CREDIT AGREEMENT
DATED AS OF AUGUST 31, 1998
BETWEEN
CORE, INC.
AND
FLEET NATIONAL BANK
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS. . . . . . . . . . . . . . . . . .1
Section 1.1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . .1
Section 1.2. ACCOUNTING TERMS . . . . . . . . . . . . . . . . . . . . 12
Section 1.3. ROUNDING.. . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.4. Exhibits and Schedules.. . . . . . . . . . . . . . . . . 13
Section 1.5. References to "Borrower and its Subsidiaries". . . . . . 13
Section 1.6. Miscellaneous Terms. . . . . . . . . . . . . . . . . . . 13
ARTICLE 2. THE CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.1. The Revolving Loans. . . . . . . . . . . . . . . . . . . 13
Section 2.2. The Revolving Note . . . . . . . . . . . . . . . . . . . 14
Section 2.3. Procedure for Borrowing. . . . . . . . . . . . . . . . . 14
Section 2.4. Termination or Optional Reduction of Commitment. . . . . 15
Section 2.5. Mandatory Reduction of Commitment. . . . . . . . . . . . 15
Section 2.6. Conversion or Continuation of Revolving Loans. . . . . . 16
Section 2.7. Optional Prepayments . . . . . . . . . . . . . . . . . . 17
Section 2.8. Interest on the Revolving Loans. . . . . . . . . . . . . 18
Section 2.9. FEES . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.10. PAYMENTS GENERALLY . . . . . . . . . . . . . . . . . . . 19
Section 2.11. CAPITAL ADEQUACY. . . . . . . . . . . . . . . . . . . . 19
Section 2.12. INCREASED COSTS. . . . . . . . . . . . . . . . . . . . . 20
Section 2.13. ILLEGALITY . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.14. Payments to be Free of Deductions. . . . . . . . . . . . 21
Section 2.15. COMPUTATIONS . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 3. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . 22
Section 3.1. Documentary Conditions Precedent . . . . . . . . . . . . 22
Section 3.2. Additional Conditions Precedent to Each Loan.. . . . . . 26
Section 3.3. Deemed Representations . . . . . . . . . . . . . . . . . 26
ARTICLE 4. REPRESENTATIONS AND WARRANTIES.. . . . . . . . . . . . . . . . 27
Section 4.1. Incorporation, Good Standing and Due Qualification . . . 27
Section 4.2. Corporate Power and Authority; No Conflicts. . . . . . . 27
Section 4.3. Legally Enforceable Agreements . . . . . . . . . . . . . 28
Section 4.4. LITIGATION . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.5. Financial Statements . . . . . . . . . . . . . . . . . . 28
Section 4.6. Ownership and Liens. . . . . . . . . . . . . . . . . . . 29
Section 4.7. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.8. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.9. Subsidiaries and Ownership of Stock. . . . . . . . . . . 30
Section 4.10. Credit Arrangements. . . . . . . . . . . . . . . . . . . 30
Section 4.11. Operation of Business. . . . . . . . . . . . . . . . . . 30
Section 4.12. No Default on Outstanding Judgments or Orders. . . . . . 31
Section 4.13. No Defaults on Other Agreements. . . . . . . . . . . . . 31
Section 4.14. Governmental Regulation. . . . . . . . . . . . . . . . . 31
Section 4.15. Consents and Approvals.. . . . . . . . . . . . . . . . . 31
Section 4.16. PARTNERSHIPS . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.17. Environmental Protection . . . . . . . . . . . . . . . . 31
Section 4.18. Copyrights, Patents, Trademarks, Etc . . . . . . . . . . 32
Section 4.19. Compliance with Laws . . . . . . . . . . . . . . . . . . 32
Section 4.20. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . 33
Section 4.21. NO ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . 33
Section 4.22. USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . 33
Section 4.23. Location of Books and Records. . . . . . . . . . . . . . 33
Section 4.24. SECURITY DOCUMENTS . . . . . . . . . . . . . . . . . . . 33
Section 4.25. SOLVENCY . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.26 Year 2000 Compatibility. . . . . . . . . . . . . . . . . 34
Section 4.27 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . 35
Section 4.28 True and Complete Disclosure . . . . . . . . . . . . . . 35
ARTICLE 5. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . 36
Section 5.1. Maintenance of Existence . . . . . . . . . . . . . . . . 36
Section 5.2. Conduct of Business. . . . . . . . . . . . . . . . . . . 36
Section 5.3. Maintenance of Properties. . . . . . . . . . . . . . . . 36
Section 5.4. Maintenance of Records . . . . . . . . . . . . . . . . . 36
Section 5.5. Maintenance of Insurance . . . . . . . . . . . . . . . . 36
Section 5.6. Compliance with Laws . . . . . . . . . . . . . . . . . . 37
Section 5.7. Right of Inspection. . . . . . . . . . . . . . . . . . . 37
Section 5.8. Reporting Requirements . . . . . . . . . . . . . . . . . 37
(a) ANNUAL GAAP STATEMENTS.. . . . . . . . . . . . . . . . . 37
(b) QUARTERLY GAAP STATEMENTS. . . . . . . . . . . . . . . . 38
(c) MONTHLY ACCOUNTS RECEIVABLE AGING REPORT . . . . . . . . 38
(d) ACTUAL AND PROJECTED QUARTERLY CAPITAL EXPENDITURES. . . 39
(e) ANNUAL FORECASTS.. . . . . . . . . . . . . . . . . . . . 39
(f) MANAGEMENT LETTERS.. . . . . . . . . . . . . . . . . . . 39
(g) STOCKHOLDER COMMUNICATIONS AND SEC FILINGS.. . . . . . . 39
(h) NOTICE OF LITIGATION.. . . . . . . . . . . . . . . . . . 39
(i) NOTICES OF DEFAULT.. . . . . . . . . . . . . . . . . . . 39
(j) OTHER FILINGS. . . . . . . . . . . . . . . . . . . . . . 40
(k) QUARTERLY INVESTMENT REPORTS . . . . . . . . . . . . . . 40
(l) ADDITIONAL INFORMATION.. . . . . . . . . . . . . . . . . 40
Section 5.9. CERTIFICATES.. . . . . . . . . . . . . . . . . . . . . . 40
(a) OFFICERS' CERTIFICATE. . . . . . . . . . . . . . . . . . 40
(b) ACCOUNTANT'S CERTIFICATE.. . . . . . . . . . . . . . . . 41
Section 5.10. FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . 41
Section 5.11. Compliance with Agreements . . . . . . . . . . . . . . . 41
Section 5.12. USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . 41
Section 5.13. Payment of Obligations . . . . . . . . . . . . . . . . . 41
Section 5.14. Interest Rate Protection . . . . . . . . . . . . . . . . 42
ARTICLE 6. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.1. DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.2. GUARANTIES, ETC. . . . . . . . . . . . . . . . . . . . . 42
Section 6.3. LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.4. INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.5. Mergers and Consolidations and Acquisitions of Assets. . 44
Section 6.6. SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . 44
Section 6.7. Stock of Subsidiaries, Etc.. . . . . . . . . . . . . . . 44
Section 6.8. Transactions with Affiliates . . . . . . . . . . . . . . 44
Section 6.9. Capital Expenditures . . . . . . . . . . . . . . . . . . 44
Section 6.10. Minimum Consolidated GAAP Net Worth. . . . . . . . . . . 45
Section 6.11. Minimum Interest Coverage. . . . . . . . . . . . . . . . 45
Section 6.12. Minimum Debt Service Coverage. . . . . . . . . . . . . . 45
Section 6.13. Minimum Fixed Charge Coverage. . . . . . . . . . . . . . 45
Section 6.14. DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . 45
Section 6.15. No Limit on Upstream Payments by Subsidiaries. . . . . . 46
Section 6.16. EARNINGS . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 7. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.1. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . 46
Section 7.2. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE 8. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.1. Amendments and Waivers . . . . . . . . . . . . . . . . . 49
Section 8.2. USURY. . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.3. Expenses; Indemnities. . . . . . . . . . . . . . . . . . 49
Section 8.4. TERM; SURVIVAL . . . . . . . . . . . . . . . . . . . . . 51
Section 8.5. Assignment; Participations . . . . . . . . . . . . . . . 51
Section 8.6. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.7. SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 8.8. Jurisdiction; Immunities . . . . . . . . . . . . . . . . 52
Section 8.9. Table of Contents; Headings. . . . . . . . . . . . . . . 52
Section 8.10. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . 52
Section 8.11. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . 53
Section 8.12. INTEGRATION. . . . . . . . . . . . . . . . . . . . . . . 53
Section 8.13. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . 53
Section 8.14. CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . 53
Section 8.15. Authorization of Third Parties to Deliver Opinions, Etc. 53
Section 8.16. BORROWER'S WAIVERS . . . . . . . . . . . . . . . . . . . 54
Section 8.17. Limitation of Liability. . . . . . . . . . . . . . . . . 54
Schedule 1.1 Commitments and Lending Offices
Schedule 3.1 UCC and Trademark Filings
Schedule 4.4 Litigation
Schedule 4.6 Liens
Schedule 4.9 Subsidiaries
Schedule 4.10 Credit Arrangements
Schedule 4.15 Consents and Approvals
Schedule 4.16 Partnerships
Schedule 4.18 Intellectual Property
Exhibit A Revolving Note
Exhibit B-1 Notice of Borrowing
Exhibit B-2 Notice of Continuation or Conversion
Exhibit C Officer's Certificate
Exhibit D Form of Opinion of Counsel to Borrower
Exhibit E CORE Pledge Agreement
Exhibit F CORE Security Agreement
Exhibit G Subsidiary Security Agreement
Exhibit H Subsidiary Guaranty
Exhibit I Trademark Security Agreement
Exhibit J Warrant
Exhibit K Registration Rights Agreement
CREDIT AGREEMENT dated as of August 31, 1998 between CORE, INC., a
Massachusetts corporation (the "Borrower"), and FLEET NATIONAL BANK (the
"Bank").
The Borrower desires that the Bank extend credit as provided herein, and
the Bank is prepared to extend such credit. Accordingly, the Borrower and
the Bank agree as follows:
ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS.
Section 1.1. DEFINITIONS. As used in this Agreement, the following
terms have the following meanings (terms defined in the singular to have a
correlative meaning when used in the plural and vice versa):
"Acquisition" means the acquisition to be effected contemporaneously with
the initial Borrowing in accordance with the terms and conditions of the
Acquisition Agreement pursuant to which the Borrower will acquire 100% of the
capital stock of DRMS.
"Acquisition Agreement" means the Capital Stock Purchase Agreement dated as
of August 31, 1998 by and among the Borrower, DRMS and the stockholders of DRMS.
"Acquisition Pro-Formas" means financial projections, prepared by the
Borrower on a GAAP basis, showing the consolidated and consolidating balance
sheets and statements of operations of the Borrower and its Subsidiaries after
giving effect to the Acquisition.
"Affiliate" means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is controlled by,
such Person. As used in this definition, "control" (including, with its
correlative meanings, "controlled by" and "under common control with") shall
mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities
or partnership or other ownership interests, by contract or otherwise),
PROVIDED THAT, in any event: (i) any Person which owns directly or
indirectly 20% or more of the securities having ordinary voting power for the
election of directors or other governing body of a corporation or 20% or more
of the partnership or other ownership interests of any other Person (other
than as a limited partner of such other Person) will be deemed to
control such corporation or other Person; and (ii) each director and officer
of the Borrower shall be deemed to be an Affiliate of the Borrower.
"Agreement" means this Credit Agreement, as amended or supplemented from
time to time. References to Articles, Sections, Exhibits, Schedules and the
like refer to the Articles, Sections, Exhibits, Schedules and the like of this
Agreement unless otherwise indicated.
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"Anniversary Date" means August 31 of each calendar year, commencing
August 31, 1999.
"Applicable Interest Rate" means for any Revolving Loan, the Base Rate,
or Eurodollar Rate for such Revolving Loan, plus in each case the Applicable
Margin.
"Applicable Margin" means, with respect to Base Rate Loans, .50 % and,
with respect to Eurodollar Rate Loans, 3.50%.
"Base Rate" means, for any Interest Period or any other period, a
fluctuating interest rate per annum as shall be in effect from time to time,
which rate per annum shall at all times be equal to the higher of (a) the
Federal Funds Rate plus one-half (1/2) of one percent (1%), or (b) the rate
of interest announced publicly by the Bank, from time to time, as the Bank's
base rate or prime rate. The interest rate of each Base Rate Loan shall
change on the date of any change in the Base Rate.
"Base Rate Loan" means a Revolving Loan which bears interest at the Base
Rate, plus the Applicable Margin.
"Borrowing" means a borrowing consisting of a Revolving Loan from the
Bank under this Agreement.
"Business Day" means any day (other than a Saturday, Sunday or legal
holiday) on which commercial banks are not authorized or required to close in
Connecticut, except that with respect to Borrowings, notices, determinations
and payments with respect to Eurodollar Rate Loans, such day shall be a
"Business Day" only if it is also a day for trading by and between banks in
the London interbank Eurodollar market.
"Capital Expenditures" means, for any period, the Dollar amount of gross
expenditures (including the principal portion of rental payments in respect
of Capital Lease Obligations) made for fixed assets, real property, plant and
equipment, and all renewals, improvements and replacements thereto (but not
repairs thereof) incurred during such period, all as determined in accordance
with GAAP.
"Capital Lease" means any lease which has been or should be capitalized
on the books of the lessee in accordance with GAAP.
"Capital Lease Obligation" means the obligation of the lessee under a
Capital Lease. The amount of a Capital Lease Obligation at any date is the
amount at which the
3
lessee's liability under the related Capital Lease would be required to be
shown on its balance sheet at such date in accordance with GAAP.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Commitment" means the commitment of the Bank to make Revolving Loans
hereunder as set forth in SCHEDULE 1.1, as the same may be reduced from time
to time pursuant to Sections 2.4 and 2.5.
"Commitment Period" means the period from and including the date hereof
to but not including the Revolving Loan Termination Date or such earlier date
as the Commitment shall terminate as provided herein.
"Consolidated GAAP Net Worth" means, with respect to any Person, the sum
of (a) the capital stock and additional paid-in capital of such Person and
its Subsidiaries on a consolidated basis, plus (without duplication) (b) the
amount of retained earnings (or, in the case of a deficit, minus the
deficit), minus (c) treasury stock, plus or minus (d) any other account which
is customarily added or deducted in determining stockholders' equity, all of
which shall be determined on a consolidated basis in accordance with GAAP.
"Continue", "Continuation", and "Continued" shall refer to the
continuation pursuant to Section 2.6 hereof of a Eurodollar Rate Loan from
one Interest Period to the next Interest Period.
"Convert", "Conversion", and "Converted" shall refer to a conversion
pursuant to Section 2.6 hereof of Base Rate Loans into Eurodollar Rate Loans
or of Eurodollar Rate Loans into Base Rate Loans.
"CORE Pledge Agreement" means the CORE Pledge Agreement, in the form of
EXHIBIT E hereto, duly executed by the Borrower, as the same may be amended,
supplemented, restated or otherwise modified and in effect from time to time.
"CORE Security Agreement" means the CORE Security Agreement, in the form
of EXHIBIT F hereto, duly executed by the Borrower, as the same may be
amended, supplemented, restated or otherwise modified and in effect from time
to time.
"Debt" means, with respect to any Person: (a) indebtedness of such
Person for borrowed money; (b) indebtedness for the deferred purchase price
of Property or services (except trade payables in the ordinary course of
business); (c) Unfunded Vested Liabilities
4
of such Person (if such Person is not the Borrower, determined in a manner
analogous to that of determining Unfunded Vested Liabilities of the
Borrower); (d) the face amount of any outstanding letters of credit issued
for the account of such Person; (e) obligations arising under acceptance
facilities; (f) guaranties, endorsements (other than for collection in the
ordinary course of business) and other contingent obligations to purchase or
to provide funds for payment of the obligations of another Person, to supply
funds to invest in any Person to cause such Person to maintain a minimum
working capital or net worth or otherwise assure the creditors of such Person
against loss; (g) obligations secured by any Lien on Property of such Person;
(h) Capital Lease Obligations; and (i) redeemable preferred stock of such
Person.
"Debt Service Coverage Ratio" at the end of any fiscal quarter means the
ratio of (A) the consolidated EBITDA of the Borrower and its Subsidiaries for
the immediately preceding four fiscal quarters (ending on such date) to (B)
the sum of (i) total Interest Expense of the Borrower and its Subsidiaries on
a consolidated basis for the immediately succeeding four fiscal quarters
(beginning on such date), plus (ii) scheduled reductions of the Commitment
for the immediately succeeding four fiscal quarters (beginning on such date).
For purposes of clause (B)(i) above, Interest Expense shall be calculated on
the assumption that, at the Borrower's election, either Base Rate Loans or
Eurodollar Rate Loans having an Interest Period of six (6) months for the
full amount of the Commitment will be outstanding for the succeeding four
fiscal quarters and that the Base Rate or Eurodollar Rate, as the case may
be, in effect on such date will remain in effect during such period.
"Default" means any event which with the giving of notice or lapse of
time, or both, would become an Event of Default.
"Default Rate" means a rate per annum equal at all times to the lesser
of 2% per annum above the Applicable Interest Rate in effect from time to
time or the highest rate permitted by law.
"Distributions" means (a) dividends or other distributions in respect of
capital stock of a Person (except distributions in such stock) and (b) the
redemption or acquisition of such stock or of warrants, rights or other
options to purchase such stock (except when solely in exchange for such
stock) unless made, contemporaneously, from the net proceeds of a sale of
such stock; in either case valued at the greater of book or fair market value
of the Property being dividend, distributed or otherwise transferred as a
Distribution.
"Dollars" and the sign "$" mean lawful money of the United States of
America.
5
"DRMS" means Disability Reinsurance Management Services, Inc., a
Delaware corporation.
"EBITDA" means, with respect to any Person, for any period, an amount
equal to Net Income for such period, plus (without duplication to the extent
deducted in determining Net Income) the sum of (a) Interest Expense for such
period, plus (b) income tax expense deducted in determining Net Income for
such period, plus (c) depreciation for such period, plus (d) amortization for
such period, all of which shall be determined in accordance with GAAP minus
(e) the amount of the following with respect to the fiscal quarter ended June
30, 1998: write-off of goodwill in the amount of $4,085,449, arbitration
costs in the amount of $736,009 and certain non-recurring charges in the
amount of $114,277 and any Restructuring Charges.
"Effective Date" means the date upon which the conditions precedent to
the Bank's obligations to make Revolving Loans hereunder specified in Section
3.1 shall have been satisfied or waived by the Bank.
"Equity Rights" shall mean, with respect to any Person, any outstanding
subscriptions, options, warrants, commitments, preemptive rights or
agreements of any kind (including, without limitation, any stockholders' or
voting trust agreements) for the issuance, sale, registration or voting of,
or outstanding securities convertible into, any additional shares of capital
stock of any class, or partnership or other ownership interests of any type
in, such Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, including any rules and regulations promulgated
thereunder.
"ERISA Affiliate" means any corporation or trade or business which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower or is under common control
(within the meaning of Section 414(c) of the Code) with the Borrower.
"Eurodollar Rate" means, for the Interest Period for each Eurodollar
Rate Loan comprising part of the same Borrowing, an interest rate per annum
equal to (x) the rate quoted by the Bank at which deposits in Dollars are
offered by prime commercial banks to prime commercial banks in the London
interbank Eurodollar market two (2) Business Days before the first day of
such Interest Period for a period equal to such Interest Period and in an
amount equal to the Borrowing, divided by (y) one (1) minus the Reserve
Requirement for each such Eurodollar Rate Loan for such Interest Period.
6
"Eurodollar Rate Loan" means a Revolving Loan which bears interest at
the Eurodollar Rate, plus the Applicable Margin.
"Event of Default" has the meaning given such term in Section 7.1.
"Federal Funds Rate" means, for any Interest Period or any other period,
the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of
1%) equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published by the Federal Reserve Bank of New
York on the Business Day next succeeding such day, PROVIDED that (a) if the
day for which such rate is to be determined is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day as so published on the next succeeding
Business Day, and (b) if such rate is not so published for any Business Day,
the Federal Funds Rate for such Business Day shall be the average rate
charged to the Bank on such Business Day on such transactions as determined
by the Bank.
"Financing Statements" means the UCC-1 financing statements signed by
the Borrower or its Subsidiaries in connection with the security interests
granted to the Bank pursuant to the Security Documents.
"Fixed Charge Coverage Ratio" at the end of any fiscal quarter means the
ratio of (a) the sum of (i) the consolidated EBITDA of the Borrower and all
Subsidiaries for the immediately preceding four fiscal quarters (ending on
such date) and (ii) rental payments (other than the interest component of
rental payments under Capital Leases included in Interest Expense) under all
leases of the Borrower and its Subsidiaries for the immediately preceding
four fiscal quarters (ending on such date) to (b) total Fixed Charges of the
Borrower and its Subsidiaries on a consolidated basis for the immediately
succeeding four fiscal quarters (beginning on such date). For purposes of
clause (b) above, the Interest Expense component of Fixed Charges shall be
calculated on the assumption that, at the Borrower's election, either Base
Rate Loans or Eurodollar Rate Loans having an Interest Period of six (6)
months for the full amount of the Commitment will be outstanding for the
succeeding four fiscal quarters and that the Base Rate or Eurodollar Rate, as
the case may be, in effect on such date will remain in effect during such
period.
"Fixed Charges" means, for any period, the sum of (a) the Interest
Expense, plus (b) rental payments (other than the interest component of
rental payments under Capital Leases included in Interest Expense) under all
leases of the Borrower and its Subsidiaries, plus (c) the quotient of (i) the
principal payments of Debt owed by the Borrower during such period divided by
(ii) 1 minus the federal income tax rate applicable to the Borrower and its
Subsidiaries for such period.
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"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, applied on a basis
consistent with those used in the preparation of the financial statements
referred to in Section 4.5 (except for changes concurred in by the Borrower's
independent public accountants).
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Interest Coverage Ratio" at the end of any fiscal quarter means the
ratio of (A) the consolidated EBITDA of the Borrower and its Subsidiaries for
the immediately preceding four fiscal quarters (ending on such date) to (B)
total Interest Expense of the Borrower and its Subsidiaries on a consolidated
basis for the immediately succeeding four fiscal quarters (beginning on such
date). For purposes of clause (B) above, Interest Expense shall be calculated
on the assumption that, at the Borrower's election, either Base Rate Loans or
Eurodollar Rate Loans having an Interest Period of six (6) months for the
full amount of the Commitment will be outstanding for the succeeding four
fiscal quarters and that the Base Rate or Eurodollar Rate, as the case may
be, in effect on such date will remain in effect during such period.
"Interest Expense" means, with respect to any Person for any period, the
consolidated interest expense, including the interest portion of rental
payments under Capital Leases, as determined on a consolidated basis in
accordance with GAAP.
"Interest Period" means (a) for each Eurodollar Rate Loan comprising
part of the same Borrowing, the period commencing on the date of such
Eurodollar Rate Loan or on the last day of the preceding Interest Period, as
the case may be, and ending on the numerically corresponding day of the last
month of the period selected by the Borrower pursuant to the following
provisions: the duration of each Eurodollar Rate Loan Interest Period shall
be one (1), three (3) or six (6) months, in each case as the Borrower may
select, and (b) for each Base Rate Loan comprising part of the same
Borrowing, the period commencing on the date of such Base Rate Loan or on the
last day of the preceding Interest Period, as the case may be, and ending on
the ninetieth (90th) day after the date of such Base Rate Loan or the last
day of the preceding Interest Period, as the case may be; PROVIDED, HOWEVER,
that:
(i) all Eurodollar Rate Loans or comprising part of the same Borrowing
shall be of the same duration;
8
(ii) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding
Business Day; PROVIDED that, if such extension would cause the
last day of such Interest Period to occur in the next following
calendar month, the last day of such Interest Period shall occur
on the next preceding Business Day;
(iii) each Interest Period that commences on the last Business Day of a
calendar month (or on any day for which there is no numerically
corresponding day in the applicable subsequent calendar month)
shall end on the last Business Day of the applicable subsequent
month; and
(iv) no Interest Period for any Revolving Loan shall extend beyond the
Revolving Loan Termination Date.
"Investment" means, with respect to any Person, any investment by or of
such Person, whether by means of purchase or other acquisition of capital
stock or other Securities of any other Person or by means of loan, advance
(other than advances to employees for moving and travel expenses, drawing
accounts and similar expenditures made in the ordinary course of business),
capital contribution or other debt or equity participation or interest, in
any other Person, including any partnership and joint venture interests of
such Person in any other Person.
"Lending Office" means, for each type of Revolving Loan, the lending
office of the Bank (or of an affiliate of the Bank) designated as such for
such type of Revolving Loan on SCHEDULE 1.1 or such other office of the Bank
(or of an affiliate of the Bank) as the Bank may from time to time specify to
the Borrower as the office through which its Revolving Loans of such type are
to be made and maintained.
"Lien" means any lien (statutory or otherwise), security interest,
mortgage, deed of trust, priority, pledge, charge, conditional sale, title
retention agreement, financing lease or other encumbrance or similar right of
others, or any agreement to give any of the foregoing.
"Loan Documents" mean, collectively, this Agreement, the Revolving Note,
the CORE Pledge Agreement, the CORE Security Agreement, the Subsidiary
Guaranty, the Subsidiary Security Agreement, the Trademark Security
Agreement, the Warrant and the Registration Rights Agreement and any other
documents, agreements and instruments now or hereafter executed in connection
herewith or contemplated hereby.
9
"Materially Adverse Effect" means any material adverse effect upon the
business, assets, liabilities, financial condition, results of operations or,
as far as the Borrower can reasonably foresee, prospects of the Borrower and
its Subsidiaries taken as a whole, or upon the ability of the Borrower or any
of its Subsidiaries to perform in all material respects its obligations under
this Agreement or any other Loan Document.
"Multiemployer Plan" means a Plan defined as such in Section 3(37) of
ERISA to which contributions have been made by the Borrower or any ERISA
Affiliate and which is covered by Title IV of ERISA.
"Net Income" means, with respect to any Person for any period, the
aggregate amount of net income of such Person, after taxes, for such period,
as determined in accordance with GAAP.
"Notice of Borrowing" means the certificate, in the form of EXHIBIT B-1
hereto, to be delivered by the Borrower to the Bank pursuant to Sections 2.3
and 3.2(d) and shall include any accompanying certifications or documents.
"Notice of Continuation or Conversion" means the certificate, in the
form of EXHIBIT B-2, to be delivered by the Borrower to the Bank pursuant to
Section 2.6.
"Obligations" means all indebtedness, obligations and liabilities of the
Borrower and its Subsidiaries, if any, to the Bank under this Agreement and
the other Loan Documents.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of
whatever nature.
"Plan" means any employee benefit or other plan established or
maintained, or to which contributions have been made, by the Borrower or any
ERISA Affiliate and which is covered by ERISA.
"Prohibited Transaction" means any transaction set forth in Section 406
of ERISA or Section 4975 of the Code for which there is no applicable
statutory or regulatory exemption (including a class exemption or an
individual exemption).
10
"Property" means any interest of any kind in property or assets, whether
real, personal or mixed, and whether tangible or intangible.
"Registration Rights Agreement" means the Registration Rights Agreement,
in the form of EXHIBIT L hereto, duly executed by the Borrower.
"Regulations D, X and U" means Regulations D, X and U of the Board of
Governors of the Federal Reserve System, as amended or supplemented from time
to time.
"Regulatory Change" means any change after the date of this Agreement in
United States federal, state or foreign laws or regulations (including
Regulation D) or the adoption or making after such date of any orders,
rulings, interpretations, directives, guidelines or requests applying to a
class of banks including the Bank, of or under any United States federal,
state, or foreign laws or regulations (whether or not having the force of
law) by any court or governmental or monetary authority charged with the
interpretation or administration thereof.
"Reportable Event" means any of the events set forth in Section 4043(c)
of ERISA as to which events the PBGC by regulation has not waived the
requirement of Section 4043(a) of ERISA that it be notified within thirty
(30) days of the occurrence of such event, PROVIDED that a failure to meet
the minimum funding standard of Section 412 of the Code or Section 302 of
ERISA shall be a Reportable Event regardless of any waivers given under
Section 412(d) of the Code.
"Requirement of Law" means, as to any Person, the Certificate of
Incorporation and By-Laws or other organization or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.
"Reserve Requirement" means for any Eurodollar Rate Loans for any
quarterly period (or, as the case may be, shorter period) as to which
interest is payable hereunder, the average maximum rate at which reserves
(including any marginal, supplemental or emergency reserves) are required to
be maintained during such period under Regulation D by member banks of the
Federal Reserve System in Boston, Massachusetts with deposits exceeding one
billion Dollars against "Eurocurrency liabilities" (as such term is used in
Regulation D). Without limiting the effect of the foregoing, the Reserve
Requirement shall reflect any other reserves required to be maintained by
such member banks by reason of any Regulatory Change against: (i) any
category of liabilities which includes deposits by references to which the
Eurodollar Rate for Eurodollar Rate Loans is to be determined as
11
provided in the definition of "Eurodollar Rate" in this Article 1, or (ii)
any category of extensions of credit or other assets which include Eurodollar
Rate Loans.
"Restructuring Charges" has the meaning given to such term in Section
6.10.
"Revolving Loans" means any loan made by the Bank pursuant to Section
2.1. Each Revolving Loan shall be a Base Rate Loan or a Eurodollar Rate Loan.
"Revolving Loan Termination Date" means August 31, 2003; PROVIDED,
HOWEVER, if not fewer than sixty (60) days nor more than ninety (90) days
prior to either or both of the first and second Anniversary Date, the
Borrower requests the Bank to extend the Revolving Loan Termination Date for
an additional year and if the Bank, in its sole discretion in writing within
thirty (30) days of such request, grants such request, the Revolving Loan
Termination Date means the date to which the Revolving Loan Termination Date
has been so extended. If such date is not a Business Day, the Revolving Loan
Termination Date shall be the next preceding Business Day.
"Revolving Note" means a promissory note of the Borrower, in the form of
EXHIBIT A hereto, evidencing the Revolving Loans made by the Bank hereunder,
including any partial or total amendment, restatement, replacement, extension
or substitution of or for such Revolving Note.
"Securities" means any capital stock, share, voting trust certificate,
bonds, debentures, notes or other evidences of indebtedness, limited
partnership interests, or any warrant, option or other right to purchase or
acquire any of the foregoing.
"Security Documents" means the CORE Pledge Agreement, the CORE Security
Agreement, the Subsidiary Guaranty, the Subsidiary Security Agreement and the
Trademark Security Agreement.
"Senior Officer" means the (a) chief executive officer, (b) chief
financial officer, or (c) president of the Person designated.
"Subsidiary" means with respect to any Person, any corporation,
partnership, limited liability company or joint venture whether now existing
or hereafter organized or acquired: (i) in the case of a corporation, of
which a majority of the securities having ordinary voting power for the
election of directors (other than securities having such power only by reason
of the happening of a contingency) are at the time owned by such Person
and/or one or more Subsidiaries of such Person or (ii) in the case of a
partnership, limited liability company or joint venture, in which such Person
is a general partner or joint venturer or of which a majority of the
partnership, membership or other ownership interests
12
are at the time owned by such Person and/or one or more of its Subsidiaries.
Unless the context otherwise requires, references in this Agreement to
"Subsidiary" or "Subsidiaries" shall be deemed to be references to a
Subsidiary or Subsidiaries of the Borrower or of a Subsidiary of the Borrower.
"Subsidiary Guaranty" means the Subsidiary Guaranty, in the form of
EXHIBIT H hereto, duly executed by each Subsidiary to the Bank, as the same
may be amended, supplemented, restated or otherwise modified and in effect
from time to time.
"Subsidiary Security Agreement" means the Subsidiary Security Agreement,
in the form of EXHIBIT G hereto, duly executed by each Subsidiary to the
Bank, as the same may be amended, supplemented, restated or otherwise
modified and in effect from time to time.
"Trademark Security Agreement" means the Trademark Security Agreement,
in the form of EXHIBIT I hereto, duly executed by the Borrower and Core
Management, Inc., a California corporation, to the Bank, as the same may be
amended, supplemented, restated or otherwise modified and in effect from time
to time.
"Unfunded Vested Liabilities" means, with respect to any Plan, the
amount (if any) by which the present value of all vested benefits under the
Plan exceeds the fair market value of all Plan assets allocable to such
benefits, as determined on the most recent valuation date of the Plan and in
accordance with the provisions of ERISA for calculating the potential
liability of the Borrower or any ERISA Affiliate to the PBGC or the Plan
under Title IV of ERISA.
"Warrant" means the Warrant, in the form of EXHIBIT K hereto, duly
executed by the Borrower, pursuant to which the Borrower grants to the Bank
warrants to purchase shares of the Common Stock of the Borrower equal to 2%
of the Borrower's outstanding Common Stock.
Section 1.2. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, applied on a
consistent basis, and all financial data required to be delivered hereunder
shall be prepared in accordance with GAAP, applied on a consistent basis;
EXCEPT as otherwise specifically prescribed herein. In the event that GAAP
changes during the term of this Agreement such that the financial covenants
contained in Article 6 would then be calculated in a different manner or with
different components (a) the Borrower and the Bank agree to enter into good
faith negotiations to amend this Agreement in such respects as are necessary
to conform those covenants as criteria for evaluating the Borrower's
financial condition to substantially the same criteria as were effective
prior to such change in GAAP and (b) the Borrower shall be deemed to be in
compliance with the financial covenants contained in such Article during
13
the sixty (60) days following any such change in GAAP if and to the extent
that the Borrower would have been in compliance therewith under GAAP as in
effect immediately prior to such change; PROVIDED, HOWEVER, if an amendment
shall not be agreed upon within sixty (60) days or such longer period as
shall be agreed to by the Bank, for purposes of determining compliance with
such covenants until such amendment shall be agreed upon, such terms shall be
construed in accordance with GAAP as in effect on the Closing Date applied on
a basis consistent with the application used in preparing the financial
statements for the year ended December 31, 1997.
Section 1.3. ROUNDING. Any financial ratios required to be maintained
by the Borrower pursuant to this Agreement shall be calculated by dividing
the appropriate component by the other component, carrying the result to one
place more than the number of places by which such ratio is expressed in this
Agreement and rounding the result up or down to the nearest number (with a
round-up if there is no nearest number) to the number of places by which such
ratio is expressed in this Agreement.
Section 1.4. EXHIBITS AND SCHEDULES. All Exhibits and Schedules to
this Agreement, either as originally existing or as the same may from time to
time be supplemented, modified or amended, are incorporated herein by this
reference. A matter disclosed on any Schedule shall be deemed disclosed on
all Schedules.
Section 1.5. REFERENCES TO "BORROWER AND ITS SUBSIDIARIES". Any
reference herein to "Borrower and its Subsidiaries" or the like shall refer
solely to the Borrower during such times, if any, as the Borrower shall have
no Subsidiaries.
Section 1.6. MISCELLANEOUS TERMS. The term "or" is disjunctive; the
term "and" is conjunctive. The term "shall" is mandatory, the term "may" is
permissive. Masculine terms also apply to females; feminine terms also apply
to males. The term "including" is by way of example and not limitation.
ARTICLE 2. THE CREDIT.
Section 2.1. THE REVOLVING LOANS. Subject to the terms and conditions
of this Agreement, the Bank agrees to make revolving loans to the Borrower
(hereinafter collectively referred to as the "Revolving Loan" or "Revolving
Loans") from time to time from and including the date hereof until the
earlier of the Revolving Loan Termination Date or the termination of the
Commitment of the Bank, up to, but not exceeding in the aggregate principal
amount at any one time outstanding, the amount of SEVENTEEN MILLION DOLLARS
($17,000,000). Each Borrowing under this Section 2.1 of (i) a Base Rate Loan
shall be in the principal amount of not less than $250,000 or any greater
amount which is an integral multiple thereof or (ii) a Eurodollar Rate Loan
shall be in the principal
14
amount of not less than $250,000 or any greater amount which is an integral
multiple thereof. During the Commitment Period and subject to the foregoing
limitations, the Borrower may borrow, repay and reborrow Revolving Loans, all
in accordance with the terms and conditions of this Agreement.
Section 2.2. THE REVOLVING NOTE.
(a) The Revolving Loans of the Bank shall be evidenced by a single
promissory note in favor of the Bank in the form of EXHIBIT A, dated the date
of this Agreement, and duly completed and executed by the Borrower.
(b) The Bank is authorized to record and, prior to any transfer of the
Revolving Note, endorse on a schedule forming a part thereof appropriate
notations evidencing the date, the type, the amount and the maturity of each
Revolving Loan made by it which is evidenced by such Revolving Note and the
date and amount of each payment of principal made by the Borrower with
respect thereto; PROVIDED, that failure to make any such endorsement or
notation shall not affect the Obligations of the Borrower hereunder or under
the Revolving Note. The Bank is hereby irrevocably authorized by the
Borrower to so endorse the Revolving Note and to attach to and make a part of
the Revolving Note a continuation of any such schedule as and when required.
The Bank may, at its option, record and maintain such information in its
internal records rather than on such schedule.
Section 2.3. PROCEDURE FOR BORROWING.
(a) The Borrower shall give the Bank a Notice of Borrowing, in the form
of EXHIBIT B-1 hereto, prior to 11:00 a.m. (California time), on the date at
least one (1) Business Day before a Borrowing of a Base Rate Loan or at least
three (3) Business Days before a Borrowing of a Eurodollar Rate Loan
specifying.
(i) the date of such Borrowing, which shall be a Business Day,
(ii) the principal amount of such Borrowing,
(iii) whether the Revolving Loan comprising such Borrowing is to
be a Base Rate Loan or a Eurodollar Rate Loan, and
(iv) if a Eurodollar Rate Loan, the Interest Period with respect to
such Borrowing.
(b) No Notice of Borrowing shall be revocable by the Borrower.
15
(c) There shall be no more than four (4) Interest Periods relating to
Eurodollar Rate Loans outstanding at any time.
Section 2.4. TERMINATION OR OPTIONAL REDUCTION OF COMMITMENT. The
Commitment shall terminate on the Revolving Loan Termination Date and any
Revolving Loans then outstanding (together with accrued interest thereon)
shall be due and payable on such date. No termination of the Commitment
hereunder shall relieve the Borrower of any of its outstanding Obligations to
the Bank hereunder or otherwise. The Borrower shall have the right, upon
prior written notice of at least five (5) Business Days to the Bank, to
terminate or, from time to time, reduce the Commitment, PROVIDED that (i) any
such reduction of the Commitment shall be accompanied by the prepayment of
the Revolving Note, together with accrued interest thereon to the date of
such prepayment and any amount due pursuant to Section 2.7, to the extent, if
any, that the aggregate unpaid principal amount thereof then outstanding
exceeds the Commitment as then reduced and (ii) any such termination of the
Commitment shall be accompanied by prepayment in full of the unpaid principal
amount of the Revolving Note together with accrued interest thereon to the
date of such prepayment and any amount due pursuant to Section 2.7. Any such
partial reduction of the Commitment shall be in an aggregate principal amount
of $250,000 or any whole multiple thereof and shall reduce permanently the
Commitment then in effect hereunder.
Section 2.5. MANDATORY REDUCTION OF COMMITMENT.
(a) On each of the dates indicated below, commencing on December 31, 1998,
the Commitment of the Bank shall be reduced automatically in the following
amounts:
Mandatory
Commitment Amount Available
Date Reduction After Reduction
---- --------- ---------------
December 31, 1998 $1,000,000 $16,000,000
March 31, 1999 $1,000,000 $15,000,000
June 30, 1999 $250,000 $14,750,000
September 30, 1999 $250,000 $14,500,000
December 31, 1999 $750,000 $13,750,000
March 31, 2000 $750,000 $13,000,000
June 30, 2000 $750,000 $12,250,000
September 30, 2000 $750,000 $11,500,000
December 31, 2000 $875,000 $10,625,000
March 31, 2001 $875,000 $9,750,000
June 30, 2001 $875,000 $8,875,000
16
September 30, 2001 $875,000 $8,000,000
December 31, 2001 $1,000,000 $7,000,000
March 31, 2002 $1,000,000 $6,000,000
June 30, 2002 $1,000,000 $5,000,000
September 30, 2002 $1,000,000 $4,000,000
December 31, 2002 $1,000,000 $3,000,000
March 31, 2003 $1,000,000 $2,000,000
June 30, 2003 $1,000,000 $1,000,000
August 31, 2003 $1,000,000 $0
(b) On the effective date of each reduction of the Commitment of the
Bank pursuant to Section 2.5(a), the Borrower shall repay such principal
amount (together with accrued interest thereon and any amount due pursuant to
Section 2.7(b)) of outstanding Revolving Loans, if any, as may be necessary
so that after such repayment, the aggregate unpaid principal amount of the
Revolving Loans does not exceed the Commitment as then reduced.
Section 2.6. CONVERSION OR CONTINUATION OF REVOLVING LOANS. The
Borrower shall have the right to Convert Revolving Loans of one type into
Revolving Loans of another type or to Continue Eurodollar Rate Loans, at any
time or from time to time, PROVIDED that: (a) the Borrower shall give the
Bank a Notice of Continuation or Conversion in the form of EXHIBIT B-2, as
applicable, prior to 11:00 a.m. (California time) on the date at least three
(3) Business Days prior to the last day of the Interest Period of any
Revolving Loan to be Converted into or Continued as a Eurodollar Rate Loan;
(b) Eurodollar Rate Loans may be Converted or Continued only on the last day
of an Interest Period for such Revolving Loans; (c) each Conversion or
Continuation of a Eurodollar Rate Loan shall be in an amount at least equal
to $250,000 or in any greater amount which is an integral multiple thereof;
(d) no Event of Default shall have occurred and be continuing at the time of
any Conversion to a Eurodollar Rate Loan or Continuation of any such
Eurodollar Rate Loan into a subsequent Interest Period; (e) accrued interest
on the Revolving Loan (or portion thereof) being Converted or Continued shall
be paid by the Borrower at the time of Continuation or Conversion; and (f)
each request for a Continuation as or Conversion to a Eurodollar Rate Loan
which fails to state an applicable Interest Period shall be deemed to be a
request for an Interest Period of one (1) month.
Notwithstanding anything to the contrary herein contained, if, upon the
expiration of any Interest Period applicable to any Eurodollar Rate Loan, the
Borrower shall fail to give a Notice of Continuation or Conversion as set
forth in this Section 2.6, the Borrower shall be deemed to have given a
Notice of Continuation of such Eurodollar Rate Loan in principal amount equal
to the outstanding principal amount of such Eurodollar Rate Loan and having
an Interest Period of one (1) month.
17
Section 2.7. OPTIONAL PREPAYMENTS.
(a) The Borrower may, upon at least one (1) Business Day's notice to
the Bank, prepay the Base Rate Loans, without premium or penalty, in whole at
any time or from time to time in part by paying the principal amount being
prepaid together with accrued interest thereon to the date of prepayment.
(b) The Borrower may, upon at least three (3) Business Days' notice to
the Bank, prepay the Eurodollar Rate Loans, in whole at any time or from time
to time in part, by paying the principal amount being prepaid together with
(i) accrued interest thereon to the date of prepayment and (ii) if such
prepayment occurs on a date that is not the last day of the Interest Period
applicable to such Eurodollar Rate Loan, any amounts as shall be sufficient
(in the reasonable Opinion of the Bank) to compensate the Bank for any
reasonable losses, costs or expenses (excluding any losses of anticipated
profit), as certified by the Bank (such certification setting forth the basis
for such compensation), which the Bank may reasonably incur as a result of
such prepayment, including without limitation, any loss, cost or expense
incurred by reason of funds liquidation or reemployment of deposits or other
funds acquired by the Bank to fund or maintain such Eurodollar Rate Loan and
any administrative costs, expenses or charges of the Bank as a result thereof.
Without limiting the effect of the preceding sentence, compensation
shall include an amount equal to the excess, if any, of (i) the amount of
interest that otherwise would have accrued on the principal amount so prepaid
for the period from the date of such prepayment to the last day of the then
current Interest Period for such Eurodollar Rate Loan at the applicable rate
of interest for such Eurodollar Rate Loan provided for herein over (ii) the
amount of interest that otherwise would have accrued on such principal amount
at a rate per annum equal to the interest component of the amount the Bank
would have bid in the London interbank market for Dollar deposits of leading
banks in amounts comparable to such principal amount and with maturities
comparable to such period (as reasonably determined by the Bank), if the Bank
has match-funded such Eurodollar Rate Loan, or the Bank's cost of funds, if
the Bank has not match-funded. The Bank will furnish to the Borrower a
certificate setting forth the basis and amount of each request by the Bank
for compensation under this Section 2.7.
18
Section 2.8. INTEREST ON THE REVOLVING LOANS.
(a) Each Base Rate Loan shall bear interest on the outstanding
principal amount thereof, for each day from the date such Base Rate Loan is
made until it becomes due, at a rate per annum equal to the Base Rate for
such day, plus the Applicable Margin. Interest shall be payable on the last
day of the Interest Period applicable thereto. Such interest shall accrue
from and including the date of such Borrowing to but excluding the date of
any repayment thereof and shall be computed on the basis of a fraction, the
numerator of which is the actual number of days elapsed from the date of
Borrowing and the denominator of which is three hundred sixty (360).
(b) Each Eurodollar Rate Loan shall bear interest on the unpaid
principal amount thereof, for each day from the date such Eurodollar Rate
Loan is made until it becomes due, at a rate per annum equal to the
Eurodollar Rate for the relevant Interest Period, plus the Applicable Margin.
Interest shall be payable on the last day of the Interest Period applicable
thereto; PROVIDED, that if such Interest Period is longer than ninety (90)
days, interest shall be payable every ninety (90) days and on the last day of
such Interest Period. Such interest shall accrue from and including the date
of such Borrowing to but excluding the date of any repayment thereof and
shall be computed on the basis of a fraction, the numerator of which is the
actual number of days elapsed from the date of Borrowing and the denominator
of which is three hundred sixty (360).
(c) Overdue principal of, and to the extent permitted by law, interest
on each Revolving Loan shall bear interest for each day until paid at a rate
per annum equal to the Default Rate.
Section 2.9. FEES.
(a) The Borrower shall pay a $187,500 upfront fee to the Bank on or
before the Effective Date.
(b) The Borrower shall pay to the Bank a stand-by commitment fee for
the Commitment Period, payable in arrears at the rate of one-half (1/2) of
one percent (1%) per annum, on the average daily unused portion of the Bank's
Commitment with respect to the Revolving Loan, which stand-by commitment fee
shall be payable quarterly on the first Business Day of January, April, July,
and October of each year beginning October 1, 1998. Such fee shall be
computed on the basis of a year of three hundred sixty (360) days and actual
days elapsed.
(c) The fees required by paragraphs (a) and (b) of this Section shall
not be refundable.
19
Section 2.10. PAYMENTS GENERALLY. All payments under this Agreement
shall be made in Dollars in immediately available funds not later than 1:00
p.m. (Connecticut time) on the due date (each such payment made after such
time on such due date to be deemed to have been made on the next succeeding
Business Day) to the Bank at its address set forth on the signature pages
hereof or at such other address as it may hereafter designate by notice to
the Borrower for the account of the Lending Office of the Bank specified by
the Bank on SCHEDULE 1.1 HERETO. The Borrower shall, at the time of making
each payment under this Agreement, specify to the Bank the principal or other
amount payable by the Borrower under this Agreement to which such payment is
to be applied (and in the event that it fails to so specify, or if a Default
or Event of Default has occurred and is continuing, the Bank may apply such
payment as it may elect in its sole discretion). The Borrower authorizes the
Bank to charge any account maintained by the Borrower at the Bank to satisfy
the Borrower's payment obligations hereunder. If any account is so charged
on the due date, the payment shall be deemed to have been timely made. If
the due date of any payment under this Agreement would otherwise fall on a
day which is not a Business Day, such date shall be extended to the next
succeeding Business Day and such extension of time shall in such case be
included in the computation of such payment; PROVIDED that, if such extension
would cause the last day of an Interest Period to occur in the next following
calendar month, the last day of such Interest Period shall occur on the next
preceding Business Day.
Section 2.11. CAPITAL ADEQUACY. If after the date hereof, either (i)
the introduction of, or any change in, or in the interpretation or
enforcement of, any law, regulation, order, ruling, interpretation,
directive, guideline or request or (ii) the compliance with any order,
ruling, interpretation, directive, guideline or request from any central bank
or other governmental authority (whether or not having the force of law)
issued, announced, published, promulgated or made after the date hereof
(including, in any event, any law, regulation, order, ruling, interpretation,
directive, guideline or request contemplated by the report dated July, 1988
entitled "International Convergence of Capital Measurement and Capital
Standards" issued by the Basle Committee on Banking Regulation and
Supervisory Practices) affects or would affect the amount of capital required
or expected to be maintained by the Bank or any corporation controlling the
Bank and the Bank reasonably determines that the amount of such required or
expected capital is increased by or based upon the existence of the Bank's
Revolving Loans hereunder or the Bank's
20
commitment to lend hereunder, then, upon demand by the Bank, the Borrower
shall be liable for, and shall pay to the Bank, within thirty (30) days
following demand from time to time by the Bank, additional amounts sufficient
to compensate the Bank in the light of such circumstances for the effects of
such law, regulation, order, ruling, interpretation, directive, guideline or
request, to the extent that the Bank reasonably determines such increase in
capital to be allocable to the existence of the Bank's Revolving Loans
hereunder or of the Bank's commitment to lend hereunder. A certificate
substantiating such amounts and identifying the event giving rise thereto,
which shall be submitted to the Borrower by the Bank at the time of its
demand for such compensation, shall be conclusive, absent demonstrable error.
The Bank shall promptly notify the Borrower of any event of which it has
knowledge occurring after the date of this Agreement which will entitle the
Bank to compensation pursuant to this Section, and the Bank shall take any
reasonable action available to it consistent with its internal policy and
legal and regulatory restrictions (including the designation of a different
Lending Office, if any) that will avoid the need for, or reduce the amount
of, such compensation and will not in the reasonable judgment of the Bank be
otherwise disadvantageous to the Bank.
Section 2.12. INCREASED COSTS. If after the date hereof, due to either
(i) the introduction of or any change in or in the interpretation or
enforcement of, any law, regulation, order, ruling, directive, guideline or
request, or (ii) the compliance with any order, ruling, directive, guideline
or request from any central bank or other governmental authority (whether or
not having the force of law) issued, announced, published, promulgated or
made after the date hereof, there shall be any increase in the cost to the
Bank of agreeing to make or making, funding or maintaining Eurodollar Rate
Loans, then the Borrower shall be liable for, and shall from time to time,
within thirty (30) days following a demand by the Bank, pay to the Bank for
the account of the Bank additional amounts sufficient to compensate the Bank
for such increased cost; PROVIDED, HOWEVER, that before making any such
demand, the Bank agrees to use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to designate a
different Lending Office if the making of such a designation would allow the
Bank or its Lending Office to continue to perform its obligations to make
Eurodollar Rate Loans or to continue to fund or maintain Eurodollar Rate
Loans and would not, in the reasonable judgment of the Bank, be otherwise
disadvantageous to the Bank. A certificate substantiating the amount of such
increased cost, which shall be submitted to the Borrower by the Bank at the
time of its demand for such compensation, shall be conclusive, absent
demonstrable error.
Section 2.13. ILLEGALITY. Notwithstanding any other provision of this
Agreement, if after the date hereof the introduction of, or any change in or
in the interpretation or enforcement of, any law, regulation, order, ruling,
directive, guideline or request shall make it unlawful, or any central bank
or other governmental authority shall assert that it is unlawful, for the
Bank or its Lending Office to perform its obligations hereunder to make
Eurodollar Rate Loans or to continue to fund or maintain Eurodollar Rate
Loans hereunder, then, on notice thereof by the Bank to the Borrower, (i) the
obligation of the Bank to make Eurodollar Rate Loans shall terminate (and the
Bank shall make all of its Revolving Loans as Base Rate Loans notwithstanding
any election by the Borrower to have the Bank make Eurodollar Rate Loans) and
(ii) if legally permissible, at the end of the current Interest Period for
such Eurodollar Rate Loans, otherwise five Business Days after such notice
and
21
demand, all Eurodollar Rate Loans of the Bank then outstanding will
automatically convert into Base Rate Loans; PROVIDED, HOWEVER, that before
making any such demand, the Bank agrees to use reasonable efforts (consistent
with its internal policy and legal and regulatory restrictions) to designate
a different Lending Office if the making of such a designation would allow
the Bank or its Lending Office to continue to perform its obligations to make
Eurodollar Rate Loans and would not, in the judgment of the Bank, be
otherwise disadvantageous to the Bank. A certificate describing such
introduction or change in or in the interpretation or enforcement of such
law, regulation, order, ruling, directive, guideline or request, which shall
be submitted to the Borrower by the Bank at the time of its demand, shall be
conclusive evidence of such introduction, change, interpretation or
enforcement, absent demonstrable error. The Bank and the Borrower agree to
negotiate in good faith in order to agree upon a mutually acceptable
mechanism to provide that Eurodollar Rate Loans made by the Bank as to which
the foregoing conditions occur shall convert into Base Rate Loans.
Section 2.14. PAYMENTS TO BE FREE OF DEDUCTIONS. All payments by the
Borrower under this Agreement shall be made without setoff or counterclaim
and free and clear of, and without deduction for, any taxes (other than any
taxes imposed on or measured by the gross income or profits of the Bank or
applicable Lending Office thereof), levies, imposts, duties, charges, fees,
deductions, withholdings, compulsory loans, restrictions or conditions of any
nature now or hereafter imposed or levied by any country or any political
subdivision thereof or taxing or other authority therein unless the Borrower
is compelled by law to make such deduction or withholding. If any such
obligation is imposed upon the Borrower with respect to any amount payable by
it hereunder, it will pay to the Bank, on the date on which such amount
becomes due and payable hereunder and in Dollars, such additional amount as
shall be necessary to enable the Bank to receive the same net amount which it
would have received on such due date had no such obligation been imposed upon
the Borrower. If the Bank is at any time, or any permitted assignee of the
Bank hereunder (an "Assignee"), is organized under the laws of any
jurisdiction other than the United States or any state or other political
subdivision thereof, the Bank or the Assignee shall deliver to the Borrower
on the date it becomes a party to this Agreement, and at such other times as
may be necessary in the determination of the Borrower in its reasonable
discretion, such certificates, documents or other evidence, properly
completed and duly executed by the Bank or the Assignee (including, without
limitation, Internal Revenue Service Form 1001 or Form 4224 or any other
certificate or statement of exemption required by Treasury Regulations
Section 1.1441-4(a) or Section 1.1441-6(c) or any successor thereto) to
establish that the Bank or the Assignee is not subject to deduction or
withholding of United States Federal Income Tax under Section 1441 or 1442 of
the Internal Revenue Code or otherwise (or under any comparable provisions of
any successor statute) with respect to any payments to the Bank or the
Assignee of principal, interest, fees or other amounts payable hereunder.
Borrower shall not be required to pay any additional
22
amount to the Bank or any Assignee under this Section 2.14 if the Bank or
such Assignee shall have failed to satisfy the requirements of the
immediately preceding sentence; PROVIDED that if the Bank or any Assignee
shall have satisfied such requirements on the date it became a party to this
Agreement, nothing in this Section 2.14 shall relieve Borrower of its
obligation to pay any additional amounts pursuant to this Section 2.14 in the
event that, as a result of any change in applicable law, the Bank or such
Assignee is no longer properly entitled to deliver certificates, documents or
other evidence at a subsequent date establishing the fact that the Bank or
the Assignee is not subject to withholding as described in the immediately
preceding sentence.
Section 2.15. COMPUTATIONS. All computations of interest and like
payments hereunder on the Revolving Loans shall, in the absence of clearly
demonstrable error, be considered correct and binding on the Borrower and the
Bank, unless within thirty (30) Business Days after receipt of any notice by
the Bank of such outstanding amount, the Borrower notifies the Bank to the
contrary.
ARTICLE 3. CONDITIONS PRECEDENT.
Section 3.1. DOCUMENTARY CONDITIONS PRECEDENT. The Commitment of the
Bank to make the initial Revolving Loans under this Agreement is subject to
the condition precedent that the Borrower shall have delivered the following,
in form and substance satisfactory to the Bank:
(a) LOAN DOCUMENTS. The Bank shall have received (i) this Agreement,
executed and delivered by a duly authorized officer of the Borrower;
(ii) a Revolving Note for the account of the Bank, completed, executed,
and delivered by a duly authorized officer of the Borrower; (iii) the
CORE Pledge Agreement, executed and delivered by a duly authorized
officer of the Borrower; (iv) the CORE Security Agreement, executed and
delivered by a duly authorized officer of the Borrower; (v) the
Subsidiary Guarantee, executed and delivered by a duly authorized
officer of each Subsidiary; (vi) the Subsidiary Security Agreement,
executed and delivered by a duly authorized officer of each Subsidiary;
(vii) the Trademark Security Agreement, executed and delivered by a duly
authorized officer of the Borrower and Core Management, Inc., a
California corporation, (viii) the Warrant, executed and delivered by a
duly authorized officer of the Borrower and (ix) the Registration Rights
Agreement, executed and delivered by a duly authorized officer of the
Borrower.
(b) PLEDGED STOCK; STOCK POWERS. The Bank shall have received (i)
certificates representing the stock pledged pursuant to the CORE Pledge
Agreement, together
23
with an undated stock power executed in blank for each such certificate
and (ii) the Issuer's Consent attached to the CORE Pledge Agreement,
executed and delivered by a duly authorized officer of the relevant
issuer.
(c) UCC AND TRADEMARK FILINGS. All documents (including, without
limitation, financing statements) required to be filed in respect of the
Security Documents in order to create in favor of the Bank a perfected,
first priority security interest in the Collateral described therein
with respect to which a security interest may be perfected by filing
under the Uniform Commercial Code or the Xxxxxx Act, as the case may be,
shall have been properly completed and signed for filing in each office
listed on Schedule 3.1. The Bank shall have received evidence that all
necessary filing fees and all taxes or other expenses related to such
filings have been paid in full or otherwise provided for.
(d) CORPORATE PROCEEDINGS. The Bank shall have received a copy of the
resolutions, in form and substance satisfactory to the Bank, of the
Board of Directors of the Borrower and each Subsidiary authorizing (i) the
execution, delivery and performance of the Loan Documents to which it is
a party, (ii) with respect to the Borrower, the grant of the Liens
pursuant to the Security Documents to which it is a party and the
execution, delivery and performance of the Acquisition Agreement, and
(iii) with respect to each Subsidiary, the grant of the Liens pursuant
to the Security Documents to which it is a party, in each case certified
by the Secretary or an Assistant Secretary of the Borrower or such
Subsidiary at the Closing Date, which certificate shall state that the
resolutions thereby certified have not been amended, modified, revoked
or rescinded and shall be in form and substance satisfactory to the Bank.
(e) INCUMBENCY CERTIFICATES. The Bank shall have received a
certificate, dated the Closing Date, of the Secretary or an Assistant
Secretary of the Borrower and each Subsidiary as to the incumbency and
signature of the officer or officers signing the Loan Documents to which
such Person is a party, together with evidence of the incumbency of such
Secretary or Assistant Secretary.
(f) CORPORATE DOCUMENTS. The Bank shall have received true and
complete copies of the certificate of incorporation and by-laws of the
Borrower and each Subsidiary, certified at the Closing Date as complete
and correct copies thereof, by the Secretary or an Assistant Secretary
of the Borrower or each Subsidiary.
(g) GOOD STANDING CERTIFICATES. The Bank shall have received
certificates dated as of a recent date from the Secretary of State or
other appropriate authority of such jurisdiction, evidencing the good
standing of the Borrower and each Subsidiary in
24
its state of incorporation and in each state where failure to obtain
authority to do business as a foreign corporation would have a
Materially Adverse Effect.
(h) TAX GOOD STANDING CERTIFICATES. The Bank shall have received
certificates dated as of a recent date from the appropriate tax
authority of such jurisdiction, evidencing the payment by the Borrower
and each Subsidiary of all taxes owed in its state of incorporation and,
if different, its principal place of business.
(i) FINANCIAL STATEMENTS. The Bank shall have received copies of the
financial statements referred to in Section 4.5 and all other documents
requested by the Bank in connection with its completion of a testing and
review of the assets and liabilities of the Borrower and its
Subsidiaries.
(j) LIEN SEARCHES. The Bank shall have received the results of a
recent search by a Person satisfactory to the Bank of Uniform Commercial
Code and other filings which may have been filed with respect to the
personal property of the Borrower or any Subsidiaries in those locations
of which the Bank notifies the Borrower prior to the Closing Date.
(k) LITIGATION. No suit, action, investigation, inquiry or other
proceeding (including, without limitation, the enactment or promulgation
of a statute or rule) by or before any arbitrator or any Governmental
Authority shall be formally instituted or threatened and no preliminary
or permanent injunction or restraining order by a state or federal court
shall have been entered or threatened (i) in connection with any Loan
Document or any of the transactions contemplated hereby or thereby or
(ii) which, in the reasonable opinion of the Bank, could have a
Materially Adverse Effect.
(l) NO VIOLATION. The consummation of the transactions contemplated by
this Agreement, the Revolving Note and the other Loan Documents shall
not contravene, violate or conflict with, nor involve the Bank in any
violation of, any Requirement of Law.
(m) CONSENTS, LICENSES AND APPROVALS. The Bank shall have received a
certificate, dated the Closing Date, executed by a duly authorized
officer of the Borrower stating that all consents, licenses, approvals,
authorizations, notices and filings necessary or advisable in connection
with the financings contemplated by this Agreement, the continuing
operations of the Borrower and each Subsidiary, and the consummation of
the Acquisition have been obtained and are in full force and effect.
25
(n) INSURANCE. The Bank shall have received evidence satisfactory to
it that the Borrower and its Subsidiaries have in place insurance
satisfying the requirements of Section 5.5.
(o) REPRESENTATIVES AND WARRANTIES. The Bank shall have received a
certificate of a Senior Officer of the Borrower, dated the Effective
Date, certifying on behalf of the Borrower that (i) the representations
and warranties in Article 4 are true, complete and correct in all
material respects on such date as though made on and as of such date,
(ii) no event has occurred and is continuing which constitutes a Default
or Event of Default, (iii) the Borrower has performed and complied with
all agreements and conditions contained in this Agreement which are
required to be performed or complied with by the Borrower at or before
the Effective Date, and (iv) there has been no material adverse change
in the financial condition, operations, Properties, business, or as far
as the Borrower can reasonably foresee, prospects of the Borrower and
its Subsidiaries, if any, taken as a whole from that reflected in the
Acquisition Pro-Formas.
(p) COMPLIANCE WITH COVENANTS. The Bank shall have received a
certificate of a Senior Officer of the Borrower, dated the Effective
Date, substantially in the form of EXHIBIT C, which certificate shall
include information required to establish that the Borrower will be in
compliance with the covenants set forth in this Agreement, after giving
effect to the Acquisition and the transactions contemplated herein.
(q) LEGAL OPINIONS. The Bank shall have received a favorable opinion
of Rich, May, Xxxxxxxx & Xxxxxxxx, P.C., counsel to the Borrower, dated
the Effective Date, in substantially the form set forth in EXHIBIT D.
(r) SATISFACTION OF BANK. All corporate and legal proceedings and all
instruments and agreements in connection with the transactions
contemplated by this Agreement shall be satisfactory in form and
substance to the Bank and the Bank shall have received any and all other
information and documents with respect to the Borrower which it may
reasonably request.
(s) UPFRONT FEE. Payment to the Bank of the upfront fee in the amount
of $187,500.
(t) TICKING FEE. Payment to the Bank of a ticking fee in the amount of
.25% per annum on the total amount of the Bank's Commitment with respect
to the Revolving Loan, as accrued for the period from August 21, 1998 to
but not including the Closing Date.
26
(u) PAYMENT OF LEGAL FEES AND DISBURSEMENTS OF COUNSEL TO THE BANK.
Payment to Day, Xxxxx & Xxxxxx LLP, special counsel to the Bank of its
legal fees and disbursements.
(v) RECEIPT OF ACQUISITION AGREEMENT. The Bank shall have received a
true and complete copy of the Acquisition Agreement (and any amendments)
as in effect on the Closing Date, certified by a Senior Officer of the
Borrower.
(w) CONSUMMATION OF ACQUISITION. Evidence satisfactory to the Bank
that DRMS has entered into employment agreements with the current owners
of DRMS on terms and conditions satisfactory to the Bank and that the
Acquisition is being consummated contemporaneously with the initial
Borrowing.
(x) DUE DILIGENCE. The Bank shall be satisfied with the results of its
ongoing due diligence of the Borrower and its Subsidiaries.
Section 3.2. ADDITIONAL CONDITIONS PRECEDENT TO EACH LOAN. The
obligation of the Bank to make the Revolving Loans pursuant to a Borrowing
(including the initial Borrowing), unless waived by the Bank, shall be
subject to the further conditions precedent that on the date of such
Revolving Loan:
(a) each of the representations and warranties made by the Borrower and
each Subsidiary in or pursuant to the Loan Documents are true and
correct in all material respects on and as of the date of such Revolving
Loan as though made on and as of such date (or, if such representation
or warranty is expressly stated to have been made as of a specific date,
as of such specific date);
(b) there does not exist any Default or Event of Default under this
Agreement;
(c) there has been no material adverse change in the financial
condition, operations, Properties, business or prospects of the Borrower
and its Subsidiaries, if any, taken as a whole, since the date of the
last Borrowing under this Agreement (or if no Borrowing has occurred,
since the date of this Agreement); and
(d the Bank shall have received a Notice of Borrowing in the form of
EXHIBIT B-1, except to the extent otherwise provided in Section 2.6.
Section 3.3. DEEMED REPRESENTATIONS. Each Notice of Borrowing
hereunder and acceptance by the Borrower of the proceeds of such Borrowing
shall constitute a representation and warranty that the statements contained
in Section 3.2(a) are true and
27
correct both on the date of such Notice of Borrowing and, unless the Borrower
otherwise notifies the Bank prior to such Borrowing, as of the date of such
Borrowing.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES.
The Borrower hereby represents and warrants the following:
Section 4.1. INCORPORATION, GOOD STANDING AND DUE QUALIFICATION. The
Borrower and each Subsidiary is duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, has
the power and authority to own its assets and to transact the business in
which it is now engaged, and is duly qualified as a foreign corporation and
in good standing under the laws of each other jurisdiction in which such
qualification is required, except where the failure to be so qualified would
not have a Materially Adverse Effect. The Borrower has all requisite power
and authority to execute and deliver and to perform this Agreement, the
Revolving Note, the Acquisition Agreement and the other Loan Documents to
which it is a party, to borrow hereunder and to grant the Liens pursuant to
the Security Documents to which it is a party and has taken all necessary
corporate action to authorize the borrowings on the terms and conditions of
this Agreement and the Revolving Note, the grant of the Liens pursuant to the
Security Documents to which it is a party, the execution, delivery and
performance of the Acquisition Agreement and the execution, delivery and
performance of this Agreement, the Revolving Note and each other Loan
Document to which it is a party. Each Subsidiary has all requisite power and
authority to execute and deliver the Loan Documents to which it is a party
and has taken all necessary corporate action to authorize the grant of the
Liens pursuant to the Security Documents to which it is a party and the
execution, delivery and performance of each Loan Document to which it is a
party.
Section 4.2. CORPORATE POWER AND AUTHORITY; NO CONFLICTS. The
execution, delivery and performance by the Borrower and each Subsidiary of
each of the Loan Documents to which it is a party have been duly authorized
by all necessary corporate action and do not and will not (a) require any
consent or approval of its shareholders; (b) violate any provisions of its
articles of incorporation or by-laws; (c) violate any provision of, or
require any filing, registration, consent or approval under, any law, rule,
regulation (including without limitation, Regulation U and X), order, writ,
judgment, injunction, decree, determination or award presently in effect
having applicability to and binding upon the Borrower or any Subsidiary; (d)
result in a breach of or constitute a default or require any consent under
any indenture, mortgage or loan or credit agreement or any other material
agreement, lease or instrument to which the Borrower or any Subsidiary is a
party or by which it or its Properties may be bound; or (e) result in, or
require, the creation or imposition of any Lien upon or with respect to any
of the Properties now owned or
28
hereafter acquired by the Borrower or any Subsidiary, except as created by
the Security Documents.
Section 4.3. LEGALLY ENFORCEABLE AGREEMENTS. This Agreement and each
other Loan Document to which the Borrower or a Subsidiary is a party
constitute the legal, valid and binding obligations of the Borrower or such
Subsidiary, as the case may be, enforceable against the Borrower or such
Subsidiary, as the case may be, in accordance with their respective terms,
except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency and other similar laws affecting creditors' rights
generally and by general principles of equity.
Section 4.4. LITIGATION. Except as disclosed on Schedule 4.4, there
are no actions, suits or proceedings or investigations pending or, as far as
the Borrower can reasonably foresee, threatened against or affecting the
Borrower or any of its Subsidiaries, or any Property of any of them before
any court, governmental agency or arbitrator, which (i) relate to any past
proposed or consummated acquisition by the Borrower or any Subsidiary or (ii)
if determined adversely to the Borrower or any such Subsidiary would in any
one case or in the aggregate have a Materially Adverse Effect.
Section 4.5. FINANCIAL STATEMENTS.
(a) The consolidated balance sheets of the Borrower and its
Subsidiaries as of December 31, 1996 and December 31, 1997 and the related
consolidated statements of operations, stockholders' equity, and cash flows
of the Borrower and its Subsidiaries for the fiscal years then ended, and the
accompanying footnotes, together with the opinion thereon of Ernst & Young
LLP, independent certified public accountants, and the unaudited interim
consolidated balance sheet of the Borrower and its Subsidiaries as at June
30, 1998 and the related consolidated statements of operations, stockholders'
equity and cash flows for the six-month period then ended, copies of which
have been furnished to the Bank, fairly present the financial condition of
the Borrower and its Subsidiaries, taken as a whole, as at such dates and the
results of the operations of the Borrower and its Subsidiaries, taken as a
whole, for the periods covered by such statements, all in accordance with
GAAP consistently applied (subject to year-end accruals and audit adjustments
and the absence of footnotes in the case of the interim financial
statements). There are no liabilities of the Borrower or any Subsidiary,
fixed or contingent, which are material but are not reflected in the
financial statements or in the notes thereto, other than liabilities arising
in the ordinary course of business since June 30, 1998 and other than this
Agreement and the other Loan Documents or contemplated by the Acquisition
Agreement. No written information, exhibit or report furnished by the
Borrower to the Bank in connection with the negotiation of this Agreement
contained any material misstatement of fact or omitted to state any fact
necessary to make the statements contained therein not materially misleading.
Since June
29
30, 1998 no event or circumstance has occurred that would have a Materially
Adverse Effect.
(b) The Acquisition Pro-Formas have been prepared in good faith and are
based on reasonable assumptions.
(c) The balance sheets of DRMS as of December 31, 1996 and December 31,
1997 and the related consolidated statements of income, retained earnings and
cash flows of DRMS for the fiscal years then ended, and the accompanying
footnotes, the audited interim balance sheet of DRMS as at June 30, 1998 and
the related statement of income, retained earnings and cash flows for the
six-month period then ended and the unaudited interim balance sheet of DRMS
as at July 31, 1998 and the related statement of income for the seven-month
period then ended, copies of which have been furnished to the Bank, fairly
present the financial condition of DRMS as at such dates and the results of
the operations of DRMS for the periods covered by such statements, all in
accordance with GAAP consistently applied (subject to year-end accruals and
audit adjustments and the absence of footnotes in the case of the interim
financial statements). There are no liabilities of DRMS, fixed or
contingent, which are material but are not reflected in the financial
statements or in the notes thereto, other than liabilities arising in the
ordinary course of business since June 30, 1998.
Section 4.6. OWNERSHIP AND LIENS. Each of the Borrower and its
Subsidiaries has good and valid title to, or valid leasehold interests in,
its material Properties and assets, real and personal, including the material
Properties and assets, and leasehold interests reflected in the financial
statements referred to in Section 4.5 (other than any Properties or assets
disposed of in the ordinary course of business of the Borrower and its
Subsidiaries), and none of the material Properties and assets owned by the
Borrower or its Subsidiaries, and none of its leasehold interests is subject
to any Lien other than the Lien created by the Security Documents, except as
disclosed in such financial statements or in SCHEDULE 4.6, or as may be
permitted hereunder.
Section 4.7. TAXES. Each of the Borrower and its Subsidiaries has
filed all federal and state tax returns and all other material local tax
returns required to be filed, has paid all due and payable taxes, assessments
and governmental charges and levies, including interest and penalties,
imposed upon it or upon its Properties, and has made adequate provision for
the payment of such taxes, assessments and other charges accruing but not yet
due and payable, except with respect to taxes which are being contested in
good faith by the Borrower or its Subsidiaries and for which the Borrower or
its Subsidiaries has established and maintains adequate reserves for payment.
To the best knowledge of the Borrower, there is no tax assessment
contemplated or proposed by any governmental
30
agency against the Borrower or any of its Subsidiaries that would have a
Materially Adverse Effect.
Section 4.8. ERISA. Each of the Borrower and its Subsidiaries is in
compliance in all material respects with all applicable provisions of ERISA.
Within the three-year period prior to the date hereof, neither a Reportable
Event nor a Prohibited Transaction has occurred with respect to any Plan; no
notice of intent to terminate a Plan has been filed nor has any Plan subject
to Title IV of ERISA been terminated; no circumstance exists which
constitutes grounds under Section 4042 of ERISA entitling the PBGC to
institute proceedings to terminate, or appoint a trustee to administer, a
Plan, nor has the PBGC instituted any such proceedings; neither the Borrower
nor any ERISA Affiliate has completely or partially withdrawn under Sections
4201 or 4204 of ERISA from a Multiemployer Plan; each of the Borrower and its
ERISA Affiliates has met its minimum funding requirements under ERISA with
respect to all of its Plans and there are no Unfunded Vested Liabilities and
neither the Borrower nor any ERISA Affiliate has incurred any material
liability to the PBGC under ERISA other than for premium payments incurred in
the normal course of operating the Plans.
Section 4.9. SUBSIDIARIES AND OWNERSHIP OF STOCK. SCHEDULE 4.9
correctly sets forth the names of all Subsidiaries of the Borrower as of the
date of this Agreement. All of the outstanding shares of capital stock, or
all of the units of equity interest, as the case may be, of each Subsidiary
are owned of record and beneficially by the Borrower or a Subsidiary of the
Borrower, as disclosed on said Schedule; there are no outstanding options,
warrants or other rights to purchase capital stock of any such Subsidiary;
and all such shares or equity interests so owned are duly authorized, validly
issued, fully paid, non-assessable, and were issued in compliance with all
applicable state and federal securities and other laws, and are free and
clear of all Liens, except for Liens arising under the CORE Pledge Agreement
or for such Liens which otherwise may be permitted hereunder.
Section 4.10. CREDIT ARRANGEMENTS. SCHEDULE 4.10 is a complete and
correct list of all credit agreements, indentures, guaranties, Capital
Leases, mortgages, and other instruments, agreements and arrangements
presently in effect providing for or relating to extensions of credit
(including agreements and arrangements for the issuance of letters of credit
or for acceptance financing) in respect of which the Borrower or any of its
Subsidiaries is in any manner directly or contingently obligated, other than
trade payables in the ordinary course of business of the Borrower and its
Subsidiaries and the obligations under the Loan Documents; and the maximum
principal or face amounts of the credit in question, which are outstanding
and which can be outstanding, are therein set forth and are correctly stated
as of the date hereof, and all Liens given or agreed to be given as security
therefor are therein set forth and are correctly described or indicated in
such Schedule.
31
Section 4.11. OPERATION OF BUSINESS. Each of the Borrower and its
Subsidiaries possesses all licenses, permits and franchises, or rights
thereto, necessary to conduct its business as now conducted and as presently
proposed to be conducted, the absence of which would have a Materially
Adverse Effect, and neither the Borrower nor any of its Subsidiaries is in
violation in any material respect of any valid rights of others with respect
to any of the foregoing.
Section 4.12. NO DEFAULT ON OUTSTANDING JUDGMENTS OR ORDERS. Each of
the Borrower and its Subsidiaries has satisfied all material judgments and
neither the Borrower nor any Subsidiary is in default with respect to any
judgment, writ, injunction, decree, rule or regulation of any court,
arbitrator or federal, state, municipal or other governmental authority,
commission, board, bureau, agency or instrumentality, domestic or foreign,
which would, in any one case or in the aggregate, have a Materially Adverse
Effect.
Section 4.13. NO DEFAULTS ON OTHER AGREEMENTS. Neither the Borrower
nor any of its Subsidiaries is a party to any indenture, mortgage or loan or
credit agreement or any lease or other agreement or instrument or subject to
any charter or corporate restriction which would have a Materially Adverse
Effect. Neither the Borrower nor any of its Subsidiaries is in default in any
material respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or
instrument, including prospectuses and investment policies, material to its
business to which it is a party.
Section 4.14. GOVERNMENTAL REGULATION. Neither the Borrower nor any of
its Subsidiaries is subject to regulation under the Investment Company Act of
1940, as amended, or any statute or regulation limiting its ability to incur
indebtedness for money borrowed as contemplated hereby.
Section 4.15. CONSENTS AND APPROVALS. No authorization, consent,
approval, order, license or permit from, or filing, registration or
qualification with, or exemption by, any governmental or public body or
authority, or any subdivision thereof, or any other Person, is required to
authorize, or is required in connection with the execution, delivery and
performance by the Borrower or any of its Subsidiaries of, or the legality,
validity, binding effect or enforceability of, any Loan Document to which the
Borrower or a Subsidiary is a party, or the Acquisition Agreement, except the
consents, approvals or other similar actions listed on SCHEDULE 4.15 attached
hereto. SCHEDULE 4.15 describes those consents, approvals or other similar
actions which have been duly and properly obtained or which may have to be
obtained by the Bank in order to enforce its rights under this Agreement and
the other Loan Documents or the Acquisition Agreement. Except as disclosed
on said Schedule, such consents, approvals or other similar actions have been
32
obtained and have not been modified, amended, rescinded or revoked, and are
in full force and effect.
Section 4.16. PARTNERSHIPS. Except as set forth in SCHEDULE 4.16,
neither the Borrower nor any of its Subsidiaries is a partner in any
partnership.
Section 4.17. ENVIRONMENTAL PROTECTION. Each of Borrower and its
Subsidiaries has obtained all permits, licenses and other authorizations
which are required under all environmental laws, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or
wastes into the environment (including without limitation, ambient air,
surface water, ground water, or land), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes, except to the extent failure to have
any such permit, license or authorization would not reasonably be expected to
have a Materially Adverse Effect. Each of the Borrower and its Subsidiaries
is in compliance with all terms and conditions of the required permits,
licenses and authorizations, and is also in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in the environmental laws or
contained in any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved thereunder,
except to the extent failure to comply would not reasonably be expected to
have a Materially Adverse Effect. None of the Properties of the Borrower or
its Subsidiaries, either owned or leased, have been included or, as far as
the Borrower can reasonably foresee, proposed for inclusion on the National
Priorities List adopted pursuant to the Comprehensive Environmental Response
Compensation and Liability Act, as amended, or on any similar list or
inventory of sites requiring response or cleanup actions adopted by any other
federal, state or local agency.
Section 4.18. COPYRIGHTS, PATENTS, TRADEMARKS, ETC. Each of the
Borrower and its Subsidiaries is duly licensed or otherwise entitled to use
all patents, trademarks, service marks, trade names, and copyrighted
materials ("Intellectual Property") which are used in the operation of its
business as presently conducted, except where the failure to be so licensed
or entitled would not have a Materially Adverse Effect. SCHEDULE 4.18 sets
forth a listing of all Intellectual Property that is material to the
operation of the business of the Borrower and its Subsidiaries as presently
and proposed to be conducted. No claim is pending or, as far as the Borrower
can reasonably foresee, threatened against the Borrower or any of its
Subsidiaries contesting the use of any such Intellectual Property, nor does
the Borrower know of any valid basis for any such claims, other than claims
which, if adversely determined, would not have a Materially Adverse Effect.
To the best of the Borrower's knowledge, the use of such Intellectual
Property by the Borrower and each
33
Subsidiary does not infringe on the rights of any Person, except for such
claims and infringements that, in the aggregate, could not have a Materially
Adverse Effect.
Section 4.19. COMPLIANCE WITH LAWS. Neither the Borrower nor any of its
Subsidiaries is in violation of any laws, ordinances, rules or regulations,
applicable to it, of any federal, state or municipal governmental authorities,
instrumentalities or agencies, including without limitation, the United States
Occupational Safety and Health Act of 1970, as amended, except where such
violation would not have a Materially Adverse Effect. The Borrower and each
Subsidiary is in compliance with all laws and other requirements applicable to
its business and has obtained all authorizations, consents, approvals, orders,
licenses, and permits from, and the Borrower and each Subsidiary has
accomplished all filings, registrations, and qualifications with, or obtained
exemptions from any of the foregoing from, any governmental or public agency
that are necessary for the transaction of its business, except where the failure
to be in such compliance, obtain such authorizations, consents, approvals,
orders, licenses, and permits, accomplish such filings, registrations, and
qualifications, or obtain such exemptions, would not have a Materially Adverse
Effect.
Section 4.20. EVENTS OF DEFAULT. No Default or Event of Default has
occurred and is continuing.
Section 4.21. NO ADVERSE CHANGE. Since December 31, 1997, there has
occurred no event which has had or, as far as the Borrower can reasonably
foresee, could have a Materially Adverse Effect, except as is disclosed by the
Borrower's Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1998.
Section 4.22. USE OF PROCEEDS. The Borrower shall use the proceeds of the
initial Revolving Loan to acquire 100% of the shares of capital stock of DRMS
and thereafter for general corporate purposes of the Borrower.
Section 4.23. LOCATION OF BOOKS AND RECORDS. All of the books of account
and records of the Borrower and its Subsidiaries are located at the Borrower's
headquarters at 00000 Xxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxxxx 00000
except that the books of account and records of DRMS are maintained at 000
Xxxxxx Xxxxxx, Xxxxxxxx, Xxxxx 00000-0000.
Section 4.24. SECURITY DOCUMENTS.
(a) The provisions of the CORE Pledge Agreement are effective to create in
favor of the Bank a legal, valid and enforceable security interest in all right,
title and interest of the pledgor in the Collateral as described therein. The
CORE Pledge Agreement
34
constitutes a lien on and security interest in, all right, title and interest
of the pledgor in the Collateral described therein and upon delivery to the
Bank of the stock certificates evidencing such Collateral, together with
stock powers duly executed by the Borrower, the Bank will have a fully
perfected first priority security interest in such Collateral.
(b) The provisions of the CORE Security Agreement are effective to
create in favor of the Bank a legal, valid and enforceable security interest in
all right, title and interest of the Borrower in the Collateral as described
therein. Except where failure to file would not have a material effect on the
Bank's ability to realize effectively on the Collateral as described therein, as
a whole, the CORE Security Agreement constitutes a lien on and security interest
in, all right, title and interest of the Borrower in such Collateral and upon
filing of the Financing Statements in the locations set forth in the CORE
Security Agreement, the Bank will have a fully perfected first priority security
interest in such Collateral. No Uniform Commercial Code financing statements
have been filed by any other Person with respect to such Collateral other than
as may be filed in connection with this Agreement and except as described in
Schedule 4.24 hereto.
(c) The provisions of the Subsidiary Security Agreement are effective to
create in favor of the Bank a legal, valid and enforceable security interest in
all right, title and interests of each Subsidiary in the Collateral as described
therein. Except where failure to file would not have a material effect on the
Bank's ability to realize effectively on the Collateral described therein, as a
whole, the Subsidiary Security Agreement constitutes a lien on and security
interest in, all right, title and interest of each Subsidiary in such Collateral
and upon filing of the Financing Statements in the locations set forth in the
Subsidiary Security Agreement, the Bank will have a fully perfected first
priority security interest in such Collateral. No Uniform Commercial Code
financing statements have been filed by any other Person with respect to such
Collateral other than as may be filed in connection with this Agreement and
except as described in Schedule 4.24 hereto.
(d) The provisions of the Trademark Security Agreement are effective to
create in favor of the Bank a legal, valid and enforceable security interest in
all right, title and interest of the Borrower and its Subsidiaries in the
Collateral as described therein. Except where failure to file would not have a
material effect on the Bank's ability to realize effectively on the Collateral
as described therein, as a whole, the Trademark Security Agreement constitutes a
lien on and security interest in, all right, title and interest of the Borrower
and its Subsidiaries in such Collateral and upon the filing of the Financing
Statements and the Trademark Security Agreement in the locations set forth in
the Trademark Security Agreement, the Bank will have a fully perfected first
priority security interest in such Collateral. No Uniform Commercial Code
financing statements or filings with the United States Patent and Trademark
Office have been filed by any other Person
35
with respect to such Collateral other than as may be filed in connection with
this Agreement and except as described in Schedule 4.24 hereto.
Section 4.25. SOLVENCY. The Borrower and each Subsidiary is, and after
giving effect to the Acquisition and the incurrence of all indebtedness and
obligations being incurred in connection herewith will be and will continue to
be, Solvent.
Section 4.26 YEAR 2000 COMPATIBILITY. Substantially all programming
required to handle all material dates and date processing, in and following the
year 2000, of (i) the Borrower's and each of its Subsidiaries' computer systems
and (ii) equipment containing embedded microchips (including systems and
equipment supplied by others or with which the Borrower's or such Subsidiaries'
systems interface) and the testing of all such systems and equipment, as so
reprogrammed, will be substantially completed by March 31, 1999. The expected
cost to the Borrower and its Subsidiaries of such reprogramming and testing and
of the reasonably foreseeable consequences of year 2000 to the Borrower and its
Subsidiaries (including, without limitation, reprogramming errors and the
failure of others' systems or equipment within the control of the Borrower or
its Subsidiaries) is not anticipated to result in a Default or have Material
Adverse Effect.
Section 4.27 CAPITALIZATION. The authorized capital stock of the
Borrower consists, on the Effective Date, of (i) an aggregate of 30,000,000
shares of common stock, par value $0.10 per share, of which 7,816,142 (including
shares issued pursuant to the Acquisition Agreement on the Closing Date) shares
are duly and validly issued and outstanding (and of which no shares are held in
treasury), each of which shares is fully paid and nonassessable and (ii) an
aggregate 500,000 shares of preferred stock, no par value, of which no shares
are issued and outstanding. As of the Effective Date, except for Equity Rights
arising under the Warrant, the Acquisition Agreement and the Asset Purchase
Agreement among the Borrower, TCM Services, Inc., Transcend Case Management,
Inc. and Transcend Services, Inc. dated March 17, 1998 and any stock bonus
awards, restricted stock awards, performance units, stock options or stock
appreciation rights heretofore issued thereunder, (x) there are no outstanding
Equity Rights with respect to the Borrower and (y) there are no outstanding
obligations of the Borrower or any of its Subsidiaries to repurchase, redeem, or
otherwise acquire any shares of capital stock of the Borrower nor are there any
outstanding obligations of the Borrower or any of its Subsidiaries to make
payments to any Person, such as "phantom stock" payments, where the amount
thereof is calculated with reference to the fair market value or equity value of
the Borrower or any of its Subsidiaries.
Section 4.28 TRUE AND COMPLETE DISCLOSURE. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of the Borrower or any of its Subsidiaries to the Bank in connection with
the negotiation, preparation or
36
delivery of this Agreement and the other Loan Documents or included herein or
therein or delivered pursuant hereto or thereto, when taken as a whole, do
not, as of the Effective Date, contain any untrue statement of material fact
or omit to state any material fact necessary to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading. All written information furnished after the Effective Date by the
Borrower and its Subsidiaries to the Bank in connection with this Agreement
and the other Loan Documents and the transactions contemplated hereby and
thereby will be true, complete and accurate in every material respect, or (in
the case of projections) based on reasonable estimates, on the date as of
which such information is stated or certified. To the Borrower's knowledge,
there is no fact peculiar to the Borrower or any of its Subsidiaries (in
contrast to information of a general economic or industry nature) that could
have a Materially Adverse Effect that has not been disclosed herein, in the
other Loan Documents or in a report, financial statement, exhibit, schedule,
disclosure letter or other writing furnished to the Bank for use in
connection with the transactions contemplated hereby or thereby.
ARTICLE 5. AFFIRMATIVE COVENANTS
During the term of this Agreement, and until performance, payment and/or
satisfaction in full of the Obligations, the Borrower covenants and agrees that
it shall, and shall cause each of its Subsidiaries to, unless the Bank otherwise
consents in writing:
Section 5.1. MAINTENANCE OF EXISTENCE. Preserve and maintain its
corporate existence and good standing in the jurisdiction of its incorporation,
and qualify and remain qualified as a foreign corporation in each jurisdiction
in which such qualification is required from time to time, except where failure
to be so qualified would not have a Materially Adverse Effect; and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business. The Borrower shall not form
any new Subsidiary.
Section 5.2. CONDUCT OF BUSINESS. Continue to engage in a business of
the same general type as conducted by it on the date of this Agreement. Neither
the Borrower nor any Subsidiary shall engage, directly or indirectly, in the
business of underwriting insurance.
Section 5.3. MAINTENANCE OF PROPERTIES. Maintain, keep and preserve all
of its material Properties (tangible and intangible), necessary or useful in the
conduct of its business, in good working order and condition, ordinary wear and
tear excepted, EXCEPT that the failure to maintain, preserve and protect a
particular item of depreciable Property that is not of significant value, either
intrinsically or to the operations of Borrower and its Subsidiaries, taken as a
whole, shall not constitute a violation of this covenant.
37
Section 5.4. MAINTENANCE OF RECORDS. Keep accurate and complete records
and books of account, in which complete entries will be made in accordance with
GAAP reflecting all financial transactions of the Borrower and its Subsidiaries,
and maintain a fiscal year that ends on December 31.
Section 5.5. MAINTENANCE OF INSURANCE. Maintain insurance (subject to
customary deductibles and retentions) with financially sound and reputable
insurance companies, in such amounts and with such coverages (including without
limitation public liability insurance, fire, hazard and extended coverage
insurance on all of its assets, necessary workers' compensation insurance and
all other coverages as are consistent with industry practice) as are maintained
by companies of established reputation engaged in similar businesses and
similarly situated and furnish to the Bank, upon written request, full
information as to the insurance carried.
Section 5.6. COMPLIANCE WITH LAWS. Comply in all respects with all
applicable laws, rules, regulations and orders, except where the failure to so
comply would not have a Materially Adverse Effect. Such compliance shall
include, without limitation, paying all taxes, assessments and governmental
charges imposed upon it or upon its Property (and all penalties and other costs,
if any, related thereto), unless contested in good faith by appropriate
proceedings and for which adequate reserves have been set aside.
Section 5.7. RIGHT OF INSPECTION. From time to time upon prior notice
and in accordance with customary standards and practices within the banking
industry (including, without limitation, upon any Event of Default or whenever
the Bank may have reasonable cause to believe that an Event of Default has
occurred), the Borrower shall permit the Bank or any agent or representative
thereof, to examine and make copies and abstracts from the records and books of
account of, and visit the Properties of, the Borrower and its Subsidiaries to
discuss the affairs, finances and accounts of the Borrower and any such
Subsidiaries with any of their respective officers and directors and the
Borrower's independent accountants, and to make such verification concerning the
Borrower and its Subsidiaries as may be reasonable under the circumstances, and
furnish promptly to the Bank true copies of all financial information that may
be reasonably requested by the Bank; PROVIDED, that the Bank shall use
reasonable efforts to not materially interfere with the business of the Borrower
and its Subsidiaries and to treat as confidential any and all information
obtained pursuant to this Section 5.7, except to the extent disclosure is
required by any law, regulation, order, ruling, directive, guideline or request
from any central bank or other government authority (whether or not having the
force of law).
Section 5.8. REPORTING REQUIREMENTS. The Borrower shall, and shall cause
each of its Subsidiaries, as applicable, to, furnish to the Bank:
38
(a ANNUAL GAAP STATEMENTS. Within ninety (90) days following the end of
Borrower's fiscal year (or, if a registered company, such earlier date as
the Borrower's Form 10-K is filed with the Securities and Exchange
Commission) copies of:
(i) the consolidated and consolidating balance sheets of the Borrower
and its Subsidiaries as at the close of such fiscal year, and
(ii) the consolidated and consolidating statements of operations
and consolidated statements of stockholders' equity and cash flows, in each
case of the Borrower and its Subsidiaries for such fiscal year,
in each case setting forth in comparative form the figures for the
preceding fiscal year and prepared in accordance with GAAP, all in
reasonable detail and accompanied by an opinion thereon of Ernst & Young
LLP or other firm of independent public accountants of recognized national
standing selected by the Borrower and reasonably acceptable to the Bank, to
the effect that the financial statements have been prepared in accordance
with GAAP (except for changes in application in which such accountants
concur) and present fairly in all material respects in accordance with GAAP
the financial condition of the Borrower and its Subsidiaries as of the end
of such fiscal year and the results of its operations for the fiscal year
then ended and that the examination of such accountants in connection with
such financial statements has been made in accordance with generally
accepted auditing standards and, accordingly, included such tests of the
accounting records and such other auditing procedures as were considered
necessary under the circumstances.
(b QUARTERLY GAAP STATEMENTS. As soon as available, and in any event
within forty-five (45) days after the end of each quarterly fiscal period
of the Borrower (other than the fourth fiscal quarter of any fiscal year),
copies of:
(i) the consolidated and consolidating balance sheets of Borrower and
its Subsidiaries as at the end of such fiscal quarter, and
(ii) the consolidated and consolidating statements of operations and
consolidated statements of stockholders' equity and cash flows, in each
case of Borrower and its Subsidiaries for such fiscal quarter and the
portion of such fiscal year ended with such fiscal quarter,
39
in each case setting forth in comparative form the figures for the
preceding fiscal year and prepared in accordance with GAAP all in
reasonable detail and certified as presenting fairly in accordance with
GAAP the financial condition of the Borrower and its Subsidiaries as of the
end of such period and the results of operations for such period by a
Senior Officer of such company, subject only to normal year-end accruals
and audit adjustments and the absence of footnotes.
(c MONTHLY ACCOUNTS RECEIVABLE AGING REPORT. As soon as available, and
in any event within thirty (30) days following the end of each month, a
report in form satisfactory to the Bank of the age of accounts receivable
generated by the Borrower and each of its Subsidiaries, certified by a
Senior Officer of the Borrower.
(d ACTUAL AND PROJECTED QUARTERLY CAPITAL EXPENDITURES. As soon as
available, and in any event within forty-five (45) days after the end of
each quarterly fiscal period of the Borrower, a report in form satisfactory
to the Bank indicating (i) the actual Capital Expenditures of the Borrower
and its Subsidiaries for the immediately preceding fiscal quarter and (ii)
the projected Capital Expenditures for the remainder of the fiscal year.
(e ANNUAL FORECASTS. On or before January 1 of each year, forecasts for
such year of the year-end balance sheet and statement of operations of the
Borrower and its Subsidiaries, on a consolidated and consolidating basis
[AND IN FORM SATISFACTORY TO THE BANK], together with a certificate of a
Senior Officer that such forecasts have been prepared in good faith and on
reasonable assumptions.
(f MANAGEMENT LETTERS. Promptly upon receipt thereof, copies of any
reports or management letters relating to the internal financial controls
and procedures delivered to the Borrower or any of its Subsidiaries by any
independent certified public accountant in connection with examination of
the financial statements of the Borrower or any such Subsidiary.
(g STOCKHOLDER COMMUNICATIONS AND SEC FILINGS. Promptly after the same
are available, copies of each annual report, proxy or financial statement
or other report or communication sent to the stockholders of the Borrower
and, if registered, copies of all annual, regular, periodic and special
reports and registration statements which the Borrower may file or be
required to file with the Securities and Exchange Commission under Sections
13 and 15(d) of the Securities and Exchange Act of 1934.
40
(h NOTICE OF LITIGATION. Promptly after the commencement thereof, notice
of any action, suit and proceeding before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic
or foreign, against the Borrower or any of its Subsidiaries commenced by
any creditor or lessor under any written credit agreement with respect to
borrowed money or any material agreement, including any lease, which
asserts a default thereunder on the part of the Borrower or any of its
Subsidiaries.
(i NOTICES OF DEFAULT. As soon as practicable and in any event within
fifteen (15) days after the occurrence of each Default or Event of Default,
a written notice setting forth the details of such Default or Event of
Default and the action which is proposed to be taken by the Borrower with
respect thereto.
(j OTHER FILINGS. At any time upon the reasonable request of the Bank,
permit the Bank the opportunity to review copies of all reports, including
annual reports, and notices which the Borrower or any Subsidiary files with
or receives from the PBGC or the U.S. Department of Labor under ERISA; and
as soon as practicable and in any event within fifteen (15) days after the
Borrower or any if its Subsidiaries knows or has reason to know that any
Reportable Event or Prohibited Transaction has occurred with respect to any
Plan or that the PBGC or the Borrower or any such Subsidiary has instituted
or will institute proceedings under Title IV of ERISA to terminate any
Plan, the Borrower will deliver to the Bank a certificate of a Senior
Officer of the Borrower setting forth details as to such Reportable Event
or Prohibited Transaction or Plan termination and the action the Borrower
proposes to take with respect thereto.
(k QUARTERLY INVESTMENT REPORTS. Within forty-five (45) days after the
end of each quarterly fiscal period of the Borrower, a report from the
Borrower certifying as to the Investments of the Borrower and its
Subsidiaries, including the amount and rating thereof.
(l ADDITIONAL INFORMATION. Such additional information as the Bank may
reasonably request concerning the Borrower and its Subsidiaries and for
that purpose all pertinent books, documents and vouchers relating to its
business, affairs and Properties, including Investments as shall from time
to time be designated by the Bank.
41
Section 5.9. CERTIFICATES.
(a OFFICERS' CERTIFICATE. Simultaneously with each delivery of financial
statements pursuant to Section 5.8(a) and 5.8(b), the Borrower shall
deliver to the Bank a certificate of its Chief Financial Officer which will
(i) certify on behalf of the Borrower that such officer has reviewed
the Agreement and the condition and transactions of the Borrower and
its Subsidiaries for the period covered by such financial statements,
and state that to the best of his knowledge the Borrower has observed
or performed all of its covenants and other agreements, and satisfied
every condition, contained in this Agreement and the other Loan
Documents, and no Default or Event of Default has occurred and is
continuing or, if a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof and the action which
is proposed to be taken with respect thereto, and
(ii) include information (with detailed calculations in the form set
out in EXHIBIT C) required to establish whether the Borrower was in
compliance with the covenants set forth in this Agreement during the
period covered by the financial statements then being delivered.
(b) ACCOUNTANT'S CERTIFICATE. Simultaneously with each delivery of
financial statements pursuant to Section 5.8(a), the Borrower will deliver
to the Bank a certificate of the independent certified public accountants
who certify such statements, stating whether, in the course of their audit
of the financial statements, they obtained any knowledge of a condition or
event which constitutes a Default or Event of Default and the nature
thereof.
Section 5.10. FURTHER ASSURANCES. The Borrower shall take or shall cause
its Subsidiaries to take all such further actions and execute and file or
record, at its own cost and expense, all such further documents and instruments
as the Bank may at any time reasonably determine may be necessary or advisable;
and shall do, execute, acknowledge, deliver, record, file, re-file, record,
register and re-register any and all such further acts, deeds, conveyances,
estoppel certificates, transfers, certificates, assurances and other instruments
as the Bank may reasonably require from time to time in order to carry out more
effectively the purposes of this Agreement and the other Loan Documents.
Section 5.11. COMPLIANCE WITH AGREEMENTS. Promptly and fully comply with
all contractual obligations under all agreements, mortgages, indentures, leases
and/or instruments to which any one or more of the Borrower and its Subsidiaries
is a party,
42
whether such agreements, mortgages, indentures, leases or instruments are
with the Bank or another Person, except where such failure to so comply would
not have a Materially Adverse Effect.
Section 5.12. USE OF PROCEEDS. Use the proceeds of the Revolving Loans
only for the purposes described in Section 4.22.
Section 5.13. PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy
at or before maturity or before they become delinquent, as the case may be, all
its obligations of whatever nature, including without limitation all payroll and
other tax obligations, except where the amount or validity thereof is currently
being contested in good faith by appropriate proceedings and reserves in
conformity with GAAP with respect thereto have been provided on the books of the
Borrower or its Subsidiaries, as the case may be or except where the failure to
pay, discharge or otherwise satisfy could not have a Materially Adverse Effect.
Section 5.14. INTEREST RATE PROTECTION. Within five (5) days after the
Bank's request, the Borrower shall enter into interest rate protection
arrangements covering, if requested, up to the amount of the Commitment, on
terms and conditions satisfactory to the Bank.
ARTICLE 6. NEGATIVE COVENANTS.
During the term of this Agreement, and until performance, payment and/or
satisfaction in full of the Obligations, the Borrower covenants and agrees that
Borrower shall not, and shall not permit its Subsidiaries to, unless the Bank
otherwise consents in writing:
Section 6.1. DEBT. Create, incur, assume or suffer to exist any Debt,
except:
(a Debt of the Borrower under this Agreement and the Revolving Note;
(b Debt permitted under Section 6.2 hereof;
(c Capital Leases of the Borrower and its Subsidiaries permitted by
Section 6.9; and
(d Debt described in Section 4.10.
Section 6.2. GUARANTIES, ETC. Assume, guarantee, endorse or otherwise be
or become directly or contingently responsible or liable (including, but not
limited to, an
43
agreement to purchase any obligation, or to supply or advance any
funds, or an agreement to cause such Person to maintain a minimum working
capital or net worth or otherwise to assure the creditors of any Person against
loss) for the obligations of any Person, except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business and the Subsidiary Guaranty.
Section 6.3. LIENS. Create, incur, assume or suffer to exist any Lien,
upon or with respect to any of its Properties, now owned or hereafter acquired,
except:
(a Liens for taxes or assessments or other government charges or levies
if not yet due and payable or if due and payable, if they are being
contested in good faith by appropriate proceedings and for which
appropriate reserves are maintained;
(b Liens imposed by law, such as mechanic's, materialmen's, landlord's,
warehousemen's and carrier's Liens, and other similar Liens, securing
obligations incurred in the ordinary course of business which are not past
due for more than forty-five (45) days, or which are being contested in
good faith by appropriate proceedings and for which appropriate reserves
have been established;
(c Liens under workers' compensation, unemployment insurance, social
security or similar legislation (other than ERISA);
(d judgment and other similar Liens arising in connection with court
proceedings; PROVIDED that the execution or other enforcement of such Liens
is effectively stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings;
(e easements, rights-of-way, restrictions and other similar encumbrances
which, in the aggregate, do not materially interfere with the occupation,
use and enjoyment by the Borrower or any of its Subsidiaries of the
Property or assets encumbered thereby in the normal course of its business
or materially impair the value of the Property subject thereto;
(f Liens referred to in Schedule 4.6;
(g Liens consisting of pledges or deposits of Property to secure
performance in connection with operating leases made in the ordinary course
of business to which Borrower or a Subsidiary is a party as lessee,
PROVIDED the aggregate value of all such pledges and deposits in connection
with any such lease does not at any time exceed 10% of the annual fixed
rentals payable under such lease; and
44
(h Any interest or title of a lessor under any lease permitted by this
Agreement, including any Lien granted by the lessee under any such lease
and any Lien arising from the filing of UCC financing statements with
respect to any such lease.
Section 6.4. INVESTMENTS. Permit any investment by the Borrower or its
Subsidiaries in an Investment other than
(a) Investments constituting (i) operating deposit accounts with
banks and (ii) accounts receivable arising in the ordinary course of
business on ordinary business terms that are not overdue; or
(b) Investments constituting commercial paper rated at least A-1 by
Standard & Poor's Ratings Group, a Division of XxXxxx-Xxxx, Inc., or P-l
by Xxxxx'x Investors Service Inc.
Section 6.5. MERGERS AND CONSOLIDATIONS AND ACQUISITIONS OF ASSETS.
Merge or consolidate with any Person (whether or not Borrower or any Subsidiary
is the surviving entity), or acquire all or substantially all of the assets or
any of the capital stock of any Person without the prior written consent of the
Bank, which consent may be withheld or granted in the sole and absolute
discretion of the Bank; PROVIDED that (a) any Subsidiary may merge into the
Borrower or any other Subsidiary and (b) the Borrower may acquire the capital
stock of DRMS pursuant to the terms of the Acquisition Agreement.
Section 6.6. SALE OF ASSETS. Sell, lease or otherwise dispose of any
material portion of its assets without the prior written consent of the Bank,
which consent may be withheld or granted in the sole and absolute discretion of
the Bank.
Section 6.7. STOCK OF SUBSIDIARIES, ETC. Pledge, assign, hypothecate,
transfer, convey, sell or otherwise dispose of, encumber or grant any security
interest in, or deliver to any other Person, any shares of capital stock of its
Subsidiaries, or permit any such Subsidiaries to issue any additional shares of
its capital stock to any Person other than the Borrower or any Subsidiaries,
except directors' qualifying shares and pursuant to the CORE Pledge Agreement.
Section 6.8. TRANSACTIONS WITH AFFILIATES. Enter into any transaction of
any kind with any Affiliate of the Borrower, or any Person that owns or holds
five percent (5%) or more of the outstanding common stock of the Borrower, OTHER
THAN (a) transactions between or among the Borrower and its wholly owned
Subsidiaries or between or among its wholly owned Subsidiaries, (b) transactions
on terms at least as favorable to the Borrower or its Subsidiaries as would be
the case in an arm's-length transaction between
45
unrelated parties of equal bargaining power or (c) as contemplated by the
Acquisition Agreement.
Section 6.9. CAPITAL EXPENDITURES. Make or permit to be made any Capital
Expenditure in any fiscal year, or commit to make any Capital Expenditure in any
fiscal year, which when added to the aggregate Capital Expenditures of the
Borrower and its Subsidiaries theretofore made or committed to be made in that
fiscal year, would exceed the corresponding amount for such year as set forth
below:
Year Permitted Capital Expenditures
---- ------------------------------
1998 $1,600,000
1999 $1,750,000
2000 $2,100,000
2001 $2,520,000
2002 $3,350,000
Section 6.10. MINIMUM CONSOLIDATED GAAP NET WORTH. As of the end of
any fiscal quarter, permit Consolidated GAAP Net Worth of the Borrower and
its Subsidiaries to be less than an amount equal to the sum of (a)
$27,000,000, after eliminating the effects of (i) the write-off of goodwill
in the amount of $4,085,449, arbitration costs in the amount of $736,009, and
certain non-recurring charges in the amount of $114,277 in the fiscal quarter
ended June 30, 1998 and (ii) any restructuring charges, not exceeding
$1,500,000 in the aggregate, incurred in the third or fourth quarter of 1998
in connection with the anticipated disposition of Integrated Behavioral
Health, Cost Review Services, Inc. and TCM Services, Inc. (the "Restructuring
Charges"), plus (b) fifty percent (50%) of any cumulative positive
consolidated Net Income of the Borrower and its Subsidiaries for each fiscal
quarter following the fiscal quarter ended December 31, 1998, plus (c) the
amount of paid-in capital resulting from any issuance by the Borrower of its
capital stock after the Closing Date and the Acquisition.
Section 6.11. MINIMUM INTEREST COVERAGE. As of the end of any fiscal
quarter during the periods set forth below, permit the Interest Coverage Ratio
to be less than 3.5 to 1.
Section 6.12. MINIMUM DEBT SERVICE COVERAGE. As of the end of each fiscal
quarter, permit the Debt Service Coverage Ratio for the immediately preceding
four fiscal quarters (ending on such date) to be less than 1.5 to 1.
Section 6.13. MINIMUM FIXED CHARGE COVERAGE. During any fiscal year,
permit the Fixed Charge Coverage Ratio to be less than the corresponding amount
for such fiscal year as set forth below:
46
Minimum Permissible
Year Fixed Charge Coverage Ratio
---- ---------------------------
1998 1.0 to 1
1999 1.25 to 1
2000 1.5 to 1
2001 2.0 to 1
2002 2.0 to 1
Section 6.14. DISTRIBUTIONS. Make any Distributions from Net Income of
the Borrower without the prior written consent of the Bank, which consent may be
withheld or granted in the sole and absolute discretion of the Bank.
Section 6.15. NO LIMIT ON UPSTREAM PAYMENTS BY SUBSIDIARIES. Permit any
of its Subsidiaries to enter into or agree, or otherwise become subject, to any
agreement, contract or other arrangement with any Person pursuant to the terms
of which (a) such Subsidiary is or would be prohibited from declaring or paying
any cash dividends or Distributions or making any other payment to the Borrower,
or (b) such dividends, distributions or other payments are, or would be, limited
or restricted on an annual or cumulative basis or otherwise. The Borrower shall
cause its Subsidiaries, to the extent permitted by applicable law, to make such
distributions of funds, including dividends, as may be necessary to meet in a
timely manner all of the Borrower's obligations under this Agreement.
Section 6.16. EARNINGS. As of the end of the fiscal quarter ended June
30, 1999 and each fiscal quarter thereafter, permit consolidated Net Income of
the Borrower and its Subsidiaries for the immediately preceding four fiscal
quarters (ending on such date and excluding the effect of the Restructuring
Charges) on a cumulative basis to be less than zero dollars ($0).
ARTICLE 7. EVENTS OF DEFAULT.
Section 7.1. EVENTS OF DEFAULT. Any of the following events shall be an
"Event of Default":
(a) (i) the Borrower shall fail to pay any principal amount of any
Revolving Loan when due, whether at stated maturity, by acceleration, by
notice of prepayment or otherwise, or (ii) the Borrower shall fail to pay
any premium or interest, or any fees or other amounts payable hereunder,
when due whether at stated maturity, by acceleration, by notice of
prepayment or otherwise;
47
(b) any written statement, representation or warranty made by the Borrower
or any Subsidiary in any Loan Document to which the Borrower or such
Subsidiary is party, or which is contained in any certificate, document,
financial or other written statement furnished at any time under or in
connection with this Agreement or any other Loan Document shall prove to
have been incorrect in any material respect on or as of the date made;
(c) the Borrower shall (i) fail to perform or observe any term, covenant,
or agreement contained in Section 4.21, Section 5.1, Section 5.8(i) or
Article 6; or (ii) fail to perform or observe any term, covenant, or
agreement on its part to be performed or observed (other than the
obligations specifically referred to elsewhere in this Section 7.1) in this
Agreement (including without limitation any such term, covenant or
agreement contained in Article 5 hereof) or any other Loan Document and
such failure shall continue unremedied for thirty (30) consecutive days;
(d) any Subsidiary shall default in the observance or performance of any
agreement contained in any Loan Document to which it is a party, and such
default shall continue unremedied for a period of thirty (30) days after
the earlier of (i) a Senior Officer of such Subsidiary becomes aware of
such default or (ii) notice of such default to such Subsidiary by the Bank;
(e) the Borrower or any Subsidiary shall (i) fail to pay any indebtedness,
including but not limited to Debt (other than the payment Obligations
described in (a) above), of the Borrower or such Subsidiary, as the case
may be, or any interest or premium thereon, when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise); or (ii)
fail to perform or observe any term, covenant or condition on its part to
be performed or observed under any agreement or instrument relating to any
such Debt, when required to be performed or observed and such failure
continues after any applicable notice and grace period, if the effect of
such failure to perform or observe is to accelerate, or to permit the
acceleration of the maturity of such Debt, or (iii) any such Debt shall be
declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the stated maturity
thereof; PROVIDED, HOWEVER, that it shall not be a Default or Event of
Default under this Section 7.1(e) unless the aggregate principal amount of
all such Debt as described in clauses (i) through (iii) above shall exceed
$100,000;
(f) the Borrower or any Subsidiary (i) shall generally not, or be unable
to, or shall admit in writing its inability to, pay its debts as such debts
become due; or (ii) shall make an assignment for the benefit of creditors
or petition or apply to any tribunal for the appointment of a custodian,
receiver or trustee for it or a substantial
48
part of its assets; or (iii) shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect; or (iv) shall have had any such petition or
application filed or any such proceeding shall have been commenced
against it in which an adjudication or appointment is made or order for
relief is entered, or which petition, application or proceeding remains
undismissed for a period of sixty (60) days or more; or (v) shall be the
subject of any proceeding under which its assets may be subject to
seizure, forfeiture or divestiture (other than a proceeding in respect
of a Lien permitted under Section 6.3(a)); or (vi) by any act or
omission shall indicate its consent to, approval of or acquiescence in
any such petition, application or proceeding or order for relief or the
appointment of a custodian, receiver or trustee for all or any
substantial part of its Property; or (vii) shall suffer any such
custodianship, receivership or trusteeship to continue undischarged for
a period of sixty (60) days or more;
(g) one or more judgments, decrees or orders for the payment of money in
excess of $100,000 in the aggregate shall have been rendered against the
Borrower or any of its Subsidiaries (excluding judgments which are covered
by insurance other than self-insurance) and such judgments, decrees or
orders shall continue unsatisfied and in effect for a period of sixty (60)
consecutive days without being vacated, discharged, satisfied or stayed or,
if required, bonded pending appeal;
(h) any of the following events shall occur or exist with respect to the
Borrower or any ERISA Affiliate: (i) any Prohibited Transaction involving
any Plan; (ii) any Reportable Event shall occur with respect to any Plan;
(iii) the filing under Section 4041 of ERISA of a notice of intent to
terminate any Plan or the termination of any Plan subject to Title IV of
ERISA (other than in a "standard termination" referred to in Section 4041
of ERISA); (iv) any event or circumstance exists which would constitute
grounds entitling the PBGC to institute proceedings under Section 4042 of
ERISA for the termination of, or for the appointment of a trustee to
administer any Plan, or the institution by the PBGC of any such
proceedings; (v) complete or partial withdrawal under Section 4201 or 4204
of ERISA from a Multiemployer Plan or the reorganization, insolvency or
termination of any Multiemployer Plan; and in each case above, such event
or condition, together with all other such events or conditions, if any,
would in the reasonable opinion of the Bank subject the Borrower to any
tax, penalty or other liability to a Plan, Multiemployer Plan, the PBGC or
otherwise (or any combination thereof) which in the aggregate exceed or may
exceed $100,000 or;
(i) this Agreement or any of the other Loan Documents shall at any time
after its execution and delivery and for any reason cease to be in full
force and effect or
49
shall be declared null and void, or the validity or enforceability
thereof shall be contested by the Borrower or the Borrower shall deny it
has any further liability or obligation hereunder.
Section 7.2. REMEDIES. Without limiting any other rights or remedies of
the Bank provided for elsewhere in this Agreement or any other Loan Document, or
by applicable law, or in equity, or otherwise, if any Event of Default shall
occur and be continuing, the Bank may by notice to the Borrower, (i) declare the
Commitment to be terminated, whereupon the same shall forthwith terminate, (ii)
declare all amounts owing under this Agreement and the Revolving Note (whether
or not such Obligations be contingent or unmatured) to be forthwith due and
payable, whereupon all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by the Borrower; PROVIDED that, in the case
of an Event of Default referred to in Section 7.1(f) above with respect to the
Borrower, the Commitment shall be immediately terminated, and all such amounts
shall be immediately due and payable without notice, presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Borrower.
ARTICLE 8. MISCELLANEOUS.
Section 8.1. AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Agreement or any other Loan Document nor consent to any
departure by the Borrower or any Subsidiary therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Bank and the
Borrower or the applicable Subsidiary, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No failure on the part of the Bank to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof or preclude
any other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
Section 8.2. USURY. Anything herein to the contrary notwithstanding, the
Obligations of the Borrower with respect to this Agreement and the Revolving
Note shall be subject to the limitation that payments of interest shall not be
required to the extent that receipt thereof would be contrary to provisions of
law applicable to the Bank limiting rates of interest which may be charged or
collected by the Bank.
50
Section 8.3. EXPENSES; INDEMNITIES.
(a) Unless otherwise agreed in writing, the Borrower shall reimburse the
Bank on demand for all reasonable costs, expenses and charges (including without
limitation, reasonable fees and charges of Day, Xxxxx & Xxxxxx LLP or any other
external legal counsel for the Bank and costs allocated by the Bank's internal
legal department) incurred by the Bank in connection with the preparation,
filing, recording, modification and amendment of this Agreement and the other
Loan Documents. The Borrower further agrees to pay on demand all reasonable
costs and expenses (including reasonable counsel fees and expenses), if any, in
connection with the enforcement, including without limitation, the enforcement
of judgments (whether through negotiations, legal proceedings or otherwise) of
this Agreement, the other Loan Documents or any other document to be delivered
under this Agreement. Until paid, the amount of any cost, expense or charge
shall constitute, together with all accrued interest thereon, part of the
Obligations.
(b) The Borrower hereby agrees to indemnify the Bank upon demand at any
time, against any and all losses, costs or expenses which the Bank may at any
time or from time to time sustain or incur as a consequence of (i) any failure
by the Borrower to pay, punctually on the due date thereof, any amount payable
by the Borrower to the Bank or (ii) the acceleration, in accordance with the
terms of this Agreement, of the time of payment of any of the Obligations of the
Borrower. Such losses, costs or expenses may include, without limitation, (i)
any costs incurred by the Bank in carrying funds to cover any overdue principal,
overdue interest, or any other overdue sums payable by the Borrower to the Bank
or (ii) any losses incurred or sustained by the Bank in liquidating or
reemploying funds acquired by the Bank from third parties, except to the extent
caused by the Bank's gross negligence or willful misconduct.
(c) The Borrower agrees to indemnify the Bank and its directors, officers,
employees, agents and Affiliates from, and hold each of them harmless against,
any and all losses, liabilities, claims, damages, costs or expenses incurred by
any of them arising out of or by reason of any investigation or litigation or
other proceedings (including any threatened investigation or litigation or other
proceedings) relating to any transaction contemplated by this Agreement or any
other Loan Document, any actions or omissions of the Borrower or any Subsidiary
or any of their respective directors, officers, employees or agents in
connection with this Agreement or any other Loan Document, or any actual or
proposed use by the Borrower or any Subsidiary of the proceeds of the Revolving
Loans, including without limitation, the reasonable fees and disbursements of
counsel incurred in connection with any such investigation or litigation or
other proceedings (but excluding any such losses, liabilities, claims, damages
or expenses incurred by reason of the gross negligence or willful misconduct of
the Person to be indemnified).
51
(d) The Borrower agrees to indemnify the Bank and its directors, officers,
employees, agents and Affiliates from, and hold each of them harmless against,
any and all losses, liabilities, claims, damages, costs or expenses (including
without limitation, reasonable fees and disbursements of counsel, engineers or
similar professionals) which may be incurred by or asserted against the Bank or
any such party in connection with or arising out of or relating to (i) the
Bank's compliance with any environmental law with respect to the Properties or
operations of the Borrower or its Subsidiaries, (ii) any natural resource
damages, governmental fines or penalties or other amounts mandated by any
governmental authority, court order, demand or decree in connection with the
disposal by the Borrower or its Subsidiaries either on-site or off-site
(including leakage or seepage from any such site including third party treatment
facilities) of pollutants, contaminants or hazardous wastes and (iii) any
personal injury or property damage to third parties resulting from such
pollutants, contaminants or hazardous wastes.
Section 8.4. TERM; SURVIVAL. This Agreement shall continue in full force
and effect as long as any Obligations are owing by the Borrower to the Bank. No
termination of this Agreement shall in any way affect or impair the rights and
obligations of the parties hereto relating to any transactions or events prior
to such termination date, and all warranties and representations of the Borrower
shall survive such termination. All representations and warranties made
hereunder and in any document, certificate, or statement delivered pursuant
hereto or in connection herewith shall survive the execution and delivery of
this Agreement and the other Loan Documents. The obligations of the Borrower
under Sections 2.11, 2.12 and 8.3 shall survive the repayment of the Revolving
Loans and the termination of the Commitment.
Section 8.5. ASSIGNMENT; PARTICIPATIONS. This Agreement shall be binding
upon, and shall inure to the benefit of, the Borrower, the Bank and their
respective successors and assigns, except that the Borrower may not assign or
transfer its rights or obligations hereunder. The Bank may sell Participations
in, or upon ten (10) days' notice to the Borrower may assign all or any part of,
any Revolving Loan to another lender, in which event (a) in the case of an
assignment, the assignee shall have, to the extent of such assignment (unless
otherwise provided therein), the same rights, benefits and obligations as it
would have if it were the Bank hereunder; and (b) in the case of a
participation, the participant shall have no rights under this Agreement, the
Revolving Note or any other Loan Document. The agreement executed by the Bank in
favor of the participant shall not give the participant the right to require the
Bank to take or omit to take any action hereunder except action directly
relating to (i) the extension of a regularly scheduled payment date with respect
to any portion of the principal of or interest on any amount outstanding
hereunder allocated to such participant, (ii) the reduction of the principal
amount allocated to such participant or (iii) the reduction of the rate of
interest payable on such amount or any amount of fees payable hereunder to a
rate or amount, as the case may
52
be, below that which the participant is entitled to receive under its
agreement with the Bank. The Bank may furnish any information concerning the
Borrower in the possession of the Bank from time to time to assignees and
participants (including prospective assignees and participants); PROVIDED
that the Bank shall require any such prospective assignee or such participant
(prospective or otherwise) to agree in writing to maintain the
confidentiality of such information.
Section 8.6. NOTICES. All notices, requests, demands and other
communications provided for herein shall be in writing and shall be (i) hand
delivered; (ii) sent by certified, registered or express United States mail,
return receipt requested, or reputable next-day courier service; or (iii) given
by telex, telecopy, telegraph or similar means of electronic communication. All
such communications shall be effective upon the receipt thereof. Notices shall
be addressed to the Borrower and the Bank at their respective addresses set
forth on the signature pages of this Agreement, or to such other address as the
Borrower or the Bank shall theretofore have transmitted to the other party in
writing by any of the means specified in this Section.
Section 8.7. SETOFF. The Borrower agrees that, in addition to (and
without limitation of) any right of setoff, banker's lien or counterclaim the
Bank may otherwise have, the Bank shall be entitled, at its option, to offset
balances (general or special, time or demand, provisional or final, and
regardless of whether such balances are then due to the Borrower) held by it for
the account of the Borrower at any of the Bank's offices, in Dollars or in any
other currency, against any amount payable by the Borrower under this Agreement
or any other Loan Document which is not paid when due, taking into account any
applicable grace period, in which case it shall promptly notify the Borrower
thereof; PROVIDED that the Bank's failure to give such notice shall not affect
the validity thereof.
Section 8.8. JURISDICTION; IMMUNITIES.
(a) The Borrower hereby irrevocably submits to the jurisdiction of any
Massachusetts State or United States Federal court sitting in Massachusetts over
any action or proceeding arising out of or relating to this Agreement or any
other Loan Document, and the Borrower hereby irrevocably agrees that all claims
in respect of such action or proceeding may be heard and determined in such
Massachusetts State or Federal court. The Borrower irrevocably consents to the
service of any and all process in any such action or proceeding by the mailing
of copies of such process to the Borrower at its address specified in Section
8.6. The Borrower agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. The Borrower further waives
any objection to venue in such State and any objection to an action or
53
proceeding in such State on the basis of forum non conveniens. The Borrower
further agrees that any action or proceeding brought against the Bank shall be
brought only in Massachusetts State or United States Federal courts sitting in
Massachusetts.
(b) Nothing in this Section shall affect the right of the Bank to serve
legal process in any other manner permitted by law or affect the right of the
Bank to bring any action or proceeding against the Borrower or its Property in
the courts of any other jurisdictions.
Section 8.9. TABLE OF CONTENTS; HEADINGS. Any table of contents and the
headings and captions hereunder are for convenience only and shall not affect
the interpretation or construction of this Agreement.
Section 8.10. SEVERABILITY. The provisions of this Agreement are intended
to be severable. If for any reason any provision of this Agreement shall be
held invalid or unenforceable in whole or in part in any jurisdiction, such
provision shall, as to such jurisdiction, be ineffective to the extent of such
invalidity or unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
Section 8.11. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Agreement by signing any such
counterpart.
Section 8.12. INTEGRATION. This Agreement, the Revolving Note, the CORE
Pledge Agreement, the CORE Security Agreement, the Subsidiary Guaranty, the
Subsidiary Security Agreement, the Trademark Security Agreement, the Warrant and
the Registration Rights Agreement set forth the entire agreement between the
parties hereto relating to the transactions contemplated hereby and thereby and
supersede any prior oral or written statements or agreements with respect to
such transactions.
Section 8.13. GOVERNING LAW. This Agreement shall be governed by, and
interpreted and construed in accordance with, the laws of the Commonwealth of
Massachusetts.
Section 8.14. CONFIDENTIALITY. Subject to the following sentence, the
Bank and any assignee of the Bank becoming a party to this Agreement agrees to
use its best efforts, consistent with its normal operating procedures, to retain
in confidence and not disclose without the prior written consent of the Borrower
any written information about the Borrower and its Subsidiaries obtained
pursuant to the requirements of this Agreement and identified in writing by the
Borrower as "confidential" or "non-public," except as permitted under Section
8.5 of this Agreement. Notwithstanding the foregoing, the Bank (A) may
54
disclose or otherwise use such information to the extent that such
information is required in any application, report, statement or testimony
submitted to any governmental agency having or claiming to have jurisdiction
over the Bank, (B) may disclose or otherwise use such information to the
extent that such information is required in response to any summons or
subpoena or in connection with any litigation affecting the Bank, (C) may
disclose or otherwise use such information to the extent that such
information is reasonably believed by the Bank (after notification to the
Borrower, unless such notification is prohibited by law) to be required in
order to comply with any law, order, regulation, or ruling applicable to the
Bank, and (D) may disclose or otherwise use such information to the extent
that such information becomes publicly available through no breach of the
Bank's obligations hereunder.
Section 8.15. AUTHORIZATION OF THIRD PARTIES TO DELIVER OPINIONS, ETC.
The Borrower hereby authorizes and directs each Person whose preparation or
delivery to the Bank of any opinion, report or other information is a condition
or covenant under this Agreement (including under Articles 4, 5 and 6) to so
prepare or deliver such opinion, report or other information for the benefit of
the Bank. The Borrower agrees to confirm such authorizations and directions
provided for in this Section 8.15 from time to time as may be requested by the
Bank.
SECTION 8.16. BORROWER'S WAIVERS. THE BORROWER ACKNOWLEDGES THAT IT HAS
BEEN ADVISED BY COUNSEL OF ITS CHOICE WITH RESPECT TO THIS TRANSACTION AND THIS
AGREEMENT AND THAT IT KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVES TRIAL BY
JURY IN ANY COURT AND IN ANY SUIT, ACTION OR PROCEEDING OR ANY MATTER ARISING IN
CONNECTION WITH OR IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT, THE REVOLVING NOTE, THE OTHER LOAN DOCUMENTS, OR ANY OF THE
BORROWER'S DOCUMENTS RELATED THERETO AND THE ENFORCEMENT OF ANY OF THE BANK'S
RIGHTS AND REMEDIES.
55
Section 8.17. LIMITATION OF LIABILITY. NONE OF THE BANK AFFILIATES OR ITS
DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS SHALL HAVE ANY LIABILITY WITH RESPECT
TO, AND THE BORROWER HEREBY WAIVES, RELEASES AND AGREES NOT TO XXX FOR, ANY
SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES SUFFERED BY THE BORROWER IN
CONNECTION WITH ANY CLAIM IN ANY WAY ARISING OUT OF, RELATED TO OR CONNECTED
WITH THE LOAN DOCUMENTS OR THE RELATIONSHIPS ESTABLISHED THEREUNDER OR THE
TRANSACTIONS CONTEMPLATED THEREBY, WHETHER SUCH CLAIM ARISES OR IS ASSERTED
BEFORE OR AFTER THE CLOSING DATE OR BEFORE OR AFTER THE MATURITY DATE.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
S-1
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
CORE, INC.
By: /s/
--------------------------------
Name:
Title:
Address for Notices:
00000 Xxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxxxx 00000
Attn: Chief Financial Officer
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
With a copy to:
Xxxxxxx X. Xxxx, Esq.
Rich, May, Xxxxxxxx & Xxxxxxxx, P.C.
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Telecopier No.: (000) 000-0000
FLEET NATIONAL BANK
By: /s/
--------------------------------
Name:
Title:
Address for Notices:
000 Xxxx Xxxxxx, XX XX 0250
Xxxxxxxx, XX 00000
Attn: Financial Institutions Group
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
With a copy to:
Xxxxxxx X. XxxXxxxxx, Esq.
Day, Xxxxx & Xxxxxx LLP
CityPlace I
Xxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
EXHIBIT A
REVOLVING NOTE
$17,000,000 Boston, Massachusetts
August 31, 1998
CORE, INC. (the "Borrower"), for value received, hereby unconditionally
promises to pay to the order of FLEET NATIONAL BANK, a national banking
association (the "Bank"), at its office located at 000 Xxxx Xxxxxx, Xxxxxxxx,
Xxxxxxxxxxx 00000, for the account of the appropriate Lending Office of the
Bank, the principal sum of SEVENTEEN MILLION DOLLARS ($17,000,000) or, if less,
the unpaid principal amount loaned by the Bank to the Borrower pursuant to the
Agreement referred to below, in lawful money of the United States of America and
in immediately available funds, on the date(s) and in the manner provided in
said Agreement. The Borrower also promises to pay interest on the unpaid
principal balance hereof, for the period such balance is outstanding, at said
principal office for the account of said Lending Office, in like money, at the
rates of interest, on the date(s) and in the manner provided in said Agreement;
and to pay interest on any overdue principal and interest at the Default Rate.
The date, type, amount and Interest Period of each Revolving Loan made by
the Bank to the Borrower under the Agreement referred to below, and each payment
of principal thereof, shall be recorded by the Bank on its books and, prior to
any transfer of this Revolving Note (or, at the discretion of the Bank, at any
other time), endorsed by the Bank on the schedule attached hereto or any
continuation thereof or otherwise recorded and maintained in its internal
records.
This is the Revolving Note referred to in that certain Credit Agreement (as
the same may be amended from time to time, the "Agreement") dated as of August
31, 1998 between the Borrower and the Bank and evidences the Revolving Loans
made by the Bank thereunder and is secured by the Security Documents as set
forth in the Agreement and is entitled to the benefits thereof. All terms not
defined herein shall have the meanings given to them in the Agreement.
The Agreement provides for the acceleration of the maturity of this
Revolving Note upon the occurrence of certain Events of Default and for
prepayments on the terms and conditions specified therein.
The Borrower waives presentment, notice of dishonor, protest and any other
notice or formality with respect to this Revolving Note.
No waiver of any right or remedy under this Revolving Note shall in any
event be effective unless the same shall be in writing and signed by the Bank
and the Borrower, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
The Borrower shall reimburse the Bank on demand for all reasonable costs,
expenses and charges (including without limitation, reasonable fees and charges
of external legal counsel for the Bank and costs allocated by the Bank's
internal legal department) incurred by the Bank in connection with the
preparation, performance or enforcement of this Revolving Note.
This Revolving Note shall be binding on the Borrower and its permitted
successors and assigns and shall inure to the benefit of the Bank and its
successors and assigns, PROVIDED that the Borrower may not delegate any
obligations hereunder without the prior written consent of the Bank.
This Revolving Note shall be governed by, and interpreted and construed in
accordance with, the laws of the Commonwealth of Massachusetts.
THE BORROWER IRREVOCABLY WAIVES TRIAL BY JURY IN ANY COURT AND IN ANY SUIT,
ACTION OR PROCEEDING OR ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY
RELATED TO THE TRANSACTIONS CONTEMPLATED BY THE AGREEMENT, THE REVOLVING NOTE,
THE CORE PLEDGE AGREEMENT, THE CORE SECURITY AGREEMENT, THE TRADEMARK SECURITY
AGREEMENT, THE WARRANT OR ANY OF THE BORROWER'S DOCUMENTS RELATED THERETO AND
THE ENFORCEMENT OF ANY OF THE BANK'S RIGHTS AND REMEDIES.
IN WITNESS WHEREOF, the undersigned has caused this Revolving Note to be
duly executed as of the day and year first above written.
CORE, INC.
By: /s/ [ILLEGIBLE]
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Name:
Title:
