EXHIBIT 99.3
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT ("Agreement") is entered into as of the
4th day of October, 1996, by and among RESPONSE ONCOLOGY, INC. ("Borrower"), a
Tennessee corporation; NATIONSBANK OF TENNESSEE, N.A. ("Agent"), a national
banking association, in its capacity as Agent for the "Lenders," as defined in
that Loan Agreement dated as of May 31, 1996, among Borrower, Union Planters
National Bank, a national banking association, and NationsBank of Tennessee,
N.A., as such Loan Agreement may be amended from time to time: and SEAFIELD
CAPITAL CORPORATION ("Subordinated Lender"), a Missouri corporation.
RECITALS:
WHEREAS, Senior Lenders (as defined below) and Subordinated Lender have
both extended or agreed to extend credit to Borrower, on certain terms and
conditions; and
WHEREAS, one condition to Senior Lenders' agreement to extend credit to
Borrower is that Subordinated Lender must agree that certain obligations of
Borrower to Subordinated Lender shall be subordinate to the obligations of
Borrower to Senior Lenders on the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises; as an inducement to
cause Senior Lenders to extend credit to Borrower; and for other valuable
consideration, the receipt and sufficiency of which are acknowledged, it is
agreed as follows:
1. DEFINITIONS. As used below in this Agreement, the following
capitalized terms have the meanings set forth below:
"Acquisition Debt" means obligations of the Borrower to either
(i) one or more of the entities engaged in a medical practice the assets of
which have been acquired by the Borrower or one of its Affiliates, or (ii) the
owners or former owners of such practice.
"Affiliate" means, with respect to any Person, a second Person
that, directly or indirectly, (i) owns a majority of the equity interest in the
first Person, (ii) is owned in equity interest, in any degree, by the first
Person, or (iii) is owned, as to a majority of its equity interest, by a third
Person who is an Affiliate of the first Person under provisions (i) or (ii)
hereof.
"Agent" means Nationsbank of Tennessee, N.A., a national
banking association, in its capacity as Agent for the Senior Lenders pursuant to
the Senior Loan Agreement.
"Blockage Notice" means a written notice given by Agent to
Subordinated Lender
stating that an Event of Default exists under the Senior Debt Agreements, which
notice shall remain in effect (i) in the case of an Event of Default for
nonpayment of principal or interest by Borrower or an Event of Default arising
from the filing of a proceeding under an Insolvency Law, from the date of
issuance of the Blockage Notice until the earlier of the Full Payment of the
Senior Debt or Agent's written notice to Subordinated Lender that the Event of
Default has been waived by or cured to the satisfaction of Agent, (ii) in the
case of any other Event of Default, from the date of issuance of the Blockage
Notice until the earlier of (a) one hundred seventy-nine (179) days after the
issuance thereof, (b) Agent's written notice to Subordinated Lender that the
Event of Default has been waived by or cured to the satisfaction of Agent or
otherwise ceased to exist, or (c) the date of Full Payment of the Senior Debt;
provided, however, that (x) no Blockage Notice under (ii) hereof may be imposed
more than twice in any rolling 360-day period and (y) there must be at least 180
consecutive days in each rolling 360-day period in which no Blockage Notice
under (ii) above is in effect.
"Bona Fide Purchaser" means a Person that (i) is not liable
for the Senior Debt (either generally or by the encumbrance of property
therefor), (ii) is not an Affiliate of any Person who is liable for the Senior
Debt (either generally or by the encumbrance of property therefor), and (iii)
purchases all or any portion of the Subordinated Debt in compliance with the
provisions of this Agreement. A wholly-owned subsidiary of Subordinated Lender
(other than Borrower) shall be regarded as a Bona Fide Purchaser.
"Borrower" means Response Oncology, Inc., a Tennessee
corporation, and its successors.
"Equity Securities" means common or preferred stock issued by
Borrower, which stock is not subject to any obligation of redemption or other
obligation of Borrower or any subsidiary of Borrower to purchase or cause the
purchase of such stock.
"Full Payment" of the Senior Debt means the payment of all
principal (in an amount not to exceed ($35,000,000.00), interest and expenses
arising under the Senior Debt Agreements.
"Insolvency Law" means the United States Bankruptcy Code and
any other present or future federal or state law constituting liquidation,
conservatorship, moratorium, receivership, rearrangement, reorganization or
similar debtor relief laws.
"Payment" means any money, security interest or other value or
benefit directly or indirectly given by or on behalf of Borrower to or for the
benefit of Subordinated Lender on account of the Subordinated Debt, or received
directly or indirectly by Subordinated Lender from any other source on account
of the Subordinated Debt, whether such money, etc. is characterized as a payment
to reduce the Subordinated Debt, as a reserve for the payment of the
Subordinated
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Debt, as consideration for the purchase of the Subordinated Debt or any interest
therein, or otherwise, except that consideration received by Subordinated Lender
from a Bona Fide Purchaser shall not be considered a Payment.
"Permitted Payments" means Payments that are paid in U.S. Dollars
and which meet either of the following additional criteria:
(a) Payments that (i) represent only interest accrued on the
Subordinated Debt, (ii) are paid by Borrower directly to Subordinated
Lender no earlier than the scheduled due dates thereof as provided in the
Subordinated Note, and (iii) are made when no Blockage Notice is in
effect.
(b) Payments made when an Event of Default has occurred and is
continuing under the Subordinated Note after the applicable Standstill
Period for such Event of Default has ended, whether or not a Blockage
Notice is then in effect, which Payments are otherwise made in full
accordance with the provisions of this Agreement (including turnover
provisions).
(c) Payments made by the issuance to Subordinated Lender of Equity
Securities or warrants to purchase Equity Securities, either pursuant to
the Subordinated Loan Agreement or in satisfaction of Subordinated Debt
pursuant to the conversion feature thereof or otherwise.
(d) Payments made with the proceeds of an issuance of Equity
Securities or Senior Subordinated Debt, which payments are made within
ten (10) days of Borrower's issuance thereof.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
government, governmental agency or political subdivision thereof, or any other
form of entity.
"Senior Debt" means all present and future obligations of
Borrower to Senior Lenders and Agent under the Credit Facilities described in
the Senior Loan Agreement, including, but not limited to, the obligations to pay
principal (in an amount not to exceed $35,000,000.00), interest, expenses, fees
and other amounts arising under, and to perform all other obligations stated in,
the Senior Debt Agreements, and all refinancings thereof.
"Senior Debt Agreements" mean (i) the Senior Loan Agreement,
(ii) each "Note," as defined in the Loan Agreement, (iii) all other "Loan
Documents," as defined in the Loan Agreement, in existence as of the date
hereof, (iv) any other document hereafter arising that further evidences or
secures the "Obligations" (as defined in the Loan Agreement); and (v) all
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amendments, modifications, restatements, renewals, increases and extensions of
any of the foregoing.
"Senior Lenders" means the "Lenders," as defined in the Senior
Loan Agreement from time to time.
"Senior Loan Agreement" means that Loan Agreement dated as of
May 31, 1996, among Borrower, Agent, Union Planters National Bank, a national
banking association, and NationsBank of Tennessee, N.A., a national banking
association.
"Senior Subordinated Debt" means obligations of the Borrower
for principal, interest, expenses and any other amounts which are subordinated
in right of payment to the Senior Debt to at least the extent herein provided
pursuant to a subordination agreement in form and substance acceptable to Agent,
but which are not either Acquisition Debt or obligations subordinated in right
of payment to the obligations of the Borrower evidenced by the Subordinated Note
and the Subordinated Loan Agreement.
"Standstill Period" means a period of time commencing upon the
date on which an Event of Default occurs under the Subordinated Note (as defined
therein) and ending upon the earlier of (i) one hundred twenty (120) days after
the date on which Subordinated Lender gives written notice to Agent of the
occurrence of the Event of Default under the Subordinated Note other than an
Event of Default resulting from a proceeding under an Insolvency Law or an Event
of Default arising from an action described in (v) below), (ii) sixty (60) days
after the institution of a proceeding by a party other than Agent against
Borrower under an Insolvency Law, if such proceeding has not been dismissed
within that time, (iii) ten (10) days after the institution of a proceeding by
Agent against Borrower under an Insolvency Law, (iv) ten (10) days after the
institution of a proceeding by Borrower under an Insolvency Law, or (v) ten (10)
days after Agent's filing of judicial debt enforcement proceedings or its
exercise of other remedies against collateral for the Senior Debt.
"Subordinated Debt" means the obligations of Borrower for
principal, interest, expenses and any other amounts arising under the
Subordinated Note.
"Subordinated Loan Agreement" means that Loan Agreement dated
as of October 4, 1996, between Borrower and Subordinated Lender.
"Subordinated Lender" means Seafield Capital Corporation, a
Missouri corporation, its successors and its assigns.
"Subordinated Note" means that Adjustable Rate Convertible
Note made by Borrower dated October 4, 1996, in the original principal amount of
Twenty-Three Million Five
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Hundred Thousand and No/100 Dollars ($23,500,000), a copy of which is attached
hereto as Exhibit A, and all modifications, extensions and renewals thereof
entered into in accordance with the terms of this Agreement.
2. OWNERSHIP OF SUBORDINATED DEBT. Subordinated Lender warrants to
Senior Lenders and Agent that Subordinated Lender is the lawful owner of the
Subordinated Debt and the lawful holder of the Subordinated Note, free of any
security interest, lien, participation interest or other claim of any kind.
3. SUBORDINATION. Subordinated Lender hereby agrees that the
Subordinated Debt shall hereafter be subordinate to the Senior Debt with respect
to the rights of payment, security, collection and collection in bankruptcy, as
and to the extent expressly set forth in this Agreement.
4. SUBORDINATION OF PAYMENTS. Except for Permitted Payments,
Subordinated Lender shall not accept, and Borrower shall not pay, any Payments
with respect to the Subordinated Debt (of principal, interest, expenses or
otherwise) unless Agent gives its express prior written consent to Subordinated
Lender, which consent may be granted or withheld in Agent's discretion.
5. SUBORDINATION OF SECURITY. The Subordinated Debt shall be
unsecured.
6. SUBORDINATION OF RIGHT OF COLLECTION. Notwithstanding the
existence of an Event of Default under the Subordinated Note (as defined
therein), acceleration thereunder or any other occurrence whatsoever,
Subordinated Lender shall take no judicial or other action to collect the
Subordinated Debt, to secure additional collateral therefor, to create a reserve
for its payment, or to seek relief under any Insolvency Law, and Borrower shall
not voluntarily participate in any such collection action, provide additional
collateral or create a reserve for the payment of the Subordinated Debt, without
the prior written approval of Agent, which consent may be granted or withheld in
Agent's discretion. Any such action, collateral or reserve purportedly
established for the Subordinated Debt without Lender's prior written consent
shall be void. Notwithstanding the foregoing, following the occurrence of an
Event of Default under the Subordinated Note and the end of the Standstill
Period for such Event of Default, even though Full Payment of the Senior Debt
may not have occurred, and provided that the Event of Default has not been
waived or cured, Subordinated Lender may seek enforcement of Borrower's
obligations with respect to the Subordinated Debt through judicial debt
collection proceedings or through the commencement of a proceeding under an
Insolvency Law, with all recoveries accomplished thereby to be paid to Agent for
application to the Senior Debt until the Full Payment of the Senior Debt, as and
to the extent provided in this Agreement.
7. SUBORDINATION OF COLLECTION IN BANKRUPTCY. If Borrower becomes
a party to a voluntary or involuntary bankruptcy proceeding, reorganization
proceeding or any
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other action under an Insolvency Law, following any applicable Standstill
Period, Subordinated Lender agrees to timely file a claim for the amount of the
Subordinated Debt, in form and substance approved by Agent (which approval Agent
shall not unreasonably withhold). Subordinated Lender hereby irrevocably
authorizes and empowers Agent to file claims in the Agent's own name and
claiming through the Subordinated Lender, as may be necessary or advisable for
the enforcement of this Agreement in any proceeding under an Insolvency Law and
to collect and receive any and all payments or distributions which may be
payable or deliverable at any time upon or with respect to the Subordinated Debt
until Full Payment of the Senior Debt. Agent will provide Subordinated Lender
with copies of any documents filed naming and claiming through the Subordinated
Lender. Subordinated Lender shall retain the right to vote and otherwise act in
any such proceeding, including without limitation, the right to file claims in
its own behalf, and to vote to accept or reject any plan of partial or complete
liquidation, reorga nization, arrangement, composition, or extension.
8. TURNOVER OF PAYMENTS. Notwithstanding any other provision of this
Agreement, any Payment made with respect to the Subordinated Debt prior to the
Full Payment of the Senior Debt, with the exception only of Payments under
subsections (a), (c) and (d) of the above definition of Permitted Payments and
those permitted by Agent's consent under Section 4 hereof, shall be held by
Subordinated Lender in trust for Agent, shall not be commingled with other
property of Subordinated Lender, and shall immediately upon receipt be remitted
to Agent (or to the trustee or similar official if received in connection with a
proceeding under an Insolvency Law) in kind with any necessary endorsement
affixed for application to the Senior Debt, without the need of demand by Agent.
9. ACCELERATION OF SUBORDINATED DEBT. Prior to accelerating the
Subordinated Debt, Subordinated Lender shall give Agent written notice of any
Event of Default under the Subordinated Debt (a notice commencing a Standstill
Period shall be regarded as a notice under this Section) and allow Agent the
lesser of (i) the period of time equal to the applicable Standstill Period, or
(ii) twenty (20) days after receipt of such notice to cure or cause the cure
thereof, unless the Event of Default arises from the filing of a voluntary
proceeding by a Borrower under any Insolvency Law, in which case no obligation
of notice or right to cure shall apply.
10. SUBORDINATION OF SUBORDINATED LENDER. Should any Payments made with
respect to the Subordinated Debt be applied to the Senior Debt pursuant to the
provisions of this Agreement, then, upon the Full Payment of the Senior Debt (as
determined including such redirected Payments), Subordinated Lender shall be
subrogated to any remaining rights of Agent with respect to the Senior Debt.
This provision does not create or evidence any obligation on the part of Agent
to exercise diligence in collection, prevent the impairment of collateral or
otherwise act in any respect for the benefit of Subordinated Lender in Agent's
dealings with Borrower or any collateral securing the Senior Debt, it being the
essence of this
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Agreement that no such duties exist on the part of Agent. For purposes of the
subrogation provided for in this Section 10, no payment or distribution to any
Agent of any cash, property or securities to which Subordinated Lender would be
entitled except for the provisions of this Agreement, and no payment over
pursuant to the provisions of this Agreement to any Agent by Subordinated Lender
will, as among the Borrower, its creditors (other than Agent) and the
Subordinated Lender be deemed to be a payment or distribution by Borrower to or
on account of any Senior Debt. If other lenders are similarly subordinated to
the Senior Debt at the time of its Full Payment, and if they are also subrogated
to the rights of Senior Lenders, all such subrogated subordinated lenders shall
share in the rights of lender on a pari passu basis.
11. LEGEND. The Subordinated Note shall bear a legend stating
that it is subject to the provisions of this Agreement.
12. TRANSFER. Subordinated Lender shall not negotiate, sell, assign, or
transfer the Subordinated Note or any interest in the Subordinated Debt without
the prior written approval of Lender, except that prior approval shall not be
necessary if a transfer is (i) made to a Bona Fide Purchaser, and (ii) made
pursuant to documents that are expressly subject to the terms and conditions of
this Agreement and by which the transferee agrees to be regarded as a
Subordinated Lender hereunder, which are delivered to Lender within five (5)
days after they become effective (such transfer to become effective under this
Agreement only upon Agent's receipt thereof). No transfer of the Subordinated
Debt shall release Subordinated Lender from liability for any obligations to
Agent or Lenders hereunder arising prior to the transfer thereof.
13. UNCONDITIONAL SUBORDINATION. The enforceability of this Agreement
in accordance with its terms is not subject to any condition and the validity
and continuing effect hereof shall not be impaired by any event whatsoever,
including, but not limited to, the merger, consolidation, cessation of business
or liquidation of Borrower; the financial decline or bankruptcy of Borrower;
Agent's compromise or settlement with or release of any party liable for the
Senior Debt; Agent's release of any collateral for the Senior Debt; Agent's
failure to give Subordinated Lender notice of any default, Event of Default or
Unmatured Default by Borrower; the extension, amendment, modification, waiver,
increase or renewal of any of the Senior Debt Agreements without notice to
Subordinated Lender; or Agent's failure to exercise diligence in collection.
Subordinated Lender agrees that this Agreement shall be valid and binding upon
Subordinated Lender upon the delivery of this executed Agreement to Subordinated
Lender by or on behalf of Agent. Subordinated Lender and Agent shall each act in
good faith under this Agreement.
14. MODIFICATION OF SUBORDINATED NOTE. Subordinated Lender and Borrower
agree that they shall give Agent written notice as promptly as is practicable of
any modification, amendment or waiver of any provision of the Subordinated Note
and agree further that no such modification, amendment or waiver shall be given
effect absent Agent's prior written consent thereto if the effect thereof would
be to (i) modify covenants as to make them more
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restrictive on Borrower including, but not limited to, the modification of
financial covenants against the interests of Borrower, (ii) create new Events of
Default or make existing Events of Default more restrictive on Borrower, (iii)
increase the interest rate thereunder or to create or increase non-interest
payment obligations of Borrower, or (iv) provide for the payment of any amount
of principal or interest of the Subordinated Debt prior to its originally
scheduled maturity.
15. EXPENSES. In any effort to enforce this Agreement between
Agent and Subordinated Lender, the prevailing party shall be entitled to recover
all court costs and reasonable attorney's fees and other expenses reasonably
associated therewith.
16. TERMINATION. Following the Full Payment of the Senior Debt,
this Agreement shall be terminated in writing by Agent.
17. NO MARSHALING OF ASSETS. Agent may proceed against collateral
securing the Senior Debt and against parties liable therefor in such order as it
may elect, and neither Subordinated Lender nor Borrower nor any surety or
guarantor for Borrower nor any other creditor of Borrower shall be entitled to
require Agent to xxxxxxxx assets. The benefit of any rule of law or equity to
the contrary is hereby expressly waived.
18. NOTICES. Any communications concerning this Agreement or the
credit described herein shall be addressed as follows:
As to Subordinated Lender:
Seafield Capital Corporation
Attn.: P. Xxxxxxx Xxxxxx
0000 Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx Xxxx, XX 00000
Telecopier: (000) 000-0000
With a Copy To:
Xxxxxxx Xxxxx
Xxxxxxx & Xxxx X. X.
0000 Xxxxx Xxxxxxxxx
Xxxxxx Xxxx, XX 00000-0000
Telecopier: (000) 000-0000
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As to Borrower:
Response Oncology, Inc.
Attn: Xxxxxx Xxxxx
0000 Xxxxxx Xxxxx Xxxx.
Xxxxxxx, Xxxxxxxxx 00000
Telecopier: (000) 000-0000
With a Copy To:
Baker, Donelson, Bearman & Xxxxxxxx
Attn: Xxxx X. Good, Esq.
000 Xxxxxxx Xxx., 00xx Xxxxx
Xxxxxxx, Xxxxxxxxx 00000
Telecopier: (000) 000-0000
As to Agent:
NationsBank of Tennessee, N.A., Agent
Attn: Xxxxx X. Xxxxx
0 XxxxxxxXxxx Xxxxx
Xxxxxxxxx, XX 00000
With a Copy To:
Boult, Cummings, Xxxxxxx & Xxxxx
Attn: Xxxx X. Xxxxxxx III, Esq.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
Telecopier: (000) 000-0000
Communications shall only be effective when set forth in writing and actually
delivered to the addresses stated above. Any party may change its address for
receipt of notices by submitting the change in writing to the other parties.
19. PAYMENTS OTHERWISE PERMITTED. Nothing contained in this Agreement,
the Senior Debt Agreements or the Subordinated Note will prevent Borrower, at
any time, from making Payments at any time of principal of or interest on, or
any other Payment in respect of, Subordinated Debt, except as expressly provided
in this Agreement.
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20. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The provisions of
this Agreement are and are intended solely for the purpose of defining the
relative rights of Agent, on the one hand, and Subordinated Lender, on the other
hand. Nothing contained in this Agreement, the Senior Debt Agreements, the
Subordinated Loan Agreement or the Subordinated Note is intended to or will (i)
impair, as among the Borrower, its creditors (other than the Agent and the
Senior Lenders) and Subordinated Lender, the obligations of the Borrower, which
are absolute and unconditional, to pay to Subordinated Lender the principal of,
or interest on, the Subordinated Debt, or any other amount payable by or any
other security issuable by Borrower under the Subordinated Note or the
Subordinated Loan Agreement, as and when the same becomes due and payable in
accordance with their terms; (ii) affect the relative rights against Borrower of
Subordinated Lender and creditors of such Borrower other than the Agent and the
Senior Lenders; or (iii) prevent Subordinated Lender from accelerating any
amount payable pursuant to the Subordinated Note and exercising all other
remedies otherwise permitted by applicable law upon default thereunder, except
as expressly provided in this Agreement.
21. AMENDMENT AND WAIVER IN WRITING. No provision of this Agreement
can be amended or waived, except by a statement in writing signed by the party
against which enforcement of the amendment or waiver is sought.
22. ENTIRE AGREEMENT. This Agreement represents the entire agreement
among the parties concerning the subordination of the Subordinated Debt.
23. SEVERABILITY. Should any provision of this Agreement be invalid
or unenforceable for any reason, the remaining provisions hereof shall remain in
full effect.
24. APPLICABLE LAW. The validity and construction of this Agreement
and all other documents executed with respect to the Senior Debt shall be
determined according to the substantive laws of Tennessee, in which state this
Agreement has been executed and delivered.
25. GENDER AND NUMBER. Words used herein indicating gender or number
shall be read as the context may require.
26. CAPTIONS NOT CONTROLLING. Captions and headings have been
included in this Agreement for the convenience of the parties, and shall not be
construed as affecting the content of the respective paragraphs.
27. CONSENT TO JURISDICTION. Subordinated Lender, Agent and Borrower
hereby irrevocably consent to the jurisdiction of the United States District
Court for the Middle District of Tennessee and of all Tennessee state courts
sitting in Davidson County, Tennessee, for the purpose of any litigation to
which Agent or Borrower may be a party and which concerns this Agreement or the
Senior Debt. It is further agreed that venue for any such action shall lie
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exclusively with courts sitting in Davidson County, Tennessee, unless Agent
agrees to the contrary in writing. Matters between Borrower and Agent shall be
determined by binding arbitration as provided in the Senior Debt Agreements.
28. JOINDER OF BORROWER; PARTIES TO AMENDMENTS. Borrower joins in
the execution of this Agreement to acknowledge and agree to the provisions
hereof, but no rights in favor of Borrower arise under this Agreement and
provisions hereof may be amended, waived or restated as between Agent and
Subordinated Lender without the joinder of Borrower.
29. CONSENT TO SENIOR DEBT. Subordinated Lender hereby consents to
Borrower's incurring of the Senior Debt and waives any Event of Default that
would arise under the Subordinated Note on account of Borrower's incurring the
Senior Debt.
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30. SIGNATURES BY FACSIMILE. This Agreement shall be effective upon the
parties' exchange by telecopier of copies hereof showing the signatures of the
other parties; provided, however, each party shall immediately forward an
executed original hereof to Agent. The failure of any party to so provide Agent
with an original hereof shall not impair the validity of this Agreement, but
shall entitle Agent to obtain specific performance of the obligation to provide
an executed original of this Agreement.
Signature Page to Subordination Agreement
Executed the date first written above.
THE UNDERSIGNED ACKNOWLEDGE A
THOROUGH UNDERSTANDING OF THE TERMS
OF THIS AGREEMENT AND AGREE TO BE
BOUND THEREBY:
NATIONSBANK OF TENNESSEE, N.A., Agent
By: _____________________________________
Title: __________________________________
RESPONSE ONCOLOGY, INC., Borrower
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Title: President
SEAFIELD CAPITAL CORPORATION,
Subordinated Lender
By: /s/ Xxxxx X. Xxxxxx
---------------------------------
Title: EVP Chief Financial Officer
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