EXHIBIT (C)(3)
UHS Acquisition Corp.
c/o X.X. Childs Associates, L.P.
Xxx Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
(000) 000-0000
Facsimile: (000) 000-0000
November 25, 1997
Xx. Xxxxx X. Xxxxxxxxx
Universal Hospital Services, Inc.
0000 Xxxxxxxxx Xxxxx
0000 Xxxx 00/xx/ Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Dear Xx. Xxxxxxxxx:
Reference is made to the Agreement and Plan of Merger of even date
herewith (the "Merger Agreement"), by and among X.X. 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 corporation ("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
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Company shall employ you, and you
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November 25, 1997
Page 2
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 reasonably 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 Xxxx 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
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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.
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November 25, 1997
Page 3
3. Compensation and Benefits.
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(a) Base Salary. Your base salary shall be at the annual rate
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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
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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,
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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.
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November 25, 1997
Page 4
4. Termination.
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(a) Death. This Employment Agreement shall automatically
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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
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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
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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 performance of your duties
hereunder;
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November 25, 1997
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(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
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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 and
continue to provide the benefits provided hereunder 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 acknowl
edged 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.
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November 25, 1997
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(f) Resignation For Good Reason. You may terminate your
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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 and continue to provide the benefits
provided hereunder 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
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your employment hereunder, pursuant to this Xxxxxxxxx 0, xxxxx xx, (x) 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
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November 25, 1997
Page 7
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
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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.
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November 25, 1997
Page 8
6. Confidentiality. You agree that during and at all times
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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 consequence of disclosure by you in violation of this
Employment Agreement.
7. Non-competition. During the Prohibition Period (as
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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
Termina-
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November 25, 1997
Page 9
tion, 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,
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directly or indirectly, hire, recruit, solicit, call upon, divert, take away,
entice or in any other manner persuade or at tempt 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
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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
Xx. Xxxxx X. Xxxxxxxxx
November 25, 1997
Page 10
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
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November 25, 1997
Page 11
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 under standing 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
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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
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in two or more counterparts, each of
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November 25, 1997
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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
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for purposes of reference only and shall not be construed to limit or affect the
substance of this Employment Agreement.
Xx. Xxxxx X. Xxxxxxxxx
November 25, 1997
Page 13
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/ Xxx Xxx
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Name: Xxx Xxx
Title: Vice President
Accepted and agreed to:
/s/ Xxxxx X. Xxxxxxxxx
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Xxxxx X. Xxxxxxxxx
EXHIBIT A
NON-QUALIFIED STOCK OPTIONS
KEY PROVISIONS
I. Options Subject to EBITDA Target Vesting.
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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
1.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.
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
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/1/i.e., the price per share, as adjusted to reflect subsequent changes in
capitalization, at which X.X. childs acquired its original shares of common
stock of the Company.
/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.
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
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Certain eligible members of management will be granted options for
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.
ADDITIONAL OPTIONS PURSUANT TO SECTION II
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REALIZED VALUE ACHIEVED PRIOR TO THE MINIMUM MULTIPLE OF REALIZED VALUE TO
FOLLOWING YEARS AFTER CLOSING ORIGINAL COMMON STOCK INVESTORS
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Year 3 4.0x
Year 4 4.5x
Year 5 5.0x
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/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.
III. Management Target
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FISCAL YEAR ENDED EBITDA TARGET ($000)/4/ Capital Expenditures ($1000)
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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, 1988 44,635 31,200
IV. Forfeited Options
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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
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to X.X. Childs; (ii) annual bank xxxx 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).
SCHEDULE A
INITIAL ALLOCATION OF MANAGEMENT INCENTIVE OPTION PLAN
EMPLOYEE % OF TOTAL NUMBER OF SHARES OF COMMON
STOCK ISSUED AT CLOSING/1/
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Xxxxx Xxxxxxxxx 1.500%
Xxxxx Xxxxxx 0.625%
Xxxxxxx Xxxxxxx 0.625%
Xxxxxx Xxxxx 0.625%
Xxxx Xxxxxxx 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 Xxxxx Xxxxxxxxx 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/
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Xxxxx Xxxxxxxxx 1.0%
Xxxxx Xxxxxx 0.5%
Xxxxxxx Xxxxxxx 0.5%
Xxxxxx Xxxxx 0.5%
Xxxx Xxxxxxx 0.5%
____
Total 3.0%
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/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.............................. 10
2.2 Call by the Company.................................... 11
2.3 Put By Management Holders.............................. 14
2.4 Tagalong............................................... 17
2.5 Dragalong.............................................. 19
2.6 [Reserved]............................................. 20
2.7 Restrictions on Other Agreements....................... 20
2.8 Stockholder Action..................................... 21
ARTICLE III
Registration Rights
3.1 General................................................ 21
3.2 Piggyback Registration................................. 21
3.3 Obligations of the Company............................. 22
3.4 Furnish Information.................................... 26
3.5 Expenses of Registration............................... 26
3.6 Underwriting Requirements.............................. 26
3.7 Indemnification........................................ 27
3.8 Rule 144............................................... 30
3.9 Market Stand-Off Agreement............................. 30
ARTICLE IV
Certain Miscellaneous Other Provisions
4.1 Remedies............................................... 31
4.2 Entire Agreement; Amendment; Termination............... 31
4.3 Severability........................................... 32
4.4 Notices................................................ 32
4.5 Binding Effect; Assignment............................. 33
4.6 Termination............................................ 33
i
4.7 Recapitalization, Exchanges, etc...................... 33
4.8 JWC Representative.................................... 34
4.9 Action Necessary to Effectuate the Agreement.......... 34
4.10 Purchase for Investment; Legend on Certificate........ 35
4.11 Effectiveness of Transfers............................ 35
4.12 Additional Stockholders............................... 36
4.13 No Waiver............................................. 36
4.14 Counterparts.......................................... 36
4.15 Headings, etc......................................... 36
4.16 Governing Law......................................... 37
4.17 Effective Time........................................ 37
Exhibits
Exhibit A - - Schedule of Stockholders...................... A-1
Exhibit B - - Form of Promissory Note....................... B-1
ii
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 X.X. 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
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1.1 Definitions. For the purposes of this Agreement, the following
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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
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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 Subsidiaries, 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.
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"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 signing 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
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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 Xxxxx X.
Xxxxxxxxx only, the Company's requiring Xx. Xxxxxxxxx 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.
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"INITIATING STOCKHOLDER" shall have the meaning set forth in Section
2.4(a).
"JWC EQUITY PARTNERS" shall mean X.X. 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 X.X. 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
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more of any of such Persons; provided that with respect to any such Transfer,
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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
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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
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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
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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,
9
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
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2.1 Restrictions on Transfers.
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(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.
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2.2 Call by the Company.
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(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 notice (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
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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
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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 Employees 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 Equivalents 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
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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
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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 employment with the Company
terminated in such fiscal year.
2.3 Put by Management Holders.
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(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
notices 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
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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 Management 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 Secu-
15
rities 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
instruments 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 indebt-
16
edness 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
17
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 conditions 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 in-
18
struments 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
obligated 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,
19
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 [Reserved]
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
20
this Agreement (whether or not such agreements and arrangements 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 X-0, X-0 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 secu-
21
rities 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 disposition 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;
22
(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 prospectus
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
23
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.
24
(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 registration 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, supple-
25
ment 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 qualification 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
underwriters 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 secondary
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.
26
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 0000 Xxx) 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, under-
27
writer 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 0000 Xxx) 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
direc-
28
tor, 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
29
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 0000 Xxx);
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 dis-
30
pose 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
31
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 X.X. Childs Associates, L.P.
Xxx Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
Telecopy: (000) 000-0000
32
(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, Xxxxxxx & Xxxx LLP
Xxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telecopy: (000) 000-0000
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
33
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) Xxxxxx X. Xxxxx, 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 X.X. 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
cor-
34
porate 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
35
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 acquiring 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 Agreement, 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
36
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]
37
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:
X.X. CHILDS EQUITY
PARTNERS, L.P.
By: X.X. Childs Advisors, L.P., its
general partner
By: X.X. Childs Associates, L.P.,
its general partner
By: X.X. Childs Associates, Inc.,
its general partner
------------------------ By:_______________________
Xxxxxx X. Xxxxx 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 Xxxxxx X. Xxxxx as its sole
representative to perform all acts as are required, 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
------------------------
A-1
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).
B-1
Universal Hospital Services, Inc.
Subordinated Note Due 20__
Page 2
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
Universal Hospital Services, Inc.
Subordinated Note Due 20__
Page 3
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. (S) 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.
Universal Hospital Services, Inc.
Subordinated Note Due 20__
Page 4
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
Universal Hospital Services, Inc.
Subordinated Note Due 20__
Page 5
(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 appointing 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
Universal Hospital Services, Inc.
Subordinated Note Due 20__
Page 6
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.
Universal Hospital Services, Inc.
Subordinated Note Due 20__
Page 7
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.
Universal Hospital Services, Inc.
Subordinated Note Due 20__
Page 8
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
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(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
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Universal Hospital Services, Inc.
Subordinated Note Due 20__
Page 9
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," respectively, 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.
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Universal Hospital Services, Inc.
Subordinated Note Due 20__
Page 10
(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,
reorganization, 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
Universal Hospital Services, Inc.
Subordinated Note Due 20__
Page 11
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
Universal Hospital Services, Inc.
Subordinated Note Due 20__
Page 12
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 X.X. Childs Associates, L.P.,
Xxx Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, Attention: Xx.
Xxxx X. Childs (Facsimile No.: (000) 000-0000); 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:
