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REVOLVING LOAN AND SECURITY AGREEMENT
DATED AS OF NOVEMBER 1, 1996
AMONG
SPECIALTY CARE NETWORK, INC.,
SCN OF PRINCETON, INC.
AND
NATIONSBANK OF TENNESSEE, N.A.,
AND
NATIONSBANK OF TENNESSEE, N.A., AS AGENT
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SPECIALTY CARE NETWORK
REVOLVING LOAN AND SECURITY AGREEMENT
DATED AS OF NOVEMBER 1, 1996
TABLE OF CONTENTS
Paragraph Number Page
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SECTION I. DEFINITIONS.................................................... 1
SECTION II. THE LOANS..................................................... 17
2.1 The Commitments................................................ 17
2.2 Use of Proceeds................................................ 18
2.3 Interest Rates and Payments of Interest........................ 19
2.4 Commitment Fee................................................. 21
2.5 Nonusage Fee................................................... 21
2.6 Reduction of Commitment........................................ 23
2.7 Alternate Rate of Interest..................................... 23
2.8 Change in Circumstances........................................ 23
2.9 Change in Legality............................................. 25
2.10 Payment to the Agent........................................... 26
SECTION III. CONDITIONS PRECEDENT......................................... 26
3.1 Documents Required for the Closing............................. 26
3.2 Documents Required for All Subsequent Disbursements............ 28
3.3 Information Required for Permitted Acquisition................. 29
3.4 Legal Matters.................................................. 29
SECTION IV. COLLATERAL SECURITY........................................... 29
4.1 Composition of the Collateral.................................. 29
4.2 Rights in Property Held by the Banks........................... 29
4.3 Rights in Property of the Borrower and Subsidiaries............ 30
4.4 Priority of Liens.............................................. 30
4.5 Financing Statements........................................... 30
4.6 Collection of Receivables...................................... 31
4.7 Mortgagees' Waivers............................................ 31
SECTION V. REPRESENTATIONS AND WARRANTIES................................. 32
5.1 Original....................................................... 32
5.2 Survival....................................................... 35
SECTION VI. THE BORROWER'S COVENANTS...................................... 35
6.1 Affirmative Covenants.......................................... 35
6.2 Negative Covenants............................................. 41
SECTION VII. DEFAULT...................................................... 44
7.1 Events of Default.............................................. 44
7.2 Acceleration................................................... 46
7.3 Remedies....................................................... 46
SECTION VIII. THE AGENT.................................................. 47
8.1 Authorization.................................................. 47
8.2 Standard of Care............................................... 47
8.3 No Waiver of Rights............................................ 48
8.4 Payments....................................................... 48
8.5 Indemnification................................................ 48
8.6 Exculpation.................................................... 49
8.7 Credit Investigation........................................... 49
8.8 Resignation.................................................... 49
8.9 Proration of Payments.......................................... 50
8.10 No Liability For Errors........................................ 50
8.11 Offset......................................................... 50
SECTION IX. MISCELLANEOUS................................................. 51
9.1 Construction................................................... 51
9.2 Further Assurance.............................................. 51
9.3 Enforcement and Waiver by the Banks............................ 51
9.4 Expenses of the Banks.......................................... 51
9.5 Notices........................................................ 51
9.6 Waiver and Release............................................. 52
9.7 Indemnification................................................ 52
9.8 Participations and Assignments................................. 53
9.9 Applicable Laws................................................ 56
9.10 Binding Effect, Assignment and Entire Agreement................ 56
9.11 Severability................................................... 56
9.12 Counterparts................................................... 56
9.13 Arbitration.................................................... 56
SCHEDULE OF EXHIBITS
EXHIBIT
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A Form of Notes
B Existing Indebtedness and Liens
C Subordinated Indebtedness
D Real Property
E Form of Stock Pledge Agreement
F Form of Guaranty and Suretyship Agreement
G Form of Opinion Letter
H Corporate Matters
(States of Incorporation and Qualification; Stock Ownership)
I Addresses
J Stock Pledge Exhibit
K Litigation and Claims
L Compliance with Laws
M Material Leases, Contracts and Commitments
N Management
O Assignment and Acceptance
REVOLVING LOAN AND SECURITY AGREEMENT
THIS REVOLVING LOAN AND SECURITY AGREEMENT is made as of the 1st day
of November, 1996, by and among Specialty Care Network (the "Borrower"); the
Guarantors, jointly and severally, as such term is defined herein; NationsBank
of Tennessee, N.A. (the "Banks"); and NationsBank of Tennessee, N.A. (the
"Agent"), individually and as Agent.
W I T N E S S E T H:
WHEREAS, Borrower has entered into various merger and exchange
agreements to acquire the assets of five (5) orthopaedic practices located in
Princeton, New Jersey; Philadelphia, Pennsylvania; Vero Beach, Florida;
Tallahassee, Florida; and Baltimore, Maryland; and
WHEREAS, pursuant to a Commitment Letter dated July 11, 1996,
NationsBank of Tennessee, N.A. committed to loan to Specialty Care Network the
sum of up to Twenty Million Dollars ($20,000,000.00) on a revolving basis to
fund the purchase price of the acquisitions and to provide working capital; and
WHEREAS, Bank, Borrower and Bank in its capacity as Agent desire to
provide more specifically for their obligations with respect to the revolving
loans;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and obligations herein contained, and each intending to be legally
bound hereby, the parties agree as follows:
SECTION I. DEFINITIONS
As used herein:
"Accounts", "Chattel Paper", "Contract Rights", "Documents",
"Equipment", "Fixtures", "General Intangibles", "Goods", "Instruments" and
"Inventory" shall have the same respective meanings as are given to those terms
in the UCC.
"Accounts Receivable" means all rights to payment for goods sold,
leased or otherwise marketed in the ordinary course of business or for services
rendered in the ordinary course of business, and all sums of money or other
proceeds due or to become due thereon pursuant to transactions with Persons,
except for that portion of the sum of money or other proceeds due or to become
due which relate to sales, use or property taxes levied in connection with such
transactions, recorded on books of account in accordance with generally accepted
accounting principles consistently applied.
"Acquisition" means any transaction, or any series of related
transactions, by which any Person, in the transaction or as of the most recent
transactions in a series of transactions, directly or indirectly acquires any
going concern or all or a substantial part of the assets of any corporation,
partnership or other entity or any division of any such entity, or any such
entity or any division of such an entity becomes a Subsidiary of such Person.
"Acquisition EBITDA" means, with respect to a Practice acquired by a
Borrower or any Subsidiary and covered by a Service Agreement, (i) the pro forma
income to the Borrower and its Subsidiaries that would have arisen under the
applicable Service Agreement preceding the effective date of the acquisition,
determined based upon the actual financial performance of the acquired Practice
over the period for which a calculation of Consolidated Cash Flow is made,
without adjustment, (ii) less the pro forma amount of expenses (other than
interest, taxes, depreciation and amortization) that the Borrower and its
Subsidiaries would have incurred over the same period on account of the acquired
Practice (including, but not limited to, additional expense of administrative
personnel), in each case calculated as if the Practice had been acquired
effective as of the beginning of the relevant financial period.
"Acquisition Loan" means Loans made by the Banks pursuant to
Paragraph 2.1 to fund the cost of Acquisitions, Capital Expenditures, and the
development of focused musculoskeletal surgery centers as set forth in Paragraph
2.2.
"Acquisition Loan Commitment" means, as to any Bank, the obligation
of such Bank to make Acquisition Loans to the Borrower in an amount not to
exceed that set forth in Paragraph 2.1.
"Acquisition Loan Termination Date" means November 1, 1998, unless
extended in writing by the Banks in their sole discretion.
"Adjusted Consolidated Cash Flow" means, for any period of
determination, Consolidated Cash Flow plus Rental Expenses less the sum of
non-expensed loan advances made to physicians and the greater of Internally
Financed Capital Expenditures or those non-financed Capital Expenditures
budgeted for such period as reflected in Borrower's budget delivered to the
Banks pursuant to Paragraph 6.1(B)(4) hereof.
"Affiliates" means as to any Person (A) any Person which, directly,
or indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with such Person, or (B) any Person who is a director or
executive officer (i) of such Person, (ii) of any Subsidiary of such Person or
(iii) of any Person described in clause (A) above. For purposes of this
definition, "control" of a Person shall mean the power, direct or indirect, (i)
to vote or direct the voting of more than five percent (5%) of the outstanding
shares of voting stock of such Person, or (ii) to direct or cause the direction
of the management and policies of such Person whether by contract or otherwise.
In no event shall any of the Banks be deemed to be Affiliates of the Borrower.
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"Agent" means NationsBank of Tennessee, N.A. in its capacity as
agent for the Banks pursuant to Section VIII hereof, and not in its individual
capacity as a Bank, and any successor Agent appointed pursuant to Section VIII.
"Agreement" means this Revolving Loan and Security Agreement, as it
may be amended, restated, renewed or extended from time to time.
"Applicable LIBO Rate Margin" means three percent (3%) per annum
with respect to Acquisition Loans and two and three quarters percent (2.75%)
with respect to Working Capital Loans; provided however, that during any fiscal
quarter of the Borrower where the Borrower shall have satisfied the Funded Debt
to Consolidated Cash Flow ratio test indicated in the table below, then the
Applicable LIBO Rate Margin for the Effective Period (as defined below) shall be
the percentage rate per annum set forth opposite the appropriate test in the
table below:
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Funded Debt to Applicable LIBO Rate Applicable LIBO Rate
Consolidated Cash Flow Margin for Acquisition Margin for Working Capital
Ratio Loans Loans
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Greater than 3.0 3.00% per annum 2.75% per annum
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Greater than 2.50 and less 2.25% per annum 2.75% per annum
than or equal to 3.00
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Greater than 2.00 and less 2.00% per annum 2.00% per annum
than or equal to 2.50
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Greater than 1.50 and less 2.00% per annum 1.75% per annum
than or equal to 2.00
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Greater than 1.00 and less 1.75% per annum 1.75% per annum
than or equal to 1.50
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Less than or equal to 1.00 1.75% per annum 1.50% per annum
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The Funded Debt to Consolidated Cash Flow ratio shall be computed in the same
manner as set forth in 6.1(F)(1), and the Applicable LIBO Rate Margin shall be
confirmed by the Agent on the basis of quarter-annual consolidated financial
statements of the Borrower delivered to the Banks pursuant to Paragraph
6.1(B)(1). The "Effective Period" shall be the period commencing on the first
business day of the first month following delivery to the Agent of the quarterly
financial statements of the Borrower pursuant to Paragraph 6.1(B)(1), which
financial statements indicate that the applicable test set forth above has been
satisfied for the preceding fiscal quarter, and ending on the date that is three
months after such commencement date. At the end of any Effective Period, the
Applicable LIBO Rate Margin shall automatically become three percent (3%) per
annum with respect to all Acquisition Loans and two and three-quarters percent
(2.75%) per annum with respect to all Working Capital Loans unless at or prior
to such time
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the next Effective Period shall have commenced. Notwithstanding the foregoing,
following the completion of a Successful IPO, in addition to the reduction based
upon Funded Debt to Consolidated Cash Flow test, the Applicable LIBO Rate
Margins shall be permanently reduced in each case by one quarter of one percent
(0.25%) per annum commencing as of the date on which Borrower receives the cash
proceeds from the Successful IPO.
"Applicable Prime Rate Margin" means one and one-quarter percent
(1.25%) per annum with respect to all Acquisition Loans and one percent (1%) per
annum with respect to all Working Capital Loans; provided however, that during
any fiscal quarter of the Borrower where the Borrower shall have satisfied the
Funded Debt to Consolidated Cash Flow ratio test indicated in the table below,
the Applicable Prime Rate Margin for the Effective Period (as defined below)
shall be the percentage rate per annum set forth opposite the appropriate test
in the table below:
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Funded Debt to Applicable Prime Rate Applicable Prime Rate
Consolidated Cash Flow Margin for Acquisition Margin for Working Capital
Ratio Loans Loans
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Greater than 3.0 1.25% per annum 1.00% per annum
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Greater than 2.50 and less 0.75% per annum 1.00% per annum
than or equal to 3.00
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Greater than 2.00 and less 0.25% per annum 0.50% per annum
than or equal to 2.50
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Greater than 1.50 and less 0.25% per annum 0.00% per annum
than or equal to 2.00
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Greater than 1.00 and less 0.00% per annum 0.00% per annum
than or equal to 1.50
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Less than or equal to 1.00 0.00% per annum 0.00% per annum
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The Funded Debt to Consolidated Cash Flow ratio shall be computed in the same
manner as set forth in 6.1(F)(1), and the Applicable Prime Rate Margin shall be
confirmed by the Agent on the basis of the quarter-annual consolidated financial
statements of the Borrower delivered to the Banks pursuant to Paragraph
6.1(B)(1). The "Effective Period" shall be the period commencing on the first
business day of the first month following delivery to the Agent of the quarterly
financial statements of the Borrower pursuant to Paragraph 6.1(B)(1), which
financial statements indicate that the applicable test set forth above has been
satisfied for the preceding fiscal quarter, and ending on the date that is three
months after such commencement date. At the end of any Effective Period, the
Applicable Prime Rate Margin shall automatically become one and one-quarter
percent (1.25%) per annum with respect to all Acquisition Loans and one percent
(1%) per annum with respect to all Working Capital Loans unless at or prior to
such time the next Effective Period shall have commenced. Notwithstanding the
foregoing, following the
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completion of a Successful IPO, in addition to the reductions based upon Funded
Debt to Consolidated Cash Flow test, the Applicable Prime Rate Margins shall be
permanently reduced in each case by one quarter of one percent (0.25%) per annum
commencing as of the date on which Borrower receives the cash proceeds from the
Successful IPO.
"Assignment and Acceptance" means an Assignment and Acceptance
substantially in the form of Exhibit O.
"Bank" means initially NationsBank of Tennessee, N.A. and thereafter
each Bank listed on a signature page of or to this Agreement, and "Banks" means
all of such Banks collectively.
"Borrowing Base" means that amount which is equal to two times
(2.0x) Consolidated Cash Flow as calculated for the Borrower and its
Subsidiaries over the most recent Borrowing Base Reference Period. Following a
Successful IPO, the figure of "two times (2.0x)" shall be deleted and replaced
with the figure of "three times (3.0x)" for purposes of computing the Borrowing
Base.
"Borrowing Base Adjustment Date" means that date following each
Borrowing Base Reference Period which occurs on the earlier of: (A) the date on
which the Banks actually receive the Borrowing Base calculations from the
Borrower as required by Subparagraph 6.1(B)(4) hereof, or (B) forty-five (45)
days after the last day of the previous Borrowing Base Reference Period.
"Borrowing Base Reference Period" means, for any period of
determination, the period of four (4) consecutive quarter-annual fiscal periods
of the Borrower and/or its Subsidiaries (i.e., rolling four quarters) ending on
the last day of the immediately preceding quarter-annual fiscal period. The
first Borrowing Base Reference Period occurring after the date of this Agreement
shall be measured from January 1, 1996 through December 31, 1996 and shall
incorporate the 1996 Acquisition EBITDA of the acquired Practices.
"Business Day" means any day on which the state banks and national
banking associations in Nashville, Tennessee are open for the conduct of
ordinary business; provided however, that when used in connection with
determining the LIBO Rate, the term "Business Day" shall also exclude any day on
which banks are not open for dealings in U.S. Dollar deposits in the London
Interbank Market.
"Capital Expenditures" means all amounts paid by the Borrower and
its Subsidiaries in connection with the purchase of property, plant, machinery,
equipment or other similar expenditures (including capital leases of any of the
foregoing) which would be required to be capitalized and shown on the
consolidated balance sheet of Borrower and its Subsidiaries in accordance with
generally accepted accounting principles consistently applied.
"Closing" means the valid execution and delivery of the Notes and
Collateral Documents to the Agent, or as the Banks otherwise direct.
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"Collateral" has the meaning set forth in Paragraph 4.1.
"Collateral Documents" means the documents specified in Paragraphs
3.1 (B) through (D).
"Commitment Percentage" means each Bank's respective percentage of
the Total Commitments as set forth in Paragraph 2.1 hereof.
"Consolidated Assets" means, as to the Borrower and its
Subsidiaries, all assets as shown on a consolidated balance sheet of the
Borrower and its Subsidiaries.
"Consolidated Capital" means, as to the Borrower and its
Subsidiaries, all Funded Debt plus Stockholders' Equity as shown on a
consolidated balance sheet of the Borrower and its Subsidiaries.
"Consolidated Cash Flow" means, as to the Borrower and its
Subsidiaries, the aggregate of: (A) Consolidated Earnings Before Interest and
Taxes, (B) amortization of intangible assets; and (C) depreciation; all as shown
by the consolidated statement of operations of the Borrower and its
Subsidiaries, calculated in accordance with generally accepted accounting
principles consistently applied. The positive Acquisition EBITDA of acquired
Practices shall also be included in Consolidated Cash Flow, but only if Agent is
satisfied, in its reasonable discretion, as to the accuracy and reliability of
the financial information related thereto. In assessing the accuracy and
reliability of such financial information, (i) unqualified audited financial
statements prepared by a regional or national accounting firm shall be
acceptable, and (ii) financial statements reviewed (but not audited) by such a
firm shall also be acceptable unless Agent in good faith determines that
reviewed statements for a particular enterprise are subject to material doubt as
to their accuracy. The negative Acquisition EBITDA for any Practice shall be
included in Consolidated Cash Flow, based upon the best information available.
Notwithstanding any other provision hereof, the Acquisition EBITDA attributed to
Non-Corporate Unperfected Subsidiaries shall not be included in Consolidated
Cash Flow if Non-Corporate Unperfected Subsidiaries would account for more than
ten percent (10%) of total Consolidated Cash Flow.
"Consolidated Current Assets" means, at any time, all assets that,
in accordance with generally accepted accounting principles consistently
applied, are classified as current assets on a consolidated balance sheet of the
Borrower and its Subsidiaries.
"Consolidated Current Liabilities" means, at any time, all
liabilities that, in accordance with generally accepted accounting principles
consistently applied, are classified as current liabilities on a consolidated
balance sheet of the Borrower and its Subsidiaries, plus, to the extent not
previously taken into account as a current liability, the then outstanding
amount of Working Capital advances hereunder regardless of their maturity date.
"Consolidated Earnings Before Interest and Taxes" means, for any
period of determination, the consolidated net earnings (or net loss) of Borrower
and its Subsidiaries
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exclusive of all write-ups, gains from sales of assets, or other extraordinary
or nonrecurring gains whether of a cash or noncash nature, but after all
expenses and other proper charges other than Interest Expense and taxes,
determined for any period in accordance with generally accepted accounting
principles consistently applied.
"Consolidated Fixed Assets" means, at any time, all tangible, fixed
assets which are, in accordance with generally accepted accounting principles
consistently applied, classified as property, plant and equipment on a
consolidated balance sheet of the Borrower and its Subsidiaries.
"Consolidated Liabilities" means all Indebtedness that, in
accordance with generally accepted accounting principles consistently applied,
which are classified as liabilities on a consolidated balance sheet of the
Borrower and its Subsidiaries.
"Consolidated Net Income" means, for any particular fiscal period,
the net earnings (or net loss) of the Borrower and its Subsidiaries on a
consolidated basis, determined in accordance with generally accepted accounting
principles consistently applied, excluding however (A) any gains resulting from
the sale or write-up of assets, and (B) any other extraordinary or non-recurring
non-cash gains or losses.
"Debt Service" means for any given period, the sum of the payments
made by the Borrower and its Subsidiaries of (A) Interest Expense, (B) Rental
Expense, and (C) any mandatory repayments of principal on any Consolidated
Liabilities, plus (D) one-seventh (1/7th) of the amount then outstanding under
the Acquisition Loan.
"Eligible Assignee" means (A) a commercial bank organized under the
laws of the United States, or any State thereof, and having a combined capital
and surplus of at least $300,000,000.00; (B) a commercial bank organized under
the laws of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having a combined capital and surplus of at least $300,000,000.00,
provided that such bank is acting through a branch or agency located in the
United States; (C) any Bank and any Affiliate of a Bank or Lender; (D) any
Federal Reserve Bank; and (E) any other Person consented to by the Agent.
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA) and the Superfund Amendments and
Reauthorization Act (XXXX); the Resource Conservation and Recovery Act (RCRA);
the Emergency Planning and Community Right to Know Act; the Clean Water Act
(Federal Water Pollution Control Act); the Safe Drinking Water Act; the Clean
Air Act; the Surface Mining Control and Reclamation Act; the Coastal Zone
Management Act; the Noise Control Act; the Occupational Safety and Health Act;
the Toxic Substances Control Act (TSCA); the Federal Insecticide, Fungicide and
Rodenticide Act (FIFRA); any so-called "Superfund" or "Superlien" law; or any
other federal, state or local statute, law, ordinance, code, rule, regulation,
order, decree or other requirements of any governmental body regulating,
relating to or imposing
7
liability or standards of conduct concerning any Hazardous Materials or toxic or
dangerous chemical, waste, substance or material.
"Eurodollar Liabilities" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Loan" means any Loan which bears interest based on the
LIBO Rate.
"Eurodollar Rate Reserve Percentage" means the reserve percentage
applicable during any Eurodollar Loan Interest Period (or if more than one such
percentage shall be so applicable, the daily average of such percentages for
those days in such Interest Period during which any such percentage shall be so
applicable) under regulations issued from time to time by the Board of Governors
of the Federal Reserve System (or any successor) for determining the maximum
reserve requirement (including, without limitation, any emergency, supplemental
or other marginal reserve requirement) for Banks with respect to liabilities or
assets consisting of or including Eurodollar Liabilities having a term equal to
such Interest Period.
"Event of Default" has the meaning set forth in Paragraph 7.1.
"Financial Statements" means the year-end audited financial
statements of Vero Orthopaedics, P.A., Princeton Orthopaedic Associates II,
P.A., and Reconstructive Orthopaedic Associates, II, P.A., plus the unaudited
compilation of Tallahassee Orthopaedic Clinic II, P.A., and the Greater
Chesapeake Associates, L.L.C. for the period ending December 31, 1995.
"Financing Statements" means any one or more filings made pursuant
to the UCC to perfect the security interests in the Collateral granted to Banks
pursuant to Section IV hereof.
"Floating Rate Loan" means any Loan which bears interest based on
the Prime Rate.
"Fraud and Abuse Laws" means Section 1128B(b) of the Social Security
Act, 42 U.S.C. Section 1320a-7b(b) and Section 1877 of the Social Security Act,
42 U.S.C. Section 1877, as from time to time amended; any successor statute(s)
thereto; all rules and regulations promulgated thereunder; and any other Law
relating to the ownership of medical facilities by providers of medical services
or the referral of patients to medical facilities owned by providers of medical
services.
"Funded Debt" means at any date, with respect to the Borrower and
its Subsidiaries, all of the following obligations (without duplication) of
Borrower and its Subsidiaries as of such date: (i) all obligations for borrowed
money, (ii) all obligations evidenced by bonds, debentures, notes or other
similar instruments, (iii) all obligations to pay the deferred purchase price of
property, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations as lessee under capitalized leases, (v) all
obligations to
8
purchase securities or other property which arise out of or in connection with
the sale of the same or substantially similar securities or property, (vi) all
non-contingent obligations to reimburse any bank or other person in respect of
amounts paid under a letter of credit or similar instrument, (vii) all debt of
others secured by a lien on any asset of Borrower and its Subsidiaries, whether
or not such debt is assumed, and (viii) all debt of others guaranteed by
Borrower and/or its Subsidiaries.
"Government Authority" means any governmental or quasi-governmental
entity, court or tribunal including, without limitation, any department,
commission, board, bureau, agency, administration, service or other
instrumentality of any foreign or domestic governmental entity.
"Guarantor" individually means any one of the following
corporations, each of which is also a Subsidiary for the purposes of this
Agreement, and "Guarantors" means all such corporations jointly and severally:
(A) SCN of Princeton, Inc., a New Jersey corporation.
"Hazardous Materials" means any hazardous, toxic or dangerous
chemical, substance, waste or material defined as such in any of the
Environmental Laws.
"Indebtedness" means, as to the Borrower or any Subsidiary, all
items of indebtedness, obligation or liability, whether matured or unmatured,
liquidated or unliquidated, direct or contingent, joint or several, including
without limitation:
(A) All indebtedness guaranteed, directly or indirectly, in
any manner, or endorsed (other than for collection or deposit in the ordinary
course of business) or discounted with recourse;
(B) All indebtedness in effect guaranteed, directly or
indirectly, through agreements, contingent or otherwise: (1) to purchase such
indebtedness; or (2) to purchase, sell or lease (as lessee or lessor) property,
products, materials or supplies or to purchase or sell services, primarily for
the purpose of enabling the debtor to make payment of such indebtedness or to
assure the owner of the indebtedness against loss; or (3) to supply funds to or
in any other manner invest in the debtor;
(C) All indebtedness secured by (or for which the holder of
such indebtedness has a right, contingent or otherwise, to be secured by) any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance upon property owned or acquired subject thereto, whether or not the
liabilities secured thereby have been assumed; and
(D) All indebtedness incurred as the lessee of facilities,
goods or services under leases that, in accordance with generally accepted
accounting principles consistently applied, should not be reflected on the
Borrower's or any Subsidiary's balance sheet.
9
"Interest Expense" means, with respect to the Borrower and its
Subsidiaries for any period, the gross interest expenses of the Borrower and its
Subsidiaries for such period determined in accordance with generally accepted
accounting principles consistently applied as shown on its income statement.
"Interest Payment Date" shall mean, as to any Loan, the last day of
the Interest Period applicable to such Loan and, in addition, in the case of a
Eurodollar Loan with an Interest Period of six (6) months' duration, the day
that would have been an Interest Payment Date for such Loan if such Loan had an
Interest Period of three (3) months.
"Interest Period" shall mean: (a) as to any Eurodollar Loan, the
period commencing on the date of such Eurodollar Loan and ending on the
numerically corresponding day (or, if there is no numerically corresponding day,
on the last day) in the calendar month that is 1, 2, 3 or 6 months thereafter,
as the Borrower may elect, and (b) as to any Floating Rate Loan, the period
commencing on the date of such Loan and ending on the first (1st) day of the
next calendar month, and (ii) the applicable Loan Termination Date; provided,
however, that (x) if any Interest Period would end on a day that shall not be a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless, with respect to Eurodollar Loans only, such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (y) no Interest Period
with respect to any Loan shall end later than the respective Loan Termination
Date. Interest shall accrue from and including the first day of an Interest
Period to but excluding the last day of such Interest Period.
"Interest Rate Contracts" means interest rate swap agreements,
interest rate cap agreements, interest rate collar agreements, interest rate
insurance and other agreements or arrangements designed to provide protection
against fluctuations in interest rates.
"Internally Financed Capital Expenditures" means Capital
Expenditures financed by Borrower and its Subsidiaries from existing cash or
Consolidated Cash Flow and not from purchase money financing or other debt
incurred and not prohibited by Paragraph 6.2(E).
"IPO" means a public offering by Borrower pursuant to a filed
registration statement of any series of common stock of Borrower under the
Securities Act of 1933, as amended.
"Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs or decrees of any government or political subdivision or
agency thereof, or any court or similar entity established by any thereof.
"LIBO Rate" means, for any Eurodollar Loan for any Interest Period
therefore, the rate per annum appearing on Telerate Page 3750 (or any successor
page) as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period for a term comparable to such
10
Interest Period. If for any reason such rate is not available, the term "LIBO
Rate" shall mean, for any Eurodollar Loan for any Interest Period therefor, the
rate per annum appearing on Reuters Screen LIBO Page as the London interbank
offered rate for deposits in Dollars at approximately 11:00 a.m. (London time)
two Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period; provided, however, if more than one rate is
specified on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates.
"Loan" means any funds which any Bank has advanced or will advance
to the Borrower on a revolving basis pursuant to this Agreement, and "Loans"
means all such advances by all Banks.
"Loan Documents" means this Agreement, the Notes, and the Collateral
Documents, or any other document executed or delivered by or on behalf of the
Borrower or any Subsidiary evidencing or securing the Obligations.
"Majority Banks" means those Banks having sixty-six and two-thirds
(66 2/3%) percent or more of the aggregate unpaid principal amount of the
Obligations owing to the Banks, or, if no such principal amount is then
outstanding, Banks having at least sixty-six and two-thirds (66 2/3%) percent of
the Commitments.
"Material Adverse Change" means a material adverse change in the
business or conditions (financial or otherwise) or in the results of operations
of the Borrower and its Subsidiaries (unless otherwise indicated), taken as a
whole as reasonably determined by the Majority Banks.
"Material Adverse Effect" means, when referring to the taking of an
action or the omission to take an action, that such action, if taken, or
omission, would have a material adverse effect on the business, condition
(financial or otherwise) or results of operations of the Borrower and its
Subsidiaries (unless otherwise indicated), taken as a whole as reasonably
determined by the Majority Banks.
"Non-Corporate Subsidiary" means a Subsidiary that is other than a
corporation.
"Non-Corporate Unperfected Subsidiary" means a Non-Corporate
Subsidiary, Borrower's interest in which is not subject to a perfected security
interest to secure the Obligations.
"Note" means a promissory note substantially in the form of Exhibit
A attached hereto, duly executed and delivered to the Agent by Borrower and
payable to the order of each of the Banks in the amount of its Commitment,
including any amendment, modification, renewal, extension, or replacement
thereof, and "Notes" means the Notes payable to each of the Banks collectively.
11
"Obligations" means the obligation of the Borrower:
(A) To pay the principal of and interest on the Notes in
accordance with the terms thereof and to satisfy all of its other liabilities to
the Banks hereunder, whether now existing or hereafter incurred, matured or
unmatured, direct or contingent, joint or several, including any extensions,
modifications, and renewals thereof and substitutions therefor;
(B) To repay to the Banks all amounts advanced by the Banks
hereunder on behalf of the Borrower, including, but without limitation, advances
for overdrafts, principal or interest payments to prior secured parties,
mortgagees, or lienors, or for taxes, levies, insurance, rent, repairs to or
maintenance or storage of any of the Collateral; and
(C) To reimburse the Banks, on demand, for all of the Agent's
reasonable out-of-pocket expenses and costs, including the reasonable fees and
expenses of its counsel, in connection with the preparation, amendment,
modification, or enforcement of this Agreement and the documents required
hereunder, including, without limitation, any proceeding brought or threatened
to enforce payment of any of the obligations referred to in the foregoing
paragraphs (A) and (B), or any suits or claims against any Bank whatsoever as a
result of such Bank's execution of this Agreement and making of its Loan;
provided, the expenses and attorneys' fees of all Banks shall be reimbursed in
connection with the enforcement of this Agreement and the other Loan Documents.
"Permitted Acquisition" means any business, enterprise or operation
of any Person unrelated to or unaffiliated with the Borrower which is the
subject of an acquisition permitted under Paragraph 6.2(M).
"Permitted Acquisition Indebtedness" means purchase money
indebtedness incurred by the Borrower or any Subsidiary in connection with the
purchase of a Permitted Acquisition approved by the Banks pursuant to Paragraphs
3.3 and 6.2(M) that:
(A) Is in a principal amount not more than sixty percent (60%)
of the Permitted Acquisition Price;
(B) Is unsecured;
(C) Has a maturity of not less than two (2) years; and
(D) Is not cross-defaulted with and is not more restrictive in
its terms and conditions than the Obligations secured hereby, in the judgment of
the Banks.
In addition, it shall include such other purchase money indebtedness as has
otherwise been approved by the Banks pursuant to Paragraph 3.3 or not prohibited
by Paragraph 6.2E(8).
12
"Permitted Acquisition Price" means the aggregate purchase price of
any Permitted Acquisition, including notes, assumed debt, amounts allocated to
non-compete agreements and the minimum amounts reasonably expected to be paid
under any earn-out agreements.
"Permitted Investments" means all expenditures made and all
liabilities incurred (contingent or otherwise) by any Borrower or any Subsidiary
for:
(A) obligations issued or guaranteed as to principal and
interest by the United States of America and having a maturity of not more than
twelve (12) months from the date of purchase;
(B) certificates of deposit, issued by banks organized under
the laws of the United States of America or any State thereof and foreign
subsidiaries of such bank, having a rating of not less than A or its equivalent
by Standard & Poor's Corporation, or its successor;
(C) commercial paper or finance company paper which is rated
not less than prime-one or A-1 or their equivalents by Xxxxx'x Investor
Services, Inc. or Standard & Poor's Corporation or their successors;
(D) repurchase agreements related to an investment of the type
described in Clause (A) above, provided that the counter-party thereto is a
government securities dealer designated by the Federal Reserve Bank of New York
as a "Reporting Dealer" and whose financial statements indicate that it has a
capital of at least $50,000,000.00 and that the investment which is the subject
of such repurchase agreement shall be at all times during the term of the
repurchase agreement in the possession of the Borrower (or the Agent) or the
interest of such Borrower therein shall be appropriately recorded in accordance
with the United States Federal Regulations regarding Book Entry Treasury
Securities; and
(E) Permitted Acquisitions.
"Permitted Liens" means:
(A) Liens for taxes, assessments, or similar charges, incurred
in the ordinary course of business that are not yet due and payable;
(B) Pledges or deposits made in the ordinary course of
business to secure payment of workmen's compensation, or to participate in any
fund in connection with workmen's compensation, unemployment insurance, old-age
pensions or other social security programs;
(C) Liens of mechanics, materialmen, warehousemen, carriers,
or other like liens, securing obligations incurred in the ordinary course of
business that are not yet due and payable;
13
(D) Good faith pledges or deposits made in the ordinary course
of business to secure performance of bids, tenders, contracts (other than for
the repayment of borrowed money) or leases, not in excess of ten percent (10%)
of the aggregate amount due thereunder, or to secure statutory obligations, or
surety, appeal, indemnity, performance or other similar bonds required in the
ordinary course of business;
(E) Encumbrances consisting of zoning restrictions, easements
or other restrictions on the use of real property, none of which materially
impairs the use of such property by the Borrower or any Subsidiary in the
operations of its business, and none of which is violated in any material
respect by existing or proposed structures or land use;
(F) Liens in favor of the Agent for the benefit of the Banks;
(G) Existing liens set forth or described on Exhibit B,
attached hereto and made a part hereof, and renewals thereof;
(H) Liens of equipment notes and capitalized leases granted to
secure not more than the amount of the purchase price financed thereby;
provided, that in the case of an Acquisition or assumption the Acquisition or
assumption is either permitted by Paragraph 6.2(M) or not otherwise prohibited
herein;
(I) Landlord's liens on Fixtures retained in any lease;
(J) The following, if the validity or amount thereof is being
contested in good faith by appropriate and lawful proceedings, so long as levy
and execution thereon have been stayed and continue to be stayed; if Borrower or
any Subsidiary has posted such security as may be required by Laws or as is
reasonably satisfactory to Banks; and if the following do not, in the aggregate,
materially detract from the value of the properties of the Borrower or any
Subsidiary taken as a whole, or materially impair the use thereof in the
operation of their respective businesses:
(1) Claims or liens for taxes, assessments or charges
due and payable and subject to interest or penalty;
(2) Claims, liens and encumbrances upon, and defects of
title to, real or personal property, including any attachment of personal or
real property or other legal process prior to adjudication of a dispute on the
merits;
(3) Claims or liens of mechanics, materialmen,
warehousemen, carriers, or other like liens; and
(4) Adverse judgments on appeal.
14
"Person" means any individual, corporation, partnership, limited
liability company, association, joint-stock company, estate, trust,
unincorporated organization, joint venture, court or government or political
subdivision or agency thereof.
"Pledged Stock" means the stock and other interests pledged pursuant
to the Stock Pledge Agreement described in Paragraph 3.1.
"Pledgors" means the owners of the Pledged Stock as set forth in the
Stock Pledge Agreement(s).
"Practice" means a musculoskeletal treatment center or a
musculoskeletal or orthopedic medical practice. Whenever in this Agreement
"Practice" is used in describing an Acquisition by the Borrower or any
Subsidiary, and if the reference relates to a medical practice, such reference
is to the Acquisition of the assets used in the operation of the Practice that
can lawfully be acquired by Borrower or any Subsidiary or to the Acquisition of
an interest in an entity that owns, as of the time of purchase, only those
assets that can be lawfully acquired by Borrower or any Subsidiary.
"Prime Rate" means that rate announced by NationsBank of Tennessee,
N.A. from time to time as the NationsBank Prime Rate. No representation is made
herein that the NationsBank Prime Rate is the lowest rate at which any bank will
lend to its customers.
"Provider" means an orthopedic doctor or other musculoskeletal
doctor whose specialty is complementary to the practice of orthopedics and who
performs professional services respecting a Practice that is either managed by
Borrower or any Subsidiary or the assets of which are owned by Borrower or any
Subsidiary.
"Quarterly Dates" means the first day of each January, April, July,
or October, the first of which shall be the first such day after November 1,
1996.
"Quarterly Period" means (a) the Period from the date of Closing to
the next succeeding Quarterly Date and (b) thereafter, any period from the first
day after a Quarterly Date to the next succeeding Quarterly Date.
"Real Property" means those leases and other interests in real
estate described in Exhibit D hereto.
"Records" means correspondence, memoranda, tapes, books, discs,
paper, magnetic storage and other documents or information of any type, whether
expressed in ordinary or machine language.
"Rental Expense" means, with respect to the Borrower and its
Subsidiaries for any period, the gross rental expenses that are paid by the
Borrower and its Subsidiaries for such period determined in accordance with
generally accepted accounting principles consistently applied.
15
"Same Clinic Revenue and Income Report" means a report produced by
the Borrower for all musculoskeletal centers/clinics owned and/or operated
directly or indirectly by Borrower, showing consolidated pre-tax revenues and
income generated by each of them for the immediately preceding fiscal quarter
together with Borrower's service fees.
"Seller" means the former owner of a Practice that is acquired by
the Borrower or any Subsidiary.
"Service Agreement" means one of those service or management
agreements now or hereafter entered into between a Provider or Providers and the
Borrower or any Subsidiary in connection with the management of an orthopedic or
musculoskeletal practice.
"Shareholders' Equity" means, at any time, the sum of the following
accounts set forth in a consolidated balance sheet of the Borrower and its
Subsidiaries, prepared in accordance with generally accepted accounting
principles consistently applied: (A) the par or stated value of all outstanding
capital stock; (B) capital surplus; and (C) retained earnings.
"Subordinated Indebtedness" means all Indebtedness incurred at any
time by the Borrower or any Subsidiary, the repayment of which is subordinated
to the Loans in form and manner satisfactory to the Banks. All existing
Subordinated Indebtedness is so specified in Exhibit C attached hereto.
"Subsidiary" means any Person of which fifty percent (50%) or more
of the outstanding voting securities or other equity interests in such Person
shall, at the time of determination, be owned directly, or indirectly through
one or more intermediaries, by the Borrower and "Subsidiaries" means all such
corporations together with each of the Guarantors, if different.
"Successful IPO" means an IPO with respect to the Borrower in which
the Borrower receives net proceeds after underwriting discount and related
expenses in excess of Twenty Million Dollars ($20,000,000.00) for the public
sale of its stock.
"Total Commitments" means the aggregate of the several Commitments
of the Banks in the principal amount of up to Twenty Million Dollars
($20,000,000.00) as set forth in Section II of this Agreement, subject to
reduction by the Borrower pursuant to Paragraph 2.6 below.
"UCC" means the Uniform Commercial Code as in effect on the date
hereof in the State of Tennessee, as it may be amended from time to time;
provided that if by reason of mandatory provisions of law, the perfection or the
effect of perfection or non-perfection of a security interest in any Collateral
is governed by the Uniform Commercial Code as in effect in a jurisdiction other
than Tennessee, "UCC" means the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection.
16
"Working Capital" means those funds used for general corporate
purposes in the ordinary course of business, but excluding the costs of the
Acquisition of any Person, permitted or otherwise, and the costs of Capital
Expenditures.
"Working Capital Loan" means Loans made pursuant to Paragraph 2.1
for the purpose or purposes set forth in Paragraph 2.2.
"Working Capital Loan Commitment" means, as to any Bank, the
obligation of such Bank to make Working Capital Loans in an amount not to exceed
the amount set forth in Paragraph 2.1.
"Working Capital Loan Termination Date" means November 11, 1997,
being 364 days from the date of Closing and initial funding, unless extended in
writing by the Banks in their sole discretion.
The definitions in this Section I shall apply equally to both the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include", "includes" and "including" shall be deemed to
be followed by the phrase "without limitation". All references herein to
Articles, Sections, Exhibits and Schedules shall be deemed references to
Articles and Sections of, and Exhibits and Schedules to, this Agreement unless
the context shall otherwise require. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with generally accepted accounting principles, as in effect from time
to time.
SECTION II. THE LOANS
2.1 The Commitments. (A) Subject to the terms and conditions of and
relying on the representations, warranties and covenants contained in this
Agreement, each Bank agrees to fund severally but not jointly to the Borrower
the amount set out below their names, which for all of the Banks shall be the
aggregate maximum principal amount of up to Twenty Million Dollars
($20,000,000.00), provided the principal balance of the Loans outstanding shall
not exceed the Borrowing Base. The maximum Acquisition Loan Commitment and the
maximum Working Capital Loan Commitment of each of the Banks and its respective
percentage of the Total Commitments (the "Commitment Percentage" of each Bank)
are as follows:
17
--------------------------------------------------------------------------------
Bank Acquisition Loan Working Capital Loan Commitment
Commitment Amount Commitment Amount Percentage
--------------------------------------------------------------------------------
NationsBank of
Tennessee, N.A. $15,000,000.00 $5,000,000.00 100%
--------------------------------------------------------------------------------
TOTAL
COMMITMENTS $15,000,000.00 $5,000,000.00 100%
--------------------------------------------------------------------------------
The Loans shall be evidenced initially by the (i) Fifteen Million Dollar
($15,000,000.00) Acquisition Loan Note of Borrower to NationsBank of Tennessee,
N.A., (ii) the Five Million Dollar ($5,000,000.00) Working Capital Loan Note of
Borrower to NationsBank of Tennessee, N.A., which Notes are substantially in the
form set forth in Exhibit A attached hereto, with each Note payable in
accordance with its terms. The Borrower may obtain Acquisition and/or Working
Capital Loans, repay without penalty or premium and reborrow hereunder, from the
date of this Agreement up to but not including the respective Acquisition Loan
Termination Date and Working Capital Loan Termination Date, either the full
amount of the Total Commitments, subject to the Borrowing Base limitation and
other limitations as hereinafter set forth, or any lesser sum which is in the
minimum amount of Fifty Thousand Dollars ($50,000.00) and in an integral
multiple of Twenty-Five Thousand Dollars ($25,000.00) if in excess thereof;
provided, however, Borrower may not borrow more than two (2) times in any
calendar week. Each advance of the Loans hereunder shall be made by each Bank
ratably in accordance with its respective Commitment Percentage of such advance.
(B) The obligations of each Bank to make advances to Borrower
pursuant to its respective Acquisition and Working Capital Loan Commitments
shall not exceed at any time such Bank's Commitment Percentage multiplied by the
applicable Borrowing Base as in effect during the term of this Agreement. The
Borrowing Base shall be adjusted on each Borrowing Base Adjustment Date, with
the initial Borrowing Base amount in effect from the date hereof through the
first Borrowing Base Adjustment Date being $7,000,000.00. If at any time the
aggregate outstanding principal balances of the Loans exceeds the Borrowing
Base, then Borrower shall immediately pay to Agent for the account of the Bank
any such excess principal to reduce such outstanding principal balances to the
applicable Borrowing Base amount. Such payment shall be applied pursuant to
Paragraph 2.10.
(C) The failure of any Bank to make any advances hereunder pursuant
to its Commitment shall not relieve any other Bank of its obligation, if any,
hereunder to make its advances pursuant to its Commitment. However, no Bank
shall be responsible for any other Bank's failure or refusal to make any
advances pursuant to such other Bank's Commitment.
2.2 Use of Proceeds. Acquisition Loan advances may be used by the
Borrower for Permitted Acquisitions, Capital Expenditures and the development of
musculoskeletal focused surgery centers. Working Capital Loan advances may be
used by the
18
Borrower for Working Capital needs; provided, if all amounts are fully drawn
under the Acquisition Loan Commitment, then the Borrower may also use funds
under the Working Capital Loan Commitment to fund Permitted Acquisitions in the
musculoskeletal field and/or Capital Expenditures. The Borrower shall disclose
in each Borrowing Notice the purpose of each advance, and the Banks shall have
no obligation to fund unless Borrower is in compliance with all of the
provisions and conditions of this Agreement and, if the advance is for Working
Capital, the amount of the advance plus all outstanding advances for Working
Capital does not exceed a total of Five Million Dollars ($5,000,000.00).
2.3 Interest Rates and Payments of Interest.
(A) Loans made hereunder may be either Eurodollar Loans,
Floating Rate Loans, or a combination thereof. Eurodollar Loans shall be in the
minimum amount of $1,000,000.00 and shall be in an integral multiple of
$100,000.00.
(B) The Borrower shall give the Agent irrevocable notice (a
"Borrowing Notice") not later than 10:00 a.m. Nashville time at least three (3)
Business Days prior to the date of any requested disbursement of Eurodollar
Loans and one (1) Business Day prior to any requested disbursement of Floating
Rate Loans. Each Borrowing Notice shall be written and may be made by
telecopier, telex or cable in addition to the means set forth for giving notice
in Paragraph 9.5. Each Borrowing Notice shall specify the funding source of the
Loan, i.e., Acquisition Loan or Working Capital Loan; the requested date of such
requested disbursement; the aggregate amount of such disbursement; the type of
Loan, i.e., Eurodollar or Floating Rate; and if a Eurodollar Loan, the
designated Interest Period. The Agent shall promptly advise the other Banks of
any Borrowing Notice given pursuant to this Section and each Bank's portion of
the requested Loan. Not later than noon (12:00 a.m.) Nashville time on each
disbursement date, and subject to the terms and conditions hereof, Agent will
credit the proceeds of the Loans received by Agent from the Banks to the
Borrower's deposit account with Agent. Each such Borrowing Notice shall obligate
the Borrower to accept the Loan disbursement requested thereby.
(C) The Borrower shall have the right at any time, on prior
irrevocable written or telex notice to the Agent not later than 10:00 a.m.,
Nashville time, three (3) Business Days prior to the date of any requested
conversion, to convert any Floating Rate or Eurodollar Loan into a Loan of
another type, or to continue any Eurodollar Loan for another Interest Period
(specifying in each case the Interest Period to be applicable thereto), subject
in each case to the following:
(1) Each conversion or continuation shall be made
prorata among the Banks in accordance with the respective principal amounts of
the Loan converted or continued;
(2) No Eurodollar Loan shall be converted at any time
other than at the end of the Interest Period applicable thereto;
19
(3) Each conversion shall be effected by applying the
proceeds of the new Eurodollar and/or Floating Rate Loan, as the case may be, to
the Loan (or portion thereof) being converted;
(4) The number of Eurodollar Loans outstanding at one
time may not exceed six (6); and
(5) No Interest Period may be selected for any
Eurodollar Loan that would end later than a repayment date occurring on or after
the first day of such Interest Period if the aggregate outstanding amount of
Eurodollar Loans with Interest Periods ending prior to such repayment date plus
the aggregate outstanding amount of all Floating Rate Loans is not equal to or
greater than the principal amount(s) of the Loan(s) to be paid on such repayment
date.
(D) Each notice pursuant to this Paragraph shall be
irrevocable and shall refer to this Agreement and specify (1) the identity and
principal amount of the particular Loan that the Borrower request be converted
or continued, (2) if such notice requests conversion, the date of such
conversion (which shall be a Business Day), and (3) if a Loan is to be converted
to a Eurodollar Loan or a Eurodollar Loan is to be continued, the Interest
Period with respect thereto. In the event that the Borrower shall not give
notice to continue any Eurodollar Loan for a subsequent period, such Eurodollar
Loan (unless repaid) shall automatically be converted into a Floating Rate Loan.
If the Borrower shall fail to specify in any Borrowing Notice the type of
borrowing or, in the case of a Eurodollar Loan, the applicable Interest Period,
the Borrower will be deemed to have requested a Floating Rate Loan. If Agent
reasonably believes that any failure by Borrower to specify the type of
borrowing or the applicable Interest Period shall have resulted from failure of
communications equipment or clerical error, then prior to funding any such
borrowing the Agent shall use reasonable efforts to obtain confirmation from
Borrower of the contents of such Borrowing Notice; however, in the absence of
prompt confirmation by Borrower which specifies the type of borrowing and/or the
applicable Interest Period, the Borrower will be deemed to have requested a
Floating Rate Loan. Notwithstanding anything to the contrary contained above, if
an Event of Default shall have occurred and be continuing, no Eurodollar Loan
may be continued and no Floating Rate Loan may be converted into a Eurodollar
Loan.
(E) Interest shall be charged and paid on each Acquisition and
Working Capital Loan from the date of the initial advance thereunder until such
Loan is paid or converted as follows:
(1) For a Floating Rate Loan, at an annual rate equal to
the Prime Rate plus the Applicable Prime Rate Margin for such Acquisition or
Working Capital Loan, said rate to change contemporaneously with any change in
the Prime Rate.
(2) For a Eurodollar Loan, at a rate equal to the LIBO
Rate plus the Applicable LIBO Rate Margin for such Acquisition or Working
Capital Loan.
20
(3) The Borrower shall pay to any Bank, if and so long
as such Bank shall be required under regulations of the Board of Governors of
the Federal Reserve System to maintain reserves with respect to liabilities or
assets consisting of or including Eurodollar Liabilities, additional interest on
the unpaid principal amount of each Eurodollar Loan, from the date of such
advance until said principal amount is paid in full, at an interest rate per
annum equal at all times to the remainder obtained by subtracting (i) the LIBO
Rate for the Interest Period from (ii) the rate obtained by dividing the LIBO
Rate by a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage
for such Interest Period, payable on each date on which interest is payable.
Such additional interest shall be determined by such Bank who shall notify
Borrower thereof; however, such additional interest shall be payable only if the
condition of Paragraph 2.9(C)(2) is satisfied.
(4) Interest for both Floating Rate Loans and Eurodollar
Loans shall be computed on the basis of a 360-day year counting the actual
number of days elapsed, and shall be due and payable without notice on each
Interest Payment Date.
(F) Notwithstanding the foregoing, upon the occurrence of an
Event of Default interest shall be charged at the Default Rate as defined and
set forth in the Notes, regardless of whether the Majority Banks have elected to
exercise any other remedies under Section VII hereof, including without
limitation acceleration of the maturity of the outstanding principal of the
Notes. All such interest shall be paid at the time of and as a condition
precedent to the curing of any such default to the extent any right to cure is
given.
(G) All agreements herein made are expressly limited so that
in no event whatsoever shall the interest and loan charges agreed to be paid to
the Banks for the use of the money advanced or to be advanced pursuant to this
Agreement exceed the maximum amounts collectible under applicable laws in effect
from time to time. If for any reason whatsoever the interest or loan charges
paid or contracted to be paid in respect of the Loans shall exceed the maximum
amounts collectible under applicable laws in effect from time to time, then,
ipso facto, the obligation to pay such interest and/or loan charges shall be
reduced to the maximum amounts collectible under applicable laws in effect from
time to time, and any amounts collected by the Banks that exceed such maximum
amounts shall be applied to the reduction of the principal balance of the Loans
and/or refunded to Borrower so that at no time shall the interest or loan
charges paid or payable in respect of the Loans exceed the maximum amounts
permitted from time to time by applicable law. This provision shall control
every other provision herein and in any and all other agreements and instruments
now existing or hereafter arising between Borrower and the Banks with respect to
the Loans.
2.4 Commitment Fee. A commitment fee of One Hundred Twelve Thousand
Five Hundred Dollars ($112,500.00) shall be due and payable (in full at Closing)
to the Banks prorata in accordance with their Commitment Percentages.
2.5 Nonusage Fee. The Borrower shall pay to the Agent for the
account of each Bank a non-use fee on the average daily undisbursed amount of
such Bank's Acquisition Loan Commitment and Working Capital Loan Commitment for
the period from and including
21
the Closing to but not including the earlier of the date such Commitment is
terminated and the respective Loan Termination Date, at the rate of (a) for the
first Quarterly Period, 0.25% per annum for the Acquisition Loan Commitment and
0.20% per annum for the Working Capital Loan Commitment, and (b) thereafter,
0.35% per annum for the Acquisition Loan Commitment and 0.30% per annum for the
Working Capital Loan Commitment or, for any Quarterly Period prior to the first
day of which (and in any event no later than 45 days after the end of the fiscal
quarter most recently ended) the Borrower has delivered to the Agent a
certificate of the Borrower calculating the Funded Debt to Consolidated Cash
Flow Ratio as at the last day of such fiscal quarter (other than such portion of
such period during which an Event of Default shall be continuing), the
percentage per annum set forth below opposite the Funded Debt to Consolidated
Cash Flow Ratio for the Borrower reflected on such certificate:
--------------------------------------------------------------------------------
Funded Debt to Applicable Non-Use Applicable Non-Use
Consolidated Cash Flow Fee for Acquisition Fee for Working Capital
Ratio Loans Loans
--------------------------------------------------------------------------------
Greater than 3.0 0.35% per annum 0.30% per annum
--------------------------------------------------------------------------------
Greater than 2.50 and less 0.30% per annum 0.30% per annum
than or equal to 3.00
--------------------------------------------------------------------------------
Greater than 2.00 and less 0.25% per annum 0.25% per annum
than or equal to 2.50
--------------------------------------------------------------------------------
Greater than 1.50 and less 0.25% per annum 0.20% per annum
than or equal to 2.00
--------------------------------------------------------------------------------
Greater than 1.00 and less 0.20% per annum 0.20% per annum
than or equal to 1.50
--------------------------------------------------------------------------------
Less than or equal to 1.00 0.20% per annum 0.15% per annum
--------------------------------------------------------------------------------
Non-use fees shall be calculated on a 360-day year counting the actual number of
elapsed days.
Accrued non-use fees shall be payable in arrears on each Quarterly Date and on
the earlier of each of the date the relevant Commitments are terminated and the
applicable Acquisition Loan Termination Date or Working Capital Loan Termination
Date.
22
2.6 Reduction of Commitment. The Borrower shall have the right to
reduce the amount of the Total Commitments, at any time and from time to time,
in any integral multiple of One Million Dollars ($1,000,000.00), which reduction
shall reduce each Bank's Commitment pro rata in accordance with its Commitment
Percentage. Contemporaneously with each such reduction, the Borrower shall repay
to the Agent for the account of each Bank in accordance with its respective
Commitment Percentage the amounts, if any, by which the then outstanding
principal balance of each Note exceeds each Commitment as so reduced. After each
such reduction: (i) the Borrower shall immediately pay the Agent any nonusage
fee provided for in Paragraph 2.5 with respect to the amount by which the Total
Commitments are so reduced, but only with respect to the time such Commitment
existed and only to the extent not previously paid; (ii) the nonusage fee
provided for in Paragraph 2.5 shall be calculated with respect to the Total
Commitments as so reduced; and (iii) the Total Commitments may not be increased
without the written consent of the Banks.
2.7 Alternate Rate of Interest.
(A) In the event, and on each occasion, that on the date of
commencement of any Interest Period for a Eurodollar Loan, any Bank shall have
determined:
(1) That dollar deposits in the amount of the requested
principal amount of such Eurodollar Loan are not generally available in the
London Interbank Market;
(2) That the rate at which such dollar deposits are
being offered will not adequately and fairly reflect the cost to Banks of making
or maintaining such Eurodollar Loan during such Interest Period; or
(3) That reasonable means do not exist for ascertaining
the LIBO Rate,
such Bank shall, as soon as practicable thereafter, give written or telephonic
notice of such determination to the Borrower. In the event of any such
determination, any request by the Borrower for a Eurodollar Loan pursuant to
Paragraph 2.3 shall, until the circumstances giving rise to such notice no
longer exist, be deemed to be a request for a Floating Rate Loan. Each
determination by a Bank hereunder shall be conclusive absent manifest error.
2.8 Change in Circumstances.
(A) Notwithstanding any other provision herein, if after the
date of this Agreement any change in applicable Laws or regulation or in the
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof (whether or not having the
force of law) shall change the basis of taxation of payments to a Bank under any
Eurodollar Loan made by a Bank or any other fees or amounts payable hereunder
(other than taxes imposed on the overall net income of such Bank by the country
in which such Bank is located, or by the jurisdiction in which such Bank has its
principal office, or by any political subdivision or taxing authority therein),
or shall impose, modify or deem applicable any
23
reserve requirement, special deposit, insurance charge (including FDIC insurance
on Eurodollar deposits) or similar requirement against assets of, deposits with
or for the account of, or credit extended by, such Bank or shall impose on such
Bank or the London Interbank Market any other condition affecting this Agreement
or Eurodollar Loans made by such Bank, and the result of any of the foregoing
shall be to increase the cost to such Bank of making or maintaining any
Eurodollar Loan or to reduce the amount of any sum received or receivable by
such Bank here under (whether of principal, interest or otherwise) in respect
thereof by an amount deemed by such Bank to be material, then the Borrower will
pay to such Bank such additional amount or amounts as will compensate such Bank
for such additional costs of reduction.
(B) If either:
(1) The introduction of, or any change in, or in the
interpretation of, any United States or foreign law, rule or regulation; or
(2) Compliance with any directive, guidelines or request
from any central bank or other United States or foreign governmental authority
(whether or not having the force of law) promulgated or made after the date
hereof (but excluding, however, any law, rule, regulation, interpretation,
directive, guideline or request contemplated by or resulting from the report
dated July, 1988, entitled "International Convergence of Capital Measurement and
Capital Standards" issued by the Basle Committee on Banking Regulations and
Supervisory Practices),
affects or would affect the amount of capital required or expected to be
maintained by a Bank (or any lending office of such Bank) or any corporation
directly or indirectly owning or controlling such Bank (or any lending office of
such Bank) based upon the existence of this Agreement, and such Bank shall have
determined that such introduction, change or compliance has or would have the
effect of reducing the rate of return on Bank's capital or on the capital of
such owning or controlling corporation as a consequence of its obligations
hereunder (including its Commitment) to a level below that which such Bank or
such owning or controlling corporation could have achieved but for such
introduction, change or compliance (after taking into account that Bank's
policies or the policies of such owning or controlling corporation, as the case
may be, regarding capital adequacy) by an amount deemed by such Bank (in its
reasonable discretion) to be material, then, from time to time, the Borrower
shall pay to such Bank such additional amount or amounts as will compensate such
Bank for such reduction attributable to making, funding and maintaining its
Commitment and Loans hereunder.
(C) A certificate of any Bank setting forth such amount or
amounts as shall be necessary to compensate such Bank (or its participating Bank
or other entities pursuant to Paragraph 9.8) as specified in paragraph (A) or
(B) above, as the case may be, shall be delivered to the Borrower and shall be
conclusive absent manifest error; provided however, that the Borrower shall be
responsible for compliance herewith and the payment of increased costs only to
the extent:
24
(1) Any change in Laws giving rise to increased costs
occurs after the date of this Agreement;
(2) Such change in Laws or the application thereof
applies generally to the banking industry and is not the result of one or more
of the Banks in this Agreement having inadequate or substandard capital as
determined by its regulators; and
(3) The affected Bank gives notice of the change giving
rise to increased costs within one hundred eighty (180) Business Days after such
Bank has, or with reasonable diligence should have had, knowledge of the change,
or else such Bank can only collect costs from and after the date of the notice.
Subject to the foregoing, the Borrower shall pay the affected Bank the amount
shown as due on any such certificate within ten (10) days after its receipt of
such certificate.
(D) The protection of this Paragraph 2.8 shall be available to
each Bank regardless of any possible contention of invalidity or inapplicability
of the law, regulation or condition that shall have been imposed; provided, if a
court of competent jurisdiction (or a final administrative proceeding which is
not judicially challenged) finally determines that such law or regulation is
invalid or unapplicable, then the protection of this Paragraph shall not be
available.
2.9 Change in Legality.
(A) Notwithstanding anything to the contrary herein contained,
if any change in any law or regulation or in interpretation thereof by any
governmental authority charged with the administration or interpretation thereof
shall make it unlawful for any Bank to make or maintain any Eurodollar Loan or
to give effect to its obligations as contemplated hereby, then, by written
notice to the Borrower, such Bank may:
(1) Declare that Eurodollar Loans will not thereafter be
made by such Bank hereunder, whereupon the Borrower shall be prohibited from
requesting Eurodollar Loans from such Bank hereunder unless such declaration is
subsequently withdrawn; and
(2) Require that all outstanding Eurodollar Loans made
by it be converted to Floating Rate Loans, in which event (a) all such
Eurodollar Loans shall be automatically converted to Floating Rate Loans as of
the effective date of such notice as provided in paragraph (B) below and (b) all
payments and prepayments of principal that would otherwise have been applied to
repay the converted Eurodollar Loans shall instead be applied to repay the
Floating Rate Loans resulting from the conversion of such Eurodollar Loans.
(B) For purposes of this Paragraph 2.9, a notice to the
Borrower by any Bank pursuant to (A) above shall be effective, if lawful, on the
last day of the then current Interest Period; in all other cases, such notice
shall be effective on the date of receipt by the Borrower.
25
2.10 Payment to the Agent.
(A) The Agent shall send the Borrower statements of all
amounts due hereunder, which statements shall be considered correct and
conclusively binding on the Borrower unless the Borrower notifies the Agent to
the contrary within one hundred eighty (180) days of its receipt of any
statement to which it objects. All sums payable to the Banks hereunder shall be
paid directly to the Agent for the account of each Bank in immediately available
funds prior to 12:00 noon, Nashville time, on the date when such sums are due
and payable. Any amounts received by the Agent after 12:00 noon Nashville time
on any Business Day shall be deemed to have been received on the next Business
Day. Alternatively, at its sole discretion, the Agent may charge against any
deposit account of the Borrower maintained with any of the Banks all or any part
of any amount due pursuant to this Agreement.
(B) Each payment made to the Agent on the Notes or for other
sums or fees due hereunder for the account of the Banks shall be properly
remitted by the Agent to each Bank, pro rata in accordance with the outstanding
unpaid principal amount of the Notes held by each Bank, no later than 2:00 p.m.
Nashville time on the date on which Agent receives such payment.
(C) Borrower shall give Agent two (2) Business Days notice of
payments of principal and/or interest other than payments on a regularly
scheduled payment date set forth herein.
SECTION III. CONDITIONS PRECEDENT
The obligation of the Banks to fund and/or continue funding the
Loans hereunder is subject to the following conditions precedent:
3.1 Documents Required for the Closing. The Borrower shall have
delivered to the Agent prior to the initial disbursement of the Loans the
following:
(A) The Notes;
(B) Stock Pledge Agreements (collectively the "Stock Pledge
Agreements") in the form attached hereto as Exhibit E, including Schedule I
thereto, duly executed by the Borrower, together with certificates representing
the shares pledged thereby, duly endorsed in blank, and stock powers duly
endorsed in blank;
(C) Duly executed Guaranty and Suretyship Agreement
(collectively the "Guaranty and Suretyship Agreements") of the Guarantor, in the
form attached hereto as Exhibit F;
(D) The Financing Statements and mortgagee waivers required by
Section IV;
26
(E) A copy of resolutions of the Borrower's board of
directors, certified by the corporate secretary of Borrower as of the date of
Closing, authorizing the execution, delivery and performance of this Agreement,
the Notes, the Collateral Documents, and each other document to be delivered
pursuant hereto;
(F) A copy of resolutions of each Subsidiary's board of
directors, certified as of the date of Closing by the secretary of each of such
corporations, authorizing the execution, delivery and performance of any
documents to be delivered by such corporation pursuant to this Agreement,
including without limitation any of the Collateral Documents.
(G) A copy, certified as of the most recent date practicable,
by the applicable Secretaries of State of, of the Borrower's and each
Subsidiary's Charter, together with a certificate dated the date of the Closing
of the Borrower's corporate secretary to the effect that such certificates of
incorporation have not been amended since the date of the aforesaid Secretary of
State certifications;
(H) A copy of the Borrower's by-laws certified by Borrower's
secretary as of the date of the Closing;
(I) A certificate dated the date of the Closing of the
Borrower's corporate secretary as to the incumbency and signatures of the
officers of the Borrower executing this Agreement, the Notes, the Collateral
Documents, and each other document to be delivered pursuant hereto;
(J) A certificate dated the date of the Closing of each
Subsidiary's corporate secretary as to the incumbency and signatures of the
officers of each of such corporation executing any document to be delivered
pursuant hereto, including without limitation any of the Collateral Documents.
(K) Certificates, as of the most recent dates practicable, of
the aforesaid Secretary of State and the Secretary of State of each state in
which the Borrower is qualified as a foreign corporation as to the good standing
of the Borrower;
(L) Copies of the executed Service Agreements with Vero
Orthopaedics, P.A., Princeton Orthopaedic Associates II, P.A., Reconstructive
Orthopaedic Associates II, P.C., TOC Specialists, P.L., and Greater Chesapeake
Orthopaedic Associates, L.L.C.
(M) A written opinion of Messrs. Baker, Donelson, Bearman &
Xxxxxxxx, the Borrower's counsel, dated the date of the Closing and addressed
individually to each Bank, in the form attached hereto as Exhibit G and
otherwise satisfactory to the Banks.
(N) A certificate, dated the date of the Closing, signed by
the president, vice president, chief financial officer, or corporate controller
of the Borrower and to the effect that:
27
(1) The representations and warranties set forth within
Paragraph 5.1 are true as of the date of the Closing;
(2) No Event of Default hereunder, and no event which,
with the giving of notice or passage of time or both, would become such an Event
of Default, has occurred as of such date;
(3) All of the Collateral Documents are and shall remain
in full force and effect.
(O) Copies of all documents evidencing the terms and
conditions of any debt specified as Subordinated Indebtedness on Exhibit C in
form and substance satisfactory to Banks;
(P) A Federal Reserve Form (or Forms) U-1, duly completed and
executed by the Borrower and each Pledgor.
3.2 Documents Required for All Subsequent Disbursements. At the
Closing, and as an express condition precedent to each disbursement of a Loan
after the Closing, the Borrower shall deliver to the Agent a true and accurate
certificate together with any Borrowing Notice, dated the date on which such
disbursement is to be made, signed by the president, vice president, chief
financial officer, or corporate controller of the Borrower and to the effect
that:
(A) As of the date thereof, no Event of Default has occurred
and is continuing, and no event has occurred and is continuing that, with the
giving of notice or passage of time or both, would be an Event of Default;
(B) The amount of the disbursement, when added to the then
outstanding balance of the Loans, does not exceed the current Borrowing Base;
(C) The disbursement will be used only as permitted in
Paragraph 2.2, together with a breakdown showing the intended uses (i.e.,
Permitted Acquisition, Capital Expenditure, or Working Capital) of the requested
disbursement and the actual uses and running total of all outstanding
disbursements;
(D) No Material Adverse Change has occurred since the date of
the Financial Statements or the date of the Closing, as applicable; and
(E) All of the Collateral Documents remain in full force and
effect, and Borrower has provided or caused to be provided such additional
Collateral Documents as required by Paragraph 6.2(M).
If any of the foregoing statements is not true and correct in the judgment of
the Banks, then the Banks shall have no obligation to fund the requested
disbursement.
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3.3 Information Required for Permitted Acquisition. Not less than
five (5) Business Days prior to entering into any Permitted Acquisition,
Borrower shall submit to each of the Banks the following information in form and
scope satisfactory to Banks:
(A) A copy of the signed letter of intent and a current draft
of the acquisition agreement with all prepared exhibits, including the Service
Agreement, any seller financing documents, and any lease agreements;
(B) A written description of the company to be acquired,
including location and type of centers, key management, and real estate assets
(including legal descriptions of any owned real estate), if any;
(C) Historical financial statements (reviewed or audited) of
the Permitted Acquisition for the prior two years and the most recent interim
statement;
(D) Two (2) years of consolidated financial projections for
both the Borrower and its Subsidiaries as well as the Person being acquired
commencing from the anticipated date of closing the Acquisition and giving pro
forma effect to any Indebtedness associated with or to be incurred as a result
of the Acquisition;
(E) Copy of acquisition analysis done by Borrower preparatory
to making the Permitted Acquisition;
provided, if the Banks have not approved in writing such acquisition as being a
Permitted Acquisition under Paragraph 6.2(M) within said five (5) day period,
the acquisition and any related disbursement (if any) shall be deemed not a
Permitted Acquisition. If the Borrower requests such in writing, the Banks agree
to notify the Borrower of any reasons for the rejection.
3.4 Legal Matters. At the time of the Closing and thereafter, all
legal matters incidental to the Loans shall be satisfactory to Messrs. Boult,
Cummings, Xxxxxxx & Xxxxx, counsel to the Banks.
SECTION IV. COLLATERAL SECURITY
4.1 Composition of the Collateral. The property in which a security
interest is granted pursuant to the provisions of Paragraphs 4.2 and 4.3 is
herein collectively called the "Collateral." The Collateral, together with all
of the Borrower's and any Subsidiary's other property of any kind, both real and
personal, held by, assigned to, mortgaged to or conveyed in favor of the Banks,
shall stand as one general, continuing collateral security for all Obliga tions
and may be retained by the Agent and/or Banks until all Obligations have been
satisfied in full.
4.2 Rights in Property Held by the Banks. As security for the prompt
satisfaction of all Obligations and all Guaranties of the Obligations, the
Borrower and each Sub sidiary hereby assign, transfer and set over to the Banks
all of their right, title and interest in
29
and to, and grant the Banks a lien on and a security interest in, all amounts
that may be owing from time to time by the Banks to the Borrower or such
Subsidiary in any capacity, including, but without limitation, any balance or
share belonging to the Borrower or such Subsidiary of any deposit or other
account with the Banks, which lien and security interest shall be independent of
any right of set-off which the Banks may have.
4.3 Rights in Property of the Borrower and Subsidiaries. As further
security for the prompt satisfaction of all Obligations and all Guaranties of
the Obligations, the Borrower and each Subsidiary hereby assign to the Banks by
and through the Agent all of their respective right, title and interest in and
to, and grant the Banks a lien upon and security interest in, all of the
following, wherever located, whether now owned or hereafter acquired, together
with all substitutions, replacements, improvements, accessions or appurtenances
thereto, and proceeds (including without limitation insurance proceeds) thereof:
(A) Accounts;
(B) Chattel Paper;
(C) Contract Rights;
(D) Documents;
(E) Equipment;
(F) Fixtures;
(G) General Intangibles;
(H) Instruments;
(I) Inventory;
(J) Service Agreements;
(K) The Pledged Stock; and
(L) All Records pertaining to any other Collateral.
4.4 Priority of Liens. The foregoing liens shall be first and prior
liens except for (1) any Permitted Liens on assets which have priority or would
have priority by the operation of Laws, and (2) any Accounts that may not be
legally assignable under applicable federal Medicare and Medicaid laws and
regulations.
4.5 Financing Statements.
(A) The Borrower and each Subsidiary will:
(1) Join with the Agent in executing such additional
Financing Statements (including amendments thereto and continuation statements
thereof) in form satisfactory to the Banks as the Banks may specify;
(2) Pay or reimburse the Banks for all costs and taxes
of filing or recording the same in such public offices as the Banks may
designate, and performing subsequent verification searches; and
30
(3) Take such other steps as the Banks may reasonably
direct, including the noting of the Banks' lien on the Collateral and on any
certificates of title therefor all to perfect the Banks' security interest in
the Collateral.
(B) A carbon, photographic, or other reproduction of this
Agreement shall be sufficient as a financing statement and may be filed in any
appropriate office in lieu thereof.
(C) To the extent lawful, the Borrower and each Subsidiary
hereby appoint the Agent as their attorney-in-fact (without requiring the Agent
to act as such) to execute any Financing Statement in the name of the Borrower
or such Subsidiary, and to perform all other acts that the Agent reasonably
deems appropriate to perfect and continue the Banks' security interest in, and
to protect and preserve, the Collateral.
4.6 Collection of Receivables. Following the occurrence of any Event
of Default and for so long as such Event of Default remains uncured, upon demand
of the Majority Banks, Borrower and each Subsidiary shall deposit or cause to be
deposited, all checks, drafts, cash, and other remittances received in payment
of services rendered or inventory sold or in payment or on account of its
accounts, immediately upon receipt thereof with Agent in one or more special
"lockboxed" bank accounts maintained with Agent, over which the Majority Banks
alone have power of withdrawal. The funds in said special bank accounts shall,
to the maximum extent allowed by applicable law, be held by the Banks as
security for all loans made hereunder and all other Obligations of Borrower to
the Banks secured hereby. Said proceeds shall be deposited in precisely the form
received, except for the endorsement of Borrower and each Sub sidiary where
necessary to permit collection, which endorsement Borrower and each Subsidiary
agree to make and which Agent also hereby is irrevocably authorized to make on
their behalf. Pending such deposit, Borrower and each Subsidiary agree that they
will not commingle any such checks, drafts, cash, and other remittances with any
of their funds or property, but will hold them separate and apart therefrom and
upon an express trust for the Banks until deposit thereof is made in the said
special bank account. At least twice weekly, Agent will apply the whole or any
part, as the Majority Banks deem appropriate, of the collected funds on deposit
in the said special bank accounts against the principal and/or interest of any
loans made hereunder and/or on Borrower's other Obligations secured hereby, the
order and method of such application to be in the discretion of the Majority
Banks. Any portion of said funds on deposit in the special bank account that the
Majority Banks elect not to apply will be paid over by Agent to Borrower.
4.7 Mortgagees' Waivers. At the request of the Majority Banks, the
Borrower will cause each mortgagee of all real estate owned by the Borrower or
any Subsidiary, to execute and deliver to the Agent instruments, in form and
substance satisfactory to the Banks, by which such mortgagee waives its rights,
if any, to any portion of the Collateral located on such premises, and agrees to
provide Agent notice of and an opportunity to cure any default by Borrower or
such Subsidiary under such mortgage.
31
SECTION V. REPRESENTATIONS AND WARRANTIES
5.1 Original. To induce the Banks to enter into this Agreement, the
Borrower and each Subsidiary jointly and severally represent and warrant to each
Bank as of the Closing and initial funding hereunder as follows:
(A) The Borrower is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware; each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the Laws of its state of incorporation, all as set forth in
Exhibit H; the Borrower and each Subsidiary have the lawful power to own their
properties and to engage in the business they conduct, and each is duly
qualified and in good standing as a foreign corporation in the jurisdictions
wherein the nature of the business transacted by it or property owned by it is
both material and makes such qualification necessary; the states in which the
Borrower and each Subsidiary are qualified to do business are set forth in
Exhibit H; the percentage of the Borrower's ownership of the outstanding stock
of each Subsidiary is as listed in Exhibit H; and the addresses of all places of
business of the Borrower and each Subsidiary are as set forth in Exhibit I;
(B) Neither the Borrower nor any Subsidiary is in default with
respect to any of its existing Indebtedness, and the making and performance of
this Agreement, the Notes and the Collateral Documents will not (immediately, or
with the passage of time or the giving of notice, or both):
(1) Violate the charter or bylaw provisions of the
Borrower or any Subsidiary, or violate any Laws (except with respect to the
assignment of Accounts due from Medicare and Medicaid), or result in a default
under any material contract, agreement, or instrument to which the Borrower or
any Subsidiary is a party or by which the Borrower or any Subsidiary or its
property is bound; or
(2) Result in the creation or imposition of any security
interest in, or lien or encumbrance upon, any of the assets of the Borrower or
any Subsidiary, except in favor of the Banks;
(C) The Borrower and each Subsidiary have the power and
authority to enter into and perform this Agreement, the Notes and the Collateral
Documents, as applicable, and to incur the Obligations herein and therein
provided for, and have taken all corporate action necessary to authorize the
execution, delivery, and performance of this Agreement, the Notes and the
Collateral Documents;
(D) This Agreement and the Collateral Documents are, and the
Notes when delivered will be, valid, binding, and enforceable in accordance with
their respective terms subject to the general principles of equity (regardless
of whether such question is considered in a proceeding in equity or at law) and
to applicable bankruptcy, insolvency, moratorium, fraudulent or preferential
conveyance and other similar laws affecting generally the enforcement of
creditors' rights;
32
(E) The Pledgors own the Pledged Stock; the Pledged Stock
constitutes one hundred percent (100%) of the issued and outstanding capital
stock of the respective issuers thereof; and the Pledged Stock has been duly
issued, is fully paid and non-assessable, and except as disclosed in Exhibit J
is free of all claims, security interests, liens, charges and encumbrances;
(F) Except as disclosed in Exhibit K hereto, there is no
pending or threatened order, notice, claim, litigation, proceeding or
investigation against or affecting the Borrower or any Subsidiary, whether or
not covered by insurance, that would involve the pay ment of One Hundred
Thousand Dollars ($100,000.00) or more if adversely determined;
(G) The Borrower and its Subsidiaries have good and marketable
title to all of their respective assets, including without limitation the
Collateral and the Real Property, subject to no security interest, encumbrance
or lien, or the claims of any other Person except for Permitted Liens;
(H) The Financial Statements, including any schedules and
notes pertaining thereto, have been prepared in accordance with generally
accepted accounting principles consistently applied, and fully and fairly
present the financial condition of the Borrower and its Subsidiaries at the
dates thereof and the results of operations for the periods covered thereby, and
there have been no Material Adverse Change in the consolidated financial
condition or business of the Borrower and its Subsidiaries from December 31,
1995 to the date hereof;
(I) As of the date hereof, the Borrower and its Subsidiaries
had no Indebtedness of any nature, including, but without limitation,
liabilities for taxes and any interest or penalties relating thereto, except to
the extent reflected (in a footnote or otherwise) and reserved against in the
December 31, 1995 Financial Statements or as disclosed in or permitted by this
Agreement; the Borrower does not know, and has no knowledge of any basis for the
assertion against it or any Subsidiary as of the date hereof, of any material
Indebtedness of any nature not fully reflected and reserved against in the
December 31, 1995 Financial Statements;
(J) Except as otherwise permitted herein, the Borrower and its
Subsidiaries have filed all federal, state and local tax returns and other
reports they are required by Laws to file prior to the date hereof and which are
material to the conduct of their respective businesses, have paid or caused to
be paid all taxes, assessments and other governmental charges that are due and
payable prior to the date hereof, and have made adequate provision for the
payment of such taxes, assessments or other charges accruing but not yet
payable; the Borrower has no knowledge of any deficiency or additional
assessment in connection with any taxes, assessments or charges not provided for
on its books;
(K) Except as otherwise disclosed in Exhibit L hereto, or
except to the extent that the failure to comply would not have a Material
Adverse Effect on the Borrower or any Subsidiary, the Borrower and its
Subsidiaries have complied in all material respects with all applicable Laws
with respect to: (1) any restrictions, specifications, or other requirement
33
pertaining to services that the Borrower or any Subsidiary performs, including
Fraud and Abuse Law; (2) the conduct of their respective businesses; (3) the
use, maintenance, and operation of the real and personal properties owned or
leased by them in the conduct of their respective businesses; and (4) health,
safety, worker's compensation, and equal employment opportunity;
(L) The Borrower and its Subsidiaries and their respective
assets and operations are in compliance in all material respects with all
Environmental Laws, and the Borrower and its Subsidiaries will comply in all
material respects with all such Environmental Laws and regulations which may be
imposed in the future; all plants, facilities and properties owned by the
Borrower and its Subsidiaries are and will be on the date of Closing in a clean
and healthful condition, free of asbestos and of all contamination by Hazardous
Materials and other potentially harmful chemical or physical conditions,
including, without limitation, any contamination of the air, soil, groundwater
or surface waters associated with or adjacent to such plants, facilities and
properties; all storage tanks (whether above or below ground) located in or on
such plants, facilities and properties are in sound condition, free or corrosion
or leaks that could allow or threaten the release of any stored material; no
Hazardous Materials have been or are used, stored, treated or disposed of in
violation of applicable Laws and regulations; and neither the Borrower nor any
Subsidiary is a defendant in any administrative or judicial action alleging
liability under the Comprehensive Environmental Response, Compensation and
Liability Act, as amended ("CERCLA"), nor has the Borrower or any Subsidiary
received a notice that it is a potentially responsible party under CERCLA or
similar state Laws.
(M) No representation or warranty by the Borrower or any
Subsidiary contained herein or in any certificate or other document furnished by
the Borrower or any Subsidiary pursuant to this Agreement contains any untrue
statement of material fact or omits to state a material fact necessary to make
such representation or warranty not misleading in light of the circumstances
under which it was made;
(N) Each consent, approval or authorization of, or filing,
registration or qualification with, any Person required to be obtained or
effected by the Borrower or any Subsidiary in connection with the execution and
delivery of the Loan Documents or the undertak ing or performance of any
obligation thereunder has been duly obtained or effected;
(O) All existing Indebtedness: (1) for money borrowed; or (2)
under any security agreement or mortgage from the Borrower or any Subsidiary is
described in Exhibit B, unless the same are immaterial (i.e., less than
$25,000.00 in amount);
(P) Except as described on Exhibit M hereto, the Borrower and
its Subsidiaries have no material lease, contract or commitment of any kind
(such as employment agreements; collective bargaining agreements; powers of
attorney; distribution arrangements; patent license agreements; contracts for
future purchase or delivery of goods or rendering of services; bonus, pension
and retirement plans; or accrued vacation pay, insurance and welfare agreements)
which would be required to be listed as an Exhibit to the Borrower's Annual
Report on Form 10-K; all parties (including the Borrower and Subsidiaries) to
all such material leases, contracts and other commitments to which the Borrower
or any Subsidiary is a party have
34
complied with the provisions of such leases, contracts and other commitments; no
party is in default under any provision thereof; and no event has occurred
which, but for the giving of notice or the passage of time, or both, would
constitute a default;
(Q) Neither the Borrower nor any Subsidiary has made any
agreement or has taken any action which may cause anyone to become entitled to a
commission or finder's fee as a result of the making of the Loans;
(R) All Defined Benefit Pension Plans, as defined in the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), of the
Borrower and each Subsidiary meet, as of the date hereof, the minimum funding
standards of Section 302 of ERISA, and no Reportable Event or Prohibited
Transaction, as defined in ERISA, has occurred with respect to any such Plan.
5.2 Survival. All of the representations and warranties set forth in
Paragraph 5.1 shall survive until all Obligations are satisfied in full.
SECTION VI. THE BORROWER'S COVENANTS
The Borrower does hereby covenant and agree with each Bank that, so
long as any of the Obligations remain unsatisfied, it will comply, and it will
cause its Subsidiaries to comply, with the following covenants:
6.1 Affirmative Covenants.
(A) The Borrower will use the proceeds of the Loans only for
the purposes described in Paragraph 2.2 and will furnish the Agent such evidence
as it may reasonably require with respect to such use.
(B) The Borrower will furnish the Banks:
(1) Within thirty (30) days after the close of each
calendar month in each fiscal year of the Borrower and its Subsidiaries: (a)
consolidated statements of cash flows of the Borrower and its Subsidiaries for
such month; (b) consolidated income statements of the Borrower and its
Subsidiaries for such month; and (c) consolidated balance sheets of the Borrower
and its Subsidiaries as of the end of such month -- all in reasonable detail,
subject to year-end audit adjustments, and certified by Borrower's president,
vice-president, chief financial officer, or corporate controller to have been
prepared in accordance with generally accepted accounting principles
consistently applied by the Borrower and its Subsidiaries, except for any
inconsistencies explained in such certificate;
(2) Within forty-five (45) days after the close of each
quarter-annual accounting period in each fiscal year of Borrower and its
Subsidiaries, a current Same Clinic Revenue and Income Report, together with the
following: (a) a consolidated statement of cash flows of the Borrower and its
Subsidiaries for such quarter annual period; (b)
35
consolidated income statements of the Borrower and its Subsidiaries for such
quarter-annual period; and (c) consolidated balance sheets of the Borrower and
its Subsidiaries as of the end of such quarter-annual period--all in reasonable
detail, subject to year-end audit adjustments, compared to budget, and certified
by the Borrower's president, vice president, chief financial officer, or
corporate controller to have been prepared in accordance with generally accepted
accounting principles consistently applied by the Borrower and its Subsidiaries,
except for any inconsistencies explained in such certificate;
(3) Within one hundred twenty (120) days after the close
of each fiscal year of Borrower and its Subsidiaries: (a) consolidated
statements of cash flows of the Borrower and its Subsidiaries for such fiscal
year; (b) consolidated and consolidating income statements of the Borrower and
its Subsidiaries for such fiscal year; and (c) consolidated and consolidating
balance sheets of the Borrower and its Subsidiaries as of the end of such fiscal
year--all in reasonable detail, including all supporting schedules, notes and
comments; the consolidated statements and balance sheets shall be audited by
Ernst & Young or another independent certified public accountant selected by the
Borrower and reasonably acceptable to the Banks, and certified by such
accountants to have been prepared in accordance with generally accepted
accounting principles consistently applied by the Borrower and its Subsidiaries,
except for any inconsistencies explained in such certificate, and the
consolidating statements shall be internally prepared by Borrower's controller
and certified to the Agent as true and correct. The Banks shall have the right,
from time to time, to discuss the Borrower's affairs directly with the
Borrower's independent certified public accountants after notice to the Borrower
and opportunity of the Borrower to be present at any such discussions;
(4) As soon as reasonably practicable but in any event
within forty-five (45) days after the close of each quarter-annual accounting
period in each fiscal year of the Borrower and its Subsidiaries, a certificate
of the president, vice president, chief financial officer or corporate
controller of the Borrower stating that: (i) such officer has individually
reviewed the provisions of this Agreement; (ii) a review of the activities of
the Borrower and its Subsidiaries during such year or quarter-annual period, as
the case may be, has been made by such officer or under such officer's
supervision, with a view to determining whether the Borrower has fulfilled all
its obligations under this Agreement; and (iii) to the best of such officer's
knowledge, the Borrower has observed and performed each undertaking contained in
this Agreement and is not in default in the observance or performance of any of
the provisions hereof or, if the Borrower shall be so in default, specifying all
such defaults and events of which he may have knowledge. Such certificate shall
further set forth (i) the calculations of the Borrowing Base, and (ii) the
financial ratios and covenants set forth in Paragraph 6.1(F), including without
limitation any antecedent calculations and the source of any information that
was used in such calculations;
(5) Within sixty (60) days of the close of the prior
fiscal year, a copy of Borrower's proposed income, expense and capital budget
for the present fiscal year, including within the capital budget a listing of
proposed non-financed Capital Expenditures;
36
(6) Promptly after the sending or making available or
filing of the same, copies of all correspondence, reports, proxy statements and
financial statements that the Borrower sends or makes available to its
stockholders and all registration statements and reports that the Borrower files
with the Securities and Exchange Commission or any successor Person; and
(7) Within ten (10) days of receipt of the same by
Borrower or any Subsidiary, copies of all management letters and any other
reports which are submitted to the Borrower or any of its Subsidiaries by its
independent accountants in connection with any annual or interim audit of the
Records of the Borrower or its Subsidiaries by such accountants.
(C) The Borrower and its Subsidiaries will maintain their
respective Inventory, Equipment, Real Property and other properties in good
condition and repair (normal wear and tear excepted), and will pay and discharge
or cause to be paid and discharged when due, the cost of repairs to or
maintenance of the same, and will pay or cause to be paid all rental or mortgage
payments due on such Equipment or Real Property. The Borrower hereby agrees
that, in the event it or any Subsidiary fails to pay or cause to be paid any
such payment, the Banks may do so and be reimbursed by the Borrower therefor.
(D) The Borrower and its Subsidiaries will maintain, or cause
to be maintained, public liability insurance, medical malpractice insurance, and
fire and extended coverage insurance on all assets owned by them, all in such
form and amounts as are consistent with industry practices and with such
insurers as may be reasonably satisfactory to the Banks. Such policies shall
name the Banks as loss payees under a standard mortgagee loss payee clause and
as an additional insured, as their interests may appear, and shall contain a
provision whereby they cannot be canceled except after thirty (30) days' written
notice to the Agent. The Bor rower will furnish to the Agent such evidence of
insurance as the Banks may require. The Borrower hereby agrees that, in the
event it or any Subsidiary fails to pay or cause to be paid the premium on any
such insurance, the Banks may do so and be reimbursed by the Borrower therefor.
The Agent is hereby appointed the Borrower's attorney-in-fact (without requiring
the Agent to act as such) to endorse any check which may be payable to the
Borrower to collect such returned or unearned premiums or the proceeds of such
insurance, and any amounts so collected may be applied by the Agent toward
satisfaction of any of the Obligations.
(E) The Borrower and its Subsidiaries will pay or cause to be
paid when due, all taxes, assessments and charges or levies imposed upon them or
on any of their property or which any of them is required to withhold or pay
over, except where contested in good faith by appropriate proceedings with
adequate security therefor having been set aside in a manner satisfactory to
Banks. The Borrower and each Subsidiary shall pay or cause to be paid all such
taxes, assessments, charges or levies forthwith whenever foreclosure on any lien
that attaches (or security therefor) appears imminent.
(F) The Borrower will maintain the following financial ratios
and covenants:
37
(1) Funded Debt to Cash Flow. At the end of each fiscal
quarter, a ratio of Funded Debt to Consolidated Cash Flow for the four (4)
quarters just ended of not greater than 2.25 to 1.0; provided, following the
completion of a Successful IPO, the ratio shall increase from 2.25 to 1.0 to
3.25 to 1.0.
(2) Current Ratio. A ratio of Consolidated Current
Assets to Consolidated Current Liabilities of not less than 2.00 to 1.00 at all
times.
(3) Shareholders Equity. At all times, Shareholders
Equity in the amount of not less than Seven Million Dollars ($7,000,000.00) plus
(i) eighty-five percent (85%) of Consolidated Net Income (no decreases for net
losses) on a cumulative basis from the date hereof and (ii) one hundred percent
(100%) of the amount of any new contributions to the capital of Borrower.
(4) Funded Debt to Consolidated Capital. At the end of
each fiscal quarter, a ratio of Funded Debt to Consolidated Capital of not more
than 0.5 to 1.0.
(5) Debt Service Coverage. At the end of each fiscal
quarter, a ratio of Adjusted Consolidated Cash Flow for the four (4) quarters
just ended divided by Debt Service for such four (4) quarter period of not less
than 1.25 to 1.0 from the Closing through March 31, 1997, and no less than 1.50
to 1.00 thereafter.
(6) Borrowing Base. Commencing as of the most recent
Borrowing Base Adjustment Date and continuing thereafter until the next
Borrowing Base Adjustment Date, the aggregate outstanding principal amount of
the Loans shall not at any time exceed the Borrowing Base then in effect. In the
event that the outstanding principal balance of the Loans exceeds the applicable
Borrowing Base, then Borrower shall immediately pay to Agent and in accordance
with Paragraph 2.10 such excess amounts by which the aggregate outstanding
principal amount of the Obligations exceeds such Borrowing Base.
(G) The Borrower and its Subsidiaries will, when requested so
to do, make available any of their Records for inspection during regular
business hours by duly authorized representatives of the Banks, and will furnish
the Banks any information regarding their business affairs and financial
condition within a reasonable time after written request therefor.
(H) The Borrower and its Subsidiaries will take all necessary
steps to renew, keep in full force and effect, and preserve their corporate
existence, good standing, and franchises, and will comply in all material
respects with all present and future Laws (including, but not limited to, Fraud
and Abuse Laws) applicable to them in the operation of their musculoskeletal
clinics and centers. The Borrower and any Subsidiary shall further use its best
efforts to assure the compliance by all Providers with all applicable Laws,
including, but not limited to, medical licensure and Fraud and Abuse Laws
relating to their providing of professional services. The Borrower and its
Subsidiaries will preserve, renew and keep in full force and effect all material
contracts, leases, governmental licenses, authorizations, consents
38
and approvals, rights, privileges and franchises necessary in the normal course
of business, including without limitation maintaining in full force and effect
Medicare certification for all musculoskeletal centers and agencies.
(I) The Borrower and its Subsidiaries will collect their
Accounts and sell their Inventory only in the ordinary course of business. If
any Accounts should be evidenced by promissory notes, then the holders shall
immediately deliver the same to Agent, appropriately endorsed to Agent's order.
The Borrower and each Subsidiary hereby waive presentment, demand, notice of
dishonor, protest, notice of protest, and all other notices with respect
thereto.
(J) The Borrower and its Subsidiaries will keep accurate and
complete Records of their Accounts, Inventory and Equipment, consistent with
sound business practices.
(K) The Borrower and its Subsidiaries will give immediate
notice to the Agent of: (1) any litigation or proceeding in which any of them is
a party if an adverse decision therein would require them to pay over more than
Five Hundred Thousand Dollars ($500,000.00) or deliver assets the value of which
exceeds such sum (if such claim is not considered to be covered by insurance) or
pay over more than One Million Dollars ($1,000,000.00) (if such claim is
considered to be covered by insurance); and (2) the institution of any other
suit or proceeding involving any of them, or the overt threat thereof, that
might result in a Material Adverse Change.
(L) Within ten (10) days of the Agent's request therefor, the
Borrower will furnish the Agent with copies of federal income tax returns filed
by the Borrower.
(M) The Borrower and its Subsidiaries will pay when due (or
within applicable grace periods) all Indebtedness for borrowed money due any
Person, except when the amount thereof is being contested in good faith by
appropriate proceedings and with adequate security therefor being set aside in a
manner satisfactory to Banks. If default is made by the Borrower or any
Subsidiary in the payment of any principal (or installment thereof) of, or
interest on, any such Indebtedness, the Banks shall have the right, in their
discretion, to pay such interest or principal for the account of the Borrower or
such Subsidiary and be reimbursed by the Borrower therefor.
(N) The Borrower and its Subsidiaries will notify the Agent
immediately if any of them becomes aware of the occurrence of any Event of
Default or of any fact, condition or event that only with the giving of notice
or passage of time or both, could become an Event of Default, or of the failure
of the Borrower or any Subsidiary to observe any of their respective
undertakings hereunder.
(O) The Borrower and its Subsidiaries will notify the Agent
thirty (30) days in advance of any change in (i) the name of the Borrower or any
Subsidiary, (ii) the location of any Collateral, (iii) the location of any of
their places of business or (iv) of the establishment of any new, or the
discontinuance of any existing, place of business.
39
(P) Borrower and its Subsidiary will (i) maintain compliance
with any applicable Environmental Laws, (ii) obtain and maintain, and cause each
of its Subsidiaries to obtain and maintain, any and all material permits
required by applicable Environmental Laws in connection with its or its
Subsidiaries' operations and (iii) dispose of, and cause each of its
Subsidiaries to dispose of, any and all Hazardous Materials only at facilities
and with carriers reasonably believed to possess valid permits under RCRA, if
applicable, and any applicable state and local Environmental Laws. The Borrower
shall use its best efforts, and cause each of its Subsidiaries to use its best
efforts, to obtain all certificates required by law to be obtained by the
Borrower and its Subsidiaries from all contractors employed by the Borrower or
any of its Subsidiaries in connection with the transport or disposal of any
Hazardous Materials.
(Q) If the Borrower or any of its Subsidiaries shall:
(1) receive written notice that any material violation
of any Environmental Laws may have been committed or is about to be committed by
the Borrower or any of its Subsidiaries;
(2) receive written notice that any administrative or
judicial complaint or order has been filed or is about to be filed against the
Borrower or any of its Subsidiaries alleging any material violation of any
Environmental Laws or requiring the Borrower or any of its Subsidiaries to take
any action in connection with the release or threatened release of Hazardous
Substances or solid waste into the environment; or
(3) receive written notice from a federal, state,
foreign or local governmental agency or private party alleging that the Borrower
or any of its Subsidiaries is liable or responsible for costs associated with
the response to cleanup, stabilization or neutralization of any environmental
activity;
then it shall provide the Agent with a copy of such notice within ten (10)
Business Days of the Borrower's or such Subsidiary's receipt thereof.
(R) Borrower agrees that Agent may from time to time, but not
more frequently than once per calendar year absent an Unmatured Default or an
Event of Default, request in writing the opinion of in-house counsel and/or
outside healthcare counsel to the Borrower as to the absence, except as
disclosed in the opinion, of such counsel's knowledge of any actual, threatened
or asserted violation of any Fraud and Abuse Law on the part of the Borrower,
any Subsidiary and/or the Providers, and the sufficiency of documentation then
in use for the acquisition of Practices as complying with Fraud and Abuse Laws.
Absent the existence of an Unmatured Default or and Event of Default, such
opinions shall require no special diligence on the part of the opining
attorney(s), but only requiring a report of matters then known to such
attorneys, unless Agent specifically inquires about facts that Agent reasonably
believes may raise a Fraud and Abuse Law issue. Such opinions shall be in form
and substance acceptable to Agent, shall be delivered to Agent at Borrower's
expense within fifteen (15) days of the date of request and shall address
specifically any facts inquired of in Agent's request.
40
(S) The Borrower and its Subsidiaries will: (1) fund all their
Defined Benefit Pension Plans in accordance with no less than the minimum
funding standards of Section 302 of ERISA and Section 412 of the Internal
Revenue Code; (2) furnish the Agent, promptly after the filing of the same, with
copies of all reports or other statements filed with the United States
Department of Labor or the Internal Revenue Service with respect to all such
Plans; and (3) promptly advise the Agent of the occurrence of any Reportable
Event or Prohibited Transaction with respect to any such Plan.
6.2 Negative Covenants.
(A) Neither the Borrower nor any Subsidiary will enter into
any merger, consolidation, reorganization or recapitalization, or reclassify its
capital stock; provided, any Subsidiary may merge into the Borrower or into any
Subsidiary provided the Agent is given not less than thirty (30) days prior
written notice thereof and provided the surviving entity is the Borrower or a
Subsidiary which is a party to this Agreement.
(B) Neither the Borrower nor any Subsidiary will sell,
transfer, lease or otherwise dispose of all or any material part of its assets;
provided, however, Borrower and its Subsidiaries may in the ordinary course of
business sell or dispose of obsolete Equipment or Inventory, or may replace
damaged or worn Equipment with Equipment of similar value and use.
(C) Neither the Borrower nor any Subsidiary will mortgage,
pledge, grant or permit to exist a security interest in or lien upon any of its
assets of any kind, now owned or hereafter acquired, except for Permitted Liens.
(D) Neither the Borrower nor any Subsidiary will become
liable, directly or indirectly, as guarantor or otherwise, for any obligation of
any other Person, except for: (1) the endorsement of commercial paper for
deposit or collection in the ordinary course of business, (2) guarantees of
Permitted Acquisition Indebtedness, and (3) leases permitted under 6.2(E)(7).
(E) Neither the Borrower nor any Subsidiary will incur,
create, assume, or permit to exist any Indebtedness except: (1) the Loans; (2)
existing Indebtedness as set forth in Exhibit B; (3) trade Indebtedness incurred
in the ordinary course of business; (4) contingent Indebtedness permitted by
Paragraph 6.2(D); (5) Indebtedness, including Permitted Acquisition
Indebtedness, secured by Permitted Liens; (6) Indebtedness owed by any
Subsidiary of the Borrower to the Borrower, by the Borrower to any Subsidiary of
the Borrower, or by a Subsidiary of the Borrower to any other Subsidiary of the
Borrower, provided that if any such Indebtedness is evidenced by a document or
instrument, the same is pledged pursuant to an appropriate pledge agreement; (7)
lease obligations not otherwise prohibited by the financial ratios in Paragraph
6.1(F); and (8) Indebtedness assumed or incurred in connection with a Permitted
Acquisition and payable to parties other than the seller or the seller's owners
provided the aggregate outstanding amount of such Indebtedness does not exceed
at any time the lesser of Five Million Dollars ($5,000,000) or fifty percent
(50%) of Shareholders Equity.
41
(F) The Borrower will not declare or pay any cash dividends,
or make any other cash payment or other distribution of an asset on account of
its capital stock.
(G) The Borrower will not redeem, purchase or retire any of
its capital stock, and no Subsidiary will issue, redeem, purchase or retire any
of its capital stock or grant or issue any warrant, right or option pertaining
thereto or other security convertible into any of the foregoing.
(H) Neither the Borrower nor any Subsidiary will form any
Subsidiary, make any investment in or make any loan in the nature of any
investment to any Person, except for: (1) any Permitted Investments, (2) the
formation of a Subsidiary in connection with making a Permitted Acquisition
which qualifies as such under Paragraph 6.2(M) below, (3) advances by the
Borrower to Subsidiaries of the Borrower, and (4) advances by Subsidiaries of
the Borrower to the Borrower.
(I) Neither the Borrower nor any Subsidiary will make any loan
or advance to any Provider or to any officer, shareholder, director or employee
of the Borrower or any Subsidiary, except for loans evidenced by recourse
promissory notes to Providers not to exceed in the aggregate Five Million
Dollars ($5,000,000.00) in face amount; provided however, that neither the
Borrower nor any Subsidiary will lend to the Providers in any Practice the total
sum of more than Two Million Dollars ($2,000,000.00) as evidenced by the face
amount of executed, recourse promissory notes. Neither the Borrower nor any
Subsidiary will make any temporary advances to any Provider or to any officer,
shareholder, director or employee of the Borrower or any Subsidiary, except for
temporary advances in the ordinary course of business not to exceed Fifty
Thousand Dollars ($50,000.00) individually or Two Hundred Fifty Thousand Dollars
($250,000.00) in the aggregate.
(J) Neither the Borrower nor any Subsidiary will prepay any
Subordinated Indebtedness, or Indebtedness for borrowed money (exclusive of
Permitted Acquisition Indebtedness), or enter into or modify any agreement as a
result of which the terms of payment of any of the foregoing Indebtedness are
waived or modified.
(K) Neither the Borrower nor any Subsidiary will enter into
any sale-leaseback transaction.
(L) Neither the Borrower nor any Subsidiary will purchase or
otherwise invest in or hold securities, non-operating real estate or other
non-operating assets, except: (1) Permitted Investments; (2) the present
investment in any such assets, including existing Subsidiaries; and (3)
operating assets that hereafter become non-operating assets.
(M) Neither the Borrower nor any Subsidiary will acquire the
stock of, or all or substantially all of the assets of, any Person without the
prior written consent of the Banks; provided however, with respect to any
permitted acquisition (hereinafter a "Permitted Acquisition"), the Borrower may
acquire either stock or assets of such Person and any Subsidiary may acquire
assets or merge with such Person (provided the Subsidiary is the
42
surviving entity) without obtaining the Banks' approval if: (1) Borrower has
submitted to the Banks on a timely basis the information required by Paragraph
3.3 above; (2) the Permitted Acquisition Price does not exceed a multiple of
seven (7) times the Acquisition EBITDA of the Person to be acquired for the
twelve (12) months preceding the Acquisition, subject to such adjustments to
Acquisition EBITDA as shall be reasonable under the circumstances and approved
by the Majority Banks in their reasonable discretion, and such Person has not
had a negative Acquisition EBITDA in either of its last two fiscal years; (3)
the cash portion of the Permitted Acquisition Price together with all amounts
thereon due within six (6) months of the closing does not exceed three percent
(3%) of Borrower's Consolidated Assets or, prior to a Successful IPO, fifty
percent (50%) of the Permitted Acquisition Price; (4) the business of the
Permitted Acquisition is in the musculoskeletal service field; (5) the
acquisition is not opposed by the Permitted Acquisition's management and the
holders of a majority of its voting shares or partnership units, as applicable;
(6) the Borrower has not made more than two acquisitions in the current fiscal
quarter nor more than nine acquisitions in the current calendar year; (7) no
Event of Default has occurred hereunder and not been cured, or would otherwise
occur as a result of or in connection with the Permitted Acquisition, whether
immediately or on a projected basis; (8) in all cases, whether or not the Banks
have been requested to disburse funds, the Borrower must pledge or cause to be
pledged to the Agent for the benefit of the Banks a first priority lien on the
outstanding stock or ownership interests in the Permitted Acquisition and a
first priority lien (subject only to Permitted Liens) on all of the assets of
the Permitted Acquisition in form and substance satisfactory to the Banks; and
(9) if a new Subsidiary is formed or the Permitted Acquisition is a stock
purchase Acquisition, the new Subsidiary and/or the acquired corporation must
become a party to this Agreement and execute a Guaranty and Suretyship with
respect to the Obligations in form and substance satisfactory to the Banks. The
Banks shall be given not less than ten (10) Business Days written notice prior
to the closing of any Acquisition to prepare all necessary documentation, and
the legal structure of the Loans following any Permitted Acquisition must be
satisfactory to the Banks and the Agent's counsel. Notwithstanding the foregoing
or anything contained herein to the contrary, if Borrower has not completed a
Successful IPO by on or before March 31, 1997, all Acquisitions occurring after
March 31, 1997 must be approved by the Banks in their sole discretion and
without regard to what constitutes a Permitted Acquisition.
(N) Borrower shall not allow or suffer any change of
management effecting a material change in the duties or change in the personnel
presently staffing the positions of Chief Executive Officer, President or Chief
Financial Officer, as set forth in Exhibit N hereto. Notwithstanding the
foregoing, should any of the named managers cease such active participation in
Borrower's management due to their death or disability, Agent shall allow
Borrower a period of sixty (60) days thereafter in which a management succession
plan may be presented to Agent so that Agent may, in its discretion, elect to
accept new management in lieu of prior management, subject to such revisions of
this Agreement as Agent may require.
(O) Neither the Borrower nor any Subsidiary will furnish the
Agent or any Bank any certificate or other document that will contain any untrue
statement of material fact or that will omit to state a material fact necessary
to make it not misleading in light of the circumstances under which it was
furnished.
43
(P) Neither the Borrower nor any Subsidiary will directly or
indirectly apply any part of the proceeds of the Loans to the purchasing or
carrying of any "margin stock" within the meaning of Regulation U of the Board
of Governors of the Federal Reserve System, or any regulations, interpretations
or rulings thereunder.
(Q) Borrower will not, and will not permit any of its
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction (including without limitation the purchase, sale, lease or exchange
of any property or the rendering of any service) with any Affiliate (other than
any Subsidiary which is wholly owned by Borrower) on terms that are less
favorable to the Borrower or its Subsidiaries than those that would be
obtainable at the time from any Person who is not an Affiliate. Borrower will
not, and will not permit any of its Subsidiaries to, pay or incur any obligation
to pay any management fee, consulting fee, service fee or similar fee or charge
to any Affiliate.
SECTION VII. DEFAULT
7.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" hereunder:
(A) The Borrower shall fail to pay within two (2) days of the
date when due any installment of principal or interest payable hereunder, or
shall fail to pay within ten (10) days of written notice any fee payable
hereunder.
(B) The Borrower shall fail to achieve any of the financial
covenants contained in Paragraph 6.1(F).
(C) The Borrower, any Subsidiary, or Pledgor shall fail to
observe or perform any obligation or covenant to be observed or performed by any
of them, jointly or severally, under any of the Loan Documents; provided,
however, if such failure is not related to the payment of money, the breach of a
financial covenant contained in Paragraph 6.1(F), or the breach of any negative
covenant in Section 6.2, Borrower shall have thirty (30) days to cure such
failure before the Majority Banks and/or Agent exercise the rights and remedies
hereunder, with such thirty (30) day period commencing after notice of such
failure from the Agent or Banks.
(D) The Borrower or any Subsidiary shall fail to pay any
Indebtedness for borrowed money (whether direct or indirect, including
guarantees of borrowed money) due any Person and such failure shall continue
beyond any applicable grace period and shall equal or exceed, either
individually or in the aggregate, One Hundred Thousand Dollars ($100,000.00) in
amount.
(E) The Borrower or any Subsidiary shall suffer a Material
Adverse Effect from any event of default arising under any agreement binding the
Borrower or such Subsidiary.
44
(F) Any financial statement, representation, warranty or
certificate made or furnished by the Borrower or any Subsidiary to the Agent or
any Bank in connection with this Agreement or the Loans, or as inducement to the
Banks to enter into this Agreement, or in any separate statement or document to
be delivered hereunder to the Agent or any Bank, shall be materially false,
incorrect, or incomplete when made.
(G) The Borrower or any Subsidiary shall admit its inability
to pay its debts as they mature, or shall make an assignment for the benefit of
its or any of its creditors.
(H) Proceedings in bankruptcy, or for reorganization of the
Borrower or any Subsidiary, or for the readjustment of any of their respective
debts, under the United States Bankruptcy Code, as amended, or any part thereof,
or under any other Laws, whether state or federal, for the relief of debtors,
now or hereafter existing, shall be commenced by the Borrower or any Subsidiary,
or shall be commenced against the Borrower or any Subsidiary.
(I) A receiver or trustee shall be appointed for the Borrower
or any Subsidiary or for any substantial part of their respective assets, or any
proceedings shall be instituted for the dissolution or the full or partial
liquidation of the Borrower or any Subsidiary, or the Borrower or any Subsidiary
shall discontinue business or materially change the nature of its business.
(J) The Borrower or any Subsidiary shall suffer final
judgments for payment of money aggregating in excess of Fifty Thousand Dollars
($50,000.00) and shall not discharge the same within a period of thirty (30)
days unless, pending further proceedings, execution has been effectively stayed.
(K) A judgment creditor of the Borrower or any Subsidiary
having a judgment in excess of Twenty Thousand Dollars ($20,000.00) shall obtain
possession of any of the Collateral by any means, including, but without
limitation, levy, distraint, replevin or self-help.
(L) Any obligee of Subordinated Indebtedness shall fail to
comply with the subordination provisions of the instruments evidencing such
Subordinated Indebtedness.
(M) Borrower or any Subsidiary shall default in any other
Indebtedness (excluding the Obligations) owed to the Banks, or any of them, or
under any other agreements for credit or borrowed money it may have with any
Bank, jointly or severally, directly or indirectly, whether matured or
unmatured.
(N) Receipt by the Borrower or any Subsidiary of a notice from
a Governmental Authority that it (i) intends to disallow requested
reimbursements, demand adjustment or repayment of past reimbursements in excess
of five percent (5%) of the gross revenues of Borrower and its Subsidiaries for
the previous four (4) fiscal quarters in the aggregate respecting amounts
submitted for reimbursement or collected by Borrower, any Subsidiary or a
Provider, or (ii) intends to impose civil money penalties or to seek to exclude
45
Borrower, any Subsidiary or a Provider from participation in the Medicare or
Medicaid programs due to a failure to comply with Fraud and Abuse Laws.
7.2 Acceleration. Upon the occurrence of any of such Events of
Default, the Majority Banks may, at their option, immediately terminate the
obligation to make any further advances under the respective Commitments and/or
declare the principal and interest accrued on the Notes and all other
Obligations to be immediately due and payable, whereupon the same shall become
forthwith due and payable, without presentment, demand, protest, or any notice
of any kind except as set forth above; provided, that in the case of the Events
of Default specified in clause (G), (H) or (I) above with respect to Borrower,
without any notice to Borrower or any act by Agent or the Banks, the Commitments
shall thereupon terminate and the Notes and all other Obligations shall become
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are waived by the Borrower. In addition, and
regardless of whether the Notes have been accelerated, the Majority Banks may
upon the occurrence of any Event of Default elect to charge interest at the
Default Rate set forth in the Notes.
7.3 Remedies. After any acceleration, as provided for in Paragraph
7.2, the Banks shall have, in addition to the rights and remedies given it by
the Loan Documents, all those allowed by all applicable Laws, including, but
without limitation, the UCC as enacted in any jurisdiction in which any
Collateral may be located. Without limiting the generality of the foregoing, the
Banks may immediately, without demand of performance and without other notice
(except as specifically required by the Loan Documents) or demand whatsoever to
the Borrower, all of which are hereby expressly waived, and without
advertisement, sell at public or private sale, in any manner and at any location
authorized by Laws, or otherwise realize upon, the whole or, from time to time,
any part of the Collateral, or any interest which the Borrower may have therein.
After deducting from the proceeds of sale or other disposition of the Collateral
all expenses (including all reasonable expenses for legal services), the Banks
shall apply such proceeds toward the satisfaction of the Obligations. Any
remainder of the proceeds after satisfaction in full of the Obligations shall be
distributed as required by applicable Laws. Notice of any sale or other
disposition shall be given to the Borrower at least five (5) days before the
time of any intended public sale or of the time after which any intended private
sale or other disposition of the Collateral is to be made, which the Borrower
hereby agrees shall be reasonable notice of such sale or other disposition. The
Borrower agrees to assemble, or to cause to be assembled, at its own expense,
the Collateral at such place or places as the Banks shall designate. At any such
sale or other disposition, the Banks may, to the extent permissible under
applicable Laws, purchase the whole or any part of the Collateral, free from any
right of redemption on the part of the Borrower, which right is hereby expressly
waived and released.
Without limiting the generality of any of the rights and
remedies conferred upon the Banks under this Paragraph 7.3, the Banks may, to
the full extent permitted by applicable Laws:
(A) Enter upon the premises of the Borrower, exclude therefrom
the Borrower, any Subsidiary or any Affiliate thereof, and take immediate
possession of the
46
Collateral, either personally or by means of a receiver appointed by a court of
competent jurisdiction, using all necessary and lawful self-help to do so;
(B) At the Banks' option, use, operate, manage and control the
Collateral in any lawful manner;
(C) Collect and receive all receivables, rents, income,
revenue, earnings, issues and profits therefrom; and
(D) Maintain, repair, renovate, alter or remove the Collateral
as the Banks may determine in their discretion.
SECTION VIII. THE AGENT
This Section VIII is between and among the Agent and the Banks only.
Neither the Borrower nor any other creditor of the Borrower shall have any
rights under this section, whether as a third party beneficiary or otherwise.
8.1 Authorization. Each Bank authorizes the Agent to act on behalf
of such Bank or holder to the extent provided herein or in any document or
instrument delivered hereunder or in connection herewith and signed by such
Bank, and to take such other action as may be reasonably incidental thereto. The
Agent shall be considered as acting solely in an administrative and ministerial
capacity, not as trustee or other fiduciary of the Banks. The Agent shall not be
construed as having any agency or fiduciary relationship with the Borrower. The
Agent shall not have any duties or obligations to the Banks other than those
expressly provided for herein. The Agent shall not be required to exercise any
discretion or take any action, but shall be fully protected in so acting or in
refraining from acting, upon the instructions of the Majority Banks (except as
otherwise provided in Paragraph 9.3, for matters which require the consent of
all Banks), and such instructions shall be binding upon all Banks and holders of
the Notes, and the Agent shall not be liable to any party hereto for any
consequence of any such action or refraining from action. Notwithstanding any
instructions of the Majority Banks, the Agent shall not be required to take any
action that exposes the Agent to personal liability or that is contrary to any
loan document or applicable law.
8.2 Standard of Care. Neither the Agent nor any of its officers,
directors, agents, employees or representatives shall be liable for any action
taken or omitted to be taken by it or any of them under or in connection with
this Agreement, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, the Agent:
(a) may treat the payee of any Notes as the holder thereof and as a Bank
hereunder until the Agent receives written notice of the assignment or transfer
thereof signed by such payee and in form satisfactory to the Agent (which notice
shall be binding on all parties hereto); (b) may consult with legal counsel
(including counsel for the Borrower), independent public accountants and other
experts and advisors selected by it 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, experts or other advisors; (c) makes no warranty or
representation to any Bank and
47
shall not be responsible to any Bank for any statements, warranties or
representations made in or in connection with this Agreement or for any failure
or delay in performance by the Borrower or any Bank under this Agreement; (d)
shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement; (e)
shall not be responsible to any Bank for the due execution, legality, validity,
enforceability, perfection, collectability, genuineness, sufficiency or value of
this Agreement, the Notes, or any other instrument or document furnished
pursuant thereto or for the accuracy or completeness of any credit or other
information provided to the Banks; (f) shall incur no liability under or in
respect of this Agreement by acting upon any notice, consent, certificate or
other instrument or writing (which may be by telecopier, telegram, cable or
telex) believed by it to be genuine and signed or sent by the proper party or
parties; and (g) shall incur no liability for relying upon any matters of fact
that might reasonably be expected to be within the knowledge of the Borrower,
upon a certificate or other writing signed by Borrower, or upon telephone
communications with Borrower which are reasonably believed to be true and valid.
8.3 No Waiver of Rights. With respect to the Notes, the Agent shall
have the same rights and powers hereunder as any other Bank and may exercise the
same as though it were not the Agent, and the Agent may accept deposits from,
and generally engage in any kind of business with, the Borrower.
8.4 Payments. The Agent shall use its best efforts to deliver to
each Bank on the same day as received by Agent in immediately available funds
such Bank's pro rata share of all payments received by the Agent for the benefit
of the Banks, but in the event Agent is unable to deliver such payments to any
Bank on the same day of receipt, Agent agrees to pay such Bank interest on the
payment for each day the Agent is unable to deliver the payments after the date
of its receipt based on the overnight federal funds rate of interest. Any
payment due for any reason under this Agreement that is required to be made on a
date on which the Agent is not open for business shall be extended until the
next day on which the Agent is open for the transaction of business.
8.5 Indemnification. The Agent shall not be required to do any act
hereunder or under any other document or instrument delivered hereunder or in
connection herewith or take any action toward the execution or enforcement of
the agency hereby created, or to prosecute or defend any suit in respect of this
Agreement or the Notes or to advance funds hereunder upon the failure by any
Bank to fund its pro rata share of the Commitment hereunder, unless ratably
indemnified to its satisfaction (to the extent not reimbursed by Borrower) by
the holders of the Notes against loss, cost, liability and expense (including
reasonable fees and out-of-pocket expenses of counsel), claim, demand, action,
loss or liability (except such as result from Agent's gross negligence or
willful misconduct) that Agent may suffer or incur in connection with this
Agreement or any action taken or omitted by Agent hereunder. If any indemnity
furnished to the Agent for or against any loss, cost, liability, and expense or
for any purpose shall, in the opinion of the Agent, be insufficient or become
impaired, the Agent may call for additional indemnity and not commence or cease
to do the acts indemnified against until such additional indemnity is furnished.
Each Bank agrees to reimburse the Agent promptly upon
48
demand for such Bank's pro rata share of any expenses referred to in Paragraph
9.4 incurred by the Agent to the extent that the Agent is not reimbursed for
such expenses by the Borrower.
8.6 Exculpation. Neither Agent nor any of its directors, officers,
employees or agents shall be liable for any action taken or not taken by it in
connection herewith (a) with the consent or at the request of the Banks or
Majority Banks, as appropriate, or (b) in the absence of its own gross
negligence or willful misconduct. Neither Agent nor any of its directors,
officers, employees or agents shall (i) be responsible for any recitals,
representations or warranties contained in, or for the execution, validity,
genuineness, effectiveness or enforceability of this Agreement, any Note or any
other instrument or document delivered hereunder or in connection herewith, or
(ii) be under any duty to inquire into or pass upon any of the foregoing
matters, or to make any inquiry concerning the performance by Borrower or any
other obligor of its obligations.
8.7 Credit Investigation. Each Bank acknowledges that it has made
such inquiries and taken such care on its own behalf as would have been the case
had the Commitment been granted and the Loan made directly by such Bank to the
Borrower. Each Bank agrees and acknowledges that the Agent makes no
representations or warranties about the creditworthiness of the Borrower or any
other party to this Agreement or with respect to the legality, validity,
sufficiency or enforceability of this Agreement, the Notes or the value of any
security therefor and that each Bank has not entered into this Agreement in
reliance upon any action, statement, representation, or warranty of any other
Bank or Agent. Each Bank agrees that it will, independently and without reliance
upon the Agent or any other Bank and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under this Agreement. Neither the Agent nor any
other Bank shall have any obligation whatsoever to make any such credit analysis
or decisions for a Bank or to provide any credit or other information with
respect to the Borrower now or in the future in the possession of the Agent or
such other Bank, except that the Agent shall promptly forward to the Banks a
copy of any notice received by the Agent from the Borrower of the occurrence of
an Event of Default hereunder and copies of all material documents delivered to
it by the Borrower pursuant to the terms hereof.
8.8 Resignation. The Agent may resign at any time as the Agent under
this Agreement by giving written notice thereof to the Banks and the Borrower,
which resignation shall be effective upon a successor Agent's acceptance of its
appointment. Upon any such resignation, the Majority Banks shall have the right
to appoint a successor Agent hereunder. If no such successor Agent shall have
been so appointed by the Majority Banks, or Borrower shall have reasonably
rejected such appointment, within thirty (30) days after the retiring Agent's
giving of notice of resignation, then the retiring Agent may, on behalf of the
Banks, appoint a successor Agent, which shall be a commercial bank organized
under the laws of the United States of America or of any State thereof having
assets of at least One Billion Dollars ($1,000,000,000.00) and which shall be
reasonably acceptable to the Borrower. Upon the acceptance of any appointment as
Agent hereunder 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
49
hereunder. After any retiring Agent's resignation as an Agent hereunder, the
provisions of this Section VIII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was an Agent under the Loan
Documents.
8.9 Proration of Payments. Except as may be provided in other
sections of this Agreement, all funds received by Banks, or any of them, shall
be allocated pro rata among all Banks in proportion to their respective
Commitment Percentages as set forth in Paragraph 2.1 hereof. If any Bank or
other holder of any Notes shall obtain any payment or other recovery (whether
voluntary, involuntary, by application of offset or otherwise) on account of
principal of or interest on the Note then held by it in excess of its pro rata
share of payments and other recoveries obtained by all Banks or other holders on
account of principal of and interest on the Note then held by them, such Bank or
other holder shall purchase from the other Banks or holders such participation
in the Note held by them as shall be necessary to cause such purchasing Bank or
other holder to share the excess payment or other recovery ratably with each of
them; provided, however, if all or any portion of the excess payment or other
recovery is thereafter recovered from such purchasing holder, the purchase shall
be rescinded and the purchase price restored to the extent of such recovery, but
without interest. Notwithstanding the foregoing, no Bank shall have any
obligation to account for or share any amount, property or profit of any kind
received by it for its own account arising out of a banking or other
relationship with the Borrower apart from the obligations under the Loan
Documents.
8.10 No Liability For Errors. The Agent shall not be liable for any
error in computing the amounts payable to any Bank in respect of any amounts due
to the Banks hereunder or in making payment of such amounts. In the event of an
error in computing any amount payable to any Bank or in the making of a payment,
the Agent, the Borrower and such Bank shall, forthwith upon discovery of such
error, make such adjustment as shall be required to correct such error,
including the payment of interest on any amounts that were incorrectly paid or
not paid from the date paid or of the date due to the date returned or paid, all
as the case may be, at the average daily rate for the overnight sale of federal
funds by the Agent in effect for such period.
8.11 Offset. In addition to and not in limitation of all rights of
offset that any Bank or other holder of any Note may have under applicable Laws,
each Bank or other holder of a Note shall, upon the occurrence of any Event of
Default described in this Agreement or in the Note in question, have the right
to appropriate and apply to the payment of such Notes any and all balances,
credits, deposits, accounts or moneys of the Borrower then or thereafter with
such Bank or other holder; provided, however, all funds received as a result of
such offsets shall be applied pro rata among the Banks in proportion to their
respective Commitment Percentages as set forth in Paragraph 2.1 hereof. Each
Bank agrees to notify the Borrower and other Banks immediately after the
exercise by it of this right of offset.
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SECTION IX. MISCELLANEOUS
9.1 Construction. The provisions of this Agreement shall be in
addition to those of any guaranty, pledge or security agreement, note or other
evidence of liability held by the Banks, all of which shall be construed as
complementary to each other; provided, in the event of any inconsistency, the
provisions of this Agreement shall control. Nothing herein contained shall
prevent the Banks from enforcing any or all other notes, guaranties, pledge or
security agreements in accordance with their respective terms.
9.2 Further Assurance. From time to time, the Borrower will execute
and deliver to the Banks such additional documents and will provide such
additional information as the Banks may reasonably require to carry out the
terms of this Agreement and be informed of the Borrower's operations, business
and condition.
9.3 Enforcement and Waiver by the Banks. The Majority Banks shall
have the sole and exclusive right to administer, amend, or modify the Loan
Documents, and are hereby empowered to act for the Banks with regard to the
aggregate Commitments and the documentation thereof as if said Majority Banks
were the sole lenders or extenders of credit under the Loan Documents; provided,
however, that it shall take an affirmative vote of all Banks to: (i) increase
any of the several Acquisition Loan Commitments or Working Capital Commitments;
(ii) decrease any of the interest rates on the Loans; (iii) extend the
Acquisition Loan Termination Date or the Working Capital Loan Termination Date;
(iv) approve prepayments of the Subordinated Indebtedness; (v) amend the
definition of Majority Banks; and (vi) amend this Paragraph 9.3. The Banks shall
have the right at all times to enforce the provisions of the Loan Documents in
strict accordance with the terms thereof, notwithstanding any conduct or custom
on the part of the Banks and/or Agent in refraining from so doing at any time or
times. The failure of the Banks at any time or times to enforce their rights
under such provisions, strictly in accordance with the same, shall not be
construed as having created a custom in any way or manner contrary to specific
provisions of the Loan Documents or as having in any way or manner modified or
waived the same. All rights and remedies of the Banks are cumulative and
concurrent and the exercise of one right or remedy shall not be deemed a waiver
or release of any other right or remedy.
9.4 Expenses of the Banks. The Borrower will, on demand, reimburse
the Agent for all out-of-pocket expenses, including the reasonable fees and
expenses of legal counsel for the Agent, incurred by the Agent in connection
with the preparation, administration, amendment, modification, or enforcement of
the Loan Documents and the collection or attempted collection of the Notes;
provided, the expenses and legal counsel fees of all Banks will be reimbursed in
connection with the enforcement of this Agreement and other Loan Documents.
9.5 Notices. Any notices or consents required or permitted by this
Agreement shall be in writing and shall be deemed delivered when delivered in
person, or when sent by certified mail, postage prepaid, return receipt
requested, by overnight courier service, or by
51
facsimile to the address and/or telecopy number as follows, unless such address
or number is changed by written notice hereunder:
(A) If to the Borrower:
Specialty Care Network, Inc.
00 Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Attention: Chief Financial Officer
Telecopy: 000-000-0000
(B) If to the Agent:
NationsBank of Tennessee, N.A., Agent
Xxx XxxxxxxXxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Healthcare Group
Telecopy: 749-4951 (615)
(C) If to the Banks:
NationsBank of Tennessee, N.A.
Xxx XxxxxxxXxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Healthcare Group
Telecopy: 749-4951 (615)
9.6 Waiver and Release. To the maximum extent permitted by
applicable Laws, the Borrower and each Subsidiary:
(A) Waive: (1) protest of all commercial paper at any time
held by the Banks on which the Borrower or any Subsidiary is in any way liable;
and (2) notice and opportunity to be heard, after acceleration in the manner
provided in Paragraph 7.2, before exercise by the Banks of the remedies of
self-help, set-off, or of other summary procedures permitted by any applicable
Laws or by any agreement with the Borrower or any Subsidiary, and, except where
required hereby or by any applicable Laws, notice of any other action taken by
the Banks; and
(B) Release the Banks and their officers, directors,
attorneys, employees, and agents from all claims for loss or damage caused by
any act or omission on the part of any of them except for gross negligence,
recklessness or willful misconduct.
9.7 Indemnification. Borrower and each Subsidiary hereby indemnify
and hold the Banks and their officers, directors, attorneys, employees and
agents free and harmless
52
from and against any and all actions, causes of action, suits, losses,
liabilities and damages, and expenses in connection therewith, including without
limitation counsel fees and disbursements, incurred by the Banks or any of them
as a result of, or arising out of, or relating to the execution, delivery,
performance or enforcement of the Loan Documents or any instrument contemplated
therein, except for any Bank's gross negligence or willful misconduct. If and to
the extent that the foregoing undertaking may be unenforceable for any reason,
Borrower and each Subsidiary hereby agree to make the maximum contribution to
the payment and satisfaction of such liabilities and costs permitted under
applicable Laws.
9.8 Participations and Assignments.
(A) This Agreement and the other Loan Documents shall be
binding upon and inure to the benefit of Borrower, Banks, and Agent and their
respective successors and assigns; provided, however, that Borrower may not
assign, transfer or delegate any of its rights, duties or obligations under this
Agreement or the other Loan Documents without the prior written consent of Agent
and Banks. Banks may assign, sell and transfer their interests, rights and
obligations under this Agreement and the other Loan Documents only in accordance
with this Paragraph 9.8.
(B) With the prior written consent of the Agent and the
Borrower, not to be unreasonably withheld, any Bank may assign to one or more
Eligible Assignees all, or a proportionate part of all, of its interests, rights
and obligations under this Agreement and the other Loan Documents; provided,
however, that (i) each such assignment shall be of a constant, and not a
varying, percentage of all of the assigning Bank's interests, rights and
obligations under this Agreement, (ii) the amount of each such assignment
(determined as of the date the Assignment and Acceptance with respect to such
assignment) shall not be less than the lesser of (A) the entire amount of such
Bank's Loans or (B) the principal amount of $3,000,000 or an integral multiple
of $1,000,000 in excess thereof, (iii) no more than three (3) Banks may be
parties hereto without first obtaining the prior written consent of the Agent
and Borrower; and (iv) the parties to each such assignment shall execute and/or
deliver to Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with the Notes subject to such assignment,
and a processing and recordation fee of $2,500 payable to Agent. Upon such
execution, delivery, acceptance and recording, from and after the "Effective
Date" specified in the Assignment and Acceptance, which "Effective Date," unless
Agent otherwise agrees, shall be not earlier than five Business Days after the
date of acceptance and recording by Agent (provided, however, that, as between
the assigning Bank and the assignee thereunder only, the effective date shall be
the effective date of execution and delivery as between such Persons as
specified in the Assignment and Acceptance), (A) the assignee thereunder shall
be a Bank under this Agreement and, to the extent provided in such Assignment
and Acceptance, have the interests, rights and obligations of a Bank hereunder
and (B) the assigning Bank thereunder shall, to the extent provided in such
Assignment and Acceptance, be released from its contractual obligations under
this Agreement (and, in the case of an Assignment and Acceptance covering all or
the remaining portion of the assigning Bank's interests, rights and obligations
under this Agreement, such assigning Bank shall cease to be a Bank under this
Agreement). Each Bank shall, in a reasonably prompt fashion after it has engaged
in any material discussions with an
53
Eligible Assignee that may lead to an assignment referred to in this Paragraph
9.8, notify Agent and Borrower of the identity of such Eligible Assignee so that
they will have sufficient time to determine if they are willing to consent.
(C) By executing and delivering an Assignment and Acceptance,
the assigning Bank thereunder and the Eligible Assignee thereunder shall be
deemed to confirm to and agree with each other and the other parties hereto as
follows: (i) such assignee is an Eligible Assignee; (ii) other than as provided
in the Assignment and Acceptance, such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to any representations,
warranties or other statements made in or in connection with this Agreement or
any other Loan Document or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other Loan Document
or any Collateral; (iii) such assigning Bank makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
Borrower or any Subsidiary or the performance or observance by Borrower or any
Subsidiary of any of its obligations under this Agreement or any other Loan
Document; (iv) such assignee confirms that it has received a copy of this
Agreement, together with copies of the most recent Financial Statements and such
other agreements, documents, instruments, certificates and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (v) such assignee will independently and without
reliance upon Agent, such assigning Bank or any other Bank and based on such
agreements, documents, instruments, certificates and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan Documents;
(vi) such assignee appoints and authorizes Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto; (vii) such assignee agrees that it
will perform in accordance with their terms all the obligations which by the
terms of this Agreement and the other Loan Documents are required to be
performed by it as a Bank; and (viii) such assignee makes loans in the ordinary
course of its business.
(D) Upon its receipt of an Assignment and Acceptance executed
by an assigning Bank and an Eligible Assignee and the required processing and
recordation fee, Agent shall, if such Assignment and Acceptance is duly
completed and is in the required form, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to Banks and Borrower. Within five Business
Days after its receipt of any such notice from Agent, Borrower, at its own
expense, shall execute and deliver to Agent, in exchange for the surrendered
Note or Notes, a new Note or Notes payable to the order of such assignee in the
appropriate principal amount(s) evidencing such assignee's assigned Loans and
Commitments, and, if the assignor Bank has retained a portion of its Loans and
Commitments, a new Note or Notes payable to the order of such assignor in the
appropriate principal amount(s) evidencing such assignor's Loans and Commitments
retained by it. Such new Note(s) shall be dated the date of the surrendered
Note(s) which they replace and shall otherwise be in substantially the form of
the surrendered Notes, as appropriate.
54
(E) Each Bank may, without the consent of Borrower, any
Subsidiary or Agent, sell participations to one or more banks in all or a
portion of its interests, rights and obligations under this Agreement (including
all or a portion of its Loans or Commitments) held by it; provided, however,
that (i) such Bank shall remain a Bank for all purposes of this Agreement and
the transferee of such participation shall not constitute a Bank under this
Agreement, (ii) such Bank's obligations under this Agreement shall remain
unchanged, (iii) such Bank shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iv) the participating banks or
other entities shall be entitled to the benefit of the provisions contained in
Paragraphs 2.8 and 2.9 to the same extent as if they were Banks, except that no
such participant shall be entitled to receive any greater benefit or amounts
pursuant to Paragraph 2.8 than its assignor Bank would have been entitled to
receive with respect to the rights participated, and (v) Borrower, Subsidiaries,
Agent and the other Banks shall continue to deal solely and directly with such
Bank in connection with such Bank's interests, rights and obligations under this
Agreement, and such Bank shall retain the sole right to enforce the obligations
of Borrower and its Subsidiaries relating to the Loans and to approve any
amendment, modification or waiver of any provision of this Agreement, provided
that such participation agreement may provide that such Bank will not agree to
any amendment, modification or waiver of this Agreement or the other Loan
Documents, without the consent of such participant, that would (A) reduce the
principal or the rate of interest payable by Borrower on any Loan or reduce any
fees payable by Borrower, (B) postpone any date fixed for the payment of
principal of or interest on the Loans or any fees payable by Borrower, (C)
increase any Commitment of any Bank or subject any Bank to any obligation to
make Loans, or (D) amend Paragraph 9.3, 9.8(E) or any other provision of this
Agreement requiring the consent or other action of all Banks.
(F) Any Bank may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Paragraph
9.8, disclose to the assignee or participant or proposed assignee or participant
any information relating to Borrower or any Subsidiary, the Collateral or the
Loan Documents furnished to such Bank by or on behalf of the Borrower or any
Subsidiary; provided, however, that, prior to any such disclosure, each such
assignee or participant or proposed assignee or participant shall execute an
agreement whereby such assignee or participant shall agree (subject to customary
exceptions) to preserve the confidentiality of any non-public information
received from such Bank.
(G) If (i) any Bank has demanded compensation under Paragraph
2.8 in an aggregate amount exceeding $5,000 during any calendar year, (ii) it
becomes unlawful, impossible or impractical for any Bank to make or continue to
maintain Eurodollar Loans pursuant to Paragraph 2.9 and such circumstance is not
applicable to NationsBank, or (iii) any Bank is or becomes insolvent or a
receiver, conservator or similar authority is appointed for any Bank, then Agent
and/or Borrower shall have the right, but not the obligation, upon notice to
such Bank and Borrower or Agent, as applicable, to designate, with the consent
of such assignee, an assignee for any such Bank, which assignee shall be an
Eligible Assignee mutually satisfactory to Agent and Borrower, to purchase such
Bank's Loans and Commitments and assume such Bank's obligations; provided,
however, that Borrower shall not have the right to designate any assignee for
NationsBank. Within ten Business Days after any such notice to such
55
Bank and Borrower or Agent, as applicable, such Bank shall be obligated to sell
its Loans and Commitments, and such assignee shall be obligated to purchase such
Loans and assume such Bank's obligations, pursuant to an Assignment and
Acceptance. The purchase price therefor shall be an amount equal to the sum of
(A) the outstanding principal amount of the Loans payable to such Bank, plus (B)
all accrued and unpaid interest on such Loans, plus (C) all accrued and unpaid
fees and other amounts due to such Bank pursuant to this Agreement.
(H) Notwithstanding anything to the contrary contained in this
Paragraph 10.6, any Bank may at any time or from time to time assign as
collateral all or any portion of its rights under this Agreement with respect to
its Loans, Commitments and Notes to a Federal Reserve Bank. No such assignment
shall release the assigning Bank from its obligations under this Agreement.
9.9 Applicable Laws. The Laws of the State of Tennessee shall govern
the construction of this Agreement and the rights and remedies of the parties
hereto.
9.10 Binding Effect, Assignment and Entire Agreement. This Agreement
shall inure to the benefit of, and shall be binding upon, the respective
successors and permitted assigns of the parties hereto. The Borrower has no
right to assign any of its rights or obligations hereunder without the prior
written consent of the Banks. This Agreement and the documents executed and
delivered pursuant hereto constitute the entire agreement between the parties,
and supersede all prior agreements and understandings among the parties hereto.
This Agreement may be amended only by a writing signed on behalf of each party.
9.11 Severability. If any provision of this Agreement shall be held
invalid under any applicable Laws, such invalidity shall not affect any other
provision of this Agreement that can be given effect without the invalid
provision, and, to this end, the provisions hereof are severable.
9.12 Counterparts. This Agreement may be executed by the parties
independently in any number of counterparts, all of which together shall
constitute but one and the same instrument which is valid and effective as if
all parties had executed the same counterpart.
9.13 Arbitration. Any controversy or claim between or among the
parties hereto including but not limited to those arising out of or relating to
this Instrument, Agreement or document or any related instruments, agreements or
documents, including any claim based on or arising from an alleged tort, shall
be determined by binding arbitration in accordance with the Federal Arbitration
Act (or if not applicable, the applicable state law), the Rules of Practice and
Procedure for the Arbitration of Commercial Disputes of Judicial Arbitration and
Mediation Services, Inc. (J.A.M.S.), and the "Special Rules" set forth below. In
the event of any inconsistency, the Special Rules shall control. Judgment upon
any arbitration award may be entered in any court having jurisdiction. Any party
to this Agreement may bring an action, including a summary or expedited
proceeding, to compel arbitration of any controversy or claim to which this
agreement applies in any court having jurisdiction over such action.
(a) Special Rules. The arbitration shall be conducted in the
city of the Borrower's domicile at the time of the execution of this instrument,
agreement or document and
56
administered by J.A.M.S. who will appoint an arbitrator; if J.A.M.S. is unable
or legally precluded from administering the arbitration, then the American
Arbitration Association will serve. All arbitration hearings will be commenced
within 90 days of the demand for arbitration; further, the arbitrator shall
only, upon a showing of cause, be permitted to extend the commencement of such
hearing for up to an additional 60 days. In any such arbitration, the prevailing
party will be awarded attorney's fees, costs of arbitration and all
out-of-pocket expenses against the defaulting party.
(b) Reservation of Rights. Nothing in this instrument,
agreement or document shall be deemed to (i) limit the applicability of any
otherwise applicable statutes of limitation or repose or any waivers contained
in this Agreement; or (ii) be a waiver by the Agent or Banks of the protection
afforded to them by 12 U.S.C. ss. 91 or any substantially equivalent state law;
or (iii) limit the right of the Agent or Banks hereto (A) to exercise self help
remedies such as (but not limited to) setoff, or (B) to foreclose against any
real or personal property collateral, or (C) to obtain from a court provisional
or ancillary remedies such as (but not limited to) injunctive relief, writ of
possession or the appointment of a receiver. The Agent or Banks may exercise
such self help rights, foreclose upon such property, or obtain such provisional
or ancillary remedies before, during or after the pendency of any arbitration
proceeding brought pursuant to this instrument, agreement or document. Neither
this exercise of self help remedies nor the institution or maintenance of an
action for foreclosure or provisional or ancillary remedies shall constitute a
waiver of the right of any party, including the claimant in any such action, to
arbitrate the merits of the controversy or claim occasioning resort to such
remedies.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
AGENT BORROWER
----- --------
NATIONSBANK OF TENNESSEE, N.A., SPECIALTY CARE NETWORK, INC.
as Agent
BY: [ILLEGIBLE] BY: [ILLEGIBLE]
-------------------------------- --------------------------------
TITLE: AVP TITLE: Vice President of Finance
----------------------------- -----------------------------
BANKS GUARANTORS AND SUBSIDIARIES
----- ---------------------------
NATIONSBANK OF TENNESSEE, N.A. SCN OF PRINCETON, INC.
BY: [ILLEGIBLE] BY: [ILLEGIBLE]
-------------------------------- --------------------------------
TITLE: AVP TITLE: Vice President
----------------------------- -----------------------------
57
EXHIBIT A
