EXECUTION COPY
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
REVOLVING CREDIT AGREEMENT
DATED AS OF
JULY 3, 1997
BETWEEN
PROSPECT MEDICAL HOLDINGS, INC.
("BORROWER")
AND
IMPERIAL BANK
("BANK")
$10,000,000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page(s)
-------
ARTICLE I
DEFINITIONS AND INTERPRETATIONS . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ADA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Applicable Margin . . . . . . . . . . . . . . . . . . . . . . . . . 1
Applicable Multiplier . . . . . . . . . . . . . . . . . . . . . . . 2
Applicable Period . . . . . . . . . . . . . . . . . . . . . . . . . 2
Asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Asset Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Bank Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Bankruptcy Code . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Borrower. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Business Day. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . . . 3
Capital Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Capital Lease Obligations . . . . . . . . . . . . . . . . . . . . . 3
Champus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . 3
Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Collateral Assignment of Transaction Documents. . . . . . . . . . . 4
Commitment Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Compliance Certificate. . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated EBITDA . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated EBITDAR. . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Interest Expense . . . . . . . . . . . . . . . . . . . 4
Consolidated Lease Expense. . . . . . . . . . . . . . . . . . . . . 4
Consolidated Net Income . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Net Worth. . . . . . . . . . . . . . . . . . . . . . . 4
Coverage Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Credit Succession Agreement . . . . . . . . . . . . . . . . . . . . 5
Current Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 5
Current Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
i
Page(s)
-------
Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ERISA Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ERISA Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . 6
Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Financial Statement(s). . . . . . . . . . . . . . . . . . . . . . . 6
GAAP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Governing Documents . . . . . . . . . . . . . . . . . . . . . . . . 7
Governmental Authority. . . . . . . . . . . . . . . . . . . . . . . 7
Guaranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Guarantor(s). . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . 7
Health Service Plan License . . . . . . . . . . . . . . . . . . . . 7
Insolvency Proceeding . . . . . . . . . . . . . . . . . . . . . . . 7
Indemnified Person(s) . . . . . . . . . . . . . . . . . . . . . . . 7
Inter-Company Note (Guarantor). . . . . . . . . . . . . . . . . . . 8
Inter-Company Note (Physician Group Shareholder). . . . . . . . . . 8
Inter-Company Security Agreement. . . . . . . . . . . . . . . . . . 8
Internal Revenue Code . . . . . . . . . . . . . . . . . . . . . . . 8
Late Payment Fee. . . . . . . . . . . . . . . . . . . . . . . . . . 8
Lending Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Letter(s) of Credit . . . . . . . . . . . . . . . . . . . . . . . . 8
Letter of Credit Application. . . . . . . . . . . . . . . . . . . . 8
Letter of Credit Fee. . . . . . . . . . . . . . . . . . . . . . . . 8
Letter of Credit Usage. . . . . . . . . . . . . . . . . . . . . . . 8
Leverage Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Lien. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Loan Document(s). . . . . . . . . . . . . . . . . . . . . . . . . . 9
Management Services Agreement . . . . . . . . . . . . . . . . . . . 9
Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . 9
Medicaid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Medicare. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Multiemployer Plan. . . . . . . . . . . . . . . . . . . . . . . . . 10
Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Notice of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . 10
Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Old Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Operating Lease . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Option Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 11
Optional Commitment Reduction . . . . . . . . . . . . . . . . . . . 11
ii
Page(s)
-------
Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Pay-Off Letters . . . . . . . . . . . . . . . . . . . . . . . . . . 11
PBGC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Permitted Acquisition . . . . . . . . . . . . . . . . . . . . . . . 11
Permitted Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . 11
Permitted Liens . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Physician Group . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Physician Group Shareholder . . . . . . . . . . . . . . . . . . . . 12
Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Prime Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Private Insurance Company . . . . . . . . . . . . . . . . . . . . . 13
Purchase Money Lien . . . . . . . . . . . . . . . . . . . . . . . . 13
Real Estate Leases. . . . . . . . . . . . . . . . . . . . . . . . . 13
Reportable Event. . . . . . . . . . . . . . . . . . . . . . . . . . 13
Responsible Officer . . . . . . . . . . . . . . . . . . . . . . . . 13
Retiree Health Plan . . . . . . . . . . . . . . . . . . . . . . . . 13
Revolving Credit Commitment . . . . . . . . . . . . . . . . . . . . 13
Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Revolving Loans Daily Balances. . . . . . . . . . . . . . . . . . . 13
Revolving Loans Maturity Date . . . . . . . . . . . . . . . . . . . 13
Security Agreement (Borrower)" . . . . . . . . . . . . . . . . . . 13
Security Agreement (Guarantor). . . . . . . . . . . . . . . . . . . 14
Security Agreement (Physician Group). . . . . . . . . . . . . . . . 14
Solvent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Stock Pledge Agreement" . . . . . . . . . . . . . . . . . . . . . . 14
Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Transaction Documents . . . . . . . . . . . . . . . . . . . . . . . 15
Transferee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Unfunded Liabilities. . . . . . . . . . . . . . . . . . . . . . . . 15
Unmatured Event of Default. . . . . . . . . . . . . . . . . . . . . 15
Unused Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . 15
Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Working Capital Sublimit. . . . . . . . . . . . . . . . . . . . . . 15
1.2 Accounting Terms and Determinations . . . . . . . . . . . . . . . . 16
1.3 Computation of Time Periods . . . . . . . . . . . . . . . . . . . . 16
1.4 Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.5 Exhibits and Schedules. . . . . . . . . . . . . . . . . . . . . . . 16
1.6 No Presumption Against Any Party. . . . . . . . . . . . . . . . . . 16
1.7 Independence of Provisions. . . . . . . . . . . . . . . . . . . . . 16
iii
Page(s)
-------
ARTICLE II
TERMS OF THE CREDIT . . . . . . . . . . . 17
2.1 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . 17
2.2 Revolving Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.3 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.4 Notice of Borrowing Requirements. . . . . . . . . . . . . . . . . . 19
2.5 Interest Rates; Payments of Interest. . . . . . . . . . . . . . . . 19
2.6 Note; Statements of Obligations . . . . . . . . . . . . . . . . . . 20
2.7 Holidays. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.8 Time and Place of Payments. . . . . . . . . . . . . . . . . . . . . 21
2.9 Commitment Fee and Unused Commitment Fee. . . . . . . . . . . . . . 21
2.10 Optional Commitment Reductions. . . . . . . . . . . . . . . . . . . 22
ARTICLE III
CONDITIONS PRECEDENT. . . . . . . . . . . 22
3.1 Conditions to Initial Loan or Letter of Credit. . . . . . . . . . . 22
3.2 Conditions to all Loans and Letters of Credit . . . . . . . . . . . 25
3.3 Additional Conditions to Loans for Permitted Acquisitions . . . . . 25
ARTICLE IV
REPRESENTATIONS AND WARRANTIES . . . . . . . . 25
4.1 Legal Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.2 No Violation; Compliance. . . . . . . . . . . . . . . . . . . . . . 26
4.3 Authorization; Enforceability . . . . . . . . . . . . . . . . . . . 26
4.4 Approvals; Consents . . . . . . . . . . . . . . . . . . . . . . . . 27
4.5 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.6 Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.8 No Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.9 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.11 Correctness of Financial Statements . . . . . . . . . . . . . . . . 28
4.12 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.13 Other Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.14 Public Utility Holding Company Act. . . . . . . . . . . . . . . . . 28
4.15 Investment Company Act. . . . . . . . . . . . . . . . . . . . . . . 28
4.16 Patents, Trademarks, Copyrights, and Intellectual Property, etc.. . 29
4.17 Environmental Condition . . . . . . . . . . . . . . . . . . . . . . 29
4.18 Real Estate Leases. . . . . . . . . . . . . . . . . . . . . . . . . 29
4.19 Compliance With ADA . . . . . . . . . . . . . . . . . . . . . . . . 29
iv
Page(s)
-------
4.20 Physician Groups; Transaction Documents . . . . . . . . . . . . . . 30
4.21 Billing Practices . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.22 Character of Business . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE V
AFFIRMATIVE COVENANTS. . . . . . . . . . . 31
5.1 Punctual Payments . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.2 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.3 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 31
5.4 Existence; Preservation of Licenses; Compliance with Law. . . . . . 33
5.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.6 Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.7 Taxes and Other Liabilities . . . . . . . . . . . . . . . . . . . . 34
5.8 Notice to Bank. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.9 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.10 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . 36
5.11 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.12 Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.13 Real Estate Leases. . . . . . . . . . . . . . . . . . . . . . . . . 37
5.14 ADA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.15 Billing Practices . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VI
NEGATIVE COVENANTS . . . . . . . . . . . 37
6.1 Use of Funds; Margin Regulation . . . . . . . . . . . . . . . . . . 37
6.2 Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.3 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.4 Xxxxxx, Consolidation, Transfer of Assets . . . . . . . . . . . . . 38
6.5 Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.6 Sales and Leasebacks. . . . . . . . . . . . . . . . . . . . . . . . 38
6.7 Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.8 Investments; Permitted Acquisitions . . . . . . . . . . . . . . . . 38
6.9 Character of Business . . . . . . . . . . . . . . . . . . . . . . . 42
6.10 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.11 Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.12 Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . . . 43
6.13 Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . 43
6.14 Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.15 Stock Issuance. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.16 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . 43
6.17 Transactions Under ERISA. . . . . . . . . . . . . . . . . . . . . . 44
v
Page(s)
-------
6.18 Transaction Documents . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES . . . . . . . . 45
7.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.2 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.3 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE VIII
TAXES. . . . . . . . . . . . . . . 47
8.1 Taxes on Payments . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.2 Indemnification For Taxes . . . . . . . . . . . . . . . . . . . . . 48
8.3 Evidence of Payment . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE IX
MISCELLANEOUS. . . . . . . . . . . . . 48
9.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.2 No Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.3 Bank Expenses; Documentary Taxes; Indemnification.. . . . . . . . . 48
9.4 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . 49
9.5 Successors and Assigns; Participations; Disclosure. . . . . . . . . 50
9.6 Counterparts; Effectiveness; Integration. . . . . . . . . . . . . . 50
9.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.8 Governing Law.. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.9 Judicial Reference. . . . . . . . . . . . . . . . . . . . . . . . . 51
EXHIBITS AND SCHEDULES
Exhibit 1.1C - Form of Collateral Assignment of Transaction Documents
Exhibit 1.1G - Form of Guaranty
Exhibit 1.1I-1 - Form of Inter-Company Note (Guarantor)
Exhibit 1.1I-2 - Form of Inter-Company Note (Physician Group
Shareholders)
Exhibit 1.1I-3 - Form of Inter-Company Security Agreement
vi
Exhibit 1.1S-1 - Form of Security Agreement (Guarantor)
Exhibit 1.1S-2 - Form of Security Agreement (Physician Group)
Exhibit 1.1S-3 - Form of Stock Pledge Agreement (Borrower)
Exhibit 1.1S-4 - Form of Stock Pledge Agreement (Guarantor)
Exhibit 2.4(b) - Form of Notice of Borrowing
Exhibit 3.1(b) - Form of Opinions of Xxxxxxxx's and Guarantors' Counsel
Exhibit 5.3(d) - Form of Compliance Certificate
Schedule 1.1P - Permitted Debt
Schedule 4.7 - Litigation
Schedule 4.9 - Subsidiaries
Schedule 4.12 - Employee Benefit Plans
Schedule 4.18 - Real Estate Leases
Schedule 4.20 - Physician Groups; Transaction Documents.
vii
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT, dated as of July 3, 1997, is entered
into among Borrower and Bank.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
1.1 DEFINITIONS. The following terms, as used herein, shall have the
following meanings:
"ADA" means the Americans with Disabilities Act, 42 U.S.C. Section
12101, ET. SEQ., and all applicable rules and regulations promulgated
thereunder.
"AFFILIATE" means any Person (i) that, directly or indirectly,
controls, is controlled by or is under common control with Borrower or any
Subsidiary; (ii) which directly or indirectly beneficially owns or controls five
percent (5%) or more of any class of voting stock of Borrower or any Subsidiary;
or (iii) five percent (5%) or more of the voting stock of which is directly or
indirectly beneficially owned or held by Borrower or any Subsidiary. For
purposes of the foregoing, "control" (including "controlled by" and "under
common control with") shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"AGREEMENT" means this Revolving Credit Agreement, together with any
concurrent or subsequent rider, amendment, schedule or exhibit to this Revolving
Credit Agreement.
"APPLICABLE MARGIN" means the margin set forth in the table below
opposite the applicable Leverage Ratio, as disclosed in the latest Compliance
Certificate delivered pursuant to Section 5.3(c):
Leverage Ratio Margin
-------------- ------
3.5:1.0 or greater 150 basis points
greater than 3.0:1.0 but less than 3.5:1.0 100 basis points
less than 3.0:1.0 50 basis points
"APPLICABLE MULTIPLIER" means for purposes of calculating the Coverage
Ratio and the Leverage Ratio, (i) for the test dates September 30, 1997,
December 31, 1997, March 31, 1998 and June 30, 1998, four (4), and (ii) for each
test date thereafter, two (2).
1
"APPLICABLE PERIOD" means for purposes of calculating the Coverage
Ratio and the Leverage Ratio, (i) for the test dates September 30, 1997,
December 31, 1997, March 31, 1998 and June 30, 1998, Xxxxxxxx's fiscal quarter
ending on each such test date, and (ii) on each test date thereafter, Xxxxxxxx's
two fiscal quarter period ending on such test date.
"ASSET" means any interest of a Person in any kind of property or
asset, whether real, personal, or mixed real and personal, and whether tangible
or intangible.
"ASSET SALE" means any sale, transfer or other disposition of
Borrower's or any Subsidiary's businesses or Asset(s) now owned or hereafter
acquired, including shares of stock and indebtedness of any Subsidiary,
receivables and leasehold interests.
"BANK" means Imperial Bank, a California banking corporation.
"BANK EXPENSES" means (i) all expenses of Bank paid or incurred in
connection with Bank's due diligence and investigation of Borrower, including
appraisal, filing, recording, documentation, publication and search fees and
other such expenses, and all attorneys' fees and expenses (including attorneys'
fees incurred pursuant to proceedings arising under the Bankruptcy Code)
incurred in connection with the structuring, negotiation, drafting, preparation,
execution and delivery of this Agreement, the Loan Documents, and any and all
other documents, instruments and agreements entered into in connection herewith;
(ii) all expenses of Bank, including attorneys' fees and expenses (including
attorneys' fees incurred pursuant to proceedings arising under the Bankruptcy
Code) paid or incurred in connection with the negotiation, preparation,
execution and delivery of any waiver, forbearance, consent, amendment or
addition to this Agreement or any Loan Document, or the termination hereof and
thereof; (iii) all costs or expenses paid or advanced by Bank which are required
to be paid by Borrower under this Agreement or the Loan Documents, including
taxes and insurance premiums of every nature and kind of Borrowers; and (iv) if
an Event of Default occurs, all expenses paid or incurred by Bank, including
attorneys' fees and expenses (including attorneys' fees incurred pursuant to
proceedings arising under the Bankruptcy Code), costs of collection, suit,
arbitration, judicial reference and other enforcement proceedings, and any other
out-of-pocket expenses incurred in connection therewith or resulting therefrom,
whether or not suit is brought, or in connection with any refinancing or
restructuring of the Obligations and the liabilities of Borrower under this
Agreement, any of the Loan Documents, or any other document, instrument or
agreement entered into in connection herewith in the nature of a "workout."
"BANKRUPTCY CODE" means The Bankruptcy Reform Act of 1978 (Pub. L.
No. 95-598; 11 U.S.C.), as amended or supplemented from time to time, or any
successor statute, and any and all rules and regulations issued or promulgated
in connection therewith.
"BORROWER" means Prospect Medical Holdings, Inc., a Delaware
corporation.
2
"BORROWING" means a borrowing of a Revolving Loan pursuant to the
terms and conditions hereof.
"BUSINESS DAY" means any day other than a Saturday, a Sunday, or a day
on which commercial banks in the City of Los Angeles, California are authorized
or required by law or executive order or decree to close.
"CAPITAL EXPENDITURES" means expenditures made in cash, or financed
with long term debt, by any Person for the acquisition of any fixed Assets or
improvements, replacements, substitutions, or additions thereto that have a
useful life of more than one (1) year, including the direct or indirect
acquisition of such Assets by way of increased product or service charges,
offset items, or otherwise, and the principal portion of payments with respect
to Capital Lease Obligations, calculated in accordance with GAAP.
"CAPITAL LEASE" means any lease of an Asset by a Person as lessee
which would, in conformity with GAAP, be required to be accounted for as an
Asset and corresponding liability on the balance sheet of that Person.
"CAPITAL LEASE OBLIGATIONS" of a Person means the amount of the
obligations of such Person under all Capital Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with GAAP.
"CHAMPUS" means the Civilian Health and Medical Program of the
Uniformed Service, a program of medical benefits covering retirees and
dependents of a member or a former member of a uniformed service, provided,
financed and supervised by the United States Department of Defense established
by 10 U.S.C. Sections 1071, ET SEQ.
"CHANGE OF CONTROL" shall be deemed to have occurred at such time as
any "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of more than twenty percent (20%) of the total voting power of all
classes of stock then outstanding of Borrower normally entitled to vote in the
election of directors.
"CLOSING DATE" means the date when all of the conditions set forth in
Section 3.1 have been fulfilled to the satisfaction of Bank and its counsel.
"COLLATERAL ASSIGNMENT OF TRANSACTION DOCUMENTS" means each Collateral
Assignment of Transaction Documents now or hereafter executed by a Guarantor in
favor of Bank, substantially in the form of EXHIBIT 1.1C.
"COMMITMENT FEE" has the meaning set forth in Section 2.9(a).
"COMPLIANCE CERTIFICATE" means a certificate of compliance to be
delivered quarterly in accordance with Section 5.3(d), substantially in the form
of EXHIBIT 5.3(d).
3
"CONSOLIDATED EBITDA" means, with respect to any period, the sum of
(without duplication) (i) Consolidated Net Income for such period (excluding
extraordinary gains and losses); (ii) Consolidated Interest Expense during such
period; (iii) accrued federal and state income taxes payable by Borrower and the
Subsidiaries during such period which are included in the determination of
Consolidated Net Income; and (iv) Borrower's and the Subsidiaries' consolidated
depreciation and amortization during such period; calculated in accordance with
GAAP.
"CONSOLIDATED EBITDAR" means, with respect to any period, the sum of
Consolidated EBITDA for such period, PLUS Consolidated Lease Expense for such
period.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any period, the
current interest accrued during such period in accordance with GAAP on the
aggregate amount of Borrower's and the Subsidiaries consolidated Debt, including
the interest portion of Borrower's and the Subsidiaries' consolidated Capital
Lease Obligations.
"CONSOLIDATED LEASE EXPENSE" means, with respect to any period, the
aggregate amount of rent paid or payable, on a consolidated basis, in connection
with any and all Operating Leases of Borrower and the Subsidiaries that is
charged against Consolidated Net Income during such period.
"CONSOLIDATED NET INCOME" means, with respect to any period, the
consolidated net income of Borrower and the Subsidiaries reflected on Borrower's
Financial Statement for such period, calculated in accordance with GAAP.
"CONSOLIDATED NET WORTH" means, as of the date of determination,
Xxxxxxxx's and the Subsidiaries' consolidated net worth, calculated in
accordance with GAAP.
"COVERAGE RATIO" means as of the date of determination for the
Applicable Period, the ratio of: (i) EBITDAR for such period TIMES the
Applicable Multiplier; to (ii) the sum of (x) [THE PRODUCT OF the sum of
(1) Consolidated Interest Expense for such period, (2) Consolidated Lease
Expense for such period, and (3) cash federal and state income taxes actually
paid by Borrower and the Subsidiaries during such period, TIMES the Applicable
Multiplier], (y) current maturities of Borrower's and the Subsidiaries'
consolidated long term Debt during such period (other than the Obligations) and
(z) twenty-five percent (25%) of the sum of the principal amount of the Loans
plus the Letter of Credit Usage outstanding on such date.
"CREDIT SUCCESSION AGREEMENT" means that certain Credit Succession
Agreement, dated as of even date herewith, among Borrower, Bank, each Guarantor,
each Physician Group and each Physician Group Shareholder.
"CURRENT ASSETS" means, as of the date of determination, the sum of
Xxxxxxxx's cash, accounts receivable, inventory and other Assets that are likely
to be
4
converted into cash, sold, exchanged, or expensed in the ordinary course of
Xxxxxxxx's business, as now conducted, within one year, calculated in accordance
with GAAP.
"CURRENT LIABILITIES" means, as of the date of determination, the sum
of Xxxxxxxx's Debt coming due within one year, calculated in accordance with
GAAP.
"CURRENT RATIO" means, as of the date of determination, the ratio of:
(i) Current Assets as of such date; to (ii) Current Liabilities less seventy-
five percent (75%) of the principal amount of the Loans and the Letter of Credit
Usage reported as current under Xxxxxxxx's latest Financial Statement as of such
date.
"DEBT" means, as of the date of determination, the sum, but without
duplication, of any and all of a Person's: (i) indebtedness heretofore or
hereafter created, issued, incurred or assumed by such Person (directly or
indirectly) for or in respect of money borrowed; (ii) Capital Lease Obligations;
(iii) obligations evidenced by bonds, debentures, notes, or other similar
instruments; (iv) obligations for the deferred purchase price of property or
services; (v) current liabilities in respect of unfunded vested benefits under
any Plan; (vi) obligations under letters of credit; (vii) obligations under
acceptance facilities; (viii) obligations under all guaranties, endorsements
(other than for collection or deposit in the ordinary course of business), and
other contingent obligations to purchase, to provide funds for payment, or
supply funds to invest in any other Person, or otherwise to assure a creditor
against loss; (ix) obligations secured by any Lien, whether or not such
obligations have been assumed; and (x) Swaps.
"DISTRIBUTIONS" means, with respect to any Person, dividends or
distributions of earnings made by such Person to its owners.
"DOLLARS" or "$" means lawful currency of the United States of
America.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor statute, and any and all regulations
thereunder.
"ERISA EVENT" means (a) a Reportable Event with respect to a Plan or
Multiemployer Plan, (b) the withdrawal of a member of the ERISA Group from a
Plan during a plan year in which it was a "substantial employer" (as defined in
Section 4001(a)(2) of ERISA), (c) the providing of notice of intent to terminate
a Plan in a distress termination (as described in Section 4041(c) of ERISA),
(d) the institution by the PBGC of proceedings to terminate a Plan or
Multiemployer Plan, (e) any event or condition (i) that provides a basis under
Section 4042(a)(1), (2), or (3) of ERISA for the termination of or the
appointment of a trustee to administer, any Plan or Multiemployer Plan, of
(ii) that may result in termination of a Multiemployer Plan pursuant to
Section 4041A of ERISA, (f) the partial or complete withdrawal within the
meaning of Sections 4203 and 4205 of ERISA of a member of the ERISA Group from a
Multiemployer Plan, or (g) providing any security to any Plan under
Section 401(a)(29) of the IRC by a member of the ERISA Group.
5
"ERISA GROUP" means Borrower and all members of a controlled group of
corporations and all trades or business (whether or not incorporated) under
common control which, together with Borrower are treated as a single employer
under Section 414 of the Internal Revenue Code.
"EVENT OF DEFAULT" has the meaning set forth in Section 7.1.
"FEES" means the Commitment Fee, the Unused Commitment Fee, the Letter
of Credit Fees and the Late Payment Fee.
"FINANCIAL STATEMENT(S)" means, with respect to any accounting period
of any Person, statements of income and statements of cash flows of such Person
for such period, and balance sheets of such Person as of the end of such period,
setting forth in each case in comparative form figures for the corresponding
period in the preceding fiscal year or, if such period is a full fiscal year,
corresponding figures from the preceding annual audit, all prepared in
reasonable detail and in accordance with GAAP, subject to year-end adjustments
in the case of monthly Financial Statements. Financial Statement(s) shall
include the schedules thereto and annual Financial Statements shall also include
the footnotes thereto.
"GAAP" means generally accepted accounting principles in the United
States of America, consistently applied, which are in effect as of the date of
this Agreement. If any changes in accounting principles from those in effect on
the date hereof are hereafter occasioned by promulgation of rules, regulations,
pronouncements or opinions by or are otherwise required by the Financial
Accounting Standards Board or the American Institute of Certified Public
Accountants (or successors thereto or agencies with similar functions), and any
of such changes results in a change in the method of calculation of, or affects
the results of such calculation of, any of the financial covenants, standards or
terms found herein, then the parties hereto agree to enter into and diligently
pursue negotiations in order to amend such financial covenants, standards or
terms so as to equitably reflect such changes, with the desired result that the
criteria for evaluating financial condition and results of operations of
Borrower and the Subsidiaries shall be the same after such changes as if such
changes had not been made.
"GOVERNING DOCUMENTS" means the certificate or articles of
incorporation, by-laws, or other organizational or governing documents of any
Person.
"GOVERNMENTAL AUTHORITY" means any federal, state, local or other
governmental department, commission, board, bureau, agency, central bank, court,
tribunal or other instrumentality or authority or subdivision thereof, domestic
or foreign, exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
6
"GUARANTIES" and "GUARANTY" means, individually or collectively as the
context requires, each certain Continuing Guaranty executed by a Guarantor in
favor of Bank, substantially in the form of EXHIBIT 1.1G.
"GUARANTOR(S)" means, individually or collectively as the context
requires, each Subsidiary and every other Person who now or hereafter executes a
Guaranty in favor of Bank with respect to the Obligations.
"HAZARDOUS MATERIALS" means all or any of the following:
(a) substances that are defined or listed in, or otherwise classified pursuant
to, any applicable laws or regulations as "hazardous substances," "hazardous
materials," "hazardous wastes," "toxic substances," or any other formulation
intended to define, list, or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity,
reproductive toxicity, or "EP toxicity" or are otherwise regulated for the
protection of persons, property or the environment; (b) oil, petroleum, or
petroleum derived substances, natural gas, natural gas liquids, synthetic gas,
drilling fluids, produced waters, and other wastes associated with the
exploration, development, or production of crude oil, natural gas, or geothermal
resources; (c) any flammable substances or explosives or any radioactive
materials; and (d) asbestos in any form or electrical equipment which contains
any oil or dielectric fluid containing levels of polychlorinated biphenyls in
excess of fifty (50) parts per million.
"HEALTH SERVICE PLAN LICENSE" means a license issued by the California
Department of Corporations or the corresponding agency of another state, and/or
any other applicable or successor state agency or body, certifying that Borrower
and/or Guarantors are qualified to operate as a health service plan under
applicable laws.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or against
any Person, under any provision of the Bankruptcy Code, or under any other
bankruptcy or insolvency law, including, but not limited to, assignments for the
benefit of creditors, formal or informal moratoriums, compositions, or
extensions with some or all creditors.
"INDEMNIFIED PERSON(S)" has the meaning given to such term in
Section 9.3(c).
"INTER-COMPANY NOTE (GUARANTOR)" means, with respect to any Permitted
Acquisition, the promissory note executed by the applicable Guarantor to
Borrower to evidence the loan made by Borrower to such Guarantor with respect
thereto, substantially in the form of EXHIBIT 1.1I-1.
"INTER-COMPANY NOTE (PHYSICIAN GROUP SHAREHOLDER)" means, with respect
to any Permitted Acquisition, the promissory note executed by the applicable
Physician Group Shareholder to the order of the applicable Guarantor to evidence
the loan made by such Guarantor to such Physician Group Shareholder with respect
thereto, substantially in the form of EXHIBIT 1.1I-2.
7
"INTER-COMPANY SECURITY AGREEMENT" means each certain Security
Agreement now or hereafter executed between a Guarantor and Borrower to secure
the Inter-Company Note (Guarantor) executed by such Guarantor, substantially in
the form of EXHIBIT 1.1I-3.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute, and any and all regulations
thereunder.
"LATE PAYMENT FEE" has the meaning given to such term in
Section 2.9(d).
"LENDING RATE" means the per annum rate equal to the Prime Rate PLUS
the Applicable Margin.
"LETTER(S) OF CREDIT" means any standby letter(s) of credit issued by
Bank, pursuant to Section 2.3.
"LETTER OF CREDIT APPLICATION" means Bank's standard Application for
Standby Letter of Credit and Security Agreement, as the same may be from time to
time amended or modified.
"LETTER OF CREDIT FEE" means, with respect to each Letter of Credit,
one and one-half percent (1.5%) PLUS the Applicable Margin TIMES the face amount
of such Letter of Credit.
"LETTER OF CREDIT USAGE" means, on any date of determination, the
aggregate maximum amounts available to be drawn under all outstanding Letters of
Credit, without regard to whether any conditions to drawing could then be met.
"LEVERAGE RATIO" means, as of the date of determination, the ratio of:
(i) Xxxxxxxx's and the Subsidiaries consolidated Debt as of such date; to
(ii) Consolidated EBITDA for the Applicable Period TIMES the Applicable
Multiplier.
"LIEN" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement or other preferential
arrangement, charge or encumbrance (including, any conditional sale or other
title retention agreement, or finance lease) of any kind.
"LOANS" means the Revolving Loans.
"LOAN DOCUMENT(S)" means each of the following documents, instruments,
and agreements individually or collectively, as the context requires:
(i) the Note;
(ii) the Security Agreement (Borrower);
8
(iii) the Guaranties;
(iv) the Security Agreements (Guarantor);
(v) the Stock Pledge Agreements (Borrower);
(vi) the Collateral Assignments of Transaction Documents;
(vii) the Credit Succession Agreement;
(viii) the Letter of Credit Applications;
(ix) the Warrant; and
(x) such other documents, instruments, and agreements (including
financing statements and fixture filings) as Bank may reasonably request in
connection with the transactions contemplated hereunder or to perfect or
protect the liens and security interests granted to Bank in connection
herewith.
"MANAGEMENT SERVICES AGREEMENT" means each certain Management Services
Agreement now or hereafter entered into between a Guarantor, on the one hand,
and a Physician Group, on the other hand, wherein such Guarantor agrees to
provide management services to such Physician Group.
"MANAGER" means, with respect to any Physician Group, the Guarantor
which is the party identified as "Manager" under the Management Services
Agreement to which such Physician Group is a party.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
business, Assets, condition (financial or otherwise), results of operations, or
prospects of Borrower, any Subsidiary, or any Physician Group; (ii) the ability
of Borrower to perform its obligations under this Agreement (including, without
limitation, repayment of the Obligations as they come due), or the ability of
any Guarantor to perform its obligations under the Guaranty to which it is a
party or (iii) the validity or enforceability of this Agreement, the Loan
Documents, or the rights or remedies of Bank hereunder and thereunder.
"MEDICAID" means the medical assistance program established by the
Social Security Act and any statutes succeeding thereto.
"MEDICARE" means the health insurance program for the aged and
disabled established by the Social Security Act and any statutes succeeding
thereto.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA or Section 3(37) of ERISA to which any member of
the ERISA Group has
9
contributed, or was obligated to contribute, within the preceding six plan years
(while a member of such ERISA Group) including for these purposes any Person
which ceased to be a member of the ERISA Group during such six year period.
"NOTE" means that certain Secured Revolving Note in the principal
amount of Ten Million Dollars ($10,000,000), dated as of even date herewith,
executed by Borrower to the order of Bank.
"NOTICE OF BORROWING" means an irrevocable notice from Borrower to
Bank of Borrower's request for a Borrowing pursuant to the terms of
Section 2.4(b), substantially in the form of EXHIBIT 2.4(B).
"OBLIGATIONS" means any and all indebtedness, liabilities, and
obligations of Borrower owing to Bank and to its successors and assigns,
previously, now, or hereafter incurred, and howsoever evidenced, whether direct
or indirect, absolute or contingent, joint or several, liquidated or
unliquidated, voluntary or involuntary, due or not due, legal or equitable,
whether incurred before, during, or after any Insolvency Proceeding, and whether
recovery thereof is or becomes barred by a statute of limitations or is or
becomes otherwise unenforceable or unallowable as claims in any Insolvency
Proceeding, together with all interest thereupon (including interest under
Section 2.5(b) and all interest accruing during the pendency of an Insolvency
Proceeding). The Obligations shall include, without limiting the generality of
the foregoing, all principal and interest owing under the Loans, all Bank
Expenses, the Fees, any other fees and expenses due hereunder, and all other
indebtedness evidenced by this Agreement and/or the Notes.
"OLD LENDERS" means, with respect to any Permitted Acquisition, the
existing lender(s) to the applicable Physician Group.
"OPERATING LEASE" means any lease of an Asset by a Person which, in
conformity with GAAP, is not a Capital Lease.
"OPTION AGREEMENT" means, with respect to any Permitted Acquisition,
the Assignable Option Agreement entered into by and among the Physician Group,
Physician Group Shareholders and Manager which are the subject of such Permitted
Acquisition.
"OPTIONAL COMMITMENT REDUCTION" has the meaning given to such term in
Section 2.10.
"PARTICIPANT" has the meaning set forth in Section 9.5(d).
"PAY-OFF LETTERS" means those certain letters, in form and substance
reasonably satisfactory to Bank, from Old Lenders respecting the amount
necessary to repay in full all of the obligations of Borrower owing to Old
Lenders and obtain a termination or release of all of the Liens existing in
favor of Old Lenders in and to the Assets of Borrower.
10
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED ACQUISITION" has the meaning given to such term in
Section 6.8(b).
"PERMITTED DEBT" means (i) Debt owing to Bank in accordance with the
terms of this Agreement and the Loan Documents; (ii) Debt which has been
approved in writing by Bank and is listed on SCHEDULE 1.1P, but no voluntary
prepayments, renewals, extensions, or refinancing thereof; and (iii) Debt
secured by a Purchase Money Lien and Capital Lease Obligations up to a maximum
aggregate principal amount outstanding for all such Debt of Borrower and the
Subsidiaries under this clause (iii) of One Million Dollars ($1,000,000).
"PERMITTED INVESTMENTS" means any of the following investments
denominated and payable in Dollars, maturing within one year from the date of
acquisition, selected by Borrower: (i) marketable direct obligations issued or
unconditionally guaranteed by the United States government or issued by any
agency thereof and backed by the full faith and credit of the United States;
(ii) marketable direct obligations issued by any state of the United States or
any political subdivision of any such state or any public instrumentality
thereof and, at the time of acquisition, having the highest credit rating
obtainable from either Standard & Poor's Corporation ("S&P") or Xxxxx'x
Investors Service, Inc. ("Xxxxx'x"); (iii) commercial paper or corporate
promissory notes bearing at the time of acquisition the highest credit rating
either of S&P or Xxxxx'x issued by United States, Canadian, European or Japanese
bank holding companies or industrial or financial companies; (iv) certificates
of deposit issued by and bankers acceptances of and interest bearing deposits
with Bank; and (v) money market funds organized under the laws of the United
States or any state thereof that invest predominantly in any of the foregoing
investments permitted under clauses (i), (ii), (iii) and (iv).
"PERMITTED LIENS" means (i) Liens for current taxes, assessments or
other governmental charges which are not delinquent or remain payable without
any penalty, (ii) Liens in favor of Bank in accordance with the Loan Documents,
(iii) statutory Liens, such as inchoate mechanics', inchoate materialmen's,
landlord's, warehousemen's, and carriers' liens, and other similar liens, other
than those described in clause (i) above, arising in the ordinary course of
business with respect to obligations which are not delinquent or are being
contested in good faith by appropriate proceedings, PROVIDED that, if
delinquent, adequate reserves have been set aside with respect thereto as
required by GAAP and, by reason of nonpayment, no property is subject to a
material risk of loss or forfeiture; (iv) Liens securing Debt described in
clauses (iii) of the definition of Permitted Debt in this Agreement,
(v) judgment Liens that do not constitute an Event of Default under
Section 7.1(i), (vi) Liens, if they constitute such, of any Operating Lease UCC
filings permitted hereunder, and (vii) Liens securing any Debt listed on
SCHEDULE 1.1P.
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, limited
liability partnerships,
11
joint stock companies, joint ventures, associations, companies, trusts, banks,
trust companies, land trusts, business trusts, or other organizations,
irrespective of whether they are legal entities, and governments and agencies
and political subdivisions thereof.
"PHYSICIAN GROUP" means, with respect to any Transaction Documents
executed or to be executed in connection with any Permitted Acquisition, the
professional medical corporation which is to be acquired thereunder.
"PHYSICIAN GROUP SHAREHOLDER" means, with respect to any Physician
Group, a shareholder of such Physician Group.
"PLAN" means an "employee benefit plan" as defined in Section 3(3) of
ERISA in which any personnel of any member of the ERISA Group participate or
from which any such personnel may derive a benefit or with respect to which any
member of the ERISA Group may incur liability, excluding any Multiemployer Plan,
but including any plan either established or maintained by any member of the
ERISA Group or to which such Person contributes under the laws of any foreign
country.
"PRIME RATE" means the rate of interest announced by Bank at its
corporate headquarters as its prime rate and which serves as the basis upon
which effective rates of interest are calculated for those loans making
reference thereto. The Prime Rate is determined by Bank from time to time as a
means of pricing credit extensions to some customers and is neither directly
tied to some external rate of interest or index nor necessarily the lowest rate
of interest charged by Bank at any given time for any particular class of
customers or credit extensions.
"PRIVATE INSURANCE COMPANY" means any insurance company and/or managed
care organization which provides reimbursement for medical care or supplies
provided by a Physician Group to its patients.
"PURCHASE MONEY LIEN" means a Lien on any Asset acquired by Borrower
or any of its Subsidiaries; PROVIDED that (i) such Lien attaches only to the
Asset being acquired; (ii) a description of the Asset being acquired is
furnished to Bank; and (iii) the Debt incurred in connection with such
acquisition does not exceed one hundred percent (100%) of the purchase price of
such Asset.
"REAL ESTATE LEASES" means all leases, licenses, and any and all other
agreements regarding a right of entry to and/or a possessory interest in real
property now or hereinafter entered into by either Borrower as a tenant or
licensee, or which have been, or are in the future, being purchased, assigned or
sublet to either Borrower as a tenant or licensee.
"REPORTABLE EVENT" means any of the events described in
Section 4043(c) of ERISA other than a Reportable Event as to which the provision
of 30 days notice to the PBGC is waived under applicable regulations.
12
"RESPONSIBLE OFFICER" means either the Chief Executive Officer, Chief
Financial Officer or Controller of a Person, or such other officer, employee, or
agent of such Person designated by a Responsible Officer in a writing delivered
to Bank.
"RETIREE HEALTH PLAN" means an "employee welfare benefit plan" within
the meaning of Section 3(1) of ERISA that provides benefits to individuals after
termination of their employment, other than as required by Section 601 of ERISA.
"REVOLVING CREDIT COMMITMENT" means Ten Million Dollars ($10,000,000).
"REVOLVING LOANS" has the meaning given to such term in Section 2.2.
"REVOLVING LOANS DAILY BALANCES" means the amount determined by taking
the amount of the obligations owed under the Revolving Loans at the beginning of
a given day, adding any new Revolving Loans advanced or incurred on such date,
and subtracting any payments or collections on the Revolving Loans which are
deemed to be paid on that date under the provisions of this Agreement.
"REVOLVING LOANS MATURITY DATE" means July 3, 1999.
"SECURITY AGREEMENT (BORROWER)" means that certain Security Agreement,
dated as of even date herewith, between Borrower and Bank.
"SECURITY AGREEMENT (GUARANTOR)" means each certain Security Agreement
now or hereafter entered into between a Guarantor, on the one hand, and Bank, on
the other hand, substantially in the form of EXHIBIT 1.1S-1, to secure the
Guaranty to which such Guarantor is a party.
"SECURITY AGREEMENT (PHYSICIAN GROUP)" means each certain Security
Agreement now or hereafter entered into between a Physician Group, on the one
hand, and a its Manager, on the other hand, substantially in the form of
EXHIBIT 1.1S-2, to secure the Management Services Agreement to which they are
parties.
"SOLVENT" means, with respect to any Person on the date any
determination thereof is to be made, that on such date: (a) the present fair
valuation of the Assets of such Person is greater than such Person's probable
liability in respect of existing debts; (b) such Person does not intend to, and
does not believe that it will, incur debts beyond such Person's ability to pay
as such debts mature; and (c) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, which
would leave such Person with Assets remaining which would constitute
unreasonably small capital after giving effect to the nature of the particular
business or transaction. For purposes of this definition (i) the "fair
valuation" of any property or assets means the amount realizable within a
reasonable time, either through collection or sale of such Assets at their
regular market value, which is the amount obtainable by a capable and diligent
Person from an interested buyer willing to purchase such property or assets
within a reasonable time under
13
ordinary circumstances; and (ii) the term "debts" includes any payment
obligation, whether or not reduced to judgment, equitable or legal, matured or
unmatured, liquidated or unliquidated, disputed or undisputed, secured or
unsecured, absolute, fixed or contingent.
"STOCK PLEDGE AGREEMENT" means each certain Security Agreement-Stock
Pledge, now or hereafter entered into between a Borrower or a Guarantor, on the
one hand, and Bank, on the other hand, substantially in the form of EXHIBIT
1.1S-3 or EXHIBIT 1.1S-4, as applicable.
"SUBSIDIARY" means any corporation, limited liability company,
partnership, trust or other entity (whether now existing or hereafter organized
or acquired) of which Borrower or one or more Subsidiaries of Borrower at the
time owns or controls directly or indirectly more than 50% of the shares of
stock or partnership or other ownership interest having general voting power
under ordinary circumstances to elect a majority of the board of directors,
managers or trustees or otherwise exercising control of such corporation,
limited liability company, partnership, trust or other entity (irrespective of
whether at the time stock or any other form of ownership of any other class or
classes shall have or might have voting power by reason of the happening of any
contingency).
"SWAPS" means payment obligations with respect to interest rate swaps,
currency swaps and similar obligations obligating a Person to make payments,
whether periodically or upon the happening of a contingency. For the purposes
of this Agreement, the amount of the obligation under any Swap shall be the
amount determined, in respect thereof as of the end of the then most recently
ended fiscal quarter of Borrower, based on the assumption that such Swap had
terminated at the end of such fiscal quarter, and in making such determination,
if any agreement relating to such Swap provides for the netting of amounts
payable by and to each party thereto or if any such agreement provides for the
simultaneous payment of amounts by and to each party, then in each such case,
the amount of such obligation shall be the net amount so determined.
"TAXES" has the meaning set forth in Section 8.1.
"TRANSACTION DOCUMENTS" means the agreements, instruments and
documents heretofore or hereafter entered into by and among Xxxxxxxx, a Manager,
a Physician Group, the Physician Group Shareholders, and certain other parties,
relating to the Permitted Acquisition with respect to such Physician Group
and/or the management of such Physician Group by its Manager, and all of the
other transactions relating thereto. Without limiting the generality of the
foregoing, the Transaction Documents with respect to each Physician Group
include the acquisition agreements, instruments and documents among such
Physician Group, its Physician Group Shareholders, its Manager and a seller, a
Management Services Agreement, an Inter-Company Note (Physician Group
Shareholder), an Inter-Company Note (Guarantor), an Inter-Company Security
Agreement, a Security Agreement (Physician Group), and an Option Agreement.
"TRANSFEREE" has the meaning set forth in Section 9.5(e).
14
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time,
the amount (if any) by which (i) the present value of all benefits under such
Plan exceeds (ii) the fair market value of all Plan assets allocable to such
benefits (excluding any accrued but unpaid contributions), all determined as of
the then most recent valuation date for such Plan, but only to the extent that
such excess represents a potential liability of a member of the ERISA Group to
the PBGC or an appointed trustee under Title IV of ERISA.
"UNMATURED EVENT OF DEFAULT" means any condition or event which with
the giving of notice or lapse of time or both would, unless cured or waived,
become an Event of Default.
"UNUSED COMMITMENT FEE" has the meaning given to such term in
Section 2.9(b).
"WARRANT" means that certain Warrant, dated as of even date herewith,
executed by Xxxxxxxx in favor of Bank.
"WORKING CAPITAL SUBLIMIT" means One Million Five Hundred Thousand
Dollars ($1,500,000).
1.2 ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with GAAP.
1.3 COMPUTATION OF TIME PERIODS. In this Agreement, with respect
to the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding." Periods of days referred to in this Agreement
shall be counted in calendar days unless otherwise stated.
1.4 CONSTRUCTION. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular and to the
singular include the plural, references to any gender include any other gender,
the part includes the whole, the term "including" is not limiting, and the term
"or" has, except where otherwise indicated, the inclusive meaning represented by
the phrase "and/or." References in this Agreement to "determination" by Bank
include good faith estimates by Bank (in the case of quantitative
determinations), and good faith beliefs by Bank (in the case of qualitative
determinations). The words "hereof," "herein," "hereby," "hereunder," and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Article, section, subsection,
clause, exhibit and schedule references are to this Agreement, unless otherwise
specified. Any reference in this Agreement or any of the Loan Documents to this
Agreement or any of the Loan Documents includes any and all permitted
alterations, amendments, changes, extensions, modifications, renewals, or
supplements thereto or thereof, as applicable.
15
1.5 EXHIBITS AND SCHEDULES. All of the exhibits and schedules
attached hereto shall be deemed incorporated herein by reference.
1.6 NO PRESUMPTION AGAINST ANY PARTY. Neither this Agreement, any
of the Loan Documents, any other document, agreement, or instrument entered into
in connection herewith, nor any uncertainty or ambiguity herein or therein shall
be construed or resolved using any presumption against any party hereto, whether
under any rule of construction or otherwise. On the contrary, this Agreement,
the Loan Documents, and the other documents, instruments, and agreements entered
into in connection herewith have been reviewed by each of the parties and their
counsel and shall be construed and interpreted according to the ordinary
meanings of the words used so as to accomplish fairly the purposes and
intentions of all parties hereto.
1.7 INDEPENDENCE OF PROVISIONS. All agreements and covenants
hereunder, under the Loan Documents, and the other documents, instruments, and
agreements entered into in connection herewith shall be given independent effect
such that if a particular action or condition is prohibited by the terms of any
such agreement or covenant, the fact that such action or condition would be
permitted within the limitations of another agreement or covenant shall not be
construed as allowing such action to be taken or condition to exist.
ARTICLE II
TERMS OF THE CREDIT
2.1 [INTENTIONALLY OMITTED].
2.2 REVOLVING LOANS. Provided that no Event of Default or
Unmatured Event of Default has occurred, and subject to the other terms and
conditions hereof, Bank agrees to make revolving loans ("REVOLVING LOANS") to
Borrower, upon notice in accordance with Section 2.4(b), from the Closing Date
up to but not including the Maturity Date, the proceeds of which shall be used
only for the purposes allowed in Section 6.1, subject to the following
conditions and limitations:
(a) the aggregate principal amount of Revolving Loans
outstanding after giving effect to any proposed Borrowing plus the Letter of
Credit Usage on such date shall not exceed the amount of the Revolving Credit
Commitment then in effect;
(b) Borrower shall not be permitted to borrow, and Bank
shall not be obligated to make, any Revolving Loans to Borrower, unless and
until all of the conditions for a Borrowing set forth in Section 3.2, and
Section 3.3 in the case of a Borrowing for a Permitted Acquisition, have been
met to the satisfaction of Bank in its sole and absolute discretion;
16
(c) Borrowings shall be in minimum amounts each of Five
Hundred Thousand Dollars ($500,000), plus increments of One Hundred Thousand
Dollars ($100,000) in excess of such minimum amount; and
(d) the aggregate amount of Revolving Loans for working
capital outstanding after giving effect to any proposed Borrowing PLUS the
Letter of Credit Usage on such date shall not exceed the Working Capital
Sublimit;
All repayments of Revolving Loans shall be without penalty or premium. On the
Maturity Date, Borrower shall pay to Bank the entire unpaid principal balance of
the Revolving Loans together with all accrued but unpaid interest thereon.
2.3 LETTERS OF CREDIT. Subject to the terms and conditions
hereof, Borrower may request Bank to issue Letters of Credit for the account of
Xxxxxxxx, subject, in each case, to the following limitations:
(a) Each Letter of Credit shall be issued only upon
satisfaction of each of the following conditions:
(i) The face amount of the Letter of Credit
requested if and when issued must not cause the sum of the aggregate
principal amount outstanding of all Revolving Loans PLUS the Letter of
Credit Usage to exceed the Revolving Credit Commitment then in effect;
(ii) The face amount of the Letter of Credit
requested if and when issued must not cause the Letter of Credit Usage PLUS
the aggregate amount of Borrowings outstanding on such date for working
capital to exceed the Working Capital Sublimit;
(iii) The Letter of Credit may not have an expiry
date or draw period which extends beyond the date which is thirty (30) days
prior to the Maturity Date;
(iv) The conditions specified in Section 3.2(b) and
(c) have been satisfied on the date of issuance of such Letter of Credit;
(v) Borrower shall have submitted a Letter of
Credit Application, and executed such other documents, instruments and
agreements as may be required by Bank, all in form and substance
satisfactory to Bank; PROVIDED, HOWEVER, that the execution, delivery and
performance of such Letter of Credit Application and other documents,
instruments and agreements must not constitute an Unmatured Event of
Default or an Event of Default and, in the event of any conflict between
the provisions hereof and such Letter of Credit Application and other
documents, instruments and agreements, the provisions hereof shall control;
and
17
(vi) Borrower shall pay any and all charges of Bank,
arising in connection with the issuance or amendment of any Letter of
Credit.
(b) Borrower shall pay to Bank the Letter of Credit Fee
upon issuance of each Letter of Credit PLUS all of Bank's standard and customary
fees with respect to each Letter of Credit.
(c) In determining whether to pay under any Letter of
Credit, only Bank shall be responsible for determining that the documents and
certificates required to be delivered under the Letter of Credit have been
delivered and that they comply on their face with the requirements of such
Letter of Credit.
(d) With respect to all Letters of Credit outstanding upon
the occurrence of an Unmatured Event of Default or Event of Default, Borrower
shall either replace such Letters of Credit, whereupon such Letters of Credit
shall be canceled, with letters of credit issued by another issuer acceptable to
the beneficiary of such Letter of Credit, or provide Bank, as security for such
Letters of Credit, with a cash deposit in an amount equal to the Letter of
Credit Usage for so long as such Letters of Credit remain outstanding during the
continuance of such Unmatured Event of Default or Event of Default.
(e) Any and all amounts paid by Bank under any Letter of
Credit shall constitute a Borrowing.
2.4 NOTICE OF BORROWING REQUIREMENTS.
(a) Each Borrowing shall be made on a Business Day.
(b) Each Borrowing shall be made upon telephonic notice
given by a Responsible Officer of Xxxxxxxx, followed by a Notice of Borrowing,
given by facsimile or personal service, delivered to Bank at the address set
forth in the Notice of Borrowing. Bank shall be given such notice no later than
11:00 a.m., California time, on the day on which such Borrowing is to be made,
and such notice shall state the amount thereof (subject to the limitations set
forth in Section 2.2). Any Notice of Borrowing (or telephonic notice in respect
thereof) shall be irrevocable and Borrower shall be bound to borrow in
accordance therewith.
(c) Bank shall not incur any liability to Borrower in
acting upon any telephonic notice which Xxxx believes in good faith to have been
given by a Responsible Officer of Borrower, or for otherwise acting in good
faith under this Section 2.3, and in making any Revolving Loans pursuant to
telephonic notice.
(d) So long as all of the conditions for a Borrowing set
forth herein have been satisfied, Bank shall make the proceeds of such Borrowing
available to Borrower on the applicable Borrowing date by transferring same day
funds, equal to the amount of such Borrowing, in accordance with written
disbursement instructions given by Xxxxxxxx
18
to Bank, in form and substance satisfactory to Bank and otherwise consistent
with Section 6.1.
2.5 INTEREST RATES; PAYMENTS OF INTEREST.
(a) INTEREST RATE. The unpaid principal balance of all
Loans shall bear interest at the Lending Rate.
(b) DEFAULT RATE. If any payment of principal or interest
on the Loans shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), in addition to and not in substitution of any of
Bank's other rights and remedies with respect to such nonpayment, the entire
unpaid principal balance of the Loans shall bear interest at the Lending Rate
PLUS five hundred (500) basis points until such overdue payment is paid in full.
In addition, interest, Bank Expenses, the Fees, and other amounts due hereunder
not paid when due shall bear interest at the Lending Rate PLUS five hundred
(500) basis points until such overdue payment is paid in full.
(c) COMPUTATION OF INTEREST. All computations of interest
shall be calculated on the basis of a year of three hundred sixty (360) days for
the actual days elapsed. In the event that the Prime Rate announced is, from
time to time, changed, adjustment in the rate of interest payable hereunder on
the Loans shall be made as of 12:01 a.m. (California time) on the effective date
of the change in the Prime Rate. Interest shall accrue from the Closing Date to
the date of repayment of the Loans in accordance with the provisions of this
Agreement.
(d) MAXIMUM INTEREST RATE. In no event shall the interest
rate and other charges hereunder exceed the highest rate permissible under any
law which a court of competent jurisdiction shall, in a final determination,
deem applicable hereto. In the event that such a court determines that Bank has
received interest and other charges hereunder in excess of the highest rate
applicable hereto, such excess shall be deemed received on account of, and shall
automatically be applied to reduce, the Obligations, other than interest, in the
inverse order of maturity, and the provisions hereof shall be deemed amended to
provide for the highest permissible rate. If there are no Obligations
outstanding, Bank shall refund to Borrower such excess.
(e) PAYMENTS OF INTEREST. All accrued but unpaid interest
on the Loans, calculated in accordance with this Section 2.5, shall be due and
payable, in arrears, on the first Business Day of each and every month.
(f) CHANGE IN APPLICABLE MARGIN. Changes in the Applicable
Margin, resulting from a change in the Leverage Ratio, shall become effective on
the 45th day following the last day of each fiscal quarter of Borrower, and
shall be based on the Leverage Ratio disclosed in the Compliance Certificate
with respect to such fiscal quarter; PROVIDED, HOWEVER, for purposes of
determining the aforementioned margins, (i) until Borrower accurately completes
and delivers to Bank the first Compliance Certificate due
19
hereunder, the Leverage Ratio shall be conclusively presumed to be greater than
3.5:1.0 and (ii) if Borrower fails to deliver to Bank an accurately completed
Compliance Certificate within forty-five (45) days following the end of each
fiscal quarter of Borrower, the Leverage Ratio shall be conclusively presumed to
be greater than 3.5:1.0 until the applicable Compliance Certificate has been so
completed and delivered to Bank.
2.6 NOTE; STATEMENTS OF OBLIGATIONS. The Revolving Loans and
Xxxxxxxx's obligation to repay the same shall be evidenced by the Note, this
Agreement and the books and records of Bank. Bank shall render monthly
statements of the Loans to Borrower, including statements of all principal and
interest owing on the Loans, and all Fees and Bank Expenses owing, and such
statements shall be presumed to be correct and accurate and constitute an
account stated between Borrower and Bank unless, within thirty (30) days after
receipt thereof by Borrower, Borrower delivers to Bank, at the address specified
in Section 9.1, written objection thereof specifying the error or errors, if
any, contained in any such statement.
2.7 HOLIDAYS. Any principal or interest in respect of the Loans
which would otherwise become due on a day other than a Business Day, shall
instead become due on the next succeeding Business Day and such adjustment shall
be reflected in the computation of interest; PROVIDED, HOWEVER, that in the
event that such due date shall, subsequent to the specification thereof by Bank,
for any reason no longer constitute a Business Day, Bank may change such
specified due date in accordance with this Section 2.7.
2.8 TIME AND PLACE OF PAYMENTS.
(a) All payments due hereunder shall be made available to
Bank in immediately available Dollars, not later than 12:00 p.m., Los Angeles
time, on the day of payment, to the following address or such other address as
Bank may from time to time specify by notice to Borrower:
IMPERIAL BANK
0000 Xxxxx Xx Xxxxxxx Xxxx., Xxx. 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Lending Services Department
(b) Borrower hereby authorizes Bank to charge any account
which Xxxxxxxx maintains with Bank for the amount of any payment due or past due
hereunder.
(c) In addition, Borrower hereby authorizes Bank at its
option, without prior notice to Borrower, to advance a Revolving Loan for any
payment due or past due hereunder, including principal and interest owing on the
Loans, the Fees and all Bank Expenses, and to pay the proceeds of such Revolving
Loan to Bank for application toward such due or past due payment.
20
2.9 COMMITMENT FEE AND UNUSED COMMITMENT FEE.
(a) On the Closing Date, Borrower shall pay to Bank a fully
earned, non-refundable Commitment Fee (the "COMMITMENT FEE") in the amount of
One Hundred Thousand Dollars ($100,000) in consideration of Bank's agreement to
enter into this Agreement upon the terms and conditions set forth herein, of
which Twenty-Five Thousand Dollars ($25,000) has previously been paid.
(b) Borrower shall pay to Bank an unused commitment fee
(the "UNUSED COMMITMENT FEE") in an aggregate amount equal to one-half of one
percent (0.5%) per annum of the average daily amount of the Revolving Credit
Commitment MINUS the Revolving Loans Daily Balances. The Unused Commitment Fee
shall begin to accrue on the Closing Date and shall be due and payable on the
first Business Day of each month and the Maturity Date.
(c) LATE PAYMENT FEE. If any payment due hereunder,
whether for principal, interest, or otherwise, is not paid on or before the
tenth day after the date such payment is due, in addition to and not in
substitution of any of Bank's other rights and remedies with respect to such
nonpayment, Borrower shall pay to Bank, a late payment fee ("LATE PAYMENT FEE")
equal to five percent (5%) of the amount of such overdue payment. The Late
Payment Fee shall be due and payable on the eleventh day after the due date of
the overdue payment with respect thereto.
2.10 OPTIONAL COMMITMENT REDUCTIONS. Borrower may terminate or
permanently reduce the Revolving Credit Commitment at any time, upon three (3)
Business Days' notice to Bank (an "OPTIONAL COMMITMENT REDUCTION"), and Borrower
shall concurrently therewith pay Bank in immediately available funds, an amount
equal to the amount by which the aggregate outstanding principal balance of the
Revolving Loans exceeds the amount of the Revolving Credit Commitment as so
reduced, PLUS all accrued interest on such amount. Optional Commitment
Reductions shall be in minimum increments of Five Hundred Thousand Dollars
($500,000).
ARTICLE III
CONDITIONS PRECEDENT
3.1 CONDITIONS TO INITIAL LOAN OR LETTER OF CREDIT. Bank's
obligation to make the initial Loan or issue the initial Letter of Credit is
subject to and contingent upon the fulfillment of each of the following
conditions to the satisfaction of Bank and its counsel:
(a) receipt by Bank of this Agreement and each of the Loan
Documents, all duly executed by Xxxxxxxx and/or the other Persons party thereto,
acknowledged where required, and in form and substance satisfactory to Bank in
its sole and absolute discretion;
21
(b) receipt by Bank of a duly executed opinion of
Xxxxxxxx's and Guarantors' counsel, dated as of the Closing Date, covering the
matters set forth in EXHIBIT 3.1(b) and otherwise in form and substance
satisfactory to Bank in its sole and absolute discretion;
(c) receipt by Bank of a Certificate of the Secretary of
Xxxxxxxx, dated as of the Closing Date, certifying (i) the incumbency and
signatures of the Responsible Officers of Borrower who are executing this
Agreement and the Loan Documents on behalf of Borrower; (ii) the bylaws of
Borrower and all amendments thereto as being true and correct and in full force
and effect; and (iii) the resolutions of the Board of Directors of Borrower as
being true and correct and in full force and effect, authorizing the execution
and delivery of this Agreement and the Loan Documents, and authorizing the
transactions contemplated hereunder and thereunder, and authorizing the
Responsible Officers of Borrower to execute the same on behalf of Borrower;
(d) receipt by Bank of a certificate of status and good
standing for each Borrower, dated as of a recent date prior to the Closing Date,
showing that Borrower is in good standing under the laws of the State of
Delaware;
(e) receipt by Bank of Xxxxxxxx's Certificate of
Incorporation and all amendments thereto, certified by the Delaware Secretary of
State and dated as of a recent date prior to the Closing Date;
(f) receipt by Bank of certificates of foreign
qualification and good standing with respect for Xxxxxxxx, dated as of a recent
date prior to the Closing Date, showing that Borrower is in good standing under
the laws of California;
(g) receipt by Bank of a certificate signed by the
President and Chief Financial Officer of Xxxxxxxx, dated as of the Closing Date,
certifying to Bank that (i) both immediately before and immediately after giving
effect to the transactions contemplated by this Agreement and the Loan
Documents, Borrower is and will be Solvent; (ii) the representations and
warranties of Borrower contained in this Agreement and the Loan Documents are
true and correct and (iii) both immediately before and immediately after giving
effect to the transactions contemplated by this Agreement and the Loan
Documents, no Event of Default or Unmatured Event of Default is continuing or
shall occur;
(h) receipt by Bank of a Certificate of the Secretary of
each Guarantor, dated as of the Closing Date, certifying (i) the incumbency and
signatures of the Responsible Officers of such Guarantor who are executing the
Loan Documents on behalf of such Guarantor, (ii) the bylaws of such Guarantor
and all amendments thereto as being true and correct and in full force and
effect, and (iii) the resolutions of the Board of Directors of such Guarantor as
being true and correct and in full force and effect, authorizing the execution
and delivery of the Loan Documents, and authorizing the
22
transactions contemplated thereunder, and authorizing the Responsible Officers
of such Guarantor to execute the same on behalf of such Guarantor;
(i) receipt by Bank of a certificate of status and good
standing for each Guarantor, dated as of a recent date prior to the Closing
Date, showing that such Guarantor is in good standing under the laws of the
state of its organization;
(j) receipt by Bank of each Guarantor's Articles of
Incorporation and all amendments thereto, certified by the Secretary of State of
the state of its organization and dated as of a recent date prior to the Closing
Date;
(k) receipt by Bank of certificates of foreign
qualification and good standing with respect to each Guarantor, dated as of a
recent date prior to the Closing Date, showing that such Guarantor is in good
standing under the laws of California;
(l) receipt by Bank of a certificate signed by the
President and Chief Financial Officer of each Guarantor, dated as of the Closing
Date, certifying to Bank that (i) both immediately before and immediately after
giving effect to the transactions contemplated by this Agreement and the Loan
Documents, such Guarantor is and will be Solvent; (ii) to the best of their
knowledge after due and diligent inquiry, the representations and warranties of
such Guarantor contained in the Loan Documents are true and correct and (iii) to
the best of their knowledge after due and diligent inquiry, both immediately
before and immediately after giving effect to the transactions contemplated by
the Loan Documents, no Event of Default or Unmatured Event of Default is
continuing or shall occur;
(m) receipt by Bank of Uniform Commercial Code and other
public record searches with respect to Xxxxxxxx and Guarantors, in each case
satisfactory to Bank in its sole and absolute discretion;
(n) receipt by Bank of (i) the balance of the Commitment
Fee and (ii) all Bank Expenses owing on the Closing Date;
(o) receipt by Bank of (i) Xxxxxxxx's internally prepared
Financial Statements for Borrower fiscal year ended September 30, 1996, and
(ii) Borrower's operating budgets and projections for their fiscal year ending
September 30, 1997, all of which satisfactory to Bank to Bank in its sole and
absolute discretion;
(p) no Material Adverse Effect shall have occurred;
(q) receipt by Bank of copies of insurance binders or
insurance certificates evidencing Borrower's having caused to be obtained
insurance in accordance with Section 5.5, including the lender's loss payee
endorsements required by such Section;
(r) Borrower, each Guarantor and Physician Group shall have
established the bank accounts at Bank as described in Section 5.11;
23
(s) receipt by Bank of (i) a written detailed description
of all proposed Permitted Acquisitions for which Xxxxxxxx has committed as of
the Closing Date, in form and substance satisfactory to Bank, including
historical and projected financial information, accounts receivable information
and reconciliations, and such other supporting information with respect to the
applicable Physician Groups and proposed Permitted Acquisitions as Bank shall
require, including historical financial statements; and (ii) draft copies of all
Transaction Documents with respect to such proposed Permitted Acquisitions, in
form and substance satisfactory to Bank;
(t) Bank's approval of Borrower's equity and capital
structure; and
(u) the Closing Date shall have occurred on or before
July 3, 1997.
3.2 CONDITIONS TO ALL LOANS AND LETTERS OF CREDIT. Bank's
obligation hereunder to make any Loans to Borrower (including the initial Loan),
or issue any Letters of Credit (including the initial Letter of Credit), is
further subject to and contingent upon the fulfillment of each of the following
conditions to the satisfaction of Bank:
(a) in the case of a Borrowing, receipt by Bank of a Notice
of Borrowing as required by Section 2.4(b) and written disbursement instructions
to Bank consistent with Section 6.1;
(b) in the case of a Borrowing or Letter of Credit
Application, the fact that, immediately before and after such Borrowing or
issuance of Letter of Credit, as the case may be, no Event of Default or
Unmatured Event of Default shall have occurred; and
(c) in the case of a Borrowing or Letter of Credit
Application, the fact that the representations and warranties of Borrower
contained in this Agreement shall be true on and as of the date of such
Borrowing, or issuance of Letter of Credit, as the case may be.
3.3 ADDITIONAL CONDITIONS TO LOANS FOR PERMITTED ACQUISITIONS.
Bank's obligation hereunder to make any Loans to Borrower for a Permitted
Acquisition with respect to any Physician Group, is further subject to and
contingent upon the fulfillment of each of the following conditions to the
satisfaction of Bank:
(a) satisfaction of all of the conditions set forth in
Section 6.8(b); and
(b) receipt by Bank of Pay-Off Letters from the Old
Lenders, if any, and such UCC-2 Termination Statements and other Lien releases
as Bank shall require, duly executed by such Old Lenders, all of the foregoing
in form and substance satisfactory to Bank; and
24
(c) receipt by Bank of such other agreements, instruments
and documents as Bank may reasonably require in connection with such Borrowing,
in form and substance satisfactory to Bank in its sole and absolute discretion.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce Bank to enter into this Agreement and to make Loans
and/or issue any Letters of Credit, Borrower represents and warrants to Bank
that on the Closing Date and on the date of each Borrowing or issuance of a
Letter of Credit:
4.1 LEGAL STATUS. Borrower is a corporation duly organized and
existing under the laws of the state of Delaware. Borrower and each Subsidiary
has the power and authority to own its own Assets and to transact the business
in which it is engaged, and is properly licensed, qualified to do business and
in good standing in every jurisdiction in which it is doing business where
failure to so qualify could have a Material Adverse Effect.
4.2 NO VIOLATION; COMPLIANCE.
(a) The execution, delivery and performance of this
Agreement and the Loan Documents and the Transaction Documents to which Borrower
is a party are within Borrower's powers, are not in conflict with the terms of
the Governing Documents of Borrower, and do not result in a breach of or
constitute a default under any contract, obligation, indenture or other
instrument to which Borrower is a party or by which Borrower is bound or
affected. There is no law, rule or regulation (including Regulations G, T, U
and X of the Federal Reserve Board and laws relating to the practice of
medicine), nor is there any judgment, decree or order of any court or
Governmental Authority binding on Borrower which would be contravened by the
execution, delivery, performance or enforcement of this Agreement and the Loan
Documents and the Transaction Documents to which Borrower is a party.
(b) The execution, delivery and performance of the Loan
Documents and the Transaction Documents to which each Guarantor is a party are
within such Guarantor's powers, are not in conflict with the terms of the
Governing Documents of such Guarantor, and do not result in a breach of or
constitute a default under any contract, obligation, indenture or other
instrument to which such Guarantor is a party or by which such Guarantor is
bound or affected. There is no law, rule or regulation (including Regulations
G, T, U and X of the Federal Reserve Board and laws relating to the practice of
medicine), nor is there any judgment, decree or order of any court or
Governmental Authority binding on any Guarantor which would be contravened by
the execution, delivery, performance or enforcement of the Loan Documents and
the Transaction Documents to which any Guarantor is a party.
25
4.3 AUTHORIZATION; ENFORCEABILITY.
(a) Xxxxxxxx has taken all corporate action necessary to
authorize the execution and delivery of this Agreement and the Loan Documents
and the Transaction Documents to which Borrower is a party, and the consummation
of the transactions contemplated hereby and thereby. Upon their execution and
delivery in accordance with the terms hereof, this Agreement and the Loan
Documents and the Transaction Documents to which Borrower is a party will
constitute legal, valid and binding agreements and obligations of Borrower
enforceable against Borrower in accordance with their respective terms, except
as enforceability may be limited by bankruptcy, insolvency, and similar laws and
equitable principles affecting the enforcement of creditors' rights generally.
(b) Each Guarantor has taken all corporate action necessary
to authorize the execution and delivery of the Loan Documents and the
Transaction Documents to which such Guarantor is a party, and the consummation
of the transactions contemplated thereby. Upon their execution and delivery in
accordance with the terms hereof, the Loan Documents and the Transaction
Documents to which each Guarantor is a party will constitute legal, valid and
binding agreements and obligations of such Guarantor enforceable against such
Guarantor in accordance with their respective terms, except as enforceability
may be limited by bankruptcy, insolvency, fraudulent conveyance, and similar
laws and equitable principles affecting the enforcement of creditors' rights
generally.
4.4 APPROVALS; CONSENTS. No approval, consent, exemption or other
action by, or notice to or filing with, any Governmental Authority is necessary
in connection with the execution, delivery, performance or enforcement of this
Agreement, the Loan Documents or the Transaction Documents.
4.5 LIENS. Borrower and each of its Subsidiaries has good and
marketable title to, or valid leasehold interests in, all of its Assets, free
and clear of all Liens or rights of others, except for Permitted Liens.
4.6 DEBT. Borrower and each of its Subsidiaries has no Debt other
than Permitted Debt.
4.7 LITIGATION. Except as set forth in SCHEDULE 4.7, there are no
suits, proceedings, claims or disputes pending or, to the knowledge of Borrower
after due inquiry, threatened, against or affecting Borrower or any of
Borrower's Assets, or any Subsidiary of Borrower or any of such Subsidiary's
Assets, which are not fully covered by applicable insurance and as to which no
reservation of rights has been taken by the insurer thereunder.
4.8 NO DEFAULT. No Event of Default or Unmatured Event of
Default is continuing or would result from the incurring of obligations by
Borrower or any Subsidiary under this Agreement or the Loan Documents.
26
4.9 SUBSIDIARIES. Set forth in SCHEDULE 4.9 is a complete and
accurate list of the Subsidiaries, showing the jurisdiction of incorporation of
each and showing the percentage of each Borrower's ownership of the outstanding
stock of each Subsidiary. All of the outstanding capital stock of each
Subsidiary has been validly issued, is fully paid and nonassessable, and is
owned by Borrower free and clear of all Liens except Permitted Liens.
4.10 TAXES. All tax returns required to be filed by Xxxxxxxx and
each of its Subsidiaries in any jurisdiction have in fact been filed, and all
taxes, assessments, fees and other governmental charges upon Borrower and each
of its Subsidiaries or upon any of their Assets, income or franchises, which are
due and payable have been paid. The provisions for taxes on the books of
Borrower and each of its Subsidiaries are adequate for all open years, and for
Borrower's and each of its Subsidiaries current fiscal period.
4.11 CORRECTNESS OF FINANCIAL STATEMENTS. Xxxxxxxx's consolidated
audited Financial Statement as of the fiscal year ended September 30, 1996, and
all information and data furnished by Borrower to Bank in connection therewith,
are complete and correct and accurately and fairly present the financial
condition and results of operations of Borrower and the Subsidiaries as of their
respective dates. Any forecasts of future financial performance delivered by
Borrower to Bank have been made in good faith and are based on reasonable
assumptions and investigations by Borrower. Said audited Financial Statement
has been prepared in accordance with GAAP. Since the date of such audited
Financial Statement, there has been no change in Borrower's or the Subsidiaries'
financial condition or results of operations sufficient to have a Material
Adverse Effect. Borrower and the Subsidiaries have no contingent obligations,
liabilities for taxes or other outstanding financial obligations which are
material in the aggregate, except as disclosed in such statements, information
and data.
4.12 ERISA. Neither Borrower nor any member of the ERISA Group
maintains or contributes to any Plan or Multiemployer Plan, other than those
listed on SCHEDULE 4.12. Borrower and each member of the ERISA Group have
satisfied the minimum funding standards of ERISA and the Internal Revenue Code
with respect to each Plan and Multiemployer Plan to which it is obligated to
contribute. No ERISA Event has occurred nor has any other event occurred that
may result in an ERISA Event that reasonably could be expected to result in a
Material Adverse Effect. None of Borrower, any member of the ERISA Group, or
any fiduciary of any Plan is subject to any direct or indirect liability with
respect to any Plan (other than to make regularly scheduled required
contributions and to pay Plan benefits in the normal course) under any
applicable law, treaty, rule, regulation, or agreement. Neither Borrower nor
any member of the ERISA Group is required to provide security to any Plan under
Section 401(a)(29) of the Internal Revenue Code. Each Plan will be able to
fulfill its benefit obligations as they come due in accordance with the Plan
documents and Under GAAP.
4.13 OTHER OBLIGATIONS. Borrower and each of its Subsidiaries is
not in default on any Debt, and Borrower and each of its Subsidiaries is not in
default on any other
27
lease, commitment, contract, instrument or obligation which is material to the
operation of its business.
4.14 PUBLIC UTILITY HOLDING COMPANY ACT. Borrower is not a
"holding company," or an "affiliate" of a "holding company" or a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
4.15 INVESTMENT COMPANY ACT. Borrower is not an "investment
company," or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
4.16 PATENTS, TRADEMARKS, COPYRIGHTS, AND INTELLECTUAL PROPERTY,
ETC. Borrower and each Subsidiary has all necessary, patents, patent rights,
licenses, trademarks, trademark rights, trade names, trade name rights,
copyrights, permits, and franchises in order for it to conduct its business and
to operate its Assets, without known conflict with the rights of third Persons,
and all of same are valid and subsisting. The consummation of the transactions
contemplated by this Agreement will not alter or impair any of such rights of
Borrower or any Subsidiary. Borrower and each Subsidiary has not been charged
or, to the best of Xxxxxxxx's knowledge after due inquiry, threatened to be
charged with any infringement or, after due inquiry, infringed on any, unexpired
trademark, trademark registration, trade name, patent, copyright, copyright
registration, or other proprietary right of any Person.
4.17 ENVIRONMENTAL CONDITION. (i) None of Borrower's, any
Subsidiary's or any Physician Group's Assets has ever been used by such
Borrower, such Subsidiary or any Physician Group or by previous owners or
operators in the disposal of, or to produce, store, handle, treat, release, or
transport, any Hazardous Materials, other than medical supplies used in the
ordinary course of a Physician Group's practice as presently conducted in
accordance with all applicable laws, rules and regulations; (ii) none of
Borrower's, any Subsidiary's or any Physician Group's Assets has ever been
designated or identified in any manner pursuant to any environmental protection
statute as a Hazardous Materials disposal site, or a candidate for closure
pursuant to any environmental protection statute; (iii) no Lien arising under
any environmental protection statute has attached to any revenues or to any real
or personal property owned or operated by Borrower, any Subsidiary nor any
Physician Group; and (iv) neither Borrower, any Subsidiary or any Physician
Group has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal or state governmental
agency concerning any action or omission by Borrower, any Subsidiary or any
Physician Group resulting in the releasing or disposing of Hazardous Materials
into the environment.
4.18 REAL ESTATE LEASES. All of the Real Estate Leases are listed
on SCHEDULE 4.18. All of the Real Estate Leases are currently in full force and
effect, and true and correct copies of all Real Estate Leases, together with all
amendments, exhibits and schedules thereto, have been delivered to Bank.
Neither the landlord nor the tenant therein,
28
as the case may be, is in default on any of its obligations thereunder, and no
event has occurred which, with the passage of time or the giving of notice, or
both, would constitute such a default.
4.19 COMPLIANCE WITH XXX.
(a) Borrower's, the Subsidiaries' and the Physician Group's
premises are presently used as an administrative, office, and for other
commercial purposes, and no portions of Borrower's, any Subsidiaries' or any
Physician Group's premises are used as or for a "public accommodation," as
described and defined in the ADA.
(b) Borrower, each Subsidiary and each Physician Group has
made all modifications and/or provided all accommodations which may be required
to be made or provided by Borrower, such Subsidiary and each Physician Group to
their premises pursuant to the ADA in order to accommodate the needs and
requirements of any disabled employees of Borrower, such Subsidiary and each
Physician Group.
(c) Borrower, the Subsidiaries and the Physician Group's
have received no notice or complaint regarding any noncompliance with the ADA of
their premises or of Borrower's, any Subsidiary's and the Physician Group's
employment practices and, to the best of Borrower's knowledge, there has been no
threatened litigation alleging any such noncompliance by Borrower, the
Subsidiaries, the Physician Groups or their premises.
4.20 PHYSICIAN GROUPS; TRANSACTION DOCUMENTS.
(a) Each of the Physician Groups is listed on SCHEDULE 4.20
including with respect to each Physician Group, its full legal name and all
trade names and fictitious business names, state of organization, and all
locations where such Physician Group conducts its business. Each of the
Transaction Documents executed in connection with the formation of such
Physician Group and currently in effect, and transactions by and among such
Physician Group, its Physician Group Shareholders, Borrower and any Subsidiary,
are listed by title, date and parties in SCHEDULE 4.20.
(b) Each Physician Group is a professional medical
corporation, duly organized and existing under the laws of the state of its
organization. Each Physician Group has the power and authority to own its own
Assets and to transact the business in which it is engaged, and is properly
licensed to practice medicine in accordance with applicable laws.
(c) The execution, delivery and performance of the
Transaction Documents to which each Physician Group is a party are within such
Physician Group's powers, are not in conflict with the terms of any charter,
bylaw, the articles or certificate of incorporation or other organization papers
of such Physician Group, and do not result in a breach of or constitute a
default under any material contract, obligation, indenture or other
29
instrument to which such Physician Group or its Physician Group Shareholders is
a party or by which such Physician Group its Physician Group Shareholders is
bound or affected. To the knowledge of Borrower, there is no law, rule or
regulation, whether relating to the practice of medicine or otherwise, nor is
there any judgment, decree or order of any court or Governmental Authority
binding on any Physician Group or any Physician Group Shareholder which would be
contravened by the execution, delivery, performance or enforcement of the
Transaction Documents to which such Physician Group and such Physician Group
Shareholder is a party.
(d) Each Physician Group has taken all corporate action
necessary to authorize the execution and delivery of the Transaction Documents
to which such Physician Group is a party, and the consummation of the
transactions contemplated thereby.
4.21 BILLING PRACTICES. To the knowledge of Borrower, all billing
practices of each Guarantor with third party payors of each Physician Group,
including Medicare, Medicaid, Champus and Private Insurance Companies, are true
and correct and in compliance with all applicable laws, regulations, policies
and agreements, except where the failure to so comply is not reasonably likely
to have a Material Adverse Effect.
4.22 CHARACTER OF BUSINESS. Borrower is a holding company engaged
in no business activities or operations other than the acquisition of Permitted
Acquisitions and the acquisition, ownership and management of the Subsidiaries,
and the Subsidiaries are not engaged in any business activities or operations
other than the management of the Physician Groups and other activities
incidental thereto.
ARTICLE V
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that from the Closing Date and
thereafter until the indefeasible payment, performance and satisfaction in full
of the Obligations and all of Bank's obligations hereunder have been terminated,
Borrower shall:
5.1 PUNCTUAL PAYMENTS. Punctually pay the interest and principal
on the Loans, the Fees and all Bank Expenses and any other fees and liabilities
due under this Agreement and the Loan Documents at the times and place and in
the manner specified in this Agreement or the Loan Documents.
5.2 BOOKS AND RECORDS. Maintain, and cause each of its
Subsidiaries to maintain, adequate books and records in accordance with GAAP,
and permit any officer, employee or agent of Bank, at any time and from time to
time, to inspect, audit and examine such books and records, and to make copies
of the same.
5.3 FINANCIAL STATEMENTS. Deliver to Bank the following, all in
form and detail satisfactory to Bank and in such number of copies as Bank may
request:
30
(a) as soon as available but not later than forty-five (45)
days after and as of the close of each monthly accounting period, a consolidated
internally prepared Financial Statement for Borrower and its Subsidiaries which
shall include Borrower's and its Subsidiaries' consolidated balance sheet as of
the close of such period, and Borrower's and its Subsidiaries' consolidated
statement of income and retained earnings and statement of cash flow for such
period and year to date, certified by the Chief Financial Officer of Xxxxxxxx,
to the best of his or her knowledge after due and diligent inquiry, as being
complete and correct and fairly presenting in all material respects Borrower's
and its Subsidiaries' financial condition and results of operations for such
period;
(b) as soon as available but not later than forty-five (45)
days after and as of the close of each quarterly accounting period, a
consolidated and consolidating internally prepared Financial Statement for
Borrower and its Subsidiaries which shall include Borrower's and its
Subsidiaries' consolidated and consolidating balance sheet as of the close of
such period, and Borrower's and its Subsidiaries' consolidated statement of
income and retained earnings and statement of cash flow for such period and year
to date, certified by the Chief Financial Officer of Xxxxxxxx, to the best of
his or her knowledge after due and diligent inquiry, as being complete and
correct and fairly presenting Xxxxxxxx's and its Subsidiaries' financial
condition and results of operations;
(c) as soon as available but not later than forty-five (45)
days after and as of the close of each quarterly accounting period, a report,
certified by a Responsible Officer of Borrower, to the best of his or her
knowledge after due and diligent inquiry, as being complete and correct, setting
forth all of the following information with respect to such quarterly accounting
period with respect to Borrower, the Subsidiaries and the Physician Groups, both
in the aggregate and by Physician Group: (i) an accounts receivable aging by
payor class, (ii) number of member lives and number of doctors employed, (iii)
monthly capitation rate for commercial lives, Medicare risk lives and
Medical/Medicaid lives, (iv) medical loss ratio; and (v) an analysis of incurred
but not reported medical expenses.
(d) as soon as available but not later than forty-five (45)
days after and as of the end of each quarterly accounting period, a Compliance
Certificate from the Chief Financial Officer of Xxxxxxxx, stating, among other
things, that he or she has reviewed the provisions of this Agreement and the
Loan Documents and that, to the best of his or her knowledge after due and
diligent inquiry there exists no Event of Default or Unmatured Event of Default,
and containing the calculations and other details necessary to demonstrate
compliance with Sections 6.12 and 6.16;
(e) as soon as available but not later than ninety (90)
after and as of the end of each fiscal year, a complete copy of Xxxxxxxx's and
the Subsidiaries' consolidated audited Financial Statement and all work papers
and supporting documents thereunder which Bank may request, which shall include
at least Borrower's and the Subsidiaries' balance sheet as of the close of such
fiscal year, and Xxxxxxxx's and the Subsidiaries' statement of income and
retained earnings and statement of cash flow for such
31
fiscal year, certified by a certified public accountant selected by Borrower and
satisfactory to Bank, which certificate shall not be qualified in any manner
whatsoever, and shall include or be accompanied by a statement from such
accountant that during the examination, solely with respect to accounting and
auditing matters herein, there was observed no Event of Default or Unmatured
Event of Default, or a statement of such Event of Default or Unmatured Event of
Default if any is found and the actions taken or to be taken with respect
thereto;
(f) as soon as available but not later than thirty (30)
days prior to the last day of each fiscal year, a Capital Expenditure budget for
the following fiscal year of Borrower and the Subsidiaries, approved by the
Board of Directors of Borrower, in form and content satisfactory to Bank;
(g) as soon as available, but no later than ten (10) days
after submission thereof to the Department of Corporations and/or any other
applicable or successor state agency or body, all reports and/or financial
statements required under Xxxxxxxx's or any Guarantor's Health Service Plan
License;
(h) promptly upon receipt by Xxxxxxxx, copies of any and
all reports and management letters submitted to Borrower or any Subsidiary by
any certified public accountant in connection with any examination of Borrower's
or any Subsidiary's financial records made by such accountant; and
(i) from time to time annual budgets, operating statistics,
operating plans and any other information as Bank may reasonably request,
promptly upon such request.
5.4 EXISTENCE; PRESERVATION OF LICENSES; COMPLIANCE WITH LAW.
Preserve and maintain, and cause each Subsidiary to preserve and maintain, its
corporate existence and good standing in the state of its organization, qualify
and remain qualified, and cause each Subsidiary to qualify and remain qualified,
as a foreign corporation in every jurisdiction where the failure to be so
qualified could have a Material Adverse Effect; and preserve, and cause each of
the Subsidiaries to preserve, all of its licenses, permits, governmental
approvals, rights, privileges and franchises required for its operations; and
comply, and cause each of the Subsidiaries to comply, with the provisions of its
Governing Documents; and comply, and cause each of the Subsidiaries to comply,
with the requirements of all applicable laws, rules, regulations, orders of any
Governmental Authority having authority or jurisdiction over it, except for such
laws, rules and regulations where the failure to so comply could not have a
Material Adverse Effect, and comply, and cause each of the Subsidiaries to
comply, with all requirements for the maintenance of its business, insurance,
licenses, permits, governmental approvals, rights, privileges and franchises;
and timely file, and cause each of its Subsidiaries to timely file, to the
Department of Corporations, all required reports and financial statements
required under its Health Service Plan License.
32
5.5 INSURANCE.
(a) Maintain and keep in force, and cause each Subsidiary
and each Physician Group to maintain and keep in force, insurance of the types
and in amounts customarily carried by companies engaged in the same or similar
business, or similarly situated, including fire, extended coverage, public
liability, business interruption, property damage, medical liability and
workers' compensation insurance, and deliver to Bank from time to time at Bank's
request schedules setting forth all insurance then in effect. All insurance
required herein shall be written by companies which are authorized to do
insurance business in the State of California. All hazard insurance and such
other insurance as Bank shall specify, shall contain a California
Form 438BFU (NS) endorsement, or an equivalent endorsement satisfactory to Bank,
showing Bank as sole loss payee thereof, and shall contain a waiver of
warranties. Every policy of insurance referred to in this Section 5.5 shall
contain an agreement by the insurer that it will not cancel such policy except
after 30 days prior written notice to Bank and that any loss payable thereunder
shall be payable notwithstanding any act or negligence of Borrower or Bank which
might, absent such agreement, result in a forfeiture of all or a part of such
insurance payment.
(b) Original policies or certificates thereof satisfactory
to Bank evidencing such insurance shall be delivered to Bank at least 30 days
prior to the expiration of the existing or preceding policies. Borrower shall
give Bank prompt notice of any loss covered by such insurance, and Bank shall
have the right to adjust any loss. Bank shall have the exclusive right to
adjust all losses payable under any such insurance policies without any
liability to Borrower whatsoever in respect of such adjustments. Any monies
received as payment for any loss under any insurance policy including the
insurance policies mentioned above, shall be paid over to Bank to be applied at
the option of Bank either to the prepayment of the Obligations without premium,
in such order or manner as Bank may elect, or shall be disbursed to Borrower
under stage payment terms satisfactory to Bank for application to the cost of
repairs, replacements, or restorations. All repairs, replacements, or
restorations shall be effected with reasonable promptness and shall be of a
value at least equal to the value of the items or property destroyed prior to
such damage or destruction. Upon the occurrence of an Event of Default, Bank
shall have the right to apply all prepaid premiums to the payment of the
Obligations in such order or form as Bank shall determine.Borrower shall,
concurrently with the financial information required to be delivered by Borrower
pursuant to Section 5.3(b), deliver to Bank, as Bank may request, copies of
certificates describing all insurance of Borrower then in effect.
5.6 ASSETS. Maintain, keep and preserve, and cause each
Subsidiary to maintain, keep and preserve, all of its Assets (tangible or
intangible) which are necessary to its business in good repair and condition,
and from time to time make necessary repairs, renewals and replacements thereto
so that such Assets shall be fully and efficiently preserved and maintained.
5.7 TAXES AND OTHER LIABILITIES. Pay and discharge when due, and
cause each Subsidiary to pay and discharge when due, any and all assessments and
taxes, both real
33
or personal and including federal and state income taxes, and any and all other
Permitted Debt.
5.8 NOTICE TO BANK. Promptly, upon Xxxxxxxx acquiring knowledge
thereof, give written notice to Bank of:
(a) all litigation affecting Borrower or any Subsidiary
where the amount in controversy is in excess of applicable insurance coverage;
(b) any dispute which may exist between Borrower, any
Subsidiary or any Physician Group, on the one hand, and any Governmental
Authority, on the other;
(c) any labor controversy resulting in or threatening to
result in a strike against Borrower or any Subsidiary;
(d) any proposal by any public authority to acquire the
Assets or business of Borrower or any Subsidiary, or to compete with Borrower or
any Subsidiary;
(e) all notices or claims which may be received by Borrower
or any Subsidiary and involving claims made by any Person as to any alleged
noncompliance of Xxxxxxxx's or such Subsidiary's premises with the requirements
of the ADA;
(f) any material notice from any Governmental Authority
pertaining to any Physician Group, the Transaction Documents or any of them, or
the transactions contemplated thereunder;
(g) any notice of termination of any Management Service
Agreement or any other material notice from any Physician Group, or any
Physician Group Shareholder;
(h) any Event of Default or Unmatured Event of Default; and
(i) any other matter which has resulted or could result in
a Material Adverse Effect.
5.9 EMPLOYEE BENEFITS. (a)(i) Promptly, and in any event within 10
Business Days after Borrower or any of the Subsidiaries knows or has reason to
know that an ERISA Event has occurred that reasonably could be expected to
result in a Material Adverse Effect, deliver or cause to be delivered a written
statement of the Chief Financial Officer of Borrower describing such ERISA Event
and any action that is being taken with respect thereto by Xxxxxxxx, any such
Subsidiary, or member of the ERISA Group, and any action taken or threatened by
the IRS, Department of Labor, or PBGC. Borrower or such Subsidiary, as
applicable, shall be deemed to know all facts known by the administrator of any
Plan of which it is the plan sponsor; (ii) promptly and in any event within 3
Business Days after the filing thereof with the IRS, a copy of each funding
waiver request filed with
34
respect to any Plan and all communications received by Xxxxxxxx, any member of
the ERISA Group with respect to such request; and (iii) promptly and in any
event within 3 Business Days after receipt by Xxxxxxxx, any of its Subsidiaries
or, to the knowledge of Borrower, any member of the ERISA Group, of the PBGC's
intention to terminate a Plan or to have a trustee appointed to administer a
Plan, copies of each such notice.
(b) Cause to be delivered to Bank, upon Bank's request,
each of the following: (i) a copy of each Plan (or, where any such plan is not
in writing, complete description thereof) (and if applicable, related trust
agreements of other funding instruments) and all amendments thereto, all written
interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of Borrower or its Subsidiaries;
(ii) the most recent determination letter issued by the IRS with respect to each
Plan; (iii) for the three most recent plan years, annual reports on Form 5500
Series required to be filed with any governmental agency for each Plan; (iv) all
actuarial reports prepared for the last three plan years for each Plan; (v) a
listing of all Multiemployer Plans, with the aggregate amount of the most recent
annual contributions required to be made by Borrower or any member of the ERISA
Group to each such plan and copies of the collective bargaining agreements
requiring such contributions; (vi) any information that has been provided to
Borrower or any member of the ERISA Group regarding withdrawal liability under
any Multiemployer Plan; and (vii) the aggregate amount of the most recent annual
payments made to former employees of Borrower or its Subsidiaries under any
Retiree Health Plan.
5.10 FURTHER ASSURANCES. Execute and deliver, or cause to be
executed and delivered, upon the request of Bank and at Xxxxxxxx's expense, such
additional documents, instruments and agreements as Bank may reasonably
determine to be necessary or advisable to carry out the provisions of this
Agreement and the Loan Documents, and the transactions and actions contemplated
hereunder and thereunder.
5.11 BANK ACCOUNTS. Maintain, and cause each Subsidiary and each
Physician Group to maintain, its cash on hand and cash equivalent investments in
deposit accounts at Bank, which deposits accounts (other than the deposit
accounts of the Physician Groups) shall be subject to the security interests
granted to Bank under the Security Agreement and the Security Agreements
(Guarantor), and all funds in the deposit accounts of the Physician Groups shall
be swept daily into the deposit account of its Manager established at Bank.
5.12 ENVIRONMENT. Be and remain, and cause each Subsidiary and
each operator of any of Borrower's or any Subsidiary's Assets to be and remain,
in compliance with the provisions of all federal, state and local environmental,
health and safety laws, codes and ordinances, and all rules and regulations
issued thereunder; notify Bank immediately of any notice of a hazardous
discharge or environmental complaint received from any Governmental Authority or
any other Person; notify Bank immediately of any hazardous discharge from or
affecting its premises; immediately contain and remove the same, in compliance
with all applicable laws; promptly pay any fine or penalty assessed in
35
connection therewith; permit Bank to inspect the premises, to conduct tests
thereon, and to inspect all books, correspondence, and records pertaining
thereto; and at Bank's request, and at Borrower's expense, provide a report of a
qualified environmental engineer, satisfactory in scope, form and content to
Bank, and such other and further assurances reasonably satisfactory to Bank that
the condition has been corrected.
5.13 REAL ESTATE LEASES. Perform all of its obligations under all
of the Real Estate Leases and promptly deliver to Bank a copy of all notices of
default or breach under any Real Estate Lease.
5.14 ADA. Observe and comply, and cause each Subsidiary to observe
and comply, in all material respects with all obligations and requirements of
the ADA as it applies to their premises, which shall include, without
limitation, installing or constructing all improvements or alterations which may
be necessary to cause such premises to be accessible to all persons if the use
of such premises or any part thereof becomes a "public accommodation," as
defined in the ADA, or in the event additional building improvements are added
or incorporated into the existing improvements, and making any reasonable
accommodations which may be necessary to accommodate the needs or requirements
of any existing or future employee of Borrower and the Subsidiaries, as
applicable.
5.15 BILLING PRACTICES. Cause all billing practices of each
Guarantor with third party payors of each Physician Group, including Medicare,
Medicaid, Champus and Private Insurance Companies, to be true and correct in all
material respects and in material compliance with all applicable laws,
regulations, policies and agreements.
ARTICLE VI
NEGATIVE COVENANTS
Borrower further covenants and agrees that from the Closing Date and
thereafter until the indefeasible payment, performance and satisfaction in full
of the Obligations and all of Bank's obligations hereunder have been terminated,
Borrower shall not:
6.1 USE OF FUNDS; MARGIN REGULATION.
(a) Use any proceeds of the Revolving Loans for any purpose
other than for (i) Permitted Acquisitions to the extent permitted by
Sections 3.3 and 6.8 and (ii) working capital; or
(b) Use any portion of the proceeds of the Loans in any
manner which might cause the Loans, the application of the proceeds thereof, or
the transactions contemplated by this Agreement to violate Regulation G, T, U,
or X of the Board of Governors of the Federal Reserve System, or any other
regulation of such board, or to violate the Securities and Exchange Act of 1934,
as amended or supplemented.
36
6.2 DEBT. Create, incur, assume or suffer to exist, or permit any
Subsidiary or any Physician Group to create, incur, assume or suffer to exist,
any Debt except Permitted Debt.
6.3 LIENS. Create, incur, assume or suffer to exist, or permit
any Subsidiary or any Physician Group to create, incur, assume or suffer to
exist, any Lien (including the lien of an attachment, judgment or execution) on
any of its Assets, whether now owned or hereafter acquired, except Permitted
Liens; or sign or file, or permit any Subsidiary or any Physician Group to sign
or file, under the Uniform Commercial Code as adopted in any jurisdiction, a
financing statement which names Borrower or any Subsidiary or any Physician
Group as a debtor, except with respect to Permitted Liens, or sign, or permit
any Subsidiary or any Physician Group to sign, any security agreement
authorizing any secured party thereunder to file such a financing statement,
except with respect to Permitted Liens.
6.4 MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Wind up, liquidate
or dissolve, reorganize, merge or consolidate with or into any other Person, or
acquire all or substantially all of the Assets or the business of any other
Person, or permit any Subsidiary to do so, except for Permitted Acquisitions;
PROVIDED, HOWEVER, upon prior written notice to Bank, any Subsidiary may merge
into or consolidate with or transfer Assets to any other Subsidiary.
6.5 LEASES. Create, incur, assume or suffer to exist, or permit
any Subsidiary to create, incur, assume or suffer to exist, any obligation as a
lessee for the rental or hire of any real or personal property, other than (i)
leases that have been or should be capitalized in accordance with GAAP and (ii)
leases (other than Capital Leases) that do not in the aggregate require Borrower
and its Subsidiaries on a consolidated basis to make payments (including taxes,
insurance, maintenance, and similar expenses which Borrower or any Subsidiary is
required to pay under the terms of any lease) in excess of One Hundred Thousand
Dollars ($100,000) in any fiscal year of Borrower.
6.6 SALES AND LEASEBACKS. Sell, transfer, or otherwise dispose
of, or permit any Subsidiary to sell, transfer, or otherwise dispose of, any
real or personal property to any Person, and thereafter directly or indirectly
leaseback the same or similar property.
6.7 ASSET SALES. Conduct any Asset Sale, or permit any Subsidiary
to do so, other than the sale or other disposition of Assets which are worn,
obsolete, or no longer used or useful in the conduct of its business.
6.8 INVESTMENTS; PERMITTED ACQUISITIONS.
(a) Make, or permit any Subsidiary to make, any loans or
advances to, or any investment in, any Person, except Permitted Investments and
loans evidenced by an Inter-Company Note (Guarantor) or an Inter-Company Note
(Physician Group) in
37
accordance with a Permitted Acquisition; or acquire, or permit any Subsidiary to
acquire, any capital stock, Assets, obligations, or other securities of, make
any contribution to, or otherwise acquire any interest in, any Person except in
accordance with Section 6.8(b); or acquire or form or permit any Subsidiary to
acquire or form, any new Subsidiary except in accordance with Section 6.8(b);
or participate, or permit any Subsidiary to participate, as a partner or joint
venturer with any other Person.
(b) Notwithstanding Section 6.8(a), Borrower shall be
permitted to acquire or form a new Subsidiary in connection with the funding by
it or such Subsidiary of the acquisition of a Physician Group in accordance with
the Transaction Documents with respect to such Physician Group (a "PERMITTED
ACQUISITION") so long as the following conditions have been fulfilled to the
satisfaction of Bank in its sole and absolute discretion:
(i) Such Subsidiary shall be a corporation, wholly
owned by Borrower;
(ii) Bank shall have received not later than thirty
(30) days prior to the date of the proposed Permitted Acquisition, (x) a
written detailed description of the proposed Permitted Acquisition, in form
and substance satisfactory to Bank, including historical and projected
financial information, accounts receivable information and reconciliations,
and such other supporting information with respect to the applicable
Physician Group and proposed Permitted Acquisition as Bank shall require,
including historical financial statements and a listing of adjustments to
physician compensation and other ongoing expenses reflected in the
projected EBITDA for the transaction; and (y) draft copies of all
Transaction Documents with respect to the proposed Permitted Acquisition,
in form and substance satisfactory to Bank;
(iii) Bank shall have given its prior written consent
to such Permitted Acquisition if either (x) the total consideration to be
paid to the seller of the applicable Physician Group is Three Million
Dollars ($3,000,000) or more, or (y) the total consideration to be paid to
the seller of the applicable Physician Group is One Million Dollars
($1,000,000) or more but less than Three Million Dollars ($3,000,000) AND
both (1) the total consideration to be paid to the seller of the applicable
Physician Group is in excess of five times such Physician Group's projected
EBITDA and (2) the cash consideration to be paid to the seller of the
applicable Physician Group is in excess of three times such Physician
Group's projected EBITDA;
(iv) Bank shall have received, not later than one
(1) day prior to the date of the closing of such Permitted Acquisition,
final copies of all Transaction Documents with respect thereto, marked to
show changes from the drafts of same previously provided to Bank, and Bank
shall be satisfied with same;
38
(v) Bank shall have received all of the following
Loan Documents with respect to such proposed Permitted Acquisition, in form
and substance satisfactory to Bank in its sole and absolute discretion:
(1) a Guaranty duly executed by the
applicable Subsidiary;
(2) a Security Agreement (Guarantor), duly
executed by the applicable Subsidiary;
(3) a Stock Pledge Agreement with respect to
the capital stock of the applicable Subsidiary, duly executed by Xxxxxxxx
and acknowledged by such Subsidiary;
(4) a Collateral Assignment of Transaction
Documents (Guarantor), duly executed by the applicable Subsidiary and
acknowledged by each of the other Persons party to such Transaction
Documents;
(5) a Security Agreement (Physician Group)
and related financing statement (Form UCC-1) and financing statement
assignment (Form UCC-2 or UCC-3, as applicable), duly executed by the
applicable Physician Group and Subsidiary;
(6) a joinder agreement to the Credit
Succession Agreement, duly executed by such Subsidiary, Physician Group and
the Physician Group Shareholders of such Physician Group;
(7) such UCC-1 financing statements and/or
fixture filings as Bank shall reasonably require in connection with the
foregoing Loan Documents, duly executed by Borrower or such Subsidiary, as
applicable;
(vi) Bank shall have received the original duly
executed Inter-Company Note (Guarantor), endorsed by allonge by Borrower to
Bank, and the original duly executed Inter-Company Note (Physician Group
Shareholder), endorsed by allonge by the applicable Guarantor to Bank,
evidencing the downstreaming of the funds from Borrower to the applicable
Guarantor to the applicable Physician Group Shareholder, together with the
original duly executed Inter-Company Security Agreement and UCC-1 Financing
Statements as Bank shall require with respect thereto, duly assigned to
Bank, all in form and substance satisfactory to Bank in its sole and
absolute discretion;
(vii) Bank shall have received the certificates
evidencing all of the capital stock of the applicable Physician Group
together with undated stock powers with respect thereto, duly executed by
the applicable Physician Group Shareholder;
39
(viii) Bank shall have received a favorable duly
executed opinion of Xxxxxxxx's and Guarantors' counsel, dated as of the
date of the closing of the proposed Permitted Acquisition, with respect to
the proposed Permitted Acquisition, satisfactory to Bank in its sole and
absolute discretion;
(ix) Bank shall have received replacement Schedules
to this Agreement and the Loan Documents, as appropriate, in form and
substance satisfactory to Bank in its sole and absolute discretion;
(x) Bank shall have received a Certificate of the
Secretary of the applicable Guarantor, dated as of the date of the closing
of the proposed Permitted Acquisition, certifying (i) the incumbency and
signatures of the Responsible Officers of such Guarantor who are executing
the Loan Documents on behalf of such Guarantor, (ii) the bylaws of such
Guarantor and all amendments thereto as being true and correct and in full
force and effect, and (iii) the resolutions of the Board of Directors of
such Guarantor as being true and correct and in full force and effect,
authorizing the execution and delivery of the Loan Documents, and
authorizing the transactions contemplated thereunder, and authorizing the
Responsible Officers of such Guarantor to execute the same on behalf of
such Guarantor;
(xi) Bank shall have received a certificate of
status and good standing for the applicable Guarantor, dated as of a recent
date prior to the date of the closing of the proposed Permitted
Acquisition, showing that such Guarantor is in good standing under the laws
of the state of its organization;
(xii) Bank shall have received the Articles or
Certificate of Incorporation and all amendments thereto of the applicable
Guarantor, certified by the Secretary of State of the state of its
organization;
(xiii) receipt by Bank of certificates of foreign
qualification and good standing with respect to the applicable Guarantor,
dated as of a recent date prior to the date of the closing of the proposed
Permitted Acquisition, showing that such Guarantor is qualified to do
business and is in good standing under the laws of each state where the
failure to be so qualified would have a Material Adverse Effect;
(xiv) receipt by Bank of a certificate signed by the
President and Chief Financial Officer of the applicable Guarantor, dated as
of the date of the closing of the proposed Permitted Acquisition,
certifying to Bank that (i) both immediately before and immediately after
giving effect to the transactions contemplated by the Loan Documents, such
Guarantor is and will be Solvent, (ii) to the best of their knowledge after
due and diligent inquiry, the representations and warranties of such
Guarantor contained in the Loan Documents are true and correct, (iii) to
the best of their knowledge after due and diligent inquiry, both
immediately before and immediately after giving effect to the transactions
contemplated by the
40
Loan Documents, no Event of Default or Unmatured Event of Default is
continuing or shall occur, and (iv) the business of such Guarantor and
the practice of the Physician Group which is the subject of such
Permitted Acquisition are substantially the same as all other Guarantors
and Physician Groups;
(xv) Bank shall have received payment in full of all
Bank Expenses pursuant to Section 9.3(a)(i) incurred in connection with the
proposed Permitted Acquisition;
(xvi) Bank shall have received copies of insurance
binders or insurance certificates evidencing Borrower's having caused to be
obtained insurance in accordance with Section 5.5, including the lender's
loss payee endorsements required by such Section;
(xvii) Bank shall have received Uniform Commercial
Code and other public record searches with respect to the applicable
Guarantor and Physician Group, in each case satisfactory to Bank in its
sole and absolute discretion; and
(xviii) Bank shall have received such other agreements,
instruments and documents as Bank may reasonably require in connection with
such Permitted Acquisition, in form and substance satisfactory to Bank in
its sole and absolute discretion.
6.9 CHARACTER OF BUSINESS. Engage in any business activities or
operations other than to make Permitted Acquisitions and the acquisition,
ownership and management of the Subsidiaries, or permit the Subsidiaries to
engage in any business activities or operations other than the management of the
Physician Groups in accordance with the Management Service Agreements and other
activities incidental thereto.
6.10 DISTRIBUTIONS. Declare or pay any Distributions; or purchase,
redeem, retire, or otherwise acquire for value any of its ownership interests
now or hereafter outstanding; or make any distribution of Assets to its partners
or problems as such, whether in cash, Assets, or in obligations of Borrower; or
allocate or otherwise set apart any sum for the payment of any Distribution on,
or for the purchase, redemption or retirement of, any of its capital stock; or
make any other distribution by reduction of capital or otherwise in respect of
any of its ownership interests; or permit any Subsidiary to purchase or
otherwise acquire for value any ownership interests of Borrower or any other
Subsidiary.
6.11 GUARANTY. Assume, guaranty, endorse (other than checks and
drafts received by Borrower in the ordinary course of business so long as an
Event of Default has not occurred), or otherwise be or become directly or
contingently responsible or liable, or permit any Subsidiary to assume,
guaranty, endorse, or otherwise be or become directly or contingently
responsible or liable (including, any agreement to purchase any obligation,
stock, Assets, goods, or services or to supply or advance any funds, Assets,
goods, or
41
services, or any agreement to maintain or cause such Person to maintain, a
minimum working capital or net worth, or otherwise to assure the creditors of
any Person against loss) for the obligations of any other Person; or pledge
or hypothecate, or permit any Subsidiary to pledge or hypothecate, any of its
Assets as security for any liabilities or obligations of any other Person.
6.12 CAPITAL EXPENDITURES. Make any Capital Expenditures, or any
commitments therefor, in excess of Seven Hundred Fifty Thousand Dollars
($750,000) in the aggregate in any fiscal year.
6.13 TRANSACTIONS WITH AFFILIATES. Enter into any transaction,
including the purchase, sale, or exchange of property or the rendering of any
service, with any Affiliate, or permit any Subsidiary to enter into any
transaction, including the purchase, sale, or exchange of property or the
rendering of any service, with any Affiliate, other than (i) in the ordinary
course of and pursuant to the reasonable requirements of Borrower's or such
Subsidiary's business and upon fair and reasonable terms no less favorable to
Borrower or such Subsidiary than would obtain in a comparable arm's length
transaction with a Person not an Affiliate; (ii) the Transaction Documents; and
(iii) that certain Tax Sharing Agreement among Borrower and Guarantors, in form
and content substantially similar to the draft circulated on or about the date
hereof.
6.14 CHANGE OF CONTROL. Cause, permit or suffer, directly or
indirectly any Change of Control.
6.15 STOCK ISSUANCE. Permit any Subsidiary to issue any additional
capital stock or other ownership interests.
6.16 FINANCIAL CONDITION. Permit or suffer:
(a) the Current Ratio at any time to be less than 1.0:1.0.
(b) Consolidated Net Worth at the end of each fiscal
quarter to be less than the sum of (i) $1,734,606, PLUS (ii) on a cumulative
basis from May 1, 1997, one hundred percent (100%) of all extraordinary gains,
proceeds from the sale of capital stock, and equity issued in connection with
any mergers and acquisitions permitted hereunder, and PLUS (iii) on a cumulative
basis from May 1, 1997, seventy percent (70%) of positive Consolidated Net
Income.
(c) the Leverage Ratio at any time to exceed the ratio set
forth in the table below during the periods indicated:
Period Maximum Leverage Ratio
------ ----------------------
Closing Date through 9/30/98 4.00:1.0
10/1/98 and thereafter 3.50:1.0
42
(d) the Coverage Ratio at any time to be less than
1.25:1.0.
6.17 TRANSACTIONS UNDER XXXXX. Directly or indirectly:
(a) engage, or permit any Subsidiary of Borrower to engage,
in any prohibited transaction which is reasonably likely to result in a civil
penalty or excise tax described in Sections 406 of ERISA or 4975 of the Internal
Revenue Code for which a statutory or class exemption is not available or a
private exemption has not been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the Internal Revenue Code), whether or not waived;
(c) fail, or permit any Subsidiary of Borrower to fail, to
pay timely required contributions or installments due with respect to any waived
funding deficiency to any Plan;
(d) terminate, or permit any Subsidiary of Borrower to
terminate, any Plan where such event would result in any liability of Borrower,
any of its Subsidiaries or any member of ERISA Group under Title IV of ERISA;
(e) fail, or permit any Subsidiary of Borrower to fail, to
make any required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of Borrower to fail, to
pay to a Plan or Multiemployer Plan any required installment or any other
payment required under Section 412 of the Internal Revenue Code on or before the
due date for such installment or other payment;
(g) amend, or permit any Subsidiary of Borrower to amend, a
Plan resulting in an increase in current liability for the plan year such that
either of Borrower, any Subsidiary of Borrower or any the member of the ERISA
Group is required to provide security to such Plan under Section 401(a)(29) of
the Internal Revenue Code; or
(h) withdraw, or permit any Subsidiary of Borrower to
withdraw, from any Multiemployer Plan where such withdrawal is reasonably likely
to result in any liability of any such entity under Title IV of ERISA;
which, individually or in the aggregate, results in or reasonably would be
expected to result in a claim against or liability of Borrower, any of its
Subsidiaries or any member of the ERISA Group in excess of Two Hundred Fifty
Thousand Dollars ($250,000).
6.18 TRANSACTION DOCUMENTS. (i) Terminate any of the Transaction
Documents, or permit any Subsidiary to do so, or (ii) amend any of the
Transaction
43
Documents, or waive any of the provisions thereof, or permit any Subsidiary to
do so, in any respect which (x) adversely affects Bank's rights or remedies with
respect thereto, or (y) could reasonably be expected to have a Material Adverse
Effect.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
7.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events, acts or occurrences shall constitute an event of default (an
"Event of Default") hereunder:
(a) Borrower fails to pay any payment of principal or
interest due on the Loans, the Fees, any Bank Expenses, or any other amount
payable hereunder or under any Loan Document;
(b) Xxxxxxxx fails to observe or perform any of the
covenants and agreements set forth in Article VI;
(c) Borrower fails to observe or perform any covenant or
agreement set forth in this Agreement and the Loan Documents (other than those
covenants and agreements described in Sections 7.1(a) and 7.1(b)), and such
failure continues for fifteen (15) days after the earlier to occur of
(i) Borrower obtaining knowledge of such failure or (ii) Bank's dispatch of
notice to Borrower of such failure;
(d) Any representation, warranty or certification made by
Borrower or any Guarantor or any officer or employee of Borrower or any
Guarantor in this Agreement or any Loan Document, in any certificate, financial
statement or other document delivered pursuant to this Agreement or any Loan
Document proves to have been untrue in any material respect when made;
(e) Borrower or any Guarantor fails to pay when due any
payment in respect of Debt or other extensions of credit or financial
arrangements (other than under this Agreement);
(f) Any event or condition occurs that: (i) results in the
acceleration of the maturity of Debt or other financial arrangements of Borrower
or any Guarantor; or (ii) permits (or, with the giving of notice or lapse of
time or both, would permit) the holder or holders of such Debt or extensions of
credit or financial accommodations or any Person acting on behalf of such holder
or holders to accelerate the maturity thereof;
(g) Borrower or any Guarantor commences a voluntary
Insolvency Proceeding seeking liquidation, reorganization or other relief with
respect to itself or its Debt or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar
44
official over it or any substantial part of its property, or consents to any
such relief or to the appointment of or taking possession by any such official
in an involuntary Insolvency Proceeding or fails generally to pay its Debt as it
becomes due, or takes any action to authorize any of the foregoing;
(h) An involuntary Insolvency Proceeding is commenced
against Borrower or any Guarantor seeking liquidation, reorganization or other
relief with respect to it or its Debt or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property and any of the following events occur: (i) the
petition commencing the Insolvency Proceeding is not timely controverted;
(ii) the petition commencing the Insolvency Proceeding is not dismissed within
thirty (30) calendar days of the date of the filing thereof; (iii) an interim
trustee is appointed to take possession of all or a substantial portion of the
Assets of, or to operate all or any substantial portion of the business of, such
Borrower or such Guarantor; or (iv) an order for relief shall have been issued
or entered therein;
(i) Borrower or any Guarantor suffers (i) any money
judgment in excess of applicable insurance coverage or (ii) any writ, warrant of
attachment, or similar process;
(j) A judgment creditor obtains possession of any of the
Assets of Borrower or any Guarantor by any means, including levy, distraint,
replevin, or self-help, or any order, judgment or decree is entered decreeing
the dissolution of either Borrower or any Guarantor;
(k) Any Management Services Agreement or any of the other
Transaction Documents is terminated or fails to be in full force and effect for
any reason, or a breach, a default or an event of default occurs under any
Transaction Document;
(l) Any of the Loan Documents fails to be in full force and
effect for any reason, or Bank fails to have a perfected, first priority Lien in
and upon all of the collateral assigned or pledged to Bank thereunder, or a
breach, default or an event of default occurs under any Loan Document; or
(m) Any other Material Adverse Effect occurs.
7.2 REMEDIES.
(a) ACCELERATION. Upon the occurrence of any Event of
Default described in Section 7.1(g) or 7.1(h), the Obligations shall become
immediately due and payable without any election or action on the part of Bank
without presentment, demand, protest or notice of any kind, all of which
Borrower hereby expressly waives. Upon the occurrence and continuance of any
other Event of Default, Bank may, at its election, without notice of its
election and without demand, immediately declare the Obligations to be due and
payable, whereupon the Obligations shall become immediately due and payable,
45
without presentment, demand, protest or notice of any kind, all of which
Borrower hereby expressly waives.
(b) TERMINATION OF REVOLVING CREDIT COMMITMENT. Upon the
occurrence of any Unmatured Event of Default or Event of Default, Bank may, at
its option, terminate the Revolving Credit Commitment and cease making Revolving
Loans to Borrower.
7.3 REMEDIES CUMULATIVE. The rights and remedies of Bank herein
and in the Loan Documents are cumulative, and are not exclusive of any other
rights, powers, privileges, or remedies, now or hereafter existing, at law, in
equity or otherwise.
ARTICLE VIII
TAXES
8.1 TAXES ON PAYMENTS. All payments in respect of the Obligations
shall be made free and clear of and without any deduction or withholding for or
on account of any present and future taxes, levies, imposts, deductions,
charges, withholdings, assessments or governmental charges, and all liabilities
with respect thereto, imposed by the United States of America, any foreign
government, or any political subdivision or taxing authority thereof or therein,
excluding any taxes, imposed on Bank under the Internal Revenue Code or similar
state and local laws and determined by Bank's net income, and any franchise
taxes imposed on Bank by the State of California (or any political subdivision
thereof) (all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings, assessments, charges and liabilities being hereinafter referred to
as "TAXES"). If any Taxes are imposed and required by law to be deducted or
withheld from any amount payable to Bank, then Borrower shall (i) increase the
amount of such payment so that Bank will receive a net amount (after deduction
of all Taxes) equal to the amount due hereunder, and (ii) pay such Taxes to the
appropriate taxing authority for the account of Bank prior to the date on which
penalties attach thereto or interest accrues thereon; PROVIDED, HOWEVER, if any
such penalties or interest shall become due, Borrower shall make prompt payment
thereof to the appropriate taxing authority.
8.2 INDEMNIFICATION FOR TAXES. Borrower shall indemnify Bank for
the full amount of Taxes (including penalties, interest, expenses and Taxes
arising from or with respect to any indemnification payment) arising therefrom
or with respect thereto, whether or not the Taxes were correctly or legally
asserted. This indemnification shall be made on demand.
8.3 EVIDENCE OF PAYMENT. Within thirty (30) days after the date
of payment of any Taxes, Borrower shall furnish to Bank the original or a
certified copy of a receipt evidencing payment thereof. If no Taxes are payable
in respect of any payment due hereunder or under the Notes, Borrower shall
furnish to Bank a certificate from each
46
appropriate taxing authority, or an opinion of counsel acceptable to Bank, in
either case stating that such payment is exempt from or not subject to Taxes.
ARTICLE IX
MISCELLANEOUS
9.1 NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission or
similar writing) and shall be given to such party at its address or facsimile
number set forth on the signature pages hereof or such other address or
facsimile number as such party may hereafter specify by notice to the other
party in accordance with this Section 9.1. Each such notice, request or other
communication shall be deemed given on the second business day after mailing;
PROVIDED that actual notice, however and from whomever given or received, shall
always be effective on receipt; PROVIDED further that notices to Bank pursuant
to Article II shall not be effective until received by a Responsible Officer of
Bank; PROVIDED FURTHER that notices sent by Bank in connection with
Sections 9504 or 9505 of the California Uniform Commercial Code shall be deemed
given when deposited in the mail or personally delivered, or, where permitted by
law, transmitted by facsimile.
9.2 NO WAIVERS. No failure or delay by Bank in exercising any
right, power or privilege hereunder or under any Loan Document shall operate as
a waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege.
9.3 BANK EXPENSES; DOCUMENTARY TAXES; INDEMNIFICATION.
(a) Borrower shall pay all Bank Expenses on demand.
(b) Borrower shall pay all and indemnify Bank against any
and all transfer taxes, documentary taxes, assessments, or charges made by any
Governmental Authority and imposed by reason of the execution and delivery of
this Agreement, any of the Loan Documents, or any other document, instrument or
agreement entered into in connection herewith.
(c) Borrower shall and hereby agrees to indemnify, protect,
defend and hold harmless Bank and its directors, officers, agents, employees and
attorneys (collectively, the "INDEMNIFIED PERSONS" and individually, an
"INDEMNIFIED PERSON") from and against (i) any and all losses, claims, damages,
liabilities, deficiencies, judgments, costs and expenses (including attorneys'
fees and attorneys' fees incurred pursuant to proceedings arising under the
Bankruptcy Code) incurred by any Indemnified Person (except to the extent that
it is finally judicially determined to have resulted from the gross negligence
or willful misconduct of any Indemnified Person) arising out of or by reason of
any litigations, investigations, claims or proceedings (whether administrative,
judicial or otherwise), including discovery, whether or not Bank is designated a
party thereto, which arise out of
47
or are in any way related to (1) this Agreement, the Loan Documents or the
transactions contemplated hereby or thereby, (2) any actual or proposed use by
Borrower of the proceeds of the Loans, or (3) Bank's entering into this
Agreement, the Loan Documents or any other agreements and documents relating
hereto; (ii) any such losses, claims, damages, liabilities, deficiencies,
judgments, costs and expenses arising out of or by reason of the use,
generation, manufacture, production, storage, release, threatened release,
discharge, disposal or presence on, under or about Borrower's operations or
property or property leased by Borrower of any material, substance or waste
which is or becomes designated as Hazardous Materials; (iii) any such losses,
claims, damages, liabilities, deficiencies, judgments, costs and expenses,
penalties, fines and other sanctions arising from any claim that Borrower's or
any Subsidiaries' premises is not in compliance with the requirements of the
ADA; and (iv) any such losses, claims, damages, liabilities, deficiencies,
judgments, costs and expenses incurred in connection with any remedial or other
action taken by Borrower or Bank in connection with compliance by Borrower with
any federal, state or local environmental laws, acts, rules, regulations,
orders, directions, ordinances, criteria or guidelines (except to the extent
that it is finally judicially determined to have resulted from the gross
negligence or willful misconduct of any Indemnified Person). If and to the
extent that the obligations of Borrower hereunder are unenforceable for any
reason, Xxxxxxxx hereby agrees to make the maximum contribution to the payment
and satisfaction of such obligations of Bank which is permissible under
applicable law.
(d) Borrower's obligations under this Section 9.3 and under
Section 8.2 shall survive any termination of this Agreement and the Loan
Documents and the payment in full of the Obligations, and are in addition to,
and not in substitution of, any other of its obligations set forth in this
Agreement.
9.4 AMENDMENTS AND WAIVERS. Any provision of this Agreement or
any of the Loan Documents to which Borrower is a party may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed by the
party asserted to be bound thereby, and then such amendment or waiver shall be
effective only in the specific instance and specific purpose for which given.
9.5 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; DISCLOSURE.
(a) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
except that Borrower may not assign or transfer any of its rights or obligations
under this Agreement without the prior written consent of Bank and any such
prohibited assignment or transfer by Borrower shall be void.
(b) Bank may make, carry or transfer the Loans at, to or
for the account of, any of its branch offices or the office of an Affiliate of
Bank or to any Federal Reserve Bank, all without Borrower's consent.
48
(c) Bank may, at its own expense, assign to one or more
banks or other financial institutions all or a portion of its rights (including
voting rights) and obligations under this Agreement and the Loan Documents. In
the event of any such assignment by Bank pursuant to this Section 9.5(c), Bank's
obligations under this Agreement arising after the effective date of such
assignment shall be released and concurrently therewith, transferred to and
assumed by Bank's assignee to the extent provided for in the document evidencing
such assignment, and Bank shall give prompt notice of such assignment to
Borrower.
(d) Bank may at any time sell to one or more banks or other
financial institutions (each a "PARTICIPANT") participating interests in the
Loans, and in any other interest of Bank hereunder. In the event of any such
sale by Bank of a participating interest to a Participant, Bank's obligations
under this Agreement shall remain unchanged, Bank shall remain solely
responsible for the performance thereof, and Borrower shall continue to deal
solely and directly with Bank in connection with Bank's rights and obligations
under this Agreement. Xxxxxxxx agrees that each Participant shall, to the
extent provided in its participation agreement, be entitled to the benefits of
Article VIII with respect to its participating interest.
(e) Borrower authorizes Bank to disclose to any assignee
under Section 9.5(c) or any Participant (either, a "TRANSFEREE") and any
prospective Transferee any and all financial information in Bank's possession
concerning Borrower which has been delivered to Bank by Borrower pursuant to
this Agreement or which has been delivered to Bank by Borrower in connection
with Bank's credit evaluation prior to entering into this Agreement.
(f) Xxxxxxxx agrees that Bank may use Xxxxxxxx's names in
advertising and promotional materials, and in conjunction therewith, Bank may
disclose the amount of the Loans and the purpose thereof.
9.6 COUNTERPARTS; EFFECTIVENESS; INTEGRATION. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall be effective when executed by each of the
parties hereto. This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof.
9.7 SEVERABILITY. The provisions of this Agreement are severable.
The invalidity, in whole or in part, of any provision of this Agreement shall
not affect the validity or enforceability of any other of its provisions. If
one or more provisions hereof shall be declared invalid or unenforceable, the
remaining provisions shall remain in full force and effect and shall be
construed in the broadest possible manner to effectuate the purposes hereof.
49
9.8 GOVERNING LAW. This Agreement shall be deemed to have been
made in the State of California and the validity, construction, interpretation,
and enforcement hereof, and the rights of the parties hereto, shall be
determined under, governed by, and construed in accordance with the internal
laws of the State of California, without regard to principles of conflicts of
law.
9.9 JUDICIAL REFERENCE.
(a) Other than (i) nonjudicial foreclosure and all matters
in connection therewith regarding security interests in real or personal
property; or (ii) the appointment of a receiver, or the exercise of other
provisional remedies (any and all of which may be initiated pursuant to
applicable law), each controversy, dispute or claim between the parties arising
out of or relating to this Agreement, which controversy, dispute or claim is not
settled in writing within thirty (30) days after the "CLAIM DATE" (defined as
the date on which a party subject to this Agreement gives written notice to all
other parties that a controversy, dispute or claim exists), will be settled by a
reference proceeding in California in accordance with the provisions of Section
638 ET SEQ. of the California Code of Civil Procedure, or their successor
section ("CCP"), which shall constitute the exclusive remedy for the settlement
of any controversy, dispute or claim concerning this Agreement, including
whether such controversy, dispute or claim is subject to the reference
proceeding and except as set forth above, the parties waive their rights to
initiate any legal proceedings against each other in any court or jurisdiction
other than the Superior Court in the County where any real property collateral
is located, or Los Angeles County, if none (the "COURT"). The referee shall be
a retired Judge of the Court selected by mutual agreement of the parties, and if
they cannot so agree within forty-five (45) days after the Claim Date, the
referee shall be promptly selected by the Presiding Judge of the Court (or his
or her representative). The referee shall be appointed to sit as a temporary
judge, with all of the powers for a temporary judge, as authorized by law, and
upon selection should take and subscribe to the oath of office as provided for
in Rule 244 of the California Rules of Court (or any subsequently enacted Rule).
Each party shall have one peremptory challenge pursuant to CCP Section 170.6.
The referee shall (i) be requested to set the matter for hearing within sixty
(60) days after the Claim Date and (ii) try any and all issues of law or fact
and report a statement of decision upon them, if possible, within ninety (90)
days of the Claim Date. Any decision rendered by the referee will be final,
binding and conclusive and judgment shall be entered pursuant to CCP Section 644
in any court in the State of California having jurisdiction. Any party may
apply for a reference proceeding at any time after thirty (30) days following
notice to any other party of the nature of the controversy, dispute or claim, by
filing a petition for a hearing and/or trial. All discovery permitted by this
Agreement shall be completed no later than fifteen (15) days before the first
hearing date established by the referee. The referee may extend such period in
the event of a party's refusal to provide requested discovery for any reason
whatsoever, including, without limitation, legal objections raised to such
discovery or unavailability of a witness due to absence or illness. No party
shall be entitled to "priority" in conducting discovery. Depositions may be
taken by either party upon seven (7) days written notice, and request for
production or inspection of documents shall be responded to within ten (10) days
after
50
service. All disputes relating to discovery which cannot be resolved by the
parties shall be submitted to the referee whose decision shall be final and
binding upon the parties. Pending appointment of the referee as provided
herein, the Superior Court is empowered to issue temporary and/or provisional
remedies, as appropriate.
(b) Except as expressly set forth in this Agreement, the
referee shall determine the manner in which the reference proceeding is
conducted including the time and place of all hearings, the order of
presentation of evidence, and all other questions that arise with respect to the
course of the reference proceeding. All proceedings and hearings conducted
before the referee, except for trial, shall be conducted without a court
reporter except that when any party so requests, a court reporter will be used
at any hearing conducted before the referee. The party making such a request
shall have the obligation to arrange for and pay for the court reporter. The
costs of the court reporter at the trial shall be borne equally by the parties.
(c) The referee shall be required to determine all issues
in accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference proceeding. The referee shall
be empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the
close of the reference proceeding which shall dispose of all of the claims of
the parties that are the subject of the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly reserve the right to findings of fact, conclusions of laws, a written
statement of decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference proceeding
under this provision.
(d) In the event that the enabling legislation which
provides for appointment of a referee is repealed (and no successor statute is
enacted), any dispute between the parties that would otherwise be determined by
the reference procedure herein described will be resolved and determined by
arbitration. The arbitration will be conducted by a retired judge of the Court,
in accordance with the California Arbitration Act, Section 1280 through Section
1294.2 of the CCP as amended from time to time. The limitations with respect to
discovery as set forth hereinabove shall apply to any such arbitration
proceeding.
[Remainder of this page intentionally left blank]
51
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
BORROWER: PROSPECT MEDICAL HOLDINGS, INC.,
a Delaware corporation
By /s/ Xxxxx X. Xxxxxx, X.X.
--------------------------------------------
Title CEO
-----------------------------------------
Address for Notices:
00000 Xxxxx Xxxxx Xxxxxxxxx
Xxxxx Xxxxx, XX
Attn: Xxxx Xxxxxx, M.D.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
BANK: IMPERIAL BANK
By /s/ Xxxx X. Xxxxxxxx
--------------------------------------------
Title SVP
-----------------------------------------
Address for Notices:
IMPERIAL BANK
000 X. Xxxxxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
52
