EXHIBIT 99.1
LOAN AGREEMENT
AMONG
HEALTH POWER, INC.
COMPMANAGEMENT, INC.
COMPMANAGEMENT HEALTH SYSTEMS, INC.
M&N RISK MANAGEMENT, INC.
M&N ENTERPRISES, INC.
AS BORROWERS
WC HOLDINGS, INC.
AS GUARANTOR
AND
BANK ONE, N.A.
AS LENDER
DECEMBER 21, 2000
TABLE OF CONTENTS
ARTICLE 1. REVOLVING CREDIT LOANS...........................................1
1.1 REVOLVING CREDIT COMMITMENT......................................1
1.2 CONVERSION OPTIONS...............................................2
1.3 REVOLVING CREDIT NOTE............................................2
1.4 CANCELLATION AND REDUCTION OF REVOLVING CREDIT COMMITMENT........4
1.5 USE OF FUNDS.....................................................4
1.6 ADDITIONAL PROVISIONS AND LIMITATIONS RELATING TO EURODOLLAR
RATE LOANS.......................................................4
1.7 KENTUCKY LC......................................................6
ARTICLE 2. TERM LOAN........................................................6
2.1 TERM LOAN AMOUNT.................................................6
2.2 TERM NOTE........................................................6
2.3 OPTIONAL REPAYMENTS..............................................8
2.4 ADDITIONAL PROVISIONS AND LIMITATIONS RELATING TO EURODOLLAR
RATE PORTIONS....................................................8
ARTICLE 3. FEES, PAYMENTS, SETOFFS, SECURITY, Default Rate..................9
3.1 FEES.............................................................9
3.2 PAYMENTS.........................................................9
3.3 SETOFFS..........................................................9
3.4 SECURITY.........................................................9
3.5 DEFAULT RATE....................................................11
ARTICLE 4. CONDITIONS OF BORROWING.........................................11
4.1 CONDITIONS PRECEDENT TO THE TERM LOAN AND THE INITIAL REVOLVING
CREDIT LOAN.....................................................11
4.2 CONDITIONS PRECEDENT TO EACH OF THE LOANS.......................14
ARTICLE 5. REPRESENTATIONS AND WARRANTIES..................................15
5.1 ORGANIZATION AND AUTHORITY......................................15
5.2 QUALIFICATION...................................................15
5.3 INVESTMENTS; GUARANTEES; LIABILITIES............................15
5.4 TAX RETURNS AND PAYMENTS........................................16
5.5 TITLE TO PROPERTIES; LIENS......................................16
5.6 LITIGATION......................................................16
5.7 COMPLIANCE WITH LAW AND OTHER INSTRUMENTS.......................16
5.8 FINANCIAL STATEMENTS............................................17
5.9 PATENTS, TRADEMARKS AND COPYRIGHTS..............................17
5.10 NO MARGIN ACTIVITY..............................................17
5.11 ERISA...........................................................17
5.12 ADVERSE CONTRACTS; DEFAULTS.....................................17
5.13 ENVIRONMENTAL LAWS..............................................18
5.14 DISCLOSURE......................................................18
5.15 INSURANCE.......................................................18
5.16 EVENTS OF DEFAULT...............................................18
5.17 GUARANTOR SINGLE PURPOSE........................................18
5.18 SOLVENCY, ETC...................................................19
5.19 PROJECTIONS AND PRO FORMA FINANCIAL STATEMENTS..................19
5.20 MERGER AGREEMENT AND SUBORDINATED NOTE PURCHASE AGREEMENT
REPRESENTATIONS.................................................20
5.21 CERTAIN ASSURANCES..............................................20
ARTICLE 6. AFFIRMATIVE COVENANTS...........................................20
6.1 BANK DEPOSITS...................................................20
6.2 FINANCIAL STATEMENTS AND REPORTS OF THE COMPANY.................20
6.3 FINANCIAL STATEMENTS AND REPORTS OF THE GUARANTOR...............22
6.4 UNAUDITED FINANCIAL STATEMENTS OF THE COMPANY...................22
6.5 AUDITED FINANCIAL STATEMENTS OF THE GUARANTOR...................23
6.6 INSPECTION......................................................23
6.7 INSURANCE.......................................................24
6.8 PAYMENT OF TAXES AND CLAIMS.....................................25
6.9 COMPLIANCE WITH LAWS............................................25
6.10 ERISA...........................................................25
6.11 PRESERVATION OF CORPORATE EXISTENCE.............................26
6.12 MAINTENANCE OF TANGIBLE ASSETS..................................26
6.13 NOTICES OF CERTAIN EVENTS.......................................26
6.14 RECORDS AND BOOKS OF ACCOUNT....................................26
6.15 PERFORMANCE OF CONTRACTS........................................26
6.16 NOTICE OF MATERIAL LITIGATION...................................26
6.17 USE OF PROCEEDS.................................................27
6.18 OWNERSHIP AND CONTROL OF BORROWERS AND GUARANTOR................27
6.19 COMPLIANCE WITH THE SUBORDINATED DEBT AGREEMENTS................27
6.20 COMPLIANCE WITH THE INTERCREDITOR AGREEMENT.....................28
6.21 COMPLIANCE WITH THE MERGER DOCUMENTS............................28
6.22 COMPLIANCE WITH THE OBWC........................................28
6.23 SUBORDINATED LENDER INFORMATION.................................28
6.24 KEY MAN LIFE INSURANCE POLICIES.................................28
ARTICLE 7. NEGATIVE COVENANTS..............................................28
7.1 INDEBTEDNESS....................................................28
7.2 LIENS AND OTHER ENCUMBRANCES....................................29
7.3 GUARANTIES AND OTHER CONTINGENT LIABILITIES.....................29
7.4 FUNDAMENTAL CHANGES.............................................29
7.5 CREATION OF SUBSIDIARIES........................................30
7.6 LOANS OR ADVANCES...............................................30
7.7 INVESTMENTS.....................................................30
7.8 SALE AND LEASEBACK..............................................30
7.9 DISPOSITION OF ASSETS...........................................30
7.10 TRANSACTIONS WITH AFFILIATES....................................30
7.11 ANNUAL LEASE PAYMENTS...........................................31
7.12 SALE OF ACCOUNTS................................................31
7.13 CAPITAL EXPENDITURES............................................31
7.14 NET WORTH.......................................................32
7.15 DEBT COVERAGE RATIO.............................................32
7.16 RATIO OF FUNDED INDEBTEDNESS TO EBITDA..........................32
7.17 MANAGEMENT FEES.................................................33
7.18 DIVIDENDS AND PAYMENTS..........................................33
7.19 ISSUANCE OF CAPITAL STOCK.......................................33
7.20 PROHIBITION OF CHANGE IN FISCAL YEAR............................34
7.21 AMENDMENT TO OTHER DOCUMENTS....................................34
7.22 MANAGEMENT......................................................34
7.23 PLEDGE RIGHTS NOT A "CHANGE"....................................34
ARTICLE 8. EVENTS OF DEFAULT...............................................34
8.1 EVENT OF DEFAULT................................................34
8.2 CONSEQUENCES OF EVENT OF DEFAULT................................37
ARTICLE 9. MISCELLANEOUS...................................................37
9.1 NOTICES.........................................................37
9.2 TERM OF AGREEMENT; TERMINATION; SUCCESSORS AND ASSIGNS..........38
9.3 NO IMPLIED RIGHTS OR WAIVERS....................................39
9.4 APPLICABLE LAW..................................................39
9.5 MODIFICATIONS, AMENDMENTS OR WAIVERS............................39
9.6 COUNTERPARTS....................................................39
9.7 HEADINGS........................................................39
9.8 EXPENSES........................................................39
9.9 ACCOUNTING TERMS................................................40
9.10 SEVERABILITY....................................................40
9.11 WAIVER OF JURY TRIAL; CONSENT TO VENUE..........................40
9.12 ENTIRE AGREEMENT................................................40
9.13 CERTIFICATES, ETC...............................................40
9.14 WAIVER OF CERTAIN DEFENSES......................................40
ARTICLE 10. DEFINITIONS....................................................40
EXHIBITS:
Exhibit A Revolving Credit Note
Exhibit B Term Note
Exhibit C Borrower Security Agreement
Exhibit D Copyright Security Agreement
Exhibit E Guarantor Security Agreement
Exhibit F Stock Pledge Agreement
Exhibit G Collateral Assignment of Leasehold Interests
Exhibit H Assignment of Life Insurance Policy
Exhibit I Guaranty
Exhibit J Opinion of Borrowers and Guarantor Counsel
Exhibit K Definitions
Exhibit L Officer Solvency Certificates
Exhibit M Pro Forma Balance Sheets
Exhibit N Projections
SCHEDULES:
Schedule 5.1 Affiliates, Directors and Officers
Schedule 5.5 Leases
Schedule 5.9 Patents, Trademarks and Copyrights
Schedule 7.10 Transactions with Affiliates
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement" is made and entered into in
Columbus, Ohio effective as of December 21, 2000, by and between HEALTH POWER,
INC., a Delaware corporation (the "Company", COMPMANAGEMENT, INC., an Ohio
corporation ("CMI"), COMPMANAGEMENT HEALTH SYSTEMS, INC., an Ohio corporation
("CHSI"), M&N RISK MANAGEMENT, INC., an Ohio corporation ("MNRMI"), and M&N
ENTERPRISES, INC., an Ohio corporation ("MNEI"), as borrowers (individually, a
"Borrower" and collectively, the "Borrowers"), WC HOLDINGS, INC., a Delaware
corporation, as guarantor (the "Guarantor"), and BANK ONE, N.A., a national
banking association, as lender (the "Lender"), as follows:
WHEREAS, the Borrowers, the Guarantor and the Lender are entering into
this Agreement to set forth the terms and conditions pursuant to which (a) the
Lender will provide a revolving line of credit of up to $8,000,000 to the
Borrowers (the "Revolving Loan") and (b) the Lender will loan up to $17,000,000
to the Borrowers (the "Term Loan"); and
WHEREAS, the Borrowers, the Guarantor and the Lender desire to establish
the security for and the conditions under which each of the above-described
Revolving Loan and Term Loan will be established;
NOW THEREFORE, the Borrowers, the Guarantor and the Lender hereby agree as
hereinafter set forth.
ARTICLE 1. REVOLVING CREDIT LOANS
1.1 REVOLVING CREDIT COMMITMENT. The Lender hereby agrees on the terms and
conditions of this Agreement to lend to the Borrowers the maximum sum of Eight
Million Dollars ($8,000,000) (the "Revolving Credit Commitment"). The Revolving
Credit Commitment shall be available to the Borrowers, subject to the
limitations herein, in whole or part and from time to time until December 31,
2002, and any amounts borrowed may be repaid in whole or in part and reborrowed
until such date. Each borrowing under the Revolving Credit Commitment shall be
made in accordance with the provisions of this Section 1.1, and shall be subject
to the conditions of Article 4 hereof, and shall be in the initial principal
amount of $100,000 or any integral multiple of $100,000 (a "Revolving Credit
Loan").
Each Revolving Credit Loan to be made in accordance with the provisions of
this Section 1.1 shall, at the election of the Borrowers, be made either in the
form of (i) a Variable Rate Loan (individually, a "Variable Rate Loan" and
collectively, the "Variable Rate Loans") or (ii) a Eurodollar Rate Loan
(individually, a "Eurodollar Rate Loan" and collectively, the "Eurodollar Rate
Loans"); provided, however, that the Borrowers shall not be permitted to have
outstanding at any time more than
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a total of eight (8) Eurodollar Rate Loans and Eurodollar Rate Portions of the
Term Loan, except as otherwise permitted by the Lender in its sole discretion.
Notwithstanding the foregoing, each Eurodollar Rate Loan shall be in the initial
principal amount of $1,000,000 or any integral multiple of $100,000. The
aggregate unpaid principal amount of the Variable Rate Loans and the Eurodollar
Rate Loans at any one time outstanding shall not exceed the Revolving Credit
Commitment.
Each Revolving Credit Loan shall be made pursuant to the request of the
Borrowers to the Lender which request for a Revolving Credit Loan shall specify
(i) the total amount of the Revolving Credit Loan; (ii) the borrowing date (the
"Borrowing Date"), which shall be a Business Day in the case of a Variable Rate
Loan and a Eurodollar Banking Day in the case of a Eurodollar Rate Loan; and
(iii) whether the Revolving Credit Loan is to be a Variable Rate Loan or a
Eurodollar Rate Loan (and in the case of a Eurodollar Rate Loan, the length of
the Interest Period). Requests for Variable Rate Loans may be made on the
applicable Borrowing Date. Requests for Eurodollar Rate Loans shall be made at
least three (3) Eurodollar Banking Days prior to the applicable Borrowing Date.
In the case of a request for a Eurodollar Rate Loan, the Lender shall not
later than 11:00 a.m., Columbus, Ohio time two (2) Eurodollar Banking Days prior
to the Borrowing Date, give notice to the Borrowers of the Adjusted Eurodollar
Rate (including information as to the calculation thereof) applicable for the
period requested by the Borrowers. The Borrowers shall not later than 11:00
a.m., Columbus, Ohio time one (1) Eurodollar Banking Day prior to the Borrowing
Date, give notice by telephone confirmed in writing to the Lender whether they
wish (i) to complete such borrowing in the form of a Eurodollar Rate Loan; (ii)
to complete such borrowing as a Variable Rate Loan; or (iii) to cancel their
request for a Revolving Credit Loan. Failure by the Borrowers to timely deliver
such notice shall constitute cancellation of such request.
1.2 CONVERSION OPTIONS. The Borrowers may elect from time to time to
convert $1,000,000 or any amount in excess thereof in any integral multiple of
$100,000 of the Variable Rate Loans then outstanding to Eurodollar Rate Loans by
giving the Lender irrevocable telephone notice of such election as provided in
this Section 1.2. Each Eurodollar Rate Loan shall automatically convert to a
Variable Rate Loan upon its maturity unless the Borrowers elect to continue such
Loan as a Eurodollar Rate Loan by giving the Lender irrevocable telephone notice
of such election as provided in this Section 1.2. Any such notice pursuant to
this Section 1.2 shall be received by the Lender at least three (3) Eurodollar
Banking Days prior to the proposed conversion date, which shall be a Eurodollar
Banking Day, and shall specify (i) the conversion date and (ii) the length of
the Interest Period. If no Event of Default then exists, such conversion shall
be made on the requested conversion date.
1.3 REVOLVING CREDIT NOTE. The Revolving Credit Commitment shall be
evidenced by a master promissory note (the "Revolving Credit Note") of the
Borrowers executed by duly authorized officers thereof, which shall be in the
form of Exhibit A attached hereto. Each Revolving Credit Loan made by the Lender
and each payment made on account of principal on the Revolving Credit Note shall
be recorded by the Lender; provided, however, that the failure of the Lender to
make such notation shall not limit or otherwise affect the obligations of the
Borrowers under the Revolving Credit Note or this Agreement. The Revolving
Credit Note shall include the following terms:
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(A) TERM. The Revolving Credit Note shall be dated as of the date of
this Agreement and shall be due and payable in full on or before December
31, 2002.
(B) INTEREST RATE ON VARIABLE RATE LOANS. From its date, each
Variable Rate Loan shall bear interest (computed on the basis of the
actual number of days elapsed over a Business Year) on the unpaid
principal balance at a fluctuating rate per annum equal to the Prime Rate
plus the Applicable Margin (it being understood and agreed that the
Applicable Margin with respect to Variable Rate Loans shall be a negative
amount as determined in accordance with Section 1.3(d), below). Any change
in the interest rate due to a change in the Prime Rate shall be effective
immediately upon and after the date of each such change in the Prime Rate.
Interest on the Variable Rate Loans shall be payable monthly on the
first day of each calendar month (each an "Interest Payment Date"),
commencing on the first day of the month following the initial
disbursement of the initial Revolving Credit Loan.
(C) INTEREST RATE ON EURODOLLAR RATE LOANS. From its date, each
Eurodollar Rate Loan shall bear interest during the period from the date
thereof until and including the maturity date thereof at a rate per annum
equal to the Adjusted Eurodollar Rate plus the Applicable Margin. The
Borrowers shall be obligated to pay with respect to each Eurodollar Rate
Loan such additional amounts as shall be determined pursuant to Section
1.6 hereof.
Interest on each Eurodollar Rate Loan shall be payable (i) with
respect to Eurodollar Rate Loans having an Interest Period of 30, 60 or 90
days, on the expiration of such Interest Period, and (ii) with respect to
Eurodollar Rate Loans having a maturity of 180 or 360 days, on the first
day of each March, June, September and December that such Eurodollar Rate
Loan is outstanding and upon expiration of such Interest Period. Interest
on all Eurodollar Rate Loans shall be calculated on the basis of the
actual number of days elapsed over a Business Year.
(D) APPLICABLE MARGIN. For purposes of Sections 1.3 and 2.2 hereof,
the "Applicable Margin" shall be determined as follows:
(i) If the Company's ratio of Funded Indebtedness (including,
without limitation, borrowings pursuant to this Agreement) as of the end
of the immediately prior Fiscal Year to EBITDA for such Fiscal Year is
less than or equal to 1.50:1, then (A) the Applicable Margin for
Eurodollar Rate Loans shall be 1.45% and (B) the Applicable Margin for
Variable Rate Loans shall be (0.75)%; provided, however, that such pricing
shall not become available to the Company until such test has been
satisfied for at least two consecutive Fiscal Years that commenced on or
after January 1, 2001; and
(ii) Otherwise, (A) the Applicable Margin for Eurodollar Rate
Loans shall be 1.75% and (B) the Applicable Margin for Variable Rate Loans
shall be (0.50)%.
The Company's Funded Indebtedness and EBITDA shall be calculated
annually based
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upon the Company's unaudited consolidated financial statements for the
prior Fiscal Year and the Applicable Margin that results from such
calculation shall be effective for the 12-month period commencing on June
1 of the then current Fiscal Year; provided, however, that if the Company
fails to provide the Lender with copies of its unaudited consolidated
financial statements for the prior Fiscal Year (together with audited
consolidated and unaudited consolidated financial statements of the
Guarantor for such Fiscal Year) by May 1 of the following Fiscal Year,
then it shall be assumed for purposes of this Section 1.3(d) that the
Company failed to satisfy the financial covenant set forth in clause (i)
above as of the end of such prior Fiscal Year.
(E) OPTIONAL REPAYMENTS. Outstanding Revolving Credit Loans may be
repaid in whole or in part at any time, without premium or penalty, in
principal amounts not less than the minimum Revolving Credit Loan for any
borrowing under Section 1.1, or any larger amount permitted thereunder, by
tender of payment and delivery of written, telegraphic or oral notice of
payment to the Lender not later than 1:30 p.m., Columbus, Ohio time, on
the Business Day on which such repayment is to be made. Payments received
after 1:30 p.m. shall be deemed tendered on the following Business Day.
Interest accrued to the date of payment shall be due and payable on the
next following Interest Payment Date unless the Revolving Credit Note is
paid in full, in which event, accrued interest shall become due and
payable on the payment date.
1.4 CANCELLATION AND REDUCTION OF REVOLVING CREDIT COMMITMENT. The
Borrowers shall be entitled to permanently reduce or cancel the Revolving Credit
Commitment from time to time upon ten (10) days' prior written notice to the
Lender. In the event of cancellation of the Revolving Credit Commitment, the
principal amount of the Revolving Credit Note shall be paid in full, together
with all accrued interest thereon, any unpaid Commitment Fee accrued to the date
of cancellation, and all other amounts owing to the Lender by the Borrowers
hereunder with respect to any Revolving Credit Loans. In the event of the
permanent reduction of the Revolving Credit Commitment to a level which is less
than the then outstanding principal amount of the Revolving Credit Note, the
Revolving Credit Note shall be prepaid at the time of such reduction in an
amount equal to the then excess of the Revolving Credit Note over the Revolving
Credit Commitment as so reduced. Accrued interest on the principal amount of the
Revolving Credit Note repaid shall be included in the interest due and payable
on the next Interest Payment Date.
1.5 USE OF FUNDS. Revolving Credit Loans shall be used for the working
capital loan requirements of the Borrowers and may be used to pay the Merger
Consideration, the Option Consideration, the Severance Consideration and Company
Expenses (each as defined in the Merger Agreement) and to repay Indebtedness
existing as of the date hereof that has been previously disclosed to the Lender.
1.6 ADDITIONAL PROVISIONS AND LIMITATIONS RELATING TO EURODOLLAR RATE
LOANS. The additional provisions and limitations set forth below shall apply
with respect to Eurodollar Rate Loans:
(a) In the event the Lender shall incur any loss, cost or reasonable
expense (including, without limitation, any loss, cost or reasonable
expense incurred by reason of the liquidation or reemployment of deposits
or other funds acquired or contracted to be acquired by the Lender to fund
or maintain or the relending or reinvesting of such deposits or other
funds or amounts paid
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or prepaid to the Lender) as a result (i) of any payment or prepayment of
a Eurodollar Rate Loan on a date other than the last day of the then
applicable Interest Period for such Eurodollar Rate Loan for any reason or
(ii) any failure by the Borrowers to borrow funds as a Eurodollar Rate
Loan after they have given a notice of election with respect thereto for
any reason, whether before or after default, and whether or not such
payment is required by any provisions of this Agreement; then, within
three (3) days after receipt of the written demand of the Lender, the
Borrowers shall pay to the Lender such amount as will reimburse the Lender
for such loss, cost or expense. If the Lender requests such a
reimbursement, it shall provide to the Borrowers at the time of demand a
certificate setting forth the computation of the loss, cost or expense
giving rise to the request for reimbursement in reasonable detail and such
certificate shall be conclusive if reasonably determined, absent manifest
error.
(b) If the Lender shall, in good faith, determine that it is unable
to reasonably ascertain the Eurodollar Rate or to acquire Eurodollar
deposits on reasonable terms in an amount sufficient to meet a request for
a Eurodollar Rate Loan, the Lender shall promptly notify the Borrowers. In
such event, the Borrowers may request a Variable Rate Loan of like amount
without regard to the notice requirement of Section 1.1 or may cancel such
request.
(c) The obligation of the Lender to make Eurodollar Rate Loans
hereunder shall be suspended in the event that any change in any law or
regulation or in any interpretation thereof by any governmental authority
charged with its administration shall, in the sole opinion of the Lender,
make it unlawful for the Lender to comply with its obligation to make or
maintain any Eurodollar Rate Loan hereunder for the duration of such
illegality. The Lender shall promptly notify the Borrowers of such
suspension, and, if and when, in the sole opinion of the Lender, such
illegality ceases to exist, such suspension shall cease and the Lender
shall promptly notify the Borrowers of the termination of such suspension.
(d) If the Lender has Eurodollar Rate Loans outstanding and there
shall occur any change in applicable law, regulation or interpretation
(including any request, guideline or policy not having the force of law by
any authority charged with the administration or interpretation thereof)
(i) which change directly affects transactions in Eurodollars, (ii) which
involves new or additional taxes, reserves or deposit requirements in
regard to the Eurodollar Rate Loans or changes in the basis of taxation of
payments on such Loans, or (iii) which, if the Eurodollar Rate Loans made
hereunder by the Lender were to have been matched with Eurodollar deposits
corresponding in amounts to such Eurodollar Rate Loans and having maturity
dates which are the same as such Eurodollar Rate Loans regardless of
whether or not such Eurodollar Rate Loans are in fact so matched,
increases the cost to the Lender of making or maintaining the Eurodollar
Rate Loans hereunder or reduces the amount of any payments (whether of
principal, interest or otherwise) receivable by the Lender as to any
Eurodollar Rate Loans or requires the Lender to make any payment on or
calculated by reference to the gross amount of any sum received by it as
to such Eurodollar Rate Loans, then where the amount of any such
additional cost, reduction or payment is deemed material by the Lender:
(i) the Lender shall promptly notify the Borrowers of the
occurrence of such event;
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(ii) the Lender shall promptly deliver to the Borrowers a
certificate stating the change which has occurred, together with the
date thereof and the amount of and the manner of calculating the
increased cost on any outstanding Eurodollar Rate Loan; and
(iii) upon receipt of such certificate from the Lender, the
Borrowers shall pay to the Lender on demand the amount or amounts of
such additional cost with respect to such outstanding Eurodollar
Rate Loan as additional compensation hereunder.
(e) The certificate of the Lender delivered to the Borrowers as to
the additional amount payable pursuant to Section 1.6(d) shall (in the
absence of manifest error in the transmission or calculation) be
conclusive evidence of the amount thereof. The protection of this Section
1.6(e) shall be available to the Lender regardless of any possible
contention of invalidity or inapplicability of the law, regulation or
condition which has been imposed. However, if the Borrowers have made a
payment of any additional amounts pursuant to Section 1.6(d) and any
subsequent event occurs which reduces the amount of the increased cost
incurred by the Lender, then the Lender shall promptly refund to the
Borrowers an amount equal to such reduction in the amount of increased
cost.
(f) In addition to the other amounts payable hereunder, the
Borrowers shall pay to the Lender such additional amounts as shall
compensate the Lender for increased costs which the Lender, in its sole
discretion, reasonably determines in good faith to be allocable to
Eurodollar Rate Loans. Additional amounts payable under this Section
1.6(f) shall be paid by the Borrowers to the Lender on the maturity of the
respective Eurodollar Rate Loans, subject to receipt by the Borrowers from
the Lender of a certificate showing the amount and certifying as to the
correctness thereof.
1.7 KENTUCKY LC. Upon the Borrower's request, the Lender shall issue a
letter of credit, upon terms and conditions reasonably acceptable to the Lender,
in favor of the Commonwealth of Kentucky Department of Worker's Claims in the
face amount of $500,000 for the account of CHSI (the "Kentucky LC"), which
Kentucky LC shall expire not later than August 31, 2001 and shall replace the
Temporary Kentucky LC. The Borrowers, the Guarantor and the Lender hereby agree
that, during the term of the Kentucky LC, $500,000 (or, if less, the then
undrawn amount of the Kentucky LC) of the Revolving Credit Commitment shall be
reserved for potential draws on the Kentucky LC. The amount of any draw on the
Kentucky LC shall be treated as a Revolving Credit Loan hereunder and, as such,
shall be subject to all of the terms of this Agreement, the Revolving Credit
Note and the other Loan Documents evidencing and securing the Revolving Credit
Loans.
ARTICLE 2. TERM LOAN
2.1 TERM LOAN AMOUNT. The Lender hereby agrees on the terms and conditions
of this Agreement to lend to the Borrowers the maximum sum of Seventeen Million
Dollars ($17,000,000) (the "Term Loan").
2.2 TERM NOTE. The Term Loan shall be evidenced by a promissory note of
the Borrowers
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executed by duly authorized officers thereof (the "Term Note"), which Term Note
shall be in the form of Exhibit B attached hereto with blanks appropriately
completed. The Term Note shall include the following terms:
(A) TERM. The Term Note shall be dated as of the date of its
execution and delivery by the Borrowers and shall be due and payable in
full on or before December 31, 2005.
(B) VARIABLE RATE PORTIONS. The unpaid principal balance of the Term
Note, other than the Eurodollar Rate Portions thereof, shall bear interest
(computed on the basis of the actual number of days elapsed over a
Business Year) at a fluctuating rate per annum equal to the Prime Rate
(the "Variable Term Rate"). The portion of the indebtedness evidenced by
the Term Note that bears interest at the Variable Term Rate is referred to
herein as the "Variable Rate Portion". Any change in the interest rate due
to a change in the Prime Rate shall be effective immediately from and
after the date of each such change in the Prime Rate.
(C) EURODOLLAR RATE PORTIONS. The Borrowers may elect from time to
time to have portions of the principal indebtedness evidenced by the Term
Note (each a "Eurodollar Rate Portion") bear interest at a rate per annum
equal to the Adjusted Eurodollar Rate plus the Applicable Margin (the
"Adjusted Eurodollar Term Rate") by providing a request therefor to the
Lender not less than three (3) Eurodollar Banking Days prior to the
applicable Effective Date for each such Eurodollar Rate Portion, which
request shall specify: (i) the total amount of the Eurodollar Rate
Portion; (ii) the effective date of the applicable Adjusted Eurodollar
Term Rate (the "Effective Date"), which shall be a Eurodollar Banking Day,
and (iii) the length of the applicable Interest Period. The Lender shall
not later than 11:00 a.m., Columbus, Ohio time, two Eurodollar Banking
Days prior to the Effective Date for such Eurodollar Rate Portion, give
notice to the Borrowers of the applicable Adjusted Eurodollar Term Rate
(including information as to the calculation thereof) applicable for the
period requested by the Borrowers. The Borrowers shall not later than
11:00 a.m., Columbus, Ohio time, one (1) Eurodollar Banking Day prior to
the Effective Date of each Eurodollar Rate Portion give notice by
telephone to the Lender as to whether or not they wish to elect to have
such Eurodollar Rate Portion bear interest at the applicable Adjusted
Eurodollar Term Rate commencing as of the applicable Effective Date. In
the event the Borrowers elect not to have such Eurodollar Rate Portion
bear interest at the applicable Adjusted Eurodollar Term Rate or fail to
timely deliver such notice of election, such Eurodollar Rate Portion shall
continue to bear interest at the Variable Term Rate until the Borrowers
elect otherwise in accordance with provisions of this paragraph. Upon the
expiration of the Interest Period applicable to each Eurodollar Rate
Portion, such Eurodollar Rate Portion shall, unless the Borrowers have
otherwise elected in accordance with the provisions of this paragraph,
bear interest at the Variable Term Rate. Each Eurodollar Rate Portion
shall be in the initial amount of $1,000,000 or any integral multiple of
$100,000. Each election to have a Eurodollar Rate Portion bear interest at
the Adjusted Eurodollar Term Rate shall be recorded by the Lender;
provided, however, that the failure of the Lender to make such recordation
shall not limit or otherwise affect the obligations of the Borrowers under
the Term Note. Each Eurodollar Rate Portion shall bear interest during the
Interest Period selected therefor at a rate per annum equal to the
Adjusted Eurodollar Rate plus the Applicable Margin. The Borrowers shall
be obligated to pay with respect to each Eurodollar Rate Portion such
additional amounts as shall be determined pursuant to Section 2.4 hereof.
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(D) INTEREST PAYMENT DATES.
(I) VARIABLE RATE PORTION. Interest on the Variable Rate
Portion shall be payable monthly on each Interest Payment Date,
commencing on the first Interest Payment Date following the date of
issuance of the Term Note.
(II) EURODOLLAR RATE PORTIONS. Interest on each Eurodollar
Rate Portion shall be payable (i) with respect to Eurodollar Rate
Portions having an Interest Period of 30, 60 or 90 days, on the
expiration of such Interest Period, and (ii) with respect to
Eurodollar Rate Portions having an Interest Period of 180 or 360
days, on the first day of each March, June, September and December
during such Interest Period and upon expiration of such Interest
Period. Interest on all Eurodollar Rate Portions shall be calculated
on the basis of the actual number of days elapsed over a Business
Year.
(E) PRINCIPAL PAYMENTS. Principal payments on the Term Note shall be
due and payable as follows: (i) fifty-nine (59) equal consecutive monthly
installments in the amount of $236,111.11 shall be due and payable
commencing on February 1, 2001 and continuing on each Interest Payment
Date thereafter to and including December 1, 2005; and (ii) one final
payment in the amount of the unpaid principal balance of the Term Note and
accrued, unpaid interest thereon shall be due and payable on December 31,
2005.
2.3 OPTIONAL REPAYMENTS. The outstanding principal balance of the Term
Note may be repaid in whole or in part at any time, without premium or penalty,
in principal amounts not less than the minimum Eurodollar Rate Portion for any
borrowing under Section 2.2(c) (provided that prepayments of the Variable Term
Rate Portion may be made in the amount of $100,000 or more), or any larger
amount permitted thereunder, by tender of payment and delivery of written,
telegraphic or oral notice of payment to the Lender not later than 1:30 p.m.,
Columbus, Ohio time, on the Business Day on which such repayment is to be made.
Payments received after 1:30 p.m. shall be deemed tendered on the following
Business Day. Interest accrued to the date of payment shall be due and payable
on the next following Interest Payment Date unless the Term Note is paid in
full, in which event, accrued interest shall become due and payable on the
payment date.
2.4 ADDITIONAL PROVISIONS AND LIMITATIONS RELATING TO EURODOLLAR RATE
PORTIONS. The additional provisions and limitations set forth below shall apply
to Eurodollar Rate Portions:
(a) If the Lender shall, in good faith, determine that it is unable
to reasonably ascertain the Adjusted Eurodollar Term Rate for a particular
Eurodollar Rate Portion or to acquire Eurodollar deposits on reasonable
terms in an amount sufficient to meet a request for a portion of the total
indebtedness evidenced by the Term Note to bear interest at the Adjusted
Eurodollar Term Rate, the Lender shall promptly notify the Borrowers. In
such event, such Eurodollar Rate Portion shall bear interest at the
Variable Term Rate.
(b) The provisions of Sections 1.6(a) and 1.6(c) through (f),
inclusive, shall be applicable to each Eurodollar Rate Portion to the same
extent as if such provisions were restated in full in this Section 2.4(b)
with the terms "Eurodollar Rate Loan(s)" and "Variable Rate Loan" replaced
each time they appear therein with the terms "Eurodollar Rate Portion(s)"
and "Variable
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Rate Portion", respectively.
ARTICLE 3. FEES, PAYMENTS, SETOFFS, SECURITY, DEFAULT RATE
3.1 FEES. The Borrowers shall pay to the Lender a Facility Fee (the
"Facility Fee") in an amount of $62,500, which amount is equal to 0.25% of the
sum of the Revolving Credit Commitment and the principal amount of the Term Loan
(collectively, the "Loans"). The Borrowers shall also pay to the Lender an
unused commitment fee (the "Commitment Fee") based on the daily average amount
of the Revolving Credit Commitment not drawn down in Revolving Credit Loans (the
"Unused Commitment") for the period beginning with the date hereof and ending
December 31, 2002 or on the sooner cancellation in full of the Revolving Credit
Commitment. The Commitment Fee shall be payable quarterly in arrears (i) within
ten (10) days after the last day of March, June, September and December of each
year commencing with the quarter ending on December 31, 2000, and (ii) within
ten (10) days after the date on which the Revolving Credit Commitment is fully
terminated. The amount of the Commitment Fee shall be equal to one-half of one
percent (0.50%) per annum of the Unused Commitment (computed on the basis of the
actual number of days elapsed over a Business Year).
3.2 PAYMENTS. All payments and prepayments by the Borrowers to be made in
respect of the Commitment Fee or of principal or interest on the Revolving
Credit Note and the Term Note (collectively, the "Notes") shall become due at
1:30 p.m., Columbus, Ohio time on the day when due, and shall be made to the
Lender in federal funds or other immediately available lawful money of the
United States of America. Whenever any payment to be made hereunder shall be due
other than on a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall in such case be included in the
computation of interest or fees hereunder.
3.3 SETOFFS. Upon the occurrence and continuance of any Event of Default,
the Lender shall have the right to set off against all obligations of each
Borrower to the Lender under this Agreement and the Notes, whether matured or
unmatured, all amounts owing to such Borrower by the Lender, whether or not then
due and payable, and all funds or property of such Borrower on deposit with or
otherwise held or in the custody of the Lender for the beneficial account of
such Borrower. Such funds shall be charged against accrued interest on and/or
principal of the Notes as the Lender may determine in its discretion.
3.4 SECURITY.
(A) BORROWER SECURITY AGREEMENTS AND COPYRIGHT SECURITY AGREEMENTS.
As security for the payment of the Notes and for the performance of, and
compliance with all of the terms, covenants, conditions, stipulations and
agreements contained in this Agreement, the Notes and the other Loan
Documents, the Borrowers, by separate Borrower Security Agreements each in
the form attached hereto as Exhibit C and incorporated herein by this
reference (individually, a "Borrower Security Agreement" and collectively,
the "Borrower Security Agreements"), by separate Copyright Security
Agreements each in the form attached hereto as Exhibit D and incorporated
herein by this reference (individually, a "Copyright Security Agreement"
and collectively, the "Copyright Security Agreements") and by other
instruments contemplated thereby, shall, as provided in the Borrower
Security Agreements and the Copyright Security Agreements, assign and
grant to the Lender a first perfected security interest in all the
collateral
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described in the Borrower Security Agreements and the Copyright Security
Agreements.
(B) GUARANTOR SECURITY AGREEMENT. As security for the payment of the
Notes and for the performance of, and compliance with all of the terms,
covenants, conditions, stipulations and agreements contained in this
Agreement, the Notes and the other Loan Documents, the Guarantor, by a
Guarantor Security Agreement in the form attached hereto as Exhibit E and
incorporated herein by this reference (the "Guarantor Security Agreement")
and by other instruments contemplated thereby, shall, as provided in the
Guarantor Security Agreement, assign and grant to the Lender a first
perfected security interest in all the collateral described in the
Guarantor Security Agreement; provided, however, that, as between the
Lender and the Mezzanine Lender, such security interest shall be subject
to the provisions of the Intercreditor Agreement.
(C) STOCK PLEDGE AGREEMENTS. As security for the payment of the
Notes and for the performance of, and compliance with all of the terms,
covenants, conditions, stipulations and agreements contained in this
Agreement, the Notes and the other Loan Documents, the relevant Borrowers,
by separate Stock Pledge Agreements each in the form attached hereto as
Exhibit F and incorporated herein by this reference (individually, a
"Stock Pledge Agreement" and collectively, the "Stock Pledge Agreements")
and by other instruments contemplated thereby, shall, as provided in the
Stock Pledge Agreements, grant to the Lender a security interest in all of
the shares of capital stock of each of the Company Subsidiaries owned by
the respective Borrower (including, without limitation, CMI, CHSI, MNRMI
and MNEI) and pledge and assign to the Lender all of the stock
certificates evidencing such shares.
(D) COLLATERAL ASSIGNMENT OF LEASEHOLD INTEREST. As security for the
payment of the Notes and for the performance of, and compliance with all
of the terms, covenants, conditions, stipulations and agreements contained
in this Agreement, the Notes and the other Loan Documents, CMI, by a
Collateral Assignment of Leasehold Interest in the form attached hereto as
Exhibit G and incorporated herein by this reference (the "Assignment of
Leasehold Interest") and by other instruments contemplated thereby, shall,
as provided in the Assignment of Leasehold Interest assign and grant to
the Lender all of CMI right, title and interest in, to and under the
Dublin Lease.
(E) ASSIGNMENT OF LIFE INSURANCE POLICIES. As security for the
payment of the Notes and for the performance of, and compliance with all
of the terms, covenants, conditions, stipulations and agreements contained
in this Agreement, the Notes and the other Loan Documents, the Company, by
separate Assignments of life Insurance Policies in the form attached
hereto as Exhibit H and incorporated herein by this reference
(individually, an "Assignment of Life Insurance Policy" and collectively,
the "Assignments of Life Insurance Policies") and by other instruments
contemplated thereby, shall, as provided in the Assignments of Life
Insurance Policies, assign, transfer and set over to the Lender the
Xxxxxxx Life Insurance Policy and the Xxxxxx Life Insurance Policy.
(F) UNCONDITIONAL GUARANTY AGREEMENT. Payment of the Notes and
payment and performance of the Borrowers obligations under this Agreement,
the Notes and the other Loan Documents shall be absolutely and
unconditionally guaranteed by the Guarantor pursuant to the
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provisions of an Unconditional Guaranty Agreement in the form attached
hereto as Exhibit I (the "Guaranty") and incorporated herein by this
reference.
3.5 DEFAULT RATE. Overdue principal and, to the extent permitted by law,
overdue interest in respect of any Loan shall bear interest at a rate equal to
the sum of the rate otherwise applicable to such Loan pursuant to Section 1.3 or
Section 2.2 hereof plus 3% per annum (the "Default Rate"). The application of
this paragraph shall not constitute a waiver of any Event of Default or an
agreement by the Lender to permit any later payments whatsoever.
ARTICLE 4. CONDITIONS OF BORROWING
The obligation of the Lender to make the Loans to the Borrowers provided
for hereunder shall be subject to the following conditions:
4.1 CONDITIONS PRECEDENT TO THE TERM LOAN AND THE INITIAL REVOLVING CREDIT
LOAN.
(a) Prior to the disbursement of the Term Loan and the initial Revolving
Credit Loan hereunder, the Borrowers and the Guarantor shall furnish to the
Lender the following, each dated the date of the disbursement of the Term Loan,
or such earlier or later date as may be acceptable to the Lender, and in form
and substance satisfactory to the Lender and counsel for the Lender:
(i) The duly executed Revolving Credit Note in the form of the
attached Exhibit A;
(ii) The duly executed Term Note in the form of the attached Exhibit
B;
(iii) The duly executed Borrower Security Agreements each in the
form of the attached Exhibit C and the duly executed Copyright Security
Agreements each in the form of attached Exhibit D;
(iv) The duly executed Guarantor Security Agreement in the form of
the attached Exhibit E;
(v) The duly executed Stock Pledge Agreements each in the form of
the attached Exhibit F, together with the original stock certificates
pledged thereby and stock powers with respect thereto executed in blank;
(vi) The duly executed Assignment of Leasehold Interest in the form
of the attached Exhibit G, together with a duly executed estoppel
certificate from the landlord under the Dublin Lease in form and substance
acceptable to the Lender and its counsel;
(vii) The duly executed Assignments of Life Insurance Policies each
in the form of the attached Exhibit H, together with original copies of
the Xxxxxxx Life Insurance Policy and the Xxxxxx Life Insurance Policy or
certificates evidencing the same, each in form and substance satisfactory
to the Lender;
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(viii) The duly executed Guaranty in the form of the attached
Exhibit I;
(ix) A standard ISDA Master Agreement between the Borrowers and the
Lender pursuant to which the Borrowers shall enter into an interest rate
swap for a minimum of $8,500,000 for a period of no less than three (3)
years (the "ISDA Master Agreement");
(x) Evidence that the Merger has been consummated in accordance with
the provisions of the Merger Agreement and that all of the conditions to
the Merger set forth in Article VIII of the Merger Agreement have been
satisfied and fulfilled (and not waived by any party thereto), including,
without limitation, that the stockholders of the Company adopted the
Merger Agreement as required under Delaware law;
(xi) Evidence that HP HMO completed its windup in accordance with
the Final Windup Plan (as defined in the Merger Agreement); and evidence
of the liquidation of the HP HMO and the approval thereof by the Ohio
Department of Insurance and/or the Franklin County Court of Common Pleas;
(xii) Copies of the following documents certified by the president
or a vice president of the Company as being true, correct and complete:
(A) The Merger Agreement;
(B) All proxy statements, schedules, reports, notices,
financial statements and other filings made by any Borrower, the
Guarantor, the Guarantor's Parent or their respective Affiliates
with the Securities and Exchange Commission in connection with the
Merger, and all correspondence with, and all orders of, the
Securities and Exchange Commission related to any of the foregoing;
(C) The certificate of incorporation of the Company as in
effect immediately after the Effective Time (as defined in the
Merger Agreement) of the Merger;
(D) The Bylaws of the Company as in effect immediately after
the Effective Time of the Merger;
(E) The Termination of Executive Severance Benefits Agreements
executed by each member of the CMI Management Team and Termination
of Employment Agreement executed by Dr. Master (each as defined in
the Merger Agreement);
(F) The Final Windup Plan (as defined in the Merger Agreement)
of HP HMO and all orders of the Ohio Department of Insurance
evidencing the termination from supervision of HP HMO;
(G) Such other agreements, documents and instruments executed
and delivered pursuant to or in connection with the Merger, the
Merger Agreement or the transactions contemplated thereby as the
Lender may request; and
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(H) The Leases;
(xiii) Certified copies of the resolutions of the board of directors
of the Guarantor and each of the Borrowers authorizing the execution,
delivery and performance of their respective obligations under this
Agreement, the other Loan Documents and the Subordinated Note Purchase
Agreement;
(xiv) Certificates of the Secretary or an Assistant Secretary of the
Guarantor and each of the Borrowers, which shall certify the names of the
officers of each such corporation authorized to sign this Agreement, the
Notes, the other Loan Documents or any other documents or certificates to
be delivered pursuant to this Agreement by the Guarantor or such Borrower,
as applicable, or any of their respective officers, together with the true
signatures of such officers. The Lender may conclusively rely upon each
such certificate until it shall receive a further certificate of the
Secretary or an Assistant Secretary of the applicable corporation
canceling or amending the prior certificate and submitting the signatures
of the officers named in such further certificate;
(xv) Evidence that the Borrowers and the Guarantor have in effect
insurance and endorsements of the character and amount described in
Section 6.7 hereof;
(xvi) An opinion of counsel to the Borrowers, the Guarantor and the
Guarantor Parent addressed to the Lender opining as to the matters set
forth in Exhibit J hereto and as to such other matters as the Lender may
request and containing only such qualifications as are acceptable to the
Lender and its counsel;
(xvii) Evidence that no material adverse change shall have occurred
with respect to the credit or financial condition of the Borrowers and the
Guarantor taken as a whole;
(xviii) A solvency certificate from each of the chief financial
officers of the Guarantor and the Company, on behalf of the Guarantor and
the Company, in form and substance as set forth in EXHIBIT L attached
hereto, which shall be addressed to the Lender, dated as of the date
hereof;
(xix) (A) Pro forma projected consolidated balance sheets of the
Guarantor and its Subsidiaries and of the Company and its Subsidiaries
after giving effect to the Merger and each of the transactions
contemplated by this Agreement, the Merger Agreement, the Subordinated
Note Purchase Agreement and each of the other Loan Documents, copies of
which pro forma balance sheets are attached hereto as EXHIBIT M; and (B)
projections of the consolidated income and cash flows of the Guarantor and
its Subsidiaries and of the Company and its Subsidiaries for the
succeeding five (5) Fiscal Years ending on December 1, 2005, copies of
which projections are attached hereto as EXHIBIT N; and
(xx) Such other opinions, certificates, affidavits, documents and
filings as the Lender may deem reasonably necessary or appropriate.
(b) The Lender's obligation hereunder to make the Term Loan and the
initial Revolving
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Credit Loan shall be subject to the fulfillment, to the Lender's satisfaction
prior to the disbursement of such Loans, of the following additional conditions:
(i) The Guarantor, the Borrowers and the Mezzanine Lender shall have
entered into the Subordinated Note Purchase Agreement, which shall be in
full force and effect and in form and substance acceptable to the Lender
and its counsel, and the Guarantor shall have issued and sold to the
Mezzanine Lender, and the Mezzanine Lender shall have purchased from the
Guarantor, the Subordinated Note in the principal amount of $6,000,000 as
contemplated by the Subordinated Note Purchase Agreement;
(ii) The Lender, the Mezzanine Lender, the Borrowers and the
Guarantor shall have entered into an intercreditor agreement, which shall
be in full force and effect and in form and substance acceptable to the
Lender and its counsel (the "Intercreditor Agreement"); and
(iii) All of the conditions to the Merger set forth in Article VIII
of the Merger Agreement (other than delivery of the Merger Consideration)
shall have been satisfied and fulfilled (and not waived by any party
thereto) and the Merger shall have been consummated in accordance with the
provisions of the Merger Agreement, subject to payment of the Merger
Consideration upon disbursement of the Term Loan and the initial Revolving
Credit Loan.
4.2 CONDITIONS PRECEDENT TO EACH OF THE LOANS. At the time of each
Revolving Credit Loan after the initial Revolving Credit Loan and at the time of
making the Term Loan, each of the Borrowers and the Guarantor shall be in
compliance with all of the provisions and covenants contained in this Agreement
and the other Loan Documents with which it is to comply; there shall exist no
Event of Default; no event shall exist or shall have occurred which with the
lapse of time or notice or both would constitute an Event of Default; and all of
the representations and warranties of the Borrowers and the Guarantor under the
Loan Documents shall be true and correct in all material respects (except for
those representations and warranties that are expressly made as of an earlier
date in which case such representations and warranties shall have been true and
correct, in all material respects, as of such earlier date).
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ARTICLE 5. REPRESENTATIONS AND WARRANTIES
The Borrowers and the Guarantor, jointly and severally, hereby represent
and warrant to the Lender, which representations and warranties shall survive
the execution and delivery of this Agreement and the Notes, as follows.
5.1 ORGANIZATION AND AUTHORITY. Each of the Borrowers and the Guarantor is
a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation, and has all requisite power and
authority to execute, deliver and perform this Agreement and all of the
documents executed in connection with the Loans, to consummate the transactions
contemplated in the Merger Agreement and the Subordinated Note Purchase
Agreement, and to own and operate its properties and to carry on its business as
now conducted. The execution, delivery and performance of this Agreement, the
Notes and the other Loan Documents have been duly authorized by the Borrowers
and the Guarantor by all necessary corporate actions; the execution, delivery
and performance of the Merger Agreement have been duly authorized by the
Company, HPAC, the Guarantor and the Guarantor's Parent; the execution, delivery
and performance of the Subordinated Note Purchase Agreement have been duly
authorized by the Guarantor; there is no prohibition, either in law, in its
certificate of incorporation, bylaws or other organizational documents, or in
any order, writ, injunction or decree of any court or arbitrator presently in
effect having applicability to any Borrower, the Guarantor or the Guarantor's
Parent which in any way prohibits or would be violated by the execution and
performance of this Agreement, the Notes, the other Loan Documents, the Merger
Agreement, the Subordinated Note Purchase Agreement or the Subordinated Note in
any respect; and this Agreement, the Notes, the other Loan Documents, the Merger
Agreement, the Subordinated Note Purchase Agreement and the Subordinated Note
are and will be valid, binding and enforceable obligations of the Borrowers and
the Guarantor, as applicable, except as enforcement thereof may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally and except to the extent enforcement thereof may be limited by
the application of general principles of equity. Immediately prior to the
consummation of the Merger, the Guarantor owned beneficially and of record at
least eighty percent (80%) of the issued and outstanding shares of capital stock
of HPAC. As of the date hereof, as a result of the completion of the Merger, the
Guarantor owns beneficially and of record at least eight percent (80%) of the
issued and outstanding shares of capital stock of the Company. The Company owns
beneficially and of record all of the issued and outstanding shares of capital
stock of CMI. CMI owns beneficially and of record all of the issued and
outstanding shares of capital stock of CHSI, MNRMI and MNEI. As of the date
hereof, the Guarantor does not have any direct or indirect subsidiaries other
than the Borrowers and HPAC. Schedule 5.1 attached hereto contains a complete
and correct list of all of the Company's Subsidiaries and of the Company's and
the Guarantor's directors and senior officers, in each case after giving effect
to the consummation of the Merger.
5.2 QUALIFICATION. Each of the Borrowers is duly qualified or licensed and
in good standing as a foreign corporation duly authorized to do business in Ohio
(except that the Company is not authorized to do business in Ohio) and in each
jurisdiction in which the character of the properties owned or leased or the
nature of the activities conducted makes such qualification or licensing
necessary and in which the failure to be so qualified would have a Material
Adverse Effect.
5.3 INVESTMENTS; GUARANTEES; LIABILITIES. Except as permitted in Sections
7.1, 7.3, 7.7 and
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7.10 hereof, the Borrowers and the Guarantor have made no material investments
(other than investment in themselves) in, material advances to or guarantees of
the obligations of any Person other than guarantees for the benefit of the
Lender and the Mezzanine Lender. As of the date hereof, except for Indebtedness
hereunder and under the Subordinated Note Purchase Agreement and the Tax
Allocation Agreement and Indebtedness disclosed in Schedule 7.10 attached
hereto, the Borrowers and the Guarantor do not have any material Liabilities,
direct or contingent, except for (i) Liabilities reflected in the Balance Sheet,
(ii) Liabilities incurred in the ordinary course of business since September 30,
2000, (iii) Liabilities incurred pursuant to the Merger Agreement or in
connection therewith, and (iv) Liabilities which under GAAP are not required to
be reflected or reserved against in the Borrowers' financial statements, but
none of which could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
5.4 TAX RETURNS AND PAYMENTS. Each of the Borrowers and the Guarantor has
filed all tax returns required by law to be filed and has paid all taxes,
assessments and other governmental charges of any material nature, either in
amount or effect, levied upon any of its properties, assets, income or
franchises, other than those not yet delinquent or those being contested in
accordance with Section 6.8 hereof. The charges, accruals and reserves on the
books of the Borrowers and the Guarantor in respect to income taxes for all
respective fiscal periods are adequate in the opinion of the Borrowers and the
Guarantor, and the Borrowers and the Guarantor know of no unpaid assessment for
additional income taxes for any fiscal period or of any reasonable basis
therefor.
5.5 TITLE TO PROPERTIES; LIENS. Each of the Borrowers and the Guarantor
has good and marketable title to all of its property and assets, in each case
including, but not limited to, the property and assets reflected as being owned
by it on the Balance Sheet except such as have been disposed of in the ordinary
course of business since the date of the Balance Sheet and all such property and
assets are free and clear of mortgages, pledges, liens, charges or other
encumbrances except such as are not prohibited by Section 7.2 hereof. Each of
the Borrowers and the Guarantor enjoys peaceful and undisturbed possession under
the Leases and all other leases under which it is lessee which are material to
the conduct of its business and all of the Leases and such other leases are
valid, subsisting and in full force and effect in accordance with their terms.
None of the Leases and such other leases contains any provision restricting
incurrence of Indebtedness by any Borrower or the Guarantor or any provision
which has a Material Adverse Effect or in the future could reasonably be
expected to have a Material Adverse Effect.
5.6 LITIGATION. There is no court action, other proceeding or
investigation pending or threatened which questions the validity of this
Agreement, the Notes, any of the other Loan Documents, the Subordinated Note
Purchase Agreement or the Subordinated Note or any action taken or to be taken
pursuant thereto or which could reasonably be expected to result, either
separately or in the aggregate, in any materially adverse change in the
business, operations, affairs or condition of the Borrowers and the Guarantor,
taken as a whole.
5.7 COMPLIANCE WITH LAW AND OTHER INSTRUMENTS. None of the Borrowers or
the Guarantor is in violation of, and the execution, delivery and performance of
this Agreement, the Notes, the Other Loan Documents, the Merger Agreement, the
Subordinated Note Purchase Agreement and the Subordinated Note does not and will
not result in a violation of nor a conflict with or default under, any
agreement, instrument, judgment, decree, order, statute or governmental rule or
regulation applicable to
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any Borrower or the Guarantor or by which any of them is bound, which now or in
the future could reasonably be expected to have a Material Adverse Effect.
5.8 FINANCIAL STATEMENTS. The Company has furnished to the Lender
financial statements of the Company including (i) audited consolidated balance
sheets, audited consolidated statements of income, audited consolidated
statements of changes in stockholders' equity and audited consolidated
statements of cash flows as at and for the Fiscal Year ended December 31, 1999,
and (ii) unaudited interim financial statements for the period ending September
30, 2000, including, without limitation, an unaudited interim balance sheet of
the Company as of September 30, 2000 (the "Balance Sheet"). Such financial
statements are complete and correct in all material respects and fairly present
the consolidated financial condition of the Company as at such dates and the
results of operations of the Company as at such dates and for the period ended
on such dates. Since the date of such statements, no materially adverse change
has occurred in the business, operations, affairs or condition (financial or
otherwise) of the Borrowers, taken as a whole.
5.9 PATENTS, TRADEMARKS AND COPYRIGHTS. Schedule 5.9 hereto lists, as of
the date of this Agreement, all patents, patent applications, trademark and
service xxxx registrations and applications therefor and copyright registrations
and applications therefor owned or licensed by any Borrower, and all license
agreements for the same entered into by any Borrower. Each of the Borrowers and
the Guarantor possesses and has made all filings with the United States Patent
and Trademark Office and appropriate state agencies to evidence in such Borrower
or the Guarantor full and complete title to all the patents, trademarks, service
marks, trade names, copyrights and licenses and rights in respect of the
foregoing which are essential to the conduct of its business, without any known
conflict with the rights of others.
5.10 NO MARGIN ACTIVITY. Neither any Borrower nor the Guarantor is engaged
in the business of extending or obtaining credit for the purpose of purchasing
or carrying margin stock (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System, as is now and may from time to time
hereafter be in effect) and no part of the proceeds of any Loan shall be used to
purchase or carry any such margin stock or to extend credit to others for the
purpose of purchasing or carrying any such margin stock or to reduce or retire
any indebtedness incurred for any such purpose. No part of the proceeds of the
Loans hereunder will be used for any purpose which violates, or which is
inconsistent with, the provisions of Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System.
5.11 ERISA. Each Plan maintained by a Borrower or the Guarantor and by
each ERISA Affiliate complies with all material applicable requirements of ERISA
and of the Code and with all material applicable rulings and regulations issued
under the provisions of ERISA and the Code setting forth those requirements.
Neither any Borrower, the Guarantor nor any ERISA Affiliate has engaged in any
prohibited transaction (as defined in Section 406 of ERISA or Section 4975 of
the Code) (i) which has not been corrected within the correction period
applicable to it under Section 502(i) of ERISA or Section 4963(e) of the Code or
(ii) for which an exemption has not been obtained under Section 408 of ERISA or
Section 4975 of the Code. As of the date hereof, neither any Borrower, the
Guarantor nor any ERISA Affiliate is a participant in (i) any Multiemployer
Plan, (ii) any other Plan which is subject to Title IV of ERISA, or (iii) any
money purchase pension plan.
5.12 ADVERSE CONTRACTS; DEFAULTS. Neither any Borrower nor the Guarantor
is a party to any
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agreement or instrument or subject to any charter or other corporate restriction
which could reasonably be expected to have a Material Adverse Effect. Neither
any Borrower nor the Guarantor 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 to which it is a party which
default could reasonably be expected to have a Material Adverse Effect.
5.13 ENVIRONMENTAL LAWS. No release, emission, or discharge into the
environment of hazardous substances, as defined under the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, or hazardous
waste as defined under the Solid Waste Disposal Act, as amended, or air
pollutants as defined under the Clean Air Act, or toxic pollutants as defined
under the Clear Air Act, or the Toxic Substances Control Act, has occurred or is
presently occurring in excess of federally permitted releases or reportable
quantities, or other concentrations, standards or limitations under, and which
would constitute a material violation of, the foregoing laws or under any other
federal, state or local laws or regulations, in connection with any aspect of
the business of the Borrowers or the Guarantor. Neither any Borrower nor the
Guarantor has any knowledge of any past or existing violations, in any material
respect, by any of them of any environmental laws, ordinances or regulations
issued by any federal, state or local governmental authority.
5.14 DISCLOSURE. None of the information (financial or otherwise)
furnished by or on behalf of the Borrowers or the Guarantor to the Lender in
connection with the negotiation of this Agreement contains any untrue statement
of a material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading in the light of the
circumstances under which such statements were made. All financial projections
delivered to the Lender in connection herewith have been prepared on the basis
of the assumptions stated therein. Such projections represent the Borrowers' and
the Guarantor's good faith estimate of the Borrowers' future financial
performance and, while there can be no assurance that the performance set forth
in such projections will approximate actual performance, such projections are
believed by the Borrowers and the Guarantor to be fair in light of current
business conditions.
5.15 INSURANCE. All of the properties and operations of the Borrowers and
the Guarantor of a character usually insured by Persons of established
reputation engaged in the same or similar businesses similarly situated are
adequately insured, by financially sound and reputable insurance companies,
against loss or damage of the kinds and in amounts customarily insured against
by such Persons and each of the Borrowers and the Guarantor carries, with such
insurers in customary amounts, such other insurance, including public and
product liability, as is usually carried by Persons of established reputation
engaged in the same or similar businesses similarly situated. The insurance
required by the provisions of Section 6.7 hereof and by the other Loan Documents
is in force and all premiums due and payable in respect thereof have been paid.
The Company is the owner of the Xxxxxxx Life Insurance Policy and the Xxxxxx
Life Insurance Policy referred to in the Assignments of Life Insurance Policies
and the Company has given written notice to the insurers under such policies
that the beneficiary thereof cannot be changed without the prior written consent
of the Lender.
5.16 EVENTS OF DEFAULT. There does not exist any Event of Default or
Default hereunder.
5.17 GUARANTOR SINGLE PURPOSE. The Guarantor has, and after completion of
the Merger will have, no material assets or material operations other than (i)
assets consisting of, or incidental to, shares
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of capital stock of the Company (or shares of capital stock of HPAC that will be
cancelled or converted into shares of capital stock of the Company in connection
with the Merger), (ii) operations consisting of the consummation and performance
of the transactions contemplated in the Loan Documents, the Subordinated
Purchase Agreement and the Merger Agreement or its direct ownership interest in
the Company and indirect ownership in the other Borrowers and (iii) rights under
the Capital Contribution Agreement and the Management Consulting Agreement.
5.18 SOLVENCY, ETC. Each of the Borrowers, the Guarantor and their
respective Subsidiaries is solvent on a going concern basis as of the date of
this Agreement and shall not become insolvent as a result of the consummation of
the transactions contemplated by the Merger Agreement, this Agreement or the
other Transaction Documents. Each of the Borrowers, the Guarantor and their
respective Subsidiaries is, and after giving effect to the transactions
contemplated by the Merger Agreement, this Agreement and the other Transaction
Documents shall be, able to pay their debts as they become due, and the property
of each Borrower, the Guarantor and their respective Subsidiaries now has, and
after giving effect to the transactions contemplated by the Merger Agreement,
this Agreement and the other Transaction Documents shall have, a fair salable
value (on a going concern basis) greater than the amounts required to pay its
debts (including a reasonable estimate of the amount of all contingent
liabilities). Each of the Borrowers, the Guarantor and their respective
Subsidiaries has adequate capital to carry on its business, and after giving
effect to the transactions contemplated by the Merger Agreement, this Agreement
and the other Transaction Documents, each of the Borrowers, the Guarantor and
their Subsidiaries shall have adequate capital to conduct their business. No
transfer of property is being made and no obligation is being incurred in
connection with the transactions contemplated by this Agreement with the intent
to hinder, delay or defraud either present or future creditors of the Borrowers,
the Guarantor or any of their respective Subsidiaries
5.19 PROJECTIONS AND PRO FORMA FINANCIAL STATEMENTS.
(i) Attached hereto as EXHIBIT N are true and complete copies of the
latest projections of the consolidated income and cash flows of the
Guarantor and its Subsidiaries and of the Company and its Subsidiaries for
the Fiscal Years ending through December 31, 2005. Such projections are
based on underlying assumptions of the Borrowers and the Guarantor which,
to the knowledge of the Borrowers and the Guarantor, provide a reasonable
basis for the projections contained therein. Such projections have been
prepared on the basis of the assumptions set forth therein, which
assumptions are, to the knowledge of the Borrowers and the Guarantor, fair
and reasonable in light of the historical financial performance of the
Borrowers, the Guarantor and their respective Subsidiaries and of current
and reasonably foreseeable business conditions and reflect the reasonable
estimate of the Borrowers and the Guarantor of the results of operations
and other information projected therein.
(ii) The pro forma projected consolidated balance sheets of the
Guarantor and its Subsidiaries and of the Company and its Subsidiaries as
of November 30, 2000, attached hereto as Exhibit M, are complete and
correct in all material respects and present fairly in all material
respects the respective consolidated financial conditions of the Guarantor
and the Company as of such date as if the transactions contemplated by the
Merger Agreement, this Agreement and the other Transaction Documents had
occurred immediately prior to such date, and such balance sheets contain
all pro forma adjustments necessary in order to fairly reflect such
assumption
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5.20 MERGER AGREEMENT AND SUBORDINATED NOTE PURCHASE AGREEMENT
REPRESENTATIONS. Each of the representations and warranties in the Merger
Agreement and the Subordinated Note Purchase Agreement are true and correct in
all material respects, in each case regardless of any limitation on survival set
forth therein.
5.21 CERTAIN ASSURANCES. CHSI is certified by the State of Ohio Bureau of
Workers' Compensation (the "OBWC") and similar agencies in other states where
the Borrowers conduct business, and such certifications are in full force and
effect. The OBWC Contracts are in full force and effect and neither the Company
nor any of the other Borrowers have received any indications, whether written or
oral, of alleged breaches of, or OBWC's intent to terminate, or not to renew,
either such contract. CHSI has not been notified that it is "at capacity" under
either OBWC Contract by the OBWC, nor has CHSI received indications that the
OBWC is intending, in any way, to limit, in any material manner, CHSI's ability
to accept new enrollments under either OBWC Contract. The Borrowers are not
aware of any changes or potential changes to the system of workers' compensation
or unemployment insurance or the Ohio Health Partnership Plan or the Qualified
Health Plan (each as defined in the Merger Agreement) that would have a Material
Adverse Effect. The foregoing representations and warranties under this Section
5.21 are given as of the date hereof. The consummation of the transactions
contemplated by the Merger Agreement will not constitute a "change in the MCO
organizational structure or business operations" as set forth in the OBWC
Contracts.
ARTICLE 6. AFFIRMATIVE COVENANTS
Until payment in full of the Notes and performance of all other
obligations of the Borrowers and the Guarantor hereunder:
6.1 BANK DEPOSITS. Each of the Borrowers and the Guarantor covenants that
by February 1, 2001 the Lender shall be the principal bank of account and
primary depository for each of the Borrowers and the Guarantor.
6.2 FINANCIAL STATEMENTS AND REPORTS OF THE COMPANY.
(a) Not later than thirty (30) days following the end of each month, the
Company shall furnish to the Lender the following items in form and substance
satisfactory to the Lender:
(i) An unaudited consolidated and unaudited consolidating income
statement (including unaudited consolidating income statements for CMI and
CHSI) for the month and Fiscal Year to date and (subject to normal
year-end adjustments) copies of the statements for the same periods of the
previous year;
(ii) An unaudited consolidated and unaudited consolidating balance
sheet as of the end of such month and a copy of such statement as of the
end of such month in the previous year; and
(iii) A certificate from the chief financial officer or treasurer of
the Company (A)
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stating, on behalf of the Company, that: (I) the financial statements are
complete and correct in all material respects and fairly represent the
financial position of the Company as of their respective dates and the
consolidated results of the Company's operations for the periods then
ended (subject to normal year-end adjustments); (II) each Borrower has
complied with and is then in compliance, in all material respects, with
all terms and covenants of this Agreement (or, if there is any
non-compliance, giving the details thereof); and (III) there exists no
Default or Event of Default (or, if a Default or Event of Default exists,
giving the details thereof); and (B) setting forth in a detailed
computation in a form reasonably satisfactory to the Lender the financial
status of the Company (as the end of, or, in the case of incurrence tests,
during such accounting period) in respect of the restrictions contained in
Section 7.11 and Sections 7.13 through 7.16, inclusive; provided, however,
that the financial covenants set forth in Sections 7.11, 7.14, 7.15 and
7.16 hereof only need to be calculated in such certificate quarterly and
the financial covenant in Section 7.13 hereof only needs to be calculated
in such certificate annually.
(b) Each of the Borrowers shall promptly upon their becoming available,
furnish to the Lender one copy of (i) each financial statement, report, notice
or proxy statement sent by any Borrower to its stockholders (in their capacity
as stockholders) generally, and (ii) each report, each registration statement
and each prospectus and all amendments thereto filed by the Guarantor or any
Borrower with the Securities and Exchange Commission and of all press releases
and other statements made available generally by any Borrower to the public
concerning developments that are material.
(c) Not later than one hundred twenty (120) days following the end of each
Fiscal Year, the Company shall furnish to the Lender a detailed schedule, in
form and substance satisfactory to the Lender, calculating the Tax Agreement
Payments for such Fiscal Year. Such schedule shall be prepared by the
independent accounting firm auditing the Guarantor's consolidated financial
statements; provided, however, that the Lender shall have the right to engage
another national accounting firm to review such schedule and to determine the
final Tax Agreement Payments for each Fiscal Year. In such event, the reasonable
fees and expenses of such other accounting firm shall be paid by the Borrowers.
Upon the Lender's request from time to time, the Borrowers shall promptly
provide the Lender and its accounting firm with such further information and
documents as the Lender or such accounting firm shall reasonably request for
purposes of reviewing the schedule(s) prepared by the Guarantor's accounting
firm and determining the Tax Agreement Payments for any Fiscal Year.
(d) In addition, within thirty (30) days following the end of each month
and forty-five (45) days following the end of each quarter of each Fiscal Year,
the Company shall furnish to the Lender a certificate from the chief financial
officer or treasurer of the Company setting forth, on behalf of the Company, a
detailed computation, in a form satisfactory to the Lender, of the Company's
EBITA for the previous month or quarter, as applicable.
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6.3 FINANCIAL STATEMENTS AND REPORTS OF THE GUARANTOR.
(a) Not later than thirty (30) days following the end of each month, the
Guarantor shall furnish to the Lender the following items in form and substance
satisfactory to the Lender:
(i) An unaudited consolidated and unaudited consolidating income
statement for the month and Fiscal Year to date and, beginning with
respect to the thirteenth complete month following the date hereof, copies
of the statements for the same periods of the previous year;
(ii) An unaudited consolidated and unaudited consolidating balance
sheet as of the end of such month and, beginning with respect to the
thirteenth complete month following the date hereof, a copy of such
statement as of the end of such month in the previous year; and
(iii) A certificate from the chief financial officer or treasurer of
the Guarantor (A) stating, on behalf of the Guarantor, that: (I) the
financial statements are complete and correct in all material respects and
fairly represent the financial position of the Guarantor as of their
respective dates and the consolidated results of the Guarantor's
operations for the periods then ended (subject to normal year-end
adjustments); (II) the Guarantor has complied with and is then in
compliance, in all material respects, with all terms and covenants of this
Agreement (or, if there is any non-compliance, giving the details
thereof); and (III) there exists no Default or Event of Default (or, if a
Default or Event of Default exists, giving the details thereof); and (B)
setting forth in a detailed computation in a form reasonably satisfactory
to the Lender the financial status of the Guarantor (at the end of, or, in
the case of incurrence tests, during such accounting period) in respect of
the restrictions contained in Sections 7.11 and 7.13; provided, however,
that the financial covenant set forth in Section 7.11 hereof only needs to
be calculated in such certificate quarterly and the financial covenant set
forth in Section 7.13 hereof only needs to be calculated in such
certificate annually.
(b) The Guarantor shall promptly upon their becoming available, furnish to
the Lender one copy of (i) each financial statement, report, notice or proxy
statement sent by the Guarantor to its stockholders (in their capacity as
stockholders) generally, and (ii) each report, each registration statement
(without exhibits except as expressly requested by the Lender), and each
prospectus and all amendments thereto filed by the Guarantor with the Securities
and Exchange Commission and of all press releases and other statements made
available generally by the Guarantor to the public concerning developments that
are material.
6.4 UNAUDITED FINANCIAL STATEMENTS OF THE COMPANY.
(a) Not later than ninety (90) days following the end of each Fiscal
Year of the Company, beginning with the Fiscal Year ended December 31,
2000, the Company shall furnish to the Lender, in form and substance
satisfactory to the Lender, complete unaudited consolidating and unaudited
consolidated financial statements for the Company (including unaudited
consolidating statements of income for CMI and CHSI) for such Fiscal Year;
provided, however, that if an Event of Default occurs in any Fiscal Year
that the Lender considers to be material, then upon the written request of
the Lender received within ten (10) days after the end of such Fiscal
Year, such consolidated (but not consolidating) financial statements shall
be audited and certified
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by Ernst & Young LLP or another independent certified public accountant
acceptable to the Lender, with an unqualified opinion, accompanied by a
certificate from such accountant, certifying that in examining the
Company's books and records for such period, such accountant has obtained
no knowledge of breaches of Section 7.11 or Sections 7.13 through 7.17,
inclusive.
(b) Each of the financial statements delivered under this Section
6.4 shall be accompanied by a certificate of the chief financial officer
or treasurer of the Company stating, on behalf of the Borrowers, that
except as disclosed in the certificate such officer has no knowledge of a
Default or an Event of Default hereunder and setting forth in a detailed
computation in form satisfactory to the Lender the financial status of the
Company (at the end of, or, in the case of incurrence tests, during such
accounting period) in respect of the restrictions contained in Section
7.11 and Sections 7.13 through 7.17, inclusive.
6.5 AUDITED FINANCIAL STATEMENTS OF THE GUARANTOR.
(a) Not later than ninety (90) days following the end of each Fiscal
Year of the Guarantor, beginning with the Fiscal Year ended December 31,
2000 (provided that the Guarantor may, with respect to such Fiscal Year,
deliver audited financial statements for the period from the date hereof
to December 31, 2000), the Guarantor shall furnish to the Lender, in form
and substance satisfactory to the Lender, complete unaudited consolidating
and audited consolidated financial statements for the Guarantor for such
Fiscal Year, accompanied by unaudited supporting schedules with respect to
the Company, CMI and CHSI, certified, in the case of the audited
consolidated financial statements, by Ernst & Young LLP or another
independent certified public accountant acceptable to the Lender, with an
unqualified opinion, accompanied by a certificate from such accountant,
stating that in examining the Guarantor's books and records for such
period, such accountant has obtained no knowledge of any breaches of
Sections 7.13 through 7.16, inclusive.
(b) Each of the financial statements delivered under this Section
6.5 shall be accompanied by a certificate of the chief financial officer
or treasurer of the Guarantor stating, on behalf of the Guarantor, that
except as disclosed in the certificate such officer has no knowledge of a
Default or an Event of Default hereunder and setting forth in a detailed
computation in form satisfactory to the Lender the financial status of the
Guarantor (at the end of, or, in the case of incurrence tests, during such
accounting period) in respect of the restrictions contained in Section
7.11 and Section 7.13 through 7.17, inclusive.
6.6 INSPECTION. Upon request of the Lender and upon reasonable prior
notice (provided, however, that no such notice shall be required if an Event of
Default shall have occurred and be continuing), each of the Borrowers and the
Guarantor shall make available for inspection by representatives of the Lender
any of its books and records and shall furnish to the Lender information
regarding its business affairs and financial condition within a reasonable time
after receipt of written request therefor.
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6.7 INSURANCE.
(a) Each of the Borrowers and the Guarantor shall insure and
maintain hazard and other insurance upon all of its assets and business
properties and liability insurance with responsible and reputable insurers
of such character and in such amounts as are usually maintained by
companies engaged in like business. All insurance policies shall be
written for the benefit of the Borrowers and the Guarantor, as applicable,
and the Lender as their interests may appear and shall contain a provision
requiring the insurance company to provide the Lender not less than thirty
(30) days' written notice prior to cancellation of any such policy. All
insurance policies or certificates evidencing the same shall be furnished
to the Lender.
(b) Without limiting the foregoing provisions of this Section 6.7,
the Borrowers shall maintain the following insurance coverages:
(i) the Borrowers shall maintain all risk property insurance
against direct physical loss or damage on an all risks basis,
including windstorm and hurricane and comprehensive boiler and
machinery coverage, subject to a maximum deductible of $50,000. The
property shall be insured for the full replacement cost and such
policy shall contain an agreed amount endorsement waiving any
coinsurance penalty;
(ii) at all times on and after the date hereof, as an
extension of the coverage required under Section 6.7(b)(i), the
Borrowers shall maintain business interruption insurance with a
minimum period of indemnity of six (6) months, subject to a maximum
five-day waiting period or $50,000 deductible and shall contain an
agreed amount endorsement waiving any coinsurance penalty;
(iii) the Borrowers shall maintain commercial general
liability insurance written on an occurrence basis with a limit of
not less than $1,000,000 for each occurrence and $3,000,000 in the
aggregate. Such coverage shall include, but not be limited to,
premises/operations, blanket contractual liability, independent
contracts, broad form products and completed operations, personal
injury, fire, legal liability and employee benefits liability;
(iv) the Borrowers shall maintain errors and omissions
insurance with a limit of not less than $5,000,000 in the aggregate;
(v) the Borrowers shall maintain workers' compensation
insurance in accordance with statutory provisions covering
accidental injury, illness or death of an employee of any Borrower
while at work or in the scope of his or her employment with the
Borrowers and employer's liability insurance in an amount not less
than $500,000; and
(vi) the Borrowers shall maintain automobile liability
insurance covering owned, non-owned, leased, hired or borrowed
vehicles against bodily injury or property damage. Such coverage
shall have a limit of not less than $1,000,000.
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6.8 PAYMENT OF TAXES AND CLAIMS. Each of the Borrowers and the Guarantor
shall pay all taxes, assessments and other governmental charges imposed upon its
properties or assets or in respect of its franchises, business, income or
profits before any penalty or interest accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which by law have or
might become a lien or charge upon any of its properties or assets, provided
that (unless any material item of property would be lost, forfeited or
materially damaged as a result thereof) no such charge or claim need be paid if
the amount, applicability or validity thereof is currently being contested in
good faith and if such reserve or other appropriate provision, if any, as shall
be required by GAAP shall have been made therefor.
6.9 COMPLIANCE WITH LAWS. Each of the Borrowers and the Guarantor shall
comply in all substantial respects with all applicable statutes, laws,
ordinances and governmental rules, regulations and orders (including, without
limitation, those promulgated by or relating to the OBWC system or the workers'
compensation system in other states in which any Borrower does business) to
which it is subject or which are applicable to its business, properties and
assets if noncompliance therewith would materially adversely affect such
business, including, but not limited to, all applicable federal, state,
regional, county or local laws, statutes, rules, regulations or ordinances
concerning public health, safety or the environment; provided that (unless such
contest or noncompliance would materially adversely affect such business) such
Borrower or the Guarantor need not so comply if any such statute, law,
ordinance, or governmental rule, regulation or order is currently being
contested in good faith.
6.10 ERISA. Each of the Borrowers and the Guarantor shall furnish to
Lender: (a) promptly and in any event within thirty (30) days after such
Borrower or the Guarantor, as applicable, knows or has reason to know of the
occurrence of a Reportable Event with respect to a Plan with regard to which
notice must be provided to the PBGC, a copy of such materials required to be
filed with the PBGC with respect to such Reportable Event and in each such case
a statement of the chief financial officer of such Borrower or the Guarantor, as
applicable, setting forth details as to such Reportable Event and the action
which such Borrower or the Guarantor, as applicable, proposes to take with
respect thereto; (b) promptly and in any event within thirty (30) days after
such Borrower or the Guarantor, as applicable, knows or has reason to know of
any condition existing with respect to a Plan which presents a material risk of
termination of the Plan, imposition of an excise tax, requirement to provide
security to the Plan or incurrence of other liability by such Borrower or
Guarantor, as applicable, or any ERISA Affiliate a statement of the chief
financial officer of such Borrower or Guarantor, as applicable, or such ERISA
Affiliate describing such condition; (c) at least thirty (30) days prior to the
filing by any plan administrator of a Plan of a notice of intent to terminate
such Plan, a copy of such notice; (d) promptly and in no event more than 10 days
after the filing thereof with the Secretary of the Treasury, a copy of any
application by such Borrower or Guarantor, as applicable, or an ERISA Affiliate
for a waiver of the minimum funding standard under section 412 of the Code; (e)
upon request, and in no event more than thirty (30) days after the request
therefore, copies of each annual report which is filed on Form 5500 together
with certified financial statements for the Plan (if any) as of the end of such
year and actuarial statements on Schedule B to such form 5500; (f) promptly and
in any event within thirty (30) days after it knows or has reason to know of any
event or condition which might reasonably be expected to constitute grounds
under section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, a statement of the chief financial officer of
such Borrower or Guarantor, as applicable, describing such event or condition;
(g) promptly and in no event more than thirty (30) days after receipt thereof by
such Borrower or Guarantor, as applicable, or any ERISA Affiliate, a copy of
each notice received by such Borrower or
- 25 -
Guarantor, as applicable, or an ERISA Affiliate concerning the imposition of any
withdrawal liability under section 4202 of ERISA; and (h) promptly after receipt
thereof a copy of any notice such Borrower or Guarantor, as applicable, or any
ERISA Affiliate may receive from the PBGC or the Internal Revenue Service with
respect to any Plan or Multiemployer Plan; provided, however, that this
subsection (h) shall not apply to notices of general application promulgated by
the PBGC or the Internal Revenue Service.
6.11 PRESERVATION OF CORPORATE EXISTENCE. Each of the Borrowers and the
Guarantor shall preserve and maintain and cause each of its subsidiaries to
preserve and maintain its corporate existence (except pursuant to a merger
permitted by Section 7.4 below), rights, franchises and privileges in the
jurisdiction of its incorporation or in any other jurisdiction it shall select,
and qualify and remain qualified as a foreign corporation in each jurisdiction
in which such qualification is necessary in view of its business and operations
or the ownership of its properties.
6.12 MAINTENANCE OF TANGIBLE ASSETS. Each of the Borrowers and the
Guarantor shall maintain its tangible assets in good condition and repair and
shall not permit any action or omission which might materially impair the value
thereof, normal wear and tear excepted.
6.13 NOTICES OF CERTAIN EVENTS. Each of the Borrowers and the Guarantor
shall promptly after it becomes aware thereof give notice to the Lender of:
(a) Any Default or Event of Default;
(b) Any default or event of default under any contractual obligation
of such Borrower or the Guarantor, as applicable, that would have a
Material Adverse Effect; and
(c) Any materially adverse change in the business, operations,
affairs or condition (financial or otherwise) of such Borrower or the
Guarantor, as applicable.
Each notice pursuant to this Section 6.13 shall be accompanied by a statement of
the chief executive officer or chief financial officer of the respective
Borrower or the Guarantor, as applicable, setting forth details of the
occurrence referred to therein and stating what action the respective Borrower
or the Guarantor, as applicable, proposes to take with respect thereto.
6.14 RECORDS AND BOOKS OF ACCOUNT. Each of the Borrowers and the Guarantor
shall keep adequate records and books of account in which complete entries will
be made in accordance with GAAP, reflecting all financial transactions required
by GAAP to be so reflected.
6.15 PERFORMANCE OF CONTRACTS. Each of the Borrowers and the Guarantor
shall perform and comply, in all material respects, with, in accordance with
their terms, all provisions of each and every contract, agreement or instrument
now or hereafter binding upon it, except to the extent that it shall contest the
provisions thereof in good faith and by proper proceedings or the failure to
perform could not reasonably be expected to have a Material Adverse Effect.
6.16 NOTICE OF MATERIAL LITIGATION. Each of the Borrowers and the
Guarantor shall promptly notify the Lender in writing of any litigation,
arbitration proceeding or administrative investigation,
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inquiry or other proceeding to which it may hereafter become a party which could
reasonably be expected to have a Material Adverse Effect and which may involve
any risk of any judgment or liability not fully covered by insurance or which
may otherwise result in any materially adverse change in the business,
operations, affairs or condition (financial or otherwise) of such Borrower or
the Guarantor or which may impair, in any material respect, the ability of such
Borrower or the Guarantor to perform its obligations under this Agreement, the
Notes, the other Loan Documents, the Subordinated Note Purchase Agreement or the
Subordinated Note.
6.17 USE OF PROCEEDS. The Borrowers shall use the proceeds of the
Revolving Credit Loans as provided in Section 1.5 hereof, and the Company shall
use the proceeds of the Term Loan solely for purposes of paying the Merger
Consideration, Option Termination Consideration, Severance Consideration and
Company Expenses (each as defined in the Merger Agreement) in accordance with
the terms of the Merger Agreement. Such uses shall be consistent with all
applicable laws.
6.18 OWNERSHIP AND CONTROL OF BORROWERS AND GUARANTOR.
(a) The Company shall at all times after the date hereof have,
direct or indirect, beneficial and legal ownership of, and the right and
power to control the voting and transfer of, and the exercise of all other
rights attributable to, all of the voting equity securities (and
securities convertible into, or granting rights to acquire, voting equity
securities) of each of the other Borrowers.
(b) The Guarantor shall at all times after the date hereof have
direct beneficial and legal ownership, and the right and power to control
the voting and transfer of, and exercise of all other rights attributable
to, not less than a majority of the voting equity securities (and
securities convertible into, or granting rights to acquire, voting equity
securities) of the Company.
(c) The senior management and key employees of the Company or of one
or more of the other Borrowers shall own at least twenty percent (20%) of
the total issued and outstanding shares of common stock of the Company on
a fully diluted basis during the period from and after the consummation of
the Merger through the second anniversary thereof; and, thereafter, such
ownership interest of such senior management and key employees of the
Company or of the other Borrowers shall be diluted only upon not less than
ten (10) days' prior written notice to the Lender and after satisfaction
of such conditions as the Lender shall reasonably establish from time to
time; provided, however, that each such member of the Company's senior
management and key employees may (before or after such second anniversary)
transfer, without the Lender's consent, his or her shares of the Company's
stock to members of his or her immediate family or to trusts for their
benefit or by will or operation of law and the shares so transferred shall
be included for purposes of meeting the above requirements provided that
they are not further transferred to any person other than those permitted
in this sentence.
6.19 COMPLIANCE WITH THE SUBORDINATED DEBT AGREEMENTS. Each of the
Borrowers and the Guarantor shall comply at all times with all covenants and
agreements contained in the Subordinated Note Purchase Agreement, the
Subordinated Note and the other agreements, documents and instruments related
thereto and take no action prohibited thereby (subject to applicable grace
periods and waiver).
- 27 -
6.20 COMPLIANCE WITH THE INTERCREDITOR AGREEMENT. Each of the Borrowers
and the Guarantor shall perform all of its duties and obligations under, and
comply with all terms of, the Intercreditor Agreement.
6.21 COMPLIANCE WITH THE MERGER DOCUMENTS. The Company shall, and the
Guarantor shall cause HPAC to, enforce each of their respective material rights
and remedies as set forth in the Merger Agreement, the agreements contemplated
thereby and the Transaction Documents. If requested by the Purchaser, each of
SCC, the Borrower, the Company and any of their Subsidiaries shall obtain and
promptly furnish to the Purchaser evidence of all governmental approvals as may
be required to enable any of SCC, the Borrower, the Company or any of their
Subsidiaries to comply with its obligations under the Merge Documents and to
continue in business as conducted on the date of Closing without materials
interruption or interference.
6.22 COMPLIANCE WITH THE OBWC. Each of the Borrowers and the Guarantor
shall comply with all material obligations, standards and requirements of all
contracts with the OBWC.
6.23 SUBORDINATED LENDER INFORMATION. At the request of the Lender, the
Borrowers and the Guarantor shall promptly deliver to the Lender copies of any
statements, reports, certificates and any other information delivered to the
Subordinated Lender or the equityholders of the Guarantor or any Borrower.
6.24 KEY MAN LIFE INSURANCE POLICIES. The Borrowers and the Guarantor
shall cause the Xxxxxxx Life Insurance Policy and the Xxxxxx Life Insurance
Policy to be maintained (each in form and substance acceptable to the Lender) in
full force and effect at all times. Within ninety (90) days after the end of
each Fiscal Year, the Company shall deliver to the Lender a certificate of the
chief executive officer or chief financial officer of the Company stating, on
behalf of the Company, that all premiums due and owing have been paid with
respect to the Xxxxxxx Life Insurance Policy and the Xxxxxx Life Insurance
Policy and that such policies are in full force and effect.
ARTICLE 7. NEGATIVE COVENANTS
Until payment in full of the Notes and the performance of all other
obligations of the Borrowers and the Guarantor hereunder, without the prior
written consent of the Lender:
7.1 INDEBTEDNESS. Each of the Borrowers and the Guarantor shall not, nor
shall any of them permit any of their respective Subsidiaries to, create, incur,
assume or suffer to exist any Indebtedness, except for: (i) Indebtedness to the
Lender; (ii) Subordinated Indebtedness; (iii) the Indebtedness incurred and owed
under that certain Asset Purchase Agreement dated May 12, 1999 between CHSI and
Community Health Insurance Company (the "Anthem Indebtedness"); (iv) capitalized
lease obligations and purchase money Indebtedness reflected on the Balance Sheet
or in historical financial statements heretofore provided to the Lender; (v)
other capitalized lease obligations and purchase money Indebtedness incurred in
any Fiscal Year commencing after the date hereof up to an aggregate amount of
$200,000 (per Fiscal Year); (vi) Indebtedness of the Guarantor under the
Subordinated Note in an amount not in excess of $6,000,000 (plus the amount of
any so-called "PIK Notes" issued pursuant to the Subordinated Note Purchase
Agreement), as reduced by any principal prepayments of the same; (vii)
- 28 -
inter-company Indebtedness between or among one or more of the Borrowers; (viii)
the Temporary Kentucky LC; (ix) Indebtedness under the Tax Allocation Agreement;
(x) Indebtedness under the Deferred Compensation Plan and accrued incentive
compensation expenses; (xi) Indebtedness incurred as a result of the accrual of
the Performance Fee (as defined in the Subordinated Note Purchase Agreement);
and (xii) trade liabilities and accrued expenses incurred in the ordinary course
of business. Except as otherwise provided, all Indebtedness permitted to be
created, incurred, assumed or suffered by the Borrowers and the Guarantor, as
applicable, pursuant to this Section shall be considered (but without
duplication) Indebtedness of the Borrowers and the Guarantor, as applicable.
7.2 LIENS AND OTHER ENCUMBRANCES. Neither any Borrower nor the Guarantor
shall create, incur, assume or suffer to exist any security interest, mortgage,
pledge, lien or other encumbrance of any nature whatsoever on any of its
property or assets whether now owned or hereafter acquired, except: (i) liens
securing the payment of taxes and other governmental charges, either not yet due
or the validity of which is being contested in good faith by appropriate
proceedings (so long as no material item of property would be lost, forfeited or
materially damaged as a result thereof), and as to which it shall, as
appropriate under GAAP, have set aside on its books and records adequate
reserves; (ii) deposits under workers' compensation, unemployment insurance,
social security and other similar laws or to secure the performance of bonds,
tenders or contracts (other than for the repayment of purchase price
indebtedness or borrowed money) or to secure statutory obligations or surety or
appeal bonds, or to secure indemnity, performance or other similar bonds, all in
the ordinary course of business; (iii) liens and security interests in favor of
the Lender; (iv) zoning restrictions, easements, licenses, covenants and other
restrictions affecting the use of real property, so long as its use of, or the
value of, its property subject thereto is not impaired, in any material respect,
thereby; (v) liens securing purchase money Indebtedness and capital leases
referred to in clauses (iv) or (v) under Section 7.1, above provided that such
liens are limited to the specific property purchased or leased and the proceeds
thereof; (vi) the pledge by the Guarantor to the Mezzanine Lender of the shares
of capital stock of the Company owned by the Guarantor as contemplated by the
Subordinated Note Purchase Agreement; (vii) the grant of a second lien security
interest by the Borrowers and the Guarantor in their assets to the Mezzanine
Lender as contemplated by the Subordinated Note Purchase Agreement; (viii) the
collateral assignment by the Guarantor to the Mezzanine Lender of a certain life
insurance policy in the amount of $3,000,000 on the life of Xxxxxx X. Xxxxxxx as
contemplated by the Subordinated Note Purchase Agreement; (ix) the grant of a
security interest to the Mezzanine Lender in the Capital Sufficiency Payments
(as defined in the Subordinated Note Purchase Agreement) as contemplated by the
Capital Contribution Agreement; and (x) the Temporary Kentucky LC Collateral.
All of the foregoing liens are hereinafter referred to as "Permitted Liens".
7.3 GUARANTIES AND OTHER CONTINGENT LIABILITIES. Neither any Borrower nor
the Guarantor shall become an indemnitor, guarantor or surety or otherwise
become liable for any of the obligations or liabilities of any Person, other
than: (i) the Guarantor's obligations under the Guaranty, this Agreement and the
other Loan Documents; (ii) the guaranty by a Borrower or the Guarantor of the
liabilities and obligations of other Borrowers; and (iii) the Borrowers'
respective guarantees of the Guarantor's obligations under the Subordinated Note
and the Subordinated Note Purchase Agreement.
7.4 FUNDAMENTAL CHANGES. Neither any Borrower nor the Guarantor shall (i)
enter into any transaction of merger or consolidation or amalgamation (other
than the Merger), (ii) liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution), (iii) convey, sell, lease, transfer or otherwise
- 29 -
dispose of, in one transaction or a series of transactions, all or any
substantial part of its business or assets, whether now owned or hereafter
acquired, (iv) acquire by purchase or otherwise all or substantially all of the
business or assets of, or stock or other evidence of beneficial ownership of,
any Person, or (v) make any material change in the nature of its business or in
the methods by which it conducts business; provided, however, that any Borrower
may, without the consent of the Lender, enter into solely with one or more other
Borrowers any transaction of the types described in clauses (i), (iii) or (iv),
above, provided that all of the Borrowers that are a party to any such
transaction have a positive net worth as determined in accordance with GAAP.
Without limiting the foregoing, the Borrowers and the Guarantor shall not permit
to occur any Change of Control (as defined in the Subordinated Note Purchase
Agreement).
7.5 CREATION OF SUBSIDIARIES. Neither any Borrower nor the Guarantor shall
create or acquire any additional Subsidiaries without the prior written consent
of the Lender, which consent shall not be unreasonably withheld.
7.6 LOANS OR ADVANCES. Neither any Borrower nor the Guarantor shall make
loans or advances to any Person (including any Subsidiary of a Borrower or the
Guarantor) other than another Borrower or the Guarantor, except in the ordinary
course of their respective businesses.
7.7 INVESTMENTS. Neither any Borrower nor the Guarantor shall acquire or
purchase the securities of any Person other than another Borrower; provided,
however, that the Borrowers and the Guarantor may purchase: (i) U.S. government
securities directly or pursuant to repurchase agreements with (A) Affiliates of
Banc One Corporation or (B) other domestic banks having capital and surplus of
at least $100,000,000; (ii) certificates of deposit of (A) Affiliates of Banc
One Corporation or (B) other domestic banks having a capital and surplus of at
least $100,000,000; and (iii) commercial paper rated A-1 or P-1 or an equivalent
by Xxxxx'x Investors Services, Inc. or Standard & Poor's Corporation, both of
New York, New York, or their successors if all of such investments have a
maturity of one year or less.
7.8 SALE AND LEASEBACK. Neither any Borrower nor the Guarantor shall enter
into any agreement with any lender or investor providing for the leasing of (i)
real or personal property which has been or is to be sold or transferred by any
Borrower or the Guarantor to such lender or investor or (ii) other real or
personal property intended to be used for substantially the same purpose as the
property sold or transferred by any Borrower or the Guarantor.
7.9 DISPOSITION OF ASSETS. Neither any Borrower nor the Guarantor shall
dispose of any of its assets in any transaction or series or transactions other
than those disposed of in the ordinary course of business and except in
connection with the replacement of assets sold by like assets.
7.10 TRANSACTIONS WITH AFFILIATES. Except for the execution, delivery and
performance by the applicable parties of the Tax Allocation Agreement and each
of the agreements listed on Schedule 7.10 attached hereto, neither any Borrower
nor the Guarantor shall: (i) enter into any `transaction, including without
limitation, the purchase, sale or exchange of property or the rendering of any
services, with any Affiliate or any officer or director thereof, enter into,
assume or suffer to exist any employment or consulting contract with any such
Affiliate, except any transaction or contract which is in the ordinary course of
its business and which is upon fair and reasonable terms no less favorable to it
than it would obtain in a comparable arms-length transaction; (ii) make any
advance or loan to any Affiliate or any director or officer thereof or to any
trust of which any of the foregoing is a beneficiary, or to any Person
- 30 -
on the guaranty of any of the foregoing; or (iii) pay any fees or expenses to,
or reimburse or assume any obligation for the reimbursement of any expenses
incurred by, any Affiliate or any officer or director thereof except as may be
permitted in accordance with the preceding clauses of this Section or the other
Sections of this Agreement and except for the reimbursement of reasonable
expenses incurred in connection with the provision of services by an officer,
director or employee of any Borrower or the Guarantor to such entity, including
expenses for travel, entertainment and similar items, in accordance with the
reimbursement policies of such Borrower or the Guarantor, as applicable.
7.11 ANNUAL LEASE PAYMENTS. Neither any Borrower nor the Guarantor shall
enter into any operating lease, as that term is construed according to GAAP, as
lessee of real property from another Person if, after giving effect thereto, the
aggregate amount of operating lease payments, exclusive of required insurance,
tax or maintenance payments, under such lease and all other operating leases of
real property in which any Borrower or the Guarantor is lessee would exceed in
any period of twelve (12) consecutive months the sum of (a) $250,000 plus (b)
the amount of such operating lease payments payable under operating leases of
real property entered into prior to the date hereof (including, without
limitation, any scheduled increases in such payments currently provided for in
such leases) and replacements thereof (provided that any rental thereunder that
is greater than the amount provided for in the replaced lease shall be counted
against the amount permitted in clause (a) hereof). Neither any Borrower nor the
Guarantor shall enter into any operating lease, as that term is construed
according to GAAP, as lessee of personal property from another Person if, after
giving effect thereto, the aggregate amount of operating lease payments,
exclusive of required insurance, tax or maintenance payments, under such lease
and all other operating leases of personal property in which any Borrower or the
Guarantor is lessee would exceed $600,000 in any period of twelve (12)
consecutive months.
7.12 SALE OF ACCOUNTS. Neither any Borrower nor the Guarantor shall sell,
assign or exchange any of its Accounts or notes receivable with or without
recourse.
7.13 CAPITAL EXPENDITURES. The Guarantor shall not purchase, on a
consolidated basis, fixed or capital assets in an amount in excess of the amount
listed in column (b) of this Section during the period listed opposite such
amount in column (a) of this Section:
(a) (b)
FOR THE PERIOD FROM AMOUNT
------------------- ------
January 1, 2001 through December 31, 2001 $1,000,000
January 1, 2002 through December 31, 2002 $1,000,000
January 1, 2003 through December 31, 2003 $1,100,000
January 1, 2004 through December 31, 2004 $1,100,000
January 1, 2005 through December 31, 2005
and in Each Fiscal Year Thereafter $1,200,000
; provided, however, that with respect to any Fiscal Year beginning on or after
January 1, 2002, the amount set forth in column (b) above shall be increased by
the amount by which the maximum dollar amount permitted to be expended in the
immediately preceding Fiscal Year exceeds the total amount actually expended.
- 31 -
7.14 NET WORTH. The Company shall not permit its Net Worth to be less than
$10,000,000 at any time after the date hereof.
7.15 DEBT COVERAGE RATIO. The Company shall not permit its Debt Coverage
Ratio based upon the most recent four fiscal quarters on a rolling basis to be
less than 1.20 to 1.00 at December 31, 2001 or at the end of any fiscal quarter
ending thereafter. In addition, the Company shall not permit its Debt Coverage
ratio for each of the periods set forth in column (a) below calculated quarterly
and computed on an annualized basis (as described below) to be less than the
ratio set forth opposite such period in column (b) below:
(a) (b)
FOR THE PERIOD FROM RATIO
------------------- -----
January 1, 2001 through March 31, 2001 .85 : 1.00
January 1, 2001 through June 30, 2001 1.05 : 1.00
January 1, 2001 through September 30, 2001 1.15 : 1.00
For purposes of computing the annualized Debt Coverage Ratio for each of
the periods set forth in column (a) above, the numerator of the fraction set
forth in the definition of "Debt Coverage Ratio" (i.e., the Company's
consolidated EBITDA for such period as adjusted as provided in such definition)
shall be annualized and then divided by the sum of the Company's projected
consolidated Total Debt Service for the Fiscal Year ending December 31, 2001
plus the Guarantor's Total Debt Service under the Subordinated Note for such
Fiscal Year (assuming that all principal and interest payments are made as
scheduled during the then remaining portion of such Fiscal Year).
7.16 RATIO OF FUNDED INDEBTEDNESS TO EBITDA. The Company shall not permit
the ratio of its Funded Indebtedness (including, without limitation, borrowings
pursuant to this Agreement) to EBITDA based upon the most recent four fiscal
quarters on a rolling basis to be less than 2.50 to 1:00 at December 31, 2001 or
at the end of any fiscal quarter ending thereafter. In addition, the Company
shall not permit the ratio of its Funded Indebtedness (including, without
limitation, borrowings pursuant to this Agreement) to annualized EBITDA
(calculated quarterly) to be less than the ratio set forth in column (b) of this
Section for the period listed opposite such ratio in column (a) of this Section:
- 32 -
(a) (b)
FOR THE PERIOD FROM RATIO
------------------- -----
January 1, 2001 through March 31, 2001 3.00 : 1.00
January 1, 2001 through June 30, 2001 2.75 : 1.00
January 1, 2001 through September 30, 2001 2.50 : 1.00
7.17 MANAGEMENT FEES. Except as otherwise permitted in this Section 7.17,
no Borrower shall pay any management fees to the Guarantor, the Guarantor's
Parent or their respective Affiliates other than another Borrower; provided,
however, that so long as no Event of Default has occurred and is continuing (or
would occur as a result of such payment), the Borrowers may pay management fees
to the Guarantor, the Guarantor's Parent or its Affiliates, solely and strictly
in accordance with the provisions of the Management Advisory Services Agreement,
in an aggregate amount not to exceed with respect to any Fiscal Year five
percent (5.0%) of the Company's total consolidated EBITA for such Fiscal Year.
The Borrowers may make the Management Fee Debt Payments, strictly in accordance
with the provisions of the Management Consulting Agreement, provided that the
Guarantor uses such Management Fee Debt Payments (a) to pay regularly scheduled
principal and interest payments and other obligations (including, without
limitation, the Performance Fee (as defined in the Subordinated Note Purchase
Agreement)) owed to the Mezzanine Lender due and payable under the Subordinated
Note (including any PIK Notes) or the Subordinated Note Purchase Agreement,
including, without limitation, for the avoidance of doubt, payments of past due
regularly scheduled interest payments, or (b) to make life insurance policy
premium payments under the life insurance policy on the life of Xxxxxx X.
Xxxxxxx pledged to the Subordinated Lender, except that such Management Fee Debt
Payments (other than Management Fee Debt Payments which are to be used for the
payment of such life insurance policy premiums) may only be made if and to the
extent that the Intercreditor Agreement expressly permits the related payment
under the Subordinated Note (including any PIK Notes) or the Subordinated Note
Purchase Agreement to which such Management Fee Debt Payment is to be applied.
The Borrowers may accrue (but shall not be permitted to pay, until all
Indebtedness hereunder is paid in full and any commitment to lend or issue
letters of credit hereunder is terminated) the Deferred Compensation Payments.
The Borrowers may make the Tax Agreement Payments at the times provided for in
the Tax Allocation Agreement; provided, however, that no Tax Agreement Payments
shall be made after the occurrence and during the continuance of an Event of
Default, except for Tax Agreement Payments representing income taxes which the
Guarantor Parent is actually required to pay and which are directly attributable
solely to the consolidated operations of the Guarantor.
7.18 DIVIDENDS AND PAYMENTS. Neither the Company nor the Guarantor shall
declare or pay on, or make any distribution to the holders of any shares of
capital stock of the Company or the Guarantor of any class, or purchase, redeem
or otherwise acquire for consideration any shares of capital stock of the
Company or the Guarantor of any class; provided, however, that nothing contained
in this Section 7.18 shall be construed to prevent any payments expressly
permitted under Section 7.17 hereof.
7.19 ISSUANCE OF CAPITAL STOCK. None of the Borrowers shall issue any
additional shares of capital stock of any class (or any options, warrants,
convertible securities or rights with respect thereto) after the date hereof
other than in connection with the Merger or as contemplated by the Merger
Agreement, except for the issuance of shares of capital stock or other
securities of the Company pursuant to the Option Plan (as identified on Schedule
7.10 and related agreements entered into in accordance therewith).
- 33 -
7.20 PROHIBITION OF CHANGE IN FISCAL YEAR. Neither any Borrower, the
Guarantor nor any Subsidiary thereof shall change its Fiscal Year-end for
accounting purposes from December 31 of any year.
7.21 AMENDMENT TO OTHER DOCUMENTS. Except as otherwise specifically
provided in the Intercreditor Agreement, the Borrowers and the Guarantor shall
not cause or permit, directly or indirectly, any amendment, waiver, consent or
modification of the Subordinated Note Purchase Agreement, Subordinated Note, Tax
Allocation Agreement, Management Advisory Services Agreement, Management
Consulting Agreement, Merger Agreement, any other agreement, document or
instrument contemplated by, or executed in connection with, the Merger Agreement
or the Subordinated Note Purchase Agreement or any other Transaction Document
(as defined in the Subordinated Note Purchase Agreement) (collectively, the
"Transaction Documents"); provided, however, that the foregoing shall not
preclude any holder of the Subordinated Note from waiving any default by the
Guarantor or the Borrowers under the Subordinated Note Purchase Agreement, the
Subordinated Note or the Related Documents (as defined in the Subordinated Note
Purchase Agreement) or from waiving compliance by the Guarantor or any Borrower
with any provisions of the Subordinated Note Purchase Agreement, the
Subordinated Note or the Related Documents (as defined in the Subordinated Note
Purchase Agreement).
7.22 MANAGEMENT. The Company shall not terminate the employment of Xxxxxx
X. Xxxxxxx, Xxxxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxx or Xxxxx X. Xxxxx, without the
prior written consent of the Lender, such consent not to be unreasonably
withheld. In the event of the termination by the Company of the employment of
any such individuals or their respective successors, the Company shall retain,
within 150 days after such termination, replacement officers reasonably
acceptable to the Lender.
7.23 PLEDGE RIGHTS NOT A "CHANGE". Neither the Borrowers nor the Guarantor
shall take or permit any of their Subsidiaries to take any action, or
participate in or consent to any transaction(s) (i) which would require the
advance approval of the OBWC under the OBWC Contracts, other than actions of
CHSI taken, or not taken, in the ordinary course of performance of the OBWC
Contracts which, from time to time, may require the approval of OBWC, or (ii)
which would cause the Lender's or the Mezzanine Lender's realization of any of
their respected rights under the Stock Pledge Agreements (as defined herein or
in the Subordinated Note Purchase Agreement, as applicable) to constitute a
"Change" under the OBWC Contracts (except for any possible "Change" resulting
from the exercise of remedies with respect to the capital stock of CHSI).
ARTICLE 8. EVENTS OF DEFAULT
8.1 EVENT OF DEFAULT. Event of Default shall mean the occurrence of one or
more of the following described events:
(a) The Borrowers shall default in the payment of any principal of the
Notes when the same shall become due, either by the terms thereof or otherwise
as herein provided;
(b) The Borrowers shall default in payment of any Commitment Fee or any
interest on the
- 34 -
Notes or of any other payment due the Lender under this Agreement when the same
shall become due, either by the terms thereof or otherwise as herein provided
and such default continues for a period of five (5) days;
(c) Any Borrower or the Guarantor shall default (after the expiration of
any applicable grace period) in the payment of any amount due to Lender pursuant
to the terms of any promissory note or other instrument other than the Notes;
(d) Any Borrower or the Guarantor shall default (after the expiration of
any applicable grace period) in the performance or observance of any covenant,
condition or agreement contained in the Guaranty, the ISDA Master Agreement, the
Borrower Security Agreements, the Copyright Security Agreements, the Copyright
Collateral Agreements, the Guarantor Security Agreement, the Stock Pledge
Agreements, the Assignments of Leasehold Interests, the Assignment of Life
Insurance Policies, the Intercreditor Agreement or any other security agreement
entered into by any Borrower or the Guarantor for the benefit of the Lender;
(e) Any Borrower or the Guarantor shall default in the payment of any
Indebtedness in excess of $250,000 beyond any period of grace provided with
respect thereto, or any Borrower or the Guarantor shall default in the
performance of any agreement under which such Indebtedness payment obligation is
created if the effect of such default is to cause or permit the holder or
holders of such obligation (or a representative of such holder or holders) to
cause, such payment obligation to become due prior to its date of maturity;
(f) Any representation or warranty made by any Buyer or the Guarantor
herein, in any other Loan Document or in any report, certificate or writing
furnished in connection with or pursuant to this Agreement shall be false or
incorrect in any material respect on the date as of which made;
(g) Any Borrower or the Guarantor shall default in the performance or
observation of any covenant, condition or agreement in Sections 6.1, 6.13, 6.16,
6.17 or 6.18 or in Article 7 hereof;
(h) Any Borrower or the Guarantor shall default in the performance or
observation of any covenant, condition or agreement made or required to be
observed or performed by it under this Agreement (other than those referred to
in Sections 8.1(a), 8.1(b) or 8.1(g) of this Agreement) and such default shall
continue without cure for thirty (30) days after written notice thereof shall
have been given to the Borrowers by the Lender, or, in the case of Sections 6.2,
6.3, 6.4 and 6.5, such default shall continue without cure for ten (10) days
(without any required notice thereof);
(i) Any Borrower or the Guarantor shall make an assignment for the benefit
of creditors;
(j) Any Borrower or the Guarantor shall petition or apply to any tribunal
for the appointment of a trustee or receiver of it, or of any substantial part
of its assets, or commence any proceeding relating to it under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction whether now or hereafter in effect;
(k) Any bankruptcy, insolvency, receivership or similar petition or
application is filed, or any proceedings are commenced against any Borrower or
the Guarantor and any Borrower or the Guarantor
- 35 -
by any act indicates its approval thereof, consent thereto, or acquiescence
therein, or any order is entered appointing a trustee or receiver, or
adjudicating any Borrower or the Guarantor bankrupt or insolvent, or approving
the petition in any such proceedings and such order remains unstayed or
undischarged for more than sixty (60) days; provided, however, that the Lender
shall be under no obligation to make Loans hereunder during the period that such
order is unstayed or undischarged;
(l) Any order is entered in any proceedings against any Borrower or the
Guarantor decreeing the dissolution of any Borrower or the Guarantor and such
order remains unstayed or undischarged for more than sixty (60) days; provided,
however, that the Lender shall be under no obligation to make Loans hereunder
during the period that such order is unstayed or undischarged;
(m) A final judgment or judgments for the payment of money in excess of an
aggregate of $250,000 shall be rendered against any Borrower or the Guarantor
and such judgment or judgments shall remain undischarged for a period of sixty
(60) consecutive days during which the execution shall not be effectively
stayed;
(n) (i) Any Reportable Event or a Prohibited Transaction shall occur with
respect to any Plan; (ii) a notice of intent to terminate a Plan under section
4041 of ERISA shall be filed; (iii) a notice shall be received by the plan
administrator of a Plan that the PBGC has instituted proceedings to terminate a
Plan or appoint a trustee to administer a Plan; (iv) any other event or
condition shall exist which might, in the opinion of the Lender, constitute
grounds under section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan; or (v) any Borrower or the Guarantor or
any ERISA Affiliate shall withdraw from a Multiemployer Plan; provided, however,
that none of the foregoing shall constitute an Event of Default except under
circumstances that the Lender determines could reasonably be expected to have a
Material Adverse Effect;
(o) There shall occur and be continuing any "Event of Default" under and
as defined in the Subordinated Note Purchase Agreement; or
(p) (i) CHSI is notified by the OBWC that it is "at capacity," declared
ineligible to solicit or accept selection by or assignment of an employer by the
OBWC, or the OBWC in any material manner limits the Company's ability to accept
new enrollments, and any of the same is reasonably likely to result in any Event
of Default under Sections 8.1(a) or (b) or any breach of Sections 7.13, 7.14,
7.15 or 7.16; (ii) the State of Ohio announces its intention to dissolve or
disband the state-sponsored system of workers' compensation insurance or the
Ohio Health Partnership Program (and the Lender determines in the exercise of
its commercially reasonable discretion that the same is reasonably likely to
impair the Borrowers' ability to perform their material obligations under this
Agreement, the Notes or the other Loan Documents); (iii) (A) the BOWC terminates
or does not renew the OBWC Contracts, or (B) the OBWC informs CHSI of its intent
to terminate or not renew the OBWC Contracts, except if the Borrowers provide
the Lender written notice that (I) CHSI is actively and diligently pursuing
renewals of the OBWC Contracts, (II) CHSI is reasonably confident that its
efforts will be successful, and (III) such active pursuit of renewal does not
exceed (without renewal) ninety (90) days time from the date of such written
notice to the Lender; or (iv) the OBWC terminates, does not renew or informs
CHSI of its intent to terminate or not renew CHSI OBWC certification as a
vendor.
- 36 -
8.2 CONSEQUENCES OF EVENT OF DEFAULT.
(a) If any Event of Default specified under Section 8.1, other
than subsections (i) through (l) thereof, shall occur and be
continuing the Lender shall be under no further obligation to make
Loans hereunder and the Lender may, by written notice to the
Borrowers, declare the unpaid balance of all Commitment Fees and the
principal and interest accrued on the Notes and all other
obligations of the Borrowers hereunder and under the other Loan
Documents to be forthwith due and payable, and the same shall
thereupon become immediately due and payable, without any other or
further presentment, demand, protest, notice of default, notice of
intent to accelerate or other notice of any kind, all of which are
hereby expressly waived.
(b) If an Event of Default specified under subsections (i)
through (l), inclusive, of Section 8.1 shall occur, the Lender shall
be under no further obligation to make Loans hereunder and the
unpaid balance of all Commitment Fees and the principal and interest
accrued on the Notes and all other obligations of the Borrowers
hereunder shall be immediately due and payable automatically without
presentment, demand, protest, notice of default, notice of intent to
accelerate, notice of acceleration or other notice of any kind, all
of which are hereby expressly waived.
ARTICLE 9. MISCELLANEOUS
9.1 NOTICES. All notices, requests and demands to or upon the parties
hereto to be effective shall be in writing or by telecopy or telex and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made when delivered by hand, or when sent by certified or registered mail,
postage prepaid, or, in the case of telecopy notice, when received, or in the
case of telegraphic notice, when delivered to the telegraph company, or in the
case of telex notice, when sent, answerback received, addressed as follows in
the case of the Borrowers, the Guarantor and the Lender or to such address or
other address as may be hereafter notified by the parties hereto:
Any Borrower or the Guarantor: c/o Security Capital Corporation
Xxx Xxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxxx, Chairman
Facsimile: (000) 000-0000
- 37 -
with copies to:
Health Power, Inc.
c/o CompManagement, Inc.
0000 Xxxxxxx Xxxxxxx
Xxxxxx, Xxxx 00000
Attention: Xxxx Xxxxxx
Facsimile: (000) 000-0000
and
Xxxx Xxxxx & Xxxxxxx LLP
Xxx Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
The Lender: Bank One, N.A.
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000-0000
Attention: Xxxxx X. Xxxxxxxx,
First Vice President
with a copy to:
Squire, Xxxxxxx & Xxxxxxx L.L.P.
0000 Xxxxxxxxxx Xxxxxx
00 Xxxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Attention: Xxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
Notwithstanding any other provision hereof to the contrary, each Borrower
has appointed the Company as its representative to receive and give all notices
to or from such Borrower, and the Lender shall have acted in accordance with
this Agreement in accepting notices from and giving notice to the Company as
being notices from or to such Borrower.
9.2 TERM OF AGREEMENT; TERMINATION; SUCCESSORS AND ASSIGNS. This Agreement
and all covenants, agreements, representations and warranties made herein and in
the reports, certificates and other writings delivered pursuant hereto shall
survive the execution and delivery of this Agreement, the making by the Lender
of each Revolving Credit Loan and the Term Loan and the execution and delivery
to the Lender of the Notes and shall continue in full force and effect until
terminated. The representations of Borrowers and the Guarantor herein are made
as of the date of this Agreement. This Agreement shall terminate at such time as
the Revolving Credit Commitment is terminated in full and the Lender has
- 38 -
received payment in full of all amounts owing to the Lender hereunder and under
the Notes. Whenever in this Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and assigns of such
parties; and all terms and provisions of this Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns, whether so expressed or not; provided, however, that (i)
neither any Borrower nor the Guarantor may assign or transfer its rights or
duties under this Agreement to any Person without the prior written consent of
the Lender and (ii) the Lender may not assign, or participate, this Agreement or
the Notes to a direct competitor of the Borrowers.
9.3 NO IMPLIED RIGHTS OR WAIVERS. No notice to or demand on any Borrower
or the Guarantor in any case shall entitle such Borrower or the Guarantor to any
other or further notice or demand in the same, similar and other circumstances.
Neither any failure nor any delay on the part of the Lender in exercising any
right, power or privilege hereunder or under the Notes shall operate as a waiver
thereof, nor shall a single or partial exercise thereof preclude any other or
further exercise of the same or the exercise of any other right, power or
privilege.
9.4 APPLICABLE LAW. This Agreement, the Notes and the other Loan Documents
shall be deemed to be contracts made under and shall be construed in accordance
with and governed by the laws of the State.
9.5 MODIFICATIONS, AMENDMENTS OR WAIVERS.
(a) The Lender, the Borrowers and the Guarantor may from time to time
enter into written agreements amending or changing any provision of this
Agreement or the rights of the Lender or the Borrowers and the Guarantor
hereunder or give waivers or consents to a departure from the due performance of
the obligations of the Borrowers or the Guarantor hereunder or under the Notes.
(b) In the case of any such waiver or consent relating to any provision
hereof, the parties shall be restored to their former positions and rights
thereunder, and any Default or Event of Default so waived or consented to shall
be deemed to be cured and not continuing; but no such waiver or consent shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereon.
9.6 COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures thereto were upon the
same instrument.
9.7 HEADINGS. The headings of the articles and sections of this Agreement
are inserted for convenience only and shall not be deemed to constitute a part
hereof.
9.8 EXPENSES. The Borrowers and the Guarantor shall pay or cause to be
paid and save the Lender harmless against liability for the payment of all
reasonable out-of-pocket expenses, including counsel fees and disbursements
incurred or paid by the Lender in connection with the negotiation, development,
preparation and execution of this Agreement, the Notes, the other Loan Documents
and the related transactions. The Borrowers and the Guarantor shall pay or cause
to be paid and save the Lender harmless against liability for the payment of all
reasonable out-of-pocket expenses, including counsel fees and disbursements
incurred or paid by the Lender in connection with (i) any requested amendments,
waivers or consents pursuant to the provisions hereof and thereof; and (ii) the
enforcement of this
- 39 -
Agreement, the Notes and the other Loan Documents including such expenses as may
be incurred by the Lender in collection of the Notes and all obligations of the
Borrowers and the Guarantor hereunder.
9.9 ACCOUNTING TERMS. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP.
9.10 SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or effecting the validity or enforceability of such
provisions in any other jurisdiction.
9.11 WAIVER OF JURY TRIAL; CONSENT TO VENUE. The Lender, the Borrowers and
the Guarantor, after having had the opportunity to consult with counsel,
knowingly, voluntarily, irrevocably, unconditionally and intentionally waive any
right to a trial by jury in any litigation based upon or arising out of this
Agreement or any related instrument or agreement, or any of the transactions
contemplated by this Agreement, or any course of conduct, dealing, statements
(whether oral or written) or actions of any Borrower, the Guarantor or the
Lender. The Borrowers and the Guarantor shall not seek to consolidate, by
counterclaim or otherwise, any action in which a jury trial has been waived with
any other action in which a jury trial cannot be or has not been waived. In the
event of a dispute under this Agreement, the Borrowers and the Guarantor hereby,
jointly and severally, agree that jurisdiction and venue lies in a court of
competent jurisdiction in Franklin County, Ohio. These provisions shall not be
deemed to have been modified in any respect or relinquished by the Lender except
by a written instrument executed by it. This provision is a material inducement
to the Lender to enter into the transactions described in this Agreement.
9.12 ENTIRE AGREEMENT. This Agreement and the Exhibits hereto reflect the
entire understanding of the parties with respect to the subject matter hereof
and supersede all prior agreements or understandings with respect thereto in
their entirety.
9.13 CERTIFICATES, ETC. All certificates, reports and other writings
submitted by any Borrower or the Guarantor to the Lender hereunder shall
constitute the representations and warranties of any Borrower or the Guarantor
to the Lender as to the truth and accuracy of all facts, calculations and other
information set forth therein, as though fully set forth and repeated in this
Agreement.
9.14 WAIVER OF CERTAIN DEFENSES. Each of the Borrowers and the Guarantor
hereby waives all defenses based on suretyship and impairment of collateral.
ARTICLE 10. DEFINITIONS
The terms set forth and defined in Exhibit K hereto shall, for the
purposes of this Agreement, have the meanings assigned to such terms as set
forth in Exhibit K.
- 40 -
IN WITNESS WHEREOF, the Borrowers, the Guarantor and the Lender have
caused this Agreement to be duly executed by their duly authorized officers, all
as of the day and year first above written.
LENDER: GUARANTOR:
------ ---------
BANK ONE, N.A. WC HOLDINGS, INC., a Delaware
corporation
By: /S/XXXXX X. XXXXXXXX By: /S/XXXXX X. XXXXXXXXXX
Xxxxx X. Xxxxxxxx, Xxxxx X. Xxxxxxxxxx, Chairman
First Vice President
BORROWERS:
HEALTH POWER, INC., a Delaware COMPMANAGEMENT, INC., an Ohio
corporation corporation
By: /S/XXXXXX X. XXXXXXX By: /S/XXXXXX X. XXXXXXX
Name: Xxxxxx X. Xxxxxxx Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer Title: Chief Executive Officer
COMPMANAGEMENT HEALTH M&N RISK MANAGEMENT, INC., an
SYSTEMS, INC., an Ohio corporation Ohio corporation
By: /S/XXXXXX X. XXXXXXX By: /S/XXXXXX X. XXXXXXX
Name: Xxxxxx X. Xxxxxxx Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer Title: Chief Executive Officer
M&N ENTERPRISES, INC., an Ohio
corporation
By: /S/XXXXXX X. XXXXXXX
Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
- 41 -
(Exhibit K follows other exhibits which have been omitted)
EXHIBIT K
DEFINITIONS
"ADJUSTED EURODOLLAR RATE" shall mean the rate per annum equal to the
following:
EURODOLLAR RATE
1 - Eurocurrency Liabilities
as adjusted to the next higher 1/16 of one percent.
"ADJUSTED EURODOLLAR TERM RATE" is defined in Section 2.2(c).
"AFFILIATE" of a Person shall mean any other Person directly or indirectly
controlling, under common control with, or controlled by such Person. An
Affiliate of the Company or the Guarantor shall include any officer, director,
or record or beneficial owner of 5% or more of the outstanding capital stock of
any class of the Company, as applicable. For purposes of the definition of
Affiliate, "control" when used with respect to any specific Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings relative
to the foregoing.
"AGREEMENT" is defined in the preamble.
"ANTHEM INDEBTEDNESS" is defined in Section 7.1.
"APPLICABLE MARGIN" shall be determined as provided in Section 1.3(d).
"ASSIGNMENT OF LEASEHOLD INTEREST" is defined in Section 3.4(d).
"ASSIGNMENT OF LIFE INSURANCE POLICY" and "ASSIGNMENTS OF LIFE INSURANCE
POLICIES" are defined in Section 3.4(e).
"BALANCE SHEET" is defined in Section 5.8.
"BORROWER SECURITY AGREEMENT" and "BORROWER SECURITY AGREEMENTS" are
defined in Section 3.4(a).
"BORROWING DATE" is defined in Section 1.1.
"XXXXXXX LIFE INSURANCE POLICY" shall mean a life insurance policy issued
by a life insurance company reasonably acceptable to the Lender and any
supplementary contracts issued in connection therewith, which policy shall have
an unencumbered face value of not less than $3,000,000 upon the life of Xxxxxx
X. Xxxxxxx.
- 42 -
"BUSINESS DAY" shall mean any day other than Saturdays, Sundays and other
legal holidays or days on which the principal office of the Lender is closed.
"BUSINESS YEAR" shall mean a year of 360 days.
"CAPITAL CONTRIBUTION AGREEMENT" means the Capital Contribution Agreement
of even date herewith executed and delivered by the Guarantor's Parent in favor
of the Mezzanine Lender pursuant to which the Guarantor's Parent has agreed to
pay Capital Contributions (as defined therein) directly to the Mezzanine Lender
in an amount not to exceed $2,000,000, subject to the terms and conditions set
forth therein.
"CHSI" is defined in the preamble.
"CMI" is defined in the preamble.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"COMMITMENT FEE" is defined in Section 3.1.
"COMPANY" is defined in the preamble.
"COPYRIGHT COLLATERAL AGREEMENT" and "COPYRIGHT COLLATERAL AGREEMENTS"
shall mean individually and collectively the Copyright Collateral Agreements
between the Borrowers and the Lender executed pursuant to the Copyright Security
Agreements.
"DEBT COVERAGE RATIO" shall mean the ratio of (i) the sum of the Company's
consolidated EBITDA for the applicable fiscal period minus (without duplication)
cash payments of income taxes and Tax Agreement Payments made in such period
divided by (ii) without duplication, the sum of the Company's consolidated Total
Debt Service for such period plus the Guarantor's Total Debt Service under the
Subordinated Note Purchase Agreement and the Subordinated Note for such period.
"DEFAULT" shall mean the occurrence of an event which with the giving of
notice, passage of time, or both would become an Event of Default.
"DEFAULT RATE" is defined in Section 3.5
"DEFERRED COMPENSATION PAYMENTS" shall mean the payments required to be
made by the Borrowers to their officers and employees pursuant to the Deferred
Compensation Plan.
"DEFERRED COMPENSATION PLAN" shall mean the CompManagement, Inc. Deferred
Compensation Plan dated December 21, 2000.
"DUBLIN LEASE" means that certain Office Lease dated December 13, 1996
between CMI and Duke Realty Limited Partnership, as more fully described in the
Assignment of Leasehold Interest.
- 43 -
"EBITA" shall mean the Company's consolidated income from operations
(plus, to the extent not included in operating income, interest income) before
(i) interest expense (adjusted for interest rate swaps and including, without
limitation, the interest component of capitalized leases), (ii) taxes, (iii)
amortization, (iv) Tax Agreement Payments, (v) Deferred Compensation Payments
(including the accrual thereof), (vi) accrual of Incentive Compensation to the
extent, if any, such accrual of Incentive Compensation is as a result of
payments of the same being blocked under the provisions of the Loan Documents or
the Subordinated Note Purchase Agreement (provided, that the subsequent actual
payment of such accrued amounts shall be deducted in determining EBITA (anything
in GAAP to the contrary notwithstanding)), (vii) management fees payable to the
Guarantor's Parent pursuant to the Management Advisory Services Agreement,
Management Fee Debt Payments paid by the Borrowers to the Guarantor for the
purpose of paying regularly scheduled principal and interest payments due under
the Subordinated Note (and excluding that portion thereof used to pay life
insurance premiums), (viii) gains (and losses) from the sale or disposition of
assets outside the ordinary course of business and extraordinary items, (ix)
income (and losses) of any Person (other than wholly-owned Subsidiaries of the
Company) in which the Company or any of its Subsidiaries has an ownership
interest unless received by the Company or one of its Subsidiaries in a cash
distribution, (x) income (and losses) of any Person prior to the date it became
a Subsidiary of the Company or was merged into or consolidated with the Company
or any of its Subsidiaries, and (xi) accrual of the Performance Fee (as defined
in the Subordinated Note Purchase Agreement) due under the Subordinated Note to
the extent not otherwise treated as an interest expense all as determined in
accordance with GAAP consistently applied. Notwithstanding anything else in this
definition, revenue from the sale or licensing of the Company's proprietary
software shall be included in the calculation of the Company's EBITA.
"EBITDA" shall mean, for any period, the Company's EBITA less management
fees paid to the Guarantor's Parent pursuant to the Management Advisory Services
Agreement plus depreciation expense of the Company and each of its Subsidiaries
determined on a consolidated basis in accordance with GAAP consistently applied.
"EFFECTIVE DATE" is defined in Section 2.2(c).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA AFFILIATE" shall mean each trade or business, including each
Borrower and the Guarantor, whether or not incorporated, which together with the
Company and/or the Guarantor would be treated as a single employer under Section
4001 of ERISA.
"EUROCURRENCY LIABILITIES" means the aggregate of the rates (expressed as
a decimal fraction) of reserve requirements (including, without limitation,
basic, supplemental, marginal and emergency reserves under any regulations of
the Board of Governors of the Federal Reserve System or other governmental
authority having jurisdiction with respect thereto), as now and from time to
time hereafter in effect, dealing with reserve requirements prescribed for
eurocurrency funding maintained by a member of such System.
"EURODOLLAR BANKING DAYS" shall mean days which are both Business Days and
London Banking Days.
- 44 -
"EURODOLLAR RATE" shall mean with respect to each Interest Period (as
hereinafter defined), the offered rate for U.S. Dollar deposits of not less than
$1,000,000 as of 11:00 a.m. City of London, England time on the London Banking
Day preceding the date of such Eurodollar Rate Loan as shown on the display
designated as "British Bankers Assoc. Interest Settlement Rates" on the Telerate
System ("Telerate"), Page 3750 or Page 3740 or such other page or pages as may
replace such pages on Telerate for the purpose of displaying such rate;
provided, however, that if such rate is not available on Telerate, then such
offered rate shall be otherwise independently determined by the Lender from an
alternate substantially similar methodology as that theretofore used to
determine such offered rate in Telerate.
"EURODOLLAR RATE LOAN(S)" is defined in Section 1.1.
"EURODOLLAR RATE PORTION" is defined in Section 2.2(c).
"EVENT OF DEFAULT" is defined in Section 8.1.
"FACILITY FEE" is defined in Section 3.1.
"FISCAL YEAR" shall mean the Fiscal Year of the Borrowers, the Guarantor
and each of their respective Subsidiaries as established from time to time in
accordance with the provisions of this Agreement.
"FUNDED INDEBTEDNESS" shall mean, without duplication, the sum of (i) the
consolidated Indebtedness of the Borrowers plus (ii) the Indebtedness of the
Guarantor under the Subordinated Note Purchase Agreement and the Subordinated
Note (excluding the accrued amount of the Performance Fee (as defined in the
Subordinated Note Purchase Agreement)) minus (iii) the consolidated total trade
liabilities and accrued expenses of the Borrowers minus (iv) Indebtedness of the
Borrowers under the Deferred Compensation Plan and the Tax Allocation Agreement
minus (v) accrued incentive compensation expenses.
"GAAP" means generally accepted accounting principles consistently
applied.
"GUARANTOR" is defined in the preamble.
"GUARANTOR'S PARENT" shall mean Security Capital Corporation, a Delaware
corporation and the parent corporation of the Guarantor.
"GUARANTOR SECURITY AGREEMENT" is defined in Section 3.4(b).
"GUARANTY" is defined in Section 3.4(f).
"HPAC" means HP Acquisition Corp., a Delaware corporation.
"HP HMO" shall mean Health Power HMO, Inc., an Ohio corporation and a
Subsidiary of the Company, which has been liquidated, dissolved and wound-up.
"INCENTIVE COMPENSATION" means any amounts payable to the Management
Investors (as defined
- 45 -
in the Subordinated Note Purchase Agreement) pursuant to any incentive
compensation plan established by the Company or any of its Subsidiaries in
respect of the Company's or any of its Subsidiaries' actual financial
performance measured against budgeted financial performance as set forth in
Section 5(c) of the Employment Agreements (as defined in the Subordinated Note
Purchase Agreement).
"ISDA MASTER AGREEMENT" is defined in Section 4.1(a)(ix).
"INDEBTEDNESS" as applied to any Person, shall mean all obligations of
that Person which are included in clauses (i), (ii), (iii) and (iv) of the
definition of Liabilities below, irrespective of whether or not any such
obligations also would be included within any other clause of such definition,
but including, however, (a) obligations properly treated as capital lease
obligations or their equivalent under GAAP, (b) any obligation of such Person or
an ERISA Affiliate to a Multiemployer Plan and (c) any indebtedness secured by a
lien on a Person's assets.
"INTERCREDITOR AGREEMENT" is defined in Section 4.1(b)(ii).
"INTEREST PAYMENT DATE" is defined in Section 1.3(b).
"INTEREST PERIOD", with respect to any Eurodollar Rate Loan or Eurodollar
Rate Portion of the Term Loan, means the period commencing on, as the case may
be, the Borrowing Date or conversion date with respect to a Eurodollar Rate Loan
or the Effective Date with respect to a Eurodollar Rate Portion, and ending 30,
60, 90, 180 or 360 days thereafter as selected by the Borrowers in their notice
of borrowing as provided in Section 1.1 or Section 2.2, as applicable; and
The foregoing provisions relating to Interest Periods are subject to the
following:
(i) any Interest Period with respect to a Eurodollar Rate Loan or a
Eurodollar Rate Portion that shall commence on the last London Banking Day
of the calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end
on the last London Banking Day of the appropriate subsequent calendar
month;
(ii) each Interest Period that would otherwise end on a day which is
not a London Banking Day shall end on the next succeeding London Banking
Day, or, if such next succeeding London Banking Day falls in the next
succeeding calendar month, on the next preceding London Banking Day; and
(iii) no Interest Period on a Eurodollar Rate Loan or a Eurodollar
Rate Portion may end after the respective maturity date of the Revolving
Credit Note or the Term Note, as the case may be.
"INVENTORY" shall have the meaning provided in the Uniform Commercial
Code.
"KENTUCKY LC" is defined in Section 1.7.
"LEASES" shall mean the leases of real property set forth on Schedule 5.5
hereto to which one or
- 46 -
more of the Borrowers are a party.
"LENDER" is defined in the preamble.
"LIABILITIES" as applied to any Person shall mean: (i) all obligations of
that Person to repay or pay money borrowed from another Person or the deferred
portion of the purchase price of services or property (other than inventory
purchased in the ordinary course of business unless evidenced by a note
payable); (ii) all obligations of that Person under bankers acceptances and all
obligations of that Person for the principal component of capitalized leases;
(iii) all obligations of that Person under letters of credit; (iv) obligations
of others which that Person has directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business),
discounted or sold with recourse or agreed (contingently or otherwise) to
purchase or repurchase or otherwise acquire, or in respect of which that Person
has agreed to supply or advance funds (whether by way of loan, stock purchase,
capital contribution or otherwise) or otherwise to become directly or indirectly
liable; (v) all obligations evidenced or secured by any mortgage, pledge, lien
or conditional sale or other title retention agreement to which any property or
asset owned or held by that Person is subject, whether or not the obligation
evidenced or secured thereby shall have been assumed; and (vi) all other items
(except items of capital stock, capital surplus, general contingency reserves,
deferred income taxes, retained earnings and amounts attributable to minority
interest, if any) which in accordance with GAAP would be included in determining
total liabilities as shown on the liability side of a balance sheet of that
Person as of the date Liabilities is to be determined; excluding, however, from
the foregoing, obligations of that Person properly treated as capital lease
obligations or their equivalent under GAAP.
"LOAN DOCUMENTS" shall mean collectively this Agreement, the Notes, the
Borrower Security Agreements, the Copyright Security Agreements, the Copyright
Collateral Agreements, the Guarantor Security Agreement, the Guaranty, the Stock
Pledge Agreements, the Assignment of Leasehold Interest, the Assignments of Life
Insurance Policies, the ISDA Master Agreement, the Intercreditor Agreement, the
UCC financing statements executed by the Borrowers and the Guarantor in favor of
the Lender and all of the other agreements, documents and instruments evidencing
or securing the Loans.
"LOANS" is defined in Section 3.1
"LONDON BANKING DAYS" shall mean days on which transactions are carried
out in the London Interbank Market.
"MANAGEMENT ADVISORY SERVICES AGREEMENT" shall mean the Management
Advisory Services Agreement dated as of December 21, 2000, by and among the
Borrowers and the Guarantor's Parent, pursuant to which the Borrowers have
agreed to pay to the Guarantor's Parent certain management advisory services
fees.
"MANAGEMENT CONSULTING AGREEMENT" shall mean the Management Consulting
Agreement dated as of December 21, 2000, by and among the Borrowers and the
Guarantor, pursuant to which the Borrowers have agreed to pay to the Guarantor
an annual management consulting fee equal to certain amounts due and payable by
the Guarantor during the applicable year to the Mezzanine Lender under the
Subordinated Note Purchase Agreement plus such additional amounts as are
necessary to pay the premiums due in each year for the Key Man Policy (as
defined in the Subordinated Note Purchase
- 47 -
Agreement).
"MANAGEMENT FEE DEBT PAYMENTS" shall mean the payments required to be made
by the Borrowers to the Guarantor under the terms of the Management Consulting
Agreement.
"MATERIAL ADVERSE EFFECT" shall mean (i) a materially adverse effect on
the business or financial position, results of operations or prospects of the
Company, CMI or the Guarantor, as applicable, and its respective Subsidiaries
considered as a whole, (ii) material impairment of the ability of a Borrower or
the Guarantor, as applicable, or its respective Subsidiaries to perform, in any
material respect, any of its obligations under this Agreement or the other Loan
Documents to which it is or will be a party, or (iii) material impairment of the
rights of or benefits available to the Lender under this Agreement.
"MERGER CONSIDERATION" shall have the meaning assigned to such term in the
Merger Agreement.
"MERGER" shall mean the merger of HPAC with and into the Company as
contemplated by the Merger Agreement.
"MERGER AGREEMENT" shall mean the Agreement and Plan of Merger dated as of
June 8, 2000, among the Guarantor's Parent, HPAC and the Company, as amended by
(i) a certain First Amendment to Agreement and Plan of Merger dated as of August
14, 2000 and (ii) a certain Second Amendment to Agreement and Plan of Merger
dated as of August 23, 2000.
"MEZZANINE LENDER" shall mean Banc One Mezzanine Corporation.
"MNEF" is defined in the preamble.
"MNRMI" is defined in the preamble.
"MULTIEMPLOYER PLAN" shall mean a Plan described in Section 4001(a)(3) of
ERISA to which any Borrower, the Guarantor or any ERISA Affiliate is required to
contribute on behalf of any of its employees.
"NET WORTH" shall mean the total of capital stock (less treasury stock),
paid in surplus, general contingency reserves, and retained earnings (deficit)
of the Company on a consolidated basis, determined in accordance with GAAP,
after eliminating all amounts properly attributable to minority interests, if
any, in the stock and surplus, and excluding, for the avoidance of doubt, the
contingent liabilities of the Borrowers under their guaranties of the
Subordinated Note.
"NOTES" is defined in Section 3.2
"OBWC" is defined in Section 5.21.
"OBWC CONTRACTS" means those certain contracts, each effective January 1,
1999, respectively by and between (i) CHSI and the OBWC, and (ii) CHSI (as
assignee of Community Insurance Company d/b/a/ Anthem Blue Cross/Blue Shield)
and the OBWC, together with any successor or subsequent substantially similar
agreements, in each case under which CHSI is to provide medical management and
- 48 -
cost containment services in connection with the OBWC's administration of
workers' compensation benefits, each of the foregoing OBWC Contracts as renewed,
modified, amended, substituted or replaced from time to time.
"PBGC" shall mean the Pension Benefit Guarantee Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"PERMITTED LIENS" is defined in Section 7.2.
"PERSON" shall mean a corporation, an association, a partnership, a
limited liability company, an organization, a business, an individual, a
government or political subdivision thereof or a governmental agency.
"PLAN" shall mean any plan (other than a Multiemployer Plan) subject to
Title IV of ERISA maintained for employees of any Borrower, the Guarantor or any
ERISA Affiliate, and any such plan no longer maintained by any Borrower, the
Guarantor or any of its ERISA Affiliates to which any Borrower, the Guarantor or
any of their ERISA Affiliates has made or was required to make any contributions
within any of the preceding five years.
"PRIME RATE" shall mean on any day the per annum rate published or
announced by the Lender from time to time as its prime rate, which may not be
the Lender's lowest rate.
"REPORTABLE EVENT" shall mean any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder, a withdrawal from a Plan
described in Section 4063 of ERISA, a cessation of operations described in
Section 4068(f) of ERISA, an amendment to a Plan necessitating the posting of
security under Section 401(a)(29) of the Code, or a failure to make a payment
required by Section 412(m) of the Code and Section 302(e) of ERISA when due.
"REVOLVING CREDIT COMMITMENT" is defined in Section 1.1.
"REVOLVING CREDIT LOAN" is defined in Section 1.1.
"REVOLVING CREDIT NOTE" is defined in Section 1.2.
"REVOLVING LOAN" is defined in the recitals hereto.
"STATE" shall mean the State of Ohio.
"STOCK PLEDGE AGREEMENT" and "STOCK PLEDGE AGREEMENTS" are defined in
Section 3.4(c).
"SUBORDINATED INDEBTEDNESS" shall mean all Indebtedness of the Borrowers
which is subordinated to all Indebtedness now or hereafter owed by the Borrowers
to the Lender on specific terms and conditions satisfactory to, and approved in
writing by, the Lender.
"SUBORDINATED NOTE" shall mean the Senior Subordinated Note dated as of
December 21, 2000 in the principal amount of $6,000,000 issued and sold by the
Guarantor to the Mezzanine Lender pursuant
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to the Subordinated Note Purchase Agreement.
"SUBORDINATED NOTE PURCHASE AGREEMENT" shall mean the Senior Subordinated
Note Purchase Agreement dated as of December 21, 2000 among the Guarantor, as
borrower, the Borrowers, as guarantors, and the Mezzanine Lender, as purchaser.
"SUBSIDIARY" of a corporation shall mean any corporation of which more
than 50% of the outstanding stock having ordinary voting power to elect a
majority of the board of directors of such corporation is directly or indirectly
owned by such corporation or by such corporation and any of its Subsidiaries
taken together.
"TAX AGREEMENT PAYMENTS" shall mean payments made by the Borrowers, the
Guarantor or their respective Subsidiaries to the Guarantor's Parent pursuant to
the Tax Allocation Agreement; provided, however, that in no event shall the
amount of such payments by the Borrowers, the Guarantor and their respective
Subsidiaries under such agreement with respect to any Fiscal Year exceed the
aggregate dollar amount of income taxes that such entities would have paid with
respect to such Fiscal Year had they filed consolidated income tax returns,
including no other Person (for avoidance of doubt, in calculating such amount
the amount, of any Tax Agreement Payments shall be excluded (i.e., shall not be
considered an expense)).
"TAX ALLOCATION AGREEMENT" means the Tax Allocation Agreement dated
December 21, 2000 among the Guarantor's Parent, the Guarantor and the Borrowers.
"TEMPORARY KENTUCKY LC" shall mean that certain letter of credit in the
face amount of $500,000 issued by National City Bank in favor of the
Commonwealth of Kentucky Department of Worker's Claims for the account of CHSI,
which letter of credit the Borrowers shall cause to be cancelled within thirty
(30) days after the date of this Agreement.
"TEMPORARY KENTUCKY LC COLLATERAL" shall mean the cash collateral in the
amount of up to $500,000 pledged to National City Bank to secure CHSI's
reimbursement obligations under the Temporary Kentucky LC, which pledge the
Borrower shall cause to be released within 30 days of the date of this
Agreement.
"TERM LOAN" is defined in the recitals hereto.
"TERM NOTE" is defined in Section 2.2.
"TOTAL DEBT SERVICE" means all principal payments, interest payments
(after taking into account hedging arrangements and including, without
limitation, the interest component of capitalized leases), letter of credit fees
and reimbursements, capital lease payments and repayments of the Anthem
Indebtedness (all without duplication) due and payable during the relevant
fiscal period for which such calculation is being made, but excluding, for the
avoidance of doubt, the accrual of the Performance Fee (as defined in the
Subordinated Note Purchase Agreement).
"TRANSACTION DOCUMENTS" is defined in Section 7.21.
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"UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code as
adopted in the State, as amended from time to time.
"UNUSED COMMITMENT" is defined in Section 3.1.
"VARIABLE RATE LOAN(S)" is defined in Section 1.1.
"VARIABLE RATE PORTION" is defined in Section 2.2(b).
"VARIABLE TERM RATE" is defined in Section 2.2(b).
"XXXXXX LIFE INSURANCE POLICY" shall mean a life insurance policy issued
by a life insurance company reasonably acceptable to the Lender and any
supplemental contracts issued in connection therewith, which policy shall have
an unencumbered face value of not less than $3,000,000 upon the life of Xxxxxxxx
X. Xxxxxx.
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