Document:

exh10_4.htm

Exhibit 10.4

 

FOURTH AMENDMENT TO PURCHASE AND SALE AGREEMENT

THIS FOURTH AMENDMENT TO PURCHASE AND SALE AGREEMENT (this “Amendment”), dated July 2, 2015 (the “Effective Date”), is entered into by and between PURE CYCLE CORPORATION, a Colorado corporation (“Pure Cycle”), and PCY HOLDINGS, LLC, a Colorado limited liability corporation (“PCY,” and together with Pure Cycle, jointly and severally, “Seller”), and ARKANSAS RIVER FARMS, LLC, a Colorado limited liability company (“Buyer”).

RECITALS

	
A.

	
Buyer and Seller entered into that certain Purchase and Sale Agreement dated March 11, 2015, as amended by the First Amendment to Purchase and Sale Agreement dated March 31, 2015, the Second Amendment to Purchase and Sale Agreement dated May 18, 2015 (“Second Amendment”) and the Third Amendment to Purchase and Sale Agreement dated June 18, 2015 (as amended, the “Agreement”) for the purchase and sale of real property and improvements located in the counties of Bent, Otero, and Prowers, State of Colorado, as more particularly described in the Agreement.

 

	
B.

	
Buyer and Seller desire to amend the Agreement on the terms and conditions set forth below.

 

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Buyer and Seller agree to amend the Agreement as follows:

 

AGREEMENT

	
1.

	
Defined Terms.  Capitalized terms not otherwise defined herein shall have the meanings set forth in the Agreement.

 

	
2.

	
Certified Water Rights and Water Companies.

 

	
  

	
(a)

	
Section 4 of the Second Amendment is deleted in its entirety.

 

	
  

	
(b)

	
Section 1(e) of the Agreement is deleted in its entirety and replaced with:

 

(e) all right, title and interest of Seller in all water and water rights, domestic and irrigation wells, well permits, tributary, non-tributary and not non-tributary water, ditch and ditch rights and easement and conveyance rights appurtenant to the Land (collectively, the “Water Rights”), including but not limited to: (i) the following certificated water interests: (A) 18,448.44 shares of stock in the Fort Lyon Canal Company (“FLCC”) evidenced by the certificates set forth on Exhibit B (the “FLCC Shares”), (B) 45 shares of stock in the Lower Arkansas Water Management Association (“LAWMA” evidenced by the certificate set forth on Exhibit B (the “LAWMA Shares”); (C) 170 shares of stock in The Arbor Lateral Company (“Arbor”) evidenced by the certificate set forth on Exhibit B, (D) 568 shares of stock in The Consolidated Lateral Company (“Consolidated”) evidenced by the certificates set forth on Exhibit B, (E) 691 shares of stock in The Wheat Ridge Mutual Lateral Ditch Company (“Wheat Ridge”) evidenced by the certificates set forth on Exhibit B; (ii) all water taps and rights to acquire water taps associated with the Land; and (iii) the wells located on the subject property and described in the well permits listed on Exhibit B; and

 

 

 

 

 

 

 

	
  

	
(c)

	
The fourth sentence of Section 1 of the Agreement is deleted in its entirety and replaced with:

 

FLCC, LAWMA, Arbor, Consolidated, and Wheat Ridge shall each hereinafter be referred to as a “Water Company,” collectively as the “Water Companies,” and those Water Rights derived from shares in the Water Companies shall be referred to as the “Certificated Water Rights.”

 

	
3.

	
Exhibit A, Legal Description. Exhibit A is replaced with Exhibit A attached hereto, provided that Buyer and Seller will cooperate to correct to any errors or inconsistencies in the legal description set forth on revised Exhibit A.

 

	
4.

	
Exhibit B, Water Rights.  Exhibit B is replaced with Exhibit B attached hereto.

 

	
5.

	
Exhibit D, Legal Description of Real Property Historically Irrigated with Dry-Up Shares.  Exhibit D is replaced with Exhibit D attached hereto.

 

	
6.

	
Deed.  The form of deed that Seller will execute to convey the Property to Buyer (excluding the Water Rights) is attached hereto as Exhibit C.  Buyer and Seller agree that the Deed shall also constitute the Relinquishment.

 

	
7.

	
Termination of Leases.  On or before July 8, 2015, Seller shall send notice of termination to all tenants under the Leases for any Leases that are terminable by Seller pursuant to the terms of the Lease, terminating such Leases effective as of December 31, 2015.

 

	
8.

	
Minerals.  Seller will retain 100% of the Minerals associated with the Land and the Mineral Land (however, Buyer shall receive 100% of the Sand and Gravel associated with the Land).

 

	
9.

	
Taxes; Assessments; Rents.  Section 8 of the Agreement is deleted in its entirety and replaced with:

 

Real and personal property taxes, rents, water rates and utility charges will not be prorated.  Seller shall be responsible for all taxes, water rates and utility charges attributable to the 2015 calendar year and any prior years.  Buyer shall be responsible for the taxes, water rates and utility charges attributable to the 2016 calendar year and any subsequent years.  In addition, Seller shall be responsible for all assessments levied by the Water Companies that are attributable to the 2015 calendar year and any prior years, and Buyer shall be responsible for all assessments levied by the Water Companies that are attributable to the 2016 calendar year and any subsequent years.  Seller shall receive all rents under the Leases for the 2015 calendar year, and Buyer shall receive rents under the Leases for the 2016 calendar year and any subsequent calendar years.  The obligations set forth in this Section shall survive Closing.

 

	
10.

	
Earnest Money; Delivery and Release of Closing Documents.

 

	
  

	
(a)

	
Closing Documents.  Following the Effective Date of this Amendment, Seller shall deliver to the Title Company (collectively, the “Farm Closing Documents”) Seller-executed counterpart originals of all closing documents required to be delivered by Seller pursuant to the Agreement in order to effectuate the transfer of the Property to Buyer for the following farms: 56, 116, 141 (each as identified on Exhibit A, hereinafter referred to as the “Deposit Release Farms”).  The Farm Closing Documents shall be subject to Buyer’s approval in its sole and absolute discretion.  The Property included in the Farm Closing Documents shall not be subject to any liens or encumbrances.

 

 

 

 

 

 

 

 

	
  

	
(b)

	
Earnest Money Release.  Within two (2) business days of the date that (i) Seller has delivered all of the Farm Closing Documents to Buyer and the Title Company and (ii) Buyer has approved all of the Farm Closing Documents in writing, Title Company shall release the remaining portion of the Deposit held by Title Company to Seller.  If Buyer fails to respond to Seller’s request for approval of the Farm Closing Documents for all of the Deposit Release Farms within three (3) business days of the delivery of all of the Farm Closing Documents to Buyer, Buyer shall be deemed to have approved the Farm Closing Documents.

 

	
  

	
(c)

	
Return of Earnest Money and Release of Farm Closing Documents. If this Agreement is terminated and Buyer is entitled to the return of all or any portion of the Deposit in accordance with the terms of the Agreement, Seller will immediately deliver to Buyer any portion of the Deposit that is held by Seller and that is to be returned to Buyer pursuant to the terms of the Agreement. Upon Buyer’s written confirmation to Title Company and Seller that it has received all portions of the Deposit that are to be returned to Buyer pursuant to the terms of the Agreement, the Farm Closing Documents shall be returned to Seller.  If Buyer has not received all portions of the Deposit that are to be returned to Buyer within five (5) business days of the date that such amounts have become due to Buyer, the Farm Closing Documents shall be released to Buyer and Buyer, Seller and Title Company shall take all actions necessary to effectuate the transfer of the Deposit Release Farms to Buyer, including recording any documents that are required to be recorded to effectuate such transfer.

 

	
  

	
(d)

	
Notwithstanding the foregoing, in no event shall any portion of the Deposit or the Farm Closing Documents held by Title Company be released to Seller or Buyer, as applicable, until Buyer and Seller have executed joint-escrow instructions to Title Company instructing Title Company to deliver the Deposit and the Farm Closing Documents in accordance with the terms of this Amendment.  Buyer and Seller agree to work in good faith to execute the joint-escrow instructions and will not unreasonably withhold approval of or signatures to the same.

 

	
  

	
(e)

	
The rights and obligations set forth in this Section 10 of this Amendment shall survive the termination of this Agreement.

 

	
11.

	
Purchase Price.

 

	
  

	
(a)

	
Section 2(a) and Section 2(b) of the Agreement (as modified by Section 5 of the Second Amendment) are deleted.

 

	
  

	
(b)

	
The Purchase Price shall be $45,776,979.45.

 

 

 

 

 

 

 

 

	
12.

	
Dry Up Shares.  Section 2(c) is deleted and replaced with:

 

“Dry-Up Shares” means any FLCC Shares that were not historically used to irrigate the Land.  Buyer shall have the right to review all dry-up covenants related to the Dry-Up Shares (the “Existing Dry-Up Covenants”).  Based on Buyer’s review of the Existing Dry-Up Covenants, as of the date of this Amendment, Buyer does not believe the Existing Dry-Up Covenants provide adequate enforceability of the obligation to dry up the property on which the Dry-Up Shares identified on Exhibit B-3 (the “Rejected Dry-Up Shares”) have been used.  Seller and Buyer shall work together to resolve Buyer’s concerns regarding the Rejected Dry-Up Shares to Buyer’s satisfaction on or before Closing, which efforts may include, among other things, obtaining new dry-up covenants.  If new dry-up covenants or other agreements or instruments are obtained, such documents must be acceptable to and approved by Buyer in its reasonable discretion and shall be obtained at Seller’s sole cost and expense.

 

If the parties are unable to resolve Buyer’s concerns with respect to the Rejected Dry-Up Shares in a manner acceptable to Buyer in its reasonable discretion on or before Closing for all or any portion of the Rejected Dry-Up Shares, Closing shall proceed on all of the Property other than those Rejected Dry-Up Shares remaining unresolved, and an amount equal to $3,250.00 multiplied times the number of unresolved Rejected Dry-Up Shares shall be held back in escrow at Closing (the “Holdback Amount”).  In addition, at or prior to Closing, Seller shall deliver to the Title Company (collectively, the “Dry-Up Closing Documents”) Seller-executed counterpart originals of all documents required to transfer the Rejected Dry-Up Shares to Buyer.  During the 180 days following the Closing, the parties shall continue to work together to resolve Buyer’s concerns regarding the remaining Rejected Dry-Up Shares.  If Seller delivers new dry-up covenants acceptable to Buyer or another satisfactory resolution is reached with respect to any certificate set forth on Exhibit B-3 representing Rejected Dry-Up Shares, Buyer and Seller shall proceed on the Closing of the resolved Dry-Up Shares as soon as practicable in accordance with the terms of the Agreement and, in connection therewith, (i) the Dry-Up Closing Documents with respect to such Shares shall be delivered to Buyer and (ii)  the Holdback Amount with respect to such Shares shall be delivered to Seller.  If Seller fails to deliver new dry-up covenants acceptable to Buyer within 180 days of the Closing Date or the parties are otherwise unable to resolve Buyer’s concerns regarding the Rejected Dry-Up Shares to Buyer’s satisfaction, the remaining Holdback Amount shall be delivered to Buyer, and the remaining Dry-Up Closing Documents shall be delivered to Seller and Seller shall retain the remaining Rejected Dry-Up Shares; provided, however, that if Seller objects to Buyer’s rejection of any Existing Dry-Up Covenants or any other documentation or resolutions presented by Seller, Seller may submit the dispute to binding arbitration in accordance with Section 13 of this Amendment by delivery of a written notice to Seller on or before the date that is 180 days after the Closing Date (the “Arbitration Notice”) setting forth the issues to be arbitrated.

 

Promptly following the Effective Date of this Amendment, Buyer and Seller shall work together in good faith to enter into a holdback and escrow agreement governing the management of the escrow for the Holdback Amount and the Dry-Up Closing Documents, which agreement shall be consistent with the terms of this Amendment and mutually acceptable to both Buyer and Seller in their reasonable discretion.   Buyer and Seller agree to work in good faith to agree upon and execute the holdback agreement and will not unreasonably withhold approval of or signatures to the same.

 

 

 

 

 

 

 

 

	
13.

	
Arbitration.  Any dispute to be submitted to arbitration under Section 12 shall be settled by binding arbitration before a single arbitrator in Denver, Colorado, in accordance with the Commercial Rules of the American Arbitration Association, except as otherwise provided herein or agreed to by the parties.  The arbitrator shall have at least ten (10) years of experience with water rights law in Colorado and may, but need not, be affiliated with the American Arbitration Association.  Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.  Buyer shall respond to the Arbitration Notice within the five (5) days, after which the parties shall proceed to select an arbitrator within twenty (20) days.  If the parties are unable within twenty (20) days to agree on an arbitrator, each shall appoint one arbitrator, who together shall appoint a third person who shall serve as the arbitrator.  If a party fails to appoint an arbitrator within twenty (20) days, an arbitrator shall be appointed for such party by the American Arbitration Association upon the request of the other party.  Arbitration shall be concluded and a decision entered within 90 days of the completion of selection of the arbitrator.

 

The costs of arbitration proceedings hereunder shall be shared equally between the parties; provided, however, that if each party selects an arbitrator (or has one selected for it by the American Arbitration Association) who in turn must agree upon the final arbitrator, each party shall bear the costs of its selected arbitrator.  The arbitrator’s authority hereunder shall be limited to determining whether or not the Existing Dry-Up Covenants and any other documentation or resolutions presented by Seller with respect to the applicable Rejected Dry-Up Shares are adequate to enforce the obligation to dry up the property and sufficient to allow such Rejected Dry-Up Shares to be used elsewhere and for different purposes consistent with a change of use decree.  With respect to any Rejected Dry-Up Shares that the arbitrator concludes the documentation and other evidence presented are adequate, the Dry-Up Closing Documents applicable to those Shares shall be released to Buyer and the Holdback Amount applicable to those Shares shall be released to Seller.  With respect to any Rejected Dry-Up Shares that the arbitrator concludes the documents and other evidence presented are not adequate, the Dry-Up Closing Documents applicable to those Shares shall be released to Seller and the Holdback Amount applicable to those Shares shall be released to Buyer.

 

	
14.

	
Additional Condition to Closing.  It shall be an additional condition to Buyer’s obligation to close that on or before Closing, Seller shall provide evidence to Buyer that the liens and encumbrances described on Exhibit E attached to this Amendment that may affect portions of the Certificated Water Rights have been released, with such evidence to be acceptable to Buyer in its sole and absolute discretion.  If Seller fails to satisfy the foregoing condition on or before Closing, Buyer shall have the right to terminate this Agreement, in which event Buyer shall receive a return of the Deposit, including any amounts previously disbursed to Seller, which Seller shall immediately deliver to Buyer.  The obligations set forth in this Section 14 shall survive the termination of the Agreement.

 

	
15.

	
Seller’s Warranties.  Section 10 of the Agreement is amended by adding a new subsection (o) as follows:

 

To Seller’s knowledge, (i) the Arbor, Consolidated and Wheat Ridge are the only lateral ditch companies associated with or required for the utilization of the FLCC Shares that issue stock certificates to represent the rights in the lateral ditch, and (ii) the certificates set forth on Exhibit B for those Water Companies are the only certificates required from such Water Companies for utilization of the FLCC Shares.

 

 

 

 

 

 

 

 

	
16.

	
Default; Remedies; Liability.  Section 9(b) of the Agreement, as amended by the Second Amendment, is deleted and replaced with:

 

If Seller fails to perform any of its material obligations under this Agreement for any reason other than default by Buyer or the termination of this Agreement as provided for herein, and Seller fails to cure the default by the date that is five (5) business days after Buyer’s delivery of written notice of such default to Seller, then Buyer may (a) enforce specific performance of this Agreement against Seller, or (b) terminate this Agreement and receive the return of the Deposit, including any amounts previously released to Seller, which Seller shall immediately deliver to Buyer, and Seller shall reimburse Buyer for its third-party out of pocket costs and expenses incurred in connection with this Agreement, including reasonable attorney’s fees.

 

	
17.

	
Counterparts; Signatures.  This Amendment may be executed in any number of counterparts, each of which shall be an original, but all of such counterparts shall together constitute but one and the same instrument.  Executed copies hereof may be delivered by facsimile or email of a PDF document, and, upon receipt, shall be deemed originals and binding upon the parties hereto.   Signature pages may be detached and reattached to physically form one document.

 

	
18.

	
Successors and Assigns.  This Amendment shall be binding upon and shall inure to the benefit of the heirs, executors, administrators, successors and permitted assigns of the respective parties hereto.

 

	
19.

	
Applicable Law.  This Amendment shall be governed by and construed in accordance with the laws of the State of Colorado.

 

	
20.

	
Effectiveness.  Buyer and Seller agree that the notice of termination of the Agreement dated July 2, 2015, delivered on behalf of Buyer to Seller is hereby revoked, and shall be of no force and effect.  Except as modified by this Amendment, the parties acknowledge and agree that the Agreement is in full force and effect in accordance with its terms.

 

 

[Signatures Appear on Following Pages]

 

 

 

 

 

 

 

 

IN WITNESS WHEREOF, Buyer and Seller hereby execute this Amendment as of the Effective Date.

BUYER:

ARKANSAS RIVER FARMS, LLC

By:       /s/ Aaron M. Patsch                                                                                                  

Name: Aaron M. Patsch

Title: Authorized Representative

 

 

 

 

 

 

 

 

 

SELLER:

PURE CYCLE CORPORATION,

a Colorado Corporation

By:  /s/ Mark W. Harding                                                                                                                 

        Mark W. Harding, President

PCY HOLDINGS, LLC,

a Colorado limited liability company

By: Pure Cycle Corporation, its sole member

By:  /s/ Mark W. Harding                                                                                                                   

        Mark W. Harding, President

 

 

 

Exhibit A

(Legal Description)

This exhibit consists of legal descriptions of the Registrant’s Arkansas River Valley properties consisting of approximately 14,641 acres, more or less, in the counties of Bent, Otero and Prowers, Colorado.

 

 

 

 

 

 

 

Exhibit B

List of Certificated Shares

FLCC Shares:

A.           FLCC Shares Historically Used on the Land:  See Exhibit B-1 attached.

B.           All Dry-Up Shares:  See Exhibit B-2 attached.

C.           Rejected Dry-Up Shares:  See Exhibit B-3 attached.

ARBOR Shares:

Certificate No. 182

CONSOLIDATED Shares:

Certificate Nos. 86 and 87

LAWMA Shares:

Certificate No. 737

WHEAT RIDGE Shares:

Certificate Nos. 408, 409, and 410

Well Permits:  See Exhibit B-4 attached.

 

 

 

 

 

 

 

 

 

Exhibit B-1

Fort Lyon Canal Company Shares Historically Used on the Land

This exhibit consists of a list of FLCC certificate numbers representing 16,553.44 shares.

 

 

 

 

 

 

 

 

 

Exhibit B-2

All Dry-Up Shares

This exhibit consists of a list of FLCC certificate numbers representing 1,895 shares.

 

 

 

 

 

 

 

Exhibit B-3

Rejected Dry-Up Shares

This exhibit consists of a list of FLCC certificate numbers representing 1,026 shares.

 

 

 

 

 

 

 

Exhibit B-4

Well Permits

This exhibit consists of a list of well permit numbers issued with respect to the Registrant’s property by the Office of the State Engineer of Colorado.

 

 

 

 

 

 

 

Exhibit C

(Form of Deed)

 

SPECIAL WARRANTY DEED

 

Recording requested by

and when recorded please return to:

Brownstein Hyatt Farber Schreck, LLP

410 17th Street, Suite 2200

Attention: Noelle Riccardella

____________________________________________________________________________

THIS SPECIAL WARRANTY DEED is made this ___ day of August, 2015, by PURE CYCLE CORPORATION, INC., a Colorado corporation, with an address of 34501 E Quincy Avenue, Bldg. 34, Box 10, Watkins, Colorado 80137 (“Grantor”), in favor of  ARKANSAS RIVER FARMS, LLC, a Colorado limited liability company (“Grantee”), with an address of 1530 16th Street, Suite 300  Denver, CO 80202.

WITNESSETH, that Grantor, for and in consideration of Ten and No/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, has granted, bargained, sold and conveyed, and by these presents does grant, bargain, sell, convey and confirm, unto Grantee, its successors and assigns forever, all the real property, together with improvements, located in the County of [Bent] [Prowers] [Otero], State of Colorado, more particularly described in Exhibit A, attached hereto and incorporated herein by this reference (the “Land”).

 

TOGETHER with all and singular hereditaments and appurtenances thereto belonging, or in anywise appertaining, and the reversion and reversions, remainder and remainders, rents, issues and profits thereof, and all the estate, right, title, interest, claim and demand whatsoever of Grantor, either in law or in equity, of, in and to the above bargained premises, with the hereditaments, privileges, easements, rights of way and appurtenances, including all right, title and interest of Grantor in all rock, limestone, granite, construction aggregate, crushed stone, sand, gravel, caliche, clay, top soil, or other similar material or substances appurtenant to the Land (collectively, the “Sand and Gravel”), together with any and all surface use, access easements, and all other rights in connection therewith (collectively and together with the Land, the “Property”).

 

TO HAVE AND TO HOLD the Property with the appurtenances, unto Grantee, its successors and assigns forever.  Grantor, for itself, and its successors and assigns, does covenant, grant, bargain and agree to and with the Grantee, its successors and assigns, that Grantor shall and will WARRANT AND FOREVER DEFEND the Property in the quiet and peaceable possession of Grantee, its successors and assigns, against all and every person or persons lawfully claiming the whole or any part thereof BY, THROUGH OR UNDER Grantor, subject only to those matters set forth on Exhibit B, attached hereto and incorporated herein by this reference (the “Permitted Exceptions”).

 

RESERVING therefrom unto Grantor all of Grantor’s right title and interest in all mineral rights associated with and/or appurtenant to the Land, including, but not limited to, all right, title, interest, claim and demand in and to all oil, gas, natural gas and hydrocarbons appurtenant to the Land (the “Minerals”), but expressly excluding all Sand and Gravel, together with the right of ingress and egress as reasonably necessary for the purpose of mining, drilling, exploring, operating and developing said Land for the production of the Minerals; provided, however that Grantor shall not (i) impair any current existing or future existing structures, improvements or appurtenances located on the Property, (ii) impair the lateral or sub-adjacent support of the Property or (iii) unreasonably interfere with Grantee’s operations or use of the surface of the Property.

 

 

 

 

 

 

 

 

IN WITNESS WHEREOF, Grantor has caused its name to be hereunto subscribed on the day and year first above written.

GRANTOR:

PURE CYCLE CORPORATION,

a Colorado corporation

By: ___________________________

       Mark W. Harding, President

STATE OF COLORADO                                                                              )

   )      ss.

COUNTY OF ARAPAHOE                                                                           )

 

The foregoing instrument was acknowledged before me this  ________ day of August, 2014, by Mark W. Harding as President of PURE CYCLE CORPORATION, a Colorado corporation.

 

Witness my hand and official seal.

 

My commission expires: ___________________________                                                                

 

 

 

                                                 ___________________________

Notary Public

 

 

 

 

 

 

 

 

Exhibit A to Deed

Legal Description of the Property

 

 

 

 

 

 

 

 

 

Exhibit B to Deed

Permitted Exceptions

 

 

 

 

 

 

 

Exhibit D

Legal Description of Real Property Historically

Irrigated with the Dry-Up Share

Legal descriptions for the following properties are attached:

	
Farm

Number

	
Farm

	
15

	
Farm

	
61

	
Farm

	
  62*

	
Farm

	
63

	
Farm

	
85

	
Farm

	
110

	
Farm

	
117

	
Farm

	
132

____________________

 

* Only the parcels of land which were previously part of Farm 62 and which are not owned by Seller are subject to dry-up covenants.

 

 

 

 

 

 

Exhibit E

(Certificated Water Rights Liens and Encumbrances)

 

	
Farm #

[DOT#]

	
Subject Document

	
2

 

[381/834]

 

 

	
Tommy L. Allard and Mary K. Allard/Public Trustee, for the benefit of United States of America, acting through the Farmers Home Administration, United States Department of Agriculture

 

Deed of Trust covering 2 tracts, subject being a part of Tract 1: the SE/4 of Section 23, Township 22 South, Range 51 West of the 6th P.M., Bent County, Colorado, together with 144 shares of the capital stock of the Fort Lyon Canal Company.

 

	
2

 

[438/362]

	
Tommy L. Allard and Mary K. Allard/Public Trustee, for the benefit of United States of America, acting through the Farmers Home Administration, United States Department of Agriculture

 

Deed of Trust covering 2 tracts, subject being a part of Tract 1: the SE/4 of Section 23, Township 22 South, Range 51 West of the 6th P.M., Bent County, Colorado, together with 144 shares of the capital stock of the Fort Lyon Canal Company.

 

 

	  	
[intentionally deleted]

 

	
9

 

[20140215]

	
PCY Holdings, LLC/The Public Trustee of Bent County, Colorado; for the benefit of Harry E. Blackburn, Jr.

 

Deed of Trust covering all that part of the SW/4 of Section 24 lying South and West of the Fort Lyon Canal, Township 22 South, Range 53 West of the 6th P.M., Bent County, Colorado, together with 140 shares of the Capital Stock of the Fort Lyon Canal Company and all other water and water rights appurtenant to the real property described above.

 

	
22

 

[20021005]

 

	
High Plains A & M, LLC/The Public Trustee of Bent County, Colorado, for the benefit of William J. Elder and Audra Jean Elder

 

Deed of Trust covering the NE/4 SE/4; the fractional SE/4 NE/4; the fractional NW/4 SE/4; the fractional NE/4 SW/4; and a tract described as the NE corner of the Frank Beck Plot, all in Section 31, Township 22 South, Range 51 West of the 6th PM, Bent County, Colorado, together with 331.2 shares of The Fort Lyon Canal Company and all other water and water rights appurtenant to the real property described above.

 

Assigned by 20110125 & 20122201

 

 

 

 

 

	
30

 

[20140496]

	
PCY Holdings, LLC/Hudson and Persyn, Ltd.

 

“Deed of Trust covering 1 tract: the NW/4, and SW/4 of Section 1, Township 22 South, Range 48 West, Bent County, CO. together with 232 shares of The Fort Lyon Canal Company and all other water and water rights appurtenant to the real property described on Exhibit A. including, but not limited to, tributary, not non-tributary, and non-tributary water and water rights.

 

	
32

 

[20021380]

	
High Plains A&M, LLC/ The Public Trustee of the County of Bent, trustee, Charles O. Jones and Ruby L. Jones, beneficiaries

 

DOT covering Multiple tracts: Subject tract being Lot 1, Section 6, Township 23 South, Range 52 West, Bent County, Colorado.

Maturity date: Not listed; together with 120 shares of The Fort Lyon Canal Company and all other water and water rights appurtenant to subject tract including tributary, not non-tributary, and non-tributary water and water rights.

 

	
35

 

[20011137]

 

	
George E. Fazekas/State Bank of Wiley

 

Deed of trust covering 1 tract: part of the NE/4 of Section 36, Township 22 South, Range 52 West of the Sixth Principal Meridian.

 

	
35

 

[20020849]

 

	
High Plains A & M LLC/Public Trustee of the County of Bent; for the Benefit of Irl A. Miller and Hazel A. Miller

 

Deed of trust covering 376 shares of The Fort Lyon Canal Company and all other water and water rights appurtenant to the real property described on Exhibit A, including, but not limited to, tributary, not not-tributary, and non-tributary water and water rights under 1 tract: E/2 of Section 36, Township 22 South, Range 52 West of the Sixth Principal Meridian.

 

	
39

 

[20010203]

	
Robert G. Reyher and Mary K. Reyher/Public Trustee, for the benefit of the United States of America, acting through the Farm Service Agency, United States Department of Agriculture

 

Deed of Trust covering Multiple tracts, including the following described lands: W/2 of Section 12, Township 22 South, Range 49 West of the 6th P.M., Bent County, Colorado, and together with 1,318 shares of the capital stock of The Fort Lyon Canal Company; Well Permit Nos. 9010-RF, 9011-F, 9012-F, 9013-F, 6299-F, 9007-F, 9008-F and 9009-F; as well as irrigation equipment, pumps, and motors.

 

	  	
[intentionally deleted]

 

	
56

 

[20021388]

	
136th and Colorado, LLC d/b/a High Plains 1031/The Public Trustee of Bent County; for the benefit of Daniel G. DiRezza and Katrena L. DiRezza

 

Deed of Trust covering a tract of land lying in multiple sections, including the E/2 of Section 23, and W/2 NW/4 of Sec. 24 Township 22 South, Range 53 West of the 6th P.M., Bent County, Colorado, together with 372 shares of the Capital Stock of the Fort Lyon Canal Company and all other water and water rights appurtenant to the above described property.

 

 

 

  

  

  

 

	
67

 

[20030393]

	
H. Hunter White, III/The Public Trustee of Bent County, Colorado, for the benefit of Joseph F. Hawkins, Jr.

 

Deed of Trust covering  the W/2 SW/4 of Section 20, Township 22 South, Range 51 West of the 6th PM, Bent County, Colorado, together with 144 shares of The Fort Lyon Canal Company and all other water and water rights appurtenant to the real property described aboveExhibit 4.1

 

THE SECURITIES REPRESENTED HEREBY WERE ORIGINALLY ISSUED ON JULY 2, 2015 AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION THEREFROM UNDER THE ACT, THE RULE AND REGULATIONS THEREUNDER AND APPLICABLE STATE LAWS. ALL INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATED TO OTHER INDEBTEDNESS PURSUANT TO ARTICLE 3 OF THIS NOTE.

 

	
July 2, 2015
    	
 
    	
$[          ]
    

 

21ST CENTURY ONCOLOGY HOLDINGS, INC.

10% SUBORDINATED UNSECURED PIK NOTES DUE 2019

 

This NOTE (this “Note”) is one of a duly authorized issue of notes of 21st Century Oncology Holdings, Inc., a Delaware corporation (together with any Successor Issuer pursuant to Article 8 of this Note, the “Issuer”), designated as its 10% Subordinated Unsecured PIK Notes Due 2019.

 

FOR VALUE RECEIVED, the Issuer promises to pay to [          ], the holder hereof (together with its registered assigns, the “Holder”), the principal sum of $[          ] (the “Original Principal Amount”) (subject to any prepayments or adjustments provided for below) on the Maturity Date and to pay interest (each such payment, an “Interest Payment”) on the principal sum outstanding from time to time under this Note, as adjusted as described below (as so adjusted, the “Outstanding Principal Amount”). Interest on the Note shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Issue Date. Interest shall be capitalized in arrears on a quarterly basis on each January 1, April 1, July 1 and October 1, commencing with the first full quarterly period immediately following the Issue Date (each, an “Interest Payment Date”). The interest shall be capitalized and payable at a rate of 10% per annum (the “PIK Interest”) and the amount of such payment shall accrue and, on the applicable Interest Payment Date, be added to the Outstanding Principal Amount hereof for purposes of calculating the Outstanding Principal Amount, which shall be paid in full, in cash on the Maturity Date. Any Outstanding Principal Amount or premium that is owed pursuant to Article II, in each case that is not paid when due shall bear interest, payable on demand, at a rate per annum equal to the otherwise applicable interest rate plus 4% (or, if less, the maximum interest rate then permitted by applicable law), compounded quarterly, from the due date thereof (whether at maturity, upon acceleration or otherwise) until the same is paid in full in cash.

 

Interest will be computed on the basis of a 365-day year and the actual days elapsed.  Interest Payments will be paid to the Person in whose name this Note is registered on the records of the Issuer regarding registration and transfers of the SFRO Notes (together, the “Notes Register”) on the Business Day prior to the applicable payment date. The Issuer shall maintain the Notes Register at its principal office.

 

 

This Note is subject to the following additional provisions:

 

ARTICLE 1
 DEFINITIONS

 

The following terms shall have the following meanings.

 

“Affiliate” of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person.  “Control” of a Person means the power, directly or indirectly, (i) to vote 10% or more of the Capital Securities (on a fully diluted basis) of such Person having ordinary voting power for the election of directors, managing members or general partners (as applicable); or (ii) to direct or cause the direction of the management and policies of such Person (whether by contract or otherwise).

 

“Business Day” means any day that is neither a Saturday or Sunday nor a legal holiday on which banks are authorized or required to be closed in New York, New York.

 

“Capital Securities” means, with respect to any Person, all shares, membership or other interests, participations, units or other equivalents (however designated, whether voting or non-voting) of such Person’s capital, whether now outstanding or issued after the Issue Date.

 

“Debt Refinancing” means the Refinancing in full, whether in one transaction or multiple transactions, of all the Issuer’s Senior Indebtedness outstanding as of June 30, 2015.

 

“EBITDA” shall mean, with respect to any calculation period, consolidated net income (as determined in accordance with generally accepted accounting principles in the United States) before interest, taxes, depreciation and amortization of SFRO (or the SFRO Division), provided:

 

(a)        there shall be excluded therefrom (i) any extraordinary, unusual or nonrecurring gains (or losses), costs, charges or expenses (including, without limitation, onetime specialist bonuses, asset sales, severance, relocation, transition and other restructuring costs and litigation settlements or losses and non-compete payments), (ii) income or loss attributable to discontinued operations (including, without limitation, operations disposed of during such period), (iii) any gains or losses and all fees and expenses or charges relating thereto attributable to the early extinguishment of indebtedness, (iv) the effect of any non-cash items resulting from any amortization, write-up, write-down or write-off of assets (including intangible assets, goodwill and deferred financing costs in connection with any future acquisition, disposition, merger, consolidation or similar transaction or any other non-cash impairment charges resulting from the application of SFAS Nos. 141, 142 or 144 or other accounting pronouncements relating to purchase accounting), and (v) any non-cash compensation charges, including any such charges arising from stock options, restricted stock grants or other equity incentive programs;

 

(b)        there shall be given pro forma effect for the full calculation period to adjustments to reflect normalized rent expense from any actions actually implemented by SFRO (or the SFRO Division) prior to the end of the relevant calculation period that are supportable and quantifiable by the underlying accounting records of SFRO (or the SFRO Division); and

 

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(c)         the Issuer shall ensure that, consistent with the two preceding paragraphs, all EBITDA related to or arising from SFRO and its subsidiaries and their business and operations shall be included for purposes of calculating EBITDA regardless of any corporate restructuring or reorganization undertaken by the Issuer, its subsidiaries or SFRO or its subsidiaries.

 

“EBITDA Milestone” means SFRO (or, if SFRO’s operations are consolidated with 21st Century Oncology, LLC the SFRO Division) has achieved EBITDA for a period of four consecutive fiscal quarters equal to or exceeding $28,000,000.

 

“EBITDA Milestone Principal Amount” means $[          ] of the Original Principal Amount.

 

“Governmental Authority” means the government of the United States, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or similar body exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

 

“Integration Milestone” means the successful integration of the business of SFRO into the business of the Issuer through the achievement of all of the requirements of the Integration Work Plan.

 

“Integration Milestone Principal Amount” means $[          ] of the Original Principal Amount.

 

“Integration Work Plan” means the description of the key steps necessary for SFRO to fully integrate SFRO with Issuer as described on Exhibit A.

 

“Issue Date” means July 2, 2015.

 

“Material Weakness Milestone” means the successful remediation of any and all Material Weaknesses (as defined by the Public Company Accounting Oversight Board Auditing Standard No. 5) at SFRO such that no Material Weakness at SFRO continues to exist, as determined by the independent auditor of the Issuer (or the independent auditor of the Issuer downgrades such Material Weaknesses such that no Material Weaknesses are required to be disclosed in the Issuer’s Annual Report on Form 10-K).  At the request of the Required Noteholders upon their good faith belief that the Material Weakness Milestone has occurred, the Issuer will cause its independent auditor to as promptly as practicable make a determination whether the Material Weaknesses have been successfully remediated or downgraded such that no Material Weaknesses are required to be disclosed in the Issuer’s Annual Report on Form 10-K.

 

“Material Weakness Milestone Principal Amount” means $[          ] of the Original Principal Amount.

 

“Maturity Date” means June 30, 2019.

 

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“Obligations” means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any indebtedness.

 

“Person” means any natural person, corporation, limited liability company, partnership, joint venture, association, trust or unincorporated organization, Governmental Authority or any other legal entity, whether acting in an individual, fiduciary or other capacity.

 

“Refinance” means refinance, refund, replace,  repay,  extend the maturity for at least two years or materially modify in the aggregate the economic terms, and the term “Refinancing” as used for any purposes herein shall have a correlative meaning.

 

“Required Noteholders” means, as of any date, the registered holders holding at least a majority of the principal amount of the SFRO Notes outstanding on such date.

 

“Senior Loan Agreement” means that certain Credit Agreement, dated as of April 30, 2015, among 21st Century Oncology, Inc. (“21C”), as borrower, the Issuer, Morgan Stanley Senior Funding, Inc., as administrative agent, collateral agent, issuing bank and as swingline lender (the “Bank”), the other agents party thereto and the lenders party thereto and each guarantee, security agreement or other agreement or document entered into in connection therewith, in each case, as amended, increased, restated, supplemented, extended, modified, renewed, refunded, restructured, replaced or refinanced in whole or in part from time to time.

 

“Senior Notes” means, collectively, 21C’s 11.00% Senior Notes due 2023 issued pursuant to that Indenture, dated as of April 30, 2015, as may be amended or supplemented from time to time, among 21C, the Issuer, the other guarantors party thereto and Wilmington Trust, National Association, as trustee (the “Trustee”), and OnCure Holdings, Inc.’s (“OnCure”) 11.75% Senior Secured Notes due 2017 issued pursuant to that Amended and Restated Indenture, dated as of October 25, 2013, as may be amended or supplemented from time to time, among OnCure, the Issuer, the other guarantors party thereto and the Trustee.

 

“SFRO” means South Florida Radiation Oncology, LLC, a Florida limited liability company.

 

“SFRO Division” means the operations of SFRO and its subsidiaries which are integrated with the operations of the Issuer and its other subsidiaries (but, for the avoidance of doubt, excluding the operations of the Issuer and such other subsidiaries) together with any additional operations acquired and added to the Southeast Florida division of the Issuer after the Issue Date.

 

“SFRO Notes” means those certain 10% Subordinated Unsecured PIK Notes due 2019 originally issued by the Issuer on July 2, 2015, in an aggregate principal amount of $15,000,000, including, for the avoidance of doubt, this Note.

 

“Subordinated Note Obligations” means all Obligations with respect to this Note, including, without limitation, principal and interest payable pursuant to the terms of this Note (including, without limitation, upon the prepayment thereof), together with and including, without limitation, any amounts received or receivable upon the exercise of rights of rescission or other rights of action (including, without limitation, claims for damages) or otherwise.

 

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ARTICLE 2
 MANDATORY PRE-PAYMENTS AND PREMIUMS

 

Section 2.01. EBITDA Milestone.

 

(i)                                     If the EBITDA Milestone occurs within 12 months of the Issue Date, then, within five (5) Business Days following such 12-month anniversary, the Issuer shall pay to the Holder a mandatory pre-payment equal to the sum of: (A) a premium of $[          ], (B) the EBITDA Milestone Principal Amount, (C) an amount equal to the PIK Interest that has accrued and been capitalized on the EBITDA Milestone Principal Amount from the Issue Date up to, but not including, such 12-month anniversary, and (D) an amount equal to any accrued but uncapitalized interest on the EBITDA Milestone Principal Amount from the last Interest Payment Date up to, but not including, such 12-month anniversary. Upon such pre-payment, the Outstanding Principal Amount shall be reduced by the sum of clauses (B) and (C) of this paragraph (i), and the amount of any accrued but uncapitalized interest outstanding on this Note shall be reduced by the amount set forth in clause (D) of this paragraph (i).

 

(ii)                                  If the EBITDA Milestone does not occur within 12 months of the Issue Date but occurs within 18 months of the Issue Date, then, within five (5) Business Days following such 18-month anniversary, the Issuer shall pay to the Holder a mandatory pre-payment equal to the sum of: (A) a premium of $[          ], (B) the EBITDA Milestone Principal Amount, (C) an amount equal to the PIK Interest that has accrued and been capitalized on the EBITDA Milestone Amount from the Issue Date up to, but not including, such 18-month anniversary, and (D) an amount equal to any accrued but uncapitalized interest on the EBITDA Milestone Principal Amount from the last Interest Payment Date up to, but not including, such 18-month anniversary. Upon such pre-payment, the Outstanding Principal Amount shall be reduced by the sum of clauses (B) and (C) of this paragraph (ii), and the amount of any accrued but uncapitalized interest outstanding on this Note shall be reduced by the amount set forth in clause (D) of this paragraph (ii).

 

(iii)                               If the EBITDA Milestone does not occur within 18 months of the Issue Date, no mandatory prepayment shall be required to be made with respect to the EBITDA Milestone Amount and there shall be no premium paid related thereto.

 

Section 2.02. Integration Milestone.

 

(i)                                     If the Integration Milestone occurs within 12 months of the Issue Date, then, within five (5) Business Days following such 12-month anniversary, the Issuer shall pay to the Holder a mandatory pre-payment equal to the sum of: (A) a premium of $[          ], (B) the Integration Milestone Principal Amount, (C) an amount equal to the PIK Interest that has accrued and been capitalized on the Integration Milestone Principal Amount from the Issue Date up to, but not including, such 12-month anniversary, and (D) an amount equal to any accrued but uncapitalized interest on the Integration Milestone Principal Amount from the last Interest Payment Date up to, but not including, such 12-month anniversary. Upon such pre-payment, the Outstanding Principal Amount shall be reduced by the sum of clauses (B) and (C) of this paragraph (i), and the amount of any accrued but uncapitalized interest outstanding on this Note shall be reduced by the amount set forth in clause (D) of this paragraph (i).

 

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(ii)                                  If the Integration Milestone does not occur within 12 months of the Issue Date but occurs within 18 months of the Issue Date, then, within five (5) Business Days following such 18-month anniversary, the Issuer shall pay to the Holder a mandatory pre-payment equal to the sum of: (A) a premium of $[          ], (B) the Integration Milestone Principal Amount, (C) an amount equal to the PIK Interest that has accrued and been capitalized on the Integration Milestone Amount from the Issue Date up to, but not including, such 18-month anniversary, and (D) an amount equal to any accrued but uncapitalized interest on the Integration Milestone Principal Amount from the last Interest Payment Date up to, but not including, such 18-month anniversary. Upon such pre-payment, the Outstanding Principal Amount shall be reduced by the sum of clauses (B) and (C) of this paragraph (ii), and the amount of any accrued but uncapitalized interest outstanding on this Note shall be reduced by the amount set forth in clause (D) of this paragraph (ii).

 

(iii)                               If the Integration Milestone does not occur within 18 months of the Issue Date, no mandatory prepayment shall be required to be made with respect to the Integration Milestone Amount and there shall be no premium paid related thereto.

 

Section 2.03. Material Weakness Milestone.

 

(i)                                     If the Material Weakness Milestone occurs within 6 months of the Issue Date, then, within five (5) Business Days following such 6-month anniversary, the Issuer shall pay to the Holder a mandatory pre-payment equal to the sum of: (A) a premium of $[          ], (B) the Material Weakness Milestone Principal Amount, (C) an amount equal to the PIK Interest that has accrued and been capitalized on the Material Weakness Milestone Principal Amount from the Issue Date up to, but not including, such 6-month anniversary, and (D) an amount equal to any accrued but uncapitalized interest on the Material Weakness Milestone Principal Amount from the last Interest Payment Date up to, but not including, such 6-month anniversary. Upon such pre-payment, the Outstanding Principal Amount shall be reduced by the sum of clauses (B) and (C) of this paragraph (i), and the amount of any accrued but uncapitalized interest outstanding on this Note shall be reduced by the amount set forth in clause (D) of this paragraph (i).

 

(ii)                                  If the Material Weakness Milestone does not occur within 6 months of the Issue Date but occurs within 18 months of the Issue Date, then, within five (5) Business Days following such 18-month anniversary, the Issuer shall pay to the Holder a mandatory pre-payment equal to the sum of: (A) a premium of $[          ], (B) the Material Weakness Milestone Principal Amount, (C) an amount equal to the PIK Interest that has accrued and been capitalized on the Material Weakness Milestone Amount from the Issue Date up to, but not including, such 18-month anniversary, and (D) an amount equal to any accrued but uncapitalized interest on the Material Weakness Milestone Principal Amount from the last Interest Payment Date up to, but not including, such 18-month anniversary. Upon such pre-payment, the Outstanding Principal Amount shall be reduced by the sum of clauses (B) and (C) of this paragraph (ii), and the amount of any accrued but uncapitalized interest outstanding on this Note shall be reduced by the amount set forth in clause (D) of this paragraph (ii).

 

(iii)                               If the Material Weakness Milestone does not occur within 18 months of the Issue Date, no mandatory prepayment shall be required to be made with respect to the Material Weakness Milestone Amount and there shall be no premium paid related thereto.

 

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ARTICLE 3
 SUBORDINATION

 

Section 3.01.  Extent of Subordination.  The Subordinated Note Obligations is subordinate and junior to all the Issuer’s indebtedness under the Senior Loan Agreement and Senior Notes (“Senior Indebtedness”). This Note is subordinate to Senior Indebtedness to the extent and in the manner set forth below:

 

(i)                                     So long as there is no default existing under the Senior Loan Agreement or Senior Notes that has not been duly cured by the Issuer or duly waived by the Bank or Trustee, as applicable, the Issuer shall pay and be permitted to pay Outstanding Principal Amount as set forth in this Note; provided that no such payment shall cause a default under the Senior Indebtedness.

 

(ii)                                  If any payment is made on this Note at a time when the Holder is not entitled to receive payments on this Note as a result of a default existing under the Senior Loan Agreement or Senior Notes that has not been duly cured by the Issuer or duly waived by the Bank or Trustee, as applicable, such payment or distribution shall be delivered directly to the holders of Senior Indebtedness for application against such Senior Indebtedness, unless and until all principal and interest on such Senior Indebtedness has been paid in full, or such payment has been provided for; provided that:

 

(A)                               no delivery shall be made of stock or obligations that are issued by the Issuer or any corporation succeeding to the Issuer or acquiring its property and assets, pursuant to reorganization proceedings or dissolution or liquidation proceedings or upon any merger, consolidation, sale, lease, transfer or other disposal, if such stock or obligations are subordinate and junior at least to the extent provided hereunder to the payment of Senior Indebtedness to the extent then outstanding and to the payment of any stock or obligations which are issued in exchange for Senior Indebtedness to the extent then outstanding, and

 

(B)                               if any holder of Senior Indebtedness receives any payment or distribution which, except for the provisions of this Article 3 would have been payable or deliverable with respect to this Note, the Holder shall (after all principal and interest owing on such Senior Indebtedness has been paid in full) be subrogated to the rights of the holders of such Senior Indebtedness against the Issuer.

 

Section 3.02.  Liquidation, Winding Up, etc.  Upon any dissolution, winding up, liquidation or reorganization of the Issuer, whether any in bankruptcy, insolvency, reorganization or receivership proceeding or upon an assignment for the benefit of creditors or any other marshalling of the assets and liabilities of the Issuer or otherwise, the holders of all Senior Indebtedness shall be entitled to receive payment in full of the principal thereof, the interest due thereon and any premium or other payment obligation with respect thereto before the Holder is entitled to receive any payments with respect to this Note.  The consolidation of the Issuer with, or the merger of the Issuer into, another entity shall not be deemed a dissolution, winding up, liquidation or reorganization of the Issuer for the purposes of this Article 3 if such entity, as a part of such consolidation or merger, succeeds to the Issuer’s property and business and assumes the Issuer’s obligations (including the Senior Indebtedness and the SFRO Notes).

 

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Section 3.03.  Rights not Subordinated.  The provisions of this Article 3 are for the purpose of defining the relative rights of the holders of Senior Indebtedness on the one hand and the Holder on the other hand.  Nothing herein shall impair the Issuer’s obligation to the Holder to pay to such Holder in accordance with the terms of this Note. No provision of this Article 3 shall be construed to prevent the Holder from exercising all remedies otherwise available under this Note or under applicable law, subject to the rights of the holder or holders of the Senior Indebtedness as set forth above to receive cash, assets, stock or obligations otherwise payable or deliverable to the Holder.

 

ARTICLE 4
 TRANSFERS

 

The rights and obligations of the Issuer and the Holder shall be binding upon and benefit the successors and permitted assigns and transferees of the Issuer and the Holder; provided that in no event shall any Holder sell, exchange, assign, pledge, hypothecate, transfer or otherwise dispose (each, a “Transfer”) of this Note or any interest therein without the Issuer’s prior written consent, in its sole and absolute discretion. The Holder agrees that in connection with any Transfer permitted pursuant to the terms hereof, the Holder will cause such permitted assignee, transferee or pledgee to provide a representation that it is entering into such Transfer for its own account and not with a view to, or for sale in connection with, any subsequent distribution. Each permitted assignee, transferee and pledgee shall have all of the rights of the Holder under this Note. The Issuer agrees that in connection with any Transfer permitted pursuant to the terms hereof, the Issuer shall cause such Transfer to be reflected in the Notes Register, and all principal, interest and other amounts which are then, and thereafter become, due under this Note shall be paid to such permitted assignee, transferee or pledgee at the place and in the manner set forth pursuant to Section 13.01. Prior to due presentment for Transfer of this Note, the Issuer may treat the Person in whose name this Note is duly registered on the Notes Register as the owner hereof for the purpose of receiving payment as herein provided and all other purposes, whether or not this Note be overdue, and the Issuer shall not be affected by notice to the contrary.

 

ARTICLE 5
 REPRESENTATIONS AND WARRANTIES

 

Section 5.01.                          The Issuer is duly organized, validly existing and in good standing under the General Corporation Law of the State of Delaware. The Issuer possesses the corporate power and authority necessary to execute and deliver this Note and perform its obligations hereunder.

 

Section 5.02.                          This Note is the valid and binding obligation of the Issuer, enforceable in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws relating to or affecting creditors’ rights generally or by general principles of equity.

 

Section 5.03.                          The execution, delivery and performance by Issuer of this Note and the fulfillment of and compliance with the terms hereof by the Issuer, do not and shall not (i) conflict 

 

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with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under (whether with or without the passage of time, the giving of notice or both), (iii) give any third party the right to modify, terminate or accelerate any obligation under, (iv) result in a violation of, or (v) require any authorization, consent, approval, exemption or other action by or notice or declaration to, or filing with, any third party or Government Authority (except for the Securities and Exchange Commission (the “SEC”)) pursuant to, (A) the certificate of incorporation and bylaws of the Issuer, (B) any law to which the Issuer is subject, or (C) any material agreement, instrument, order, judgment or decree to which the Issuer is subject, except, in the case of subclause (B) and (C) above, for any conflict, breach, default, lien, modification, termination, obligation, violation or failure that would not be material to the Issuer and its subsidiaries in the aggregate.

 

ARTICLE 6
 COVENANTS

 

Section 6.01.                          The Issuer will promptly deliver to the Holder copies of any material written amendment, restatement or modification of any Senior Indebtedness; provided, however, that the Issuer shall be deemed to have satisfied this requirement by furnishing or filing any such agreement, amendment, restatement or modification with the SEC through EDGAR.

 

Section 6.02                             The Issuer will cause 21C to maintain at all times under any covenant restricting dividends or distributions to the Issuer contained in the Senior Loan Agreement, the indenture governing the Senior Notes or any other applicable agreement governing such Senior Indebtedness an amount available, in the aggregate, for Restricted Payments or Permitted Investments (or any other term applicable to restrictions on dividends or distributions to, or investments in, the Issuer) which may then be used by 21C to make a dividend or distribution to the Issuer equal to at least $19,500,000, which amount shall be reduced by the amount of the aggregate Original Principal Amount of the SFRO Notes that has been repaid to the holders thereof; provided such available amount may be subject to restrictions based solely on the existence of a default under the Issuer’s Senior Indebtedness or compliance with applicable corporate laws governing dividends generally.  The Issuer will cause 21C to make a dividend or distribution to the Issuer to make payments due hereunder when due to the extent the making of such dividend or distribution would not result in a default under the Issuer’s Senior Indebtedness or a violation of applicable corporate laws governing dividends generally.

 

ARTICLE 7
 EVENTS OF DEFAULT

 

Section 7.01                             For purposes of this Note, an Event of Default shall be deemed to have occurred if:

 

(i)             the Issuer shall default in the payment of principal (including the EBITDA Milestone Principal Amount and the Material Weakness Milestone Principal Amount), interest or premium of this Note on the date when due, whether at maturity, by acceleration or otherwise, continued for 15 days;

 

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(ii)          the Issuer makes a general assignment for the benefit of creditors; or an order, judgment or decree is entered adjudicating the Issuer bankrupt or insolvent; or any order for relief with respect to the Issuer is entered under the Federal Bankruptcy Code; or the Issuer petitions or applies to any tribunal for the appointment of a custodian, trustee, receiver or liquidator of the Issuer of any substantial part of its assets, or commences any proceeding relating to the Issuer under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction; or any such petition or application is filed, or any such proceeding is commenced, against the Issuer and either (A) the Issuer by any overt act indicates its approval thereof, consent thereto or acquiescence therein or (B) such petition, application or proceeding is not dismissed within 60 days;

 

(iii)       the Issuer shall default in the payment or performance of any Senior Indebtedness and pursuant to such default the holder of such Senior Indebtedness has accelerated the maturity of such Senior Indebtedness and (A) initiated a proceeding demanding immediate payment of such Senior Indebtedness or (B) commenced foreclosure on the collateral securing such Senior Indebtedness; or

 

(iv)      the Issuer fails to comply, for 30 days after receipt of written notice from the Required Noteholders, with the covenants described in Section 6.01 or Section 6.02.

 

Section 7.02.                          If an Event of Default pursuant to Section 7.01 above has occurred and is continuing, subject to the provisions of Article 3 hereof, the Required Noteholders may demand immediate payment of all or any portion of the Outstanding Principal Amount of, and uncapitalized interest on, this Note.  If the Required Noteholders demand immediate payment of all or any portion of this Note, (x) the Issuer shall immediately pay to the Holder the entire Outstanding Principal Amount of this Note subject to such demand and any and all accrued but uncapitalized interest thereon, and (y) the Holder shall be entitled to exercise any other rights which the Holder may have been afforded under any contract or agreement at any time and any other rights which the Holder may have pursuant to applicable law. If an Event of Default described in clause (ii) of Section 7.01 occurs, the Outstanding Principal Amount of and accrued but uncapitalized interest on this Note then outstanding will become immediately due and payable without any declaration or other act on the part of the Holder or any other party.

 

ARTICLE 8
 SUCCESSOR ISSUER; MERGER

 

If the Issuer consolidates with, merges into, conveys, transfers or leases, in one transaction or a series of transactions, all or substantially all its assets to any Person, the resulting, surviving or transferee Person in any such transaction (“Successor Issuer”) will succeed to, and be substituted for, and may exercise every right and power of, the Issuer under this Note, but the predecessor Issuer in the case of a conveyance, transfer or lease of all its assets or substantially all its assets will be released from its obligations under this Note, including without limitation the obligation to pay the principal of and interest on this Note.

 

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ARTICLE 9
 REPLACEMENT NOTES

 

In the event that the Holder notifies the Issuer that this Note has been lost, stolen or destroyed, a replacement Note identical in all respects to the original Note (except for Outstanding Principal Amount, if different than that shown on the original Note) shall be issued by the Issuer to the Holder; provided that the Holder executes and delivers to the Issuer an agreement reasonably satisfactory to the Issuer to indemnify the Issuer from any loss incurred by it in connection with such lost, stolen or destroyed Note.

 

ARTICLE 10
 SAVINGS CLAUSE

 

In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.

 

ARTICLE 11
 AMENDMENTS AND WAIVER

 

Except as otherwise expressly provided herein, the provisions of this Note may be amended and the Issuer may take any action herein prohibited, or omit to perform any act herein required to be performed by it, if, and only if, the Issuer has obtained the written consent of the Required Noteholders.

 

ARTICLE 12
 NOTICES

 

Unless otherwise provided herein, any notices, consents, waivers or other communications required or permitted to be given under the terms of this Note must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally, (ii) upon transmission, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party) or (iii) one Business Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:

 

If to the Issuer:

 

21st Century Oncology Holdings, Inc.

2270 Colonial Boulevard

Fort Myers, FL 33907

 

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Facsimile: [          ]

Attention: [          ]

 

With a copy to (which shall not constitute notice to the Issuer):

 

Hall, Render, Killian, Heath & Lyman, PLLC

Columbia Center, Suite 1200

201 West Big Beaver Road

Troy, MI 48084

Facsimile: [          ]

Attention: [          ]

 

and to:

 

Kirkland & Ellis LLP

601 Lexington Avenue

New York, NY 10022

Facsimile: [          ]

Attention: [          ]

 

If to the Holder, to its address and facsimile number appearing in the Notes Register which, in the case of the initial Holder, shall be:

 

[          ]

[          ]

[          ]

Fax:  [          ]

 

With a copy to (which shall not constitute notice to the initial Holder):

 

McDermott Will & Emery LLP
 227 West Monroe Street
 Chicago, IL 60606-5096
 Attn:  [          ]
 Facsimile: [          ]

 

Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

 

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ARTICLE 13
 PAYMENT; MISCELLANEOUS

 

Section 13.01.  Manner of Payment.  The Issuer shall make all payments due on this Note in immediately available funds to a bank account of the Holder specified in writing by the Holder to the Issuer.

 

Section 13.02.  Voluntary Pre-Payments.  The Issuer may, at any time, and from time to time, after 18 months have elapsed since the Issue Date, without premium or penalty, prepay all or a portion of the Outstanding Principal Amount and any accrued but uncapitalized interest. The Issuer shall send written notice of its election to make a prepayment on this Note to the Holder at least one Business Day prior to the date of prepayment.

 

Section 13.03  Debt Refinancing and Mandatory Pre-Payments. Following a Debt Refinancing, but in no event before 18 months have elapsed since the Issue Date, the Required Noteholders may make a written demand for the Issuer to prepay the Outstanding Principal Amount and any accrued but uncapitalized interest. Within ten (10) Business Days following receipt of such written demand, the Issuer shall pay to the Holder the Outstanding Principal Amount and any accrued but uncapitalized interest.

 

Section 13.04.  Miscellaneous.  Whenever the sense of this Note requires, words in the singular shall be deemed to include the plural and words in the plural shall be deemed to include the singular. Paragraph headings are for convenience only and shall not affect the meaning of this document.

 

Section 13.05.   EBITDA Determination.

 

(a)        The Issuer and the Holder will attempt to resolve any dispute whether the EBITDA Milestone has occurred in good faith for a period of fifteen (15) Business Days after the Issuer has objected to written notice by the Required Noteholders of the Required Noteholders’ belief that the EBITDA Milestone has occurred. If an agreement as to such disputed matter is not reached during such fifteen (15) Business Day period, the parties will, as promptly as possible, work in good faith to retain the dispute resolution group of Deloitte & Touche LLP or, if Deloitte & Touche LLP is unable to or unwilling to serve in such capacity, the dispute resolution group of an independent auditing firm of national recognition mutually selected by the Issuer and the Required Noteholders (the “Independent Auditor”) to resolve such dispute.  Within ten (10) days after such retention date, the Issuer and the Required Noteholders will each submit to the Independent Auditor a statement specifying such party’s calculation of EBITDA together with supporting documentation as it deems appropriate, with a copy of such submission simultaneously delivered to the other party.  Within ten (10) days after a party’s receipt of the other party’s submission to the Independent Auditor, such party may submit a response together with any supporting documentation to the Independent Auditor.  Unless requested by the Independent Auditor in writing, no party hereto may present any additional information or arguments to the Independent Auditor, either orally or in writing. The Issuer and the Required Noteholders shall instruct the Independent Auditor to resolve such dispute (i) as soon as practicable, but in any event within thirty (30) days following the initial submission of the unresolved items and (ii) in accordance with the definitions of EBITDA and EBITDA Milestone 

 

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(without any independent analysis into the appropriateness of such definitions). The Independent Auditor will prepare and deliver a written report relating only to the unresolved disputed item(s) to the Issuer and the Holder and will promptly submit a resolution of such unresolved disputed item(s) within thirty (30) days after the dispute is submitted to the Independent Auditor. The Independent Auditor shall (i) limit its review to disputed matters specifically set forth in the parties’ submissions to the Independent Auditor and (ii) shall not assign a value to any item greater than the greatest value for such item claimed by either party or less than the smallest value for such item claimed by either party.  Absent fraud and except to the extent of any mathematical error, the Independent Auditor’s determination of such unresolved disputes will be final, non-appealable, conclusive and binding on the parties for purposes of this Note (regardless of whether the Holder was one of the Required Noteholders as set forth in this Section 13.05(a)).  Other than the costs and expenses of the Independent Auditor, each party shall bear its own costs and expenses in connection with the resolution of such dispute by the Independent Auditor. The costs and expenses of the Independent Auditor will be allocated to and paid by the Issuer, on the one hand, and the Holder, on the other, based upon the percentage that the portion of the contested amount not awarded to each party bears to the amount actually contested by such party, as determined by the Independent Auditor.

 

(b)        For eighteen (18) months after the Issue Date, in connection with the determination whether the EBITDA Milestone has occurred, the Issuer will provide the Holder with reasonable access, during regular business hours, to the books and records, and the personnel and outside accountants of the Issuer and its subsidiaries (including SFRO and its subsidiaries), for the limited purpose of determining whether the EBITDA Milestone has occurred.

 

ARTICLE 14
 CHOICE OF LAW AND VENUE; WAIVER OF JURY TRIAL

 

This Note shall be governed by and construed in accordance with the law of the State of New York. The Issuer and, by accepting this Note, the Holder hereby irrevocably consent to the jurisdiction of the United States District Court for the Southern District of New York or any New York State court sitting in New York City (and of the appropriate appellate courts therefrom) in any suit, action or proceeding seeking to enforce any provision of, or based on any suit, action or proceeding arising out of or in connection with, this Note or the transactions contemplated hereby and irrevocably waive, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum.  Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.  Without limiting the foregoing, each party agrees that service of process on such party as provided in this Article 11 shall be deemed effective service of process on such party.  EACH OF THE ISSUER AND, BY ACCEPTING THIS NOTE, THE HOLDER HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS NOTE.

 

*   *   *   *   *   *   *   *

 

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IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed by its officer thereunto duly authorized as of the date first written above.

 

 

	
 
    	
21ST   CENTURY ONCOLOGY HOLDINGS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:   
    	
Frank   English
    
	
 
    	
 
    	
Title:   
    	
Treasurer
    

 

Signature Page to 10% Subordinated Unsecured PIK Note

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