LOAN AGREEMENT
First Union National Bank
00 Xxxx Xxxxxx
Xxxxx Xxxxxx, Xxx Xxxx 00000
(Hereinafter referred to as the "Bank")
Oak Tree Medical Management, Inc.
0 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxx Xxxx 00000
(Individually and collectively "Borrower")
This Loan Agreement ("Agreement") is entered into September 30, 1996, by and
between Bank and Borrower, a Corporation organized under the laws of New York.
Borrower has applied to Bank for a loan or loans (individually and collectively,
the "Loan") evidenced by one or more promissory notes (whether one or more, the
"Note") as follows:
Term Loan - in the principal amount of $400,000.00 which is evidenced by the
Promissory Note dated September 30, 1996. The Loan proceeds are to be used by
Borrower solely to enable the Borrower to refinance debt incurred by the
Guarantor in acquiring the physical therapy practice now know as Oak Tree
Medical Management, Inc.
Line of Credit - in the principal amount of $200,000.00 which is evidenced by
the Promissory Note dated September 30, 1996 ("Line of Credit Note"), under
which Borrower may borrow, repay, and reborrow, from time to time, so long as
the total indebtedness outstanding at any one time does not exceed the principal
amount. The Loan proceeds are to be used by Borrower solely to finance accounts
receivable. Bank's obligation to advance or readvance under the Line of Credit
Note shall terminate if Borrower is in Default under the Line of Credit Note.
This Agreement applies to the Loan and all Loan Documents. The terms "Loan
Documents" and "Obligations," as used in this Agreement, are defined in the
Note. The term "Borrower" shall include its Subsidiaries and Affiliates. As used
in this Agreement as to Borrower, "Subsidiary" shall mean any corporation of
which more than 50% of the issued and outstanding voting stock is owned directly
or indirectly by Borrower. As to Borrower, "Affiliate" shall have the meaning as
defined in 11 U.S.C. ss. 101, except that the term "debtor" therein shall be
substituted by the term "Borrower" herein.
Relying upon the covenants, agreements, representations and warranties contained
in this Agreement, Bank is willing to extend credit to Borrower upon the terms
and subject to the conditions set forth herein, and Bank and Borrower agree as
follows:
REPRESENTATIONS. Borrower represents that from the date of this Agreement and
until final payment in full of the Obligations: Accurate Information. All
information now and hereafter furnished to Bank is and will be true, correct and
complete. Any such information relating to Borrower's financial condition will
accurately reflect Borrower's financial condition as of the date(s) thereof,
(including all contingent liabilities of every type), and Borrower further
represents that its financial condition has not changed materially or adversely
since the date(s) of such documents. Authorization; Non-Contravention. The
execution, delivery and performance by Borrower and any guarantor, as
applicable, of this Agreement and other Loan Documents to which it is a party
are within its power, have been duly authorized by all necessary action taken by
the duly authorized officers of Borrower and any guarantors and, if necessary,
by making appropriate filings with any
governmental agency or unit and are the legal, binding, valid and enforceable
obligations of Borrower and any guarantors; and do not (i) contravene, or
constitute (with or without the giving of notice or lapse of time or both) a
violation of any provision of applicable law, a violation of the organizational
documents of Borrower or any guarantor, or a default under any agreement,
judgment, injunction, order, decree or other instrument binding upon or
affecting Borrower or any guarantor, (ii) result in the creation or imposition
of any lien (other than the lien(s) created by the Loan Documents) on any of
Borrower's or guarantor's assets, or (iii) give cause for the acceleration of
any obligations of Borrower or any guarantor to any other creditor. Asset
Ownership. Borrower has good and marketable title to all of the properties and
assets reflected on the balance sheets and financial statements supplied Bank by
Borrower, and all such properties and assets are free and clear of mortgages,
security deeds, pledges, liens, charges, and all other encumbrances, except as
otherwise disclosed to Bank by Borrower in writing ("Permitted Liens"). To
Borrower's knowledge, no default has occurred under any Permitted Liens and no
claims or interests adverse to Borrower's present rights in its properties and
assets have arisen. Discharge of Liens and Taxes. Borrower has duly filed, paid
and/or discharged all taxes or other claims which may become a lien on any of
its property or assets, except to the extent that such items are being
appropriately contested in good faith and an adequate reserve for the payment
thereof is being maintained. Sufficiency of Capital. Borrower is not, and after
consummation of this Agreement and after giving effect to all indebtedness
incurred and liens created by Borrower in connection with the Loan, will not be,
insolvent within the meaning of 11 U.S.C. ss. 101(32). Compliance with Laws.
Borrower is in compliance in all respects with all federal, state and local
laws, rules and regulations applicable to its properties, operations, business,
and finances, including, without limitation, any federal or state laws relating
to liquor (including 18 U.S.C. ss. 3617, et seq.) or narcotics (including 21
U.S.C. ss. 801, et seq.) and/or any commercial crimes; all applicable federal,
state and local laws and regulations intended to protect the environment; and
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), if
applicable. Organization and Authority. Each corporate or limited liability
company Borrower and any guarantor, as applicable, is duly created, validly
existing and in good standing under the laws of the state of its organization,
and has all powers, governmental licenses, authorizations, consents and
approvals required to operate its business as now conducted. Each corporate or
limited liability company Borrower and any guarantor, if any, is duly qualified,
licensed and in good standing in each jurisdiction where qualification or
licensing is required by the nature of its business or the character and
location of its property, business or customers, and in which the failure to so
qualify or be licensed, as the case may be, in the aggregate, could have a
material adverse effect on the business, financial position, results of
operations, properties or prospects of Borrower or any such guarantor. No
Litigation. There are no pending or threatened suits, claims or demands against
Borrower or any guarantor that have not been disclosed to Bank by Borrower in
writing.
AFFIRMATIVE COVENANTS. Borrower agrees that from the date of this Agreement and
until final payment in full of the Obligations, unless Bank shall otherwise
consent in writing, Borrower will: Business Continuity. Conduct its business in
substantially the same manner and locations as such business is now and has
previously been conducted. Maintain Properties. Maintain, preserve and keep its
property in good repair, working order and condition, making all needed
replacements, additions and improvements thereto, to the extent allowed by this
Agreement. Access to Books & Records. Allow Bank, or its agents, during normal
business hours, access to the books, records and such other documents of
Borrower as Bank shall reasonably require, and allow Bank to make copies thereof
at Bank's expense. Insurance. Maintain adequate insurance coverage with respect
to its properties and business against loss or damage of the kinds and in the
amounts customarily insured against by companies of established reputation
engaged in the same or similar businesses including, without limitation,
commercial general liability insurance, workers compensation insurance, and
business interruption insurance; all acquired in such amounts and from such
companies as Bank may reasonably require. Notice of Default and Other Notices.
(a) Notice of Default. Furnish to Bank immediately upon becoming aware of the
existence of any condition or event which
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constitutes a Default (as defined in the Loan Documents) or any event which,
upon the giving of notice or lapse of time or both, may become a Default,
written notice specifying the nature and period of existence thereof and the
action which Borrower is taking or proposes to take with respect thereto. (b)
Other Notices. Promptly notify Bank in writing of (i) any material adverse
change in its financial condition or its business; (ii) any default under any
material agreement, contract or other instrument to which it is a party or by
which any of its properties are bound, or any acceleration of the maturity of
any indebtedness owing by Borrower; (iii) any material adverse claim against or
affecting Borrower or any part of its properties; (iv) the commencement of, and
any material determination in, any litigation with any third party or any
proceeding before any governmental agency or unit affecting Borrower; and (v) at
least 30 days prior thereto, any change in Borrower's name or address as shown
above, and/or any change in Borrower's structure. Compliance with Other
Agreements. Comply with all terms and conditions contained in this Agreement,
and any other Loan Documents, and swap agreements, if applicable, as defined in
the Note. Payment of Debts. Pay and discharge when due, and before subject to
penalty or further charge, and otherwise satisfy before maturity or delinquency,
all obligations, debts, taxes, and liabilities of whatever nature or amount,
except those which Borrower in good faith disputes. Reports and Proxies. Deliver
to Bank, promptly, a copy of all financial statements, reports, notices, and
proxy statements, sent by Borrower to stockholders, and all regular or periodic
reports required to be filed by Borrower with any governmental agency or
authority. Other Financial Information. Deliver promptly such other information
regarding the operation, business affairs, and financial condition of Borrower
which Bank may reasonably request. Non-Default Certificate From Borrower.
Deliver to Bank, with the Financial Statements required herein, a certificate
signed by Borrower, if Borrower is an individual, or by a principal financial
officer of Borrower warranting that no "Default" as specified in the Loan
Documents nor any event which, upon the giving of notice or lapse of time or
both, would constitute such a Default, has occurred. Estoppel Certificate.
Furnish, within 15 days after request by Bank, a written statement duly
acknowledged of the amount due under the Loan and whether offsets or defenses
exist against the Obligations. Deposit Relationship. Maintain its primary
depository account and cash management account with Bank. Reports and Proxies.
Borrower shall deliver to First Union, promptly, a copy of all financial
statements, reports, notices, and proxy statements, sent by Borrower to
stockholders, and all regular or periodic reports required to be filed by
Borrower with any governmental agency or authority.
NEGATIVE COVENANTS. Borrower agrees that from the date of this Agreement and
until final payment in full of the Obligations, unless Bank shall otherwise
consent in writing, Borrower will not: Default on Other Contracts or
Obligations. Default on any material contract with or obligation when due to a
third party or default in the performance of any obligation to a third party
incurred for money borrowed. Judgment Entered. Permit the entry of any monetary
judgment or the assessment against, the filing of any tax lien against, or the
issuance of any writ of garnishment or attachment against any property of or
debts due Borrower in an amount in excess of $25,000.00 and that is not
discharged or execution is not stayed within Thirty (30) days of entry.
Government Intervention. Permit the assertion or making of any seizure, vesting
or intervention by or under authority of any government by which the management
of Borrower or any guarantor is displaced of its authority in the conduct of its
respective business or such business is curtailed or materially impaired.
Prepayment of Other Debt. Retire any long-term debt entered into prior to the
date of this Agreement at a date in advance of its legal obligation to do so.
Retire or Repurchase Capital Stock. Retire or otherwise acquire any of its
capital stock. Change in Fiscal Year. Borrower or guarantor shall not change its
fiscal year without the consent of Bank. Guarantees. Guarantee or otherwise
become responsible for obligations of any other person or persons in an
aggregate amount in excess of $10,000.00 per fiscal year, other than the
endorsement of checks and drafts for collection in the ordinary course of
business. Encumbrances. Create, assume, or permit to exist any mortgage,
security deed, deed of trust, pledge, lien, charge or other encumbrance on any
of its assets, whether now owned or hereafter acquired, other than: (i) security
interests required
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by the Loan Documents; (ii) liens for taxes contested in good faith; (iii) liens
accruing by law for employee benefits; or (iv) Permitted Liens.
FINANCIAL COVENANTS. Borrower, on a consolidated basis, agrees to the following
provisions from the date of this Agreement and until final payment in full of
the Obligations, unless Bank shall otherwise consent in writing: Current Ratio.
Borrower shall, at all times, maintain a Current Ratio of not less than 2.00 to
1.00. "Current Ratio" shall mean the ratio of current assets divided by current
liabilities. Working Capital. Borrower shall, at all times, maintain Working
Capital of at least $2,000,000.00. "Working Capital" shall mean the excess of
the current assets over the current liabilities. Tangible Net Worth. Borrower
shall, at all times, maintain Tangible Net Worth of at least $6,000,000.00.
"Tangible Net Worth" shall mean the total assets minus total liabilities. For
purposes of this computation, the aggregate amount of any intangible assets of
Borrower including, without limitation, goodwill, franchises, licenses, patents,
trademarks, trade names, copyrights, service marks, and brand names, shall be
subtracted from total assets, and total liabilities shall include fully
subordinated debt. Total Liabilities to Tangible Net Worth Ratio. Borrower
shall, at all times, maintain a ratio of Total Liabilities, including fully
subordinated debt, divided by Tangible Net Worth of not more than 3.00 to 1.00.
For purposes of this computation, "Total Liabilities" shall mean all liabilities
of Borrower, including capitalized leases and all reserves for deferred taxes
and other deferred sums appearing on the liabilities side of a balance sheet of
Borrower, in accordance with generally accepted accounting principles applied on
a consistent basis. Debt Service Coverage Ratio. Borrower shall at all times
maintain a Debt Service Coverage Ratio of not less than 2.00 to 1.00. "Debt
Service Coverage Ratio" shall mean the sum of net profit plus interest expense
plus income tax expense plus depreciation and amortization divided by the sum of
interest expense plus the current portion of long term debt and capital leases
plus income tax expense. Limitation on Debt. Borrower and any guarantor shall
not, without the Bank's prior written consent, directly or indirectly, create,
incur, assume or become liable for any debt, contingent or direct, if, giving
effect to such additional debt on a pro forma basis, causes the aggregate amount
of Borrower's debt, including obligations to Bank, to exceed $1,300,000.00.
Loans and Advances. Borrower shall not, during any fiscal year, make loans or
advances, excepting ordinary course of business travel and expense advances, to
any person or entity, which total more than $10,000.00 in the aggregate.
ANNUAL FINANCIAL STATEMENTS. Borrower shall deliver to Bank, within 120 days
after the close of each fiscal year, audited financial statements reflecting its
operations during such fiscal year, including, without limitation, a balance
sheet, profit and loss statement and statement of cash flows, with supporting
schedules; all on a consolidated and consolidating basis and in reasonable
detail, prepared in conformity with generally accepted accounting principles,
applied on a basis consistent with that of the preceding year. All such
statements shall be examined by an independent certified public accountant
acceptable to Bank. The opinion of such independent certified public accountant
shall not be acceptable to Bank if qualified due to any limitations in scope
imposed by Borrower or its Subsidiaries, if any. Any other qualification of the
opinion by the accountant shall render the acceptability of the financial
statements subject to Bank's approval.
PERIODIC FINANCIAL STATEMENTS. Borrower shall deliver to Bank unaudited
management-prepared quarterly financial statements including, without
limitation, a balance sheet, profit and loss statement and statement of cash
flows, with supporting schedules, as soon as available and in any event within
30 days after the close of each such period; all in reasonable detail and
prepared in conformity with generally accepted accounting principles, applied on
a basis consistent with that of the preceding year. Such statements shall be
certified as to their correctness by a principal financial officer of Borrower
and in each case, if audit statements are required, subject to audit and
year-end adjustments.
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FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank such information
as Bank may reasonably request from time to time, including without limitation,
financial statements and information pertaining to Borrower's financial
condition. Such information shall be true, complete, and accurate.
TAX RETURNS. Borrower shall deliver to Bank, within 30 days of filing, complete
copies of federal and state tax returns, as applicable, each of which shall be
signed and certified by Borrower to be true and complete copies of such returns.
In the event an extension is filed, Borrower shall deliver a copy of the
extension within 30 days of filing.
BORROWING BASE. As to the Line of Credit Note in the principal amount of
$200,000.00, the following provisions shall apply:
Borrowing Limitation. The maximum principal amount that Borrower may borrow
shall be the lesser of the principal amount stated in the Line of Credit Note or
the maximum principal amount allowed under this addendum (the "Maximum Principal
Amount").
The Maximum Principal Amount shall be an amount equal to 75% of the net amount
of Eligible Accounts, less the amount of any Reserve required by Bank.
"Eligible Account" refers to an account receivable not more than 90 days from
the date of the original invoice that arises in the ordinary course of
Borrower's business and meets the following eligibility requirements: (a) the
sale of goods or services reflected in such account is final and such goods and
services have been delivered or provided and accepted by the account debtor and
payment for such is owing; (b) the invoices comprising an account are not
subject to any claims, returns or disputes of any kind; (c) the account debtor
is not insolvent; (d) the account debtor has its principal place of business in
the United States; (e) the account debtor is not an affiliate of Borrower and is
not a supplier to Borrower and the account is not otherwise exposed to risk of
set-off; (f) not more than twenty five percent of the original invoices owing
Borrower by the account debtor are more than ninety days from the date of the
original invoice and do not meet the other eligible requirements; (g) Bank has a
first priority perfected security interest in such account.
"Reserves" may be required at any time and from time to time by Bank without
prior notice to Borrower in amounts deemed by Bank to be adequate to reserve
against outstanding letter of credit, outstanding bankers acceptances,
Borrower's obligations to Bank or its affiliates or any guaranties or other
contingent debt of Borrower.
Required Reports. Borrower shall certify to Bank by the tenth day of each month,
the amount of Eligible Accounts as of the first day of each month, on forms
required by Bank together with all detail and supporting documents requested by
Bank. Bank may at any time and from time to time, during Bank's normal business
hours, enter upon any business premises of Borrower and audit Borrower's
accounts. Bank's determination of the amount of Eligible Accounts shall at all
times be indisputable and deemed correct. The Borrower, at all times, shall
cooperate with Bank without limitation by providing Bank information and access
to Borrower's premises and business records and shall be courteous to Bank's
agents.
Continuing Representations. Borrower warrants and represents as a continuing
warranty, that so long as principal is outstanding under the Line of Credit
Note, the outstanding principal balance shall not exceed the lesser of the
Maximum Principal Amount or the principal amount stated in the Line of Credit
Note (the "Borrowing Limit"). Borrower agrees to pay any advances in excess of
the Borrowing Limit immediately upon receipt by Borrower of written notice that
the Borrowing Limit has been exceeded.
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CONDITIONS PRECEDENT. The obligations of Bank to make the Loan and any advances
pursuant to this Agreement are subject to the following conditions precedent:
Additional Documents. Receipt by Bank of such additional supporting documents as
Bank or its counsel may reasonably request.
IN WITNESS WHEREOF, Borrower and Bank, on the day and year first written above,
have caused this Agreement to be executed under seal.
Oak Tree Medical Management, Inc.
Taxpayer Identification Number: 00-0000000
CORPORATE By:_________________________________________
SEAL Xxxxxxx Xxxxxxxx, President
By:_________________________________________
Xxxxxxx Xxxxxx, Executive Vice President
First Union National Bank
_________________________________________
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