, and that these obligations do not prevent you from
earning a livelihood. If, however, for any reason any court of competent
jurisdiction determines that any restriction contained in Paragraphs 6,
7 or 8 are not reasonable, that consideration is inadequate or that you
have been prevented unlawfully from earning a livelihood, such
restriction shall be interpreted, modified or rewritten to include as
much of the duration, scope and geographic area identified in such
Paragraph 6, 7 or 8 as will render such restrictions valid and
enforceable.
10. Equitable Relief. You acknowledge that Merger Sub or
the Company will suffer irreparable harm as a result of a breach of this
Employment Agreement by you for which an adequate monetary remedy does not
exist and a remedy at law may prove to be inadequate. Accordingly, in the
event of any actual or threatened breach by you of any provision of this
Employment Agreement, Merger Sub or the Company shall, in addition to any
other remedies permitted by law, be entitled to obtain remedies in equity,
including without limitation specific performance, injunctive relief, a
temporary restraining order and/or a permanent injunction in any court of
competent jurisdiction, to prevent or otherwise restrain any such breach
without the necessity of proving damages, posting a bond or other security,
and to recover any and all costs and expenses, including reasonable counsel
fees, incurred in enforcing this Employment Agreement against you, and you
hereby consent to the entry of such relief against you and agree not to
contest such entry. Such relief shall be in addition to and not in
substitution of any other remedies available to Merger Sub or the Company.
The existence of any claim or cause of action by you against Merger Sub or
the Company or any of its subsidiaries, whether predicated on this
Employment Agreement or otherwise, shall not constitute a defense to the
enforcement by Merger Sub or the Company of this Employment Agreement. You
agree not to defend on the basis that there is an adequate remedy at law.
11. Stockholders' Agreement. In connection with the
acquisition of any equity securities, or options therefor, of the
Company, you and your spouse will be expected to enter, and you agree to
enter and cause your spouse to enter, into a stockholders' agreement with
the other equity investors in the Company, substantially in the form
attached hereto as Exhibit B.
12. Life Insurance. Either Merger Sub or the Company,
as the case may be, may, at its discretion and at any time after the
execution of this Employment Agreement, apply for and procure, as owner
and for its own benefit, and at its own expense, insurance on your life,
in such amount and in such form or forms Merger Sub or the Company may
determine. You shall have no right or interest whatsoever in such policy
or policies, but you agree that you will, at the request of Merger Sub or
the Company, submit yourself to such medical examinations, supply such
information and execute and deliver such documents as may be required by
the insurance company or companies to which Merger Sub or the Company or
any such subsidiary has applied for such insurance.
13. Successors; Assigns; Amendment; Notice. This
Employment Agreement shall be binding upon and shall inure to the benefit
of Merger Sub and its successors (including, after the Effective Time, the
Company). This Employment Agreement shall be binding upon you and shall
inure to the benefit of your heirs, executors, administrators and legal
representatives, but shall not be assignable by you. This Employment
Agreement may be amended or altered only by the written agreement of Merger
Sub (or, after the Effective Time, the Company) and you. All notices or
other communications permitted or required under this Employment Agreement
shall be in writing and shall be deemed to have been duly given if
delivered by hand, by facsimile transmission (if confirmed) or mailed
(certified or registered mail, postage prepaid, return receipt requested)
to you or Merger Sub (or, after the Effective Time, the Company) at the
respective addresses on the first page of this Employment Agreement, or
such other address as shall be furnished in writing by like notice by you
or Merger Sub (or, after the Effective Time, the Company) to the other.
14. Entire Agreement. This Employment Agreement,
together with the Stockholders' Agreement as executed in accordance with
Paragraph 11 hereof, embodies the entire agreement and understanding
between you and Merger Sub (and, after the Effective Time, the Company)
with respect to the subject matter hereof and supersedes all such prior
agreements and understandings.
15. Severability. If any term, provision, covenant or
restriction of this Employment Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Employment
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
16. Governing Law. This Employment Agreement shall be
governed by and construed and enforced in accordance with the laws of
the state of Minnesota applicable to contracts made and to be performed
in such state without giving effect to the principles of conflicts of
laws thereof.
17. Counterparts. This Employment Agreement may be
executed in two or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
18. Headings. All headings in this Employment
Agreement are for purposes of reference only and shall
not be construed to limit or affect the substance of this
Employment Agreement.
If you accept and agree to the foregoing, please sign and
return a counterpart of this letter to Merger Sub at the above address,
whereupon this letter will become a binding Employment Agreement between
you and the Company as of the Effective Time.
Very truly yours,
UHS Acquisition Corp.
By:/s/ ▇▇▇ ▇▇▇
______________________
Name: ▇▇▇ ▇▇▇
Title: Vice President
Accepted and agreed to:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
_________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
EXHIBIT A
NON-QUALIFIED STOCK OPTIONS
KEY PROVISIONS
I. Options Subject to EBITDA Target Vesting.
Effective at the date of execution of the Employment Agreement,
Executive will be granted non-qualified options to acquire, at
"buy-in-price"(1), an aggregate number of shares of common stock of the
Company equal to the percentage specified in Schedule A out of the total
numbers of shares allocated to the management incentive option plan which
in the aggregate equals 7.5% of the outstanding common stock and common
stock equivalents of the Company, on a fully diluted basis.
The above options will vest according to the schedule hereinbelow
based on the Company's achievement of the annual EBITDA targets set forth
in the Management LBO Plan (subject to audited results), as may be amended
or revised in good faith by the Board for acquisitions, divestitures,
material increases in annual projected capital expenditures (described in
Section III below) or other circumstances. Such annual EBITDA targets are
referred to herein respectively as the "Management Target" and are
described in Section III below.
a. Options to acquire between 0% and 20% of the total number of
option shares shall vest in each fiscal year beginning with
the fiscal year ending on December 31, 1998 in which the
Company meets or exceeds 90% of the Management Target, on a
linear basis such that, if, for example, the Company achieves
95% of the Management Target, 10% of the total number of
option shares would vest.
b. Options to acquire 20% of the total number of option shares
shall vest in each fiscal year beginning with the fiscal year
ending on December 31, 1998 in which the Company meets or
exceeds the Management Target. No more than 20% of the total
number of option shares shall vest in any fiscal year, except
as noted in Section I.c. below.
c. Irrespective of the foregoing, if at the end of the fifth
fiscal year the company: (i) on a cumulative basis meets the
cumulative Management Target for such period; and (ii) meets
or exceeds the annual Management Target for the fifth fiscal
year, additional options will then vest such that the total
number of vested options under the management incentive
option plan will be no less than 100% of the total number of
options allocated to such plan.
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1 i.e., the price per share, as adjusted to reflect subsequent
changes in capitalization, at which ▇.▇. Childs acquired its
original shares of common stock of the Company.
In the event of a Change of Control(2) transaction, the
unvested portion of the options will become vested in a proportion
equal to the ratio of options which have actually vested at such
time to the total number of options as would have vested had the
Company achieved the Management Target for all periods prior to
the change of control. Irrespective of the foregoing, if at the
end of the last fiscal year ending prior to the Change of Control,
the company: (i) on a cumulative basis meets the cumulative
Management Target for such period; and (ii) meets or exceeds the
annual Management Target for such fiscal year, additional options
will then vest such that the total number of vested options under
the management incentive option plan will be no less than 100% of
the total number of options allocated to such plan.
Each option shall expire, unless earlier exercised or
terminated, ten years and six months from the date of grant.
In the case of termination of Executive's employment for
Cause or Resignation Without Good Reason, as defined in the
Employment Agreement, each option shall terminate at the time of
termination of employment.
In the case of termination of Executive's employment
without Cause or his resignation for Good Reason, again as defined
in the Employment Agreement, options which have vested at the time
of termination/resignation shall terminate on the 91st day after
the date of employment termination or resignation, and options
which have not vested shall terminate immediately.
If Executive's employment is terminated due to death or
disability pursuant to the Employment Agreement, options which
have vested at the time of termination/resignation shall terminate
on the 181st day after the date of employment termination or death
and may be exercised during such period by the Executive or his
legal representative or estate, as the case may be, and options
which have not vested shall terminate immediately.
II. Additional Options
Certain eligible members of management will be granted options for
an additional 3.0% of the Company as outlined in Schedule B, which options
shall vest, if within five years of the effective date of the Merger, the
original common stock investors of the Company in the Merger achieve a
realized value(3) of the multiple specified in the table below for the
corresponding time period, or more on their original investment.
------------------
2 A "Change of Control" means, generally, a sale of the business of
the Company to any person, firm, entity or group which, together
with its affiliates, prior to such transaction, did not own more
than 50% of the outstanding common equity of the Company.
3 For purpose hereof, "realized value" will mean, in general, the
cash or market value of registered, publicly traded and tradeable
securities not subject to transfer or Rule 144 restrictions
received in a Change of Control.
Additional Options Pursuant to Section II
Realized value achieved prior to Minimum multiple of realized value
the following years after closing to original common stock investors
----------------------------------------------------------------------------
Year 3 4.0x
Year 4 4.5x
Year 5 5.0x
III. Management Target
Fiscal Year Ended EBITDA Target ($000)(4) Capital Expenditures ($1000)
----------------------------------------------------------------------------
December 31, 1998 $29,709 $21,100
December 31, 1999 32,977 22,600
December 31, 2000 36,445 22,700
December 31, 2001 40,314 25,000
December 31, 2002 44,635 31,200
IV. Forfeited Options
Provision shall be made in the Stock Option Plan for options
forfeited to be available for grant at fair market value to management
employees in the discretion of the Board.
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4 Calculation of EBITDA will exclude expenses related to: (i) any
payments to ▇.▇. Childs; (ii) annual bank fees related to Merger
related debt financing; (iii) Bazooka bed asset impairment
write-downs; (iv) all severance payments incurred prior to December
31, 1998; and (v) compensation incurred during fiscal 1998 for certain
senior executives who are terminated in connection with the Merger
(the amount of which will be net of a pro forma adjustment for the
pre-Merger time period for raises given to senior executives who
receive promotions and raises in connection with the Merger). 1
Closing of the Merger.
Schedule A
Initial Allocation of Management Incentive Option Plan
Employee % of total number of shares of common
stock issued at closing(1)
----------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 1.500%
▇▇▇▇▇ ▇▇▇▇▇▇ 0.625%
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 0.625%
▇▇▇▇▇▇ ▇▇▇▇▇ 0.625%
▇▇▇▇ ▇▇▇▇▇▇▇ 0.625%
Other Employees(2) 3.000%
Reserved 0.500%
Total 7.500%
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1 Closing of the Merger.
2 To be allocated by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ with the approval of
the board of directors.
Schedule B
Allocation of Additional Options
Employee % of total number of shares of
common stock issued at closing(1)
---------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 1.0%
▇▇▇▇▇ ▇▇▇▇▇▇ 0.5%
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 0.5%
▇▇▇▇▇▇ ▇▇▇▇▇ 0.5%
▇▇▇▇ ▇▇▇▇▇▇▇ 0.5%
Total 3.0%
-----------------------
1 Closing of the Merger.
Exhibit B
UNIVERSAL HOSPITAL SERVICES, INC.
STOCKHOLDERS' AGREEMENT
Dated as of [ ], 1997
TABLE OF CONTENTS
ARTICLE I
Definitions
1.1 Definitions...................................................2
ARTICLE II
Transfer Provisions
2.1 Restrictions on Transfers....................................11
2.2 Call by the Company..........................................11
2.3 Put By Management Holders....................................15
2.4 Tagalong.....................................................18
2.5 Dragalong....................................................20
2.6 Corporate Governance.........................................21
2.7 Restrictions on Other Agreements.............................21
2.8 Stockholder Action...........................................22
ARTICLE III
Registration Rights
3.1 General......................................................22
3.2 Piggyback Registration.......................................22
3.3 Obligations of the Company...................................23
3.4 Furnish Information..........................................27
3.5 Expenses of Registration.....................................27
3.6 Underwriting Requirements....................................27
3.7 Indemnification..............................................28
3.8 Rule 144.....................................................31
3.9 Market Stand-Off Agreement...................................32
ARTICLE IV
Certain Miscellaneous Other Provisions
4.1 Remedies.....................................................32
4.2 Entire Agreement; Amendment; Termination.....................33
4.3 Severability.................................................33
4.4 Notices......................................................33
4.5 Binding Effect; Assignment...................................34
4.6 Termination..................................................34
4.7 Recapitalization, Exchanges, etc.............................35
4.8 JWC Representative...........................................35
4.9 Action Necessary to Effectuate the Agreement.................36
4.10 Purchase for Investment; Legend on Certificate...............36
4.11 Effectiveness of Transfers...................................37
4.12 Additional Stockholders......................................37
4.13 No Waiver....................................................37
4.14 Counterparts.................................................38
4.15 Headings, etc................................................38
4.16 Governing Law................................................38
4.17 Effective Time...............................................38
Exhibits
Exhibit A - - Schedule of Stockholders...............................A-1
Exhibit B - - Form of Promissory Note................................B-1
STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT (this "AGREEMENT") is
entered into as of [ ], 1997, by and among Universal Hospital Services,
Inc., a Minnesota corporation (the "COMPANY"), those persons listed as
the Management Holders on the signature pages hereof (the "MANAGEMENT
HOLDERS") and those persons listed as the JWC Holders on the signature
pages hereof (the "JWC HOLDERS").
RECITALS
A. Upon consummation of the transactions contemplated
by the Agreement and Plan of Merger, dated as of [ ], 1997 by and among
▇.▇. Childs Equity Partners, L.P., a Delaware limited partnership, UHS
Acquisition Corp., a Minnesota corporation, and Universal Hospital
Services, Inc., a Minnesota corporation (the "ACQUISITION AGREEMENT"),
and of certain related transactions to be consummated concurrently
therewith, the Stockholders (as hereinafter defined) will own (and may
hereafter acquire) certain shares of Common Stock (as hereinafter
defined) and certain options, warrants, securities and other rights to
acquire from the Company, by exercise, conversion, exchange or otherwise,
shares of Common Stock or securities convertible into Common Stock.
B. All of the Stockholders desire to enter into this
Agreement for the purpose of regulating certain aspects of the
Stockholders' relationships with one another and with the Company.
AGREEMENT
In consideration of the premises and the mutual
promises, representations, warranties, covenants and conditions set forth
in this Agreement, the parties to this Agreement mutually agree as
follows:
ARTICLE I
Definitions
1.1 Definitions. For the purposes of this Agreement,
the following terms shall be defined as follows:
The "1933 ACT" shall mean the Securities Act of 1933,
as amended, or any successor federal statute thereto, and the rules and
regulations of the SEC promulgated thereunder, all as the same shall be
in effect from time to time.
The "1934 ACT" shall mean the Securities Exchange Act
of 1934, as amended, or any successor federal statute thereto, and the
rules and regulations of the SEC promulgated thereunder, all as the same
shall be in effect from time to time.
An "AFFILIATE" of a specified Person shall mean a
Person who, directly or indirectly, through one or more intermediaries,
controls or is controlled by or is under common control with the
specified Person and, when used with respect to the Company or any
Subsidiary of the Company, shall include any holder of at least 5% of the
capital stock, or any officer or director, of the Company or any
Subsidiary of the Company.
"BUSINESS DAY" shall mean any day, other than a
Saturday, Sunday or a day on which commercial banking institutions in New
York, New York or Boston, Massachusetts are authorized or required by
law to be closed.
"CALL EVENT" shall have the meaning set forth
in Section 2.2(a).
"CALL GROUP" shall have the meaning set forth
in Section 2.2(a).
"CALL NOTICE" shall have the meaning set forth
in Section 2.2(a).
"CALL OPTION" shall have the meaning set forth
in Section 2.2(a).
"CALL PRICE" shall mean, as of any date, a per share
price equal to the remainder of (a) (i) the excess of (A) the product of
4.75 times EBITDA, over (B) the aggregate amount of the Consolidated
Indebtedness as of the date of the most recently prepared consolidated
balance sheet of the Company and its Subsidiaries, divided by (ii) the
aggregate number of Common Stock Equivalents at the time outstanding,
minus, (b) in the case of Vested Options, the per share exercise price
payable in connection with such Vested Options.
"CALL SECURITIES" shall have the meaning set forth in
Section 2.2(a).
"CAUSE" shall mean, with respect to any Management
Holder, such Management Holder's (a) continued failure, whether willful,
intentional or grossly negligent, after written notice, to perform
substantially his duties as an employee of the Company or any of its Sub-
sidiaries, other than as a result of a "Disability" as defined (if
applicable) in any Employment Agreement by and between the Company and
the Management Holder; (b) dishonesty in the performance of such
Management Holder's duties as an employee of the Company; (c) conviction
or confession of an act or acts on such Management Holder's part
constituting a felony under the laws of the United States or any state
thereof; (d) other willful act or omission on such Management Holder's
part which is materially injurious to the financial condition or business
reputation of the Company or any of its Subsidiaries; (e) breach of any
duty or obligation of noncompetition or confidentiality owed by such
Management Holder to the Company or any of its Subsidiaries; or (f)
breach of any provision or covenant contained in any employment agreement
between such Management Holder and the Company or any of its
Subsidiaries, which breach shall not have been cured within sixty (60)
days after notice thereof from the Company to the Management Holder.
"COMMON STOCK" shall mean shares of Common Stock, par
value $.01 per share, of the Company.
"COMMON STOCK EQUIVALENTS" shall mean, as of any date,
(a) all shares of Common Stock outstanding as of such date and (b) all
shares of Common Stock that may be acquired as of such date pursuant to
Vested Options.
The "COMPANY" shall mean Universal Hospital Services,
Inc., a Minnesota corporation, and its successors and assigns.
"COMPANY CALL PERIOD" shall have the meaning
set forth in Section 2.2(a).
"CONSOLIDATED INDEBTEDNESS" shall mean, as of any date,
the aggregate amount outstanding, on a consolidated basis, of (a) all
indebtedness of the Company and its Subsidiaries for borrowed money
(other than intercompany debt), (b) those letters of credit that would be
required to be honored upon liquidation of the Company and/or its
Subsidiaries (c) all notes payable, drafts accepted and other obligations
(including, without limitation, any amounts representing deferred sign-
ing bonuses payable to various employees of the Company in accordance
with the terms of their respective employment agreements with the
Company and any Promissory Note (as hereinafter defined) of the Company
issued pursuant to Section 2.3(e) hereof) representing extensions of
credit to the Company and/or its Subsidiaries, whether or not
representing obligations for borrowed money, and (d) that portion of
obligations with respect to capital leases which is reflected as a
liability on the most recently prepared consolidated balance sheet of the
Company and its Subsidiaries.
"COST PRICE" shall mean, with respect to any Subject
Securities, the purchase price, if any, per share of Common Stock or per
Vested Option, as the case may be, paid to the Company for such Subject
Securities by the original holder thereof; provided, however, that in the
event that any such Subject Securities were obtained by the holder thereof
pursuant to the terms of an agreement in writing between JWC Equity
Partners and/or UHS Acquisition Corp., a Minnesota corporation, and the
holder of such Subject Securities, as referenced in the first clause of
Section 1.6(a) or the first clause of Section 1.8(a) of the Acquisition
Agreement, then the Cost Price of such Subject Securities shall be (a) in
the case of Common Stock, the Merger Consideration (as defined in the
Acquisition Agreement), and (b) in the case of Vested Options, the Option
Consideration (as defined in the Acquisition Agreement). If at any time the
number of shares of Common Stock outstanding is (a) increased by a stock
dividend payable in shares of Common Stock or by a subdivision or split-up
of shares of Common Stock or (b) decreased by a combination of shares of
such Common Stock, following the record date for such stock dividend,
subdivision, split-up or combination, the Cost Price per share of Common
Stock shall be adjusted upward or downward, as appropriate, to reflect the
decrease or increase in shares of Common Stock outstanding.
"DESIGNATED EMPLOYEE" and "DESIGNATED EMPLOYEES" shall
have the meanings set forth in Section 2.2(e).
"DRAGALONG GROUP" shall have the meaning set forth in
Section 2.5(a).
"EBITDA" shall mean, as of any date for which it is to
be determined, the consolidated earnings of the Company and its
Subsidiaries before interest, taxes, depreciation and amortization and
after deduction of all operating expenses, all as calculated in
accordance with generally accepted accounting principles consistently
applied, as reflected in the Company's consolidated financial statements
for the four (4) most recent consecutive fiscal quarters of the Company
ending at least 45 days prior to such date.
"EQUITY PARTNERS AGREEMENT" shall have the meaning set
forth in Section 4.8.
"GOOD REASON" shall mean, with respect to any
Management Holder, such Management Holder's resignation from his
employment with the Company or any of its Subsidiaries following and
because of (a) the Company's reducing or reassigning a material portion
of the Management Holder's duties under his employment agreement, if
any, without Cause or, in the case of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ only, the
Company's requiring ▇▇. ▇▇▇▇▇▇▇▇▇ to relocate outside the greater
Minneapolis, Minnesota area; (b) a reduction of the Management Holder's
base salary other than in connection with an across-the-board reduction
of executive compensation imposed by the Board of Directors of the
Company in response to negative financial results or other adverse
circumstances affecting the Company; (c) an illness of the Management
Holder, that, in the good faith determination of the Board of Directors
of the Company, is likely to result in the Management Holder becoming
disabled and unable to continue his employment with the Company; or (d) a
material breach by the Company of any Employment Agreement by and
between the Company and the Management Holder.
"HOLDER" shall have the meaning set forth in Section 3.1.
"INITIATING STOCKHOLDER" shall have the meaning set
forth in Section 2.4(a).
"JWC EQUITY PARTNERS" shall mean ▇.▇. Childs Equity
Partners, L.P., a Delaware limited partnership.
"JWC HOLDERS" shall have the meaning set forth in the
preamble preceding the Recitals to this Agreement and shall also include
Permitted Transferees of the JWC Holders and other transferees of the JWC
Holders unless immediately prior to such Transfer such transferee was a
Management Holder.
"JWC INC." shall mean ▇.▇. Childs Associates, Inc., a
Delaware corporation.
"JWC REPRESENTATIVE" shall have the meaning set forth in
Section 4.8.
"MANAGEMENT HOLDERS" shall have the meaning set forth
in the preamble preceding the Recitals to this Agreement and shall also
include (a) any director, officer or management employee of the Company
or any of its Subsidiaries (other than JWC Holders) who, with the written
consent of the Company and the JWC Representative, hereafter becomes a
party to this Agreement and (b) Permitted Transferees of the Management
Holders, unless immediately prior to such Transfer such transferee was a
JWC Holder.
"NON-INITIATING MANAGEMENT HOLDERS" shall have the
meaning set forth in Section 2.3(c).
"PARTICIPATING NOTICE" shall have the meaning set forth
in Section 2.4(a).
"PARTICIPATING OFFEREES" shall have the meaning set
forth in Section 2.4(a).
"PARTICIPATING SECURITIES" shall have the meaning set
forth in Section 2.4(a).
"PERMITTED TRANSFER" shall mean:
(a) a Transfer of any Subject Securities between any
JWC Holder or Management Holder who is a natural person and such
Stockholder's spouse, children, parents or siblings (whether natural,
step or by adoption) or to a trust solely for the benefit of one or
more of any of such Persons; provided that with respect to any such
Transfer, the Stockholder retains, as trustee or by some other means, the
sole authority to vote such Subject Securities (including any Common
Stock that may be acquired pursuant to any Vested Options);
(b) a Transfer of Subject Securities by a JWC Holder to
JWC Inc. or to an officer, employee or consultant of JWC Inc. or to a
corporation or to a partnership (or other entity for collective
investment, such as a fund) which is (and continues to be) controlled by,
controlling or under common control with JWC Inc.;
(c) a Transfer of Subject Securities (i) by a
Management Holder to another Management Holder or (ii) from a JWC Holder
to another JWC Holder;
(d) a Transfer of Subject Securities between any
Stockholder who is a natural person and such Stockholder's guardian or
conservator; or
(e) (i) a bona fide pledge of Subject Securities by a
JWC Holder to a bank or financial institution [or (ii) any pledge
existing at the date hereof of Subject Securities by a Management
Holder].
No Permitted Transfer shall be effective unless and until the transferee
of the Subject Securities so transferred executes and delivers to the
Company an executed counterpart of this Agreement in accordance with
Section 4.13 hereof.
"PERMITTED TRANSFEREE" shall mean any Person who shall
have acquired and who shall hold any Subject Securities pursuant to a
Permitted Transfer.
"PERSON" means an individual, corporation, partnership,
limited liability company, trust, unincorporated association, government
or any agency or political subdivision thereof, or other entity.
"PROMISSORY NOTE" shall have the meaning set
forth in Section 2.3(e).
"PUBLIC FLOAT DATE" shall mean the first date on which
shares of Common Stock shall have been sold pursuant to one or more
Public Offerings in which the aggregate proceeds (before deducting
underwriter discounts and commissions) to the Company and the selling
stockholders, if any, of such shares equal or exceed $25 million.
A "PUBLIC OFFERING" shall mean the completion of a sale
of shares of Common Stock pursuant to a registration statement which has
become effective under the 1933 Act, excluding registration statements on
Form S-4 or Form S-8 or similar limited purpose forms.
"PUT EVENT" shall have the meaning set forth in Section
2.3(a).
"PUT NOTICE" shall have the meaning set forth in Section
2.3(a).
"PUT OPTION" shall have the meaning set forth in Section
2.3(a).
"PUT PERIOD" shall have the meaning set forth in Section
2.3(a).
"PUT PRICE" shall mean, as of any date, a per share
price equal to the remainder of (a) (i) the excess of (A) the product of
4.5 times EBITDA, over (B) the aggregate amount of the Consolidated
Indebtedness as of the date of the most recently prepared consolidated
balance sheet of the Company and its Subsidiaries, divided by (ii) the
aggregate number of Common Stock Equivalents at the time outstanding,
minus, (b) in the case of Vested Options, the per share exercise price
payable in connection with such Vested Options.
"PUT SECURITIES" shall have the meaning set forth in
Section 2.3(a).
"REGISTRABLE SECURITIES" shall mean, as of any date,
with respect to any Stockholder, (a) all shares of Common Stock held by
such Stockholder as of such date and (b) all shares of Common Stock that
may be acquired as of such date by such Stockholder upon exercise of
Vested Options; provided that, as to any particular Registrable
Securities, such securities shall cease to be Registrable Securities when
(i) a registration statement (other than a registration statement on
Form S-8) with respect to the sale or exchange of such securities shall
have become effective under the 1933 Act and such securities shall have
been disposed of in accordance with such registration statement, (ii) a
registration statement on Form S-8 with respect to such securities
shall have become effective under the 1933 Act, (iii) such securities
shall have been sold or acquired under a Rule 144 Transaction, or (iv)
such securities have ceased to be outstanding.
"RULE 144 TRANSACTION" means a transfer of Common Stock
(a) complying with Rule 144 under the 1933 Act as such rule or a
successor thereto is in effect on the date of such transfer (but only a
sale pursuant to a "brokers transaction" as defined in clauses (i) and
(ii) of paragraph (g) of Rule 144 as in effect on the date hereof) and
(b) occurring at a time when the Common Stock is registered pursuant to
Section 12 of the 1934 Act.
"SALE REQUEST" shall have the meaning set forth in
Section 2.5(a).
"SCHEDULE OF STOCKHOLDERS" shall refer to the Schedule
of Stockholders attached hereto as EXHIBIT A as from time to time amended
pursuant to Section 4.2.
"SEC" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the 1933 Act.
"STOCKHOLDER" shall mean any party hereto other than
the Company, including any Person who hereafter becomes a party to this
Agreement pursuant to Section 4.13 hereof.
"STOCKHOLDER GROUP" shall mean any of (a) the JWC
Holders taken as a group or (b) the Management Holders taken as a group.
The Company shall not in any case be deemed to be a member of any
Stockholder Group (whether or not the Company holds or repurchases any
Common Stock Equivalents).
"SUBJECT SECURITIES" shall mean any Common Stock or
Vested Options now or hereafter held by any Stockholder.
"SUBSIDIARY" with respect to any Person (the "parent")
shall mean any Person of which such parent, at the time in respect of which
such term is used, (a) owns directly or indirectly more than fifty percent
(50%) of the equity or beneficial interest, on a consolidated basis, or (b)
owns directly or controls with power to vote, indirectly through one or
more Subsidiaries, shares of capital stock or beneficial interest having
the power to cast at least a majority of the votes entitled to be cast for
the election of directors, trustees, managers or other officials having
powers analogous to those of directors of a corporation. Unless otherwise
specifically indicated, when used herein the term Subsidiary shall refer
to a direct or indirect Subsidiary of the Company.
"THIRD PARTY" means any Person other than the Company.
"TRANSFER" shall mean to transfer, sell, assign,
pledge, hypothecate, give, grant or create a security interest in or
lien on, place in trust (voting or otherwise), assign an interest in or
in any other way encumber or dispose of, directly or indirectly and
whether or not by operation of law or for value, any of the Subject
Securities.
"VESTED OPTIONS" shall mean, as of any date, options,
warrants, securities and other rights to acquire from the Company, by
exercise, conversion, exchange or otherwise, shares of Common Stock or
securities convertible into Common Stock, but only to the extent that
such options, warrants, securities and other rights are both, as of such
date, (a) vested under the terms thereof or under any plan, agreement or
instrument pursuant to which such options, warrants, securities and other
rights were issued, and (b) so exchangeable, exercisable or convertible.
ARTICLE II
Transfer Provisions
2.1 Restrictions on Transfers.
(a) Without the prior written consent of the holders of
a majority of the Common Stock Equivalents at the time held by the JWC
Holders, no Stockholder shall Transfer all or any part of the Subject
Securities at the time held by such Stockholder to any Person.
(b) The provisions of this Section 2.1 shall not apply
to a Transfer which is (i) a Permitted Transfer, (ii) pursuant to a
Public Offering, or (iii) after a Public Offering, pursuant to a Rule 144
Transaction.
2.2 Call by the Company.
(a) (i) If the employment of a Management Holder by
the Company or any of its Subsidiaries shall terminate (a "CALL
EVENT") for any reason prior to the Public Float Date, then,
subject to Section 2.2(a)(ii), the Company shall have the right
to purchase (the "CALL OPTION"), by delivery of a written no-
▇▇▇▇ (the "CALL NOTICE") to such terminated Management Holder
(with a copy thereof to the JWC Representative) no later than 90
days after the date of the Call Event (the "COMPANY CALL
PERIOD"), and such Management Holder and such Management
Holder's direct and indirect transferees (a "CALL GROUP") shall
be required to sell, all or any portion of the Subject
Securities which are held by the members of the Call Group on
the date of such Call Event that (A) were originally issued by
the Company to such Management Holder, and (B) were owned by
such Management Holder or his direct or indirect transferees on
the date of the Call Event (such Subject Securities to be
purchased hereunder being referred to collectively as the "CALL
SECURITIES") at, except as otherwise provided in Section
2.2(a)(ii) hereof, a price per share equal to the greater of (x)
the Call Price of such Call Securities as of the date of the
Call Event and (y) the Cost Price of such Call Securities.
(ii) Notwithstanding anything set forth in this
Section 2.2 to the contrary, in the event a Management Holder
resigns without Good Reason from his employment with the Company
or any of its Subsidiaries, or his employment is terminated for
Cause by the Company or a Subsidiary, then the purchase price per
share payable for the Call Securities shall be an amount equal to
the Cost Price of such Call Securities.
(b) The closing of any purchase of Call Securities by
the Company from a Call Group pursuant to this Section 2.2 shall take
place at the principal office of the Company on such date within 30 days
after the expiration of the Company Call Period with respect to such
Call Group as the Company shall specify to the members of such Call Group
in writing. At such closing, the members of the Call Group shall deliver,
against payment for the Call Securities in accordance with Section 2.2(f)
hereof, to the Company certificates and/or other instruments
representing, together with stock or other appropriate powers duly
endorsed with respect to, the Call Securities, free and clear of all
claims, liens and encumbrances. All of the foregoing deliveries will be
deemed to be made simultaneously and none shall be deemed completed until
all have been completed.
(c) Notwithstanding anything set forth in this Section
2.2 to the contrary, prior to the exercise by the Company of its Call
Option to purchase Call Securities pursuant to this Section 2.2, one or
more prospective or existing employees of the Company or any Subsidiary
may be designated by the Chief Executive Officer of the Company, subject
to the approval of the Board of Directors of the Company (individually, a
"DESIGNATED EMPLOYEE" and, collectively, "DESIGNATED EMPLOYEES"), who
shall have the right, but not the obligation, to exercise the Call Option
and to acquire, in lieu of the Company, some or all (as determined by the
Company) of the Call Securities that the Company is entitled to purchase
from the Call Group hereunder, for cash and otherwise on the same terms
and conditions as set forth in Section 2.2(b) which apply to the
repurchase of Call Securities by the Company. Concurrently with any such
purchase of Call Securities by any such Designated Employee, such
Designated Employee shall execute a counterpart of this Agreement
whereupon such Designated Employee shall be deemed a "Management Holder"
and shall have the same rights and be bound by the same obligations as
the other Management Holders hereunder. Payment under this Section
2.2(c) and under Section 2.2(d) below shall be made by a certified check
or checks payable to the respective members of the Call Group, in an
amount equal to the purchase price for such Call Securities under
Section 2.2(a) hereof.
(d) If and to the extent that, subsequent to a Call
Event, (i) neither the Company nor any Designated Employee elects to
exercise the Call Option by delivery of a Call Notice prior to the
expiration of the Company Call Period with respect to such Management
Holder in accordance with this Section 2.2 and (ii) if applicable, the
Management Holder has not delivered a Put Notice to the Company prior to
the expiration of the Put Period with respect to such Management Holder in
accordance with Section 2.3(a), then the JWC Holders, pro rata in
accordance with the respective Common Stock Equivalents at the time held by
the JWC Holders so exercising their rights under this Section 2.2(d), may
exercise the Call Option in lieu of the Company and such Designated Em-
ployees by delivery of a Call Notice to such terminated Management Holder
no later than 30 days after the expiration of the Company Call Period with
respect to such Management Holder. The closing of any purchase of Call
Securities by such JWC Holders shall take place on such date within 60 days
after the expiration of the Company Call Period with respect to such
Management Holder as the holders of a majority of the Common Stock Equiva-
▇▇▇▇▇ at the time held by the JWC Holders so exercising their rights under
this Section 2.2(d) shall specify to the members of such Call Group in
writing, provided that if any such JWC Holder fails to purchase all or a
portion of the number of Call Securities which such JWC Holder may
purchase pursuant to this Section 2.2(d), then the other JWC Holders so
exercising their rights under this Section 2.2(d) shall be entitled to
purchase such Call Securities (pro rata based upon their respective Common
Stock Equivalents at the time held, or as otherwise agreed, by such JWC
Holders).
(e) If none of the Company, any Designated Employees or
any JWC Holders elects to exercise the Call Option and deliver a Call
Notice within 120 days after the date of the Call Event, then the Call
Option provided for in this Section 2.2 shall terminate, but such
Management Holder and his direct and indirect transferees shall continue
to hold such Call Securities pursuant to all of the other provisions of
this Agreement, including Sections 2.1 and 2.5 hereof.
(f) At each closing for the purchase of Call Securities
to be purchased pursuant to Section 2.2(a) above, the Company shall
repurchase such Call Securities for cash (by delivery of a certified check
or checks payable to the Management Holder or his direct or indirect
transferees, as the case may be). If an agreement or indenture governing
indebtedness for borrowed money of the Company or any Subsidiary contains a
restriction on the amount of Call Securities that can be repurchased from
any terminated Management Holder or his direct or indirect transferees in
any given fiscal year of the Company, the maximum amount which the Company
shall be permitted to pay in such fiscal year for the repurchase of Call
Securities pursuant to Section 2.2 hereof from a terminated Management
Holder or his transferees shall be, in the aggregate, (x) the maximum
amount permitted by such agreement or indenture for the fiscal year of the
Company in which such Management Holder terminates his employment with the
Company, less (y) the aggregate amount previously paid by the Company to
repurchase Call Securities from any other Management Holder whose em-
ployment with the Company terminated in such fiscal year.
2.3 Put by Management Holders.
(a) (i) If the employment of any Management Holder by
the Company or any Subsidiary shall be terminated for any reason
(other than for Cause or upon a resignation without Good Reason)
prior to the Public Float Date (any such termination being
hereinafter referred to as a "PUT EVENT"), any such terminated
or resigning Management Holder and his direct and indirect
transferees shall have the right (the "PUT OPTION"), subject to
Section 2.3(a)(ii) below, by delivery of one or more written no-
tices to the Company (with copies to each Non-Initiating
Management Holder and JWC Holder) (the "PUT NOTICE") during the
30-day period beginning on the date of the Put Event (the "PUT
PERIOD"), to cause the Company to purchase, and the Company
shall purchase, all of the Subject Securities that (x) were
originally issued by the Company to such Management Holder, and
(y) were owned by such Management Holder or his direct or
indirect transferees on the date of the Put Event (such Subject
Securities to be purchased hereunder being referred to
collectively as the "PUT SECURITIES"), at the Put Price of such
Put Securities as of the date of the Put Event. Neither
termination for Cause nor resignation without Good Reason shall
constitute a Put Event.
(ii) If and to the extent
that, subsequent to a Put Event and prior to the expiration of
the Put Period with respect to such Management Holder, the
Management Holder and his direct and indirect transferees
do not elect to exercise the Put Option by delivery of a Put
Notice to the Company in accordance with this Section 2.3, all
of the Management Holder's and such transferees' rights to sell
Put Securities to the Company pursuant to this Section 2.3 shall
terminate.
(b) The closing of the purchase of any Put Securities
from a Management Holder or his direct and indirect transferees pursuant
to this Section 2.3 shall take place at the principal office of the
Company on such date within 30 days after the expiration of the Put
Period with respect to such Management Holder as the Company shall
specify to such Management Holder and his direct and indirect transferees
in writing. At any closing pursuant to this Section 2.3, the Company
shall deliver the payment for the Put Securities in accordance with
Section 2.3(e) hereof against delivery of certificates and/or other
instruments representing, together with stock or other appropriate powers
duly endorsed with respect to, the Put Securities specified in the Put
Notice, free and clear of all claims, liens and encumbrances.
(c) The Company shall have the right, but not in any
case the obligation, to satisfy its obligations pursuant to this Section
2.3 by allowing the Management Holders other than the Management Holder
and his direct and indirect transferees, if any, exercising his rights
under this Section 2.3 (the "NON-INITIATING MANAGEMENT HOLDERS"), to
purchase all or any portion of the Put Securities, pro rata in accordance
with the Common Stock Equivalents at the time held by such Non-Initiating
Management Holders (with rights to over-allotment to the other
Non-Initiating Management Holders should any Non-Initiating Management
Holder choose to purchase none (or less than its pro rata share) of such
Put Securities under this Section 2.3(c)). Each Non-Initiating Manage-
ment Holder shall, within 30 days after the receipt of the Put Notice by
it, notify the Company if such Non-Initiating Management Holder wishes to
purchase all or any portion of its pro rata share of the Put Securities
at the Put Price. At the closing of the purchase of the Put Securities in
accordance with Section 2.3(b) above, each Non-Initiating Management
Holder purchasing Put Securities shall deliver a certified check or
checks payable to the Management Holder or his direct or indirect
transferees, as the case may be, selling Put Securities as specified in
the Put Notice, in an aggregate amount equal to the Put Price for such
Put Securities, against delivery of certificates and/or other instru-
ments representing the Put Securities to be purchased by it in accordance
with this Section 2.3(c), free and clear of all claims, liens and
encumbrances, together with stock or other appropriate powers therefor
duly endorsed.
(d) If and to the extent that, subsequent to a Put
Event, the Non-Initiating Management Holders elect to purchase fewer than
all of the Put Securities by delivery of written notice to the Company
pursuant to Section 2.3(c), the Company shall have the right, but not in
any case the obligation, to satisfy its obligations pursuant to this
Section 2.3 by allowing the JWC Holders to purchase all or any portion of
the Put Securities, pro rata in accordance with the Common Stock
Equivalents at the time held by such JWC Holders (with rights to
over-allotment to the JWC Holders should any JWC Holder choose to
purchase none (or less than its pro rata share) of such Put Securities
under this Section 2.3(c)). The procedures by which such JWC Holders
shall notify the Company and purchase the Put Securities shall be
identical in all respects to the procedures provided for in Section
2.3(c) for the Non-Initiating Management Holders.
(e) Notwithstanding anything to the contrary set forth
herein, the Company shall not be required to purchase Put Securities
pursuant to this Section 2.3 (i) after the Public Float Date, (ii) if,
after giving effect to such purchase, the Company would be (or with the
lapse of time or the giving of notice would be) in default under any of
the agreements and indentures governing indebtedness for borrowed money
of the Company or any Subsidiary or (iii) if the Company does not at the
time have sufficient funds legally available for such purchase.
(f) At each closing for the purchase of Put Securities
to be purchased pursuant to Section 2.3(a)(i) above, such Subject
Securities shall, subject to Section 2.3(f) below, be purchased as
follows: to the extent (and only to the extent) that (i) funds are
legally available for the repurchase of equity securities of the Company
and (ii) the Company is permitted to repurchase for cash equity
securities of terminated employees pursuant to the agreements and
indentures governing indebtedness for borrowed money of the Company or
any Subsidiary, the Company shall repurchase such Put Securities for
cash (by delivery of a certified check or checks payable to the
Management Holder or his direct or indirect transferees, as the case may
be). If the Company is unable pursuant to the foregoing provisions of
this Section 2.3(e) to purchase for cash any Put Securities from any
terminated Management Holder or his direct or indirect transferees, the
purchase price therefor shall be paid by delivery of a subordinated
promissory note (each a "Promissory Note") substantially in the form
attached hereto as Exhibit B in an original principal amount equal to the
purchase price of such Put Securities not so paid in cash. If an
agreement or indenture referred to in clause (ii) above contains a
restriction on the amount of Put Securities that can be repurchased from
any terminated Management Holder or his direct or indirect transferees in
any given fiscal year of the Company, the maximum amount which the
Company shall be required to apply to the repurchase of Put Securities
pursuant to this Section 2.3 in such fiscal year shall be, in the
aggregate, (x) the maximum amount permitted by such agreement or
indenture for the fiscal year of the Company in which such Management
Holder terminates his employment with the Company, less (y) the aggregate
amount previously paid by the Company to repurchase Put Securities from
any other Management Holder whose employment with the Company terminated
in such fiscal year.
(g) Any amounts which would otherwise be available with
respect to any fiscal year of the Company for the repurchase of Put
Securities and Call Securities shall first be applied to prepayment of
outstanding Promissory Notes issued under Section 2.3(e) and any
payment-in-kind Promissory Notes issued in payment of interest, in the
order in which such Promissory Notes were issued, until all such
Promissory Notes have been prepaid in accordance herewith. Prepayments
shall be applied first to accrued and unpaid interest and second to
principal.
2.4 Tagalong. Except as provided in Section 2.2 or 2.3
hereof, no Stockholder shall Transfer (in one or a series of transactions
within any 24-month period) any Subject Securities representing more than
ten percent (10%) of the Common Stock Equivalents held by such Stockholder
on the date of execution of this Agreement by such stockholder, to a Third
Party without complying with the terms and conditions set forth in this
Section 2.4, as applicable; provided that this Section 2.4 shall not in any
way limit or affect the restrictions of Section 2.1, and any Stockholder
may be an Initiating Stockholder (as defined below) under this Section 2.4
only if such Transfer is permitted under Section 2.1:
(a) Any Stockholder (the "Initiating Stockholder")
desiring to Transfer such Subject Securities shall give not less than 10
days' prior written notice of such intended Transfer to each other
Stockholder ("Participating Offerees") and to the Company. Such notice
(the "Participation Notice") shall set forth the terms and conditions of
such proposed Transfer, including the name of the prospective
transferee, the number of Common Stock Equivalents proposed to be
transferred (the "Participation Securities") by the Initiating
Stockholder, the purchase price per share proposed to be paid therefor
and the payment terms and type of Transfer to be effectuated. Within 15
days following the delivery of the Participation Notice by the
Initiating Stockholder to each Participating Offeree and to the Company,
each Participating Offeree shall, by notice in writing to the Initiating
Stockholder and to the Company, have the opportunity and right to sell to
the purchasers in such proposed Transfer (upon the same terms and condi-
tions as the Initiating Stockholder) up to that number of Subject
Securities representing Common Stock Equivalents at the time held by
such Participating Offeree as shall equal the product of (i) a fraction,
the numerator of which is the number of Common Stock Equivalents owned by
such Participating Offeree as of the date of such proposed Transfer and
the denominator of which is the aggregate number of Common Stock
Equivalents owned as of the date of such Participation Notice by each
Initiating Stockholder and by all Participating Offerees so electing to
sell Subject Securities pursuant to this Section 2.4(a), multiplied by
(ii) the number of Participation Securities. The amount of Participation
Securities to be sold by any Initiating Stockholder shall be reduced to
the extent necessary to provide for such sales of Subject Securities by
Participating Offerees.
(b) At the closing of any proposed Transfer in respect
of which a Participation Notice has been delivered, the Initiating
Stockholder, together with all Participating Offerees so electing to sell
Subject Securities pursuant to this Section 2.4(a) shall deliver to the
proposed transferee certificates and/or other instruments representing
the Subject Securities to be sold, free and clear of all liens and
encumbrances, together with stock or other appropriate powers duly
endorsed therefor, and shall receive in exchange therefor the
consideration to be paid or delivered by the proposed transferee in
respect of such Subject Securities as described in the Participation
Notice.
(c) The provisions of this Section 2.4 shall not apply
to (i) any Transfer pursuant to a Public Offering, (ii) following a
Public Offering, pursuant to a Rule 144 Transaction or (iii) any
Transfers pursuant to Section 2.5 hereof.
2.5 Dragalong.
(a) If Stockholders holding at least a majority of
Common Stock Equivalents at the time held by the Stockholders (the
"Dragalong Group") determine to sell or exchange (in a sale or exchange of
securities of the Company or in a merger, consolidation or other business
combination or any similar transaction) in one or a series of bona fide
arms-length transactions to an unrelated and unaffiliated Third party
fifty percent (50%) or more of the Subject Securities at the time held by
them (the actual percentage of the total number of Subject Securities held
by the Dragalong Group represented by the Subject Securities determined to
be so sold or exchanged being referred to as the "Dragalong Percentage"),
then, upon 30 days' written notice from the Dragalong Group to the other
Stockholders, which notice shall include reasonable details of the proposed
sale or exchange including the proposed time and place of closing and the
consideration to be received by the Dragalong Group (such notice being
referred to as the "Sale Request"), each other Stockholder shall be obli-
gated to, and shall, (i) sell, transfer and deliver, or cause to be sold,
transferred and delivered, to such Third Party the Dragalong Percentage of
the Subject Securities at the time held by such Stockholder, in the same
transaction at the closing thereof and shall (A) execute and deliver such
agreements for the purchase of such Subject Securities and other
agreements, instruments and certificates as the members of the Dragalong
Group shall execute and deliver in connection with such proposed
transaction and (B) deliver certificates and/or other instruments
representing all of such Stockholder's Subject Securities, together with
stock or other appropriate powers therefor duly executed, at the closing,
free and clear of all claims, liens and encumbrances), and each Stockholder
shall receive upon the closing of such transaction the same per share
consideration to be paid or delivered by the proposed transferee in respect
of such Stockholder's Subject Securities as shall be payable to the members
of the Dragalong Group in respect of their Subject Securities, and (ii) if
stockholder approval of the transaction is required, vote such
Stockholder's Common Stock in favor thereof.
(b) The provisions of this Section 2.5 shall not apply
to any Transfer (i) pursuant to a Public Offering or (ii) pursuant to a
Permitted Transfer.
2.6 Corporate Governance. Until the 10th anniversary
of the date hereof, the Company and each of the JWC Holders and the
Management Holders shall take all action (including but not limited to
such Stockholder's voting, or executing proxies or written consents
with respect to, the Common Stock at the time held by such Stockholder as
may be from time to time requested by holders of a majority of the
Common Stock Equivalents at the time held by the JWC Holders) so that the
Company's Board of Directors shall include such number of members
designated by the holders of a majority of the Common Stock Equivalents
at the time held by the JWC Holders (or the JWC Representative). The hold-
ers of a majority of the Common Stock Equivalents at the time held by the
JWC Holders (or the JWC Representative) shall also be entitled to require
that any member of the Company's Board of Directors so designated
pursuant to this Section 2.6 be removed or replaced by another designee
of the holders of a majority of the Common Stock Equivalents at the time
held by the JWC Holders (or the JWC Representative), in which event the
Company and each such Stockholder shall take all action, including but
not limited to such Stockholder's voting, or executing written consents
with respect to, the Common Stock at the time held by such Stockholder as
may be necessary to effect such removal or replacement.
2.7 Restrictions on Other Agreements. Except for JWC
Holders as provided in Sections 4.8 and 4.9, no Stockholder shall grant any
proxy or enter into or agree to be bound by any voting trust with respect
to any Subject Securities nor shall any Stockholder enter into any
stockholders agreements or arrangements of any kind with any Person with
respect to any of the Subject Securities on terms which conflict with the
provisions of this Agreement (whether or not such agreements and ar-
rangements are with other Stockholders or holders of Common Stock
Equivalents that are not parties to this Agreement), including but not
limited to, agreements or arrangements with respect to the acquisition,
disposition or voting of Subject Securities inconsistent herewith.
2.8 Stockholder Action. Each Stockholder agrees that,
in such Stockholder's capacity as a stockholder of the Company, such
Stockholder shall, pursuant to Section 2.5 hereof, vote, or grant proxies
relating to the Common Stock at the time held by such Stockholder to
vote, all of such Stockholder's Common Stock in favor of any sale or
exchange of securities of the Company or any merger, consolidation or
other business combination or any similar transaction pursuant to Section
2.5 hereof if, and to the extent that, approval of the Company's
stockholders is required in order to effect such transaction.
ARTICLE III
Registration Rights
3.1 General. For purposes of this Article III: (a) the
terms "register", "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement on
Form ▇-▇, ▇-▇ or S-3 in compliance with the 1933 Act and the declaration
or ordering of effectiveness of such registration statement; and (b) the
term "Holder" means any Stockholder.
3.2 Piggyback Registration. If, at any time, the
Company determines to register any Public Offering of any of the Common
Stock Equivalents for the account of any JWC Holder under the 1933 Act in
connection with the public offering of such securities, the Company
shall, at each such time, promptly give each Holder written notice of
such determination no later than 30 days before its intended filing with
the SEC. Upon the written request of any Holder received by the Company
within 10 days after the giving of any such notice by the Company, the
Company shall use its best efforts to cause to be registered under the
1933 Act all of the Registrable Securities of such Holder that such
Holder has requested be registered. If the total amount of Registrable
Securities that are to be included by the Company in such registration
exceeds the amount of securities that the underwriters reasonably
believe compatible with the success of the offering, then the Company
will include in such registration only the number of securities which in
the opinion of such underwriters can be sold, in the following order:
(i) first, all securities of
the Company to be offered for the account of
the Company; and
(ii) second, the Registrable
Securities, pro rata based on the number of Registrable
Securities held by each Holder seeking to have Registrable
Securities included in such registration.
3.3 Obligations of the Company.
(a) Whenever required under Section 3.2 hereof to use
its best efforts to effect the registration of any Registrable
Securities, the Company shall:
(i) prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become and
remain effective, including, without limitation, filing of
post-effective amendments and supplements to any registration
statement or prospectus necessary to keep the registration
statement current;
(ii) as expeditiously as reasonably possible,
prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply
with the provisions of the 1933 Act with respect to the dis-
position of all securities covered by such registration statement
and to keep each registration and qualification under this
Agreement effective (and in compliance with the 1933 Act) by such
actions as may be necessary or appropriate for a period of 90 days
after the effective date of such registration statement (unless
all securities covered by such registration statement are sooner
disposed of), all as requested by such Holder or Holders;
(iii) as expeditiously as reasonably possible
furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as they may
reasonably request in order to facilitate the disposition of
Registrable Securities owned by them in accordance with the plan
of distribution provided for in such registration statement;
(iv) as expeditiously as reasonably possible use its
best efforts to register and qualify the securities covered by
such registration statement under such securities or "blue sky"
laws of such jurisdictions as shall be reasonably appropriate for
the distribution of the securities covered by the registration
statement; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any
such jurisdiction; and further provided that (anything in this
Agreement to the contrary notwithstanding with respect to the
bearing of expenses) if any jurisdiction in which the securities
shall be qualified shall require that expenses incurred in
connection with the qualification of the securities in that
jurisdiction be borne by selling stockholders, then such expenses
shall be payable by selling stockholders pro rata, to the extent
required by such jurisdiction;
(v) notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospec-
tus relating thereto is required to be delivered under the 1933
Act, upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were
made, and at the request of any such seller or Holder promptly
prepare to furnish to such seller or Holder a reasonable number of
copies of a supplement to or an amendment of such prospectus as
may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include
an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the
circumstances under which they were made;
(vi) otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC, and make
available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least
12 months but not more than 18 months, beginning with the first
full calendar month after the effective date of such registration
statement, which earnings statement shall satisfy the provisions
of Section ll(a) of the 1933 Act, and will furnish to each such
seller at least 2 Business Days prior to the filing thereof a copy
of any amendment or supplement to such registration statement or
prospectus and shall not file any thereof to which any such seller
shall have reasonably objected, except to the extent required by
law, on the grounds that such amendment or supplement does not
comply in all material respects with the requirements of the 1933
Act or of the rules or regulations thereunder;
(vii) provide and cause to be maintained a transfer
agent and registrar for all Registrable Securities covered by such
registration statement from and after a date not later than the
effective date of such registration statement; and
(viii) use its best efforts to list all Registrable
Securities covered by such registration statement on any
securities exchange on which any class of Registrable Securities
is then listed.
(b) The Company will furnish to each Holder on whose
behalf Registrable Securities have been registered pursuant to this
Agreement a signed counterpart, addressed to such Holder, of (i) an
opinion of counsel for the Company dated the effective date of such regis-
tration statement, and (ii) a so-called "cold comfort" letter signed by
the independent public accountants who have certified the Company's
financial statements included in such registration statement, and such
opinion of counsel and accountants' letter, with respect to events
subsequent to the date of such financial statements, as are customarily
covered in opinions of issuer's counsel and in accountants' letters
delivered to underwriters in connection with underwritten public
offerings of securities.
(c) If the Company at any time proposes to register any
of its securities under the Securities Act subject to the piggyback
registration rights of the Holders under Section 3.2 hereof, and such
securities are to be distributed by or through one or more underwriters,
then the Company will make reasonable efforts, if requested by any Holder
of Registrable Securities who requests registration of Registrable
Securities in connection therewith pursuant to Section 3.2 hereof, to
arrange for such underwriters to include such Registrable Securities
among the securities to be distributed by or through such underwriters.
(d) In connection with the preparation and filing of
each registration statement registering Registrable Securities under this
Agreement, the Company will give the Holders of Registrable Securities on
whose behalf such Registrable Securities are to be so registered and
their underwriters, if any, and their respective counsel and accountants
the opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the SEC, and
each amendment thereof or supplement thereto, and will give each of them
such access to its books and records and such opportunities to discuss
the business of the Company with its officers, its counsel and the
independent public accountants who have certified its financial
statements, as shall be reasonably necessary, in the opinion of such
Holders or such underwriters or their respective counsel, in order to
conduct a reasonable and diligent investigation within the meaning of
the 1933 Act. Without limiting the foregoing, each registration
statement, prospectus, amendment, supplement or any other document filed
with respect to a registration under this Agreement shall be subject to
review and reasonable approval by the Holders registering Registrable
Securities in such registration and by their counsel.
3.4 Furnish Information. It shall be a condition
precedent to the obligations of the Company to take any action pursuant
to this Article III that each Holder shall furnish to the Company such
information regarding such Holder, the Registrable Securities held by
such Holder, and the intended method of disposition of such securities as
the Company shall reasonably request and as shall be required in
connection with the action to be taken by the Company.
3.5 Expenses of Registration. All expenses incurred in
connection with a registration pursuant to Section 3.2 hereof (excluding
underwriters' discounts and commissions, which shall be borne by the
sellers), including without limitation all registration and quali-
fication fees, printers' and accounting fees, fees and disbursements of
counsel for the Company, and the reasonable fees and disbursements of
one counsel for the selling Holders (which counsel shall be selected by
the holders of a majority in interest of such Holders based on the number
of Registrable Securities included in such registration) shall be borne
by the Company.
3.6 Underwriting Requirements. In connection with any
underwritten registration of Registrable Securities under this
Agreement, the Company shall, if requested by the Company or the
underwriters for any Registrable Securities included in such
registration, enter into an underwriting agreement with such under-
writers for such offering, such agreement to contain such representations
and warranties by the Company and such other terms and provisions as are
customarily contained in underwriting agreements with respect to sec-
ondary distributions, including, without limitation, provisions relating
to indemnification and contribution. The Holders on whose behalf
Registrable Securities are to be distributed by such underwriters shall
be parties to any such underwriting agreement, and the representations
and warranties by, and the other agreements on the part of, the Company
to and for the benefit of such underwriters shall be also made to and for
the benefit of such Holders of Registrable Securities. Such underwriting
agreement shall comply with Section 3.7.
3.7 Indemnification. In the event any Registrable
Securities are included in a registration statement pursuant to this
Article III:
(a) To the fullest extent permitted by law, the Company
will indemnify and hold harmless each Holder joining in a registration,
any underwriter (as defined in the ▇▇▇▇ ▇▇▇) for it, and each Person, if
any, who controls such Holder or such underwriter within the meaning of
the 1933 Act, from and against any losses, claims, damages, expenses
(including reasonable attorneys' fees and expenses and reasonable costs
of investigation) or liabilities, joint or several, to which they or any
of them may become subject under the 1933 Act or otherwise, insofar as
such losses, claims, damages, expenses or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise
out of or are based on any untrue or alleged untrue statement of any
material fact contained in such registration statement including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements made therein not
misleading in light of the circumstances under which they were made or
arise out of any violation by the Company of any rule or regulation
promulgated under the 1933 Act applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration; provided that the indemnity agreement contained in this
Section 3.7(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable to anyone for
any such loss claim, damage, liability or action to the extent that it
arises out of or is based upon an untrue statement or omission made in
connection with such registration statement, preliminary prospectus,
final prospectus or amendments or supplements thereto in reliance upon
and in conformity with written information furnished expressly for use
in connection with such registration by such Holder, underwriter or
control person. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Holder,
underwriter or control person and shall survive the transfer of such
securities by such Holder.
(b) To the fullest extent permitted by law, each Holder
joining in a registration shall indemnify and hold harmless the Company,
each of its directors, each of its officers who has signed the
registration statement, each Person, if any, who controls the Company
within the meaning of the 1933 Act, and each agent and any underwriter
for the Company and any Person who controls any such agent or
underwriter and each other Holder and any Person who controls such Holder
(within the meaning of the ▇▇▇▇ ▇▇▇) against any losses, claims, damages
or liabilities to which the Company or any such director, officer,
control person, agent, underwriter or other Holder may become subject,
under the 1933 Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon an untrue
statement of any material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, or arise out of or are
based upon the omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or omission was made in such registration statement,
preliminary or final prospectus, or amendments or supplements thereto, in
reliance upon and in conformity with written information furnished by
such Holder with respect to such Holder expressly for use in connection
with such registration, and such Holder shall reimburse any legal or
other expenses reasonably incurred by the Company or any such director,
officer, control person, agent, underwriter or other Holder in connection
with investigating or defending any such loss, claim, damage, liability
or action; provided that the indemnity obligation of each such Holder
hereunder shall be limited to and shall not exceed the proceeds actually
received by such Holder upon a sale of Registrable Securities pursuant to
a registration statement hereunder; provided, further that the indemnity
agreement contained in this Section 3.7(b) shall not apply to amounts
paid in settlements effected without the consent of such Holder (which
consent shall not be unreasonably withheld). Such indemnity shall remain
in full force and effect regardless of any investigation made by or on
behalf of the Company or any such director, officer, Holder, underwriter
or control person and shall survive the transfer of such securities by
such Holder.
(c) Any person seeking indemnification under this
Section 3.7 will (i) give prompt notice to the indemnifying party of any
claim with respect to which it seeks indemnification, but the failure to
give such notice will not affect the right to indemnification hereunder,
(except to the extent the indemnifying party is materially prejudiced by
such failure) and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest may exist between such indemnified and
indemnifying parties with respect to such claim, permit such indemnifying
party, and other indemnifying parties similarly situated, jointly to
assume the defense of such claim with counsel reasonably satisfactory to
the parties. In the event that the indemnifying parties cannot mutually
agree as to the selection of counsel, each indemnifying party may retain
separate counsel to act on its behalf and at its expense. The indemnified
party shall in all events be entitled to participate in such defense at
its expense through its own counsel. If such defense is not assumed by
the indemnifying party, the indemnifying party will not be subject to any
liability for any settlement made without its consent (but such consent
will not be unreasonably withheld). No indemnifying party will consent to
entry of any judgment or enter into any settlement which does not include
as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect of
such claim or litigation. An indemnifying party who is not entitled to,
or elects not to, assume the defense of a claim will not be obligated to
pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless
in the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the reasonable fees and
expenses of such additional counsel.
(d) If for any reason the foregoing indemnification is
unavailable to any party or insufficient to hold it harmless as and to
the extent contemplated by the preceding paragraphs of this Section 3.7,
then each indemnifying party shall contribute to the amount paid
or payable by the indemnified party as a result of such loss, claim,
damage expense or liability in such proportion as is appropriate to
reflect the relative benefits received by the applicable indemnifying
party, on the one hand, and the applicable indemnified party, as the case
may be, on the other hand, and also the relative fault of the applicable
indemnifying party and any applicable indemnified party, as the case may
be, as well as any other relevant equitable considerations.
3.8 Rule 144. With a view to making available to the
Holders and their transferees the benefits of Rule 144 and Rule 144A
under the 1933 Act and any other rule or regulation of the SEC that may
at any time permit a Holder to sell securities of the Company to the
public without registration, the Company agrees to use its best efforts
to take all action that may be required as a condition to the
availability after a public offering of Rule 144, Rule 144A or such
other rules or regulations, including without limitation to:
(a) make and keep public information available, as
those terms are understood and defined in Rule 144, at all times
subsequent to 90 days after the effective date of the first registration
statement covering an underwritten public offering filed by the Company;
(b) file with the SEC in a timely manner all reports
and other documents required of the Company under the 1933 Act and the
1934 Act (including, without limitation, under Section 13 or Section 15
of the ▇▇▇▇ ▇▇▇); and
(c) furnish to any Holder forthwith upon request a
written statement by the Company that it has complied with the reporting
requirements of Rule 144 (at any time after 90 days after the effective
date of said first registration statement filed by the Company), and of
the 1933 Act and the 1934 Act (at any time after it has become subject to
such reporting requirements), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so
filed by the Company as may be reasonably requested in availing any
Holder of any rule or regulation of the SEC permitting the selling of any
such securities without registration.
3.9 Market Stand-Off Agreement. Each Stockholder
agrees not to sell or otherwise transfer or dispose of any Common Stock
(or other securities) of the Company at the time held by such Stockholder
(other than securities included in the applicable registration statement
or shares purchased in the public market after the effective date of
registration) or any interest or future interest therein during such
period (not to exceed 180 days) as is mutually acceptable to a majority
in interest of Stockholders and the underwriter following the effective
date of each registration statement of the Company filed under the 1933
Act which includes securities of the Company to be sold to the public in
an underwritten offer.
ARTICLE IV
Certain Miscellaneous Other Provisions
4.1 Remedies. The parties to this Agreement
acknowledge and agree that the covenants of the Company and the
Stockholders set forth in this Agreement may be enforced in equity by a
decree requiring specific performance. Without limiting the foregoing,
if any dispute arises concerning the sale or other disposition of any of
the securities of the Company subject to this Agreement or concerning any
other provisions hereof or the obligations of the parties hereunder, the
parties to this Agreement agree that an injunction may be issued in
connection therewith. Such remedies shall be cumulative and non-exclusive
and shall be in addition to any other rights and remedies the parties may
have under this Agreement or otherwise.
4.2 Entire Agreement; Amendment; Termination.
(a) This Agreement, together with the Acquisition
Agreement, sets forth the entire understanding of the parties, and
supersedes all prior agreements and all other arrangements and
communications, whether oral or written, with respect to the subject
matter hereof.
(b) The Schedule of Stockholders may be amended in
writing by the Company to reflect changes in the composition of the
Stockholders and changes in their addresses or telecopy numbers that may
occur from time to time as a result of Permitted Transfers or Transfers
permitted under Article II hereof. Amendments to the Schedule of
Stockholders reflecting Permitted Transfers or Transfers permitted under
Article II hereof shall become effective when the amended Schedule of
Stockholders, and a copy of the Agreement as executed by any new
transferee in accordance with Section 4.14, are filed with the Company.
(c) Any other amendment to this Agreement shall be in
writing and shall require the written consent of (a) the Company, (b)
either the JWC Representative or the holders of a majority of Common
Stock Equivalents at the time held by the JWC Holders, and, (c) if
adverse to the interests of a particular Stockholder or Stockholder
Group, that Stockholder or the holders of a majority of the Common Stock
Equivalents at the time held by that Stockholder Group, as the case may
be.
(d) Notwithstanding the foregoing provisions of this
Section 4.2, this Agreement may be terminated at any time upon the
written consent of (i) the Company and (ii) the holders of a majority of
the Common Stock Equivalents at the time held by the Management Holders
and the JWC Holders (or the JWC Representative), voting together as a
single group.
4.3 Severability. The invalidity or unenforceability
of any particular provision of this Agreement shall not affect the other
provisions hereof, and this Agreement shall be construed in all respects
as if the invalid or unenforceable provision were omitted.
4.4 Notices. All notices, consents and other
communications required, or contemplated under this Agreement shall be in
writing and shall be delivered in the manner specified herein or, in the
absence of such specification, shall be deemed to have been duly given
(i) 3 Business Days after mailing by first class certified mail, postage
prepaid, (ii) when delivered by hand, (iii) upon confirmation of receipt
by telecopy, or (iv) 1 Business Day after sending by overnight delivery
service, to the respective addresses of the parties set forth below:
(a) For notices and communications to the Company:
c/o ▇.▇. Childs Associates, L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(b) For notices and communications to the Stockholders,
to the respective addresses set forth in the Schedule of Stockholders.
(c) With a copy in the case of the JWC Holders to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
By notice complying with the foregoing provisions of this Section 4.4,
each party shall have the right to change the mailing address for future
notices and communications to such party.
4.5 Binding Effect; Assignment. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and to
their respective transferees, successors, assigns, heirs and
administrators; provided that the rights under this Agreement may not be
assigned except as expressly provided herein. No such assignment shall
relieve an assignor of its obligations hereunder.
4.6 Termination. Without affecting any other provision
of this Agreement requiring termination of any rights in favor of any
Stockholder, Permitted Transferee or any other transferee of Common Stock
Equivalents, the provisions of Articles II and III of this Agreement
shall terminate as to such Stockholder, Permitted Transferee or other
transferee, when, pursuant to and in accordance with this Agreement, such
Stockholder, Permitted Transferee or other transferee, as the case may
be, no longer owns any Common Stock Equivalents.
4.7 Recapitalization, Exchanges, etc. The provisions of
this Agreement shall apply, to the full extent set forth herein with
respect to Common Stock Equivalents, to any and all shares of capital stock
of the Company or any successor or assign of the Company (whether by
merger, consolidation, sale of assets or otherwise) which may be issued in
respect of, in exchange for, or in substitution of the Common Stock
Equivalents, by reason of a stock dividend, stock split, stock issuance,
reverse stock split, combination, recapitalization, reclassification,
merger, consolidation or otherwise. Upon the occurrence of any such events,
amounts hereunder shall be appropriately adjusted.
4.8 JWC Representative. Each JWC Holder hereby
designates and appoints (and each Permitted Transferee of each such JWC
Holder shall be deemed to have so designated and appointed) ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, with full power of substitution (the "JWC Representative") the
representative of each such Person to perform all such acts as are
required, authorized or contemplated by this Agreement to be performed by
any such Person and hereby acknowledges that the JWC Representative shall
be the only Person authorized to take any action so required, authorized
or contemplated by this Agreement by each such Person. Each such Person
further acknowledges that the foregoing appointment and designation shall
be deemed to be coupled with an interest and shall survive the death or
incapacity of such Person. Each such Person hereby authorizes (and each
Permitted Transferee shall be deemed to have authorized) the other
parties hereto to disregard any notice or other action taken by such
Person pursuant to this Agreement except for the JWC Representative. The
other parties hereto are and will be entitled to rely on any action so
taken or any notice given by the JWC Representative and are and will be
entitled and authorized to give notices only to the JWC Representative
for any notice contemplated by this Agreement to be given to any such
Person. A successor to the JWC Representative may be chosen by the
holders of a majority of the Common Stock Equivalents at the time held by
the JWC Holders; provided that written notice thereof is given by the
successor JWC Representative to the Company, the Management Holders and
the other JWC Holders. Each of the JWC Holders agrees to be bound by all
of the provisions of paragraph 3.07 of the First Amended and Restated
Agreement of Limited Partnership of ▇.▇. Childs Equity Partners, L.P.
dated as of December 20, 1995 (the "Equity Partners Agreement") including
without limitation, the provisions of paragraph 3.07(b) thereof, and
further agrees to be bound by the confidentiality provisions set forth in
paragraph 14.08 of the Equity Partners Agreement as if such JWC Holder
were a limited partner under the Equity Partners Agreement.
4.9 Action Necessary to Effectuate the Agreement. The
parties hereto agree to use their reasonable best efforts to take or
cause to be taken all such corporate and other action as may be
necessary to effect the intent and purposes of this Agreement.
4.10 Purchase for Investment; Legend on Certificate.
Each Stockholder acknowledges that all of the securities of the Company
held by such Stockholder are being (or have been) acquired for investment
and not with a view to the distribution thereof and that no transfer,
hypothecation or assignment of any such securities (including the Common
Stock for which such securities may be exercisable or exchangeable or
into which such securities may be convertible) may be made except in
compliance with applicable federal and state securities laws. All the
certificates or other instruments representing any of such securities
(including the Common Stock for which such securities may be exercisable
or exchangeable or into which such securities may be convertible) which
are now or hereafter held by any Stockholder shall be subject to the
terms of this Agreement and shall have endorsed in writing, stamped or
printed, thereon the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE TERMS AND CONDITIONS OF A STOCKHOLDERS AGREEMENT DATED AS OF
_____________ ___, 1997, AS AMENDED FROM TIME TO TIME, A COPY OF
WHICH IS ON FILE WITH AND AVAILABLE FROM THE SECRETARY OF THE
COMPANY."
4.11 Effectiveness of Transfers. Any Subject Securities
transferred by a Stockholder (other than pursuant to an effective
registration statement under the 1933 Act or a Rule 144 Transaction) shall
be held by the transferee thereof pursuant to this Agreement. Such
transferee shall, except as otherwise expressly stated herein, have all
the rights and be subject to all of the obligations of a Stockholder under
this Agreement automatically and without requiring any further act by such
transferee or by any parties to this Agreement. Without affecting the
preceding sentence, if such transferee is not a Stockholder on the dates of
such transfer, then such transferee, as a condition to such transfer, shall
confirm such transferee's obligations hereunder in accordance with Section
4.12 hereof. The Subject Securities shall not be transferred on the
Company's books and records, and no transfer thereof shall be otherwise
effective, unless any such transfer is made in accordance with the terms
and conditions of this Agreement, and the Company is hereby authorized by
all of the Stockholders to enter appropriate stop transfer notations on
its transfer records to give effect to this Agreement.
4.12 Additional Stockholders. Any Person acquiring any
Subject Securities (except for any acquisition thereof (a) in an offering
registered under the 1933 Act or (b) in a Rule 144 Transaction) shall on or
before the transfer or issuance to it of such Subject Securities, sign a
counterpart signature page hereto in form reasonably satisfactory to the
Company and the JWC Representative and shall thereby become a party to this
Agreement; provided that a transferee which is a pledgee and within the
definition of a Permitted Transferee shall not be obligated so to agree
until foreclosure on its pledge. The Company shall require each Person ac-
▇▇▇▇▇▇▇ an option, warrant or other right to purchase shares of Common
Stock under any option or other equity participation plan to execute a
counterpart signature page hereto.
4.13 No Waiver. No course of dealing and no delay on
the part of any party hereto in exercising any right, power or remedy
conferred by this Agreement shall operate as a waiver thereof or
otherwise prejudice such party's rights, powers and remedies. No single
or partial exercise of any rights, powers or remedies conferred by this
Agreement shall preclude any other or further exercise thereof or the
exercise of any other right, power or remedy.
4.14 Counterparts. This Agreement may be executed in
two or more counterparts each of which shall be deemed an original but
all of which together shall constitute one and the same instrument, and
all signatures need not appear on any one counterpart.
4.15 Headings, etc. All headings and captions in this
Agreement are for purposes of reference only and shall not be construed to
limit or affect the substance of this Agreement. Words used in this Agree-
ment, regardless of the gender and number used, will be deemed and
construed to include any other gender, masculine, feminine, or neuter, and
any other number, singular or plural, as the context requires. As used in
this Agreement, the word "including" is not limiting, and the word "or" is
not exclusive. The words "this Agreement", "hereto", "herein", "hereunder",
"hereof", and words or phrases of similar import refer to this Agreement as
a whole, together with any and all Schedules and Exhibits hereto, and not
to any particular article, section, subsection, paragraph, clause or other
portion of this Agreement.
4.16 Governing Law. This Agreement shall be construed
under and governed by the substantive and procedural laws of The
Commonwealth of Massachusetts applicable to a contract executed in and
wholly performed within Massachusetts.
4.17 Effective Time. Notwithstanding anything in this
Agreement to the contrary, this Agreement shall become binding and
effective as of the date of the Closing (as defined in the Merger
Agreement).
[Signatures on Following Pages]
UNIVERSAL HOSPITAL SERVICES, INC.
Stockholders' Agreement
Counterpart Signature Page
IN WITNESS WHEREOF, the parties have executed this
Agreement as an instrument under SEAL as of the date first set forth
above.
THE COMPANY:
UNIVERSAL HOSPITAL
SERVICES, INC.
By: ___________________________
Name:
Title:
UNIVERSAL HOSPITAL SERVICES, INC.
Stockholders' Agreement
Additional Counterpart Signature Page
THE MANAGEMENT HOLDERS:
______________________________
Print Name:
UNIVERSAL HOSPITAL SERVICES, INC.
Stockholders' Agreement
Additional Counterpart Signature Page
THE JWC HOLDERS:
▇.▇. CHILDS EQUITY
PARTNERS, L.P.
By: ▇.▇. Childs Advisors,
L.P., its general
partner
By: ▇.▇. Childs
Associates, L.P., its
general partner
By: ▇.▇. Childs
Associates, Inc., its
general partner
_____________________________ By: __________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Title:
_____________________________
Print Name:
By executing above, each of the foregoing JWC Holders
acknowledges that, pursuant to Section 4.8 of this Stockholders'
Agreement, each of the foregoing JWC Holders has designated and appointed
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ as its sole representative to perform all acts as are re-
quired, authorized or contemplated by this Stockholders' Agreement, all
as set forth in such Section 4.8.
EXHIBIT A
UNIVERSAL HOSPITAL SERVICES, INC.
STOCKHOLDERS' AGREEMENT
SCHEDULE OF STOCKHOLDERS
EXHIBIT B
UNIVERSAL HOSPITAL SERVICES, INC.
STOCKHOLDERS' AGREEMENT
FORM OF PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT AND UNDER ANY SUCH APPLICABLE STATE
LAW.
AS PROVIDED IN THIS NOTE, PAYMENT OF PRINCIPAL OF AND INTEREST ON THIS
NOTE IS SUBORDINATED AND JUNIOR IN RIGHT OF PAYMENT TO ALL "SENIOR DEBT"
(AS SUCH TERM IS DEFINED IN THIS NOTE).
UNIVERSAL HOSPITAL SERVICES, INC.
SUBORDINATED NOTE DUE 20__
Boston, Massachusetts
U.S.$ _________ _____________ __, 19
FOR VALUE RECEIVED, the undersigned, Universal Hospital
Services, Inc., a Minnesota corporation (the "Company"), hereby promises
to pay to __________, a __________ with a business address at
_______________(facsimile number __________) (the "holder"), on [I.E. 10
YEARS AFTER THE DATE OF ISSUANCE], the principal amount of
__________United States Dollars (U.S.$__________ ) or such part thereof
as then remains unpaid, with interest (computed on the basis of a
365/6-day year and the actual number of days elapsed) on the unpaid
principal amount hereof at a rate per annum equal to the Applicable Rate
(as defined in Section 4) from the date hereof payable semiannually on
the last day of May and November in each year (each such date is
hereinafter referred to as a "Payment Date"), beginning on __________,
19__, until such principal amount shall become due and payable (whether
at maturity or a date fixed for payment or prepayment or by acceleration
or otherwise).
1. The Note. All payments of principal, interest and other
amounts payable on or in respect of this Note or the indebtedness
evidenced hereby shall be made at the address of the holder specified
herein. All payments received in respect of the indebtedness evidenced by
this Note shall, subject to the provisions of Section 5 hereof, be
applied first to interest hereon accrued to the date of payment, then to
the payment of other amounts (except principal) at the time due and
unpaid hereunder, and finally to the unpaid principal hereof.
If any payment on this Note becomes due and payable on a day
other than a Business Day, the maturity thereof shall be extended to the
next succeeding Business Day and, with respect to any payment of
principal, interest thereon shall be payable at the then Applicable Rate
during such extension.
2. Payment Provisions.
2.1 On __________ __, ____ [I.E. THE MATURITY DATE] or
on any accelerated maturity of this Note, the Company will pay to the
holder hereof the entire principal amount of this Note then outstanding,
without premium, but together with accrued and unpaid interest thereon.
The Company may at any time or from time to time prepay all or any part
of the outstanding principal amount of this Note at the principal amount
thereof, without premium, but together with accrued and unpaid interest
thereon.
2.2 Except as otherwise expressly provided herein,
payments on account of principal and interest with respect to this Note
shall be made by mailing a check or money order to the holder hereof at
the address of such holder appearing herein and without the necessity of
any presentment or notation of payment, except upon payment in full, and
the amount of principal so paid on this Note shall be regarded as having
been retired and canceled at the time of the mailing of such payment. The
holder of this Note, before any transfer thereof, shall make a notation
thereon of the date to which interest has been paid and of all principal
payments theretofore made thereon and shall in writing notify the Company
of the name and address of the transferee. Anything herein to the
contrary notwithstanding, the Company may elect to pay interest payable
on any Payment Date occurring on or before __________ __, ____, in lieu
of cash interest payments, by issuing and delivering a note (each, a
"Paid-in-Kind Interest Note") to the holder hereof having an aggregate
original principal amount equal to the accrued and unpaid interest on
this Note and otherwise containing the same terms and provisions as this
Note.
3. Defaults.
3.1 Events of Default. If any one or more Events of
Default shall occur and be continuing, then and in each and every such
case, the holder may proceed to protect and enforce his rights by suit in
equity, action at law and/or other appropriate proceeding either for
specific performance of any covenant or condition contained in this Note,
or in aid of the exercise of any power granted in this Note, and may by
notice in writing to the Company declare all or any part of the unpaid
balance of this Note then outstanding to be forthwith due and payable
without presentation, protest or further demand or notice of any kind, all
of which are hereby expressly waived, and the holder may proceed to enforce
payment of such balance or part thereof in such manner as he may elect,
except in each and every such case to the extent the foregoing rights of
the holder hereof are restricted by the provisions of Section 5 hereof.
3.2 Annulment of Defaults. An Event of Default shall
not be deemed to have occurred or to be in existence for any purpose of
this Note if the holder shall have waived such Event of Default in
writing or stated in writing that the same has been cured to such holder'
s satisfaction, but no such waiver shall extend to or affect any
subsequent Event of Default or impair any of the rights of the holder
upon the occurrence thereof.
3.3 Waivers. The Company hereby waives to the extent
not prohibited by applicable law (a) all presentments, demands for
performance, notices of nonperformance (except to the extent required by
the provisions hereof or of any instrument executed and delivered in
connection with this Note), protests, notices or protest, and notices of
dishonor in connection with this Note.
4. Definitions. For purposes of this Note:
4.1 "Applicable Rate" shall mean, for any period, the
weighted average of the daily interest rates for such period applicable
to all borrowings by the Company outstanding during such period under the
Credit Agreement, as determined by the Company in accordance with sound
financial practice; provided, however, that if the Company is not party
to any Credit Agreement during any (or any portion of any) period, the
Applicable Rate during such (or such portion of such) period shall be
equal to the Prime Rate plus one percent (1%). Notwithstanding anything
in this Note to the contrary, the interest rate hereunder shall not
exceed the maximum legal rate.
4.2 "Bankruptcy Code" shall mean 11 U.S.C. ss. 101 et
seq., and the rules and regulations thereunder, all as from time to time
in effect, or any successor law, rules or regulations and any reference
to any statutory or regulatory provision shall be deemed to be a
reference to any successor statutory or regulatory provision.
4.3 "Business Day" shall mean any day other than a
Saturday or a Sunday or a day on which commercial banking institutions in
Boston, Massachusetts or New York, New York are authorized or required by
applicable law to be closed.
4.4 "Code" shall mean the Internal Revenue Code of
1986, as amended, or any successor federal law of similar import.
4.5 "Credit Agreement" shall mean that Credit
Agreement dated as of [ ], 1997 by and among the Company, [ ], the
lenders from time to time party thereto, __________, as administrative
agent, and [ ], as Collateral Agent, as amended and in effect from time
to time.
4.6 "Debt" shall mean (a) indebtedness for borrowed
money, (b) obligations evidenced by bonds, debentures, notes or other
similar instruments, (c) obligations to pay the deferred purchase price of
property (other than trade accounts payable), (d) obligations as lessee
under leases which shall have been or should be, in accordance with
generally accepted accounting principles, recorded as capitalized leases,
and (e) obligations under direct or indirect guaranties in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise assure a creditor against loss in respect of, indebtedness or
obligations of the kinds referred to in clauses (a) through (d) above.
4.7 "Event of Default" shall mean the occurrence and
continuance of any of the following events:
(a) The Company shall have failed, for a period
of thirty (30) days after written notice thereof, to make any
principal, interest, fee or other payment on any of the
indebtedness evidenced by this Note or pursuant to any provision
of this Note (notwithstanding that such payment shall have been
suspended pursuant to the subordination provisions hereof); or
(b) The Company shall have failed duly to
observe or perform in any material respect any other covenant,
agreement or provision contained in this Note other than those
referred to in subdivision (a) above, and such failure shall
have continued for a period of thirty (30) days after written
notice thereof from the holder of this Note to the Company; or
(c) The Company shall:
(i) commence a voluntary case under
the Bankruptcy Code or authorize, by appropriate
proceedings of its board of directors, the commencement
of such a voluntary case;
(ii) (A) have filed against it a
petition commencing an involuntary case under the
Bankruptcy Code that shall not have been dismissed
within sixty (60) days after the date on which such
petition is filed, or (B) file an answer or other
pleading within such 60-day period admitting or failing
to deny the material allegations of such a petition or
seeking, consenting or to acquiescing in the relief
therein provided, or (C) have entered against it an
order for relief in any involuntary case commenced
under the Bankruptcy Code;
(iii) seek relief as a debtor under
any applicable law, other than the Bankruptcy Code, of
any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or
alteration of the rights of creditors, or consent to or
acquiesce in such relief;
(iv) have entered against it an
order by a court of competent jurisdiction (A) finding
it to be bankrupt or insolvent, (B) ordering or
approving its liquidation or reorganization as a
debtor or any modification or alteration of the rights
of its creditors or (C) assuming custody of, or appoint-
ing a receiver or other custodian for all or a
substantial portion of its property; or
(v) make an assignment for the
benefit of, or enter into a composition with, its
creditors, or appoint, or consent to the appointment
or, or suffer to exist a receiver or other custodian
for, all or a substantial portion of its property.
4.8 "Obligations" means any principal, interest
(including post-petition interest, whether or not allowed as a claim in
any proceeding), penalties, fees, costs, expenses, indemnifications,
reimbursements, damages and other liabilities payable under or in
connection with any Debt.
4.9 "Payment Date" shall have the meaning given such
term in the first paragraph of this Note.
4.10 "Person" shall mean any natural individual or any
corporation, firm, limited liability company, unincorporated
organization, association, partnership, a trust (inter vivos or
testamentary), an estate of a deceased individual, business trust, joint
stock company, joint venture or other organization, entity or business,
or any governmental authority.
4.11 "Prime Rate" shall mean the prime rate in effect
as announced from time to time by Chase Manhattan Bank.
4.12 "Senior Bank Debt" means all Obligations
outstanding under or in connection with the Credit Agreement.
4.13 "Senior Bank Documents" shall mean the Credit
Agreement and any note, mortgage, security agreement, pledge agreement,
guaranty or other agreement or instrument now or hereafter evidencing,
securing or executed in connection with any Senior Bank Debt, and any
credit agreement, note, mortgage, security agreement, pledge agreement,
guaranty or other agreement or instrument hereafter executed in
connection with any extension, renewal, refunding or refinancing
thereof.
4.14 "Senior Debt" means (a) the Senior Bank Debt and
(b) any other Debt, unless the instrument under which such Debt is
incurred expressly provides that it is on a parity with or subordinated
in right of payment to this Note. Notwithstanding anything to the
contrary in the foregoing, Senior Debt shall not include (i) any
liability for federal, state, local or other taxes owed or owing by the
Company, (ii) any Debt of the Company to any of its Subsidiaries or other
Affiliates or (iii) any trade payables.
4.15 "Senior Debt Default" shall have the meaning
given such term in Section 5.2 hereof.
4.16 "Subordinated Distributions" shall have the
meaning given such term in Section 5.1 hereof.
4.17 "Subordinated Payments" shall have the meaning
given such term in Section 5 hereof.
5. Subordination. The payment of principal (whether at
maturity, upon mandatory or voluntary prepayment, or upon declaration or
otherwise) of, interest on, and all fees, expenses, indemnities and other
amounts payable with respect to, this Note (collectively, the
"Subordinated Payments") are hereby subordinated and junior in right of
payment, to the extent and in the manner set forth in this Section to all
Senior Debt.
This Section shall constitute a continuing offer to all persons
who, in reliance upon such provisions, become holders of, or continue to
hold, Senior Debt, whether now outstanding or hereafter created,
incurred, assumed or guaranteed, and such provisions are made for the
benefit of the holders (which term shall include owners, if not otherwise
holders, of Senior Debt) of Senior Debt, and such holders of Senior Debt
are made obligees hereunder and beneficiaries hereof (with the same force
and effect as if named herein) and any one or more of them may enforce
such provisions. This Section is binding upon the Company and its
successors and assigns and the holders, from time to time, of this Note,
each of whom, by his acceptance of this Note, agrees to be bound by and
comply with all of the provisions of this Section. Notwithstanding any
provision of this Note to the contrary, neither this Section nor any of
its provisions may be changed or waived to adversely affect or impair in
any way whatsoever the rights of the holders of Senior Debt, except with
the prior written consent of the holders of the Senior Debt at the time
outstanding.
5.1 Subordinated Distributions. Upon any payment or
distribution of assets or securities of the Company of any kind or
character, whether in cash, property or securities, by way of set-off or
otherwise (including any collateral, whether the proceeds thereof or in
kind, at any time securing this Note and including any such payment or
distribution which may be payable or deliverable by reason of the payment
of any other indebtedness of the Company being subordinated to the
payment of this Note) of the Company (all such payments and distributions
being referred to collectively as "Subordinated Distributions"), upon any
dissolution, winding up, liquidation (partial or complete) or
reorganization of the Company (whether voluntary or involuntary and
whether in bankruptcy, insolvency, receivership or other proceedings, or
upon an assignment for the benefit of creditors or any other marshaling
of the assets and liabilities of the Company or otherwise), each of the
Company and the holder of this Note, by acceptance hereof, covenants and
agrees that:
(a) all Senior Debt shall first be paid in full,
or provision made for such payment, in accordance with the terms
of such Senior Debt, before any payment or distribution of any
Subordinated Distribution is made on account of any Subordinated
Payments and before the holder of this Note shall be entitled to
retain any amounts so paid or distributed in respect thereof;
(b) any payment or distribution of any
Subordinated Distribution to which the holder of this Note
would be entitled except for the provisions of this Section,
shall be paid or delivered by the Company or any debtor,
custodian, receiver, trustee in bankruptcy, liquidating trustee,
agent or other Person making such payment or distribution,
directly to the holders of Senior Debt or their representative
or representatives (in accordance with any certificate referred
to in this Section) or to the trustee or agent for the holders
of such Senior Debt, as their respective interests may appear,
to the extent necessary to pay in full all Senior Debt remaining
unpaid in accordance with the terms of such Senior Debt, after
giving effect to any concurrent payment or distribution to or
for the holders of such Senior Debt, before any payment or
distribution is made to the holder of this Note; and
(c) in the event that, notwithstanding the
foregoing, any payment or distribution of any Subordinated
Distribution shall be received by the holder of this Note before
all Senior Debt is paid in full, or provision made for the
payment thereof, in accordance with the terms of such Senior
Debt, such payment or distribution shall be held in trust for
the benefit of, and shall be paid over or delivered to, the
holders of such Senior Debt or their representative or
representatives, or to the trustee or agent for the holders of
such Senior Debt, as their respective interests may appear, to
the extent necessary to pay in full all Senior Debt remaining
unpaid, after giving effect to any concurrent payment or
distribution to the holders of such Senior Debt.
The Company shall give prompt written notice to the
holder of this Note of any declaration of any Senior Debt as due and
payable before its stated maturity and of any event which pursuant to
this Section would prevent payment or distribution of any Subordinated
Distribution or any Subordinated Payment with respect to this Note. The
holder of this Note shall be entitled to assume that no such event has
occurred and shall not at any time be charged with knowledge of the
existence of any event which would prohibit the making of any payment to
it, unless and until such holder shall have received written notice
thereof from the Company or from the holders of Senior Debt or any
trustee, agent or representative thereof; and prior to the receipt of any
such written notice the holder of this Note shall be entitled to assume
conclusively that no such event exists, without, however, limiting any
such rights of holders of Senior Debt under this Section to recover from
the holder of this Note any payment made to any such holder which it is
not entitled under this Section to retain.
Upon any payment or distribution of any Subordinated
Distribution, the holder of this Note shall be entitled to rely upon an
order or decree of any court of competent jurisdiction in which such
bankruptcy, insolvency, reorganization, liquidation, receivership or other
proceeding is pending, or a certificate of the debtor, custodian, receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making
such payment or distribution, to the holder of this Note, for the purpose
of ascertaining the Persons entitled to participate in such distribution,
the holders of the Senior Debt and other indebtedness of the Company, the
amount distributed thereon and all other facts pertinent thereto or to this
Section.
The holder of this Note shall be entitled to rely on
the delivery to it of a written notice by a Person representing himself
to be a holder of Senior Debt to establish that such notice has been
given by a holder of Senior Debt.
5.2 No Payments Under Certain Circumstances.
(a) No payment (by purchase of this Note or
otherwise) shall be made or agreed to be made, directly or
indirectly, in cash, property or securities (other than
Paid-in-Kind Interest Notes), or by way of set-off or otherwise,
by the Company of any Subordinated Payment with respect to this
Note if, at the time of such payment or immediately after giving
effect thereto,
(i) (A) the Company shall be in
default in the payment of any principal of, premium, if
any, or interest on, or any other amounts due with
respect to, any Senior Debt, and all applicable grace
or cure periods shall have expired (a "Senior Debt
Payment Default") or (B) there shall have occurred and
be continuing any default (other than a Senior Debt
Payment Default) with respect to any Senior Debt and
all applicable grace or cure periods shall have expired
(a "Senior Debt Non-Payment Default", and including any
Senior Debt Payment Default, a "Senior Debt Default"),
which Senior Debt Non-Payment Default would entitle the
holder of such Senior Debt, or any trustee therefor, to
declare the principal of such Senior Debt, if not
already due and payable, to be due and payable, unless
and until such Senior Debt Non-Payment Default shall
have been cured or waived or shall cease to exist; and
(ii) the Company shall have been
notified in writing by the holder of such Senior Debt,
or any trustee therefor, of such Senior Debt Payment
Default or Senior Debt Non-Payment Default (a "Senior
Debt Payment Default Notice" and "Senior Debt
Non-Payment Default Notice," respec tively,
collectively a "Senior Debt Default Notice").
(b) The Company shall immediately deliver to the
holder of this Note a copy of any Senior Debt Default Notice
received by the Company.
(c) If notwithstanding the foregoing provisions of
this Section 5.2, the Company shall make any Subordinated Payment
prohibited by the provisions of this Section, then, except as
hereinafter in this Section otherwise provided, unless and until
full payment of all amounts then due for principal of, sinking
fund, if any, premium, if any, and interest on, and all other
amounts payable with respect to, Senior Debt has been made or duly
provided for in accordance with the terms of such Senior Debt, or
unless and until any such default or Senior Debt Default shall
have been cured or waived or shall cease to exist, such prohibited
Subordinated Payment shall be held in trust for the benefit of,
and shall be paid over or delivered, in the form received and
without interest, to the holders of Senior Debt or their
respective representative or to the trustee or agent for the
holders of such Senior Debt, as their respective interests may
appear, to the extent necessary to pay in full all principal of,
premium, if any, and interest on, and all other amounts payable
with respect to, Senior Debt, to the extent any of the same are
then due after giving effect to any concurrent payment or
distribution to the holders of such Senior Debt.
(d) Unless and until written notice of such
event shall be given to the holder of this Note at its address
set forth on the register maintained by the Company by or on
behalf of any holder of Senior Debt or by the Company, the
holder of this Note shall be entitled to conclusively presume
that no event exists which would prohibit the making of any
payment to the holder of this Note.
5.3 Standstill.
(a) Acceleration. No holder of this Note shall
take any action to accelerate the maturity of the indebtedness
evidenced by this Note unless the Senior Debt shall have been
paid in full or all Senior Debt shall theretofore have become
due and payable.
(b) Remedies. No holder of this Note as such
will commence any action or proceeding against the Company to
recover all or any part of any indebtedness evidenced by this
Note or bring or join with any creditor in bringing, unless the
holders of the Senior Debt then outstanding shall join therein,
any proceeding against the Company under any bankruptcy, reorga-
nization, readjustment of debt, arrangement of debt,
receivership, liquidation or insolvency law or statute unless
and until all Senior Debt shall be paid in full, provided that
the foregoing shall not prohibit a holder of this Note from (x)
commencing an action against the Company to recover any amounts
owing to such holder which at the time the Company is entitled
to pay and such holder is entitled to receive under this Note,
including under Section 5.2, or (y) at any time at which the
holder of this Note shall be permitted to accelerate the
maturity of this Note as provided in Section 5.3(a), commencing
any proceeding against the Company under any bankruptcy,
reorganization, readjustment of debt, arrangement of debt,
receivership, liquidation, or insolvency law or statute,
provided further, that any amounts received by the holder of
this Note as a result of any such action or proceeding shall be
subject to the provisions of Sections 5.1 and 5.2 of this Note.
5.4 No Impairment. Nothing contained in this Section or
elsewhere in this Note is intended to or shall impair, as between the
Company, its creditors other than the holders of Senior Debt and the holder
of this Note, the obligation of the Company, which is absolute and
unconditional, to pay to the holder of this Note, subject to the rights of
the holders of Senior Debt, all Subordinated Payments with respect to this
Note, as and when the same shall become due and payable in accordance with
its terms (subject to the applicable requirements of the Code concerning
withholding of taxes), or is intended to or shall affect the relative
rights of the holders and creditors of the Company other than the holders
of Senior Debt, nor shall anything herein or therein prevent the holder of
this Note from exercising all remedies otherwise permitted by applicable
law or under the terms of this Note upon an Event of Default with respect
to this Note subject to the rights, if any, under this Section, of the
holders of Senior Debt in respect of Subordinated Distributions received
upon the exercise of any such remedy.
5.5 Subrogation. Subject to the payment in full of all
Senior Debt at the time outstanding, the holder of this Note shall be
subrogated (equally and ratably with the holders of all indebtedness of
the Company which, by its express terms, ranks on a parity with this Note
and is entitled to like rights of subrogation) to the rights of the
holders of Senior Debt (to the extent of payments or distributions
previously made to such holders of Senior Debt pursuant to the provisions
of this Section) to receive payments or distributions of assets or
securities of the Company payable or distributable to holders of the
Senior Debt until all Subordinated Payments with respect to this Note
shall be paid in full. For purposes of such subrogation, no payments or
distributions on the Senior Debt pursuant to Section 5.1 or 5.2 shall, as
between the Company and its creditors other than the holders of Senior
Debt, and the holder of this Note, be deemed to be a payment or
distribution by the Company to or on account of the Senior Debt, and no
payments or distributions to the holder of this Note of assets or
securities by virtue of the subrogation herein provided for shall, as
between the Company and its creditors other than the holders of Senior
Debt and the holder of this Note, be deemed to be a payment to or on
account of this Note. The provisions of this Section are and are intended
solely for the purpose of defining the relative rights of the holder of
this Note, on the one hand, and the holders of the Senior Debt, on the
other hand.
5.6 No Impairment of Rights. No right of any present
or future holder of any Senior Debt of the Company to enforce
subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the
Company or by any act or failure to act, in good faith, by any such
holder of Senior Debt, or by any noncompliance by the Company with the
terms, provisions and covenants of this Note, regardless of any knowledge
thereof with which any such holder of Senior Debt may have or be
otherwise charged.
5.7 Waiver of Notice. The holder of this Note, by his
acceptance thereof, waives all notice of the acceptance of the
subordination provisions contained herein by each holder of Senior Debt,
whether now outstanding or hereafter incurred, and waives reliance by
each such holder upon such provisions.
5.8 Subordination Rights Not Impaired by Acts or
Omissions of Company or Holders of Senior Debt. The holders of Senior
Debt may at any time or from time to time, and in their absolute
discretion, change the manner, place or terms of payment of, change or
extend the time of payment of, renew or alter, any Senior
Debt, or amend or supplement any agreement, instrument or document
evidencing any Senior Debt, or exercise or refrain from exercising any
other of their rights under the Senior Debt including without limitation
the waiver of default thereunder, all without notice to or assent from
the holder of this Note. No right of any present or future holders of any
Senior Debt to enforce subordination as provided herein shall at any time
in any way be prejudiced or impaired by any act or failure to act on the
part of the Company or by any act or failure to act by any such holder or
by any noncompliance by the Company with the terms of this Note,
regardless of any knowledge thereof which any such holder may have or be
otherwise charged with.
6. Waivers; Amendments. Subject to the provisions of Section 8
hereof, amendments to and modifications of this Note may be made,
required consents and approvals may be granted, compliance with any term,
covenant, agreement, condition or other provision set forth herein may
be omitted or waived, either generally or in a particular instance and
either retroactively or prospectively with, but only with, the written
consent of the Company and the holder.
7. Notices. All notices and other communications which by any
provision of this Note are required or permitted to be given shall be
given in writing and shall be (a) mailed by first-class or express mail,
or by recognized courier service, postage prepaid, (b) sent by facsimile
or other form of rapid transmission, confirmed by mailing (by first class
or express mail, or by recognized courier service, postage prepaid)
written confirmation at substantially the same time as such rapid
transmission, or (c) personally delivered to the receiving party (which
if other than an individual shall be an officer or other responsible
party of the receiving party). All such notices and communications shall
be mailed, sent or delivered as follows: if to the holder hereof, at the
address and/or facsimile number of such holder appearing on the first
page hereof; if to the Company, c/o ▇.▇. Childs Associates, L.P., ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇.
▇▇▇▇ ▇. Childs (Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇); or to such other
person(s), facsimile number(s) or address(es) as the party to receive any
such communication or notice may have designated by written notice to the
other party.
8. Section Headings. The headings contained in this Note are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Note.
9. Governing Law. The validity, interpretation, construction
and performance of this Note shall be governed by, and construed in
accordance with, the internal laws of the state of New York, without
giving effect to any choice or conflict of laws provision or rule that
would cause the application of domestic substantive laws of any other
jurisdiction.
IN WITNESS WHEREOF, the Company has caused this Note to
be executed as a sealed instrument as of the date first above written.
UNIVERSAL HOSPITAL
SERVICES, INC.
By:_______________________
Title: