-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NvBG24K0uCnFy+zzIiqm9NaSALUPCqpXoyI3yCrX1EQlOB76Gj9F7QCbs/Svv4ON nFARNUpwtIPzu+MMZ1m2eA== 0000899243-98-000418.txt : 19980325 0000899243-98-000418.hdr.sgml : 19980325 ACCESSION NUMBER: 0000899243-98-000418 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980323 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN ONCOLOGY RESOURCES INC /DE/ CENTRAL INDEX KEY: 0000943061 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SPECIALTY OUTPATIENT FACILITIES, NEC [8093] IRS NUMBER: 841213501 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-26190 FILM NUMBER: 98571377 BUSINESS ADDRESS: STREET 1: 16825 NORTHCHASE DR STREET 2: STE 1300 CITY: HOUSTON STATE: TX ZIP: 77060 BUSINESS PHONE: 7188732674 10-K 1 FORM 10-K - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------- FORM 10-K -------------------- (Mark One) [x] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (fee required) For the fiscal year ended December 31, 1997 OR [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (no fee required) Commission file number 0-26190 AMERICAN ONCOLOGY RESOURCES, INC. (Exact name of registrant as specified in its charter) -------------------- Delaware 84-1213501 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NO.) OF INCORPORATION OR ORGANIZATION) 16825 Northchase Drive, Suite 1300, Houston, Texas 77060 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) Registrant's telephone number, including area code: (281) 873-2674 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock ($.01 par value) (Title of class) Series A Preferred Stock Purchase Rights (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. _____ The aggregate market value of the voting stock held by non-affiliates of the Registrant as of March 10, 1998 was $487,827,443. There were 31,121,368 shares of the Registrant's Common Stock outstanding on March 10, 1998. In addition, as of March 10, 1998, the Registrant had agreed to deliver 17,219,632 shares of its Common Stock on certain future dates for no additional consideration. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Proxy Statement issued in connection with the Registrant's 1998 Annual Meeting of Stockholders are incorporated by reference into Part III hereof. - ------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS American Oncology Resources, Inc. (together with its subsidiaries, "AOR" or the "Company") is a national physician practice management company focusing exclusively on oncology. As of December 31, 1997, the Company provided comprehensive management services under long-term agreements to oncology practices comprised of 304 physicians in 16 states. Affiliated physicians provide a broad range of medical services to cancer patients, integrating the specialties of medical and gynecological oncology, hematology, radiation oncology, stem cell transplantation and diagnostic radiology. The Company believes that the coordinated delivery of comprehensive cancer care in an outpatient setting offers high quality care that is more cost-effective than traditional approaches and is increasingly preferred by patients, payors and physicians. The Company's affiliation strategy is designed to enhance the affiliated physician groups' competitiveness while preserving their autonomy regarding medical practice decisions. The Company was incorporated in October 1992 under the laws of the state of Delaware. The Company's principal executive offices are located at 16825 Northchase Drive, Suite 1300, Houston, Texas, and its telephone number is (281) 873-2674. Cancer and Its Treatment Cancer is a group of more than 100 complex diseases characterized by the uncontrolled growth and spread of abnormal cells. Cancer treatment is provided primarily by physicians utilizing chemotherapy, radiation therapy, surgery and immunotherapy. Due to cancer's complexity and the variety of cancer treatment therapies, physicians who treat cancer typically have had extensive, highly- specialized training. Chemotherapy and immunotherapy are typically provided under the care of a medical oncologist or hematologist, typically an internist with additional subspecialty training in oncology. Radiation therapy is typically provided under the care of a radiation oncologist, a physician with additional subspecialty training in radiation oncology. The Company estimates that at least 6,000 community-based physicians in the United States specialize in oncology. Because the treatment of cancer requires a multidisciplinary approach, numerous health care professionals with different medical and surgical specialties are involved in treating cancer patients. In addition, cancer patients typically receive treatment in a variety of settings, including hospitals, outpatient facilities and physicians' offices. The Company believes that this system can result in uncoordinated treatment and is inherently inefficient. In the Company's view, oncology group practices that provide comprehensive, coordinated oncology services in outpatient facilities offer high-quality, low-cost and convenient medical care to cancer patients. Traditionally, most oncologists in the United States have practiced individually or in small groups of two to five physicians, offering their services to cancer patients in hospitals and, to a lesser extent, in outpatient facilities. In recent years, however, there has been a trend among oncologists to form larger group practices that provide a broader range of services to cancer patients in outpatient settings, rather than in hospitals or other inpatient settings. The Company believes this trend is attributable to several factors, including (i) initiatives by governmental and private payors to contain health care expenditures, (ii) the competitiveness and rising costs of medical practice generally, (iii) advances in cancer therapies that permit treatment in outpatient settings and (iv) patients' desire to receive treatment outside the hospital. The Company believes that many of these large oncology practices recognize the need for outside managerial, financial and business expertise to more efficiently manage the increasingly complex, burdensome and time-consuming nonmedical aspects of their practice. Such management relationships free oncologists to practice medicine without sacrificing autonomy and control over the medical aspects of their practices. The Company believes that these physicians will seek long-term relationships with a management entity that endeavors to (i) promote and facilitate the consolidation of physicians and resources into regional group practices providing comprehensive, outpatient oncology services, (ii) assist in strategic and financial planning, (iii) develop and expand managed care relationships, (iv) provide strategic information systems 1 and administrative policies and procedures, (v) assist in managing the practices' expenditures, (vi) provide a source of capital to support practice expansion and (vii) assist in physician recruitment and other significant strategic decisions. Growth Strategy The Company's objective is to be the leading national physician practice management company providing comprehensive services to an integrated network of affiliated oncology physician groups. The Company intends to achieve this objective by (i) focusing exclusively on oncology, (ii) affiliating with leading oncology groups throughout the United States, (iii) expanding each affiliated physician groups presence in its market by affiliating with additional physician groups in that market and recruiting new physicians, (iv) assisting affiliated physician groups in offering coordinated, comprehensive cancer care by adding new services (for example, gynecological oncology, diagnostic radiology and stem cell transplantation), (v) negotiating and expanding managed care relationships on behalf of the affiliated physician groups and improving reimbursement from payors and (vi) expanding the clinical research operations of the affiliated physician groups. Based on the Companys success in expanding its business to date, the Company believes that it has effective strategies for achieving its objective of becoming the leading national oncology practice management company. Management Services The Company provides management services that extend to all business aspects of an oncology group s operations. After establishing an oncology group affiliation, the Company begins implementing the following policies, procedures and systems necessary to provide the management services contemplated by its management agreement with the group: STRATEGIC SERVICES. At each affiliated practice, a policy board composed of equal representation from the Company and affiliated physicians is created to develop and adopt a strategic plan designed to improve the performance of the practice by (i) outlining physician recruiting goals, (ii) identifying services and equipment to be added, (iii) identifying desirable payor relationships and other oncology groups that are possible affiliation candidates and (iv) facilitating communication with other affiliated physician groups in the AOR network. FINANCIAL SERVICES. The Company provides comprehensive financial analysis to each affiliated physician group in connection with managed care contracting and billing, collection, reimbursement, tax and accounting services and also implements its cash management system. In addition, the Company and the affiliated physician group jointly develop a comprehensive budget that involves the adoption of financial controls and cost containment measures. MANAGEMENT INFORMATION SYSTEMS. The Company implements its management information system to facilitate and organize the exchange of clinical and operational information among the Company's affiliated physicians. The Company believes that an integrated information system will enable the Company and its affiliated physicians to identify effective protocols and manage the costs of cancer care in future years. The Company intends to significantly expand its clinical information system in 1998 and 1999, with the goal of better understanding and analyzing the means of providing high-quality, cost effective cancer care. ADMINISTRATIVE SERVICES. The Company manages the facilities used by the affiliated physicians and, in consultation with the physicians, determines the number and location of practice sites. The Company is implementing its integrated management information system to support practice management, billing functions and patient record keeping. The Company also provides comprehensive purchasing services for drugs, supplies, equipment, insurance and other costs. In addition, the Company provides the regulatory expertise to assist the group in complying with increasingly complex laws and regulations applicable to oncology practices. 2 PERSONNEL MANAGEMENT. The Company employs and manages all nonmedical personnel of the physician group, including the executive director, controller and other administrative personnel. The Company evaluates these employees, makes staffing recommendations, provides and manages employee benefits and implements personnel policies and procedures. The Company also provides similar administrative services to the physician group's employees. CLINICAL RESEARCH SERVICES. Through its clinical research network, the Company facilitates clinical research conducted by its affiliated physician groups and markets the groups' ability to perform and manage clinical trials to pharmaceutical and biotechnology companies. Clinical research conducted by the oncology groups focuses on (i) improving cancer survival rates, (ii) enhancing the cancer patient's quality of life, (iii) reducing the costs of cancer care and (iv) developing new approaches to cancer diagnosis, treatment and post- treatment monitoring. The Company believes that a well-managed clinical research program enhances its affiliated oncologists' reputations and the Company's ability to recruit new physicians. CLINICAL INITIATIVES AND STANDARDS. The Company organizes clinical conferences for its affiliated physicians to discuss and identify clinical care, research and educational strategies for the Company's network of affiliated physicians. The Company also assists its affiliated physicians in developing clinical practice guidelines for the different types of cancer and in operating in accordance with standards of care required for accreditation by the Joint Committee on Accreditation of Health Care Organizations and other managed care accreditation bodies. The Company is also implementing a clinical information system with the goal of facilitating the exchange of information among affiliated physicians, permitting them to share clinical data and treatment patterns and allowing ready access to current patient care as well as studies regarding cancer therapies and research developments. Operations of Oncology Groups Since the Company's incorporation in October 1992, the Company has grown rapidly from managing a single practice comprised of six physicians in one state to managing multiple oncology practices comprised of 304 physicians in 16 states as of December 31, 1997.
DECEMBER 31, -------------------------------------------------------- 1997 1996 1995 1994 1993 ---------- --------- --------- --------- --------- Affiliated physicians..................... 304 227 148 42 9 States.................................... 16 15 14 6 1
The Company estimates that most of the affiliated physician groups are among the largest group practices providing medical oncology services in their markets. The physician members of these groups have staff privileges at most private hospitals in their markets and have long-standing relationships with governmental and private payors. The oncologists are employed by the affiliated physician group, not the Company, and maintain control over all aspects of the provision of medical care to their patients. The Company does not provide medical care to patients or employ any of the non-physician personnel of its affiliated physician groups who provide medical care. However, under the terms of the management agreements with the affiliated physician groups, the Company is responsible for the compensation and benefits of the groups' non-physician medical personnel, and the financial statements of the Company reflect the costs of such compensation and benefits. The affiliated physician groups offer a wide array of services to cancer patients in outpatient settings, including professional medical services, chemotherapy infusion, radiation oncology services, stem cell transplantation, clinical laboratory, diagnostic radiology, pharmacy services and patient education. The groups employ a range of personnel to provide these services, including medical assistants, nurses (including oncology certified nurses), radiation therapy technicians, physicists and laboratory and pharmacy technicians. The practice sites are generally located in close proximity to other health care providers and typically are equipped to provide the outpatient services necessary to treat and care for cancer patients and their families. 3 Affiliation Structure The Company's structure enables its affiliated physicians to retain their autonomy through ownership and participation in their local professional corporation or other entity, thereby maintaining local authority and control over medical practice decisions. The Company believes that this local governance structure is critical to its success. Identifying appropriate physician groups and proposing, negotiating and implementing economically attractive affiliations with them is a lengthy, complex and costly process, typically requiring three to six months. In connection with affiliating with an oncology group, the Company enters into a management agreement with the group and purchases the group's nonmedical assets. In consideration of these arrangements, the Company typically pays cash and promissory notes and agrees to deliver shares of its Common Stock at specified future dates (typically on the third through fifth anniversaries of the closing date). In addition, each affiliated physician enters into an employment agreement with the physician group containing non-competition terms. The Company believes that the delivery of shares on a delayed basis, the Company's affiliation structure and the compensation formulas defined in the management agreements all serve to align the long-term interests of the affiliated physicians with those of the Company. All of the management agreements with the affiliated physician groups have contractual terms of 40 years. These agreements cannot be terminated by the physician groups without cause. As consideration for the Company's management services, each management agreement provides for payment to the Company of a management fee, which typically includes all practice costs (other than amounts retained by physicians), a fixed fee, an amount equal to a percentage of the affiliated physician group's net revenue (in most states) and, if certain financial and performance criteria are satisfied, a performance fee. In the event the physician group breaches the agreement, the physician group must purchase the related assets owned by the Company, including the unamortized portion of the management agreement asset, at book value. Competition The business of providing health care services generally, and of managing and providing oncology services specifically, is intensely competitive. The Company is aware of several competitors specializing in the management of oncology practices; in addition, several health care companies with established operating histories and significantly greater resources than the Company are also providing at least some management services to oncologists. Furthermore, the Company believes that others in the health care industry may adopt strategies similar to those of the Company. The Company's revenues depend on the continued success of its affiliated physician groups. These physician groups face competition from several sources, including sole practitioners, single and multi-specialty groups, hospitals and managed care organizations. Regulation General. The health care industry is highly regulated, and there can be no assurance that the regulatory environment in which the Company and its affiliated physician groups operate will not change significantly and adversely in the future. In general, regulation of health care providers and companies is increasing. There are currently several federal and state initiatives designed to amend regulations relating to the provision of health care services, the access to health care, the costs of health care and the manner in which health care providers are reimbursed for their services. It is not possible to predict whether any such initiatives will be enacted as legislation or, if enacted, what their form, effective dates or impact on the Company will be. The Company's affiliated physician groups are intensely regulated at the federal, state and local levels. Although these regulations often do not directly apply to the Company, to the extent an affiliated physician group is 4 found to have violated any of these regulations and, as a result, suffers a decrease in its revenues or an increase in costs, the Company's results of operations might be materially and adversely affected. Every state imposes licensing requirements on individual physicians and on facilities and services operated or provided by physicians. Many states require regulatory approval, including certificates of need, before establishing certain types of health care facilities, offering certain services or making expenditures in excess of statutory thresholds for health care equipment, facilities or programs. The execution of a management agreement with a physician group currently does not require any health care regulatory approval on the part of the Company or the physician group. However, in connection with the expansion of existing operations and the entry into new markets, the Company and its affiliated physician groups may become subject to additional regulation. Fee-Splitting; Corporate Practice of Medicine. The laws of many states prohibit physicians from splitting professional fees with non-physicians and prohibit non-physician entities, such as the Company, from practicing medicine and from employing physicians to practice medicine. The laws in most states regarding the corporate practice of medicine have been subjected to relatively limited judicial and regulatory interpretation. The Company believes its current and planned activities do not constitute fee-splitting or the practice of medicine as contemplated by these statutes and interpretations. However, there can be no assurance that future interpretations of such laws will not require structural and organizational modifications of the Company's existing relationships with the affiliated physician groups. In addition, statutes in some states in which the Company does not currently operate could require the Company to modify its affiliation structure. Medicare Fraud and Abuse Provisions. Federal law prohibits the offer, payment, solicitation or receipt of any form of remuneration in return for the referral of Medicare or state health program patients or patient care opportunities, or in return for the purchase, lease or order of any item or service that is covered by Medicare or a state health program. Pursuant to this law, the federal government has pursued a policy of increased scrutiny of joint ventures and other transactions among health care providers in an effort to reduce potential fraud and abuse relating to Medicare costs. The applicability of these provisions to many business practices in the health care industry, including the Company's arrangements with its affiliated physician groups, has not been subject to judicial and regulatory interpretation. The Medicare and Medicaid anti-kickback amendments (the "Anti-Kickback Amendments") provide criminal penalties for individuals or entities participating in the Medicare or Medicaid programs who knowingly and willfully offer, pay, solicit or receive remuneration in order to induce referrals for items or services reimbursed under such programs. In addition to federal criminal penalties, the Social Security Act also establishes the intermediate sanction of excluding violators from participation in the Medicare or Medicaid programs. A violation of the Anti-Kickback Amendments requires several elements: (i) the offer, payment, solicitation or receipt of remuneration; (ii) the intent to induce referrals; (iii) the ability of the parties to make or influence referrals of patients; (iv) the provision of services that are reimbursable under Medicare or state health programs; and (v) patient coverage under the Medicare program or a state health program. Management believes that the Company is receiving compensation under the management agreements for management services. The Company also believes that it is not in a position to make or influence referrals of patients or services reimbursed under Medicare or state health programs to its affiliated physician groups. Consequently, the Company does not believe that the management fees payable to it should be viewed as remuneration for referring or influencing referrals of patients or services covered by such programs as prohibited by the Anti-Kickback Amendments. The Company is not a provider or supplier of services or items reimbursed by Medicare or state health programs. In 1991, the Inspector General of the United States Department of Health and Human Services published "Safe Harbor Regulations," defining safe harbors for certain arrangements that do not violate the Anti-Kickback Amendments. One of the safe harbors specifically provided is a safe harbor for personal services and management contracts. Under this safe harbor, "remuneration" prohibited by the Anti-Kickback Amendments will not include any payment made by a principal to an agent as compensation for services of the agent as long as certain standards are 5 met. To the Company's knowledge, there have been no agency interpretations or case law decisions of management agreements similar to the Company's that would indicate that such agreements do not fall within a safe harbor. Further, the Company believes that since it is not a provider of medical services, and is not in a position to refer patients to any particular medical practice, the remuneration it receives for providing services does not violate the Anti- Kickback Amendments. Prohibitions on Certain Referrals. The Omnibus Budget Reconciliation Act of 1993 ("OBRA") includes a provision that significantly expands the scope of the Ethics in Patient Referral Act, also known as the "Stark Bill." The Stark Bill originally prohibited a physician from referring a Medicare or Medicaid patient to any entity for the provision of clinical laboratory services if the physician or a family member of the physician had an ownership interest or compensation relationship with the entity. The revisions to the Stark Bill included in OBRA prohibit a referral to an entity in which the physician or a family member has an ownership interest or compensation relationship if the referral is for any of a list of "designated health services." In January 1998, the Health Care Financing Administration issued proposed regulations to the Stark Bill. The proposed regulations, if enacted, would limit reimbursement for pharmaceutical expenses, would classify chemotherapy as a "designated health service" and would restrict the manner in which health care services are provided. It is not yet possible to predict whether these proposed regulations will be adopted or, if adopted, what their final form, effective dates and impact on the Company will be. Prohibitions on Certain Compensation Arrangements. The OBRA legislation also prohibits physician group practices from developing compensation or bonus arrangements that are directly related to the volume or value of referrals by a physician in the group for designated health services. The Company believes that the compensation arrangements of the affiliated physician groups administered by the Company are in compliance with the OBRA requirements. Reimbursement Requirements. In order to participate in the Medicare and Medicaid programs, the Company's affiliated physicians must comply with stringent reimbursement regulations, including those that require many health care services to be conducted "incident to" a physician's supervision. Satisfaction of these reimbursement requirements is an integral component the Company's compliance program. The Company believes that its affiliated physicians are in compliance with the reimbursement requirements; however, affiliated physicians' failure to comply with these requirements could negatively affect the Company's results of operations. Antitrust. The Company and its affiliated physician groups are subject to a range of antitrust laws that prohibit anti-competitive conduct, including price fixing, concerted refusals to deal and division of market. The Company believes it is in compliance with such federal and state laws, but there can be no assurance that a review of the Company's business would not result in a determination that could adversely affect the operations of the Company and its affiliated physician groups. Regulatory Compliance. The Company recognizes that health care regulations will continue to change and, as a result, regularly monitors developments in health care law. The Company expects to modify its agreements and operations from time to time as the business and regulatory environment changes. While the Company believes it will be able to structure all of its agreements and operations in accordance with applicable law, there can be no assurance that its arrangements will not be successfully challenged. Employees As of December 31, 1997, the Company employed 1,162 people. In addition, as of December 31, 1997, the affiliated physician groups employed 1,601 people (excluding the affiliated physicians). Under the terms of the management agreements with the affiliated physician groups, the Company is responsible for the practice compensation and benefits of the groups' non-physician medical personnel. No employee of the Company or of any affiliated physician group is a member of a labor union or subject to a collective bargaining agreement. The Company considers its relations with its employees to be good. 6 Service Marks The Company has registered the service marks "American Oncology Resources" and "AOR" with the United States Patent and Trademark Office. ITEM 2. PROPERTIES The Company leases 45,750 square feet of space at 16825 Northchase Drive, Suite 1300, in Houston, Texas, where the Company's headquarters are located. The Company or its affiliated physician groups also own, lease, sublease or occupy the facilities where the affiliated physician groups provide medical services. In connection with the development of integrated cancer centers, the Company has acquired land valued at approximately $2.2 million. The Company anticipates that, as its affiliated group practices grow, expanded facilities will be required. ITEM 3. LEGAL PROCEEDINGS The provision of medical services by the affiliated physicians with which the Company contracts entails an inherent risk of professional liability claims. The Company does not control the practice of medicine by physicians or the compliance with certain regulatory and other requirements directly applicable to physicians and physician groups. Because the practices purchase and resell pharmaceutical products, they face the risk of product liability claims. Although the Company has not been a party to any claims, suits or complaints relating to services and products provided by the Company, or physicians affiliated with the Company, there can be no assurances that such claims will not be asserted against the Company in the future. The Company maintains insurance coverage that it believes to be adequate both as to risks and amounts. In addition, pursuant to the management services agreements with the affiliated physician groups, the affiliated practices and the Company are required to maintain comprehensive professional liability insurance. Successful malpractice claims asserted against the Company or one of the affiliate physician groups could, however, have a material adverse effect on the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of 1997. 7 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is traded on the Nasdaq Stock Market's National Market under the symbol AORI. The high and low closing sale prices of the Common Stock, as reported by Nasdaq, were as follows for the quarterly periods indicated. All stock prices have been adjusted to reflect a 2-for-1 split of the Company's Common Stock that was effected as a stock dividend on June 10, 1996. Year Ended December 31, 1996 High Low ------ ------ Fiscal Quarter Ended March 31, 1996 $24.81 $18.19 Fiscal Quarter Ended June 30, 1996 $26.00 $20.06 Fiscal Quarter Ended September 30, 1996 $22.25 $ 6.25 Fiscal Quarter Ended December 31, 1996 $11.25 $ 7.31 Year Ended December 31, 1997 Fiscal Quarter Ended March 31, 1997 $11.00 $ 8.75 Fiscal Quarter Ended June 30, 1997 $16.88 $ 7.44 Fiscal Quarter Ended September 30, 1997 $17.38 $13.31 Fiscal Quarter Ended December 31, 1997 $19.00 $12.75 As of March 10, 1998, there were approximately 5,810 holders of the Common Stock. The Company has not declared or paid any cash dividends on its Common Stock. The payment of cash dividends in the future will depend on the Company's earnings, financial condition, capital needs and other factors deemed pertinent by the Company's board of directors, including the limitations, if any, on the payment of dividends under state law and then-existing credit agreements. It is the present policy of the Company's board of directors to retain earnings, if any, to finance the operations and expansion of the Company's business. The Company's credit facility currently requires creditor approval for the payment of cash dividends. See "Management Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." RECENT SALES OF UNREGISTERED SECURITIES In connection with each affiliation transaction between the Company and an oncology group, the Company purchases the nonmedical assets of, and enters into a long-term management agreement with, that oncology group. In consideration for that arrangement, the Company typically pays cash, issues subordinated promissory notes (in general, payable on each of the third through seventh anniversaries of the closing date at an annual interest rate of seven percent) and unconditionally agrees to deliver shares of Common Stock at specified future dates (in general, on each of the third through fifth anniversaries of the closing date). The following table describes all private placements by the Company of the Company's securities during 1997. Each sale was a private placement made in connection with a physician transaction, described in general in the preceding paragraph, to affiliated oncologists, the overwhelming majority of whom are accredited investors. No underwriter was involved in any such sale, and no commission or similar fee was paid with respect thereto. Each sale was not registered under the Securities Act of 1933 in reliance on Section 4(2) of such Act and Rule 506 enacted thereunder. 8
Number of Shares of Common Aggregate Principal Amount of Date of Transaction Number of Physicians Stock (1) Notes 1/97 2 94,452 $ 1,620,000 1/97 2 67,022 859,000 3/97 1 25,134 470,000 3/97 8 514,124 6,006,000 4/97 4 342,632 4,223,000 4/97 4 253,385 600,000 4/97 1 12,717 149,000 4/97 1 30,088 646,000 6/97 2 28,658 420,000 9/97 2 28,230 602,000 11/97 5 155,396 1,240,000 11/97 3 397,947 2,200,000 11/97 23 1,117,074 19,925,000
(1) In connection with each affiliation transaction, the Company unconditionally agrees to deliver shares of Common Stock at specified future dates (typically on each of the third through fifth anniversaries of the closing date). 9 ITEM 6. SELECTED FINANCIAL DATA The selected consolidated financial information of the Company set forth below is qualified by reference to, and should be read in conjunction with, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and notes thereto included elsewhere in this report.
YEAR ENDED DECEMBER 31, ------------------------------------------------------ 1997 1996 1995 1994 1993 --------- ---------- --------- --------- --------- (in thousands, except per share data) STATEMENT OF OPERATIONS DATA: Revenue................................................ $321,840 $205,460 $ 99,174 $20,410 $ 7,177 -------- -------- -------- ------- ------- Operating expenses: Pharmaceuticals and supplies.......................... 144,890 85,210 35,763 7,575 2,461 Practice compensation and benefits.................... 61,296 41,350 19,766 4,001 1,809 Other practice costs.................................. 35,090 23,495 12,032 2,258 885 General and administrative............................ 21,174 14,095 9,406 4,367 2,076 Depreciation and amortization......................... 14,177 9,343 4,655 746 219 -------- -------- -------- ------- ------- 276,627 173,493 81,622 18,947 7,450 -------- -------- -------- ------- ------- Income (loss) from operations.......................... 45,213 31,967 17,552 1,463 (273) Interest income........................................ 348 1,062 2,007 143 52 Interest expense....................................... (8,715) (4,307) (3,690) (237) (96) Other, net............................................. 1,600(1) -------- -------- -------- ------- ------- Income (loss) before taxes............................. 36,846 28,722 17,469 1,369 (317) Income taxes (2)....................................... 13,979 11,072 5,852 126 -------- -------- -------- ------- ------- Net income (loss)...................................... $ 22,867 $ 17,650 $ 11,617 $ 1,243 $ (317) ======== ======== ======== ======= ======= Net income (loss) per share - basic.................... $0.50 $0.40 $0.33 $0.08 $ (0.04) ======== ======== ======== ======= ======= Shares used in per share computations - basic (3)...... 45,571 44,228 35,559 15,926 7,734 ======== ======== ======== ======= ======= Net income (loss) per share - diluted.................. $0.48 $0.37 $0.30 $0.07 $(0.04) ======== ======== ======== ======= ======= Shares used in per share computations - diluted (3).... 48,100 47,549 39,318 16,995 7,734 ======== ======== ======== ======= ======= DECEMBER 31, ------------------------------------------------------ 1997 1996 1995 1994 1993 -------- -------- -------- ------- ------- (in thousands) BALANCE SHEET DATA: Working capital (deficit)............................ $ 43,864 $ 42,972 $ 59,724 $ 6,653 $(1,175) Management service agreements, net................... 326,295 240,034 164,522 40,444 1,545 Total assets......................................... 483,893 339,400 272,359 55,709 5,413 Long-term debt....................................... 139,716 81,707 44,190 18,703 79 Stockholders' equity................................. 263,994 221,854 191,180 30,977 1,288
- ---------------- (1) Consists of life insurance proceeds of $2,091,000, less lease termination costs of $491,000. (2) No taxes are provided for 1993 due to operating losses. (3) See Note 1 to the Company's Consolidated Financial Statements. For information concerning the number of shares of Common Stock that the Company is obligated to issue at specified future dates to physicians whose groups have affiliated with the Company, see Note 7 to the Company's Consolidated Financial Statements. 10 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION AOR provides comprehensive management services under long-term agreements to oncology practices that provide a broad range of medical services to cancer patients, integrating the specialties of medical and gynecological oncology, hematology, radiation oncology, diagnostic radiology and stem cell transplantation. Since the Company's incorporation in October 1992, it has grown rapidly from managing six affiliated physicians in one state to 311 affiliated physicians in 16 states as of March 10, 1998:
MARCH 10, December 31, ------------ ------------------------------------------- 1998 1997 1996 1995 ------------ ------------ ------------ ------------- Affiliated physicians............................ 311 304 227 148 States........................................... 16 16 15 14
The Company enters into management agreements with, and purchases the nonmedical assets of, oncology practices. Under the terms of the management agreements, the Company provides comprehensive management services to its affiliated physician groups, including operational and administrative services, and furnishes personnel, facilities, supplies and equipment. The physician groups, in return, agree to practice medicine exclusively in affiliation with the Company under the management agreements. Substantially all of the Company's revenue consists of management fees paid under the terms of the management agreements. Management fees include all practice costs (other than amounts retained by physicians), a fixed monthly fee, an amount equal to a percentage of each affiliated physician group's net revenue (in most states) and, if certain financial criteria are satisfied, a performance fee. For the year ended December 31, 1997, none of the Company's affiliated physician groups contributed more than 10% of the Company's revenue. For the year ended December 31, 1996, only one of the Company's affiliated physician groups contributed more than 10% of the Company's revenue. For the year ended December 31, 1995, two of the Company's affiliated physician groups contributed more than 10% of the Company's revenue. In 1997, the payor mix of the affiliated physician groups' medical practice revenue, expressed as a percentage, was 33% for Medicare and Medicaid, 47% for managed care and 20% for private insurance and other payors. In 1996, the payor mix was 33% for Medicare and Medicaid, 45% for managed care and 22% for private insurance and other payors. In 1995, the payor mix was 27% for Medicare and Medicaid, 51% for managed care and 22% for private insurance and other payors. The payor mix varies from physician group to physician group and changes as a result of new practice affiliations. 11 Results of Operations The following table sets forth the percentages of revenue represented by certain items reflected in the Company's Statement of Operations. The information that follows should be read in conjunction with the Company's Consolidated Financial Statements and notes thereto included elsewhere herein.
Year Ended December 31, ------------------------- 1997 1996 1995 ------ ------ ----- Revenue................................. 100.0% 100.0% 100.0% ----- ----- ----- Operating expenses: Pharmaceuticals and supplies...... 45.0 41.5 36.1 Practice compensation and benefits 19.0 20.1 19.9 Other practice costs.............. 10.9 11.4 12.1 General and administrative........ 6.6 6.9 9.5 Depreciation and amortization..... 4.4 4.5 4.7 Net interest............................ 2.6 1.6 1.7 Other income............................ ____. (1.6) ----- Income before income taxes.............. 11.5 14.0 17.6 Income taxes............................ 4.4 5.4 5.9 ----- ----- ----- Net income.............................. 7.1% 8.6% 11.7% ===== ===== =====
1997 COMPARED TO 1996 The Company affiliated with thirteen and seventeen oncology groups in 1997 and 1996, respectively, the results of which are included in the Company's operating results from the dates of affiliation. Changes in results of operations year to year were caused in part by affiliations with these oncology practices. Overall, the Company experienced a decrease in operating margins from 1996 to 1997, with earnings before taxes, interest, depreciation and amortization ("EBITDA"), as a percentage of revenue, declining from 20.1% to 18.5%. A number of factors contributed to the decrease in operating margins, including (i) the introduction of a number of chemotherapy agents that are used in combination with or in addition to existing therapies, some of which have significantly lower margins than existing chemotherapy regimens, (ii) difficulty in efficiently integrating practices that affiliated with the Company in late 1996 and 1997 and (iii) higher discounts to managed care payors. The Company benefited, however, from lower general and administrative costs, practice compensation and benefits and other practice costs, in each case as a percentage of revenue. To address the decline in margins, the Company has adopted a number of strategies, including enhancing purchasing power by initiating preferred pharmaceutical relationships on behalf of its affiliated physician groups. Revenue. Revenue increased from $205.5 million in 1996 to $321.8 million in 1997, an increase of $116.3 million, or 57%. Revenue for markets under management in 1996 and 1997 increased $85.5 million or 42% over the same period from the prior year. The methodology for calculating same market growth is a change from the same practice growth disclosed in prior periods. The Company changed the methodology to more accurately reflect the revenue growth of a market from period to period as well as the changing structure of new physician transactions in 1997. Under the new method, revenue growth for all practices within a metropolitan service area in which the Company has operations in both periods is treated as same market growth. Under the old methodology, the same practice growth for 1997 over the comparable period in 1996 would have been a 25% increase in revenue. This growth was the result of expansion of services, increases in patient volume, recruitment of or affiliation with additional physicians and, to a lesser extent, increases in charges for certain physician services. The remaining $30.8 million was attributable to affiliations with oncology practices in new markets. Pharmaceuticals and Supplies. Pharmaceuticals and supplies, which include drugs, medications and other supplies used by the affiliated physician groups, increased from $85.2 million for 1996 to $144.9 million for 1997, an 12 increase of $59.7 million, or 70%. This increase was principally attributable to the same factors that caused revenue to increase. As a percentage of revenue, pharmaceuticals and supplies increased from 41.5% for 1996 to 45.0% for 1997. This increase was primarily due to a shift in the revenue mix to a higher percentage of drug revenue, the introduction of a number of new chemotherapy agents and, to a lesser extent, lower reimbursement from payors. Management expects that third-party payors will continue to negotiate the reimbursement rate for medical services, pharmaceuticals (including chemotherapy drugs) and other supplies, with the goal of lowering reimbursement and utilization rates, and that such lower reimbursement and utilization rates as well as shifts in revenue mix may continue to adversely impact the Company's margins with respect to such items. The Company has adopted a number of strategies to address this matter, including initiating preferred pharmaceutical relationships. Practice Compensation and Benefits. Practice compensation and benefits, which include the salaries, wages and benefits of the affiliated physician groups' employees (excluding affiliated physicians) and the Company's employees located at the affiliated physician practice sites and business offices, increased from $41.4 million in 1996 to $61.3 million in 1997, an increase of $19.9 million or 48%. This increase was principally attributable to the same factors that caused revenue to increase. As a percentage of revenue, practice compensation and benefits decreased from 20.1% for 1996 to 19.0% for 1997, primarily as a result of economies of scale. Other Practice Costs. Other practice costs, which consist of rent, utilities, repairs and maintenance, insurance and other direct practice costs, increased from $23.5 million in 1996 to $35.1 million in 1997, an increase of $11.6 million or 49%. This increase was principally attributable to the same factors that caused revenue to increase. As a percentage of revenue, other practice costs decreased from 11.4% for 1996 to 10.9% for 1997, primarily as a result of economics of scale. General and Administrative. General corporate expenses increased from $14.1 million in 1996 to $21.2 million in 1997, an increase of $7.1 million or 50%. This increase was primarily attributable to the addition of personnel and greater support costs associated with the Company's growth since December 31, 1996. As a percentage of revenue, general and administrative expenses decreased from 6.9% for 1996 to 6.6% for 1997, primarily as a result of economies of scale. Depreciation and Amortization. Depreciation and amortization expenses increased from $9.3 million in 1996 to $14.2 million in 1997, an increase of $ 4.9 million or 53%. This increase was primarily attributable to the new physician groups with which the Company affiliated as well as investments in equipment, leasehold improvements and management information systems during 1997. Interest. Net interest expense increased from $3.2 million in 1996 to $8.4 million in 1997, an increase of $5.2 million or 163%. The increase was the result of higher levels of debt, principally incurred to finance transactions with thirteen oncology groups during 1997. As a percentage of revenue, net interest expense increased from 1.6% in 1996 to 2.6% in 1997. Indebtedness to physicians increased from approximately $66 million at December 31, 1996 to approximately $ 94.7 million at December 31, 1997. In the future, management expects that net interest expense as a percentage of revenue will continue to increase due to anticipated debt related to medical practice transactions. Income Taxes. Income tax expense increased from the prior year as a result of the Company's increased profitability. For 1997, the Company recognized a tax provision of $14.0 million resulting in an effective rate of 38% as compared to a rate of 38.5% for 1996. The decrease in the effective rate is due primarily to a change in the Company's composition of revenue by state since 1996. 1996 COMPARED TO 1995 The Company affiliated with seventeen and fifteen oncology groups in 1996 and 1995, respectively, the results of which are included in the Company's operating results from the dates of affiliation. Changes in results of operations year to year were caused primarily by affiliations with these oncology practices. 13 Revenue. Revenue increased from $99.2 million in 1995 to $205.5 million in 1996, an increase of $106.3 million or 107%. Of this increase, $32.0 million was attributable to same market growth. This growth was the result of expansion of services, increases in patient volume, recruitment of or affiliation with additional physicians and, to a lesser extent, increases in charges for certain physician services. The remainder of the growth was attributable to affiliations with oncology practices in new markets. Pharmaceuticals and Supplies. Pharmaceuticals and supplies increased from $35.8 million for 1995 to $85.2 million for 1996, an increase of $49.4 million or 138%. This increase was principally attributable to the same factors that caused revenue to increase. As a percentage of revenue, pharmaceuticals and supplies increased from 36.1% for 1995 to 41.5% for 1996. This increase was primarily due to a shift in the revenue mix to a higher percentage of drug revenue, the introduction of a number of new chemotherapy agents and, to a lesser extent, lower reimbursement from payors. Practice Compensation and Benefits. Practice compensation and benefits increased from $19.8 million in 1995 to $41.4 million in 1996, an increase of $21.6 million or 109%. This increase was principally attributable to the same factors that caused revenue to increase. As a percentage of revenue, practice compensation and benefits increased from 19.9% for 1995 to 20.1% for 1996. Practice compensation and benefit costs relative to patient volumes decreased as a result of economies of scale. However, these improvements were offset by lower reimbursement rates caused by a shift in payor mix, higher discounts to payors and practice integration factors resulting from the Company's rapid growth. Other Practice Costs. Other practice costs increased from $12.0 million in 1995 to $23.5 million in 1996, an increase $11.5 million or 96%. This increase was principally attributable to the same factors that caused revenue to increase. As a percentage of revenue, other practice costs decreased from 12.1% for 1995 to 11.4% for 1996, primarily as a result of economies of scale. General and Administrative. General corporate expenses increased from $9.4 million in 1995 to $14.1 million in 1996, an increase of $4.7 million or 50%. This increase was primarily attributable to the addition of personnel and greater support costs associated with the Company's rapid growth since December 31, 1995. As a percentage of revenue, general and administrative expenses decreased from 9.5% for 1995 to 6.9% for 1996, primarily as a result of economies of scale. Depreciation and Amortization. Depreciation and amortization expenses increased from $4.7 million in 1995 to $9.3 million in 1996, an increase of $4.6 million or 98%. This increase was primarily attributable to the new physician groups with which the company affiliated as well as investments in equipment, leasehold improvements and management information systems during 1996. Interest. Net interest expense increased from $1.7 million in 1995 to $3.2 million in 1996, an increase of $1.5 million or 88%. The increase was the result of higher levels of debt, principally incurred to finance transactions with seventeen oncology practices during 1996. As a percentage of revenue, net interest expense decreased from 1.7% in 1995 to 1.6% in 1996. Indebtedness to physicians increased from approximately $57 million at December 31, 1995 to approximately $66 million at December 31, 1996. Income Taxes. Income tax expense increased from the prior year as a result of the Company's increased profitability as well as a change in the Company's composition of revenue by state since 1995. For 1996, the Company recognized a tax provision of $11.1 million resulting in an effective rate of 38.5% compared to 38% for 1995 adjusted for non-taxable, non-recurring life insurance proceeds of $2.1 million. 14 FORWARD-LOOKING STATEMENTS AND RISK FACTORS This Annual Report on Form 10-K includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in this report are forward- looking statements and, although the Company believes that the expectations reflected in such forward looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. The following are certain important factors that could cause actual results to differ materially from the Company's expectations ("Cautionary Statements"). All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements. The Company does not undertake to update any forward-looking statement that may be made from time to time on behalf of the Company. Growth Strategy; Rapid Growth. One of the Company's strategies is to grow through transactions with additional oncology groups and through the expansion of its affiliated physician groups. Identifying appropriate physician groups and proposing, negotiating and implementing economically attractive affiliations with them can be a lengthy, complex and costly process. There can be no assurance that the Company will continue to be successful in identifying and establishing relationships with additional oncology groups. The Company has experienced rapid growth in its business and staff. Continued rapid growth may impair the Company's ability to efficiently provide its management services to its affiliated physician groups and to adequately manage and supervise its employees. The Company's future results could be materially adversely affected if it is unable to manage growth effectively. In the event that the Company is successful in establishing relationships with additional physician groups, there can be no assurance that the Company will be able to successfully integrate the operations of such groups or to institute Company-wide systems and procedures to operate as a combined enterprise with such groups. In addition, a strategy of growth by acquisition or affiliation involves the risk of assuming unknown or contingent liabilities of the affiliated physician groups, which could be material, individually or in the aggregate. Any failure by the Company to successfully integrate newly affiliated physician groups or to effectively insulate itself from unwanted liabilities of such groups may have a material, adverse effect on the Company's business, financial condition and results of operations. Another strategy of the Company is to develop integrated cancer centers. The development of integrated cancer centers is subject to a number of risks, including (i) obtaining regulatory approval, including certificates of need (in some states), (ii) delays that often accompany construction of facilities and ( iii) environmental liabilities that attach to ownership, lease or operation of real property. Any failure or delay by the Company to successfully build and operate integrated cancer centers or to effectively insulate itself from liabilities arising from operating these centers may have a material, adverse effect on the Company's business, financial condition and results of operation. Dependence on Affiliated Physician Groups. The Company's revenue depends on revenue generated by the Company's affiliated physician groups. There can be no assurance that existing and future physician groups with which the Company affiliates will maintain successful medical practices, that the management agreements with the affiliated physician groups will not be terminated or that any of the key members of a particular physician group will continue practicing with such group. Loss of revenue by the affiliated physician groups could have a material adverse effect on the Company. Competition. The business of providing health care related services is intensely competitive. The Company is aware of a number of competitors specializing in the management of oncology practices, and several health care companies with established operating histories and significant resources are currently providing at least some management services to oncologists. In addition, there are other companies with substantial resources that may decide to enter the oncology practice management business. The Company's revenues depend on the continued success of its affiliated physician groups. The physician groups face competition from several sources, including sole 15 practitioners, single and multi-specialty groups, hospitals and managed care organizations. See "Business - Competition." Reductions in Third-Party Reimbursement. Physician groups typically bill various third-party payors, such as governmental programs (e.g., Medicare and Medicaid), private insurance plans and managed care plans, for the health care services provided to their patients. These third-party payors are increasingly negotiating or legislating the prices charged for medical services, pharmaceuticals and other supplies, with the goal of lowering reimbursement and utilization rates. For example, the proposed Stark II regulations would, if enacted, limit the reimbursement of pharmaceuticals expenses. Third-party payors can also deny reimbursement for medical services, pharmaceuticals and other supplies if they determine that a treatment was not performed in accordance with treatment protocols established by such payors or for other reasons. Loss of revenue by the Company's affiliated physician groups caused by cost containment efforts could have a material adverse effect on the Company. To the extent that patients or enrollees covered by a contract require more frequent or extensive care than is anticipated by the physician groups, the revenue to the affiliated physician groups derived from such contract may be insufficient to cover the costs of the services provided. Health Care Regulation. The health care industry is highly regulated at the federal and state levels. The Company believes its business and the practices of its affiliated physician groups are in material compliance with applicable law. The relationships between the Company and its affiliated physician groups, however, are unique and many aspects of these relationships have not been the subject of judicial or regulatory interpretation. There can be no assurance that a review of the Company's business or its affiliated physician groups by courts or by health care, tax, labor or other regulatory authorities would not result in determinations that could adversely affect the Company's operations or that the health care regulatory environment will not change so as to restrict the Company's existing operations or potential for expansion. There are currently several federal and state initiatives designed to amend regulations relating to the provision of health care services, the access to health care, the costs of health care and the manner in which health care providers are reimbursed for their services. However, it is not possible to predict whether any such initiatives will be enacted as legislation or, if enacted, what their form, effective dates or impact on the Company will be. See "Business Regulation." Risks Inherent in Provision of Medical Services. The Company's affiliated physician groups are involved in the delivery of health care services to the public and are exposed to the risk of professional liability claims. Claims of this nature, if successful, could result in damage awards to the claimants in excess of the limits of any applicable insurance coverage. Insurance against losses related to claims of this type can be expensive and varies widely from state to state. The Company and its affiliated physician groups maintain liability insurance in amounts and coverages believed to be usual and customary. Nevertheless, successful malpractice claims asserted against the physician groups or the Company could have a material adverse effect on the Company. See "Legal Proceedings." Dependence on Key Personnel. The Company depends on the services of its executive officers for the management of the Company and the implementation of its business strategy. The Company has obtained key man life insurance on its chief executive officer and its president. Nevertheless, the Company could be materially adversely affected if the chief executive officer, president or other executive officers were unwilling or unable to continue in the Company's employ. See "Directors and Executive Officers of the Registrant." 16 Risk of Applicability of Insurance Regulations. The Company and its affiliated groups may in the future enter into contracts with managed care organizations whereby the Company and its affiliated groups would assume risk in connection with providing healthcare services under capitation arrangements. If the Company or its affiliated groups are considered to be in the business of insurance as a result of entering into such risk sharing arrangements, the Company and such groups could become subject to a variety of regulatory and licensing requirements applicable to insurance companies which could have a material adverse effect upon the Company's business, financial condition and results of operations. Volatility of Stock Price. From time to time, there may be significant volatility in the market price for the Common Stock. Quarterly results of the Company, changes in earnings estimates by analysts, changes in general conditions in the economy, the financial markets or the health care industry, reimbursement trends or other developments affecting the Company or its competitors could cause the market price of the Common Stock to fluctuate substantially. Any shortfall in revenue, earnings or other financial results from levels expected by analysts could have an immediate and significant adverse effect on the market price of the Common Stock. In this regard the Company neither endorses nor accepts any responsibility for the estimates or recommendations issued by stock research analysts from time to time. In addition, in recent years, the stock market has experienced extreme price and volume fluctuations. This volatility has had a significant effect on the market prices of securities issued by many companies for reasons unrelated to their operating performance. See "Market for Registrant's Common Equity and Related Stockholder Matters." Shareholder Rights Plan; Anti-Takeover Provisions. Certain provisions of the Company's Certificate of Incorporation and certain provisions of the General Corporation Law of Delaware (the state in which the Company is incorporated) may make it difficult to change control of the Company and to replace incumbent management. For example, the Company's Certificate of Incorporation permits the Board of Directors, without stockholder approval, to issue additional shares of Common Stock or to establish one or more classes or series of Preferred Stock having the number of shares, designations, relative voting rights, dividend rates, liquidation and other rights, preferences and limitations that the Board of Directors can establish. The Company has also adopted a Shareholder Rights Plan, which would materially inhibit the ability of another entity to acquire control of the Company through a tender offer or otherwise without the approval of the Company's board of directors. These provisions could limit the price that certain investors might be willing to pay in the future for shares of Common Stock. SUMMARY OF OPERATIONS BY QUARTER The following table presents unaudited quarterly operating results for 1997 and 1996. The Company believes that all necessary adjustments have been included in the amounts stated below to present fairly the quarterly results when read in conjunction with the Consolidated Financial Statements. Results of operations for any particular quarter are not necessarily indicative of results of operations for a full year or predictive of future periods.
1997 QUARTER ENDED 1996 QUARTER ENDED -------------------------------------- ----------------------------------------- DEC 31 SEP 30 JUN 30 MAR 31 Dec 31 SEP 30 JUN 30 MAR 31 -------- ------- ------- -------- -------- -------- ------- ---------- (In thousands, except per share data) Net revenue.................. $89,626 $82,293 $79,525 $70,396 $63,635 $53,701 $47,374 $40,750 Income from operations....... 12,468 11,513 11,343 9,889 9,259 7,782 7,297 7,629 Net income................... 6,166 5,910 5,719 5,072 4,840 4,303 4,060 4,447 Net income per share-basic .13 .13 .13 .11 .11 .10 .09 .10 Net income per share-diluted .13 .12 .12 .11 .10 .09 .09 .09
17 LIQUIDITY AND CAPITAL RESOURCES The Company requires capital primarily to enter into management agreements with, and to purchase the nonmedical assets of, oncology medical practices. During 1996, the Company paid total consideration of $91 million in connection with affiliations with seventeen physician groups, including cash and transaction costs of $46 million. During 1997, the Company paid total consideration of $102 million in connection with affiliations with thirteen physician groups, including cash and transaction costs of $33 million. To fund this rapid growth and development, the Company has satisfied its transaction and working capital needs through debt and equity financings and borrowings under a $150 million syndicated revolving credit facility ("Credit Facility") with First Union National Bank of North Carolina ("First Union"), as agent for the various lenders. In addition, as part of the Credit Facility, the Company has recently obtained a $75 million end-loaded leasing facility, which will principally be used to finance the purchase of property and construction of integrated cancer centers. The Company has relied primarily on management fees received from its affiliated physician groups to fund its operations. Cash derived from operations was $33.4 million in 1997, an increase of $26.4 million from 1996. The increase was due to increased income from operations as well as improvements in cash management through vendor payment terms. During 1997, the Company borrowed $43 million, net, under the Credit Facility to fund medical practice transactions, development of integrated cancer centers and the purchase of its common stock under the Company's stock repurchase program. Borrowings under the Credit Facility bear interest at a rate equal to a rate based on prime rate or the London Interbank Offer Rate, based on a defined formula. The Credit Facility contains affirmative and negative covenants, including the maintenance of certain ratios, restrictions on sales, leases or other dispositions of properties, restrictions on other indebtedness and on the payment of dividends. The Company's management services agreements and the capital stock of the Company's subsidiaries are pledged as security under the Credit Facility. The Company is currently in compliance with the Credit Facility covenants, with additional capacity under the Credit Facility of $62.5 million at December 31, 1997. At December 31, 1997, the Company had working capital of $43.9 million and cash and equivalents of $5.0 million. The Company also had $71.2 million of current liabilities, including approximately $22.6 million of short-term notes and long-term indebtedness maturing before December 31, 1998. The Company currently expects that its principal use of funds in the near future will be in connection with future transactions with oncology groups, the purchase of medical equipment, investment in information systems and the acquisition or lease of real estate for the development of integrated cancer centers. The Company expects that cash generated from operations and amounts available under the Credit Facility will be adequate to satisfy the Company's cash requirements for the next 12 months. YEAR 2000 ISSUE The Year 2000 issue (i.e., the ability of computer systems to accurately identify and process dates beginning with year 2000 and beyond) affects virtually all companies and organizations. Recognizing the need to limit problems associated with year 2000 software failures, the Company has developed plans to address this potential exposure. Key financial information and operational systems are being assessed, detailed plans have been developed and initial conversion efforts are underway. The Company recognizes that information systems are integral to its operations, and in 1998 and 1999 the Company intends to make significant capital investments in developing an integrated clinical and financial information system throughout its network of affiliated physicians. As a result of these investments, the Company believes that the year 2000 issue will not pose significant internal problems for the Company's business. The Company is also communicating with suppliers, financial institutions and, most importantly, third-party payors (such as managed care companies and governmental payors) to determine their plans to limit problems associated with the year 2000 issue. Despite these efforts, the year 2000 issue is complex and may present unforeseen problems in the Company's systems and from third parties with which the Company deals, such as third party payors. Failure 18 of the Company's or third parties' computer systems could materially and adversely impact the Company's operations. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Reference is made to the Index to Consolidated Financial Statements, which appears on page 22 of this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The Proxy Statement issued in connection with the Annual Meeting of Stockholders to be held o n May 14, 1998, to be filed with the Securities and Exchange Commission pursuant to Rule 14a-6(c), contains under the caption, "Election of Directors" information required by Item 10 of Form 10-K as to directors and certain executive officers of the Company and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The Proxy Statement issued in connection with the Annual Meeting of Stockholders to be held on May 14, 1998, to be filed with the Securities and Exchange Commission pursuant to Rule 14a-6(c), contains under the caption, "Compensation of Executive Officers" information required by Item 11 of Form 10- K as to directors and certain executive officers of the Company and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The Proxy Statement issued in connection with the Annual Meeting of Stockholders to be held on May 14, 1998, to be filed with the Securities and Exchange Commission pursuant to Rule 14a-6(c), contains under the caption, "Beneficial Ownership of Common Stock of Directors, Nominees and Executive Officers" information required by Item 12 of Form 10-K as to directors, certain executive officers and certain beneficial owners of the Company and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Proxy Statement issued in connection with the Annual Meeting of Stockholders to be held on May 14, 1998, to be filed with the Securities and Exchange Commission pursuant to Rule 14a-6(c), contains under the caption, "Certain Relationships and Related Transactions" information required by Item 13 of Form 10-K as to directors and certain executive officers of the Company and is incorporated herein by reference. 19 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as a part of this report: 1. Financial Statements: See Item 8 of this report. 2. Financial Statement Schedules: See Item 8 of this report. 3. Exhibit Index Exhibit No. Description ----------- ----------- 3.1 Certificate of Incorporation of the Company, as amended (filed as Exhibit 3.1 to Form 10-Q for the quarter ended March 31, 1997 and incorporated herein by reference) 3.2 By-Laws of the Company, as amended (filed as Exhibit 3.2 to Form 10-Q for the quarter ended March 31, 1997 and incorporated herein by reference) 4.1 Rights Agreement between the Company and American Stock Transfer & Trust Company (incorporated by reference from Form 8-A filed June 2, 1997) 10.1 Third Amended and Restated Loan Agreement among the Company and First Union National Bank, as agent 10.2 Participation Agreement among AOR Synthetic Real Estate, Inc., the Company, First Union National Bank and the other parties identified therein 10.3 Credit Agreement among the Company, First Security Bank, First Union National Bank and the other parties identified therein 10.4 Chief Executive Officer Stock Option Plan and Agreement (filed as an exhibit to the Registration Statement on Form S-1 (Registration No. 33-90634) and incorporated herein by reference) 10.5 Everson Stock Option Plan and Agreement (filed as an exhibit to the Registration Statement on Form S-1 (Registration No. 33-90634) and incorporated herein by reference) 10.6 Non-Employee Director Stock Option Plan (filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 and incorporated herein by reference) 10.7 Key Employee Stock Option Plan, as amended (filed as an exhibit to the Registration Statement on Form S-8 (Registration No. 333-30057) and incorporated herein by reference) 20 10.8 Affiliate Stock Option Plan (filed as an exhibit to the Registration Statement on Form S-1 (Registration No. 33-90634) and incorporated herein by reference) 11 Statement Re - Computation of Per Share Earnings 21.1 Subsidiaries of the Registrant 23(a) Consent of Independent Accountants 27 Financial Data Schedule (b) Reports on Form 8-K. During the fiscal quarter ended December 31, 1997, the Registrant filed no reports on Form 8-K. 21 AMERICAN ONCOLOGY RESOURCES, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Consolidated Financial Statements as of December 31, 1997 and 1996 and for the three years ended December 31, 1997: Page ---- Report of Independent Accountants................ 23 Consolidated Balance Sheet....................... 24 Consolidated Statements of Operations............ 25 Consolidated Statements of Stockholders' Equity.. 26 Consolidated Statements of Cash Flows............ 27 Notes to Consolidated Financial Statements....... 28 Financial statement schedules have been omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto. 22 REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders and Board of Directors of American Oncology Resources, Inc. In our opinion, the consolidated financial statements listed in the index on page 22 present fairly, in all material respects, the financial position of American Oncology Resources, Inc. and its subsidiaries at December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Houston, Texas March 11, 1998 23 AMERICAN ONCOLOGY RESOURCES, INC. CONSOLIDATED BALANCE SHEET (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
December 31, -------------------- 1997 1996 --------- --------- ASSETS Current assets: Cash and equivalents..................................................... $ 5,000 $ 3,429 Accounts receivable...................................................... 92,038 61,183 Prepaids and other current assets........................................ 10,149 5,775 Due from affiliated physician groups..................................... 7,904 5,356 -------- -------- Total current assets................................................... 115,091 75,743 -------- -------- Property and equipment: Land..................................................................... 2,229 1,336 Computers and software................................................... 11,617 6,200 Equipment, furniture and fixtures........................................ 20,578 13,169 Buildings and leasehold improvements..................................... 16,685 4,439 -------- -------- 51,109 25,144 Less - accumulated depreciation and amortization......................... (12,545) (6,201) -------- -------- 38,564 18,943 Management service agreements, net of amortization of $15,589 and $8,343.. 326,295 240,034 Other assets.............................................................. 3,943 4,680 -------- -------- $483,893 $339,400 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term notes payable................................................. $ 14,011 $ 4,219 Current maturities of long-term indebtedness............................. 8,628 5,564 Accounts payable......................................................... 38,870 15,148 Due to affiliated physician groups....................................... 289 616 Accrued compensation costs............................................... 2,783 1,806 Accrued interest payable................................................. 2,804 2,325 Income taxes payable..................................................... 8 641 Other accrued liabilities................................................ 3,834 2,452 -------- -------- Total current liabilities.............................................. 71,227 32,771 Deferred income taxes..................................................... 8,956 3,068 Long-term indebtedness.................................................... 139,716 81,707 -------- -------- Total liabilities...................................................... 219,899 117,546 -------- -------- Stockholders' equity: Preferred stock, $.01 par value, 1,000,000 shares authorized, none issued and outstanding Series A Preferred Stock, $.01 par value, 500,000 shares authorized and reserved, none issued and outstanding Common stock, $.01 par value, 80,000,000 shares authorized, 29,721,754 and 28,369,482 shares issued and 29,721,754 and 27,371,422 shares outstanding............................ 297 284 Additional paid-in capital............................................... 138,381 139,804 Common stock to be issued, 17,937,752 and 17,462,782 shares.............. 74,757 61,225 Treasury stock, 998,060 shares........................................... (8,530) Retained earnings........................................................ 50,559 29,071 -------- -------- Total stockholders' equity............................................. 263,994 221,854 -------- -------- Commitments and contingencies (Note 9).................................... -------- -------- $483,893 $339,400 ======== ========
The accompanying notes are an integral part of this statement. 24 AMERICAN ONCOLOGY RESOURCES, INC. CONSOLIDATED STATEMENT OF OPERATIONS (in thousands, except per share data)
Year ended December 31, ------------------------------ 1997 1996 1995 --------- --------- -------- Revenue.......................................... $321,840 $205,460 $99,174 -------- -------- ------- Operating expenses: Pharmaceuticals and supplies................... 144,890 85,210 35,763 Practice compensation and benefits............. 61,296 41,350 19,766 Other practice costs........................... 35,090 23,495 12,032 General and administrative..................... 21,174 14,095 9,406 Depreciation and amortization.................. 14,177 9,343 4,655 -------- -------- ------- 276,627 173,493 81,622 -------- -------- ------- Income from operations........................... 45,213 31,967 17,552 Other income (expense): Interest income................................ 348 1,062 2,007 Interest expense............................... (8,715) (4,307) (3,690) Other, net..................................... 1,600 -------- -------- ------- Income before income taxes....................... 36,846 28,722 17,469 Income taxes..................................... 13,979 11,072 5,852 -------- -------- ------- Net income....................................... $ 22,867 $ 17,650 $11,617 ======== ======== ======= Net income per share - basic..................... $0.50 $0.40 $0.33 ======== ======== ======= Shares used in per share calculations - basic.... 45,571 44,228 35,559 ======== ======== ======= Net income per share - diluted................... $0.48 $0.37 $0.30 ======== ======== ======= Shares used in per share calculations - diluted.. 48,100 47,549 39,318 ======== ======== =======
The accompanying notes are an integral part of this statement. 25 AMERICAN ONCOLOGY RESOURCES, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (in thousands)
Common Stock Additional Common Treasury Stockholder ---------------------- paid-in Stock to Stock Retained notes Shares Par Value capital be issued Cost earnings receivable Total ---------- --------- ----------- ---------- -------- ---------- ----------- -------- Balance at December 31, 1994......... 15,266 $ 153 $ 22,085 $ 8,811 $ 28 $ (100) $ 30,977 Issuances of Common Stock............ 12,199 122 110,875 110,997 Medical practice transactions - value of 9,628,388 shares to be issued............................ 37,207 37,207 Compensation value of non-employee options to purchase Common Stock.. 250 250 Exercise of options to purchase Common Stock...................... 12 32 32 Repayment of promissory notes........ 100 100 Net income........................... 11,617 11,617 ---------- --------- ----------- ---------- -------- --------- ---------- -------- Balance at December 31, 1995......... 27,477 275 133,242 46,018 11,645 0 191,180 Medical practice transactions - value of 2,313,250 shares to be issued......................... 15,312 15,312 Purchase of 1,110,500 shares of Treasury Stock.................... $ (9,414) (9,414) Delivery of 112,440 shares of Common Stock to be issued from Treasury.......................... (555) (105) 884 (224) Exercise of options to purchase Common Stock...................... 892 9 1,116 1,125 Tax benefit from exercise of non-qualified stock options....... 6,001 6,001 Net income........................... 17,650 17,650 ---------- --------- ----------- ---------- -------- --------- ---------- -------- Balance at December 31, 1996......... 28,369 284 139,804 61,225 (8,530) 29,071 0 221,854 Medical practice transactions - value of 3,066,859 shares to be issued......................... 22,355 22,355 Purchase of 657,000 shares of Treasury Stock.................... (6,418) (6,418) Delivery of 1,650,064 shares of Common Stock to be issued from Treasury.......................... (7,981) (5,540) 14,900 (1,379) Delivery of 941,825 shares from issuance of Common Stock.......... 942 9 3,274 (3,283) Exercise of options to purchase Common Stock...................... 411 4 1,242 48 1,294 Tax benefit from exercise of non-qualified stock options....... 2,042 2,042 Net income........................... 22,867 22,867 ---------- --------- ----------- ---------- -------- --------- ---------- -------- Balance at December 31, 1997......... 29,722 $ 297 $ 138,381 $ 74,757 $ 0 $ 50,559 $ 0 $263,994 ========== ========= =========== ========== ======== ========= ========== ========
The accompanying notes are an integral part of this statement. 26 AMERICAN ONCOLOGY RESOURCES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands)
Year ended December 31, ----------------------------------- 1997 1996 1995 --------- --------- ---------- Cash flows from operating activities: Net income................................................. $ 22,867 $ 17,650 $ 11,617 Noncash adjustments: Depreciation and amortization............................ 14,177 9,343 4,655 Deferred income taxes.................................... 5,916 2,130 876 Imputed interest on medical practice transactions........ 248 122 315 Cash provided (used), net of effects of medical practice transactions, by changes in: Accounts receivable...................................... (26,392) (24,084) (9,190) Prepaids and other current assets........................ (4,342) (2,088) (2,566) Other assets............................................. 252 Accounts payable......................................... 22,064 1,670 3,033 Due from/to affiliated physician groups.................. (2,636) (2,524) (873) Income taxes payable..................................... 1,409 2,672 4,186 Other accrued liabilities................................ 71 2,068 2,059 -------- -------- --------- Net cash provided by operating activities.............. 33,382 6,959 14,364 -------- -------- --------- Cash flows from investing activities: Sales of short-term investments............................ 44,967 323,991 Purchases of short-term investments........................ (368,100) Acquisition of property and equipment...................... (22,538) (10,030) (3,705) Net payments in medical practice transactions.............. (33,228) (46,221) (51,312) Other...................................................... 1,188 (3,052) -------- -------- --------- Net cash used by investing activities.................. (54,578) (14,336) (99,126) -------- -------- --------- Cash flows from financing activities: Proceeds from Credit Facility.............................. 142,000 23,000 35,000 Repayment of Credit Facility............................... (99,000) (35,000) Repayment of other indebtedness............................ (14,549) (17,444) (14,489) Debt financing costs....................................... (560) (1,277) (411) Proceeds from exercise of stock options.................... 1,294 1,125 32 Purchase of Treasury Stock................................. (6,418) (9,414) Net proceeds from issuance of Common Stock................. 110,997 Collection of promissory notes............................. 100 -------- -------- --------- Net cash provided (used) by financing activities....... 22,767 (4,010) 96,229 -------- -------- --------- Increase (decrease) in cash and equivalents................. 1,571 (11,387) 11,467 Cash and equivalents: Beginning of period........................................ 3,429 14,816 3,349 -------- -------- --------- End of period.............................................. $ 5,000 $ 3,429 $ 14,816 ======== ======== ========= Interest paid............................................... $ 7,894 $ 3,735 $ 2,104 Taxes paid.................................................. 6,380 6,567 790 Noncash transactions: Tax benefit from exercise of non-qualified stock options... 2,042 6,001 Value of Common Stock to be issued in medical practice transactions............................................. 22,355 15,312 37,207 Delivery of Common Stock to be issued in medical practice transactions............................................. 18,183 884 Debt issued in medical practice transactions............... 37,860 25,295 50,817 Debt assumed in medical practice transactions.............. 4,554 684 4,712
The accompanying notes are an integral part of this statement. 27 AMERICAN ONCOLOGY RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES American Oncology Resources, Inc., a Delaware corporation (the "Company"), is a physician practice management company focusing exclusively on oncology. The Company provides comprehensive management services under long-term agreements to oncology practices comprised of 304 physicians in 16 states at December 31, 1997. These practices provide a comprehensive range of medical services to cancer patients, integrating the multiple specialties of cancer care, including medical and gynecological oncology, hematology, radiation oncology, diagnostic radiology and stem cell transplantation. The following is a summary of the Company's significant accounting policies: Principles of consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated. Use of estimates The preparation of the Company's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities. Because of inherent uncertainties in this process, actual future results could differ from those expected at the reporting date. Cash equivalents and investments The Company considers all highly liquid debt securities with original maturities of three months or less to be cash equivalents. At December 31, 1995, the Company considered all investments in debt securities as available for use in current operations and therefore classified them as available for sale. Revenue recognition Substantially all of the Company's revenues represent the contractual fees earned under its long-term management service agreements with affiliated physician groups. Under the agreements, the Company is contractually responsible and at risk for the operating costs of the affiliated physician groups, except for amounts retained by physicians. The Company's revenues include the reimbursement of all affiliated physician group operating costs and the fixed and variable contractual management fees as defined in the management services agreements. Contractual fees are accrued when collection is probable. Property and equipment Property and equipment is stated at cost. Depreciation of property and equipment is provided using the straight-line method over the estimated useful lives of three to ten years for equipment, computers and software, furniture and fixtures, the lesser of ten years or the remaining lease term for leasehold improvements and twenty years for buildings. 28 AMERICAN ONCOLOGY RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Management service agreements Management service agreements consist of the costs of purchasing the rights to manage oncology groups. These costs are amortized on a straight-line basis over the initial noncancelable 40-year terms of the related management service agreements. Under the long-term agreements, the affiliated physician groups have agreed to provide medical services on an exclusive basis only through facilities managed by the Company. The agreements are noncancelable except for performance defaults. In the event an affiliated physician group breaches the agreement, or if the Company terminates with cause, the physician group is required to purchase all related tangible and intangible assets, including the unamortized portion of the management service agreement, at the then net book value. The carrying value of the management service agreements is reviewed for impairment when events or changes in circumstances indicate their recorded cost may not be recoverable. If the review indicates that the undiscounted cash flows from operations of the related management service agreement over the remaining amortization period is expected to be less than the recorded amount of the management service agreement, the Company's carrying value of the management service agreement will be reduced to its estimated fair value. Other assets The costs associated with obtaining long-term financing are capitalized and amortized over the terms of the related debt agreements. Income taxes Deferred tax assets and liabilities are determined based on the temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities using the enacted tax rates in effect in the years in which the differences are expected to reverse. In estimating future tax consequences, all expected future events are considered other than enactments of changes in the tax law or rates. Fair Value of Financial Instruments The Company's receivables, payables, prepaids and accrued liabilities are current and on normal terms and, accordingly, are believed by management to approximate fair value. Management also believes that subordinated notes issued to affiliated physicians approximate fair value when current interest rates for similar debt securities are applied. Earnings per share During 1997, the Company adopted the provisions of Financial Accounting Standards Board (FASB) Statement No. 128, "Earnings Per Share," (FAS 128) which requires the Company to disclose "basic" and "diluted" EPS and to restate all prior periods presented for comparative purposes. In addition, the Securities and Exchange Commission recently issued Staff Accounting Bulletin No. 98 (SAB 98) which eliminates the impact of "cheap stock" issued prior to an initial public offering. The Company has restated all periods presented to comply with the provisions of FAS 128 and SAB 98. The computation of basic earnings per share is based on a weighted average number of Common Stock and Common Stock to be issued shares outstanding during the periods. The computation of the diluted earnings per share is based on a weighted average number of Common Stock and Common Stock to be issued shares outstanding during the periods as well as all dilutive potential Common Stock calculated under the treasury stock method. The diluted 29 AMERICAN ONCOLOGY RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED EPS amount currently approximates the primary EPS amount which would previously have been reported due to the adoption of this Statement. The following table summarizes the determination of shares used in per share calculations (in thousands):
Year ended December 31, -------------------------- 1997 1996 1995 -------- ------- ------- Basic Outstanding at end of period: Common Stock...................................... 29,722 27,371 27,476 Common Stock to be issued......................... 17,938 17,463 15,262 ------ ------ ------ 47,660 44,834 42,738 Effect of weighting................................. (2,089) (606) (7,179) ------ ------ ------ Shares used in per share calculation............. 45,571 44,228 35,559 ====== ====== ====== Diluted Outstanding at end of period: Common Stock...................................... 29,722 27,371 27,476 Common Stock to be issued......................... 17,938 17,463 15,262 ------ ------ ------ 47,660 44,834 42,738 Effect of weighting and assumed share equivalents for grants of stock options and issuances of stock at less than the weighted-average price............. 440 2,715 (3,420) ------ ------ ------ Shares used in diluted share calculation.......... 48,100 47,549 39,318 ====== ====== ======
Reclassifications Certain amounts previously reported have been reclassified to conform with their 1997 presentation. Accounting Pronouncements for Future Adoption The FASB recently issued Statement No. 130, "Comprehensive Income," which is effective for the Company's financial statements as of and for the year ending December 31, 1998. In addition to net income, comprehensive income is comprised of "other comprehensive income" which includes all charges and credits to equity that are not the result of transactions with owners of the Company's Common Stock. This Statement is not anticipated to materially affect the Company's financial statements. The FASB recently issued statement No. 131, "Disclosures About Segments of an Enterprise and Related Information," which is effective for the Company's financial statements as of and for the year ending December 31, 1998. This Statement requires reporting of summarized financial results for operating segments as well as established standards for related disclosures about products and services, geographic areas and major customers. Primary disclosure requirements include total segment revenues, total segment profit or loss and total segment assets. The Company has not yet completed its evaluation of the impact of this Statement on the Company's financial statements. 30 AMERICAN ONCOLOGY RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE 2 - REVENUE Medical service revenue for services to patients by the physician groups affiliated with the Company is recorded when services are rendered based on established or negotiated charges reduced by contractual adjustments and allowances for doubtful accounts. Differences between estimated contractual adjustments and final settlements are reported in the period when final settlements are determined. Medical service revenue of the affiliated physician groups is reduced by the contractual amounts retained by the physician groups to arrive at the Company's revenue. The following presents the amounts included in the determination of the Company's revenues (in thousands):
Year ended December 31, ----------------------------- 1997 1996 1995 --------- -------- -------- Medical service revenue.......................... $424,446 $269,380 $129,709 Amounts retained by affiliated physician groups.. 102,606 63,920 30,535 -------- -------- -------- Revenue.......................................... $321,840 $205,460 $ 99,174 ======== ======== ========
In 1997, none of the Company's affiliated physician groups provided more than 10% of revenues. In 1996, 11% of the Company's revenues were derived from one affiliated physician group, which was the only group that provided 10% or more of revenues. In 1995, 15% and 11% of the Company's revenues were derived from two affiliated physician groups. For the years ended December 31, 1997, 1996 and 1995, the affiliated physician groups derived approximately 33%, 33% and 27%, respectively, of their medical service revenue from services provided under the Medicare and state Medicaid programs and 47%, 45% and 51%, respectively, from contractual, fee-for- service arrangements with managed care programs, none of which individually aggregated more than 10% of medical service revenue. The remaining 20%, 22% and 22%, respectively, was derived from various non-contracted fee-for-service payors. Capitation revenues were less than 1% of total revenue in 1997, 1996 and 1995. Changes in the payor reimbursement rates, particularly Medicare due to its concentration, or affiliated physician groups' payor mix can materially and adversely affect the Company's revenues. Under its management service agreements, receivables generated by affiliated physician groups from patient services are purchased at their net collectible value on a full recourse basis by the Company; thus, the Company does not have an allowance for doubtful accounts. As a result, the Company's accounts receivable are a function of medical service revenue of the affiliated physician groups rather than the Company's revenue. Such receivables are recorded by the affiliated physician groups net of contractual adjustments and allowances for doubtful accounts. Receivables from the Medicare and state Medicaid programs are considered to have minimal credit risk, and no other payor comprised more than 10% of accounts receivable at December 31, 1997. 31 AMERICAN ONCOLOGY RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE 3 - MEDICAL PRACTICE TRANSACTIONS From January 1995 through December 31, 1997, the Company affiliated with oncology groups comprised of 262 physicians. The consideration paid for the physician groups to enter into long-term management service agreements and for the nonmedical assets of the physician groups, primarily receivables and fixed assets, has been accounted as asset purchases. Total consideration includes the assumption by the Company of specified liabilities, the estimated value of nonforfeitable commitments by the Company to issue Common Stock at specified future dates for no additional consideration, short-term and subordinated notes, cash payments and related transaction costs as follows (in thousands):
Year ended December 31, --------------------------------------------- 1997 1996 1995 -------------- -------------- ------------- Cash and transaction costs.......................... $ 33,228 $46,221 $ 51,312 Short-term and subordinated notes................... 37,860 25,295 50,817 Common Stock to be issued........................... 22,355 15,312 37,207 Liabilities assumed................................. 8,252 3,794 11,014 -------- ------- -------- Total costs......................................... $101,695 $90,622 $150,350 ======== ======= ========
During 1997, the Company affiliated with 13 oncology physician groups on the effective dates indicated as follows: January 10, Williamsburg Hematology and Oncology of Virginia, total consideration of $4,566,000 including 94,452 shares of Common Stock to be issued with a value of $588,000; March 14, Virginia Oncology Associates, P.C., of Norfolk, Virginia, total consideration of $21,085,000 including 514,124 shares of Common Stock to be issued with a value of $3,239,000; April 1, Central Indiana Radiation Oncology, P.S.C. of Indiana, total consideration of $4,622,000, including 253,385 shares of Common Stock to be issued with a value of $1,393,000; March 24, Texas Radiation Oncology Group, L.L.P. of Austin, Texas, total consideration of $12,065,000, including 342,632 shares of Common Stock to be issued with a value of $1,754,000; November 1, Hematology Associates of South Texas, P.A., total consideration of $6,082,000, including 155,396 shares of Common Stock to be issued with a value of $1,366,000; November 1, Clinical Hematology Oncology Associates, P.C. of Arizona, total consideration of $9,855,000, including 397,947 shares of Common Stock to be issued with a value of $3,767,000; November 17, Florida Community Cancer Centers, P.A. of Tampa, Florida, total consideration of $34,846,000 including 1,117,074 shares of Common Stock to be issued with a value of $8,964,000; and in January through September of 1997, six smaller transactions with physician groups in Tulsa, Oklahoma; Las Vegas, Nevada; Portland, Oregon; Fairfax, Virginia; Vancouver, Washington; and Franklin Pennsylvania; for total consideration of $8,574,000 which includes 191,849 shares of Common Stock to be issued with a value of $1,284,000. During 1996, the Company affiliated with 17 oncology physician groups on the effective dates indicated as follows: March 1, Cancer Center of Kansas, P.A. of Wichita, Kansas, total consideration of $12,547,000 including 163,676 shares of Common Stock to be issued with a value of $1,926,000; March 1, Coram Physician Services of Fairfax, Virginia, total consideration of $15,518,000 including 116,298 shares of Common Stock to be issued with a value of $1,375,000; May 1, San Antonio Tumor and Blood Clinic, P.A. and Drs. Cohen, Gordon and Lopez, P.A. of San Antonio, Texas, total consideration of $12,479,000 including 210,048 shares of Common 32 AMERICAN ONCOLOGY RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED Stock to be issued with a value of $1,980,000; September 1, Central Texas Diagnostic Center, P.A. of Austin, Texas, total consideration of $18,863,000 including 770,589 shares of Common Stock to be issued with a value of $4,157,000; November 1, Hematology-Oncology Associates, P.A. of Jacksonville, Florida, total consideration of $8,012,000 including 258,992 shares of Common Stock to be issued with a value of $1,113,000; and, in January through November of 1996, twelve smaller transactions with physician groups in Durham, North Carolina; Denver, Colorado; Portland, Oregon; Tucson, Arizona; San Antonio, Texas; Independence, Missouri; Flagstaff, Arizona and Orange Park, St. Augustine and Ocala, Florida; for total consideration of $23,203,000 which includes 793,647 shares of Common Stock to be issued with a value of $4,761,000. During 1995, the Company affiliated with 16 oncology physician groups on the effective dates indicated as follows: January 1, Southwestern Radiation Oncology, Ltd. and Miked, Inc. of Tucson, Arizona, total consideration of $10,249,000 including 1,378,000 shares of Common Stock to be issued with a value of $2,897,000; March 1, Pikes Peak Cancer Specialists, P.C. and Paul N. Anderson, M.D., P.C. of Colorado Springs, Colorado, total consideration of $8,799,000 including 910,000 shares of Common Stock to be issued with a value of $1,916,000; March 1, Cancer Care Associates, P.A. of Tulsa, Oklahoma, total consideration of $26,309,000 including 2,888,000 shares of Common Stock to be issued with a value of $6,431,000; March 15, Hematology and Oncology Associates, P.A. of Greenville, South Carolina, total consideration of $9,587,000 including 1,098,000 shares of Common Stock to be issued with a value of $2,580,000; April 1, Hematology-Oncology Medical Associates, Inc. of Pittsburgh, Pennsylvania, total consideration of $18,205,000 including 1,622,000 shares of Common Stock to be issued with a value of $8,072,000; August 1, James River Clinic, P.C. and Mattern, Schultz & Booth Company of Hampton, Virginia, total consideration of $7,602,000 including 172,000 shares of Common Stock to be issued with a value of $1,517,000; October 1, Riverview Cancer Care Medical Associates, P.C. of Rexford, New York, total consideration of $9,101,000 including 206,000 shares of Common Stock to be issued with a value of $2,774,000; October 1, Capital District Hematology Oncology Associates, P.C. of Latham, New York, total consideration of $16,060,000 including 308,000 shares of Common Stock to be issued with a value of $4,203,000; December 1, Triad Hematology-Oncology Associates, P.L.L.C. of Winston-Salem, North Carolina, total consideration of $4,185,000 including 64,000 shares of Common Stock to be issued with a value of $663,000 and, in September through December of 1995, the following seven smaller transactions in Raleigh, North Carolina; Asheville, North Carolina; Boulder, Colorado; Jacksonville, Florida; Las Vegas, Nevada; Winston-Salem, North Carolina and Pittsburgh, Pennsylvania, for total consideration of $40,253,000 which includes 626,000 shares of Common Stock to be issued with a value of $6,154,000. In conjunction with five medical practice transactions occurring in 1996 and 1997, the Company is contingently obligated to pay up to an additional $3,870,000 in future years, depending on the achievement of certain financial objectives. Such liability, if any, will be recorded in the period in which the outcome of the contingency becomes probable. Any payment made will be allocated to the affiliated long-term management services agreements and will be amortized over the remaining life of that asset. The accompanying financial statements include the results of operations derived from the management services agreements from their respective effective dates. The following unaudited pro forma information presents the results of operations of the Company for the year ended December 31, 1996 as if the 1997 and 1996 transactions had been consummated on January 1, 1996 and for the year ended December 31, 1997 as if the 1997 transactions were consummated on January 1, 1997. Such pro forma information is based on the historical financial information of the physician groups and does not include operational or other changes which might have been affected pursuant to the Company's management of the nonmedical aspects of such groups. 33 AMERICAN ONCOLOGY RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED The unaudited pro forma information presented below is for illustrative information only and is not necessarily indicative of results which would have been achieved or results which may be achieved in the future (in thousands, except per share amounts): Pro forma (unaudited) Year Ended December 31, ----------------------- 1997 1996 ---- ---- Revenue....................... $355,201 $269,870 Net income.................... 24,234 20,533 Net income per share-basic.... 0.51 0.43 Net income per share-diluted.. 0.49 0.40 NOTE 4 - INDEBTEDNESS Short-term notes payable Short-term notes payable bear interest at 7% and have original maturities of less than one year. The notes are payable to physicians with whom the Company entered into long-term management agreements and relate to medical practice transactions. Long-term indebtedness Long-term indebtedness consists of the following (in thousands): December 31, ------------------- 1997 1996 --------- -------- Subordinated notes................... 80,710 62,113 Credit Facility...................... 66,000 23,000 Capital lease obligations and other.. 1,634 2,158 -------- ------- 148,344 87,271 Less - current maturities............ (8,628) (5,564) -------- ------- $139,716 $81,707 ======== ======= Subordinated notes The subordinated notes are issued in substantially the same form in different series and are payable to the physicians with whom the Company entered into management agreements. Substantially all of the notes outstanding at December 31, 1997 and 1996 bear interest at 7%, are due in installments through 2004 and are subordinated to senior bank and certain other debt. If the Company fails to make payment under any of the notes, the respective physician group can terminate the related management service agreement for cause. Credit Facility The Company has a loan agreement and revolving credit/term facility (Credit Facility) with First Union National Bank of North Carolina (First Union) individually and as Agent for twelve additional lenders (Lenders), 34 AMERICAN ONCOLOGY RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED which was amended as of December 29, 1997 to improve certain terms and covenants. Under the terms of the agreement, the amount available for borrowing is $150 million through October 31, 2002. Proceeds of loans may be used to finance medical group transactions, provide working capital or for other general corporate uses. At December 31, 1997, the Company had an outstanding balance of $66 million under the Credit Facility. The Company has classified this facility as long term due to its ability and intent to maintain the borrowings past 1998. Borrowings under the Credit Facility are secured by capital stock of the Company's subsidiaries and all material contracts, including management service agreements. At the Company's option, funds may be borrowed at the Base interest rate or the London Interbank Offer Rate (LIBOR) up to London Interbank Offer Rate plus an amount determined under a defined formula. The Base rate is selected by First Union and is defined as their prime rate or Federal Funds Rate plus 1/2%. Interest on amounts outstanding under Base rate loans is due quarterly while interest on London Interbank Offer Rate related loans is due at the end of each applicable interest period or quarterly, if earlier. As of December 31, 1997, the interest on all outstanding draws was 8.5%, which represented borrowings at the Base rate which were converted to LIBOR loans at a rate of 6.6% in January 1998. The Company is subject to restrictive covenants under the facility, including the maintenance of certain financial ratios. The agreement limits certain activities such as additional indebtedness, sales of assets, investments, capital expenditures, mergers and consolidations and the payment of dividends. Under certain circumstances, additional medical practice transactions may require First Union and the Lenders' consent. Capital lease obligations and other Leases for medical and office equipment are capitalized using effective interest rates between 7.5% and 11.5%. At December 31, 1997 and 1996, the gross amount of assets recorded under the capital leases was $3,239,000 and $3,710,000 and the related accumulated amortization was $1,945,000 and $1,431,000. Amortization expense is included with depreciation. Total future capital lease payments are $1,548,288. Other indebtedness consists principally of installment notes and bank debt, with varying interest rates, assumed in medical practice transactions. Maturities Future principal maturities of long-term indebtedness, including capital lease obligations, is $8,628,000 in 1998, $13,525,000 in 1999, $16,099,000 in 2000, $15,774,000 in 2001, $80,795,000 in 2002 and $13,523,000 thereafter. 35 AMERICAN ONCOLOGY RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE 5 - INCOME TAXES The Company's income tax provision consists of the following (in thousands): Year ended December 31, -------------------------------- 1997 1996 1995 ---- ---- ----- Federal: Current...................... $ 8,137 $ 7,787 $4,352 Deferred..................... 4,592 1,914 815 State: Current...................... 896 1,155 701 Deferred..................... 354 216 61 ------- ------- ------ 13,979 11,072 5,929 Reversal of valuation allowance due to net operating loss utilization................... (77) ------- ------- ------ $13,979 $11,072 $5,852 ======= ======= ====== The difference between the effective income tax rate and the amount which would be determined by applying the statutory U.S. income tax rate before income taxes is as follows: Year ended December 31, ------------------------------ 1997 1996 1995 ---- ---- ---- Provision for income taxes at U.S. 35.0% 35.0% 35.0% statutory rates.............. State income taxes, net of 3.0 3.5 3.0 federal benefit.............. Nontaxable life insurance (4.2) proceeds..................... Nondeductible items and other.... .1 Reversal of valuation allowance due to net operating loss utilization.................. (.4) ------ ------- ------ 38.0% 38.5% 33.5% ====== ======= ====== Deferred income taxes are comprised of the following (in thousands): December 31, -------------- 1997 1996 ------ ------ Deferred tax assets: Deferred rent.................................. $ 101 $ 48 Accrued expenses............................... 24 Other.......................................... 175 111 ------ ------ $ 300 $ 159 ====== ====== Deferred tax liabilities: Amortization of management service agreements.. $7,909 $2,973 Depreciation................................... 457 140 Prepaid expenses............................... 890 86 ------ ------ $9,256 $3,199 ====== ====== 36 AMERICAN ONCOLOGY RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE 6 - OTHER INCOME, NET Other income, net in 1995 consists of a gain from life insurance proceeds of $2,090,000 less lease termination costs of $490,000. NOTE 7 - STOCKHOLDERS' EQUITY Effective May 16, 1997, the Board of Directors of the Company adopted a shareholders rights plan and in connection therewith, declared a dividend of one Series A Preferred Share Purchase Right for each outstanding share of Common Stock. For a more detailed description of the shareholders rights plan, refer to the Company's Form 8-A filed with the Securities and Exchange Commission on June 2, 1997. Effective May 8, 1997, the Company's stockholders approved an increase in the number of shares of Common Stock authorized to be issued to 80,000,000 shares On August 13, 1996, the Board of Directors of the Company authorized the purchase of up to 3,000,000 shares of the Company's Common Stock in public or private transactions. On May 16, 1996, the Board of Directors of the Company declared a two-for- one stock split of the Company's Common Stock which was paid on June 10, 1996 to stockholders of record on May 31, 1996. All references herein to the number of shares and per share amounts have been adjusted to reflect the effect of the split. In June 1995, the Company consummated its initial public offering of 10,925,000 shares of Common Stock. Proceeds from the offering were $105,743,000, net of commissions and expenses of $8,970,000. Of this amount, $35,000,000 was used to repay amounts outstanding under the Company's credit facility. The remainder was used for general corporate purposes and working capital needs, including medical practice transactions. In February 1995, the Company issued for cash 1,273,642 shares of Common Stock for $4.13 per share, of which 1,209,192 shares were purchased by the Company's major stockholder and certain executive officers, directors and employees. As part of entering into long-term management services agreements with physician practices described in Note 3, the Company has made nonforfeitable commitments to issue shares of Common Stock at specified future dates for no further consideration. Common Stock to be issued is shown as a separate component in stockholders' equity. The amounts, upon issuance of the shares, are reclassified to other equity accounts as appropriate. The shares of Common Stock to be issued at specified future dates were valued at a discount from the estimated fair value of a delivered share after considering all relevant factors, including normal discounts for marketability due to the time delay in delivery of the shares, estimates of the value of the respective management service agreements and proximate sales of Common Stock for cash. The Common Stock in the transactions is to be delivered under the terms of the respective agreements for periods up to seven years. The Common Stock to be delivered is discounted at weighted-averages of 39%, 39% and 38% for 1997, 1996 and 1995 respectively, from comparable cash sales of Common Stock. For transactions completed through December 31, 1997, the scheduled issuance of the shares of Common Stock that the Company is committed to deliver over the passage of time are 2,940,618 in 1998, 5,244,319 in 1999, 5,491,405 in 2000, 1,694,212 in 2001, 1,934,599 in 2002 and 632,599 thereafter. 37 AMERICAN ONCOLOGY RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE 8 - STOCK OPTIONS The Company's 1993 Key Employee Stock Option Plan, as amended, provides that employees may be granted options to purchase Common Stock. Total shares available for grant are limited to 7% of the outstanding common shares plus the shares to be issued to physician groups at specified future dates. Individual option vesting and related terms are determined by the Compensation Committee of the Board of Directors. However, the stock option plan provides that the options granted may be incentive options at an exercise price no less than fair value at the grant date or 85% of fair value in the case of nonqualified options. Option terms may not exceed ten years. Individual option grants vest ratably over time, generally five years. Effective November 7, 1996, the Board of Directors exchanged 626,100 options with exercise prices of $18.10 to $24.18 for new options with an exercise price of $8.79, which approximated fair value on the date of grant. Under the terms of the Company's Chief Executive Officer Stock Option Plan and Agreement and the Everson Stock Option Plan and Agreement, two executives were granted 3,693,798 non-qualified options to purchase Common Stock with an exercise price effectively equal to the fair market value at the date of grant. The options vested on the date of the Company's initial public offering and expire between 2000 and 2003. The Company's ability to grant further options under these plans ceased on the date of the Company's initial public stock offering. At December 31, 1997, 2,218,428 Common Stock options with a weighted- average exercise price of $3.33 per share were outstanding and exercisable under the terms of these plans. The Company's 1993 Non-Employee Director Stock Option Plan provides that up to 200,400 options to purchase Common Stock can be granted. The options vest in 6 months or ratably over 4 years, have a term of 10 years and exercise prices effectively equal to the fair market value at the date of grant. As of December 31, 1997, 104,000 options were outstanding , all of which were vested and exercisable. The Company's 1993 Affiliate Stock Option Plan, as amended, provides that options to purchase up to 1,000,000 shares of Common Stock can be granted. Options under the plan have a term of 10 years. All individual option grants vest ratably over the vesting periods of 3 to 5 years. Effective November 7, 1996, the Board of Directors exchanged 61,500 options with exercise prices of $18.10 to $24.18 for new options with an exercise price of $8.79 which approximated fair value on the date of grant. Of the outstanding options to purchase shares of Common Stock granted under this plan, 324,000 were granted to physician employees of the affiliated physician groups and 24,250 were granted to other employees of the affiliated physician groups. In 1997 and 1996, the fair value of the options granted to non-employees was $8.21 and $13.06, respectively. Compensation expense will be recognized over the respective vesting periods. Expense of $270,000 and $106,000 was recognized in 1997 and 1996, respectively. All of the Company's Common Stock options vest automatically upon a change in control of the Company, as defined in such stock option plans. 38 AMERICAN ONCOLOGY RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED The following summarizes the activity for all option plans: Weighted Average Shares Exercise Price ----------- -------------- Balance, December 31, 1994.. 3,298,000 $ 2.28 Granted................... 2,549,000 8.78 Exercised................. (12,000) 2.67 Canceled.................. (49,000) 3.17 ---------- Balance, December 31, 1995.. 5,786,000 5.14 Granted................... 1,080,000 13.53 Exercised................. (893,000) 1.70 Canceled.................. (1,154,000) 19.09 ---------- Balance, December 31, 1996.. 4,819,000 4.30 Granted 1,440,000 12.73 Exercised................. (415,000) 3.14 Canceled.................. (135,000) 10.68 ---------- Balance, December 31, 1997.. 5,709,000 $ 6.36 ========== The following table summarizes information about the Company's stock options outstanding at December 31, 1997:
Options Outstanding Options Exercisable ------------------------------------------------------------ --------------------------------------- Number Weighted-Average Weighted Number Weighted Range of Outstanding Remaining Contractual Average Exercisable at Average Exercise Prices at 12/31/97 Life Exercise Price 12/31/97 Exercise Price - ----------------- ------------- ---------------------- ------------------ ----------------- -------------------- $ 1 to 3 1,774,000 3.8 years $ 2.25 1,616,000 $ 2.26 4 to 9 3,220,000 6.5 6.49 1,764,000 4.80 15 to 24 715,000 9.6 16.00 16,000 24.18 ----------- ----------- 1 to 24 5,709,000 6.1 $ 6.36 3,396,000 $ 3.68 =========== ===========
39 AMERICAN ONCOLOGY RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123 ("SFAS No. 123"), "Accounting for Stock- Based Compensation. " Accordingly, no compensation cost has been recognized for fixed options granted to Company employees. Had compensation cost for the Company's five stock option plans been determined based on the fair value at the grant date for awards in 1996 and 1995 consistent with the provisions of SFAS No. 123, the Company's pro forma net income and net income per share would have been as follows: Pro forma Year Ended December 31, ----------------------- 1997 1996 ------------ --------- Net income............ $21,102 $16,656 Net income per share.. $ 0.44 $ 0.35 During the initial phase-in of SFAS No. 123, this pro forma is not likely to be representative of the effects on reported net income for future years as options granted prior to 1995 are not included in the calculation. Options granted in 1997 and 1996 had weighted-average fair values of $9.11 and $6.04, respectively. The fair value of each Common Stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants from all plans in 1997 and 1996: 1997 1996 ----- ----- Expected life (years)........... 5 5 Risk-free interest rate......... 5.2% 5.1% Expected volatility (post IPO).. 81% 87% Expected dividend yield......... 0% 0% 40 AMERICAN ONCOLOGY RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE 9 - COMMITMENTS AND CONTINGENCIES The Company leases office space and certain equipment under noncancelable operating lease agreements. Total future minimum lease payments, including escalation provisions and leases with entities affiliated with physician groups, are $12,315,000 in 1998, $11,074,000 in 1999, $9,686,000 in 2000, $8,649,000 in 2001, $7,064,000 in 2002 and $11,417,000 thereafter. Rental expense under noncancelable operating leases was $12,274,000 in 1997, $8,565,000 in 1996 and $4,459,000 in 1995. In December 1997, the Company entered into a $75,000,000 master lease agreement for the purpose of financing property and construction of integrated cancer centers. Under the agreement, the lessor purchases the properties, pays for the construction costs and thereafter leases the facilities to the Company. The initial term of the lease is for five years and can be renewed in one year increments if approved by the lessor. The lease provides for substantial residual value guarantees and includes purchase options at original cost on each option. The Company and its affiliated physician groups maintain insurance with respect to medical malpractice risks on a claims-made basis in amounts believed to be customary and adequate. Management is not aware of any outstanding claims or unasserted claims probable of assertion against it or its affiliated physician groups which would have a material impact on the Company's financial position or results of operations. NOTE 10 - RELATED PARTIES The management services agreement activity between the Company and the affiliated physician groups is reflected in the due to/from affiliated physician groups components on the consolidated balance sheet. The Company leases a portion of its medical office space and equipment, at rates which the Company believes approximate fair market value, from entities affiliated with certain of the stockholders of physician groups affiliated with the Company. Payments under these leases were $2,621,000 in 1997, $2,296,000 in 1996 and $1,854,000 in 1995 and total future commitments are $12,649,000. The subordinated notes are payable to the persons or entities which are also stockholders or holders of rights to receive Common Stock at specified future dates. Total interest expense to these parties was $5,186,000 in 1997, $3,885,000 in 1996 and $1,909,000 in 1995. A director and a stockholder is a partner of a law firm utilized by the Company. The Company incurred $584,000 in 1997, $651,000 in 1996 and $904,000 in 1995 for legal services provided by the firm. Three of the Company's directors are practicing physicians with physician groups affiliated with the Company. In 1997, the three physician groups generated total medical service revenues of $40,378,000 of which $8,484,000 was retained by the groups and $31,894,000 was included in the Company's revenue. In 1996, the three physician groups generated total medical service revenues of $37,725,000 of which $8,218,000 was retained by the groups and $29,507,000 was included in the Company's revenue. In 1995, three physician groups generated total medical service revenues of $31,782,000 of which $6,694,000 was retained by the groups and $25,088,000 was included in the Company's revenue. 41 AMERICAN ONCOLOGY RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED NOTE 11 - QUARTERLY FINANCIAL DATA The following table presents the Company's unaudited quarterly information (in thousands, except per share amounts):
1997 Quarter Ended 1996 Quarter Ended ------------------------------ -------------------------------------- Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 ------ ------ ------ ------ -------- -------- -------- -------- Revenue................... 89,626 82,293 79,525 70,396 $63,635 $53,701 $47,374 $40,750 Income from operations.... 12,468 11,513 11,343 9,889 9,259 7,782 7,297 7,629 Net income................ 6,166 5,910 5,719 5,072 4,840 4,303 4,060 4,447 Net income per share (Basic).................. 0.13 0.13 0.13 0.11 0.11 0.10 0.09 0.10 Net income per share (Diluted)................ 0.13 0.12 0.12 0.11 0.10 0.09 0.09 0.09
42 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. AMERICAN ONCOLOGY RESOURCES, INC. By: /s/ R. DALE ROSS -------------------------------- R. Dale Ross Chairman of the Board and Chief Executive Officer PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE --------- ----- ---- /s/ R. DALE ROSS Chairman of the Board, March 19, 1998 - ----------------------------------- Chief Executive Officer R. Dale Ross and Director /s/ LLOYD K. EVERSON, M.D. President and Director March 19, 1998 - ----------------------------------- Lloyd K. Everson, M.D. /s/ L. FRED POUNDS Vice President of Finance, March 19, 1998 - ----------------------------------- Chief Financial Officer L. Fred Pounds and Treasurer /s/ RUSSELL L. CARSON Director March 19, 1998 - ----------------------------------- Russell L. Carson Director - ----------------------------------- Kyle M. Fink, M.D. /s/ RICHARD B. MAYOR Director March 17, 1998 - ----------------------------------- Richard B. Mayor /s/ MAGARAL S. MURALI, M.D. Director March 18, 1998 - ----------------------------------- Magaral S. Murali, M.D. /s/ ROBERT A. ORTENZIO Director March 19, 1998 - ----------------------------------- Robert A. Ortenzio /s/ EDWARD E. ROGOFF, M.D. Director March 18, 1998 - ----------------------------------- Edward E. Rogoff, M.D.
43 EX-10.1 2 EXHIBIT 10.1 EXHIBIT 10.1 THIRD AMENDED AND RESTATED LOAN AGREEMENT AMONG FIRST UNION NATIONAL BANK AS AGENT VARIOUS LENDERS AND AMERICAN ONCOLOGY RESOURCES, INC. AS BORROWER $150,000,000 Revolving Credit Facility DECEMBER 29, 1997 TABLE OF CONTENTS Page ---- Recitals...................................................................... 1 ARTICLE I. DEFINITIONS 1.1 Defined Terms............................................................ 2 1.2 Accounting Terms.........................................................22 1.3 Singular/Plural..........................................................23 1.4 Other Terms..............................................................23 ARTICLE II. AMOUNT AND TERMS OF THE LOANS 2.1 Commitments; Loans.......................................................23 2.2 Committed Borrowings.....................................................24 2.3 Bid Borrowings...........................................................25 2.4 Disbursements; Funding Reliance; Domicile of Loans.......................29 2.5 Notes....................................................................30 2.6 Termination and Reduction of Commitments.................................30 2.7 Payments; Voluntary, Mandatory...........................................31 2.8 Interest.................................................................32 2.9 Fees.....................................................................33 2.10 Interest Periods.........................................................34 2.11 Conversions and Continuations............................................35 2.12 Method of Payments; Computations.........................................36 2.13 Increased Costs, Change in Circumstances, etc............................38 2.14 Taxes....................................................................40 2.15 Compensation.............................................................42 2.16 Use of Proceeds..........................................................43 2.17 Recovery of Payments.....................................................43 2.18 Pro Rata Borrowings......................................................43 2.19 Substitution of Lender...................................................44 2.20 Letters of Credit........................................................44 ARTICLE III. CLOSING; CONDITIONS OF CLOSING AND BORROWING 3.1 Conditions of Initial Borrowing..........................................51 3.2 Conditions of All Borrowings.............................................54 i 3.3 Waiver of Conditions Precedent...........................................54 ARTICLE IV. REPRESENTATIONS AND WARRANTIES 4.1 Corporate Organization and Power.........................................55 4.2 Litigation; Government Regulation........................................55 4.3 Taxes....................................................................55 4.4 Enforceability of Loan Documents; Compliance with Other Instruments......56 4.5 Governmental Authorization...............................................56 4.6 Event of Default.........................................................57 4.7 Margin Securities........................................................57 4.8 Full Disclosure..........................................................57 4.9 Principal Places of Business.............................................57 4.10 ERISA; Employee Benefits.................................................58 4.11 Subsidiaries.............................................................59 4.12 Financial Statements.....................................................59 4.13 Title to Assets..........................................................59 4.14 Solvency.................................................................60 4.15 Use of Proceeds..........................................................60 4.16 Assets for Conduct of Business...........................................60 4.17 Compliance with Laws.....................................................60 4.18 Environmental Matters....................................................60 4.19 First Priority...........................................................61 4.20 Contracts; Labor Disputes................................................61 4.21 Insurance................................................................61 4.22 Reimbursement from Third Party Payors....................................61 4.23 Fraud and Abuse..........................................................61 4.24 Single Business Enterprise...............................................62 4.25 Continuing Security Interest.............................................62 ARTICLE V. AFFIRMATIVE COVENANTS 5.1 Financial and Business Information about the Borrower....................63 5.2 Notice of Certain Events.................................................64 5.3 Corporate Existence and Maintenance of Properties........................65 5.4 Payment of Debt..........................................................65 5.5 Maintenance of Insurance.................................................66 5.6 Maintenance of Books and Records; Inspection.............................66 5.7 COBRA....................................................................66 5.8 Payment of Taxes.........................................................66 5.9 Compliance with Laws.....................................................67 5.10 Name Change..............................................................67 ii 5.11 Creation or Acquisition of New Subsidiaries..............................67 5.12 Recoveries in Bankruptcy Proceedings.....................................68 5.13 Solvency of Subsidiaries.................................................68 5.14 Certain Physician Transactions...........................................68 5.15 Year 2000 Compatibility..................................................69 ARTICLE VI. NEGATIVE COVENANTS 6.1 Merger, Consolidation....................................................70 6.2 Physician Transactions...................................................70 6.3 Debt.....................................................................70 6.4 Contingent Obligations...................................................71 6.5 Liens and Encumbrances...................................................71 6.6 Disposition of Assets....................................................72 6.7 Transactions with Related Persons........................................72 6.8 Restricted Investments; Loans............................................73 6.9 Restricted Payments......................................................73 6.10 Capital Expenditures.....................................................73 6.11 Consolidated Net Worth...................................................73 6.12 EBITDA to Interest Expense...............................................74 6.13 Annualized EBITDAR to Debt Service Ratio.................................74 6.14 Consolidated Debt to Annualized EBITDA...................................74 6.15 Consolidated Debt to Consolidated Total Capital..........................74 6.16 Sale and Leaseback.......................................................74 6.17 New Business.............................................................74 6.18 Subsidiaries or Partnerships.............................................74 6.19 Transactions Affecting the Collateral....................................74 6.20 Hazardous Wastes.........................................................74 6.21 Fiscal Year..............................................................75 6.22 Amendments; Prepayments of Subordinated Debt or Permitted Subordinated Debt, etc................................................................75 6.23 Fraud and Abuse..........................................................75 ARTICLE VII. EVENTS OF DEFAULT 7.1 Events of Default........................................................76 ARTICLE VIII. RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT 8.1 Remedies: Termination of Commitments, Acceleration, etc..................79 iii 8.2 Right of Setoff.........................................................80 8.3 Rights and Remedies Cumulative; Non-Waiver; etc.........................80 ARTICLE IX. THE AGENT 9.1 Appointment.............................................................80 9.2 Nature of Duties........................................................80 9.3 Exculpatory Provisions..................................................81 9.4 Reliance by Agent.......................................................81 9.5 Non-Reliance on Agent and Other Lenders.................................82 9.6 Notice of Default.......................................................82 9.7 Indemnification.........................................................82 9.8 The Agent in its Individual Capacity....................................83 9.9 Successor Agent.........................................................83 9.10 Collateral Matters......................................................84 9.11 Applicable Parties......................................................84 ARTICLE X. MISCELLANEOUS 10.1 Survival................................................................84 10.2 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial............85 10.3 Arbitration; Preservation and Limitation of Remedies....................86 10.4 Notice..................................................................87 10.5 Assignments, Participations.............................................88 10.6 Fees and Expenses.......................................................91 10.7 Indemnification.........................................................91 10.8 Amendments, Waivers, etc................................................92 10.9 Rights and Remedies Cumulative, Non-Waiver, etc.........................93 10.10 Binding Effect, Assignment..............................................93 10.11 Severability............................................................93 10.12 Entire Agreement........................................................93 10.13 Interpretation..........................................................94 10.14 Counterparts, Effectiveness.............................................94 10.15 Conflict of Terms.......................................................94 10.16 Injunctive Relief.......................................................94 10.17 Confidentiality.........................................................94 10.18 Post-Closing Matters....................................................95 EXHIBITS Exhibit A-1 - Form of Committed Loan Note iv Exhibit A-2 - Form of Bid Loan Note Exhibit B-1 - Form of Notice of Borrowing Exhibit B-2 - Form of Notice of Conversion/Continuation Exhibit B-3 - Form of Letter of Credit Request Exhibit C-1 - Form of Bid Request Exhibit C-2 - Form of Invitation for Bids Exhibit C-3 - Form of Bid Exhibit D - Form of Guaranty Agreement Exhibit E-1 - Form of Security Agreement Exhibit E-2 - Form of Guarantors' Security Agreement Exhibit F - Form of Compliance Certificate Exhibit G - Form of Assignment and Acceptance SCHEDULES Schedule 1.1(a) Existing Liens Schedule 1.1(b) Example of Permitted Subordinated Debt Instrument Schedule 4.1 Corporate Organization Schedule 4.2 Litigation; Government Regulation Schedule 4.3 Taxes Schedule 4.4 Defaults Schedule 4.9 Principal Places of Business Schedule 4.10 ERISA Matters Schedule 4.11 Subsidiaries Schedule 4.13 Exceptions to Title to Assets Schedule 4.21 Insurance Schedule 6.8 Investments; Loans v EXECUTION - 12/31/97 THIRD AMENDED AND RESTATED LOAN AGREEMENT THIS THIRD AMENDED AND RESTATED LOAN AGREEMENT, dated as of the 29th day of December, 1997 (the "Loan Agreement" or "Agreement"), is made among AMERICAN ONCOLOGY RESOURCES, INC., a Delaware corporation (the "Borrower") with its principal offices in Houston, Texas, the banks and other financial institutions from time to time parties hereto (each, a "Lender," and collectively, the "Lenders"), and FIRST UNION NATIONAL BANK , as Agent (the "Agent"). RECITALS A. The Borrower, certain Lenders, and the Agent are parties to a Loan Agreement, dated as of December 5, 1994, as amended by (i) a First Amendment to Loan Agreement, dated as of March 23, 1995, (ii) a First Amended and Restated Loan Agreement, dated as of January 31, 1996, (iii) a First Amendment to First Amended and Restated Loan Agreement, dated as of September 24, 1996, (iv) a Second Amended and Restated Loan Agreement, dated as of October 30, 1996 and (v) a First Amendment to Second Amended and Restated Loan Agreement, dated as of April 17, 1997 (such agreement, as heretofore amended and restated, the "Original Agreement"), pursuant to which the Lenders have made a reducing revolving credit facility (including a letter of credit subfacility) available to the Borrower in the principal amount of $150,000,000. B. The Borrower, the Lenders and the Agent have agreed to amend and restate the Original Agreement to, among other things, (i) provide for a competitive bid borrowing option under the reducing revolving credit facility and (ii) allow the Borrower to enter into an End Loaded Lease Facility (the "ELLF") in an amount not to exceed $75,000,000 for the synthetic lease financing of the acquisition or construction of certain health care facilities. C. The Subsidiaries of the Borrower have jointly and severally guaranteed all of the obligations of the Borrower under the Original Agreement and the loan documents relating thereto and have further guaranteed the Borrower's Swingline Note (as defined below) to the Agent in the maximum principal amount of $5,000,000. Such Subsidiaries have consented to this Loan Agreement, and their guarantees shall relate to the Obligations (defined below) of the Borrower hereunder and under the other Loan Documents (defined below). D. The parties acknowledge that this Loan Agreement and each of the other Loan Documents have been negotiated and delivered in Charlotte, North Carolina. E. The Lenders are willing to make the Loans described herein based on the terms and conditions set forth herein. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower, the Lenders and the Agent hereby agree as follows: ARTICLE I. DEFINITIONS 1.1 Defined Terms. For purposes of this Loan Agreement, in addition to the terms defined elsewhere in this Loan Agreement, the following terms shall have the meanings set forth below: "Absolute Rate" shall have the meaning given to such term in SECTION 2.3(C)(V). "Absolute Rate Auction" shall mean a solicitation of Bids setting forth Absolute Rates pursuant to SECTION 2.3. "Absolute Rate Loan" shall mean, at any time, any Bid Loan that bears interest at such time at an Absolute Rate established pursuant to an Absolute Rate Auction. "Account Designation Letter" shall mean a letter from the Borrower to the Agent, duly completed and signed by an Authorized Officer of the Borrower and in form and substance satisfactory to the Agent, listing any one or more accounts to which the Borrower may from time to time request the Agent to forward the proceeds of any Loans made hereunder. "Adjusted LIBOR Rate" shall mean, at any time with respect to any LIBOR Committed Loan, a rate per annum equal to the LIBOR Rate plus the Applicable Margin for LIBOR Loans, each as in effect at such time. "Affiliate" shall mean, as to any Person, each of the Persons that directly or indirectly, through one or more intermediaries, owns or controls, or is controlled by or under common control with, such Person. For the purpose of this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies, whether through the ownership of voting securities, by contract or otherwise. "Agent" shall mean First Union, in its capacity as appointed in ARTICLE IX hereof, and its permitted successors and assigns. "Agreement" or "this Agreement" or "Loan Agreement" shall mean this Loan Agreement and any amendments, modifications and supplements hereto, any replacements, renewals, extensions and restatements hereof, and any substitutes herefor, in whole or in part and all Schedules and Exhibits hereto, and shall refer to this Agreement as the same may be in effect at the time such reference becomes operative. 2 "Annualized EBITDA" shall mean, with respect to the Borrower and its Subsidiaries, on a consolidated basis, as of the last day of any fiscal quarter, the product of (a) EBITDA for the fiscal quarter ending on such date, multiplied by (b) four (4). "Annualized EBITDAR" shall mean, with respect to the Borrower and its Subsidiaries, on a consolidated basis, as of the last day of any fiscal quarter, the product of (a) the sum of (i) EBITDA for the fiscal quarter ending on such date, plus (ii) Lease Expense for the fiscal quarter ending on such date, multiplied by (b) four (4). "Applicable Margin" shall mean, at any time with respect to any LIBOR Committed Loan, the applicable percentage points as determined under the following matrix with reference to the ratio of Consolidated Debt to Annualized EBITDA calculated as provided below: Ratio of Consolidated Debt to Annualized EBITDA Applicable Margin ------------------------- Greater than 3.00 to 1.0 0.875% Greater than 2.50 to 1.0 0.800% but less than or equal to 3.00 to 1.0 Greater than 2.00 to 1.0 0.550% but less than or equal to 2.50 to 1.0 Greater than 1.50 to 1.0 0.450% but less than or equal to 2.00 to 1.0 Less than or equal to 0.325% 1.50 to 1.0 From the Closing Date until the fifth (5th) day after receipt by the Agent of the December 1, 1997 financial statements pursuant to SECTION 5.1(B) below, the Applicable Margin shall be 0.80%. The Applicable Margin shall be reset from time to time in accordance with the above matrix on the fifth (5th) day after receipt by the Agent in accordance with SECTIONS 5.1(A) and (B) of financial statements together with a Compliance Certificate (reflecting the computation of the ratio of Consolidated Debt to Annualized EBITDA as of the last day of the preceding fiscal quarter or fiscal year, as appropriate). "Assignment and Acceptance" shall mean an Assignment and Acceptance Agreement entered into between a Lender and an Eligible Assignee, and accepted by the Agent, in substantially the form of EXHIBIT G. 3 "Assignment Restrictions" shall mean, with respect to any contracts or agreements assigned to the Agent, on behalf of the Lenders, as Collateral by the Borrower or any Subsidiary, any restriction or prohibition on assignment that has not been waived or consented to by the Person for whose benefit such restriction or prohibition exists with respect to which the Agent has waived the requirement of such waiver or consent. "Authorized Officer" shall mean any officer of the Borrower authorized by resolution of the board of directors of the Borrower to take the action specified herein with respect to such officer and whose signature and incumbency shall have been certified to the Agent by the secretary or an assistant secretary of the Borrower. "Bankruptcy Code" shall mean 11 U.S.C. (S) 101 et seq., as amended, and any successor statute or statute having substantially the same function. "Base Rate" shall mean, at any time, a rate per annum equal to the higher of (i) the per annum interest rate publicly announced from time to time by First Union in Charlotte, North Carolina, to be its prime or base rate (which may not necessarily be its best lending rate), as adjusted to conform to changes as of the opening of business on the date of any such change in such prime or base rate, or (ii) one-half percentage point (0.5%) per annum in excess of the Federal Funds Rate, as adjusted to conform to changes as of the opening of business on the date of any such change in the Federal Funds Rate. "Base Rate Loan" shall mean, at any time, any Committed Loan that bears interest at such time at the Base Rate. "Bid" shall mean an offer by a Lender to make one or more Bid Loans in accordance with the provisions of SECTION 2.3. "Bid Borrowing" shall mean the incurrence by the Borrower on a single date of any one or more Bid Loans of a single Type and as to which a single Interest Period is in effect, in accordance with the provisions of SECTION 2.3. "Bid Loan Notes" shall mean the promissory notes of the Borrower in substantially the form of EXHIBIT A-2, together with any amendments, modifications and supplements thereto, substitutions therefor and restatements thereof. "Bid Loans" shall have the meaning given to such term in SECTION 2.1(B). "Bid Request" shall have the meaning given to such term in SECTION 2.3(A). "Bloodborne Pathogens Standard" shall mean the Final Standard for Occupational Exposure to Bloodborne Pathogens promulgated by OSHA at 56 Federal Register 64004 et seq. (December 6, 1991) and codified at 29 C.F.R. (S) 1910.1030, or any similar regulation promulgated by any Governmental Authority. 4 "Borrower" shall mean American Oncology Resources, Inc., a Delaware corporation, and its successors and assigns. "Borrowing" shall mean a Committed Borrowing or a Bid Borrowing on a given date. "Borrowing Date" shall mean a Business Day on which a Borrowing is made. "Business Day" shall mean (i) any day other than a Saturday or Sunday, a legal holiday or a day on which commercial banks in Charlotte, North Carolina or, in respect of any determination relevant to a Loan, New York City are required by law to be closed and (ii) in respect of any determination relevant to a LIBOR Loan, any such day that is also a day on which tradings are conducted in the London interbank Eurodollar market. "Capital Asset" shall mean any asset that would, in accordance with Generally Accepted Accounting Principles, be required to be classified and accounted for as a capital asset. "Capital Expenditures" shall mean the aggregate amount of all expenditures and liabilities (including, without limitation, Capital Lease Obligations) made and incurred in respect of the acquisition by the Borrower or any Subsidiary of Capital Assets. "Capital Lease" shall mean (i) any lease of any property that would, in accordance with Generally Accepted Accounting Principles, be required to be classified and accounted for as a capital lease on the balance sheet of the lessee and (ii) any lease entered into pursuant to the ELLF and any other tax retention operating lease or synthetic lease that is treated as a capital lease of the lessee or its consolidated group for tax purposes. "Capital Lease Obligation" shall mean, with respect to any Capital Lease, the amount of the obligation of the lessee thereunder that would, in accordance with Generally Accepted Accounting Principles, appear on a balance sheet as a liability of such lessee in respect of such Capital Lease (or such amount similarly calculated for any Capital Lease that does not appear on a balance sheet), net of any government grant applicable to such Capital Lease. "Cash Collateral Account" shall have the meaning given to such term in SECTION 2.20(J). "Cash Investments" shall mean (i) marketable direct obligations issued or unconditionally guaranteed by the United States of America or issued by any agency thereof and backed by the full faith and credit of the United States of America, in each case maturing within one year from the date of acquisition thereof; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having the highest rating obtainable from either Standard & Poor's Ratings Services or Moody's Investors Service, Inc.; (iii) marketable commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 or the equivalent thereof by Standard & Poor's Ratings Services or at least P-1 or the equivalent thereof by Moody's Investors Service, Inc.; (iv) demand deposits, time deposits and certificates of deposit maturing within one (1) year from the date of issuance thereof and issued by a bank or trust company organized under the laws of the United States of America or any state 5 thereof and having a long term debt rating by Standard & Poor's Ratings Services of A or higher and (v) any mutual fund that invests solely in any of the items described in clauses (i), (ii), (iii) and (iv) of this paragraph. "Change of Control" shall mean the occurrence of any one or more of the following: (i) the Borrower shall merge or consolidate with or into another corporation with the effect that the Persons who were the shareholders of the Borrower immediately prior to the effective time of such merger or consolidation hold less than 51% of the combined voting power of the outstanding securities of the surviving corporation of such merger or the corporation resulting from such consolidation ordinarily (and apart from rights accruing under special circumstances) having the right to vote in the election of directors, or (ii) any Person or "group" (within the meaning of Section 13(d)(3) of the Exchange Act), other than the Welsh, Carson, Anderson and Stowe group or any of its affiliates, shall, directly or indirectly, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, have become, after the Closing Date, the "beneficial owner" (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Borrower representing 49% or more of the combined voting power of the then outstanding securities of the Borrower ordinarily (and apart from rights accruing under special circumstances) having the right to vote in the election of directors. "Closing" shall mean the closing of the initial transactions contemplated by this Agreement. "Closing Date" shall mean the date upon which the Closing takes place. "Collateral" shall mean all right, title and interest of the Borrower and each Guarantor in (i) its Management Services Agreements and the proceeds thereof, (ii) the Securities (as defined in the Security Agreements) owned by such Borrower or Guarantor and the proceeds thereof, and (iii) all other property and interests in property that shall, from time to time, be collaterally assigned to secure the Obligations or the obligations of any Guarantor under the Guaranty Agreement, in each case whether now owned or existing or hereafter acquired or arising and whether in the possession or control of the Borrower, any Guarantor or the Agent, for the benefit of the Lenders, or any Lender. "Committed Borrowing" shall mean the incurrence by the Borrower (including as a result of conversions and continuations of outstanding Committed Loans pursuant to SECTION 2.11) on a single date of a group of Committed Loans of a single Type and, in the case of LIBOR Committed Loans, as to which a single Interest Period is in effect. "Committed Loan Notes" shall mean the promissory notes of the Borrower in substantially the form of EXHIBIT A-1, together with any amendments, modifications and supplements thereto, substitutions therefor and restatements thereof. "Committed Loans" shall have the meaning given to such term in SECTION 2.1(A). "Commitment" shall mean, with respect to any Lender at any time, the amount set forth opposite such Lender's name on its signature page hereto under the caption "Commitment" or, if 6 such Lender has entered into one or more Assignment and Acceptances, the amount set forth for such Lender at such time in the Register maintained by the Agent pursuant to SECTION 10.5(B) as such Lender's "Commitment," as such amount may be reduced at or prior to such time pursuant to the terms hereof. "Compliance Certificate" shall mean a fully completed certificate in the form of EXHIBIT F. "Consolidated Debt" shall mean, at any time, the aggregate (without duplication) of all Debt of the Borrower and its Subsidiaries as of such date, determined on a consolidated basis. "Consolidated Net Income" shall mean, for any period, the net income (or loss) of the Borrower and its Subsidiaries, on a consolidated basis and excluding intercompany items, for such period, determined in accordance with Generally Accepted Accounting Principles, but excluding as income: (a) gains on the sale, conversion or other disposition of Capital Assets, (b) gains on the acquisition, retirement, sale or other disposition of Stock of the Borrower or any Subsidiary, (c) gains on the collection of life insurance proceeds, (d) any write-up of any asset, and (e) any other gain or credit of an extraordinary nature. "Consolidated Net Revenue" shall mean, for any period, the revenues of the Borrower and its Subsidiaries, on a consolidated basis and excluding intercompany items, for such period, determined in accordance with Generally Accepted Accounting Principles, but excluding as revenue: (a) the sale or other disposition of Capital Assets, (b) the sale or other disposition of Stock of the Borrower or any Subsidiary, (c) the collection of life insurance proceeds, (d) any write-up of any asset, and (e) any other source of revenue of an extraordinary nature. "Consolidated Net Worth" shall mean, as of the last day of any fiscal quarter, the net worth of the Borrower and its Subsidiaries as of such date, determined on a consolidated basis in accordance with Generally Accepted Accounting Principles. "Consolidated Total Capital" shall mean, with respect to the Borrower and its Subsidiaries, at any time, the sum of Consolidated Net Worth and Consolidated Debt. "Contingent Obligation" shall mean, with respect to any Person, any direct or indirect liability of such Person with respect to any Debt, lease, dividend, guaranty, letter of credit or other obligation (the "primary obligation") of another Person (the "primary obligor"), whether or not contingent, (a) to purchase, repurchase or otherwise acquire such primary obligations or any property constituting direct or indirect security therefor, (b) to advance or provide funds (i) for the payment or discharge of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor in respect thereof to make payment of such primary obligation or (d) otherwise to assure or hold harmless the owner of any such primary obligation against loss or failure or inability to perform in respect thereof. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or 7 determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith. "Covenant Compliance Worksheet" shall mean a fully completed certificate in the form of Attachment A to EXHIBIT F. "Credit Parties" shall have the meaning given to such term in the Participation Agreement. "Debt" shall mean, with respect to any Person, without duplication, (i) all indebtedness of such Person for money borrowed, (ii) all reimbursement obligations of such Person with respect to surety bonds, letters of credit and bankers' acceptances (in each case, whether or not matured), (iii) all obligations of such Person evidenced by notes, bonds, debentures or similar instruments, (iv) all obligations of such Person to pay the deferred purchase price of property or services (including seller subordinated notes, contingent or otherwise), other than trade payables, (v) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (vi) all Capital Lease Obligations of such Person, (vii) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any capital stock or other equity securities that, by their stated terms (or by the terms of any equity securities issuable upon conversion thereof or in exchange therefor), or upon the occurrence of any event, mature or are mandatorily redeemable, or are redeemable at the option of the holder thereof, in whole or in part, (viii) all indebtedness referred to in clauses (i) through (vii) above to the extent secured by any lien on any property or asset owned or held by such Person regardless of whether the indebtedness secured thereby shall have been assumed by such Person or is nonrecourse to the credit of such Person and (x) any Contingent Obligation of such Person. "Debt Service" shall mean, with respect to the Borrower and its Subsidiaries on a consolidated basis as of the last day of any fiscal quarter, the sum of (a) Fixed Charges for the fiscal quarter ending on such date multiplied by four (4) plus (b) current maturities (due within twelve months) of all Debt (provided that the amount outstanding under the Facility shall not be considered a current maturity of Debt solely by reason of the Maturity Date falling within such twelve month period). "Default" shall mean any event that, with the passage of time or giving of notice, or both, would constitute an Event of Default. "Dollars" or "$" shall mean dollars of the United States of America. "EBITDA" shall mean, for any period, an amount equal to, without duplication, the sum of (a) net income (determined in accordance with Generally Accepted Accounting Principles) earned in such period, plus (b) to the extent net income has been reduced thereby, the sum of (i) depreciation and amortization expense, plus (ii) Interest Expense, plus (iii) federal and state income taxes. 8 "Eligible Assignee" shall mean (i) a commercial bank organized under the laws of the United States or any state thereof and having total assets in excess of $5,000,000,000, (ii) a commercial bank organized under the laws of any other country that is a member of the OECD or a political subdivision of any such country and having total assets in excess of $5,000,000,000, provided that such bank is acting through a branch or agency located in the United States, in the country under the laws of which it is organized or in another country that is also a member of the OECD, (iii) the central bank of any country that is a member of the OECD, (iv) a finance company, mutual fund, insurance company or other financial institution that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and having total assets in excess of $500,000,000, (v) any Affiliate of an existing Lender or (vi) any other Person (other than an Affiliate of the Borrower) approved by the Agent and the Borrower, which approval shall not be unreasonably withheld; provided, however, that in no event shall the withholding of approval by the Borrower under this definition or SECTION 10.5 be considered unreasonable if (i) the Borrower has had prior dealings with such Person which the Borrower regards as unfavorable or (ii) such Person provides banking or other financial services to any of the Borrower's competitors. "ELLF shall mean the End Loaded Lease Facility as embodied in the Participation Agreement and the other Operative Agreements (as defined in the Participation Agreement). "Employee Plan" shall mean any "employee benefit plan" within the meaning of Section 3(3) of ERISA maintained by the Borrower or any Subsidiary. "Environmental Claims" shall mean any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations (other than internal reports prepared by the Borrower or any Subsidiary solely in the ordinary course of its business and not in response to any third party action or request of any kind) or proceedings relating in any way to any Environmental Law or any permit issued, or any approval given, under any such Environmental Law (hereinafter, "Claims"), including, without limitation, (i) any and all Claims by Governmental Authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law and (ii) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Substances or arising from alleged injury or threat of injury to health or the environment. "Environmental Laws" shall mean any and all applicable laws, subsequent enactments, amendments and modifications, including, without limitation, federal, state and local laws, statutes, ordinances, rules, regulations, permits, licenses, approvals, interpretations and orders of courts or Governmental Authorities, relating to the protection of the environment (and related human health issues), including, but not limited to, requirements pertaining to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation, handling, reporting, licensing, permitting, investigation or remediation of Hazardous Substances. Environmental Laws include, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. (S) 9601 et seq.) ("CERCLA"), the Hazardous Material Transportation Act (49 U.S.C. (S) 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. (S) 6901 et seq.) ("RCRA"), the Federal Water Pollution Control Act (33 U.S.C. (S) 1251 et 9 seq.), the Clean Air Act (42 U.S.C. (S) 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. (S) 2601 et seq.), the Safe Drinking Water Act (42 U.S.C. (S) 300, et seq.), the Environmental Protection Agency's regulations relating to underground storage tanks (40 C.F.R. Parts 280 and 281), and the Occupational Safety and Health Act (29 U.S.C. (S) 651 et seq.) ("OSHA"), as such laws have been amended or supplemented and any analogous federal, state or local, statutes and the rules and regulations promulgated thereunder. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and all rules and regulations from time to time promulgated thereunder. "ERISA Affiliate" shall mean any Person that would be deemed to be under "common control" with, or a member of the same "controlled group" as, the Borrower or any of its Subsidiaries within the meaning of Section 414(b), (c), (m) or (o) of the Internal Revenue Code or Section 4001 of ERISA. "ERISA Event" means (a) a Reportable Event with respect to a Qualified Plan (as defined in SECTION 4.10(C)); (b) a withdrawal by any ERISA Affiliate from a Qualified Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA); (c) a complete or partial withdrawal by any ERISA Affiliate from a Multiemployer Plan; (d) the filing of a notice of intent to terminate, the treatment of a plan amendment as a termination under Section 4041 or 4041A of ERISA or the commencement of proceedings by the Pension Benefit Guaranty Corporation to terminate a Qualified Plan or Multiemployer Plan subject to Title IV of ERISA; (e) a failure to make required contributions to a Qualified Plan or Multiemployer Plan; (f) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Qualified Plan or Multiemployer Plan; (g) the imposition of any liability under Title IV of ERISA, other than Pension Benefit Guaranty Corporation premiums due but not delinquent under Section 4007 of ERISA, upon any ERISA Affiliate; (h) an application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Internal Revenue Code with respect to any Qualified Plan; (i) any ERISA Affiliate engages in or otherwise becomes liable for a non-exempt prohibited transaction; or (j) a violation of the applicable requirements of Section 404 or 405 of ERISA or the exclusive benefit rule under Section 401(a) of the Internal Revenue Code by any fiduciary with respect to any Qualified Plan for which any ERISA Affiliate may be directly or indirectly liable. "Event of Default" shall have the meaning specified in ARTICLE VII hereof. "Facility" shall mean the reducing revolving line of credit facility established by the Lenders under SECTION 2.1. "Federal Funds Rate" shall mean, for any day, the interest rate per annum equal to the weighted average of the rates of overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of Richmond, or if such rate is not so published on the relevant Business Day, the average of the 10 quotations for such day on such transactions received by the Agent from three federal funds brokers of recognized standing selected by the Agent. "Financials" or "Financial Statements" shall mean the audited consolidated financial statements of the Borrower and its Subsidiaries for the fiscal years ended December 31, 1995 and December 31, 1996; the unaudited consolidated interim financial statements of the Borrower and its Subsidiaries for the nine months ended September 30, 1997; and all other financial statements of the Borrower and its Subsidiaries subsequent to December 31, 1995 that have previously been delivered by the Borrower or any Subsidiary to the Agent or any Lender in connection with this Agreement, including without limitation interim financial statements. "Financing Statements" shall mean financing statements approved for filing in accordance with the applicable adopted version of the Uniform Commercial Code and all other titles, documents, and certificates that the Agent may require from the Borrower or any Guarantor to describe and perfect the security interests created hereunder or under the other Loan Documents, and all assignments thereof and amendments thereto, in form and substance satisfactory to the Agent. "First Union" shall mean First Union National Bank, a national banking association, and its successors and assigns. "Fixed Charges" shall mean at any time, with respect to the Borrower and its Subsidiaries on a consolidated basis as of the last day of any fiscal quarter, without duplication, the sum of Interest Expense and Lease Expense for such fiscal quarter. "Generally Accepted Accounting Principles" shall mean generally accepted accounting principles, as recognized by the American Institute of Certified Public Accountants, consistently applied and maintained on a consistent basis for the Borrower and its Subsidiaries on a consolidated basis throughout the period indicated and consistent with the financial practice of the Borrower and its Subsidiaries after the date hereof. "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any central bank thereof, any municipal, local, city or county government, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantors" shall mean AOR, Inc., AOR Management Company of Indiana, Inc., AOR Holding Company of Indiana, Inc., AOR Management Company of Oregon, Inc., AOR Management Company of Oklahoma, Inc., AOR Management Company of Pennsylvania, Inc., AOR Management Company of Missouri, Inc., AOR Management Company of Arizona, Inc., AOR Management Company of South Carolina, Inc., AOR Management Company of Virginia, Inc., AOR Management Company of North Carolina, Inc., AOR Management Company of New York, Inc., AOR Management Company of Florida, Inc., AOR Management Company of Nevada, Inc., AOR Management Company of Texas, Inc., AOR Real Estate, Inc., AORT Holding Company, Inc., RMCC Cancer Center, Inc., AORIP. Inc. (each of the foregoing a Delaware corporation and a direct or indirect wholly-owned Subsidiary of the Borrower), AOR 11 of Texas Management Limited Partnership and AOR of Indiana Management Partnership, their successors and assigns, each future direct and indirect Subsidiary and any other Person that guarantees the Obligations of the Borrower and the obligations of the other Guarantors under the Guaranty Agreement; provided, that unless requested by the Required Lenders AOR Synthetic Real Estate, Inc. shall not be required to become a Guarantor so long as it (i) is the Lessee (as defined in the Participation Agreement) under the ELLF, (ii) is not a party to any Management Services Agreements and (iii) does not have any Subsidiaries. "Guarantors' Security Agreement" shall mean the Third Amended and Restated Guarantors' Security Agreement, substantially in the form of EXHIBIT E-2, together with any amendments, modifications and supplements thereto, any replacements, renewals, extensions and restatements thereof, and any substitutes therefor, in whole or in part. "Guaranty Agreement" shall mean the Second Amended and Restated Guaranty Agreement substantially in the form of EXHIBIT D, together with accessions thereto at various dates thereafter, and all other similar guaranty agreements and accessions executed and delivered from time to time by any Guarantor or future Guarantor in form and substance satisfactory to the Lenders, together with any amendments, modifications, supplements and accessions thereto, any replacements, renewals, extensions and restatements thereof, and any substitutes therefor, in whole or in part. "HCFA" shall mean the United States Health Care Financing Administration and any successor agency. "Hazardous Substances" means any substances or materials (i) that are or become defined as hazardous wastes, hazardous substances, pollutants, contaminants or toxic substances under any Environmental Law, including, without limitation, underground or above ground storage tanks; (ii) that are toxic, explosive, corrosive, flammable, infectious, radioactive, mutagenic or otherwise hazardous and that, in each case, are or become regulated under any Environmental Law by any Governmental Authority; or (iii) the presence of which requires investigation or remediation under any Environmental Law. "IRS" shall mean the Internal Revenue Service and any successor thereto. "Indemnified Costs" shall have the meaning assigned to such term in SECTION 10.7. "Indemnified Person" shall have the meaning assigned to such term in SECTION 10.7. "Interest Expense" shall mean, for any period, total interest expense of the Borrower and its Subsidiaries on a consolidated basis for such period (including, without limitation, capitalized interest expense and interest expense attributable to Capital Lease Obligations), determined in accordance with Generally Accepted Accounting Principles, and all lease payments made by the Borrower and its Subsidiaries pursuant to the ELLF. "Interest Period" shall have the meaning set forth in SECTION 2.10 hereof. 12 "Interest Rate Protection Agreements" shall mean all interest rate swap agreements, interest rate cap agreements, interest rate collar agreements, interest rate insurance or other hedging arrangements and all other similar agreements or arrangements designed to protect against fluctuations in interest rates. "Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Invitation for Bids" shall have the meaning given to such term in SECTION 2.3(B). "Issuing Bank" shall mean First Union in its capacity as issuer of Letters of Credit, and its successors or assigns in such capacity. "L/C Participant" shall have the meaning assigned to such term in SECTION 2.20(C) hereof. "Lease Expense" shall mean, for any period, all amounts paid, payable or accrued during such period by the Borrower and its Subsidiaries on a consolidated basis with respect to all leases of real and personal property, excluding Capital Leases and intercompany items. "Lender" shall mean each financial institution signatory hereto and each other financial institution that becomes a "Lender" hereto pursuant to SECTION 10.5, and their permitted successors and assigns. "Lending Office" shall mean, with respect to any Lender, the office of such Lender designated as its "Lending Office" on its signature page hereto or in an Assignment and Acceptance, or such other office as may be otherwise designated in writing from time to time by such Lender to the Borrower and the Agent. A Lender may designate separate Lending Offices as provided in the foregoing sentence for the purposes of making or maintaining different Types of Loans, and, with respect to LIBOR Loans, such office may be a domestic or foreign branch or Affiliate of such Lender. "Letter of Credit Outstandings" shall mean, at any time, the sum of (i) the aggregate Stated Amount of all outstanding Letters of Credit at such time and (ii) the aggregate amount of all Reimbursement Obligations at such time (exclusive of Reimbursement Obligations that are repaid with the proceeds of, and simultaneously with the incurrence of, Loans). "Letter of Credit Request" shall have the meaning assigned to such term in SECTION 2.20(B) hereof. "Letters of Credit" shall have the meaning set forth in SECTION 2.20(A) hereof. "LIBOR Auction" shall mean a solicitation of Bids setting forth LIBOR Bid Margins pursuant to SECTION 2.3. "LIBOR Bid Loan" shall mean, at any time, any Bid Loan that bears interest at such time at a rate equal to the LIBOR Rate as in effect at such time plus (or minus) a LIBOR Bid Margin established pursuant to a LIBOR Auction. 13 "LIBOR Bid Margin" shall have the meaning given to such term in SECTION 2.3(C)(IV). "LIBOR Committed Loan" shall mean, at any time, any outstanding Committed Loan that bears interest at such time at the Adjusted LIBOR Rate as in effect at such time. "LIBOR Loan" shall mean any LIBOR Bid Loan or any LIBOR Committed Loan. "LIBOR Rate" shall mean, with respect to each LIBOR Loan comprising part of the same borrowing for any Interest Period, an interest rate per annum equal to (i) the rate of interest appearing on Telerate Page 3750 (or any successor page) or (ii) if no such rate is available, the rate of interest determined by the Agent to be the rate or the arithmetic mean of rates (rounded upward, if necessary to the nearest 1/16 of one percentage point) at which Dollar deposits in immediately available funds are offered by First Union to first-tier banks in the London interbank Eurodollar market, in each case under (i) and (ii) above at approximately 11:00 a.m., London time, two (2) Business Days prior to the first day of such Interest Period for a period substantially equal to such Interest Period and in an amount substantially equal to the amount of First Union's Loan comprising part of such LIBOR Loan. For purposes of this definition, with respect to LIBOR Bid Loans comprising a Bid Borrowing in which First Union is not participating, the LIBOR Rate shall be determined as if such LIBOR Bid Loans were LIBOR Committed Loans. "Loan" or "Loans" shall mean and collectively refer to the Committed Loans and the Bid Loans. "Loan Documents" shall mean and collectively refer to this Agreement, the Notes, the Security Agreements, the Guaranty Agreement, the Financing Statements, Interest Rate Protection Agreements (if any) with any Lenders relating to the Notes, and any and all agreements, instruments and documents, including, without limitation, notes, guaranties, mortgages, deeds to secure debt, deeds of trust, chattel mortgages, pledges, powers of attorney, consents, assignments, contracts, notices, security agreements, trust account agreements and all other written matters, whether heretofore, now or hereafter, executed by or on behalf of the Borrower or any Subsidiary and delivered to the Agent or any Lender, with respect to this Agreement or with respect to the transactions contemplated by this Agreement, and in each case, together with any amendments, modifications and supplements thereto, any replacements, renewals, extensions and restatements thereof, and any substitutes therefor, in whole or in part. "Management Services Agreements" shall mean the management services agreements of Borrower and its Subsidiaries, whether now existing or hereafter acquired or arising, together with any and all extensions, modifications, amendments, renewals, substitutions or replacements thereof. "Margin Stock" shall have the meaning given to such term in Regulation U or Regulation G. "Material Adverse Effect" or "Material Adverse Change" shall mean, in the good faith and reasonable opinion of the Required Lenders, a material adverse effect upon, or a material adverse change in, any of (a) the financial condition, operations, business or properties of the 14 Borrower and its Subsidiaries, taken as a whole; or (b) the ability of the Borrower and its Subsidiaries, taken as a whole, to perform under the Loan Documents. "Maturity Date" shall mean December 31, 2002. "Medicaid Certification" shall mean, with respect to any health care facility, certification by HCFA or another Governmental Authority, or any Person under contract with HCFA, that such health care facility is in compliance with all conditions of participation set forth in the Medicaid Regulations, except where the failure to so comply would not have a Material Adverse Effect. "Medicaid Provider Agreement" shall mean an agreement entered into between any Person administering the Medicaid program and a health care facility under which the health care facility agrees to provide services for Medicaid patients in accordance with the terms of the agreement and Medicaid Regulations. "Medicaid Regulations" shall mean, collectively, (i) all federal statutes (whether set forth in Title XIX of the Social Security Act, 42 USC (S)(S) 1396 et seq., or elsewhere) affecting the medical assistance program established by Title XIX of the Social Security Act, and any statutes succeeding thereto; (ii) all applicable provisions of all federal rules, regulations, manuals having the force of law and orders of all Governmental Authorities promulgated pursuant to or in connection with the statutes described in clause (i) above and all federal administrative, reimbursement and other guidelines of all Governmental Authorities having the force of law promulgated pursuant to or in connection with the statutes described in clause (i) above; (iii) all state statutes and plans for medical assistance enacted in connection with the statutes and provisions described in clauses (i) and (ii) above; and (iv) all applicable provisions of all rules, regulations, manuals and orders of all Governmental Authorities promulgated pursuant to or in connection with the statutes described in clause (iii) above and all state administrative, reimbursement and other guidelines of all Governmental Authorities having the force of law promulgated pursuant to or in connection with the statutes described in clause (iii) above, in each case as may be amended, supplemented or otherwise modified from time to time. "Medicare Certification" shall mean, with respect to any health care facility, certification by HCFA or any other Governmental Authority, or any Person under contract with HCFA, that such health care facility is in compliance with all the conditions of participation set forth in the Medicare Regulations, except where the failure to so comply would not have a Material Adverse Effect. "Medicare Provider Agreement" shall mean an agreement entered into between any Person administering the Medicare program and a health care facility under which the health care facility agrees to provide services for Medicare patients in accordance with the terms of the agreement and Medicare Regulations. "Medicare Regulations" shall mean, collectively, all federal statutes (whether set forth in Title XVIII of the Social Security Act, 42 USC (S)(S) 1396 et seq., or elsewhere) affecting the health insurance program for the aged and disabled established by Title XVIII of the Social Security Act 15 and any statutes succeeding thereto; together with all applicable provisions of all rules, regulations, manuals having the force of law and orders and administrative, reimbursement and other guidelines having the force of law of all Governmental Authorities (including without limitation, Health and Human Services ("HHS"), HCFA, the Office of the Inspector General for HHS, or any Person succeeding to the functions of any of the foregoing) promulgated pursuant to or in connection with any of the foregoing having the force of law, in each case as may be amended, supplemented or otherwise modified from time to time. "Multiemployer Plan" shall mean any "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA to which any Borrower or any Subsidiary is required to make contributions. "Notes" shall mean the Committed Loan Notes and the Bid Loan Notes. "Notice of Committed Borrowing" shall have the meaning assigned to such term in SECTION 2.2(A). "Notice of Conversion/Continuation" shall have the meaning assigned to such term in SECTION 2.11B). "OECD" shall mean the Organization for Economic Cooperation and Development and any successor thereto. "OSHA" shall mean the Occupational Safety and Health Act, as amended from time to time, and all rules and regulations from time to time promulgated thereunder. "Obligations" shall mean (i) the Loans and Reimbursement Obligations and all other loans, advances, indebtedness, liabilities, obligations, covenants and duties owing, arising, due or payable from the Borrower to the Agent or any Lender or Issuing Bank of any kind or nature, present or future, howsoever evidenced, created, incurred, acquired or owing, arising under this Agreement, the Notes or the other Loan Documents or in any other way related to this Agreement, whether direct or indirect (including those acquired by an Assignment and Acceptance), absolute or contingent, primary or secondary, due or to become due, now existing or hereafter arising and however acquired, (ii) all interest (including, to the extent permitted by law, all post-petition interest), charges, expenses, fees, attorneys' fees and any other sums payable by the Borrower to the Agent or any Lender under this Agreement or any of the other Loan Documents, (iii) all obligations to any Lender pursuant to any Interest Rate Protection Agreement (if any) in respect of the Notes, (iv) the obligations of the Borrower to First Union arising pursuant to the Swingline Note, and, (v) for purposes of Sections 4.19, 7.1(q) and 9.10(b), the obligations of the Borrower and its Subsidiaries as Credit Parties under the ELLF. "Participant" shall mean any Person, now or at any time hereafter, participating with any Lender in the Loans pursuant to this Agreement, and its permitted successors and assigns. "Participation Agreement" shall mean the Participation Agreement, dated as of a date on or about the date hereof (together with any amendments, modifications, replacements, substitutes 16 and supplements thereto and any renewals or extensions thereof, in whole or in part), among the Borrower, First Security Bank, National Association, as owner trustee, and First Union, as agent., "Partnership Interests" shall mean all ownership or profit-sharing interests (howsoever designated) in any general or limited partnership, limited liability company or other non-corporate company or entity and all agreements, instruments and documents convertible, in whole or in part, into any one or more or all of the foregoing. "Pension Plan" shall mean any "employee pension benefit plan" within the meaning of Section 3(2) of ERISA maintained by the Borrower or any Subsidiary (other than any Multiemployer Plan that is subject to the provisions of Title IV of ERISA). "Percentage" shall mean, with respect to any Lender at any time, a fraction (expressed as a percentage) the numerator of which is the Commitment of such Lender at such time and the denominator of which is the Total Commitment at such time; provided that if the Percentage of any Lender is to be determined after the Commitments have been terminated, then such Percentage shall be determined immediately prior (and without giving effect) to such termination. "Permitted Liens" shall mean any of the following liens, restrictions or encumbrances securing any liability or indebtedness of the Borrower or any Subsidiary on, or otherwise affecting, any of the Borrower's or such Subsidiary's property, real or personal, whether now owned or hereafter acquired: (a) Liens granted to the Agent, for the benefit of the Lenders; (b) Liens imposed by mandatory provisions of law of carriers, warehousemen, mechanics, repairmen and materialmen and other like liens required by provisions of law and incurred in the ordinary course of business for sums not yet due and payable (or with respect to any obligation not greater than $50,000, not more than sixty (60) days past the date of service) or that are being contested in good faith and with due diligence by appropriate proceedings; (c) Liens incurred in the ordinary course of business in connection with worker's compensation, unemployment insurance or other forms of governmental insurance or benefits, or liens arising from good faith deposits in connection with letters of credit, bids, tenders, statutory obligations, leases and contracts (other than for borrowed money) entered into in the ordinary course of business, or to secure obligations on surety or appeal bonds provided that all such liens in the aggregate have no Material Adverse Effect; (d) Liens for current taxes, assessments or other governmental charges that are not delinquent or remain payable without any penalty or that are being contested in good faith and with due diligence by appropriate proceedings, provided that all such liens in the aggregate have no Material Adverse Effect and, if reasonably requested by the Agent, the Borrower or such Subsidiary has established reserves reasonably satisfactory to the Agent with respect thereto; (e) Liens upon property leased under a Capital Lease and either (i) placed upon such property at the time of, or within ten (10) days after, the commencement of the lease thereof to 17 secure the lease payments under such Capital Lease, provided that any such lien (A) shall not encumber any other property of the Borrower or any Subsidiary and (B) shall not exceed the total of such lease payments, or (ii) entered into or arising in compliance with the terms of the ELLF; (f) Liens set forth on SCHEDULE 1.1(A) attached hereto, provided that such liens are not renewed, extended or increased; (g) Purchase money liens (x) incurred in the purchase of equipment permitted under SECTION 6.10 hereof, provided that any such lien (i) attaches to such asset concurrently with or within ten (10) days after the acquisition thereof, (ii) shall not encumber any other property of the Borrower or any Subsidiary and (iii) shall not exceed the purchase price of such asset or (y) that have been disclosed to the Agent and the Lenders and assumed in any Permitted Physician Transaction in accordance with SECTION 5.14 or Physician Transaction approved in accordance with SECTION 6.2 hereof; (h) Other liens disclosed to the Agent and Lenders and incurred, assumed or otherwise acquired in connection with any Permitted Physician Transaction or permitted in connection with any Physician Transaction approved under SECTION 6.2; (i) Assignment Restrictions; (j) Easements, rights of way, zoning restrictions and other similar encumbrances on real estate that do not materially impair the value of the property to which they relate; (k) Any other liens or encumbrances as the Required Lenders may approve in writing from time to time; (l) Liens on Margin Stock, to the extent the value thereof exceeds 25% of the value of the total assets of the Borrower and its Subsidiaries (including Margin Stock); and (m) Liens granted pursuant to the ELLF. "Permitted Physician Transaction" shall mean a Physician Transaction that, upon satisfaction of all of the following conditions, may be consummated without the consent of the Agent or the Lenders: (A) the assets acquired, or the business of the Person whose stock is acquired, shall be of an oncology, hematology or radiation oncology physician practice; (B) those Physician Transactions that are structured as asset acquisitions shall be for an entire business, division, facility, operation or product line of such Person, excluding medical assets not acquired by the Borrower or Subsidiary; (C) those Physician Transactions that are structured as stock acquisitions shall be effected through a purchase of 100% of the capital stock of such Person by the Borrower or through a merger between such Person and the Borrower or a direct wholly-owned Subsidiary of the Borrower, as the case may be, so that after giving effect to such merger 100% of the capital stock of the surviving corporation of such merger is owned by the Borrower or a direct wholly-owned Subsidiary of the Borrower; (D) the Transaction Amount for such Physician Transaction shall not exceed $75,000,000 (subject to the proviso below); and (E) in the fiscal year of such Physician Transaction, the aggregate Transaction Amount for all Permitted Physician Transactions in such year shall not exceed $120,000,000; provided, that within 45 days 18 following receipt by the Lenders of documentation (pursuant to SECTION 5.14(E)) of any Permitted Physician Transaction with a Transaction Amount in excess of $30,000,000, the Required Lenders in their sole discretion may by notice to the Borrower from and after the date of delivery of such notice reduce the individual Permitted Physician Transaction limit in clause (D) above to $30,000,000. Notwithstanding anything to the contrary contained in the immediately preceding sentence, a Physician Transaction shall be a Permitted Physician Transaction only if, in addition to the foregoing, all requirements of SECTIONS 5.11 (if any new Subsidiaries are acquired or created in connection with such Physician Transaction) and 5.14 are met with respect thereto. "Permitted Subordinated Debt" shall mean any Debt of the Borrower or any Subsidiary incurred in respect of a Permitted Physician Transaction and evidenced by a written instrument. The terms and conditions of any Permitted Subordinated Debt shall be substantially similar to those shown on SCHEDULE 1.1(B), including, without limitation, (i) an express statement of subordination to the payment and performance of the Obligations, (ii) an interest rate not exceeding the greater of 7% per annum and three percentage points per annum over the Base Rate (other than upon a default), (iii) a term for repayment that provides for no more than 20% of the total original principal amount of such Permitted Subordinated Debt to be repaid in any fiscal year, (iv) a final maturity of such Permitted Subordinated Debt not less than five (5) years from the date of the Permitted Physician Transaction and (v) a payment blockage on such Permitted Subordinated Debt in the event of a payment default on any senior debt or an event of default allowing senior creditors to accelerate such senior debt (provided that such payment blockage may expire if the senior debt has not been accelerated within at least ninety (90) days from the commencement of such blockage). "Person" shall mean a corporation, an association, a joint venture, a partnership, an organization, a business, an individual, a trust or a government or political subdivision thereof or any government agency or any other legal entity. "Physician Transaction" shall mean any bona fide transaction or series of related transactions, consummated after the date hereof, by which the Borrower or any Subsidiary (i) acquires all or part of the assets, or a going business or division, of any Person, whether through purchase of assets or securities, merger or otherwise, (ii) directly or indirectly acquires control of any Person or (iii) acquires the right to manage the non-medical aspects of the business of any Person. For the purpose of this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of management and non-medical policies, whether through the ownership of voting securities, by contract or otherwise. Notwithstanding the above, "control" shall not include, and shall not be implied to include, the power to direct any physician's practice of medicine or the power to interfere in any physician/patient relationship. "Practice" shall have the meaning assigned to such term in SECTION 5.14(C)(I). "Pro Rata Share" of any amount shall mean, with respect to any Lender at any time, the product of (i) such amount, multiplied by (ii) such Lender's Percentage at such time. 19 "Prohibited Transaction" shall mean any transaction described in (i) Section 406 of ERISA that is not exempt by reason of Section 408 of ERISA or (ii) Section 4975(c) of the Internal Revenue Code that is not exempt by reason of Section 4975(c) or 4975(d). "Regulations D, G, T, U and X" shall mean Regulations D, G, T, U and X, respectively, of the Federal Reserve Board and any successor regulations. "Reimbursement Obligations" shall have the meaning set forth in SECTION 2.20(D) hereof. "Reportable Event" shall mean a reportable event as defined in Section 4043(b) of ERISA (other than an event for which notice is waived under the ERISA regulations). "Required Lenders" shall mean, at any time, the Lenders with 66-2/3% or more of the aggregate of all Commitments at such time or, if the Commitments have been terminated, Lenders owning or holding 66-2/3% or more of the then aggregate principal amount of the Loans and Letter of Credit Outstandings then outstanding. "Requirement of Law" means, as to any Person, the charter, articles or certificate of incorporation and bylaws or other organizational or governing documents of such Person, and any statute, law, treaty, rule, regulation, order, decree, writ, injunction or determination of any arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Reserve Requirement" shall mean, with respect to any Interest Period, the reserve percentage (expressed as a decimal) in effect from time to time during such Interest Period, as provided by the Board of Governors of the Federal Reserve System (or any successor governmental body), applied for determining the reserve requirement (including, without limitation, basic, supplemental, marginal and emergency reserves) applicable to First Union under Regulation D with respect to "Eurocurrency liabilities" within the meaning of Regulation D, or under any similar or successor regulation with respect to Eurocurrency liabilities or Eurocurrency funding. "Security Agreement" shall mean the Third Amended and Restated Security Agreement, substantially in the form of EXHIBIT E-1, together with any amendments, modifications and supplements thereto, any replacements, renewals, extensions and restatements thereof, and any substitutes therefor, in whole or in part. "Security Agreements" shall mean the Security Agreement and the Guarantors' Security Agreement. "Solvent" shall mean, as to any Person on any particular date, that such Person (i) has capital sufficient to carry on its business and transactions and all business and transactions in which it is about to engage, (ii) is able to pay its debts as they mature, (iii) owns property having a fair saleable value greater than the amount required to pay its probable liability on existing debts as they mature (including known reasonable contingencies and contingencies that should be included in notes of the Financial Statements pursuant to Generally Accepted Accounting 20 Principles), and (iv) does not intend to, and does not believe that it will, incur debts or probable liabilities beyond its ability to pay such debts or liabilities as they mature. "Stated Amount" shall mean, with respect to any Letter of Credit at any time, the maximum amount available to be drawn thereunder at such time (regardless of whether any conditions for drawing could then be met). "Stock" shall mean all shares, interests, rights to purchase, options, participations or other equivalents of or interests in (howsoever designated) the equity of any Person, whether voting or non-voting, including, without limitation, common stock, warrants, preferred stock, convertible debentures and all agreements, instruments and documents convertible, in whole or in part, into any one or more or all of the foregoing. "Subordinated Debt" shall mean any Debt of the Borrower or any Subsidiary to the extent such Debt is expressly subordinated and made junior to the payment and performance of the Obligations and evidenced as such by a written instrument the terms and conditions (including, without limitation, subordination provisions) of which are satisfactory in form and substance to the Required Lenders and are approved in writing by the Agent in accordance with SECTION 6.2 or 6.3 hereof. "Subsidiary" shall mean any corporation of which more than fifty percent (50%) of the outstanding Stock having ordinary voting power to elect a majority of the board of directors, or other entity of which more than fifty percent (50%) of the Partnership Interest or voting power, is at the time, directly or indirectly, owned by any Person or one or more of its Subsidiaries (irrespective of whether, at the time, the ownership interests or Stock of any other class or classes of such entity or corporation shall have or might have voting power by reason of the happening of any contingency). When used without reference to a parent, the term "Subsidiary" shall be deemed to refer to a Subsidiary of the Borrower. "Swingline Note" shall mean the note from Borrower to First Union in a principal amount of $5,000,000 delivered in connection with the Borrower's cash management facility. "Taxes" shall have the meaning assigned to such term in SECTION 2.12(A). "Termination Date" shall mean the Maturity Date, or such earlier date of termination of the Total Commitment in accordance with SECTION 2.6 or SECTION 8.1. "Total Commitment" shall mean, at any time, the sum of the Commitments of each Lender at such time. "Total Unutilized Commitment" shall mean, at any time, the sum of the Unutilized Commitments of each Lender at such time. "Transaction Amount" shall mean, with respect to any Physician Transaction, the sum (without duplication) of the following, in each case determined in accordance with Generally Accepted Accounting Principles: (i) the aggregate original principal amount of all Loans the proceeds of which are utilized to finance such Physician Transaction, in part or in whole, (ii) the 21 amount of cash paid by the Borrower and its Subsidiaries in connection with such Physician Transaction, (iii) the fair market value of all capital stock or other ownership interests of the Borrower or any Subsidiary issued or given (or to be issued or given in the future) to the seller in connection with such Physician Transaction, (iv) the outstanding principal amount of all Debt incurred, assumed or acquired in connection with such Physician Transaction, (v) all additional purchase price amounts in the form of notes and other contingent obligations, as recorded or disclosed on the financial statements (including the notes to such statements) of the Borrower and its Subsidiaries, (vi) all amounts paid in consideration of parties' entering into covenants not to compete and consulting agreements in connection with such Physician Transaction and (vii) the aggregate fair market value of all other consideration given by the Borrower and its Subsidiaries in connection with such Physician Transaction. "Type" shall have the meaning assigned to such term in SECTION 2.1(D). "Uniform Commercial Code" shall mean the Uniform Commercial Code of the State of North Carolina, as amended from time to time, unless in any particular instance the Uniform Commercial Code of another state is applicable, in which case it shall mean the Uniform Commercial Code of such state. "Unutilized Commitment" shall mean, with respect to any Lender at any time, such Lender's Commitment at such time less (i) the aggregate principal amount of all Committed Loans made by such Lender that are outstanding at such time, (ii) such Lender's Pro Rata Share of Letter of Credit Outstandings and (iii) such Lender's Pro Rata Share of all Bid Loans outstanding at such time (even though such Lender may not have made some or all of the Bid Loans). 1.2 Accounting Terms. Any accounting terms used in this Agreement that are not specifically defined shall have the meanings customarily given them in accordance with Generally Accepted Accounting Principles; provided, however, that, in the event that changes in Generally Accepted Accounting Principles shall be mandated by the Financial Accounting Standards Board, or any similar accounting body of comparable standing, or shall be recommended by the Borrower's certified public accountants, to the extent that such changes would modify or could modify such accounting terms (including accounting terms otherwise defined in this Agreement) or the interpretation or computation thereof, such changes shall be followed in defining such accounting terms only from and after the date this Agreement shall have been amended to the extent necessary to reflect any such changes in the financial covenants and other terms and conditions of this Agreement. 1.3 Singular/Plural. Unless the context otherwise requires, words in the singular include the plural and words in the plural include the singular. 1.4 Other Terms. The terms "Lease Agreement", "Agency Agreement", "Credit Agreement", "Tranche A Obligations", and "Operative Agreements" have the meanings set forth in Appendix A to the Participation Agreement. All other terms contained in this Agreement shall, when the context so indicates, have the meanings provided for by the Uniform Commercial Code of the State of North Carolina to the extent the same are used or defined therein. 22 ARTICLE II. AMOUNT AND TERMS OF THE LOANS 2.1 Commitments; Loans. (a) Each Lender severally agrees, subject to and on the terms and conditions of this Agreement, to make loans (each, a "Committed Loan," and collectively, the "Committed Loans") to the Borrower, from time to time on any Business Day during the period from the date hereof to but not including the Termination Date; provided, that no Lender shall make any Committed Loan in an amount that would exceed such Lender's Unutilized Commitment at such time. Subject to and on the terms and conditions of this Agreement, the Borrower may borrow, repay and reborrow Committed Loans. (b) In addition to Committed Loans, each Lender severally agrees that the Borrower may, subject to and on the terms and conditions of this Agreement and as more particularly set forth in SECTION 2.3, request the Lenders to submit offers to make loans (each, a "Bid Loan," and collectively, the "Bid Loans") to the Borrower, from time to time on any Business Day during the period from the date hereof to but not including the earlier of (i) the date that is one (1) Business Day prior to the seventh (7th) day prior to the Maturity Date or (ii) the Termination Date; provided, that the Lenders may, but shall have no obligation to, submit such offers and the Borrower may, but shall have no obligation to, accept any such offers. (c) No Borrowing (i) shall be made if, immediately after giving effect thereto, the sum of (y) the aggregate principal amount of Loans outstanding at such time (exclusive of Loans that are repaid with the proceeds of, and simultaneously with the incurrence of, a Borrowing) plus (z) the aggregate Letter of Credit Outstandings at such time (exclusive of Reimbursement Obligations that are repaid with the proceeds of, and simultaneously with the incurrence of, a Borrowing) would exceed the Total Commitment and (ii) shall be required of any Lender if, immediately after giving effect thereto, a Default or Event of Default would exist. (d) The Loans shall, at the option of the Borrower and subject to the terms and conditions of this Agreement, be (i) in the case of Committed Loans, either Base Rate Loans or LIBOR Committed Loans, or (ii) in the case of Bid Loans, either Absolute Rate Loans or LIBOR Bid Loans (Base Rate Loans, LIBOR Committed Loans, Absolute Rate Loans and LIBOR Bid Loans, each, a "Type" of Loan), provided that all Loans comprising the same Borrowing shall, unless otherwise specifically provided herein, be of the same Type. (e) Any Loans made on the Closing Date shall be made initially as Base Rate Loans. (f) Any borrowings outstanding under the Original Agreement shall not be continued as Loans under this Agreement and shall be repaid, together with all interest and fees accrued thereon (including the accrued commitment fee pursuant to SECTION 2.7(A) of the Original Agreement and all amounts required to be paid pursuant to SECTION 2.13 of the Original Agreement), on or prior to the Closing Date. 23 2.2 Committed Borrowings. (a) Whenever the Borrower desires to make a Committed Borrowing hereunder (other than continuations or conversions of outstanding Loans pursuant to SECTION 2.11 or any Borrowing pursuant to SECTION 2.20), the Borrower will give the Agent written notice (by telecopier or otherwise), prior to 9:00 a.m., Charlotte time, at least two (2) Business Days prior to each Borrowing to be comprised of LIBOR Committed Loans and on the same Business Day of each Borrowing to be comprised of Base Rate Loans; provided, that Base Rate Loans may be borrowed upon written notice delivered prior to 12:00 p.m. (noon), Charlotte time, on the same Business Day of the proposed Borrowing Date for any Bid Borrowing of Absolute Rate Loans duly requested in accordance with SECTION 2.3. Each such notice (each, a "Notice of Committed Borrowing") shall be irrevocable, shall be given in the form of EXHIBIT B-1 and shall be appropriately completed to specify (i) the aggregate principal amount and Type of the Loans to be made pursuant to such Borrowing (and, in the case of LIBOR Committed Loans, the initial Interest Period to be applicable thereto) and (ii) the requested date of the Borrowing (the "Borrowing Date"), which shall be a Business Day. Notwithstanding anything to the contrary contained herein: (i) the aggregate principal amount of each Borrowing hereunder (y) in the case of Borrowings comprised of Base Rate Loans, shall not be less than $2,000,000 and, if greater, shall be in an integral multiple of $500,000 in excess thereof and (z) in the case of Borrowings comprised of LIBOR Committed Loans, shall not be less than $3,000,000 and, if greater, shall be in an integral multiple of $1,000,000 in excess thereof; (ii) if the Borrower shall have failed to designate the Type of Loans comprising a Borrowing, the Borrower shall be deemed to have requested a Borrowing comprised of Base Rate Loans; (iii) if the Borrower shall have failed to select the duration of the Interest Period to be applicable to any Borrowing of LIBOR Committed Loans, then the Borrower shall be deemed to have selected an Interest Period with a duration of one month; and (iv) LIBOR Committed Loans under the Facility may not be outstanding under more than ten (10) separate Interest Periods at any one time, less the number of Bid Loans outstanding at such time. (b) Upon its receipt of a Notice of Committed Borrowing, the Agent will promptly notify each Lender of the proposed Borrowing, of such Lender's Pro Rata Share thereof and of the other matters specified in the Notice of Committed Borrowing. Each such Lender will make the amount of its Pro Rata Share of such Borrowing available to the Agent at its office referred to in SECTION 10.4, for the account of the Borrower, in Dollars and in immediately available funds, prior to 2:00 p.m., Charlotte time, on the Borrowing Date. To the extent the relevant Lenders have made such amounts available to the Agent as provided hereinabove, the Agent will make the aggregate of such amounts available to the Borrower in accordance with SECTION 2.4(A) below and in like funds as received by the Agent, as soon as practicable prior to 3:30 p.m., Charlotte time, on the Borrowing Date. 24 2.3 Bid Borrowings. (a) In order to request the Lenders to submit Bids to make Bid Loans hereunder, the Borrower will give the Agent written notice not later than 11:00 a.m., Charlotte time, (y) four (4) Business Days prior to the requested Bid Borrowing, in the case of a LIBOR Auction, or (z) two (2) Business Days prior to the requested Bid Borrowing, in the case of an Absolute Rate Auction. The Borrower may request offers to make Bid Loans for up to three (3) separate Interest Periods in a single notice, and each such request for offers for a separate Interest Period shall be deemed a request for a separate Bid Borrowing. Each such notice (each, a "Bid Request") shall be given in the form of EXHIBIT C-1 and shall specify, with respect to each requested Bid Borrowing for a particular Interest Period: (i) the Interest Period to be applicable to such Bid Borrowing; (ii) the aggregate amount of such requested Bid Borrowing, which shall not (with respect to any single Interest Period) be less than $5,000,000 or, if greater, an integral multiple of $1,000,000 in excess thereof, but shall not cause the limits specified in Section 2.1(c) to be exceeded as of the proposed Borrowing Date of the Bid Borrowing; (iii) whether the Bid Borrowing requested for a particular Interest Period is to be comprised of LIBOR Bid Loans or Absolute Rate Loans; and (iv) the requested Borrowing Date, which shall be a Business Day; provided, however, that (w) no Interest Period applicable to any Bid Borrowing shall expire on a date later than the Business Day prior to the Maturity Date, (x) the Borrower may not submit a Bid Request within five (5) Business Days after the date of submission of any previous Bid Request, (y) the Borrower may not submit more than three (3) Bid Requests in any calendar month, and (z) no Bid Borrowing shall be made if, immediately after giving effect thereto, there would be outstanding Bid Loans having more than four (4) separate Interest Periods or outstanding LIBOR Committed Loans and Bid Loans together having more than ten (10) separate Interest Periods (for which purpose Interest Periods applicable to LIBOR Committed Loans and Interest Periods applicable to LIBOR Bid Loans shall be deemed to be separate Interest Periods even if they are coterminous). A Bid Request not given in the form of EXHIBIT C-1 or otherwise not given in compliance with the requirements of this subsection (a) may be rejected by the Agent in its sole discretion, and the Agent shall promptly notify the Borrower of any such rejection. (b) Upon receipt of a Bid Request that is not rejected as aforesaid, the Agent will promptly deliver to the Lenders a notice in substantially the form of EXHIBIT C-2 (each such notice, an "Invitation for Bids"), the delivery of which shall constitute an invitation by the Borrower to each Lender to submit Bids, on the terms and subject to the conditions of this Agreement, offering to make Bid Loans pursuant to such Bid Request. (c) Each Lender may, at its discretion, submit a Bid containing an offer or offers to make Bid Loans in response to any Invitation for Bids; provided that such Lender may submit a 25 single Bid containing an offer or offers to make up to three separate Bid Loans for each Interest Period specified in the relevant Bid Request. Each Bid must comply with the requirements of this subsection (c) and must be submitted to the Agent in writing (by facsimile transmission or otherwise) not later than 10:30 a.m., Charlotte time, (y) two (2) Business Days prior to the requested Borrowing Date, in the case of a LIBOR Auction, or (z) on the requested Borrowing Date, in the case of an Absolute Rate Auction; provided, however, that Bids submitted by the Agent (or any Affiliate of the Agent) in its capacity as a Lender may be submitted only if the Agent or such Affiliate notifies the Borrower of the terms of the offer or offers contained therein not later than 10:15 a.m., Charlotte time, (y) two (2) Business Days prior to the requested Bid Borrowing, in the case of a LIBOR Auction, or (z) on the requested Borrowing Date, in the case of an Absolute Rate Auction. Each Bid by a Lender shall (subject to the conditions of Article III and Section 7.1) be irrevocable, shall be submitted in substantially the form of EXHIBIT C-3 and shall specify: (i) the identity of such Lender; (ii) the Interest Period with respect to each Bid Loan for which such Bid is being made; (iii) with respect to each such Interest Period, the principal amount of each Bid Loan for which such Bid is being made, which principal amounts shall, in the aggregate with respect to each such Interest Period, be not less than $5,000,000 or, if greater, in an integral multiple of $1,000,000 in excess thereof, provided that (y) the aggregate principal amount of all Bid Loans for which a Bid is submitted may be equal to, greater than or less than the Commitment of such Lender, and (z) the aggregate principal amount of all Bid Loans offered by such Lender for a single Interest Period shall not exceed the requested principal amount of the Bid Borrowing for such Interest Period; (iv) in the case of a LIBOR Auction, the margin above or below the applicable LIBOR Rate (the "LIBOR Bid Margin") offered for each such Bid Loan, expressed as a percentage (rounded to the nearest 1/1000 of 1%) to be added to or subtracted from the applicable LIBOR Rate; (v) in the case of an Absolute Rate Auction, the fixed rate of interest per annum (rounded to the nearest 1/1000th of 1%) offered for each such Bid Loan (the "Absolute Rate"); and (vi) the proposed Borrowing Date. A Bid shall be disregarded by the Agent if it (w) is not given substantially in the form of EXHIBIT C-3 or fails to specify all of the information required by this subsection (c), (x) contains qualifying, conditional or similar language, (y) proposes terms other than or in addition to those set forth in the applicable Invitation for Bids (other than setting forth separate offers for any Interest Period as contemplated by the preceding sentence), or (z) is submitted to the Agent after 10:30 a.m., Charlotte time, (i) two (2) Business Days prior to the requested Borrowing Date, in the case of a LIBOR Auction, or (ii) on the requested Borrowing Date, in the case of an Absolute Rate Auction. 26 (d) Promptly upon receipt thereof and in any event not later than 11:00 a.m., Charlotte time, (y) two (2) Business Days prior to the requested Borrowing Date, in the case of a LIBOR Auction, or (z) on the requested Borrowing Date, in the case of an Absolute Rate Auction, the Agent will notify the Borrower of the terms (i) of each Bid, if any, submitted by a Lender in compliance with the provisions of subsection (c) above, and (ii) of each Bid, if any, submitted by a Lender that amends, modifies or is otherwise inconsistent with a previous Bid submitted by such Lender with respect to the same Bid Request. Any such subsequent Bid shall be disregarded by the Agent unless such subsequent Bid is submitted solely to correct a manifest error in such former Bid and is timely received as provided in subsection (c) above. The Agent's notice to the Borrower shall specify the aggregate principal amount of each Bid Borrowing in respect of which Bids were made for each Interest Period specified in the relevant Bid Request, the respective principal amounts and LIBOR Bid Margins or Absolute Rates, as the case may be, so offered, and the identity of the Lender that made each such Bid. (e) Not later than 11:30 a.m., Charlotte time, (y) two (2) Business Days prior to the requested Borrowing Date, in the case of a LIBOR Auction, or (z) on the requested Borrowing Date, in the case of an Absolute Rate Auction, the Borrower will notify the Agent of its acceptance or rejection of the offers referred to in subsection (d) above. The Borrower shall be under no obligation to accept any offer and may choose in its discretion to reject all offers, provided that the failure by the Borrower to give such notice in a timely manner shall be deemed to constitute a rejection of all Bids. In the case of acceptance, such notice shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower may accept any Bid in whole or in part, subject to the limitations on the aggregate outstanding principal amount of Bid Loans set forth in Section 2.1(b) and provided that: (i) the aggregate principal amount of each Bid Borrowing with regard to each Interest Period shall not exceed the applicable amount set forth in the related Bid Request; (ii) the aggregate principal amount of each Bid Borrowing shall not be less than $5,000,000 or, if greater, an integral multiple of $1,000,000 in excess thereof (subject to the provisions of clause (v) below); (iii) acceptance of Bids may be made only on the basis of ascending (i.e., from the lowest effective yield to the highest) LIBOR Bid Margins or Absolute Rates within each Interest Period, as the case may be (subject to clause (v) below); (iv) the Borrower may not accept any Bid that has been disregarded under the provisions of subsection (c) above or that otherwise fails to comply with the terms and conditions of this Section 2.3; and (v) if offers are made by two or more Lenders with the same LIBOR Bid Margins or Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are permitted to be accepted for the related Interest Period, then if the Borrower elects to accept any such offers, the aggregate principal amount of Bid Loans in respect of which such offers are accepted shall be allocated by the Borrower among such Lenders (after consultation with the Agent) as nearly as practicable 27 (in such integral multiples of not less than $1,000,000 as the Borrower, after consultation with the Agent, may deem appropriate) in proportion to the respective aggregate principal amounts of such offers. Determinations by the Borrower and the Agent of the amounts of Bid Loans shall be conclusive absent manifest error. (f) The Agent will promptly notify each Lender having submitted a Bid whether its offer has been accepted or rejected and, if accepted, with regard to each applicable Interest Period, of the amount and Absolute Rate or LIBOR Bid Margin, as the case may be). Not later than 2:00 p.m., Charlotte time, on the requested Borrowing Date, each Lender that has received such notice of an accepted Bid will make available to the Agent at its office referred to in SECTION 10.4 (or at such other location as the Agent may designate) an amount, in Dollars and in immediately available funds, equal to the amount of the Bid Loan or Bid Loans required to be made by such Lender. To the extent the relevant Lenders have made such amounts available to the Agent as provided hereinabove, the Agent will make the aggregate of such amounts available to the Borrower by 3:30 p.m. Charlotte time in accordance with SECTION 2.4(A) and in like funds as received by the Agent. The Agent, in its discretion, may provide details of the Bids to the Lenders. (g) In respect of each Bid Request received by the Agent hereunder (regardless of whether any Bid Loans shall be offered or made in response thereto), the Borrower will pay to the Agent, on the date of receipt by the Agent of such Bid Request, a fee of $1,500. (h) Notwithstanding the foregoing provisions of this SECTION 2.3, if on the last day of any Interest Period applicable to one or more Bid Loans the Borrower is unable to make a Committed Borrowing or Bid Borrowing because of the Borrower's inability to meet the conditions of SECTION 3.2(B) or (C), any Lender of one or more such Bid Loans may in its sole discretion agree (but in no event more than one time with respect to any Bid Loan) in writing to extend the Interest Period applicable to any such Bid Loan for no more than thirty (30) days at an Absolute Rate equal to the Base Rate or, if applicable, the interest rate on Committed Loans then in effect pursuant to SECTION 2.8(B). An extension of any Bid Loan as provided herein shall require the agreement and consent only of the extending Lender and the Borrower. On or prior to the Business Day following any such extension, the Borrower and extending Lender each shall give written notice of the terms thereof to the Agent, which shall give prompt notice thereof to the Lenders. 2.4 Disbursements; Funding Reliance; Domicile of Loans. (a) The Borrower hereby authorizes the Agent to disburse the proceeds of each Borrowing in accordance with the terms of any written instructions from any of the Authorized Officers, provided that the Agent shall not be obligated under any circumstances to forward amounts to any account not listed in an Account Designation Letter. The Borrower may at any time deliver to the Agent an Account Designation Letter listing any additional accounts or deleting any accounts listed in a previous Account Designation Letter. (b) Unless the Agent has received, prior to 1:00 p.m., Charlotte time, on any Borrowing Date, written notice from a Lender that such Lender will not make available to the Agent its Bid Loan or Pro Rata Share of the relevant Committed Loan, the Agent may assume 28 that such Lender has made its Loan available to the Agent on such Borrowing Date in accordance with the terms of this Agreement, and the Agent may, in reliance upon such assumption, make a corresponding amount available to the Borrower on such Borrowing Date. If and to the extent that such Lender shall not have made such Loan available to the Agent, and the Agent shall have made such corresponding amount available to the Borrower, such Lender, on the one hand, and the Borrower, on the other, severally agree to pay to the Agent forthwith on demand such corresponding amount, together with interest thereon for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, (i) if recovered from such Lender, at the Federal Funds Rate, and (ii) if recovered from the Borrower, at the rate of interest applicable to Loans comprising such Borrowing, as determined under SECTION 2.8. If such Lender shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Lender's Loan as part of such Borrowing for purposes of this Agreement. (c) The failure of any Lender to make any Loan required to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation hereunder to make its Loan on the respective Borrowing Date, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender as part of any Borrowing. (d) Each Lender may, at its option, make and maintain any Loan at, to or for the account of any of its Lending Offices, provided that any exercise of such option shall not increase or otherwise adversely affect the obligation of the Borrower to compensate or otherwise make additional payments to such Lender or to repay such Loan to or for the account of such Lender in accordance with the terms of this Agreement. 2.5 Notes (a) The Loans made by each Lender shall be evidenced by a Note appropriately completed in substantially the form of EXHIBIT A-1, with respect to Committed Loans and EXHIBIT A-2 with respect to the Bid Loans. The Notes issued to each Lender shall (i) be executed by the Borrower, (ii) be payable to the order of such Lender, (iii) be dated as of the date hereof (or, in the case of Notes issued pursuant to an Assignment and Acceptance, as of the effective date thereof), (iv) bear interest in accordance with the provisions of SECTION 2.8, as the same may be applicable to the Loans made by such Lender from time to time, and (v) be entitled to all of the benefits of this Agreement and the other Loan Documents and subject to the provisions hereof and thereof. Committed Loan Notes shall be in a stated principal amount equal to such Lender's Commitment and Bid Loan Notes shall be in a stated principal amount equal to the Total Commitment. (b) Each Lender will record on its internal records the amount of each Loan made by it and each payment received by it in respect thereof and will, in the event of any transfer of any of its Notes, either endorse on the reverse side thereof the outstanding principal amount of the Loans evidenced thereby as of the date of transfer or provide such information on Annex I to the Assignment and Acceptance relating to such transfer; provided, however, that the failure of any Lender to make any such recordation or provide any such information, or any error in such recordation or information, shall not affect the Borrower's obligations in respect of such Loans. 29 2.6 Termination and Reduction of Commitments. (a) The Commitments shall be automatically and permanently terminated on the Maturity Date unless sooner terminated pursuant to subsection (B) or (C) below or SECTION 8.1. (b) On each date set forth below, the Total Commitment shall automatically be permanently reduced by the amount set forth below opposite such date): Amount of Reduction in Date Aggregate Commitments ---- ---------------------- December 31, 2000 $37,500,000 December 31, 2001 37,500,000 December 31, 2002 75,000,000 (c) At any time and from time to time, upon at least five (5) Business Days' prior written notice to the Agent, the Borrower may terminate in whole or reduce in part the Total Commitment, provided that the amount of any partial reduction (i) may not exceed the Total Unutilized Commitment at such time (after taking into account any prepayments to be made at such time) and (ii) shall be in an aggregate amount of not less than $5,000,000 or integral multiples thereof. The amount of any termination or reduction made under this subsection (C) may not thereafter be reinstated. (d) The Total Commitment shall automatically be permanently reduced by the amount of the proceeds of sales to physicians as described in SECTION 6.6 (III). (e) Each reduction of the Total Commitment under this Section shall be applied ratably to the Commitments of the Lenders according to their respective Percentages. After any such reduction, the fee provided for in SECTION 2.9 shall be calculated with respect to the reduced Commitments. Each reduction of the Total Commitment under subsections (C) and (D) of this Section shall be applied to reduce the scheduled reduction amounts in subsection (B) in chronological order. 2.7 Payments; Voluntary, Mandatory. (a) The Borrower shall have the right from time to time to prepay the Loans, in whole or in part, without premium or penalty, upon written notice to the Agent prior to 9:00 a.m., Charlotte time, at least two (2) Business Days' prior to each intended prepayment of LIBOR Loans and on the same Business Day of each intended prepayment of Base Rate Loans or Absolute Rate Loans, provided that (i) each partial prepayment of Committed Loans shall be in an aggregate principal amount of no less than $2,000,000 and, if greater, in an integral multiple of $500,000 in excess thereof, (ii) each partial prepayment of Bid Loans shall be in an aggregate principal amount of no less than $5,000,000 and, if greater, in an integral multiple of $1,000,000 in excess thereof, (iii) no partial prepayment of LIBOR Loans made pursuant to any single Borrowing shall reduce the outstanding principal amount of the remaining LIBOR Loans under such Borrowing to less than $3,000,000 or to any greater amount not an integral multiple of 30 $1,000,000 in excess thereof, and (iv) unless made together with all amounts required under SECTION 2.15 to be paid as a consequence of such prepayment, a prepayment of a LIBOR Loan or Absolute Rate Loan may be made only on the last day of the Interest Period applicable thereto. Each such notice shall specify (y) the proposed date of such prepayment and (z) the aggregate principal amount and the Types of the Loans to be prepaid (and, in the case of LIBOR Loans and Absolute Rate Loans, the specific Borrowing or Borrowings pursuant to which made) and shall be irrevocable and shall bind the Borrower to make such prepayment on the terms specified therein. Amounts prepaid pursuant to this subsection (A) may be reborrowed, subject to the terms and conditions of this Agreement. (b) In the event that the aggregate principal amount of the Loans outstanding plus Letter of Credit Outstandings on any date exceeds the Total Commitment as of such date (after giving effect to any termination or reduction thereof as of such date), the Borrower will repay the principal amount of the Loans on such date in the amount of such excess; provided that, to the extent such excess amount is greater than the aggregate principal amount of Loans outstanding immediately prior to the application of such prepayment, the amount so prepaid shall be retained by the Agent and held in the Cash Collateral Account as collateral for the Letter of Credit Outstandings, as more particularly described in SECTION 2.20(J), and thereupon such cash shall be deemed to reduce the aggregate Letter of Credit Outstandings by an equivalent amount. Each such Prepayment shall be applied (i) first, to the outstanding principal amount of the Committed Loans, ratably among the Lenders based upon their Percentages and (ii) second, to the outstanding principal amount of the Bid Loans, ratably among the Lenders holding Bid Loans in proportion to the aggregate principal amount of Bid Loans held by each. Such payment shall be accompanied by all amounts required under SECTION 2.15 if applied to a LIBOR Loan or Absolute Rate Loan and such payment is not made on the last day of the Interest Period applicable thereto. (c) The Borrower shall repay the Notes in full on the Termination Date. 2.8 Interest. (a) The Borrower will pay interest in respect of the unpaid principal amount of each Loan, from the date of Borrowing thereof until such principal amount shall be paid in full, (i) in respect of each Committed Loan, (y) at the Base Rate, as in effect from time to time during such periods as such Loan is a Base Rate Loan, and (z) at the Adjusted LIBOR Rate, as in effect from time to time during such periods as such Loan is a LIBOR Loan, and (ii) in respect of each Bid Loan, (y) at the applicable Absolute Rate established in accordance with the provisions of SECTION 2.3, if such Loan is an Absolute Rate Loan, and (z) at a rate per annum equal to the LIBOR Rate, as in effect from time to time during the applicable Interest Period, plus (or minus) the applicable LIBOR Bid Margin, if such Loan is a LIBOR Bid Loan. (b) Upon the occurrence and during the continuance of an Event of Default under SECTION 7.1(A), (I) or (J), and (at the election of the Required Lenders) upon the occurrence and 31 during the continuance of any other Event of Default, all outstanding principal amounts of the Loans and, to the greatest extent permitted by law, all interest accrued on the Loans and all other fees and amounts not paid when due hereunder, shall bear interest at a rate per annum equal to the interest rate applicable from time to time thereafter to such Loans plus 2% (or, in the case of fees and other amounts, at the Base Rate plus 2%), and, in each case, such default interest shall be payable on demand. To the greatest extent permitted by law, interest shall continue to accrue after the filing by or against the Borrower of any petition seeking any relief in bankruptcy or under any law pertaining to insolvency or debtor relief. (c) Accrued (and theretofore unpaid) interest shall be payable as follows: (i) in respect of each Base Rate Loan (including any Base Rate Loan or portion thereof paid or prepaid pursuant to the provisions of SECTION 2.7, except as provided in the proviso hereinbelow), in arrears on the last Business Day of each calendar quarter; provided, that in the event the Base Rate Loans are repaid or prepaid in full and the Commitments have been terminated, then accrued interest in respect of all Base Rate Loans shall be payable together with such repayment or prepayment on the date thereof; (ii) in respect of each LIBOR Loan (including any LIBOR Committed Loan or portion thereof paid or prepaid pursuant to the provisions of SECTION 2.7, except as provided in the proviso hereinbelow), in arrears (y) on the last Business Day of the Interest Period applicable thereto (subject to the provisions of clause (iv) in SECTION 2.10) and (z) in the case of a LIBOR Loan having an Interest Period of six months, on the date three months after the first day of such Interest Period; provided, that in the event all LIBOR Loans made pursuant to a single Borrowing are repaid or prepaid in full, then accrued interest in respect of such LIBOR Loans shall be payable together with such repayment or prepayment on the date thereof; (iii) in respect of each Absolute Rate Loan, (y) in arrears on the last day of the Interest Period applicable thereto, and (2) on the date of any repayment or prepayment thereof in full; and (iv) in respect of any Loan, at maturity (whether pursuant to acceleration or otherwise) and, after maturity, on demand. (d) Nothing contained in this Agreement or in any other Loan Document shall be deemed to establish or require the payment of interest to any Lender at a rate in excess of the maximum rate permitted by applicable law. If the amount of interest payable for the account of any Lender on any interest payment date would exceed the maximum amount permitted by applicable law to be charged by such Lender, the amount of interest payable for its account on such interest payment date shall be automatically reduced to such maximum permissible amount. In the event of any such reduction affecting any Lender, if from time to time thereafter the amount of interest payable for the account of such Lender on any interest payment date would be less than the maximum amount permitted by applicable law to be charged by such Lender, then the amount of interest payable for its account on such subsequent interest payment date shall be automatically increased to such maximum permissible amount, provided that at no time shall the 32 aggregate amount by which interest paid for the account of any Lender has been increased pursuant to this sentence exceed the aggregate amount by which interest paid for its account has theretofore been reduced pursuant to the previous sentence. (e) The Agent shall promptly notify the Borrower and the Lenders upon determining the interest rate for each Borrowing after its receipt of the relevant Notice of Committed Borrowing, Notice of Conversion/Continuation or Bid; provided, however, that the failure of the Agent to provide the Borrower or the Lenders with any such notice shall neither affect any obligations of the Borrower or the Lenders hereunder nor result in any liability on the part of the Agent to the Borrower or any Lender. Each such determination (including each determination of the Reserve Requirement in connection with a Borrowing of LIBOR Loans) shall, absent manifest error, be final and conclusive and binding on all parties hereto. 2.9 Fees. (a) The Borrower agrees to pay the Agent, for the ratable benefit of each Lender, a facility fee per annum determined pursuant to the following table, for the period from the Closing Date to the Termination Date. Ratio of Consolidated Debt to Annualized EBITDA Facility Fee ------------------------- ------------ Greater than 3.0 to 1.0 0.250% Greater than 2.0 to 1.0 0.200% but less than or equal to 3.0 to 1.0 Less than or equal to 0.175% 2.0 to 1.0 The facility fee shall be applied to the average daily Total Commitment, payable in arrears on the last Business Day of each fiscal quarter, commencing with the fiscal quarter ending March 31, 1998, and calculated on the basis of actual days elapsed over a year of 360 days. From the Closing Date until the fifth (5th) day after receipt by the Agent of the March 31, 1998 financial statements pursuant to SECTION 5.1(A) below, the facility fee shall be .20% per annum. The facility fee shall be reset from time to time in accordance with the above matrix on the fifth (5th) day after receipt by the Agent in accordance with SECTIONS 5.1(A) and (B) of financial statements together with a Compliance Certificate (reflecting the computation of the ratio of Consolidated Debt to Annualized EBITDA as of the last day of the preceding fiscal quarter or fiscal year, as appropriate). (b) The Borrower agrees to pay to the Agent, for its own account, an annual administrative fee of $40,000, payable quarterly in advance on the last Business Day of each fiscal quarter. 33 2.10 Interest Periods. Concurrently with the giving of any Notice of Committed Borrowing or Notice of Conversion/Continuation in respect of any Borrowing comprised of LIBOR Committed Loans and concurrently with the giving of a Bid Request in respect of any requested Bid Loans, the Borrower shall have the right to elect, pursuant to such notice, the interest period (each, an "Interest Period") to be applicable to such Loans, which Interest Period, (x) in the case of any LIBOR Committed Loan and at the option of the Borrower, shall be a one, two, three or six (subject to availability for all Lenders) month period, (y) in the case of any LIBOR Bid Loan and as agreed to by the Borrower and the Lender making such LIBOR Bid Loan, shall be a one, two, three or six month period, or (z) in the case of any Absolute Rate Loan and as agreed to by the Borrower and the Lender making such Absolute Rate Loan, shall be a period of not less than seven (7) nor more than one hundred eighty (180) days; provided, however, that: (i) all LIBOR Loans comprising a single Borrowing shall at all times have the same Interest Period; (ii) the initial Interest Period for any LIBOR Loan shall commence on the date of the Borrowing of such Loan (including the date of any continuation of, or conversion into, such LIBOR Loan), and each successive Interest Period applicable to such LIBOR Loan shall commence on the day following the day on which the next preceding Interest Period applicable thereto expires; (iii) the Borrower may not select any Interest Period that expires after the Maturity Date; (iv) if any Interest Period would expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day unless such next succeeding Business Day falls in another calendar month, in which case such Interest Period shall expire on the next preceding Business Day; (v) if any Interest Period begins on a day for which there is no numerically corresponding day in the calendar month during which such Interest Period would otherwise expire, such Interest Period shall expire on the last Business Day of such calendar month; and (vi) if, upon the expiration of any Interest Period applicable to Committed LIBOR Loans, the Borrower shall have failed to elect a new Interest Period to be applicable to such LIBOR Loans, then the Borrower shall be deemed to have elected to convert such LIBOR Loans into Base Rate Loans as of the expiration of the then current Interest Period applicable thereto. 2.11 Conversions and Continuations. (a) The Borrower shall have the right, on any Business Day, to elect (y) to convert all (or a portion in an amount not less than (A) in the case of Base Rate Loans, $2,000,000 or, if greater, an integral multiple of $500,000 in excess thereof and (B) in the case of LIBOR Committed Loans, $3,000,000 or, if greater, an integral multiple of $1,000,000 in excess thereof) 34 of the outstanding principal amount of any such Committed Loans of one Type made pursuant to one or more Borrowings (and, in the case of LIBOR Committed Loans, having the same Interest Period) into a Borrowing or Borrowings of Committed Loans of the other Type, or (z) to continue all (or a portion, subject to the restrictions as to amount set forth in clause (B) of the parenthetical in clause (y) above) of the outstanding principal amount of any LIBOR Committed Loans made pursuant to one or more Borrowings (having the same Interest Period) for an additional Interest Period, provided that (i) except as otherwise provided for in SECTION 2.13(D), LIBOR Committed Loans may be converted into Base Rate Loans only on the last day of the Interest Period applicable thereto (and, in any event, if a LIBOR Committed Loan is converted into a Base Rate Loan on any day other than the last day of the Interest Period applicable thereto, the Borrower will pay, upon such conversion, all amounts required under SECTION 2.15 to be paid as a consequence thereof), (ii) if any partial conversion of LIBOR Committed Loans into Base Rate Loans shall have reduced the outstanding principal amount of the remaining LIBOR Committed Loans made pursuant to a single Borrowing (and thereby continued) to less than $3,000,000, such remaining LIBOR Committed Loans shall be converted immediately into Base Rate Loans and may not thereafter be converted into or continued as LIBOR Committed Loans unless the requirements of clause (y) above are satisfied, (iii) no conversion of Base Rate Loans into LIBOR Committed Loans or continuation of LIBOR Committed Loans shall be permitted during the continuance of an Event of Default and (iv) no conversion or continuation under this Section shall result in a greater number of separate Interest Periods in respect of LIBOR Loans than is permitted under SECTION 2.2(A)(IV). (b) The Borrower shall make each such election by delivering written notice to the Agent prior to 9:00 a.m., Charlotte time, at least two (2) Business Days prior to the effective date of any conversion of Base Rate Loans into, or continuation of, LIBOR Committed Loans and on the same Business Day of any conversion of LIBOR Committed Loans into Base Rate Loans. Each such notice (each, a "Notice of Conversion/Continuation") shall be irrevocable, shall be given in the form of EXHIBIT B-2 and shall be appropriately completed to specify (x) the date of such conversion or continuation, (y) in the case of a conversion into, or a continuation of, LIBOR Committed Loans, the Interest Period to be applicable thereto and (z) the aggregate amount and Type of the Committed Loans being converted or continued. Upon the receipt of a Notice of Conversion/Continuation, the Agent will promptly notify each Lender having a Commitment of the proposed conversion or continuation, of such Lender's Pro Rata Share thereof and of the other matters specified in the Notice of Conversion/Continuation. In the event that the Borrower shall fail to deliver a Notice of Conversion/Continuation as provided hereinabove with respect to any Borrowing of LIBOR Committed Loans, such LIBOR Committed Loans shall automatically be converted to Base Rate Loans upon the expiration of the then current Interest Period applicable thereto. 2.12 Method of Payments; Computations. (a) All payments by the Borrower hereunder and under the Notes shall be made without setoff, counterclaim or other defense, in Dollars and in immediately available funds to the Agent, for the account of the Lenders (except as otherwise provided herein as to payments required to be made to the Agent or Issuing Bank for its own account or directly to the Lenders) at its office referred to in SECTION 10.4, prior to 12:00 noon, Charlotte time, on the date payment 35 is due. Any payment made as required hereinabove, but after 12:00 noon, Charlotte time, shall be deemed to have been made on the next succeeding Business Day. If any payment falls due on a day that is not a Business Day, then such due date shall be extended to the next succeeding Business Day (except that in the case of LIBOR Loans to which the provisions of clause (iv) in SECTION 2.10 are applicable, such due date shall be the next preceding Business Day), and such extension of time shall then be included in the computation of payment of interest, fees or other applicable amounts. (b) The Agent will distribute payments made to the Agent for the account of the Lenders as follows: (i) with respect to fees and Committed Loans, to each Lender such Lender's Pro Rata Share of such payment and (ii) with respect to Bid Loans, to each Lender participating in such Bid Loan, its pro rata share based on its respective principal amount of the relevant Bid Loans. If any such payment is received by 12:00 noon, Charlotte time, in immediately available funds, the Agent will make available on the same date, by wire transfer of immediately available funds, the amounts to each Lender as provided in the foregoing sentence. If such payment is received after 12:00 noon, Charlotte time, or in other than immediately available funds, the Agent will make available to each such Lender its respective payment by wire transfer of immediately available funds on the next succeeding Business Day (or in the case of uncollected funds, as soon as practicable after collected). If the Agent shall not have made a required distribution to the appropriate Lenders as required hereinabove after receiving a payment for the account of such Lenders, the Agent will pay to each such Lender, on demand, the principal amount of its respective payment with interest thereon at the Federal Funds Rate for each day from the date such amount was required to be disbursed by the Agent until the date repaid to such Lender. (c) Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to any Lender hereunder that such payment will not be made in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date, and the Agent may, in reliance on such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due to each such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Agent, and without limiting the obligation of the Borrower to make such payment in accordance with the terms hereof, each such Lender shall repay to the Agent forthwith on demand such amount so distributed to such Lender, together with interest thereon for each day from the date such amount is so distributed to such Lender until the date repaid to the Agent, at the Federal Funds Rate. (d) The Borrower hereby authorizes each Lender, if and to the extent that any payment owed to such Lender is not made to the Agent or such Lender when due hereunder or under any Note held by such Lender, to charge from time to time against any or all of the accounts of the Borrower with such Lender any amount so due in accordance with SECTION 8.2 hereof (with prompt notice to the Agent and the Borrower); provided that the failure to give such notice shall not affect the validity of such debit by such Lender. (e) With respect to each payment on the Loans hereunder, except as specifically provided otherwise herein or in any of the other Loan Documents, the Borrower may designate by written notice to the Agent prior to or concurrently with such payment the Types of Loans that 36 are to be repaid or prepaid and, in the case of LIBOR Loans and Absolute Rate Loans, the specific Borrowing or Borrowings pursuant to which made, provided that (i) unless made together with all amounts required under SECTION 2.15 to be paid as a consequence thereof, a prepayment of a LIBOR Loan or Absolute Rate Loan may be made only on the last day of the Interest Period applicable thereto, (ii) if any partial prepayment of LIBOR Loans made pursuant to any single Borrowing shall reduce the outstanding principal amount of the remaining LIBOR Loans under such Borrowing to less than $3,000,000, such remaining LIBOR Loans shall be converted immediately into Base Rate Loans and (iii) each prepayment of Loans comprising a single Borrowing shall be applied pro rata among such Loans. In the absence of any such designation by the Borrower, or if an Event of Default has occurred and is continuing, the Agent shall, subject to the foregoing, make such designation in its sole discretion or as the Required Lenders may direct, subject to the foregoing and the other provisions of this Agreement. (f) All computations of interest and fees hereunder (including computations of the Reserve Requirement) shall be made on the basis of a year consisting of 360 days and the actual number of days (including the first day, but excluding the last day) elapsed for LIBOR Loans and Absolute Rate Loans and of 365/366 days and the actual number of days (including the first day, but excluding the last day) elapsed for Base Rate Loans. 2.13 Increased Costs, Change in Circumstances, etc. (a) If, at any time after the Closing Date and from time to time, the adoption or modification of any applicable law, rule or regulation, or any interpretation or administration thereof by any Governmental Authority or central bank (whether or not having the force of law) charged with the interpretation, administration or compliance of the Lenders with any of such requirements, in each case affecting banking institutions generally shall: (i) subject any Lender to, or increase the net amount of, any tax, impost, duty, charge or withholding with respect to any amount received or to be received hereunder in connection with LIBOR Loans (other than taxes imposed on net income or profits of, or any branch or franchise tax applicable to, such Lender or a Lending Office of such Lender); (ii) change the basis of taxation of payments to any Lender in connection with LIBOR Loans (other than changes in taxes on the net income or profits of, or any branch or franchise tax applicable to, such Lender or a Lending Office of such Lender); (iii) impose, increase or render applicable any reserve (other than the Reserve Requirement), capital adequacy, special deposit or similar requirement against assets of, deposits with or for the account of, or loans, credit or commitments extended by, any Lender or a Lending Office of such Lender; or (iv) impose on any Lender or in the London interbank Eurodollar market any other condition or requirement affecting this Agreement or LIBOR Loans; 37 and the result of any of the foregoing is to increase the costs to any Lender of agreeing to make, making, funding or maintaining any LIBOR Loans or to reduce the yield or rate of return of such Lender on any LIBOR Loans to a level below that which such Lender could have achieved but for the adoption or modification of any such requirements, the Borrower will, within fifteen (15) days after delivery to the Borrower by such Lender of written demand therefor (with a copy thereof to the Agent), pay to such Lender such additional amounts as shall compensate such Lender for such increase in costs or reduction in return. (b) If, at any time after the Closing Date and from time to time, any Lender shall have determined that the adoption or modification of any applicable federal, state or local law, rule or regulation regarding such Lender's required level of capital (including any allocation of capital requirements or conditions, but excluding federal, state or local income tax liability), or the implementation of any such requirements previously adopted but not implemented prior to the Closing Date, or any interpretation or administration thereof by any Governmental Authority (whether or not having the force of law) charged with the interpretation, administration or compliance of such Lender with any of such requirements, in each case affecting banking institutions generally, has or would have the effect of reducing the rate of return on such Lender's capital as a consequence of its Commitment or Loans hereunder to a level below that which such Lender could have achieved but for such adoption, modification, implementation or interpretation (taking into account such Lender's policies with respect to capital adequacy), the Borrower will, within fifteen (15) days after delivery to the Borrower by such Lender of written demand therefor (with a copy thereof to the Agent), pay to such Lender such additional amounts as will compensate such Lender for such reduction in return. (c) If, on or prior to the first day of any Interest Period, (i) the Agent shall have received written notice from any Lender of such Lender's determination that Dollar deposits in the amount of such Lender's required LIBOR Committed Loan pursuant to such Borrowing are not generally available in the London interbank Eurodollar market or that the rate at which such Dollar deposits are being offered will not adequately and fairly reflect the cost to such Lender of making or maintaining its LIBOR Committed Loan during such Interest Period or (ii) the Agent shall have determined that adequate and reasonable means do not exist for ascertaining the applicable LIBOR Rate for such Interest Period, the Agent will forthwith so notify the Borrower and the Lenders, whereupon the obligation of (y) in the case of clause (i) above, each such affected Lender, and (z) in the case of clause (ii) above, all Lenders, in each case to make, to convert Base Rate Loans into, or to continue, LIBOR Committed Loans shall be suspended (including pursuant to the Borrowing to which such Interest Period applies), and any Notice of Borrowing or Notice of Conversion/Continuation given at any time thereafter with respect to LIBOR Committed Loans shall be deemed to be a request for Base Rate Loans (but in the case of clause (i) above, only to the extent of such affected Lender's Pro Rata Share thereof) until the Agent or the affected Lender, as the case may be, shall have determined that the circumstances giving rise to such suspension no longer exist. (d) Notwithstanding any other provision in this Agreement, if, at any time after the Closing Date and from time to time, any Lender shall have determined that the adoption or modification of any applicable law, rule or regulation, or any interpretation or administration thereof by any Governmental Authority or central bank (whether or not having the force of law) 38 charged with the interpretation, administration or compliance of such Lender with any of such requirements, has or would have the effect of making it unlawful for such Lender to honor its obligation to make LIBOR Loans or to continue to make or maintain LIBOR Loans, such Lender will forthwith so notify the Agent and the Borrower, whereupon (i) each of such Lender's outstanding LIBOR Loans shall automatically, on the expiration date of the respective Interest Period applicable thereto or, to the extent any such LIBOR Loan may not lawfully be maintained as a LIBOR Loan until such expiration date, upon such notice, be converted into a Base Rate Loan and (ii) the obligation of such Lender to make, to convert Base Rate Loans into, or to continue, LIBOR Loans shall be suspended, and any Notice of Borrowing or Notice of Conversion/Continuation given at any time thereafter with respect to LIBOR Committed Loans shall, as to such Lender, be deemed to be a request for Base Rate Loans, until such Lender shall have determined that the circumstances giving rise to such suspension no longer exist. (e) Determinations by the Agent or any Lender for purposes of this Section of any increased costs, reduction in return, market contingencies, illegality or any other matter shall, absent manifest error, be conclusive, provided that such determinations are made reasonably and in good faith. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of this Section with respect to such Lender, it will, if requested by the Borrower and to the extent permitted by law, endeavor in good faith to designate another Lending Office for its LIBOR Loans, but only if such designation would make it lawful for such Lender to continue to make or maintain LIBOR Loans hereunder; provided that such designation is made on such terms that such Lender, in its good faith determination, suffers no increased cost or economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of this Section. (f) Each demand for payment under this Section shall be preceded by a notice to the Borrower of such anticipated demand, which notice shall specify in reasonable detail the basis for such demand and the calculation of the amount requested hereunder, but the failure to provide such advance notice shall not relieve the Borrower of any of its obligations hereunder. No failure by the Agent or any Lender to demand payment of any amounts payable under this Section shall constitute a waiver of its right to demand payment of any additional amounts arising at any subsequent time. Nothing in this Section shall be construed or so operate as to require the Borrower to pay any interest, fees, costs or charges in excess of that permitted by applicable law. 2.14 Taxes. (a) Any and all payments by the Borrower hereunder or under any Note shall be made, in accordance with the terms hereof and thereof, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto (other than taxes imposed on the net income or profit of, or any branch or franchise tax applicable to, the Agent or any Lender) (y) by the jurisdiction under the laws of which the Agent or such Lender, as the case may be, is organized or any political subdivision thereof and (z) in the case of each Lender, by the jurisdiction in which any Lending Office of such Lender is located or any political subdivision thereof (all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any 39 sum payable hereunder or under any Note to the Agent or any Lender, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section), the Agent or such Lender, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower will make such deductions and (iii) the Borrower will pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) The Borrower will indemnify the Agent and each Lender for the full amount of Taxes (including, without limitation, any Taxes imposed by any jurisdiction on amounts payable under this Section) paid by the Agent or such Lender, as the case may be, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally asserted. This indemnification shall be made within thirty (30) days from the date the Agent or any Lender, as the case may be, makes written demand therefor. Within thirty (30) days after the date of any payment of Taxes pursuant to this Section, the Borrower will furnish to the Agent or the relevant Lender, as the case may be, the original or a certified copy of a receipt evidencing payment thereof. (c) If any Lender is a "foreign corporation, partnership or trust" within the meaning of the Code, and such Lender claims exemption from United States withholding tax under Section 1441 or 1442 of the Code, such Lender will deliver to the Agent and the Borrower: (i) if such Lender claims an exemption from, or a reduction of, withholding tax under a United States tax treaty, properly completed IRS Forms 1001 and W-8 before the payment of any interest in the first calendar year, and before the payment of any interest in each third succeeding calendar year, during which interest may be paid to such Lender under this Agreement; (ii) if such Lender claims that interest paid under this Agreement is exempt from United States withholding tax because it is effectively connected with a United States trade or business of such Lender, two properly completed and executed copies of IRS Form 4224 before the payment of any interest is due in the first taxable year of such Lender, and in each succeeding taxable year of such Lender, during which interest may be paid to such Lender under this Agreement, and IRS Form W-9; and (iii) such other form or forms as may be required under the Code or other laws of the United States as a condition to exemption from, or reduction of, United States withholding tax. Each such Lender will promptly notify the Agent and the Borrower of any changes in circumstances that would modify or render invalid any claimed exemption or reduction. (d) If any Lender is entitled to a reduction in the applicable withholding tax, the Agent may withhold from any interest payment to such Lender an amount equivalent to the applicable withholding tax after taking into account such reduction. If the forms or other documentation required under subsection (C) above are not delivered to the Agent, then the Agent 40 may withhold from any interest payment to such Lender not providing such forms or other documentation an amount equivalent to the applicable withholding tax. For purposes of this Section, a distribution hereunder by the Agent to or for the account of any Lender shall be deemed a payment by the Borrower. (e) If at any time the Borrower requests any Lender to deliver any forms or other documentation pursuant to subsection (C) above, then the Borrower shall, upon demand of such Lender, reimburse such Lender for any reasonable costs or expenses incurred by such Lender in the preparation or delivery of such forms or other documentation. (f) Each Lender agrees that, upon the occurrence of any event giving rise to the Borrower's obligation to make any payments or incur any other expenses in respect of any Taxes under this SECTION 2.14 with respect to such Lender, it will, if requested by the Borrower and to the extent permitted by law, endeavor in good faith to designate another Lending Office for its Loans, but only if such designation would relieve the Borrower from or lessen the amount of any further such payments or expenses; provided that such designation is made on such terms that such Lender, in its good faith determination, suffers no increased cost or economic, legal or regulatory disadvantage. 2.15 Compensation. (a) The Borrower will compensate each Lender, upon its written request (which request shall set forth the basis for requesting such compensation and shall be copied to the Agent), for all losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Lender to fund its LIBOR Loans or Absolute Rate Loans) that such Lender may sustain (i) if for any reason (other than a default by such Lender or the Agent or, with respect to any Borrowing, a change in law described in SECTION 2.13 or any Taxes payable as described in SECTION 2.14 or additional costs under SECTION 2.15(B), in each such case arising during the two (2) Business Days after a Notice of Borrowing and of which the Borrower did not have knowledge at the time the Borrower submitted such Notice of Borrowing; provided further that the Lenders shall not be required to extend such Borrowing as a LIBOR Committed Loan if such extension would create undue hardship for such Lender) a Borrowing of, or conversion of or into, LIBOR Loans or Absolute Rate Loans does not occur on a date specified therefor in a Notice of Borrowing, Invitation for Bids or Notice of Conversion/Continuation, (ii) if any repayment, prepayment or conversion of any of its LIBOR Loans or Absolute Rate Loans occurs on a date other than the last day of an Interest Period applicable thereto (other than a conversion of a LIBOR Loan pursuant to SECTIONS 2.13(C) or (D)), (iii) if any prepayment of any of its LIBOR Loans or Absolute Rate Loans is not made on any date specified in a notice of prepayment given by the Borrower or (iv) as a consequence of any other failure by the Borrower to make any payments with respect to LIBOR Loans or Absolute Rate Loans when due hereunder, including as a consequence of acceleration of the maturity of such Loans pursuant to SECTION 8.1. In addition, the Borrower will pay to the Agent, for its own account, an administrative fee of $1,000 concurrently with any payments made in respect of any single occurrence pursuant to this Section. Calculation of all amounts payable to a Lender under this Section with respect to LIBOR Loans shall be made as though such Lender had actually funded its relevant LIBOR Loan 41 through the purchase of a Eurodollar deposit bearing interest at the LIBOR Rate in an amount equal to the amount of such LIBOR Loan, having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore Lending Office of such Lender to a Lending Office of such Lender in the United States; provided, however, that each Lender may fund each of its LIBOR Loans in any manner it sees fit and the foregoing assumption shall be utilized only for the calculation of amounts payable under this Section. (b) Each Lender may require the Borrower to pay, contemporaneously with each payment of interest on LIBOR Committed Loans, additional interest at a rate per annum equal to the excess of (i) (A) the applicable LIBOR Rate divided by (B) one minus the Reserve Requirement for such Lender over (ii) the rate specified in clause (i)(A). Any Lender electing to require payment of such additional interest (x) shall so notify the Borrower and the Agent, in which case such additional interest on the LIBOR Committed Loans of such Lender shall be payable to such Lender with respect to each Interest Period commencing at least four (4) Business Days after the giving of such notice and (y) shall notify the Borrower at least five (5) Business Days prior to each date on which interest is payable on the LIBOR Committed Loans of the amount then due it under this subparagraph (b); provided that, if the original notice from such Lender indicates that such additional interest shall continue to be due on each LIBOR Committed Loan until such Lender withdraws its notice, then no further notice shall be due. 2.16 Use of Proceeds. The proceeds of the Loans shall be used by the Borrower and its Subsidiaries (i) to finance Physician Transactions made pursuant to SECTION 5.14 or SECTION 6.2 hereof, together with legal and accounting fees and other transaction costs incurred in connection therewith, (ii) to pay certain fees and expenses in connection with this Facility, and (iii) to provide working capital for, and to finance, the Borrower's and its Subsidiaries' general business purposes. The Borrower will not use any of the proceeds of the Loans or any advances under the Swingline Note to purchase or carry Margin Stock, or to extend credit to others for that purpose and will at all times be in compliance with Section 4.7. 2.17 Recovery of Payments. (a) The Borrower agrees that to the extent the Borrower makes a payment or payments to or for the account of the Agent or the Lenders, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy, insolvency or similar state or federal law, or otherwise at law or equity, then, to the extent of such payment or repayment, the Obligation intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been received. (b) If any amounts distributed by the Agent to a Lender are subsequently returned or repaid by the Agent to the Borrower or its representative or successor in interest, whether by court order or by settlement approved by the Lender in question, such Lender will, promptly upon receipt of notice thereof from the Agent, pay the Agent such amount. If any such amounts are recovered by the Agent from the Borrower or its representative or successor in interest, the Agent shall redistribute such amounts to the Lenders on the same basis as such amounts were originally distributed. 42 2.18 Pro Rata Borrowings. (a) All Borrowings, continuations and conversions of Committed Loans shall be made by the Lenders pro rata on the basis of their respective Percentages, as appropriate from time to time, rounded to the nearest penny. (b) Each Lender agrees that if it shall receive any amount hereunder (whether by voluntary payment, realization upon security, exercise of the right of setoff or banker's lien, counterclaim or cross action, enforcement of any right under the Loan Documents, or otherwise) applicable to the payment of any of the Obligations (other than Bid Loans or obligations arising under the Swingline Note) that exceeds its Pro Rata Share of payments on account of such Obligations then or therewith obtained by all the Lenders to which such payments are required to have been made, such Lender shall forthwith purchase from the other Lenders such participations in such Obligations as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each such other Lender shall be rescinded and each such other Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such other Lender's ratable share (according to the proportion of (i) the amount of such other Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to the provisions of this Section may, to the fullest extent permitted by law, exercise any and all rights of payment (including, without limitation, setoff, banker's lien or counterclaim) with respect to such participation as fully as if such participant were a direct creditor of the Borrower in the amount of such participation. If any Lender receives an amount (as described in the first sentence of this section) applicable to the payment of any Bid Loans that exceeds its ratable share of payments on account of such Bid Loans, then the foregoing provisions of this section shall be applied with respect to those Lenders also participating in such Bid Loans. 2.19 Substitution of Lender. If (i) the obligation of any Lender to make LIBOR Committed Loans has been suspended pursuant to SECTION 2.13 or (ii) any Lender has demanded compensation under SECTION 2.13 or SECTION 2.15(B), or if any Lender has notified the Borrower to make any payments under SECTION 2.14, the Borrower shall have the right, with the assistance of the Agent, to seek a substitute bank or banks (which may be one or more of the Lenders), each of which must be an Eligible Assignee, acceptable to the Borrower and the Agent, to purchase the Note and assume the Commitment of such Lender in accordance with SECTION 10.5 hereof by executing an Assignment and Acceptance. 2.20 Letters of Credit. (a) Issuance. Subject to and upon the terms and conditions herein set forth, so long as no Default or Event of Default has occurred and is continuing, the Issuing Bank will, at any time and from time to time on and after the Closing Date and prior to the earlier of (i) the seventh day prior to the Maturity Date and (ii) the Termination Date, upon request by the Borrower in 43 accordance with the provisions of SECTION 2.20(B), issue for the account of the Borrower one or more irrevocable standby letters of credit denominated in Dollars and in a form customarily used or otherwise reasonably approved by the Issuing Bank (together with all amendments, modifications and supplements thereto, substitutions therefor and renewals and restatements thereof, collectively, the "Letters of Credit"). The Stated Amount of each Letter of Credit shall not be less than such amount as may be acceptable to the Issuing Bank but in all events any amount greater than or equal to $5,000 shall be deemed acceptable. Notwithstanding the foregoing: (i) No Letter of Credit shall be issued the Stated Amount upon issuance of which (i) when added to all other Letter of Credit Outstandings at such time, would exceed $5,000,000 or (ii) when added to all other Letter of Credit Outstandings at such time and the aggregate principal amount of all Loans then outstanding, would exceed the Total Commitment at such time; (ii) No Letter of Credit shall be issued that by its terms expires later than the seventh day prior to the Maturity Date or, in any event, more than one (1) year after its date of issuance (subject to renewal as provided below); provided, however, that a Letter of Credit may, if requested by the Borrower, provide by its terms, and on terms acceptable to the Issuing Bank, for renewal for successive periods of one year or less (but not beyond the seventh day prior to the Maturity Date), unless and until the Issuing Bank shall have delivered a notice of nonrenewal to the beneficiary of such Letter of Credit; and (iii) The Issuing Bank shall be under no obligation to issue any Letter of Credit if, at the time of such proposed issuance, (A) any order, judgment or decree of any Governmental Authority or arbitrator shall purport by its terms to enjoin or restrain the Issuing Bank from issuing such Letter of Credit, or any Requirement of Law applicable to the Issuing Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Issuing Bank shall prohibit, or request that the Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Issuing Bank with respect to such Letter of Credit any restriction or reserve or capital requirement (for which the Issuing Bank is not otherwise compensated) not in effect on the Closing Date, or any unreimbursed loss, cost or expense that was not applicable or in effect as of the Closing Date and that the Issuing Bank reasonably deems material to it, or (B) the Issuing Bank shall have actual knowledge, or shall have received notice from any Lender, prior to the issuance of such Letter of Credit that one or more of the conditions specified in ARTICLE III are not then satisfied or that the issuance of such Letter of Credit would violate the provisions of subsection (I) above. (b) Notices. Whenever the Borrower desires the issuance of a Letter of Credit, the Borrower will notify the Issuing Bank (with copies to the Agent) in writing, by 11:00 a.m., Charlotte, North Carolina local time, at least three (3) Business Days (or such shorter period as is acceptable to the Issuing Bank in any given case) prior to the requested date of issuance thereof. Each such request (each, a "Letter of Credit Request") shall be irrevocable, shall be given in the form of EXHIBIT B-3 and shall be appropriately completed to specify (i) the proposed date of 44 issuance (which shall be a Business Day), (ii) the proposed Stated Amount and expiry date of the Letter of Credit, and (iii) the name and address of the proposed beneficiary or beneficiaries of the Letter of Credit. The Borrower will also complete any application procedures and documents required by the Issuing Bank in connection with the issuance of any Letter of Credit; provided, however, that the terms of this Agreement shall govern in the event that there is any inconsistency between the terms of such application and any of the terms and conditions hereof and, without limiting the generality of the foregoing, no provision in any letter of credit application or agreement shall give the Issuing Bank, the Agent or any Lender any rights that are in addition to or greater than the rights such Person would otherwise have under this Agreement. The Agent will, promptly upon its receipt thereof, notify each Lender of the Letter of Credit Request. Upon its issuance of any Letter of Credit, the Issuing Bank will promptly notify each Lender of such issuance and the amount of its participation therein under SECTION 2.20(C). (c) Participations. Immediately upon the issuance of any Letter of Credit, the Issuing Bank shall be deemed to have sold and transferred to each Lender, and each Lender (each, in such capacity, an "L/C Participant") shall be deemed irrevocably and unconditionally to have purchased and received from the Issuing Bank, without recourse or warranty, an undivided interest and participation, pro rata to the extent of its Percentage at such time, in such Letter of Credit, each drawing made thereunder, and the obligations of the Borrower under this Agreement with respect thereto and any security therefor (including the Collateral) or guaranty pertaining thereto; provided, however, that the fees and other charges relating to Letters of Credit described in SECTIONS 2.20(L)(II) and 2.20(L)(III) shall be payable directly to the Issuing Bank as provided therein, and the L/C Participants shall have no right to receive any portion thereof. Upon any change in the Commitments of any of the Lenders pursuant to SECTION 10.5, with respect to all outstanding Letters of Credit and Reimbursement Obligations there shall be an automatic adjustment to the participations pursuant to this Section to reflect the new Percentages of the assigning Lender and the Eligible Assignee. (d) Reimbursement. The Borrower hereby agrees to reimburse the Issuing Bank for any drawing made under any Letter of Credit and, subject to SECTION 2.20(E), shall make payment to the Agent, for the account of the Issuing Bank, in immediately available funds, for any payment made by the Issuing Bank under any Letter of Credit (each such amount so paid until reimbursed (including by a loan under SECTION 2.20(E)), together with interest thereon payable as provided hereinbelow, a "Reimbursement Obligation") immediately after, and in any event within one (1) Business Day after its receipt of notice of, such payment, together with interest on the amount so paid by the Issuing Bank, to the extent not reimbursed prior to 1:00 p.m., Charlotte time, on the date of such payment or disbursement, for the period from the date of the respective payment to the date the Reimbursement Obligation created thereby is satisfied, at the Base Rate as in effect from time to time during such period, such interest also to be payable on demand. The Issuing Bank will provide the Agent and the Borrower with prompt notice of any payment or disbursement made under any Letter of Credit, although the failure to give, or any delay in giving, any such notice shall not release, diminish or otherwise affect the Borrower's obligations under this Section or any other provision of this Agreement. The Agent will promptly pay to the Issuing Bank any such amounts received by it under this Section. 45 (e) Payment by Loans. In the event that the Issuing Bank makes any payment under any Letter of Credit and the Borrower shall not have timely satisfied in full its Reimbursement Obligation to the Issuing Bank pursuant to SECTION 2.20(D), and to the extent that any amounts then held in the Cash Collateral Account established pursuant to SECTION 2.20(J) shall be insufficient to satisfy such Reimbursement Obligation in full, the Issuing Bank will promptly notify the Agent, and the Agent will promptly notify each L/C Participant, of such failure. If the Agent gives such notice prior to 11:00 a.m., Charlotte, North Carolina local time, on any Business Day to any L/C Participant, such L/C Participant will make available to the Agent, for the account of the Issuing Bank, its Pro Rata Share (based on its Percentage) of the amount of such payment on such Business Day in immediately available funds. If the Agent gives such notice after 11:00 a.m., Charlotte, North Carolina local time, on any Business Day to any such L/C Participant, such L/C Participant shall make its Pro Rata Share of such amount available to the Agent on the next succeeding Business Day. If and to the extent such L/C Participant shall not have so made its Pro Rata Share of the amount of such payment available to the Agent, such L/C Participant agrees to pay to the Agent, for the account of the Issuing Bank, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Agent at the Federal Funds Rate. The failure of any L/C Participant to make available to the Agent its Pro Rata Share of any payment under any Letter of Credit shall not relieve any other L/C Participant of its obligation hereunder to make available to the Agent its Pro Rata Share of any payment under any Letter of Credit on the date required, as specified above, but no L/C Participant shall be responsible for the failure of any other L/C Participant to make available to the Agent such other L/C Participant's Pro Rata Share of any such payment. Each such payment by an L/C Participant under this SECTION 2.20(E) of its Pro Rata Share of an amount paid by the Issuing Bank shall constitute a Loan by such Lender (the Borrower being deemed to have given a timely Notice of Borrowing therefor) and shall be treated as such for all purposes of this Agreement; provided that for purposes of determining the Total Unutilized Commitment immediately prior to giving effect to the application of the proceeds of such Loans, the Reimbursement Obligation being satisfied thereby shall be deemed not to be outstanding at such time. (f) Payment to L/C Participants. Whenever the Issuing Bank receives a payment in respect of a Reimbursement Obligation as to which the Agent has received, for the account of the Issuing Bank, any payments from the L/C Participants pursuant to SECTION 2.20(E), the Issuing Bank will promptly pay to the Agent, and the Agent will promptly pay to each L/C Participant that has paid its Pro Rata Share thereof, in immediately available funds, an amount equal to such L/C Participant's ratable share (based on the proportionate amount funded by such L/C Participant to the aggregate amount funded by all L/C Participants) of such Reimbursement Obligation. (g) Obligations Absolute. The Reimbursement Obligations of the Borrower, and the obligations of the L/C Participants to make payments to the Agent, for the account of the Issuing Bank, with respect to Letters of Credit, shall be irrevocable, shall remain in effect until the Issuing Bank shall have no further obligations to make any payments or disbursements under any circumstances with respect to any Letter of Credit, and, shall not be subject to counterclaim, setoff or other defense or any other qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, 46 without limitation, any of the following circumstances; provided, that the making of such reimbursement payments shall not affect the rights of the Borrower or the L/C Participants to seek damages or other remedies arising from any breach of the Issuing Bank's standard of care as set forth in the final paragraph of this subsection (G): (i) Any lack of validity or enforceability of this Agreement, any of the other Loan Documents or any documents or instruments relating to any Letter of Credit; (ii) Any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations in respect of any Letter of Credit or any other amendment, modification or waiver of or any consent to departure from any Letter of Credit or any documents or instruments relating thereto, in each case whether or not the Borrower has notice or knowledge thereof; (iii) The existence of any claim, setoff, defense or other right that the Borrower may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), the Agent, the Issuing Bank, any Lender or other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated hereby or any unrelated transactions (including any underlying transaction between the Borrower and the beneficiary named in any such Letter of Credit); (iv) Any draft, certificate or any other document presented under the Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, any errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, telecopier or otherwise, or any errors in translation or in interpretation of technical terms; (v) Any defense based upon the failure of any drawing under a Letter of Credit to conform to the terms of the Letter of Credit, any nonapplication or misapplication by the beneficiary or any transferee of the proceeds of such drawing or any other act or omission of such beneficiary or transferee in connection with such Letter of Credit; (vi) The exchange, release, surrender or impairment of any Collateral or other security for the Obligations; (vii) The occurrence of any Default or Event of Default; or (viii) Any other circumstance or event whatsoever, including, without limitation, any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or a guarantor. None of the foregoing shall impair, prevent or otherwise affect any of the rights and powers granted to the Issuing Bank hereunder. Any action taken or omitted to be taken by the Issuing Bank under or in connection with any Letter of Credit, if taken or omitted in accordance with the Uniform Commercial Code and the Uniform Customs and Practice for Documentary Credits (1993 Revision), to the extent applicable, and in the absence of fraud, gross negligence or 47 willful misconduct, shall be binding upon Borrower and each L/C Participant and shall not create or result in any liability of the Issuing Bank to the Borrower or any L/C Participant. It is expressly understood and agreed that, for purposes of determining whether a wrongful payment under a Letter of Credit resulted from the Issuing Bank's gross negligence or willful misconduct, (i) the Issuing Bank's acceptance of documents that appear on their face to comply with the terms of such Letter of Credit, without responsibility for further investigation, regardless of any notice or information to the contrary, (ii) the Issuing Bank's exclusive reliance on the documents presented to it under such Letter of Credit as to any and all matters set forth therein, including the amount of any draft presented under such Letter of Credit, whether or not the amount due to the beneficiary thereunder equals the amount of such draft and whether or not any document presented pursuant to such Letter of Credit proves to be insufficient in any respect (so long as such document appears on its face to comply with the terms of such Letter of Credit), and whether or not any other statement or any other document presented pursuant to such Letter of Credit proves to be forged or invalid or any statement therein proves to be inaccurate or untrue in any respect whatsoever, and (iii) any noncompliance in any immaterial respect of the documents presented under such Letter of Credit with the terms thereof shall, in each case, be deemed not to constitute gross negligence or willful misconduct of the Issuing Bank. (h) Increased Costs. If at any time after the Closing Date the Issuing Bank or any L/C Participant determines that the introduction of or any change in any applicable law, rule, regulation, order, guideline or request or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof, or compliance by the Issuing Bank or any L/C Participant with any request or directive after the Closing Date by any such authority (whether or not having the force of law) shall either (i) impose, modify or make applicable any reserve, deposit, capital adequacy or similar requirement against Letters of Credit issued by the Issuing Bank or participated in by any L/C Participant or (ii) impose on the Issuing Bank or any L/C Participant any other conditions relating, directly or indirectly, to this Agreement or any Letter of Credit, and the result of any of the foregoing is to increase the cost to the Issuing Bank or L/C Participant of issuing, maintaining or participating in any Letter of Credit, or to reduce the amount of any sum received or receivable by the Issuing Bank or such L/C Participant hereunder or reduce the rate of return on its capital with respect to Letters of Credit, then the Borrower will, within fifteen (15) days after delivery to the Borrower by the Issuing Bank or such L/C Participant of written demand therefor (with a copy thereof to the Agent), pay to the Issuing Bank or such L/C Participant such additional amounts as shall compensate the Issuing Bank or such L/C Participant for such increase in costs or reduction in return. A certificate submitted to the Borrower by the Issuing Bank or such L/C Participant, as the case may be (a copy of which certificate shall be sent by the Issuing Bank or such L/C Participant to the Agent), setting forth a reasonably detailed calculation of such additional amount and the basis for the determination of such additional amount or amounts necessary to compensate the Issuing Bank or such L/C Participant as aforesaid, shall be presumptively correct. (i) INTENTIONALLY OMITTED. (j) Cash Collateral Account. At any time and from time to time (i) during the continuance of an Event of Default, the Agent, at the direction, or with the consent, of the Required Lenders, may require the Borrower to deliver to the Agent such additional amount of 48 cash as is equal to the aggregate Stated Amount of all Letters of Credit at any time outstanding (whether or not any beneficiary under any Letter of Credit shall have drawn or be entitled at such time to draw thereunder) and (ii) in the event of a prepayment under SECTION 2.5(B), the Agent will retain such amount as may then be required to be retained under the proviso in SECTION 2.5(B), such amounts in each case under clauses (i) and (ii) above to be held by the Agent in a cash collateral account (the "Cash Collateral Account") as security for, and for application to, the Borrower's Reimbursement Obligations as and when the same shall arise. The Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest on the investment of such amounts in Cash Equivalents, which investments shall be made at the direction of the Borrower (unless a Default or Event of Default shall have occurred and be continuing, in which case the determination as to which investments shall be made shall be at the option and in the discretion of the Agent; provided that the Agent shall have no liability with respect thereto), amounts in the Cash Collateral Account shall not bear interest. Interest and profits, if any, on such investments shall accumulate in such account. In the event of a drawing, and subsequent payment by the Issuing Bank, under any Letter of Credit at any time during which any amounts are held in the Cash Collateral Account, the Agent will deliver to the Issuing Bank an amount equal to the Reimbursement Obligation created as a result of such payment (or, if the amounts so held are less than such Reimbursement Obligation, all of such amounts) to reimburse the Issuing Bank therefor. Any amounts remaining in the Cash Collateral Account after the expiration of all Letters of Credit and reimbursement in full of the Issuing Bank for all of its obligations thereunder shall be held by the Agent (i) in the case of funds held pursuant to clause (i) above during the continuance of an Event of Default, for the benefit of the Borrower, to be applied against the Obligations then or as they become due and payable in such order as the Agent may direct and (ii) in the event funds held pursuant to clause (ii) above, where the Borrower is required to provide cash collateral pursuant to SECTION 2.5(B), such amount (to the extent not applied as aforesaid) shall be returned to the Borrower on demand, provided that after giving effect to such return (i) the sum of (y) the aggregate principal amount of all Loans outstanding at such time and (z) the aggregate Letter of Credit Outstandings at such time would not exceed the Total Commitment at such time and (ii) no Default or Event of Default shall have occurred and be continuing at such time. If the Borrower is required to provide cash collateral as a result of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within two (2) Business Days after all Events of Default have been cured or waived. (k) Effectiveness. Notwithstanding any termination of the Commitments or repayment of the Loans, or both, the obligations of the Borrower under this SECTION 2.18 shall remain in full force and effect until the Issuing Bank and the L/C Participants shall have no further obligations to make any payments or disbursements under any circumstances with respect to any Letter of Credit. (l) Fees. In connection with the Letters of Credit, the Borrower agrees to pay: (i) To the Agent, for the account of each Lender, a letter of credit fee in respect of each Letter of Credit for the period from the date of its issuance to the date of its termination, at a rate per annum equal to the Applicable Margin in effect from time to time during such period on the daily average Stated Amount thereof, payable in arrears 49 (x) on the last Business Day of each fiscal quarter, beginning with the last Business Day of the fiscal quarter ending March 31, 1998, and (y) on the later of the Termination Date and the date of termination of the last outstanding Letter of Credit, in each case calculated on the basis of actual days elapsed over a year of 360 days; (ii) To the Issuing Bank, for its own account, a facing fee in respect of each Letter of Credit for the period from the date of its issuance to the date of its termination, at the rate of 0.125% per annum on the daily average Stated Amount thereof, payable in arrears (i) on the last Business Day of each fiscal quarter, beginning with the last Business Day of the fiscal quarter ending March 31, 1998, and (ii) on the later of the Termination Date and the date of termination of the last outstanding Letter of Credit; and (iii) To the Issuing Bank, for its own account, such reasonable commissions, issuance fees, transfer fees and other fees and charges incurred in connection with the issuance and administration of each Letter of Credit as are customarily charged from time to time by the Issuing Bank for the performance of such services in connection with similar letters of credit, or as may be otherwise agreed to by the Issuing Bank, but without duplication of amounts payable under subsection (II) above. ARTICLE III. CLOSING; CONDITIONS OF CLOSING AND BORROWING 3.1 Conditions of Initial Borrowing. The obligation of each Lender to make Loans in connection with the initial Borrowing hereunder, and the obligation of the Issuing Bank to issue Letters of Credit hereunder, is subject to the satisfaction of the following conditions precedent: (a) The Agent shall have received the following, each dated as of the Closing Date (unless otherwise specified) and, except for the Notes and the certificates and instruments required to be delivered under the Security Agreements, in sufficient copies for each Lender: (i) counterparts hereof signed by each of the parties hereto; (ii) a Committed Loan Note and Bid Loan Note for the account of each Lender that is a party hereto as of the Closing Date, in the amount of such Lender's Commitment and duly completed and executed by the Borrower; (iii) the Guaranty, duly completed and executed by the Guarantors; (iv) the Security Agreements, duly completed and executed by the Borrower and the Guarantors owning any property of the type covered thereby, together with all certificates evidencing the capital stock being pledged thereunder and undated stock powers for each such certificate, duly executed in blank, and any promissory notes being pledged thereunder, duly endorsed in blank; 50 (v) an acknowledgment copy, or other evidence satisfactory to the Agent, of the proper filing or recording of each document (including Financing Statements) required by law or reasonably requested by the Agent to be filed or recorded in each jurisdiction in which the filing or recording is so required or requested in order to create in favor of the Agent, for the benefit of the Lenders, a valid, legal and perfected first priority security interest in or lien on the Collateral that is the subject of the Security Agreements, subject only to Permitted Liens; (vi) a certificate, signed by the chief executive officer or chief financial officer of the Borrower, in form and substance satisfactory to the Agent, certifying that (A) all representations and warranties of the Borrower contained in this Agreement and the other Loan Documents are true and correct as of the Closing Date, both immediately before and after giving effect to any Loans to be made on the Closing Date hereunder and the application of the proceeds thereof, (B) no Default or Event of Default has occurred and is continuing, both immediately before and after giving effect to any Loans to be made on the Closing Date hereunder and the application of the proceeds thereof, (C) both immediately before and after giving effect to the consummation of the transactions contemplated by this Agreement, no Material Adverse Change has occurred since December 31, 1996, and there exists no event, condition or state of facts related to the business of the Borrower and its Subsidiaries that could reasonably be expected to result in a Material Adverse Change and (D) the Borrower has satisfied each of the conditions set forth in this Section applicable to the Borrower and its Subsidiaries; (vii) a certificate of the secretary or an assistant secretary of each of the Borrower and its Subsidiaries, in form and substance satisfactory to the Agent, certifying (A) that attached thereto is a true and complete copy of the articles or certificate of incorporation and all amendments thereto of the Borrower or such Subsidiary, as the case may be, certified as of a recent date by the Secretary of State (or comparable Governmental Authority) of its jurisdiction of organization, and that the same has not been amended since the date of such certification, (B) that attached thereto is a true and complete copy of the bylaws of the Borrower or such Subsidiary, as the case may be, as then in effect and as in effect at all times from the date on which the resolutions referred to in clause (C) below were adopted to and including the date of such certificate, and (C) that attached thereto is a true and complete copy of resolutions adopted by the board of directors of the Borrower or such Subsidiary, as the case may be, authorizing the execution, delivery and performance of the Loan Documents to which it is a party, and as to the incumbency and genuineness of the signature of each officer of the Borrower or such Subsidiary executing any of such Loan Documents, and attaching all such copies of the documents described above; provided, that non-corporate Subsidiaries shall provide comparable documentation as appropriate and reasonably satisfactory to the Agent. (viii) certificates as of a recent date of (A) the good standing of each of the Borrower and its Subsidiaries under the laws of its jurisdiction of organization, from the Secretary of State (or comparable Governmental Authority) of such jurisdiction, (B) the qualification of each of the Borrower and its Subsidiaries to conduct business as foreign corporations in the states where each is qualified to conduct business and, (C) where 51 reasonably available from the department of revenue or other appropriate Governmental Authority, that the Borrower and each Subsidiary has filed all required tax returns and owes no delinquent taxes; provided, that non- corporate Subsidiaries shall provide comparable certificates to the extent available and such other documentation reasonably requested by the Agent. (ix) the favorable opinion of Mayor, Day, Caldwell & Keeton, L.L.P., counsel to the Borrower, addressed to the Agent and the Lenders, in form and substance satisfactory to the Agent and each Lender; (x) certificates, and copies of policies, of insurance, in form and substance satisfactory to the Agent, upon the Collateral and the business of the Borrower and each Guarantor. (b) All legal matters, documentation and corporate or other proceedings incident to the transactions contemplated hereby shall be reasonably acceptable to the Agent; all approvals, permits and consents of any Governmental Authorities or other Persons required in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby shall have been obtained (without the imposition of conditions that are not reasonably acceptable to the Agent), and all related filings, if any, shall have been made, and all such approvals, permits, consents and filings shall be in full force and effect and the Agent shall have received such copies thereof as it shall have requested; all applicable waiting periods shall have expired without any adverse action being taken by any Governmental Authority having jurisdiction; and no action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before, and no order, injunction or decree shall have been entered by, any court or other Governmental Authority, in each case to enjoin, restrain or prohibit, to obtain substantial damages in respect of, or that is otherwise related to or arises out of, this Agreement or the consummation of the transactions contemplated hereby, or that, in the opinion of the Agent, would otherwise be reasonably likely to have a Material Adverse Effect. (c) Since December 31, 1996, both immediately before and after giving effect to the consummation of the transactions contemplated by this Agreement, there shall not have occurred any Material Adverse Change or any event, condition or state of facts relating to the business of the Borrower and its Subsidiaries that could reasonably be expected to result in a Material Adverse Change, other than as specifically contemplated by this Agreement and the other Loan Documents. (d) The Borrower shall have paid (i) to the Agent, the initial quarterly installment of the annual administrative fee described in SECTION 2.9(B), and (ii) all other fees and expenses of the Agent and the Lenders for which the Borrower has received an invoice required hereunder or under any other Loan Document to be paid on or prior to the Closing Date (including fees and expenses of counsel) in connection with this Agreement and the transactions contemplated hereby. 52 (e) The Agent shall have received an Account Designation Letter, together with written instructions from an Authorized Officer of the Borrower, including wire transfer information, directing the payment of the proceeds of the initial Loans to be made hereunder. (f) The Lenders shall have received the Financial Statements from the Borrower, in form and substance satisfactory to the Lenders. (g) All taxes, fees and other charges in connection with the execution, delivery, recording, filing and registration of any of the Loan Documents shall have been paid by the Borrower. (h) The Agent and each Lender shall have received such other documents, certificates, and instruments as the Agent or any Lender shall have reasonably requested. 3.2 Conditions of All Borrowings. The obligation of the Lenders to make any Loans hereunder, including the initial Loans, and the obligation of the Issuing Bank to issue any Letters of Credit hereunder, is subject to the satisfaction of the following conditions precedent on the relevant Borrowing Date or date of issuance: (a) The Agent shall have received a Notice of Borrowing, if required, in accordance with SECTION 2.2(A), a Bid Request in accordance with SECTION 2.3(A) or a Letter of Credit Request in accordance with SECTION 2.18(B), as applicable; (b) Each of the representations and warranties made by the Borrower contained in ARTICLE IV shall be true and correct on and as of such Borrowing Date for new Borrowings (other than conversions with no new funds advanced), with the same effect as if made on and as of the Borrowing Date, except to the extent the facts upon which such representation and warranty are based may be changed as a result of transactions permitted or contemplated hereby or such representation or warranty relates solely to a prior date and except for new Subsidiaries for whom the representations and warranties shall apply only as of the date of representation; (c) No Default or Event of Default shall have occurred and be continuing on such date, both immediately before and after giving effect to the Loans to be made or Letter of Credit to be issued on such date; and (d) The security interests in the Collateral previously pledged to the Agent, for the benefit of the Lenders, pursuant to the Loan Documents shall remain in full force and effect. Each giving of a Notice of Borrowing or a Letter of Credit Request, and the consummation of each Borrowing or issuance of a Letter of Credit, shall be deemed to constitute a representation by the Borrower that the statements contained in subsections (B) and (C) above are true, both as of the date of such notice or request and as of the relevant Borrowing Date or date of issuance. 3.3 Waiver of Conditions Precedent. If any Lender makes any Loan hereunder, prior to the fulfillment of any of the conditions precedent set forth in this ARTICLE III, the making of such Loan or the issuance of such Letter of Credit shall constitute only an extension of time for 53 the fulfillment of such condition and not a waiver thereof, and unless the Required Lenders indicate otherwise in writing, the Borrower shall thereafter use its best efforts to fulfill each such condition promptly. No failure by the Borrower to fulfill any such condition precedent shall constitute a Default or an Event of Default hereunder, except to the extent any such failure is continuing after the expiration of any period within which such condition is specifically required to be fulfilled. ARTICLE IV. REPRESENTATIONS AND WARRANTIES In order to induce the Lenders to enter into this Loan Agreement and extend the credit contemplated hereby, the Borrower makes the following warranties and representations to the Agent and each Lender: 4.1 Corporate Organization and Power. The Borrower and each Subsidiary (a) is a corporation duly organized, validly existing and in good standing or other legal entity duly organized and validly existing under the laws of the jurisdiction set forth opposite its name on SCHEDULE 4.1; (b) is qualified to do business and is in good standing in every other jurisdiction where the nature of its business or the ownership of its properties requires it to be so qualified and where the failure to be so qualified would have a Material Adverse Effect, which jurisdictions are set forth on SCHEDULE 4.1; (c) except as set forth on SCHEDULE 4.1, has no Subsidiaries or Affiliates (other than its officers, directors and shareholders and other than the physician groups not owned by the Borrower or a Subsidiary to which the Borrower or its Subsidiaries provide management services) and is not a partner or joint venturer in any partnerships or joint ventures; (d) has the power (corporate or otherwise) to own and give a lien on and security interest in its respective Collateral and to engage in the transactions contemplated hereby; and (e) has the full power (corporate or otherwise), authority and legal right to execute and deliver this Agreement and the other Loan Documents to which it is a party and to perform and observe the terms and provisions thereof. Neither the Borrower nor any of its Subsidiaries has, during the preceding five (5) years, been known as or used any other corporate, fictitious or trade names in the United States other than as set forth on SCHEDULE 4.1. 4.2 Litigation; Government Regulation. Except as set forth in SCHEDULE 4.2, (a) there are no judgments, injunctions or similar orders or decrees and no actions, suits, investigations or proceedings pending (pursuant to which the Borrower or any Subsidiary has been served) or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any Subsidiary or its business that is reasonably likely to have a Material Adverse Effect, or that question the validity of this Agreement or any of the Loan Documents, at law or in equity before any court, arbitrator or Governmental Authority, and (b) neither the Borrower nor any Subsidiary is in violation of or in default under any Requirement of Law where such violation could reasonably be expected to have a Material Adverse Effect. 4.3 Taxes. Except as set forth in SCHEDULE 4.3, neither the Borrower nor any Subsidiary is delinquent in the payment of any taxes that have been levied or assessed by any 54 Governmental Authority against it or its assets. Except as set forth in SCHEDULE 4.3, the Borrower and each Subsidiary (a) has timely filed all tax returns that are required by law to be filed prior to the date hereof, and has paid all taxes shown on said returns and all other assessments or fees levied upon it or upon its properties to the extent that such taxes, assessments or fees have become due, and if not due, such taxes have been adequately provided for and sufficient reserves therefor established on its books of account, and (b) is current with respect to payment of all federal and state withholding taxes, social security taxes and other payroll taxes. 4.4 Enforceability of Loan Documents; Compliance with Other Instruments. Each of the Loan Documents to which the Borrower or any Guarantor is a party, as the case may be, has been duly authorized by all necessary corporate action on the part of the Borrower or such Guarantor, has been validly executed and delivered by the Borrower or such Guarantor and is the legal, valid and binding obligation of the Borrower or such Guarantor, enforceable against the Borrower or such Guarantor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditor's rights generally or by general principles of equity. Except as set forth in SCHEDULE 4.4, neither the Borrower nor any Subsidiary is in default with respect to any indenture, loan agreement, mortgage, lease, deed or similar agreement related to the borrowing of monies to which it is a party or by which it, or any of its property, is bound except where such default would not have a Material Adverse Effect. Neither the execution, delivery or performance of the Loan Documents by the Borrower and the Guarantors, nor compliance by the Borrower and the Guarantors therewith: (a) conflicts or will conflict with or results or will result in any breach of, or constitutes or will constitute with the passage of time or the giving of notice or both, a default under, (i) any Requirement of Law or (ii) any written or oral agreement or instrument to which the Borrower or any Guarantor is a party or by which it, or any of its property, is bound, except where such conflict, breach or default would not have a Material Adverse Effect, or (b) results or will result in the creation or imposition of any lien, charge or encumbrance upon the properties of the Borrower or any Subsidiary pursuant to any such agreement or instrument, except for Permitted Liens. 4.5 Governmental Authorization. No authorization, consent or approval of, notice to, or declaration or filing with, any Governmental Authority is required for the valid execution, delivery and performance by the Borrower or any Guarantor of the Loan Documents to which it is a party or the consummation by the Borrower or any Guarantor of the transactions contemplated thereby, except for the filing of Financing Statements. The Borrower and each Subsidiary has, and is in good standing with respect to, all material licenses, approvals, permits, certificates, inspections, consents and franchises of Governmental Authorities and other Persons necessary to continue to conduct its business as heretofore conducted and to own or lease and operate its respective properties as now owned or leased by it, except where the failure to be in good standing would not have a Material Adverse Effect. Without limitation of the foregoing, the Borrower and each Subsidiary has, to the extent applicable, (i) obtained (or been duly assigned) all required certificates of need or determinations of need, as required by the relevant state Governmental Authority, for the acquisition, construction, expansion of, investment in or operation of its businesses as currently operated; (ii) obtained and maintains in good standing all required licenses, except where the failure to do so would not have a Material Adverse Effect; and (iii) to the extent prudent and customary in the industry in which the Borrower or such 55 Subsidiary is engaged, obtained and maintains accreditation from all generally recognized accrediting agencies for the Borrower and its Subsidiaries. No Medicaid Certification or Medicare Certification is required for the operation of the business) of the Borrower or any Guarantor and neither the Borrower nor any Guarantor is required to have entered into Medicare Provider Agreement or Medicaid Provider Agreement for the operation of its business). 4.6 Event of Default. No Default or Event of Default has occurred and is continuing. 4.7 Margin Securities. No proceeds of the Loans or advances under the Swingline Note will be used, directly or indirectly, to purchase or carry any Margin Stock, to extend credit for such purpose or for any other purpose that would violate or be inconsistent with Regulations G, T, U or X. As of the date hereof and at all times during the term of this Agreement, including following the application of the proceeds of each Loan and each advance under the Swingline Note, the Borrower will conduct its business and cause its Subsidiaries to conduct their respective businesses such that not more than 25% of the value of the assets of the Borrower will consist of assets which are Margin Stock and such that not more than 25% of the value of the assets of the Borrower and its Subsidiaries will consist of assets which are Margin Stock. 4.8 Full Disclosure. The written estimates, projections and forecasts provided to the Lenders and the Agent with the syndication materials dated December 1997 were prepared, at the request of the Agent, on the basis of the assumption that the Borrower would not consummate any additional Physician Transactions after December 31, 1998, and on the basis of the good faith estimate of the Borrower's senior management concerning probable financial condition and performance based on other assumptions, data, tests or conditions believed to be reasonable or to represent industry conditions existing at the time such estimates, projections or forecasts were made. All other written estimates, projections and forecasts furnished by or on behalf of the Borrower or any Subsidiary to the Agent or any Lender for purposes of or in connection with this Agreement, or in connection with any extension of credit hereunder, were and will be prepared on the basis of the good faith estimate of the Borrower's senior management concerning probable financial condition and performance based on assumptions, data, tests or conditions believed to be reasonable or to represent industry conditions existing at the time such estimates, projections or forecasts were made. None of (i) the other statements furnished to the Agent or any Lender by or on behalf of the Borrower or any Subsidiary in connection with the Loan Documents or (ii) the Loan Documents, as of the date furnished, contained any untrue statement of a material fact or, to the Borrower's knowledge, omitted to state a material fact necessary to make the statements contained therein or herein, in light of the circumstances under which they were made, not misleading. To the Borrower's knowledge, there is no fact related to the business of the Borrower and its Subsidiaries that the Borrower has not disclosed to the Agent or the Lenders that may reasonably be expected to result in a Material Adverse Effect. 4.9 Principal Places of Business. SCHEDULE 4.9 lists the chief executive office and principal place of business, as provided in the Uniform Commercial Code, of the Borrower and each Subsidiary as of the Closing Date. 56 4.10 ERISA; Employee Benefits. (a) SCHEDULE 4.10 (i) lists, as of the Closing Date, all material Employee Plans and Pension Plans ("Plans") maintained or sponsored by the Borrower and its Subsidiaries or to which the Borrower or any Subsidiary is obligated to contribute and (ii) separately identifies all Qualified Plans (as defined below) and all Multiemployer Plans. (b) Each such Plan is in compliance in all material respects (or may be brought into compliance without a Material Adverse Effect) with the applicable provisions of ERISA, the Internal Revenue Code and other federal or state law, including all requirements under the Internal Revenue Code or ERISA for filing reports (which are true and correct in all material respects as of the date filed), and benefits have been paid in accordance with the provisions of each such Plan. (c) The form of each Plan intended to be qualified under Section 401 of the Internal Revenue Code ("Qualified Plan") in the opinion of Borrower qualifies under Section 401 of the Internal Revenue Code, and any trust or trusts created thereunder are, in the opinion of the Borrower, exempt from tax under the provisions of Section 501 of the Internal Revenue Code, and to the knowledge of the Borrower nothing has occurred that would cause the loss of such qualification or tax-exempt status. (d) There is no outstanding liability under Title IV of ERISA with respect to any Qualified Plan maintained or sponsored by the Borrower and its Subsidiaries (as to which the Borrower or any Subsidiary is or may be liable), nor to the knowledge of the Borrower with respect to any Plan to which the Borrower or any Subsidiary (wherein the Borrower or any Subsidiary is or may be liable) contributes or is obligated to contribute. (e) None of the Qualified Plans subject to Title IV of ERISA has any unfunded benefit liability, as defined in Section 4001(a)(18) of ERISA (as to which the Borrower or any Subsidiary is or may be liable). (f) No Plan maintained or sponsored by the Borrower or any Subsidiary provides medical or other welfare benefits or extends coverage relating to such benefits beyond the date of a participant's termination of employment with the Borrower or such Subsidiary, except to the extent required by Section 4980B of the Internal Revenue Code and at the sole expense of the participant or the beneficiary of the participant to the fullest extent permissible under such Section of the Internal Revenue Code. The Borrower and its Subsidiaries have complied in all material respects with the notice and continuation coverage requirements of Section 4980B of the Internal Revenue Code. (g) No ERISA Event has occurred or is reasonably expected to occur with respect to any Plan maintained or sponsored by the Borrower and its Subsidiaries or to the knowledge of the Borrower, to which the Borrower or any Subsidiaries is obligated to contribute. (h) As of the Closing Date, there are no pending or, to the knowledge of the Borrower, threatened claims, actions or lawsuits, other than routine claims for benefits in the 57 usual and ordinary course, asserted or instituted against (i) any Plan maintained or sponsored by the Borrower and its Subsidiaries or their assets, or (ii) any fiduciary with respect to any Plan for which the Borrower or any Subsidiary may be directly or indirectly liable, through indemnification obligations or otherwise. (i) Neither the Borrower nor any Subsidiary has incurred or, to the knowledge of the Borrower, reasonably expects to incur (i) any liability (and no event has occurred that, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan or (ii) any liability under Title IV of ERISA (other than premiums due and not delinquent under Section 4007 of ERISA) with respect to a Plan. (j) Neither the Borrower nor any Subsidiary has engaged, directly or indirectly, in a non-exempt prohibited transaction (as defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA) in connection with any Plan maintained or sponsored by the Borrower that has a Material Adverse Effect. 4.11 Subsidiaries. SCHEDULE 4.11 contains a complete and accurate list of the Subsidiaries of the Borrower as of the Closing Date, showing, as to each Subsidiary, the number of shares of each class of capital stock or the amount and type of other equity interests authorized and outstanding, if applicable. Except as expressly set forth on SCHEDULE 1.1(A) as an encumbrance on stock or equity interest, all of such issued and outstanding shares of capital stock or other equity interests of all of the Borrower's Subsidiaries have been duly authorized and validly issued, are, in the case of Subsidiaries that are corporations, fully paid and nonassessable and are owned by the Borrower, free and clear of any liens, charges, encumbrances, security interests, claims or restrictions of any nature whatsoever, except for liens in favor of the Agent, for the benefit of the Lenders, granted under the Loan Documents, except for Permitted Liens, and there are no other equity securities of any Subsidiary issued and outstanding or reserved for any purpose. 4.12 Financial Statements. The Financial Statements delivered to the Lenders have been prepared by the Borrower and its Subsidiaries and, in the case of the annual Financial Statements, audited in accordance with Generally Accepted Accounting Principles by Price Waterhouse LLP, independent certified public accountants, contain no material misstatement or omission and fairly present the financial position, assets and liabilities of the Borrower and its Subsidiaries on a consolidated basis as of the respective dates thereof and the consolidated results of operations of the Borrower and its Subsidiaries for the respective periods then ended. Except for the transactions contemplated by the Loan Documents, since the date of the most recent audited Financial Statements there has been no Material Adverse Change. 4.13 Title to Assets. Except as set forth on SCHEDULE 4.13, (a) the Borrower and each Subsidiary holds interests as lessee under leases in full force and effect with respect to all leased real and personal property used in connection with its business, and has good and indefeasible title to the Collateral and the other assets owned by it that are reflected in the most recent Financial Statements, in each case free and clear of all liens, claims, security interests and encumbrances except Permitted Liens; and (b) no financing statement that names the Borrower 58 or any Subsidiary as debtor has been filed and is still in effect or has been authorized to be filed, other than Financing Statements evidencing Permitted Liens. 4.14 Solvency. The Borrower and each Subsidiary (i) is Solvent, and (ii) after giving effect to the transactions contemplated hereby, will be Solvent. 4.15 Use of Proceeds. The Borrower's use of the proceeds of any Loans made by the Lenders to the Borrower pursuant to this Agreement are and will be legal and proper corporate uses, duly authorized by the Board of Directors of the Borrower, and such uses are and will be consistent in all material respects with all applicable laws and statutes, as in effect from time to time. 4.16 Assets for Conduct of Business. The Borrower and each Subsidiary possess adequate assets, licenses and trade names to continue to conduct its business as heretofore conducted without any material conflict with the rights of other Persons. 4.17 Compliance with Laws. The Borrower and each Subsidiary have duly complied with, and their business operations and leaseholds are in compliance in all material respects with, all Requirements of Law other than those failures to comply which would not have a Material Adverse Effect. 4.18 Environmental Matters. Except where failure to comply with the following provisions of this SECTION 4.18 would not have a Material Adverse Effect: (a) All activities and operations of the Borrower and its Subsidiaries are in material compliance with all applicable Environmental Laws. (b) Neither the Borrower nor any Subsidiary is involved in any suit or proceeding, or has received any notice from any Governmental Authority, with respect to a release of Hazardous Substances or has received notice of any claims against the Borrower or any of its Subsidiaries from any Person relating to personal injuries from exposure to Hazardous Substances. (c) The Borrower and each Subsidiary has timely filed all reports required to be filed, has acquired all necessary certificates, approvals and permits and has generated and maintained in all material respects all required data, documentation and records under all applicable Environmental Laws. (d) To the knowledge of the Borrower, neither the Borrower nor any Subsidiary has ever sent a Hazardous Substance to a site that, pursuant to any Environmental Law, (1) has been placed on the "National Priorities List" or "CERCLIS List" of hazardous waste sites (or any similar state list) or (2) that is subject to a claim, an administrative order or other request to take "removal" or "remedial" action (as defined under CERCLA) or to pay for the costs of cleaning up such a site. 4.19 First Priority. Except for Permitted Liens, when the initial Loans are made hereunder, this Agreement, together with the other Loan Documents, will create valid and perfected first priority security interests and liens in and upon the Collateral covered thereby, in 59 each case enforceable against the Borrower or a Subsidiary and all other Persons in all relevant jurisdictions and securing the payment of all Obligations purported to be secured thereby. 4.20 Contracts; Labor Disputes. Neither the Borrower nor any Subsidiary is a party to any contract or agreement, or subject to any charge, corporate restriction, judgment, injunction, decree, rule, regulation or order of any court or other Governmental Authority, that has or could reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any Subsidiary is a party to, and there is not pending or, to the Borrower's knowledge, threatened, any labor dispute, strikes, lock-out, grievance, work stoppage or walkouts relating to any labor contract to which the Borrower or any Subsidiary is a party, in each case, which could reasonably be expected to have a Material Adverse Effect. 4.21 Insurance. SCHEDULE 4.21 accurately summarizes all insurance policies or programs of the Borrower and its Subsidiaries in effect as of the Closing Date, and indicates the insurer's name, policy number, expiration date, amount of coverage, type of coverage, annual premiums, exclusions and deductibles, and also indicates any self-insurance program that is in effect. 4.22 Reimbursement from Third Party Payors. The accounts receivable for the physician groups for which the Borrower and its Subsidiaries provide management services have been and will continue to be adjusted to reflect reimbursement policies of third party payors such as Medicare, Medicaid, Blue Cross/Blue Shield, private insurance companies, health maintenance organizations, preferred provider organizations, alternative delivery systems, managed care systems and other third party payors. In particular, the accounts receivable relating to such third party payors do not and shall not exceed amounts the relevant physician group is entitled to receive under any capitation arrangement, fee schedule, discount formula, cost-based reimbursement or other adjustment or limitation to the usual charges of such physician group. 4.23 Fraud and Abuse. Neither the Borrower nor any Subsidiary, nor any of their respective stockholders, officers or directors have engaged on behalf of Borrower or any Subsidiary in any of the following: (i) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any applications for any benefit or payment under the Medicare or Medicaid program; (ii) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or payment under the Medicare or Medicaid program; (iii) failing to disclose knowledge by a claimant of the occurrence of any event affecting the initial or continued right to any benefit or payment under the Medicare or Medicaid program on its own behalf or on behalf of another, with intent to secure such benefit or payment fraudulently; (iv) knowingly and willfully soliciting or receiving any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind or offering to pay such remuneration (a) in return for referring an individual to a Person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part by Medicare or Medicaid, or (b) in return for purchasing, leasing or ordering or arranging for or recommending the purchasing, leasing or ordering of any good, facility, service, or item for which payment may be made in whole or in part by Medicare or Medicaid. With respect to this Section, knowledge by an individual stockholder, director or officer of the Borrower or a Subsidiary of any of the events 60 described in this Section shall not be imputed to the Borrower or such Subsidiary unless such knowledge was obtained or learned by the stockholder, director or officer in his or her official capacity as a stockholder, director or officer of the Borrower or such Subsidiary. No activity of the Borrower or any Subsidiary shall be considered to be a breach of this Section, except in the case of a knowing and willful violation thereof, until the Borrower or such Subsidiary has received notification, written or oral, by a Governmental Authority of competent jurisdiction as to any such violation. The provisions of SUBSECTION (III) hereof shall not require the Borrower or any Subsidiary (unless otherwise required by law) to disclose to the Agent, Lenders or any other Person any activity or omission by a third party (including associated physician groups) unless such activity or omission (x) constitutes willful fraud or abuse, (y) would reasonably be likely to have a Material Adverse Effect or (z) is not being corrected, cured or remedied by the Borrower and any other relevant Persons diligently, in good faith and in the exercise of sound business judgment. 4.24 Single Business Enterprise. The Borrower and the Guarantors have historically operated as, and intend to continue operating as, a single business enterprise. Although separate entities, the Borrower and the Guarantors operate under a common business plan. Each of the Borrower and the Guarantors will accordingly benefit from the financing arrangement established by this Agreement. The Borrower acknowledges that, but for the agreement by each Guarantor to execute and deliver the Guaranty and Guarantors' Security Agreement, the Borrower would not have qualified separately for the total amount of the credit facilities established hereby. 4.25 Continuing Security Interest. All Loans to and other Obligations of the Borrower under the Loan Agreement and the Notes will continue to be secured by the Agent's security interest in all of the Collateral granted under the Loan Documents. Such security interest will relate back to the date of initial perfection of the security interests under the Loan Documents, and nothing herein will affect the validity, perfection or enforceability of such security interests. ARTICLE V. AFFIRMATIVE COVENANTS The Borrower covenants and agrees that, until the termination of the Commitments and all Letters of Credit and the payment in full of all principal and interest with respect to the Loans and Letter of Credit Outstandings together with all other amounts then due and owing hereunder, it will, and will cause each of its Subsidiaries to comply with the following covenants. 5.1 Financial and Business Information about the Borrower. The Borrower shall deliver to the Agent and the Lenders: (a) Within forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, beginning with the fiscal quarter ending March 31, 1998, the unaudited consolidated and consolidating balance sheets of the Borrower and its Subsidiaries as of the close of such fiscal quarter and unaudited consolidated and consolidating statements of income, retained earnings and cash flows for the Borrower and its Subsidiaries for the fiscal 61 quarter then ended and for that portion of the fiscal year then ended, all prepared in accordance with Generally Accepted Accounting Principles (subject to the absence of notes required by Generally Accepted Accounting Principles and subject to normal and reasonable year-end audit adjustment) applied on a basis consistent with that of the preceding quarter or containing disclosure of the effect on the financial position or results of operation of any change in the application of accounting principles and practices during the quarter, certified by the Chief Executive Officer or Chief Financial Officer of the Borrower to fairly present, in all material respects, the financial condition of the Borrower and its Subsidiaries on a consolidated basis as of the date thereof or the results of operation of the Borrower and its Subsidiaries on a consolidated basis for the period covered thereby; (b) Within one hundred (100) days after the close of each fiscal year of the Borrower, beginning with the fiscal year ending December 31, 1997, an audited consolidated and unaudited consolidating balance sheet of the Borrower and its Subsidiaries as of the close of such fiscal year and audited consolidated and unaudited consolidating statements of income, retained earnings and cash flows for the Borrower and its Subsidiaries for the fiscal year then ended, including the notes to each, prepared by Price Waterhouse or any other independent certified public accountant reasonably acceptable to the Required Lenders, in accordance with Generally Accepted Accounting Principles applied on a basis consistent with that of the preceding year or containing disclosure of the effect on the financial position or results of operation of any change in the application of accounting principles and practices during the year, and accompanied by a report thereon by such certified public accountants, containing an opinion that is not qualified with respect to scope limitations imposed by the Borrower or its Subsidiaries or with respect to accounting principles followed by the Borrower or its Subsidiaries not in accordance with Generally Accepted Accounting Principles; (c) Concurrently with the delivery of the financial statements described in subsection (B) above, a report from the independent certified public accountant that in making its audit of the consolidated financial statements of the Borrower and its Subsidiaries, that nothing came to their attention regarding any Event of Default, or Default under SECTIONS 6.11 through 6.15 as of December 31 of the fiscal year subject to audit or a statement specifying the nature and period of existence of any such Default or Event of Default disclosed by their examination, it being understood that such audit was not performed primarily for the purpose of obtaining knowledge of noncompliance with this Agreement or the Loan Documents; (d) Concurrently with the delivery of the financial statements described in subsections (A) and (B) above, a Compliance Certificate with respect to the period covered by the financial statements then being delivered, attaching a Covenant Compliance Worksheet reflecting the computation of the financial covenants set forth in ARTICLE VI as of the last day of the period covered by such financial statements; (e) As soon as practicable and in any event within thirty (30) days after the close of each fiscal year of the Borrower, beginning with the current fiscal year, an annual operating budget and capital budget prepared on a quarterly basis for the Borrower and its Subsidiaries on a consolidated basis, in form and detail reasonably acceptable to the Agent; 62 (f) Promptly upon their becoming available, copies of (i) all financial statements, reports, notices and proxy statements that the Borrower or any Subsidiary shall send or make available generally to its stockholders, (ii) all regular, periodic and special reports, registration statements and prospectuses that the Borrower or any Subsidiary shall render to or file with the Securities and Exchange Commission, the National Association of Securities Dealers or any national securities exchange, (iii) all material reports and other statements (other than routine reports prepared in the ordinary course of business that would not result in any adverse action) that the Borrower or any Subsidiary may render to or file with any other Governmental Authority, including, without limitation, HCFA, the Environmental Protection Agency, OSHA and state environmental and health authorities and agencies, (iv) all press releases and other statements that the Borrower or any Subsidiary shall make available generally to the public concerning developments in the business of the Borrower or any of its Subsidiaries, other than press releases or statements issued in the ordinary course of business, and (v) all material consulting reports and other similar business reports that the Borrower or any Subsidiary shall request of any Person from time to time, other than routine reports received in the ordinary course of business; (g) Promptly after review by the Borrower's Board of Directors, but in any event within thirty (30) days after the Borrower's receipt thereof, copies of any management letters from certified public accountants; (h) Concurrently with each delivery of the financial statements described in subsections (A) and (B) an aging of the accounts receivable of the Borrower and its Subsidiaries by payor class as of the end of such fiscal quarter; and (i) Upon the Agent's or any Lender's request, such other information about the Collateral or the financial condition and operations of the Borrower and its Subsidiaries as the Agent or any Lender may from time to time reasonably request. 5.2 Notice of Certain Events. The Borrower shall promptly, but in no event later than five (5) Business Days after the Borrower obtains knowledge thereof (or in the shorter period required by subsection (G) below), give written notice to the Agent and the Lenders of: (a) Any litigation or proceeding brought against the Borrower or any Subsidiary that could reasonably be expected to have a Material Adverse Effect; (b) Any written notice of a violation received by the Borrower or any Subsidiary from any Governmental Authority that, if such violation were established and not promptly corrected, could reasonably be expected to have a Material Adverse Effect; (c) Any attachment, judgment, lien, levy or order in excess of $100,000 that may be placed on, assessed against or threatened against the Borrower or any Subsidiary or any of the Collateral, except for Permitted Liens; (d) Any Default or Event of Default; (e) Any material default or event of default under any agreement or instrument to which the Borrower or any Subsidiary is a party or by which the Borrower or any Subsidiary, or 63 any of their respective property, is bound, the termination of which could reasonably be expected to have a Material Adverse Effect; (f) Any other matter that has resulted in a Material Adverse Change; (g) Any default on any Subordinated Debt or Permitted Subordinated Debt (notice of which shall be delivered to the Agent and Lenders within one Business Day following any such default); and (h) Any default under any Management Services Agreement. (i) In addition, the Borrower shall give the notice to the Agent required by Section 4.4(h) of the Security Agreement concerning disputes, waivers, defaults or terminations of Management Services Agreements and shall cause the Subsidiaries to give the equivalent notices required by Section 4.4(h) of the Guarantors' Security Agreement. 5.3 Corporate Existence and Maintenance of Properties. The Borrower shall, and shall cause each of its Subsidiaries to: (a) Maintain and preserve in full force and effect (i) its corporate existence, except as otherwise permitted by SECTION 6.1 and (ii) all material rights, privileges and franchises; (b) Conduct its business in an orderly and efficient manner, keep its properties in good working order and condition (normal wear and tear excepted) and from time to time make all needed repairs to, renewals of or replacements of its properties (except to the extent that any of such properties are obsolete or are being replaced) so that the efficiency of its business operations shall be fully maintained and preserved; and (c) File or cause to be filed in a timely manner all reports, applications, estimates and licenses required by any Governmental Authority that, if not timely filed, could reasonably be expected to have a Material Adverse Effect. 5.4 Payment of Debt. The Borrower shall, and shall cause each of its Subsidiaries to, pay all Debt when due and all other obligations in accordance with customary trade practices. 5.5 Maintenance of Insurance. (a) The Borrower shall, and shall cause each of its Subsidiaries to, maintain and pay for insurance on its properties, assets and business, now owned or hereafter acquired, against such casualties, risks and contingencies, and in such types and amounts and with such insurance companies, as shall be reasonably satisfactory to the Agent and deliver certificates and copies of policies of such insurance to the Agent, provided, however, that such types and amounts of insurance in effect at the Closing Date shall continue to be satisfactory for the business of the Borrower and its Subsidiaries (in existence as of the date hereof) as currently conducted. (b) If the Borrower or any Subsidiary fails to obtain and maintain any of the policies of insurance required to be maintained hereunder or to pay any premium in whole or in part, then 64 the Agent may, at the Borrower's expense, without waiving or releasing any obligation or Default by the Borrower hereunder, procure the same, but shall not be required to do so. All sums so disbursed by the Agent, including reasonable attorneys' fees, court costs, expenses and other charges related thereto, shall be payable on demand by the Borrower to the Lenders and shall be additional Obligations hereunder, secured by the Collateral. (c) Upon the reasonable request of the Agent from time to time, the Borrower shall deliver to the Agent evidence that the insurance required to be maintained pursuant to this Agreement is in effect. 5.6 Maintenance of Books and Records; Inspection. The Borrower shall, and shall cause each of its Subsidiaries to, maintain adequate books, accounts and records, and prepare all financial statements required under this Agreement in accordance with Generally Accepted Accounting Principles (except as set forth in SECTION 5.1 and in material compliance with the regulations of any Governmental Authority having jurisdiction over it. The Borrower shall, upon request, permit employees or agents of the Agent or any Lender to inspect the properties of the Borrower and any of its Subsidiaries and to examine or audit the books, records, working papers and accounts of the Borrower and any Subsidiary and make copies and memoranda of them, and to discuss the affairs, finances and accounts of the Borrower and any Subsidiary with its officers and, upon notice to the Borrower, and (at the Borrower's option) in the presence of the Borrower, with the independent public accountants of the Borrower or its Subsidiaries (and by this provision the Borrower and each Subsidiary authorize such accountants to so discuss the finances and affairs of the Borrower or any Subsidiary), all at such times and from time to time during business hours as may be reasonably requested. 5.7 COBRA. The Employee Plans of the Borrower and its Subsidiaries shall be operated in such a manner that neither the Borrower nor any Subsidiary will incur any material tax liability under Section 4980B of the Internal Revenue Code or any material liability to any qualified beneficiary as defined in Section 4980B. 5.8 Payment of Taxes. The Borrower shall, and shall cause each of its Subsidiaries to, pay and discharge all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any properties belonging to it, prior to the date on which penalties would attach thereto, and all lawful claims when due that, if unpaid, might become a lien or charge upon any of its properties; provided, however, that the Borrower or any Subsidiary may in good faith by appropriate proceedings and with due diligence contest any such tax, assessment, charge, levy or claim if the Borrower or such Subsidiary establishes any reserves reasonably requested by the Agent with respect thereto in accordance with Generally Accepted Accounting Principles. 5.9 Compliance with Laws. The Borrower shall, and shall cause each of its Subsidiaries to, (i) have all material licenses, permits, certifications, approvals and authorizations required by Governmental Authorities necessary to the ownership, occupation or use of its properties or the conduct of its business, including, without limitation, certificates of need, and maintain the same at all times in full force and effect for so long as is required, and (ii) comply with all Requirements of Law in respect of the conduct of its business, the ownership of its 65 property and the Collateral, including, without limitation, Titles XVIII and XIX of the Social Security Act, Medicare Regulations, Medicaid Regulations, ERISA, OSHA, Environmental Laws and the Bloodborne Pathogens Standard, other than those, in the case of each of clauses (i) and (ii), the failure to have or comply with which would not have a Material Adverse Effect. 5.10 Name Change. The Borrower shall notify the Agent and the Lenders at least thirty (30) days prior to the effective date of any change of its name or the name of any Subsidiary, and prior to such effective date the Borrower or such Subsidiary shall have executed any required amended or new Financing Statements and other Loan Documents necessary to maintain and continue the perfected security interest of the Agent in all of its Collateral and shall have taken such other actions and executed such documents as the Agent shall reasonably require. 5.11 Creation or Acquisition of New Subsidiaries. The Borrower and its Subsidiaries may from time to time create or acquire new Subsidiaries, provided that, at any time promptly upon request by the Agent (and in any event, with respect to any new Subsidiary that is created or acquired in connection with a Physician Transaction or that receives proceeds of any Borrowings, prior to or concurrently with satisfaction of the conditions set forth in clauses (y) and (z) of clause (i) below or, if earlier, the consummation of such Physician Transaction), (i) each such new Subsidiary (y) having assets with a gross value (determined in accordance with Generally Accepted Accounting Principles) in excess of $100,000, and (z) having commenced the conduct of an active business, will execute and deliver to the Agent (with sufficient copies for each Lender) an amendment or supplement to the Guaranty Agreement, Guarantors' Security Agreement if such Subsidiary owns any property of the type covered thereby and such other documents to effectuate the foregoing as may be reasonably requested by the Required Lenders, including without limitation Financing Statements, each in form and substance satisfactory to the Agent, pursuant to which such new Subsidiary shall become a party thereto, (ii) the Borrower will execute and deliver to the Agent (with sufficient copies for each Lender) an amendment or supplement to the Security Agreement, in form and substance satisfactory to the Agent, pursuant to which all of the capital stock or other ownership interests of such new Subsidiary that is directly or indirectly owned by the Borrower shall be pledged to the Agent under the Security Agreement, together with the certificates representing such capital stock or other ownership interests and stock powers duly executed in blank, and (iii) the Borrower will cause each such new Subsidiary to execute and deliver, and will cause to be delivered, all documentation of the type described in SECTIONS 3.1(A)(VII) and (VIII) as such new Subsidiary would have had to deliver were it a Subsidiary on the Closing Date. 5.12 Recoveries in Bankruptcy Proceedings. Should any Subsidiary become a debtor under the Bankruptcy Code, the Agent, on behalf of the Lenders, is authorized, but not required, to file proofs of claim on the Borrower's behalf and vote the rights of the Borrower in any plan of reorganization, in each case with respect to such advances and other amounts owed by any Subsidiary of the Borrower to the Borrower. The Agent, on behalf of the Lenders, is further empowered to demand, sue for, collect and receive every payment and distribution on such Debt owing to the Borrower in such Subsidiary's bankruptcy proceeding. 5.13 Solvency of Subsidiaries. The Borrower shall cause each of its Subsidiaries to remain Solvent (taking into account rights of contribution). 66 5.14 Certain Physician Transactions. (a) Subject to the remaining provisions of this SECTION 5.14 applicable thereto and the requirements contained in the definition of Permitted Physician Transaction, as the case may be, the Borrower may from time to time after the Closing Date effect Physician Transactions approved by the Required Lenders pursuant to SECTION 6.2 and Permitted Physician Transactions, so long as with respect to each Physician Transaction, no Default or Event of Default shall have occurred or be continuing at the time of the consummation of such Physician Transaction or would exist after giving effect thereto. (b) At the time of each Physician Transaction involving the creation or acquisition of a Subsidiary, or the acquisition of capital stock or other equity interest of any Person, all capital stock or other interest thereof created or acquired in connection with such Physician Transaction shall be directly or indirectly owned by the Borrower, and the Borrower and each new Subsidiary shall have complied with SECTION 5.11. (c) Not less than five (5) days prior to the consummation of any Permitted Physician Transaction financed in part or in full by a Borrowing, the Borrower shall deliver to the Agent and the Lenders the following items, each in form and substance reasonably satisfactory to the Agent: (i) a description of the practice whose stock, equity interests or assets are to be acquired ("Practice"); (ii) a description of the material terms of such Permitted Physician Transaction known as of such date (including, without limitation, the purchase price and method and structure of payment), provided that a description of any additional or changed material terms of such Permitted Physician Transaction shall be disclosed to the Agent within five (5) days of such addition or change; (iii) projected revenue and EBITDA contribution levels with respect to the Practice to be acquired, prepared on a quarterly basis for the two- year period following the consummation of such Permitted Physician Transaction, in reasonable detail; (iv) confirmation, supported by reasonably detailed calculations, of projected covenant compliance over the four quarter period following such Permitted Physician Transaction after giving effect to the pro forma consolidation of the Practice to be acquired with the Borrower and its Subsidiaries; and (v) a description of any Liens to be incurred or assumed in connection with such Permitted Physician Transaction, which Liens would not be Permitted Liens without such disclosure. (d) Within thirty (30) days after the closing of any Permitted Physician Transaction not financed by a Borrowing and having an Transaction Amount greater than $2,500,000, the Borrower shall deliver to the Lenders the items listed in clauses (i), (ii) and (iii) of the above subsection (C). 67 (e) Within thirty (30) days after the closing of each Physician Transaction, the Borrower shall deliver to the Agent a copy of the form of each material Physician Transaction document, including any purchase agreement, master transaction agreement or Management Services Agreement relating to such Physician Transaction. (f) The consummation of each Physician Transaction shall be deemed to be a representation and warranty by the Borrower that all conditions thereto have been satisfied, that the same is permitted in accordance with the terms of this Loan Agreement and that the information submitted by the Borrower pursuant to subsections (C) and (D) above, as appropriate, is true and correct in all material respects as of the date submitted, which representation and warranty shall be deemed to be a representation and warranty for all purposes hereunder. 5.15 Year 2000 Compatibility. Borrower shall take all reasonable action necessary to assure that Borrower's computer based systems are able to operate and effectively process dates on and after January 1, 2000. At the reasonable request of the Agent or the Required Lenders, Borrower shall provide the Lenders with evidence of its Year 2000 compatibility. ARTICLE VI. NEGATIVE COVENANTS The Borrower covenants and agrees that, until the termination of the Commitments and all Letters of Credit and the payment in full of all principal and interest with respect to the Loans and all Letter of Credit Outstandings together with all other amounts then due and owing hereunder, it will not, and will not permit any of its Subsidiaries to, individually or in the aggregate: 6.1 Merger, Consolidation. Liquidate, wind up or dissolve, or enter into any consolidation, merger or other combination, or agree to do any of the foregoing; provided, however, that: (i) the Borrower may merge or consolidate with another Person so long as (x) the Borrower is the surviving corporation, (y) the applicable conditions of SECTIONS 5.11, 5.14 and 6.2 shall be satisfied and (z) immediately after giving effect thereto, no Default or Event of Default would exist; and (ii) any Subsidiary may merge or consolidate with another Person so long as (w) the Person surviving such merger or consolidation is the Borrower or a Guarantor, (y) the applicable conditions of SECTIONS 5.11, 5.14 and 6.2 shall be satisfied and (z) immediately after giving effect thereto, no Default or Event of Default would exist. 6.2 Physician Transactions. Make any Physician Transaction, other than a Permitted Physician Transaction in compliance with SECTION 5.14, without the prior written consent of the Required Lenders. In connection with any proposed Physician Transaction that is not a Permitted Physician Transaction, as soon as practicable prior to the proposed consummation of such 68 Physician Transaction the Borrower shall deliver to the Agent and each Lender (i) a description of any proposed Capital Expenditures related to such Physician Transaction, (ii) the items described in SECTION 5.14(C) if the proposed Physician Transaction is of an oncology, hematology or radiation oncology physician practice and (iii) such other information as the Lenders may reasonably request if the proposed Physician Transaction is for anything other than an oncology, hematology or radiation oncology physician practice. The Lenders shall use their best commercially reasonable efforts to respond to a request from the Borrower for approval of a Physician Transaction (including requests for Capital Expenditures and Subordinated Debt or Permitted Subordinated Debt) within five (5) Business Days after receipt of the information required by this Section; provided, however, the failure to approve or disapprove a Physician Transaction during such period shall not constitute approval. 6.3 Debt. Create, incur, assume or suffer to exist any Debt other than: (i) Debt incurred pursuant to this Agreement; (ii) unsecured Subordinated Debt and Permitted Subordinated Debt; (iii) accrued expenses, current trade payables and other current liabilities arising in the ordinary course of business and not incurred through the borrowing of money; (iv) unsecured Debt (x) of any Subsidiary to the Borrower (y) of any Subsidiary to a Subsidiary and (z) of the Borrower to any Subsidiary, provided that any such Debt under this clause (iv) is incurred in the ordinary course of business consistent with past practice and is evidenced by one or more promissory notes pledged to the Agent pursuant to the Security Agreements; (v) Contingent Obligations permitted by SECTION 6.4; (vi) other Consolidated Debt (including, without limitation, Debt secured by liens described in clauses (E) and (G) of the definition of Permitted Liens and Capital Lease Obligations) in an aggregate principal amount at any time outstanding not to exceed $30,000,000 for the Borrower and its Subsidiaries; (vii) Debt of the Borrower under any Interest Rate Protection Agreements (if any) entered into with one or more Lenders in respect of the Debt incurred pursuant to this Agreement; provided that the notional amount of all such agreements at any time shall not exceed the aggregate amount of the Commitments at such time; (viii) Debt incurred pursuant to the Swingline Note; and (ix) Debt incurred pursuant to the ELLF. The Lenders shall use their best commercially reasonable efforts to respond to a request from the Borrower for approval of Subordinated Debt (on terms acceptable to the Required Lenders in their sole discretion) within five (5) Business Days after the Agent's and the Lender's 69 receipt of information regarding the amount and material terms thereof; provided, however, the failure to approve or disapprove such Subordinated Debt during such period shall not constitute approval. 6.4 Contingent Obligations. Create, incur, assume or suffer to exist any Contingent Obligation other than: (i) endorsements of instruments or items of payment for deposit or collection in the ordinary course of business; (ii) Contingent Obligations incurred pursuant to the Guaranty Agreements; (iii) guarantees by the Borrower or any Subsidiary of obligations of the Borrower or any of its Subsidiaries under leases permitted hereunder; (iv) guarantees by the Borrower or any Subsidiary of any other Debt permitted under SECTION 6.3; and (v) guarantees by the Borrower of the obligations of any Subsidiary under any Management Services Agreement to which such Subsidiary is a party, provided that such guaranteed obligations are incurred in the ordinary course of business of the Borrower and are consistent with the obligations under the Management Services Agreements otherwise entered into by the Borrower or its Subsidiaries. 6.5 Liens and Encumbrances. Create, assume or suffer to exist any deed of trust, mortgage or encumbrance, lien (including a lien of attachment, judgment or execution) or security interest (including the interest of a conditional seller of goods), securing a charge or obligation, in or on any of its property, real or personal, whether now owned or hereafter acquired, except for Permitted Liens. 6.6 Disposition of Assets. Sell, lease, transfer, convey or otherwise dispose of any of its assets or property, including, without limitation, the Collateral, except for (i) sales of inventory in the ordinary course of business; (ii) the sale or exchange of used equipment, to the extent the proceeds of such sale are applied towards, or such equipment is exchanged for, similar replacement equipment or the sale or exchange of obsolete equipment; (iii) the sale of assets to physicians in accordance with Part II of SCHEDULE 1.1(A); provided that the Total Commitments shall be reduced by the amount of the proceeds of such sales and such proceeds shall be used to make any repayment required pursuant to SECTION 2.5(B) to the extent that (a) such sale arises from the termination of any Management Services Agreement for cause by such physicians or (b) the aggregate proceeds of sales under this subsection (III) exceed the aggregate Transaction Amounts of Physician Transactions during any period of two consecutive fiscal quarters following the Closing Date; (iv) other dispositions not exceeding $1,000,000 in the aggregate, for the Borrower and its Subsidiaries, for any fiscal year; (v) any sale, lease, transfer or conveyance from one Subsidiary to another Subsidiary or to the Borrower or from the Borrower to any Subsidiary in accordance with SECTION 6.7, provided that, with respect to this clause (v), (y) immediately after giving effect thereto, no Default or Event of Default would exist, and 70 (z) with respect to any transfer from the Borrower or a Guarantor to a Subsidiary that is not a Guarantor, the Borrower shall notify the Agent and the Lenders thereof and, at the request of the Required Lenders, shall cause the transferee Subsidiary to comply with the provisions of SECTION 5.11; (vi) the sale or other disposition of any Margin Stock; and (vii) dispositions made in compliance with the terms of the ELLF of property (y) financed with the proceeds of the ELLF or (z) conveyed to the Trust (as defined in the Participation Agreement) by the Borrower or any Subsidiary. 6.7 Transactions with Related Persons. Except as otherwise permitted by SECTIONS 6.1, 6.3, 6.4, 6.6 and 6.8, directly or indirectly make any loan or advance to, or purchase, assume or guarantee any Debt to or from, any of its officers, directors, stockholders or Affiliates, or subcontract any operations to any Affiliate, or enter into any transaction with any Affiliate, except (a) in the ordinary course of and pursuant to the reasonable requirements of the Borrower's or such Subsidiary's business and (b) upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than would obtain in a comparable arm's-length transaction with a Person not an Affiliate; provided, that the Borrower or any of its Subsidiaries may (i) provide legal and accounting services to their officers, directors and employees in the ordinary course of business and consistent with past practice, (ii) provide indemnification to their officers, directors and employees to the extent permitted by applicable law, (iii) pay reasonable and customary fees to directors, and (iv) provide other corporate management, cash management, back- office, legal, accounting and consulting services to Affiliates who are not Subsidiaries, provided, that the aggregate fair market value of such services pursuant to this subsection (IV) (and not otherwise covered by subsections (I), (II) OR (III)) shall not exceed $250,000 in any calendar year. 6.8 Restricted Investments; Loans. Purchase, own, invest in or otherwise acquire, directly or indirectly, any Stock, Debt, evidence of indebtedness or other obligation or security or any interest whatsoever in any other Person, or make or permit to exist any loans, advances or extensions of credit to, or any investment in cash or by delivery of property in, any Person, or make a commitment or otherwise agree to do any of the foregoing, except for (a) investments in Cash Investments, (b) loans and advances to employees for reasonable travel and business expenses in the ordinary course of business, (c) prepaid expenses incurred in the ordinary course of business, (d) accounts receivable created in the ordinary course of business (e) investments in Subsidiaries in existence as of the Closing Date or in new Subsidiaries created or acquired in compliance with the applicable provisions of SECTIONS 5.11, 5.14, 6.2 and 6.18, (f) investments and loans set forth on SCHEDULE 6.8 attached hereto, as renewed or extended, and (g) other investments not covered in clauses (a) through (e) having an aggregate cost to the Borrower and its Subsidiaries not to exceed $15,000,000 at any time. If any Person would become a Subsidiary (but not a wholly-owned Subsidiary) of the Borrower or any Subsidiary solely by reason of an investment made pursuant to SUBSECTION (G) hereof, then such Person shall not be considered a Subsidiary for purposes of this Agreement or any Loan document; provided, that if Generally Accepted Accounting Principles require such Person to be included in the Borrower's consolidated financial statements, then such Person shall be so included in the financial statements for all purposes including the calculation of the financial covenants in SECTIONS 6.11 through 6.15. 71 6.9 Restricted Payments. (a) Declare or pay any dividends upon any of its Stock (other than dividends paid in Stock and dividends paid to the Borrower or by a Subsidiary to another Subsidiary), or (b) (in the case of the Borrower) purchase, redeem, retire or otherwise acquire, directly or indirectly, any shares of its Stock, or any option, warrant or other right to acquire shares of its Stock or make any distribution of cash, property or assets other than Stock among the holders of shares of its Stock; provided, however, that so long as no Default or Event of Default shall have occurred and be continuing or would occur after giving effect thereto, the Borrower may expend an aggregate amount up to $25,000,000 to repurchase shares of its Stock. 6.10 Capital Expenditures. Make any Capital Expenditures (other than in connection with a Physician Transaction allowed under SECTIONS 5.14 or 6.2 hereof) if, after giving effect to such Capital Expenditures, the aggregate amount of all such Capital Expenditures made by the Borrower and its Subsidiaries during any fiscal quarter, beginning with the current fiscal quarter, shall exceed the amount equal to ten percent (10%) of Consolidated Net Revenue for such fiscal quarter; provided, however, that in addition to the foregoing permitted Capital Expenditures, the Borrower and its Subsidiaries may make additional Capital Expenditures during the term of the Facility in connection with and as permitted under the ELLF. 6.11 Consolidated Net Worth. Permit Consolidated Net Worth at the end of any fiscal quarter, beginning with the fiscal quarter ending December 31, 1996, to be less than (i) $200,000,000, increased by 80% of Consolidated Net Income (if positive) for each fiscal quarter thereafter, plus (ii) 90% of the positive amount of all increases in capital stock and additional paid-in capital from issuances of equity securities or other capital investments. 6.12 EBITDA to Interest Expense. Permit the ratio of EBITDA for the relevant fiscal quarter to Interest Expense for the relevant fiscal quarter at the end of any fiscal quarter to be less than 3.5 to 1.0. 6.13 Annualized EBITDAR to Debt Service Ratio. Permit the ratio of Annualized EBITDAR to Debt Service at the end of any fiscal quarter to be less than 1.35 to 1.0. 6.14 Consolidated Debt to Annualized EBITDA. Permit the ratio of Consolidated Debt to Annualized EBITDA as of the end of any fiscal quarter to be greater than 3.50 to 1.0. 6.15 Consolidated Debt to Consolidated Total Capital. Permit the ratio of Consolidated Debt to Consolidated Total Capital as of the end of any fiscal quarter to be greater than 0.55 to 1.0. 6.16 Sale and Leaseback. Enter into any arrangement with any Person (other than the Borrower or any Subsidiary, provided the provisions of SECTION 6.7 are satisfied) providing for the leasing by the Borrower or any Subsidiary of any asset that has been sold or transferred by the Borrower or such Subsidiary to such Person, other than a lease pursuant to the ELLF of property transferred as permitted under SECTION 6.6(VII). 6.17 New Business. Engage in any business other than the business in which the Borrower or such Subsidiary is currently engaged or a business reasonably related thereto 72 (including without limitation the development of radiation and medical oncology facilities and the acquisition and construction of properties in connection therewith) or make any material change in any of its business objectives, purposes and operations that would be reasonably likely to materially adversely affect the repayment of the Obligations. 6.18 Subsidiaries or Partnerships. Except as otherwise permitted by SECTION 6.8, (a) become a partner or joint venturer in any partnership or joint venture, or (b) create or acquire any new Subsidiary; provided that the Borrower or any Subsidiary may (i) create or acquire one or more Subsidiaries in connection with a Permitted Physician Transaction or an approved Physician Transaction consummated in compliance with SECTION 5.14 or 6.2, respectively, of this Agreement, and (ii) create a direct or indirect wholly-owned Subsidiary de novo; provided further that, in any such instance, the created or acquired Subsidiary complies with the provisions of SECTION 5.11. 6.19 Transactions Affecting the Collateral. Enter into any transaction that materially adversely affects a material portion of the Collateral. Notwithstanding the foregoing, the Borrower and its Subsidiaries may sell certain assets as provided in SECTION 6.6(III) hereof. 6.20 Hazardous Wastes. Permit any Hazardous Substances the removal of which is required or the maintenance of which is restricted, prohibited or penalized by any Governmental Authority, to be unlawfully brought on to any real property owned or leased by the Borrower or any Subsidiary, or if so brought or found located thereon, fail to promptly commence and continue removal of such materials, with proper disposal, in accordance with required cleanup procedures under applicable Environmental Laws, except where any of the foregoing would not have a Material Adverse Effect. 6.21 Fiscal Year. Change its fiscal year from a December 31 year end. 6.22 Amendments; Prepayments of Subordinated Debt or Permitted Subordinated Debt, etc. (a) Amend or modify (or permit the amendment or modification of) any of the terms or provisions of any Subordinated Debt or Permitted Subordinated Debt or any agreement related thereto or (b) make any voluntary or optional payment or prepayment or redemption or acquisition for value of (including, without limitation, by way of depositing with any trustee with respect thereto money or securities before due for the purpose of paying when due), or exchange, any Subordinated Debt or Permitted Subordinated Debt; provided, that the terms or provisions of any Permitted Subordinated Debt may be amended or modified if (i) such Permitted Subordinated Debt, as amended or modified, complies with the conditions set forth in the definition of "Permitted Subordinated Debt" and (ii) such amendment or modification does not adversely effect the rights or interests of the Agent or Lenders. 6.23 Fraud and Abuse. Neither the Borrower nor any Subsidiary, nor any of their respective officers or directors, shall engage on behalf of Borrower or any Subsidiary in any of the following: (i) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any applications for any benefit or payment under Medicare or Medicaid programs; (ii) knowingly and willfully making or causing to be made any false statement or representation of a material fact for use in determining rights to any benefit or 73 payment under Medicare or Medicaid programs; (iii) failing to disclose knowledge by a claimant of the occurrence of any event affecting the initial or continued right to any benefit or payment under Medicare or Medicaid programs on its own behalf or on behalf of another, with intent to secure such benefit or payment fraudulently; (iv) knowingly and willfully soliciting or receiving any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind or offering to pay such remuneration (a) in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part by Medicare or Medicaid, or (b) in return for purchasing, leasing or ordering or arranging for or recommending the purchasing, leasing or order of any good, facility, service, or item for which payment may be made in whole or in part by Medicare or Medicaid. With respect to this Section, knowledge by an individual director or officer of the Borrower or a Subsidiary of any of the event described in this Section shall not be imputed to the Borrower or such Subsidiary unless such knowledge was obtained or learned by the director or officer in his or her official capacity as a director or officer of the Borrower or such Subsidiary. Neither the Borrower nor any Subsidiary shall be considered to have breached this Section, except in the case of a knowing and willful violation thereof, until the Borrower or such Subsidiary has received notification, written or oral, by a Governmental Authority of competent jurisdiction as to any such violation. The provisions of SUBSECTION (III) hereof shall not require the Borrower or any Subsidiary (unless otherwise required by law) to disclose to the Agent, Lenders or any other Person any activity or omission by a third party (including associated physician groups) unless such activity or omission (x) constitutes willful fraud or abuse, (y) would reasonably be likely to have a Material Adverse Effect or (z) is not being corrected, cured or remedied by the Borrower and any other relevant Persons diligently, in good faith and in the exercise of sound business judgment. ARTICLE VII. EVENTS OF DEFAULT 7.1 Events of Default. The occurrence of any one or more of the following events shall constitute an "Event of Default": (a) The Borrower fails to pay when due any principal of any Note when the same becomes due or fails to pay any fees or interest or other Obligations under this Agreement or any other Loan Document within three (3) days of when due; (b) The Borrower or any Subsidiary fails or neglects to observe, perform or comply with any term, provision, condition or covenant contained in SECTIONS 2.14, 5.1, 5.2, 5.3(A)(I) or ARTICLE VI (except, in the case of SECTION 6.5, to the extent permitted under SECTION 7.1(S) below); (c) The Borrower or any Subsidiary fails or neglects to observe, perform or comply with any term, provision, condition or covenant contained herein except those specified in subsections (A) and (B) above (and except to the extent that violations of any such provisions or covenants otherwise trigger an Event of Default under any of the other subparagraphs of this 74 SECTION 7.1), and the same is not cured to the Required Lenders' satisfaction within thirty (30) Business Days after the earlier of (i) notice thereof from the Agent or (ii) Borrower or such Subsidiary acquires knowledge thereof; (d) If any representation or warranty made in writing by or on behalf of the Borrower or any Subsidiary in this Agreement, in the other Loan Documents or in any other agreement now existing or hereafter executed between the Borrower or any Subsidiary and the Agent or any Lender in connection with any Loan Document, or in connection with the transactions contemplated hereby or thereby, shall prove to have been false or misleading in any material respect when made; (e) The occurrence of any default or event of default on the part of the Borrower or any Subsidiary (including specifically, but without limitation, defaults due to nonpayment) under the terms of any agreement, document or instrument (including, without limitation, the Operative Documents (as defined in the definition of "ELLF" herein)) pursuant to which the Borrower or such Subsidiary has incurred any Debt having an aggregate outstanding principal amount of greater than $250,000 (other than the intercompany loans), which default would permit acceleration of such Debt; (f) The termination of any one or more agreements, contracts or instruments to which a Borrower or any Subsidiary is a party or by which it or any of its properties are bound, and such termination or aggregate terminations results in a Material Adverse Effect; (g) The occurrence of an "Event of Default" under any of the Loan Documents; (h) The occurrence of any material uninsured damage to or loss, theft or destruction of the Collateral or other assets of the Borrower or any Subsidiary that has a Material Adverse Effect; (i) The Borrower or any of its Subsidiaries shall (i) file a voluntary petition or commence a voluntary case seeking liquidation, winding-up, reorganization, dissolution, arrangement, readjustment of debts or any other relief under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to controvert in a timely and appropriate manner, any petition or case of the type described in subsection (J) below, (iii) apply for or consent to the appointment of or taking possession by a custodian, trustee, receiver or similar official for or of itself or all or a substantial part of its properties or assets, (iv) fail generally, to pay its debts generally as they become due, or (v) make a general assignment for the benefit of creditors; (j) Any involuntary petition or case shall be filed or commenced against the Borrower or any of its Subsidiaries seeking liquidation, winding-up, reorganization, dissolution, arrangement, readjustment of debts, the appointment of a custodian, trustee, receiver or similar official for it or all or a substantial part of its properties or any other relief under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, and such petition or case shall continue undismissed and unstayed for a period of sixty 75 (60) days; or an order, judgment or decree approving or ordering any of the foregoing shall be entered in any such proceeding; (k) (i) The Borrower ceases to be Solvent (taking into account any rights of contribution), or (ii) the Borrower or any of its Subsidiaries (x) ceases to conduct its business as now conducted or (y) is enjoined, restrained or in any way prevented by court order from conducting all or any material part of its business affairs, except as otherwise specifically permitted under SECTION 6.1 or except where such cessation, injunction, restraint or order would not have a Material Adverse Effect; (l) A notice of lien, levy or assessment in excess of $250,000 is filed of record against any portion of the assets of the Borrower or any Subsidiary by the United States, or any department, agency or instrumentality thereof, or by any other Governmental Authority, including, without limitation, the Pension Benefit Guaranty Corporation, or if any taxes or debts in excess of $250,000 owing at any time or times hereafter to any one of them becomes a lien or encumbrance (other than a Permitted Lien) upon the Collateral or any other asset of the Borrower or any Subsidiary, and the same is not dismissed, released, discharged or stayed pending appeal within thirty (30) days after the same becomes a lien or encumbrance or, in the case of ad valorem taxes, prior to the last day when payment may be made without penalty; (m) The entry of a judgment or the issuance of a warrant of attachment, execution or similar process against the Borrower or any Subsidiary or any of their respective assets that are $200,000 or more in excess of proceeds of insurance which shall not be dismissed, discharged, stayed pending appeal or bonded within sixty (60) days after entry unless the Borrower or its Subsidiary is diligently contesting such judgment in good faith by appropriate proceedings with adequate funded reserves being set aside on its books in accordance with Generally Accepted Accounting Principles; (n) The occurrence of any of the following events: (i) the happening of a Reportable Event that could give rise to liability (that is not waived by the by the Pension Benefit Guaranty Corporation or by the Required Lenders, or if such liability can be avoided by any corrective action of the Borrower, such corrective action is not completed within ninety (90) days after the occurrence of such Reportable Event) with respect to any Pension Plan; (ii) the termination of any Pension Plan in a "distress termination" under the provisions of Section 4041 of ERISA; (iii) the appointment of a trustee by an appropriate United States District Court to administer any Pension Plan; (iv) the institution of any proceedings by the Pension Benefit Guaranty Corporation to terminate any Pension Plan or to appoint a trustee to administer any such plan; and (v) the failure of the Borrower to notify the Lenders promptly upon receipt by the Borrower of any notice of the institution of any proceeding or any other actions that may result in the termination of any such plan; (o) The Borrower or any Subsidiary, to the extent, if any, presently participating or required by law to participate, in Medicaid or Medicare programs shall fail to be eligible for any reason to participate in Medicaid or Medicare programs or to accept assignments or rights to reimbursement under Medicaid Regulations or Medicare Regulations and such failure shall have 76 a Material Adverse Effect and such failure shall also continue beyond the completion of any appeal process diligently pursued by the Borrower or such Subsidiary in good faith; (p) For any reason other than the satisfaction in full of all Obligations and termination of this Agreement or the release of any relevant Subsidiary from its Obligations under the Guaranty Agreement in accordance with the terms thereof, (i) the guaranty given by any Subsidiary of the Borrower under the Guaranty Agreement shall cease to be in full force and effect at any time or is declared to be null and void or (ii) any such Subsidiary denies that it has any further liability under the Guaranty Agreement or gives notice to such effect, and such denial or notice is not revoked within one Business Day after the earlier of (A) receipt by the Borrower of notice from the Agent or any Lender of such denial or notice or (B) the Borrower becomes aware of such denial or notice being made or given, as the case may be; (q) For any reason other than the satisfaction in full of all Obligations and termination of this Agreement and termination of the ELLF, the release of any relevant Subsidiary from its Obligations under the Guarantors Security Agreement in accordance with the terms thereof or hereof, or the release of any Collateral under either Security Agreement in accordance with the terms thereof or hereof, (i) either Security Agreement shall cease to be in full force and effect at any time or is declared to be null and void with respect to any material portion of the Collateral, (ii) the Agent ceases to have a perfected, first priority security interest in any material portion of the Collateral (subject to Permitted Liens), (iii) the Borrower denies that it has any further liability under the Security Agreement or gives notice to such effect or (iv) any Subsidiary denies that it has any further liability under the Guarantors' Security Agreement or gives notice to such effect, and such denial or notice is not revoked within one Business Day after the earlier of (A) receipt by the Borrower of notice from the Agent or any Lender of such denial or notice or (B) the Borrower becomes aware of such denial or notice being made or given, as the case may be; (r) The occurrence of any Material Adverse Change; (s) Change of Control shall occur; or (t) The existence of any security interests, liens or other encumbrances in excess of $250,000 in the aggregate at any time, arising from or relating to any Physician Transaction or Subsidiary acquired in such Physician Transaction, other than Permitted Liens. ARTICLE VIII. RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT 8.1 Remedies: Termination of Commitments, Acceleration, etc. Upon and at any time after the occurrence and during the continuance of any Event of Default, the Agent shall at the direction, or may with the consent, of the Required Lenders, take any or all of the following actions at the same or different times: 77 (a) Declare the Commitments of each Lender and the Issuing Bank's obligations to issue Letters of Credit to be terminated, whereupon the same shall terminate (provided that, upon the occurrence of an Event of Default pursuant to SECTIONS 7.1(I) or (J), all of the Commitments shall automatically be terminated); (b) Declare all or any part of the outstanding principal amount of the Loans, all unpaid interest accrued thereon, and all other amounts (excluding unearned interest) payable under this Agreement, the Notes and the other Loan Documents to be immediately due and payable, whereupon such outstanding principal amounts, accrued interest and other such amounts shall become immediately due and payable without presentment, demand, protest, notice of intent to accelerate or other notice or legal process of any kind, all of which are hereby knowingly and expressly waived by the Borrower (provided that, upon the occurrence of an Event of Default pursuant to SECTIONS 7.1(I) or (J), all of such outstanding principal amounts, accrued interest and other such amounts shall automatically become immediately due and payable); (c) Direct the Borrower to deposit (and the Borrower hereby agrees, forthwith upon receipt of notice of such direction from the Agent, to deposit) with the Agent from time to time such additional amount of cash as is equal to the aggregate Stated Amount of all Letters of Credit then outstanding (whether or not any beneficiary under any Letter of Credit shall have drawn or be entitled at such time to draw thereunder), such amount to be held by the Agent in the Cash Collateral Account as security for the Letter of Credit Outstandings as described in SECTION 2.20(J); and (d) Exercise all rights and remedies available to it under this Agreement, the other Loan Documents and applicable law. 8.2 Right of Setoff. The Agent and each Lender (including, without limitation, the Issuing Bank and the L/C Participants) may, and are hereby authorized by the Borrower, at any time and from time to time, to the fullest extent permitted by applicable law, without advance notice to the Borrower (any such notice being expressly waived by the Borrower) and irrespective of demand for payment, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held in other than a fiduciary account and any other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower against any or all of the Obligations now or hereafter existing, which are then due and payable. The Agent agrees to notify the Borrower after any such setoff or application, provided that the failure to give such notice shall not affect the validity of such setoff and application. 8.3 Rights and Remedies Cumulative; Non-Waiver; etc. The enumeration of the Agent's and the Lenders' rights and remedies set forth in this Agreement is not intended to be exhaustive, and the exercise by the Agent or any Lender of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative, and shall be in addition to any other right or remedy given hereunder, under the Loan Documents or under any other agreement between the Borrower or any Subsidiary and the Agent or the Lenders or that may now or hereafter exist in law or in equity or by suit or otherwise. No delay or failure to take 78 action on the part of the Agent or any Lender in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude other or further exercise thereof or the exercise of any other right, power or privilege or shall be construed to be a waiver of any Event of Default. No course of dealing between the Borrower or any Subsidiary and the Agent or the Lenders or their agents or employees shall be effective to change, modify or discharge any provision of this Agreement or any of the other Loan Documents or to constitute a waiver of any Event of Default. ARTICLE IX. THE AGENT 9.1 Appointment. Each Lender hereby irrevocably appoints and authorizes First Union to act as Agent hereunder and under the other Loan Documents and to take such actions as agent on its behalf hereunder and under the other Loan Documents, and to exercise such powers and to perform such duties, as are specifically delegated to the Agent by the terms hereof or thereof, together with such other powers and duties as are reasonably incidental thereto. 9.2 Nature of Duties. The Agent shall have no duties or responsibilities other than those expressly set forth in this Agreement and the other Loan Documents. The Agent shall not have, by reason of this Agreement or any other Loan Document, a fiduciary relationship in respect of any Lender; and nothing in this Agreement or any other Loan Document, express or implied, is intended to or shall be so construed as to impose upon the Agent any obligations or liabilities in respect of this Agreement or any other Loan Document except as expressly set forth herein or therein. The Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents or attorneys-in-fact and shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact that it selects with reasonable care. The Agent shall be entitled to consult with legal counsel, independent public accountants and other experts selected by it with respect to all matters pertaining to this Agreement and the other Loan Documents and its duties hereunder and thereunder and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts. The Lenders hereby acknowledge that the Agent shall not be under any duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement or any other Loan Document unless it shall be requested in writing to do so by the Required Lenders (or, where a higher percentage of the Lenders is expressly required hereunder, such Lenders). 9.3 Exculpatory Provisions. Neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable to any Lender for any action taken or omitted to be taken by it or such Person under or in connection with the Loan Documents, except for its or such Person's own gross negligence or willful misconduct, (ii) responsible in any manner to any Lender for any recitals, statements, information, representations or warranties herein or in any other Loan Document or in any document, instrument, certificate, report or other writing delivered in connection herewith or therewith, for 79 the execution, effectiveness, genuineness, validity, enforceability or sufficiency of this Agreement or any other Loan Document, or for the financial condition of the Borrower, its Subsidiaries or any other Person, or (iii) required to ascertain or make any inquiry concerning the performance or observance of any of the terms, provisions or conditions of this Agreement or any other Loan Document or the existence or possible existence of any Default or Event of Default, or to inspect the properties, books or records of the Borrower or any of its Subsidiaries. 9.4 Reliance by Agent. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any notice, statement, consent or other communication (including, without limitation, any thereof by telephone, telecopy, telex, telegram or cable) believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person or Persons. The Agent may deem and treat each Lender as the owner of its interest hereunder for all purposes hereof unless and until a written notice of the assignment, negotiation or transfer thereof shall have been given to the Agent in accordance with the provisions of this Agreement. The Agent shall be entitled to refrain from taking or omitting to take any action in connection with this Agreement or any other Loan Document (i) if such action or omission would, in the reasonable opinion of the Agent, violate any applicable law or any provision of this Agreement or any other Loan Document or (ii) unless and until it shall have received such advice or concurrence of the Required Lenders (or, where a higher percentage of the Lenders is expressly required hereunder, such Lenders) as it deems appropriate or it shall first have been indemnified to its satisfaction by the Lenders against any and all liability and expense (other than liability and expense arising from its own gross negligence or willful misconduct) that may be incurred by it by reason of taking, continuing to take or omitting to take any such action. Without limiting the foregoing, no Lender shall have any right of action whatsoever against the Agent as a result of the Agent's acting or refraining from acting hereunder or under any other Loan Document in accordance with the instructions of the Required Lenders (or, where a higher percentage of the Lenders is expressly required hereunder, such Lenders), and such instructions and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders (including all subsequent Lenders). 9.5 Non-Reliance on Agent and Other Lenders. Each Lender expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representation or warranty to it and that no act by the Agent or any such Person hereafter taken, including any review of the affairs of the Borrower and its Subsidiaries, shall be deemed to constitute any representation or warranty by the Agent to any Lender. Each Lender represents to the Agent that (i) it has, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, properties, financial and other condition and creditworthiness of the Borrower and its Subsidiaries and made its own decision to enter into this Agreement and extend credit to the Borrower hereunder, and (ii) it will, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action hereunder and under the other Loan Documents and to make such investigation as it deems necessary to inform itself as to the business, prospects, operations, properties, financial and other condition and 80 creditworthiness of the Borrower and its Subsidiaries. Except as expressly provided in this Agreement and the other Loan Documents, the Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information concerning the business, prospects, operations, properties, financial or other condition or creditworthiness of the Borrower, its Subsidiaries or any other Person that may at any time come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 9.6 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless the Agent shall have received written notice from the Borrower or a Lender referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." In the event that the Agent receives such a notice, the Agent will give prompt notice thereof to the Lenders; provided, however, that if any such notice has also been furnished to the Lenders, the Agent shall have no obligation to notify the Lenders with respect thereto. The Agent shall (subject to SECTIONS 9.4 and 10.8) take such action with respect to such Default or Event of Default as shall reasonably be directed by the Required Lenders; provided that, unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. 9.7 Indemnification. To the extent the Agent is not reimbursed by or on behalf of the Borrower, and without limiting the obligation of the Borrower to do so, the Lenders agree (i) to indemnify the Agent and its officers, directors, employees, agents, attorneys-in-fact and Affiliates, ratably in proportion to their respective Percentages as used in determining the Required Lenders as of the date of determination, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including, without limitation, attorneys' fees and expenses) or disbursements of any kind or nature whatsoever that may at any time (including at any time following the repayment in full of the Loans and the termination of the Commitments) be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of this Agreement or any other Loan Document or any documents contemplated by or referred to herein or the transactions contemplated hereby or thereby or any action taken or omitted by the Agent under or in connection with any of the foregoing, and (ii) to reimburse the Agent upon demand, ratably in proportion to their respective Percentages as used in determining the Required Lenders as of the date of determination, for any expenses incurred by the Agent in connection with the preparation, negotiation, execution, delivery, administration, amendment, modification, waiver or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement or any of the other Loan Documents (including, without limitation, reasonable attorneys' fees and expenses and compensation of agents and employees paid for services rendered on behalf of the Lenders); provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent resulting from the gross negligence or willful misconduct of the party to be indemnified. 81 9.8 The Agent in its Individual Capacity. With respect to its Commitment, the Loans made by it, the Letters of Credit issued by it and the Note or Notes issued to it, the Agent in its individual capacity and not as Agent shall have the same rights and powers under the Loan Documents as any other Lender and may exercise the same as though it were not performing the agency duties specified herein; and the terms "Lenders," "Required Lenders," "holders of Notes" and any similar terms shall, unless the context clearly otherwise indicates, include the Agent in its individual capacity. The Agent and its Affiliates may accept deposits from, lend money to and generally engage in any kind of banking, trust, financial advisory or other business with the Borrower, any of its Subsidiaries or any of their respective Affiliates as if the Agent were not performing the agency duties specified herein, and may accept fees and other consideration from any of them for services in connection with this Agreement and otherwise without having to account for the same to the Lenders. 9.9 Successor Agent. The Agent may resign at any time by giving thirty (30) days' prior written notice to the Borrower and the Lenders. Upon any such notice of resignation, the Required Lenders will, with the prior written consent of the Borrower (which consent shall not be unreasonably withheld), appoint from among the Lenders a successor to the Agent (provided that the Borrower's consent shall not be required in the event a Default or Event of Default shall have occurred and be continuing). If no successor to the Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within such thirty-day period, then the retiring Agent may, on behalf of the Lenders and after consulting with the Lenders and the Borrower, appoint a successor Agent from among the Lenders. Upon the acceptance of any appointment as Agent by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents. After any retiring Agent's resignation as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent. If no successor to the Agent has accepted appointment as Agent by the thirtieth (30th) day following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective, and the Lenders shall thereafter perform all of the duties of the Agent hereunder and under the other Loan Documents until such time, if any, as the Required Lenders appoint a successor Agent as provided for hereinabove. 9.10 Collateral Matters. (a) The Agent is hereby authorized on behalf of the Lenders, without the necessity of any notice to or further consent from the Lenders, from time to time (but without any obligation) to take any action with respect to the Collateral and the Security Documents that may be necessary to perfect and maintain perfected the Liens upon the Collateral granted pursuant to the Security Documents. (b) The Lenders hereby irrevocably authorize the Agent, at its option and in its discretion, to release any Lien granted to or held by the Agent upon any Collateral (i) upon termination of the Commitments and payment in full of all of the Obligations and termination of the ELLF, (ii) constituting property sold or to be sold or disposed of as part of or in connection 82 with any disposition that may be permitted hereunder or under any other Loan Document or (iii) otherwise pursuant to and in accordance with the provisions of SECTION 10.8(B) or any applicable Loan Document. Upon request by the Agent at any time, the Lenders will confirm in writing the Agent's authority to release Collateral pursuant to this subsection (B). 9.11 Applicable Parties. The provisions of this ARTICLE IX, other than the provisions of SECTION 9.9, are solely for the benefit of the Agent and the Lenders, and the Borrower shall not have any rights as a third party beneficiary or otherwise or any obligations under any of the provisions of this ARTICLE IX, other than as provided in SECTION 9.9. In performing functions and duties hereunder and under the other Loan Documents, the Agent shall act solely as the Agent of the Lenders and does not assume, nor shall be deemed to have assume, any obligation or relationship of trust or agency with or for the Borrower or any legal representative, successor and assign of the Borrower. ARTICLE X. MISCELLANEOUS 10.1 Survival. The representations and warranties made by or on behalf of the Borrower or any Subsidiary in this Agreement and in each other Loan Document shall survive the execution and delivery of this Agreement and each such other Loan Document until the satisfaction of all of Obligations and the termination of the Commitments. Notwithstanding any other provision herein or anything provided or implied by law to the contrary, no termination or cancellation (regardless of cause or procedure) of the Commitments, this Agreement or any of the other Loan Documents shall in any way affect or impair the rights and obligations of the parties hereto with respect to any of the provisions of (i) SECTION 2.17 or (ii) this Agreement and the other Loan Documents relating to indemnification or payment of costs and expenses, including, without limitation, all of the provisions of SECTIONS 2.13(A), 2.13(B), 2.14, 2.15, 9.7, 10.3, 10.6 and 10.7, and, in each case, such provisions shall survive any such termination or cancellation and the making and repayment of the Loans. 10.2 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS HAVE BEEN EXECUTED, DELIVERED AND ACCEPTED IN, AND SHALL BE DEEMED TO HAVE BEEN MADE IN, NORTH CAROLINA AND SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA (WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF); PROVIDED THAT EACH LETTER OF CREDIT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT OR, IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICES FOR DOCUMENTARY CREDITS, INTERNATIONAL CHAMBER OF COMMERCE, AS IN EFFECT FROM TIME TO TIME (THE "UNIFORM CUSTOMS"), AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE 83 STATE OF NORTH CAROLINA (WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF). THE BORROWER HEREBY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF ANY STATE COURT WITHIN MECKLENBURG COUNTY, NORTH CAROLINA OR ANY FEDERAL COURT LOCATED WITHIN THE WESTERN DISTRICT OF THE STATE OF NORTH CAROLINA FOR ANY PROCEEDING INSTITUTED HEREUNDER OR UNDER ANY OF THE OTHER LOAN DOCUMENTS, OR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY PROCEEDING TO WHICH THE AGENT OR ANY LENDER OR THE BORROWER IS A PARTY, INCLUDING ANY ACTIONS BASED UPON, ARISING OUT OF, OR IN CONNECTION WITH, ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT OR ANY LENDER OR THE BORROWER. THE BORROWER IRREVOCABLY AGREES TO BE BOUND (SUBJECT TO ANY AVAILABLE RIGHT OF APPEAL) BY ANY JUDGMENT RENDERED OR RELIEF GRANTED THEREBY AND FURTHER WAIVES ANY OBJECTION THAT IT MAY HAVE BASED ON LACK OF JURISDICTION OR IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY SUCH PROCEEDING. THE BORROWER CONSENTS THAT ALL SERVICE OF PROCESS BE MADE BY REGISTERED OR CERTIFIED MAIL DIRECTED TO IT AT ITS ADDRESS SET FORTH HEREINBELOW, AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID AND PROPERLY ADDRESSED. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF ANY PARTY TO BRING ANY ACTION OR PROCEEDING AGAINST ANY OTHER PARTY IN THE COURTS OF ANY OTHER JURISDICTION. THE BORROWER, BY ITS ACCEPTANCE OF THE BENEFITS HEREOF, AND THE AGENT AND EACH LENDER, HEREBY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. 10.3 Arbitration; Preservation and Limitation of Remedies. (a) Upon demand of any party hereto, whether made before or after institution of any judicial proceeding (subject to the following limitation), any dispute, claim or controversy arising out of, connected with or relating to this Agreement or any other Loan Document ("Disputes") between or among the Borrower, the Agent and the Lenders, or any of them, shall be resolved by binding arbitration as provided herein; provided, however, that no party may demand arbitration in any judicial proceeding to which it is a party more than 90 days from the later of (i) its commencement of such proceeding or (ii) the date it is served with a complaint, counterclaim or third-party claim in such proceeding. Disputes may include, without limitation, tort claims, counterclaims, claims brought as class actions, claims arising from Loan Documents executed in the future, or claims arising out of or connected with the transactions contemplated by this 84 Agreement and the other Loan Documents. Arbitration shall be conducted under and governed by the Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American Arbitration Association (the "AAA"), as in effect from time to time, and Title 9 of the U.S. Code, as amended. All arbitration hearings shall be conducted in the city in which the principal office of either the Agent or the Borrower is located. The expedited procedures set forth in Rule 51 et seq. of the Arbitration Rules shall be applicable to claims of less than $1,000,000. All applicable statutes of limitation shall apply to any Dispute. All arbitrations commenced with respect to any of the Loan Documents shall be consolidated for hearing before the same panel of arbitrators as prescribed herein. Any attorney-client privilege or other protection against disclosure of confidential information, including, without limitation, any protection afforded the work product of any attorney, that would otherwise be claimed by any party shall be available to and may be claimed by any such party in any arbitration proceeding. A judgment upon the award may be entered in any court having jurisdiction. The panel from which all arbitrators are selected shall be comprised of licensed attorneys. The single arbitrator selected for expedited procedure shall be a retired judge from the highest court of general jurisdiction, state or federal, of the state where the hearing will be conducted. Notwithstanding the foregoing, this arbitration provision does not apply to Disputes under or related to Interest Rate Protection Agreements. An arbitration arising from an Interest Rate Protection Agreement shall not be consolidated with any other arbitration hereunder without the consent of all parties to the arbitrations that are proposed to be consolidated. (b) Notwithstanding the preceding binding arbitration provisions, the parties hereto agree to preserve, without diminution, certain remedies that any party hereto may employ or exercise freely, either alone, in conjunction with or during a Dispute. Any party hereto shall have the right to proceed in any court of proper jurisdiction or by self-help to exercise or prosecute the following remedies, as applicable: (i) all rights to foreclose against any Collateral by exercising a power of sale granted pursuant to any of the Loan Documents or under applicable law other than judicial foreclosure and sale, including a proceeding to confirm the sale; (ii) all rights of self-help, including peaceful occupation of real property and collection of rents, setoff, and peaceful possession of personal property; (iii) obtaining provisional or ancillary remedies, including injunctive relief, sequestration, garnishment, attachment, appointment of a receiver and filing an involuntary bankruptcy proceeding; and (iv) when applicable, a judgment by confession of judgment. Preservation of these remedies does not limit the power of an arbitrator to grant similar remedies that may be requested by a party in a Dispute. 10.4 Notice. All notices and other communications provided for hereunder or in connection herewith shall be in writing (including telegraphic, telex, facsimile transmission or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or delivered to the party to be notified at the following addresses: 85 If to the Borrower: American Oncology Resources, Inc. 16825 Northchase Drive Suite 1300 Houston, Texas 77060 Attention: L. Fred Pounds, Chief Financial Officer Telephone: (713) 873-2674 Telecopier: (713) 873-7762 With copies to: Mayor, Day, Caldwell & Keeton, L.L.P. 700 Louisiana, Suite 1900 Houston, Texas 77002 Attention: Diana M. Hudson Telephone: (713) 225-7020 Telecopier: (713) 225-7047 If to the Agent: First Union National Bank One First Union Center, TW-10 301 South College Street Charlotte, North Carolina 28288-0608 Attention: Syndication Agency Services Telephone: (704) 383-0281 Telecopier: (704) 383-0288 with a copy to: Robinson, Bradshaw & Hinson, P.A. 101 North Tryon Street Suite 1900 Charlotte, North Carolina 28246 Attention: Stokely G. Caldwell, Jr. Telephone: (704) 377-2536 Telecopier: (704) 378-4000 If to any Lender: At the address set forth on its signature page hereto (or if to any Lender not a party hereto as of the date hereof, at the address for notices set forth in its Assignment and Acceptance); or to such other address as any party may designate for itself by like notice to all other parties hereto. All such notices and communications shall be deemed to have been given (i) if mailed as provided above by any method other than overnight delivery service, on the third Business Day after deposit in the mails, (ii) telegraphed, telexed, telecopied or cabled, when delivered to the telegraph company, confirmed by telex answerback, transmitted by telecopier or delivered to the cable company, respectively, or (iii) if delivered by hand, or mailed by overnight delivery services upon delivery; provided that notices and communications to the Agent shall not be effective until received by the Agent. 86 10.5 Assignments, Participations. (a) Each Lender may assign to one or more other Eligible Assignees (each, an "Assignee") all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment, the outstanding Loans made by it, the Note or Notes held by it and its participations in Letters of Credit); provided, however, that (i) so long as First Union remains the Agent, it will retain a Commitment of ten percent (10%) of the Total Commitment, up to a total exposure of $15,000,000 (including the Commitment, Swingline Note and any commitment under the ELLF) at all times (free of participation), (ii) each such assignment shall be of an equal percentage of such Lender's rights and obligations (including its Commitment, the outstanding Loans made by it, the Note or Notes held by it, its participations in Letters of Credit and its commitment and loans as a Lender (as defined in the Participation Agreement) under the ELLF), (iii) any such assignment (other than an assignment to a Lender or an Affiliate of a Lender) shall not be made without the prior written consent of the Agent and the Borrower (to be evidenced by their counterexecution of the relevant Assignment and Acceptance), which consent shall not be unreasonably withheld, (iv) except in the case of an assignment to a Lender or an Affiliate of a Lender, the amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to each such assignment) shall in no event be less than the lesser of (y) the entire Commitment of such Lender immediately prior to such assignment or (z) $5,000,000, and (v) the parties to each such assignment will execute and deliver to the Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note or Notes subject to such assignment, and the assigning Lender will pay a nonrefundable processing fee of $3,000 to the Agent for its own account. Upon such execution, delivery, acceptance and recording of the Assignment and Acceptance, from and after the effective date specified therein, which effective date shall be at least five (5) Business Days after the execution and delivery to the Agent thereof (unless the Agent shall otherwise agree), (A) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of the assigning Lender hereunder with respect thereto and (B) the assigning Lender shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, and from and after such assignment, relinquish its rights (other than rights under the provisions of this Agreement and the other Loan Documents relating to indemnification or payment of fees, costs and expenses, to the extent such rights relate to the time prior to the effective date of such Assignment and Acceptance) and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of such assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto). The terms and provisions of each Assignment and Acceptance shall, upon the effectiveness thereof, be incorporated into and made a part of this Agreement, and the covenants, agreements and obligations of each Lender set forth therein shall be deemed made to and for the benefit of the Agent and the other parties hereto as if set forth at length herein. (b) The Agent will maintain at its address for notices referred to herein a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of 87 the names and addresses of the Lenders and the Commitments of, and principal amount of the Loans owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and each Lender at any reasonable time and from time to time upon reasonable prior notice. (c) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an Assignee and counterexecuted by the Borrower (if required above), together with any Note or Notes subject to such assignment and the processing fee referred to in subsection (A) above, the Agent will (i) accept such Assignment and Acceptance, (ii) on the effective date thereof, record the information contained therein in the Register and (iii) give notice thereof to the Borrower and the Lenders. Within five (5) Business Days after its receipt of such notice, the Borrower, at its own expense, will execute and deliver to the Agent in exchange for the surrendered Note or Notes a new Note or Notes to the order of such Assignee in an aggregate principal amount equal to the principal amount of the Commitment (or, if the Commitments have been terminated, the principal amount of the Loans) assumed by it pursuant to such Assignment and Acceptance and, to the extent the assigning Lender has retained its Loans and/or Commitment hereunder, a new Note or Notes to the order of the assigning Lender in an aggregate principal amount equal to the principal amount of the Commitment (or, if the Commitments have been terminated, the principal amount of the Loans) retained by it hereunder. Such new Note or Notes shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of EXHIBITS A-1 and A-2. The Agent will return canceled Notes to the Borrower. (d) Subject to SECTION 10.5(A)(I), Each Lender may, without the consent of the Borrower, the Agent or any other Lender, sell to one or more other Persons engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business (each, a "Participant") participations in any portion comprising less than all of its rights and obligations under this Agreement (including, without limitation, a portion of its Commitment, the outstanding Loans made by it, the Note or Notes held by it and its participations in Letters of Credit); provided, however, that (i) such Lender's obligations under this Agreement shall remain unchanged and such Lender shall remain solely responsible for the performance of such obligations, (ii) no Lender shall sell any participation that, when taken together with all other participations, if any, sold by such Lender, covers all of such Lender's rights and obligations under this Agreement, except that the foregoing shall not prohibit a Lender from selling to an Affiliate of such Lender a participation in all of such Lender's rights and obligations under this Agreement so long as after reasonable investigation by such Lender (including due inquiry of the Borrower, if necessary or advisable), such participation would not give rise to a "prohibited transaction" under ERISA with respect to the Borrower, (iii) the amount of the participation shall in no event be less than $3,000,000, (iv) the Borrower, the Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and no Lender shall permit any Participant to have any voting rights or any right to control the vote of such Lender with respect to any amendment, 88 modification, waiver, consent or other action hereunder or under any other Loan Document (except as to actions (to the extent such actions affect the rights of such Participant) that would (x) reduce or forgive the principal amount of, or rate of interest on, any Loan, or reduce or forgive any fees or other Obligations, (y) extend any date (including the Maturity Date and any scheduled date for the mandatory reduction of the Commitments) fixed for the payment of any principal of or interest on any Loan, any fees or any other Obligations, or (z) increase any Commitment of any Lender (it being understood that a waiver of any Default or Event of Default or of any mandatory reduction of the Total Commitment shall not constitute such an increase), and (v) no Participant shall have any rights under this Agreement or any of the other Loan Documents, each Participant's rights against the granting Lender in respect of any participation to be those set forth in the participation agreement, and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not granted such participation. Notwithstanding the foregoing, subject to SECTION 2.19 hereof each Participant shall have the rights of a Lender for purposes of SECTIONS 2.13(A), 2.13(B), 2.14, 2.15 and 9.3, and shall be entitled to the benefits thereto, to the extent that the Lender granting such participation would be entitled to such benefits if the participation had not been made, but only by acts and notices taken by the granting Lender provided that no Participant shall be entitled to receive any greater amount pursuant to any of such Sections than the Lender granting such participation would have been entitled to receive in respect of the amount of the participation made by such Lender to such Participant had such participation not been made. (e) Nothing in this Agreement shall be construed to prohibit any Lender from pledging or assigning all or any portion of its rights and interest hereunder or under any Note to any Federal Reserve Bank as security for borrowings therefrom; provided, however, that no such pledge or assignment shall release a Lender from any of its obligations hereunder. (f) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section, disclose to the Assignee or Participant or proposed Assignee or Participant any information relating to the Borrower and its Subsidiaries furnished to it by or on behalf of any other party hereto, provided that such Assignee or Participant or proposed Assignee or Participant agrees in writing with the Agent and the Borrower to keep such information confidential to the same extent required of the Lenders under SECTION 10.17. 10.6 Fees and Expenses. The Borrower agrees (i) whether or not the transactions contemplated by this Agreement shall be consummated, to pay upon demand all reasonable out-of-pocket costs and expenses of the Agent (including, without limitation, reasonable attorneys' fees, but excluding salaries of the Agent's regularly employed personnel and overhead incurred or paid by the Agent) in connection with the preparation, negotiation, execution, delivery and syndication of this Agreement and the other Loan Documents, and any amendment, modification or waiver hereof or thereof or consent with respect hereto or thereto, (ii) to pay upon demand all reasonable out-of-pocket costs and expenses of the Agent and (upon the occurrence and during the continuance of an Event of Default) each Lender (including, without limitation, reasonable attorneys' fees, but excluding salaries of any Lender's or the Agent's regularly employed personnel and overhead incurred or paid by any Lender or the Agent) in connection with (y) any 89 refinancing or restructuring of the credit arrangement provided under this Agreement, whether in the nature of a "work-out," in any insolvency or bankruptcy proceeding or otherwise and whether or not consummated, and (z) the enforcement, attempted enforcement or preservation of any rights or remedies under this Agreement or any of the other Loan Documents, whether in any action, suit or proceeding (including any bankruptcy or insolvency proceeding) or otherwise, and (iii) to pay and hold harmless the Agent and each Lender from and against all liability for any intangibles, documentary, stamp or other similar taxes, fees and excises, if any, including any interest and penalties, and any finder's or brokerage fees, commissions and expenses (other than any fees, commissions or expenses of finders or brokers engaged by the Agent or any Lender), that may be payable in connection with the transactions contemplated by this Agreement and the other Loan Documents. 10.7 Indemnification. From and at all times after the date of this Agreement, and in addition to the costs and expenses payable under SECTION 10.6 and all of the Agent's and the Lenders' other rights and remedies against the Borrower, the Borrower agrees to indemnify and hold harmless the Agent and each Lender and each of their directors, officers, employees, agents and Affiliates (each, an "Indemnified Person") against any and all claims, losses, damages, liabilities, costs and expenses of any kind or nature whatsoever, including, without limitation, reasonable attorneys' fees, costs and expenses (collectively, "Indemnified Costs") incurred by or asserted against any such Indemnified Person from and after the date hereof, whether direct or indirect, as a result of or arising from or in any way relating to any suit, action or proceeding (including any inquiry or investigation) by any Person, whether threatened or initiated, asserting a claim for any legal or equitable remedy under any statute or regulation, including, without limitation, any federal or state securities laws, or under any common law or equitable cause or otherwise, arising from or in connection with the negotiation, preparation, execution, performance or enforcement of this Agreement or the other Loan Documents or any of the transactions contemplated herein or therein, and including, without limitation, Environmental Claims and any matters arising from the Borrower's violation of SECTION 4.7, whether or not such Indemnified Person is a party to any such action, proceeding or suit or the target of any such inquiry or investigation; provided, however, that no Indemnified Person shall have the right to be indemnified hereunder for any Indemnified Costs resulting primarily from the fraud, gross negligence, willful misconduct or violation of law of such Indemnified Person (as finally determined by a court of competent jurisdiction or arbitration as provided herein). All of the foregoing losses, damages, costs and expenses of any Indemnified Person shall be payable by the Borrower, as and when incurred and upon demand, and shall be additional Obligations hereunder. In the event that the foregoing indemnity is unavailable or insufficient to hold each Indemnified Person harmless, then the Borrower will contribute to amounts paid or payable by such Indemnified Persons in respect of their losses, claims, damages or liabilities in such proportions as appropriately reflect the relative benefits received by and fault of the Borrower and such Indemnified Persons in connection with the matters as to which such losses, claims, damages or liabilities relate and other equitable considerations. Neither the Borrower nor any Subsidiary shall be liable to the Agent or any Lender or any other Indemnified Person for any consequential damages. Neither the Agent nor any Lender shall be liable to the Borrower or any Subsidiary or any of their Affiliates for any consequential damages. 90 10.8 Amendments, Waivers, etc. Except as may be otherwise specifically set forth in this Agreement or the other Loan Documents, neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be amended, modified, waived, discharged or terminated, and no consent to any departure by the Borrower from any provision hereof or thereof may be given, except in a writing signed by the Required Lenders; provided, however, that: (a) no such amendment, modification, waiver, discharge, termination or consent shall, without the consent of each Lender holding Obligations directly affected thereby, (i) reduce the principal amount of, or rate of interest on, any Loan, or reduce any fees or other monetary Obligations (other than fees payable to the Agent for its own account) or any monetary obligations of any Person now or hereafter primarily or contingently liable with respect to the Obligations or (ii) extend any date fixed for any payment of principal, interest (other than additional interest payable under SECTION 2.6(B) during the continuance of an Event of Default), fees (other than fees payable to the Agent for its own account) or any other monetary Obligations; (b) no such amendment, modification, waiver, discharge, termination or consent shall, without the consent of all Lenders, (i) increase the Commitments of any Lender (it being understood that a waiver of any Default or Event of Default or of any mandatory reduction in the Total Commitment shall not constitute such an increase), (ii) change the definition of "Required Lenders" or otherwise change the number or percentage of Lenders that shall be required for the Lenders or any of them to take or approve, or direct the Agent to take, any action hereunder, (iii) amend, modify or waive any of the provisions for extending, or take action to extend, the term of the Facility, (iv) amend any provision of this Section, (v) release all or substantially all of the Collateral, (vi) release all or substantially all of the Guarantors from their obligations under the Guaranty Agreement or (vii) consent to the assignment or transfer by the Borrower, or by any other Person now or hereafter primarily or contingently liable with respect to the Obligations, of any of its rights and obligations under this Agreement or any of the other Loan Documents; and (c) no provision relating to the rights or obligations of the Agent or Issuing Bank under this Agreement or any of the other Loan Documents may be amended, modified or waived without the consent of the Agent or Issuing Bank, as applicable. 10.9 Rights and Remedies Cumulative, Non-Waiver, etc."-""" The enumeration of the Agent's and the Lenders' rights and remedies set forth in this Agreement and the other Loan Documents is not intended to be exhaustive, and the exercise by the Agent or any Lender of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative, and shall be in addition to any other right or remedy given hereunder, under the other Loan Documents or under any other agreement between the Borrower and the Lenders, or any of them (or the Agent on their behalf), or that may now or hereafter exist in law or in equity or by suit or otherwise. No delay or failure to take action on the part of the Agent or any Lender in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude other or further exercise thereof or the exercise of any other right, power or privilege or shall be construed to be a waiver of any 91 Event of Default. No course of dealing between any of the Borrower and the Agent or the Lenders or their agents or employees shall be effective to change, modify or discharge any provision of this Agreement or to constitute a waiver of any Event of Default. No notice to or demand upon the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the right of the Agent or any Lender to exercise any right or remedy or take any other or further action in any circumstances without notice or demand. 10.10 Binding Effect, Assignment. All of the terms of this Agreement shall be binding upon, inure to the benefit of and be enforceable by the respective successors and assigns of the Borrower, the Agent and each Lender; provided, however, that (i) the Borrower may not sell, assign or transfer this Agreement or any portion hereof or thereof, including, without limitation, any of its rights, title, interests, remedies, powers and duties hereunder or thereunder and (ii) any assignees and participants shall have such rights and obligations with respect to this Agreement and the other Loan Documents as are provided for in and pursuant to SECTION 10.5. 10.11 Severability. To the extent any provision of this Agreement is prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 10.12 Entire Agreement. THIS AGREEMENT AND THE DOCUMENTS AND INSTRUMENTS EXECUTED AND DELIVERED CONTEMPORANEOUSLY HEREWITH EMBODY THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES HERETO AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS OF SUCH PERSONS, VERBAL OR WRITTEN, RELATING TO THE SUBJECT MATTER HEREOF EXCEPT FOR ANY AGENCY FEE LETTER, IF ANY, EXECUTED BY THE AGENT AND THE BORROWER, THE PROVISIONS OF WHICH FEE LETTER ARE HEREBY INCORPORATED INTO THIS AGREEMENT BY THIS REFERENCE. THIS AGREEMENT, THE NOTES, THE OTHER LOAN DOCUMENTS AND THE INSTRUMENTS AND DOCUMENTS EXECUTED IN CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 10.13 Interpretation. The captions to the various sections and subsections of this Agreement have been inserted for convenience only and shall not limit or affect any of the terms hereof. Unless the context otherwise requires, words in the singular include the plural and words in the plural include the singular, and the use of any gender shall be applicable to all genders. 10.14 Counterparts, Effectiveness. This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which, when so executed and delivered, shall be an original, but all of which shall together constitute one and the 92 same instrument. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto. 10.15 Conflict of Terms. The provisions of the Exhibits and Schedules hereto and the other Loan Documents are incorporated in this Agreement by this reference thereto. Except as otherwise provided in this Agreement and except as otherwise provided in the other Loan Documents, if any provision contained in this Agreement is in conflict with, or inconsistent with, any provision of the other Loan Documents, the provision contained in this Agreement shall control. 10.16 Injunctive Relief. The Borrower recognizes that in the event it fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, any remedy of law may prove to be inadequate relief to the Agent and the Lenders. The Borrower therefore agrees that the Agent and the Lenders, if the Agent so requests, shall be entitled to temporary and permanent injunctive relief without the necessity of proving actual damages in any case where a remedy at law, would prove to be inadequate relief. 10.17 Confidentiality. Each of the Agent, the Issuing Bank and each Lender agrees to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all non-public confidential information provided in connection with this Agreement or any other Loan Document and agrees and undertakes that it shall not use any such information for any purpose or in any manner other than pursuant to the terms contemplated by this Agreement. Any Lender may disclose such information (i) at the request of any bank regulatory authority or in connection with an examination of such Lender by any such authority, (ii) pursuant to subpoena or other court process, (iii) when required to do so in accordance with the provisions of any applicable law or regulation, (iv) at the express direction of any agency of any State of the United States of America or of any other jurisdiction in which such Lender conducts its business, (v) to such Lender's independent auditors and other professional advisors that have a reasonable need or basis for access thereto, (vi) to such Lender's Affiliates, provided that such Affiliates shall be bound by the provisions of this SECTION 10.17 and the Lender shall remain liable for any breach hereof by such Affiliate and (vii) in connection with any proceeding to enforce its rights hereunder or under any other Loan document or any other litigation or proceeding related hereto; provided, however, Agent or such Lender shall instruct such independent auditors or other professional advisors to keep such information confidential in accordance with the terms of this SECTION 10.17; provided further, that in the event of any disclosure of non-public information pursuant to any of clauses (ii), (iii), (iv) and (vii) of this SECTION 10.17, the Agent or such Lender shall make a good faith attempt, to the extent practicable, to notify Borrower of any such disclosure of non-public information at least three (3) Business Days prior to disclosing such information, and in any event shall notify Borrower of such disclosure as soon as practicable. 10.18 Post-Closing Matters. The Borrower will, and will cause each of its Subsidiaries to, cooperate to assist the Agent in the syndication of the Facilities and the resultant addition of Lenders after the Closing Date. 93 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their corporate names by their duly authorized corporate officers as of the date first above written. AMERICAN ONCOLOGY RESOURCES, INC. By: ------------------------------------------- L. Fred Pounds, Vice President of Finance ATTEST: By: -------------------------- Leo E. Sands, Secretary FIRST UNION NATIONAL BANK, AS AGENT By: ------------------------------------------- Ann M. Dodd, Senior Vice President S-1 FIRST UNION NATIONAL BANK By: ----------------------------------------- Ann M. Dodd, Senior Vice President Commitment: $14,309,900 Address: First Union National Bank One First Union Center, TW-10 301 South College Street Charlotte, North Carolina 28288-0608 Attention: Syndication Agency Services Telephone: (704) 383-0281 Telecopier: (704) 383-0288 Wiring Instructions: First Union National Bank Charlotte, North Carolina ABA #053000219 Account #: 465906 RC5007 Reference: American Oncology Resources, Inc. Attention: Syndication Agency Services S-2 CREDIT LYONNAIS NEW YORK BRANCH By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- Commitment: $13,468,000 Address: Credit Lyonnais New York Branch 1301 Avenue of the Americas New York, NY 10019 Attention: Martin Golden Christophe Choquart Telephone: (212) 261-7791 Telecopier: (212) 261-7259 Wiring Instructions: Credit Lyonnais New York Branch New York, NY ABA: 0260-0807-3 Account: 01-88179-3701 Reference: American Oncology Resources, Inc. Attention: Loan Servicing S-3 WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- Commitment: $11,447,800 Address: Wells Fargo Bank (Texas) National Association 1000 Louisiana Avenue, 3rd Floor Houston, TX 77002 Attention: David Anderson or Christopher King Telephone: 713-250-2339/713-250-7150 Telecopier: 713-250-7029 Wiring Instructions: Wells Fargo Bank (Texas) National Association ABA: 121000248 Account: #2712-507201 Attention: Commercial Banking Services Reference: American Oncology Resources, Inc. S-4 SUNTRUST BANK, TAMPA BAY By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- Commitment: $8,080,800 Address: SunTrust Bank, Tampa Bay Commercial Banking Office 2520 Countryside Boulevard Clearwater, FL 33763. Attention: Charles T. Falk Telephone: 813-892-4037 Telecopier: 813-725-2315 Wiring Instructions: SunTrust Bank, Tampa Bay ABA: 063106569 Ref: G/L #9656004210 Reference: American Oncology Resources, Inc. Attention: Commercial Loan Operations S-5 COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A. "RABOBANK NEDERLAND", NEW YORK BRANCH By: -------------------------------------- Title: By: -------------------------------------- Title: Commitment: $13,299,650 Address: Lending Office: 245 Park Avenue New York, NY 10167 Attention: Corporate Services Department Telephone: 212/916-7800 Telecopier: 212/818-0233 Wiring Instructions: Bank of New York ABA: 021000018 A/C Rabobank New York Account: 802-6002533 Reference: American Oncology Resources, Inc. S-6 ABN AMRO BANK N.V. ATLANTA AGENCY By: ------------------------------------ Name: ------------------------------- Title: ------------------------------ By: ------------------------------------ Name: ------------------------------- Title: ------------------------------ Commitment: $13,299,650 Address: (Loan Administration and Credit Contacts and (Credit Contacts and Financial Information) Financial Information) ABN AMRO BANK N.V. ABN AMRO BANK N.V. 1 Ravinia Drive, Suite 1200 136 South LaSalle Street Atlanta, GA 30346 Chigaco, IL 60603 Attention: Thomas Thornhill Attention: Loan Administration Telephone: 770/396-0066 (Ext. 140) Telephone: 312/804-8865 Telecopier: 770/399-7397 Telecopier: 312-904-8893
Wiring Instructions: ABN AMRO Bank, New York ABA: 26029530 Account: 650-001-1789-41 F/O: ABN AMRO Bank N.V. Chicago CPU Reference: American Oncology Resources Attention: Chicago CPU S-7 CORESTATES BANK, N.A. By: ----------------------------------- Name: --------------------------------- Title: -------------------------------- Commitment: $13,468,000 Address: Corestates Bank, N.A. 1339 Chestnut Street (Post Office Box 7618) F.C. 1-8-3-22 Philadelphia, PA 19101-7618 Attention: Deidre L. McAleer Telephone: 215/786-4363 Telecopier: 215/973-2738 Wiring Instructions: Corestates Bank, N.A. Philadelphia, PA ABA: 031000011 Account: 132-0452 Reference: American Oncology Resources, Inc. Attention: RC2490 S-8 TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: -------------------------------- Name: ------------------------------ Title: ----------------------------- Commitment: $12,962,950 Address: Texas Commerce Bank National Assoc. 6550 Fannin, Suite 237 Houston, TX 77030 Attention: Jerry L. Boyd Telephone: 713/795-7344 Telecopier: 713/795-7309 Wiring Instructions: Texas Commerce Bank, N.A. ABA: 113000609 Account: G/L #13681-7800 Loan Acct. #4004-004-0317305 Reference: American Oncology Resources Inc. S-9 THE LONG TERM CREDIT BANK OF JAPAN, LIMITED By: --------------------------------- Name: ------------------------------- Title: ------------------------------ Commitment: $8,080,800 Address: The Long Term Credit Bank of Japan, Ltd. The Long Term Credit Bank of Japan, Ltd. N.Y. Branch Dallas Representative Office 165 Broadway, 49th Floor 2200 Ross Avenue, Suite 4700 West New York, NY 10006 Dallas, TX 75201 Attention: Kathleen Dorsch-Santiago Attention: R. Bruce Frey Telephone: 212/335-4553 Telephone: 214/969-5352 Telecopier: 212/608-2371 Telecopier: 214-969-5357 LTCB NY Branch Finance Operations Division 165 Broadway New York, NY 10006 Attention: Robert Pacifici Telephone: 212/335-4801 Telecopier: 212/608-3452
Wiring Instructions: Chase Manhattan Bank, NY. ABA: 021000021 For the Account of: The Long Term Credit Bank of Japan, Ltd., New York Branch Account: 544-7-75066 Attention: Mr. Robert Pacifici Reference: American Oncology - $150mm RC S-10 NATIONSBANK OF TEXAS, N.A. By: --------------------------------- Name: ------------------------------- Title: ------------------------------ Commitment: $13,468,000 Address: NationsBank of Texas, N.A. NationsBank of Texas, N.A. 700 Louisiana Street, 8th Floor 901 Main Street Houston, TX 77002 TX1-492-14-05 Attention: Larry Gordon Dallas, TX 75202 Telephone: 713/247-6619 Attention: Chris Bertel Telecopier: 713/247-6719 Telephone: 214/508-2354 Telecopier: 214/508-1215 Wiring Instructions: NationsBank of Texas ABA: 111000025 Further Credit: 1292000883 Attention: Corporate Loans Reference: American Oncology Resources Inc. Attn: Chris Bertel S-11 THE FIRST NATIONAL BANK OF CHICAGO By: --------------------------------- Name: ------------------------------- Title: ------------------------------ Commitment: $13,299,650 Address: The First National Bank of Chicago The First National Bank of Chicago One First National Plaza, Suite 0091 One First National Plaza, Suite 0091 Chicago, IL 60607 Chicago, IL 60607 Attention: Richard L. Schiller, Vice Attention: Ken Fecko President Telephone: 312/732-4616 Telephone: 312/732-5932 Telecopier: 312/732-4303 Telecopier: 312/732-2016
Wiring Instructions: First National Bank of Chicago ABA: 071000013 For Further Credit: DES Incoming Clearing Account # 7521765 Reference: American Oncology Resources Inc. S-12 NATIONAL CITY BANK OF KENTUCKY By: --------------------------------- Name: ------------------------------- Title: ------------------------------ Commitment: $8,080,800 Address: National City Bank of Kentucky 101 South 5th Street Louisville, KY 40202 Attention: Roderic M. Brown Tami Boston Telephone: 502-581-4369/502-581-4376 Telecopier: 502-581-4424/502-581-4079 Wiring Instructions: National City Bank of Kentucky ABA 083 000 056 Louisville, KY Commercial Loan Operations Attention: Tami Boston Reference: American Oncology Resources Inc. S-13 THE FUJI BANK, LIMITED, HOUSTON AGENCY By: --------------------------------- Name: ------------------------------- Title: ------------------------------ Commitment: $6,734,000 Address: The Fuji Bank Limited Houston Agency Fuji Bank and Trust Company One Houston Center Two World Trade Center 1221 McKinney Street, Suite 4100 79th Floor Houston, TX 77010 New York, NY 10048 Attention: Phillip C. Lauinger, III Attention: Carl Marcantonio Telephone: 713/759-0717 Telephone: 212/898-2439 Telecopier: 713/650-7852 Telecopier: 212-775-7276 Wiring Instructions: Texas Commerce Bank, N.A., Houston, Texas ABA: 113000609 Account: 0010-197-3098 Beneficiary: The Fuji Bank, Ltd., Houston Agency Reference: American Oncology Resources, Inc. Attention: Loan Administrator S-14 EX-10.2 3 EXHIBIT 10.2 EXHIBIT 10.2 - -------------------------------------------------------------------------------- PARTICIPATION AGREEMENT Dated as of December 30, 1997 among AOR SYNTHETIC REAL ESTATE, INC., as the Construction Agent, as the Lessee and as a Tranche A Guarantor, AMERICAN ONCOLOGY RESOURCES, INC., as the Guarantor and as a Tranche A Guarantor, THE VARIOUS PARTIES HERETO FROM TIME TO TIME, as the other Tranche A Guarantors, FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, except as expressly stated herein, but solely as the Owner Trustee under the AOR Trust 1997-1, THE VARIOUS BANKS AND OTHER LENDING INSTITUTIONS WHICH ARE PARTIES HERETO FROM TIME TO TIME, as the Holders, THE VARIOUS BANKS AND OTHER LENDING INSTITUTIONS WHICH ARE PARTIES HERETO FROM TIME TO TIME, as the Lenders, and FIRST UNION NATIONAL BANK, as the Agent for the Lenders and respecting the Security Documents, as the Agent for the Lenders and the Holders, to the extent of their interests - -------------------------------------------------------------------------------- TABLE OF CONTENTS
Page SECTION 1. THE LOANS................................................................2 SECTION 2. HOLDER ADVANCES..........................................................3 SECTION 3. SUMMARY OF TRANSACTIONS..................................................3 3.1. Operative Agreements.......................................................3 3.2. Property Purchase..........................................................3 3.3. Construction of Improvements; Commencement of Basic Rent...................4 SECTION 4. THE CLOSINGS.............................................................4 4.1. Initial Closing Date.......................................................4 4.2. Initial Closing Date; Property Closing Dates; Acquisition Advances; Construction Advances......................................................4 SECTION 5. FUNDING OF ADVANCES; CONDITIONS PRECEDENT; REPORTING REQUIREMENTS ON COMPLETION DATE; THE LESSEE'S DELIVERY OF NOTICES; RESTRICTIONS ON LIENS....................................................................4 5.1. General....................................................................4 5.2. Procedures for Funding.....................................................5 5.3. Conditions Precedent for the Lessor, the Agent, the Lenders and the Holders Relating to the Initial Closing Date and the Advance of Funds for the Acquisition of a Property..........................................7 5.4. Conditions Precedent for the Lessor, the Agent, the Lenders and the Holders Relating to the Advance of Funds after the Acquisition Advance....12 5.5. Additional Reporting and Delivery Requirements on Completion Date and on Construction Period Termination Date...................................13 5.6. The Construction Agent Delivery of Construction Budget Modifications......14 5.7. Restrictions on Liens.....................................................14 5.8. Accession Agreement Requirements - New Tranche A Guarantors...............14 5.9. Maintenance of AOR Synthetic Real Estate, Inc. as a Wholly-Owned Entity....................................................................15 5.10. Post-Closing Requirements Regarding Certain Properties for Which Advances are Made on the Initial Closing Date............................15 SECTION 6. REPRESENTATIONS AND WARRANTIES..........................................15 6.1. Representations and Warranties of the Borrower............................15 6.2. Representations and Warranties of Each Credit Party.......................18 SECTION 7. PAYMENT OF CERTAIN EXPENSES..............................................23 7.1. Transaction Expenses......................................................23 7.2. Brokers' Fees.............................................................24 7.3. Certain Fees and Expenses.................................................25
7.4. Facility Fee..............................................................25 7.5. Administrative Fee........................................................26 SECTION 8. OTHER COVENANTS AND AGREEMENTS..........................................26 8.1. Cooperation with the Construction Agent or the Lessee.....................26 8.2. Covenants of the Owner Trustee and the Holders............................26 8.3. Credit Party Covenants, Consent and Acknowledgment........................28 8.4. Sharing of Certain Payments...............................................31 8.5. Grant of Easements, etc...................................................32 8.6. Appointment of the Agent by the Lenders, the Holders and the Owner Trustee...................................................................32 8.6B. Appointment of the Lessor by the Lenders and the Holders.................33 8.7. Collection and Allocation of Payments and Other Amounts...................33 8.8. Release of Properties, etc................................................36 SECTION 9. CREDIT AGREEMENT AND TRUST AGREEMENT....................................37 9.1. The Construction Agent's and the Lessee's Credit Agreement Rights.........37 9.2. The Construction Agent's and the Lessee's Trust Agreement Rights..........37 SECTION 10. TRANSFER OF INTEREST...................................................38 10.1. Restrictions on Transfer.................................................38 10.2. Effect of Transfer.......................................................39 SECTION 11. INDEMNIFICATION........................................................39 11.1. General Indemnity........................................................39 11.2. General Tax Indemnity....................................................42 11.3. Increased Costs, Illegality, etc.........................................46 11.4. Funding/Contribution Indemnity...........................................48 11.5 EXPRESS INDEMNIFICATION FOR ORDINARY NEGLIGENCE, STRICT LIABILITY, ETC......................................................................49 SECTION 12. MISCELLANEOUS..........................................................50 12.1. Survival of Agreements...................................................50 12.2. Notices..................................................................50 12.3. Counterparts.............................................................53 12.4. Terminations, Amendments, Waivers, Etc.; Unanimous Vote Matters..........53 12.5. Headings, etc............................................................54 12.6. Parties in Interest......................................................55 12.7. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; VENUE; ARBITRATION.......................................................55 12.8. Severability.............................................................57 12.9. Liability Limited........................................................57 12.10. Rights of the Lessee....................................................58 12.11. Further Assurances......................................................58 12.12. Calculations under Operative Agreements.................................59 12.13. Confidentiality.........................................................59
iii
12.14. Financial Reporting/Tax Characterization................................59 12.16 USURY SAVINGS PROVISION..................................................60 12.17 Chapter 346 of the Texas Finance Code....................................61
EXHIBITS A - Form of Requisition - Sections 4.2, 5.2, 5.3 and 5.4 B - Form of Outside Counsel Opinion for the Lessee - Section 5.3(j) C -[Intentionally Omitted] D - Form of Officer's Certificate - Section 5.3(z) E- Form of Officer's Certificate - Section 5.3(aa) F - Form of Officer's Certificate - Section 5.3(bb) G - Form of Officer's Certificate - Section 5.3(cc) H - Form of Outside Counsel Opinion for the Owner Trustee - Section 5.3(dd) I - Form of Outside Counsel Opinion for the Lessee - Section 5.3(ee) J - Form of Officer's Certificate - Section 5.5 K - Form of Accession Agreement - Section 5.8 L - Description of Material Litigation - Section 6.2(d) M - States of Incorporation/Formation and Principal Place of Business of each Tranche A Guarantor - Section 6.3(i) N - Form of Compliance Certificate and Covenant Compliance Worksheet - Section 8.3(l) Appendix A - Rules of Usage and Definitions iv PARTICIPATION AGREEMENT THIS PARTICIPATION AGREEMENT dated as of December 30, 1997 (as amended, modified, extended, supplemented, restated and/or replaced from time to time, this "Agreement") is by and among AOR SYNTHETIC REAL ESTATE, INC., a Delaware corporation (the "Lessee" or the "Construction Agent" or a "Tranche A Guarantor"); AMERICAN ONCOLOGY RESOURCES, INC., a Delaware corporation, (the "Guarantor" or a "Tranche A Guarantor"), the various entities which are parties hereto from time to time as guarantors of the Tranche A Loans (subject to the definition of Tranche A Guarantors in Appendix A hereto, individually a "Tranche A Guarantor" and collectively, the "Tranche A Guarantors"), FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking association, not individually (in its individual capacity, the "Trust Company"), except as expressly stated herein, but solely as the Owner Trustee under the AOR Trust 1997-1 (the "Owner Trustee", the "Borrower" or the "Lessor"); the various banks and other lending institutions which are parties hereto from time to time as lenders (subject to the definition of Lenders in Appendix A hereto, individually, a "Lender" and collectively, the "Lenders"); FIRST UNION NATIONAL BANK, a national banking association, as the agent for the Lenders and respecting the Security Documents, as the agent for the Lenders and the Holders, to the extent of their interests (in such capacity, the "Agent"); the various banks and other lending institutions which are parties hereto from time to time as holders of certificates issued with respect to the AOR Trust 1997-1 (subject to the definition of Holders in Appendix A hereto, individually, a "Holder" and collectively, the "Holders"). Capitalized terms used but not otherwise defined in this Agreement shall have the meanings set forth in Appendix A hereto. In consideration of the mutual agreements herein contained and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. THE LOANS. Subject to the terms and conditions of this Agreement and in reliance on the representations and warranties of each of the parties hereto contained herein or made pursuant hereto, the Lenders have agreed to make Loans to the Lessor from time to time in an aggregate principal amount of up to the aggregate amount of the Commitments of the Lenders in order for the Lessor to acquire the Properties and certain Improvements, to develop and construct certain Improvements in accordance with the Agency Agreement and the terms and provisions hereof and for the other purposes described herein, and in consideration of the receipt of proceeds of the Loans, the Lessor will issue the Notes. The Loans shall be made and the Notes shall be issued pursuant to the Credit Agreement. Pursuant to Section 5 of this Agreement and Section 2 of the Credit Agreement, the Loans will be made to the Lessor from time to time at the request of the Construction Agent in consideration for the Construction Agent agreeing for the benefit of the Lessor, pursuant to the Agency Agreement, to acquire the Properties, to acquire the Equipment, to construct certain Improvements and to cause the Lessee to lease the Properties, each in 2 accordance with the Agency Agreement and the other Operative Agreements. The Loans and the obligations of the Lessor under the Credit Agreement shall be secured by the Collateral. SECTION 2. HOLDER ADVANCES. Subject to the terms and conditions of this Agreement and in reliance on the representations and warranties of each of the parties hereto contained herein or made pursuant hereto, on each date Advances are requested to be made in accordance with Section 5 hereof, each Holder shall make a Holder Advance on a pro rata basis to the Lessor with respect to the AOR Trust 1997-1 based on its Holder Commitment in an amount in immediately available funds such that the aggregate of all Holder Advances on such date shall be three percent (3%) of the amount of the Requested Funds on such date; provided, that no Holder shall be obligated for any Holder Advance in excess of its pro rata share of the Available Holder Commitment. The aggregate amount of Holder Advances shall be up to the aggregate amount of the Holder Commitments. No prepayment or any other payment with respect to any Advance shall be permitted such that the Holder Advance with respect to such Advance is less than three percent (3%) of the outstanding amount of such Advance, except in connection with termination or expiration of the Term or in connection with the exercise of remedies relating to the occurrence of a Lease Event of Default. The representations, warranties, covenants and agreements of the Holders herein and in the other Operative Agreements are several, and not joint or joint and several. SECTION 3. SUMMARY OF TRANSACTIONS. 3.1. OPERATIVE AGREEMENTS. On the date hereof, each of the respective parties hereto and thereto shall execute and deliver this Agreement, the Lease, each applicable Ground Lease, the Agency Agreement, the Credit Agreement, the Notes, the Trust Agreement, the Certificates, the Security Agreement, each applicable Mortgage Instrument and such other documents, instruments, certificates and opinions of counsel as agreed to by the parties hereto. 3.2. PROPERTY PURCHASE. On each Property Closing Date and subject to the terms and conditions of this Agreement (a) the Holders will each make a Holder Advance in accordance with Sections 2 and 5 of this Agreement and the terms and provisions of the Trust Agreement, (b) the Lenders will each make Loans in accordance with Sections 1 and 5 of this Agreement and the terms and provisions of the Credit Agreement, (c) the Lessor will purchase and acquire good and marketable title to or ground lease pursuant to a Ground Lease, the applicable Property, each to be within an Approved State, identified by the Construction Agent, in each case pursuant to a Deed, Bill of Sale or Ground Lease, as the case may be, and grant the Agent a lien on such Property by execution of the required Security Documents, (d) the Agent, the Lessee and the Lessor shall execute and 3 deliver a Lease Supplement relating to such Property and (e) the Term shall commence with respect to such Property. 3.3. CONSTRUCTION OF IMPROVEMENTS; COMMENCEMENT OF BASIC RENT. Construction Advances will be made with respect to particular Improvements to be constructed and with respect to ongoing Work regarding the Equipment and construction of particular Improvements, in each case, pursuant to the terms and conditions of this Agreement and the Agency Agreement. The Construction Agent will act as a construction agent on behalf of the Lessor respecting the Work regarding the Equipment, the construction of such Improvements and the expenditures of the Construction Advances related to the foregoing. The Construction Agent shall promptly notify the Lessor upon Completion of the Improvements and the Lessee shall commence to pay Basic Rent as of the Rent Commencement Date. SECTION 4. THE CLOSINGS. 4.1. INITIAL CLOSING DATE. All documents and instruments required to be delivered on the Initial Closing Date shall be delivered at the offices of Moore & Van Allen, PLLC, Charlotte, North Carolina, or at such other location as may be determined by the Lessor, the Agent and the Lessee. 4.2. INITIAL CLOSING DATE; PROPERTY CLOSING DATES; ACQUISITION ADVANCES; CONSTRUCTION ADVANCES. The Construction Agent shall deliver to the Agent a requisition (a "Requisition"), in the form attached hereto as EXHIBIT A or in such other form as is satisfactory to the Agent, in its reasonable discretion, in connection with (a) the Transaction Expenses and other fees, expenses and disbursements payable, pursuant to Section 7.1, by the Lessor and (b) each Acquisition Advance pursuant to Section 5.3 and (c) each Construction Advance pursuant to Section 5.4. SECTION 5. FUNDING OF ADVANCES; CONDITIONS PRECEDENT; REPORTING REQUIREMENTS ON COMPLETION DATE; THE LESSEE'S DELIVERY OF NOTICES; RESTRICTIONS ON LIENS. 5.1. GENERAL. (a) To the extent funds have been advanced to the Lessor as Loans by the Lenders and to the Lessor as Holder Advances by the Holders, the Lessor will use such funds from time to time in accordance with the terms and conditions of this Agreement and the other Operative Agreements (i) at the direction of the Construction Agent to acquire the Properties in accordance with the terms of this Agreement, the Agency Agreement and the other Operative Agreements, (ii) to make Advances to the 4 Construction Agent to permit the acquisition, testing, engineering, installation, development, construction, modification, design, and renovation, as applicable, of the Properties (or components thereof) in accordance with the terms of the Agency Agreement and the other Operative Agreements, and (iii) to pay Transaction Expenses, fees, expenses and other disbursements payable by the Lessor under Sections 7.1(a) and 7.1(b). (b) In lieu of the payment of interest on the Loans and Holder Yield on the Holder Advances on any Scheduled Interest Payment Date with respect to any Property during the period prior to the Rent Commencement Date with respect to such Property, (i) each Lender's Loan shall automatically be increased by the amount of interest accrued and unpaid on such Loan for such period (except to the extent that at any time such increase would cause such Lender's Loan to exceed such Lender's Available Commitment, in which case the Lessee shall pay such excess amount to such Lender in immediately available funds on the date such Lender's Available Commitment was exceeded), and (ii) each Holder's Holder Advance shall automatically be increased by the amount of Holder Yield accrued and unpaid on such Holder Advance for such period (except to the extent that at any time such increase would cause the Holder Advance of such Holder to exceed such Holder's Available Holder Commitment, in which case the Lessee shall pay such excess amount to such Holder in immediately available funds on the date the Available Holder Commitment of such Holder was exceeded). Such increases in a Lender's Loan and a Holder's Holder Advance shall occur without any disbursement of funds by any Person. 5.2. PROCEDURES FOR FUNDING. (a) The Construction Agent shall designate the date for Advances hereunder in accordance with the terms and provisions hereof; provided, however, it is understood and agreed that no more than two (2) Advances (excluding any conversion and/or continuation of any Loan or Holder Advance) may be requested during any calendar month; provided, further, each such Advance shall include all disbursements made on a given day under any Requisition and may relate to one or more Properties. Not less than (i) three (3) Business Days prior to the Initial Closing Date and (ii) three (3) Business Days prior to the date on which any Acquisition Advance or Construction Advance is to be made, the Construction Agent shall deliver to the Agent, (A) with respect to the Initial Closing Date and each Acquisition Advance, a Requisition as described in Section 4.2 hereof (including without limitation a legal description of the Land in the case of a Requisition for an Acquisition Advance for the acquisition of such Land), a schedule of the Improvements, if any, and a schedule of the Equipment, if any, acquired or to be acquired on such date, and a schedule of the Work, if any, to be performed, each of the foregoing in a form reasonably acceptable to the Agent) and (B) with respect to each Construction Advance, a Requisition identifying (among other things) the Property to which such Construction Advance relates. 5 (b) Each Requisition shall: (i) be irrevocable, (ii) request funds in an amount that is not in excess of the total aggregate of the Available Commitments plus the Available Holder Commitments at such time, and (iii) request that the Holders make Holder Advances and that the Lenders make Loans to the Lessor for the payment of Transaction Expenses, Property Acquisition Costs (in the case of an Acquisition Advance) or other Property Costs (in the case of a Construction Advance) that have previously been incurred or are to be incurred on the date of such Advance to the extent such were not subject to a prior Requisition, in each case as specified in the Requisition. (c) Subject to the satisfaction of the conditions precedent set forth in Sections 5.3 or 5.4, as applicable, on each Property Closing Date or the date on which the Construction Advance is to be made, as applicable, (i) the Lenders shall make Loans based on their respective Lender Commitments to the Lessor in an aggregate amount equal to ninety-seven percent (97%) of the Requested Funds specified in any Requisition, (ratably between the Tranche A Lenders and the Tranche B Lenders with the Tranche A Lenders funding eighty-five percent (85%) of the Requested Funds and the Tranche B Lenders funding twelve percent (12%) of the Requested Funds) up to an aggregate principal amount equal to the aggregate of the Available Commitments, (ii) each Holder shall make a Holder Advance based on its Holder Commitment in an amount such that the aggregate of all Holder Advances at such time shall be three percent (3%) of the balance of the Requested Funds specified in such Requisition, up to the aggregate advanced amount equal to the aggregate of the Available Holder Commitments; and (iii) the total amount of such Loans and Holder Advances made on such date shall (x) be used by the Lessor to pay Property Costs and/or Transaction Expenses within three (3) Business Days of the receipt by the Lessor of such Advance or (y) be advanced by the Lessor on the date of such Advance to the Construction Agent or the Lessee to pay Property Costs, as applicable. Notwithstanding that the Operative Agreements state that Advances shall be directed to the Lessor, each Advance shall in fact be directed to the Agent (for the benefit of the Lessor) and applied by the Agent (for the benefit of the Lessor) pursuant to the requirements imposed on the Lessor under the Operative Agreements. (d) With respect to an Advance obtained by the Lessor to pay for Property Costs and/or Transaction Expenses and not expended by the Lessor for such purpose on the date of such Advance, such amounts shall be held by the Lessor (or the Agent on behalf of the Lessor) until the applicable closing date or, if such closing date does not occur within three (3) Business Days of the date of the Lessor's receipt of such Advance, shall be applied regarding the applicable Advance to repay the Lenders and the Holders and, subject to the terms hereof, and of the Credit Agreement and the Trust Agreement, shall remain available for future Advances. Any such amounts held by the Lessor (or the Agent on behalf of the Lessor) shall be subject to the lien of the Security Agreement. (e) All Operative Agreements which are to be delivered to the Lessor, the Agent, the Lenders or the Holders shall be delivered to the Agent, on behalf of the Lessor, the Agent, the Lenders or the Holders, and such items (except for Notes, 6 Certificates, Bills of Sale, the Ground Leases and chattel paper originals, with respect to which in each case there shall be only one original) shall be delivered with originals sufficient for the Lessor, the Agent, each Lender and each Holder. All other items which are to be delivered to the Lessor, the Agent, the Lenders or the Holders shall be delivered to the Agent, on behalf of the Lessor, the Agent, the Lenders or the Holders, and such other items shall be held by the Agent. To the extent any such other items are requested in writing from time to time by the Lessor, any Lender or any Holder, the Agent shall provide a copy of such item to the party requesting it. (f) Notwithstanding the completion of any closing under this Agreement pursuant to Sections 5.3 or 5.4, each condition precedent waived in connection with any such closing may be subsequently enforced by the Agent (unless such has been expressly waived in writing by the Agent). 5.3. CONDITIONS PRECEDENT FOR THE LESSOR, THE AGENT, THE LENDERS AND THE HOLDERS RELATING TO THE INITIAL CLOSING DATE AND THE ADVANCE OF FUNDS FOR THE ACQUISITION OF A PROPERTY. The obligations (i) on the Initial Closing Date of the Lessor, the Agent, the Lenders and the Holders to enter into the transactions contemplated by this Agreement, including without limitation the obligation to execute and deliver the applicable Operative Agreements to which each is a party on the Initial Closing Date, (ii) on the Initial Closing Date of the Holders to make Holder Advances, and of the Lenders to make Loans in order to pay Transaction Expenses and (iii) on a Property Closing Date for the purpose of providing funds to the Lessor necessary to pay the Transaction Expenses and to acquire or ground lease a Property (an "Acquisition Advance"), in each case (with regard to the foregoing Sections 5.3(i), (ii) and (iii)) are subject to the satisfaction or waiver of the following conditions precedent on or prior to the Initial Closing Date or the applicable Property Closing Date, as the case may be (To the extent such conditions precedent require the delivery of any agreement, certificate, instrument, memorandum, legal or other opinion, appraisal, commitment, title insurance commitment, lien report or any other document of any kind or type, such shall be in form and substance satisfactory to the Agent, in its reasonable judgment. Notwithstanding the foregoing, the obligations of each party shall not be subject to any conditions contained in this Section 5.3 which are required to be performed by such party.): (a) the correctness of the representations and warranties of the parties to this Agreement contained herein, in each of the other Operative Agreements and each certificate delivered pursuant to any Operative Agreement (including without limitation the Incorporated Representations and Warranties) on each such date; (b) the performance by the parties to this Agreement of their respective agreements contained herein and in the other Operative Agreements to be performed by them on or prior to each such date; 7 (c) the Agent shall have received a fully executed counterpart copy of the Requisition, appropriately completed; (d) title to each such Property shall conform to the representations and warranties set forth in Section 6.2(l) hereof; (e) the Construction Agent shall have delivered to the Agent a good standing certificate for the Construction Agent in the state where each such Property is located, the Deed with respect to the Land and existing Improvements (if any), a copy of the Ground Lease (if any), and a copy of the Bill of Sale with respect to the Equipment (if any), respecting such of the foregoing as are being acquired or ground leased on each such date with the proceeds of the Loans and Holder Advances or which have been previously acquired or ground leased with the proceeds of the Loans and Holder Advances and such Land, existing Improvements (if any) and Equipment (if any) shall be located in an Approved State; (f) there shall not have occurred and be continuing any Default or Event of Default under any of the Operative Agreements and no Default or Event of Default under any of the Operative Agreements will have occurred after giving effect to the Advance requested by each such Requisition; (g) the Construction Agent shall have delivered to the Agent title insurance commitments to issue policies respecting each such Property in favor of the Lessor and the Agent from a title insurance company reasonably acceptable to the Agent, with such title exceptions thereto as are reasonably acceptable to the Agent; (h) the Construction Agent shall have delivered to the Agent an environmental site assessment respecting each such Property prepared by an independent recognized professional reasonably acceptable to the Agent; (i) the Construction Agent shall have delivered to the Agent a survey (with a flood hazard certification) respecting each such Property prepared by an independent recognized professional reasonably acceptable to the Agent; (j) unless such an opinion has previously been delivered with respect to a particular state, the Construction Agent shall have caused to be delivered to the Agent a legal opinion in the form attached hereto as EXHIBIT B or in such other form as is acceptable to the Agent with respect to local law real property issues respecting the state in which each such Property is located addressed to the Lessor, the Agent, the Lenders and the Holders, from counsel located in the state where each such Property is located, prepared by counsel reasonably acceptable to the Agent; (k) [Intentionally Omitted] 8 (l) the Construction Agent shall have delivered to the Agent invoices for, or other reasonably satisfactory evidence of, the various Transaction Expenses; (m) the Construction Agent shall have caused to be delivered to the Agent a Mortgage Instrument (in such form as is reasonably acceptable to the Agent, with revisions as necessary to conform to applicable state law), Lessor Financing Statements and Lender Financing Statements respecting each such Property, all fully executed and in recordable form; (n) the Lessee shall have delivered to the Agent with respect to each such Property a Lease Supplement and a memorandum (or short form lease) regarding the Lease and such Lease Supplement (such memorandum or short form lease to be in the form attached to the Lease as EXHIBIT B or in such other form as is reasonably acceptable to the Agent, with modifications as necessary to conform to applicable state law, and in form suitable for recording); (o) with respect to each Acquisition Advance, the sum of the Available Commitment plus the Available Holder Commitment (after deducting the Unfunded Amount, if any, and after giving effect to the Acquisition Advance) will be sufficient to pay all amounts payable therefrom; (p) if any such Property is subject to a Ground Lease, the Construction Agent shall have caused a lease memorandum (or short form lease) to be delivered to the Agent for such Ground Lease and, if requested by the Agent, a landlord waiver and a mortgagee waiver (in each case, in such form as is reasonably acceptable to the Agent); (q) [Intentionally Omitted]; (r) the Construction Agent shall have delivered to the Agent a preliminary Construction Budget for each such Property, if applicable; (s) the Construction Agent shall have provided evidence to the Agent of insurance with respect to each such Property as provided in the Lease; (t) the Construction Agent shall have caused an Appraisal regarding each such Property to be provided to the Agent from an appraiser reasonably satisfactory to the Agent until such time as Appraisals for Properties then subject to the Lease have been submitted to the Agent and evidence an aggregate value of all such Properties of at least the Base Amount; (u) the Construction Agent shall cause (i) Uniform Commercial Code lien searches, tax lien searches and judgment lien searches regarding the Lessee to be conducted (and copies thereof to be delivered to the Agent) in such jurisdictions as reasonably determined by the Agent by a nationally recognized search company reasonably acceptable to the Agent and (ii) the liens referenced in such lien searches 9 which are objectionable to the Agent to be either removed or otherwise handled in a manner reasonably satisfactory to the Agent; (v) all taxes, fees and other charges in connection with the execution, delivery, recording, filing and registration of the Operative Agreements and/or documents related thereto shall have been paid or provisions for such payment shall have been made to the reasonable satisfaction of the Agent; (w) in the opinion of the Agent and its respective counsel, the transactions contemplated by the Operative Agreements do not and will not subject the Lessor, the Lenders, the Agent or the Holders to any adverse regulatory prohibitions, constraints, penalties or fines; (x) each of the Operative Agreements to be entered into on such date shall have been duly authorized, executed and delivered by the parties thereto, and shall be in full force and effect, and the Agent shall have received a fully executed copy of each of the Operative Agreements; (y) since the date of the most recent audited financial statements of AOR delivered pursuant to Section 5.1(b) of the Lessee Credit Agreement, there shall not have occurred any event, condition or state of facts which shall have or could reasonably be expected to have a Material Adverse Effect, other than as specifically contemplated by the Operative Agreements; (z) as of the Initial Closing Date only, the Agent shall have received an Officer's Certificate, dated as of the Initial Closing Date, of the Lessee in the form attached hereto as EXHIBIT D or in such other form as is reasonably acceptable to the Agent stating that (i) each and every representation and warranty of each Credit Party contained in the Operative Agreements to which it is a party is true and correct on and as of the Initial Closing Date; (ii) no Default or Event of Default has occurred and is continuing under any Operative Agreement; and (iii) each Operative Agreement to which any Credit Party is a party is in full force and effect with respect to it; (aa) as of the Initial Closing Date only, the Agent shall have received (i) a certificate of the Secretary or an Assistant Secretary of each Credit Party, dated as of the Initial Closing Date, in the form attached hereto as EXHIBIT E or in such other form as is reasonably acceptable to the Agent attaching and certifying as to (1) the resolutions of the Board of Directors of such Credit Party duly authorizing the execution, delivery and performance by such Credit Party of each of the Operative Agreements to which it is or will be a party, (2) the articles of incorporation of such Credit Party certified as of a recent date by the Secretary of State of its state of incorporation and its by-laws and (3) the incumbency and signature of persons authorized to execute and deliver on behalf of such Credit Party the Operative Agreements to which it is or will be a party and (ii) a good standing certificate (or local equivalent) from the appropriate office of the respective states where such Credit Party is incorporated and where the principal place of 10 business of such Credit Party is located as to its good standing in each such state (To the extent any Credit Party is a partnership, a limited liability company or is otherwise organized, such Credit Party shall deliver to the Agent (in form and substance reasonably satisfactory to the Agent) as of the Initial Closing Date (A) a certificate regarding such Credit Party and any corporate general partners covering the matters described in EXHIBIT E and (B) a good standing certificate, a certificate of limited partnership or a local equivalent of either of the foregoing, as applicable.); (bb) as of the Initial Closing Date only, the Agent shall have received an Officer's Certificate of the Lessor dated as of the Initial Closing Date in the form attached hereto as EXHIBIT F or in such other form as is reasonably acceptable to the Agent, stating that (i) each and every representation and warranty of the Lessor contained in the Operative Agreements to which it is a party is true and correct on and as of the Initial Closing Date, (ii) each Operative Agreement to which the Lessor is a party is in full force and effect with respect to it and (iii) the Lessor has duly performed and complied with all covenants, agreements and conditions contained herein or in any Operative Agreement required to be performed or complied with by it on or prior to the Initial Closing Date; (cc) as of the Initial Closing Date only, the Agent shall have received (i) a certificate of the Secretary, an Assistant Secretary, Trust Officer or Vice President of the Trust Company in the form attached hereto as EXHIBIT G or in such other form as is reasonably acceptable to the Agent, attaching and certifying as to (A) the signing resolutions duly authorizing the execution, delivery and performance by the Lessor of each of the Operative Agreements to which it is or will be a party, (B) its articles of association or other equivalent charter documents and its by- laws, as the case may be, certified as of a recent date by an appropriate officer of the Trust Company and (C) the incumbency and signature of persons authorized to execute and deliver on its behalf the Operative Agreements to which it is a party and (ii) a good standing certificate from the Office of the Comptroller of the Currency; (dd) as of the Initial Closing Date only, counsel for the Lessor reasonably acceptable to the Agent shall have issued to the Lessee, the Holders, the Lenders and the Agent its opinion in the form attached hereto as EXHIBIT H or in such other form as is reasonably acceptable to the Agent; (ee) as of the Initial Closing Date only, the Construction Agent shall have caused to be delivered to the Agent a legal opinion in the form attached hereto as EXHIBIT I or in such other form as is reasonably acceptable to the Agent, addressed to the Lessor, the Agent, the Lenders and the Holders, from counsel reasonably acceptable to the Agent; and (ff) as of the Initial Closing Date only, the Construction Agent shall cause (i) tax lien searches and judgment lien searches regarding each Credit Party to be conducted (and copies thereof to be delivered to the Agent) in such jurisdictions as determined by the Agent by a nationally recognized search company acceptable to the Agent and (ii) the 11 liens referenced in such lien searches which are objectionable to the Agent to be either removed or otherwise handled in a manner satisfactory to the Agent; provided this Section 5.3(ff) shall not be interpreted to limit or to contradict the requirements of Section 5.3(u). 5.4. CONDITIONS PRECEDENT FOR THE LESSOR, THE AGENT, THE LENDERS AND THE HOLDERS RELATING TO THE ADVANCE OF FUNDS AFTER THE ACQUISITION ADVANCE. The obligations of the Holders to make Holder Advances, and the Lenders to make Loans in connection with all requests for Advances subsequent to the acquisition of a Property (and to pay the Transaction Expenses in connection therewith) are subject to the satisfaction or waiver of the following conditions precedent (To the extent such conditions precedent require the delivery of any agreement, certificate, instrument, memorandum, legal or other opinion, appraisal, commitment, title insurance commitment, lien report or any other document of any kind or type, such shall be in form and substance satisfactory to the Agent, in its reasonable discretion. Notwithstanding the foregoing, the obligations of each party shall not be subject to any conditions contained in this Section 5.4 which are required to be performed by such party.): (a) the correctness on such date of the representations and warranties of the parties to this Agreement contained herein, in each of the other Operative Agreements and each certificate delivered pursuant to any Operative Agreement (including without limitation the Incorporated Representations and Warranties); (b) the performance by the parties to this Agreement of their respective agreements contained herein and in the other Operative Agreements to be performed by them on or prior to each such date; (c) the Agent shall have received a fully executed counterpart of the Requisition, appropriately completed; (d) based upon the applicable Construction Budget which shall satisfy the requirements of this Agreement, the Available Commitments and the Available Holder Commitment (after deducting the Unfunded Amount) will be sufficient to complete the Improvements; (e) there shall not have occurred and be continuing any Default or Event of Default under any of the Operative Agreements and no Default or Event of Default under any of the Operative Agreements will have occurred after giving effect to the Construction Advance requested by the applicable Requisition; (f) the title insurance policy delivered in connection with the requirements of Section 5.3(g) shall provide for (or shall be endorsed to provide for) insurance in an amount at least equal to the maximum total Property Cost indicated by the Construction Budget referred to in subparagraph (d) above and there shall be no title change or exception objectionable to the Agent; 12 (g) the Construction Agent shall have delivered to the Agent copies of the Plans and Specifications for the applicable Improvements; (h) the Construction Agent shall have delivered to the Agent invoices for, or other reasonably satisfactory evidence of, any Transaction Expenses and other fees, expenses and disbursements referenced in Section 7.1(b) that are to be paid with the Advance; (i) the Construction Agent shall have delivered, or caused to be delivered to the Agent, copies of invoices, Bills of Sale or other documents reasonably acceptable to the Agent, in each case with regard to any Equipment or other components of such Property then being acquired with the proceeds of the Loans and Holder Advances and naming the Lessor as purchaser and transferee; (j) all taxes, fees and other charges in connection with the execution, delivery, recording, filing and registration of the Operative Agreements shall have been paid or provisions for such payment shall have been made to the reasonable satisfaction of the Agent; (k) since the date of the most recent audited Financial Statements (as such term is defined in the Lessee Credit Agreement) of the Lessee, there shall not have occurred any event, condition or state of facts which shall have or could reasonably be expected to have a Material Adverse Effect, other than as specifically contemplated by the Operative Agreements; and (l) in the opinion of the Agent and its counsel, the transactions contemplated by the Operative Agreements do not and will not subject the Lessor, the Lenders, the Agent or the Holders to any adverse regulatory prohibitions, constraints, penalties or fines arising out of any change in, or re-interpretation of, law or regulation since the Initial Closing Date. 5.5. ADDITIONAL REPORTING AND DELIVERY REQUIREMENTS ON COMPLETION DATE AND ON CONSTRUCTION PERIOD TERMINATION DATE. Within 10 days after the Completion Date (but in no event later than the Construction Period Termination Date) for each Property, the Construction Agent shall deliver to the Agent an Officer's Certificate in the form attached hereto as EXHIBIT J or in such other form as is reasonably acceptable to the Agent specifying (a) the address for such Property, (b) the Completion Date for such Property, (c) the aggregate Property Cost for such Property and (d) detailed, itemized documentation supporting the asserted Property Cost figures. The Agent shall have the right to contest on reasonable grounds the information contained in such Officer's Certificate. Furthermore, on or prior to the Completion Date for each Property, the Construction Agent shall deliver or cause to be delivered to the Agent (unless previously delivered to the Agent) originals of the following, each of which shall be in form and substance acceptable to the 13 Agent, in its reasonable judgment: (u) a title insurance endorsement regarding the title insurance policy delivered in connection with the requirements of Section 5.3(g), but only to the extent such endorsement is necessary to provide for insurance in an amount at least equal to the maximum total Property Cost and, if endorsed, the endorsement shall not include a title change or exception objectionable to the Agent; (v) an as-built survey for such Property, (w) insurance certificates respecting such Property as required hereunder and under the Lease Agreement, (x) a memorandum (or short form) of the Lease and such Lease Supplement (in form suitable for recording) and (y) if requested by the Agent, amendments to the Lessor Financing Statements executed by the appropriate parties. In addition, on the Completion Date for such Property the Construction Agent covenants and agrees that the recording fees, documentary stamp taxes or similar amounts required to be paid in connection with the related Mortgage Instrument shall be or have been paid in an amount required by applicable law, subject, however, to the obligations of the Lenders and the Holders to fund such costs to the extent required pursuant to Section 7.1. 5.6. THE CONSTRUCTION AGENT DELIVERY OF CONSTRUCTION BUDGET MODIFICATIONS. The Construction Agent covenants and agrees to deliver to the Agent each month notification of any modification to any Construction Budget regarding any Property if such modification materially increases the cost to construct such Property; provided, no Construction Budget may be increased unless (a) the title insurance policies referenced in Section 5.3(g) are also modified or endorsed, if necessary, to provide for insurance in an amount that satisfies the requirements of Section 5.4(f) of this Agreement and (b) after giving effect to any such amendment, the Construction Budget remains in compliance with the requirements of Section 5.4(d) of this Agreement. 5.7. RESTRICTIONS ON LIENS. On each Property Closing Date, the Construction Agent shall cause each Property acquired by the Lessor on such date to be free and clear of all Liens except those referenced in Sections 6.2(r)(i) and 6.2(r)(ii). On each date a Property is either sold to a third party in accordance with the terms of the Operative Agreements or, pursuant to Section 22.1(a) of the Lease Agreement, retained by the Lessor, the Lessee shall cause such Property to be free and clear of all Liens (other than Lessor Liens and such other Liens that are expressly set forth as title exceptions on the title commitment issued under Section 5.3(g) with respect to such Property, to the extent such title commitment has been approved by the Agent). 5.8. ACCESSION AGREEMENT REQUIREMENTS - NEW TRANCHE A GUARANTORS. AOR and its Subsidiaries may from time to time create or acquire new Subsidiaries, provided, that at any time promptly upon request by the Agent (and in any event, with respect to any new Subsidiary that is created or acquired in connection with a Physician Transaction or that is requested or required to become a guarantor under the Lessee Credit Agreement prior to or concurrently with satisfaction of the conditions set forth in clauses (y) and (z) of clause (i) below or, if earlier, the consummation of such Physician Transaction), (i) each such new Subsidiary (y) having assets with a gross value (determined in accordance with GAAP) in excess of $100,000, 14 and (z) having commenced the conduct of an active business, will execute and deliver to the Agent (with sufficient copies for each Financing Party) an Accession Agreement in the form of Exhibit K and such other documents to effectuate the foregoing as may be reasonably requested by the Majority Secured Parties, and (ii) AOR will cause each such new Subsidiary to execute and deliver, and will cause to be delivered, all documentation of the type described in Section 5.3 as such new Subsidiary would have had to deliver were it a Tranche A Guarantor on the Initial Closing Date. 5.9. MAINTENANCE OF AOR SYNTHETIC REAL ESTATE, INC. AS A WHOLLY-OWNED ENTITY. From the Initial Closing Date and thereafter until such time as all obligations of all Credit Parties under the Operative Agreements have been satisfied and performed in full, AOR shall retain the Lessee as a Wholly-Owned Entity of AOR. 5.10. POST-CLOSING REQUIREMENTS REGARDING CERTAIN PROPERTIES FOR WHICH ADVANCES ARE MADE ON THE INITIAL CLOSING DATE. With respect to all Properties to which the Owner Trustee holds title on or prior to the Initial Closing Date and for which Advances are made on the Initial Closing Date, within forty-five (45) days after the Initial Closing Date, and to the extent not delivered with respect to the Initial Closing Date, the Construction Agent shall deliver to the Agent any and all items specified in Section 5.3 with respect to such Properties including without limitation surveys (with flood hazard certificates), title insurance endorsements, appraisals and opinions. All such items shall be in form and substance reasonably satisfactory to the Agent. To the extent the requirements of Section 5.3 are not satisfied with respect to such Properties within forty-five (45) days after the Initial Closing Date, the Agent (upon direction from the Majority Secured Parties) may require the Lessee to purchase, and the Agent shall purchase, all such Properties on a Business Day specified by the Agent for an amount equal to the Termination Value with respect to such Properties and otherwise in accordance with Sections 20.1 through 20.2 of the Lease (as if such date specified by the Agent were an Election Date). Unless the Financing Parties otherwise agree, the Financing Parties shall have no obligation to make any additional Advances with respect to such Properties until such time as the requirements of Section 5.3 are satisfied with respect to such Properties. SECTION 6. REPRESENTATIONS AND WARRANTIES. 6.1. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. Effective as of the Initial Closing Date, the date of each Advance and the Rent Commencement Date, the Trust Company in its individual capacity and as the Borrower, as indicated, represents and warrants to each of the other parties hereto as follows, provided, that 15 the representations in the following paragraphs (h), (j) and (k) are made solely in its capacity as the Borrower: (a) It is a national banking association and is duly organized and validly existing and in good standing under the laws of the United States of America and has the power and authority to enter into and perform its obligations under the Trust Agreement and (assuming due authorization, execution and delivery of the Trust Agreement by the Holders) has the corporate and trust power and authority to act as the Owner Trustee and to enter into and perform the obligations under each of the other Operative Agreements to which the Trust Company or the Owner Trustee, as the case may be, is or will be a party and each other agreement, instrument and document to be executed and delivered by it on or before such Closing Date in connection with or as contemplated by each such Operative Agreement to which the Trust Company or the Owner Trustee, as the case may be, is or will be a party; (b) The execution, delivery and performance of each Operative Agreement to which it is or will be a party, either in its individual capacity or (assuming due authorization, execution and delivery of the Trust Agreement by the Holders) as the Owner Trustee, as the case may be, has been duly authorized by all necessary action on its part and neither the execution and delivery thereof, nor the consummation of the transactions contemplated thereby, nor compliance by it with any of the terms and provisions thereof (i) does or will require any approval or consent of any trustee or holders of any of its indebtedness or obligations, (ii) does or will contravene any Legal Requirement, (iii) does or will contravene or result in any breach of or constitute any default under, or result in the creation of any Lien upon any of its property under, (A) its charter or by-laws, or (B) any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, bank loan or credit agreement or other agreement or instrument to which it is a party or by which it or its properties may be bound or affected, which contravention, breach, default or Lien under clause (B) would materially and adversely affect its ability, in its individual capacity or as the Owner Trustee, to perform its obligations under the Operative Agreements to which it is a party or (iv) does or will require any Governmental Action by any Governmental Authority; (c) The Trust Agreement and, assuming the Trust Agreement is the legal, valid and binding obligation of the Holders, each other Operative Agreement to which the Trust Company or the Owner Trustee, as the case may be, is or will be a party have been, or on or before such Closing Date will be, duly executed and delivered by the Trust Company or the Owner Trustee, as the case may be, and the Trust Agreement and each such other Operative Agreement to which the Trust Company or the Owner Trustee, as the case may be, is a party constitutes, or upon execution and delivery will constitute, a legal, valid and binding obligation enforceable against the Trust Company or the Owner Trustee, as the case may be, in accordance with the terms thereof; (d) There is no action or proceeding pending or, to its knowledge, threatened to which it is or will be a party, either in its individual capacity or as the Owner Trustee, 16 before any Governmental Authority that, if adversely determined, would materially and adversely affect its ability, in its individual capacity or as the Owner Trustee, to perform its obligations under the Operative Agreements to which it is a party or would question the validity or enforceability of any of the Operative Agreements to which it is or will become a party; (e) It has not assigned or transferred any of its right, title or interest in or under the Lease, the Agency Agreement or its interest in any Property or any portion thereof, except in accordance with the Operative Agreements; (f) No Default of Event of Default under the Operative Agreements attributable to it has occurred and is continuing; (g) Except as otherwise contemplated in the Operative Agreements, the proceeds of the Loans and Holder Advances shall not be applied by the Owner Trustee for any purpose other than the repayment of the Bridge Financing, the purchase and/or lease of the Properties, the acquisition, installation and testing of the Equipment, the construction of Improvements and the payment of Transaction Expenses, in each case which accrue prior to the Rent Commencement Date with respect to a particular Property and in each case in accordance with the Agency Agreement; (h) Neither the Owner Trustee nor any Person authorized by the Owner Trustee to act on its behalf has offered or sold any interest in the Trust Estate or the Notes, or in any similar security relating to a Property, or in any security the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the aforementioned securities to, or solicited any offer to acquire any of the same from, any Person other than, in the case of the Notes, the Agent, and neither the Owner Trustee nor any Person authorized by the Owner Trustee to act on its behalf will take any action which would subject, as a direct result of such action alone, the issuance or sale of any interest in the Trust Estate or the Notes to the provisions of Section 5 of the Securities Act or require the qualification of any Operative Agreement under the Trust Indenture Act of 1939, as amended; (i) The Owner Trustee's principal place of business, chief executive office and office where the documents, accounts and records relating to the transactions contemplated by this Agreement and each other Operative Agreement are kept are located at 79 South Main Street, Salt Lake City, Utah 84111; (j) The Owner Trustee is not engaged principally in, and does not have as one (1) of its important activities, the business of extending credit for the purpose of purchasing or carrying any margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System of the United States), and no part of the proceeds of the Loans or the Holder Advances will be used by it to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock or for any purpose that violates, or is inconsistent with, the 17 provisions of Regulations G, T, U, or X of the Board of Governors of the Federal Reserve System of the United States; (k) The Owner Trustee is not an "investment company" or a company controlled by an "investment company" within the meaning of the Investment Company Act; (l) Each Property is free and clear of all Lessor Liens attributable to the Owner Trustee in its individual capacity; and (m) The Owner Trustee, in its trust capacity, is a party to no documents, instruments or agreements other than documents in connection with the Bridge Financing and the Operative Agreements to which it is a party and any other documents delivered by the Owner Trustee in connection with the Operative Agreements. Effective as of the Initial Closing Date, the date of each Advance and the Rent Commencement Date, the Owner Trustee represents and warrants that each Property is free and clear of all Lessor Liens. 6.2. REPRESENTATIONS AND WARRANTIES OF EACH CREDIT PARTY. Effective as of the Initial Closing Date, the date of each Advance, the date each Wholly-Owned Entity delivers an Accession Agreement and the Rent Commencement Date, each Credit Party represents and warrants to each of the other parties hereto that: (a) The Incorporated Representations and Warranties are true and correct (unless such relate solely to an earlier point in time) and the Lessee has delivered to the Agent the financial statements and other reports referred to in Section 5.1 of the Lessee Credit Agreement; (b) The execution and delivery by each Credit Party of this Agreement and the other applicable Operative Agreements as of such date and the performance by each Credit Party of its respective obligations under this Agreement and the other applicable Operative Agreements are within the corporate, partnership or limited liability company (as the case may be) powers of each Credit Party, have been duly authorized by all necessary corporate, partnership or limited liability company (as the case may be) action on the part of each Credit Party (including without limitation any necessary shareholder, partnership or limited liability company action), have been duly executed and delivered, have received all necessary governmental approval required to be obtained by each Credit Party, and do not and will not (i) violate any Legal Requirement which is binding on any Credit Party or any of their Subsidiaries, (ii) contravene or conflict with, or result in a breach of, any provision of (A) the Articles of Incorporation, By-Laws or other organizational documents of any Credit Party or any of their Subsidiaries or (B) any agreement, indenture, instrument or other document which is binding on any Credit Party or any of their Subsidiaries (excepting such contravention of, conflict with or breach 18 thereof which shall not have or could not reasonably be expected to have a Material Adverse Effect) or (iii) result in, or require, the creation or imposition of any Lien (other than pursuant to the terms of the Operative Agreements) on any asset of any Credit Party or any of their Subsidiaries; (c) This Agreement and the other applicable Operative Agreements to which any Credit Party is a party, executed prior to and as of such date, constitute the legal, valid and binding obligation of each Credit Party, as applicable, enforceable against each Credit Party, as applicable, in accordance with their terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditor's rights generally or by general principles of equity. Each Credit Party has executed the various Operative Agreements required to be executed as of such date; (d) Except as described in EXHIBIT L, there are no material actions, suits or proceedings pending or, to the knowledge of any Credit Party, threatened against any Credit Party in any court or before any Governmental Authority (nor shall any order, judgment or decree have been issued or to the knowledge of any Credit Party, proposed to be issued by any Governmental Authority to set aside, restrain, enjoin or prevent the full performance of any Operative Agreement or any transaction contemplated thereby) that (i) concern any Property or any Credit Party's interest therein, (ii) question the validity or enforceability of any Operative Agreement or any transaction contemplated by the Operative Agreements or (iii) shall have or could reasonably be expected to have a Material Adverse Effect; (e) No Governmental Action by any Governmental Authority or other authorization, registration, consent, approval, waiver, notice or other action by, to or of any other Person (x) pursuant to any Legal Requirement or (y) pursuant to any contract, indenture, instrument or agreement (the failure of which to obtain in the case of this clause (y) shall not have or could not reasonably be expected to have a Material Adverse Effect) is required to have been obtained on the part of any Credit Party to authorize or is required in connection with (i) the execution, delivery or performance of any Operative Agreement, (ii) the legality, validity, binding effect or enforceability of any Operative Agreement, (iii) the acquisition, ownership, construction, completion, occupancy, operation, leasing or subleasing of any Property except for those that may appropriately be obtained at a later date or (iv) any Advance, in each case, except those which have been obtained and are in full force and effect; (f) Upon the execution and delivery of each Lease Supplement to the Lease, (i) the Lessee will have unconditionally accepted the Property subject to the Lease Supplement and will have a valid and subsisting leasehold interest in such Property, subject only to the Permitted Liens, and (ii) no offset will exist with respect to any Rent or other sums payable under the Lease; 19 (g) Except as otherwise contemplated by the Operative Agreements, the Construction Agent shall not use the proceeds of any Holder Advance or Loan for any purpose other than the purchase and/or lease of the Properties, the acquisition, installation and testing of the Equipment, the construction of Improvements and the payment of Transaction Expenses, in each case which accrue prior to the Rent Commencement Date with respect to a particular Property; (h) All information heretofore or contemporaneously herewith furnished by any Credit Party or any of their Subsidiaries to the Agent, the Owner Trustee, any Lender or any Holder for purposes of or in connection with this Agreement and the transactions contemplated hereby is, and all information hereafter furnished by or on behalf of any Credit Party or any of their Subsidiaries to the Agent, the Owner Trustee, any Lender or any Holder pursuant hereto or in connection herewith will be, true and accurate in all material respects on the date as of which such information is dated or certified, and such information, taken as a whole, does not and will not omit to state any material fact necessary to make such information, taken as a whole, not misleading; (i) The Lessee is duly incorporated under the laws of the State of Delaware. The principal place of business, chief executive office and office of the Construction Agent and the Lessee where the documents, accounts and records relating to the transactions contemplated by this Agreement and each other Operative Agreement are kept are located at Houston, Harris County, Texas. The states of incorporation/formation and the principal place of business of the Tranche A Guarantors are located in the states set forth in EXHIBIT M; (j) The representations and warranties of each Credit Party set forth in any of the Operative Agreements are true and correct in all material respects on and as of each such date as if made on and as of such date (unless expressly referring to another date and in each case, such representations and warranties shall have been true and correct on and as of such earlier date). There exists no Default or Event of Default under any of the Operative Agreements which is continuing and which has not been cured within any cure period expressly granted under the terms of the applicable Operative Agreement or otherwise waived in accordance with the applicable Operative Agreement. No Default or Event of Default will occur under any of the Operative Agreements as a result of, or after giving effect to, the Advance requested by the Requisition on the date of such Advance; (k) As of each Property Closing Date and the date of each subsequent Advance and the Rent Commencement Date only, each Property then being financed consists of (i) unimproved Land or (ii) Land and existing Improvements thereon which Improvements are either suitable for occupancy at the time of acquisition, ground leasing or at the Rent Commencement Date or will be renovated and/or modified in accordance with the terms of this Agreement on or prior to the Rent Commencement Date. Each Property then being financed is located at the location set forth on the applicable Requisition, each of which is in one (1) of the Approved States; 20 (l) As of each Property Closing Date, the date of each subsequent Advance and the Rent Commencement Date only, the Lessor has good and indefeasible fee simple title to each Property, or, if any Property is the subject of a Ground Lease, the Lessor will have a valid ground leasehold interest enforceable against the ground lessor of such Property in accordance with the terms of such Ground Lease, subject only to (i) such Liens referenced in Sections 6.2(r)(i) and 6.2(r)(ii) on the applicable Property Closing Date and (ii) subject to Section 5.7, Permitted Liens after the applicable Property Closing Date; (m) As of each Property Closing Date, the date of each subsequent Advance and the Rent Commencement Date only, no portion of any Property is located in an area identified as a special flood hazard area by the Federal Emergency Management Agency or other applicable agency, or if any such Property is located in an area identified as a special flood hazard area by the Federal Emergency Management Agency or other applicable agency, then flood insurance has been obtained for such Property in accordance with Section 14.2(b) of the Lease and in accordance with the National Flood Insurance Act of 1968, as amended; (n) As of each Property Closing Date, the date of each subsequent Advance and the Rent Commencement Date only, each Property complies with all Insurance Requirements and in all material respects with all standards of the Credit Parties with respect to similar properties owned by any Credit Party; (o) As of each Property Closing Date, the date of each subsequent Advance and the Rent Commencement Date only, each Property complies with all Legal Requirements as of such date (including without limitation all zoning and land use laws and Environmental Laws), except to the extent that failure to comply therewith, individually or in the aggregate, shall not have and could not reasonably be expected to have a Material Adverse Effect; (p) As of each Property Closing Date, the date of each subsequent Advance and the Rent Commencement Date only, all utility services and facilities necessary for the construction and operation of the Improvements and the installation and operation of the Equipment regarding each Property (including without limitation gas, electrical, water and sewage services and facilities) are available at the applicable Land and will be constructed prior to the Completion Date for such Property; (q) As of each Property Closing Date, the date of each subsequent Advance and the Rent Commencement Date only, acquisition, installation and testing of the Equipment (if any) and construction of the Improvements (if any) to such date shall have been performed in a good and workmanlike manner, substantially in accordance with the applicable Plans and Specifications; (r) (i) The Security Documents create, as security for the Obligations (as such term is defined in the Security Agreement), valid and enforceable security interests 21 in, and Liens on, all of the Collateral, in favor of the Agent, for the ratable benefit of the Lenders and the Holders, as their respective interests appear in the Operative Agreements, and such security interests and Liens are subject to no other Liens (subject to Liens for Taxes not yet due and payable) other than Liens that are expressly set forth as title exceptions on the title commitment issued under Section 5.3(g) with respect to the applicable Property, to the extent such title commitment has been approved by the Agent. Upon recordation of the Mortgage Instrument in the real estate recording office in the applicable Approved State identified by the Construction Agent or the Lessee, the Lien created by the Mortgage Instrument in the real property described therein shall be a perfected first priority mortgage Lien on such real property in favor of the Agent, for the ratable benefit of the Lenders and the Holders, as their respective interests appear in the Operative Agreements subject to no other Liens (subject to Liens for Taxes not yet due and payable) other than Liens that are expressly set forth as title exceptions on the title commitment issued under Section 5.3(g) with respect to the applicable Property, to the extent such title commitment has been approved by the Agent. To the extent that the security interests in the portion of the Collateral comprised of personal property can be perfected by filing in the filing offices in the applicable Approved States or elsewhere identified by the Construction Agent or the Lessee, upon filing of the Lender Financing Statements in such filing offices, the security interests created by the Security Agreement shall be perfected first priority security interests (subject to Liens for Taxes not yet due and payable) in such personal property in favor of the Agent, for the ratable benefit of the Lenders and the Holders, as their respective interests appear in the Operative Agreements to the extent that perfection may be accomplished by the filing of financing statements; (ii) The Lease Agreement creates, as security for the obligations of the Lessee under the Lease Agreement, valid and enforceable security interests in, and Liens on, each Property leased thereunder, in favor of the Lessor, and such security interests and Liens are subject to no other Liens (subject to Liens for Taxes not yet due and payable) other than Liens that are expressly set forth as title exceptions on the title commitment issued under Section 5.3(g) with respect to the applicable Property, to the extent such title commitment has been approved by the Agent. Upon recordation of the memorandum of the Lease Agreement and the memorandum of a Ground Lease (or, in either case, a short form lease) in the real estate recording office in the applicable Approved State identified by the Construction Agent or the Lessee, the Lien created by the Lease Agreement in the real property described therein shall be a perfected first priority mortgage Lien (subject to Liens for Taxes not yet due and payable) on such real property in favor of the Agent, for the ratable benefit of the Lenders and the Holders, as their respective interests 22 appear in the Operative Agreements. To the extent that the security interests in the portion of any Property comprised of personal property can be perfected by the filing in the filing offices in the applicable Approved State or elsewhere identified by the Construction Agent or the Lessee upon filing of the Lessor Financing Statements in such filing offices, a security interest created by the Lease Agreement shall be a perfected first priority security interest (subject to Liens for Taxes not yet due and payable) in such personal property in favor of the Lessor, which rights pursuant to the Lessor Financing Statements are assigned to the Agent, for the ratable benefit of the Lenders and the Holders, as their respective interests appear in the Operative Agreements to the extent perfection may be accomplished by the filing of financing statements; (s) The Plans and Specifications for each Property will be prepared prior to the commencement of construction in accordance with all applicable Legal Requirements (including without limitation all applicable Environmental Laws and building, planning, zoning and fire codes), except to the extent the failure to comply therewith, individually or in the aggregate, shall not have and could not reasonably be expected to have a Material Adverse Effect. Upon completion of the Improvements for each Property in accordance with the applicable Plans and Specifications, such Improvements will be within any building restriction lines and will not encroach in any manner onto any adjoining land (except as permitted by express written easements, which have been approved by the Agent); (t) As of the Rent Commencement Date only, each Property shall be improved in accordance with the applicable Plans and Specifications in a good and workmanlike manner, shall be operational and shall constitute all the equipment, facilities, rights, other personal property and other real property necessary to operate, utilize and maintain such Property for its originally intended purpose in a commercially reasonable manner and on an independent, stand alone basis; (u) As of each Property Closing Date only, each Property has been acquired or ground leased pursuant to a Ground Lease at a price that is not in excess of fair market value or fair market rental value, as the case may be; and (v) As of the Initial Closing Date only, each Wholly-Owned Entity (formed or acquired prior to or on such date) shall have executed this Agreement and the Credit Agreement in its capacity as a Tranche A Guarantor and, as to AOR, in its capacity as the Guarantor and as a Tranche A Guarantor. SECTION 7. PAYMENT OF CERTAIN EXPENSES. 7.1. TRANSACTION EXPENSES. (a) The Lessor agrees on the Initial Closing Date, to pay, or cause to be paid, all Transaction Expenses arising from the Initial Closing Date, including without limitation all reasonable fees, expenses and disbursements of the various legal counsels for the Lessor and the Agent in connection with the transactions contemplated by the Operative Agreements and incurred in connection with such Initial Closing Date, the initial fees and expenses of the Owner Trustee due and payable on such Initial Closing Date, all fees, taxes and expenses for the recording, registration and filing of documents and all other reasonable fees, expenses and disbursements incurred in connection with such Initial Closing Date; provided, however, the Lessor shall pay such amounts described in this Section 7.1(a) only if (i) such amounts are properly described in a 23 Requisition delivered on or before the Initial Closing Date, and (ii) funds are made available by the Lenders and the Holders in connection with such Requisition in an amount sufficient to allow such payment. On the Initial Closing Date after delivery and receipt of the Requisition referenced in Section 4.2(a) hereof and satisfaction of the other conditions precedent for such date, the Holders shall make Holder Advances and the Lenders shall make Loans to the Lessor to pay for the Transaction Expenses. The Lessee agrees to timely pay all amounts referred to in this Section 7.1(a) to the extent not paid by the Lessor. (b) Assuming no Default or Event of Default shall have occurred and be continuing and only for the period prior to the Rent Commencement Date, the Lessor agrees on each Property Closing Date, on the date of any Construction Advance and on the Completion Date to pay, or cause to be paid, all Transaction Expenses including without limitation all reasonable fees, expenses and disbursements of the various legal counsels for the Lessor and the Agent in connection with the transactions contemplated by the Operative Agreements and billed in connection with such Advance or such Completion Date, all Transaction Expenses arising from the Initial Closing Date which have not been previously paid by the Lessor, the annual fees and reasonable out-of-pocket expenses of the Owner Trustee, all fees, expenses and disbursements incurred with respect to the various items referenced in Sections 5.3, 5.4 and/or 5.5 (including without limitation any premiums for title insurance policies and charges for any updates to such policies), all other reasonable fees, expenses and disbursements in connection with such Advance or such Completion Date and all other Transaction Expenses theretofore incurred and not paid by the Lessor, including without limitation all expenses relating to and all fees, taxes and expenses for the recording, registration and filing of documents and during the Commitment Period, all fees, expenses and costs referenced in Sections 7.3(a), 7.3(b), 7.3(d) and 7.4; provided, however, the Lessor shall pay such amounts described in this Section 7.1(b) on the applicable Business Day only if (i) such amounts are properly described in a Requisition delivered on the applicable date and (ii) funds are made available by the Lenders and the Holders in connection with such Requisition in an amount sufficient to allow such payment. On each Property Closing Date, on the date of any Construction Advance or any Completion Date, after delivery of the applicable Requisition and satisfaction of the other conditions precedent for such date, the Holders shall make a Holder Advance and the Lenders shall make Loans to the Lessor to pay for the Transaction Expenses referenced in this Section 7.1(b). The Lessee agrees to timely pay all amounts referred to in this Section 7.1(b) to the extent not paid by the Lessor. 7.2. BROKERS' FEES. The Lessee agrees to pay or cause to be paid any and all brokers' fees, if any, including without limitation any interest and penalties thereon, which are payable in connection with the transactions contemplated by this Agreement and the other Operative Agreements. 24 7.3. CERTAIN FEES AND EXPENSES. The Lessee agrees to pay or cause to be paid (a) the initial and annual Owner Trustee's fee and all reasonable expenses of the Owner Trustee and any co- trustees (including without limitation reasonable counsel fees and expenses) or any successor owner trustee and/or co-trustee, for acting as the owner trustee under the Trust Agreement, (b) all reasonable out-of-pocket costs and expenses incurred by the Credit Parties, the Agent, the Lenders, the Holders or the Lessor in entering into any Lease Supplement and any future amendments, modifications, supplements, restatements and/or replacements with respect to any of the Operative Agreements, whether or not such Lease Supplement, amendments, modifications, supplements, restatements and/or replacements are ultimately entered into, or giving or withholding of waivers of consents hereto or thereto, which have been requested by the Credit Parties, the Agent, the Lenders, the Holders or the Lessor, (c) all reasonable out-of-pocket costs and expenses incurred by the Construction Agent, the Lessee, the Agent, the Lenders, the Holders or the Lessor in connection with any exercise of remedies under any Operative Agreement or any purchase of any Property by the Construction Agent, the Lessee or any third party and (d) all reasonable out-of-pocket costs and expenses incurred by the Credit Parties, the Agent, the Lenders, the Holders or the Lessor in connection with any transfer or conveyance of any Property, whether or not such transfer or conveyance is ultimately accomplished. 7.4. FACILITY FEE. Until the Maturity Date, the Lessee agrees to pay or to cause to be paid to the Agent for the account of (a) the Lenders, respectively, a facility fee (the "Lender Facility Fee") equal to the product of either (i) the average daily Commitment of each Lender (for Tranche A Loans and Tranche B Loans) during the Commitment Period or (ii) after the Commitment Period, the average daily aggregate amount of the Advances of such Lender outstanding until the Maturity Date, in each case multiplied by the applicable percentage set forth in the matrix below per annum and (b) the Holders, respectively, a facility fee (the "Holder Facility Fee") equal to the product of either (i) the average daily Holder Commitment of each Holder during the Commitment Period or (ii) after the Commitment Period, the average daily aggregate amount of the Advances of such Holder outstanding until the Maturity Date, in each case multiplied by the applicable percentage set forth in the matrix below per annum. From the Initial Closing Date until the fifth (5th) day after delivery of the December 31, 1997 financial statements pursuant to Section 28.1 of the Lease, such applicable percentage shall be 0.200% for both the Lender Facility Fee and for the Holder Facility Fee. Such Facility Fees shall be calculated on the basis of a year of three hundred sixty (360) days for the actual days elapsed and shall be payable in arrears on the last Business Day of each fiscal quarter of the Lessee, commencing with the fiscal quarter ending December 31, 1997. The Facility Fees shall be reset from time to time at the time of the resetting of the Applicable Margin. If all or a portion of any such Facility Fee shall not be paid when due, such overdue amount shall bear interest, payable by the Lessee on demand, at a rate per annum equal to the ABR (or in the case of Holder Yield, the ABR plus the Applicable Margin for Eurodollar Holder Advances) plus two percent (2%) from the date of such non-payment until such amount is paid in full (as well as before judgment). 25
Ratio of Consolidated Lender Holder Debt to Annualized EBITDA Facility Fee Facility Fee - ------------------------- ------------ ------------ Greater than 3.0 to 1.0 0.250% 0.250% Greater than 2.0 to 1.0 but less 0.200% 0.200% than or equal to 3.0 to 1.0 Less than or equal to 2.0 to 1.0 0.175% 0.175%
7.5. ADMINISTRATIVE FEE. During the Term, the Lessee agrees to pay or to cause to be paid to the Agent (for the account of the Agent) the administrative fee contemplated by to the terms of the engagement letter dated October 24, 1997, as supplemented from time to time, from First Union Capital Markets Corp. to AOR. SECTION 8. OTHER COVENANTS AND AGREEMENTS. 8.1. COOPERATION WITH THE CONSTRUCTION AGENT OR THE LESSEE. The Holders, the Lenders, the Lessor (at the direction of the Majority Secured Parties) and the Agent shall, at the expense of and to the extent reasonably requested by the Construction Agent or the Lessee (but without assuming additional liabilities on account thereof and only to the extent such additional liabilities are acceptable to the Agent in its reasonable judgment), cooperate with the Construction Agent or the Lessee in connection with the Construction Agent or the Lessee satisfying its covenant obligations contained in the Operative Agreements including without limitation at any time and from time to time, promptly and duly executing and delivering any and all such further instruments, documents and financing statements (and continuation statements related thereto) as the Construction Agent or the Lessee may reasonably request. 8.2. COVENANTS OF THE OWNER TRUSTEE AND THE HOLDERS. Each of the Owner Trustee and the Holders hereby agrees that so long as this Agreement is in effect: (a) Neither the Owner Trustee (in its trust capacity or in its individual capacity) nor any Holder will create or permit to exist at any time, and each of them will, at its own cost and expense, promptly take such action as may be necessary duly to discharge, or to cause to be discharged, all Lessor Liens on the Properties attributable to it; provided, however, that the Owner Trustee and the Holders shall not be required to so 26 discharge any such Lessor Lien while the same is being contested in good faith by appropriate proceedings diligently prosecuted so long as such proceedings shall not involve any material danger of impairment of the Liens of the Security Documents or involve any danger of the sale, forfeiture or loss of, and shall not interfere with the use or disposition of, any material part of any Property or title thereto or any interest therein or the payment of Rent; (b) Without prejudice to any right under the Trust Agreement of the Owner Trustee to resign (subject to requirement set forth in the Trust Agreement that such resignation shall not be effective until a successor shall have agreed to accept such appointment), or the Holders' rights under the Trust Agreement to remove the institution acting as the Owner Trustee (after consent to such removal by the Agent as provided in the Trust Agreement and by the Lessee as provided in the succeeding paragraph (c) below), each of the Owner Trustee and the Holders hereby agrees with the Lessee, the Construction Agent and the Agent (i) not to terminate or revoke the trust created by the Trust Agreement except as permitted by Article VIII of the Trust Agreement, (ii) not to amend, supplement, terminate or revoke or otherwise modify any provision of the Trust Agreement in such a manner as to adversely affect the rights of any such party without the prior written consent of such party and (iii) to comply with all of the terms of the Trust Agreement, the nonperformance of which would adversely affect any such party; (c) The Owner Trustee or any successor may resign or be removed by the Holders as the Owner Trustee, a successor Owner Trustee may be appointed and a corporation may become the Owner Trustee under the Trust Agreement, only in accordance with the provisions of Article IX of the Trust Agreement and, with respect to such appointment, with the consent of the Lessee, which consent shall not be unreasonably withheld or delayed; (d) The Owner Trustee, in its capacity as the Owner Trustee under the Trust Agreement, and not in its individual capacity, shall not contract for, create, incur or assume any Indebtedness, or enter into any business or other activity or enter into any contracts or agreements, other than pursuant to or under (i) documents executed prior to the Initial Closing Date with respect to the Bridge Financing or (ii) the Operative Agreements; (e) The Holders will not instruct the Owner Trustee to take any action in violation of the terms of any Operative Agreement; (f) Neither any Holder nor the Owner Trustee shall (i) commence any case, proceeding or other action with respect to the Owner Trustee under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, arrangement, winding- up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (ii) seek appointment of a receiver, trustee, custodian or other similar official with respect to the Owner Trustee or for all or any substantial benefit of the creditors of the Owner Trustee; and neither any Holder nor the 27 Owner Trustee shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in this paragraph; (g) The Owner Trustee shall give prompt notice to the Lessee, the Holders and the Agent if the Owner Trustee's principal place of business or chief executive office, or the office where the records concerning the accounts or contract rights relating to any Property are kept, shall cease to be located at 79 South Main Street, Salt Lake City, Utah 84111, or if it shall change its name; and (h) The Owner Trustee shall take or refrain from taking such actions and grant or refrain from granting such approvals with respect to the Operative Agreements and/or relating to any Property in each case as directed in writing by the Agent (until such time as the Loans are paid in full, and then by the Majority Holders) or, in connection with Sections 8.5 and 9.2 hereof, the Lessee; provided, however, that notwithstanding the foregoing provisions of this subparagraph (h) the Owner Trustee, the Agent, the Lenders and the Holders each acknowledge, covenant and agree that neither the Owner Trustee nor the Agent shall act or refrain from acting, regarding each Unanimous Vote Matter, until such party has received the approval of each Lender and each Holder affected by such matter. 8.3. CREDIT PARTY COVENANTS, CONSENT AND ACKNOWLEDGMENT. (a) Each Credit Party acknowledges and agrees that the Owner Trustee, pursuant to the terms and conditions of the Security Agreement and the Mortgage Instruments, shall create Liens respecting the various personal property, fixtures and real property described therein in favor of the Agent. Each Credit Party hereby irrevocably consents to the creation, perfection and maintenance of such Liens. Each Credit Party shall, to the extent reasonably requested by any of the other parties hereto, cooperate with the other parties to satisfy their covenants herein or in the other Operative Agreements, including without limitation at any time and from time to time promptly and duly executing and delivering any and all such future instruments, documents and financing statements (and continuation statements related thereto) as any other party hereto may reasonably request. (b) The Lessor hereby instructs each Credit Party, and each Credit Party hereby acknowledges and agrees, that until such time as the Loans and the Holder Advances are paid in full and the Liens evidenced by the Security Agreement and the Mortgage Instruments have been released (i) any and all Rent (excluding Excepted Payments which shall be payable to each Holder or other Person as appropriate) and any and all other amounts of any kind or type under any of the Operative Agreements due and owing or payable to any Person shall instead be paid directly to the Agent (excluding Excepted Payments which shall be payable to each Holder or other Person as appropriate) or as the Agent may direct from time to time for allocation and distribution in accordance with the procedures set forth in Section 8.7 hereof, (ii) all rights of the Lessor under the Lease shall be exercised by the Agent and (iii) each Credit Party shall cause all notices, 28 certificates, financial statements, communications and other information which are delivered, or are required to be delivered, to the Lessor, also to be delivered at the same time to the Agent. (c) No Credit Party shall consent to or permit any amendment, supplement or other modification of the terms or provisions of any Operative Agreement except in accordance with Section 12.4 of this Agreement. (d) The Lessee hereby covenants and agrees to cause an Appraisal or reappraisal (in form and substance satisfactory to the Agent and from an appraiser selected by the Agent) to be issued respecting any Property as requested by the Agent (i) at each and every time as such shall be required to satisfy any regulatory requirements imposed on the Agent, the Lessor, the Trust Company, any Lender and/or any Holder and (ii) from time to time after the occurrence and during the continuance of an Event of Default. (e) Each Credit Party hereby covenants and agrees that, except for amounts payable as Basic Rent, any and all payment obligations owing from time to time under the Operative Agreements by any Person to the Agent, any Lender, any Holder or any other Person shall (without further action) be deemed to be Supplemental Rent obligations payable by the Lessee. Without limitation, such obligations shall include without limitation arrangement fees, administrative fees, participation fees, facility fees, unused fees, prepayment penalties, breakage costs, indemnities, trustee fees and transaction expenses incurred by the parties hereto in connection with the transactions contemplated by the Operative Agreements. (f) At any time the Lessor or the Agent is entitled under the Operative Agreements to possession of a Property or any component thereof, each of the Construction Agent and the Lessee hereby covenants and agrees, at its own cost and expense, to assemble (in the case of tangible personal property) and make the same available to the Agent (on behalf of the Lessor). (g) The Lessee hereby covenants and agrees that respecting all Properties in the aggregate subject to the Lease at any time (and without respect to analysis on a Property by Property basis), (i) Non-Integral Equipment financed under the Operative Agreements may constitute up to, but not to exceed, fifteen percent (15%) of the aggregate Advances extended at or prior to such time and (ii) Equipment (including without limitation such Non-Integral Equipment) financed under the Operative Agreements may constitute up to, but not to exceed fifty percent (50%) of the aggregate Advances extended at or prior to such time. (h) The Lessee hereby covenants and agrees that as of Completion (i) the Property Cost for each individual parcel of the Property shall be no less than $2,000,000 and (ii) each parcel of the Property shall be a Permitted Facility. 29 (i) The Lessee hereby covenants and agrees that it shall give prompt notice to the Agent if the Lessee's principal place of business or chief executive office, or the office where the records concerning the accounts or contract rights relating to any Property are kept, shall cease to be located at Houston, Harris County, Texas or if it shall change its name. (j) The Lessee hereby covenants and agrees that the aggregate Property Cost of Properties purchased for any reason by the Lessee pursuant to its Purchase Option prior to the Expiration Date shall not exceed ten percent (10%) of the aggregate Property Cost for all Properties funded during the Commitment Period. (k) The Lessee hereby covenants and agrees that the rights of the Lessee under this Agreement and the Lease shall not impair or in any way diminish the obligations of the Construction Agent and/or the rights of the Lessor under the Agency Agreement. (l) Within forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year of the Lessee (beginning with the fiscal quarter ending March 31, 1998) and within one-hundred (100) days after the close of each fiscal year of the Lessee (beginning with the fiscal year ending December 31, 1997), the Lessee hereby covenants and agrees to deliver to the Agent, the Lenders and the Holders a Compliance Certificate and a Covenant Compliance Worksheet reflecting the computation of the financial covenants incorporated by reference into the Lease pursuant to Section 28.1 of the Lease as of the last day of the period covered by such financial statements. (m) Each Credit Party agrees that the Tranche A Loans, the Tranche B Loans and the Certificates will be treated as debt of AOR for purposes of calculating financial covenants. (n) Each Credit Party shall promptly notify the Agent, or cause the Agent to be promptly notified, upon such Credit Party gaining knowledge of the occurrence of any Default or Event of Default which is continuing at such time. In any event, such notice shall be provided to the Agent within ten (10) days of when an officer of such Credit Party gains such knowledge. (o) Until all of the obligations under the Operative Agreements have been finally and indefeasibly paid and satisfied in full and the Commitments and the Holder Commitments terminated unless consent has been obtained from the Majority Secured Parties, each Credit Party will: (i) except as permitted by the express provisions of the Lessee Credit Agreement, preserve and maintain its separate legal existence and all rights, franchises, licenses and privileges necessary to the conduct of its business, and qualify and remain qualified as a foreign corporation (or partnership, limited liability company or other such similar entity, as the case may be) and authorized 30 to do business in each jurisdiction in which the failure to do so qualify shall have or could reasonably be expected to have a Material Adverse Effect; (ii) pay and perform all obligations of the Credit Parties under the Operative Agreements and pay or perform (A) all taxes, assessments and other governmental charges that may be levied or assessed upon it or any of its property, and (B) all other indebtedness, obligations and liabilities in accordance with customary trade practices, which in the case of each of (A) and (B) if not paid shall have or could reasonably be expected to have a Material Adverse Effect; provided, that any Credit Party may contest any item described in this Section 8.3(o)(ii) in good faith so long as adequate reserves are maintained with respect thereto in accordance with GAAP; (iii) do each of the following to the extent failure to do so shall have or could reasonably be expected to have a Material Adverse Effect: observe and remain in compliance with all applicable Laws and maintain in full force and effect all Governmental Actions, in each case applicable to the conduct of its business; keep or cause to be kept in full force and effect all licenses, certifications or accreditations necessary for any Permitted Facility to carry on its business; and (iv) provided, that the Agent, the Lenders and the Holders use reasonable efforts to minimize disruption to the business of the Credit Parties, permit representatives of the Agent or any Lender or any Holder, from time to time upon reasonable notice and during normal banking hours to do each of the following: to visit and inspect its properties; inspect, audit and make extracts from its books, records and files, including without limitation management letters prepared by independent accountants; and discuss with its principal officers, and (in the presence of its officers) its independent accountants, its business, assets, liabilities, financial condition, results of operations and business prospects. 8.4. SHARING OF CERTAIN PAYMENTS. Except for Excepted Payments, the parties hereto acknowledge and agree that all payments due and owing by any Credit Party to the Lessor under the Lease or any of the other Operative Agreements shall be made by such Credit Party directly to the Agent as more particularly provided in Section 8.3 hereof. The Lessor, the Holders, the Agent, the Lenders and the Credit Parties acknowledge the terms of Section 8.7 of this Agreement regarding the allocation of payments and other amounts made or received from time to time under the Operative Agreements and agree, that all such payments and amounts are to be allocated as provided in Section 8.7 of this Agreement. 31 8.5. GRANT OF EASEMENTS, ETC. The Agent, the Lenders and the Holders hereby agree that, so long as no Event of Default shall have occurred and be continuing, the Owner Trustee shall, from time to time at the request of the Lessee (and with the prior consent of the Agent), in connection with the transactions contemplated by the Agency Agreement, the Lease or the other Operative Agreements, (i) grant easements and other rights in the nature of easements with respect to any Property, (ii) release existing easements or other rights in the nature of easements which are for the benefit of any Property, (iii) execute and deliver to any Person any instrument appropriate to confirm or effect such grants or releases, and (iv) execute and deliver to any Person such other documents or materials in connection with the acquisition, development, construction, testing or operation of any Property, including without limitation reciprocal easement agreements, construction contracts, operating agreements, development agreements, plats, replats or subdivision documents; provided, that each of the agreements referred to in this Section 8.5 shall be of the type normally executed by the Lessee or its Affiliates or other Persons operating businesses similar to the businesses of Lessee and/or its Affiliates and similarly situated to Lessee and/or its Affiliates in the ordinary course of such firm's business and shall be on commercially reasonable terms so as not to diminish the value of any Property in any material respect. 8.6. APPOINTMENT OF THE AGENT BY THE LENDERS, THE HOLDERS AND THE OWNER TRUSTEE. The Holders hereby appoint the Agent to act as collateral agent for the Holders in connection with the Lien granted by the Security Documents to secure the Holder Amount. The Lenders and the Holders acknowledge and agree and direct that the rights and remedies of the beneficiaries of the Lien of the Security Documents shall be exercised by the Agent on behalf of the Lenders and the Holders as directed from time to time by the Majority Secured Parties or, pursuant to Sections 8.2(h) and 12.4, all of the Lenders and the Holders, as the case may be; provided, in all cases, the Agent shall allocate payments and other amounts received in accordance with Section 8.7; provided, further, the Agent shall take directions with respect to the guaranty provisions of (a) Sections 8B.1 through 8B.8 of the Credit Agreement from the Tranche A Lenders holding sixty-six and two thirds percent (66 2/3%), of the aggregate Tranche A Loans outstanding and (b) Sections 8C.1 through 8C.8 of the Credit Agreement from the Majority Secured Parties. The Agent is further appointed to provide notices under the Operative Agreements on behalf of the Owner Trustee (as determined by the Agent, in its reasonable discretion), to receive notices under the Operative Agreements on behalf of the Owner Trustee and (subject to Sections 8.5 and 9.2) to take such other action which the Owner Trustee is entitled to take under the Operative Agreements on behalf of the Owner Trustee as the Agent shall determine in its reasonable discretion from time to time. The Agent hereby accepts such appointments. For purposes hereof, the provisions of Section 7 of the Credit Agreement, together with such other terms and provisions of the Credit Agreement and the other Operative Agreements as required for the full interpretation and operation of Section 7 of the Credit Agreement are hereby incorporated by reference as if restated herein for the mutual benefit of the Agent and each Holder as if each Holder were a Lender thereunder. Outstanding Holder Advances and outstanding Loans shall each be taken into account for purposes of determining 32 Majority Secured Parties. Further, the Agent shall be entitled to take such action on behalf of the Owner Trustee as is delegated to the Agent under any Operative Agreement (whether express or implied) as may be reasonably incidental thereto. The parties hereto hereby agree to the provisions contained in this Section 8.6. Any appointment of a successor agent under Section 7.9 of the Credit Agreement shall also be effective as an appointment of a successor agent for purposes of this Section 8.6. 8.6B. APPOINTMENT OF THE LESSOR BY THE LENDERS AND THE HOLDERS. The Lenders and the Holders hereby appoint the Lessor to act as collateral agent for the Lenders and the Holders in connection with the Lien granted by the Lease to secure the obligations of each Credit Party under any and all Operative Agreements. The Lessor accepts such appointment. The Lessor hereby agrees, and the Lenders and the Holders hereby acknowledge, that (to the extent not otherwise set forth in any other Operative Agreement) all right, title and interest of the Lessor in, to and under the Lease is hereby further assigned to the Agent, for the benefit of the Lenders and the Holders, as collateral to secure the obligations of the Lessor and each Credit Party under any and all Operative Agreements. 8.7. COLLECTION AND ALLOCATION OF PAYMENTS AND OTHER AMOUNTS. (a) Each Credit Party has agreed pursuant to the terms of this Agreement to pay to (i) the Agent any and all Rent (excluding Excepted Payments) and any and all other amounts of any kind or type under any of the Operative Agreements due and owing or payable to any Person and (ii) each Person as appropriate the Excepted Payments. Promptly after receipt, the Agent shall apply and allocate, in accordance with the terms of this Section 8.7, such amounts received from any Credit Party and all other payments, receipts and other consideration of any kind whatsoever received by the Agent pursuant to the Security Agreement or otherwise received by the Agent, the Holders or any of the Lenders in connection with the Collateral, the Security Documents or any of the other Operative Agreements. Ratable distributions among the Lenders and the Holders under this Section 8.7 shall be made based on (in the case of the Lenders) the ratio of the outstanding Loans to the aggregate Property Cost and (in the case of the Holders) the ratio of the outstanding Holder Advances to the aggregate Property Cost. Ratable distributions among the Tranche A Lenders under this Section 8.7 shall be made based on the ratio of the individual Tranche A Lender's Commitment for Tranche A Loans to the aggregate of all the Tranche A Lenders' Commitments for Tranche A Loans. Ratable distributions among the Tranche B Lenders under this Section 8.7 shall be made based on the ratio of the individual Tranche B Lender's Commitment for Tranche B Loans to the aggregate of all the Tranche B Lenders' Commitments for Tranche B Loans. Ratable distributions among the Lenders (in situations where the Tranche A Lenders are not differentiated from the Tranche B Lenders) shall be made based on the ratio of the individual Lender's Commitment to the aggregate of all the Lenders' Commitments. Ratable distributions among the Holders under this Section 8.7 shall be based on the ratio of the individual Holder's Holder Commitment to the aggregate of all the Holders' Holder Commitments. 33 (b) Payments and other amounts received by the Agent from time to time in accordance with the terms of subparagraph (a) shall be applied and allocated as follows: (i) Any such payment or amount identified as or deemed to be Basic Rent shall be applied and allocated by the Agent first, ratably to the Lenders and the Holders for application and allocation to the payment of interest on the Loans and thereafter the principal of the Loans which is due and payable on such date and to the payment of accrued Holder Yield with respect to the Holder Advances and thereafter the portion of the Holder Advances which is due on such date; and second, if no Default or Event of Default is in effect, any excess shall be paid to such Person or Persons as the Lessee may designate; provided, that if a Default or Event of Default is in effect, such excess (if any) shall instead be held by the Agent until the earlier of (I) the first date thereafter on which no Default or Event of Default shall be in effect (in which case such payments or returns shall then be made to such other Person or Persons as the Lessee may designate) and (II) the Maturity Date or the Expiration Date, as the case may be (or, if earlier, the date of any Acceleration), in which case such amounts shall be applied and allocated in the manner contemplated by Section 8.7(b)(iv). (ii) If on any date the Agent or the Lessor shall receive any amount in respect of (A) any Casualty or Condemnation pursuant to Sections 15.1(a) or 15.1(g) of the Lease (excluding any payments in respect thereof which are payable to the Lessee in accordance with the Lease), or (B) the Termination Value in connection with the delivery of a Termination Notice pursuant to Article XVI of the Lease, or (C) the Termination Value in connection with the exercise of the Purchase Option under Section 20.1 of the Lease or the exercise of the option of the Lessor to transfer the Properties to the Lessee pursuant to Section 20.3 of the Lease, or (D) any payment required to be made or elected to be made by the Construction Agent to the Lessor pursuant to the terms of the Agency Agreement, then in each case, the Lessor shall be required to pay such amount received (1) if no Acceleration has occurred, to prepay the principal balance of the Loans and the Holder Advances, on a pro rata basis, a portion of such amount to be distributed to the Lenders and the Holders or (2) if an Acceleration has occurred, to apply and allocate the proceeds respecting Sections 8.7(b)(ii)(A) through 8.7(b)(ii)(D) in accordance with Section 8.7(b)(iii) hereof. (iii) Subject to Section 8.7(c), an amount equal to any payment identified as proceeds of the sale or other disposition (or lease upon the exercise of remedies) of the Properties or any portion thereof, whether pursuant to Article XXII of the Lease or the exercise of remedies under the Security Documents or otherwise, the execution of remedies set forth in the Lease and any payment in respect of excess wear and tear pursuant to Section 22.3 of the Lease (whether such payment relates to a period before or after the Construction Period Termination Date) shall be applied and allocated by the Agent first, ratably to the 34 payment of the principal and interest of the Tranche B Loans then outstanding, second, ratably to the payment to the Holders of the outstanding principal balance of all Holder Advances plus all outstanding Holder Yield with respect to such outstanding Holder Advances, third, to the extent such amount exceeds the maximum amount to be returned pursuant to the foregoing provisions of this paragraph (iii), ratably to the payment of the principal and interest of the Tranche A Loans then outstanding, fourth, to any and all other amounts owing under the Operative Agreements to the Lenders under the Tranche B Loans, fifth, to any and all other amounts owing under the Operative Agreements to the Holders, sixth, to any and all other amounts owing under the Operative Agreements to the Lenders under the Tranche A Loans, and seventh, to the extent moneys remain after application and allocation pursuant to clauses first through sixth above, to the Owner Trustee for application and allocation to any and all other amounts owing to the Holders or the Owner Trustee and as the Holders shall determine; provided, where no Event of Default shall exist and be continuing and a prepayment is made for any reason with respect to less than the full amount of the outstanding principal amount of the Loans and the outstanding Holder Advances, the proceeds shall be applied and allocated ratably to the Lenders and to the Holders. (iv) Subject to Section 8.7(c), an amount equal to (A) any such payment identified as a payment pursuant to Section 22.1(b) of the Lease (or otherwise) of the Maximum Residual Guarantee Amount (and any such lesser amount as may be required by Section 22.1(b) of the Lease) in respect of the Properties, (B) any other amount payable upon any exercise of remedies after the occurrence of an Event of Default not covered by Sections 8.7(b)(i) or 8.7(b)(iii) above (including without limitation any amount received in connection with an Acceleration which does not represent proceeds from the sale or liquidation of the Properties), (C) any amount paid by the Tranche A Guarantors pursuant to Sections 8B.1 - 8B.8 of the Credit Agreement and/or by the Guarantor pursuant to Sections 8C.1 - 8C.8 of the Credit Agreement and (D) any amount received with respect to the collateral which secures both the Lessee Credit Agreement and any obligations under the Operative Agreements, shall be applied and allocated by the Agent first, ratably, to the payment of the principal and interest balance of Tranche A Loans then outstanding, second, ratably to the payment of the principal and interest balance of the Tranche B Loans then outstanding, third, ratably to the payment of the principal balance of all Holder Advances plus all outstanding Holder Yield with respect to such outstanding Holder Advances, fourth, to the payment of any other amounts owing to the Lenders hereunder or under any of the other Operative Agreement, and fifth, to the extent moneys remain after application and allocation pursuant to clauses first through fourth above, to the Owner Trustee for application and allocation to Holder Advances and Holder Yield and any other amounts owing to the Holders or the Owner Trustee as the Holders shall determine. 35 (v) An amount equal to any such payment identified as Supplemental Rent shall be applied and allocated by the Agent to the payment of any amounts then owing to the Agent, the Lenders, the Holders and the other parties to the Operative Agreements (or any of them) (other than any such amounts payable pursuant to the preceding provisions of this Section 8.7(b)) as shall be determined by the Agent in its reasonable discretion; provided, however, that Supplemental Rent received upon the exercise of remedies after the occurrence and continuance of an Event of Default in lieu of or in substitution of the Maximum Residual Guarantee Amount or as a partial payment thereon shall be applied and allocated as set forth in Section 8.7(b)(iv). (vi) The Agent in its reasonable judgment shall identify the nature of each payment or amount received by the Agent and apply and allocate each such amount in the manner specified above. (c) Upon the termination of the Commitments and the Holder Commitments and the indefeasible payment in full of all Loans, all Holder Advances and all other amounts owing by the Owner Trustee or any Credit Party in accordance with any Operative Agreement, any excess moneys remaining with the Agent with regard to one or more of the Properties shall be returned to the Lessee. In the event of an Acceleration it is agreed that, prior to the application and allocation of amounts received by the Agent in the order described in Section 8.7(b) above, any such amounts shall first be applied and allocated to the payment of (i) any and all sums advanced by the Agent in order to preserve the Collateral or to preserve its Lien thereon, (ii) the expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing or realizing on the Collateral, or of any exercise by the Agent of its rights under the Security Documents, together with reasonable attorneys' fees and expenses and court costs and (iii) any and all other amounts reasonably owed to the Agent in accordance with the transactions contemplated by the Operative Agreements (including without limitation any accrued and unpaid administration fees). 8.8. RELEASE OF PROPERTIES, ETC. If the Lessee shall at any time purchase any Property pursuant to the Lease, or the Construction Agent shall purchase any Property pursuant to the Agency Agreement, or if any Property shall be sold in accordance with Article XXII of the Lease, then, upon satisfaction by the Owner Trustee of its obligation to prepay the Loans, Holder Advances and all other amounts owing to the Lenders and the Holders under the Operative Agreements, the Agent is hereby authorized and directed to release such Properties from the Liens created by the Security Documents to the extent of its interest therein. In addition, upon the termination of the Commitments and the Holder Commitments and the payment in full of the Loans, the Holder Advances and all other amounts owing by the Owner Trustee hereunder or under any other Operative Agreement, the Agent is hereby authorized and directed to release all of the Properties from the Liens created by the Security Documents to the extent of its interest therein. Upon request of the Owner Trustee or the Lessee following any such release, the Agent shall, at the 36 sole cost and expense of the Lessee, execute and deliver to the Owner Trustee and the Lessee such documents as the Owner Trustee or the Lessee shall reasonably request to evidence such release. SECTION 9. CREDIT AGREEMENT AND TRUST AGREEMENT. 9.1. THE CONSTRUCTION AGENT'S AND THE LESSEE'S CREDIT AGREEMENT RIGHTS. Notwithstanding anything to the contrary contained in the Credit Agreement, the Agent, the Lenders, the Holders, the Credit Parties and the Owner Trustee hereby agree that, prior to the occurrence and continuation of any Default (except with respect to subsections (a), (b), (d) or (g) which shall apply in the case of a Default) or Event of Default (except with respect to subsections (a), (b), (d) or (g) which shall apply in the case of an Event of Default), the Construction Agent or the Lessee, as the case may be, shall have the following rights: (a) the right to designate an account to which amounts funded under the Operative Agreements shall be credited pursuant to Section 2.3(a) of the Credit Agreement; (b) the right to terminate or reduce the Commitments pursuant to Section 2.5(a) of the Credit Agreement; (c) the right to exercise the conversion and continuation options pursuant to Section 2.7 of the Credit Agreement; (d) the right to receive any notice and any certificate, in each case issued pursuant to Sections 2.9(c) and/or 2.11(a) of the Credit Agreement; (e) the right to replace any Lender pursuant to Section 2.11(b) of the Credit Agreement; (f) the right to approve any successor agent pursuant to Section 7.9 of the Credit Agreement; and (g) the right to consent to any assignment by a Lender to which the Lessor has the right to consent pursuant to Section 9.8 of the Credit Agreement. 9.2. THE CONSTRUCTION AGENT'S AND THE LESSEE'S TRUST AGREEMENT RIGHTS. Notwithstanding anything to the contrary contained in the Trust Agreement, the Credit Parties, the Owner Trustee and the Holders hereby agree that, prior to the occurrence and continuation of any Default (except with respect to subsection (b) which shall apply in the case of a Default) or Event of Default (except with respect to subsection (b) which shall apply in the 37 case of an Event of Default), the Construction Agent or the Lessee, as the case may be, shall have the following rights: (a) the right to exercise the conversion and continuation options pursuant to Section 3.8 of the Trust Agreement; (b) the right to receive any notice and any certificate, in each case issued pursuant to Section 3.9(a) of the Trust Agreement; (c) the right to replace any Holder pursuant to Section 3.9(b) of the Trust Agreement; (d) the right to exercise the removal options contained in Section 3.9 of the Trust Agreement; and (e) no removal of the Owner Trustee and appointment of a successor Owner Trustee pursuant to Section 9.1 of the Trust Agreement shall be made without the prior written consent (not to be unreasonably withheld or delayed) of the Lessee. SECTION 10. TRANSFER OF INTEREST. 10.1. RESTRICTIONS ON TRANSFER. Each Lender may participate, assign or transfer all or a portion of its interest hereunder and under the other Operative Agreements in accordance with Sections 9.7 and 9.8 of the Credit Agreement; provided, at such time each participant, assignee or transferee must obtain the same ratable interest in Tranche A Loans, the Tranche B Loans and the Lessee Credit Agreement. The Holders may, directly or indirectly, assign, convey or otherwise transfer any of their right, title or interest in or to the Trust Estate or the Trust Agreement with the prior written consent of the Agent and the Lessee (which consent shall not be unreasonably withheld or delayed) and in accordance with the terms of Section 11.8(b) of the Trust Agreement. The Owner Trustee may, subject to the rights of the Lessee under the Lease and the other Operative Agreements and to the Lien of the applicable Security Documents but only with the prior written consent of the Agent (which consent may be withheld by the Agent in its sole discretion) and (provided, no Default or Event of Default has occurred and is continuing) with the consent of the Lessee, directly or indirectly, assign, convey, appoint an agent with respect to enforcement of, or otherwise transfer any of its right, title or interest in or to any Property, the Lease, the Trust Agreement and the other Operative Agreements (including without limitation any right to indemnification thereunder), or any other document relating to a Property or any interest in a Property as provided in the Trust Agreement and the Lease. The provisions of the immediately preceding sentence shall not apply to the obligations of the Owner Trustee to transfer Property to the Lessee or a third party purchaser pursuant to Article XXII of the Lease upon payment for such Property in accordance with the terms and conditions of the Lease. No Credit Party may assign any of the Operative Agreements or any of their respective rights or obligations thereunder or with respect 38 to any Property in whole or in part to any Person without the prior written consent of the Agent, the Lenders, the Holders and the Lessor. 10.2. EFFECT OF TRANSFER. From and after any transfer effected in accordance with this Section 10, the transferor shall be released, to the extent of such transfer, from its liability hereunder and under the other documents to which it is a party in respect of obligations to be performed on or after the date of such transfer; provided, however, that any transferor shall remain liable hereunder and under such other documents to the extent that the transferee shall not have assumed the obligations of the transferor thereunder. Upon any transfer by the Owner Trustee, a Holder or a Lender as above provided, any such transferee shall assume the obligations of the Owner Trustee, the Holder or the Lender, as the case may be, and shall be deemed an "Owner Trustee", "Holder", or "Lender", as the case may be, for all purposes of such documents and each reference herein to the transferor shall thereafter be deemed a reference to such transferee for all purposes, except as provided in the preceding sentence. Notwithstanding any transfer of all or a portion of the transferor's interest as provided in this Section 10, the transferor shall be entitled to all benefits accrued and all rights vested prior to such transfer including without limitation rights theretofore accrued to indemnification under any such document. SECTION 11. INDEMNIFICATION. 11.1. GENERAL INDEMNITY. Whether or not any of the transactions contemplated hereby shall be consummated, the Indemnity Provider hereby assumes liability for and agrees to defend, indemnify and hold harmless each Indemnified Person on an After Tax Basis from and against any Claims, which may be imposed on, incurred by or asserted against an Indemnified Person by any third party, including without limitation Claims arising from the negligence of an Indemnified Person (but not to the extent such Claims arise from the gross negligence or willful misconduct of such Indemnified Person itself, as determined by a court of competent jurisdiction) in any way relating to or arising or alleged to arise out of the execution, delivery, performance or enforcement of this Agreement, the Lease or any other Operative Agreement or on or with respect to any Property or any component thereof, including without limitation Claims in any way relating to or arising or alleged to arise out of (a) the financing, refinancing, purchase, acceptance, rejection, ownership, design, construction, refurbishment, development, delivery, acceptance, nondelivery, leasing, subleasing, possession, use, occupancy, operation, maintenance repair, modification, transportation, condition, sale, return, repossession (whether by summary proceedings or otherwise), or any other disposition of any Property or any part thereof, including without limitation the acquisition, holding or disposition of any interest in the Property, lease or agreement comprising a portion of any thereof; (b) any latent or other defects in any Property or any portion thereof whether or not discoverable by an Indemnified Person or the Indemnity Provider; (c) a violation of Environmental Laws, Environmental Claims or other loss of or 39 damage to any property or the environment relating to the Property, the Lease, the Agency Agreement or the Indemnity Provider; (d) the Operative Agreements, or any transaction contemplated thereby; (e) any breach by the Indemnity Provider of any of its representations or warranties under the Operative Agreements to which the Indemnity Provider is a party or failure by the Indemnity Provider to perform or observe any covenant or agreement to be performed by it under any of the Operative Agreements; (f) the transactions contemplated hereby or by any other Operative Agreement, in respect of the application of Parts 4 and 5 of Subtitle B of Title I of ERISA; and (g) personal injury, death or property damage, including without limitation Claims based on strict or absolute liability in tort. All Claims relating to Impositions which otherwise would be subject to this Section 11.1 shall instead be subject to the provisions of Section 11.2. If a written Claim is made against any Indemnified Person or if any proceeding shall be commenced against such Indemnified Person (including without limitation a written notice of such proceeding), for any Claim, such Indemnified Person shall promptly notify the Indemnity Provider in writing and shall not take action with respect to such Claim without the consent of the Indemnity Provider for thirty (30) days after the receipt of such notice by the Indemnity Provider; provided, however, that in the case of any such Claim, if action shall be required by law or regulation to be taken prior to the end of such period of thirty (30) days, such Indemnified Person shall endeavor to, in such notice to the Indemnity Provider, inform the Indemnity Provider of such shorter period, and no action shall be taken with respect to such Claim without the consent of the Indemnity Provider before seven (7) days before the end of such shorter period; provided, further, that the failure of such Indemnified Person to give the notices referred to in this sentence shall not diminish the Indemnity Provider's obligation hereunder except to the extent such failure precludes the Indemnity Provider from contesting such Claim and then only to the extent of such actual preclusion. If, within thirty (30) days of receipt of such notice from the Indemnified Person (or such shorter period as the Indemnified Person has notified the Indemnity Provider is required by law or regulation for the Indemnified Person to respond to such Claim), the Indemnity Provider shall request in writing that such Indemnified Person respond to such Claim, the Indemnified Person shall, at the expense of the Indemnity Provider, in good faith conduct and control such action (including without limitation by pursuit of appeals) (provided, however, that (A) at the Indemnity Provider's request, shall allow the Indemnity Provider to conduct and control the response to such Claim and (B) in the case of any Claim (and notwithstanding the provisions of the foregoing subsection (A)), the Indemnified Person may request the Indemnity Provider to conduct and control the response to such Claim (with counsel to be selected by the Indemnity Provider and consented to by such Indemnified Person, such consent not to be unreasonably withheld; provided, however, that any Indemnified Person may retain separate counsel at the expense of the Indemnity Provider in the event of a conflict of interest between such Indemnified Person and the Indemnity Provider)) by, in the sole discretion of the Person conducting and controlling the response to such Claim (1) resisting payment thereof, (2) not paying the same except under protest, if protest is necessary and proper, (3) if the 40 payment be made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings, or (4) taking such other action as is reasonably requested by the Indemnity Provider from time to time. The party controlling the response to any Claim shall consult in good faith with the non-controlling party and shall keep the non-controlling party reasonably informed as to the conduct of the response to such Claim; provided, that all decisions ultimately shall be made in the discretion of the controlling party. The parties agree that an Indemnified Person may at any time decline to take further action with respect to the response to such Claim and may settle such Claim if such Indemnified Person shall waive its rights to any indemnity from the Indemnity Provider that otherwise would be payable in respect of such Claim (and any future Claim, the pursuit of which is precluded by reason of such resolution of such Claim) and shall pay to the Indemnity Provider any amount previously paid or advanced by the Indemnity Provider pursuant to this Section 11.1 by way of indemnification or advance for the payment of an amount regarding such Claim. Notwithstanding the foregoing provisions of this Section 11.1, an Indemnified Person shall not be required to take any action (except to consult with the Indemnity Provider and to keep the Indemnity Provider reasonably informed as set forth above unless such Indemnified Person determines in good faith that there exists a conflict of interest between such Indemnified Person and the Indemnity Provider) and no Indemnity Provider shall be permitted to respond to any Claim in its own name or that of the Indemnified Person unless (A) the Indemnity Provider shall have agreed to pay and shall pay to such Indemnified Person on demand and on an After Tax Basis all reasonable costs, losses and expenses that such Indemnified Person actually incurs in connection with such Claim, including without limitation all reasonable legal, accounting and investigatory fees and disbursements and, if the Indemnified Person has informed the Indemnity Provider that it intends to contest such Claim (whether or not the control of the contest is then assumed by the Indemnity Provider), the Indemnity Provider shall have agreed that the Claim is an indemnifiable Claim hereunder, (B) in the case of a Claim that must be pursued in the name of an Indemnified Person (or an Affiliate thereof), the amount of the potential indemnity (taking into account all similar or logically related Claims that have been or could be raised for which the Indemnity Provider may be liable to pay an indemnity under this Section 11.1) exceeds $25,000 (or such lesser amount as may be subsequently agreed between the Indemnity Provider and the Indemnified Person), (C) the Indemnified Person shall have reasonably determined that the action to be taken will not result in any material danger of sale, forfeiture or loss of the Property, or any part thereof or interest therein, will not interfere with the payment of Rent, and will not result in risk of criminal liability, (D) if such Claim shall involve the payment of any amount prior to the resolution of such Claim, the Indemnity Provider shall provide to the Indemnified Person an interest-free advance in an amount equal to the amount that the Indemnified Person is required to pay (with no additional net after-tax cost to such Indemnified Person) prior to the date such payment is due, (E) in the case of a Claim that must be pursued in the name of an Indemnified Person (or an Affiliate thereof), the Indemnity Provider shall have provided to such Indemnified Person an opinion of independent counsel selected by the Indemnity Provider and 41 reasonably satisfactory to the Indemnified Person stating that a reasonable basis exists to contest such Claim (or, in the case of an appeal of an adverse determination, an opinion of such counsel to the effect that the position asserted in such appeal will more likely than not prevail) and (F) no Event of Default shall have occurred and be continuing. In no event shall an Indemnified Person be required to appeal an adverse judicial determination to the United States Supreme Court. In addition, an Indemnified Person shall not be required to contest any Claim in its name (or that of an Affiliate) if the subject matter thereof shall be of a continuing nature and shall have previously been decided adversely by a court of competent jurisdiction pursuant to the contest provisions of this Section 11.1, unless there shall have been a change in law (or interpretation thereof) and the Indemnified Person shall have received, at the Indemnity Provider's expense, an opinion of independent counsel selected by the Indemnity Provider and reasonably acceptable to the Indemnified Person stating that as a result of such change in law (or interpretation thereof), it is more likely than not that the Indemnified Person will prevail in such contest. In no event shall the Indemnity Provider be permitted to negotiate or settle any Claim without the consent of the Indemnified Person to the extent any loss, adjustment or settlement involves, or is reasonably likely to involve, any performance by or adverse admission by or with respect to the Indemnified Person. 11.2. GENERAL TAX INDEMNITY. (a) Subject to the following paragraph (b), the Indemnity Provider shall pay and assume liability for, and does hereby agree to indemnify, protect and defend each Property and all Indemnified Persons, and hold them harmless against, all Impositions on an After Tax Basis, and all payments pursuant to the Operative Agreements shall be made free and clear of and without deduction for any and all present and future Impositions. (b) Notwithstanding anything to the contrary in Section 11.2(a) hereof, the following shall be excluded from the indemnity required by Section 11.2(a): (i) Taxes (other than Taxes that are, or are in the nature of, sales, use, rental, value added, transfer or property taxes) that are imposed on a Indemnified Person (other than the Lessor, the Owner Trustee and the Trust except to the extent of fees and compensation paid to the Trust Company for acting as Owner Trustee under the Operative Agreements) by the United States federal government that are based on or measured by the net income or capital (including without limitation taxes based on capital gains and minimum taxes) of such Person; provided, that this clause (i) shall not be interpreted to prevent a payment from being made on an After Tax Basis if such payment is otherwise required to be so made; (ii) Taxes (other than Taxes that are, or are in the nature of, sales, use, rental, value added, transfer or property taxes) that are imposed on any 42 Indemnified Person (other than the Lessor, the Owner Trustee and the Trust except to the extent of fees and compensation paid to the Trust Company for acting as Owner Trustee under the Operative Agreements) by any state or local jurisdiction or taxing authority within any state or local jurisdiction and that are based upon or measured by the net income or capital (including without limitation taxes based on capital gains and minimum taxes) of such Person; provided, that this clause (ii) shall not be interpreted to prevent a payment from being made on an After Tax Basis if such payment is otherwise required to be so made; (iii) any Tax to the extent it relates to any act, event or omission that occurs after the termination of the Lease and redelivery or sale of the Property in accordance with the terms of the Lease (but not any Tax that relates to such termination, redelivery or sale and/or to any period prior to such termination, redelivery or sale); and (iv) any Taxes which are imposed on an Indemnified Person as a result of the gross negligence or willful misconduct of such Indemnified Person itself, as determined by a court of competent jurisdiction, but not Taxes imposed as a result of ordinary negligence of such Indemnified Person; (c) (i) Subject to the terms of Section 11.2(f), the Indemnity Provider shall pay or cause to be paid all Impositions required to be paid under or pursuant to Section 11.2(a) directly to the taxing authorities where feasible and otherwise to the Indemnified Person, as appropriate, and the Indemnity Provider shall at its own expense, upon such Indemnified Person's reasonable request, furnish to such Indemnified Person copies of official receipts or other satisfactory proof evidencing such payment. (ii) In the case of Impositions for which no contest is conducted pursuant to Section 11.2(f) and which the Indemnity Provider pays directly to the taxing authorities, the Indemnity Provider shall pay such Impositions prior to the latest time permitted by the relevant taxing authority for timely payment. In the case of Impositions for which the Indemnity Provider reimburses an Indemnified Person, the Indemnity Provider shall do so within thirty (30) days after receipt by the Indemnity Provider of demand by such Indemnified Person describing in reasonable detail the nature of the Imposition and the basis for the demand (including without limitation the computation of the amount payable), accompanied by receipts or other reasonable evidence of such demand. In the case of Impositions for which a contest is conducted pursuant to Section 11.2(f), the Indemnity Provider shall pay such Impositions or reimburse such Indemnified Person for such Impositions, to the extent not previously paid or reimbursed pursuant to subsection (a), prior to the latest time permitted by the relevant taxing 43 authority for timely payment after conclusion of all contests under Section 11.2(f). (iii) At the Indemnity Provider's request, the amount of any indemnification payment by the Indemnity Provider pursuant to subsection (a) shall be verified and certified by an independent public accounting firm mutually acceptable to the Indemnity Provider and the Indemnified Person. The fees and expenses of such independent public accounting firm shall be paid by the Indemnity Provider unless such verification shall result in an adjustment in the Indemnity Provider's favor of fifteen percent (15%) or more of the payment as computed by the Indemnified Person, in which case such fee shall be paid by the Indemnified Person. (d) The Indemnity Provider shall be responsible for preparing and filing any real and personal property or ad valorem tax returns in respect of each Property and any other tax returns required for the Owner Trustee respecting the transactions described in the Operative Agreements. The Indemnity Provider shall undertake reasonable diligence to determine if any other report or tax return shall be required to be made with respect to any obligations of the Indemnity Provider under or arising out of subsection (a) and, with respect to such other reports or tax returns of which the Indemnity Provider has knowledge, the Indemnity Provider, at its sole cost and expense, shall notify the relevant Indemnified Person of such requirement and (except if such Indemnified Person notifies the Indemnity Provider that such Indemnified Person intends to prepare and file such report or return) (A) to the extent required or permitted by and consistent with Legal Requirements, make and file in the Indemnity Provider's name such return, statement or report; and (B) in the case of any other such return, statement or report required to be made in the name of such Indemnified Person, advise such Indemnified Person of such fact and prepare such return, statement or report for filing by such Indemnified Person or, where such return, statement or report shall be required to reflect items in addition to any obligations of the Indemnity Provider under or arising out of subsection (a), provide such Indemnified Person at the Indemnity Provider's expense with information sufficient to permit such return, statement or report to be properly made with respect to any obligations of the Indemnity Provider under or arising out of subsection (a). Such Indemnified Person shall, upon the Indemnity Provider's request and at the Indemnity Provider's expense, provide any data maintained by such Indemnified Person with respect to each Property which the Indemnity Provider may reasonably require to prepare any required tax returns or reports. (e) As between the Indemnity Provider on one hand, and each Financing Party on the other hand, the Indemnity Provider shall be responsible for, and the Indemnity Provider shall indemnify and hold harmless each Financing Party (without duplication of any indemnification required by subsection (a)) on an After Tax Basis against, any obligation for United States or foreign withholding taxes or 44 similar levies, imposts, charges, fees, deductions or withholdings (collectively, "Withholdings") imposed in respect of the interest payable on the Notes, Holder Yield payable on the Certificates or with respect to any other payments under the Operative Agreement (all such payments being referred to herein as "Exempt Payments" to be made without deduction, withholding or set off) (and, if any Financing Party receives a demand for such payment from any taxing authority or a Withholding is otherwise required with respect to any Exempt Payment, the Indemnity Provider shall discharge such demand on behalf of such Financing Party); provided, however, that the obligation of the Indemnity Provider under this Section 11.2(e) shall not apply to: (i) Withholdings on any Exempt Payment to any Financing Party which is a non-U.S. Person unless such Financing Party is, on the date hereof (or on the date it becomes a Financing Party hereunder) and on the date of any change in the principal place of business or the lending office of such Financing Party, entitled to submit a Form 1001 (relating to such Financing Party and entitling it to a complete exemption from Withholding on such Exempt Payment) or Form 4224 or is otherwise subject to exemption from Withholding with respect to such Exempt Payment (except where the failure of the exemption results from a change in the principal place of business of the Lessee; provided, if a failure of exemption for any Financing Party results from a change in the principal place of business or lending office of any other Financing Party, then such other Financing Party shall be liable for any Withholding or indemnity with respect thereto), or (ii) Any U.S. Taxes imposed solely by reason of the failure by a non-U.S. Person to comply with applicable certification, information, documentation or other reporting requirements concerning the nationality, residence, identity or connections with the United States of America of such non-U.S. Person if such compliance is required by statute or regulation of the United States of America as a precondition to relief or exemption from such U.S. Taxes. For the purposes of this Section 11.2(e), (A) "U.S. Person" shall mean a citizen, national or resident of the United States of America, a corporation, partnership or other entity created or organized in or under any laws of the United States of America or any State thereof, or any estate or trust that is subject to Federal income taxation regardless of the source of its income, (B) "U.S. Taxes" shall mean any present or future tax, assessment or other charge or levy imposed by or on behalf of the United States of America or any taxing authority thereof or therein, (C) "Form 1001" shall mean Form 1001 (Ownership, Exemption, or Reduced Rate Certificate) of the Department of the Treasury of the United States of America and (D) "Form 4224" shall mean Form 4224 (Exemption from Withholding of Tax on Income Effectively Connected with the Conduct of a Trade or Business in the United States) of the Department of Treasury of the United States of America (or in relation to 45 either such Form such successor and related forms as may from time to time be adopted by the relevant taxing authorities of the United States of America to document a claim to which such Form relates). Each of the Forms referred to in the foregoing clauses (C) and (D) shall include such successor and related forms as may from time to time be adopted by the relevant taxing authorities of the United States of America to document a claim to which such Form relates. If a Financing Party or an Affiliate with whom such Financing Party files a consolidated tax return (or equivalent) subsequently receives the benefit in any country of a tax credit or an allowance resulting from U.S. Taxes with respect to which it has received a payment of an additional amount under this Section 11.2(e), such Financing Party will pay to the Indemnity Provider such part of that benefit as in the reasonable opinion of such Financing Party will leave it (after such payment) in a position no more and no less favorable than it would have been in if no additional payment had been required to be paid, provided, always that (i) such Financing Party will be the sole judge of the amount of any such benefit and of the date on which it is received, (ii) such Financing Party will have the absolute discretion as to the order and manner in which it employs or claims tax credits and allowances available to it and (iii) such Financing Party will not be obliged to disclose to the Borrower any information regarding its tax affairs or tax computations. Each non-U.S. Person that shall become a Financing Party after the date hereof shall, upon the effectiveness of the related transfer or otherwise upon becoming a Financing Party hereunder, be required to provide all of the forms and statements referenced above or other evidences of exemption from Withholdings. (f) If a written Claim is made against any Indemnified Person or if any proceeding shall be commenced against such Indemnified Person (including without limitation a written notice of such proceeding), for any Impositions, the provisions in Section 11.1 relating to notification and rights to contest shall apply; provided, however, that the Indemnity Provider shall have the right to conduct and control such contest only if such contest involves a Tax other than a Tax on net income of the Indemnified Person and can be pursued independently from any other proceeding involving a Tax liability of such Indemnified Person. 11.3. INCREASED COSTS, ILLEGALITY, ETC. (a) If, due to either (i) the introduction of, or any change in or in the interpretation of, any law or regulation or (ii) the compliance with any guideline or request hereafter adopted, promulgated or made by any central bank or other governmental authority (whether or not having the force of law), there shall be any increase in the cost to any Financing Party of agreeing to make or making, funding or maintaining Advances, then the Lessee shall from time to time, promptly after demand by such Financing Party (with a copy of such demand to the Agent but 46 subject to the terms of Section 2.11 of the Credit Agreement and 3.9 of the Trust Agreement, as the case may be), pay to the Agent for the account of such Financing Party additional amounts sufficient to compensate such Financing Party for such increased cost. A certificate setting forth in reasonable detail the amount of such increased cost and the basis therefor, submitted to the Lessee and the Agent by such Financing Party, shall be presumptively correct for all purposes, absent manifest error. (b) If any Financing Party determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law, which in the case of all of the foregoing in this sentence is promulgated or made after the date hereof) affects or would affect the amount of capital required or expected to be maintained by such Financing Party or any corporation controlling such Financing Party and that the amount of such capital is increased by or based upon the existence of such Financing Party's commitment to make Advances or upon the Advances, then, promptly after demand by such Financing Party (with a copy of such demand to the Agent but subject to the terms of Section 2.11 of the Credit Agreement and 3.9 of the Trust Agreement), the Lessee shall pay to the Agent for the account of such Financing Party, from time to time as specified by such Financing Party, additional amounts sufficient to compensate such Financing Party or such corporation in the light of such circumstances, to the extent that such Financing Party reasonably determines such increase in capital to be allocable to the existence of such Financing Party's commitment to make such Advances. A certificate setting forth in reasonable detail such amounts and the basis therefor submitted to the Lessee and the Agent by such Financing Party shall be presumptively correct for all purposes, absent manifest error. (c) Without limiting the effect of the foregoing, the Lessee shall pay to each Financing Party on the last day of the Interest Period therefor so long as such Financing Party is maintaining reserves against "Eurocurrency liabilities" under Regulation D an additional amount (determined by such Financing Party and notified to the Lessee through the Agent) equal to the product of the following for each Eurodollar Loan or Eurodollar Holder Advance, as the case may be, for each day during such Interest Period: (i) the principal amount of such Eurodollar Loan or Eurodollar Holder Advance, as the case may be, outstanding on such day; and (ii) the remainder of (x) a fraction the numerator of which is the rate (expressed as a decimal) at which interest accrues on such Eurodollar Loan or Eurodollar Holder Advance, as the case may be, for such Interest Period as provided in the Credit Agreement or the Trust Agreement, as the case may be (less the Applicable Margin), and the denominator of which is one (1) minus the effective rate (expressed as a decimal) at which such 47 reserve requirements are imposed on such Financing Party on such day minus (y) such numerator; and (iii) 1/360. (d) Without affecting its rights under Sections 11.3(a), 11.3(b) or 11.3(c) or any other provision of any Operative Agreement, each Financing Party agrees that if there is any increase in any cost to or reduction in any amount receivable by such Financing Party with respect to which the Lessee would be obligated to compensate such Financing Party pursuant to Sections 11.3(a) or 11.3(b), such Financing Party shall use reasonable efforts to select an alternative office for Advances which would not result in any such increase in any cost to or reduction in any amount receivable by such Financing Party; provided, however, that no Financing Party shall be obligated to select an alternative office for Advances if such Financing Party determines that (i) as a result of such selection such Financing Party would be in violation of any applicable law, regulation, treaty, or guideline, or would incur additional costs or expenses or (ii) such selection would be inadvisable for regulatory reasons or materially inconsistent with the interests of such Financing Party. (e) With reference to the obligations of the Lessee set forth in Sections 11.3(a) through 11.3(d), the Lessee shall not have any obligation to pay to any Financing Party amounts owing under such Sections for any period which is more than one (1) year prior to the date upon which the request for payment therefor is delivered to the Lessee. (f) Notwithstanding any other provision of this Agreement, if any Financing Party shall notify the Agent that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for any Financing Party to perform its obligations hereunder to make or maintain Eurodollar Loans or Eurodollar Holder Advances, as the case may be, then (i) each Eurodollar Loan or Eurodollar Holder Advance, as the case may be, will automatically, at the earlier of the end of the Interest Period for such Eurodollar Loan or Eurodollar Holder Advance, as the case may be, or the date required by law, convert into an ABR Loan or an ABR Holder Advance, as the case may be, and (iii) the obligation of the Financing Parties to make, convert or continue Eurodollar Loans or Eurodollar Holder Advances, as the case may be, shall be suspended until the Agent shall notify the Lessee that such Financing Party has determined that the circumstances causing such suspension no longer exist. 11.4. FUNDING/CONTRIBUTION INDEMNITY. Subject to the provisions of Section 2.11(a) of the Credit Agreement and 3.9(a) of the Trust Agreement, as the case may be, the Lessee agrees to indemnify each Financing Party 48 and to hold each Financing Party harmless from any l oss or reasonable expense which such Financing Party may sustain or incur as a consequence of (a) any default not attributable to such Financing Party in connection with the drawing of funds for any Advance, (b) any default in making any prepayment after a notice thereof has been given in accordance with the provisions of the Operative Agreements or (c) the making of a voluntary or involuntary prepayment of Eurodollar Loans or Eurodollar Holder Advances, as the case may be, on a day which is not the last day of an Interest Period with respect thereto. Such indemnification shall be in an amount equal to the excess, if any, of (x) the amount of interest or Holder Yield, as the case may be, which would have accrued on the amount so prepaid, or not so borrowed, accepted, converted or continued for the period from the date of such prepayment or of such failure to borrow, accept, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, accept, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable Eurodollar Rate plus the Applicable Margin for such Loan or Holder Advance, as the case may be, for such Interest Period over (y) the amount of interest (as determined by such Financing Party in its reasonable judgment) which would have accrued to such Financing Party on such amount by (i) (in the case of the Lenders) reemploying such funds in loans of the same type and amount during the period from the date of prepayment or failure to borrow to the last day of the then applicable Interest Period (or, in the case of a failure to borrow, the Interest Period that would have commenced on the date of such failure) and (ii) (in the case of the Holders) placing such amount on deposit for a comparable period with leading banks in the relevant interest rate market. This covenant shall survive the termination of the Operative Agreements and the payment of all other amounts payable hereunder. 11.5 EXPRESS INDEMNIFICATION FOR ORDINARY NEGLIGENCE, STRICT LIABILITY, ETC. WITHOUT LIMITING THE GENERALITY OF THE INDEMNIFICATION PROVISIONS OF ANY AND ALL OF THE OPERATIVE AGREEMENTS, EACH PERSON PROVIDING INDEMNIFICATION OF ANOTHER PERSON UNDER ANY OPERATIVE AGREEMENT HEREBY FURTHER EXPRESSLY RELEASES EACH BENEFICIARY OF ANY SUCH INDEMNIFICATION FROM ALL CLAIMS FOR LOSS OR DAMAGE, DESCRIBED IN ANY OPERATIVE AGREEMENT, CAUSED BY ANY ACT OR OMISSION ON THE PART OF ANY SUCH BENEFICIARY ATTRIBUTABLE TO THE ORDINARY NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OR STRICT LIABILITY OF ANY SUCH BENEFICIARY, AND INDEMNIFIES, EXONERATES AND HOLDS EACH SUCH BENEFICIARY FREE AND HARMLESS FROM AND AGAINST ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS, CLAIMS, LOSSES, COSTS, LIABILITIES, DAMAGES AND EXPENSES (INCLUDING WITHOUT LIMITATION ATTORNEY'S FEES AND EXPENSES), DESCRIBED ABOVE, INCURRED BY ANY SUCH BENEFICIARY (IRRESPECTIVE OF WHETHER ANY SUCH BENEFICIARY IS A PARTY TO THE ACTION FOR WHICH INDEMNIFICATION UNDER THIS AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT IS SOUGHT) ATTRIBUTABLE TO THE ORDINARY NEGLIGENCE 49 (WHETHER SOLE OR CONTRIBUTORY) OR STRICT LIABILITY OF ANY SUCH BENEFICIARY. SECTION 12. MISCELLANEOUS. 12.1. SURVIVAL OF AGREEMENTS. The representations, warranties, covenants, indemnities and agreements of the parties provided for in the Operative Agreements, and the parties' obligations under any and all thereof, shall survive the execution and delivery of this Agreement, the transfer of any Property to the Owner Trustee, the acquisition of any Property (or any of its components), the construction of any Improvements, the Completion of any Property, any disposition of any interest of the Owner Trustee in any Property or any interest of the Holders in the Trust Estate, the payment of the Notes and any disposition of the Notes and shall be and continue in effect notwithstanding any investigation made by any party and the fact that any party may waive compliance with any of the other terms, provisions or conditions of any of the Operative Agreements. Except as otherwise expressly set forth herein or in other Operative Agreements, the indemnities of the parties provided for in the Operative Agreements shall survive the expiration or termination of any thereof. 12.2. NOTICES. All notices required or permitted to be given under or otherwise given in connection with any Operative Agreement shall be in writing. Notices may be served by certified or registered mail, postage paid with return receipt requested; by private courier, prepaid; by telex, facsimile, or other telecommunication device capable of transmitting or creating a written record; or personally. Mailed notices shall be deemed delivered five (5) days after mailing, properly addressed. Couriered notices shall be deemed delivered when delivered as addressed, or if the addressee refuses delivery, when presented for delivery notwithstanding such refusal. Telex or telecommunicated notices shall be deemed delivered when receipt is either confirmed by confirming transmission equipment or acknowledged by the addressee or its office. Personal delivery shall be effective when accomplished. Unless a party changes its address by giving notice to the other party as provided herein, notices shall be delivered to the parties at the following addresses: 50 If to the Construction Agent or the Lessee, to such entity at the following address: AOR Synthetic Real Estate, Inc. c/o American Oncology Resources, Inc. 16825 Northchase Drive Suite 1300 Houston, Texas 77060 Attention: L. Fred Pounds, Chief Financial Officer Telephone: (713) 873-2674 Telecopy: (713) 873-7762 If to the Guarantor, to such entity at the following address: American Oncology Resources, Inc. 16825 Northchase Drive Suite 1300 Houston, Texas 77060 Attention: L. Fred Pounds, Chief Financial Officer Telephone: (713) 873-2674 Telecopy: (713) 873-7762 If to any Tranche A Guarantor, to such entity c/o AOR at the following address: [Name of applicable Tranche A Guarantor] c/o American Oncology Resources, Inc. 16825 Northchase Drive Suite 1300 Houston, Texas 77060 Attention: L. Fred Pounds, Chief Financial Officer Telephone: (713) 873-2674 Telecopy: (713) 873-7762 51 with a copy to: Mayor, Day, Caldwell & Keeton, L.L.P. 700 Louisiana, Suite 1900 Houston, Texas 77002 Attention: Geoffrey K. Walker Telephone: (713) 225-7020 Telecopy: (713) 225-7047 If to the Owner Trustee, to it at the following address: First Security Bank, National Association 79 South Main Street Salt Lake City, Utah 84111 Attention: Val T. Orton, Vice President Telephone: (801) 246-5300 Telecopy: (801) 246-5053 If to the Holders, to each such Holder at the address set forth for such Holder on Schedule I of the Trust Agreement. If to the Agent, to it at the following address: First Union National Bank c/o First Union Capital Markets Group DC-6 301 South College Street Charlotte, North Carolina 28288-0166 Attention: Jane O. Hurley, Capital Markets Services Telephone: (704) 383-3812 Telecopy: (704) 383-7989 If to any Lender, to it at the address set forth for such Lender in Schedule 1.1 of the Credit Agreement. From time to time any party may designate additional parties and/or another address for notice purposes by notice to each of the other parties hereto. Each notice hereunder shall be effective upon receipt or refusal thereof. 52 12.3. COUNTERPARTS. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one (1) and the same instrument. 12.4. TERMINATIONS, AMENDMENTS, WAIVERS, ETC.; UNANIMOUS VOTE MATTERS. Each Operative Agreement may be terminated, amended, supplemented, waived or modified only by an instrument in writing signed by, subject to Article VIII of the Trust Agreement regarding termination of the Trust Agreement, the Majority Secured Parties and each Credit Party (to the extent such Credit Party is a party to such Operative Agreement); provided, to the extent no Default or Event of Default shall have occurred and be continuing, the Majority Secured Parties shall not amend, supplement, waive or modify any provision of any Operative Agreement in such a manner as to adversely affect the rights of any Credit Party without the prior written consent (to be determined in good faith with such determination not to be unreasonably delayed) of such Credit Party. In addition, (a) the Unanimous Vote Matters shall require the consent of each Lender and each Holder affected by such matter and (b) any provision of any Operative Agreement incorporated by reference or otherwise referenced in a second Operative Agreement shall remain, respecting such second Operative Agreement, in its original form without regard to any such termination, amendment, supplement, waiver or modification in the first Operative Agreement except if such termination, amendment, supplement, waiver or modification has been agreed to by an instrument in writing signed by, subject to Article VIII of the Trust Agreement regarding termination of the Trust Agreement, the Majority Secured Parties and each Credit Party (to the extent such Credit Party is a party to such Operative Agreement). Notwithstanding the foregoing, no such termination, amendment, supplement, waiver or modification shall, without the consent of the Agent and, to the extent affected thereby, each Lender and each Holder (collectively, the "Unanimous Vote Matters") (i) reduce the amount of any Note or any Certificate, extend the scheduled date of maturity of any Note, extend the scheduled Expiration Date, extend any date of payment of any Note or Certificate, reduce the stated rate of interest payable on any Note or reduce the stated Holder Yield payable on any Certificate (other than as a result of waiving the applicability of any post-default increase in interest rates or Holder Yields), modify the priority of any Lien in favor of the Agent under any Security Document, subordinate any obligation owed to any Lender or Holder, reduce any Lender Facility Fees or any Holder Facility Fees payable under the Participation Agreement, extend the scheduled date of payment of any Lender Facility Fees or any Holder Facility Fees or increase the amount or extend the expiration date of any Lender's Commitment or the Holder Commitment of any Holder, or (ii) terminate, amend, supplement, waive or modify any provision of this Section 12.4 or reduce the percentages specified in the definitions of Majority Lenders, Majority Holders or Majority Secured Parties, or consent to the assignment or transfer by the Owner Trustee of any of its rights and obligations under any Credit Document or release a material portion of the Collateral (except in accordance with Section 8.8) or release the Construction Agent, the Lessee or AOR from their respective obligations under any Operative Agreement, release all or substantially all of the Tranche A Guarantors from their obligations 53 under Section 8B of the Credit Agreement or consent to the assignment or transfer by any Credit Party (except with respect to the rights of Lessee under Section 25.2 of the Lease) of its rights or obligations under the Operative Agreements, or (iii) terminate, amend, supplement, waive or modify any provision of Section 7 of the Credit Agreement, or (iv) permit Advances for Work in excess of the Construction Budget, or (v) eliminate the automatic option under Section 5.3(b) of the Agency Agreement requiring that the Construction Agent pay certain liquidated damages in exchange for the conveyance of a Property to the Construction Agent. Any such termination, amendment, supplement, waiver or modification shall apply equally to each of the Lenders and the Holders and shall be binding upon all the parties to this Agreement. In the case of any waiver, each party to this Agreement shall be restored to its former position and rights under the Operative Agreements prior to the event or condition so waived, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. If at a time when the conditions precedent set forth in the Operative Agreements to any Loan are, in the opinion of the Majority Lenders, satisfied, any Lender shall fail to fulfill its obligations to make such Loan (any such Lender, a "Defaulting Lender") then, for so long as such failure shall continue, the Defaulting Lender shall (unless the Lessee and the Construction Agent and the Majority Lenders, determined as if the Defaulting Lender were not a "Lender", shall otherwise consent in writing) be deemed for all purposes relating to terminations, amendments, supplements, waivers or modifications under the Operative Agreements to have no Loans, shall not be treated as a "Lender" when performing the computation of Majority Lenders or Majority Secured Parties, and shall have no rights under this Section 12.4; provided, that any action taken pursuant to the second paragraph of this Section 12.4 shall not be effective as against the Defaulting Lender unless it otherwise consents. If at a time when the conditions precedent set forth in the Operative Agreements to any Holder Advance are, in the opinion of the Majority Holders, satisfied, any Holder shall fail to fulfill its obligations to make such Holder Advance (any such Holder, a "Defaulting Holder") then, for so long as such failure shall continue, the Defaulting Holder shall (unless the Lessee and the Construction Agent and the Majority Holders, determined as if the Defaulting Holder were not a "Holder", shall otherwise consent in writing) be deemed for all purposes relating to terminations, amendments, supplements, waivers or modifications under the Operative Agreements to have no Holder Advances, shall not be treated as a "Holder" when performing the computation of Majority Holders or Majority Secured Parties, and shall have no rights under this Section 12.4; provided, that any action taken pursuant to the second paragraph of this Section 12.4 shall not be effective as against the Defaulting Holder unless it otherwise consents. 12.5. HEADINGS, ETC. The Table of Contents and headings of the various Articles and Sections of this Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions hereof. 54 12.6. PARTIES IN INTEREST. Except as expressly provided herein, none of the provisions of this Agreement are intended for the benefit of any Person except the parties hereto. 12.7. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; VENUE; ARBITRATION. (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA. Any legal action or proceeding with respect to this Agreement or any other Operative Agreement may be brought in the courts of the State of North Carolina in Mecklenburg County or of the United States for the Western District of the State of North Carolina, and, by execution and delivery of this Agreement, each of the parties to this Agreement hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the nonexclusive jurisdiction of such courts. Each of the parties to this Agreement further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it at the address set out for notices pursuant to Section 12.2, such service to become effective three (3) days after such mailing. Nothing herein shall affect the right of any party to serve process in any other manner permitted by Law or to commence legal proceedings or to otherwise proceed against any party in any other jurisdiction. (b) EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY, TO THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW, WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, ANY OTHER OPERATIVE AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN. (c) To the fullest extent allowed by applicable law, each of the parties to this Agreement hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement or any other Operative Agreement brought in the courts referred to in subsection (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. (d) Notwithstanding the provisions of Section 12.7(a) or of any other Operative Agreement to the contrary, upon demand of any party hereto, whether made before or after institution of any judicial proceeding (subject to the following limitation), any dispute, claim or controversy arising out of, connected with or relating to this Agreement or any other Operative Agreement ("Disputes") between or among parties to this Agreement and/or any other Operative Agreement, or any of them, shall be resolved 55 by binding arbitration as provided herein; provided, however, that no party may demand arbitration in any judicial proceeding to which it is a party more than ninety (90) days from the later of (i) its commencement of such proceeding or (ii) the date it is served with a complaint, counterclaim or third-party claim in such proceeding. Disputes may include, without limitation, tort claims, counterclaims, claims brought as class actions, claims arising from this Agreement and/or any other Operative Agreement executed in the future, or claims arising out of or connected with the transactions contemplated by this Agreement and/or any other Operative Agreement. Arbitration shall be conducted under and governed by the Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American Arbitration Association (the "AAA"), as in effect from time to time, and Title 9 of the U.S. Code, as amended. All arbitration hearings shall be conducted in the city in which the principal office of either the Agent or the Borrower is located. The expedited procedures set forth in Rule 51 et seq. of the Arbitration Rules shall be applicable to claims of less than $1,000,000. All applicable statutes of limitation shall apply to any Dispute. All arbitrations commenced with respect to any of the Operative Agreements shall be consolidated for hearing before the same panel of arbitrators as prescribed herein. Any attorney-client privilege or other protection against disclosure of confidential information, including without limitation any protection afforded the work product of any attorney, that would otherwise be claimed by any party shall be available to and may be claimed by any such party in any arbitration proceeding. A judgment upon the award may be entered in any court having jurisdiction. The panel from which all arbitrators are selected shall be comprised of licensed attorneys. The single arbitrator selected for expedited procedure shall be a retired judge from the highest court of general jurisdiction, state or federal, of the state where the hearing will be conducted. Notwithstanding the foregoing, this arbitration provision does not apply to Disputes under or related to Interest Rate Protection Agreements. An arbitration arising from an Interest Rate Protection Agreement shall not be consolidated with any other arbitration hereunder without the consent of all parties to the arbitrations that are proposed to be consolidated. Notwithstanding the preceding binding arbitration provisions, the parties hereto agree to preserve, without diminution, certain remedies that any party hereto may employ or exercise freely, either alone, in conjunction with or during a Dispute. Any party hereto shall have the right to proceed in any court of proper jurisdiction or by self-help to exercise or prosecute the following remedies, as applicable: (a) all rights to foreclose against any Collateral by exercising a power of sale granted pursuant to any of the Operative Agreements or under applicable law other than judicial foreclosure and sale, including a proceeding to confirm the sale; (b) all rights of self-help, including peaceful occupation of real property and collection of rents, setoff, and peaceful possession of personal property; (c) obtaining provisional or ancillary remedies, including injunctive relief, sequestration, garnishment, attachment, appointment of a receiver and filing an involuntary bankruptcy proceeding; and (d) when applicable, a judgment by confession of judgment. Preservation of these remedies does not limit the power of an arbitrator to grant similar remedies that may be requested by a party in a Dispute. 56 12.8. SEVERABILITY. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 12.9. LIABILITY LIMITED. (a) The Lenders, the Agent, the Credit Parties, the Owner Trustee and the Holders each acknowledge and agree that the Owner Trustee is (except as otherwise expressly provided herein or therein) entering into this Agreement and the other Operative Agreements to which it is a party (other than the Trust Agreement and to the extent otherwise provided in Section 6.1 of this Agreement), solely in its capacity as trustee under the Trust Agreement and not in its individual capacity and that the Trust Company shall not be liable or accountable under any circumstances whatsoever in its individual capacity for or on account of any statements, representations, warranties, covenants or obligations stated to be those of the Owner Trustee, except for its own gross negligence or willful misconduct and as otherwise expressly provided herein or in the other Operative Agreements. (b) Anything to the contrary contained in this Agreement, the Credit Agreement, the Notes or in any other Operative Agreement notwithstanding, no officer, director or shareholder (other than any Credit Party) of any party to any Operative Agreement (but excluding all Credit Parties which shall be fully liable for all their obligations under the Operative Agreements) shall be personally liable in any respect for any liability or obligation arising hereunder or in any other Operative Agreement including without limitation the payment of the principal of, or interest on, the Notes, or for monetary damages for the breach of performance of any of the covenants contained in the Credit Agreement, the Notes, this Agreement, the Security Agreement or any of the other Operative Agreements. The Lenders, the Holders and the Agent agree that, in the event any remedies under any Operative Agreement are pursued, neither the Lenders, the Holders nor the Agent shall have any recourse against any officer, director or shareholder (other than any Credit Party) of any party to any Operative Agreement (but excluding all Credit Parties which shall be fully liable for all their obligations under the Operative Agreements), for any deficiency, loss or Claim for monetary damages or otherwise resulting therefrom and recourse shall be had solely and exclusively against the Trust Estate (excluding Excepted Payments) and the Credit Parties (with respect to the Credit Parties' obligations under the Operative Agreements); but nothing contained herein shall be taken to prevent recourse against or the enforcement of remedies against the Trust Estate (excluding Excepted Payments) in respect of any and all liabilities, obligations and undertakings contained herein and/or in any other Operative Agreement. Notwithstanding the provisions of this Section, nothing in any Operative Agreement shall: (i) constitute a waiver, release or discharge of any indebtedness or obligation 57 evidenced by the Notes and/or the Certificates arising under any Operative Agreement or secured by any Operative Agreement, but the same shall continue until paid or discharged; (ii) relieve any Exculpated Person from liability and responsibility for (but only to the extent of the damages arising by reason of): active waste knowingly committed by any Exculpated Person with respect to any Property, any fraud, gross negligence or willful misconduct on the part of any Exculpated Person; (iii) relieve any Exculpated Person from liability and responsibility for (but only to the extent of the moneys misappropriated, misapplied or not turned over) (A) except for Excepted Payments, misappropriation or misapplication by the Lessor (i.e., application in a manner contrary to any of the Operative Agreements) of any insurance proceeds or condemnation award paid or delivered to the Lessor by any Person other than the Agent, (B) except for Excepted Payments, any deposits or any escrows or amounts owed by the Construction Agent under the Agency Agreement held by the Lessor or (C) except for Excepted Payments, any rent or other income received by the Lessor from any Credit Party that is not turned over to the Agent; or (iv) affect or in any way limit the Agent's rights and remedies under any Operative Agreement with respect to the Rents and rights and powers of the Agent under the Operative Agreements or to obtain a judgment against the Lessee's interest in the Properties or the Agent's rights and powers to obtain a judgment against the Lessor or any Credit Party (provided, that no deficiency judgment or other money judgment shall be enforced against any Exculpated Person except to the extent of the Lessor's interest in the Trust Estate (excluding Excepted Payments) or to the extent the Lessor may be liable as otherwise contemplated in clauses (ii) and (iii) of this Section 12.9(b)). 12.10. RIGHTS OF THE LESSEE. If at any time all obligations (i) of the Owner Trustee under and in accordance with the Credit Agreement, the Security Documents and the other Operative Agreements and (ii) of the Credit Parties under the Operative Agreements have in each case been satisfied or discharged in full, then the Credit Parties shall be entitled to (a) terminate the Lease and the guaranty obligations of the Guarantor and the Tranche A Guarantors arising under and in accordance with the Credit Agreement and (b) receive all amounts then held under the Operative Agreements and all proceeds with respect to any of the Properties. Upon the termination of the Lease and the guaranty obligations of the Guarantor and the Tranche A Guarantors pursuant to the foregoing clause (a), the Lessor shall transfer to the Lessee or its designee all of its right, title and interest free and clear of the Lien of the Lease, the Lien of the Security Documents and all Lessor Liens in and to any Properties then subject to the Lease and any amounts or proceeds referred to in the foregoing clause (b) shall be paid over to the Lessee. 12.11. FURTHER ASSURANCES. The parties hereto shall promptly cause to be taken, executed, acknowledged or delivered, at the sole expense of the Lessee, all such further acts, conveyances, documents and assurances as the other parties may from time to time reasonably request in order to carry out and effectuate the intent and purposes of this Participation Agreement, the other Operative Agreements and the 58 transactions contemplated hereby and thereby (including without limitation the preparation, execution and filing of any and all Uniform Commercial Code financing statements, filings of Mortgage Instruments and other filings or registrations which the parties hereto may from time to time reasonably request to be filed or effected). The Lessee, at its own expense, shall take such action (including without limitation any action specified in the preceding sentence), as the Owner Trustee shall so request in order to maintain and protect all security interests provided for hereunder or under any other Operative Agreement. 12.12. CALCULATIONS UNDER OPERATIVE AGREEMENTS. The parties hereto agree that all calculations and numerical determinations to be made under the Operative Agreements by the Owner Trustee shall be made by the Agent and that such calculations and determinations shall be presumptively correct on the parties hereto in the absence of manifest error. 12.13. CONFIDENTIALITY. Each of the Agent, the Lessor, each Lender and each Holder agrees to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all non-public confidential information provided in connection with this Agreement or any other Operative Agreement and agrees and undertakes that it shall not use any such information for any purpose or in any manner other than pursuant to the terms contemplated by this Agreement. The Agent, the Lessor, any Lender or any Holder may disclose such information (a) at the request of any bank regulatory authority or in connection with an examination of the Agent, the Lessor, such Lender or such Holder by any such authority, (b) pursuant to subpoena or other court process, (c) when required to do so in accordance with the provisions of any applicable law or regulation, (d) at the express direction of any agency of any State of the United States of America or of any other jurisdiction in which the Agent, the Lessor, such Lender or such Holder conducts its business, (e) to the Agent's, the Lessor's, such Lender's or such Holder's independent auditors and other professional advisors that have a reasonable need or basis for access thereto and (f) in connection with any proceeding to enforce its rights hereunder or under any other Operative Agreement or any other litigation or proceeding related hereto; provided, however, the Agent, the Lessor, such Lender or such Holder shall instruct such independent auditors or other professional advisors to keep such information confidential in accordance with the terms of this Section 12.13; provided, further, that in the event of any disclosure of non-public information pursuant to any of clauses (b), (c), (d), and (f) of this Section 12.13, the Agent, the Lessor, such Lender or such Holder shall make a good faith attempt, to the extent practicable, to notify AOR of any such disclosure of non-public information at least three (3) Business Days prior to disclosing such information, and in any event shall notify AOR of such disclosure as soon as practicable. 12.14. FINANCIAL REPORTING/TAX CHARACTERIZATION. Lessee agrees to obtain advice from its own accountants and tax counsel regarding the financial reporting treatment and the tax characterization of the transactions described in the Operative Agreements. Lessee further agrees that Lessee shall not rely upon any statement of 59 any Financing Party or any of their respective Affiliates and/or Subsidiaries regarding any such financial reporting treatment and/or tax characterization. 12.15. SET-OFF. In addition to any rights now or hereafter granted under applicable Law and not by way of limitation of any such rights, upon and after the occurrence of any Event of Default and during the continuance thereof, each Lender, each Holder and any assignee of a Lender or a Holder in accordance with the applicable provisions of the Operative Agreements is hereby authorized by each Credit Party at any time or from time to time, without notice to any Credit Party or to any other Person, any such notice being hereby expressly waived to the extent permitted by applicable law, to set-off and to appropriate and to apply any and all deposits (general or special, time or demand, including without limitation indebtedness evidenced by certificates of deposit, whether matured or unmatured) and any other indebtedness at any time held or owing by such Lender, such Holder or any such assignee of a Lender or a Holder in accordance with the applicable provisions of the Operative Agreements to or for the credit or the account of any Credit Party against and on account of the obligations of any Credit Party under the Operative Agreements irrespective of whether or not (a) the Lenders or the Holders shall have made any demand under any Operative Agreement or (b) the Agent shall have declared any or all of the obligations of any Credit Party under the Operative Agreements to be due and payable and although such obligations shall be contingent or unmatured. 12.16 USURY SAVINGS PROVISION. NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT, IT IS THE INTENT OF THE PARTIES HERETO TO CONFORM TO AND CONTRACT IN STRICT COMPLIANCE WITH APPLICABLE USURY LAW FROM TIME TO TIME IN EFFECT. ANY PAYMENTS HEREUNDER OR UNDER ANY OPERATIVE AGREEMENT CONSTITUTING INTEREST UNDER ANY APPLICABLE LAW FROM TIME TO TIME IN EFFECT MAY BE REFERRED TO HEREIN AS "INTEREST." ALL AGREEMENTS AMONG THE PARTIES HERETO (INCLUDING ALL OF THE OPERATIVE AGREEMENTS) ARE HEREBY LIMITED BY THE PROVISIONS OF THIS PARAGRAPH WHICH SHALL OVERRIDE AND CONTROL ALL SUCH AGREEMENTS, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER WRITTEN OR ORAL. IN NO WAY, NOR IN ANY EVENT OR CONTINGENCY (INCLUDING WITHOUT LIMITATION PREPAYMENT OR ACCELERATION OF THE MATURITY OF ANY OBLIGATION OR THE EARLY TERMINATION OF THE LEASE FOR ANY REASON), SHALL ANY INTEREST TAKEN, RESERVED, CONTRACTED FOR, CHARGED, OR RECEIVED UNDER THIS AGREEMENT OR UNDER ANY OPERATIVE AGREEMENT OR OTHERWISE, EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMISSIBLE UNDER APPLICABLE LAW NOR SHALL ANY PROVISION CREATE AN OBLIGATION TO PAY UNEARNED INTEREST IN VIOLATION OF APPLICABLE LAW. IF, FROM ANY POSSIBLE CONSTRUCTION OF ANY OF THE OPERATIVE AGREEMENTS OR ANY OTHER DOCUMENT OR AGREEMENT, UNEARNED INTEREST WOULD BE PAYABLE OR 60 INTEREST WOULD OTHERWISE BE PAYABLE IN EXCESS OF THE MAXIMUM NONUSURIOUS AMOUNT, ANY SUCH CONSTRUCTION SHALL BE SUBJECT TO THE PROVISIONS OF THIS PARAGRAPH AND SUCH AMOUNTS UNDER SUCH DOCUMENTS OR AGREEMENTS SHALL BE AUTOMATICALLY REDUCED TO THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED UNDER APPLICABLE LAW, WITHOUT THE NECESSITY OF EXECUTION OF ANY AMENDMENT OR NEW DOCUMENT OR AGREEMENT. IF THE AGENT, ANY LENDER OR ANY OTHER FINANCING PARTY SHALL EVER RECEIVE ANYTHING OF VALUE WHICH CONSTITUTES INTEREST UNDER ANY APPLICABLE LAW FROM TIME TO TIME WITH RESPECT TO THE OBLIGATIONS OWED HEREUNDER OR UNDER ANY OPERATIVE AGREEMENT OR UNDER APPLICABLE LAW AND WHICH WOULD, APART FROM THIS PROVISION, BE IN EXCESS OF THE MAXIMUM LAWFUL AMOUNT, AN AMOUNT EQUAL TO THE AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE INTEREST SHALL, WITHOUT PENALTY, TO THE EXTENT PERMITTED BY APPLICABLE LAW, BE APPLIED TO THE REDUCTION OF THE COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL AND NOT TO THE PAYMENT OF INTEREST, OR REFUNDED TO THE BORROWER OR ANY OTHER PAYOR THEREOF, IF AND TO THE EXTENT SUCH AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE EXCEEDS THE COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL. THE RIGHT TO DEMAND PAYMENT OF ANY AMOUNTS EVIDENCED BY ANY OF THE OPERATIVE AGREEMENTS DOES NOT INCLUDE THE RIGHT TO RECEIVE ANY INTEREST WHICH HAS NOT OTHERWISE ACCRUED ON THE DATE OF SUCH DEMAND, AND NEITHER THE AGENT NOR ANY LENDER NOR ANY HOLDER NOR ANY OTHER FINANCING PARTY INTENDS TO CHARGE OR RECEIVE ANY UNEARNED INTEREST IN THE EVENT OF SUCH DEMAND. ALL INTEREST PAID OR AGREED TO BE PAID TO THE AGENT OR ANY LENDER OR ANY HOLDER OR ANY OTHER FINANCING PARTY SHALL, TO THE EXTENT PERMITTED BY APPLICABLE LAW, BE AMORTIZED, PRORATED, ALLOCATED, AND SPREAD THROUGHOUT THE FULL TERM (INCLUDING WITHOUT LIMITATION ANY RENEWAL OR EXTENSION) OF THIS AGREEMENT SO THAT THE AMOUNT OF INTEREST ON ACCOUNT OF SUCH PAYMENTS DOES NOT EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED BY APPLICABLE LAW. 12.17 CHAPTER 346 OF THE TEXAS FINANCE CODE. In the event the laws of the State of Texas are applicable to any of the Operative Agreements or any of the obligations thereunder, to the extent a higher maximum lawful rate of interest would result from the parties hereto agreeing that the provisions of Chapter 346 of the Texas Finance Code (relating to certain revolving credit accounts), as amended, shall not apply to the Operative Agreements or any of the obligations thereunder, the parties hereto so agree that the provisions of such Chapter 346 shall not apply. [signature pages follow] 61 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. AOR SYNTHETIC REAL ESTATE, INC., as the Construction Agent, as the Lessee and as a Tranche A Guarantor AMERICAN ONCOLOGY RESOURCES, INC., as the Guarantor and as a Tranche A Guarantor AOR REAL ESTATE, INC., as a Tranche A Guarantor AOR, INC., as a Tranche A Guarantor RMCC CANCER CENTER, INC., as a Tranche A Guarantor AOR MANAGEMENT COMPANY OF OREGON, INC., as a Tranche A Guarantor AOR MANAGEMENT COMPANY OF INDIANA, INC., as a Tranche A Guarantor AOR MANAGEMENT COMPANY OF MISSOURI, INC., as a Tranche A Guarantor AOR MANAGEMENT COMPANY OF ARIZONA, INC., as a Tranche A Guarantor AOR MANAGEMENT COMPANY OF SOUTH CAROLINA, INC., as a Tranche A Guarantor AOR MANAGEMENT COMPANY OF OKLAHOMA, INC., as a Tranche A Guarantor AOR MANAGEMENT COMPANY OF PENNSYLVANIA, INC., as a Tranche A Guarantor AOR MANAGEMENT COMPANY OF VIRGINIA, INC., as a Tranche A Guarantor AOR MANAGEMENT COMPANY OF NORTH CAROLINA, INC., as a Tranche A Guarantor AOR MANAGEMENT COMPANY OF NEW YORK, INC., as a Tranche A Guarantor AOR MANAGEMENT COMPANY OF FLORIDA, INC. as a Tranche A Guarantor AOR MANAGEMENT COMPANY OF NEVADA, INC. as a Tranche A Guarantor AOR HOLDING COMPANY OF INDIANA, INC., as a Tranche A Guarantor [SIGNATURE PAGES CONTINUED] AOR MANAGEMENT COMPANY OF TEXAS, INC. as a Tranche A Guarantor AORT HOLDING COMPANY, INC., as a Tranche A Guarantor AORIP, INC., as a Tranche A Guarantor By:____________________________________ Name: L. Fred Pounds Title: Treasurer of each of the foregoing Entities AOR OF TEXAS MANAGEMENT LIMITED PARTNERSHIP, a Texas limited partnership, as a Tranche A Guarantor By: AOR MANAGEMENT COMPANY OF TEXAS, INC., a Delaware corporation, as general partner By:____________________________________ Name: L. Fred Pounds Title: Treasurer AOR OF INDIANA MANAGEMENT PARTNERSHIP, an Indiana general partnership, as a Tranche A Guarantor By: AOR MANAGEMENT COMPANY OF INDIANA, INC., a Delaware corporation, as general partner By:____________________________________ Name: L. Fred Pounds Title: Treasurer By: AOR HOLDING COMPANY OF INDIANA, INC., a Delaware corporation, as general partner By:____________________________________ Name: L. Fred Pounds Title: Treasurer [SIGNATURE PAGES CONTINUED] FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, but solely as Owner Trustee under the AOR Trust 1997-1 By:_________________________________ Name:_______________________________ Title:______________________________ FIRST UNION NATIONAL BANK, as Agent, as a Lender, and as a Holder By:_________________________________ Name:_______________________________ Title:______________________________ [SIGNATURE PAGES CONTINUED] THE FIRST NATIONAL BANK OF CHICAGO, as a Lender and as a Holder By:_________________________________ Name:_______________________________ Title:______________________________ [SIGNATURE PAGES CONTINUED] ABN AMRO BANK N.V., as a Lender and as a Holder By:_________________________________ Name:_______________________________ Title:______________________________ By:_________________________________ Name:_______________________________ Title:______________________________ [SIGNATURE PAGES CONTINUED] TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as a Lender and as a Holder By:_________________________________ Name:_______________________________ Title:______________________________ [SIGNATURE PAGES CONTINUED] COOPERATIEVE CENTRALE RAIFFEISEN- BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH, as a Lender and as a Holder By:_________________________________ Name:_______________________________ Title:______________________________ By:_________________________________ Name:_______________________________ Title:______________________________ [SIGNATURE PAGES CONTINUED] SUNTRUST BANK, TAMPA BAY, as a Lender By:_________________________________ Name:_______________________________ Title:______________________________ [SIGNATURE PAGES CONTINUED] THE FUJI BANK, LIMITED, as a Lender By:_________________________________ Name:_______________________________ Title:______________________________ [SIGNATURE PAGES CONTINUED] WELLS FARGO BANK (TEXAS) NATIONAL ASSOCIATION, as a Lender By:_________________________________ Name:_______________________________ Title:______________________________ [SIGNATURE PAGES CONTINUED] NATIONAL CITY BANK OF KENTUCKY, as a Lender By:_________________________________ Name:_______________________________ Title:______________________________ [SIGNATURE PAGES CONTINUED] CREDIT LYONNAIS NEW YORK BRANCH, as a Lender By:_________________________________ Name:_______________________________ Title:______________________________ [SIGNATURE PAGES CONTINUED] THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED, as a Lender By:_________________________________ Name:_______________________________ Title:______________________________ [SIGNATURE PAGES CONTINUED] CORESTATES BANK, N.A., as a Lender By:_________________________________ Name:_______________________________ Title:______________________________ [SIGNATURE PAGES CONTINUED] NATIONSBANK OF TEXAS, N.A., as a Lender By:_________________________________ Name:_______________________________ Title:______________________________ ______________________________________________________________________________ Appendix A Rules of Usage and Definitions ______________________________________________________________________________ I. Rules of Usage The following rules of usage shall apply to this Appendix A and the Operative Agreements (and each appendix, schedule, exhibit and annex to the foregoing) unless otherwise required by the context or unless otherwise defined therein: (a) Except as otherwise expressly provided, any definitions set forth herein or in any other document shall be equally applicable to the singular and plural forms of the terms defined. (b) Except as otherwise expressly provided, references in any document to articles, sections, paragraphs, clauses, annexes, appendices, schedules or exhibits are references to articles, sections, paragraphs, clauses, annexes, appendices, schedules or exhibits in or to such document. (c) The headings, subheadings and table of contents used in any document are solely for convenience of reference and shall not constitute a part of any such document nor shall they affect the meaning, construction or effect of any provision thereof. (d) References to any Person shall include such Person, its successors, permitted assigns and permitted transferees. (e) Except as otherwise expressly provided, reference to any agreement means such agreement as amended, modified, extended, supplemented, restated and/or replaced from time to time in accordance with the applicable provisions thereof. (f) Except as otherwise expressly provided, references to any law includes any amendment or modification to such law and any rules or regulations issued thereunder or any law enacted in substitution or replacement therefor. (g) When used in any document, words such as "hereunder", "hereto", "hereof" and "herein" and other words of like import shall, unless the context clearly indicates to the contrary, refer to the whole of the applicable document and not to any particular article, section, subsection, paragraph or clause thereof. (h) References to "including" means including without limiting the generality of any description preceding such term and for purposes hereof the rule of ejusdem generis shall not be applicable to the term "including" or other similar terms to limit a general statement, followed by or referable to an enumeration of specific matters, to matters similar to those specifically mentioned. (i) References herein to "attorney's fees", "legal fees", "costs of counsel" or other such references shall be deemed to include the allocated cost of in-house counsel. (j) Each of the parties to the Operative Agreements and their counsel have reviewed and revised, or requested revisions to, the Operative Agreements, and the usual rule of construction that any ambiguities are to be resolved against the drafting party shall be inapplicable in the construing and interpretation of the Operative Agreements and any amendments or exhibits thereto. (k) Capitalized terms used in any Operative Agreements which are not defined in this Appendix A but are defined in another Operative Agreement shall have the meaning so ascribed to such term in the applicable Operative Agreement. (l) If any obligation under the Operative Agreements is required to be performed on a day that is not a Business Day, such obligation shall be required to be performed on the next succeeding Business Day (unless otherwise provided in the Operative Agreements) so long as there shall be no such postponement beyond the Maturity Date or the Expiration Date. II. Definitions "AAA" shall have the meaning given to such term in Section 12.7(d) of the Participation Agreement. "ABR" shall mean, for any day, a rate per annum equal to the greater of (a) the Prime Lending Rate in effect on such day, and (b) the Federal Funds Effective Rate in effect on such day plus one-half of one percent (0.5%). For purposes hereof: "Prime Lending Rate" shall mean the rate which the Agent announces from time to time as its prime lending rate as in effect from time to time. The Prime Lending Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Any Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Lending Rate. The Prime Lending Rate shall change automatically and without notice from time to time as and when the prime lending rate of the Agent changes. "Federal Funds Effective Rate" shall mean, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members or the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three (3) Federal funds brokers of recognized standing selected by it. Any change in the ABR due to a change in the Prime Lending Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Lending Rate or the Federal Funds Effective Rate, respectively. Appendix A-2 "ABR Holder Advance" shall mean a Holder Advance bearing a Holder Yield based on the ABR. "ABR Loans" shall mean Loans the rate of interest applicable to which is based upon the ABR. "Acceleration" shall have the meaning given to such term in Section 6 of the Credit Agreement. "Accession Agreement" shall mean each Accession Agreement executed from time to time by Tranche A Guarantors pursuant to Section 5.8 of the Participation Agreement, in the form attached to the Participation Agreement as Exhibit K. "Accounts" shall have the meaning given to such term in Section 1 of the Security Agreement. "Acquisition Advance" shall have the meaning given to such term in Section 5.3 of the Participation Agreement. "Acquisition Loan" shall mean any Loan made in connection with an Acquisition Advance. "Additional Incorporated Terms" shall have the meaning given to such term in Section 28.1 of the Lease. "Advance" shall mean a Construction Advance or an Acquisition Advance. "Affiliate" shall mean, with respect to any Person, any Person or group acting in concert in respect of the Person in question that, directly or indirectly, controls or is controlled by or is under common control with such Person. For the purpose of this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies, whether through the ownership of voting securities, by contract or otherwise. "After Tax Basis" shall mean, with respect to any payment to be received, the amount of such payment increased so that, after deduction of the amount of all taxes required to be paid by the recipient calculated at the then maximum marginal rates generally applicable to Persons of the same type as the recipients with respect to the receipt by the recipient of such amounts (less any tax savings realized as a result of the payment of the indemnified amount), such increased payment (as so reduced) is equal to the payment otherwise required to be made. "Agency Agreement" shall mean the Agency Agreement, dated on or about the Initial Closing Date between the Construction Agent and the Lessor. Appendix A-3 "Agency Agreement Event of Default" shall mean an "Event of Default" as defined in Section 5.1 of the Agency Agreement. "Agent" shall mean First Union National Bank, as agent for the Lenders pursuant to the Credit Agreement, or any successor agent appointed in accordance with the terms of the Credit Agreement and respecting the Security Documents, for the Lenders and the Holders, to the extent of their interests. "Anniversary Date" shall have the meaning given to such term in Section 2.2 of the Lease. "Annualized EBITDA" shall mean, with respect to AOR and its Subsidiaries, on a consolidated basis, as of the last day of any fiscal quarter, the product of (a) EBITDA for the fiscal quarter ending on such date, multiplied by (b) four (4). "AOR" shall mean American Oncology Resources, Inc., a Delaware corporation, and its successors and permitted assigns. "AOR Trust 1997-1" shall mean the grantor trust created pursuant to the terms and conditions of the Trust Agreement. "Applicable Margin" shall mean, at any time with respect to any Eurodollar Loan or any Eurodollar Holder Advances, the applicable percentage points as determined under the following matrix with reference to the ratio of Consolidated Debt to Annualized EBITDA calculated as provided below:
Ratio of Consolidated Applicable Margin for Applicable Margin for Applicable Margin for Debt to Annualized EBITDA Eurodollar Tranche A Loans Eurodollar Tranche B Loans Eurodollar Holder Advances - ------------------------- -------------------------- -------------------------- -------------------------- Greater than 3.00 to 1.00 0.875% 1.250% 1.635% Greater than 2.50 to 1.00 but 0.800% 1.175% 1.550% less than or equal to 3.00 to 1.00 Greater than 2.00 to 1.00 but 0.550% 0.925% 1.300% less than or equal to 2.50 to 1.00 Greater than 1.50 to 1.00 but 0.450% 0.825% 1.200% less than or equal to 2.00 to 1.00 Less than or equal to 1.50 to 0.325% 0.700% 1.075% 1.00
From the Initial Closing Date until the fifth (5th) day after receipt by the Agent of the December 31, 1997 financial statements pursuant to Section 28.1 of the Lease, the Applicable Appendix A-4 Margin shall be 0.800% (for the Eurodollar Tranche A Loans), 1.175% (for the Eurodollar Tranche B Loans) and 1.550% (for the Eurodollar Holder Advances). The Applicable Margin shall be reset from time to time in accordance with the above matrix on the fifth (5th) day after receipt by the Agent in accordance with Section 28.1 of the Lease of financial statements together with a Compliance Certificate (reflecting the computation of the ratio of Consolidated Debt to Annualized EBITDA as of the last day of the preceding fiscal quarter or fiscal year, as appropriate). "Appraisal" shall mean, with respect to any Property, an appraisal to be delivered in connection with the Participation Agreement or in accordance with the terms of the Lease, in each case prepared by a reputable appraiser reasonably acceptable to the Agent, which in the judgment of counsel to the Agent, complies with all of the provisions of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended, the rules and regulations adopted pursuant thereto, and all other applicable Legal Requirements. "Appraisal Procedure" shall have the meaning given such term in Section 22.4 of the Lease. "Approved State" shall mean each of the following: Colorado, Florida, Indiana, Oklahoma and Texas and any other state within the continental United States proposed by the Lessee and consented to in writing by the Agent. "Appurtenant Rights" shall mean (a) all agreements, easements, rights of way or use, rights of ingress or egress, privileges, appurtenances, tenements, hereditaments and other rights and benefits at any time belonging or pertaining to the Land underlying the Improvements or the Improvements, including without limitation the use of any streets, ways, alleys, vaults or strips of land adjoining, abutting, adjacent or contiguous to the Land and (b) all permits, licenses and rights, whether or not of record, appurtenant to such Land or the Improvements. "Arbitration Rules" shall have the meaning given to such term in Section 12.7(d) of the Participation Agreement. "Assignment and Acceptance" shall mean the Assignment and Acceptance in the form attached to the Credit Agreement as EXHIBIT B. "Available Commitment" shall mean, as to any Lender at any time, an amount equal to the excess, if any, of (a) the amount of such Lender's Commitment over (b) the aggregate principal amount of all Loans made by such Lender as of such date after giving effect to Section 5.2(d) of the Participation Agreement (but without giving effect to any other repayments or prepayments of any Loans hereunder). "Available Holder Commitments" shall mean an amount equal to the excess, if any, of (a) the aggregate amount of the Holder Commitments over (b) the aggregate amount of the Holder Advances made since the Initial Closing Date after giving effect to Section 5.2(d) of the Appendix A-5 Participation Agreement (but without giving effect to any other repayments or prepayments of any Holder Advances). "Bankruptcy Code" shall mean Title 11 of the U. S. Code entitled "Bankruptcy," as now or hereafter in effect or any successor thereto. "Base Amount" shall have the meaning specified in Section 10.1(e) of the Lease. "Basic Rent" shall mean, the sum of (a) the Loan Basic Rent and (b) the Lessor Basic Rent, calculated as of the applicable date on which Basic Rent is due. "Benefitted Lender" shall have the meaning specified in Section 9.10(a) of the Credit Agreement. "Bill of Sale" shall mean a Bill of Sale regarding Equipment in form and substance satisfactory to the Agent. "Board" shall mean the Board of Governors of the Federal Reserve System of the United States (or any successor). "Borrower" shall mean the Owner Trustee, not in its individual capacity but as Borrower under the Credit Agreement. "Borrowing Date" shall mean any Business Day specified in a notice delivered pursuant to Section 2.3 of the Credit Agreement as a date on which the Lessor requests the Lenders to make Loans hereunder. "Bridge Financing" shall mean the financing provided in favor of the Owner Trustee by AOR with respect to various properties prior to the Initial Closing Date. "Budgeted Total Property Cost" shall mean, at any date of determination with respect to any Construction Period Property, an amount equal to the aggregate amount which the Construction Agent in good faith expects to be expended in order to achieve Completion with respect to such Property. "Business Day" shall mean a day other than a Saturday or Sunday, a legal holiday or other day on which commercial banks in Charlotte, North Carolina or, in respect of any determination relevant to an Advance, New York, New York are required by law to close; provided, however, that when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market. "Capital Lease" shall mean (a) any lease of any property that would, in accordance with GAAP, be required to be classified and accounted for as a capital lease on the balance sheet of Appendix A-6 the lessee and (b) the Lease and any other tax retention operating lease or synthetic lease that is treated as a capital lease of the lessee or its consolidated group for tax purposes. "Capital Lease Obligation" shall mean, with respect to any Capital Lease, the amount of the obligation of the lessee thereunder that would, in accordance with GAAP, appear on a balance sheet as a liability of such lessee in respect of such Capital Lease (or such amount similarly calculated for any Capital Lease that does not appear on a balance sheet), net of any government grant applicable to such Capital Lease. "Capital Stock" shall mean any nonredeemable capital stock of the Lessee or any of its Subsidiaries, whether common or preferred. "Capitalized Lease" shall mean, as applied to any Person, any lease of property (whether real, personal, tangible, intangible or mixed of such Person) by such Person as the lessee which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP. "Casualty" shall mean any damage or destruction of all or any portion of the Property as a result of a fire or other casualty. "CERCLA" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. (S) 9601 et seq., as amended by the Superfund Amendments and Reauthorization Act of 1986. "Certificate" shall mean a Certificate in favor of each Holder regarding the Holder Commitment of such Holder issued pursuant to the terms and conditions of the Trust Agreement in favor of each Holder. "Change of Control" shall mean the occurrence of any one or more of the following: (i) AOR shall merge or consolidate with or into another corporation with the effect that the Persons who were the shareholders of AOR immediately prior to the effective time of such merger or consolidation hold less than 51% of the combined voting power of the outstanding securities of the surviving corporation of such merger or the corporation resulting from such consolidation ordinarily (and apart from rights accruing under special circumstances) having the right to vote in the election of directors, or (ii) any Person or "group" (within the meaning of Section 13(d)(3) of the Exchange Act), other than the Welsh, Carson, Anderson and Stowe group or any of its affiliates, shall, directly or indirectly, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, have become, after the Closing Date, the "beneficial owner" (within the meaning of Rule 13d-3 under the Exchange Act) of securities of AOR representing 49% or more of the combined voting power of the then outstanding securities of AOR ordinarily (and apart from rights accruing under special circumstances) having the right to vote in the election of directors. "Chattel Paper" shall have the meaning given to such term in Section 1 of the Security Agreement. Appendix A-7 "Claims" shall mean any and all obligations, liabilities, losses, actions, suits, penalties, claims, demands, costs and expenses (including without limitation reasonable attorney's fees and expenses) of any nature whatsoever. "Closing Date" shall mean the Initial Closing Date and each Property Closing Date. "Code" shall mean the Internal Revenue Code of 1986 together with rules and regulations promulgated thereunder, as amended from time to time, or any successor statute thereto. "Collateral" shall mean all assets of the Lessor, the Construction Agent and the Lessee, now owned or hereafter acquired, upon which a Lien is purported to be created by one or more of the Security Documents. "Commencement Date" shall have the meaning specified in Section 2.2 of the Lease. "Commitment" shall mean, as to any Lender, the obligation of such Lender to make the portion of the Loans to the Lessor in an aggregate principal amount at any time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule 1.1 of the Credit Agreement, as such amount may be reduced from time to time in accordance with the provisions of the Credit Agreement. "Commitment Percentage" shall mean, as to any Lender at any time, the percentage which such Lender's Commitment then constitutes of the aggregate Commitments (or, at any time after the Commitments shall have expired or terminated, the percentage which the aggregate principal amount of such Lender's Loans then outstanding constitutes of the aggregate principal amount of all of the Loans then outstanding), and such Commitment Percentage shall take into account both the Lender's Tranche A Commitment and the Lender's Tranche B Commitment. "Commitment Period" shall mean the period from and including the Initial Closing Date to and including the Construction Period Termination Date, or such earlier date as the Commitments shall terminate as provided in the Credit Agreement or the Holder Commitment shall terminate as provided in the Trust Agreement. "Company Obligations" shall mean the obligations of AOR Synthetic Real Estate, Inc. in any and all capacities, under and with respect to the Operative Agreements and/or each Property. "Completion" shall mean, with respect to a Property, such time as the acquisition, installation, testing and final completion of the Improvements on such Property has been achieved in accordance with the Plans and Specifications, the Agency Agreement and/or the Lease, and in compliance with all Legal Requirements and Insurance Requirements and a certificate of occupancy has been issued with respect to such Property by the appropriate governmental entity (except if non-compliance, individually or in the aggregate, shall not have and could not reasonably be expected to have a Material Adverse Effect). If the Lessor purchases a Property that includes existing Improvements that are to be immediately occupied by the Lessee, the date of Completion for such Property shall be the Property Closing Date. Appendix A-8 "Completion Date" shall mean, with respect to a Property, the earlier of (a) the date on which Completion for such Property has occurred or (b) the Construction Period Termination Date. "Compliance Certificate" shall mean a fully completed certificate in the form of Exhibit N to the Participation Agreement. "Condemnation" shall mean any taking or sale of the use, access, occupancy, easement rights or title to any Property or any part thereof, wholly or partially (temporarily or permanently), by or on account of any actual or threatened eminent domain proceeding or other taking of action by any Person having the power of eminent domain, including without limitation an action by a Governmental Authority to change the grade of, or widen the streets adjacent to, any Property or alter the pedestrian or vehicular traffic flow to any Property so as to result in a change in access to such Property, or by or on account of an eviction by paramount title or any transfer made in lieu of any such proceeding or action. "Consolidated Debt" shall mean, at any time, the aggregate (without duplication) of all Debt of AOR and its Subsidiaries as of such date, determined on a consolidated basis. "Consolidated Subsidiary" shall mean, as to any Person, any Subsidiary of such Person which under the rules of GAAP consistently applied should have its financial results consolidated with those of such Person for purposes of financial accounting statements. "Construction Advance" shall mean an advance of funds to pay Property Costs pursuant to Section 5.4 of the Participation Agreement. "Construction Agent" shall mean AOR Synthetic Real Estate, Inc., a Delaware corporation, as the construction agent under the Agency Agreement. "Construction Budget" shall mean the cost of acquisition, installation, testing, constructing and developing any Property as determined by the Construction Agent in its reasonable, good faith judgment. "Construction Commencement Date" shall mean, with respect to Improvements, the date on which construction of such Improvements commences pursuant to the Agency Agreement. "Construction Contract" shall mean any contract entered into between the Construction Agent or the Lessee with a Contractor for the construction of Improvements or any portion thereof on the Property. "Construction Loan" shall mean any Loan made in connection with a Construction Advance. Appendix A-9 "Construction Loan Property Cost" shall mean with respect to each Construction Period Property at the date of determination, an amount equal to (a) the aggregate principal amount of Construction Loans made on or prior to such date with respect to the Property minus (b) the aggregate principal amount of prepayments or repayments of the Loans allocated to reduce the Construction Loan Property Cost of such Property pursuant to Section 2.6(c) of the Credit Agreement. "Construction Period" shall mean, with respect to a Property, the period commencing on the Construction Commencement Date for such Property and ending on the Completion Date for such Property. "Construction Period Property" means, at any date of determination, any Property as to which the Rent Commencement Date has not occurred on or prior to such date. "Construction Period Termination Date" shall mean (a) the earlier of (i) the date that the Commitments have been terminated in their entirety in accordance with the terms of Section 2.5(a) of the Credit Agreement, or (ii) the second anniversary of the Initial Closing Date or (b) such later date as shall be agreed to by the Majority Secured Parties. "Contingent Obligation" shall mean, with respect to any Person, any direct or indirect liability of such Person with respect to any Debt, lease, dividend, guaranty, letter of credit or other obligation (the "primary obligation") of another Person (the "primary obligor"), whether or not contingent, (a) to purchase, repurchase or otherwise acquire such primary obligations or any property constituting direct or indirect security therefor, (b) to advance or provide funds (i) for the payment or discharge of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor in respect thereof to make payment of such primary obligation or (d) otherwise to assure or hold harmless the owner of any such primary obligation against loss or failure or inability to perform in respect thereof. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith "Contractor" shall mean each entity with whom the Construction Agent or the Lessee contracts to construct any Improvements or any portion thereof on the Property. "Controlled Group" shall mean all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with AOR, are treated as a single employer under Section 414 of the Code. "Co-Owner Trustee" shall have the meaning specified in Section 9.2 of the Trust Agreement. Appendix A-10 "Covenant Compliance Worksheet" shall mean a fully completed certificate in the form of Attachment A to EXHIBIT L to the Participation Agreement. "Credit Agreement" shall mean the Credit Agreement, dated on or about the Initial Closing Date, among the Lessor, the Agent, the Lenders, as specified therein, AOR and the other Tranche A Guarantors. "Credit Agreement Default" shall mean any event or condition which, with the lapse of time or the giving of notice, or both, would constitute a Credit Agreement Event of Default. "Credit Agreement Event of Default" shall mean any event or condition defined as an "Event of Default" in Section 6 of the Credit Agreement. "Credit Documents" shall mean the Participation Agreement, the Credit Agreement, the Notes and the Security Documents. "Credit Parties" shall mean, collectively, the Construction Agent, the Lessee, the Guarantor and each Tranche A Guarantor. "Debt" shall mean, with respect to any Person, without duplication, (a) all indebtedness of such Person for money borrowed, (b) all reimbursement obligations of such Person with respect to surety bonds, letters of credit and bankers' acceptances (in each case, whether or not matured), (c) all obligations of such Person evidenced by notes, bonds, debentures or similar instruments, (d) all obligations of such Person to pay the deferred purchase price of property or services (including seller subordinated notes, contingent or otherwise), other than trade payables, (e) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (f) all Capital Lease Obligations of such Person, (g) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any capital stock or other equity securities that, by their stated terms (or by the terms of any equity securities issuable upon conversion thereof or in exchange therefor), or upon the occurrence of any event, mature or are mandatorily redeemable, or are redeemable at the option of the holder thereof, in whole or in part, (h) all indebtedness referred to in clauses (a) through (g) above to the extent secured by any lien on any property or asset owned or held by such Person regardless of whether the indebtedness secured thereby shall have been assumed by such Person or is nonrecourse to the credit of such Person and (i) any Contingent Obligation of such Person. "Deed" shall mean a warranty deed regarding the Land and/or Improvements in form and substance reasonably satisfactory to the Agent. "Default" shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. Appendix A-11 "Defaulting Holder" shall have the meaning given to such term in Section 12.4 of the Participation Agreement. "Defaulting Lender" shall have the meaning given to such term in Section 12.4 of the Participation Agreement. "Deficiency Balance" shall have the meaning given in Section 22.1(b) of the Lease Agreement. "Disputes" shall have the meaning given to such term in Section 12.7(d) of the Participation Agreement. "Documents" shall have the meaning given to such term in Section 1 of the Security Agreement. "Dollars" and "$" shall mean dollars in lawful currency of the United States of America. "EBITDA" shall mean, for any period, an amount equal to, without duplication, the sum of (a) net income (determined in accordance with GAAP) earned in such period, plus (b) to the extent net income has been reduced thereby, the sum of (i) depreciation and amortization expense, plus (ii) Interest Expense, plus (iii) federal and state income taxes. "Effective Date" shall mean December 31, 1997. "Election Date" shall have the meaning given to such term in Section 20.1 of the Lease. "Election Notice" shall have the meaning given to such term in Section 20.1 of the Lease. "Eligible Assignee" shall mean (i) a commercial bank organized under the laws of the United States or any state thereof and having total assets in excess of $5,000,000,000, (ii) a commercial bank organized under the laws of any other country that is a member of the OECD or a political subdivision of any such country and having total assets in excess of 5,000,000,000, provided, that such bank is acting through a branch or agency located in the United States, in the country under the laws of which it is organized or in another country that is also a member of the OECD, (iii) the central bank of any country that is a member of the OECD, (iv) a finance company, mutual fund, insurance company or other financial institution that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and having total assets in excess of $500,000,000, (v) any Affiliate of an existing Lender or (vi) any other Person (other than an Affiliate of AOR) approved by the Agent and AOR, which approval shall not be unreasonably withheld; provided, however, that in no event shall the withholding of approval by AOR under this definition be considered unreasonable if (i) AOR has had prior dealings with such Person which AOR regards as unfavorable or (ii) such Person provides banking or other financial services to any of AOR's competitors. Appendix A-12 "Employee Benefit Plan" or "Plan" shall mean an employee benefit plan (within the meaning of Section 3(3) of ERISA, including without limitation any Multiemployer Plan), or any "plan" as defined in Section 4975(e)(1) of the Code and as interpreted by the Internal Revenue Service and the Department of Labor in rules, regulations, releases or bulletins in effect on any Closing Date. "Environmental Claims" shall mean any investigation, notice, violation, demand, allegation, action, suit, injunction, judgment, order, consent decree, penalty, fine, lien, proceeding, or claim (whether administrative, judicial, or private in nature) arising (a) pursuant to, or in connection with, an actual or alleged violation of, any Environmental Law, (b) in connection with any Hazardous Substance, (c) from any abatement, removal, remedial, corrective, or other response action in connection with a Hazardous Substance, Environmental Law, or other order of a Tribunal or (d) from any actual or alleged damage, injury, threat, or harm to health, safety, natural resources, or the environment. "Environmental Laws" shall mean any Law, permit, consent, approval, license, award, or other authorization or requirement of any Tribunal relating to emissions, discharges, releases, threatened releases of any Hazardous Substance into ambient air, surface water, ground water, publicly owned treatment works, septic system, or land, or otherwise relating to the handling, storage, treatment, generation, use, or disposal of Hazardous Substances, pollution or to the protection of health or the environment, including without limitation CERCLA, the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901, et seq., and state statutes analogous thereto. "Environmental Violation" shall mean any activity, occurrence or condition that violates or threatens (if the threat then requires remediation under any Environmental Law and is not remediated during any grace period allowed under such Environmental Law) to violate or results in or threatens (if the threat then requires remediation under any Environmental Law and is not remediated during any grace period allowed under such Environmental Law) to result in noncompliance with any Environmental Law. "Equipment" shall mean equipment, apparatus, furnishings, fittings and personal property of every kind and nature whatsoever purchased, leased or otherwise acquired using the proceeds of the Loans or the Holder Advances by the Construction Agent, the Lessee or the Lessor and all improvements and modifications thereto and replacements thereof, whether or not now owned or hereafter acquired or now or subsequently attached to, contained in or used or usable in any way in connection with any operation of any Improvements or other improvements to real property, including but without limiting the generality of the foregoing, all equipment described in the Appraisal including without limitation all heating, electrical, and mechanical equipment, lighting, switchboards, plumbing, ventilation, air conditioning and air-cooling apparatus, refrigerating, and incinerating equipment, escalators, elevators, loading and unloading equipment and systems, cleaning systems (including without limitation window cleaning apparatus), telephones, communication systems (including without limitation satellite dishes and antennae), televisions, computers, sprinkler systems and other fire prevention and extinguishing apparatus and materials, security systems, motors, engines, machinery, pipes, pumps, tanks, conduits, appliances, fittings and fixtures of every kind and description. Appendix A-13 "Equipment Schedule" shall mean (a) each Equipment Schedule attached to the applicable Requisition and (b) each Equipment Schedule attached to the applicable Lease Supplement. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" shall mean each entity required to be aggregated with any Credit Party pursuant to the requirements of Section 414(b) or (c) of the Code. "Eurocurrency Reserve Requirements" shall mean for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the maximum rates (expressed as a decimal) of reserve requirements in effect on such day (including without limitation basic, supplemental, marginal and emergency reserves under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed on eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D) maintained by a member bank of the Federal Reserve System. "Eurodollar Holder Advance" shall mean a Holder Advance bearing a Holder Yield based on the Eurodollar Rate. "Eurodollar Loans" shall mean Loans the rate of interest applicable to which is based upon the Eurodollar Rate. "Eurodollar Rate" shall mean for the Interest Period for each Eurodollar Loan or Eurodollar Holder Advance comprising part of the same borrowing or advance (including without limitation conversions, extensions and renewals), a per annum interest rate equal to the per annum rate determined by the Agent on the basis of the offered rates for deposits in dollars for a period of time corresponding to such Interest Period (and commencing on the first day of such Interest Period), which appear on the Reuters Screen LIBO Page as of 11:00 a.m. (London time) two (2) Business Days before the first day of such Interest Period (provided, that if at least two (2) such offered rates appear on the Reuters Screen LIBO Page, the rate in respect of such Interest Period will be the arithmetic mean of such offered rates). As used herein, "Reuters Screen LIBO Page" means the display designated as page "LIBO" on the Reuters Monitor Money Rates Service (or such other page as may replace the LIBO page on that service for the purpose of displaying London interbank offered rates of major banks) ("RMMRS"). In the event the RMMRS is not then quoting such offered rates, "Eurodollar Rate" shall mean for the Interest Period for each Eurodollar Loan or Eurodollar Holder Advance comprising part of the same borrowing or advance (including without limitation conversions, extensions and renewals), the average (rounded upward to the nearest one-hundredth (1/100) of one percent (1%)) per annum rate of interest determined by the office of the Agent (each such determination to be presumptively correct) as of two (2) Business Days prior to the first day of such Interest Period, as the effective rate at which deposits in immediately available funds in U.S. dollars are being, have been, or would be offered or quoted by the Agent to major banks in the applicable interbank Appendix A-14 market for Eurodollar deposits at any time during the Business Day which is the second Business Day immediately preceding the first day of such Interest Period, for a term comparable to such Interest Period and in the amount of the requested Eurodollar Loan and/or Eurodollar Holder Advance. If no such offers or quotes are generally available for such amount, then the Agent shall be entitled to determine the Eurodollar Rate by estimating in its reasonable judgment the per annum rate (as described above) that would be applicable if such quote or offers were generally available. "Event of Default" shall mean a Lease Event of Default, an Agency Agreement Event of Default or a Credit Agreement Event of Default. "Excepted Payments" shall mean: (a) all indemnity payments (including without limitation indemnity payments made pursuant to Section 11 of the Participation Agreement), whether made by adjustment to Basic Rent or otherwise, to which the Owner Trustee, any Holder or any of their respective Affiliates, agents, officers, directors or employees is entitled; (b) any amounts (other than Basic Rent or Termination Value) payable under any Operative Agreement to reimburse the Owner Trustee, any Holder or any of their respective Affiliates (including without limitation the reasonable expenses of the Owner Trustee, the Trust Company and the Holders incurred in connection with any such payment) for performing or complying with any of the obligations of any Credit Party under and as permitted by any Operative Agreement; (c) any amount payable to a Holder by any transferee of such interest of a Holder as the purchase price of such Holder's interest in the Trust Estate (or a portion thereof); (d) any insurance proceeds (or payments with respect to risks self- insured or policy deductibles) under liability policies other than such proceeds or payments payable to the Agent or any Lender; (e) any insurance proceeds under policies maintained by the Owner Trustee or any Holder; (f) Transaction Expenses or other amounts, fees, disbursements or expenses paid or payable to or for the benefit of the Owner Trustee or any Holder under any Operative Agreement; (g) all right, title and interest of any Holder or the Owner Trustee to any Property or any portion thereof or any other property to the extent any of the foregoing has been released from the Liens of the Security Documents and the Lease pursuant to the terms thereof; (h) upon termination of the Credit Agreement pursuant to the terms thereof, all remaining property covered by the Lease or Security Documents unless such is payable to another Person pursuant to an express provision of any Operative Agreement; (i) all payments in respect of the Holder Yield; Appendix A-15 (j) any payments in respect of interest to the extent attributable to payments referred to in clauses (a) through (i) above; and (k) any rights of either the Owner Trustee or the Trust Company to demand, collect, sue for or otherwise receive and enforce payment of any of the foregoing amounts, provided, that such rights shall not include the right to terminate the Lease. "Excess Proceeds" shall mean the excess, if any, of the aggregate of all awards, compensation or insurance proceeds payable in connection with a Casualty or Condemnation over the Termination Value paid by the Lessee pursuant to the Lease with respect to such Casualty or Condemnation. "Exculpated Persons" shall mean the Borrower, the Holders, the Lessor, their officers, directors, shareholders and partners. "Exempt Payments" shall have the meaning specified in Section 11.2(e) of the Participation Agreement. "Expiration Date" shall mean the last day of the Term; provided, in no event shall the Expiration Date be later than the fifth annual anniversary of the Initial Closing Date, unless such later date has been expressly agreed to in writing by each of the Lessor, the Lessee, the Agent, the Lenders and the Holders. "Extension Option" shall mean the meaning given to such term in Section 20.1 of the Lease. "Facility Fee" shall mean, collectively, the Holder Facility Fee and the Lender Facility Fee. "Fair Market Sales Value" shall mean, with respect to any Property, the amount, which in any event, shall not be less than zero (0), that would be paid in cash in an arms-length transaction between an informed and willing purchaser and an informed and willing seller, neither of whom is under any compulsion to purchase or sell, respectively, such Property. Fair Market Sales Value of any Property shall be determined based on the assumption that, except for purposes of Section 17 of the Lease, such Property is in the condition and state of repair required under Section 10.1 of the Lease and each Credit Party is in compliance with the other requirements of the Operative Agreements. "Federal Funds Effective Rate" shall have the meaning given to such term in the definition of ABR. "Financing Party" shall mean the Lessor, the Owner Trustee, in its trust capacity, the Agent, the Holders, the Lenders. Appendix A-16 "Fixtures" shall mean all fixtures relating to the Improvements, including without limitation all components thereof, located in or on the Improvements, together with all replacements, modifications, alterations and additions thereto. "Force Majeure Event" shall mean any event beyond the control of the Construction Agent, other than a Casualty or Condemnation, including without limitation strikes, lockouts, adverse soil conditions, acts of God, adverse weather conditions, inability to obtain labor or materials, governmental activities, civil commotion and enemy action; but excluding any event, cause or condition that results from the Construction Agent's financial condition. "Form 1001" shall have the meaning specified in Section 11.2(e) of the Participation Agreement. "Form 4224" shall have the meaning specified in Section 11.2(e) of the Participation Agreement. "GAAP" shall mean generally accepted accounting principles set forth in the opinions and pronouncements of the accounting principles board of the American Institute of Certified Public Accountants, and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, that are applicable to the circumstances as of the date of determination. "Governmental Action" shall mean all permits, authorizations, registrations, consents, approvals, waivers, exceptions, variances, orders, judgments, written interpretations, decrees, licenses, exemptions, publications, filings, notices to and declarations of or with, or required by, any Governmental Authority, or required by any Legal Requirement, and shall include, without limitation, all environmental and operating permits and licenses that are required for the full use, occupancy, zoning and operating of the Property. "Governmental Authority" shall mean any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Ground Lease" shall mean a ground lease respecting any Property which is in form and substance reasonably satisfactory to the Agent. "Guarantor" shall mean AOR. "Hard Costs" shall mean all costs and expenses payable for supplies, materials, labor and profit with respect to the Improvements under any Construction Contract. "Hazardous Substance" shall mean any of the following: (a) any petroleum or petroleum product, explosives, radioactive materials, asbestos, formaldehyde, polychlorinated biphenyls, lead and radon gas to the extent any of the foregoing are harmful or hazardous to the Appendix A-17 environment or human health or safety as determined in accordance with any Environmental Law or otherwise constitute an Environmental Violation; (b) any substance, material, product, derivative, compound or mixture, mineral, chemical, waste, gas, medical waste, or pollutant, in each case whether naturally occurring, man-made or the by-product of any process, that is toxic, harmful or hazardous to the environment or human health or safety as determined in accordance with any Environmental Law; or (c) any substance, material, product, derivative, compound or mixture, mineral, chemical, waste, gas, medical waste or pollutant that would support the assertion of any claim under any Environmental Law, whether or not defined as hazardous as such under any Environmental Law. "Holder Advance" shall mean any advance made by any Holder to the Owner Trustee pursuant to the terms of the Trust Agreement or the Participation Agreement. "Holder Amount" shall mean as of any date, the aggregate amount of Holder Advances made by each Holder to the Trust Estate pursuant to Section 2 of the Participation Agreement and Section 3.1 of the Trust Agreement less any payments of any Holder Advances received by the Holders pursuant to Section 3.4 of the Trust Agreement. "Holder Commitments" shall mean $2,250,000; provided, if there shall be more than one (1) Holder, the Holder Commitment of each Holder shall be as set forth in Schedule I to the Trust Agreement as such Schedule I may be amended and replaced from time to time, as such amount may be increased or reduced from time to time in accordance with the provisions of the Operative Agreements. "Holder Construction Property Cost" shall mean, with respect to each Construction Period Property, at any date of determination, an amount equal to the outstanding Holder Advances made with respect thereto under the Trust Agreement. "Holder Facility Fee" shall have the meaning given to such term in Section 7.4 of the Participation Agreement. "Holder Overdue Rate" shall mean the lesser of (a) the then current rate of Holder Yield respecting the particular amount in question plus two percent (2%) and (b) the highest rate permitted by applicable law. "Holder Property Cost" shall mean with respect to a Property an amount equal to the outstanding Holder Advances with respect thereto. "Holder Yield" shall mean with respect to Holder Advances from time to time either the Eurodollar Rate plus the Applicable Margin or the ABR as elected by the Owner Trustee from time to time with respect to such Holder Advances in accordance with the terms of the Trust Agreement; provided, however, (a) upon delivery of the notice described in Section 3.7(c) of the Trust Agreement, the outstanding Holder Advances of each Holder shall bear a yield at the ABR applicable from time to time from and after the dates and during the periods specified in Section 3.7(c) of the Trust Agreement, and (b) upon the delivery by a Holder of the notice described in Appendix A-18 Section 11.3(f) of the Participation Agreement, the Holder Advances of such Holder shall bear a yield at the ABR applicable from time to time after the dates and during the periods specified in Section 11.3(f) of the Participation Agreement. "Holders" shall mean First Union National Bank and shall include the other banks and financial institutions which may be from time to time holders of Certificates in connection with the AOR Trust 1997-1. "Impositions" shall mean, except to the extent described in the following sentence, any and all liabilities, losses, expenses, costs, charges and Liens of any kind whatsoever for fees, taxes, levies, imposts, duties, charges, assessments or withholdings ("Taxes") including but not limited to (i) real and personal property taxes, including without limitation personal property taxes on any property covered by the Lease that is classified by Governmental Authorities as personal property, and real estate or ad valorem taxes in the nature of property taxes; (ii) sales taxes, use taxes and other similar taxes (including rent taxes and intangibles taxes); (iii) excise taxes; (iv) real estate transfer taxes, conveyance taxes, stamp taxes and documentary recording taxes and fees; (v) taxes that are or are in the nature of franchise, income, value added, privilege and doing business taxes, license and registration fees; (vi) assessments on any Property, including without limitation all assessments for public Improvements or benefits, whether or not such improvements are commenced or completed within the Term; and (vii) taxes, Liens, assessments or charges asserted, imposed or assessed against the Lessee or any of its Affiliates by the PBGC or any governmental authority succeeding to or performing functions similar to, the PBGC; and in each case all interest, additions to tax and penalties thereon, which at any time prior to, during or with respect to the Term or in respect of any period for which the Lessee shall be obligated to pay Supplemental Rent, may be levied, assessed or imposed by any Governmental Authority upon or with respect to (a) any Property or any part thereof or interest therein; (b) the leasing, financing, refinancing, demolition, construction, substitution, subleasing, assignment, control, condition, occupancy, servicing, maintenance, repair, ownership, possession, activity conducted on, delivery, insuring, use, operation, improvement, sale, transfer of title, return or other disposition of such Property or any part thereof or interest therein; (c) the Notes, other indebtedness with respect to any Property, or the Certificates, or any part thereof or interest therein; (d) the rentals, receipts or earnings arising from any Property or any part thereof or interest therein; (e) the Operative Agreements, the performance thereof, or any payment made or accrued pursuant thereto; (f) the income or other proceeds received with respect to any Property or any part thereof or interest therein upon the sale or disposition thereof; (g) any contract (including the Agency Agreement) relating to the construction, acquisition or delivery of the Improvements or any part thereof or interest therein; (h) the issuance of the Notes or the Certificates; (i) the Owner Trustee, the Trust or the Trust Estate; or (j) otherwise in connection with the transactions contemplated by the Operative Agreements. "Improvements" shall mean, with respect to the construction, renovations and/or Modifications on any Land, all buildings, structures, Fixtures, and other improvements of every kind existing at any time and from time to time on or under the Land purchased, leased or otherwise acquired using the proceeds of the Loans or the Holder Advances, together with any and all appurtenances to such buildings, structures or improvements, including without limitation Appendix A-19 sidewalks, utility pipes, conduits and lines, parking areas and roadways, and including without limitation all Modifications and other additions to or changes in the Improvements at any time, including without limitation (a) any Improvements existing as of the Property Closing Date as such Improvements may be referenced on the applicable Requisition and (b) any Improvements made subsequent to such Property Closing Date. "Incorporated Covenants" shall have the meaning given to such term in Section 28.1 of the Lease. "Incorporated Representations and Warranties" shall have the meaning given to such term in Section 28.1 of the Lease. "Indebtedness" of a Person shall mean, without duplication, such Person's: (a) obligations for borrowed money; (b) obligations representing the deferred purchase price of Property (whether real, personal, tangible, intangible or mixed) or services (other than accounts payable arising in the ordinary course of such Person's business ); (c) obligations, whether or not assumed, secured by liens or payable out of the proceeds or production from property now or hereafter owned or acquired by such Person; (d) obligations which are evidenced by notes, acceptances or other instruments; (e) Capital Lease Obligations; (f) net liabilities under Interest Rate Protection Agreements; and (g) contingent obligations, to the extent such guarantee, affirm or otherwise are in support of the types of obligations referenced in the preceding sections (a) through (f). "Indemnified Person" shall mean the Lessor, the Owner Trustee, in its individual and its trust capacity, the Trust, the Trust Company, the Agent, the Holders, the Lenders and their respective successors, assigns, directors, shareholders, partners, officers, employees, agents and Affiliates. "Indemnity Provider" shall mean, respecting each Property, the Lessee. "Initial Closing Date" shall mean December 31, 1997 . Appendix A-20 "Initial Construction Advance" shall mean any initial Advance to pay for: (a) Property Costs for construction of any Improvements; and (b) the Property Costs of restoring or repairing any Property which is required to be restored or repaired in accordance with Section 15.1(e) of the Lease. "Instruments" shall have the meaning given to such term in Section 1 of the Security Agreement. "Insurance Requirements" shall mean all terms and conditions of any insurance policy either required by the Lease to be maintained by the Lessee or required by the Agency Agreement to be maintained by the Construction Agent, and all requirements of the issuer of any such policy and, regarding self insurance, any other requirements of the Lessee. "Interest Expense" shall mean, for any period, total interest expense of AOR and its Subsidiaries on a consolidated basis for such period (including without limitation capitalized interest expense and interest expense attributable to Capital Lease Obligations), determined in accordance with GAAP. "Interest Period" shall mean (a) during the Commitment Period and thereafter as to any Eurodollar Loan or Eurodollar Holder Advance (i) with respect to the initial Interest Period, the period beginning on the date of the first Eurodollar Loan and Eurodollar Holder Advance and ending one (1) month, two (2) months, three (3) months or (subject to availability for all Lenders and Holders) six (6) months thereafter, as selected by the Lessor (in the case of a Eurodollar Loan) or the Owner Trustee (in the case of a Eurodollar Holder Advance) in its applicable notice given with respect thereto and (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan or Eurodollar Holder Advance and ending one (1) month, two (2) months or three (3) months thereafter, as selected by the Lessor by irrevocable notice to the Agent (in the case of a Eurodollar Loan) or by the Owner Trustee (in the case of a Eurodollar Holder Advance) in each case not less than three (3) Business Days prior to the last day of the then current Interest Period with respect thereto; provided, however, that all of the foregoing provisions relating to Interest Periods are subject to the following: (A) if any Interest Period would end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day (except that where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding Business Day), (B) no Interest Period shall extend beyond the Maturity Date or the Expiration Date, as the case may be, (C) where an Interest Period begins on a day for which there is no numerically corresponding day in the calendar month in which the Interest Period is to end, such Interest Period shall end on the last Business Day of such calendar month, (D) there shall not be more than four (4) Interest Periods outstanding at any one (1) time. "Interest Rate Protection Agreements" shall mean all interest rate swap agreements, interest rate cap agreements, interest rate collar agreements, interest rate insurance or other hedging arrangements and all other similar agreements or arrangements designed to protect against fluctuations in interest rates. Appendix A-21 "Investment Company Act" shall mean the Investment Company Act of 1940, as amended, together with the rules and regulations promulgated thereunder. "Land" shall mean a parcel of real property described on (a) the Requisition issued by the Construction Agent on the Property Closing Date relating to such parcel and (b) the schedules to each applicable Lease Supplement executed and delivered in accordance with the requirements of Section 2.4 of the Lease. "Law" shall mean any statute, law, ordinance, regulation, rule, directive, order, writ, injunction or decree of any Tribunal. "Lease" or "Lease Agreement" shall mean the Lease Agreement dated on or about the Initial Closing Date, between the Lessor and the Lessee, together with any Lease Supplements thereto. "Lease Default" shall mean any event or condition which, with the lapse of time or the giving of notice, or both, would constitute a Lease Event of Default. "Lease Event of Default" shall have the meaning specified in Section 17.1 of the Lease. "Lease Supplement" shall mean each Lease Supplement substantially in the form of EXHIBIT A to the Lease, together with all attachments and schedules thereto. "Legal Requirements" shall mean all foreign, federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions applicable to the Owner Trustee, any Holder, the Lessor, the Lessee, the Agent, any Lender or any Property, Land, Improvement, Equipment or the taxation, demolition, construction, use or alteration of such Improvements, whether now or hereafter enacted and in force, including without limitation any that require repairs, modifications or alterations in or to any Property or in any way limit the use and enjoyment thereof (including without limitation all building, zoning and fire codes and the Americans with Disabilities Act of 1990, 42 U.S.C. (S) 12101 et. seq., and any other similar federal, state or local laws or ordinances and the regulations promulgated thereunder) and any that may relate to environmental requirements (including without limitation all Environmental Laws), and (to the extent required by Law) all permits, certificates of occupancy, licenses, authoriza tions and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments which are either of record or known to the Lessee affecting any Property or the Appurtenant Rights. "Lender Commitments" shall mean $72,750,000; provided, if there shall be more than one (1) Lender, the Lender Commitment of each Lender shall be as set forth in Schedule 1.1 to the Credit Agreement as such Schedule 1.1 may be amended and replaced from time to time, as such amount may be increased or reduced from time to time in accordance with the provisions of the Operative Agreements. Appendix A-22 "Lender Facility Fee" shall have the meaning given to such term in Section 7.4 of the Participation Agreement. "Lender Financing Statements" shall mean UCC financing statements and fixture filings appropriately completed and executed for filing in the applicable jurisdiction in order to procure a security interest in favor of the Agent in the Collateral subject to the Security Documents. "Lenders" shall mean First Union National Bank and shall include the other banks and financial institutions which may be from time to time party to the Participation Agreement and the Credit Agreement. "Lessee" shall have the meaning set forth in the Lease. "Lessee Assets" shall mean all right, title and interest of Lessee in and to any and all real and personal properties and fixtures, of every kind and description, tangible or intangible, whether now owned or hereafter existing or acquired, and wherever located, and all products and proceeds (both cash and non-cash) thereof, including without limitation all of the following (each of the following being listed without limiting the generality of any other of the following listed items): all of the Lessee's right, title and interest, whether now owned or hereafter acquired or existing, in and to all books and records; and in and to all of the following (each such term as defined in the Uniform Commercial Code): all accounts, chattel paper, documents, instruments, general intangibles, investment property, goods, equipment, inventory and fixtures; and in and to all insurance premiums; and further in and to all of the Lessee's other rights, remedies, obligations or other property of every kind and description including without limitation all rights of Lessee to the payment of money, causes of action or choses in action and all rights to recovery therefrom; and in and to all consents, licenses, certificates and other governmental approvals; and in and to all money, cash or cash equivalents and bank accounts; and in and to all proceeds of letters of credit issued in favor of Lessee; and including without limitation such properties and other assets leased or otherwise subject to the Lease (including without limitation all right, title and interest of Lessee, now owned or hereafter acquired, and wherever located, in, to and under (a) all Properties including without limitation all Equipment and all Fixtures, (b) all substitutions, modifications and replacements of, and all additions, accessions and improvements to, the Fixtures and Equipment, (c) all books and records relating to or kept in connection with Lessee's operation of the Properties or any part thereof, (d) all insurance premiums under insurance policies now or subsequently obtained by Lessee including without limitation such premiums relating to the Properties or any part thereof, (e) all awards and other compensation, including without limitation the interest payable thereon and any right to collect and receive the same for the taking by eminent domain, condemnation or otherwise of any and all property including without limitation the Properties or any part thereof, (f) all consents, licenses, certificates and other governmental approvals relating to the construction, completion, use or operation of any and all property including without limitation the Properties or any part thereof, (g) all Plans and Specifications relating to any and all property including without limitation the Properties or any part thereof, (h) all "instruments" (as defined in the Uniform Commercial Code) relating to the Properties or any part thereof, (i) all "documents" (as such term is defined in the Uniform Commercial Code) relating to the Properties or any part thereof, (j) all "general intangibles" (as Appendix A-23 such term is defined in the Uniform Commercial Code) relating to the Properties or any part thereof, (k) all "chattel paper" (as such term is defined in the Uniform Commercial Code) relating to the Properties or any part thereof, (l) all "accounts" (as such term is defined in the Uniform Commercial Code) relating to the Properties or any part thereof, and (m) all proceeds, both cash and non-cash of any of the foregoing). "Lessee Credit Agreement" shall mean that certain Third Amended and Restated Loan Agreement dated as of December 29, 1997 among AOR, the various lenders parties thereto from time to time and First Union National Bank, as the agent thereunder, as such may hereafter be amended, modified, supplemented, restated and/or refinanced or otherwise replaced from time to time. "Lessee Credit Agreement Event of Default" shall mean an Event of Default as defined in Article VII of the Lessee Credit Agreement. "Lessor" shall mean the Owner Trustee, not in its individual capacity, but as the Lessor under the Lease. "Lessor Basic Rent" shall mean the scheduled Holder Yield accrued, outstanding and due on the Holder Advances on any Scheduled Interest Payment Date pursuant to the Trust Agreement (but not including interest on (a) any such scheduled Holder Yield due on the Holder Advances prior to the Rent Commencement Date with respect to the Property to which such Holder Advances relate or (b) overdue amounts under the Trust Agreement or otherwise). "Lessor Financing Statements" shall mean UCC financing statements and fixture filings appropriately completed and executed for filing in the applicable jurisdictions in order to protect the Lessor's interest under the Lease to the extent the Lease is a security agreement or a mortgage. "Lessor Lien" shall mean any Lien, true lease or sublease or disposition of title arising as a result of (a) any claim against the Lessor or the Trust Company, in its individual capacity, not resulting from the transactions contemplated by the Operative Agreements, (b) any act or omission of the Lessor or the Trust Company, in its individual capacity, which is not required by the Operative Agreements or is in violation of any of the terms of the Operative Agreements, (c) any claim against the Lessor or the Trust Company, in its individual capacity, with respect to Taxes or Transaction Expenses against which the Lessee is not required to indemnify the Lessor or the Trust Company, in its individual capacity, pursuant to Section 11 of the Participation Agreement or (d) any claim against the Lessor arising out of any transfer by the Lessor of all or any portion of the interest of the Lessor in the Properties, the Trust Estate or the Operative Agreements other than the transfer of title to or possession of any Properties by the Lessor pursuant to and in accordance with the Lease, the Credit Agreement, the Security Agreement or the Participation Agreement or pursuant to the exercise of the remedies set forth in Article XVII of the Lease. Appendix A-24 "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien, option or charge of any kind. "Limited Recourse Amount" shall mean with respect to all the Properties on an aggregate basis, an amount equal to the sum of the Termination Values with respect to all the Properties on an aggregate basis on each Payment Date, less the Maximum Residual Guarantee Amount as of such date with respect to all the Properties on an aggregate basis. "Loan Basic Rent" shall mean the scheduled interest accrued, outstanding and due on the Loans on any Scheduled Interest Payment Date pursuant to the Credit Agreement (but not including interest on (a) any such Loan due prior to the Rent Commencement Date with respect to the Property to which such Loan relates or (b) any overdue amounts under Section 2.8(c) of the Credit Agreement or otherwise). "Loan Property Cost" shall mean, with respect to each Property at any date of determination, an amount equal to (a) the aggregate principal amount of all Loans (including without limitation all Acquisition Loans and Construction Loans) made on or prior to such date with respect to such Property minus (b) the aggregate amount of prepayments or repayments as the case may be of the Loans allocated to reduce the Loan Property Cost of such Property pursuant to Section 2.6(c) of the Credit Agreement. "Loans" shall mean the loans extended pursuant to the Credit Agreement and shall include both the Tranche A Loans and the Tranche B Loans. "Majority Holders" shall mean at any time, Holders whose Holder Advances outstanding represent at least sixty-six and two thirds percent (66 2/3%) of the aggregate Holder Advances outstanding. "Majority Lenders" shall mean at any time, Lenders whose Loans outstanding represent at least sixty-six and two thirds percent (66 2/3%) of the aggregate Loans outstanding. "Majority Secured Parties" shall mean at any time, Lenders and Holders whose Loans and Holder Advances outstanding represent at least sixty-six and two thirds percent (66 2/3%) of the aggregate Advances outstanding. "Marketing Period" shall mean, if the Lessee has given a Sale Notice in accordance with Section 20.1 of the Lease, the period commencing on the date such Sale Notice is given and ending on the Expiration Date. "Material Adverse Effect" shall, mean a material adverse effect on (a) the business, condition (financial or otherwise), assets, liabilities or operations of the Credit Parties (on a consolidated basis), (b) the ability of the Credit Parties (on a consolidated basis) to perform their collective obligations under or in connection with the Operative Agreements, (c) the validity, priority or enforceability of any Lien on any Property created by any of the Operative Agreements (except this subsection (c) shall not limit the rights of Lessee, or impose additional Appendix A-25 obligations on Lessee, relating to Permitted Liens and/or Lessor Liens), or (d) the value, utility or useful life of any material portion of any Property or the use, or ability of the Lessee to use, any material portion of any Property for the purpose for which it was intended. "Maturity Date" shall mean the Expiration Date. "Maximum Residual Guarantee Amount" shall mean an amount equal to the product of the aggregate Property Cost for all of Properties times eighty-five percent (85%). "Modifications" shall have the meaning specified in Section 11.1(a) of the Lease. "Mortgage Instrument" shall mean any mortgage, deed of trust or any other instrument executed by the Owner Trustee and the Lessee (or regarding any Property subject to a Ground Lease, the applicable Affiliate of the Lessee) in favor of the Agent (for the benefit of the Lenders and the Holders) and evidencing a Lien on the Property, in form and substance reasonably acceptable to the Agent. "Multiemployer Plan" shall mean any plan described in Section 4001(a)(3) of ERISA to which contributions are or have been made or required by any Credit Party or any of its Subsidiaries or ERISA Affiliates. "Multiple Employer Plan" shall mean a plan to which any Credit Party or any ERISA Affiliate and at least one (1) other employer other than an ERISA Affiliate is making or accruing an obligation to make, or has made or accrued an obligation to make, contributions. "New Facility" shall have the meaning given to such term in Section 28.1 of the Lease. "Non-Integral Equipment" shall mean Equipment constituting solely personal property which (a) is not and shall at no time during the Term become a fixture or otherwise be deemed to constitute real property, (b) is not integral to the operations of the Property and (c) is not radiation equipment, including without limitation, linear accelerators, treatment simulators and other related equipment used in the planning and delivery of external beam radiation therapy or cancer cases that benefit from precision delivery of ionizing radiation. "Notes" shall mean those notes issued to the Lenders pursuant to the Credit Agreement and shall include both the Tranche A Notes and the Tranche B Notes. "Obligations" shall have the meaning given to such term in Section 1 of the Security Agreement. "OECD" shall mean the Organization for Economic Cooperation and Development and any successor thereto. "Officer's Certificate" with respect to any Person shall mean a certificate executed on behalf of such Person by a Responsible Officer who has made or caused to be made such Appendix A-26 examination or investigation as is necessary to enable such Responsible Officer to express an informed opinion on behalf of such Person with respect to the subject matter of such Officer's Certificate. "Operative Agreements" shall mean the following: the Participation Agreement, the Agency Agreement, the Trust Agreement, the Certificates, the Credit Agreement, the Notes, the Lease, the Lease Supplements (and memoranda of the Lease and each Lease Supplement in a form reasonably acceptable to the Agent), the Accession Agreements, the Security Agreement, the Mortgage Instruments, the other Security Documents, the Ground Leases, the Deeds and the Bills of Sale and any and all other agreements, documents and instruments executed in connection with any of the foregoing. "Original Executed Counterpart" shall have the meaning given to such term in Section 5 of EXHIBIT A to the Lease. "Overdue Interest" shall mean any interest payable pursuant to Section 2.8(c) of the Credit Agreement. "Overdue Rate" shall mean (a) with respect to the Loan Basic Rent, and any other amount owed under or with respect to the Credit Agreement or the Security Documents, the rate specified in Section 2.8(b) of the Credit Agreement, (b) with respect to the Lessor Basic Rent, the Holder Yield and any other amount owed under or with respect to the Trust Agreement, the Holder Overdue Rate, and (c) with respect to any other amount, the amount referred to in clause (y) of Section 2.8(b) of the Credit Agreement. "Owner Trustee," "Borrower" or "Lessor" shall mean First Security Bank, National Association, not individually, except as expressly stated in the various Operative Agreements, but solely as the Owner Trustee under the AOR Trust 1997-1, and any successor or replacement Owner Trustee expressly permitted under the Operative Agreements. "Participant" shall have the meaning given to such term in Section 9.7 of the Credit Agreement. "Participation Agreement" shall mean the Participation Agreement dated on or about the Initial Closing Date, among the Lessee, AOR, the various entities which are parties thereto from time to time, as the other Tranche A Guarantors, the Owner Trustee, not in its individual capacity except as expressly stated therein, the Holders, the Lenders and the Agent. "Payment Date" shall mean any Scheduled Interest Payment Date and any date on which interest or Holder Yield in connection with a prepayment of principal on the Loans or of the Holder Advances is due under the Credit Agreement or the Trust Agreement. "PBGC" shall mean the Pension Benefit Guaranty Corporation created by Section 4002(a) of ERISA or any successor thereto. Appendix A-27 "Pension Plan" shall mean a "pension plan", as such term is defined in section 3(2) of ERISA, which is subject to title IV of ERISA (other than a Multiemployer Plan), and to which the Lessee or any ERISA Affiliate may have any liability, including without limitation any liability by reason of having been a substantial employer within the meaning of section 4063 of ERISA at any time during the preceding five (5) years, or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA. "Permitted Facility" shall mean a cancer treatment facility of the type and size customarily used and operated by a medical practice group that is managed or controlled by AOR and/or any of its Wholly-Owned Entities in the ordinary course of its business as of the Initial Closing Date. For the purpose of this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of management and non-medical policies, whether through the ownership of voting securities, by contract or otherwise. Notwithstanding the above, control shall not include, and shall not be implied to include, the power to direct any physician's practice of medicine or the power to interfere in any physician/patient relationship. "Permitted Liens" shall mean: (a) the respective rights and interests of the parties to the Operative Agreements as provided in the Operative Agreements; (b) the rights of any sublessee or assignee under a sublease or an assignment expressly permitted by the terms of the Lease for no longer than the duration of the Lease; (c) Liens for Taxes that either are not yet due or are being contested in accordance with the provisions of Section 13.1 of the Lease; (d) Liens arising by operation of law, materialmen's, mechanics', workmen's, repairmen's, employees', carriers', warehousemen's and other like Liens relating to the construction of the Improvements or in connection with any Modifications or arising in the ordinary course of business for amounts that either are not more than thirty (30) days past due or are being diligently contested in good faith by appropriate proceedings, so long as such proceedings satisfy the conditions for the continuation of proceedings to contest Taxes set forth in Section 13.1 of the Lease; (e) Liens of any of the types referred to in clause (d) above that have been bonded for not less than the full amount in dispute (or as to which other security arrangements satisfactory to the Lessor and the Agent have been made), which bonding (or arrangements) shall comply with applicable Legal Requirements, and shall have effectively stayed any execution or enforcement of such Liens; (f) Liens arising out of judgments or awards with respect to which appeals or other proceedings for review are being prosecuted in good faith and for the payment of Appendix A-28 which adequate reserves have been provided as required by GAAP or other appropriate provisions have been made, so long as such proceedings have the effect of staying the execution of such judgments or awards and satisfy the conditions for the continuation of proceedings to contest Taxes set forth in Section 13.1 of the Lease; (g) Liens in favor of municipalities to the extent agreed to by the Lessor; and (h) Liens appearing on title insurance policies in favor of the Lessor and the Agent delivered pursuant to the Participation Agreement with respect to the various Properties, to the extent such Liens are reasonably acceptable to the Agent. "Person" shall mean any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization, governmental authority or any other entity. "Physician Transaction" shall mean any bona fide transaction or series of related transactions, consummated after the date hereof, by which AOR or any Subsidiary (a) acquires all or part of the assets, or a going business or division, of any Person, whether through purchase of assets or securities, merger or otherwise, (b) directly or indirectly acquires control of any Person or (c) acquires the right to manage the non-medical aspects of the business of any Person. For the purpose of this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of management and non-medical policies, whether through the ownership of voting securities, by contract or otherwise. Notwithstanding the above, control shall not include, and shall not be implied to include, the power to direct any physician's practice of medicine or the power to interfere in any physician/patient relationship. "Plans and Specifications" shall mean, with respect to Improvements, the plans and specifications for such Improvements to be constructed or already existing, as such Plans and Specifications may be amended, modified or supplemented from time to time in accordance with the terms of the Operative Agreements. "Prime Lending Rate" shall have the meaning given to such term in the definition of ABR. "Property" shall mean, with respect to each Permitted Facility that is (or is to be) acquired, constructed and/or renovated pursuant to the terms of the Operative Agreements, the Land and each item of Equipment and the various Improvements, in each case located on such Land, including without limitation each Construction Period Property, each Property subject to a Ground Lease and each Property for which the Term has commenced. "Property Acquisition Cost" shall mean the cost to the Lessor to purchase a Property on a Property Closing Date. Appendix A-29 "Property Closing Date" shall mean the date on which the Lessor purchases a Property or, with respect to the first Advance, the date on which the Lessor seeks reimbursement for Property previously purchased by the Lessor. "Property Cost" shall mean with respect to a Property the aggregate amount (and/or the various items and occurrences giving rise to such amounts) of the Loan Property Cost plus the Holder Property Cost for such Property (as such amounts shall be increased equally among all Properties respecting the Holder Advances and the Loans extended from time to time to pay for the Transaction Expenses, fees, expenses and other disbursements referenced in Sections 7.1(a) and 7.1(b) of the Participation Agreement). "Purchase Option" shall have the meaning given to such term in Section 20.1 of the Lease. "Purchasing Lender" shall have the meaning given to such term in Section 9.8(a) of the Credit Agreement. "Register" shall have the meaning given to such term in Section 9.9(a) of the Credit Agreement. "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time. "Release" shall mean any release, pumping, pouring, emptying, injecting, escaping, leaching, dumping, seepage, spill, leak, flow, discharge, disposal or emission of a Hazardous Substance. "Rent" shall mean, collectively, the Basic Rent and the Supplemental Rent, in each case payable under the Lease. "Rent Commencement Date" shall mean, regarding each Property, the earlier to occur of the Construction Period Termination Date and the Completion Date. "Reportable Event" shall have the meaning specified in ERISA. "Requested Funds" shall mean any funds requested by the Lessee or the Construction Agent, as applicable, in accordance with Section 5 of the Participation Agreement. "Requisition" shall have the meaning specified in Section 4.2 of the Participation Agreement. "Responsible Officer" shall mean the Chairman or Vice Chairman of the Board of Directors, the Chairman or Vice Chairman of the Executive Committee of the Board of Directors, the President, any Senior Vice President or Executive Vice President, any Vice Appendix A-30 President, the Secretary, any Assistant Secretary, the Treasurer, or any Assistant Treasurer, except that when used with respect to the Trust Company or the Owner Trustee, "Responsible Officer" shall also include the Cashier, any Assistant Cashier, any Trust Officer or Assistant Trust Officer, the Controller and any Assistant Controller or any other officer of the Trust Company or the Owner Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Sale Date" shall have the meaning given to such term in Section 20.3(a) of the Lease. "Sale Notice" shall mean a notice given to the Lessor in connection with the election by the Lessee of its Sale Option. "Sale Option" shall have the meaning given to such term in Section 20.1 of the Lease. "Sale Proceeds Shortfall" shall mean the amount by which the proceeds of a sale described in Section 22.1 of the Lease are less than the Limited Recourse Amount with respect to the Properties if it has been determined that the Fair Market Sales Value of the Properties at the expiration of the term of the Lease has been impaired by greater than expected wear and tear during the Term of the Lease. "Scheduled Interest Payment Date" shall mean (a) as to any Eurodollar Loan or Eurodollar Holder Advance, the last day of the Interest Period applicable to such Eurodollar Loan or Eurodollar Holder Advance (provided with respect to any Eurodollar Loan or Eurodollar Holder Advance having an Interest Period of six (6) months, the day which is three (3) months after the first day of such Interest Period), (b) as to any ABR Loan or any ABR Holder Advance, the fifteenth day of each month and (c) as to all Loans and Holder Advances, the date of any voluntary or involuntary payment, prepayment, return or redemption, and the Maturity Date or the Expiration Date, as the case may be. "Secured Parties" shall have the meaning given to such term in the Security Agreement. "Securities Act" shall mean the Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder. "Security Agreement" shall mean the Security Agreement dated on or about the Initial Closing Date between the Lessor and the Agent, for the benefit of the Secured Parties and accepted and agreed to by Lessee. "Security Documents" shall mean the collective reference to the Security Agreement, the Mortgage Instruments, (to the extent the Lease is construed as a security instrument) the Lease and all other security documents hereafter delivered to the Agent granting a lien on any asset or assets of any Person to secure the obligations and liabilities of the Lessor under the Credit Appendix A-31 Agreement and/or under any of the other Credit Documents or to secure any guarantee of any such obligations and liabilities. "Soft Costs" shall mean all costs which are ordinarily and reasonably incurred in relation to the acquisition, development, installation, construction, improvement and testing of the Properties other than Hard Costs, including without limitation structuring fees, administrative fees, legal fees, upfront fees, fees and expenses related to appraisals, title examinations, title insurance, document recordation, surveys, environmental site assessments, geotechnical soil investigations and similar costs and professional fees customarily associated with a real estate closing, the Lender Facility Fee, the Holder Facility Fee, fees and expenses of the Owner Trustee payable or reimbursable under the Operative Agreements and costs and expenses incurred pursuant to Sections 7.3(a) and 7.3(b) of the Participation Agreement. "Subsidiary" shall mean, as to any Person, any corporation of which at least a majority of the outstanding stock having by the terms thereof ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether or not at the time stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person, or by one (1) or more Subsidiaries, or by such Person and one (1) or more Subsidiaries. "Supplemental Amounts" shall have the meaning given to such term in Section 9.18 of the Credit Agreement. "Supplemental Rent" shall mean all amounts, liabilities and obligations (other than Basic Rent) which the Lessee assumes or agrees to pay to the Lessor, the Trust Company, the Holders, the Agent, the Lenders or any other Person under the Lease or under any of the other Operative Agreements including without limitation payments of the Termination Value, the Maximum Residual Guarantee Amount, Facility Fees, Owner Trustee fees, break-funding amounts and all indemnification amounts, liabilities and obligations. "Taxes" shall have the meaning specified in the definition of "Impositions". "Term" shall have the meaning specified in Section 2.2 of the Lease. "Termination Date" shall have the meaning specified in Section 16.2(a) of the Lease. "Termination Event" shall mean (a) with respect to any Pension Plan, the occurrence of a Reportable Event or an event described in Section 4062(e) of ERISA, (b) the withdrawal of the Lessee or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a substantial employer (as such term is defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan, (c) the distribution of a notice of intent to terminate a Plan or Multiemployer Plan pursuant to Section 4041(a)(2) or 4041A of ERISA, (d) the institution of proceedings to terminate a Plan or Multiemployer Plan by the PBGC under Section 4042 of ERISA, (e) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan or Appendix A-32 Multiemployer Plan, or (f) the complete or partial withdrawal of any Credit Party or any ERISA Affiliate from a Multiemployer Plan. "Termination Notice" shall have the meaning specified in Section 16.1 of the Lease. "Termination Value" shall mean at any date the sum of (a) either (i) with respect to all Properties, an amount equal to the aggregate outstanding Property Cost for all the Properties, in each case as of the last occurring Payment Date, or (ii) with respect to a particular Property, an amount equal to the product of the Termination Value of all the Properties times a fraction, the numerator of which is the Property Cost allocable to the particular Property in question and the denominator of which is the aggregate Property Cost for all the Properties, in each case as of the last occurring Payment Date, plus (b) respecting the amounts described in each of the foregoing subclause (i) or (ii), as applicable, any and all accrued but unpaid interest to such date on the Loans and any and all Holder Yield on the Holder Advances related to the applicable Property Cost, plus (c) to the extent the same is not duplicative of the amounts payable under clause (b) above, all other Rent and other amounts then due and payable or accrued to such date under the Agency Agreement, Lease and/or under any other Operative Agreement (including without limitation amounts under Sections 11.1 and 11.2 of the Participation Agreement and all costs and expenses referred to in clause FIRST of Section 22.2 of the Lease). "Tranche A Commitments" shall mean the obligation of the Tranche A Lenders to make the Tranche A Loans to the Lessor in an aggregate principal amount at any one (1) time outstanding not to exceed the aggregate of the amounts set forth opposite each Tranche A Lender's name on Schedule 1.1 to the Credit Agreement, as such amount may be reduced from time to time in accordance with the provisions of the Operative Agreements; provided, no Tranche A Lender shall be obligated to make Tranche A Loans in excess of such Tranche A Lender's share of the Tranche A Commitments as set forth adjacent to such Tranche A Lender's name on Schedule 1.1 to Credit Agreement. "Tranche A Guarantors" shall mean those parties to the Credit Agreement from time to time as guarantors of the Tranche A Obligations, including without limitation the Lessee and such other parties executing Accession Agreements from time to time. "Tranche A Lenders" shall mean First Union National Bank and shall include the several banks and other financial institutions from time to time party to the Credit Agreement that commit to make the Tranche A Loans. "Tranche A Loans" shall mean the Loans made pursuant to the Tranche A Commitment. "Tranche A Note" shall have the meaning given to it in Section 2.2 of the Credit Agreement. "Tranche A Obligations" shall mean any and all obligations of the Owner Trustee to pay any and all amounts and perform any and all obligations regarding the Tranche A Notes, Appendix A-33 including without limitation to pay the principal amount, all amounts of interest and all other amounts owing with respect thereto on the Maturity Date or upon any earlier due date therefor. "Tranche B Commitments" shall mean the obligation of the Tranche B Lenders to make the Tranche B Loans to the Lessor in an aggregate principal amount at any one (1) time outstanding not to exceed the aggregate of the amounts set forth opposite each Tranche B Lender's name on Schedule 1.1 to the Credit Agreement, as such amount may be reduced from time to time in accordance with the provisions of the Operative Agreements; provided, no Tranche B Lender shall be obligated to make Tranche B Loans in excess of such Tranche B Lender's share of the Tranche B Commitments as set forth adjacent to such Tranche B Lender's name on Schedule 1.1 to Credit Agreement. "Tranche B Lenders" shall mean First Union National Bank and shall include the several banks and other financial institutions from time to time party to the Credit Agreement that commit to make the Tranche B Loans. "Tranche B Loan" shall mean the Loans made pursuant to the Tranche B Commitment. "Tranche B Note" shall have the meaning given to it in Section 2.2 of the Credit Agreement. "Transaction Expenses" shall mean all Soft Costs and all other costs and expenses incurred in connection with the preparation, execution and delivery of the Operative Agreements and the transactions contemplated by the Operative Agreements including without limitation all costs and expenses described in Sections 7.1 and 7.3 of the Participation Agreement and the following: (a) the reasonable fees, out-of-pocket expenses and disbursements of counsel in negotiating the terms of the Operative Agreements and the other transaction documents, preparing for the closings under, and rendering opinions in connection with, such transactions and in rendering other services customary for counsel representing parties to transactions of the types involved in the transactions contemplated by the Operative Agreements; (b) the reasonable fees, out-of-pocket expenses and disbursements of accountants for any Credit Party in connection with the transaction contemplated by the Operative Agreements; (c) any and all other reasonable fees, charges or other amounts payable to the Lenders, the Agent, the Holders, the Owner Trustee or any broker which arises under any of the Operative Agreements; (d) any other reasonable fee, out-of-pocket expenses, disbursement or cost of any party to the Operative Agreements or any of the other transaction documents; and Appendix A-34 (e) any and all Taxes and fees incurred in recording or filing any Operative Agreement or any other transaction document, any deed, declaration, mortgage, security agreement, notice or financing statement with any public office, registry or governmental agency in connection with the transactions contemplated by the Operative Agreement; provided, however, the foregoing shall not provide for the payment of fees and expenses of counsel to any of the Holders or the Lenders (excepting the Agent) other than (i) after the occurrence and during the continuance of any Event of Default and (ii) as provided for in the indemnification provisions of the Operative Agreements (including without limitation Sections 11.1 through 11.4 of the Participation Agreement). "Tribunal" shall mean any state, commonwealth, federal, foreign, territorial, or other court or government body, subdivision agency, department, commission, board, bureau or instrumentality of a governmental body. "Trust" shall mean the AOR Trust 1997-1. "Trust Agreement" shall mean the Trust Agreement dated on or about the Initial Closing Date between the Holders and the Owner Trustee. "Trust Company" shall mean First Security Bank, National Association, in its individual capacity, and any successor owner trustee under the Trust Agreement in its individual capacity. "Trust Estate" shall have the meaning specified in Section 2.2 of the Trust Agreement. "Type" shall mean, as to any Loan, whether it is an ABR Loan or a Eurodollar Loan. "UCC Financing Statements" shall mean collectively the Lender Financing Statements and the Lessor Financing Statements. "Unanimous Vote Matters" shall have the meaning given it in Section 12.4 of the Participation Agreement. "Unfunded Amount" shall have the meaning specified in Section 3.2 of the Agency Agreement. "Unfunded Liability" shall mean, with respect to any Plan, at any time, the amount (if any) by which (a) the present value of all benefits under such Plan exceeds (b) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of the Company or any member of the Controlled Group to the PBGC or such Plan under Title IV of ERISA. "Uniform Commercial Code" and "UCC" shall mean the Uniform Commercial Code as in effect in any applicable jurisdiction. Appendix A-35 "United States Bankruptcy Code" shall mean Title 11 of the United States Code. "U.S. Person" shall have the meaning specified in Section 11.2(e) of the Participation Agreement. "U.S. Taxes" shall have the meaning specified in Section 11.2(e) of the Participation Agreement. "Wholly-Owned Entity" shall mean a Person all of the shares of capital stock or other ownership interest of which are owned by AOR and/or one of its wholly-owned Subsidiaries or other wholly-owned entities. "Withholdings" shall have the meaning specified in Section 11.2(e) of the Participation Agreement. "Work" shall mean the furnishing of labor, materials, components, furniture, furnishings, fixtures, appliances, machinery, equipment, tools, power, water, fuel, lubricants, supplies, goods and/or services with respect to any Property. Appendix A-36 EX-10.3 4 EXHIBIT 10.3 EXHIBIT 10.3 CREDIT AGREEMENT Dated as of December 30, 1997 among First Security Bank, National Association, not individually, except as expressly stated herein, but solely as the Owner Trustee under the AOR Trust 1997-1, as the Borrower, The Several Lenders from Time to Time Parties Hereto, and FIRST UNION NATIONAL BANK, as the Agent, AMERICAN ONCOLOGY RESOURCES, INC., as the Guarantor and as a Tranche A Guarantor, and The Various Parties Hereto from time to time, as the other Tranche A Guarantors TABLE OF CONTENTS Page SECTION 1. DEFINITIONS........................................................1 1.1 Definitions...........................................................1 1.2 Interpretation........................................................1 SECTION 2. AMOUNT AND TERMS OF COMMITMENTS....................................2 2.1 Commitments...........................................................2 2.2 Notes.................................................................2 2.3 Procedure for Borrowing...............................................3 2.4 Lender Facility Fees..................................................3 2.5 Termination or Reduction of Commitments...............................3 2.6 Prepayments and Payments..............................................4 2.7 Conversion and Continuation Options...................................5 2.8 Interest Rates and Payment Dates......................................6 2.9 Computation of Interest...............................................6 2.10 Pro Rata Treatment and Payments......................................7 2.11 Notice of Amounts Payable; Mandatory Assignment......................8 SECTION 3. REPRESENTATIONS AND WARRANTIES.....................................8 SECTION 4. CONDITIONS PRECEDENT...............................................9 4.1 Conditions to Effectiveness...........................................9 4.2 Conditions to Each Loan...............................................9 SECTION 5. COVENANTS..........................................................9 5.1 Other Activities......................................................9 5.2 Ownership of Properties, Indebtedness.................................9 5.3 Disposition of Assets................................................10 5.4 Compliance with Operative Agreements.................................10 5.5 Further Assurances...................................................10 5.6 Notices..............................................................10 5.7 Discharge of Liens...................................................10 5.8 Trust Agreement......................................................11 SECTION 6. EVENTS OF DEFAULT.................................................11 SECTION 7. THE AGENT.........................................................14 7.1 Appointment..........................................................14 7.2 Delegation of Duties.................................................14 7.3 Exculpatory Provisions...............................................14 7.4 Reliance by the Agent................................................15 7.5 Notice of Default....................................................15 7.6 Non-Reliance on the Agent and Other Lenders..........................15 i 7.7 Indemnification......................................................16 7.8 The Agent in Its Individual Capacity.................................16 7.9 Successor Agent......................................................17 7.10 Actions of the Agent on Behalf of Holders...........................17 7.11 The Agent's Duty of Care............................................17 7.12 Applicable Parties..................................................18 SECTION 8. MATTERS RELATING TO PAYMENT AND COLLATERAL........................18 8.1 Collection and Allocation of Payments and Other Amounts..............18 8.2 Certain Remedial Matters.............................................18 8.3 Excepted Payments....................................................18 SECTION 8B. MATTERS RELATING TO GUARANTY OF TRANCHE A OBLIGATIONS............19 8B.1. Tranche A Guaranty of Payment and Performance......................19 8B.2. Obligations Unconditional..........................................19 8B.3. Modifications......................................................20 8B.4. Waiver of Rights...................................................21 8B.5. Reinstatement......................................................21 8B.6. Remedies...........................................................21 8B.7. Limitation of Tranche A Guaranty...................................22 8B.8. Payment of Amounts to the Agent....................................22 SECTION 8C. MATTERS RELATING TO GUARANTY OF COMPANY OBLIGATIONS..............22 8C.1. Guaranty of Payment and Performance of Company Obligations.........22 8C.2. Obligations Unconditional..........................................23 8C.3. Modifications......................................................24 8C.4. Waiver of Rights...................................................24 8C.5. Reinstatement......................................................25 8C.6. Remedies...........................................................25 8C.7. Limitation of Guaranty.............................................25 8C.8. Payment of Amounts to the Agent....................................25 SECTION 9. MISCELLANEOUS......................................................26 9.1 Amendments and Waivers...............................................26 9.2 Notices..............................................................26 9.3 No Waiver; Cumulative Remedies.......................................26 9.4 Survival of Representations and Warranties...........................26 9.5 Payment of Expenses and Taxes........................................26 9.6 Successors and Assigns; Participations and Assignments...............27 9.7 Participations.......................................................27 9.8 Assignments..........................................................28 9.9 The Register; Disclosure; Pledges to Federal Reserve Banks...........30 9.10 Adjustments; Set-off................................................30 ii 9.11 Counterparts........................................................31 9.12 Severability........................................................31 9.13 Integration.........................................................31 9.14 GOVERNING LAW.......................................................32 9.15 SUBMISSION TO JURISDICTION; VENUE; ARBITRATION......................32 9.16 Acknowledgements....................................................32 9.17 WAIVERS OF JURY TRIAL...............................................32 9.18 Nonrecourse.........................................................32 9.19 USURY SAVINGS PROVISION.............................................33 9.20 Acceptances and Agreements..........................................34 iii SCHEDULES Schedule 1.1 Commitments and Addresses of Lenders EXHIBITS EXHIBIT A-1 FORM OF TRANCHE A NOTE EXHIBIT A-2 FORM OF TRANCHE B NOTE EXHIBIT B FORM OF ASSIGNMENT AND ACCEPTANCE iv CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of December 30, 1997 (as amended, modified, extended, supplemented, restated and/or replaced from time to time, the "Agreement") is among FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, except as expressly stated herein, but solely as the Owner Trustee under the AOR Trust 1997-1 (the "Owner Trustee" or the "Borrower"), the several banks and other financial institutions from time to time parties to this Agreement (the "Lenders") and FIRST UNION NATIONAL BANK, a national banking association, as a Lender and as the agent for the Lenders (the "Agent") and AMERICAN ONCOLOGY RESOURCES, INC., a Delaware corporation, as the Guarantor and as a Tranche A Guarantor, and the various other entities from time to time parties to the Agreement, as the other Tranche A Guarantors. The parties hereto hereby agree as follows: SECTION 1. DEFINITIONS 1.1 DEFINITIONS. For purposes of this Agreement, capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings assigned to them in Appendix A to that certain Participation Agreement dated as of December 30, 1997 (as amended, modified, extended, supplemented, restated and/or replaced from time to time in accordance with the applicable provisions thereof, the "Participation Agreement") among the Lessee, AOR, the various entities which are parties thereto from time to time, as the other Tranche A Guarantors, the Borrower, the various banks and other lending institutions which are parties thereto from time to time, as the Holders, the various banks and other lending institutions which are parties thereto from time to time, as the Lenders, and First Union National Bank, as agent for the Lenders and respecting the Security Documents, as the agent for the Lenders and the Holders, to the extent of their interests. Unless otherwise indicated, references in this Agreement to articles, sections, paragraphs, clauses, appendices, schedules and exhibits are to the same contained in this Agreement. 1.2 INTERPRETATION. The rules of usage set forth in Appendix A to the Participation Agreement shall apply to this Agreement. SECTION 2. AMOUNT AND TERMS OF COMMITMENTS 2.1 COMMITMENTS. (a) Subject to the terms and conditions hereof, each of the Lenders severally agrees to make the portion of the Tranche A Loans and the Tranche B Loans to the Borrower from time to time during the Commitment Period in an amount up to such Lender's Commitment as is set forth adjacent to such Lender's name in Schedule 1.1 hereto for the purpose of enabling the Borrower to purchase the Properties and to pay Property Acquisition Costs, Property Costs and Transaction Expenses, provided, that the aggregate principal amount at any one (1) time outstanding with respect to each of the Tranche A Loans and the Tranche B Loans shall not exceed the amount of the Tranche A Commitments and the Tranche B Commitments respectively. Any prepayments of the Loans, whether mandatory or at the Borrower's election, shall not be subject to reborrowing except as set forth in Section 5.2(d) of the Participation Agreement. (b) The Loans may from time to time be (i) Eurodollar Loans, (ii) ABR Loans, or (iii) a combination thereof, as determined by the Borrower and notified to the Agent in accordance with Sections 2.3 and 2.7. In the event the Borrower fails to provide notice pursuant to Section 2.3, the Loan shall be an ABR Loan. Further, any Loan by any Lender in an amount less than $100,000 shall be an ABR Loan, unless the remaining Available Commitment for such Lender is less than $100,000, in which case, the Borrower may elect a Eurodollar Loan for such remaining amount. 2.2 NOTES. The Loans made by each Lender shall be evidenced by promissory notes of the Borrower, substantially in the form of EXHIBIT A-1 in the case of the Tranche A Loans (each, a "Tranche A Note") or EXHIBIT A-2 in the case of the Tranche B Loans (each, a "Tranche B Note," and with the Tranche A Notes, the "Notes"), with appropriate insertions as to payee, date and principal amount, payable to the order of such lender and in a principal amount equal to the Tranche A Commitment or Tranche B Commitment, as the case may be, of such lender. Each Lender is hereby authorized to record the date, Type and amount of each Loan made by such Lender, each continuation thereof, each conversion of all or a portion thereof to another Type, and the date and amount of each payment or prepayment of principal thereof on the schedule annexed to and constituting a part of its Note, and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded, provided, that the failure to make any such recordation or any error in such recordation shall not affect the borrower's obligations hereunder or under such Note. Each Note shall (i) be dated on or about the Initial Closing Date, (ii) be stated to mature on the Maturity Date and (iii) provide for the payment of principal in accordance with Section 2.6(d) and the payment of interest in accordance with Section 2.8. 2 2.3 PROCEDURE FOR BORROWING. (a) The Borrower may borrow under the Commitments during the Commitment Period on any Business Day that an Advance may be requested pursuant to the terms of Section 5.2 of the Participation Agreement, provided, that the Borrower shall give the Agent irrevocable notice (which must be received by the Agent prior to 12:00 Noon, Charlotte, North Carolina time, at least three (3) Business Days prior to the requested Borrowing Date specifying (i) the amount to be borrowed (which on any date shall not be in excess of the then Available Commitments), (ii) the requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, ABR Loans or a combination thereof, (iv) if the borrowing is to be a combination of Eurodollar Loans and ABR Loans, the respective amounts of each Type of Loan and (v) the Interest Period applicable to each Eurodollar Loan. Pursuant to the terms of the Participation Agreement, the Borrower shall be deemed to have delivered such notice upon the delivery of a notice by the Construction Agent or the Lessee containing such required information. Upon receipt of any such notice from the Borrower, the Agent shall promptly notify each Lender thereof. Each Lender will make the amount of its pro rata share of each borrowing available to the Agent for the account of the Borrower at the office of the Agent specified in Section 9.2 prior to 12:00 Noon, Charlotte, North Carolina time, on the Borrowing Date requested by the Borrower in funds immediately available to the Agent. Such borrowing will then be made available to the Borrower by the Agent crediting an account designated, subject to Section 9.1 of the Participation Agreement, by the Borrower on the books of such office with the aggregate of the amounts made available to the Agent by the Lenders and in like funds as received by the Agent. No amount of any Loan which is repaid or prepaid by the Borrower may be reborrowed hereunder, except as set forth in Section 5.2(d) of the Participation Agreement. (b) Interest accruing on each Loan during the Construction Period with respect to any Property shall, subject to the limitations set forth in Section 5.1(b) of the Participation Agreement, be added to the principal amount of such Loan on the relevant Scheduled Interest Payment Date. On each such Scheduled Interest Payment Date, the Loan Property Cost and Construction Loan Property Cost shall be increased by the amount of interest added to the Loans. 2.4 LENDER FACILITY FEES. Promptly after receipt from the Lessee of the payment of the Lender Facility Fee payable pursuant to Section 7.4 of the Participation Agreement, the Agent shall distribute such payments to the Lenders pro rata in accordance with their respective Commitments. 2.5 TERMINATION OR REDUCTION OF COMMITMENTS. (a) The Borrower shall have the right, upon not less than three (3) Business Days' written notice to the Agent, to terminate the Commitments or, from time to time, to reduce the amount of the Commitments, provided, that (i) after giving effect to such reduction, the aggregate outstanding principal amount of the Loans shall not exceed the aggregate Commitments and (ii) such notice shall be accompanied by a certificate of the Construction 3 Agent stating that the amount equal to ninety-seven percent (97%) of aggregate Budgeted Total Property Costs as of the date of such reduction does not exceed the aggregate amount of Available Commitments as of such date after giving effect to such reduction. Any such reduction (A) shall be in an amount equal to the lesser of (1) $1,000,000 (or an even multiple thereof) or (2) the remaining Available Commitments, (B) shall reduce permanently the Commitments then in effect and (C) shall be pro rata for the Commitments of all Lenders and pro rata between the Tranche A Loans and the Tranche B Loans. (b) The Commitments respecting any particular Property shall automatically be reduced to zero (0) upon the occurrence of the Rent Commencement Date respecting such Property. On any date on which the Commitments shall automatically be reduced to zero (0) pursuant to Section 6, the Borrower shall prepay all outstanding Loans, together with accrued unpaid interest thereon and all other amounts owing thereunder. 2.6 PREPAYMENTS AND PAYMENTS. (a) Subject to Sections 11.2(e), 11.3 and 11.4 of the Participation Agreement, the Borrower may at any time and from time to time prepay the Loans, in whole or in part, without premium or penalty, upon at least three (3) Business Days' (in the case of Eurodollar Loans) and at least one (1) Business Day's (in the case of ABR Loans) irrevocable notice to the Agent, specifying the date and amount of prepayment and whether the prepayment is of Eurodollar Loans, ABR Loans or a combination thereof, and, if a combination thereof, the amount allocable to each. Upon receipt of any such notice the Agent shall promptly notify each Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein. Amounts prepaid may not be reborrowed, except as set forth in Section 5.2(d) of the Participation Agreement. (b) If on any date the Agent or the Lessor shall receive any payment in respect of (i) any Casualty, Condemnation or Environmental Violation pursuant to Sections 15.1(a) or 15.1(g) or Article XVI of the Lease (excluding any payments in respect thereof which are payable to the Lessee in accordance with the Lease), or (ii) the Termination Value of any Property in connection with the delivery of a Termination Notice pursuant to Article XVI of the Lease, or (iii) the Termination Value of any Property in connection with the exercise of the Purchase Option under Article XX of the Lease or the exercise of the option of the Lessor to transfer the Properties to the Lessee pursuant to Section 20.3 of the Lease, or (iv) any payment required to be made or elected to be made by the Construction Agent to the Lessor pursuant to the terms of the Agency Agreement, then in each case, the Borrower shall pay such amounts to the Agent and the Agent shall be required to apply and pay such amounts in accordance with the provisions of Section 8.7(b) of the Participation Agreement. (c) Each prepayment of the Loans pursuant to Section 2.6(a) shall be allocated to reduce the respective Loan Property Costs of all Properties pro rata according to the Loan Property Costs of such Properties immediately before giving effect to such prepayment. Each prepayment of the Loans pursuant to Section 2.6(b) shall be allocated to reduce the Loan Property Cost of the Property or Properties subject to the respective Casualty, Condemnation, 4 Environmental Violation, termination, purchase, transfer or other circumstance giving rise to such prepayment. Any amounts applied to reduce the Loan Property Cost of any Construction Period Property pursuant to this paragraph (c) shall also be applied to reduce the Construction Loan Property Cost of such Property until such Construction Loan Property Cost has been reduced to zero (0). (d) The outstanding principal balance of the Loans and all other amounts then due and owing under this Agreement or otherwise with respect to the Loans shall be due and payable in full on the Maturity Date. 2.7 CONVERSION AND CONTINUATION OPTIONS. (a) The Borrower may elect from time to time to convert Eurodollar Loans to ABR Loans by giving the Agent (subject to the last proviso of Section 2.7(b)) at least one (1) Business Day's prior irrevocable notice of such election, provided, that any such conversion of Eurodollar Loans may only be made on the last day of an Interest Period with respect thereto, and provided, further, to the extent an Event of Default has occurred and is continuing on the last day of any such Interest Period, the applicable Eurodollar Loan shall automatically be converted to an ABR Loan. The Borrower may elect from time to time to convert ABR Loans to Eurodollar Loans by giving the Agent at least three (3) Business Days' prior irrevocable notice of such election. Upon receipt of any such notice, the Agent shall promptly notify each Lender thereof. All or any part of outstanding Eurodollar Loans or ABR Loans may be converted as provided herein, provided, that (i) no ABR Loan may be converted into a Eurodollar Loan after the date that is one (1) month prior to the Maturity Date and (ii) such notice of conversion regarding any Eurodollar Loan shall contain an election by the Borrower of an Interest Period for such Eurodollar Loan to be created by such conversion and such Interest Period shall be in accordance with the terms of the definition of the term "Interest Period" including without limitation subparagraphs (A) through (D) thereof. (b) Subject to the restrictions set forth in Section 2.3 hereof, any Eurodollar Loan may be continued as such upon the expiration of the current Interest Period with respect thereto by the Borrower giving irrevocable notice to the Agent, in accordance with the applicable notice provision for the conversion of ABR Loans to Eurodollar Loans set forth herein, of the length of the next Interest Period to be applicable to such Loans, provided, that no Eurodollar Loan may be continued as such after the date that is one (1) month prior to the Maturity Date, and provided further no Eurodollar Loans may be continued as such if an Event of Default has occurred and is continuing as of the last day of the Interest Period for such Eurodollar Loan, and provided, further, that if the Borrower shall fail to give any required notice as described above or otherwise herein, or if such continuation is not permitted pursuant to the proceeding proviso, such Loan shall automatically be converted to an ABR Loan on the last day of such then expiring Interest Period. 5 2.8 INTEREST RATES AND PAYMENT DATES. (a) Subject to Section 9.19, the Loans outstanding hereunder from time to time shall bear interest at a rate per annum equal to either (i) with respect to a Eurodollar Loan, the Eurodollar Rate determined for the applicable Interest Period plus the Applicable Margin or (ii) with respect to an ABR Loan, the ABR, as selected by the Borrower in accordance with the provisions hereof; provided, however, (A) upon delivery by the Agent of the notice described in Section 2.9(c), the Loans of each of the Lenders shall bear interest at the ABR applicable from time to time from and after the dates and during the periods specified in Section 2.9(c), (B) upon the delivery by a Lender of the notice described in Section 11.3(f) of the Participation Agreement, the Loans of such Lender shall bear interest at the ABR applicable from time to time from and after the dates and during the periods specified in Section 11.3(f) of the Participation Agreement and (C) in such other circumstances as expressly provided herein, the Loans shall bear interest at the ABR. (b) If all or a portion of (i) the principal amount of any Loan, (ii) any interest payable thereon or (iii) any other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum which is the lesser of (x) the then current rate of interest respecting such payment plus two percent (2%) and (y) the highest interest rate permitted by applicable law, in each case from the date of such non-payment until such amount is paid in full (whether after or before judgment). (c) Interest shall be payable in arrears on the applicable Scheduled Interest Payment Date, provided, that (i) interest accruing pursuant to paragraph (b) of this Section 2.8 shall be payable from time to time on demand and (ii) each prepayment of the Loans shall be accompanied by accrued interest to the date of such prepayment on the amount prepaid. 2.9 COMPUTATION OF INTEREST. (a) Whenever it is calculated on the basis of the Prime Lending Rate, interest shall be calculated on the basis of a year of three hundred sixty-five (365) days (or three hundred sixty-six (366) days, as the case may be) for the actual days elapsed; and, otherwise, interest shall be calculated on the basis of a year of three hundred sixty (360) days for the actual days elapsed. The Agent shall as soon as practicable notify the Borrower and the Lenders of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the ABR or the Eurocurrency Reserve Requirements shall become effective as of the day on which such change becomes effective. The Agent shall as soon as practicable notify the Borrower and the Lenders of the effective date and the amount of each such change in interest rate. (b) Each determination of an interest rate by the Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. 6 (c) If the Eurodollar Rate cannot be determined by the Agent in the manner specified in the definition of the term "Eurodollar Rate", the Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. Until such time as the Eurodollar Rate can be determined by the Agent in the manner specified in the definition of such term, no further Eurodollar Loans shall be made or shall be continued as such at the end of the then current Interest Period nor shall the Borrower have the right to convert ABR Loans to Eurodollar Loans. 2.10 PRO RATA TREATMENT AND PAYMENTS. (a) Each borrowing by the Borrower from the Lenders hereunder and any reduction of the Commitments of the Lenders shall be made pro rata according to their respective Commitments. Subject to the provisions of Section 8.7 of the Participation Agreement and Section 2.11(b) hereof, each payment (including without limitation each prepayment) by the Borrower on account of principal of and interest on the Loans shall be made pro rata according to the respective outstanding principal amounts on the Loans then held by the Lenders. All payments (including without limitation prepayments) to be made by the Borrower hereunder and under the Notes, whether on account of principal, interest or otherwise, shall be made without setoff or counterclaim and shall be made prior to 12:00 Noon, Charlotte, North Carolina time, on the due date thereof to the Agent, for the account of the Lenders, at the Agent's office specified in Section 9.2, in Dollars and in immediately available funds. The Agent shall distribute such payments to the Lenders promptly upon receipt in like funds as received. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day; provided, however, if such payment includes an amount of interest calculated with reference to the Eurodollar Rate and the result of such extension would be to extend such payment into another calendar month, then such payment shall be made on the immediately preceding Business Day. In the case of any extension of any payment of principal pursuant to the preceding two (2) sentences, interest thereon shall be payable at the then applicable rate during such extension. (b) Unless the Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make its share of such borrowing available to the Agent, the Agent may assume that such Lender is making such amount available to the Agent, and the Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period until such Lender makes such amount immediately available to the Agent. A certificate of the Agent submitted to any Lender with respect to any amounts owing under this Section 2.10(b) shall be conclusive in the absence of manifest error. If such Lender's share of such borrowing is not made available to the Agent by such Lender within three (3) Business Days of such Borrowing Date, the Agent shall also be entitled to recover such amount with interest thereon at the rate as set forth above on demand from the Borrower. 7 2.11 NOTICE OF AMOUNTS PAYABLE; MANDATORY ASSIGNMENT. (a) In the event that any Lender becomes aware that any amounts are or will be owed to it pursuant to Sections 11.2(e), 11.3 or 11.4 of the Participation Agreement or that it is unable to make Eurodollar Loans for any of the reasons set forth in Section 11.3(f) of the Participation Agreement, then it shall promptly notify the Borrower, the Lessee and the Agent thereof and, as soon as possible thereafter, such Lender shall submit to the Borrower (with a copy to the Agent) a certificate indicating the amount owing to it and the calculation thereof. The amounts set forth in such certificate shall be prima facie evidence of the obligations of the Borrower hereunder. (b) In the event that any Lender delivers to the Borrower a certificate in accordance with Section 2.11(a) in connection with amounts payable pursuant to Sections 11.2(e), 11.3 or 11.4 of the Participation Agreement or such Lender is required to make Loans as ABR Loans in accordance with Section 11.3(d) of the Participation Agreement then, subject to Section 9.1 of the Participation Agreement, the Borrower may, at its own expense (provided, such amounts shall be reimbursed or paid entirely (as elected by the Borrower) by the Lessee, as Supplemental Rent) and in the discretion of the Borrower, (i) require such Lender to transfer or assign, in whole or (with such Lender's consent) in part, without recourse (in accordance with Section 9.8), all or (with such Lender's consent) part of its interests, rights (except for rights to be indemnified for actions taken while a party hereunder) and obligations under this Agreement from and after the effective date of such transfer or assignment to a replacement bank or institution if the Borrower (subject to Section 9.1 of the Participation Agreement and with the full cooperation of such Lender) can identify a Person who is ready, willing and able to be such replacement bank or institution with respect thereto and such replacement bank or institution (which may be another Lender) shall assume such assigned obligations, or (ii) terminate the Commitment of such Lender and prepay all outstanding Loans of such Lender; provided, however, that (x) subject to Section 9.1 of the Participation Agreement, the Borrower or such replacement bank or institution, as the case may be, shall have paid to such Lender in immediately available funds the principal of and interest accrued to the date of such payment on the Loans made by it hereunder and all other amounts owed to it hereunder (and, if such Lender is also a Holder, all Holder Advances and Holder Yield accrued and unpaid thereon), (y) any termination of Commitments shall be subject to the terms of Section 2.5(a) and (z) such assignment or termination of the Commitment of such Lender and prepayment of Loans does not conflict with any law, rule or regulation or order of any court or Governmental Authority. SECTION 3. REPRESENTATIONS AND WARRANTIES To induce the Agent and the Lenders to enter into this Agreement and to make the Loans, each of the Trust Company and the Owner Trustee hereby makes and affirms the representations and warranties set forth in Section 6.1 of the Participation Agreement to the same extent as if such representations and warranties were set forth in this Agreement in their entirety. 8 SECTION 4. CONDITIONS PRECEDENT 4.1 CONDITIONS TO EFFECTIVENESS. The effectiveness of this Agreement is subject to the satisfaction of all conditions precedent set forth in Section 5.3 of the Participation Agreement required by said Section to be satisfied on or prior to the Initial Closing Date. 4.2 CONDITIONS TO EACH LOAN. The agreement of each Lender to make any Loan requested to be made by it on any date is subject to the satisfaction of all conditions precedent set forth in Section 5.3 and 5.4 of the Participation Agreement required by said Sections to be satisfied on or prior to the date of the applicable Loan; provided, that a request for any conversion or extension of any then outstanding Loan (in each case, only to the extent no new funds are advanced) shall only require the delivery of the applicable notice (if any) required therefor, that no Default or Event of Default shall have occurred and be continuing on such date, both immediately before and after giving effect to the Loan to be made on such date and that the security interest in the Collateral previously pledged to the Agent, for the benefit of the Lenders and the Holders, pursuant to the Operative Agreements shall remain in full force and effect. Each borrowing by the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date of such Loan that the conditions contained in this Section 4.2 have been satisfied. SECTION 5. COVENANTS So long as any Loan or Note remains outstanding and unpaid or any other amount is owing to any Lender or the Agent hereunder: 5.1 OTHER ACTIVITIES. The Borrower shall not conduct, transact or otherwise engage in, or commit to transact, conduct or otherwise engage in, any business or operations other than the entry into, and exercise of rights and performance of obligations in respect of, the Bridge Financing and/or the Operative Agreements and other activities incidental or related to the foregoing. 5.2 OWNERSHIP OF PROPERTIES, INDEBTEDNESS. The Borrower shall not own, lease, manage or otherwise operate any properties or assets other than in connection with the activities described in Section 5.1, or incur, create, assume or suffer to exist any Indebtedness or other consensual liabilities or financial obligations other than as may be incurred, created or assumed or as may exist in connection with the activities 9 described in Section 5.1 (including without limitation the Loans and other obligations incurred by the Borrower hereunder). 5.3 DISPOSITION OF ASSETS. The Borrower shall not convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets, whether now owned or hereafter acquired, except to the extent expressly contemplated by the Operative Agreements or as may otherwise be necessary with regard to properties subject to the Bridge Financing to the extent such properties are not financed under the Operative Agreements. 5.4 COMPLIANCE WITH OPERATIVE AGREEMENTS. The Borrower shall at all times (a) observe and perform all of the covenants, conditions and obligations required to be performed by it (whether in its capacity as the Lessor, the Owner Trustee or otherwise) under each Operative Agreement to which it is a party and (b) observe and perform, or cause to be observed and performed, all of the covenants, conditions and obligations of the Lessor under the Lease, even in the event that the Lease is terminated at stated expiration following a Lease Event of Default or otherwise. 5.5 FURTHER ASSURANCES. At any time and from time to time, upon the written request of the Agent, and at the expense of the Borrower (provided, such amounts shall be reimbursed or paid entirely (as elected by the Borrower) by the Lessee, as Supplemental Rent), the Borrower will promptly and duly execute and deliver such further instruments and documents and take such further action as the Agent or the Majority Lenders may reasonably request for the purpose of carrying out and effectuating the intent and purpose of this Agreement and the other Operative Agreements and of the rights and powers herein or therein granted. 5.6 NOTICES. If on any date, a Responsible Officer of the Borrower shall obtain actual knowledge of the occurrence of a Default or Event of Default, the Borrower will give written notice thereof to the Agent within five (5) Business Days after such date. 5.7 DISCHARGE OF LIENS. Neither the Borrower nor the Trust Company will create or permit to exist at any time, and will, at its own expense, promptly take such action as may be necessary duly to discharge, or cause to be discharged, all Lessor Liens, provided, that the Borrower and the Trust Company shall not be required to discharge any Lessor Lien while the same is being contested in good faith by appropriate proceedings diligently prosecuted so long as such proceedings shall not involve any material danger of impairment of any of the Liens contemplated by the Security Documents or involving any danger of the sale, forfeiture or loss of, and shall not materially interfere with 10 the disposition of, any material part of any Property or title thereto or any interest therein or the payment of Rent. 5.8 TRUST AGREEMENT. Without prejudice to any right under the Trust Agreement of the Owner Trustee to resign, the Owner Trustee (a) agrees not to terminate or revoke the trust created by the Trust Agreement except as permitted by Article VIII of the Trust Agreement, (b) agrees not to amend, supplement, terminate, revoke or otherwise modify any provision of the Trust Agreement in any manner which could reasonably be expected to have an adverse effect on the rights or interests of the Agent or the Lenders hereunder or under the other Operative Agreements and (c) agrees to comply with all of the terms of the Trust Agreement. SECTION 6. EVENTS OF DEFAULT Upon the occurrence of any of the following specified events (each an "Event of Default"): (a) Except as provided in Sections 6(c), the Borrower shall default in the payment when due of any principal on the Loans or default in the payment when due of any interest on the Loans, and in either such case, such default shall continue for three (3) or more days; or (b) Except as provided in paragraphs (a) and (c), the Borrower shall default, and such default shall continue for three (3) or more days, in the payment of any amount owing under any Credit Document; or (c) (i) The Borrower shall default in the payment of any amount due on the Maturity Date owing under any Credit Document or (ii) the Borrower shall default in the payment when due of any principal or interest on the Loans payable with regard to any obligation of Lessee to pay Termination Value when due or to pay Basic Rent or Supplemental Rent at such time as any Termination Value is due; or (d) The Borrower shall default in the due performance or observance by it of any term, covenant or agreement contained in any Credit Document to which it is a party (other than those referred to in paragraphs (a), (b) and (c) above), provided, that in the case of any such default under Sections 5.4, 5.5 or 5.8(c), such default shall have continued unremedied for a period of at least thirty (30) days after notice to the Borrower by the Agent or the Majority Lenders, provided, further, if any such default under Sections 5.4, 5.5 or 5.8(c) is not capable of remedy within such thirty (30) day period but may be remedied with further diligence and if the Borrower has and continues to pursue diligently such remedy, then the Borrower shall be granted additional time to pursue such remedy but in no event more than an additional thirty (30) days. (e) Any representation, warranty or statement made or deemed made by the Borrower herein or in any other Credit Document or by the Borrower or any Credit Party in the 11 Participation Agreement, or in any statement or certificate required to be delivered pursuant hereto or thereto, shall prove to be untrue in any material respect on the date as of which made or deemed made; or (f) (i) Any Lease Event of Default shall have occurred and be continuing, or (ii) the Owner Trustee shall default in the due performance or observance by it of any term, covenant or agreement contained in the Participation Agreement or in the Trust Agreement to or for the benefit of the Agent or a Lender, provided, that in the case of this clause (ii) such default shall have continued unremedied for a period of at least thirty (30) days after notice to the Owner Trustee and Lessee by the Agent or the Majority Lenders, provided, further, that in the case of this clause (ii), such default is not capable of remedy within such thirty (30) day period but may be remedied with further diligence and if the Borrower has and continues to pursue diligently such remedy, then the Borrower shall be granted additional time to pursue such remedy but in no event more than an additional thirty (30) days; or (g) The Borrower shall commence a voluntary case concerning itself under the Bankruptcy Code or an involuntary case is commenced against the Borrower and the petition is not contravened within ten (10) days after commencement of the case or an involuntary case is commenced against the Borrower and the petition is not dismissed within ninety (90) days after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of the Borrower; or the Borrower commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Borrower, or there is commenced against the Borrower any such proceeding which remains undismissed for a period of ninety (90) days; or the Borrower is adjudicated insolvent or bankrupt, or any order of relief or other order approving any such case or proceeding is entered; or the Borrower suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of ninety (90) days; or the Borrower makes a general assignment for the benefit of creditors; or any corporate or partnership action is taken by the Borrower for the purpose of effecting any of the foregoing; or (h) Any Security Document shall cease to be in full force and effect, or the Agent ceases to have a perfected first priority security interest in any material portion of the Collateral (subject to Permitted Liens); or (i) The Lease shall cease to be enforceable against the Lessee; or (j) One (1) or more judgments or decrees shall be entered against the Borrower involving a liability of $100,000 or more in the aggregate for all such judgments and decrees for the Borrower and any such judgments or decrees shall not have been vacated, discharged, satisfied or stayed or bonded pending appeal within sixty (60) days from the entry thereof or any greater time period required by law, 12 then, and in any such event, (A) if such event is an Event of Default specified in paragraph (g) above with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the Notes shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Majority Lenders, the Agent may, or upon the request of the Majority Lenders, the Agent shall, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Majority Lenders, the Agent may, or upon the request of the Majority Lenders, the Agent shall, by notice to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the Notes to be due and payable forthwith, whereupon the same shall immediately become due and payable (any of the foregoing occurrences or actions referred to in clause (A) or (B) above, an "Acceleration"). Except as expressly provided above in this Section 6, presentment, demand, protest and all other notices of any kind are hereby expressly waived to the extent permitted by law. Upon the occurrence of any Event of Default and at any time thereafter so long as any Event of Default shall be continuing, the Agent shall, upon the written instructions of the Majority Secured Parties, exercise any or all of the rights and powers and pursue any and all of the remedies available to it hereunder and (subject to the terms thereof) under the other Credit Documents, the Lease and the other Operative Agreements and shall have any and all rights and remedies available under the Uniform Commercial Code or any provision of law. Upon the occurrence of any Event of Default and at any time thereafter so long as any Event of Default shall be continuing, the Agent may, and upon request of the Majority Secured Parties shall, proceed to protect and enforce this Agreement, the Notes, the other Credit Documents and the Lease by suit or suits or proceedings in equity, at law or in bankruptcy, and whether for the specific performance of any covenant or agreement herein contained or in execution or aid of any power herein granted, or for foreclosure hereunder, or for the appointment of a receiver or receivers for the Property or for the recovery of judgment for the indebtedness secured thereby or for the enforcement of any other proper, legal or equitable remedy available under applicable laws. The Borrower shall be liable for any and all accrued and unpaid amounts due hereunder before, after or during the exercise of any of the foregoing remedies, including without limitation all reasonable legal fees and other reasonable costs and expenses incurred by the Agent or any Lender by reason of the occurrence of any Event of Default or the exercise of remedies with respect thereto. 13 SECTION 7. THE AGENT 7.1 APPOINTMENT. Each Lender hereby irrevocably designates and appoints the Agent as the agent of such Lender under this Agreement and the other Operative Agreements, and each such Lender irrevocably authorizes the Agent, in such capacity, to execute the Operative Agreements as agent for and on behalf of such Lender, to take such action on behalf of such Lender under the provisions of this Agreement and the other Operative Agreements and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement and other Operative Agreements, together with such other powers as are reasonably incidental thereto. Without limiting the generality of the foregoing, each of the Lenders hereby specifically acknowledges the terms and provisions of the Participation Agreement and directs the Agent to exercise such powers, make such decisions and otherwise perform such duties as are delegated to the Agent thereunder without being required to obtain any specific consent with respect thereto from any Lender, unless the matter under consideration is a Unanimous Vote Matter or otherwise requires the consent of the Majority Lenders and/or the Majority Secured Parties. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Operative Agreement or otherwise exist against the Agent. 7.2 DELEGATION OF DUTIES. The Agent may execute any of its duties under this Agreement and the other Operative Agreements by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. 7.3 EXCULPATORY PROVISIONS. Neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (a) liable to any of the Lenders for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Operative Agreement (except for its or such Person's own gross negligence or willful misconduct) or (b) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any Credit Party or any officer thereof contained in this Agreement or any other Operative Agreement or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Operative Agreement or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Operative Agreement or for any failure of the Borrower or any Credit Party to perform its obligations hereunder or thereunder. The Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this 14 Agreement or any other Operative Agreement, or to inspect the properties, books or records of the Borrower or any Credit Party. 7.4 RELIANCE BY THE AGENT. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including without limitation counsel to the Borrower or the Credit Parties), independent accountants and other experts selected with due care by the Agent. The Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Operative Agreement unless it shall first receive such advice or concurrence of the Majority Lenders, the Majority Secured Parties or all Secured Parties, as the case may be, as it reasonably deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected from the Lenders in acting, or in refraining from acting, under this Agreement and the other Operative Agreements in accordance with a request of the Majority Lenders, the Majority Secured Parties or all Secured Parties, as the case may be, and such and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Notes (or all Secured Parties, as the case may be). 7.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Agent has received written notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Agent receives such a notice, the Agent shall give notice thereof to the Lenders. The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Majority Secured Parties; provided, that unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Secured Parties; provided, further, the foregoing shall not limit (a) the rights of the Majority Secured Parties to elect remedies as set forth in Section 6 and/or (b) the rights of the Majority Secured Parties or all Secured Parties, as the case may be, as described in the Participation Agreement (including without limitation Sections 8.2(h) and 8.6 of the Participation Agreement). 7.6 NON-RELIANCE ON THE AGENT AND OTHER LENDERS. Each Lender expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or 15 warranties to it and that no act by the Agent hereinafter taken, including without limitation any review of the affairs of the Borrower or the Credit Parties, shall be deemed to constitute any representation or warranty by the Agent to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrower and the Credit Parties and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Operative Agreements, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower and the Credit Parties. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Borrower or the Credit Parties which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 7.7 INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY THE AGENT, IN ITS CAPACITY AS SUCH (TO THE EXTENT NOT REIMBURSED BY THE BORROWER AND WITHOUT LIMITING THE OBLIGATION OF THE BORROWER TO DO SO), RATABLY ACCORDING TO THEIR RESPECTIVE COMMITMENT PERCENTAGES IN EFFECT ON THE DATE ON WHICH INDEMNIFICATION IS SOUGHT UNDER THIS SECTION 7.7 (OR, IF INDEMNIFICATION IS SOUGHT AFTER THE DATE UPON WHICH THE COMMITMENTS SHALL HAVE TERMINATED AND THE LOANS SHALL HAVE BEEN PAID IN FULL, RATABLY IN ACCORDANCE WITH THEIR COMMITMENT PERCENTAGES IMMEDIATELY PRIOR TO SUCH DATE), FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND WHATSOEVER WHICH MAY AT ANY TIME (INCLUDING WITHOUT LIMITATION AT ANY TIME FOLLOWING THE PAYMENT OF THE NOTES) BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST ANY OF THEM IN ANY WAY RELATING TO OR ARISING OUT OF, THE COMMITMENTS, THIS AGREEMENT, ANY OF THE OTHER OPERATIVE AGREEMENTS OR ANY DOCUMENTS CONTEMPLATED BY OR REFERRED TO HEREIN OR THEREIN OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR ANY ACTION TAKEN OR OMITTED BY ANY OF THEM UNDER OR IN CONNECTION WITH ANY OF THE FOREGOING; PROVIDED, THAT NO LENDER SHALL BE LIABLE FOR THE PAYMENT OR ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING SOLELY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE AGENT. THE AGREEMENTS IN THIS SECTION 7.7 SHALL SURVIVE THE PAYMENT OF THE NOTES AND ALL OTHER AMOUNTS PAYABLE HEREUNDER. 7.8 THE AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower or the Credit Parties as though the Agent were 16 not the Agent hereunder and under the other Operative Agreements. With respect to its Loans made or renewed by it and any Note issued to it, the Agent shall have the same rights and powers under this Agreement and the other Operative Agreements as any Lender and may exercise the same as though it were not the Agent, and the terms "Lender" and "Lenders" shall include the Agent in its individual capacity. 7.9 SUCCESSOR AGENT. The Agent may resign at any time as the Agent upon thirty (30) days' notice to the Lenders, the Borrower and, so long as no Lease Event of Default shall have occurred and be continuing, the Lessee. If the Agent shall resign as the Agent under this Agreement, the Majority Lenders shall appoint from among the Lenders a successor Agent which successor Agent shall be subject to the approval of the Borrower and, so long as no Lease Event of Default shall have occurred and be continuing, the Lessee, such approval not to be unreasonably withheld or delayed. If no successor Agent is appointed prior to the effective date of the resignation of the resigning Agent, the Agent may appoint, after consulting with the Lenders and subject to the approval of the Borrower and, so long as no Lease Event of Default shall have occurred and be continuing, the Lessee, such approval not to be unreasonably withheld or delayed, a successor Agent from among the Lenders. If no successor Agent has accepted appointment as the Agent by the date which is thirty (30) days following a retiring Agent's notice of resignation, the retiring Agent's notice of resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Agent until such time, if any, as the Majority Lenders appoint a successor Agent, as provided for above. Upon the effective date of such resignation, only such successor Agent shall succeed to all the rights, powers and duties of the retiring Agent and the term "Agent" shall mean such successor agent and the retiring Agent's rights, powers and duties in such capacity shall be terminated. After any retiring Agent resigns hereunder as the Agent, the provisions of this Article VII and Section 9.5 shall inure to their respective benefit as to any actions taken or omitted to be taken by it while it was the Agent under this Agreement. 7.10 ACTIONS OF THE AGENT ON BEHALF OF HOLDERS. The parties hereto specifically acknowledge and consent to the Agent's acting on behalf of the Holders as provided in the Participation Agreement, and, in any such case, the Lenders acknowledge that the Holders shall be entitled to vote as "Secured Parties" hereunder to the extent required or permitted by the Operative Agreements (including without limitation Sections 8.2(h) and 8.6 of the Participation Agreement). 7.11 THE AGENT'S DUTY OF CARE. Other than the exercise of reasonable care to assure the safe custody of the Collateral while being held by the Agent hereunder or under any other Operative Agreement, the Agent shall have no duty or liability to preserve rights pertaining thereto, it being understood and agreed that the Lessee shall be responsible for preservation of all rights in the Collateral, and the Agent shall be relieved of all responsibility for the Collateral upon surrendering it or tendering the surrender of it to the Lessee. The Agent shall be deemed to have exercised reasonable care in 17 the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which the Agent accords its own property, which shall be no less than the treatment employed by a reasonable and prudent agent in the industry, it being understood that the Agent shall not have responsibility for taking any necessary steps to preserve rights against any parties with respect to any of the Collateral. 7.12 APPLICABLE PARTIES. The provisions of Section 7, other than the provisions of Section 7.9, are solely for the benefit of the Agent and the Lenders, and the Borrower shall not have any rights as a third party beneficiary or otherwise or any obligations under any provision of Section 7, other than as provided in Section 7.9. SECTION 8. MATTERS RELATING TO PAYMENT AND COLLATERAL 8.1 COLLECTION AND ALLOCATION OF PAYMENTS AND OTHER AMOUNTS. The Credit Parties, the Agent, the Lenders, the Holders and the Borrower have agreed pursuant to the terms of Section 8.7 of the Participation Agreement to a procedure for the allocation and distribution of certain payments and distributions, including without limitation the proceeds of Collateral. 8.2 CERTAIN REMEDIAL MATTERS. Notwithstanding any other provision of this Agreement or any other Credit Document: (a) the Borrower shall at all times retain to the exclusion of all other parties, all rights to Excepted Payments payable to it and to demand, collect or commence an action at law to obtain such payments and to enforce any judgment with respect thereto; and (b) the Borrower and each Holder shall at all times retain the right, but not to the exclusion of the Agent, (i) to retain all rights with respect to insurance that Article XIV of the Lease specifically confers upon the "Lessor", (ii) to provide such insurance as the Lessee shall have failed to maintain or as the Borrower or any Holder may desire, and (iii) to enforce compliance by the Lessee with the provisions of Articles VIII, IX, X, XI, XIV and XVII of the Lease. 8.3 EXCEPTED PAYMENTS. Notwithstanding any other provision of this Agreement or the Security Documents, any Excepted Payment received at any time by the Agent shall be distributed promptly to the Person entitled to receive such Excepted Payment. 18 SECTION 8B. MATTERS RELATING TO GUARANTY OF TRANCHE A OBLIGATIONS 8B.1. TRANCHE A GUARANTY OF PAYMENT AND PERFORMANCE. Subject to Section 8B.7, the Tranche A Guarantors hereby unconditionally guarantee on a joint and several basis to the Tranche A Lenders the prompt payment and performance of the Tranche A Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise) or when such is otherwise to be performed. This Section 8B is a guaranty of payment and performance and not of collection and is a continuing guaranty and shall apply to all Tranche A Obligations whenever arising. All rights granted to the Tranche A Lenders under this Section 8B shall be subject to the provisions of Sections 8.2(h) and 8.6 of the Participation Agreement. 8B.2. OBLIGATIONS UNCONDITIONAL. The Tranche A Guarantors agree, to the extent permitted by law, that the obligations of the Tranche A Guarantors under this Section 8B are absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of any of the Operative Agreements, or any other agreement or instrument referred to therein, or any substitution, release or exchange of any other guarantee of or security for any of the Tranche A Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety, guarantor or co-obligor, it being the intent of this Section 8B.2 that the obligations of the Tranche A Guarantors hereunder shall be absolute and unconditional under any and all circumstances. The Tranche A Guarantors agree that this Section 8B may be enforced by the Agent on behalf of the Tranche A Lenders without the necessity at any time of resorting to or exhausting any other security or collateral and without the necessity at any time of having recourse to the Tranche A Notes or any other of the Operative Agreements or any collateral, if any, hereafter securing the Tranche A Obligations or otherwise and the Tranche A Guarantors hereby waive the right to require the Agent on behalf of the Tranche A Lenders to proceed against any Person (including without limitation any co-guarantor) or to require the Agent on behalf of the Tranche A Lenders to pursue any other remedy or enforce any other right. Each Tranche A Guarantor further agrees not to exercise any right of subrogation, indemnity, reimbursement or contribution against any Person for amounts paid under this Section 8B until such time as the Tranche A Loans, accrued but unpaid interest thereon and all other amounts owing under the Operative Agreements have been paid in full. Without limiting the generality of the waiver provisions of this Section 8B, the Tranche A Guarantors hereby waive any rights to require the Agent on behalf of the Tranche A Lenders to proceed against any Person or to require the Agent on behalf of the Tranche A Lenders to pursue any other remedy or enforce any other right, including without limitation any and all rights under N.C. Gen, Stat. (S) 26-7 through 26-9. The Tranche A Guarantors further agree that nothing contained in this Section 8B shall prevent the Agent on behalf of the Tranche A Lenders from suing on any Operative Agreement or foreclosing any security interest in or Lien on any collateral, if any, securing the Tranche A Obligations or from exercising any other rights available to the Agent on behalf of the Tranche A Lenders under any Operative 19 Agreement, or any other instrument of security, if any, and the exercise of any of the aforesaid rights and the completion of any foreclosure proceedings shall not constitute a discharge of the Tranche A Guarantors' obligations hereunder; it being the purpose and intent of the Tranche A Guarantors that their obligations hereunder shall be absolute, independent and unconditional under any and all circumstances; provided, that any amounts due under this Section 8B which are paid to or for the benefit of any Tranche A Lender shall reduce the Tranche A Obligations by a corresponding amount (unless required to be rescinded at a later date). To the extent permitted by law, neither the Tranche A Guarantors' obligations under this Section 8B nor any remedy for the enforcement thereof shall be impaired, modified, changed or released in any manner whatsoever by an impairment, modification, change, release or limitation of the liability of any firm or by reason of the bankruptcy or insolvency of any Person. The Tranche A Guarantors waive any and all notice of the creation, renewal, extension or accrual of any of the Tranche A Obligations and notice of or proof of reliance by the Agent or any Tranche A Lender upon this Section 8B or acceptance of this Section 8B. The Tranche A Obligations shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Section 8B. All dealings between any or all of the Credit Parties, on the one hand, and the Agent or the Tranche A Lenders, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon this Section 8B. 8B.3. MODIFICATIONS. The Tranche A Guarantors agree that (a) all or any part of the security now or hereafter held for the Tranche A Obligations, if any, may be exchanged, compromised or surrendered from time to time; (b) neither the Agent nor any Tranche A Lender shall have any obligation to protect, perfect, secure or insure any such security interests, liens or encumbrances now or hereafter held, if any, for the Tranche A Obligations or the properties subject thereto; (c) the time or place of payment of the Tranche A Obligations may be changed or extended, in whole or in part, to a time certain or otherwise, and may be renewed or accelerated, in whole or in part; (d) any or all of the Credit Parties and any other party liable for payment under the Operative Agreements may be granted indulgences generally; (e) any of the provisions of the Notes, the Certificates or any of the other Operative Agreements may be modified, amended or waived; (f) any party (including without limitation any co-guarantor) liable for the payment thereof may be granted indulgences or be released; and (g) any deposit balance for the credit any or all of the Credit Parties or any other party liable for the payment of the Tranche A Obligations or liable upon any security therefor may be released, in whole or in part, at, before or after the stated, extended or accelerated maturity of the Tranche A Obligations, all without notice to or further assent by any Tranche A Guarantor, which shall remain bound thereon, notwithstanding any such exchange, compromise, surrender, extension, renewal, acceleration, modification, indulgence or release (except to the extent any such exchange, compromise, surrender, extension, renewal, acceleration, modification, indulgence or release is expressly for the benefit of such Tranche A Guarantor). 20 8B.4. WAIVER OF RIGHTS. Each Tranche A Guarantor expressly waives to the fullest extent permitted by applicable law: (a) notice of acceptance of this Section 8B by the Agent and any Tranche A Lender and of all extensions of credit or other Advances to any Credit Party by any Tranche A Lender pursuant to the terms of the Operative Agreements; (b) presentment and demand for payment or performance of any of the Tranche A Obligations; (c) protest and notice of dishonor or of default with respect to the Tranche A Obligations or with respect to any security therefor; (d) notice of the Agent on behalf of the Tranche A Lenders obtaining, amending, substituting for, releasing, waiving or modifying any security interest, lien or encumbrance, if any, hereafter securing the Tranche A Obligations, or the Agent on behalf of the Tranche A Lenders subordinating, compromising, discharging or releasing such security interests, liens or encumbrances, if any; and (e) all other notices to which the Tranche A Guarantors might otherwise be entitled. Notwithstanding anything to the contrary herein, (i) the Tranche A Guarantors' payments hereunder shall be due three (3) days after written demand by the Agent for such payment (unless the Tranche A Obligations are automatically accelerated pursuant to the applicable provisions of the Operative Agreements in which case the Tranche A Guarantors' payments shall be automatically due) and (ii) any modification of the Operative Agreements which has the effect of increasing the Tranche A Obligations shall not be enforceable against the Tranche A Guarantors unless each Tranche A Guarantors executes the document evidencing such modification or otherwise reaffirms its guaranty in writing in connection with such modification. 8B.5. REINSTATEMENT. The obligations of the Tranche A Guarantors under this Section 8B shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Person in respect of the Tranche A Obligations is rescinded or must be otherwise restored by any holder of any of the Tranche A Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and the Tranche A Guarantors agree that each of them will indemnify the Agent and each Tranche A Lender on demand for all reasonable costs and expenses (including, without limitation, reasonable fees of counsel) incurred by the Agent and/or any Tranche A Lender in connection with such rescission or restoration, including without limitation any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law. 8B.6. REMEDIES. The Tranche A Guarantors agree that, as between the Tranche A Guarantors, on the one hand, and the Agent and each Tranche A Lender, on the other hand, the Tranche A Obligations may be declared to be forthwith due and payable as provided in the applicable provisions of the Operative Agreements (and shall be deemed to have become automatically due and payable in the circumstances provided therein) notwithstanding any stay, injunction or other prohibition preventing such declaration (or preventing such Tranche A Obligations from becoming automatically due and payable) as against any other Person and that, in the event of such 21 declaration (or such Tranche A Obligations being deemed to have become automatically due and payable), such Tranche A Obligations (whether or not due and payable by any other Person) shall forthwith become due and payable by the Tranche A Guarantors in accordance with the applicable provisions of the Operative Agreements. 8B.7. LIMITATION OF TRANCHE A GUARANTY. Notwithstanding any provision to the contrary contained herein or in any of the other Operative Agreements, to the extent the Tranche A Obligations shall be adjudicated to be invalid or unenforceable for any reason (including without limitation because of any applicable state or federal law relating to fraudulent conveyances or transfers) then the obligations of the Tranche A Guarantors hereunder shall be limited to the maximum amount that is permissible under applicable law (whether federal or state and including without limitation the Bankruptcy Code). Subject to Section 8B.5, upon the satisfaction of the Tranche A Obligations in full, regardless of the source of payment, the Tranche A Guarantors' obligations hereunder shall be deemed satisfied, discharged and terminated other than indemnifications set forth herein that expressly survive. 8B.8. PAYMENT OF AMOUNTS TO THE AGENT. Each Tranche A Lender hereby instructs the Tranche A Guarantors, and the Tranche A Guarantors hereby acknowledge and agree, that until such time as the Tranche A Loans are paid in full and the Liens evidenced by the Security Agreement and the Mortgage Instruments have been released any and all Rent (excluding Excepted Payments which shall be payable to each Holder or other Person as appropriate) and any and all other amounts of any kind or type under any of the Operative Agreements due and owing or payable to any Person shall instead be paid directly to the Agent (excluding Excepted Payments which shall be payable to each Holder or other Person as appropriate) or as the Agent may direct from time to time for allocation and distribution in accordance with the procedures set forth in Section 8.7 of the Participation Agreement. SECTION 8C. MATTERS RELATING TO GUARANTY OF COMPANY OBLIGATIONS 8C.1. GUARANTY OF PAYMENT AND PERFORMANCE OF COMPANY OBLIGATIONS. Subject to Section 8C.7, AOR hereby unconditionally guarantees to the Financing Parties the prompt payment and performance of the Company Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise) or when such is otherwise to be performed. This Section 8C is a guaranty of payment and performance and not of collection and is a continuing guaranty and shall apply to all Company Obligations whenever 22 arising. All rights granted to the Financing Parties under this Section 8C shall be subject to the provisions of Sections 8.2(h) and 8.6 of the Participation Agreement. 8C.2. OBLIGATIONS UNCONDITIONAL. AOR agrees, to the extent permitted by law, that the obligations of AOR under this Section 8C are absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of any of the Operative Agreements, or any other agreement or instrument referred to therein, or any substitution, release or exchange of any other guarantee of or security for any of the Company Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety, guarantor or co-obligor, it being the intent of this Section 8B.2 that the obligations of AOR hereunder shall be absolute and unconditional under any and all circumstances. AOR agrees that this Section 8C may be enforced by the Agent on behalf of the Financing Parties without the necessity at any time of resorting to or exhausting any other security or collateral and without the necessity at any time of having recourse to the Notes, the Certificates or any other of the Operative Agreements or any collateral, if any, hereafter securing the Company Obligations or otherwise and AOR hereby agrees not to exercise the right to require the Agent on behalf of the Financing Parties to proceed against any Person (including without limitation any co-guarantor) or to require the Agent on behalf of the Financing Parties to pursue any other remedy or enforce any other right. AOR further agrees not to exercise any right of subrogation, indemnity, reimbursement or contribution against any Person for amounts paid under this Section 8C until such time as the Loans, Holder Advances accrued but unpaid interest thereon, accrued but unpaid Holder Yield and all other amounts owing under the Operative Agreements have been paid in full. Without limiting the generality of the waiver provisions of this Section 8C, AOR hereby waives any rights to require the Agent on behalf of the Financing Parties to proceed against any Person or to require the Agent on behalf of the Financing Parties to pursue any other remedy or enforce any other right, including without limitation any and all rights under N.C. Gen, Stat. (S) 26-7 through 26-9. AOR further agrees that nothing contained in this Section 8C shall prevent the Agent on behalf of the Financing Parties from suing on any Operative Agreement or foreclosing any security interest in or Lien on any collateral, if any, securing the Company Obligations or from exercising any other rights available to the Agent on behalf of the Financing Parties under any Operative Agreement, or any other instrument of security, if any, and the exercise of any of the aforesaid rights and the completion of any foreclosure proceedings shall not constitute a discharge of AOR's obligations hereunder; it being the purpose and intent of AOR that its obligations hereunder shall be absolute, independent and unconditional under any and all circumstances; provided, that any amounts due under this Section 8C which are paid to or for the benefit of any Financing Party shall reduce the Company Obligations by a corresponding amount (unless required to be rescinded at a later date). To the extent permitted by law, neither AOR's obligations under this Section 8C nor any remedy for the enforcement thereof shall be impaired, modified, changed or released in any manner whatsoever by an impairment, modification, change, release or limitation of the liability of any firm or by reason of the bankruptcy or insolvency of any Person. AOR waives any and all notice of the creation, renewal, extension or accrual of any of the Company Obligations and notice of or proof of reliance by the Agent or any Financing Party upon this 23 Section 8C or acceptance of this Section 8C. The Company Obligations shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Section 8C. All dealings between any or all of the Credit Parties, on the one hand, and the Agent or the Financing Parties, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon this Section 8C (except to the extent any such exchange, compromise, surrender, extension, renewal, acceleration, modification, indulgence or release is expressly for the benefit of AOR). 8C.3. MODIFICATIONS. AOR agrees that (a) all or any part of the security now or hereafter held for the Company Obligations, if any, may be exchanged, compromised or surrendered from time to time; (b) neither the Agent nor any Financing Party shall have any obligation to protect, perfect, secure or insure any such security interests, liens or encumbrances now or hereafter held, if any, for the Company Obligations or the properties subject thereto; (c) the time or place of payment of the Company Obligations may be changed or extended, in whole or in part, to a time certain or otherwise, and may be renewed or accelerated, in whole or in part; (d) any or all of the Credit Parties and any other party liable for payment under the Operative Agreements may be granted indulgences generally; (e) any of the provisions of the Notes, the Certificates or any of the other Operative Agreements may be modified, amended or waived; (f) any party (including without limitation any co-guarantor) liable for the payment thereof may be granted indulgences or be released; and (g) any deposit balance for the credit of any or all of the Credit Parties or any other party liable for the payment of the Company Obligations or liable upon any security therefor may be released, in whole or in part, at, before or after the stated, extended or accelerated maturity of the Company Obligations, all without notice to or further assent by AOR, which shall remain bound thereon, notwithstanding any such exchange, compromise, surrender, extension, renewal, acceleration, modification, indulgence or release. 8C.4. WAIVER OF RIGHTS. AOR expressly waives to the fullest extent permitted by applicable law: (a) notice of acceptance of this Section 8C by the Agent and any Financing Party and of all extensions of credit or other Advances to any Credit Party by any Financing Party pursuant to the terms of the Operative Agreements; (b) presentment and demand for payment or performance of any of the Company Obligations; (c) protest and notice of dishonor or of default with respect to the Company Obligations or with respect to any security therefor; (d) notice of the Agent on behalf of the Financing Parties obtaining, amending, substituting for, releasing, waiving or modifying any security interest, lien or encumbrance, if any, hereafter securing the Company Obligations, or the Agent on behalf of the Financing Parties subordinating, compromising, discharging or releasing such security interests, liens or encumbrances, if any; and (e) all other notices to which AOR might otherwise be entitled. Notwithstanding anything to the contrary herein, (i) AOR's payments hereunder shall be due three (3) days after written demand by the Agent for such payment (unless the Company Obligations are automatically accelerated pursuant to the applicable provisions of the Operative Agreements in which case AOR's payments shall be automatically due) and (ii) any modification of the Operative Agreements which has the effect of 24 increasing the Company Obligations shall not be enforceable against the AOR unless AOR executes the document evidencing such modification or otherwise reaffirms its guaranty in writing in connection with such modification. 8C.5. REINSTATEMENT. The obligations of AOR under this Section 8C shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Person in respect of the Company Obligations is rescinded or must be otherwise restored by any holder of any of the Company Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and AOR agrees that AOR will indemnify the Agent and each Financing Party on demand for all reasonable costs and expenses (including, without limitation, reasonable fees of counsel) incurred by the Agent and/or any Financing Party in connection with such rescission or restoration, including without limitation any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law. 8C.6. REMEDIES. AOR agrees that, as between AOR, on the one hand, and the Agent and each Financing Party, on the other hand, the Company Obligations may be declared to be forthwith due and payable as provided in the applicable provisions of the Operative Agreements (and shall be deemed to have become automatically due and payable in the circumstances provided therein) notwithstanding any stay, injunction or other prohibition preventing such declaration (or preventing such Company Obligations from becoming automatically due and payable) as against any other Person and that, in the event of such declaration (or such Company Obligations being deemed to have become automatically due and payable), such Company Obligations (whether or not due and payable by any other Person) shall forthwith become due and payable by AOR in accordance with the applicable provisions of the Operative Agreements. 8C.7. LIMITATION OF GUARANTY. Notwithstanding any provision to the contrary contained herein or in any of the other Operative Agreements, to the extent the Company Obligations shall be adjudicated to be invalid or unenforceable for any reason (including without limitation because of any applicable state or federal law relating to fraudulent conveyances or transfers) then the obligations of AOR hereunder shall be limited to the maximum amount that is permissible under applicable law (whether federal or state and including without limitation the Bankruptcy Code). Subject to Section 8C.5, upon the satisfaction of the Company Obligations in full, regardless of the source of payment, AOR's obligations hereunder shall be deemed satisfied, discharged and terminated other than indemnifications set forth herein that expressly survive. 8C.8. PAYMENT OF AMOUNTS TO THE AGENT. 25 Each Financing Party hereby instructs AOR, and AOR hereby acknowledges and agrees, that until such time as the Loans, Holder Advances, and all other amounts due and payable under the Operative Agreements are paid in full and the Liens evidenced by the Security Agreement and the Mortgage Instruments have been released any and all Rent (excluding Excepted Payments which shall be payable to each Holder or other Person as appropriate) and any and all other amounts of any kind or type under any of the Operative Agreements due and owing or payable to any Person shall instead be paid directly to the Agent (excluding Excepted Payments which shall be payable to each Holder or other Person as appropriate) or as the Agent may direct from time to time for allocation and distribution in accordance with the procedures set forth in Section 8.7 of the Participation Agreement. SECTION 9 MISCELLANEOUS 9.1 AMENDMENTS AND WAIVERS. None of the terms or provisions of this Agreement may be terminated, amended, supplemented, waived or modified except in accordance with the terms of Section 12.4 of the Participation Agreement. 9.2 NOTICES. All notices required or permitted to be given under this Agreement shall be given in accordance with Section 12.2 of the Participation Agreement. 9.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of the Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Credit Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or future exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made by the Borrower under the Operative Agreements shall survive the execution and delivery of this Agreement and the Notes and the making of the Loans hereunder. 9.5 PAYMENT OF EXPENSES AND TAXES. The Borrower agrees to (with funds provided by the Lessee as Supplemental Rent): (a) pay all reasonable out-of-pocket costs and expenses of (i) the Agent whether or not the transactions herein contemplated are consummated, in connection with the negotiation, 26 preparation, execution and delivery of the Operative Agreements and the documents and instruments referred to therein (including without limitation the reasonable fees and disbursements of Moore & Van Allen, PLLC) and any amendment, waiver or consent relating thereto (including without limitation the reasonable fees and disbursements of counsel to the Agent) and (ii) the Agent and upon the occurrence and during the continuance of an Event of Default each of the Lenders in connection with the enforcement of the Operative Agreements and the documents and instruments referred to therein (including without limitation the reasonable fees and disbursements of counsel for the Agent and for each of the Lenders) and (b) pay and hold each of the Lenders harmless from and against any and all present and future stamp and other similar taxes with respect to the foregoing matters and save each of the Lenders harmless from and against any all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Lender) to pay such stamp or similar taxes. 9.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS. This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Agent, all future holders of the Notes and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender. 9.7 PARTICIPATIONS. Subject to and in accordance with Section 10.1 of the Participation Agreement, any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one (1) or more Persons engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business (each, a "Participant") participating interests in any Loan owing to such Lender, any Note held by such Lender, any Commitment of such Lender or any other interest of such Lender hereunder and under the other Operative Agreements; provided, that any such sale of a participating interest shall be in a principal amount of at least $2,000,000 or such lesser amount (to the extent such Lender's interest in this Agreement and the Notes is less than $2,000,000) which may be sold without violating the provisions of the following proviso; provided, further, no Lender shall sell any participating interest, when taken together with all other participating interests, if any, sold by such Lender or such lesser amount constitutes such Lender's entire interest in this Agreement and the Notes. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Note for all purposes under this Agreement and the Notes, and the Borrower and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the Notes. In no event shall any Participant have any right to approve any amendment or waiver of any provision of this Agreement or any other Operative Agreement, or any consent to any departure by the Borrower or any other Person therefrom, except to the extent that such amendment, waiver or consent would (a) reduce the principal of, or interest on, any Loan or Note, or postpone the date of the final maturity of any Loan or Note, or reduce the amount of any Lender Facility Fee, in each case 27 to the extent subject to such participation or (b) release all or substantially all of the Collateral. The Borrower agrees that, while an Event of Default shall have occurred and be continuing, if amounts outstanding under this Agreement and the Notes are due or unpaid, or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interests in amounts owing directly to it as a Lender under this Agreement or any Note, provided, that in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in Section 9.10(a) as fully as if it were a Lender hereunder. The Borrower also agrees that each Participant shall be entitled to the benefits of Sections 11.2(e), 11.3 and 11.4 of the Participation Agreement with respect to its participation in the Commitments and the Loans outstanding from time to time as if it was a Lender; provided, that such Participant shall have complied with the requirements of said Sections and provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such Section than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. 9.8 ASSIGNMENTS. (a) Subject to and in accordance with Sections 9.1 and 10.1 of the Participation Agreement, any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time and from time to time assign to any Eligible Assignee (each, a "Purchasing Lender") all or any part of its rights and obligations under this Agreement and the other Operative Agreements pursuant to an Assignment and Acceptance, substantially in the form of EXHIBIT B, executed by such Purchasing Lender, such assigning Lender (and, in the case of a Purchasing Lender that is not a Lender or an affiliate thereof, subject to Section 9.1 of the Participation Agreement, by the Borrower and the Agent) and delivered to the Agent for its acceptance and recording in the register; provided, that no such assignment to a Purchasing Lender (other than any Lender or any affiliate thereof) shall be in an aggregate principal amount less than $5,000,000 (other than in the case of an assignment of all of a Lender's interests under this Agreement and the Notes). Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Purchasing Lender thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein, and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the remaining portion of an assigning Lender's rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto). notwithstanding anything to the contrary in this Agreement, no such assignment shall be made to a Purchasing Lender without the prior written consent of the Borrower, not to be unreasonably withheld, and, unless requested by the rekevant Purchasing Lender and/or Assigning Lender, new Notes shall not be required to be executed and delivered by the Borrower, for any assignment which occurs at any time when any of the events described in Section 6(g) shall have occurred and be continuing. 28 (b) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and a Purchasing Lender (and, in the case of a Purchasing Lender that is not a lender or an affiliate thereof, by the Borrower and the Agent) together with payment to the Agent of a registration and processing fee of $2,500 (which shall not be payable by the Borrower or the Lessee, except as otherwise provided in connection with an assignment requested in accordance with Section 2.11(b)), the Agent shall (i) promptly accept such Assignment and Acceptance and (ii) promptly after the effective date determined pursuant thereto, record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the Borrower. On or prior to such effective date, the Borrower, at its own expense, shall execute and deliver to the Agent new Notes (in exchange for the Notes of the assigning Lender), each in an amount equal to the Commitment assumed or Loans purchased by the relevant Purchasing Lender pursuant to such Assignment and Acceptance, and, if the assigning Lender has retained a Commitment or any Loan hereunder, new Notes to the order of the assigning Lender, each in an amount equal to the Commitment or Loans retained by it hereunder. Such new Notes shall be dated the effective date of the applicable Assignment and Acceptance and shall otherwise be in the form of the notes replaced thereby. (c) Each Purchasing Lender (other than any Lender organized and existing under the laws of the U.S. or any political subdivision in or of the U.S.), by executing and delivering an Assignment and Acceptance, (i) agrees to execute and deliver to the Agent, as promptly as practicable, four (4) signed copies (two (2) for the Agent and two (2) for delivery by the Agent to the Borrower) of form 1001 or form 4224 (or any successor form or comparable form) (it being understood that if the applicable form is not so delivered, payments under or in respect of this Agreement may be subject to withholding and deduction); (ii) represents and warrants to the Borrower and the Agent that the form so delivered is true and accurate and that, as of the effective date of the applicable Assignment and Acceptance, each of such Purchasing Lender's lending offices is entitled to receive payments of principal and interest under or in respect of this Agreement without withholding or deduction for or on account of any taxes imposed by the U.S. Federal government; (iii) agrees to annually hereafter deliver to each of the Borrower and the Agent not later than December 31 of the year preceding the year to which it will apply, two (2) further properly completed signed copies of Form 1001 or Form 4224 (or any successor form or comparable form), as appropriate, unless an event has occurred which renders the relevant form inapplicable (it being understood that if the applicable form is not so delivered, payments under or in respect of this Agreement may be subject to withholding and deduction); (iv) agrees to promptly notify the Borrower and the Agent in writing if it ceases to be entitled to receive payments of principal and interest under or in respect of this Agreement without withholding or deduction for or on account of any taxes imposed by the U.S. or any political subdivision in or of the U.S. (it being understood that payments under or in respect of this Agreement may be subject to withholding and deduction in such event); 29 (v) acknowledges that in the event it ceases to be exempt from withholding and/or deduction of such taxes, the Agent may withhold and/or deduct the applicable amount from any payments to which such assignee Lender would otherwise be entitled, without any liability to such assignee Lender therefor; and (vi) agrees to indemnify the Borrower and the Agent from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs or expenses that result from such assignee lender's breach of any such representation, warranty or agreement. (d) Any Lender party to this Agreement may, from time to time and without the consent of the Borrower or any other Person, pledge or assign for security purposes any portion of its loans or any other interests in this Agreement and the other Credit Documents to any Federal Reserve Bank. 9.9 THE REGISTER; DISCLOSURE; PLEDGES TO FEDERAL RESERVE BANKS. (a) The Agent shall maintain for the benefit of the Lenders at its address referred to in Section 9.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders, the Commitments of the Lenders, and the principal amount of the Loans owing to each Lender from time to time. The entries in the Register shall be conclusive, in the absence of clearly demonstrable error, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register as the owner of the Loan recorded therein for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable notice. (b) Nothing herein shall prohibit any Lender from pledging or assigning any Note to any Federal Reserve Bank in accordance with applicable law. 9.10 ADJUSTMENTS; SET-OFF. (a) Except as otherwise expressly provided in Section 8.1 hereof and Section 8.7 of the Participation Agreement where, and to the extent, one (1) Lender is entitled to payments prior to other Lenders, if any Lender (a "Benefitted Lender") shall at any time receive any payment of all or part of its Loans, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 6(g), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Loans, or interest thereon, such Benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Loan, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such Benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or 30 benefits is thereafter recovered from such Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the event of such recovery, but without interest. (b) In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default, each of the Agent and each Lender is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to the Borrower or to any other Person, any such notice being hereby expressly waived (to the extent permitted by law), to set off and to appropriate and apply any and all deposits (general or special) and any other Indebtedness at any time held or owing by the Agent or such Lender (including without limitation by branches and agencies of the Agent or such Lender wherever located) to or for the credit or the account of the Borrower against and on account of the obligations and liabilities of the Borrower to the Agent or such Lender under this Agreement or under any of the other Operative Agreements, including without limitation all interests in obligations of the Borrower purchased by any such Lender pursuant to Section 9.10(a), and all other claims of any nature or description arising out of or connected with this Agreement or any other Operative Agreement, irrespective of whether or not the Agent or such Lender shall have made any demand and although said obligations, liabilities or claims, or any of them, shall be contingent or unmatured. 9.11 COUNTERPARTS. This Agreement may be executed by one (1) or more of the parties to this Agreement on any number of separate counterparts (including without limitation by telecopy), and all of said counterparts taken together shall be deemed to constitute one (1) and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Agent. 9.12 SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 9.13 INTEGRATION. This Agreement and the other Credit Documents represent the agreement of the Borrower, the Agent, and the Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Credit Documents. 31 9.14 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NORTH CAROLINA. 9.15 SUBMISSION TO JURISDICTION; VENUE; ARBITRATION. THE PROVISIONS OF THE PARTICIPATION AGREEMENT RELATING TO SUBMISSION TO JURISDICTION, VENUE AND ARBITRATION ARE HEREBY INCORPORATED BY REFERENCE HEREIN, MUTATIS MUTANDIS. 9.16 ACKNOWLEDGEMENTS. The Borrower hereby acknowledges that: (a) neither the Agent nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Credit Documents, and the relationship between the Agent and the Lenders, on one (1) hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (b) no joint venture is created hereby or by the other Credit Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders. 9.17 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 9.18 NONRECOURSE. In addition to and not in limitation of Section 12.9 of the Participation Agreement, anything to the contrary contained in this Agreement or in any other Operative Agreement notwithstanding, no officer, director or shareholder (other than a Credit Party) of any party to any Operative Agreement shall be personally liable in any respect for any liability or obligation hereunder or under any other Operative Agreement including without limitation the payment of the principal of, or interest on, the Notes, or for monetary damages for the breach of performance of any of the covenants contained in this Agreement, the Notes or any of the other Operative Agreements. The Agent and the Lenders agree that, in the event any of them pursues any 32 remedies available to them under this Agreement, the Notes or any other Operative Agreement, neither the Agent nor the Lenders shall have any recourse against the Borrower, nor any officer, director or shareholder (other than a Credit Party) of any party to any Operative Agreement, for any deficiency, loss or claim for monetary damages or otherwise resulting therefrom and recourse shall be had solely and exclusively against the Trust Estate and the Credit Parties; but nothing contained herein shall be taken to prevent recourse against or the enforcement of remedies against the Trust Estate in respect of any and all liabilities, obligations and undertakings contained in this Agreement, the Notes or any other Operative Agreement. The Agent and the Lenders further agree that the Borrower shall not be responsible for the payment of any amounts owing hereunder (excluding principal and interest (other than Overdue Interest) in respect of the Loans) (such non-excluded amounts, "Supplemental Amounts") except to the extent that payments of Supplemental Rent designated by the Lessee for application to such Supplemental Amounts shall have been paid by the Lessee pursuant to the Lease (it being understood that the failure by the Lessee for any reason to pay any Supplemental Rent in respect of such Supplemental Amounts shall nevertheless be deemed to constitute a default by the Borrower for the purposes of Section 6). Notwithstanding the foregoing provisions of this Section 9.18, nothing in this Agreement or any other Operative Agreement shall (a) constitute a waiver, release or discharge of any obligation evidenced or secured by this Agreement or any other Credit Document, (b) limit the right of the Agent or any Lender to name the Borrower as a party defendant in any action or suit for judicial foreclosure and sale under any Security Document, or (c) affect in any way the validity or enforceability of any guaranty (whether of payment and/or performance) given to the Lessor, the Agent or the Lenders, or of any indemnity agreement given by the Borrower, in connection with the Loans made hereunder. 9.19 USURY SAVINGS PROVISION. NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT, IT IS THE INTENT OF THE PARTIES HERETO TO CONFORM TO AND CONTRACT IN STRICT COMPLIANCE WITH APPLICABLE USURY LAW FROM TIME TO TIME IN EFFECT. ANY PAYMENTS HEREUNDER CONSTITUTING INTEREST UNDER ANY APPLICABLE LAW FROM TIME TO TIME IN EFFECT MAY BE REFERRED TO HEREIN AS "INTEREST." ALL AGREEMENTS AMONG THE PARTIES HERETO (INCLUDING ALL OF THE OPERATIVE AGREEMENTS) ARE HEREBY LIMITED BY THE PROVISIONS OF THIS PARAGRAPH WHICH SHALL OVERRIDE AND CONTROL ALL SUCH AGREEMENTS, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER WRITTEN OR ORAL. IN NO WAY, NOR IN ANY EVENT OR CONTINGENCY (INCLUDING WITHOUT LIMITATION PREPAYMENT OR ACCELERATION OF THE MATURITY OF ANY OBLIGATION OR THE EARLY TERMINATION OF THE LEASE FOR ANY REASON), SHALL ANY INTEREST TAKEN, RESERVED, CONTRACTED FOR, CHARGED, OR RECEIVED UNDER THIS AGREEMENT OR OTHERWISE, EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMISSIBLE UNDER APPLICABLE LAW NOR SHALL ANY PROVISION CREATE AN OBLIGATION TO PAY UNEARNED INTEREST IN VIOLATION OF APPLICABLE LAW. IF, FROM ANY POSSIBLE CONSTRUCTION OF ANY OF THE OPERATIVE AGREEMENTS OR ANY OTHER DOCUMENT OR 33 AGREEMENT, UNEARNED INTEREST WOULD BE PAYABLE OR INTEREST WOULD OTHERWISE BE PAYABLE IN EXCESS OF THE MAXIMUM NONUSURIOUS AMOUNT, ANY SUCH CONSTRUCTION SHALL BE SUBJECT TO THE PROVISIONS OF THIS PARAGRAPH AND SUCH AMOUNTS UNDER SUCH DOCUMENTS OR AGREEMENTS SHALL BE AUTOMATICALLY REDUCED TO THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED UNDER APPLICABLE LAW, WITHOUT THE NECESSITY OF EXECUTION OF ANY AMENDMENT OR NEW DOCUMENT OR AGREEMENT. IF THE AGENT, ANY LENDER OR ANY OTHER FINANCING PARTY SHALL EVER RECEIVE ANYTHING OF VALUE WHICH CONSTITUTES INTEREST UNDER ANY APPLICABLE LAW FROM TIME TO TIME WITH RESPECT TO THE OBLIGATIONS OWED HEREUNDER OR UNDER APPLICABLE LAW AND WHICH WOULD, APART FROM THIS PROVISION, BE IN EXCESS OF THE MAXIMUM LAWFUL AMOUNT, AN AMOUNT EQUAL TO THE AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE INTEREST SHALL, WITHOUT PENALTY, TO THE EXTENT PERMITTED BY APPLICABLE LAW, BE APPLIED TO THE REDUCTION OF THE COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL AND NOT TO THE PAYMENT OF INTEREST, OR REFUNDED TO THE BORROWER OR ANY OTHER PAYOR THEREOF, IF AND TO THE EXTENT SUCH AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE EXCEEDS THE COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL. THE RIGHT TO DEMAND PAYMENT OF ANY AMOUNTS EVIDENCED BY ANY OF THE OPERATIVE AGREEMENTS DOES NOT INCLUDE THE RIGHT TO RECEIVE ANY INTEREST WHICH HAS NOT OTHERWISE ACCRUED ON THE DATE OF SUCH DEMAND, AND NEITHER THE AGENT NOR ANY LENDER INTENDS TO CHARGE OR RECEIVE ANY UNEARNED INTEREST IN THE EVENT OF SUCH DEMAND. ALL INTEREST PAID OR AGREED TO BE PAID TO THE AGENT OR ANY LENDER SHALL, TO THE EXTENT PERMITTED BY APPLICABLE LAW, BE AMORTIZED, PRORATED, ALLOCATED, AND SPREAD THROUGHOUT THE FULL TERM (INCLUDING WITHOUT LIMITATION ANY RENEWAL OR EXTENSION) OF THIS AGREEMENT SO THAT THE AMOUNT OF INTEREST ON ACCOUNT OF SUCH PAYMENTS DOES NOT EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED BY APPLICABLE LAW. 9.20 ACCEPTANCES AND AGREEMENTS. Each of the Credit Parties (other than AOR) executing this Agreement as a Tranche A Guarantor is doing so for the sole purpose of accepting and agreeing to the provisions of Sections 8B.1 through 8B.8, and AOR is executing this Agreement for the sole purposes set forth above its signature hereto. 34 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. FIRST SECURITY BANK, NATIONAL ASSOCIATION, not individually, except as expressly stated herein, but solely as the Owner Trustee under the AOR Trust 1997-1 By:_____________________________________ Name:___________________________________ Title:__________________________________ FIRST UNION NATIONAL BANK, as the Agent and a Lender By:_____________________________________ Name:___________________________________ Title:__________________________________ AOR HAS EXECUTED THIS AGREEMENT FOR THE PURPOSE OF ACCEPTING AND AGREEING TO THE PROVISIONS OF SECTIONS 8B.1 THROUGH 8B.8 AND SECTIONS 8C.1 THROUGH 8C.8 OF THIS AGREEMENT AND HEREBY CONFIRMS THAT THIS AGREEMENT SHALL BE DEEMED A CREDIT AGREEMENT OF AOR. THE OBLIGATION OF AOR PURSUANT TO SECTIONS 8B.1 THROUGH 8B.8 AND 8C.1 THROUGH 8C.8 CONSTITUTE OBLIGATIONS UNDER THE LESSEE CREDIT AGREEMENT. AMERICAN ONCOLOGY RESOURCES, INC., as the Guarantor and as a Tranche A Guarantor AOR SYNTHETIC REAL ESTATE, INC., as a Tranche A Guarantor AOR REAL ESTATE, INC., as a Tranche A Guarantor AOR, INC., as a Tranche A Guarantor RMCC CANCER CENTER, INC., as a Tranche A Guarantor AOR MANAGEMENT COMPANY OF OREGON, INC., as a Tranche A Guarantor AOR MANAGEMENT COMPANY OF INDIANA, INC., as a Tranche A Guarantor AOR MANAGEMENT COMPANY OF MISSOURI, INC., as a Tranche A Guarantor AOR MANAGEMENT COMPANY OF ARIZONA, INC., as a Tranche A Guarantor AOR MANAGEMENT COMPANY OF SOUTH CAROLINA, INC., as a Tranche A Guarantor AOR MANAGEMENT COMPANY OF OKLAHOMA, INC., as a Tranche A Guarantor [SIGNATURE PAGES CONTINUED] AOR MANAGEMENT COMPANY OF PENNSYLVANIA, INC., as a Tranche A Guarantor AOR MANAGEMENT COMPANY OF VIRGINIA, INC., as a Tranche A Guarantor AOR MANAGEMENT COMPANY OF NORTH CAROLINA, INC., as a Tranche A Guarantor AOR MANAGEMENT COMPANY OF NEW YORK, INC., as a Tranche A Guarantor AOR MANAGEMENT COMPANY OF FLORIDA, INC., as a Tranche A Guarantor AOR MANAGEMENT COMPANY OF NEVADA, INC., as a Tranche A Guarantor AOR HOLDING COMPANY OF INDIANA, INC., as a Tranche A Guarantor AOR MANAGEMENT COMPANY OF TEXAS, INC., as a Tranche A Guarantor AORT HOLDING COMPANY, INC., as a Tranche A Guarantor AORIP, INC., as a Tranche A Guarantor By:____________________________ Name: L. Fred Pounds Title: Treasurer of each of the foregoing Entities AOR OF TEXAS MANAGEMENT LIMITED PARTNERSHIP, A TEXAS LIMITED PARTNERSHIP, as a Tranche A Guarantor BY: AOR MANAGEMENT COMPANY OF TEXAS, INC., a Delaware corporation, as general partner BY:____________________________ Name: L. Fred Pounds Title: Treasurer AOR OF INDIANA MANAGEMENT PARTNERSHIP, an Indiana General Partnership, as a Tranche A Guarantor BY: AOR MANAGEMENT COMPANY OF INDIANA, INC., a Delaware Corporation, as general partner BY:____________________________ Name: L. Fred Pounds Title: Treasurer BY: AOR HOLDING COMPANY OF INDIANA, INC., a Delaware Corporation, as general partner BY:____________________________ Name: L. Fred Pounds Title: Treasurer [SIGNATURE PAGES CONTINUED] THE FIRST NATIONAL BANK OF CHICAGO, as a Lender By:______________________________________ Name:____________________________________ Title:___________________________________ [SIGNATURE PAGES CONTINUED] CREDIT LYONNAIS NEW YORK BRANCH, as a Lender By:______________________________________ Name:____________________________________ Title:___________________________________ [SIGNATURE PAGES CONTINUED] THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED, as a Lender By:______________________________________ Name:____________________________________ Title:___________________________________ [SIGNATURE PAGES CONTINUED] SUNTRUST BANK, TAMPA BAY, as a Lender By:______________________________________ Name:____________________________________ Title:___________________________________ [SIGNATURE PAGES CONTINUED] WELLS FARGO BANK (TEXAS) NATIONAL ASSOCIATION, as a Lender By:______________________________________ Name:____________________________________ Title:___________________________________ [SIGNATURE PAGES CONTINUED] CORESTATES BANK, N.A., as a Lender By:______________________________________ Name:____________________________________ Title:___________________________________ [SIGNATURE PAGES CONTINUED] THE FUJI BANK, LIMITED, as a Lender By:______________________________________ Name:____________________________________ Title:___________________________________ [SIGNATURE PAGES CONTINUED] NATIONAL CITY BANK OF KENTUCKY, as a Lender By:______________________________________ Name:____________________________________ Title:___________________________________ [SIGNATURE PAGES CONTINUED] TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as a Lender By:______________________________________ Name:____________________________________ Title:___________________________________ [SIGNATURE PAGES CONTINUED] ABN AMRO BANK N.V., as a Lender By:______________________________________ Name:____________________________________ Title:___________________________________ [SIGNATURE PAGES CONTINUED] COOPERATIEVE CENTRALE RAIFFEISEN- BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH, as a Lender By:______________________________________ Name:____________________________________ Title:___________________________________ By:______________________________________ Name:____________________________________ Title:___________________________________ [SIGNATURE PAGES CONTINUED] NATIONSBANK OF TEXAS, N.A., as a Lender By:______________________________________ Name:____________________________________ Title:___________________________________ Schedule 1.1 ------------
Tranche A Tranche B Commitment Commitment -------------- ---------------- Name and Address of Lenders Amount Percentage Amount Percentage - --------------------------- ------ ---------- -------- ---------- First Union National Bank $6,080,700 9.538% $859,400 9.549% c/o First Union Capital Markets Group DC-6 301 South College Street Charlotte, North Carolina 28288-0166 Attention: Ms. Jane O. Hurley, Capital Markets Services Telephone: (704) 383-3812 Telecopy: (704) 383-7989 The First National Bank of Chicago $5,652,450 8.867% $797,900 8.866% One First National Plaza Suite 0091 Chicago, Illinois 60670 Attention: Richard L. Schiller Vice President Telephone: (312) 732-5932 Telecopy: (312) 732-2016 Credit Lyonnais New York Branch $5,724,000 8.979% $808,000 8.978% 1301 Avenue of the Americas New York, New York 10019 Attention: Martin Golden Vice President Telephone: (212) 261-7791 Telecopy: (212) 261-3440 The Long -Term Credit Bank of Japan, Limited $3,434,400 5.387% $484,800 5.387% N.Y. Branch - BP II 165 Broadway, 49th Floor New York, New York 10006 Attention: Kathleen Dorsch-Santiago Telephone: (212) 3335-4553 Telecopy: (212) 608-2371
CoreStates Bank, N.A. $5,724,000 8.979% $808,000 8.978% FC 1-8-3-22 1339 Chestnut Street Philadelphia, Pennsylvania 19107 Attention: Dierdre McAleer Vice President Telephone: (215) 973-7560 Telecopy: (215) 973-2738 ABN AMRO Bank N.V. $5,652,450 8.867% $797,000 8.866% One Ravinia Drive, Suite 1200 Atlanta, Georgia 30346 Attention: Thomas Thornhill Senior Vice President and Managing Director Telephone: (770) 396-0066 Telecopy: (770) 399-7397 NationsBank of Texas, N.A. $5,724,000 8.979% $808,000 8.978% 700 Louisiana Street, 8th Floor Houston, Texas 77002-2700 Attention: Larry Gordon Corporate Banking Officer Telephone: (713) 247-6619 Telecopy: (713) 247-6719 The Fuji Bank, Limited $2,862,000 4.489% $404,000 4.489% One Houston Center 1221 McKinney, Suite 4100 Houston, Texas 77010 Attention: Philip C. Lauinger III Vice President and Manager Telephone: (713) 759-0717 Telecopy: (713) 650-7852 Wells Fargo Bank (Texas) National Association $4,865,400 7.632% $686,800 7.631% 1000 Louisiana, 3rd Floor Houston, Texas 77002 Attention: Christopher King Assistant Vice President Telephone: (713) 250-7150 Telecopy: (713) 250-7029
National City Bank of Kentucky $3,434,400 5.387% $484,800 5.387% 101 South Fifth Street Louisville, Kentucky 40202 Attention: Roderic M. Brown Vice President Telephone: (502) 581-4369 Telecopy: (502) 581-4424 SunTrust Bank, Tampa Bay $3,434,400 5.387% $484,800 5.387% 2520 Countryside Boulevard Clearwater, Florida 33763 Attention: Charles T. Falk First Vice President Telephone: (813) 892-4037 Telecopy: (813) 752-2315 Cooperatieve Centrale Raiffeisen- $5,652,450 8.867% $797,900 8.866% Boerenleenbank B.A., "Rabobank" Nederland", New York Branch 13355 Noel Road, Suite 1000 Dallas, Texas 75240-6645 Attention: J. David Thomas Vice President Telephone: (972) 419-5266 Telecopy: (972) 419-6315 Texas Commerce Bank National Association $5,509,350 8.642% $777,700 8.641% 6550 Fannin, Suite 237 Houston, TX 77030 Attention: Jerry Boyd Vice President Telephone: (713) 795-7344 Telecopy: (713) 795-7309 TOTAL $63,750,000 100% $9,000,000 100%
EX-11 5 EXHIBIT 11 Exhibit 11 AMERICAN ONCOLOGY RESOURCES, INC. STATEMENT RE-COMPUTATION OF PER SHARE EARNINGS (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Year Ended December 31, ------------------------------------------------- 1997 1996 1995 --------------- --------------- --------------- NET INCOME $22,867 $17,650 $11,617 ======= ======= ======= OUTSTANDING AT END OF PERIOD Shares of Common Stock 29,722 27,371 27,476 Commitments to issue Common Stock at specific future dates 17,938 17,463 15,262 Effects of weighting (2,089) (606) (7,179) ------- ------- ------- Total Shares Used in per share calculation - basic 45,571 44,228 35,559 ======= ======= ======= Net Income per share - basic $ 0.50 $ 0.40 $ 0.33 ======= ======= ======= ASSUMING DILUTION Outstanding per above 45,571 44,228 35,559 Options to purchase Common Stock 5,709 4,819 5,532 Effects of treasury stock method (3,180) (1,498) (1,773) ------- ------- ------- Total Shares Used in per share calculation - diluted 48,100 47,549 39,318 ======= ======= ======= Net income per share - diluted $ 0.48 $ 0.37 $ 0.30 ======= ======= =======
EX-21.1 6 EXHIBIT 21.1 Exhibit 21.1 AMERICAN ONCOLOGY RESOURCES, INC. LIST OF SUBSIDIARIES AOR, Inc. - incorporated in Delaware AORIP, Inc. - incorporated in Delaware RMCC Cancer Center, Inc. - incorporated in Delaware AOR Management Company of Arizona, Inc. - incorporated in Delaware AOR Management Company of Florida, Inc. - incorporated in Delaware AOR Management Company of Central Florida, Inc. - incorporated in Delaware AOR Management Company of Indiana, Inc. - incorporated in Delaware AOR Holding Company of Indiana, Inc. - incorporated in Delaware AOR of Indiana Management Partnership - organized in Indiana AOR Management Company of Missouri, Inc. - incorporated in Delaware AOR Management Company of North Carolina, Inc. - incorporated in Delaware AOR Management Company of Nevada, Inc. - incorporated in Delaware AOR Management Company of New York, Inc. - incorporated in Delaware AOR Management Company of Oklahoma, Inc. - incorporated in Delaware AOR Management Company of Ohio, Inc. - incorporated in Delaware AOR Management Company of Oregon, Inc. - incorporated in Delaware AOR Management Company of Pennsylvania, Inc. - incorporated in Delaware AOR Management Company of South Carolina, Inc. - incorporated in Delaware AOR Management Company of Virginia, Inc. - incorporated in Delaware AOR Management Company of Texas, Inc. - incorporated in Delaware AORT Holding Company, Inc. - incorporated in Delaware AOR of Texas Management Limited Partnership - organized in Texas AOR Real Estate, Inc. - incorporated in Delaware AOR Synthetic Real Estate, Inc. - incorporated in Delaware Greenville Radiation Care, Inc. - incorporated in Delaware EX-23.(A) 7 EXHIBIT 23(A) Exhibit 23(a) CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No.'s 333-778, 333-780, 333-782, 333-784, 333-786 and 333-30057) of American Oncology Resources, Inc. of our report dated March 11, 1998 appearing on page 23 of this Form 10-K. PRICE WATERHOUSE LLP Houston, Texas March 11, 1998 EX-27 8 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS DEC-31-1997 JAN-01-1997 DEC-31-1997 5,000 0 92,038 0 0 115,091 51,109 12,545 483,893 71,227 0 0 0 297 263,697 483,893 0 321,840 0 276,627 0 0 8,715 36,846 13,979 22,867 0 0 0 22,867 .50 .48
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