1
EXHIBIT 10.13
LETTER LOAN AGREEMENT
July 1, 2000
The undersigned, U.S. PHYSICAL THERAPY, INC., a Nevada corporation
("BORROWER"), has requested that SOUTHWEST BANK OF TEXAS, N.A. ("BANK") provide
to Borrower a TWO MILLION FIVE HUNDRED THOUSAND DOLLAR ($2,500,000.00)
convertible line of credit facility and FIVE HUNDRED THOUSAND DOLLAR
($500,000.00) revolving credit facility and Bank is willing to provide such
credit facility to Borrower upon the terms and subject to the conditions set
forth in this letter loan agreement (this "AGREEMENT"). In consideration for the
above premises and the mutual promises and covenants herein contained, Borrower
and Bank hereby agree as follows:
1. Credit Facilities.
(a) Convertible Line of Credit. On the terms and subject to
the conditions hereinafter set forth, Bank agrees to make loans to Borrower
(each a "CONVERTIBLE LINE OF CREDIT LOAN") on any business day prior to December
31, 2000 (the "CONVERSION DATE") in such amounts as Borrower may request, up to
but not exceeding an aggregate principal sum of $2,500,000 (the "LOAN"). Within
such limits and during the period from the date of this Agreement to the
Conversion Date (the "CONVERTIBLE LINE OF CREDIT PERIOD"), Borrower may borrow
under the Convertible Line of Credit Loan. The Bank shall have no obligation to
make additional Convertible Line of Credit Loans to Borrower following the Line
of Credit Conversion Date. The principal amount of Convertible Line of Credit
Loans outstanding on the Conversion Date shall be due and payable as provided
below with a final maturity date of June 30, 2003 (the "LINE OF CREDIT MATURITY
DATE").
(b) Unsecured Revolving Line of Credit. On the terms and
subject to the conditions hereinafter set forth, Bank agrees to make loans to
Borrower (each a "REVOLVING LOAN") on any business day prior to July 1, 2001
(the "REVOLVER TERMINATION DATE") in such amounts as Borrower may request, up to
but not exceeding an aggregate principal sum at any time outstanding of
$500,000.00 (the "REVOLVING LINE OF CREDIT COMMITMENT"). Within such limits and
during the period from the date of this Agreement to the Revolver Termination
Date (the "REVOLVING CREDIT PERIOD") Borrower may borrow, repay and reborrow
hereunder (the "REVOLVING LINE OF
1
2
CREDIT"). The Convertible Line of Credit Loan and the Revolving Line of Credit
are herein called the "CREDIT FACILITY"; and each Convertible Line of Credit
Loan and each Revolving Loan are herein called the "LOANS".
2. Promissory Notes; Interest Rate; Manner of Borrowing; Etc.
(a) The Notes:
(i) Convertible Line of Credit Note. The Convertible Line of
Credit Loans shall be evidenced by a promissory note (herein
called, together with any renewals and extensions thereof, the
"CONVERTIBLE LINE OF CREDIT NOTE") in substantially the form
attached hereto as Exhibit A(i), duly executed by Borrower,
dated of even date herewith, not to exceed the principal
amount of TWO MILLION FIVE HUNDRED THOUSAND DOLLARS
($2,500,000.00) and made payable to the order of Bank.
(ii) Revolving Line of Credit Note. The Revolving Loans shall
be evidenced by a promissory note in substantially the form
attached hereto as Exhibit A(ii), duly executed by
Borrower(herein called, together with any renewals and
extensions thereof the "REVOLVING LINE OF CREDIT NOTE"), dated
of even date herewith, in the principal amount of FIVE HUNDRED
THOUSAND DOLLARS ($500,000.00) and made payable to the order
of Bank. The Convertible Line of Credit Note and the Revolving
Line of Credit Note are herein collectively, the "NOTES."
(iii) Renewal Notes. All renewals, extensions, modifications,
increases, and rearrangements of the Notes, if any, shall be
deemed to be made pursuant to this Agreement and accordingly,
shall be subject to the terms and provisions hereof, and the
Borrower shall be deemed to have ratified, as of such renewal,
extension, modification, increase, or rearrangement date, all
of the representations, warranties, covenants and agreements
set forth herein.
(b) Principal and Interest Note Payments.
(i) Convertible Line of Credit Note. The principal of and
interest to accrue on the Convertible Line of Credit Loan
shall be due and payable as follows: Principal shall
2
3
be due and payable in ten (10) equal quarterly payments of
$250,000 each on the last day of each March, June, September
and December, until the Line of Credit Maturity Date
commencing March 31, 2001; and interest shall be due and
payable quarterly as it accrues commencing September 30, 2000,
and continuing on the last day of each March, June, September
and December thereafter until the Line of Credit Maturity
Date.
(ii) Revolving Line of Credit Note. The principal of and
interest to accrue on the Revolving Loans shall be due and
payable as follows: Interest to accrue on the Revolving Loans
shall be due and payable quarterly as it accrues, with the
first installment to be due and payable on or before the last
day of September 2000, with a like installment of all accrued
but unpaid interest to be due and payable on or before the
same day of each December, March, June and September
succeeding thereafter until the Revolver Termination Date on
which date both all outstanding principal and accrued but
unpaid interest thereon shall be due and payable in full.
(iii) Payment Dates. Should the principal of, or any
installment of interest on, the Notes become due and payable
on any day other than a business day, the maturity thereof
shall be extended to the next succeeding business day, and
interest shall be payable with respect to such extension.
(c) Payment Location. All payments on the Notes shall be made to Bank
at its principal office in Houston, Texas by company check or, if required by
Bank, by automatic debit provided sufficient funds exist in Borrower=s operating
account at Bank, in immediately available funds, and payments shall be applied
first to expenses, if any, due hereunder and outstanding, then to accrued
interest and then to principal.
(d) Interest Rate. The Loan shall bear interest on the outstanding and
unpaid principal balance thereof, from the date such Loans are made until they
become due for each date at the rates set forth in the Notes.
(e) Manner of Borrowing under the Credit Facilities. During the
Convertible Line of Credit Period and the Revolving Credit Period respectively,
Borrower shall give Bank prior written notice on or before 10:00 a.m. (Houston,
Texas time) one business
3
4
day before a Loan under each such Credit Facility is requested (a "NOTICE OF
BORROWING") hereunder in form and substance acceptable to Bank and shall specify
the Credit Facility, aggregate amount and requested date of such Loan. Not later
than 2:00 p.m., Houston, Texas time, on the business day specified, subject to
the terms and conditions of this Agreement, Bank shall make available to
Borrower the requested Loan in immediately available funds in Borrower's
operating account maintained at Bank, or as otherwise directed in the Notice of
Borrowing.
(f) Commitment Fee. Borrower shall pay Bank a fee on the average daily
amount of the difference between $500,000.00 and the aggregate amount of all
outstanding Revolving Loans at a per annum rate equal to three-eighths of one
percent (3/8%). Such fee shall accrue from the date all conditions in Section
3(a) hereof are satisfied to the Revolver Termination Date and shall be due and
payable quarterly in arrears on the same day as interest payments are due under
the Revolving Line of Credit Note through the Revolver Termination Date, with
the final payment to be made on the Revolver Termination Date.
3. Conditions Precedent.
(a) Conditions of Initial Loans. The obligation of Bank to make the
initial Loans to Borrower is subject to the conditions precedent that: (i) Bank
shall have received duly executed this Agreement, the Notes, the Guaranties
executed by U.S. P-T Delaware, Inc., Rehab Partners #1, Inc., Rehab Partners #2,
Inc., Rehab Partners #3, Inc., Rehab Partners #4, Inc., Rehab Partners #5, Inc.
and Rehab Partners #6, Inc. (herein collectively "Guarantors") and any other
documents and instruments contemplated hereby or executed in connection
herewith, and any modifications thereof (hereinafter collectively referred to as
the "LOAN DOCUMENTS"); (ii) Bank shall have received the other documents listed
on Exhibit B attached hereto in form and substance acceptable to Bank and its
legal counsel; and (iii) Borrower shall have paid to Bank (A) all reasonable
fees to be received by Bank pursuant to this Agreement or any other Loan
Document, (B) as reimbursement to the Bank an amount equal to the reasonable
fees and out-of-pocket expenses of Bank's counsel incurred in connection with
the preparation, execution and delivery of the Loan Documents and the
consummation of the transactions contemplated thereby and (C) a fee equal to
one-quarter of one percent (0.25%) of the $3,000,000.00 commitment hereunder.
4
5
(b) Conditions of All Loans. The obligation of Bank to make any Loan
under this Agreement (including the initial Loans) shall be subject to the
conditions precedent that, as of the date of such Loan and after giving effect
thereto: (i) there exists no Default or Event of Default; (ii) there exists no
change that would cause a material adverse change in, or effect upon, (A) the
validity, performance or enforceability of any Loan Documents, (B) the financial
condition or business operations of Borrower or any Guarantor, or (C) the
ability of Borrower or any Guarantor to fulfill its obligations under the Loan
Documents (a "MATERIAL ADVERSE EFFECT"); (iii) Bank shall have received from
Borrower a Notice of Borrowing dated as of the date of such Loan and all of the
statements contained in such Notice of Borrowing shall be true and correct; (iv)
the representations and warranties contained in each of the Loan Documents shall
be true in all respects as though made on the date of such Loan; and (v) the
making of the Loans shall be permitted by the laws and regulations of each
jurisdiction to which Bank or Borrower may be subject (including, without limi-
tation, Regulation T, U or X of the Board of Governors of the Federal Reserve
System), and shall not subject Bank to any penalty or, in the reasonable
judgment of the Bank, other burdensome condition under or pursuant to any
applicable law or governmental regulation.
4. Representations and Warranties. In order to induce Bank to make the
Loans hereunder, Borrower represents and warrants to Bank that:
(a) The Borrower is a corporation, duly organized and in good standing,
under the laws of the State of Nevada and each of Borrower's Subsidiaries is
incorporated in the states identified under Exhibit C hereto and Borrower and
each of its Subsidiaries has the power to own its property and to carry on its
business in each jurisdiction in which it operates;
(b) The Borrower has full power and authority to enter into this
Agreement, to make the borrowing hereunder, to execute and deliver the Loan
Documents and to incur the obligations provided for in the Loan Documents, all
of which has been duly authorized by all necessary corporate action;
(c) The Borrower has no subsidiaries other than those companies
described on Exhibit C hereto (herein collectively the "Subsidiaries" and each
individually a "Subsidiary"); for purposes of compliance with Section 3(b)(iv),
Borrower shall only be required to update Exhibit C once every quarter of the
fiscal year.
5
6
(d) The Loan Documents are the legal and binding obligations of
Borrower, enforceable in accordance with their respective terms, except as
limited by bankruptcy, insolvency or other laws of general application relating
to the enforcement of creditors' rights;
(e) Neither the execution and delivery of this Agreement and the other
Loan Documents, nor consummation of any of the transactions herein or therein
contemplated, nor compliance with the terms and provisions hereof or thereof,
will contravene or conflict with (i) any provision of law, statute or regulation
to which Borrower is subject, or (ii) any judgment, license, order or permit
applicable to Borrower or any indenture, mortgage, deed of trust or other
instrument to which Borrower may be subject; no consent, approval, authorization
or order of any court, governmental authority or third party is required in
connection with the execution and delivery by Borrower of this Agreement or any
of the other Loan Documents or to consummate the transactions contemplated
herein or therein;
(f) All financial statements delivered by Borrower to Bank prior to the
date hereof are true and correct, fairly present the financial condition of
Borrower and its Subsidiaries and have been prepared in accordance with
generally accepted accounting principles, consistently applied, and no material
adverse changes have occurred in the financial condition or business of Borrower
or its Subsidiaries since the date of the most recent financial statements which
Borrower has delivered to Bank;
(g) No litigation, investigation, or governmental proceeding is
pending, or, to the knowledge of any of Borrower's officers, threatened against
or affecting Borrower or its Subsidiaries, which may result in any material
adverse change in Borrower's and its Subsidiaries' business, properties or
operations on a consolidated basis;
(h) There is no fact known to Borrower that Borrower has not disclosed
to Bank in writing which may result in any material adverse change in Borrower's
or its Subsidiaries' business, properties or operations;
(i) Borrower and its Subsidiaries own all of the assets reflected on
its most recent balance sheet free and clear of all liens, security interests or
other encumbrances, except as listed on Exhibit E;
6
7
(j) The principal office, chief executive office and principal place of
business of Borrower is in Houston, Xxxxxx County, Texas;
(k) Borrower and each of its Subsidiaries has filed all tax returns to
be filed, or received an extension for the filing of such tax return, and paid
all taxes shown thereon to be due, including interest and penalties, or provided
adequate reserves for the payment thereof;
(l) Borrower is not in material violation of any law, ordinance,
governmental rule or regulation to which it is subject, and is not in default
under any material agreement, contract or understanding to which it is a party;
(m) Borrower and each of its Subsidiaries and any properties or assets
owned by Borrower and each of its Subsidiaries are not in violation of, in any
material respect, any environmental laws, nor is there existing, pending or
threatened any investigation or inquiry by any governmental authority pursuant
to any environmental laws, nor is there existing or pending any remedial
obligations under any environmental laws;
(n) The proceeds of the Notes shall be used by the Borrower for general
corporate needs. No part of the proceeds received under this Agreement or the
Notes will be used, directly or indirectly, for the purpose of purchasing or
carrying, or the payment in full or in part, of indebtedness which was incurred
for the purpose of purchasing or carrying, any margin stock, as such term is
defined in Regulation U of the Board of Governors of the Federal Revenue System,
12 C.F.R., Part 221 ("REGULATION U"). No part of proceeds received under this
Agreement or the Notes will be used for any purpose which violates Regulation X
of the Board of Governors of the Federal Reserve System, 12 C.F.R., Part 224
("REGULATION X"). All Loans evidenced by the Notes are and shall be "business
loans," as such term is used in the Depository Institutions Deregulation and
Monetary Control Act of 1980, as amended, and such loans are for business or
commercial purposes and not primarily for personal, family, or household use, as
such terms are used in the Federal Truth-in-Lending Act and in chapter One of
the Texas Credit Code; and
(o) All factual information heretofore or contemporaneously furnished
by or on behalf of the Borrower to Bank for purposes or in connection with this
Agreement and the Notes or any transaction contemplated herein is, and all other
such information hereafter
7
8
furnished by or on behalf of the Borrower to Bank will be, true and accurate on
the date as of which such information is dated or certified and not incomplete
by omitting to state any material fact necessary to make such information not
misleading at such time.
5. Affirmative Covenants. Until payment in full of the Notes and all
other obligations and liabilities of Borrower hereunder, and until the
expiration and termination of Bank's obligation hereunder, Borrower agrees and
covenants that (unless Bank shall otherwise consent in writing):
(a) Borrower shall conduct its business in an orderly and efficient
manner consistent with good business practices and in accordance with all valid
regulations, laws and orders of any governmental authority and will act in
accordance with customary industry standards in maintaining and operating its
assets, properties and investments;
(b) Borrower shall maintain materially complete and accurate books and
records of its transactions prepared on a consistent basis, and upon reasonable
notice will coordinate with and give Bank access to all books, records and
documents of Borrower and each of its Subsidiaries and permit Bank to make and
take away copies thereof during Borrower's regular business hours so as to not
unreasonably interfere with Borrower's and its Subsidiaries' normal business
operations;
(c) Borrower shall furnish to Bank as soon as available and in any
event within forty-five (45) days after the end of each of the first three (3)
quarterly fiscal periods of each fiscal year of Borrower, copies of the balance
sheet of Borrower and its Subsidiaries on a consolidated basis (such
Subsidiaries included in Borrower's consolidated financial statements are herein
called "CONSOLIDATED SUBSIDIARIES") as of the end of such fiscal period, and
statements of income and changes in cash flow of Borrower and its Subsidiaries
on a consolidated basis for the portion of the fiscal year ending with such
period, all in reasonable detail, and certified by the chief financial officer
of Borrower in the form of Exhibit D attached hereto as being true and correct
and as having been prepared in accordance with generally accepted accounting
principles, consistently applied, subject to year-end adjustments and shall
provide to Bank copies of its 10-Q as filed with the Securities Exchange
Commission;
(d) Borrower shall furnish to Bank as soon as available and in any
event within one hundred twenty (120) days after the close
8
9
of each fiscal year of Borrower, copies of the audited balance sheet of Borrower
and its Subsidiaries on a consolidated basis as of the close of such fiscal
year, and statements of income and retained earnings and changes in cash flow of
Borrower and its Subsidiaries on a consolidated basis for such fiscal year, in
each case setting forth in comparative form the figures for the preceding fiscal
year, all in reasonable detail and accompanied by an unqualified opinion (or if
qualified, of a non-material nature (e.g., FASB changes of accounting
principles) or nothing indicative of an ongoing concern or material
misrepresentation nature) of independent public accountants of recognized
national standing selected by Borrower and satisfactory to Bank, to the effect
that (i) such financial statements have been prepared in accordance with
generally accepted accounting principles, (ii) the examination of such accounts
in connection with such financial statements has been made in accordance with
generally accepted auditing standards, and, accordingly, includes such tests of
the accounting records and such other auditing procedures as were considered
necessary in the circumstances, and (iii) certified by Borrower's Chief
Financial Officer that Borrower's Chief Financial Officer has not become aware
of any condition or event which would constitute a default or an Event of
Default under any of the terms or provisions of this Agreement and, if any such
condition or event then exists, specifying in the nature and period of existence
thereof;
(e) Borrower shall furnish to Bank, immediately upon becoming aware of
the existence of any condition or event constituting an Event of Default or
event which, with the lapse of time and/or giving of notice would constitute an
Event of Default, written notice specifying the nature and period of existence
thereof and any action which Borrower is taking or proposes to take with respect
thereto;
(f) Borrower shall promptly notify Bank of (i) any material adverse
change in Borrower's financial condition or business; (ii) any default under any
material agreement, contract or other instrument to which Borrower is a party or
by which any of its Subsidiaries or its properties are bound, or any
acceleration of any maturity of any indebtedness owing by Borrower or any of its
Subsidiaries; (iii) any material adverse claim against or affecting Borrower or
any of its Subsidiaries; and (iv) any litigation, or any claim or controversy
which might become the subject of litigation, against Borrower or any of its
Subsidiaries or affecting any of Borrower's or any of its Subsidiaries'
property, if such litigation or potential litigation might, in the event of an
unfavorable outcome, have a material adverse effect on
9
10
Borrower's or any of its Subsidiaries' financial condition or business or might
cause an Event of Default;
(g) Borrower shall promptly furnish to Bank, at Bank's request, such
additional financial or other information concerning assets, liabilities,
operations and transactions of Borrower and its Subsidiaries as Bank may from
time to time reasonably request;
(h) Borrower shall, and shall cause each of its Subsidiaries to,
promptly pay all lawful claims, whether for labor, materials or otherwise, which
might or could, if unpaid, become a lien or charge on any property or assets of
Borrower and its Subsidiaries, unless and to the extent only that the same are
being contested in good faith by appropriate proceedings and reserves have been
established therefor;
(i) Borrower shall, and shall cause each of its Subsidiaries to,
preserve and maintain all licenses, privileges, franchises, certificates and the
like necessary for the operation of its business;
(j) Borrower shall, and shall cause each of its Subsidiaries to,
execute such additional instruments as may be reasonably requested by Bank in
order to carry out the intent of this Agreement and to perfect or give further
assurances of any of the rights granted or provided for hereunder or under any
of the Loan Documents;
(k) Borrower shall indemnify, defend and hold harmless Bank and its
directors, officers, agents, attorneys, and employees (individually, an
"INDEMNITEE" and collectively, the "INDEMNITEES") from and against any and all
loss, liability, obligation, damage, penalty, judgment, claim, deficiency and
expense (including interest, penalties, attorneys' fees and amounts paid in
settlement) to which the Indemnitees may become subject arising out of this
Agreement and the other Loan Documents other than those which arise by reason of
the gross negligence or willful misconduct of Bank, BUT SPECIFICALLY INCLUDING
ANY LOSS, LIABILITY, OBLIGATION, DAMAGE, PENALTY, JUDGMENT, CLAIM, DEFICIENCY OR
EXPENSE ARISING OUT OF THE SOLE OR CONCURRENT NEGLIGENCE OF BANK. Borrower shall
also indemnify, protect and hold each Indemnitee harmless from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, proceedings, costs, expenses (including without
limitation all reasonable attorneys' fees and legal expenses whether or not suit
is brought), and disbursements of any kind or nature whatsoever which may at any
10
11
time be imposed on, incurred by, or asserted against such Indemnitee, with
respect to or as a direct or indirect result of the violation by Borrower of any
environmental law. The provisions of and undertakings and indemnifications set
forth in this Section shall survive (i) the satisfaction and payment of the
Loans and termination of this Agreement and (ii) the release of any security
interests held by Bank or the extinguishment of such security interests by
foreclosure or action in lieu thereof;
(l) Borrower shall use the proceeds of the Line of Credit Loan to
repurchase up to 565,000 shares of Borrower's outstanding common stock provided
the weighted average price per share repurchased shall not exceed $12.00;
(m) Borrower shall use the proceeds of the Revolving Loan for general
working capital purposes.
6. Negative Covenants. Until payment in full of the Notes and all other
obligations and liabilities of Borrower hereunder, and until the expiration and
termination of Bank's obligation hereunder, Borrower agrees and covenants that
it shall not and shall not permit any of its Subsidiaries to (unless Bank shall
otherwise consent in writing):
(a) create, incur or assume any indebtedness or borrow money, except
for (i) the Loans hereunder, (ii) intercompany indebtedness between Borrower and
any Consolidated Subsidiaries, (iii) trade debt incurred in the ordinary course
of Borrower's and its Subsidiaries' business, including under office space
leases, (iv) debt reflected on Borrower's most recent balance sheet, and (v)
additional debt not to exceed $500,000.00.
(b) endorse, guarantee, or otherwise become liable for the obligations
of any person, firm or corporation except for endorsements of negotiable
instruments by Borrower and its Subsidiaries' in the ordinary course of business
and except as provided in 6(a)(v) above.
(c) mortgage, assign, encumber, hypothecate or grant a security
interest in any of Borrower's or any of its Subsidiaries' assets, except to Bank
(provided, however, that the foregoing shall not apply to inchoate landlord
liens and liens for taxes which are not delinquent or which are being contested
in good faith and liens resulting from deposits to secure the payments of
workmen's compensation or social security or to secure the performance of bids
or contracts in the ordinary course of business);
11
12
(d) liquidate, dissolve or reorganize Borrower or any Consolidated
Subsidiary; or merge or consolidate Borrower or any Consolidated Subsidiary
with, or permit Borrower or any Consolidated Subsidiary to acquire all or
substantially all of the assets of, any other company, firm or association
except with respect to wholly-owned Subsidiaries of Borrower; or make any other
change in Borrower's or any Consolidated Subsidiary's capitalization or its
business if any such transaction would have a Material Adverse effect on
Borrower's capitalization or business;
(e) pay any dividends on any of its outstanding stock (other than
dividends by Borrower's Subsidiaries to Borrower); own, purchase or acquire,
directly or indirectly, any promissory notes, stock or securities of any person,
firm or corporation, other than Borrower's or Borrower's Subsidiaries,
commercial paper of an issuer rated at least "A - 1" by Standard and Poor's
Ratings Group, a Division of XxXxxx-Xxxx, Inc., "P - 1" by Xxxxx'x Investor
Service, Inc. or "F - 1" by Fitch IBCA and securities guaranteed as to the
principal and interest by the United States government; or make any loans or
advances to any other person other than Borrower's employees and its
Consolidated Subsidiaries;
(f) sell any of its assets used or useful in its business, except in
the ordinary course of business; or sell any of its assets to any other person,
firm or corporation with the agreement that such assets shall be leased back to
Borrower.
7. Financial Covenants.
(a) For purposes of this Section 7, the following terms shall have the
respective meanings assigned to them below:
"CAPEX" means, for any person on a consolidated basis as of
any period, the aggregate amount of expenditures related to equipment,
leasehold improvements and other tangible assets.
"Current Assets" means, as of any date, the total assets of
Borrower on a consolidated basis that would be reflected on a balance
sheet of Borrower as "current assets" in accordance with GAAP.
"Current Liabilities" means, as of any date, the total
liabilities of Borrower on a consolidated basis that would be reflected
on a balance sheet of Borrower as "current liabilities" in accordance
with GAAP.
12
13
"EBITDA" means, as of any date, with respect to Borrower
on a consolidated basis, without duplication, (i) Net Income plus (ii)
depreciation, depletion, amortization and other non- cash items
(including non-cash minority interests expenses) reducing Net Income
plus (iii) interest expenses plus (iv) income tax expenses, all
determined in accordance with GAAP.
"GAAP" means generally accepted accounting principles, applied
on a consistent basis, that are applicable in the circumstances as of
the date in question.
"Intangible Assets" means assets that are (i) deferred assets,
other than prepaid insurance, prepaid taxes and deferred taxes, (ii)
patents, copyrights, trademarks, tradenames, franchises, goodwill,
experimental expenses and other similar assets which would be
classified as intangible assets on a balance sheet, and (iii)
unamortized debt discount and expense.
"Net Income" means, for any period, the net earnings (or loss)
after taxes of Borrower on a consolidated basis for such period
determined in accordance with GAAP.
"Subordinated Debt" means those certain 8% convertible
subordinated notes issued by Borrower June 2, 1993, April 7, 1994 and
May 2, 1994 in the aggregate amount of $8,050,000.00 due June 30, 2003
and June 30, 2004.
"Tangible Net Worth" means the total shareholders' equity of
Borrower, plus outstanding Subordinated Debt less the aggregate book
value of Intangible Assets.
"Total Liabilities" means, as of any date, the liabilities of
Borrower on a consolidated basis that would be reflected on a balance
sheet of Borrower as "liabilities" in accordance with GAAP excluding
the outstanding Subordinated Debt.
(b) Until payment in full of the Notes and all other obligations and
liabilities of Borrower hereunder, Borrower covenants that it shall not (unless
Bank shall otherwise consent in writing):
(i) permit the ratio of its Current Assets to its Current
Liabilities to be less than 2.0 to 1.0;
13
14
(ii) permit its ratio of Total Liabilities to Tangible Net
Worth to be greater than 1.25 to 1.00;
(iii) permit, at all times after December 31, 1999, its
Tangible Net Worth to be less than $10,000,000.00 plus 50% of
Net Income, on a cumulative basis (provided that no negative
adjustment will be made in the event that Net Income is a
deficit figure for such period);
(iv) permit, for any period, the ratio of Borrower's (x)
EBITDA to (y) CAPEX plus dividends plus cash interest expenses
plus scheduled debt repayments plus cash tax expenses all on a
consolidated basis to be less than 1.25 to 1.00, in each case
for the one-year period ending on the last day of such period;
or
(v) permit Net Income to be negative for two or more
consecutive fiscal quarters.
8. Default. An Event of Default shall exist if any one or more of the
following events (individually, an "EVENT OF DEFAULT" and collectively, "EVENTS
OF DEFAULT") shall occur:
(a) Borrower shall fail to pay when due any principal of, or interest
on, the Notes or any other fee or payment due hereunder or under any of the Loan
Documents;
(b) any representation or warranty made in any of the Loan Documents
shall prove to be untrue or inaccurate in any material respect as of the date on
which such representation or warranty is made;
(c) default shall occur in the performance of any of the covenants or
agreements of Borrower contained herein or in any of the other Loan Documents
other than as specifically set forth under this Section 8 and such default shall
remain uncured for a period of 10 days following notice of same;
(d) Borrower or any of its Subsidiaries shall (i) apply for or consent
to the appointment of a receiver, custodian, trustee, intervener or liquidator
of such party or of all or a substantial part of such party's assets, (ii)
voluntarily become the subject of a bankruptcy, reorganization or insolvency
proceeding or be insolvent or admit in writing that such party is unable to pay
its debts as they become due or generally not pay such party's debts as they
become due, (iii) make a general assignment for the benefit of
14
15
creditors (iv) file a petition or answer seeking reorganization or an
arrangement with creditors or to take advantage of any bankruptcy or insolvency
laws, (v) file an answer admitting the material allegations of, or consent to,
or default in answering, a petition filed against such party in any bankruptcy,
reorganization or insolvency proceeding, (vi) become the subject of an order for
relief under any bankruptcy, reorganization or insolvency proceeding, or (vii)
fail to pay any money judgment against such party before the expiration of
thirty days after such judgment becomes final and no longer subject to appeal;
(e) an order, judgment or decree shall be entered by any court of
competent jurisdiction or other competent authority approving a petition
appointing a receiver, custodian, trustee, intervener or liquidator of Borrower
and of its Subsidiaries or of all or substantially all of such person's assets,
and such order, judgment or decree shall continue unstayed and in effect for a
period of 30 days; or a complaint or petition shall be filed against Borrower or
any of its Subsidiaries seeking or instituting a bankruptcy, insolvency,
reorganization, rehabilitation or receivership proceeding of such persons and
such petition or complaint shall not have been dismissed within sixty (60) days;
(f) Borrower shall default in the payment of the Subordinated Debt or
any other indebtedness in excess of $75,000.00 of Borrower or in the performance
of any of its obligations under such indebtedness and such default shall
continue for more than any applicable period of grace for which adequate
reserves have been set aside if disputed; or
(g) Any final judgment(s) for the payment of money in excess of
$75,000.00 shall be rendered against Borrower or any of its Subsidiaries and
such judgment(s) shall not be satisfied or discharged at least ten (10) days
prior to the date on which any of such person's assets could be lawfully sold to
satisfy such judgment(s).
9. Remedies Upon Event of Default. If an Event of Default shall have
occurred and be continuing, then Bank at its option may (i) declare the
principal of, and all interest then accrued on, the Notes and any other
liabilities of Borrower to Bank to be forthwith due and payable, whereupon the
same shall forthwith become due and payable without notice, presentment, demand,
protest, notice of intention to accelerate, notice of acceleration, or other
notice of any kind, all of which Borrower hereby expressly waives, anything
contained herein or in the Note to the contrary notwithstanding,
15
16
(ii) reduce any claim to judgment, and/or (iii) without notice of default or
demand, pursue and enforce any of Bank's rights and remedies under the Loan
Documents or otherwise provided under or pursuant to any applicable law or
agreement.
10. Miscellaneous.
(a) Waiver. No failure to exercise, and no delay in exercising, on the
part of Bank, any right hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right. The rights of Bank hereunder and
under the other Loan Documents shall be in addition to all other rights provided
by law. No notice or demand given in any case shall constitute a waiver of the
right to take other action in the same, similar or other instances without such
notice or demand.
(b) Notices. Any notices or other communications required or permitted
to be given by any of the Loan Documents must be given in writing and must be
personally delivered or mailed by prepaid certified or registered mail to the
party to whom such notice or communication is directed at the address of such
party as follows: (i) Borrower: U.S. Physical Therapy, Inc., 0000 Xxxx Xxx
Xxxx., Xxxxx 000, Xxxxxxx, Xxxxx 00000, Attention: J. Xxxxxxx Xxxxxx, Chief
Financial Officer, and (ii) Bank: Southwest Bank of Texas, 0000 Xxxx Xxx Xxxx,
Xxxxxxx, Xxxxx 00000, Attention: Xx. Xxxxxx Xxxxxxx, Vice President. Any such
notice or other communication shall be deemed to have been given (whether
actually received or not) on the day it is personally delivered as aforesaid or,
if mailed, on the third day after it is mailed as aforesaid. Any party may
change its address for purposes of this Agreement by giving notice of such
change to all other parties pursuant to this paragraph 9(b).
(c) Governing Law. This Agreement and the other Loan Documents are
being executed and delivered, and are intended to be performed, in the State of
Texas, and the substantive laws of Texas shall govern the validity,
construction, enforcement and interpretation of this Agreement and all other
Loan Documents, except to the extent: (i) otherwise specified therein; (ii) the
federal laws governing national banks expressly supersede and have contrary
application; or (iii) federal laws governing maximum interest rates shall
provide for rates of interest higher than those permitted under the laws of the
State of Texas.
16
17
(d) Arbitration. All disputes, claims and controversies between the
undersigned, whether individual, joint, or class in nature, arising from this
Agreement, the Loan Documents or otherwise, including without limitation
contract and tort disputes, shall be arbitrated pursuant to the Rules of the
American Arbitration Association, upon request of any of the undersigned. No act
to take or dispose of any collateral securing the Loan shall constitute a waiver
of this arbitration provision or be prohibited by this arbitration provision.
This includes, without limitation, obtaining injunctive relief or a temporary
restraining order; invoking a power of sale under any deed of trust or mortgage;
obtaining a writ of attachment or imposition of a receiver; or exercising any
rights relating to personal property, including taking or disposing of such
property with or without judicial process pursuant to Article 9 of the Uniform
Commercial Code. Any disputes, claims, or controversies concerning the
lawfulness or reasonableness of any act, or exercise of any right concerning any
collateral securing the Loan, including any claim to rescind, reform, or
otherwise modify any agreement relating to the collateral securing the Loan,
shall also be arbitrated, provided however that no arbitrator shall have the
right or the power to enjoin or restrain any act of any party. Judgment upon any
award rendered by any arbitrator may be entered in any court having
jurisdiction; provided, however, that nothing contained herein shall be deemed
to be a waiver by any party that is a bank of the protections afforded to it
under 12 USC Section 91, Texas Banking Code art. 342-8.002 or any other
protection provided banks by the laws of Texas or the United States. The
statutes of limitations, estoppel, waiver, laches, and similar doctrines which
would otherwise be applicable in any action brought by a party shall be
applicable in any arbitration proceeding, and the commencement of an arbitration
proceeding shall be deemed the commencement of an action for these purposes. The
Federal Arbitration Act shall apply to the construction, interpretation, and
enforcement of this arbitration provision. If the Federal Arbitration Act is
inapplicable to any such claim or controversy for any reason, such arbitration
shall be conducted pursuant to the Texas General Arbitration Act and in
accordance with this arbitration provision and Commercial Arbitration Rules of
the American Arbitration Association.
(e) Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable by a court of competent jurisdiction, then
such provision shall be severed from this Agreement and the remaining provisions
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance from this Agreement.
17
18
(f) Interest.
(i) It is the intention of the parties hereto to comply with
applicable usury laws; accordingly, notwithstanding any
provision to the contrary in this Agreement, the Notes or in
any of the other Loan Documents securing the payment hereof or
otherwise relating hereto, in no event shall this Agreement,
the Notes or such other Loan Documents require or permit the
payment, taking, reserving, receiving, collection, or charging
of any sums constituting interest under applicable laws which
exceed the maximum amount permitted by such laws. If any such
excess interest is called for, contracted for, charged, taken,
reserved, or received in connection with the Loans evidenced
by the Notes or in any of the Loan Documents securing the
payment thereof or otherwise relating thereto, or in any
communication by Bank or any other Person to Borrower or any
other Person, or in the event all or part of the principal or
interest thereof shall be prepaid or accelerated, so that
under any of such circumstances or under any other
circumstance whatsoever the amount of interest contracted for,
charged, taken, reserved, or received on the amount of
principal actually outstanding from time to time under the
Notes or any other Loan Document shall exceed the maximum
amount of interest permitted by applicable usury laws, then in
any such event it is agreed as follows: (A) the provisions of
this paragraph shall govern and control, (B) neither Borrower
nor any other Person now or hereafter liable for the payment
of the Notes or any obligation shall be obligated to pay the
amount of such interest to the extent such interest is in
excess of the maximum amount of interest permitted by
applicable usury laws, (C) any such excess which is or has
been received notwithstanding this paragraph shall be credited
against the then unpaid principal balance of the Notes or
other obligations, as applicable, or, if the Notes or other
obligations, as applicable, have been or would be paid in
full, refunded to Borrower, and (D) the provisions of this
Agreement, the Notes and the other Loan Documents securing the
payment thereof and otherwise relating thereto, and any
communication to Borrower, shall immediately be deemed
reformed and such excess interest reduced, without the
necessity of executing any other document, to the maximum
lawful rate allowed under applicable laws as now or hereafter
construed by courts having jurisdiction hereof
18
19
or thereof. Without limiting the foregoing, all calculations
of the rate of the interest contracted for, charged,
collected, taken, reserved, or received in connection with the
Notes, this Agreement or any other Loan Document which are
made for the purpose of determining whether such rate exceeds
the maximum lawful rate shall be made to the extent permitted
by applicable laws by amortizing, prorating, allocating and
spreading during the period of the full term of the Loans or
other obligations, as applicable, including all prior and
subsequent renewals and extensions, all interest at any time
contracted for, charged, taken, collected, reserved, or
received. The terms of this paragraph shall be deemed to be
incorporated in every document and communication relating to
the Notes, the Loans or any other Loan Document.
(ii) Texas Finance Code, Chapter 346 (formerly Tex. Rev. Civ.
Stat., Title 79, Chapter 15), which regulates certain
revolving loan accounts and revolving triparty accounts, shall
not apply to any revolving loan accounts created under the
Notes, this Agreement or the other Loan Documents or
maintained in connection therewith.
(iii) To the extent that the interest rate laws of the
State of Texas are applicable to the Loans or any other
obligations, the applicable interest rate ceiling is the
weekly ceiling (formerly the indicated rate ceiling)
determined in accordance with Tex. Rev. Civ. Stat.,
Title 79, Article 5069-1D.003, also codified at Texas
Finance Code, Section 303.301 (formerly Article 5069-
1.01(a)(1)), and, to the extent that this Agreement, the
Notes or any other Loan Document is deemed an open end
account as such term is defined in Tex. Rev. Civ.
Stat., Title 79, Article 5069-1B.002(14), also codified
at Texas Finance Code Section 3.01.001(3) (formerly
Article 5069-1.01(f)), the Bank retains the right to
modify the interest rate in accordance with applicable
law.
(g) Entirety and Amendments. The Loan Documents embody the entire
agreement between the parties and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof and thereof, and
this Agreement and the other Loan Documents may be amended only by an instrument
in writing executed by the party, or an authorized officer of the party, against
whom such amendment is sought to be enforced.
19
20
(h) Parties Bound. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, assigns and
legal representatives; provided, however, that Borrower may not, without the
prior written consent of Bank, assign any rights, powers, duties or obligations
hereunder.
(i) Expenses. Borrower will promptly pay all reasonable costs, fees and
expenses paid or incurred by Bank incident to this Agreement and the other Loan
Documents or incident to the collection of the Loan hereunder (including the
fees and expenses of counsel to Bank).
(j) Headings. Paragraph headings are for convenience of reference only
and shall in no way affect the interpretation of this Agreement.
THIS WRITTEN LOAN AGREEMENT, THE NOTES, AND THE DOCUMENTS AND
INSTRUMENTS EXECUTED IN CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENT IS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF the parties hereto have executed this Agreement on the date
first written above.
U.S. PHYSICAL THERAPY, INC., a
Nevada corporation
By: /s/ J. Xxxxxxx Xxxxxx
--------------------------------
J. Xxxxxxx Xxxxxx
Chief Financial Officer,
Vice President
- BORROWER -
SOUTHWEST BANK OF TEXAS, N.A.
By: /s/ Xxxxxx Xxxxxxx
--------------------------------
Xxxxxx Xxxxxxx
Vice President
- BANK -
20
