EXHIBIT 10.4
CREDIT AGREEMENT
Dated as of October 30, 1998
among
SIERRA HEALTH SERVICES, INC.,
as Borrower,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
and
Issuing Bank,
FIRST UNION NATIONAL BANK,
as Syndication Agent,
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
Lead Arranger:
NATIONSBANC XXXXXXXXXX SECURITIES LLC
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS.....................................................................................................1
1.01 Certain Defined Terms.....................................................................................1
1.02 Other Interpretive Provisions............................................................................24
1.03 Accounting Principles....................................................................................25
ARTICLE II
THE CREDITS....................................................................................................26
2.01 Amounts and Terms of Commitments.........................................................................26
2.02 Loan Accounts............................................................................................26
2.03 Procedure for Borrowing..................................................................................27
2.04 Conversion and Continuation Elections....................................................................28
2.05 Voluntary Termination or Reduction of Commitments........................................................29
2.06 Optional Prepayments.....................................................................................30
2.07 Mandatory Prepayments of Loans; Mandatory Commitment
Reductions and Repayments.........................................................................30
2.09 Interest.................................................................................................33
2.10 Fees ..................................................................................................34
(a) Agents' Fees..............................................................................34
(b) Commitment Fees...........................................................................34
2.11 Computation of Fees and Interest.........................................................................34
2.12 Payments by the Company..................................................................................35
2.13 Payments by the Banks to the Agent.......................................................................35
2.14 Sharing of Payments, Etc.................................................................................36
2.15 Security.................................................................................................37
ARTICLE III
THE LETTERS OF CREDIT..........................................................................................37
3.01 The Letter of Credit Subfacility.........................................................................37
3.02 Issuance, Amendment and Renewal of Letters of Credit.....................................................38
3.03 Existing BofA Letters of Credit; Risk Participations,
Drawings and Reimbursements.......................................................................41
3.04 Repayment of Participations..............................................................................43
3.05 Role of the Issuing Bank.................................................................................44
3.06 Obligations Absolute.....................................................................................44
3.07 Cash Collateral Pledge...................................................................................46
3.08 Letter of Credit Fees....................................................................................46
3.09 Uniform Customs and Practice.............................................................................46
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY.........................................................................47
4.01 Taxes ..................................................................................................47
4.02 Illegality...............................................................................................48
4.03 Increased Costs and Reduction of Return..................................................................49
4.04 Funding Losses...........................................................................................50
4.05 Inability to Determine Rates.............................................................................50
4.06 Certificates of Banks....................................................................................51
-i-
Section Page
4.07 Substitution of Banks....................................................................................51
4.08 Survival.................................................................................................51
ARTICLE V
CONDITIONS PRECEDENT...........................................................................................51
5.01 Conditions of Initial Credit Extensions..................................................................51
(a) Credit Agreement and Notes................................................................52
(b) Resolutions; Incumbency...................................................................52
(c) Organization Documents; Good Standing.....................................................52
(d) Legal Opinions............................................................................52
(e) Payment of Fees...........................................................................52
(f) Certificate...............................................................................53
(g) Collateral Documents......................................................................53
(h) Regulatory Compliance.....................................................................54
(i) Prior Credit Agreement....................................................................54
(j) Kaiser Acquisition Agreements.............................................................54
(k) Litigation................................................................................55
(l) Financial Covenant Certificate............................................................55
(m) Other Documents...........................................................................55
5.02 Conditions to All Credit Extensions......................................................................55
(a) Notice, Application.......................................................................55
(b) Continuation of Representations and Warranties............................................56
(c) No Existing Default.......................................................................56
ARTICLE VI
REPRESENTATIONS AND WARRANTIES.................................................................................56
6.01 Corporate Existence and Power............................................................................56
6.02 Corporate Authorization; No Contravention................................................................57
6.03 Authorization, Approval, etc.............................................................................57
6.04 Binding Effect...........................................................................................58
6.05 Litigation...............................................................................................58
6.06 No Default...............................................................................................58
6.07 Compliance with Laws and ERISA...........................................................................58
6.08 Use of Proceeds; Margin Regulations......................................................................60
6.09 Title to Property and Collateral; No Liens...............................................................60
6.10 As to Pledged Shares.....................................................................................60
6.11 Taxes ..................................................................................................60
6.12 Financial Condition......................................................................................60
6.13 Environmental Matters....................................................................................61
6.14 Collateral Documents.....................................................................................62
6.15 Regulated Entities.......................................................................................62
6.16 No Burdensome Restrictions...............................................................................62
6.17 Copyrights, Patents, Trademarks and Licenses, etc........................................................62
6.18 Subsidiaries.............................................................................................63
6.19 Insurance................................................................................................63
6.20 Swap Obligations.........................................................................................63
6.21 Full Disclosure..........................................................................................63
6.22 Business Activity........................................................................................63
6.23 Licensing, Etc...........................................................................................63
-ii-
Section Page
6.24 Kaiser Acquisition Agreements.............................................................................64
6.25 Year 2000 Representation.................................................................................64
ARTICLE VII
AFFIRMATIVE COVENANTS..........................................................................................65
7.01 Financial Statements.....................................................................................65
7.02 Certificates; Other Information..........................................................................66
7.03 Notices..................................................................................................67
7.04 Preservation of Corporate Existence, Etc.................................................................68
7.05 Maintenance of Property..................................................................................68
7.06 Insurance................................................................................................68
7.07 Payment of Obligations...................................................................................69
7.08 Compliance with Laws.....................................................................................69
7.09 Compliance with ERISA....................................................................................69
7.10 Inspection of Property and Books and Records.............................................................70
7.11 Environmental Laws.......................................................................................70
7.12 Use of Proceeds..........................................................................................70
7.13 Further Assurances.......................................................................................70
7.14 Dividends of Subsidiaries During Default.................................................................71
7.15 Acquisitions.............................................................................................71
ARTICLE VIII
NEGATIVE COVENANTS.............................................................................................72
8.01 Limitation on Liens......................................................................................72
8.02 Disposition of Assets....................................................................................74
8.03 Consolidations and Mergers...............................................................................74
8.04 Loans and Investments....................................................................................75
8.05 Limitation on Indebtedness...............................................................................76
8.06 Transactions with Affiliates.............................................................................76
8.07 Use of Proceeds..........................................................................................77
8.08 Contingent Obligations...................................................................................77
8.09 Lease Obligations........................................................................................77
8.10 Restricted Payments......................................................................................78
8.11 ERISA ..................................................................................................79
8.12 Change in Business.......................................................................................79
8.13 Accounting Changes.......................................................................................79
8.14 Financial Covenants......................................................................................79
8.15 Limitation on Payment Restrictions Affecting
Subsidiaries......................................................................................80
8.16 Pledged Shares...........................................................................................80
8.17 Acquisitions.............................................................................................81
ARTICLE IX
EVENTS OF DEFAULT..............................................................................................81
9.01 Event of Default.........................................................................................81
(a) Non-Payment...............................................................................81
(b) Representation or Warranty................................................................82
(c) Specific Defaults.........................................................................82
(d) Other Defaults............................................................................82
-iii-
Section Page
(e) Cross-Default.............................................................................82
(f) Insolvency; Voluntary Proceedings.........................................................82
(g) Involuntary Proceedings...................................................................83
(h) ERISA.....................................................................................83
(i) Monetary Judgments........................................................................83
(j) Non-Monetary Judgments....................................................................83
(k) Change of Control.........................................................................83
(l) Loss of Licenses..........................................................................84
(m) HMO Event.................................................................................84
(n) Prospective Premium Default...............................................................84
(o) Adverse Change............................................................................84
(p) Invalidity of Subordination Provisions....................................................84
9.02 Remedies.................................................................................................84
9.03 Rights Not Exclusive.....................................................................................85
ARTICLE X
THE AGENT......................................................................................................85
10.01 Appointment and Authorization; "Agent"..................................................................85
10.02 Delegation of Duties....................................................................................86
10.03 Liability of Agent......................................................................................86
10.04 Reliance by Agent.......................................................................................87
10.05 Notice of Default.......................................................................................87
10.06 Credit Decision.........................................................................................88
10.07 Indemnification of Agent................................................................................88
10.08 Agent in Individual Capacity............................................................................89
10.09 Successor Agent.........................................................................................89
10.10 Withholding Tax.........................................................................................90
10.11 Syndication Agent.......................................................................................91
ARTICLE XI
MISCELLANEOUS..................................................................................................91
11.01 Amendments and Waivers..................................................................................91
11.02 Notices.................................................................................................92
11.03 No Waiver; Cumulative Remedies..........................................................................93
11.04 Costs and Expenses......................................................................................93
11.05 Company Indemnification.................................................................................94
11.06 Payments Set Aside......................................................................................95
11.07 Successors and Assigns..................................................................................95
11.08 Assignments, Participations, etc........................................................................95
11.09 Set-off.................................................................................................97
11.10 Automatic Debits of Fees................................................................................97
11.11 Notification of Addresses, Lending Offices, Etc.........................................................98
11.12 Counterparts............................................................................................98
11.13 Severability............................................................................................98
11.14 No Third Parties Benefited..............................................................................98
11.15 Governing Law and Jurisdiction..........................................................................98
11.16 Waiver of Jury Trial....................................................................................99
11.17 Entire Agreement.......................................................................................100
-iv-
SCHEDULES
Schedule 1.01 Specified Charges
Schedule 2.01 Commitments
Schedule 3.03 Existing BofA Letters of Credit
Schedule 5.01(g) Excluded Subsidiaries
Schedule 6.03 Required Approvals
Schedule 6.05 Litigation
Schedule 6.12 Permitted Liabilities
Schedule 6.13 Environmental Matters
Schedule 6.18 Subsidiaries and Minority Interests
Schedule 6.19 Insurance Matters
Schedule 8.01 Permitted Liens
Schedule 8.04 Existing Investments
Schedule 8.05 Permitted Indebtedness
Schedule 8.08 Contingent Obligations
Schedule 8.17 Permitted Acquisitions
Schedule 11.02 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D Form of Legal Opinion of Company's Counsel
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Promissory Note
Exhibit G Form of Pledge Agreement
Exhibit H Form of Kaiser Note
Exhibit I Form of Joinder Agreement
-v-
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of October 30,
1998, among SIERRA HEALTH SERVICES, INC., a Nevada corporation
(the "Company"), the several financial institutions from time to
time party to this Agreement (collectively, the "Banks";
individually, a "Bank"), Bank of America National Trust and
Savings Association, as Issuing Bank and as administrative agent
for the Banks and First Union National Bank, as syndication
agent.
WHEREAS, the Banks have agreed to make available to the
Company a revolving credit facility with letter of credit
subfacility upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained herein, the parties agree as
follows:
ARTICLE I
DEFINITIONS
1.01 Certain Defined Terms. The following terms have the
following meanings:
"Acquisition" means any transaction or series of related
transactions for the purpose of or resulting, directly or
indirectly, in (a)the acquisition of all or substantially all of
the assets of a Person, or of any business or division of a
Person, (b)the acquisition of in excess of 50% of the capital
stock, partnership interests, membership interests or equity of
any Person, or otherwise causing any Person to become a
Subsidiary, or (c)a merger or consolidation or any other
combination with another Person (other than a Person that is a
Subsidiary) provided that the Company or the Subsidiary is the
surviving entity.
"Actual Knowledge" shall mean, as to any matter with respect
to any Person, the actual knowledge of such matter by a
Responsible Officer of such Person, it being understood in any
event that "actual knowledge" shall be deemed to exist upon
receipt of a notice of such matter by a Responsible Officer.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person. A Person shall be deemed
to control another Person if the controlling Person possesses,
directly or indirectly, the power to direct or cause the
direction of the management and policies of the other Person,
1
whether through the ownership of voting securities, membership
interests, by contract, or otherwise.
"Agent" means BofA in its capacity as agent for the Banks
hereunder, and any successor agent arising under Section 10.09.
"Agent-Related Persons" means BofA and any successor agent
arising under Section 10.09 and any successor letter of credit
issuing bank hereunder, together with their respective Affiliates
(including, in the case of BofA, the Arranger), and the officers,
directors, employees, agents and attorneys-in-fact of such
Persons and Affiliates.
"Agent's Payment Office" means the address for payments set
forth on Schedule 11.02 or such other address as the Agent may
from time to time specify.
"Agreement" means this Credit Agreement.
"Applicable Regulatory Requirements" refers to any requisite
filing or approval requirements of any state insurance regulatory
authorities having jurisdiction over any of the Subsidiaries that
must be satisfied or obtained by the Agent or the Lender Parties
as a condition to exercising or transferring direct or indirect
voting or other control over such Subsidiaries or transferring or
otherwise disposing of the Pledged Shares, Pledged Property or
Collateral with respect to such Subsidiaries.
"Applicable Commitment Fee Rate" means a rate per annum
determined by reference to the Leverage Ratio as follows:
Applicable
Level Leverage Ratio Commitment Fee Rate
Level 1 Less than or equal to 1.50 0.300%
Level 2 Greater than 1.50 but less than or equal to 2.00 0.350%
Level 3 Greater than 2.00 but less than or equal to 2.50 0.350%
Level 4 Greater than 2.50 but less than or equal to 3.00 0.450%
Level 5 Greater than 3.00 but less than or equal to 3.50 0.450%
Xxxxx 0 Greater than 3.50 0.500%
From the Closing Date until the delivery of the Compliance
Certificate for the fiscal quarter ending June 30, 1999, the
Applicable Commitment Fee Rate shall be Level 5. Thereafter, the
Applicable Commitment Fee Rate shall be effective from and
including the date on which the Agent receives a Compliance
Certificate to but excluding the date on which the Agent receives
the next Compliance Certificate; provided, however, that if the
2
Agent does not receive a Compliance Certificate by the date
required by subsection 7.02(b), the Applicable Commitment Fee
Rate shall, effective as of such date, be Xxxxx 0 to but
excluding the date the Agent receives such Compliance
Certificate.
"Applicable Letter of Credit Fee Rate" means a rate per
annum equal to the Applicable Margin for LIBOR Rate Loans.
"Applicable Margin" means in the case of Base Rate Loans and
LIBOR Rate Loans a rate per annum determined by reference to the
Leverage Ratio as follows:
Applicable Applicable
LIBOR Base
Level Leverage Ratio Rate Margin Rate Margin
Level 1 Less than or equal to 1.50 1.000% 0.000%
Level 2 Greater than 1.50 but less
than or equal to 2.00 1.250% 0.250%
Level 3 Greater than 2.00 but less
than or equal to 2.50 1.625% 0.625%
Level 4 Greater than 2.50 but less
than or equal to 3.00 1.875% 0.875%
Level 5 Greater than 3.00 but less
than or equal to 3.50 2.125% 1.125%
Xxxxx 0 Greater than 3.50 2.375% 1.375%
From the Closing Date until the delivery of the Compliance
Certificate for the fiscal quarter ending June 30, 1999, the
Applicable Margin shall be Level 5. Thereafter, the Applicable
Margin shall be effective from and including the date on which
the Agent receives a Compliance Certificate to but excluding the
date on which the Agent receives the next Compliance Certificate;
provided, however, that if the Agent does not receive a
Compliance Certificate by the date required by subsection
7.02(b), the Applicable Margin shall, effective as of such date,
be Xxxxx 0 to but excluding the date the Agent receives such
Compliance Certificate.
"Assignee" has the meaning specified in subsection 11.08(a).
"Attorney Costs" means and includes all reasonable fees and
disbursements of any law firm or other external counsel, the
allocated reasonable cost of internal legal services and all
disbursements of internal counsel.
"Bank" has the meaning specified in the introductory clause
hereto. References to the "Banks" shall include BofA, and shall
3
include any Bank acting in its capacity as Issuing Bank; for
purposes of clarification only, to the extent that a Bank may
have any rights or obligations in addition to those of the Banks
due to its status as Issuing Bank, its status as such will be
specifically referenced.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of
1978 (11 U.S.C. Section 101, et seq.), as amended.
"Base Rate" means, for any day, the higher of: (a) 0.50%
per annum above the latest Federal Funds Rate; and (b)the rate
of interest in effect for such day as publicly announced from
time to time by BofA in San Francisco, California, as its
"reference rate." (The "reference rate" is a rate set by BofA
based upon various factors including BofA's costs and desired
return, general economic conditions and other factors, and is
used as a reference point for pricing some loans, which may be
priced at, above, or below such announced rate.) Any change in
the reference rate announced by BofA shall take effect at the
opening of business on the day specified in the public
announcement of such change.
"Base Rate Loan" means a Revolving Loan, or an L/C Advance,
that bears interest based on the Base Rate.
"BofA" means Bank of America National Trust and Savings
Association, a national banking association.
"Borrowing" means a borrowing hereunder consisting of
Revolving Loans of the same Type made to the Company on the same
day by the Banks under Article II, and, other than in the case of
Base Rate Loans, having the same Interest Period.
Borrowing Date means any date on which a Borrowing occurs
under Section 2.03.
"Business Day" means any day other than a Saturday, Sunday
or other day on which commercial banks in San Francisco are
authorized or required by law to close and, if the applicable
Business Day relates to any LIBOR Rate Loan, means such a day on
which dealings are carried on in the applicable offshore dollar
interbank market.
"Capital Adequacy Regulation" means any guideline, request
or directive of any central bank or other Governmental Authority,
or any other law, rule or regulation, whether or not having the
force of law, in each case, regarding capital adequacy of any
bank or of any corporation controlling a bank.
4
"Capital Expenditures" means, for any period, the aggregate
amount of all expenditures of the Company and its Subsidiaries
for fixed or capital assets made during such period which, in
accordance with GAAP, would be classified as capital
expenditures.
"Capital Lease" means any lease of property which in
accordance with GAAP should be capitalized on the lessee's
balance sheet or disclosed in a footnote thereto as a capitalized
lease.
"Cash Collateralize" means to pledge and deposit with or
deliver to the Agent, for the benefit of the Agent, the Issuing
Bank and the Banks, as additional collateral for the L/C
Obligations, cash or deposit account balances pursuant to
documentation in form and substance satisfactory to the Agent and
the Issuing Bank (which documents are hereby consented to by the
Banks). Derivatives of such term shall have corresponding
meaning. The Company shall grant to the Agent, for the benefit
of the Agent, the Issuing Bank and the Banks, a security interest
in all such cash and deposit account balances. Cash collateral
shall be maintained in blocked deposit accounts at BofA.
"Change of Control" shall be deemed to have occurred if any
Person or group (as defined in Section 13(d)(3) of the Exchange
Act) acquires (beneficially or of record) 25% or more of the
voting or economic interests in the fully diluted capital stock
of the Company.
"CII" means CII Financial, Inc., a wholly-owned Subsidiary
of the Company.
"Closing Date" means the date on or before November 30, 1998
on which all conditions precedent set forth in Section 5.01 are
satisfied or waived by all Banks (or, in the case of subsection
5.01(e), waived by the Person entitled to receive such payment).
"Code" means the Internal Revenue Code of 1986, and
regulations promulgated thereunder.
"Collateral" means all property and interests in property
and proceeds thereof now owned or hereafter acquired by the
Company and its Subsidiaries in or upon which a Lien now or
hereafter exists in favor of the Banks, or the Agent on behalf of
the Banks, whether under this Agreement or under any other
documents executed by any such Person and delivered to the Agent
or the Banks.
5
"Collateral Documents" means, collectively, (i)the Pledge
Agreements and all other security agreements, mortgages, deeds of
trust, patent and trademark assignments, lease assignments,
guarantees and other similar agreements between the Company or
any Subsidiary and the Banks or the Agent for the benefit of the
Banks now or hereafter delivered to the Banks or the Agent
pursuant to or in connection with the transactions contemplated
hereby, and all financing statements (or comparable documents now
or hereafter filed in accordance with the Uniform Commercial Code
or comparable law) against the Company or any Subsidiary as
debtor in favor of the Banks or the Agent for the benefit of the
Banks as secured party, and (ii) any amendments, supplements,
modifications, renewals, replacements, consolidations,
substitutions and extensions of any of the foregoing.
"Commitment", as to each Bank, has the meaning specified in
Section 2.01.
"Commitment Increase Date" has the meaning specified in
Section 2.08.
"Company" has the meaning specified in the introductory
clause hereto.
"Compliance Certificate" means a certificate substantially
in the form of Exhibit C.
"Consolidated Adjusted EBITDA" means, for any period, the
Sierra Adjusted EBITDA plus the Kaiser-Texas Modified EBITDA.
Consolidated Adjusted EBITDA shall be calculated as of the last
day of the most recently ended fiscal quarter of the Company for
the period of four consecutive full fiscal quarters then ended.
"Consolidated Funded Debt" means, as of any date, when
used with reference to any Person, without duplication,
(i) Indebtedness of such Person which by its terms matures in, or
at such Person's option can be extended for, one year or more
from the date of the creation or incurrence thereof (including
current portions of such long-term Indebtedness), including all
hedging agreements and letters of credit entered into in
connection with such Indebtedness, (ii) such Person's Capital
Lease obligations classified as long-term liabilities under GAAP,
(iii) Guaranty Obligations of such Person of Indebtedness of
other Persons of the character referred to in clauses (i) and
(ii) above and (iv) the amount by which CII's reserve liabilities
exceed the sum of CII's cash and marketable securities.
"Consolidated Net Worth" of any Person means the amount, if
any, by which Total Assets exceed Total Liabilities.
6
"Consolidated Tangible Assets" means, at any time, (a) the
Total Assets of the Company and its Subsidiaries, minus (b) the
aggregate net book value at such time of all assets of the
Company and its Subsidiaries that should be treated as intangible
assets in accordance with GAAP, (including, without limitation,
goodwill, patents, trade names, trade marks, copyrights,
franchises, experimental expense, organization expense,
unamortized debt discount and expense, deferred assets (other
than prepaid insurance, prepaid taxes and deferred tax assets)
treasury stock and the excess of cost of shares acquired over
book value of related assets).
"Contingent Obligation" means, as to any Person, any direct
or indirect liability of that Person, with or without recourse,
(a) with respect to any Indebtedness, lease, dividend, letter of
credit or other obligation (the "primary obligations") of another
Person (the "primary obligor"), including any obligation of that
Person (i) to purchase, repurchase or otherwise acquire such
primary obligations or any security therefor, (ii) to advance or
provide funds for the payment or discharge of any such primary
obligation, or to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial
condition of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the
owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation, or
(iv) otherwise to assure or hold harmless the holder of any such
primary obligation against loss in respect thereof (each, a
"Guaranty Obligation"); (b) with respect to any Surety Instrument
issued for the account of that Person or as to which that Person
is otherwise liable for reimbursement of drawings or payments;
(c) to purchase any materials, supplies or other property from,
or to obtain the services of, another Person if the relevant
contract or other related document or obligation requires that
payment for such materials, supplies or other property, or for
such services, shall be made regardless of whether delivery of
such materials, supplies or other property is ever made or
tendered, or such services are ever performed or tendered, or
(d) in respect of any Swap Contract. The amount of any
Contingent Obligation shall, in the case of Guaranty Obligations,
be deemed equal to the stated or determinable amount of the
primary obligation in respect of which such Guaranty Obligation
is made or, if not stated or if indeterminable, the maximum
reasonably anticipated liability in respect thereof, and in the
case of other Contingent Obligations other than in respect of
Swap Contracts, shall be equal to the maximum reasonably
anticipated liability in respect thereof and, in the case of
7
Contingent Obligations in respect of Swap Contracts, shall be
equal to the Swap Termination Value.
"Contractual Obligation" means, as to any Person, any
provision of any security issued by such Person or of any
agreement, undertaking, contract, indenture, mortgage, deed of
trust or other instrument, document or agreement to which such
Person is a party or by which it or any of its property is bound.
"Conversion/Continuation Date" means any date on which,
under Section 2.04, the Company (a) converts Loans of one Type to
another Type, or (b) continues as Loans of the same Type, but
with a new Interest Period, Loans having Interest Periods
expiring on such date.
"Convertible Debt" means the Indebtedness in respect of
those certain 71/2% Convertible Subordinated Debentures Due 2001 of
CII, in an outstanding principal amount of $51,456,000 as of
September 30, 1998.
"Credit Extension" means and includes (a) the making of any
Revolving Loans hereunder, and (b) the Issuance of any Letters of
Credit hereunder.
"Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured
or otherwise remedied during such time) constitute an Event of
Default.
"Dollars", "dollars" and "$" each mean lawful money of the
United States.
"Effective Amount" means (i) with respect to any Revolving
Loans on any date, the aggregate outstanding principal amount
thereof after giving effect to any Borrowings and prepayments or
repayments of Revolving Loans occurring on such date; and
(ii) with respect to any outstanding L/C Obligations on any date,
the amount of such L/C Obligations on such date after giving
effect to any Issuances of Letters of Credit occurring on such
date and any other changes in the aggregate amount of the L/C
Obligations as of such date, including as a result of any
reimbursements of outstanding unpaid drawings under any Letters
of Credit or any reductions in the maximum amount available for
drawing under Letters of Credit taking effect on such date.
"Eligible Assignee" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and
having a combined capital and surplus of at least $100,000,000;
8
b) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political
subdivision of any such country, and having a combined capital
and surplus of at least $100,000,000, provided that such bank is
acting through a branch or agency located in the United States;
(c) a Person that is primarily engaged in the business of
commercial banking and that is (i) a Subsidiary of a Bank, (ii) a
Subsidiary of a Person of which a Bank is a Subsidiary, or
(iii) a Person of which a Bank is a Subsidiary; or (d) any
insurance company, mutual fund or other financial institution or
fund which has been approved in writing by the Company and the
Agent as an Eligible Assignee for purposes of this Agreement,
provided that in each such case such approval shall not be
unreasonably withheld and shall not be required from the Company
during the continuance of any Event of Default.
"Environmental Claims" means all claims, however asserted,
by any Governmental Authority or other Person alleging potential
liability or responsibility for violation of any Environmental
Law, or for release or injury to the environment or threat to
public health, personal injury (including sickness, disease or
death), property damage, natural resources damage, or otherwise
alleging liability or responsibility for damages (punitive or
otherwise), cleanup, removal, remedial or response costs,
restitution, civil or criminal penalties, injunctive relief, or
other type of relief, resulting from or based upon the presence,
placement, discharge, emission or release (including intentional
and unintentional, negligent and non-negligent, sudden or non-
sudden, accidental or non-accidental, placement, spills, leaks,
discharges, emissions or releases) of any Hazardous Material at,
in, or from Property, whether or not owned by the Company.
"Environmental Laws" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and
codes, together with all administrative orders, directed duties,
requests, licenses, authorizations and permits of, and agreements
with, any Governmental Authorities, in each case relating to
environmental, health, safety and land use matters; including,
without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), the Clean Air
Act, the Federal Water Pollution Control Act of 1972, the Solid
Waste Disposal Act, the Federal Resource Conservation and
Recovery Act, the Toxic Substances Control Act and the Emergency
Planning and Community Right-to-Know Act.
"ERISA" means the Employee Retirement Income Security Act of
1974, and regulations promulgated thereunder.
9
"ERISA Affiliate" means any trade or business (whether or
not incorporated) under common control with the Company within
the meaning of Section 414(b) or (c) of the Code (and Sections
414(m) and (o) of the Code for purposes of provisions relating to
Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Company or any ERISA
Affiliate from a Pension Plan subject to Section 4063 of ERISA
during a plan year in which it was a substantial employer (as
defined in Section 4001(a)(2) of ERISA) or a cessation of
operations which is treated as such a withdrawal under Section
4062(e) of ERISA; (c) a complete or partial withdrawal by the
Company or any ERISA Affiliate from a Multiemployer Plan or
notification that a Multiemployer Plan is in reorganization;
(d) the filing of a notice of intent to terminate, the treatment
of a Plan amendment as a termination under Section 4041 or 4041A
of ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multiemployer Plan; (e) an event or
condition which might reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Pension Plan or
Multiemployer Plan; or (f) the imposition of any liability under
Title IV of ERISA, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon the Company or any
ERISA Affiliate.
"Eurodollar Reserve Percentage" has the meaning specified in
the definition of "LIBOR Rate".
"Event of Default means any of the events or circumstances
specified in Section 9.01.
"Exchange Act" means the Securities Exchange Act of 1934,
and regulations promulgated thereunder.
"Excluded Subsidiary" means the 2314 Partnership, any
Subsidiary of the Company that has less than $500,000 of assets
or the pledge of whose stock (i) is prohibited pursuant to
applicable regulations of a Governmental Authority or (ii) would
otherwise subject the Company or such Subsidiary to burdensome
regulatory requirements (as reasonably determined by the Company
and the Agent).
"Existing BofA Letters of Credit" means the letters of
credit described in Schedule 3.03.
"Federal Funds Rate" means, for any day, the rate set forth
in the weekly statistical release designated as H.15(519), or any
10
successor publication, published by the Federal Reserve Bank of
New York (including any such successor, "H.15(519)") on the
preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such
day will be the arithmetic mean as determined by the Agent of the
rates for the last transaction in overnight Federal funds
arranged prior to 9:00 a.m. (New York City time) on that day by
each of three leading brokers of Federal funds transactions in
New York City selected by the Agent.
"Fee Letter" has the meaning specified in subsection
2.10(a).
"Fixed Charges" means, for any period of four consecutive
fiscal quarters and without duplication, the sum of (i) cash
Interest Expense and fees paid on, all Indebtedness during such
period plus (ii) the aggregate principal amount of all current
maturities of Consolidated Funded Debt (including the principal
portion of rentals under Capital Leases) scheduled to be paid by
the Company and its Subsidiaries during such period (excluding
prepayments of principal not required under the loan documents
relating to such Indebtedness and excluding the payment of the
Convertible Debt upon the maturity thereof), all as determined
for the Company and its Subsidiaries on a consolidated basis in
accordance with GAAP.
"Fixed Charges Coverage Ratio" means, at any date, the ratio
of (i) Consolidated Adjusted EBITDA for the four consecutive
fiscal quarters ending on or prior to such date minus cash
Capital Expenditures and cash income taxes paid during such
period to (ii) Fixed Charges for such period.
"FRB" means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
"Further Taxes" means any and all present or future taxes,
levies, assessments, imposts, duties, deductions, fees,
withholdings or similar charges (including, without limitation,
net income taxes and franchise taxes), and all liabilities with
respect thereto, imposed by any jurisdiction on account of
amounts payable or paid pursuant to Section 4.01.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of
11
the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the
circumstances as of the Closing Date.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank
(or similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guaranty Obligation" has the meaning specified in the
definition of "Contingent Obligation."
"Hazardous Materials" means all those substances that are
regulated by, or which may form the basis of liability under, any
Environmental Law, including any substance identified under any
Environmental Law as a pollutant, contaminant, hazardous waste,
hazardous constituent, special waste, hazardous substance,
hazardous material, or toxic substance, or petroleum or petroleum
derived substance or waste.
"Health Care Business" shall mean (a) the provision,
administration or arrangement of health care services, related
ancillary products or both, directly or through an HMO, a
provider, a regulated health care service contractor or any other
business which in the ordinary course provides, administers or
arranges for such services, products or both, (b) the provision,
administration or arrangement of health, life and related
insurance, (c) the provision or management of health care
services (including medical management claims services and
management through medical information services), (d) the
provision, administration or arrangement of health care through a
hospital, outpatient, urgent care, clinical, home health or
hospice environment, (e) the provision, administration or
arrangement of workers' compensation services both fully insured
and administrative in nature, (f) any business activities
directly related and incidental to any of the foregoing, and
(g) any other business activity which is related, ancillary or
incidental to any of the foregoing and in which the Company is
engaged on the Closing Date.
"HMO" shall mean any Person which operates as a health
maintenance organization.
12
"HMO Event" shall mean failure by the Company or any of its
HMO Subsidiaries to comply in any material respect with any of
the terms and provisions of any applicable HMO Regulation
pertaining to the fiscal soundness, solvency or financial
condition of the Company or any of its HMO Subsidiaries, or the
assertion in writing, after the Closing Date, by an HMO Regulator
that it intends to take administrative action against the Company
or any of its HMO Subsidiaries to revoke or modify any
Governmental Approval of, or to enforce the fiscal soundness,
solvency or financial provisions or requirements of such HMO
Regulations against, the Company or any of its HMO Subsidiaries,
if such action, modification or enforcement is reasonably likely
to have a Material Adverse Effect.
"HMO Regulations" shall mean all Requirements of Law
applicable to any HMO Subsidiary under federal or state law and
any regulations, orders and directives promulgated or issued
pursuant to the foregoing.
"HMO Regulator" means any Person charged with the
administration, oversight or enforcement of an HMO Regulation,
whether primarily, secondarily, or jointly.
"HMO Subsidiary" shall mean any current or future Subsidiary
of the Company that is either an HMO or a regulated health care
service contractor.
"HMO Texas" means HMO Texas, L.C., a Texas limited liability
company which is an indirect Subsidiary of the Company.
"Honor Date" has the meaning specified in subsection
3.03(b).
"Indebtedness" of any Person means, without duplication,
(a) all indebtedness for borrowed money; (b) all obligations
issued, undertaken or assumed as the deferred purchase price of
property or services (other than trade payables entered into in
the ordinary course of business on ordinary terms); (c) all non-
contingent reimbursement or payment obligations with respect to
Surety Instruments; (d) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations
so evidenced incurred in connection with the acquisition of
property, assets or businesses; (e) all indebtedness created or
arising under any conditional sale or other title retention
agreement, or incurred as financing, in either case with respect
to property acquired by the Person (even though the rights and
remedies of the seller or bank under such agreement in the event
of default are limited to repossession or sale of such property);
13
f) all obligations with respect to Capital Leases; (g) all
Indebtedness referred to in clauses (a) through (f) above secured
by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien upon
or in property (including accounts and contracts rights) owned by
such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness; and (h) all Guaranty
Obligations in respect of Indebtedness or obligations of others
of the kinds referred to in clauses (a) through (g) above. For
all purposes of this Agreement, the Indebtedness of any Person
shall include all recourse Indebtedness of any partnership or
joint venture in which such Person is a general partner or a
joint venturer or a member. For purposes of calculating the
amount of any Indebtedness described in clauses (e) and (g)
above, to the extent that the rights and remedies of the obligee
of such Indebtedness are limited to certain property and are
nonrecourse to the Person owning or pledging such property, the
amount of such Indebtedness shall not exceed the value of such
property.
"Indemnified Liabilities" has the meaning specified in
Section 11.05.
"Indemnified Person" has the meaning specified in Section
11.05.
"Independent Auditor" has the meaning specified in
subsection 7.01(a).
"Insolvency Proceeding" means, with respect to any Person,
(a) any case, action or proceeding with respect to such Person
before any court or other Governmental Authority relating to
bankruptcy, reorganization, insolvency, liquidation,
receivership, dissolution, winding-up or relief of debtors, or
(b) any general assignment for the benefit of creditors,
composition, marshalling of assets for creditors, or other,
similar arrangement in respect of its creditors generally or any
substantial portion of its creditors; undertaken under U.S.
Federal, state or foreign law, including the Bankruptcy Code.
"Interest Expense" of the Company and its Subsidiaries for
any period means the aggregate amount of interest paid, accrued
or scheduled to be paid or accrued in respect of any Indebtedness
(including the interest portion of rentals under Capital Leases)
and all but the principal component of payments in respect of
conditional sales, equipment trust or other title retention
agreements or under a Capital Lease paid, accrued or scheduled to
be paid or accrued by the Company and its Subsidiaries during
such period, in each case determined in accordance with GAAP and
14
excluding periodic maintenance, insurance, taxes and similar
charges not properly characterized as interest expense under
GAAP.
"Interest Payment Date" means, as to any LIBOR Rate Loan,
the last day of each Interest Period applicable to such Loan and,
as to any Base Rate Loan, the last Business Day of each calendar
quarter and each date such Loan is converted into another Type of
Loan, provided, however, that if any Interest Period for a LIBOR
Rate Loan exceeds three months, the date that falls three months
after the beginning of such Interest Period and after each
Interest Payment Date thereafter is also an Interest Payment
Date.
"Interest Period" means, as to any LIBOR Rate Loan, the
period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into
or continued as a LIBOR Rate Loan, and ending on the date one,
two, three or six months thereafter as selected by the Company in
its Notice of Borrowing or Notice of Conversion/Continuation;
provided that:
(i) if any Interest Period would otherwise end on a
day that is not a Business Day, that Interest Period shall
be extended to the following Business Day unless the result
of such extension would be to carry such Interest Period
into another calendar month, in which event such Interest
Period shall end on the preceding Business Day;
(ii) any Interest Period pertaining to a LIBOR Rate
Loan that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period; and
(iii) no Interest Period for any Loan shall extend
beyond the Revolving Termination Date.
"Investment" has the meaning specified in Section 8.04.
"IRS" means the Internal Revenue Service, and any
Governmental Authority succeeding to any of its principal
functions under the Code.
"Issuance Date" has the meaning specified in subsection
3.01(a).
15
"Issue" means, with respect to any Letter of Credit, to
issue or to extend the expiry of, or to renew or increase the
amount of, such Letter of Credit; and the terms "Issued,"
"Issuing" and "Issuance" have corresponding meanings.
"Issuing Bank" means BofA in its capacity as issuer of one
or more Letters of Credit hereunder, together with any
replacement letter of credit issuer arising under subsection
10.01(b) or Section 10.09.
"Joinder Agreement" means each of the Joinder Agreements
which may be executed by additional Banks pursuant to Section
2.08, substantially in the form of Exhibit I.
"Kaiser Acquisition Agreements" means those certain Asset
Sale and Purchase Agreements dated June 5, 1998, one of which is
between PMAT and HMO Texas and the other of which is between
Kaiser-Texas and HMO Texas.
"Kaiser Note" means that certain promissory note in the
principal amount of $35,200,000 and otherwise substantially in
the form of Exhibit H, from HMO Texas in favor of Kaiser Texas.
"Kaiser Texas" means Xxxxxx Foundation Health Plan of Texas.
"Kaiser-Texas Acquisition" means the transaction pursuant to
which the Company will acquire certain assets of Kaiser Texas and
PMAT.
"Kaiser-Texas Modified EBITDA" means, for the four quarter
period ending on December 31, 1998, a loss of [$5,641,000]; for
the four quarter period ending on March 31, 1999, the product of
(a) 4 times (b) the net income of HMO Texas and PMAT for the
fiscal quarter ending on March 31, 1999 plus to the extent
deducted therefrom, total book taxes, Interest Expense and
depreciation and amortization expenses minus any non-cash
extraordinary gains; for the four quarter period ending on
June 30, 1999, the product of (a) 2 times (b) the net income of
HMO Texas and PMAT for the two fiscal quarters ending on June 30,
1999 plus to the extent deducted therefrom, total book taxes,
Interest Expense and depreciation and amortization expenses minus
any non-cash extraordinary gains; for the four quarter period
ending on September 30, 1999, the product of (a) 4/3 times (b)
the net income of Texas and PMAT for the three fiscal quarters
ending on September 30, 1999 plus to the extent deducted
therefrom, total book taxes, Interest Expense and depreciation
and amortization expenses minus any non-cash extraordinary gains;
and for all periods ending after September 30, 1999, zero.
16
"L/C Advance" means each Bank's participation in any L/C
Borrowing in accordance with its Pro Rata Share.
"L/C Amendment Application" means an application form for
amendment of outstanding standby letters of credit as shall at
any time be in use at the Issuing Bank, as the Issuing Bank shall
request.
"L/C Application" means an application form for issuances of
standby letters of credit as shall at any time be in use at the
Issuing Bank, as the Issuing Bank shall request.
"L/C Borrowing" means an extension of credit resulting from
a drawing under any Letter of Credit which shall not have been
reimbursed on the date when made nor converted into a Borrowing
of Revolving Loans under subsection 3.03(c).
"L/C Commitment" means the commitment of the Issuing Bank to
Issue, and the commitment of the Banks severally to participate
in, Letters of Credit from time to time Issued or outstanding
under Article III, in an aggregate amount not to exceed on any
date the amount of $50,000,000, as the same shall be reduced as a
result of a reduction in the L/C Commitment pursuant to Section
2.05; provided that the L/C Commitment is a part of the combined
Commitments, rather than a separate, independent commitment.
"L/C Obligations" means at any time the sum of (a) the
aggregate undrawn amount of all Letters of Credit then
outstanding, plus (b) the amount of all unreimbursed drawings
under all Letters of Credit, including all outstanding L/C
Borrowings.
"L/C-Related Documents" means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other
document relating to any Letter of Credit, including any of the
Issuing Bank's standard form documents for letter of credit
issuances.
"Lead Arranger" means NationsBanc Xxxxxxxxxx Securities LLC,
a Delaware limited liability company.
"Lender Party" has the meaning specified in the Pledge
Agreements.
"Lending Office" means, as to any Bank, the office or
offices of such Bank specified as its "Lending Office" or
"Domestic Lending Office" or "Offshore Lending Office", as the
case may be, on Schedule 11.02, or such other office or offices
39246619.6 11699 1000P 96246459
17
as such Bank may from time to time notify the Company and the
Agent.
"Letters of Credit" means any standby letters of credit
Issued by the Issuing Bank pursuant to Article III.
"Leverage Ratio" of any Person means the ratio of
Consolidated Funded Debt to Consolidated Adjusted EBITDA.
"LIBOR Rate" means, for any Interest Period, with respect to
LIBOR Rate Loans comprising part of the same Borrowing, the rate
of interest per annum (rounded upward to the next 1/100th of 1%)
determined by the Agent as follows:
LIBOR Rate = LIBOR
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for
any Interest Period the maximum reserve percentage
(expressed as a decimal, rounded upward to the next 1/100th
of 1%) in effect on such day (whether or not applicable to
any Bank) under regulations issued from time to time by the
FRB for determining the maximum reserve requirement
(including any emergency, supplemental or other marginal
reserve requirement) with respect to Eurocurrency funding
(currently referred to as "Eurocurrency liabilities"); and
"LIBOR" means the rate of interest per annum determined
by the Agent to be the arithmetic mean (rounded upward to
the next 1/16th of 1%) of the rates of interest per annum
notified to the Agent by BofA as the rate of interest at
which dollar deposits in the approximate amount of the
amount of the Loan to be made or continued as, or converted
into, a LIBOR Rate Loan by BofA and having a maturity
comparable to such Interest Period would be offered to major
banks in the London interbank market at their request at
approximately 11:00 a.m. (London time) two Business Days
prior to the commencement of such Interest Period.
The LIBOR Rate shall be adjusted automatically as to
all LIBOR Rate Loans then outstanding as of the effective
date of any change in the Eurodollar Reserve Percentage.
"LIBOR Rate Loan" means a Loan that bears interest based on
the LIBOR Rate.
18
"Lien" means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) option, pre-emptive right
or preferential arrangement of any kind or nature whatsoever
having substantially the same effect as any of the foregoing in
respect of any property (including those created by, arising
under or evidenced by any conditional sale or other title
retention agreement, the interest of a lessor under a Capital
Lease, any financing lease having substantially the same economic
effect as any of the foregoing, or the filing of any financing
statement naming the owner of the asset to which such lien
relates as debtor, under the Uniform Commercial Code or any
comparable law), any contingent or other agreement to provide any
of the foregoing (but not including the interest of a lessor
under an operating lease), and including, in the case of stock,
stockholder agreements, voting trust agreements and similar
arrangements.
"Loan" means an extension of credit by a Bank to the Company
under Article II or Article III in the form of a Revolving Loan
or L/C Advance.
"Loan Documents" means this Agreement, any Notes, the
Collateral Documents, the Fee Letter, the L/C-Related Documents,
and all other letters and documents delivered to the Agent,
Syndication Agent, Lead Arranger or any Bank in connection
herewith.
"Majority Banks" means at any time Banks then holding in
excess of 50% of the then aggregate unpaid principal amount of
the Loans, or, if no such principal amount is then outstanding,
Banks then having in excess of 50% of the Commitments.
"Margin Stock" means "margin stock" as such term is defined
in Regulation T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse
change in, or a material adverse effect upon, the operations,
business, properties or condition (financial or otherwise) of the
Company or the Company and its Subsidiaries taken as a whole;
(b) a material impairment of the ability of the Company to
perform under any Loan Document and to avoid any Event of
Default; or (c) a material adverse effect upon (i) the legality,
validity, binding effect or enforceability against the Company of
any Loan Document, or (ii) the perfection or priority of any Lien
granted under any of the Collateral Documents.
19
"Multiemployer Plan" means a "multiemployer plan", within
the meaning of Section 4001(a)(3) of ERISA, to which the Company
or any ERISA Affiliate makes, is making, or is obligated to make
contributions or, during the preceding three calendar years, has
made, or been obligated to make, contributions.
"Net Cash Proceeds" shall mean cash payments received from
any sale, lease, transfer or other disposition of equity
securities of a Subsidiary of the Company or property or other
assets of the Company or a Subsidiary thereof (including any cash
payments received by way of deferred payment pursuant to a note
or installment receivable or otherwise, but only as and when
received), in each case net of (A) all accounting, appraisal,
legal, title and recording tax expenses, (B) the amount of any
Indebtedness (other than Indebtedness hereunder) secured by the
property or assets being sold and/or required to be repaid by the
Company or Subsidiaries of the Company on the occasion of such
sale, (C) the amount of accrued employee benefits required to be
paid on the occasion of such, (D) a reserve for amounts, if any,
subject to recapture by Medicare as a consequence of such sale,
(E) commissions and other reasonably estimated income taxes
payable with respect to the fiscal year during which such sale
occurs, as a consequence of such sale, lease, transfer or other
disposition or as a consequence of any repatriation of such cash
payments and (F) all distributions and other payments made to
holders of minority interests in Subsidiaries as a result of such
sale, lease, transfer or other disposition.
"Note" means a promissory note executed by the Company in
favor of a Bank pursuant to subsection 2.02(b), in substantially
the form of Exhibit F.
"Notice of Borrowing" means a notice in substantially the
form of Exhibit A.
"Notice of Conversion/Continuation" means a notice in
substantially the form of Exhibit B.
"Obligations" means all advances, debts, liabilities,
obligations, covenants and duties arising under any Loan Document
owing by the Company to any Bank, the Agent, or any Indemnified
Person, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now
existing or hereafter arising and any obligations owing by the
Company to any Bank under any Swap Contracts permitted under the
terms of this Agreement.
"Organization Documents" means, for any corporation, the
certificate or articles of incorporation, the bylaws, any
certificate of determination or instrument relating to the rights
20
of preferred shareholders of such corporation, any shareholder
rights agreement, and all applicable resolutions of the board of
directors (or any committee thereof) of such corporation.
"Other Taxes" means any present or future stamp, court or
documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made hereunder or
from the execution, delivery, performance, enforcement or
registration of, or otherwise with respect to, this Agreement or
any other Loan Documents.
"Participant" has the meaning specified in subsection
11.08(d).
"PBGC" means the Pension Benefit Guaranty Corporation, or
any Governmental Authority succeeding to any of its principal
functions under ERISA.
"Pension Plan" means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA which the Company
sponsors, maintains, or to which it makes, is making, or is
obligated to make contributions, or in the case of a multiple
employer plan (as described in Section 4064(a) of ERISA) has made
contributions at any time during the immediately preceding five
(5) plan years.
"Permitted Acquisitions" means Acquisitions by the Company
or any of its Subsidiaries of Persons and/or assets involved (or
to be used) in connection with the Health Care Business;
provided, that (i) any Acquisition involving a merger to which
the Company or any of its Subsidiaries is a party must provide
that the Company or such Subsidiary is the surviving corporation
in such merger, (ii) immediately before and after giving effect
to the consummation of each Acquisition, no Default has occurred
and is continuing or will exist; (iii) for each such Acquisition,
the prior, effective written consent or approval to such
Acquisition of the board of directors or equivalent governing
body of the acquiree has been obtained; and (iv) the Company
shall have complied with the requirements of Section 7.15, if
applicable.
"Permitted Liens" has the meaning specified in Section 8.01.
"Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company,
trust, unincorporated association, joint venture or Governmental
Authority.
21
"Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which the Company sponsors or maintains or to
which the Company makes, is making, or is obligated to make
contributions and includes any Pension Plan.
"Pledge Agreement" means each Pledge Agreement executed and
delivered by the Company or a Pledgor Subsidiary pursuant to
Section 5.0.1(g), substantially in the form of Exhibit G hereto,
as amended, supplemented, restated or otherwise modified from
time to time.
"Pledged Collateral" has the meaning specified in the Pledge
Agreements.
"Pledged Property" has the meaning specified in the Pledge
Agreements.
"Pledged Shares" has the meaning specified in the Pledge
Agreements.
"Pledgor Subsidiary" means any Subsidiary of the Company or
of another Subsidiary executing and delivering a Pledge
Agreement.
"PMAT" means Permanente Medical Association of Texas.
"Prior Credit Agreement" means that certain Credit Agreement
dated as of April 11, 1996, as amended, among the Company, the
lenders party thereto and BofA, as agent.
"Pro Rata Share" means, as to any Bank at any time, the
percentage equivalent (expressed as a decimal, rounded to the
ninth decimal place) at such time of such Bank's Commitment
divided by the combined Commitments of all Banks.
"Prospective Premium Default" shall mean the institution,
with respect to the Company or any of its Subsidiaries by an HMO
Regulator pursuant to applicable HMO Regulations, of a
restriction on the fees or premiums that any HMO Subsidiary of
the Company may charge that is likely to cause the Company to be
in default of one or more of the financial covenants in
Section 8.14 of this Agreement during one or more of the four
fiscal quarters of the Company following the effective date of
such restriction; provided that, in determining such likelihood,
due consideration shall be given of actions the Company proposes
to take, or to have any HMO Subsidiary take, in response to such
restriction to the extent such actions have been communicated to
the Banks within 30 days after such effective date and so long as
22
no other Default (whether or not related to such restriction)
shall then have occurred and be continuing.
"Regulatory Tangible Net Equity" shall mean, for any HMO,
"tangible net equity," "net worth" or such similar financial
concept as defined by any HMO Regulation promulgated by any HMO
Regulator as shall be applicable to HMOs.
"Regulatory Tangible Net Equity Requirement" shall mean, as
to any HMO, the minimum level at which an HMO is required by any
applicable HMO Regulation or HMO Regulator to maintain its
Regulatory Tangible Net Equity.
"Reportable Event" means, any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder, other
than any such event for which the 30-day notice requirement under
ERISA has been waived in regulations issued by the PBGC.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or
determination of an arbitrator or of a Governmental Authority, in
each case applicable to or binding upon the Person or any of its
property or to which the Person or any of its property is
subject.
"Responsible Officer" means the chief executive officer or
the president of the Company, the chief financial officer or any
other officer having substantially the same authority and
responsibility; or, with respect to compliance with financial
covenants, the chief financial officer, the treasurer or the
assistant treasurer of the Company, or any other officer having
substantially the same authority and responsibility.
"Revolving Loan" has the meaning specified in Section 2.01,
and may be a Base Rate Loan or a LIBOR Rate Loan (each, a "Type"
of Revolving Loan).
"Revolving Termination Date" means the earlier to occur of:
(a) September 30, 2003; and
(b) the date on which the Commitments terminate in
accordance with the provisions of this Agreement.
"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal
functions.
23
"Sierra Adjusted EBITDA" means, for any period, the net
income of the Company and its consolidated Subsidiaries (other
than, for the fiscal quarters ending on December 31, 1998,
March 31, 1999, June 30, 1999 and September 30, 1999, HMO Texas
and PMAT) plus, to the extent deducted in determining net income,
total book taxes, Interest Expense, depreciation and amortization
expenses and solely for the first three fiscal quarters of 1999,
the Specified Charges, minus any non-cash extraordinary gains.
Sierra Adjusted EBITDA shall be calculated as of the last day of
the most recently ended fiscal quarter of the Company for the
period of four consecutive full fiscal quarters then ended (the
"Measurement Period"), and such calculation shall include, on a
pro forma basis, the Consolidated Adjusted EBITDA of any Person
(other than Kaiser-Texas) acquired by the Company pursuant to an
Acquisition during the Measurement Period, as if such Acquisition
had occurred on the first day of the Measurement Period.
"Significant Subsidiary" shall mean HMO Texas and any other
Subsidiary of the Company of which (i) the revenues (directly and
together with its Subsidiaries) for the most recent fiscal
year of the Company were at least five percent (5%) of the
Company's consolidated revenues for such fiscal year or (ii) the
consolidated total assets as of the last day of the most recent
fiscal year of the Company were at least five percent (5%) of the
Company's consolidated total assets as of such date.
"Specified Charges" means those charges set forth on
Schedule 1.01 hereof.
"Specified Percentage" means a percentage determined by
reference to the Leverage Ratio set forth in the most recent
Compliance Certificate received by the Agent, as follows:
Leverage Ratio Specified Percentage
Greater than or equal to 3.00 100%
Greater than or equal to 2.00
but less than 3.00 75%
Less than 2.00 50%
"Subsidiary" of a Person means any corporation, association,
partnership, limited liability company, joint venture or other
business entity of which 50% or more of the voting stock,
membership interests or other equity interests (in the case of
Persons other than corporations), is owned or controlled directly
or indirectly by the Person, or one or more of the Subsidiaries
of the Person, or a combination thereof. Unless the context
otherwise clearly requires, references herein to a "Subsidiary"
refer to a Subsidiary of the Company.
24
"Surety Instruments" means all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties,
shipside bonds, surety bonds and similar instruments.
"Swap Contract" means any agreement, whether or not in
writing, relating to any transaction that is a rate swap, basis
swap, forward rate transaction, commodity swap, commodity option,
equity or equity index swap or option, bond, note or xxxx option,
interest rate option, forward foreign exchange transaction, cap,
collar or floor transaction, currency swap, cross-currency rate
swap, swaption, currency option or any other, similar transaction
(including any option to enter into any of the foregoing) or any
combination of the foregoing, and, unless the context otherwise
clearly requires, any master agreement relating to or governing
any or all of the foregoing.
"Swap Termination Value" means, in respect of any one or
more Swap Contracts, after taking into account the effect of any
legally enforceable netting agreement relating to such Swap
Contracts, (a) for any date on or after the date such Swap
Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s),
and (b) for any date prior to the date referenced in clause (a)
the amount(s) determined as the xxxx-to-market value(s) for such
Swap Contracts, as determined by the Company based upon one or
more mid-market or other readily available quotations provided by
any recognized dealer in such Swap Contracts (which may include
any Bank).
"Taxes" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or
similar charges, and all liabilities with respect thereto,
excluding, in the case of each Bank and the Agent, respectively,
taxes imposed on or measured by its net income by the
jurisdiction (or any political subdivision thereof) under the
laws of which such Bank or the Agent, as the case may be, is
organized or maintains a lending office.
"Total Assets" of any Person means all property (whether
real, personal, tangible, intangible or mixed) that, in
accordance with GAAP should be included in determining total
assets as shown on the asset portion of the balance sheet of such
Person.
"Total Liabilities" of any Person means all obligations
that, in accordance with GAAP, would be included in determining
total liabilities as shown on the liabilities side of the balance
sheet of such Person.
25
"2314 Partnership" means 0000 Xxxx Xxxxxxxxxx Partnership, a
Nevada general partnership of which the general partner is
Southwest Realty, Inc., a Nevada corporation which is a wholly-
owned subsidiary of the Company.
"Type" has the meaning specified in the definition of
"Revolving Loan."
"Unfunded Pension Liability" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the
current value of that Plan's assets, determined in accordance
with the assumptions used for funding the Pension Plan pursuant
to Section 412 of the Code for the applicable plan year.
"United States" and "U.S." each means the United States of
America.
"Wholly-Owned Subsidiary" means any corporation in which
(other than directors' qualifying shares required by law) 100% of
the capital stock of each class having ordinary voting power, in
each case, at the time as of which any determination is being
made, is owned, beneficially and of record, by the Company, or by
one or more of the other Wholly-Owned Subsidiaries, or both.
1.02 Other Interpretive Provisions.
(a) The meanings of defined terms are equally
applicable to the singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and
similar words refer to this Agreement as a whole and not to any
particular provision of this Agreement; and subsection, Section,
Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(c) (i) The term "documents" includes any and all
instruments, documents, agreements, certificates,
indentures, notices and other writings, however evidenced.
(ii) The term "including" is not limiting and
means "including without limitation."
(iii) In the computation of periods of time from a
specified date to a later specified date, the word "from"
means "from and including"; the words "to" and "until" each
mean "to but excluding", and the word "through" means "to
and including."
26
(iv) The term "property" includes any kind of
property or asset, real, personal or mixed, tangible or
intangible.
(d) Unless otherwise expressly provided herein,
(i) references to agreements (including this
Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other
modifications thereto, but only to the extent such
amendments and other modifications are not prohibited
by the terms of any Loan Document, and
(ii) references to any statute or regulation
are to be construed as including all statutory and
regulatory provisions consolidating, amending,
replacing, supplementing or interpreting the statute or
regulation.
(e) The captions and headings of this Agreement are
for convenience of reference only and shall not affect the
interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use
several different limitations, tests or measurements to regulate
the same or similar matters. All such limitations, tests and
measurements are cumulative and shall each be performed in
accordance with their terms. Unless otherwise expressly
provided, any reference to any action of the Agent or the Banks
by way of consent, approval or waiver shall be deemed modified by
the phrase "in its/their reasonable discretion."
(g) This Agreement and the other Loan Documents are
the result of negotiations among and have been reviewed by
counsel to the Agent, the Company and the other parties, and are
the products of all parties. Accordingly, they shall not be
construed against the Banks or the Agent merely because of the
Agent's or Banks' involvement in their preparation.
1.03 Accounting Principles.
(a) Unless the context otherwise clearly requires, all
accounting terms not expressly defined herein shall be construed,
and all financial computations required under this Agreement
shall be made, in accordance with GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal
quarter" refer to such fiscal periods of the Company.
27
ARTICLE II
THE CREDITS
2.01 Amounts and Terms of Commitments. Each Bank severally
agrees, on the terms and conditions set forth herein, to make
loans to the Company (each such loan, a "Revolving Loan") from
time to time on any Business Day during the period from the
Closing Date to the Revolving Termination Date, in an aggregate
amount not to exceed at any time outstanding the amount set forth
on Schedule 2.01 (such amount as the same may be reduced under
Section 2.05 or increased under Section 2.08 or as a result of
one or more assignments under Section 10.08, the Bank's
"Commitment"); provided, however, that, after giving effect to
any Borrowing of Revolving Loans, the Effective Amount of all
outstanding Revolving Loans and the Effective Amount of all L/C
Obligations, shall not at any time exceed the combined
Commitments; and provided further, that the Effective Amount of
the Revolving Loans of any Bank plus the participation of such
Bank in the Effective Amount of all L/C Obligations shall not at
any time exceed such Bank's Commitment. Within the limits of
each Bank's Commitment, and subject to the other terms and
conditions hereof, the Company may borrow under this section
2.01, prepay under Section 2.06 and reborrow under this section
2.01.
2.02 Loan Accounts.
(a) The Loans made by each Bank and the Letters of
Credit Issued by the Issuing Bank shall be evidenced by one or
more accounts or records maintained by such Bank or Issuing Bank,
as the case may be, in the ordinary course of business. The
accounts or records maintained by the Agent, the Issuing Bank and
each Bank shall be presumptive evidence of the amount of the
Loans made by the Banks to the Company and the Letters of Credit
Issued for the account of the Company, and the interest and
payments thereon. Any failure to so maintain such accounts or
records, or any error in doing so, shall not, however, limit or
otherwise affect the obligation of the Company hereunder to pay
any amount owing with respect to the Loans or any Letter of
Credit.
(b) Upon the request of any Bank made through the
Agent, the Loans made by such Bank may be evidenced by one or
more Notes, instead of or in addition to loan accounts. Each
such Bank shall endorse on the schedules annexed to its Note(s)
the date, amount and maturity of each Loan made by it and the
amount of each payment of principal made by the Company with
28
respect thereto. Each such Bank is irrevocably authorized by the
Company to endorse its Note(s) and each Bank's record shall be
conclusive absent manifest error; provided, however, that the
failure of a Bank to make, or an error in making, a notation
thereon with respect to any Loan shall not limit or otherwise
affect the obligations of the Company hereunder or under any such
Note to such Bank.
2.03 Procedure for Borrowing.
(a) Each Borrowing of Revolving Loans shall be made
upon the Company's irrevocable written notice delivered to the
Agent in the form of a Notice of Borrowing (which notice must be
received by the Agent prior to 10:00 a.m. (San Francisco time)
(i) three Business Days prior to the requested Borrowing Date, in
the case of LIBOR Rate Loans, and (ii) one Business Day prior to
the requested Borrowing Date, in the case of Base Rate Loans,
specifying:
(A) the amount of the Borrowing, which
shall be, in the case of LIBOR Rate Loans, in an
aggregate minimum amount of $5,000,000 or any multiple
of $1,000,000 in excess thereof and, in the case of
Base Rate Loans, in an aggregate minimum amount of
$1,000,000 or any multiple of $100,000 in excess
thereof;
(B) the requested Borrowing Date, which
shall be a Business Day;
(C) the Type of Loans comprising the
Borrowing; and
(D) if such Borrowing is comprised of
LIBOR Rate Loans, the duration of the Interest Period
applicable to such Loans included in such notice. If
the Notice of Borrowing fails to specify the duration
of the Interest Period for any Borrowing comprised of
LIBOR Rate Loans, such Interest Period shall be one
month.
(b) The Agent will promptly notify each Bank of its
receipt of any Notice of Borrowing and of the amount of such
Bank's Pro Rata Share of that Borrowing.
(c) Each Bank will make the amount of its Pro Rata
Share of each Borrowing available to the Agent for the account of
the Company at the Agent's Payment Office by 11:00 a.m. (San
29
Francisco time) on the Borrowing Date requested by the Company in
funds immediately available to the Agent. The proceeds of all
such Loans will then be made available to the Company by the
Agent by wire transfer in accordance with written instructions
provided to the Agent by the Company of like funds as received by
the Agent.
(d) After giving effect to any Borrowing, unless the
Agent shall otherwise consent, there may not be more than ten
(10) different Interest Periods in effect.
2.04 Conversion and Continuation Elections.
(a) The Company may, upon irrevocable written notice
to the Agent in accordance with subsection 2.04(b):
(i) elect, as of any Business Day, in the case of
Base Rate Loans, to convert any such Loans (or any part
thereof in an amount not less than $5,000,000, or that is in
an integral multiple of $1,000,000 in excess thereof) into
LIBOR Rate Loans;
(ii) elect, as of the last day of the
applicable Interest Period, in the case of LIBOR Rate
Loans, to convert any such Loans (or any part thereof
in an amount not less than $1,000,000, or that is in an
integral multiple of $100,000 in excess thereof) into
Base Rate Loans; or
(iii) elect as of the last day of the applicable
Interest Period, in the case of LIBOR Rate Loans, to
continue any such Loans having Interest Periods expiring on
such day (or any part thereof in an amount not less than
$5,000,000, or that is in an integral multiple of $1,000,000
in excess thereof);
provided, that if at any time the aggregate amount of LIBOR Rate
Loans in respect of any Borrowing is reduced, by payment,
prepayment, or conversion of part thereof to be less than
$5,000,000, such LIBOR Rate Loans shall automatically convert
into Base Rate Loans, and on and after such date the right of the
Company to continue such Loans as, and convert such Loans into,
LIBOR Rate Loans, shall terminate.
(b) The Company shall deliver a Notice of
Conversion/Continuation to be received by the Agent not later
than 9:00 a.m. (San Francisco time) at least (i) three Business
Days in advance of the Conversion/ Continuation Date, if the
30
Loans are to be converted into or continued as LIBOR Rate Loans,
and (ii) one Business Day in advance of the Conversion/
Continuation Date, if the Loans are to be converted into Base
Rate Loans, specifying:
(A) the proposed Conversion/Continuation
Date;
(B) the aggregate amount of Loans to be
converted or continued;
(C) the Type of Loans resulting from the
proposed conversion or continuation; and
(D) other than in the case of conversions
into Base Rate Loans, the duration of the requested Interest
Period.
(c) If upon the expiration of any Interest Period
applicable to LIBOR Rate Loans, the Company has failed to select
timely a new Interest Period to be applicable to such LIBOR Rate
Loans, the Company shall be deemed to have elected to convert
such LIBOR Rate Loans into Base Rate Loans effective as of the
expiration date of such Interest Period.
(d) The Agent will promptly notify each Bank of its
receipt of a Notice of Conversion/ Continuation, or, if no timely
notice is provided by the Company, the Agent will promptly notify
each Bank of the details of any automatic conversion. All
conversions and continuations shall be made ratably according to
the respective outstanding principal amounts of the Loans with
respect to which the notice was given held by each Bank.
(e) Unless the Majority Banks otherwise consent,
during the existence of a Default or Event of Default, the
Company may not elect to have a Loan converted into or continued
as a LIBOR Rate Loan.
(f) After giving effect to any conversion or
continuation of Loans, unless the Agent shall otherwise consent,
there may not be more than ten (10) different Interest Periods in
effect.
2.05 Voluntary Termination or Reduction of Commitments. The
Company may, upon not less than three Business Days' prior notice
to the Agent, terminate the Commitments, or permanently reduce
the Commitments by an aggregate minimum amount of $5,000,000 or
any multiple of $1,000,000 in excess thereof; unless, after
31
giving effect thereto and to any prepayments of Loans made on the
effective date thereof, (i) the Effective Amount of all Revolving
Loans and L/C Obligations together would exceed the amount of the
combined Commitments then in effect, or (ii) the Effective Amount
of all L/C Obligations then outstanding would exceed the L/C
Commitment. Once reduced in accordance with this Section, the
Commitments may not be increased. Any reduction of the
Commitments shall be applied to each Bank according to its Pro
Rata Share. If and to the extent specified by the Company in the
notice to the Agent, some or all of the reduction in the combined
Commitments shall be applied to reduce the L/C Commitment. All
accrued commitment and letter of credit fees to, but not
including, the effective date of any reduction or termination of
Commitments, shall be paid on the effective date of such
reduction or termination.
2.06 Optional Prepayments. Subject to Section 4.04, the
Company may, at any time or from time to time, upon not less than
(i) three Business Days' irrevocable notice to the Agent, ratably
prepay LIBOR Rate Loans in whole or in part, in minimum amounts
of $5,000,000 or any multiple of $1,000,000 in excess thereof,
and (ii) one Business Day's irrevocable notice to the Agent,
ratably prepay Base Rate Loans in whole or in part, in minimum
amounts of $1,000,000 or any multiple of $100,000 in excess
thereof. Such notice of prepayment shall specify the date and
amount of such prepayment and the Type(s) of Loans to be prepaid.
The Agent will promptly notify each Bank of its receipt of any
such notice, and of such Bank's Pro Rata Share of such
prepayment. If such notice is given by the Company, the Company
shall make such prepayment and the payment amount specified in
such notice shall be due and payable on the date specified
therein, together with accrued interest to each such date on the
amount prepaid and any amounts required pursuant to Section 4.04.
Amounts so prepaid may be reborrowed subject to the applicable
provisions of this Agreement.
2.07 Mandatory Prepayments of Loans; Mandatory Commitment
Reductions and Repayments.
(a) If on any date the Effective Amount of L/C
Obligations exceeds the L/C Commitment, the Company shall Cash
Collateralize on such date the outstanding Letters of Credit in
an amount equal to the excess of the maximum amount then
available to be drawn under the Letters of Credit over the
Aggregate L/C Commitment. Subject to Section 4.04, if on any
date after giving effect to any Cash Collateralization made on
such date pursuant to the preceding sentence, the Effective
Amount of all Revolving Loans then outstanding plus the Effective
32
Amount of all L/C Obligations exceeds the combined Commitments,
the Company shall immediately, and without notice or demand,
prepay the outstanding principal amount of the Revolving Loans
and L/C Advances by an amount equal to the applicable excess.
(b) On each date set forth below, the aggregate
Commitments shall, without any further action, automatically and
permanently be reduced to the amount set forth opposite such
date:
Date Amount
June 30, 2001 $205,000,000*/
December 31, 2001 $185,000,000
June 30, 2002 $165,000,000
December 31, 2002 $145,000,000
June 30, 2003 $125,000,000
provided, however, that on the Revolving Termination Date, the
aggregate Commitments shall be zero and on such date the Company
shall repay to the Banks the aggregate principal amount of Loans
outstanding on such date.
(c) If the aggregate Commitments equal or exceed
$100,000,000, the aggregate Commitments shall be automatically
and permanently reduced (but not to an amount below $100,000,000)
by an amount equal to seventy-five percent (75%) of the first
$25,000,000 of Net Cash Proceeds and one hundred percent (100%)
of all Net Cash Proceeds in excess thereof received by the
Company or its Subsidiary from a sale or disposition of any asset
(including, without limitation, any sale or disposition by the
Company of any capital stock of any of its Subsidiaries) other
than up to $10,000,000 in any fiscal year of Net Cash Proceeds
from asset sales in the ordinary course of business; provided,
however, that so long as no Default or Event of Default shall
have occurred and then be continuing, the aggregate Commitments
shall not be required to be reduced under this Section 2.07(c) if
and to the extent the Company or one of its Subsidiaries has used
such Net Cash Proceeds within 180 days of the receipt thereof for
Capital Expenditures or Acquisitions (in accordance with the
provisions of Article VI hereof) in the existing lines of
business of the Company; provided, further, that in no event
shall the Net Cash Proceeds used by the Company or its
Subsidiaries in accordance with the previous proviso exceed
$10,000,000 in any fiscal year or $25,000,000 during the term of
this Agreement. The reduction in the aggregate Commitments
--------
*/Applicable only if the commitments have been increased pursuant
to
Section 2.08.
33
contemplated by this Section 2.07(c) shall occur no later than
the earlier of (i) the tenth day after receipt by the Company or
its Subsidiary of Net Cash Proceeds, unless prior to such date
the Company shall have provided the Agent with written notice of
its intention to reinvest such proceeds in accordance with the
terms of the preceding sentence, or (ii) the date which is 180
days from the date of receipt by the Company or its Subsidiary of
such Net Cash Proceeds subject, in the case of asset sales by
regulated Subsidiaries of the Company, to the compliance by such
Subsidiaries with any applicable Requirements of Law. Any
reduction in the aggregate Commitment pursuant to this Section
2.07(c) shall be applied to reduce any remaining scheduled
installments in inverse order of maturity.
2.08 Increase to the Commitment.
(a) On or before April 30, 1999, the Company may by
written notice to the Agent, request proposed increases to the
amount of the Commitments to be effective on a date to be
specified by the Company (the "Commitment Increase Date"),
provided that (i) as of the Commitment Increase Date, no Default
or Event of Default shall have occurred, (ii) each such request
shall be for an increase in the Commitments which is in an
integral multiple of $5,000,000 and (iii) without the prior
written consent of all of the Banks, no such increase shall
result in the aggregate principal amount of the Commitments being
in excess of $225,000,000. Nothing contained in this Section
2.08 shall be construed as a commitment on behalf of the Agent or
any Bank to assume any increase in the Commitments.
(b) Each Person which assumes any portion of an
increase to the Commitments shall be a Bank or a willing
financial institution which qualifies as an Eligible Assignee and
which is designated by the Agent or the Syndication Agent.
(c) The Borrower, each such Eligible Assignee or Bank
and the Agent shall execute and deliver a Joinder Agreement, and
Company shall deliver a Note to each such Eligible Assignee in
the amount of its Commitment. Upon the Commitment Increase Date,
the Eligible Assignee or Bank named therein shall become a Bank
for all purposes of the Loan Documents, with the Commitment
therein set forth.
(d) By executing and delivering a Joinder Agreement,
the Eligible Assignee or Bank named therein acknowledges and
agrees as of the Commitment Increase Date that (i) it has
received a copy of this Agreement, together with copies of the
most recent financial statements delivered pursuant to Section
7.01 and such other documents and information as it has deemed
34
appropriate to make its own credit analysis and decision to enter
into such Joinder Agreement; (ii) it will, independently and
without reliance upon the Agent, the Syndication Agent or any
Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement;
(iii) it appoints and authorizes the Agent to take such action
and to exercise such powers under this Agreement as are delegated
to the Agent by this Agreement; and (iv) it will perform in
accordance with their terms all of the obligations which by the
terms of this Agreement are required to be performed by it as a
Bank.
(e) The Agent shall maintain a copy of each Joinder
Agreement, shall promptly inform the Banks of the identity of
each Bank which executes a Joinder Agreement and provide each
Bank and the Company with a revised Schedule 2.01 to this
Agreement.
2.09 Interest.
(a) Each Revolving Loan shall bear interest on the
outstanding principal amount thereof from the applicable
Borrowing Date at a rate per annum equal to the LIBOR Rate or the
Base Rate, as the case may be (and subject to the Company's right
to convert to other Types of Loans under Section 2.04), plus the
Applicable Margin.
(b) Interest on each Revolving Loan shall be paid in
arrears on each Interest Payment Date. Interest shall also be
paid on the date of any prepayment of LIBOR Rate Loans under
Section 2.06 or 2.07 for the portion of the Loans so prepaid and
upon payment (including prepayment) in full thereof and, during
the existence of any Event of Default, interest on all Loans
shall be paid on demand of the Agent at the request or with the
consent of the Majority Banks.
(c) Notwithstanding subsection (a) of this Section,
while any Event of Default exists or after acceleration, the
Company shall pay interest (after as well as before entry of
judgment thereon to the extent permitted by law) on the principal
amount of all outstanding Obligations, at a rate per annum which
is determined by adding 2% per annum to the Applicable Margin
then in effect for such Loans and, in the case of Obligations not
subject to an Applicable Margin, at a rate per annum equal to the
Base Rate plus 2%; provided, however, that, on and after the
expiration of any Interest Period applicable to any LIBOR Rate
Loan outstanding on the date of occurrence of such Event of
35
Default or acceleration, the principal amount of such Loan shall,
during the continuation of such Event of Default or after
acceleration, bear interest at a rate per annum equal to the Base
Rate plus the Applicable Margin for Base Rate Loans plus 2%.
(d) Anything herein to the contrary notwithstanding,
the obligations of the Company to any Bank hereunder shall be
subject to the limitation that payments of interest shall not be
required for any period for which interest is computed hereunder,
to the extent (but only to the extent) that contracting for or
receiving such payment by such Bank would be contrary to the
provisions of any law applicable to such Bank limiting the
highest rate of interest that may be lawfully contracted for,
charged or received by such Bank, and in such event the Company
shall pay such Bank interest at the highest rate permitted by
applicable law.
2.10 Fees. In addition to certain fees described in
Section 3.08:
(a) Agents' Fees. The Company shall pay fees to the
Agent and the Syndication Agent for their own account, as
required by the letter agreement ("Fee Letter") between the
Company, the Agent and the Syndication Agent dated October 1,
1998.
(b) Commitment Fees. The Company shall pay to the
Agent for the account of each Bank a commitment fee on the
average daily unused portion of such Bank's Commitment, computed
on a quarterly basis in arrears on the last Business Day of each
fiscal quarter, equal to the product of (i) the Applicable
Commitment Fee Rate and (ii) the average daily unused portion of
such Bank's Commitment during such fiscal quarter. For purposes
of calculating utilization under this subsection, the Commitments
shall be deemed used to the extent of the Effective Amount of
Revolving Loans then outstanding, plus the Effective Amount of
L/C Obligations then outstanding. Such commitment fee shall
accrue from the Closing Date to the Revolving Termination Date
and shall be due and payable quarterly in arrears on the last day
of each March, June, September and December, commencing
December 31, 1998 through the Revolving Termination Date, with
the final payment to be made on the Revolving Termination Date;
provided that, in connection with any reduction or termination of
Commitments under Section 2.05 or Section 2.07, the accrued
commitment fee calculated for the period ending on such date
shall also be paid on the date of such reduction or termination,
with the following quarterly payment being calculated on the
basis of the period from such reduction or termination date to
36
such quarterly payment date. The commitment fees provided in
this subsection shall accrue at all times after the above-
mentioned commencement date, including at any time during which
one or more conditions in Article V are not met.
2.11 Computation of Fees and Interest.
(a) All computations of interest for Base Rate Loans
when the Base Rate is determined by BofA's "reference rate" shall
be made on the basis of a year of 365 or 366 days, as the case
may be, and actual days elapsed. All other computations of fees
and interest shall be made on the basis of a 360-day year and
actual days elapsed (which results in more interest being paid
than if computed on the basis of a 365-day year). Interest and
fees shall accrue during each period during which interest or
such fees are computed from the first day thereof to the last day
thereof.
(b) Each determination of an interest rate by the
Agent shall be conclusive and binding on the Company and the
Banks in the absence of manifest error. The Agent will, at the
request of the Company or any Bank, deliver to the Company or the
Bank, as the case may be, a statement showing the quotations used
by the Agent in determining any interest rate and the resulting
interest rate.
2.12 Payments by the Company.
(a) All payments to be made by the Company shall be
made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein, all payments by the Company
shall be made to the Agent for the account of the Banks at the
Agent's Payment Office, and shall be made in dollars and in
immediately available funds, no later than 11:00 a.m. (San
Francisco time) on the date specified herein. The Agent will
promptly distribute to each Bank its Pro Rata Share (or other
applicable share as expressly provided herein) of such payment in
like funds as received. Any payment received by the Agent later
than 11:00 a.m. (San Francisco time) shall be deemed to have been
received on the following Business Day and any applicable
interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the
definition of "Interest Period" herein, whenever any payment is
due on a day other than a Business Day, such payment shall be
made on the following Business Day, and such extension of time
shall in such case be included in the computation of interest or
fees, as the case may be.
37
(c) Unless the Agent receives notice from the Company
prior to the date on which any payment is due to the Banks that
the Company will not make such payment in full as and when
required, the Agent may assume that the Company has made such
payment in full to the Agent on such date in immediately
available funds and the Agent may (but shall not be so required),
in reliance upon such assumption, distribute to each Bank on such
due date an amount equal to the amount then due such Bank. If
and to the extent the Company has not made such payment in full
to the Agent, each Bank shall repay to the Agent on demand such
amount distributed to such Bank, together with interest thereon
at the Federal Funds Rate for each day from the date such amount
is distributed to such Bank until the date repaid.
2.13 Payments by the Banks to the Agent.
(a) Unless the Agent receives notice from a Bank on or
prior to the Closing Date or, with respect to any Borrowing after
the Closing Date, at least one Business Day prior to the date of
such Borrowing, that such Bank will not make available as and
when required hereunder to the Agent for the account of the
Company the amount of that Bank's Pro Rata Share of the
Borrowing, the Agent may assume that each Bank has made such
amount available to the Agent in immediately available funds on
the Borrowing Date and the Agent may (but shall not be so
required), in reliance upon such assumption, make available to
the Company on such date a corresponding amount. If and to the
extent any Bank shall not have made its full amount available to
the Agent in immediately available funds and the Agent in such
circumstances has made available to the Company such amount, that
Bank shall on the Business Day following such Borrowing Date make
such amount available to the Agent, together with interest at the
Federal Funds Rate for each day during such period. A notice of
the Agent submitted to any Bank with respect to amounts owing
under this subsection (a) shall be conclusive, absent manifest
error. If such amount is so made available, such payment to the
Agent shall constitute such Bank's Loan on the date of Borrowing
for all purposes of this Agreement. If such amount is not made
available to the Agent on the Business Day following the
Borrowing Date, the Agent will notify the Company of such failure
to fund and, upon demand by the Agent, the Company shall pay such
amount to the Agent for the Agent's account, together with
interest thereon for each day elapsed since the date of such
Borrowing, at a rate per annum equal to the interest rate
applicable at the time to the Loans comprising such Borrowing.
(b) The failure of any Bank to make any Loan on any
Borrowing Date shall not relieve any other Bank of any obligation
38
hereunder to make a Loan on such Borrowing Date, but no Bank
shall be responsible for the failure of any other Bank to make
the Loan to be made by such other Bank on any Borrowing Date.
2.14 Sharing of Payments, Etc. If, other than as expressly
provided elsewhere herein, any Bank shall obtain on account of
the Loans made by it any payment (whether voluntary, involuntary,
through the exercise of any right of set-off, or otherwise) in
excess of its ratable share (or other share contemplated
hereunder), such Bank shall immediately (a) notify the Agent of
such fact, and (b) purchase from the other Banks such
participations in the Loans made by them as shall be necessary to
cause such purchasing Bank to share the excess payment pro rata
with each of them; provided, however, that if all or any portion
of such excess payment is thereafter recovered from the
purchasing Bank, such purchase shall to that extent be rescinded
and each other Bank shall repay to the purchasing Bank the
purchase price paid therefor, together with an amount equal to
such paying Bank's ratable share (according to the proportion of
(i) the amount of such paying Bank's required repayment to
(ii) the total amount so recovered from the purchasing Bank) of
any interest or other amount paid or payable by the purchasing
Bank in respect of the total amount so recovered. The Company
agrees that any Bank so purchasing a participation from another
Bank may, to the fullest extent permitted by law, exercise all
its rights of payment (including the right of set-off, but
subject to Section 11.10) with respect to such participation as
fully as if such Bank were the direct creditor of the Company in
the amount of such participation. The Agent will keep records
(which shall be conclusive and binding in the absence of manifest
error) of participations purchased under this Section and will in
each case notify the Banks following any such purchases or
repayments.
2.15 Security. All obligations of the Company under this
Agreement, the Notes all other Loan Documents and any Swap
Contract entered into with a Bank and permitted under this
Agreement shall be secured in accordance with the Collateral
Documents.
ARTICLE III
THE LETTERS OF CREDIT
3.01 The Letter of Credit Subfacility.
(a) On the terms and conditions set forth herein (i)
the Issuing Bank agrees, (A) from time to time on any Business
39
Day during the period from the Closing Date to the Revolving
Termination Date to issue Letters of Credit for the account of
the Company, and to amend or renew Letters of Credit previously
issued by it, in accordance with subsections 3.02(c) and 3.02(d),
and (B) to honor drafts under the Letters of Credit; and (ii) the
Banks severally agree to participate in Letters of Credit Issued
for the account of the Company; provided, that the Issuing Bank
shall not be obligated to Issue, and no Bank shall be obligated
to participate in, any Letter of Credit if as of the date of
Issuance of such Letter of Credit (the "Issuance Date") (1) the
Effective Amount of all L/C Obligations plus the Effective Amount
of all Revolving Loans exceeds the combined Commitments, (2) the
participation of any Bank in the Effective Amount of all L/C
Obligations plus the Effective Amount of the Revolving Loans of
such Bank exceeds such Bank's Commitment, or (3) the Effective
Amount of L/C Obligations exceeds the L/C Commitment. Within the
foregoing limits, and subject to the other terms and conditions
hereof, the Company's ability to obtain Letters of Credit shall
be fully revolving, and, accordingly, the Company may, during the
foregoing period, obtain Letters of Credit to replace Letters of
Credit which have expired or which have been drawn upon and
reimbursed.
(b) The Issuing Bank is under no obligation to Issue
any Letter of Credit if:
(i) any order, judgment or decree of any
Governmental Authority or arbitrator shall by its terms
purport to enjoin or restrain the Issuing Bank from Issuing
such Letter of Credit, or any Requirement of Law applicable
to the Issuing Bank or any request or directive (whether or
not having the force of law) from any Governmental Authority
with jurisdiction over the Issuing Bank shall prohibit, or
request that the Issuing Bank refrain from, the Issuance of
letters of credit generally or such Letter of Credit in
particular or shall impose upon the Issuing Bank with
respect to such Letter of Credit any restriction, reserve or
capital requirement (for which the Issuing Bank is not
otherwise compensated hereunder) not in effect on the
Closing Date, or shall impose upon the Issuing Bank any
unreimbursed loss, cost or expense which was not applicable
on the Closing Date and which the Issuing Bank in good xxxxx
xxxxx material to it;
(ii) the Issuing Bank has received written notice
from any Bank, the Agent or the Company, on or prior to the
Business Day prior to the requested date of Issuance of such
40
Letter of Credit, that one or more of the applicable
conditions contained in Article V is not then satisfied;
(iii) the expiry date of any requested Letter of
Credit is (A) more than 364 days after the date of Issuance,
unless the Majority Banks have approved such expiry date in
writing, or (B) later than thirty days prior to the
Revolving Termination Date;
(iv) any requested Letter of Credit does not
provide for drafts, or is not otherwise in form and
substance acceptable to the Issuing Bank, or the Issuance of
a Letter of Credit shall violate any applicable policies of
the Issuing Bank;
(v) any requested Letter of Credit is for the
purpose of supporting the issuance of any letter of credit
by any other Person; or
(vi) such Letter of Credit is in a face amount
less than $500,000 or to be denominated in a currency other
than Dollars.
3.02 Issuance, Amendment and Renewal of Letters of Credit.
(a) Each Letter of Credit shall be issued upon the
irrevocable written request of the Company received by the
Issuing Bank (with a copy sent by the Company to the Agent) at
least four days (or such shorter time as the Issuing Bank may
agree in a particular instance in its sole discretion) prior to
the proposed date of issuance. Each such request for issuance of
a Letter of Credit shall be by facsimile, confirmed immediately
in an original writing, in the form of an L/C Application, and
shall specify in form and detail satisfactory to the Issuing
Bank:
(i) the proposed date of issuance of the
Letter of Credit (which shall be a Business Day);
(ii) the face amount of the Letter of Credit;
(iii) the expiry date of the Letter of
Credit;
(iv) the name and address of the beneficiary
thereof;
41
(v) the documents to be presented by the
beneficiary of the Letter of Credit in case of any
drawing thereunder;
(vi) the full text of any certificate to be
presented by the beneficiary in case of any drawing
thereunder; and
(vii) such other matters as the Issuing Bank
may require.
(b) At least two Business Days prior to the Issuance
of any Letter of Credit, the Issuing Bank will confirm with the
Agent (by telephone or in writing) that the Agent has received a
copy of the L/C Application or L/C Amendment Application from the
Company and, if not, the Issuing Bank will provide the Agent with
a copy thereof. Unless the Issuing Bank has received notice on
or before the Business Day immediately preceding the date the
Issuing Bank is to issue a requested Letter of Credit from the
Agent (A) directing the Issuing Bank not to issue such Letter of
Credit because such issuance is not then permitted under
subsection 3.01(a) as a result of the limitations set forth in
clauses (1) through (3) thereof or subsection 3.01(b)(ii); or
(B) that one or more conditions specified in Article V are not
then satisfied; then, subject to the terms and conditions hereof,
the Issuing Bank shall, on the requested date, issue a Letter of
Credit for the account of the Company in accordance with the
Issuing Bank's usual and customary business practices.
(c) From time to time while a Letter of Credit is
outstanding and prior to the Revolving Termination Date, the
Issuing Bank will, upon the written request of the Company
received by the Issuing Bank (with a copy sent by the Company to
the Agent) at least four days (or such shorter time as the
Issuing Bank may agree in a particular instance in its sole
discretion) prior to the proposed date of amendment, amend any
Letter of Credit issued by it. Each such request for amendment of
a Letter of Credit shall be made by facsimile, confirmed
immediately in an original writing, made in the form of an L/C
Amendment Application and shall specify in form and detail
satisfactory to the Issuing Bank: (i) the Letter of Credit to be
amended; (ii) the proposed date of amendment of the Letter of
Credit (which shall be a Business Day); (iii) the nature of the
proposed amendment; and (iv) such other matters as the Issuing
Bank may require. The Issuing Bank shall be under no obligation
to amend any Letter of Credit if: (A) the Issuing Bank would have
no obligation at such time to issue such Letter of Credit in its
amended form under the terms of this Agreement; or (B) the
42
beneficiary of any such Letter of Credit does not accept the
proposed amendment to the Letter of Credit. The Agent will
promptly notify the Banks of the receipt by it of any L/C
Application or L/C Amendment Application.
(d) The Issuing Bank and the Banks agree that, while a
Letter of Credit is outstanding and prior to the Revolving
Termination Date, at the option of the Company and upon the
written request of the Company received by the Issuing Bank (with
a copy sent by the Company to the Agent) at least four days (or
such shorter time as the Issuing Bank may agree in a particular
instance in its sole discretion) prior to the proposed date of
notification of renewal, the Issuing Bank shall be entitled to
authorize the automatic renewal of any Letter of Credit issued by
it. Each such request for renewal of a Letter of Credit shall be
made by facsimile, confirmed immediately in an original writing,
in the form of an L/C Amendment Application, and shall specify in
form and detail satisfactory to the Issuing Bank: (i) the Letter
of Credit to be renewed; (ii) the proposed date of notification
of renewal of the Letter of Credit (which shall be a Business
Day); (iii) the revised expiry date of the Letter of Credit; and
(iv) such other matters as the Issuing Bank may require. The
Issuing Bank shall be under no obligation so to renew any Letter
of Credit if: (A) the Issuing Bank would have no obligation at
such time to issue or amend such Letter of Credit in its renewed
form under the terms of this Agreement; or (B) the beneficiary of
any such Letter of Credit does not accept the proposed renewal of
the Letter of Credit. If any outstanding Letter of Credit shall
provide that it shall be automatically renewed unless the
beneficiary thereof receives notice from the Issuing Bank that
such Letter of Credit shall not be renewed, and if at the time of
renewal the Issuing Bank would be entitled to authorize the
automatic renewal of such Letter of Credit in accordance with
this subsection 3.02(e) upon the request of the Company but the
Issuing Bank shall not have received any L/C Amendment
Application from the Company with respect to such renewal or
other written direction by the Company with respect thereto, the
Issuing Bank shall nonetheless be permitted to allow such Letter
of Credit to renew, and the Company and the Banks hereby
authorize such renewal, and, accordingly, the Issuing Bank shall
be deemed to have received an L/C Amendment Application from the
Company requesting such renewal.
(e) The Issuing Bank may, at its election (or as
required by the Agent at the direction of the Majority Banks),
deliver any notices of termination or other communications to any
Letter of Credit beneficiary or transferee, and take any other
action as necessary or appropriate, at any time and from time to
43
time, in order to cause the expiry date of such Letter of Credit
to be a date not later than the Revolving Termination Date.
(f) This Agreement shall control in the event of any
conflict with any L/C-Related Document (other than any Letter of
Credit).
(g) The Issuing Bank will also deliver to the Agent,
concurrently or promptly following its delivery of a Letter of
Credit, or amendment to or renewal of a Letter of Credit, to an
advising bank or a beneficiary, a true and complete copy of each
such Letter of Credit or amendment to or renewal of a Letter of
Credit.
3.03 Existing BofA Letters of Credit; Risk Participations,
Drawings and Reimbursements.
(a) On and after the Closing Date, the Existing BofA
Letters of Credit shall be deemed for all purposes, including for
purposes of the fees to be collected pursuant to subsections
3.08(a) and 3.08(b), and reimbursement of costs and expenses to
the extent provided herein, Letters of Credit outstanding under
this Agreement and entitled to the benefits of this Agreement and
the other Loan Documents, and shall be governed by the
applications and agreements pertaining thereto and by this
Agreement. Each Bank shall be deemed to, and hereby irrevocably
and unconditionally agrees to, purchase from the Issuing Bank on
the Closing Date or on the Commitment Increase Date a
participation in each such Letter of Credit and each drawing
thereunder in an amount equal to the product of such Bank's Pro
Rata Share times the maximum amount available to be drawn under
such Letter of Credit and the amount of such drawing,
respectively. For purposes of subsection 2.01(b) and subsection
2.10(b), the Existing BofA Letters of Credit shall be deemed to
utilize pro rata the Commitment of each Bank.
(b) Immediately upon the Issuance of each Letter of
Credit in addition to those described in subsection 3.3(a), each
Bank shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from the Issuing Bank a
participation in such Letter of Credit and each drawing
thereunder in an amount equal to the product of (i) the Pro Rata
Share of such Bank, times (ii) the maximum amount available to be
drawn under such Letter of Credit and the amount of such drawing,
respectively. For purposes of subsection 2.01(b), each Issuance
of a Letter of Credit shall be deemed to utilize the Commitment
of each Bank by an amount equal to the amount of such
participation.
44
(c) In the event of any request for a drawing under a
Letter of Credit by the beneficiary or transferee thereof, the
Issuing Bank will promptly notify the Company. The Company shall
reimburse the Issuing Bank prior to 10:00 a.m. (San Francisco
time), on each date that any amount is paid by the Issuing Bank
under any Letter of Credit (each such date, an "Honor Date"), in
an amount equal to the amount so paid by the Issuing Bank. In
the event the Company fails to reimburse the Issuing Bank for the
full amount of any drawing under any Letter of Credit by 10:00
a.m. (San Francisco time) on the Honor Date, the Issuing Bank
will promptly notify the Agent and the Agent will promptly notify
each Bank thereof, and the Company shall be deemed to have
requested that Base Rate Loans be made by the Banks to be
disbursed on the Honor Date under such Letter of Credit, subject
to the amount of the unutilized portion of the Revolving
Commitment and subject to the conditions set forth in Section
5.02. Any notice given by the Issuing Bank or the Agent pursuant
to this subsection 3.03(c) may be oral if immediately confirmed
in writing (including by facsimile); provided that the lack of
such an immediate confirmation shall not affect the
conclusiveness or binding effect of such notice.
(d) Each Bank shall upon any notice pursuant to
subsection 3.03(c) make available to the Agent for the account of
the relevant Issuing Bank an amount in Dollars and in immediately
available funds equal to its Pro Rata Share of the amount of the
drawing, whereupon the participating Banks shall (subject to
subsection 3.03(e)) each be deemed to have made a Loan consisting
of a Base Rate Loan to the Company in that amount. If any Bank
so notified fails to make available to the Agent for the account
of the Issuing Bank the amount of such Bank's Pro Rata Share of
the amount of the drawing by no later than 12:00 noon (San
Francisco time) on the Honor Date, then interest shall accrue on
such Bank's obligation to make such payment, from the Honor Date
to the date such Bank makes such payment, at a rate per annum
equal to the Federal Funds Rate in effect from time to time
during such period. The Agent will promptly give notice of the
occurrence of the Honor Date, but failure of the Agent to give
any such notice on the Honor Date or in sufficient time to enable
any Bank to effect such payment on such date shall not relieve
such Bank from its obligations under this Section 3.03.
(e) With respect to any unreimbursed drawing that is
not converted into Loans consisting of Base Rate Loans to the
Company in whole or in part, because of the Company's failure to
satisfy the conditions set forth in Section 5.02 or for any other
reason, the Company shall be deemed to have incurred from the
Issuing Bank an L/C Borrowing in the amount of such drawing,
45
which L/C Borrowing shall be due and payable on demand (together
with interest) and shall bear interest at a rate per annum equal
to the Base Rate plus 2% per annum, and each Bank's payment to
the Issuing Bank pursuant to subsection 3.03(d) shall be deemed
payment in respect of its participation in such L/C Borrowing and
shall constitute an L/C Advance from such Bank in satisfaction of
its participation obligation under this Section 3.03.
(f) Each Bank's obligation in accordance with this
Agreement to make the Loans or L/C Advances, as contemplated by
this Section 3.03, as a result of a drawing under a Letter of
Credit, shall be absolute and unconditional and without recourse
to the Issuing Bank and shall not be affected by any
circumstance, including (i) any set-off, counterclaim,
recoupment, defense or other right which such Bank may have
against the Issuing Bank, the Company or any other Person for any
reason whatsoever; (ii) the occurrence or continuance of a
Default, an Event of Default or a Material Adverse Effect; or
(iii) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing; provided,
however, that each Bank's obligation to make Loans under this
Section 3.03 is subject to the conditions set forth in Section
5.02.
3.04 Repayment of Participations.
(a) Upon (and only upon) receipt by the Agent for the
account of the Issuing Bank of immediately available funds from
the Company (i) in reimbursement of any payment made by the
Issuing Bank under the Letter of Credit with respect to which any
Bank has paid the Agent for the account of the Issuing Bank for
such Bank's participation in the Letter of Credit pursuant to
Section 3.03 or (ii) in payment of interest thereon, the Agent
will pay to each Bank, in the same funds as those received by the
Agent for the account of the Issuing Bank, the amount of such
Bank's Pro Rata Share of such funds, and the Issuing Bank shall
receive the amount of the Pro Rata Share of such funds of any
Bank that did not so pay the Agent for the account of the Issuing
Bank.
(b) If the Agent or the Issuing Bank is required at
any time to return to the Company, or to a trustee, receiver,
liquidator, custodian, or any official in any Insolvency
Proceeding, any portion of the payments made by the Company to
the Agent for the account of the Issuing Bank pursuant to
subsection 3.04(a) in reimbursement of a payment made under the
Letter of Credit or interest or fee thereon, each Bank shall, on
demand of the Agent, forthwith return to the Agent or the Issuing
46
Bank the amount of its Pro Rata Share of any amounts so returned
by the Agent or the Issuing Bank plus interest thereon from the
date such demand is made to the date such amounts are returned by
such Bank to the Agent or the Issuing Bank, at a rate per annum
equal to the Federal Funds Rate in effect from time to time.
3.05 Role of the Issuing Bank.
(a) Each Bank and the Company agree that, in paying
any drawing under a Letter of Credit, the Issuing Bank shall not
have any responsibility to obtain any document (other than any
sight draft and certificates expressly required by the Letter of
Credit) or to ascertain or inquire as to the validity or accuracy
of any such document or the authority of the Person executing or
delivering any such document.
(b) No Agent-Related Person nor any of the respective
correspondents, participants or assignees of the Issuing Bank
shall be liable to any Bank for: (i) any action taken or omitted
in connection herewith at the request or with the approval of the
Banks (including the Majority Banks, as applicable); (ii) any
action taken or omitted in the absence of gross negligence or
willful misconduct; or (iii) the due execution, effectiveness,
validity or enforceability of any L/C-Related Document.
(c) The Company hereby assumes all risks of the acts
or omissions of any beneficiary or transferee with respect to its
use of any Letter of Credit; provided, however, that this
assumption is not intended to, and shall not, preclude the
Company's pursuing such rights and remedies as it may have
against the beneficiary or transferee at law or under any other
agreement. No Agent-Related Person, nor any of the respective
correspondents, participants or assignees of the Issuing Bank,
shall be liable or responsible for any of the matters described
in clauses (i) through (vii) of Section 3.06; provided, however,
anything in such clauses to the contrary notwithstanding, that
the Company may have a claim against the Issuing Bank, and the
Issuing Bank may be liable to the Company, to the extent, but
only to the extent, of any direct, as opposed to consequential or
exemplary, damages suffered by the Company which the Company
proves were caused by the Issuing Bank's willful misconduct or
gross negligence or the Issuing Bank's willful failure to pay
under any Letter of Credit after the presentation to it by the
beneficiary of a sight draft and certificate(s) strictly
complying with the terms and conditions of a Letter of Credit. In
furtherance and not in limitation of the foregoing: (i) the
Issuing Bank may accept documents that appear on their face to be
in order, without responsibility for further investigation,
47
regardless of any notice or information to the contrary; and
(ii) the Issuing Bank shall not be responsible for the validity
or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part,
which may prove to be invalid or ineffective for any reason.
3.06 Obligations Absolute. The obligations of the Company
under this Agreement and any L/C-Related Document to reimburse
the Issuing Bank for a drawing under a Letter of Credit, and to
repay any L/C Borrowing and any drawing under a Letter of Credit
converted into Revolving Loans, shall be unconditional and
irrevocable, and shall be paid strictly in accordance with the
terms of this Agreement and each such other L/C-Related Document
under all circumstances, including the following:
(i) any lack of validity or enforceability of this
Agreement or any L/C-Related Document;
(ii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the
obligations of the Company in respect of any Letter of
Credit or any other amendment or waiver of or any consent to
departure from all or any of the L/C-Related Documents;
(iii) the existence of any claim, set-off, defense
or other right that the Company may have at any time against
any beneficiary or any transferee of any Letter of Credit
(or any Person for whom any such beneficiary or any such
transferee may be acting), the Issuing Bank or any other
Person, whether in connection with this Agreement, the
transactions contemplated hereby or by the L/C-Related
Documents or any unrelated transaction;
(iv) any draft, demand, certificate or other
document presented under any Letter of Credit proving to be
forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any
respect; or any loss or delay in the transmission or
otherwise of any document required in order to make a
drawing under any Letter of Credit;
(v) any payment by the Issuing Bank under any
Letter of Credit against presentation of a draft or
certificate that does not strictly comply with the terms of
any Letter of Credit; or any payment made by the Issuing
Bank under any Letter of Credit to any Person purporting to
be a trustee in bankruptcy, debtor-in-possession, assignee
48
for the benefit of creditors, liquidator, receiver or other
representative of or successor to any beneficiary or any
transferee of any Letter of Credit, including any arising in
connection with any Insolvency Proceeding;
(vi) any exchange, release or non-perfection of
any collateral, or any release or amendment or waiver of or
consent to departure from any other guarantee, for all or
any of the obligations of the Company in respect of any
Letter of Credit; or
(vii) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing,
including any other circumstance that might otherwise
constitute a defense available to, or a discharge of, the
Company or a guarantor.
3.07 Cash Collateral Pledge. Upon (i) the request of the
Agent, (A) if the Issuing Bank has honored any full or partial
drawing request on any Letter of Credit and such drawing has
resulted in an L/C Borrowing hereunder, or (B) if, as of the
Revolving Termination Date, any Letters of Credit may for any
reason remain outstanding and partially or wholly undrawn, or
(ii) the occurrence of the circumstances described in Section
2.07 requiring the Company to Cash Collateralize Letters of
Credit, then, the Company shall immediately Cash Collateralize
the L/C Obligations in an amount equal to such L/C Obligations.
3.08 Letter of Credit Fees.
(a) The Company shall pay to the Agent for the account
of each of the Banks a letter of credit fee on the average daily
maximum amount available to be drawn of the outstanding Letters
of Credit, computed on a quarterly basis in arrears on the last
Business Day of each calendar quarter based upon Letters of
Credit outstanding for that quarter as calculated by the Agent,
at a rate per annum equal to the Applicable Letter of Credit Fee
Rate. Such letter of credit fees shall be due and payable
quarterly in arrears on the last Business Day of each calendar
quarter during which Letters of Credit are outstanding,
commencing on December 31, 1998, through the Revolving
Termination Date (or such later date upon which the outstanding
Letters of Credit shall expire), with the final payment to be
made on the Revolving Termination Date (or such later expiration
date).
(b) The Company shall pay to the Issuing Bank, for its
sole account, a letter of credit fronting fee for each Letter of
49
Credit Issued by the Issuing Bank equal to .125% of the face
amount (or increased face amount, as the case may be) of such
Letter of Credit. Such Letter of Credit fronting fee shall be
due and payable on each date of Issuance of a Letter of Credit.
(c) The Company shall pay to the Issuing Bank, for its
sole account, from time to time on demand the normal issuance,
presentation, amendment and other processing fees, and other
standard costs and charges, of the Issuing Bank relating to
letters of credit as from time to time in effect.
3.09 Uniform Customs and Practice. The Uniform Customs and
Practice for Documentary Credits as published by the
International Chamber of Commerce most recently at the time of
issuance of any Letter of Credit shall (unless otherwise
expressly provided in the Letters of Credit) apply to the Letters
of Credit.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
4.01 Taxes.
(a) Any and all payments by the Company to each Bank
or the Agent under this Agreement and any other Loan Document
shall be made free and clear of, and without deduction or
withholding for, any Taxes. In addition, the Company shall pay
all Other Taxes.
(b) If the Company shall be required by law to deduct
or withhold any Taxes or Other Taxes from or in respect of any
sum payable hereunder to any Bank or the Agent, then:
(i) the sum payable shall be increased as
necessary so that, after making all required deductions and
withholdings (including deductions and withholdings
applicable to additional sums payable under this Section),
such Bank or the Agent, as the case may be, receives and
retains an amount equal to the sum it would have received
and retained had no such deductions or withholdings been
made;
(ii) the Company shall make such deductions and
withholdings;
50
(iii) the Company shall pay the full amount
deducted or withheld to the relevant taxing authority or
other authority in accordance with applicable law; and
(iv) the Company shall also pay to each Bank or
the Agent for the account of such Bank, at the time interest
is paid, Further Taxes in the amount that the respective
Bank specifies as necessary to preserve the after-tax yield
the Bank would have received if such Taxes, Other Taxes or
Further Taxes had not been imposed;
provided, that the foregoing obligation of the Company to pay
such additional amounts shall not apply
(A) to any payment to any Bank that is
subject to deduction for or withholding for taxes pursuant
to the Code, unless, as of the Closing Date or the date it
becomes a Bank pursuant to Section 11.08, such Bank is
entitled to submit a Form 1001 (relating to such Bank and
entitling it to a complete exemption from withholding on all
interest to be received by it under this Agreement) or a
Form 4224 (relating to all interest to be received by such
Bank under this Agreement in respect of the Loans) (and, in
that regard, each such Bank shall deliver to the
Administrative Agent and the Company the documentation
required by Section 10.10), or
(B) to any taxes imposed solely by reason of the failure of such Bank to
comply with applicable certification, information, documentation or other
reporting requirements concerning the nationality, residence, identity or
connections with the United States of such Bank if such compliance is required
by statute or regulations of the United States as a precondition to relief or
exemption from such Taxes.
(c) The Company agrees to indemnify and hold harmless
each Bank and the Agent for the full amount of (i) Taxes,
(ii) Other Taxes, and (iii) Further Taxes in the amount that the
respective Bank specifies as necessary to preserve the after-tax
yield the Bank would have received if such Taxes, Other Taxes or
Further Taxes had not been imposed, and any liability (including
penalties, interest, additions to tax and expenses) arising
therefrom or with respect thereto, whether or not such Taxes,
Other Taxes or Further Taxes were correctly or legally asserted.
Payment under this indemnification shall be made within 30 days
after the date the Bank or the Agent makes written demand
therefor.
51
(d) Within 30 days after the date of any payment by
the Company of Taxes, Other Taxes or Further Taxes, the Company
shall furnish to each Bank or the Agent the original or a
certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to such Bank or the Agent.
(e) If the Company is required to pay any amount to
any Bank or the Agent pursuant to subsection (b) or (c) of this
Section, then such Bank shall use reasonable efforts (consistent
with legal and regulatory restrictions) to change the
jurisdiction of its Lending Office so as to eliminate any such
additional payment by the Company which may thereafter accrue, if
such change in the sole judgment of such Bank is not otherwise
disadvantageous to such Bank.
4.02 Illegality.
(a) If any Bank determines that the introduction of
any Requirement of Law, or any change in any Requirement of Law,
or in the interpretation or administration of any Requirement of
Law, has made it unlawful, or that any central bank or other
Governmental Authority has asserted that it is unlawful, for any
Bank or its applicable Lending Office to make LIBOR Rate Loans,
then, on notice thereof by the Bank to the Company through the
Agent, any obligation of that Bank to make LIBOR Rate Loans shall
be suspended until the Bank notifies the Agent and the Company
that the circumstances giving rise to such determination no
longer exist.
(b) If a Bank determines that it is unlawful to
maintain any LIBOR Rate Loan, the Company shall, upon its receipt
of notice of such fact and demand from such Bank (with a copy to
the Agent), prepay in full such LIBOR Rate Loans of that Bank
then outstanding, together with interest accrued thereon and
amounts required under Section 4.04, either on the last day of
the Interest Period thereof, if the Bank may lawfully continue to
maintain such LIBOR Rate Loans to such day, or immediately, if
the Bank may not lawfully continue to maintain such LIBOR Rate
Loan. If the Company is required to so prepay any LIBOR Rate
Loan, then concurrently with such prepayment, the Company shall
borrow from the affected Bank, in the amount of such repayment, a
Base Rate Loan.
(c) If the obligation of any Bank to make or maintain
LIBOR Rate Loans has been so terminated or suspended, the Company
may elect, by giving notice to the Bank through the Agent that
all Loans which would otherwise be made by the Bank as LIBOR Rate
Loans shall be instead Base Rate Loans.
52
4.03 Increased Costs and Reduction of Return.
(a) If any Bank determines that, due to either (i) the
introduction of or any change in or in the interpretation by any
Governmental Authority of any law or regulation or (ii) the
compliance by that Bank with any guideline or request from any
central bank or other Governmental Authority (whether or not
having the force of law), there shall be any increase in the cost
to such Bank of agreeing to make or making, funding or
maintaining any LIBOR Rate Loans or participating in Letters of
Credit, or, in the case of the Issuing Bank, any increase in the
cost to the Issuing Bank of agreeing to issue, issuing or
maintaining any Letter of Credit or of agreeing to make or
making, funding or maintaining any unpaid drawing under any
Letter of Credit, then the Company shall be liable for, and shall
from time to time, upon demand (with a copy of such demand to be
sent to the Agent), pay to the Agent for the account of such
Bank, additional amounts as are sufficient to compensate such
Bank for such increased costs.
(b) If any Bank shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change
in any Capital Adequacy Regulation, (iii) any change in the
interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or
(iv) compliance by the Bank (or its Lending Office) or any
corporation controlling the Bank with any Capital Adequacy
Regulation, affects or would affect the amount of capital
required or expected to be maintained by the Bank or any
corporation controlling the Bank and (taking into consideration
such Bank's or such corporation's policies with respect to
capital adequacy and such Bank's desired return on capital)
determines that the amount of such capital is increased as a
consequence of its Commitment, loans, credits or obligations
under this Agreement, then, upon demand of such Bank to the
Company through the Agent, the Company shall pay to the Bank,
from time to time as specified by the Bank, additional amounts
sufficient to compensate the Bank for such increase.
4.04 Funding Losses. The Company shall reimburse each Bank
and hold each Bank harmless from any loss or expense which the
Bank may sustain or incur as a consequence of:
(a) the failure of the Company to make on a timely
basis any payment of principal of any LIBOR Rate Loan;
53
(b) the failure of the Company to borrow, continue or
convert a Loan after the Company has given (or is deemed to have
given) a Notice of Borrowing or a Notice of Conversion/
Continuation;
(c) the failure of the Company to make any prepayment
in accordance with any notice delivered under Section 2.06;
(d) the prepayment (including pursuant to Section
2.07) or other payment (including after acceleration thereof) of
a LIBOR Rate Loan on a day that is not the last day of the
relevant Interest Period; or
(e) the automatic conversion under Section 2.04 of any
LIBOR Rate Loan into a Base Rate Loan on a day that is not the
last day of the relevant Interest Period;
including any such loss or expense arising from the liquidation
or reemployment of funds obtained by it to maintain its LIBOR
Rate Loans or from fees payable to terminate the deposits from
which such funds were obtained. For purposes of calculating
amounts payable by the Company to the Banks under this Section
and under subsection 4.03(a), each LIBOR Rate Loan made by a Bank
(and each related reserve, special deposit or similar
requirement) shall be conclusively deemed to have been funded at
the LIBOR used in determining the LIBOR Rate for such LIBOR Rate
Loan by a matching deposit or other borrowing in the interbank
eurodollar market for a comparable amount and for a comparable
period, whether or not such LIBOR Rate Loan is in fact so funded.
4.05 Inability to Determine Rates. If the Agent determines
that for any reason adequate and reasonable means do not exist
for determining the LIBOR Rate for any requested Interest Period
with respect to a proposed LIBOR Rate Loan, or that the LIBOR
Rate applicable pursuant to subsection 2.09(a) for any requested
Interest Period with respect to a proposed LIBOR Rate Loan does
not adequately and fairly reflect the cost to the Banks of
funding such Loan, the Agent will promptly so notify the Company
and each Bank. Thereafter, the obligation of the Banks to make
or maintain LIBOR Rate Loans hereunder shall be suspended until
the Agent revokes such notice in writing. Upon receipt of such
notice, the Company may revoke any Notice of Borrowing or Notice
of Conversion/Continuation then submitted by it. If the Company
does not revoke such Notice, the Banks shall make, convert or
continue the Loans, as proposed by the Company, in the amount
specified in the applicable notice submitted by the Company, but
such Loans shall be made, converted or continued as Base Rate
Loans instead of LIBOR Rate Loans.
54
4.06 Certificates of Banks. Any Bank claiming
reimbursement or compensation under this Article IV shall deliver
to the Company (with a copy to the Agent) a certificate setting
forth in reasonable detail the amount payable to the Bank
hereunder and the reasons therefor and such certificate shall be
conclusive and binding on the Company in the absence of manifest
error.
4.07 Substitution of Banks. If the Company shall receive
notice from any Bank that LIBOR Rate Loans are no longer
available from such Bank pursuant to Section 4.02 or that amounts
are due to such Bank pursuant to Section 4.01 or 4.03, the
Company may (but subject in any such case to the payments
required by Section 4.04), upon at least five Business Days'
prior written or telecopier notice to such Bank and the Agent,
but not more than 90 days after receipt of written notice from
such Bank, identify to the Agent a lending institution acceptable
to the Company and the Agent, which will purchase the
Commitments, the amount of outstanding Loans and any
participations in Letters of Credit from the Bank providing such
notice, and such Bank shall thereupon assign its Commitment, any
Loans owing to such Bank, any participations in Letters of Credit
and the Notes held by such Bank to such replacement lending
institution pursuant to Section 11.08.
4.08 Survival. The agreements and obligations of the
Company in this Article IV shall survive the payment of all other
Obligations.
ARTICLE V
CONDITIONS PRECEDENT
5.01 Conditions of Initial Credit Extensions. The
obligation of each Bank to make its initial Credit Extension
hereunder is subject to the condition that the Agent shall have
received on or before the Closing Date all of the following, in
form and substance satisfactory to the Agent and each Bank, and
in sufficient copies for each Bank:
(a) Credit Agreement and Notes. This Agreement and
the Notes executed by each party thereto;
(b) Resolutions; Incumbency.
(i) Copies of the resolutions of the board of
directors of the Company and each Pledgor Subsidiary
authorizing the transactions contemplated hereby, certified
as of the Closing Date by the Secretary or an Assistant
55
Secretary of the Company and each such Pledgor Subsidiary;
and
(ii) A certificate of the Secretary or Assistant
Secretary of the Company and each Pledgor Subsidiary
certifying the names and true signatures of the officers of
the Company or such Pledgor Subsidiary (as the case may be)
authorized to execute, deliver and perform, as applicable,
this Agreement, and all other Loan Documents to be delivered
by it hereunder;
(c) Organization Documents; Good Standing. Each of
the following documents:
(i) the articles or certificate of incorporation
and the bylaws of the Company as in effect on the Closing
Date, certified by the Secretary or Assistant Secretary of
the Company as of the Closing Date; and
(ii) a good standing and tax good standing
certificate for the Company and each of its domestic
Subsidiaries from the Secretary of State (or similar,
applicable Governmental Authority) of its state of
incorporation and each state where the Company or such
Subsidiary (as the case may be) is qualified to do business
as a foreign corporation as of a recent date, together with
a bring-down certificate by facsimile, dated the Closing
Date;
(d) Legal Opinions. Opinions of (i) Xxxxxx, Xxxxx &
Xxxxxxx, special California counsel to the Company; (ii) internal
Nevada counsel to the Company; and (iii) local counsel to the
Company and its Subsidiaries in such other jurisdictions as the
Agent may reasonably request, each addressed to the Agent and the
Banks and collectively addressing the matters set forth in
Exhibit D with respect to the Company and its Subsidiaries;
(e) Payment of Fees. Evidence of payment by the
Company of all accrued and unpaid fees, costs and expenses to the
extent then due and payable on the Closing Date, other than costs
associated with the Kaiser-Texas Acquisition, together with
Attorney Costs of BofA to the extent invoiced prior to or on the
Closing Date, plus such additional amounts of Attorney Costs as
shall constitute BofA's reasonable estimate of Attorney Costs
incurred or to be incurred by it through the closing proceedings
(provided that such estimate shall not thereafter preclude final
settling of accounts between the Company and BofA); including any
56
such costs, fees and expenses arising under or referenced in
Sections 2.10 and 11.04;
(f) Certificate. A certificate signed by a
Responsible Officer, dated as of the Closing Date, stating that:
(i) the representations and warranties contained
in Article VI are true and correct on and as of such date,
as though made on and as of such date;
(ii) no Default or Event of Default exists or
would result from the Credit Extension;
(iii) there has occurred since December 31, 1997,
no event or circumstance that has resulted or could
reasonably be expected to result in a Material Adverse
Effect; and
(iv) to the best of such Responsible
Officer's knowledge there has not occurred since
December 31, 1997, a material adverse change in, or a
material adverse effect upon, the operations, business,
properties, or condition (financial or otherwise) of
the business being acquired by HMO Texas from Kaiser
Texas or PMAT;
(g) Collateral Documents. The Pledge Agreements,
executed by the Company and each Pledgor Subsidiary, covering the
capital stock of all Subsidiaries other than those Excluded
Subsidiaries listed on Schedule 5.01(g), in appropriate form for
recording, where necessary, together with:
(i) acknowledgment copies of all UCC-1 financing
statements filed, registered or recorded to perfect the
security interests of the Agent for the benefit of the
Banks, or other evidence satisfactory to the Agent that
there has been filed, registered or recorded all financing
statements and other filings, registrations and recordings
necessary and advisable to perfect the Liens of the Agent
for the benefit of the Banks in accordance with applicable
law;
(ii) written advice relating to such Lien and
judgment searches as the Agent shall have requested, and
such termination statements or other documents as may be
necessary to confirm that the Collateral is subject to no
other Liens in favor of any Persons (other than Permitted
Liens);
57
(iii) all certificates and instruments
representing the Pledged Collateral, stock transfer powers
executed in blank with signatures guaranteed as the Agent or
the Banks may specify;
(iv) evidence that all other actions necessary or,
in the opinion of the Agent or the Banks, desirable to
perfect and protect the first priority security interest
created by the Pledge Agreements have been taken;
(v) funds sufficient to pay any filing or
recording tax or fee in connection with any and all UCC-1
financing statements; and
(vi) evidence that all other actions necessary or,
in the opinion of the Agent or the Banks, desirable to
perfect and protect the first priority Lien created by the
Collateral Documents, and to enhance the Agent's ability to
preserve and protect its interests in and access to the
Collateral, have been taken;
(h) Regulatory Compliance. A certificate of a
Responsible Officer on behalf of each of the HMO Subsidiaries to
the effect that such HMO Subsidiary is in compliance in all
material respects with the requirements of all applicable HMO
Regulations, including such Regulatory Tangible Net Equity
Requirements as are applicable to such HMO Subsidiary, and with
all other Requirements of Law;
(i) Prior Credit Agreement. Evidence that all
commitments to lend under the Prior Credit Agreement have been
terminated and that all principal, interest, fees and other sums
then due and payable under the Prior Credit Agreement have been
paid in full;
(j) Kaiser Acquisition Agreements. A certificate
signed by a Responsible Officer of the Company, dated as of the
Closing Date, stating that:
(i) the conditions precedent to the
transactions contemplated by the Kaiser Acquisition
Agreements have been satisfied without waiver or
forbearance;
(ii) to the best of such Responsible
Officer's knowledge, the representations and warranties
of HMO Texas, the Company, PMAT and Kaiser Texas set
58
forth in the Kaiser Acquisition Agreements are true and
correct in all material respects;
(iii) each of PMAT and Kaiser Texas has
certified to HMO Texas that its representations and
warranties set forth in the Kaiser Acquisition
Agreements are true and correct in all material
respects; and
(iv) the Kaiser Acquisition Agreements have
not been amended in any material respect adverse to the
Company;
(k) Litigation. Such evidence as the Agent shall
reasonably require that (i) there exists no litigation
challenging or seeking to restrain or prohibit the consummation
of the transactions contemplated by the Kaiser Acquisition
Agreements, the making of the Loans by the Banks or the
performance of the Obligations and (ii) there exists no judgment,
order, injunction, or other restraint prohibiting the
consummation of the transactions contemplated by the Kaiser
Acquisition Agreements, the making of the Loans by the Banks or
the performance of the Obligations;
(l) Financial Covenant Certificate. A certificate
signed by a Responsible Officer of the Company, dated as of the
Closing Date confirming that after giving effect to the Kaiser-
Texas Acquisition, on a pro forma basis:
(i) the Leverage Ratio, as of September 30,
1998 is not more than 3.50 to 1.00; and
(ii) Sierra Adjusted EBITDA, as of
September 30, 1998 is not less than $70,000,000.
(m) Other Documents. Such other approvals, opinions,
documents or materials as the Agent or any Bank may request.
5.02 Conditions to All Credit Extensions. The obligation
of each Bank to make any Loan to be made by it (including its
initial Loan) and the obligation of the Issuing Bank to Issue any
Letter of Credit (including the initial Letter of Credit) is
subject to the satisfaction of the following conditions precedent
on the relevant Borrowing Date or Issuance Date:
(a) Notice, Application. The Agent shall have
received (with, in the case of the initial Loan only, a copy for
each Bank) a Notice of Borrowing or, in the case of any Issuance
59
of any Letter of Credit, the Issuing Bank and the Agent shall
have received an L/C Application or L/C Amendment Application, as
required under Section 3.02;
(b) Continuation of Representations and Warranties.
The representations and warranties in Article IV hereof and in
the Pledge Agreements shall be true and correct on and as of such
Borrowing Date or Issuance Date (in all material respects if such
date is a date subsequent to the Closing Date) with the same
effect as if made on and as of such Borrowing Date or Issuance
Date (except to the extent such representations and warranties
expressly refer to an earlier date, in which case they shall be
true and correct as of such earlier date); and
(c) No Existing Default. No Default or Event of
Default shall exist or shall result from such Borrowing or
Issuance.
Each Notice of Borrowing and L/C Application or L/C Amendment
Application submitted by the Company hereunder shall constitute a
representation and warranty by the Company hereunder, as of the
date of each such notice and as of each Borrowing Date or
Issuance Date, as applicable, that the conditions in this Section
5.02 are satisfied.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Agent and each
Bank that:
6.01 Corporate Existence and Power. The Company and each
of its Subsidiaries:
(a) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation;
(b) has the corporate power and authority and all
governmental licenses, authorizations, consents and approvals to
own or hold under lease its property and other assets, carry on
its business as currently conducted by it and to execute,
deliver, and perform its obligations under the Loan Documents;
(c) is duly qualified as a foreign corporation and is
licensed and in good standing under the laws of each jurisdiction
where its ownership, lease or operation of property or the
60
conduct of its business requires such qualification or license,
except where the failure to be so licensed or qualified would not
have, individually or in the aggregate, a Material Adverse
Effect; and
(d) is in compliance with all Requirements of Law,
except for such instances of non-compliance as would not have,
individually or in the aggregate, a Material Adverse Effect.
6.02 Corporate Authorization; No Contravention. The
execution, delivery and performance by the Company of this
Agreement, the Pledge Agreements and each other Loan Document to
which the Company or any Pledgor Subsidiary is party, have been
duly authorized by all necessary corporate action, and do not and
will not:
(a) contravene the terms of any of the Company's or
the Pledgor Subsidiaries' Organization Documents;
(b) conflict with or result in any breach or
contravention of, or the creation of any Lien under, any document
evidencing any Contractual Obligation to which the Company is a
party or any order, injunction, writ or decree of any
Governmental Authority to which the Company or any Pledgor
Subsidiary or any of their respective property is subject, except
for such instances as would not have, individually or in the
aggregate, a Material Adverse Effect; or
(c) violate any Requirement of Law.
6.03 Authorization, Approval, etc.
(a) Except as set forth on Schedule 6.03, no approval,
consent, exemption, authorization, or other action by, or notice
to, or filing with, any Governmental Authority or any other
Person (except for recordings or filings in connection with the
Liens granted to the Agent under the Collateral Documents) is
necessary or required in connection with the execution, delivery
or performance by, or enforcement against, the Company or any of
its Subsidiaries of the Agreement, the Pledge Agreements or any
other Loan Document including:
(i) the pledge by the Company and the
Pledgor Subsidiaries of any Collateral pursuant to the
Pledge Agreements or the execution, delivery, and
performance of the Pledge Agreements by the Company and
the Pledgor Subsidiaries; and
61
(ii) the exercise by the Agent of the voting
or other rights provided for in the Pledge Agreements,
or, except with respect to any Pledged Shares, as may
be required in connection with a disposition of such
Pledged Shares by laws affecting the offering and sale
of securities generally, the remedies in respect of the
Collateral pursuant to the Pledge Agreements.
(b) As of the Closing of the Kaiser-Texas Acquisition,
no material approval, consent, exemption, authorization, or other
action by, or notice to, or filing with, any Governmental
Authority is necessary or required for the consummation of the
Kaiser-Texas Acquisition, other than that which has been
obtained.
6.04 Binding Effect. This Agreement, the Pledge Agreements
and each other Loan Document to which the Company or any Pledgor
Subsidiary is a party constitute the legal, valid and binding
obligations of the Company or such Pledgor Subsidiary (as the
case may be), enforceable against the Company or such Pledgor
Subsidiary (as the case may be) in accordance with their
respective terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws affecting the
enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
6.05 Litigation. Except as set forth on Schedule 6.05,
there are no actions, suits, proceedings, claims or disputes
pending which have been served, or to the best knowledge of the
Company, otherwise pending, threatened or contemplated, at law,
in equity, in arbitration or before any Governmental Authority,
against the Company, or its Subsidiaries or any of their
respective properties which:
(a) purport to affect or pertain to this Agreement or
any other Loan Document, or any of the transactions contemplated
hereby or thereby; or
(b) would reasonably be expected to have a Material
Adverse Effect. No injunction, writ, temporary restraining order
or any order of any nature has been issued by any court or other
Governmental Authority purporting to enjoin or restrain the
execution, delivery or performance of this Agreement or any other
Loan Document, or directing that the transactions provided for
herein or therein not be consummated as herein or therein
provided.
62
6.06 No Default. No Default or Event of Default exists or
would result from the incurring of any Obligations by the Company
or any of its Subsidiaries or from the grant or perfection of the
Liens of the Agent and the Banks on the Collateral. As of the
Closing Date, neither the Company nor any Subsidiary is in
default under or with respect to any Contractual Obligation in
any respect which, individually or together with all such
defaults, could reasonably be expected to have a Material Adverse
Effect, or that would, if such default had occurred after the
Closing Date, create an Event of Default under subsection
9.01(e).
6.07 Compliance with Laws and ERISA.
(a) Except as set forth on Schedule 6.03, the Company
and its Subsidiaries are in compliance with the requirements of
all applicable laws, rules, regulations and orders of every
governmental authority, the non-compliance with which might
materially adversely affect the business, properties, assets,
operations or condition (financial or otherwise) of the Company
or the value of the Collateral or the worth of the Collateral as
collateral security.
(b) Each Plan is in compliance in all material
respects with the applicable provisions of ERISA, the Code and
other federal or state law. Each Plan which is intended to
qualify under Section 401(a) of the Code has received a favorable
determination letter from the IRS and to the best knowledge of
the Company, nothing has occurred which would cause the loss of
such qualification. The Company and each ERISA Affiliate has
made all required contributions to any Plan subject to Section
412 of the Code, and no application for a funding waiver or an
extension of any amortization period pursuant to Section 412 of
the Code has been made with respect to any Plan.
(c) There are no pending (and served) or, to the best
knowledge of Company, otherwise pending or threatened claims,
actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has resulted or could reasonably
be expected to result in a Material Adverse Effect. There has
been no prohibited transaction or violation of the fiduciary
responsibility rules with respect to any Plan which has resulted
or could reasonably be expected to result in a Material Adverse
Effect.
(d) (i) No ERISA Event has occurred or is reasonably
expected to occur;
63
(ii) no Pension Plan has any Unfunded Pension
Liability;
(iii) neither the Company nor any ERISA
Affiliate has incurred, or reasonably expects to incur,
any liability under Title IV of ERISA with respect to
any Pension Plan (other than premiums due and not
delinquent under Section 4007 of ERISA);
(iv) neither the Company nor any ERISA
Affiliate has incurred, or reasonably expects to incur,
any liability (and no event has occurred which, with
the giving of notice under Section 4219 of ERISA, would
result in such liability) under Section 4201 or 4243 of
ERISA with respect to a Multiemployer Plan; and
(v) neither the Company nor any ERISA
Affiliate has engaged in a transaction that could be
subject to Section 4069 or 4212(c) of ERISA.
6.08 Use of Proceeds; Margin Regulations. The proceeds of
the Loans are to be used solely for the purposes set forth in and
permitted by Section 7.12 and Section 8.07. Neither the Company
nor any Subsidiary is generally engaged in the business of
purchasing or selling Margin Stock or extending credit for the
purpose of purchasing or carrying Margin Stock.
6.09 Title to Property and Collateral; No Liens. The
Company and each Subsidiary have good record and marketable title
in fee simple to, or valid leasehold interests in, all real
property necessary or used in the ordinary conduct of their
respective businesses, except for such defects in title as could
not, individually or in the aggregate, have a Material Adverse
Effect. The Company and the Pledgor Subsidiaries are the legal
and beneficial owners of, and have good and marketable title to
(and have full right and authority to pledge, hypothecate,
mortgage and deliver) all the Collateral that is subject to their
respective Pledge Agreements. As of the Closing Date, all the
Collateral and other property of the Company and its Subsidiaries
are subject to no Liens, other than Permitted Liens. Even after
the Closing Date, the Collateral shall continue not to be subject
to any Liens, other than Permitted Liens.
6.10 As to Pledged Shares. Except as disclosed in Schedule
6.10, all Pledged Shares are duly authorized and validly issued,
fully paid, and non-assessable, and constitute all of the issued
and outstanding shares of capital stock of the Subsidiaries whose
shares have been pledged by the Company and the Pledgor
64
Subsidiaries under the Pledge Agreements. Other than the Pledged
Shares, no Subsidiary whose shares have been pledged under the
Pledge Agreements has outstanding any capital stock or other
securities convertible into or exchangeable for any of its
capital stock, nor will it have outstanding any rights to
subscribe for or to purchase, or any warrants or options for the
purchase of, or any agreements (contingent or otherwise)
providing for the issuance of, or any calls, commitments or
claims of any character relating to, any of its capital stock or
any securities convertible into or exchangeable for any of its
capital stock.
6.11 Taxes. The Company and its Subsidiaries have filed
all Federal and other material tax returns and reports required
to be filed, and have paid all Federal and other material taxes,
assessments, fees and other governmental charges levied or
imposed upon them or their properties, income or assets otherwise
due and payable, except those which are being contested in good
faith by appropriate proceedings and for which adequate reserves
have been provided in accordance with GAAP. There is no proposed
tax assessment against the Company or any Subsidiary that would,
if made, have a Material Adverse Effect.
6.12 Financial Condition.
(a) The audited consolidated financial statements of
the Company and its Subsidiaries dated December 31, 1997, and the
related consolidated statements of income or operations,
shareholders' equity and cash flows for the fiscal year ended on
that date:
(i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby,
except as otherwise expressly noted therein;
(ii) fairly present the financial condition of the
Company and its Subsidiaries as of the date thereof and
results of operations for the period covered thereby; and
(iii) except as specifically disclosed in Schedule
6.12, show all material indebtedness and other liabilities,
direct or contingent, of the Company and its consolidated
Subsidiaries as of the date thereof, including liabilities
for taxes, material commitments and Contingent Obligations.
(b) The audited consolidated financial statements of
Kaiser Texas and its Subsidiaries dated December 31, 1997, and
the related consolidated statements of income of operations,
65
shareholders' equity and cash flows for the fiscal year ended on
that date and the unaudited consolidated financial statements of
Kaiser Texas and its Subsidiaries dated June 30, 1998, and the
related consolidated statements of income or operations,
shareholders' equity and cash flows for the six months ended on
that date:
(i) were prepared in accordance with GAAP
consistently applied throughout the period covered
thereby, except as otherwise expressly noted therein;
(ii) fairly present the financial condition
of Kaiser Texas and its Subsidiaries as of the dates
thereof and results of operations for the period
covered thereby;
(iii) except as specifically disclosed in
Schedule 6.12, show all material indebtedness and other
liabilities, direct or contingent, of Kaiser Texas and
its consolidated Subsidiaries as of the date thereof,
including liabilities for taxes, material commitments
and Contingent Obligations;
except to the extent that departures from the
representations in clauses (i), (ii) or (iii) above could not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
(c) Since December 31, 1997, there has been no
Material Adverse Effect.
6.13 Environmental Matters. The Company conducts in the
ordinary course of business a review of the effect of existing
Environmental Laws and existing Environmental Claims on its
business, operations and properties, and as a result thereof the
Company has reasonably concluded that, except as specifically
disclosed in Schedule 6.13, such Environmental Laws and
Environmental Claims could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
6.14 Collateral Documents.
(a) The provisions of the Pledge Agreements and the
delivery of the Collateral pursuant thereto are effective to
create in favor of the Agent for the benefit of the Banks, a
legal, valid and enforceable first priority security interest in
all right, title and interest of the Company and its Subsidiaries
in the Collateral described therein and all proceeds thereof.
66
Except as contemplated by this Agreement, no filing or other
action will be necessary to perfect or protect such security
interest.
(b) All representations and warranties of the Company
and the Pledgor Subsidiaries contained in the Collateral
Documents are true and correct.
6.15 Regulated Entities. None of the Company, any Person
controlling the Company, or any Subsidiary, is an "Investment
Company" within the meaning of the Investment Company Act of
1940. The Company is not subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, any state public utilities code, or any
other Federal or state statute or regulation limiting its ability
to incur Indebtedness.
6.16 No Burdensome Restrictions. Neither the Company nor
any Subsidiary is a party to or bound by any Contractual
Obligation, or subject to any restriction in any Organization
Document, or any Requirement of Law, which could reasonably be
expected to have a Material Adverse Effect.
6.17 Copyrights, Patents, Trademarks and Licenses, etc.
The Company or its Subsidiaries own or are licensed or otherwise
have the right to use all of the patents, trademarks, service
marks, trade names, copyrights, contractual franchises,
authorizations and other rights that are reasonably necessary for
the operation of their respective businesses, without conflict
with the rights of any other Person. To the best knowledge of
the Company, no slogan or other advertising device, product,
process, method, substance, part or other material now employed,
or now contemplated to be employed, by the Company or any
Subsidiary infringes upon any rights held by any other Person.
No claim or litigation regarding any of the foregoing is pending
or threatened, and no patent, invention, device, application,
principle or any statute, law, rule, regulation, standard or code
is pending or, to the knowledge of the Company, proposed, which,
in either case, could reasonably be expected to have a Material
Adverse Effect.
6.18 Subsidiaries. As of the Closing Date, the Company has
no Subsidiaries other than those specifically disclosed in part
(a) of Schedule 6.18 hereto and has no equity investments in any
other corporation or entity constituting 20% or more of the
outstanding equity interests in such corporation or entity other
than those specifically disclosed in part (b) of Schedule 6.18.
67
Set forth in part (c) of Schedule 6.18 is a list of all Excluded
Subsidiaries as of the Closing Date.
6.19 Insurance. Except as specifically disclosed in
Schedule 6.19, the properties of the Company and its Subsidiaries
are insured with financially sound and reputable insurance
companies not Affiliates of the Company, in such amounts, with
such deductibles and covering such risks as are customarily
carried by companies engaged in similar businesses and owning
similar properties in localities where the Company or such
Subsidiary operates.
6.20 Swap Obligations. Neither the Company nor any of its
Subsidiaries has incurred any outstanding obligations under any
Swap Contracts except in the ordinary course of business for bona
fide hedging purposes.
6.21 Full Disclosure. None of the representations or
warranties made by the Company or any Subsidiary in the Loan
Documents as of the date such representations and warranties are
made or deemed made, and none of the statements contained in any
exhibit, report, statement or certificate furnished by or on
behalf of the Company or any Subsidiary in connection with the
Loan Documents (including the offering and disclosure materials
delivered by or on behalf of the Company to the Banks prior to
the Closing Date), contains any untrue statement of a material
fact or omits any material fact required to be stated therein or
necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the
time when made or delivered.
6.22 Business Activity. Neither the Company nor any of its
Subsidiaries is engaged in any line or lines of business activity
other than the Health Care Business.
6.23 Licensing, Etc. Each HMO Subsidiary maintains (i) all
licenses and certifications required pursuant to any HMO
Regulation; (ii) all certifications and authorizations necessary
to ensure that each of the HMO Subsidiaries is eligible for all
reimbursements available under the HMO Regulations to the extent
applicable to HMOs of their type; and (iii)all licenses,
permits, authorizations and qualifications required under the HMO
Regulations in connection with the ownership or operation of
HMOs; except where the failure to maintain the items described in
any of the preceding three clauses would not have a Material
Adverse Effect.
6.24 Kaiser Acquisition Agreements.
68
(a) Consummation of the transactions contemplated by
the Kaiser Acquisition Agreements by Kaiser Texas, the Company,
PMAT and Kaiser Texas has not and will not:
(i) contravene the terms of any of that
Person's Organization Documents;
(ii) conflict with in any material respect or
result in a breach or contravention of, or the creation
of any Lien under, any document evidencing any material
Contractual Obligation to which such Person is a party
or any order, injunction, writ or decree of any
Governmental Authority to which such Person or its
property is subject; or
(iii) violate any material Requirement of
Law.
(b) The Kaiser Acquisition Agreements constitute the
legal, valid and binding obligations of the Company and, to the
Company's knowledge, PMAT and Kaiser Texas, enforceable against
such Person in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating
to enforceability.
6.25 Year 2000 Representation. On the basis of a
comprehensive review and assessment of the Company's and its
Subsidiaries' systems and equipment and inquiry made of the
Company's and its Subsidiaries' material suppliers, vendors and
customers, the Company reasonably believes that the "Year 2000
problem" (that is, the inability of computers, as well as
embedded microchips in non-computing devices, to perform properly
date-sensitive functions with respect to certain dates prior to
and after December 31, 1999), including costs of remediation,
will not result in a Material Adverse Effect. The Company and
its Subsidiaries have developed feasible contingency plans
adequately to ensure uninterrupted and unimpaired business
operation in the event of failure of their own or a third party's
systems or equipment due to the Year 2000 problem, including
those of vendors, customers, and suppliers, as well as a general
failure of or interruption in its communications and delivery
infrastructure.
69
ARTICLE VII
AFFIRMATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or
any Loan or other Obligation shall remain unpaid or unsatisfied,
or any Letter of Credit shall remain outstanding, unless the
Majority Banks waive compliance in writing:
7.01 Financial Statements. The Company shall deliver to
the Agent, in form and detail satisfactory to the Agent and the
Majority Banks, with sufficient copies for each Bank:
(a) as soon as available, but not later than 90 days
after the end of each fiscal year (commencing with the fiscal
year ended December 31, 1998), a copy of the audited consolidated
balance sheets of the Company and its Subsidiaries as at the end
of such year and the related consolidated statements of income or
operations, shareholders' equity and cash flows for such year,
setting forth in each case in comparative form the figures for
the previous fiscal year, and accompanied by the opinion of
Deloitte & Touche or another nationally-recognized independent
public accounting firm ("Independent Auditor") which report shall
state that such consolidated financial statements present fairly
the financial position for the periods indicated in conformity
with GAAP applied on a basis consistent with prior years. Such
opinion shall not be qualified or limited because of a restricted
or limited examination by the Independent Auditor of any material
portion of the Company's or any Subsidiary's records;
(b) as soon as available, but not later than 45 days
after the end of each of the first three fiscal quarters of each
fiscal year (commencing with the fiscal quarter ended March 31,
1999), a copy of the unaudited consolidated balance sheets of the
Company and its Subsidiaries as of the end of such quarter and
the related consolidated statements of income and cash flows for
the period commencing on the first day and ending on the last day
of such quarter, and certified by a Responsible Officer as fairly
presenting, in accordance with GAAP (subject to ordinary, good
faith year-end audit adjustments), the financial position and the
results of operations of the Company and the Subsidiaries;
(c) as soon as available, but not later than 90 days
after the end of each fiscal year (commencing with the fiscal
year ended December 31, 1998), (i) a copy of an unaudited
consolidating balance sheets of the Company and its Subsidiaries
as at the end of such year and the related consolidating
statements of income for such year, certified by a Responsible
Officer as having been developed and used in connection with the
70
preparation of the financial statements referred to in subsection
7.01(a) and (ii) a copy of a statement of financial position for
any of the Company's Subsidiaries for which the Company provides
a guaranty of reserve liabilities, as of the end of such quarter,
certified by a Responsible Officer; and
(d) as soon as available, but not later than 45 days
after the end of each of the first three fiscal quarters of each
fiscal year (commencing with the fiscal quarter ended March 31,
1999), (i) a copy of the unaudited consolidating balance sheets
of the Company and its Subsidiaries, and the related
consolidating statements of income for such quarter, all
certified by a Responsible Officer as having been developed and
used in connection with the preparation of the financial
statements referred to in subsection 7.01(b) and (ii) a copy of a
statement of financial position for any of the Company's
Subsidiaries for which the Company provides a guaranty of reserve
liabilities, as of the end of such quarter, certified by a
Responsible Officer.
7.02 Certificates; Other Information. The Company shall
furnish to the Agent, with sufficient copies for each Bank:
(a) concurrently with the delivery of the financial
statements referred to in subsection 7.01(a), a certificate of
the Independent Auditor stating that in making the examination
necessary therefor no knowledge was obtained of any Default or
Event of Default, except as specified in such certificate;
(b) concurrently with the delivery of the financial
statements referred to in subsections 7.01(a) and (b), a
Compliance Certificate executed by a Responsible Officer;
(c) promptly, copies of all financial statements and
reports that the Company sends to its shareholders, and copies of
all financial statements and regular, periodical or special
reports (including Forms 10K, 10Q and 8K) that the Company or any
Subsidiary may make to, or file with, the SEC;
(d) promptly following the receipt of the same, a copy
of each notice relating to the loss by the Company or any HMO
Subsidiary of any material operating permit, license or
certification by any HMO Regulator;
(e) promptly following the receipt of the same, all
material correspondence received by the Company or any Subsidiary
(other than correspondence in draft form) from an HMO Regulator
which asserts that the Company or any HMO Subsidiary is not in
71
substantial compliance with any HMO Regulation or which threatens
the taking of any action against the Company or any Subsidiary
under any HMO Regulation which would reasonably be expected to
have a Material Adverse Effect;
(f) from time to time upon receipt of a written
request by the Agent or any Bank specifying in reasonable detail
the types of documents to be provided, copies of any and all
statements, audits, studies or reports submitted by or on behalf
of the Company or any HMO Subsidiary to any HMO Regulator; and
(g) promptly, such additional information regarding
the business, financial or corporate affairs of the Company or
any Subsidiary as the Agent, at the request of any Bank, may from
time to time reasonably request in writing.
7.03 Notices. The Company shall promptly notify the Agent
and each Bank:
(a) of the occurrence of any Default or Event of
Default, and of the occurrence or existence of any event or
circumstance that could, with reasonable foreseeability, become a
Default or Event of Default;
(b) of any matter that has resulted or may reasonably
be expected to result in a Material Adverse Effect, including
(i) breach or non-performance of, or any default under, a
Contractual Obligation of the Company or any Subsidiary; (ii) any
dispute, litigation, investigation, proceeding or suspension
between the Company or any Subsidiary and any Governmental
Authority; or (iii) the commencement of, or any material
development in, any litigation or proceeding affecting the
Company or any Subsidiary; including pursuant to any applicable
Environmental Laws;
(c) of the occurrence of any of the following events
affecting the Company or any ERISA Affiliate (but in no event
more than 10 days after such event), and deliver to the Agent and
each Bank a copy of any notice with respect to such event that is
filed with a Governmental Authority and any notice delivered by a
Governmental Authority to the Company or any ERISA Affiliate with
respect to such event:
(i) an ERISA Event,
(ii) a material increase in the Unfunded Pension
Liability of any Pension Plan,
72
(iii) the adoption of, or the commencement of
contributions to, any Plan subject to Section 412 of the
Code by the Company or any ERISA Affiliate, or
(iv) the adoption of any amendment to a Plan
subject to Section 412 of the Code, if such amendment
results in a material increase in contributions or Unfunded
Pension Liability;
(d) of any material change in accounting policies or
financial reporting practices by the Company or any of its
consolidated Subsidiaries; and
(e) of the creation or acquisition of Subsidiary and a
statement as to whether or not such Subsidiary is an Excluded
Subsidiary.
Each notice under this Section shall be accompanied by a written
statement by a Responsible Officer setting forth details of the
occurrence referred to therein, and stating what action the
Company or any affected Subsidiary proposes to take with respect
thereto and at what time. Each notice under subsection 7.03(a)
shall describe with particularity any and all clauses or
provisions of this Agreement or other Loan Document that have
been (or could with reasonable foreseeability be) breached or
violated.
7.04 Preservation of Corporate Existence, Etc. The Company
shall, and shall cause each Subsidiary to:
(a) preserve and maintain in full force and effect its
corporate existence and good standing under the laws of its state
or jurisdiction of incorporation;
(b) preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits,
licenses and franchises necessary or desirable in the normal
conduct of its business, including all licenses and
certifications required pursuant to any HMO Regulation, all
certifications and authorizations necessary to ensure that each
of the HMO Subsidiaries is eligible for all reimbursements
available under the HMO Regulation to the extent applicable to
HMOs of their type, and all licenses, permits, authorization and
qualifications required under the HMO Regulations in connection
with the ownership or operation of HMOs;
(c) use reasonable efforts, in the ordinary course of
business, to preserve its business organization and goodwill; and
73
(d) preserve or renew all of its registered patents,
trademarks, trade names and service marks, the non-preservation
of which could reasonably be expected to have a Material Adverse
Effect.
7.05 Maintenance of Property. The Company shall maintain,
and shall cause each Subsidiary to maintain, and preserve all its
property which is used or useful in its business in good working
order and condition, ordinary wear and tear excepted and make all
necessary repairs thereto and renewals and replacements thereof
except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect.
7.06 Insurance. Except as specifically disclosed in
Schedule 6.19, in addition to insurance requirements set forth in
the Collateral Documents, the Company shall maintain, and shall
cause each Subsidiary to maintain, with financially sound and
reputable independent insurers, insurance with respect to its
properties and business against loss or damage of the kinds
customarily insured against by Persons engaged in the same or
similar business, of such types and in such amounts as are
customarily carried under similar circumstances by such other
Persons, of such types and in such amounts as are customarily
carried under similar circumstances by such other Persons;
including workers' compensation insurance, public liability and
property and casualty insurance which amount shall not be
reduced by the Company in the absence of 30 days' prior notice to
the Agent. Upon request of the Agent or any Bank, the Company
shall furnish the Agent, with sufficient copies for each Bank, at
reasonable intervals (but not more than once per calendar year) a
certificate of a Responsible Officer of the Company (and, if
requested by the Agent, any insurance broker of the Company)
setting forth the nature and extent of all insurance maintained
by the Company and its Subsidiaries in accordance with this
Section or any Collateral Documents (and which, in the case of a
certificate of a broker, were placed through such broker).
7.07 Payment of Obligations. The Company shall, and shall
cause each Subsidiary to, pay and discharge as the same shall
become due and payable, all their respective obligations and
liabilities, including:
(a) all tax liabilities, assessments and governmental
charges or levies upon it or its properties or assets, unless the
same are being contested in good faith by appropriate proceedings
and adequate reserves in accordance with GAAP are being
maintained by the Company or such Subsidiary;
74
(b) all lawful claims which, if unpaid, would by law
become a Lien upon its property; and
(c) all Indebtedness, as and when due and payable, but
subject to any subordination provisions contained in any
instrument or agreement evidencing such Indebtedness.
7.08 Compliance with Laws. The Company shall comply, and
shall cause each Subsidiary to comply, in all material respects
with all Requirements of Law of any Governmental Authority having
jurisdiction over it or its business (including all HMO
Regulations and the Federal Fair Labor Standards Act), except
such as may be contested in good faith or as to which a bona fide
dispute may exist.
7.09 Compliance with ERISA. The Company shall, and shall
cause each of its ERISA Affiliates to: (a) maintain each Plan in
compliance in all material respects with the applicable
provisions of ERISA, the Code and other federal or state law;
(b) cause each Plan which is qualified under Section 401(a) of
the Code to maintain such qualification; and (c) make all
required contributions to any Plan subject to Section 412 of the
Code.
7.10 Inspection of Property and Books and Records. The
Company shall maintain and shall cause each Subsidiary to
maintain proper books of record and account, in which full, true
and correct entries in conformity with GAAP consistently applied
shall be made of all financial transactions and matters involving
the assets and business of the Company and such Subsidiary. The
Company shall permit, and shall cause each Subsidiary to permit,
representatives and independent contractors of the Agent or any
Bank to visit and inspect any of their respective properties, to
examine their respective corporate, financial and operating
records, and make copies thereof or abstracts therefrom, and to
discuss their respective affairs, finances and accounts with
their respective directors, officers, and independent public
accountants, all at the expense of the Company and at such
reasonable times during normal business hours and as often as may
be reasonably desired, upon reasonable advance notice to the
Company.
7.11 Environmental Laws. The Company shall, and shall
cause each Subsidiary to, conduct its operations and keep and
maintain its property in material compliance with all
Environmental Laws.
75
7.12 Use of Proceeds. The Company shall use the proceeds of
the Loans for the Kaiser-Texas Acquisition, for general working
capital purposes and for general corporate purposes (other than
for Acquisitions that are not Permitted Acquisitions) not in
contravention of any Requirement of Law or of any Loan Document.
7.13 Further Assurances.
(a) The Company shall ensure that all written
information, exhibits and reports furnished to the Agent or the
Banks do not and will not contain any untrue statement of a
material fact and do not and will not omit to state any material
fact or any fact necessary to make the statements contained
therein not misleading in light of the circumstances in which
made, and will promptly disclose to the Agent and the Banks and
correct any defect or error that may be discovered therein or in
any Loan Document or in the execution, acknowledgment or
recordation thereof.
(b) Promptly upon request by the Agent or the Majority
Banks, the Company shall (and shall cause any of its
Subsidiaries, including Pledgor Subsidiaries, to) do, execute,
acknowledge, deliver, record, re-record, file, re-file, register
and re-register, any and all such further acts, deeds,
conveyances, security agreements, mortgages, assignments,
estoppel certificates, financing statements and continuations
thereof, termination statements, notices of assignment,
transfers, certificates, assurances and other instruments the
Agent or such Banks, as the case may be, may reasonably require
from time to time in order (i) to carry out more effectively the
purposes of this Agreement or any other Loan Document, (ii) to
subject to the Liens created by any of the Collateral Documents
any of the Collateral, properties, rights or interests covered by
any of the Collateral Documents, (iii) to perfect, protect and
maintain the validity, effectiveness and priority of any of the
Collateral Documents and the Liens intended to be created
thereby, and (iv) to better assure, convey, grant, assign,
transfer, preserve, protect and confirm to the Agent and Banks
the rights granted or now or hereafter intended to be granted to
the Banks under any Loan Document or under any other document
executed in connection therewith.
7.14 Dividends of Subsidiaries During Default. Promptly
upon (but in no case more than five Business Days after) the
occurrence of a Default, the Company shall cause each HMO
Subsidiary of the Company to declare and pay dividends (in cash,
property, or obligations) on, or to make payments or
distributions on account of, the shares of all classes of stock
76
of such entity in an amount equal to the maximum amount permitted
by applicable law at such time to such Subsidiary for the payment
of dividends; provided, however, that no such Subsidiary shall be
required to pay dividends under this Section 7.14 to the extent
that doing so would cause the Regulatory Tangible Net Equity of
such Subsidiary to be less than 105 percent of any Regulatory
Tangible Net Equity Requirement applicable to such Subsidiary.
7.15 Acquisitions. Prior to consummating any Permitted
Acquisition for aggregate consideration (whether consisting of
cash, securities, other property, assumption of Indebtedness or
other obligations, or any combination thereof) having a value in
excess of $25,000,000, the Company shall have delivered to the
Agent (in form and detail satisfactory to each Bank and in
sufficient copies for each Bank) the following:
(i) At least 15 days' prior written notice from a
Responsible Officer of the Company, stating the Company's
intention to consummate a Permitted Acquisition, together
with a brief summary of the substantive terms thereof;
(ii) At least 10 days prior to the consummation of
such Permitted Acquisition, a certified copy of the executed
purchase contract or merger agreement relating to such
Permitted Acquisition; and
(iii) An officer's certificate, executed by a
Responsible Officer of the Company, dated the date of
consummation of such Permitted Acquisition, certifying that
immediately before and after giving effect to such Permitted
Acquisition (A) no Default has occurred and is continuing or
will exist after giving effect to the Permitted Acquisition
and (B) that the Company will be in compliance on a pro
forma basis with each of the financial ratios specified in
Section 8.14 as of the end of the fiscal quarter immediately
preceding such Acquisition for the twelve-month period
preceding such fiscal quarter end, together with a
reasonably detailed worksheet setting forth the calculations
of such ratios, which calculations shall be acceptable to
the Banks.
ARTICLE VIII
NEGATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or
any Loan or other Obligation shall remain unpaid or unsatisfied,
77
or any Letter of Credit shall remain outstanding, unless the
Majority Banks waive compliance in writing:
8.01 Limitation on Liens. The Company shall not, and shall
not suffer or permit any Subsidiary to, directly or indirectly,
make, create, incur, assume or suffer to exist any Lien upon or
with respect to any part of its property, whether now owned or
hereafter acquired, other than the following ("Permitted Liens"):
(a) any Lien existing on property of the Company or
any Subsidiary on the Closing Date and set forth in Schedule 8.01
securing Indebtedness outstanding on such date and any
refinancing or refunding thereof;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other
governmental charges which are not delinquent or remain payable
without penalty, or to the extent that non-payment thereof is
permitted by Section 7.07, provided that no notice of lien has
been filed or recorded under the Code;
(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the
ordinary course of business which are not delinquent or remain
payable without penalty;
(e) Liens (other than any Lien imposed by ERISA)
consisting of pledges or deposits required in the ordinary course
of business in connection with workers' compensation,
unemployment insurance and other social security legislation;
(f) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of business
which, in the aggregate, are not substantial in amount, and which
do not in any case materially detract from the value of the
property subject thereto or interfere with the ordinary conduct
of the businesses of the Company and its Subsidiaries;
(g) purchase money security interests on any property
acquired or held by the Company or its Subsidiaries in the
ordinary course of business, securing Indebtedness incurred or
assumed for the purpose of financing all or any part of the cost
of acquiring such property; provided that (i) any such Lien
attaches to such property concurrently with or within 20 days
after the acquisition thereof, (ii) such Lien attaches solely to
the property so acquired in such transaction, (iii) the principal
amount of the Indebtedness secured thereby does not exceed 100%
78
of the cost of such property, and (iv) the principal amount of
the Indebtedness secured by any and all such purchase money
security interests shall not at any time exceed $25,000,000;
(h) mortgage Liens in connection with the financing of
existing, unencumbered real property of the Company or its
Subsidiaries securing Indebtedness having an aggregate principal
amount of up to $100,000,000 so long as the Specified Percentage
of the net proceeds thereof are applied, within ten days after
receipt thereof, by the Company to the scheduled reductions of
the Commitment pursuant to Section 2.07(b), and such payments are
applied to reduce the ratable reduction of the remaining
installments under Section 2.07(b);
(i) mortgage Liens on any real property acquired or
constructed by the Company or its Subsidiaries subsequent to the
Closing Date in the ordinary course of business, securing
Indebtedness incurred or assumed for the purpose of financing all
or any part of the cost of acquiring or constructing such
property; provided that (i) any such Lien attaches to such
property concurrently with or within 90 days after such property
is placed in service by the Company, (ii) such Lien attaches
solely to the property so acquired or constructed in such
transaction, (iii) the principal amount of the Indebtedness
secured thereby does not exceed 100% of the fair market value of
such property, (iv) such Indebtedness is without recourse to the
Company or any of its Subsidiaries and (v) the aggregate amount
of all such Indebtedness does not exceed $25,000,000;
(j) Liens securing obligations in respect of Capital
Leases, limited to the assets subject to such leases, provided
that such Capital Leases are otherwise permitted hereunder;
(k) Liens on any property of HMO Texas, securing the
Kaiser Note; provided that such Indebtedness is without recourse
to the Company or any of its Subsidiaries (other than HMO Texas
to the extent set forth in the Kaiser Note);
(l) Liens securing letters of credit, each of which
has an individual face amount less than $500,000 and the
aggregate face amounts of which are less than $1,000,000; and
(m) Liens securing obligations of the Company to a
Subsidiary permitted pursuant to Section 8.05(g).
8.02 Disposition of Assets. The Company shall not, and
shall not suffer or permit any Subsidiary to, directly or
indirectly, sell, assign, lease, convey, transfer or otherwise
dispose of (whether in one or a series of transactions) any
79
property (including accounts and notes receivable, with or
without recourse) or enter into any agreement to do any of the
foregoing, except:
(a) dispositions of inventory, or used, worn-out or
surplus equipment, all in the ordinary course of business;
(b) the sale of equipment to the extent that such
equipment is exchanged for credit against the purchase price of
similar replacement equipment, or the proceeds of such sale are
reasonably promptly applied to the purchase price of such
replacement equipment;
(c) sales by the Company in the ordinary course of
business of marketable securities held in its investment
portfolios;
(d) dispositions of assets (including all, but not
less than all of the capital stock of any Subsidiary) acquired
subsequent to December 31, 1997, to the extent advisable in the
best business judgment of the Company; and
(e) dispositions not otherwise permitted hereunder of
assets (including all, but not less than all, of the capital
stock of any Subsidiary) listed on the balance sheet of the
Company at December 31, 1997, which are made for fair market
value; provided, that (i) at the time of any disposition, no
Event of Default shall exist or shall result from such
disposition, (ii) the aggregate sales price from such disposition
shall be paid in cash, (iii) the aggregate value of all assets so
sold by the Company and its Subsidiaries prior to the Revolving
Loan Termination Date, together, shall not exceed 10% of the
Consolidated Tangible Assets listed on the December 31, 1997
balance sheet.
8.03 Consolidations and Mergers. The Company shall not,
and shall not suffer or permit any Subsidiary to, merge,
consolidate with or into, or convey, transfer, lease or otherwise
dispose of (whether in one transaction or in a series of
transactions all or substantially all of its assets (whether now
owned or hereafter acquired) to or in favor of any Person,
except:
(a) any Subsidiary may merge with the Company,
provided that the Company shall be the continuing or surviving
corporation, or with any one or more Subsidiaries, provided that
if any transaction shall be between a Subsidiary and a Wholly-
Owned Subsidiary, the Wholly-Owned Subsidiary shall be the
continuing or surviving corporation;
(b) any Subsidiary may sell all or substantially all
of its assets (upon voluntary liquidation or otherwise), to the
Company or another Wholly-Owned Subsidiary; and
(c) Permitted Acquisitions.
8.04 Loans and Investments. The Company shall not purchase
or acquire, or suffer or permit any Subsidiary to purchase or
acquire, or make any commitment therefor, any capital stock,
equity interest, or any obligations or other securities of, or
any interest in, any Person, or make or commit to make any
Acquisitions, or make or commit to make any advance, loan,
extension of credit or capital contribution to or any other
investment in, any Person including any Affiliate of the Company
(together, "Investments"), except for:
(a) Investments held by the Company or Subsidiary in
the form of cash equivalents or marketable securities in the
ordinary course of business;
(b) extensions of credit in the nature of accounts
receivable or notes receivable arising from the sale or lease of
goods or services in the ordinary course of business;
(c) extensions of credit by the Company to any of its
Wholly-Owned Subsidiaries or by any of its Wholly-Owned
Subsidiaries to another of its Wholly-Owned Subsidiaries;
(d) Investments in Subsidiaries;
(e) the Investments as of the Closing Date listed on
Schedule 8.04;
(f) loans or advances to officers and employees in an
aggregate amount not to exceed $2,500,000; and
(g) other Investments consisting of equity holdings in
2314 Partnership and Persons other than Subsidiaries in an
aggregate amount not exceeding 15% of the Company's Net Worth at
any one time outstanding.
8.05 Limitation on Indebtedness. The Company shall not,
and shall not suffer or permit any Subsidiary to, create, incur,
assume, suffer to exist, or otherwise become or remain directly
or indirectly liable with respect to, any Indebtedness, except:
80
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness consisting of Contingent Obligations
permitted pursuant to Section 8.08;
(c) Indebtedness existing on the Closing Date and set
forth in Schedule 8.05 (including, without limitation, the
Indebtedness evidenced by the Kaiser Note);
(d) Indebtedness secured by Liens permitted by
subsections 8.01(g), (h) and (i);
(e) Indebtedness incurred for the purpose of
refinancing all (but not less than all) of any item of
Indebtedness incurred pursuant to subsections (b) or (c) above;
provided, that the aggregate outstanding principal amount of such
Indebtedness shall not at any time exceed the aggregate
outstanding principal amount thereof at the Closing Date, minus
the aggregate amount of all payments and prepayments of principal
which as of such time shall have been made after the date of this
Agreement in respect of Indebtedness incurred pursuant to
subsections (b) and (c) or pursuant to this subsection (e); and
(f) loans or advances to officers and employees of the
Company and its Subsidiaries permitted pursuant to Section
8.04(f);
(g) loans from any Subsidiary of the Company to the
Company;
(h) Indebtedness in an aggregate principal amount at
any one time outstanding not in excess of $25,000,000 in respect
of Capital Leases; and
(i) additional unsecured Indebtedness not otherwise
permitted under this Section 8.05, in an aggregate principal
amount not to exceed $15,000,000 at any one time outstanding;
provided that not more than $7,500,000 of such Indebtedness may
be Indebtedness of the Company's Subsidiaries.
8.06 Transactions with Affiliates. The Company shall not,
and shall not suffer or permit any Subsidiary to, enter into any
transaction with any Affiliate of the Company, except upon fair
and reasonable terms no less favorable to the Company or such
Subsidiary than would obtain in a comparable arm's-length
transaction with a Person not an Affiliate of the Company or such
Subsidiary.
81
8.07 Use of Proceeds.
(a) The Company shall not, and shall not suffer or
permit any Subsidiary to, use any portion of the Loan proceeds or
any Letter of Credit, directly or indirectly, (i) to purchase or
carry Margin Stock, (ii) to repay or otherwise refinance
indebtedness of the Company or others incurred to purchase or
carry Margin Stock, (iii) to extend credit for the purpose of
purchasing or carrying any Margin Stock, (iv) to acquire any
security in any transaction that is subject to Section 13 or 14
of the Exchange Act, or (v) for any purpose which violated
Regulations T, U or X of the FRB.
(b) The Company shall not, directly or indirectly, use
any portion of the Loan proceeds or any Letter of Credit
(i) knowingly to purchase Ineligible Securities from the Agent or
any of its Affiliates during any period in which the Agent or any
of its Affiliates makes a market in such Ineligible Securities,
(ii) knowingly to purchase during the underwriting or placement
period Ineligible Securities being underwritten or privately
placed by the Agent or any of its Affiliates, or (iii) to make
payments of principal or interest on Ineligible Securities
underwritten or privately placed by the Agent or any of its
Affiliates and issued by or for the benefit of the Company or any
Affiliate of the Company. Certain Affiliates of the Agent are
registered broker-dealers and permitted to underwrite and deal in
certain Ineligible Securities; and "Ineligible Securities" means
securities which may not be underwritten or dealt in by member
banks of the Federal Reserve System under Section 16 of the
Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.
8.08 Contingent Obligations. The Company shall not, and
shall not suffer or permit any Subsidiary to, create, incur,
assume or suffer to exist any Contingent Obligations except:
(a) endorsements for collection or deposit in the
ordinary course of business;
(b) Contingent Obligations of the Company and its
Subsidiaries existing as of the Closing Date and listed in
Schedule 8.08;
(c) Contingent Obligations under Swap Contracts; and
(d) Contingent Obligations with respect to Surety
Instruments incurred in the ordinary course of business;
82
(e) Guarantees by the Company of leases by its
Subsidiaries of office and medical space; and
(f) Guarantees by the Company of reserve obligations
and similar obligations of its Subsidiaries under applicable
Requirements of Law.
8.09 Lease Obligations. The Company shall not, and shall
not suffer or permit any Subsidiary to, create or suffer to exist
any obligations for the payment of rent for any property under
lease or agreement to lease, except for:
(a) leases of the Company and of Subsidiaries in
existence on the Closing Date and any renewal, extension or
refinancing thereof;
(b) operating leases entered into by the Company or
any Subsidiary after the Closing Date in the ordinary course of
business; and
(c) Capital Leases other than those permitted under
clause (a) of this Section, entered into by the Company or any
Subsidiary after the Closing Date to finance the acquisition of
equipment, to the extent permitted pursuant to Section 8.05.
8.10 Restricted Payments.
(a) So long as there are any Obligations outstanding,
the Company shall not, and shall not suffer or permit any
Subsidiary to, (x) purchase, redeem, retire or otherwise acquire
for value, or set apart any money for a sinking, defeasance or
other analogous fund for, the purchase, redemption, retirement or
other acquisition of, or make any voluntary prepayment of, the
principal of the Convertible Debt or the Kaiser Note prior to the
scheduled maturity thereof, (y) declare or make any dividend
payment or other distribution of assets, properties, cash,
rights, obligations or securities on account of any shares of any
class of its capital stock, or purchase, redeem or (z) otherwise
acquire for value any shares of its capital stock or any
warrants, rights or options to acquire such shares, now or
hereafter outstanding (each, a "Restricted Payment") unless
(i) at the time of, and immediately after giving
effect to, such Restricted Payment, no Default or Event of
Default shall have occurred and be continuing,
(ii) after giving effect to such Restricted
Payment, the aggregate amount of all Restricted Payments
83
made in any fiscal year does not exceed $15,000,000;
provided, however that if the Company's Leverage Ratio as of
the end of any fiscal quarter shall be less than 2.5 to 1.0,
the annual limitation on Restricted Payments for the fiscal
year in which such fiscal quarter falls and in each
following fiscal year shall be $20,000,000, and
(iii) after giving effect to such Restricted
Payment, the aggregate amount of all Restricted
Payments after the Closing Date does not exceed
$50,000,000;
notwithstanding the foregoing, the Company may refinance the
Convertible Debt or the Kaiser Note with equity securities or
with Indebtedness so long as, in the case of Indebtedness, the
terms of the replacement Indebtedness (including, without
limitation, interest rate, maturity, average life and collateral
therefore) are no less favorable to the Company or the Banks than
those of the Indebtedness so refinanced.
(b) The Company shall not, and shall not suffer or
permit any Subsidiary to make any regularly scheduled payment of
the principal of or interest on, or any other amount owing in
respect of the Convertible Debt unless both before and after
giving effect thereof, no Default or Event of Default shall have
occurred and be continuing.
8.11 ERISA. The Company shall not, and shall not suffer or
permit any of its ERISA Affiliates to:
(a) engage in a prohibited transaction or violation of
the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably expected to result in liability
of the Company in an aggregate amount in excess of $2,000,000; or
(b) engage in a transaction that could be subject to
Section 4069 or 4212(c) of ERISA.
8.12 Change in Business. The Company shall not, and shall
not suffer or permit any Subsidiary to, engage in any material
line of business other than the Health Care Business.
8.13 Accounting Changes. The Company shall not, and shall
not suffer or permit any Subsidiary to, make any significant
change in accounting treatment or reporting practices, except as
required by GAAP, or change the fiscal year of the Company or of
any Subsidiary.
84
8.14 Financial Covenants. The Company shall not:
(a) permit its Leverage Ratio at the end of any fiscal
quarter set forth below to exceed the ratio set forth below
opposite such date:
For the Quarter Ended: Ratio
December 31, 1998 3.75 to 1.00
March 31, 1999 3.50 to 1.00
June 30, 1999 3.25 to 1.00
September 30, 1999 3.25 to 1.00
December 31, 1999 3.00 to 1.00
March 31, 2000 3.00 to 1.00
June 30, 2000 2.75 to 1.00
September 30, 2000 2.75 to 1.00
Thereafter 2.50 to 1.00
(b) permit its Consolidated Net Worth to be less than
the sum of (i) 85% of its Consolidated Net Worth as of the
Closing Date (after giving effect to the Kaiser-Texas
Acquisition) plus (ii) 75% of cumulative consolidated net income
(without giving effect to any consolidated net losses) for the
period commencing on the Closing Date and ending on the date of
determination, plus (iii) 75% of the amount by which its
Consolidated Net Worth is increased by issuances of equity
securities (except to the extent such issuance is made in
connection with an Acquisition or securities issued pursuant to
the Company's long term incentive plans, stock option plans and
employee stock purchase plans);
(c) permit its Fixed Charges Coverage Ratio at the end
of any fiscal quarter set forth below to be less than the ratio
set forth below opposite such date:
For the Quarter Ended: Ratio
December 31, 1998 1.50 to 1.00
March 31, 1999 1.50 to 1.00
June 30, 1999 1.50 to 1.00
September 30, 1999 1.50 to 1.00
December 31, 1999 1.50 to 1.00
March 31, 2000 1.75 to 1.00
June 30, 2000 2.00 to 1.00
September 30, 2000 2.25 to 1.00
December 31, 2000 2.50 to 1.00
Thereafter 3.00 to 1.00
(d) incur, make or enter into any contractual
undertaking for Capital Expenditures in any fiscal year in excess
of [6% of the Company's Consolidated Tangible Assets as of the
last day of the most recently ended fiscal year.]
85
8.15 Limitation on Payment Restrictions Affecting
Subsidiaries. Except as set forth in this Agreement, the Company
shall not, and shall not permit any of its Subsidiaries, directly
or indirectly, to create or suffer to exist or allow to become
effective any consensual encumbrance or restriction on the
ability of (i) any of the Subsidiaries of the Company to
(a) declare and pay dividends on such Subsidiaries' stock or pay
any obligation, liability or any Indebtedness owed to the Company
or any of its other Subsidiaries, (b) make loans or advances to
the Company or its other Subsidiaries or (c) transfer any of its
properties or assets to the Company or any of its other
Subsidiaries, or (ii) the Company or any of its Subsidiaries to
receive or retain vis-a-vis the transferor any such amounts set
forth in clauses (i)(a), (i)(b) or (i)(c) above, except for
encumbrances or restrictions existing under or by reason of HMO
Regulations and other applicable law.
8.16 Pledged Shares. The Company shall, and shall cause
each of its Subsidiaries to, pledge to the Agent, for the benefit
of the Banks, all of the shares of capital stock of each of their
respective Subsidiaries (other than the shares of Excluded
Subsidiaries) from time to time pursuant to a Pledge Agreement.
8.17 Acquisitions. The Company will not, nor will it
permit any of its Subsidiaries to, make any Acquisition unless:
(i) immediately before and after giving effect
to the consummation of each Acquisition, no Default has
occurred and is continuing or will exist;
(ii) for each such Acquisition involving the
purchase of a majority of the stock of another party,
the prior, effective written consent or approval to
such Acquisition of the board of directors or
equivalent governing body of the other party or parties
has been obtained;
(iii) the aggregate value of the cash or other
non-stock consideration (including Indebtedness assumed
by the Company or its Subsidiaries in connection
therewith) for all Acquisitions (other than those
described in the following proviso) does not exceed
$25,000,000 in any fiscal year or $50,000,000 after the
Closing Date; and
(iv) the aggregate value of all consideration
(including Indebtedness assumed by the Company and its
Subsidiaries in connection therewith) for all such
Acquisitions (other than those described in the
86
following proviso) does not exceed $75,000,000 in any
fiscal year or $150,000,000 after the Closing Date;
provided, however, that notwithstanding the foregoing, any
Subsidiary of the Company may be merged or consolidated with or
into the Company if the Company shall be the continuing or
surviving corporation or with or into any other Subsidiary of the
Company.
ARTICLE IX
EVENTS OF DEFAULT
9.01 Event of Default. Any of the following shall
constitute an "Event of Default":
(a) Non-Payment. The Company fails to pay, (i) when
and as required to be paid herein, any amount of principal of or
interest on any Loan or of any L/C Obligation, or (ii) within
three days after the same becomes due, any fee or any other
amount payable hereunder or under any other Loan Document; or
(b) Representation or Warranty. Any representation or
warranty by the Company or any Subsidiary made or deemed made
herein, in any other Loan Document, or which is contained in any
certificate, document or financial or other statement by the
Company, any Subsidiary, or any Responsible Officer, furnished at
any time under this Agreement, or in or under any other Loan
Document, is incorrect in any material respect on or as of the
date made or deemed made; or
(c) Specific Defaults. The Company fails to perform
or observe any term, covenant or agreement contained in any of
Section 7.01, 7.02, 7.03 or 7.09 or in Article VIII; or
(d) Other Defaults. The Company fails to perform or
observe any other term or covenant contained in this Agreement or
any other Loan Document, and such default shall continue
unremedied for a period of 20 days after the earlier of (i) the
date upon which a Responsible Officer had Actual Knowledge of
such failure or (ii) the date upon which written notice thereof
is given to the Company by the Agent or any Bank; or
(e) Cross-Default. The Company or any Subsidiary
(A) fails to make any payment in respect of any Indebtedness or
Contingent Obligation, having an aggregate principal amount of
more than $10,000,000 when due (whether by scheduled maturity,
required prepayment, acceleration, demand, or otherwise); or
87
(B) fails to perform or observe any other condition or covenant,
or any other event shall occur or condition exist, under any
agreement or instrument relating to any such Indebtedness or
Contingent Obligation, and such failure continues after the
applicable grace or notice period, if any, specified in the
relevant document on the date of such failure if the effect of
such failure, event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Indebtedness (or a trustee or agent on
behalf of such holder or holders or beneficiary or beneficiaries)
to cause such Indebtedness to be declared to be due and payable
prior to its stated maturity, or such Contingent Obligation to
become payable or cash collateral in respect thereof to be
demanded; or
(f) Insolvency; Voluntary Proceedings. The Company or
any Significant Subsidiary (i) ceases or fails to be solvent, or
generally fails to pay, or admits in writing its inability to
pay, its debts as they become due, subject to applicable grace
periods, if any, whether at stated maturity or otherwise;
(ii) voluntarily ceases to conduct its business in the ordinary
course; (iii) commences any Insolvency Proceeding with respect to
itself; or (iv) takes any action to effectuate or authorize any
of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary
Insolvency Proceeding is commenced or filed against the Company
or any Significant Subsidiary, or any writ, judgment, warrant of
attachment, execution or similar process, is issued or levied
against a substantial part of the Company's or any Significant
Subsidiary's properties, and any such proceeding or petition
shall not be dismissed, or such writ, judgment, warrant of
attachment, execution or similar process shall not be released,
vacated or fully bonded within 60 days after commencement, filing
or levy; (ii) the Company or any Significant Subsidiary admits
the material allegations of a petition against it in any
Insolvency Proceeding, or an order for relief (or similar order
under non-U.S. law) is ordered in any Insolvency Proceeding; or
(iii) the Company or any Significant Subsidiary acquiesces in the
appointment of a receiver, trustee, custodian, conservator,
liquidator, mortgagee in possession (or agent therefor), or other
similar Person for itself or a substantial portion of its
property or business; or
(h) ERISA. (i) An ERISA Event shall occur with
respect to a Pension Plan or Multiemployer Plan which has
resulted or could reasonably be expected to result in liability
of the Company under Title IV of ERISA to the Pension Plan,
88
Multiemployer Plan or the PBGC in an aggregate amount in excess
of $2,000,000; the aggregate amount of Unfunded Pension Liability
among all Pension Plans at any time exceeds $2,000,000; or
(iii) the Company or any ERISA Affiliate shall fail to pay when
due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability
under Section 4201 of ERISA under a Multiemployer Plan in an
aggregate amount in excess of $2,000,000; or
(i) Monetary Judgments. One or more non-interlocutory
judgments, non-interlocutory orders, decrees or arbitration
awards is entered against the Company or any Subsidiary involving
in the aggregate a liability (to the extent not covered by
independent third-party insurance as to which the insurer does
not dispute coverage) as to any single or related series of
transactions, incidents or conditions, of $5,000,000 or more, and
the same shall remain unvacated and unstayed pending appeal for a
period of 10 days after the entry thereof; or
(j) Non-Monetary Judgments. Any non-monetary
judgment, order or decree is entered against the Company or any
Subsidiary which does or would reasonably be expected to have a
Material Adverse Effect, and there shall be any period of 10
consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect; or
(k) Change of Control. There occurs any Change of
Control; or
(l) Loss of Licenses. Any HMO Regulator or any other
Governmental Authority revokes or fails to renew any material
license, permit or franchise of the Company or any Subsidiary, or
the Company or any Subsidiary for any reason loses any material
license, permit or franchise, or the Company or any Subsidiary
suffers the imposition of any restraining order, escrow,
suspension or impound of funds in connection with any proceeding
(judicial or administrative) with respect to any material
license, permit or franchise; or
(m) HMO Event. An HMO Event shall have occurred and
remain unremedied for the lesser of 30 days after the occurrence
of such event or five days after the duration of any cure period
imposed for the cure of such HMO Event by the HMO Regulator
administering the pertinent HMO Regulations; or
(n) Prospective Premium Default. A Prospective
Premium Default shall have occurred; or
89
(o) Adverse Change. There occurs a Material Adverse
Effect; or
(p) Invalidity of Subordination Provisions. The
subordination provisions of the Convertible Debt is for any
reason revoked or invalidated, or otherwise cease to be in full
force and effect, or any Person contests in any manner (with a
reasonable likelihood of success) the validity or enforceability
thereof or denies that it has any further liability or obligation
thereunder, or the Indebtedness hereunder is for any reason
subordinated or does not have the priority contemplated by this
Agreement or such subordination provisions.
9.02 Remedies. If any Event of Default occurs, the Agent
shall, at the request of, or may, with the consent of, the
Majority Banks,
(a) declare the commitment of each Bank to make Loans
and any obligation of the Issuing Bank to Issue Letters of Credit
to be terminated, whereupon such commitments and obligation shall
be terminated;
(b) declare an amount equal to the maximum aggregate
amount that is or at any time thereafter may become available for
drawing under any outstanding Letters of Credit (whether or not
any beneficiary shall have presented, or shall be entitled at
such time to present, the drafts or other documents required to
draw under such Letters of Credit) to be immediately due and
payable, and declare the unpaid principal amount of all
outstanding Loans, all interest accrued and unpaid thereon, and
all other amounts owing or payable hereunder or under any other
Loan Document to be immediately due and payable, without
presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Banks all
rights and remedies available to it and the Banks under the Loan
Documents or applicable law;
provided, however, that upon the occurrence of any event
specified in subsection (f) or (g) of Section 9.01 (in the case
of clause (i) of subsection (g) upon the expiration of the 60-day
period mentioned therein), the obligation of each Bank to make
Loans and any obligation of the Issuing Bank to Issue Letters of
Credit shall automatically terminate and the unpaid principal
amount of all outstanding Loans and all interest and other
amounts as aforesaid shall automatically become due and payable
without further act of the Agent, the Issuing Bank or any Bank.
90
NOTWITHSTANDING THE FOREGOING, THE AGENT AND THE BANKS EXPRESSLY
ACKNOWLEDGE AND AGREE THAT ANY TRANSFER OF THE PLEDGED SHARES, OR
ANY EXERCISE OF CONTROL WITH RESPECT THERETO, IS SUBJECT TO, AND
SHALL BE EFFECTED SOLELY IN COMPLIANCE WITH, APPLICABLE
REGULATORY REQUIREMENTS; PROVIDED THAT THIS ACKNOWLEDGMENT AND
AGREEMENT IS MADE SOLELY FOR THE BENEFIT OF APPLICABLE
GOVERNMENTAL AND REGULATORY AUTHORITIES AND SHALL NOT BE
CONSTRUED AS A COVENANT AS BETWEEN THE AGENT AND THE BANKS, ON
THE ONE HAND, AND THE COMPANY OR ANY OF ITS SUBSIDIARIES, ON THE
OTHER HAND.
9.03 Rights Not Exclusive. The rights provided for in this
Agreement and the other Loan Documents are cumulative and are not
exclusive of any other rights, powers, privileges or remedies
provided by law or in equity, or under any other instrument,
document or agreement now existing or hereafter arising.
ARTICLE X
THE AGENT
10.01 Appointment and Authorization; "Agent".
(a) Each Bank hereby irrevocably (subject to Section
10.09) appoints, designates and authorizes the Agent to take such
action on its behalf under the provisions of this Agreement and
each other Loan Document and to exercise such powers and perform
such duties as are expressly delegated to it by the terms of this
Agreement or any other Loan Document, together with such powers
as are reasonably incidental thereto. Notwithstanding any
provision to the contrary contained elsewhere in this Agreement
or in any other Loan Document, the Agent shall not have any
duties or responsibilities, except those expressly set forth
herein, nor shall the Agent have or be deemed to have any
fiduciary relationship with any Bank, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent. Without limiting the
generality of the foregoing sentence, the use of the term "agent"
in this Agreement with reference to the Agent is not intended to
connote any fiduciary or other implied (or express) obligations
arising under agency doctrine of any applicable law. Instead,
such term is used merely as a matter of market custom, and is
intended to create or reflect only an administrative relationship
between independent contracting parties.
(b) The Issuing Bank shall act on behalf of the Banks
with respect to any Letters of Credit Issued by it and the
91
documents associated therewith until such time and except for so
long as the Agent may agree at the request of the Majority
Lenders to act for such Issuing Bank with respect thereto;
provided, however, that the Issuing Bank shall have all of the
benefits and immunities (i) provided to the Agent in this Article
X with respect to any acts taken or omissions suffered by the
Issuing Bank in connection with Letters of Credit Issued by it or
proposed to be Issued by it and the application and agreements
for letters of credit pertaining to the Letters of Credit as
fully as if the term "Agent", as used in this Article X, included
the Issuing Bank with respect to such acts or omissions, and
(ii) as additionally provided in this Agreement with respect to
the Issuing Bank.
10.02 Delegation of Duties. The Agent may execute any of
its duties under this Agreement or any other Loan Document by or
through agents, employees or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining
to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it
selects with reasonable care.
10.03 Liability of Agent. None of the Agent-Related
Persons shall (i) be liable for any action taken or omitted to be
taken by any of them under or in connection with this Agreement
or any other Loan Document or the transactions contemplated
hereby (except for its own gross negligence or willful
misconduct), or (ii) be responsible in any manner to any of the
Banks for any recital, statement, representation or warranty made
by the Company or any Subsidiary or Affiliate of the Company, or
any officer thereof, contained in this Agreement or in any other
Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent
under or in connection with, this Agreement or any other Loan
Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of the Company or any other party to
any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any
obligation to any Bank to ascertain or to inquire as to the
observance or performance of any of the agreements contained in,
or conditions of, this Agreement or any other Loan Document, or
to inspect the properties, books or records of the Company or any
of the Company's Subsidiaries or Affiliates.
10.04 Reliance by Agent.
92
(a) The Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile,
telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons, and
upon advice and statements of legal counsel (including counsel to
the Company), independent accountants and other experts selected
by the Agent. The Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other
Loan Document unless it shall first receive such advice or
concurrence of the Majority Banks as it deems appropriate and, if
it so requests, it shall first be indemnified to its satisfaction
by the Banks against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any
such action. The Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement or any
other Loan Document in accordance with a request or consent of
the Majority Banks and such request and any action taken or
failure to act pursuant thereto shall be binding upon all of the
Banks.
(b) For purposes of determining compliance with the
conditions specified in Section 5.01, each Bank that has executed
this Agreement shall be deemed to have consented to, approved or
accepted or to be satisfied with, each document or other matter
either sent by the Agent to such Bank for consent, approval,
acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to the
Bank.
10.05 Notice of Default. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or
Event of Default, except with respect to defaults in the payment
of principal, interest and fees required to be paid to the Agent
for the account of the Banks, unless the Agent shall have
received written notice from a Bank or the Company referring to
this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". The Agent
will notify the Banks of its receipt of any such notice. The
Agent shall take such action with respect to such Default or
Event of Default as may be requested by the Majority Banks in
accordance with Article IX; provided, however, that unless and
until the Agent has received any such request, the Agent may (but
shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of
Default as it shall deem advisable or in the best interest of the
Banks.
93
10.06 Credit Decision. Each Bank acknowledges that none of
the Agent-Related Persons has made any representation or warranty
to it, and that no act by the Agent hereinafter taken, including
any review of the affairs of the Company and its Subsidiaries,
shall be deemed to constitute any representation or warranty by
any Agent-Related Person to any Bank. Each Bank represents to
the Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal
of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of
the Company and its Subsidiaries, and all applicable bank
regulatory laws relating to the transactions contemplated hereby,
and made its own decision to enter into this Agreement and to
extend credit to the Company hereunder. Each Bank also
represents that it will, independently and without reliance upon
any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking
or not taking action under this Agreement and the other Loan
Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of
the Company. Except for notices, reports and other documents
expressly herein required to be furnished to the Banks by the
Agent, the Agent shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning
the business, prospects, operations, property, financial and
other condition or creditworthiness of the Company which may come
into the possession of any of the Agent-Related Persons.
10.07 Indemnification of Agent. Whether or not the
transactions contemplated hereby are consummated, the Banks shall
indemnify upon demand the Agent-Related Persons (to the extent
not reimbursed by or on behalf of the Company and without
limiting the obligation of the Company to do so), pro rata, from
and against any and all Indemnified Liabilities; provided,
however, that no Bank shall be liable for the payment to the
Agent-Related Persons of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence
or willful misconduct. Without limitation of the foregoing, each
Bank shall reimburse the Agent upon demand for its ratable share
of any costs or out-of-pocket expenses (including Attorney Costs)
incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document,
94
or any document contemplated by or referred to herein, to the
extent that the Agent is not reimbursed for such expenses by or
on behalf of the Company. The undertaking in this Section shall
survive the payment of all Obligations hereunder and the
resignation or replacement of the Agent.
10.08 Agent in Individual Capacity. BofA and its
Affiliates may make loans to, issue letters of credit for the
account of, accept deposits from, acquire equity interests in and
generally engage in any kind of banking, trust, financial
advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Agent or
the Issuing Bank hereunder and without notice to or consent of
the Banks. The Banks acknowledge that, pursuant to such
activities, BofA or its Affiliates may receive information
regarding the Company or its Affiliates (including information
that may be subject to confidentiality obligations in favor of
the Company or such Subsidiary) and acknowledge that the Agent
shall be under no obligation to provide such information to them.
With respect to its Loans, BofA shall have the same rights and
powers under this Agreement as any other Bank and may exercise
the same as though it were not the Agent or the Issuing Bank.
10.09 Successor Agent. The Agent may, and at the request
of the Majority Banks shall, resign as Agent upon 30 days' notice
to the Banks. If the Agent resigns under this Agreement, the
Majority Banks shall appoint from among the Banks a successor
agent for the Banks. If no successor agent is appointed prior to
the effective date of the resignation of the Agent, the Agent may
appoint, after consulting with the Banks and the Company, a
successor agent from among the Banks. Upon the acceptance of its
appointment as successor agent hereunder, such successor agent
shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor
agent and the retiring Agent's appointment, powers and duties as
Agent shall be terminated. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Article X and Sections
11.04 and 11.05 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this
Agreement. If no successor agent has accepted appointment as
Agent by the date which is 30 days following a retiring Agent's
notice of resignation, the retiring Agent's resignation shall
nevertheless thereupon become effective and the Banks shall
perform all of the duties of the Agent hereunder until such time,
if any, as the Majority Banks appoint a successor agent as
provided for above. Notwithstanding the foregoing, however, BofA
may not be removed as the Agent at the request of the Majority
Banks unless BofA shall also simultaneously be replaced as
95
"Issuing Bank" hereunder pursuant to documentation in form and
substance reasonably satisfactory to BofA.
10.10 Withholding Tax.
(a) If any Bank is a "foreign corporation, partnership
or trust" within the meaning of the Code and such Bank claims
exemption from, or a reduction of, U.S. withholding tax under
Sections 1441 or 1442 of the Code, such Bank agrees with and in
favor of the Agent and the Company, to deliver to the Agent:
(i) if such Bank claims an exemption from, or a
reduction of, withholding tax under a United States tax
treaty, two properly completed and executed copies of IRS
Form 1001 before the payment of any interest in the first
calendar year and before the payment of any interest in each
third succeeding calendar year during which interest may be
paid under this Agreement;
(ii) if such Bank claims that interest paid under
this Agreement is exempt from United States withholding tax
because it is effectively connected with a United States
trade or business of such Bank, two properly completed and
executed copies of IRS Form 4224 before the payment of any
interest is due in the first taxable year of such Bank and
in each succeeding taxable year of such Bank during which
interest may be paid under this Agreement; and
(iii) such other form or forms as may be required
under the Code or other laws of the United States as a
condition to exemption from, or reduction of, United States
withholding tax.
Such Bank agrees to promptly notify the Agent and the Company of
any change in circumstances which would modify or render invalid
any claimed exemption or reduction.
(b) If any Bank claims exemption from, or reduction
of, withholding tax under a United States tax treaty by providing
IRS Form 1001 and such Bank sells, assigns, grants a
participation in, or otherwise transfers all or part of the
Obligations of the Company to such Bank, such Bank agrees to
notify the Agent of the percentage amount in which it is no
longer the beneficial owner of Obligations of the Company to such
Bank. To the extent of such percentage amount, the Agent will
treat such Bank's IRS Form 1001 as no longer valid.
96
(c) If any Bank claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Agent sells,
assigns, grants a participation in, or otherwise transfers all or
part of the Obligations of the Company to such Bank, such Bank
agrees to undertake sole responsibility for complying with the
withholding tax requirements imposed by Sections 1441 and 1442 of
the Code.
(d) If any Bank is entitled to a reduction in the
applicable withholding tax, the Agent may withhold from any
interest payment to such Bank an amount equivalent to the
applicable withholding tax after taking into account such
reduction. However, if the forms or other documentation required
by subsection (a) of this Section are not delivered to the Agent,
then the Agent may withhold from any interest payment to such
Bank not providing such forms or other documentation an amount
equivalent to the applicable withholding tax imposed by Sections
1441 and 1442 of the Code, without reduction.
(e) If the IRS or any other Governmental Authority of
the United States or other jurisdiction asserts a claim that the
Agent or the Company did not properly withhold tax from amounts
paid to or for the account of any Bank (because the appropriate
form was not delivered or was not properly executed, or because
such Bank failed to notify the Agent of a change in circumstances
which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Bank shall
indemnify the Agent and the Company fully for all amounts paid,
directly or indirectly, by the Agent or the Company as tax or
otherwise, including penalties and interest, and including any
taxes imposed by any jurisdiction on the amounts payable to the
Agent under this Section, together with all costs and expenses
(including Attorney Costs). The obligation of the Banks under
this subsection shall survive the payment of all Obligations and
the resignation or replacement of the Agent.
10.11 Syndication Agent. The Bank identified on the facing
page or signature pages of this Agreement as the "syndication
agent" shall not have any right, power, obligation, liability,
responsibility or duty under this Agreement other than those
applicable to all Banks as such. Without limiting the foregoing,
the Bank so identified as the "syndication agent" shall not have
or be deemed to have any fiduciary relationship with any Bank.
Each Bank acknowledges that it has not relied, and will not rely,
on the Bank so identified in deciding to enter into this
Agreement or in taking or not taking any action hereunder.
97
ARTICLE XI
MISCELLANEOUS
11.01 Amendments and Waivers. No amendment or waiver of
any provision of this Agreement or any other Loan Document, and
no consent with respect to any departure by the Company
therefrom, shall be effective unless the same shall be in writing
and signed by the Majority Banks (or by the Agent at the written
request of the Majority Banks) and the Company and acknowledged
by the Agent, and then any such waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such waiver,
amendment, or consent shall, unless in writing and signed by all
the Banks and the Company and acknowledged by the Agent, do any
of the following:
(a) increase or extend the Commitment of any Bank (or
reinstate any Commitment terminated pursuant to Section 8.02);
(b) postpone or delay any date fixed by this Agreement
or any other Loan Document for any payment of principal,
interest, fees or other amounts due to the Banks (or any of them)
hereunder or under any other Loan Document;
(c) reduce the principal of, or the rate of interest
specified herein on any Loan, or (subject to clause (iii) below)
any fees or other amounts payable hereunder or under any other
Loan Document;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required
for the Banks or any of them to take any action hereunder; or
(e) amend this Section, or Section 2.14, or any
provision herein providing for consent or other action by all
Banks;
and, provided further, that (i) no amendment, waiver or consent
shall, unless in writing and signed by the Issuing Bank in
addition to the Majority Banks or all the Banks, as the case may
be, affect the rights or duties of the Issuing Bank under this
Agreement or any L/C-Related Document relating to any Letter of
Credit Issued or to be Issued by it, (ii) no amendment, waiver or
consent shall, unless in writing and signed by the Agent in
addition to the Majority Banks or all the Banks, as the case may
be, affect the rights or duties of the Agent under this Agreement
or any other Loan Document, and (iii) the Fee Letters may be
98
amended, or rights or privileges thereunder waived, in a writing
executed by the parties thereto.
11.02 Notices.
(a) All notices, requests, consents, approvals,
waivers and other communications shall be in writing (including,
unless the context expressly otherwise provides, by facsimile
transmission, provided that any matter transmitted by the Company
by facsimile (i) shall be immediately confirmed by a telephone
call to the recipient at the number specified on Schedule 11.02,
and (ii) shall be followed promptly by delivery of a hard copy
original thereof) and mailed, faxed or delivered, to the address
or facsimile number specified for notices on Schedule 11.02; or,
as directed to the Company or the Agent, to such other address as
shall be designated by such party in a written notice to the
other parties, and as directed to any other party, at such other
address as shall be designated by such party in a written notice
to the Company and the Agent.
(b) All such notices, requests and communications
shall, when transmitted by overnight delivery, or faxed, be
effective when delivered for overnight (next-day) delivery, or
transmitted in legible form by facsimile machine, respectively,
or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery;
except that notices pursuant to Article II, III or X to the Agent
shall not be effective until actually received by the Agent, and
notices pursuant to Article III to the Issuing Bank shall not be
effective until actually received by the Issuing Bank at the
address specified for the "Issuing Bank" on the applicable
signature page hereof.
(c) Any agreement of the Agent and the Banks herein to
receive certain notices by telephone or facsimile is solely for
the convenience and at the request of the Company and the Pledgor
Subsidiaries. The Agent and the Banks shall be entitled to rely
on the authority of any Person purporting to be a Person
authorized by the Company or any Pledgor Subsidiary to give such
notice and the Agent and the Banks shall not have any liability
to the Company, any Pledgor subsidiary or other Person on account
of any action taken or not taken by the Agent or the Banks in
reliance upon such telephonic or facsimile notice. The
obligation of the Company to repay the Loans and L/C Obligations
shall not be affected in any way or to any extent by any failure
by the Agent and the Banks to receive written confirmation of any
telephonic or facsimile notice or the receipt by the Agent and
the Banks of a confirmation which is at variance with the terms
99
understood by the Agent and the Banks to be contained in the
telephonic or facsimile notice.
11.03 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Agent or
any Bank, any right, remedy, power or privilege hereunder, shall
operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of
any other right, remedy, power or privilege.
11.04 Costs and Expenses. The Company shall:
(a) whether or not the transactions contemplated
hereby are consummated, pay or reimburse BofA (including in its
capacity as Agent and Issuing Bank) within five Business Days
after demand (subject to subsection 5.01(e)) for all reasonable
costs and expenses incurred by BofA (including in its capacity as
Agent and Issuing Bank) in connection with the development,
preparation, delivery, administration and execution of, and any
amendment, supplement, waiver or modification to (in each case,
whether or not consummated), this Agreement, any Loan Document
and any other documents prepared in connection herewith or
therewith, and the consummation of the transactions contemplated
hereby and thereby, including reasonable Attorney Costs incurred
by or on behalf of BofA (including in its capacity as Agent and
Issuing Bank) with respect thereto; and
(b) pay or reimburse the Agent and each Bank within
five Business Days after demand (subject to subsection 5.01(e))
for all reasonable costs and expenses (including Attorney Costs)
incurred by them in connection with the enforcement, attempted
enforcement, or preservation of any rights or remedies under this
Agreement or any other Loan Document during the existence of an
Event of Default or after acceleration of the Loans (including in
connection with any "workout" or restructuring regarding the
Loans, and including in any Insolvency Proceeding or appellate
proceeding).
11.05 Company Indemnification. Whether or not the
transactions contemplated hereby are consummated, the Company
shall indemnify, defend and hold the Agent-Related Persons, and
each Bank and each of its respective officers, directors,
employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, charges, expenses and disbursements
(including of experts and agents and Attorney Costs which all
100
shall be paid upon demand by the Agent) of any kind or nature
whatsoever which may at any time (including at any time following
repayment of the Loans, the termination of the Letters of Credit
and the termination, resignation or replacement of the Agent or
replacement of any Bank) be imposed on, incurred by or asserted
against any such Person in any way relating to or arising out of:
this Agreement, the Pledge Agreements or any document
contemplated by or referred to herein; the administration of the
Loan Documents; the custody, preservation, use or operation of or
the sale of, collection from, or other realization upon, any of
the Collateral; the exercise or enforcement of any of the rights
of the Agent under the Pledge Agreements or any other Loan
Document; the failure by the Company to perform or observe any of
the provisions of the Pledge Agreements or any other Loan
Document; the transactions contemplated hereby; or any other
action taken or omitted by any such Person under or in connection
with any of the foregoing, including with respect to any
investigation, litigation or proceeding (including any Insolvency
Proceeding or appellate proceeding) related to or arising out of
this Agreement or the Loans or Letters of Credit or the use of
the proceeds thereof, whether or not any Indemnified Person is a
party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided, that the Company shall have no
obligation hereunder to any Indemnified Person with respect to
Indemnified Liabilities resulting solely from the gross
negligence or willful misconduct of such Indemnified Person. The
agreements in this Section shall survive payment of all other
Obligations.
11.06 Payments Set Aside. To the extent that the Company
makes a payment to the Agent or the Banks, or the Agent or the
Banks exercise their right of set-off, and such payment or the
proceeds of such set-off or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside
or required (including pursuant to any settlement entered into by
the Agent or such Bank in its discretion) to be repaid to a
trustee, receiver or any other party, in connection with any
Insolvency Proceeding or otherwise, then (a) to the extent of
such recovery the obligation or part thereof originally intended
to be satisfied shall be revived and continued in full force and
effect as if such payment had not been made or such set-off had
not occurred, and (b) each Bank severally agrees to pay to the
Agent upon demand its pro rata share of any amount so recovered
from or repaid by the Agent.
11.07 Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns,
101
except that the Company may not assign or transfer any of its
rights or obligations under this Agreement without the prior
written consent of the Agent and each Bank.
11.08 Assignments, Participations, etc.
(a) Any Bank may, with the written consent of the
Company at all times other than during the existence of an Event
of Default and the Agent and the Issuing Bank, which consents
shall not be unreasonably withheld, at any time assign and
delegate to one or more Eligible Assignees (provided that no
written consent of the Company, the Agent or the Issuing Bank
shall be required in connection with any assignment and
delegation by a Bank to an Eligible Assignee that is an Affiliate
of such Bank) (each an "Assignee") all, or any ratable part of
all, of the Loans, the Commitments, the L/C Obligations and the
other rights and obligations of such Bank hereunder, in a minimum
amount of $5,000,000; provided, however, that after giving effect
thereto, such Bank shall either retain a Commitment in a minimum
amount of $5,000,000 or have no ongoing Commitment and provided
further that the Company and the Agent may continue to deal
solely and directly with such Bank in connection with the
interest so assigned to an Assignee until (i) written notice of
such assignment, together with payment instructions, addresses
and related information with respect to the Assignee, shall have
been given to the Company and the Agent by such Bank and the
Assignee; (ii) such Bank and its Assignee shall have delivered to
the Company and the Agent an Assignment and Acceptance in the
form of Exhibit E ("Assignment and Acceptance") together with any
Note or Notes subject to such assignment and (iii) the assignor
Bank or Assignee has paid to the Agent a processing fee in the
amount of $3,500.
(b) From and after the date that the Agent notifies
the assignor Bank that it has received (and provided its consent
with respect to) an executed Assignment and Acceptance and
payment of the above-referenced processing fee, (i) the Assignee
thereunder shall be a party hereto and, to the extent that rights
and obligations hereunder have been assigned to it pursuant to
such Assignment and Acceptance, shall have the rights and
obligations of a Bank under the Loan Documents, and (ii) the
assignor Bank shall, to the extent that rights and obligations
hereunder and under the other Loan Documents have been assigned
by it pursuant to such Assignment and Acceptance, relinquish its
rights and be released from its obligations under the Loan
Documents.
102
(c) Within five Business Days after its receipt of
notice by the Agent that it has received an executed Assignment
and Acceptance and payment of the processing fee, (and provided
that it consents to such assignment in accordance with subsection
11.08(a)), the Company shall execute and deliver to the Agent,
new Notes evidencing such Assignee's assigned Loans and
Commitment and, if the assignor Bank has retained a portion of
its Loans and its Commitment, replacement Notes in the principal
amount of the Loans retained by the assignor Bank (such Nots to
be in exchange for, but not in payment of, the Notes held by such
Bank). Immediately upon each Assignee's making its processing
fee payment under the Assignment and Acceptance, this Agreement
shall be deemed to be amended to the extent, but only to the
extent, necessary to reflect the addition of the Assignee and the
resulting adjustment of the Commitments arising therefrom. The
Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Bank pro tanto.
(d) Any Bank may at any time sell to one or more
commercial banks or other Persons not Affiliates of the Company
(a "Participant") participating interests in any Loans, the
Commitment of that Bank and the other interests of that Bank (the
"originating Bank") hereunder and under the other Loan Documents;
provided, however, that (i) the originating Bank's obligations
under this Agreement shall remain unchanged, (ii) the originating
Bank shall remain solely responsible for the performance of such
obligations, (iii) the Company, the Issuing Bank and the Agent
shall continue to deal solely and directly with the originating
Bank in connection with the originating Bank's rights and
obligations under this Agreement and the other Loan Documents,
and (iv) no Bank shall transfer or grant any participating
interest under which the Participant has rights to approve any
amendment to, or any consent or waiver with respect to, this
Agreement or any other Loan Document, except to the extent such
amendment, consent or waiver would require unanimous consent of
the Banks as described in the first proviso to Section 11.01. In
the case of any such participation, the Participant shall be
entitled to the benefit of Sections 4.01, 4.03 and 11.05 as
though it were also a Bank hereunder, and if amounts outstanding
under this Agreement are due and unpaid, or shall have been
declared or shall have become due and payable upon the occurrence
of an Event of Default, each Participant shall be deemed to have
the right of set-off in respect of its participating interest in
amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as
a Bank under this Agreement.
103
(e) Notwithstanding any other provision in this
Agreement, any Bank may at any time create a security interest
in, or pledge, all or any portion of its rights under and
interest in this Agreement and the Note held by it in favor of
any Federal Reserve Bank in accordance with Regulation A of the
FRB or U.S. Treasury Regulation 31 CFR Section 203.14, and such Federal
Reserve Bank may enforce such pledge or security interest in any
manner permitted under applicable law.
11.09 Set-off. In addition to any rights and remedies of
the Banks provided by law, if an Event of Default exists or the
Loans have been accelerated, each Bank is authorized at any time
and from time to time, without prior notice to the Company, any
such notice being waived by the Company to the fullest extent
permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any
time held by, and other indebtedness at any time owing by, such
Bank to or for the credit or the account of the Company against
any and all Obligations owing to such Bank, now or hereafter
existing, irrespective of whether or not the Agent or such Bank
shall have made demand under this Agreement or any Loan Document
and although such Obligations may be contingent or unmatured.
Each Bank agrees promptly to notify the Company and the Agent
after any such set-off and application made by such Bank;
provided, however, that the failure to give such notice shall not
affect the validity of such set-off and application.
11.10 Automatic Debits of Fees. With respect to any
commitment fee, arrangement fee, letter of credit fee or other
fee, or any other cost or expense (including Attorney Costs) due
and payable to the Agent, the Issuing Bank, the Arranger or the
Banks under the Loan Documents, the Company hereby irrevocably
authorizes BofA to debit any deposit account of the Company with
BofA in an amount such that the aggregate amount debited from all
such deposit accounts does not exceed such fee or other cost or
expense. If there are insufficient funds in such deposit accounts
to cover the amount of the fee or other cost or expense then due,
such debits will be reversed (in whole or in part, in BofA's sole
discretion) and such amount not debited shall be deemed to be
unpaid. No such debit under this Section shall be deemed a set-
off.
11.11 Notification of Addresses, Lending Offices, Etc.
Each Bank shall notify the Agent in writing of any changes in the
address to which notices to the Bank should be directed, of
addresses of any Lending Office, of payment instructions in
respect of all payments to be made to it hereunder and of such
104
other administrative information as the Agent shall reasonably
request.
11.12 Counterparts. This Agreement may be executed in any
number of separate counterparts, each of which, when so executed,
shall be deemed an original, and all of said counterparts taken
together shall be deemed to constitute but one and the same
instrument.
11.13 Severability. Wherever possible each provision of
this Agreement, the Pledge Agreements or any other instrument
agreement required hereunder shall be interpreted in such manner
as to be effective and valid under applicable law, but if any
provision of this Agreement, the Pledge Agreements or any other
instrument or agreement required hereunder shall be prohibited by
or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining
provisions of such agreement or instrument.
11.14 No Third Parties Benefited. This Agreement is made
and entered into for the sole protection and legal benefit of the
Company, the Banks, the Agent and the Agent-Related Persons, and
their permitted successors and assigns, and no other Person shall
be a direct or indirect legal beneficiary of, or have any direct
or indirect cause of action or claim in connection with, this
Agreement or any of the other Loan Documents.
11.15 Governing Law and Jurisdiction.
(a) THIS AGREEMENT, THE PLEDGE AGREEMENTS AND THE
NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF CALIFORNIA EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PERFECTION OF ANY SECURITY INTERESTS OR REMEDIES
UNDER ANY LOAN DOCUMENTS ARE GOVERNED BY THE LAWS OF A STATE
OTHER THAN CALIFORNIA; PROVIDED THAT THE AGENT AND THE BANKS
SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION, PROCEEDING OR LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT, THE PLEDGE AGREEMENTS OR ANY OTHER LOAN DOCUMENT, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
ORAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE BANKS OR THE
COMPANY MAY BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE
OF CALIFORNIA OR IN THE UNITED STATES DISTRICT COURT FOR THE
CENTRAL DISTRICT OF CALIFORNIA; PROVIDED, HOWEVER, THAT ANY SUIT
SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY
BE BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY
105
JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE
FOUND. BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR THE
PLEDGE AGREEMENTS, EACH OF THE COMPANY, THE BANKS AND THE AGENT
HEREBY CONSENTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY AND
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF CALIFORNIA AND OF THE
UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF
CALIFORNIA FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH
ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH SUCH LITIGATION. THE AGENT, THE BANKS
AND THE COMPANY FURTHER IRREVOCABLY CONSENT TO THE SERVICE OF
PROCESS BY ANY MEANS PERMITTED BY CALIFORNIA LAW INCLUDING BY
REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN
OR WITHOUT THE STATE OF CALIFORNIA. THE AGENT, THE BANKS AND THE
COMPANY HEREBY EXPRESSLY AND IRREVOCABLY WAIVE, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH THEY MAY HAVE OR
HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT
ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
TO THE EXTENT THAT THE AGENT, THE BANKS AND THE COMPANY HAVE OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT
OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO THEM OR THEIR PROPERTY, THE AGENT, THE
BANKS AND THE COMPANY HEREBY IRREVOCABLY WAIVE SUCH IMMUNITY IN
RESPECT OF THEIR OBLIGATIONS UNDER THIS AGREEMENT, THE PLEDGE
AGREEMENTS AND THE OTHER LOAN DOCUMENTS.
11.16 Waiver of Jury Trial. THE COMPANY, THE BANKS AND THE
AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR
RELATED TO THIS AGREEMENT, THE PLEDGE AGREEMENTS, THE OTHER LOAN
DOCUMENTS, ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE COMPANY, THE PLEDGOR
SUBSIDIARIES, THE BANKS OR THE AGENT, OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR
OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES
AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT
OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. THE COMPANY, THE BANKS AND THE AGENT EACH
AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS
AGREEMENT, THE PLEDGE AGREEMENTS, OR THE OTHER LOAN DOCUMENTS OR
ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY
106
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT, THE PLEDGE AGREEMENTS, AND THE OTHER LOAN
DOCUMENTS. THE COMPANY ACKNOWLEDGES AND AGREES THAT IT HAS
RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION
(AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT
IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR
THE AGENT AND THE BANKS ENTERING INTO THIS AGREEMENT AND EACH
SUCH OTHER LOAN DOCUMENT.
11.17 Entire Agreement. This Agreement, together with the
Pledge Agreements and the other Loan Documents, embodies the
entire agreement and understanding among the Company, the Pledgor
Subsidiaries, the Banks and the Agent, and supersedes all prior
or contemporaneous agreements and understandings of such Persons,
verbal or written, relating to the subject matter hereof and
thereof.
[remainder of page intentionally left blank]
107
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered in Los Angeles,
California by their proper and duly authorized officers as of the
day and year first above written.
SIERRA HEALTH SERVICES, INC.
By:______________________________
Title:___________________________
000
XXXX XX XXXXXXX NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By:______________________________
Title:___________________________
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Issuing
Bank
By:______________________________
Title:___________________________
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Bank
By:______________________________
Title:___________________________
109
FIRST UNION NATIONAL BANK
By:______________________________
Title:___________________________
110
SCHEDULE 1.01
SPECIFIED CHARGES
1. Acquisition and integration expenses up to $10,000,000
recorded in the fourth quarter of 1998
related to the Kaiser-Texas Acquisition
2. Legal and related costs to settle the up to $12,000,000
TRICARE Region 1 bid protest.
3. Acquisition and integration expenses up to $2,000,000
related to the acquisition from Mutual of
Omaha and subsidiaries
111
SCHEDULE 2.01
COMMITMENTS AND PRO RATA SHARES
Bank Commitment Pro Rata Share
Bank of America National
Trust and Savings
Association $120,000,000 60%
First Union National Bank $ 80,000,000 40%
TOTAL $200,000,000 100%
112
SCHEDULE 3.03
EXISTING BofA LETTERS OF CREDIT
Letter of Credit Amount Expires
3001796 $4,242,000 March 3, 1999
113
SCHEDULE 5.01(G)
EXCLUDED SUBSIDIARIES
A. CII Financial, Inc. and its subsidiaries
1. CII Leasing, Inc. (California)
2. CII Premium Finance Company (California)
3. Direct Rehabilitation Services (California)
4. Finance Assurance Co., Ltd. (Cayman Islands)
5. K & L Insurance Services, Inc. (California)
6. CII Insurance Agency (California)
7. California Indemnity Insurance Company and its subsidiaries
(California)
a. E & E Insurance Agency, Inc. (Nevada)
b. Sierra Insurance Company of Texas (Texas)
c. Commerical Casualty Insurance Company (California)
d. CII Insurance Company (California)
B. Intermed, Inc. (Arizona)
C. Midwest Health, Inc. (Illinois)
D. Nevada Administrators, Inc. (Nevada)
E. Northern Nevada Health Network, Inc. (Nevada)
F. Xxxxx X. Xxxxxx, Ltd. (Nevada)
G. M.E.G.A., Inc. (Nevada)
H. Sierra Behavioral Health, Inc. (Nevada)
I. Sierra Health & Life Insurance Company, Inc. (California)
J. Sierra Health Holdings, Inc. (Nevada) and its subsidiary
1. Texas Health Choice, L.C. (Texas LLC)
K. 0000 Xxxx Xxxxxxxxxx Partnership
SCHEDULE 6.03
REQUIRED APPROVALS
1. The Company or certain of its Subsidiaries will be required, following the
Closing, to notify applicable insurance regulators of the transaction
evidenced by the Loan Documents by filing amendments to their Insurance
Holding Company System Registration Statement or equivalent statement.
2. Prior to obtaining ownership and/or control, or transferring ownership
and/or control of the Pledged Shares of Subsidiaries subject to regulation
by state insurance regulatory authorities, the Agent and the Banks may need
to make certain filings with those authorities and obtain requisite
regulatory approval. Under apllicable anti-affiliation statutes, banks and
certain other financial institutions may be prohibited from owning or
controlling any subsidiary subject to state insurance legislation.
3. Section 18442 of the California Financial Code states that "(a)n industrial
loan company shall not make any loan of money or property to or guarantee the
obligation of any person upon the security of its capital (including the
shares of capital stock) of the company, its holding company, or its
affiliates." Although Section 18442 may be read to prohibit the pledge of
shares of a corporation which owns an industrial loan company (such as in the
case of CIIF and CII Premium Finance Company), a representative of the
Industrial Loan Department of the Department of Corporations has taken the
position in a telephonic conversation that Section 18442 is not intended to
prohibit the pledge of shares of the parent company.
SCHEDULE 6.05
LITIGATION
PCA v. Sierra Health Services, Inc. (United States District Court, Southern
District of Florida). PCA filed on March 18, 1997 and seeks specific
performance of a terminated merger agreement and monetary damages exceeding
$20,000,000. The court dismissed the action without prejudice for failure
to join an indespensable party.
Sierra Health Services, Inc. v. PCA (Court of Chancery of Delaware). The
Company filed on March 27, 1997 and seeks damages and declaratory relief for
breach of the merger agreement and fraud. On July 31, 1998, the Company
filed a Second Amended Complaint that also alleges negligent misrepresentation.
The action is currently pending.
Harbor House Cafe, Inc. and other similarly situated v. California Indemnity
Insurance Company and Does 1-20 (No. 787823-5, Superior Court of the State of
California for the County of Alameda) Class action alleging non-disclosure of
inability to pay policyholder dividends to certain policyholders.
Harbor House Cafe, Inc. and other similarly situated v. California Indemnity
Insurance Company and Does 1-100 (No. 7879920-9, Superior Court of the State of
California for the County of Alameda) One of approximately 35 class actions
against various insurers and the California state insurance fund seeking
damages growing out of administration by the defendants of experience
readjustments.
SCHEDULE 6.12
PERMITTED LIABILITIES
None.
SCHEDULE 6.13
ENVIRONMENTAL MATTERS
None
SCHEDULE 6.18
SUBSIDIARIES & MINORITY INTERESTS
(A) Subsidiaries of Sierra Health Services, Inc.
A. Behavioral Healthcare Options, Inc. (Nevada)
B. CII Financial, Inc. and its subsidiaries
1. CII Leasing, Inc. (California)
2. CII Premium Finance Company (California)
3. Direct Rehabilitation Services (California)
4. Finance Assurance Co., Ltd. (Cayman Islands)
5. K & L Insurance Services, Inc. (California)
6. CII Insurance Agency (California)
7. California Indemnity Insurance Company and its subsidiaries
(California)
a. California Indemnity Insurance Company (Nevada)
b. Sierra Insurance Company of Texas (Texas)
c. Commercial Casualty Insurance Company (California)
d. CII Insurance Company (California)
C. Family Healthcare Services (Nevada)
D. Family Home Hospice, Inc. (Nevada)
E. Health Plan of Nevada (Nevada)
F. Intermed, Inc. (Arizona)
G. Midwest Health, Inc. (Illinois)
H. Nevada Administrators, Inc. (Nevada)
I. Northern Nevada Health Network, Inc. (Nevada)
J. Prime Holdings, Inc. (Nevada) and its subsidiaries
1. Med One Health Plan (Nevada)
2. Xxxxx X. Xxxxxx, Ltd. (Nevada)
3. M.E.G.A., Inc. (Nevada)
4. Prime Health, Inc. (Nevada)
K. Sierra Acquisition, Inc. (Delaware)
L. Sierra Behavioral Health, Inc. (Nevada)
M. Sierra Health & Life Insurance Company, Inc. (California)
N. Sierra Health Holdings, Inc. (Nevada) and its subsidiary
1. Texas Health Choice, L.C. (Texas LLC)
O. Sierra Health-Care Options, Inc. (Nevada)
P. Sierra Home Medical Products, Inc. (Nevada)
Q. Sierra Medical Management, Inc. (Nevada) and its subsidiaries
1. Mohave Valley Hospital, Inc. (Arizona)
2. Tolemac, Inc. (Arizona)
R. Sierra Military Health Services, Inc. (Delaware)
S. Sierra Texas Systems, Inc. (Texas)
T. Southwest Medical Associates, Inc. (Nevada)
U. Southwest Realty, Inc. (Nevada)
1. 0000 X. Xxxxxxxxxx Partnership
(B) Equity Investments:
A. Integrated Health Services at Silvercrest, Inc.
B. Triwest Healthcare Alliance Corp.
(C) Excluded Subsidiaries
See Schedule 5.01(g)
SCHEDULE 6.19
INSURANCE MATTERS
The Company does not carry a separate errors and omissions policy.
SCHEDULE 8.01
PERMITTED LIENS
See Schedule 8.05
SCHEDULE 8.04
EXISTING INVESTMENTS
1. Mortgage loans to former officers and employees of CII in a principal
amount outstanding on the date hereof of approximately $4,954,000.
2. Loans to Dr. Xxxxxxx Xxxxxx in a principal amount outstanding on the date
hereof of approximately $2,650,000 secured by a pledge of options to purchase
Company stock.
3. See Schedule 6.18(B).
SCHEDULE 8.05
PERMITTED INDEBTEDNESS
1. 7.11% Mortgage Note in favor of BofA, Nevada secured by a deed of trust,
assignment of rents and leases, and a security agreement covering the newly
constructed portion of the Company's administrative headquarters complex
and underlying real property.
2. 7.5% Convertible Subordinated Debentures due 2001 of CII.
3. 7 3/8% Mortgage Note in favor of BofA, Nevada secured by a deed of trust,
assignment of rents and leases, and a security agreement covering a portion
of the Company's administrative headquarters.
4. Master Lease and Security Agreement dated as of December 31, 1997
between Sumitomo Bank Leasing and Finance, Inc. as lessor and Sierra Health
Services, Inc. as lessee.
5. The Kaiser Note.
6. Other existing debt of approximately $7,158,000 in principal.
7. Earn-out under the Kaiser Acquisition Agreement.
8. Earn-out in connection with the in-market acquisition of certain assets
from Mutual of Omaha or affiliates not to exceed $15,000,000 over three years.
SCHEDULE 8.08
CONTINGENT OBLIGATIONS
None
SCHEDULE 8.17
PERMITTED ACQUISITIONS
The in-market acquisition of certain assets from Mutual of Omaha or affiliates
for a price not to exceed $15,000,000 over three years.
SCHEDULE 11.02
OFFSHORE AND DOMESTIC LENDING OFFICES,
ADDRESSES FOR NOTICES
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
Notices (other than Borrowing Notices and Notices of
Conversion/Continuation):
Bank of America National Trust
and Savings Association
Agency Management Services #20529
000 Xxxxx Xxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xx. Xxxx Xxxxxx
Vice President
Telephone: 213/000-0000
Facsimile: 213/228-2299
AGENT'S PAYMENT OFFICE:
Notices for Extensions of Credit and Conversion/Continuation:
Bank of America National Trust
and Savings Association
Agency Administrative Services #5596
0000 Xxxxxxx Xxxxxxxxx, Xxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxx
Telephone: 925/000-0000
Facsimile: 925/675-8500
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as a Bank
Domestic and Offshore Lending Office:
GPO-Domestic Account Administration #5693
0000 Xxxxxxx Xxxxxxxxx, Xxxxx Xxxxx
Xxxxxxx, XX 00000
1
Attention: Xxxxxx Xxxxxx
Telephone: 925/000-0000
Facsimile: 925/675-7531/7532
Notices (other than Borrowing notices and Notices of
Conversion/Continuation):
Bank of America National Trust
and Savings Association
Health Care Finance #9173
000 Xxxxx Xxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: J. Xxxxxxx Xxxxxx
Vice President
Telephone: 213/000-0000
Facsimile: 213/228-2756
