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Exhibit 10.26
AGREEMENT
This Agreement ("Agreement"), dated as of NOVEMBER ___, 1996 is by and
among OAKTREE CAPITAL MANAGEMENT, LLC, a California limited liability company,
as general partner or investment manager (in such capacity, "Oaktree") on behalf
of the funds listed on Annex I under the heading "Oaktree Funds" (collectively,
the "Oaktree Funds"), DDJ OVERSEAS CORP., a Cayman Islands company ("Overseas"),
THE COPERNICUS FUND, L.P., a Delaware limited partnership ("Copernicus" and,
collectively with Overseas, the "DDJ Funds"), BELMONT FUND, L.P., a Bermuda
limited partnership ("Belmont I"), BELMONT CAPITAL PARTNERS, II, L.P., a
Delaware limited partnership ("Belmont II" and, collectively with Belmont I, the
"Fidelity Funds" and, collectively with the Oaktree Funds and the DDJ Funds, the
"Funds"), and CERBERUS PARTNERS, L.P. ("Cerberus") (Oaktree, the DDJ Funds, the
Fidelity Funds, and Cerberus hereinafter collectively referred to as the "Senior
Lenders"), and NU-TECH BIO-MED, INC., a Delaware corporation ("Nu-Tech" and,
collectively with the Senior Lenders, the "Parties").
R E C I T A L S
1. The Senior Lenders currently hold all (a) senior secured notes (the
"Bank Debt") of Physician's Clinical Laboratory, Inc. (the "Company"), issued
pursuant to the Credit Agreement dated as of April 1, 1994, as amended, among
the Company, as borrower, OCM Administrative Services, L.L.C. (as assignee of
▇▇▇▇▇ Fargo Bank, N.A.), as agent, and the financial institutions party thereto
and (b) certain subordinated indebtedness of the Company.
2. The Senior Lenders and Nu-Tech contemplate a restructuring of the
Company pursuant to which, among other things, (a) the Senior Lenders will
assign to Nu-Tech and Nu-Tech will purchase from the Senior Lenders
participation in certain of the Bank Debt, on a pro rata basis, subject to the
terms and conditions of this Agreement, and (b) Senior Lenders will make certain
loans to the Company.
NOW THEREFORE, for good and valuable consideration, the sufficiency and
delivery of which are hereby acknowledged, the Parties hereby agree as follows:
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SECTION 1. BOARD APPROVAL OF DIP TERM SHEET. Each of the Parties shall
use its best efforts with respect to obtaining the approval and execution by the
Board of Directors of the Company of the "Summary of Terms of Restructuring of
Physician's Clinical Laboratory, Inc." attached hereto as Exhibit A or a term
sheet containing substantially similar terms and conditions, acceptable to all
of the Parties (the "Term Sheet").
SECTION 2. PARTICIPATION IN BANK DEBT. Upon approval and execution by
the Board of Directors of the Company of the Term Sheet described in Section 1,
Nu-Tech shall purchase an undivided participation in the Bank Debt from the
Senior Lenders, pro rata to the percentage holdings of such Bank Debt by each of
the Senior Lenders, for $10,000,000, pursuant to the terms and conditions of the
Participation Agreement attached hereto as Exhibit B. Nu-Tech hereby
acknowledges and agrees that the foregoing obligation shall be binding,
irrespective of the failure of any other conditions contained herein or in the
DIP Term Sheet to be satisfied, including, without limitation, the failure of
the Company to file a bankruptcy petition, appoint ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ as its
chief executive or crisis manager, consummate a debtor in possession financing
arrangement (as described in the Term Sheet AND ▇▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇, the "DIP
Financing"), consummate the plan of reorganization (such plan as described in
the Term Sheet the "Plan") or provide for the "Plan Treatment", all described in
the DIP Term Sheet. In the event the DIP Financing is not approved or the Plan
are not consummated, Nu-Tech's sole interest in the Company arising under this
Agreement shall be as a participant in the Bank Debt purchased from the Senior
Lenders pursuant to this Section 2.
SECTION 3. DIP FINANCING. As more particularly set forth in the DIP
Term Sheet and subject to Section 5 below, the Senior Lenders will provide to
the Company a debtor in possession secured credit facility in an amount up to
$10,000,000, the proceeds of which shall be used (a) for administrative costs
incurred by the Company in connection with the bankruptcy (including legal,
accounting and investment banking fees), (b) for working capital needs of the
Company during the bankruptcy and (c) to fund the Plan. The Parties shall use
their best efforts to obtain court approval of the DIP Financing as soon as
practicable after the Company files its chapter 11 bankruptcy petition.
SECTION 4. BREAK-UP/OVERBID PROTECTIONS. The Parties agree to support
the Break-up/Overbid Protections (more fully described in the DIP Term Sheet)
and agree to use their best efforts to obtain Bankruptcy Court approval for the
Break-Up/Overbid Protections, as contemplated by the DIP Term Sheet.
SECTION 5. PLAN OF REORGANIZATION. The Parties shall use their best
efforts to obtain confirmation of the Plan as soon as reasonably practicable.
Additionally, the Parties
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agree to vote all of their claims against the Company (including, without
limitation, claims relating to the Bank Debt and the Subordinated Indebtedness)
in favor of the Plan. As more particularly set forth in the DIP Term Sheet and
subject to Section 5, the Plan shall provide for the following to occur on the
effective date of the Plan (the "Effective Date"):
a. The capitalization of the reorganized Company (the
"Reorganized Company") shall be as follows:
i. Nu-Tech shall hold 51% of the fully diluted
common shares of Reorganized Company (the
"Shares") by (a) exchanging its holding of
Existing Senior Debt in the principle amount
of $13.333 million for 34% of the Shares and
(b) purchasing 17% of the Shares for the sum
of Five Million Dollars ($5,000,000) as of
the Effective Date;
ii. The Senior Lenders shall receive 49% of the
Shares, unless the Voting Condition (as
defined in the DIP Term Sheet) is satisfied,
in which event the Senior Lenders shall
receive 37% of the Shares;
iii. If, but only if the Voting Condition is
satisfied, the holders of the Subordinated
Indebtedness shall receive 9% of the Shares;
iv. If, but only if the Voting Condition is
satisfied, the holders of existing equity
interests in PCL shall receive 3% of the
Shares and the Warrants (as defined in the
DIP Term Sheet);
v. The Senior Lenders shall receive the
$55,000,000 of "New Senior Debt" issued by
the Reorganized Company, which shall contain
the terms and conditions set forth in the
DIP Term Sheet and other terms and
conditions agreeable to all of the Parties;
vi. All amounts owed under the DIP Facility
shall be forgiven and any unfunded portion
of the DIP Facility shall be contributed by
the Senior Lenders to the Reorganized
Company as a capital contribution;
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vii. The Reorganized Company shall have no other
indebtedness, equity interest or claims
against its equity interest, other than the
working capital facility referenced in the
DIP Term Sheet and outstanding trade debt
incurred in the ordinary course of business.
b. The Plan or separate agreement of the Parties shall provide
for the following:
i. Reorganized Company's Board of Directors
will consist of five (5) directors, three of
whom shall be appointed by Nu-Tech
(INCLUDING THE CHAIRMAN OF THE BOARD) and
the remaining two (the "Lender Director(s)")
of whom shall be appointed by the Senior
Lenders. The SENIOR LENDERS SHALL BE
ENTITLED TO APPOINT TWO DIRECTORS TO THE
REORGANIZED COMPANY'S BOARD OF DIRECTORS
UNLESS AND UNTIL THEY, IN THE AGGREGATE, OWN
LESS THAN TWENTY PERCENT (20%) OF THE SHARES
OF THE Reorganized Company , IN WHICH EVENT,
THE SENIOR LENDERS SHALL ONLY BE ENTITLED TO
APPOINT SUCH DIRECTORS, IF ANY, WHICH THEY
WOULD BE ENTITLED TO APPOINT UNDER THE
CUMULATIVE VOTING PROVISIONS OF DELAWARE
LAW.
ii. The organizational documents of the
Reorganized Company shall provide that the
Reorganized Company's Board of Directors
will not undertake the following activities
without approval of at least one Lender
Director: (a) merger & acquisition; (b)
assuming non-ordinary course obligations in
excess of $1 million; (c) making capital
expenditures in excess of $1 million; and
(d) modifying, extending or renewing the
employment agreement referenced in
subparagraph iii, below. The foregoing
LIMITATION ON THE ACTIONS OF THE REORGANIZED
COMPANY'S BOARD OF DIRECTORS shall cease to
be effective in the event the Senior Lenders
in the aggregate own less than 20% of the
Shares of Reorganized Company; and
iii. J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ shall be appointed as
the President and Chief Executive Officer of
Reorganized Company for a term of three (3)
years and shall be paid an initial salary of
$104,000 per annum, and stock options at THE
market value OF
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PCL AS OF THE PETITION DATE AND IN AN AMOUNT
to be negotiated with the Board of
Directors.
SECTION 6. CONFIDENTIALITY. Each of the Parties agrees to respect the
confidential information disclosed in the negotiation and performance of this
Agreement and the DIP Term Sheet, including any information labeled or otherwise
indicated as being confidential or proprietary by the disclosing party, except
disclosures (a) which may be compelled by legal process, by an order, judgment
or decree of a court or other governmental authority of competent jurisdiction,
(b) to its own employees, attorneys, accountants or representatives or (c) which
may be required by any applicable federal, state or other regulatory requirement
including disclosures required by Bankruptcy Code Section 1125 AND DISCLOSURES
REQUIRED TO BE MADE BY NU-TECH IN ACCORDANCE WITH FEDERAL OR STATE SECURITIES
LAWS.
SECTION 7. TERMINATION. The obligation of the Parties under Section 5
shall be binding on each of the Parties until the earliest of THE EFFECTIVE DATE
OR THE FIRST ANNIVERSARY OF THE PETITION DATE.
SECTION 8. LIMITATIONS ON LIABILITY. Nu-Tech hereby acknowledges and
agrees that in no event shall any of the partners, officers, directors, members,
fiduciaries, shareholders, employees, agents, affiliates or investment managers
(collectively "Representatives") of any of Oaktree, the DDJ Funds or the
Fidelity Funds have any obligation or liability to Nu-Tech for any action taken
or omitted by or on behalf of any of the Funds or in connection herewith (such
obligation and liability being the sole responsibility of such Funds). Nu-Tech
further acknowledges and agrees that (a) all obligations and liabilities of each
Fund under this Agreement or in connection herewith are enforceable solely
against such Fund and its assets and not against the assets of Oaktree, the DDJ
Funds' affiliates, the Fidelity Funds' affiliates, any other Fund or any
Representatives of Oaktree, the DDJ Funds or the Fidelity Funds, and (b) the
obligations and liabilities of each Fund shall be several in the proportions set
forth on Annex I and not joint and several.
SECTION 9. REPRESENTATIONS AND WARRANTIES. Each Party hereby represents
and warrants as follows:
a. Such Party is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization with all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
herein.
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b. The execution, delivery and performance of this Agreement
and all other instruments and documents executed and delivered by such Party in
connection herewith have been duly authorized by all necessary proceedings.
c. No authorizations, consents or approvals from, or
notifications to, any court or any governmental agency having jurisdiction over
such Party or any other person or entity are or will be necessary to the valid
execution, delivery or performance by such Party of this Agreement.
d. This Agreement constitutes the legal, valid and binding
obligation of such Party except as may be limited by bankruptcy, reorganization,
receivership, insolvency or similar laws affecting the enforcement of creditors'
rights generally.
SECTION 10. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with
the Annexes and Exhibits hereto, sets forth the entire agreement between the
Parties and supersedes all prior communications and understandings of any nature
and may not be supplemented or altered orally. Any amendments hereto shall be in
writing and signed by each party.
SECTION 11. NOTICES. Each notice or other communication hereunder shall
be in writing, shall be sent by messenger, by telecopy or facsimile transmission
or by express mail, shall be deemed given when sent to the designated address
set forth in Annex II (or such other address as the Parties may designate from
time to time to the other Parties).
SECTION 12. FURTHER ASSURANCES. Each Party shall execute and deliver
all further documents or instruments reasonably requested by the other Parties
in order to effect the intent of this Agreement and obtain the full benefit of
this Agreement.
SECTION 13. SUCCESSORS AND ASSIGNS. This Agreement shall be binding on,
and inure to the benefit of, the Parties and their successors and assigns.
SECTION 14. SUBMISSION TO JURISDICTION. The Parties agree that any
legal action or proceeding arising out of or relating to this Agreement may be
brought in the courts of the State of California, the courts of the United
States of America located in the City of Los Angeles, or in any other court
having jurisdiction with respect thereto, and the Parties irrevocably consent to
service of process in any said action or proceeding in any of such courts by the
mailing of copies thereof, postage prepaid, to such Party at such Party's
address set forth in Annex II, such service to become effective 10 days after
such mailing.
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SECTION 15. GOVERNING LAW; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA. EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY
LAW ITS RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY DISPUTE ARISING WITH
RESPECT TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 16. SEVERABILITY. If any provision of this Agreement shall for
any reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof, but this Agreement
shall be construed as if such invalid or unenforceable provision had never been
contained herein.
SECTION 17. AUTHORITY. Oaktree represents and warrants to Nu-Tech that
it has full power and authority to execute and deliver this Agreement for and on
behalf of the Oaktree Funds. Oaktree is authorized to act on behalf of its
respective Funds in connection with the matters contemplated hereby.
SECTION 18. COUNTERPARTS. This Agreement may be executed in one or more
counterparts each signed by one or more of the parties to this Agreement, and
such counterparts shall together constitute one agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
NU-TECH BIO-MED, INC.
By_________________________________
Its_____________________________
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[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
OAKTREE CAPITAL MANAGEMENT,
LLC, as general partner or
investment manager on
behalf of the funds listed
on Annex I hereto under
"Oaktree Funds"
By_________________________________
Its_____________________________
By_________________________________
Its______________________________
DDJ OVERSEAS CORP.
By_________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its Vice President
THE COPERNICUS FUND, L.P.
By DDJ Copernicus, LLC, its General Partner
By_________________________________
Its_____________________________
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
BELMONT FUND, L.P.
By [_______________], its General Partner
By_________________________________
Its______________________________
BELMONT CAPITAL PARTNERS, II, L.P.,
By [_______________], its General Partner
By_________________________________
Its______________________________
CERBERUS PARTNERS, L.P.
By_________________________________
By_________________________________
Its______________________________
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Annex I
Oaktree Funds
Entity Percentage
OCM Opportunities Fund, L.P. 96%
Columbia/HCA Master Retirement Trust 4%
(Separate Account) ---
100%
DDJ
Funds
The Copernicus Fund, L.P.
DDJ Overseas Corp.
Fidelity Funds
Belmont Fund, L.P.
Belmont Capital Partners II, L.P.
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Annex II
Oaktree:
Oaktree Capital Management, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
DDJ Funds:
c/o DDJ Capital Management, LLC
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Fidelity Funds:
c/o Fidelity Management & Research Company
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Cerberus Partners, L.P.:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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Nu-Tech:
Nu-Tech Bio-Med, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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Exhibit A
DIP TERM SHEET
[To be attached]
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Exhibit B
PARTICIPATION AGREEMENT
[To be attached]