GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT, dated as of November 7, 2002 is made by
MEDCATH CORPORATION, a Delaware corporation (the "Parent"), and certain
Subsidiaries of the Parent as identified on the signature pages attached hereto
or otherwise joined as a party hereto (such subsidiaries collectively, the
"Subsidiary Guarantors", and each, a "Subsidiary Guarantor", and together with
the Parent, the "Guarantors"), in favor of BANK OF AMERICA, N.A., a national
banking association, as Administrative Agent (the "Administrative Agent") for
the ratable benefit of itself and the financial institutions (the "Lenders")
from time to time party to the Loan Agreement (as defined below).
STATEMENT OF PURPOSE
Pursuant to the terms of the Amended and Restated Loan Agreement of
even date herewith (as amended, restated, supplemented or otherwise modified,
the "Loan Agreement"), by and among Heart Hospital of San Antonio, LP, as
Borrower (the "Borrower"), the Lenders party thereto (the "Lenders") and the
Administrative Agent, the Lenders have agreed to extend certain credit
facilities to the Borrower as more specifically described in the Loan Agreement.
The Borrower and the Guarantors, though separate legal entities,
comprise one integrated financial enterprise, and all Construction Loan Advances
under the Loan Agreement to the Borrower will inure, directly or indirectly, to
the benefit of each of the Guarantors.
In connection with the transactions contemplated by the Loan Agreement
and as a condition precedent thereto, the Lenders have requested that each
Guarantor execute and deliver this Guaranty, and each of the Guarantors has
agreed to do so pursuant to the terms hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, and to induce the Administrative Agent and the
Lenders to enter into and to make available Construction Loan Advances pursuant
to the Loan Agreement, each Guarantor hereby agrees with the Administrative
Agent for the ratable benefit of the Administrative Agent and the Lenders as
follows:
SECTION 1. Definitions and Rules of Construction.
(a) Definitions. Capitalized terms used and not otherwise defined
in this Guaranty including the preambles and recitals hereof, shall have the
meanings ascribed to them in the Loan Agreement. In the event of a conflict
between capitalized terms defined herein and in the Loan Agreement, this
Guaranty shall control. In addition, the following terms when used in this
Guaranty shall have the meaning assigned to them below:
"Administrative Agent" shall have the meaning assigned thereto in the
Preamble.
"Adjusted EBITDA" means, for any period, the sum of the following
determined, without duplication, in accordance with GAAP: (a) Consolidated
EBITDA of the Parent and its
Subsidiaries for such period plus (or minus) (b) to the extent deducted in
determining Net Income (or to the extent added in determining Net Income), the
"minority interest share of earnings of the consolidated subsidiaries" of the
Parent for such period as reflected on the consolidated statement of operations
of the Parent and its Subsidiaries plus (c) to the extent deducted in
determining Net Income, the "equity in the net losses of unconsolidated
affiliates" attributable to Unconsolidated Entities for such period as reflected
on the consolidated statement of operations of the Parent and its Subsidiaries
minus (d) to the extent added in determining Net Income, the "equity in the net
profits of unconsolidated affiliates" attributable to Unconsolidated Entities
for such period as reflected on the consolidated statement of operations of the
Parent and its Subsidiaries plus (e) Unconsolidated EBITDA of each
Unconsolidated Entity for such period plus (f) certain adjustments approved by
the Administrative Agent and the Lenders and set forth on Schedule 1(a)(i) minus
(g) to the extent in included in any of the foregoing clauses (a) through (e),
the aggregate amount of EBITDA of the Developmental Pool for such period. For
the purpose hereof, each item referred to herein which is determined by
reference to the consolidated statement of operations of the Parent and its
Subsidiaries shall be calculated in the manner required pursuant to Section 28.
"Affiliate" shall have the meaning assigned thereto in the Loan
Agreement.
"Aggregate Commitment" shall have the meaning assigned thereto in the
Loan Agreement.
"Applicable Insolvency Laws" means all Applicable Laws governing
bankruptcy, reorganization, arrangement, adjustment of debts, relief of debtors,
dissolution, insolvency, fraudulent transfers or conveyances or other similar
laws (including, without limitation, 11 U.S.C. Section 547, Section 548,
Section 550 and other "avoidance" provisions of Title 11 of the United States
Code) applicable in any proceeding involving the bankruptcy, reorganization,
arrangement, adjustment of debts, relief of debtors, dissolution or insolvency
or any similar proceeding with respect to any Guarantor or its assets or this
Guaranty.
"Applicable Law" means, collectively, all international, foreign,
federal, state and local statutes, treaties, rules, guidelines, regulations,
ordinances, codes, constitutions and administrative or judicial precedents or
authorities, including the interpretation or administration thereof by any
Governmental Authority charged with the enforcement, interpretation or
administration thereof, and all applicable administrative orders, directed
duties, requests, licenses, authorizations and permits of, and agreements with,
any Governmental Authority, in each case whether or not having the force of law.
"Available Cash" means, as of any date of determination, the sum of the
following, without duplication, calculated in accordance with GAAP: (a) the
aggregate amount of all cash and cash equivalents of the Parent and its
Subsidiaries, which such cash or cash equivalents are readily marketable and
available without restriction or limitation for the immediate payment or
repayment of Debt thereof as of such date of determination plus (b) the
aggregate amount of all Unconsolidated Cash of the Unconsolidated Entities as of
such date of determination.
"Borrower" shall have the meaning assigned thereto in the Statement of
Purpose.
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"Capital Lease" means any lease of any property by the Parent or any of
its Subsidiaries, as Lessee, that should, in accordance with GAAP, be classified
and accounted for as a capital lease on a Consolidated balance sheet of Parent
and its Subsidiaries.
"Cash Interest Expense" means, with respect to any Person for any
period, all Interest Expense paid in cash during such period.
"Closing Date" shall have the meaning assigned thereto in the Loan
Agreement.
"Collateral" shall have the meaning assigned thereto in the Loan
Agreement.
"Commitments" shall have the meaning assigned thereto in the Loan
Agreement.
"Completion Date" means, with respect to any Hospital Facility owned by
any Hospital Joint Venture, the date upon which such Hospital Joint Venture has
received (i) the final certificate of occupancy for such Hospital Facility and
(ii) all permits and licenses required under Applicable Law (including the
Medicare Certification and the Medicaid Certification) to operate such Hospital
Facility.
"Consolidated" means, when used with reference to financial statements
or financial statement items of the Parent and its Subsidiaries, such statements
or items on a consolidated basis in accordance with applicable principles of
consolidation under GAAP.
"Consolidated Net Worth" means, with respect to the Parent and its
Subsidiaries at any date of determination, the sum of the following determined
on a Consolidated basis, without duplication, in accordance with GAAP: (a) the
amount of assets shown on the Consolidated balance sheet of the Parent and its
Subsidiaries less (b) all liabilities of the Parent and its Subsidiaries. For
purposes of this definition, assets shall include sums due from (i) physicians
or medical practices managed by the Parent or any of its Subsidiaries, (ii)
health care facilities owned or managed by the Parent or any of its
Subsidiaries, and (iii) physicians with whom Borrower is affiliated, to the
extent that (x) the repayment of such sums constitutes valid and enforceable
obligations of such Persons and (y) such Persons have not defaulted in the
repayment of such sums.
"Construction Loan Advances" shall have the meaning assigned thereto in
the Loan Agreement.
"Corporate Revolver" means the Loan Agreement dated as of July 31,
1998, as amended, restated, supplemented or otherwise modified from time to
time, by and among MedCath Intermediate Holdings, Inc., as borrower, the lenders
referred to therein, as lenders, and Bank of America, N. A., as agent.
"Debt" means, with respect to any Person at any date and without
duplication, the sum of the following calculated in accordance with GAAP: (a)
all liabilities, obligations and indebtedness for borrowed money including, but
not limited to, obligations evidenced by bonds, debentures, notes or other
similar instruments of any such Person, (b) all obligations to pay the deferred
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purchase price of property or services of any such Person (including, without
limitation, all obligations under non-competition agreements), except trade
payables arising in the ordinary course of business not more than one hundred
and twenty (120) days past due, (c) all obligations of any such Person as lessee
under Capital Leases, (d) all Debt of any other Person secured by a Lien on any
asset of any such Person, (e) all Guaranty Obligations of any such Person, (f)
all obligations, contingent or otherwise, of any such Person relative to the
face amount of letters of credit, whether or not drawn, and banker's acceptances
issued for the account of any such Person, (g) all obligations of any such
Person to redeem, repurchase, exchange, defease or otherwise make payments in
respect of capital stock or other securities or partnership interests of such
Person, (h) all net payment obligations incurred by any such Person pursuant to
Hedging Agreements and (i) all outstanding payment obligations of any such
Person with respect to any synthetic lease, tax retention operating lease,
off-balance sheet loan or similar off-balance sheet financing product where such
transaction is considered borrowed money indebtedness for tax purposes but is
classified as an operating lease in accordance with GAAP.
"Default" shall have the meaning assigned thereto in the Loan
Agreement.
"Developmental Pool" shall mean the collective reference to all
Hospital Joint Ventures which own a Hospital Facility with respect to which (i)
the Completion Date has not yet occurred or (ii) six (6) full fiscal quarters or
less have elapsed since the Completion Date of such Hospital Facility.
"EBITDA" means, with respect to any Person for any period, the sum of
the following determined, without duplication, in accordance with GAAP: (a) Net
Income for such period plus (b) the sum of the following to the extent deducted
in determining Net Income for such period: (i) Interest Expense for such period,
(ii) income and franchise taxes for such period, (iii) amortization and
depreciation for such period, (iv) non-cash charges for such period solely with
respect to the impairment of goodwill in accordance with GAAP, (v) non-cash
impairment charges for such period solely with respect to management contracts
of MedCath Diagnostics LLC and its Subsidiaries and MedCath Cardiology
Consulting & Management, Inc. and its Subsidiaries, and (vi) non-cash impairment
charges for such period solely with respect to loan acquisition costs minus (c)
to the extent added in the determination of Net Income, extraordinary gains for
such period.
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which (a) is maintained for employees of the
Parent or any ERISA Affiliate or (b) has at any time within the preceding six
(6) years been maintained for the employees of the Parent or any current or
former ERISA Affiliate.
"Environmental Laws" means any and all federal, foreign, state,
provincial and local laws, statutes, ordinances, rules, regulations, permits,
licenses, approvals, interpretations and orders of courts or Governmental
Authorities, relating to the protection of human health or the environment,
including, but not limited to, requirements pertaining to the manufacture,
processing, distribution, use, treatment, storage, disposal, transportation,
handling, reporting, licensing, permitting, investigation or remediation of
Hazardous Materials.
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"ERISA" means the Employee Retirement Income Security Act of 1974, and
the rules and regulations thereunder, each as amended or modified from time to
time.
"ERISA Affiliate" means any Person who together with the Parent is
treated as a single employer within the meaning of Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b) of ERISA.
"Event of Default" shall have the meaning assigned thereto in the Loan
Agreement.
"Fiscal Year" means the fiscal year of the Parent ending on September
30.
"GAAP" means generally accepted accounting principles, as recognized by
the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board, consistently applied and maintained on a consistent
basis for the Parent and its Subsidiaries or any other applicable Person
throughout the period indicated and (subject to Section 28) consistent with the
prior financial practice of the Parent and its Subsidiaries or any such other
Person.
"Governmental Approval" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.
"Governmental Authority" means any nation, province, state or political
subdivision thereof, and any government or any Person 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.
"Guaranteed Obligations" shall have the meaning assigned thereto in
Section 2(b) of this Guaranty.
"Guarantors" shall have the meaning assigned thereto in the Preamble.
"Guaranty" means this Guaranty Agreement, as amended, restated,
supplemented otherwise modified from time to time.
"Guaranty Obligation" means, with respect to any Person at any date and
without duplication, any obligation, contingent or otherwise, of any such Person
pursuant to which such Person has directly or indirectly guaranteed any Debt or
other obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of any
such Person (a) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
condition or otherwise) or (b) entered into for the purpose of assuring in any
other manner the obligee of such Debt or other obligation of the payment thereof
or to protect such obligee against loss in respect thereof (in whole or in
part); provided, that the term Guaranty Obligation shall not include
endorsements for collection or deposit in the ordinary course of business. The
amount of any Guaranty Obligation hereunder shall (subject to any limitations
set forth therein) be deemed to be the lower of (a) an amount equal to the
stated or determinable
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amount of the primary obligation in respect of which such Guaranty Obligation is
made and (b) the maximum amount for which such guaranteeing Person may be liable
pursuant to the terms of the instrument evidencing such Guaranty Obligation.
"Hazardous Materials" means any substances or materials (a) which are
or become defined as hazardous wastes, hazardous substances, pollutants,
contaminants, chemical substances or mixtures or toxic substances under any
Environmental Law, (b) which are toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to human
health or the environment and are or become regulated by any Governmental
Authority, (c) the presence of which require investigation or remediation under
any Environmental Law or common law, (d) the discharge or emission or release of
which requires a permit or license under any Environmental Law or other
Governmental Approval, (e) which are deemed to constitute a nuisance or a
trespass which pose a health or safety hazard to Persons or neighboring
properties, (f) which consist of underground or aboveground storage tanks,
whether empty, filled or partially filled with any substance, or (g) which
contain, without limitation, asbestos, polychlorinated biphenyls, urea
formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived
substances or waste, crude oil, nuclear fuel, natural gas or synthetic gas.
"Hedging Agreements" means any agreement with respect to any Interest
Rate Contract, forward rate agreement, commodity swap, forward foreign exchange
agreement, currency swap agreement, cross-currency rate swap agreement, currency
option agreement or other agreement or arrangement designed to alter the risks
of any Person arising from fluctuations in interest rates, currency values or
commodity prices, all as amended, restated, supplemented or otherwise modified
from time to time.
"CMS" means the Center for Medicare and Medicaid Administration of the
United States Department of Health and Human Services and any successor agency.
"HHS" means the United States Department of Health and Human Services,
and any successor thereto.
"Hospital Facility" shall mean any heart hospital and related
facilities or diagnostic facilities owned by a Hospital Joint Venture.
"Hospital Joint Venture" means any business entity (a) formed for the
purpose of owning, operating or managing a heart hospital and related facilities
or diagnostic facilities, and (b) a portion of the capital stock, limited
liability company interests, partnership interests or other ownership interest
of which is owned or beneficially controlled, either directly or indirectly, by
the Parent or one or more of its Wholly-Owned Subsidiaries.
"Improvements" shall have the meaning assigned thereto in the Loan
Agreement.
"Interest Expense" means, with respect to any Person for any period,
the gross interest expense (including without limitation, interest expense
attributable to Capital Leases and all net payment obligations pursuant to
Hedging Agreements) of such Person, all determined for such period, without
duplication, in accordance with GAAP.
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"Interest Rate Contract" means any interest rate swap agreement,
interest rate cap agreement, interest rate floor agreement, interest rate collar
agreement, interest rate option or any other agreement regarding the hedging of
interest rate risk exposure executed in connection with hedging the interest
rate exposure of any Person and any confirming letter executed pursuant to such
agreement, all as amended, restated, supplemented or otherwise modified from
time to time.
"Joinder Agreement" means, collectively, each joinder agreement
executed in favor of the Administrative Agent for the ratable benefit of itself
and the Lenders, substantially in the form of Exhibit A.
"Land" shall have the meaning assigned thereto in the Loan Agreement.
"Lease Expense" means, with respect to any Person for any period, all
obligations of such Person for payments under leases of real or personal
property, whether such leases presently exist or are hereafter entered into by
such Person.
"Lenders" shall have the meaning assigned thereto in the Preamble.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, hypothecation or encumbrance of any kind in respect
of such asset. For the purposes of this Agreement, a Person shall be deemed to
own subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, Capital
Lease or other title retention agreement relating to such asset.
"Loan Agreement" shall have the meaning assigned thereto in the
Statement of Purpose.
"Loan Documents" shall have the meaning assigned thereto in the Loan
Agreement.
"Material Adverse Effect" shall have the meaning assigned thereto in
the Loan Agreement.
"Material Contract" shall have the meaning assigned thereto in the Loan
Agreement.
"Maturity Date" shall have the meaning assigned thereto in the Loan
Agreement.
"Maximum Available Corporate Revolver Commitment" means the amount of
the unused portion of the aggregate commitment of the lenders under the
Corporate Revolver which is available for borrowing from time to time under the
Corporate Revolver to the extent that (a) no default or event of default shall
have occurred and be continuing under the Corporate Revolver on the date of any
such borrowing and after giving effect thereto and (b) the Parent and its
Subsidiaries shall be in compliance with Section 12(c) on the date of any such
borrowing and after giving effect thereto.
"Medicaid Certification" means certification by CMS or a Governmental
Authority under contract with CMS that health care operations are in compliance
with all the conditions of participation set forth in the Medicaid Regulations.
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"Medicaid Regulations" means, collectively, (a) all federal statutes
(whether set forth in Title XIX of the Social Security Act or elsewhere)
affecting the medical assistance program established by Title XIX of the Social
Security Act and any statutes succeeding thereto; (b) all applicable provisions
of all federal rules, regulations, manuals and orders of all Governmental
Authorities promulgated pursuant to or in connection with the statutes described
in clause (a) above and all federal administrative, reimbursement and other
guidelines of all Governmental Authorities having the force of law promulgated
pursuant to or in connection with the statutes described in clause (a) above;
(c) all state statutes and plans for medical assistance enacted in connection
with the statutes and provisions described in clauses (a) and (b) above; and (c)
all applicable provisions of all rules, regulations, manuals and orders of all
Governmental Authorities promulgated pursuant to or in connection with the
statutes described in clause (c) above and all state administrative,
reimbursement and other guidelines of all Governmental Authorities having the
force of law promulgated pursuant to or in connection with the statutes
described in clause (b) above, in each case as may be amended, supplemented or
otherwise modified from time to time.
"Medicare Certification" means certification by CMS or a Governmental
Authority under contract with CMS that the health care operation is in
compliance with all the conditions of participation set forth in the Medicare
Regulations.
"Medicare Regulations" means, collectively, (i) all federal statutes
(whether set forth in Title XVIII of the Social Security Act or elsewhere)
affecting the health insurance program for the aged and disabled established by
Title XVIII of the Social Security Act and any statutes succeeding thereto; and
(ii) all applicable provisions of all rules, regulations, manuals, orders and
administrative, reimbursement and other guidelines having the force of law of
all Governmental Authorities (including without limitation, HHS, CMS, the Office
of the Inspector General for HHS, or any person succeeding to the functions of
any of the foregoing) promulgated pursuant to or in connection with any of the
foregoing having the force of law, as each may be amended, supplemented or
otherwise modified from time to time.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which the Parent or any ERISA Affiliate is making, or is
accruing an obligation to make, or has accrued an obligation to make
contributions within the preceding six (6) years.
"Net Income" means, with respect to any Person, for any period of
determination, the net income (or loss) of the such Person for such period,
determined in accordance with GAAP.
"Obligations" shall have the meaning assigned thereto in the Loan
Agreement.
"Officer's Compliance Certificate" shall have the meaning assigned
thereto in Section 10(b) of this Guaranty.
"Parent" shall have the meaning assigned thereto in the Preamble.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency.
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"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or
Section 412 of the Code and which (a) is maintained for the employees of the
Parent or any ERISA Affiliates or (b) has at any time within the preceding six
(6) years been maintained for the employees of the Parent or any of its current
or former ERISA Affiliates.
"Permanent Principal Payment" means, with respect to the Debt of any
Person, an actual payment or repayment of the outstanding principal amount of
(a) term Debt (excluding voluntary prepayments thereof), which by its terms does
not permit any payments or repayments of principal to be re-borrowed, or (b)
Debt under a revolving credit facility (or other facility which permits the
re-borrowing of principal payments or repayments) so long as the aggregate
commitment of the lender thereunder to allow any such re-borrowing has been
permanently reduced by an amount equal to such payment or repayment.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust, business trust, joint venture, joint stock
company, pool, syndicate, sole proprietorship, unincorporated organization,
Governmental Authority or any other form of entity or group thereof.
"Required Lenders" shall have the meaning assigned thereto in the Loan
Agreement.
"Subsidiary" means as to any Person, any corporation, partnership,
limited liability company or other entity of which more than fifty percent (50%)
of the outstanding capital stock or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other managers of
such corporation, partnership, limited liability company or other entity is at
the time owned by or the management is otherwise controlled by such Person
(irrespective of whether, at the time, capital stock or other ownership
interests of any other class or classes of such corporation, partnership,
limited liability company or other entity shall have or might have voting power
by reason of the happening of any contingency). Unless otherwise qualified
references to "Subsidiary" or "Subsidiaries" herein shall refer to those of the
Parent.
"Subsidiary Guarantors" shall have the meaning assigned thereto in the
Preamble.
"Termination Event" means: (a) except for any such event that could not
reasonably be expected to have a Material Adverse Effect, a "Reportable Event"
described in Section 4043 of ERISA for which the notice requirement has not been
waived by the PBGC, or (b) except for any withdrawal that could not reasonably
be expected to have a Material Adverse Effect, the withdrawal of the Parent or
any ERISA Affiliate from a Pension Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, or (c) the
termination of a Pension Plan, the filing of a notice of intent to terminate a
Pension Plan or the treatment of a Pension Plan amendment as a termination, each
under Section 4041(c) of ERISA, or (d) the institution of proceedings to
terminate, or the appointment of a trustee with respect to, any Pension Plan by
the PBGC, or (e) any other event or condition which would constitute grounds
under Section 4042(a) of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan, or (f) the imposition of a Lien
pursuant to Section 412 of the Code or Section 302 of ERISA, or (g) except for
any such event or condition that could not reasonably
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be expected to have a Material Adverse Effect, any event or condition which
results in the reorganization or insolvency of a Multiemployer Plan under
Sections 4241 or 4245 of ERISA, or (h) except for any such event or condition
that could not reasonably be expected to have a Material Adverse Effect, any
event or condition which results in the termination of a Multiemployer Plan
under Section 4041A of ERISA or the institution by PBGC of proceedings to
terminate a Multiemployer Plan under Section 4042 of ERISA.
"Total Capitalization" means, at any date of determination, the sum of
(a) Total Debt plus (b) Total Equity, each as of such date and calculated in
accordance with GAAP.
"Total Debt" means, as of any date of determination, the sum of the
following, without duplication, calculated in accordance with GAAP: (a) all Debt
of the Parent and its Subsidiaries less (b) all Available Cash.
"Total Equity" means, with respect to the Parent, its Subsidiaries and
each Hospital Joint Venture owned thereby, at any date of determination, the
stockholders' equity calculated in accordance with GAAP without duplication.
"Unconsolidated Cash" means, with respect to each Unconsolidated
Entity, for any period, the greater of the following clause (a) or clause (b),
as applicable, in each case determined, without duplication, in accordance with
GAAP:
(a) an amount equal to (i) the proportion of (A) the Debt
of such Unconsolidated Entity guaranteed by the Parent or any
Wholly-Owned Subsidiary thereof as of the last day of such period to
(B) all Debt of such Unconsolidated Entity as of the last day of such
period times (ii) the aggregate amount of all cash and cash equivalents
of such Unconsolidated Entity, which such cash or cash equivalents are
readily marketable and available without restriction or limitation for
the immediate payment or repayment of Debt thereof as of the last day
of such period, and
(b) an amount equal to (i) the percentage of the total
amount of issued and outstanding capital stock, limited liability
company interests, partnership interests, or other ownership interests
of such Unconsolidated Entity owned by the Parent or any Wholly-Owned
Subsidiary thereof as of the last day of such period times (ii) the
aggregate amount of all cash and cash equivalents of such
Unconsolidated Entity, which such cash or cash equivalents are readily
marketable and available without restriction or limitation for the
immediate payment or repayment of Debt thereof as of the last day of
such period.
"Unconsolidated Cash Interest Expense" means, with respect to each
Unconsolidated Entity, for any period, the greater of the following clause (a)
or clause (b), as applicable, in each case determined, without duplication, in
accordance with GAAP:
(a) an amount equal to (i) the proportion of (A) the Debt
of such Unconsolidated Entity guaranteed by the Parent or any
Wholly-Owned Subsidiary thereof as of the last day of such period to
(B) all Debt of such Unconsolidated Entity as of the
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last day of such period times (ii) the amount of Cash Interest Expense
of such Unconsolidated Entity for such period, and
(b) an amount equal to (i) the percentage of the total
amount of issued and outstanding capital stock, limited liability
company interests, partnership interests, or other ownership interests
of such Unconsolidated Entity owned by the Parent or any Wholly-Owned
Subsidiary thereof as of the last day of such period times (ii) the
amount of Cash Interest Expense of such Unconsolidated Entity for such
period.
"Unconsolidated EBITDA" means, with respect to each Unconsolidated
Entity, for any period, the greater of the following clause (a) or clause (b),
as applicable, in each case determined, without duplication, in accordance with
GAAP:
(a) an amount equal to (i) the proportion of (A) the Debt
of such Unconsolidated Entity guaranteed by the Parent or any
Wholly-Owned Subsidiary thereof as of the last day of such period to
(B) all Debt of such Unconsolidated Entity as of the last day of such
period times (ii) the amount of EBITDA of such Unconsolidated Entity
for such period, and
(b) an amount equal to (i) the percentage of the total
amount of issued and outstanding capital stock, limited liability
company interests, partnership interests, or other ownership interests
of such Unconsolidated Entity owned by the Parent or any Wholly-Owned
Subsidiary thereof as of the last day of such period times (ii) the
amount of EBITDA of such Unconsolidated Entity for such period.
"Unconsolidated Entity" means any Hospital Joint Venture the financial
information with respect to which is not included in the Consolidated financial
statements of the Parent and its Subsidiaries required to be delivered pursuant
to Section 10(a)(i) hereof.
"Unconsolidated Lease Expense" means, with respect to each
Unconsolidated Entity, for any period, the greater of the following clause (a)
or clause (b), as applicable, in each case determined, without duplication, in
accordance with GAAP:
(a) an amount equal to (i) the proportion of (A) the Debt
of such Unconsolidated Entity guaranteed by the Parent or any
Wholly-Owned Subsidiary thereof as of the last day of such period to
(B) all Debt of such Unconsolidated Entity as of the last day of such
period times (ii) the amount of Lease Expense of such Unconsolidated
Entity for such period, and
(b) an amount equal to (i) the percentage of the total
amount of issued and outstanding capital stock, limited liability
company interests, partnership interests, or other ownership interests
of such Unconsolidated Entity owned by the Parent or any Wholly-Owned
Subsidiary thereof as of the last day of such period times (ii) the
amount of Lease Expense of such Unconsolidated Entity for such period.
11
"Unconsolidated Permanent Principal Payments" means, with respect to
each Unconsolidated Entity, for any period, the greater of the following clause
(a) or clause (b), as applicable, in each case determined, without duplication,
in accordance with GAAP:
(a) an amount equal to (i) the proportion of (A) the Debt
of such Unconsolidated Entity guaranteed by the Parent or any
Wholly-Owned Subsidiary thereof as of the last day of such period to
(B) all Debt of such Unconsolidated Entity as of the last day of such
period times (ii) the amount of Permanent Principal Payments of such
Unconsolidated Entity for such period, and
(b) an amount equal to (i) the percentage of the total
amount of issued and outstanding capital stock, limited liability
company interests, partnership interests, or other ownership interests
of such Unconsolidated Entity owned by the Parent or any Wholly-Owned
Subsidiary thereof as of the last day of such period times (ii) the
amount of Permanent Principal Payments of such Unconsolidated Entity
for such period.
"Wholly-Owned" means, with respect to a Subsidiary, that all of the
shares of capital stock or other ownership interests of such Subsidiary are,
directly or indirectly, owned or controlled by the Parent and/or one or more of
its Wholly-Owned Subsidiaries (except for directors' qualifying shares or other
shares required by Applicable Law to be owned by a Person other than the
Parent).
(b) General. Unless otherwise specified, a reference in this
Guaranty to a particular article, section, subsection, schedule or exhibit is a
reference to that article, section, subsection, schedule or exhibit of this
Guaranty. Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter. Any reference herein to "Charlotte time"
shall refer to the applicable time of day in Charlotte, North Carolina.
(c) Reference to Agreement. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Guaranty shall refer
to this Guaranty as a whole and not to any particular provision of this
Guaranty.
SECTION 2. Terms of the Guaranty.
(a) Guaranty of Obligations. Each Guarantor hereby,
jointly and severally with the other Guarantors, unconditionally
guarantees to the Administrative Agent for the ratable benefit of
itself and the Lenders, and their respective permitted successors,
endorsees, transferees and assigns, the prompt payment (whether at
stated maturity, by acceleration or otherwise) and performance of all
Obligations of the Borrower, whether primary or secondary (whether by
way of endorsement or otherwise), whether now existing or hereafter
arising, whether or not from time to time reduced or extinguished
(except by payment thereof) or hereafter increased or incurred, whether
or not recovery may be or hereafter become barred by the statute of
limitations, whether enforceable or unenforceable as against the
Borrower, whether or not discharged, stayed or
12
otherwise affected by any bankruptcy, insolvency or other similar law
or proceeding, whether created directly with the Administrative Agent
or any Lender or acquired by the Administrative Agent or any Lender
through assignment, endorsement or otherwise, whether matured or
unmatured, whether joint or several, as and when the same become due
and payable (whether at maturity or earlier, by reason of acceleration,
mandatory repayment or otherwise), in accordance with the terms of any
such instruments evidencing any such Obligations, including all
renewals, extensions or modifications thereof.
(b) Additional Guaranty of Performance. Additionally,
each Guarantor hereby, jointly and severally with the other Guarantors,
unconditionally guarantees to the Administrative Agent for the ratable
benefit of itself and the Lenders, and their respective permitted
successors, endorsees, transferees and assigns, the timely performance
of all other obligations of Borrower under the Loan Agreement and the
other Loan Documents, including, without limiting the generality of the
foregoing, that:
(i) the Improvements will be constructed upon
the Land in accordance with this Agreement and the Plans; and
(ii) the Improvements will be completed and ready
for occupancy, including delivery of any certificates required
by Applicable Law, the Loan Agreement and the other Loan
Documents, on or before the date required in the Loan
Agreement and the other Loan Documents.
In the event the foregoing conditions are not complied with in any
respect whatsoever, the Guarantors hereby agree to (i) assume all
responsibility for the completion of the Improvements and, at the
Guarantors' own cost and expense, to cause the Improvements to be fully
completed in accordance with the Plans and in accordance with the Loan
Agreement and the other Loan Documents; (ii) pay all bills in
connection with the construction of the Improvements; and (iii)
indemnify and hold the Administrative Agent and the Lenders harmless
from any and all loss, cost, liability or expense that the
Administrative Agent or the Lenders may suffer by reason of any such
event (except with respect to the willful misconduct or the gross
negligence of the Administrative Agent or the Lenders). The
Administrative Agent shall accept performance by the Guarantors of the
Borrower's obligations under the Loan Agreement and the other Loan
Documents, and so long as all of said obligations are being performed
by the Borrower or the Guarantors, the Administrative Agent will make
the proceeds of the Construction Loan Advances available under the
terms of the Loan Agreement. If, after the occurrence of a Default or
Event of Default, the Required Lenders are not satisfied with the
progress of construction by the Borrower and/or the Guarantors, the
Administrative Agent shall, if required by the Required Lenders, and on
behalf of Lenders, after first having given notice to the Guarantors at
the address and in the manner set forth in Section 12.1 of the Loan
Agreement, complete the Improvements either before or after
commencement of foreclosure proceedings or before or after any other
remedy
13
of the Administrative Agent or the Lenders against the Borrower or the
Guarantors, with such changes or modifications in the Plans which the
Administrative Agent reasonably deems necessary and expend such sums as
the Administrative Agent, in its discretion, reasonably deems necessary
and proper in order to so complete the Improvements, and the Guarantors
hereby waive any right to contest any such reasonably necessary
expenditures. The amount of any and all expenditures made by the
Administrative Agent for the foregoing purposes shall be due and
payable to the Lenders upon demand and accrue interest at a rate two
percent (2%) per annum above the rate then applicable under the
Construction Loan Notes (or that would be applicable under the
Construction Loan Notes if they were still outstanding). Neither the
Borrower nor any Guarantor shall be liable to the Lenders for the cost
of completing the Improvements to the extent that the aggregate cost of
completing the Improvements exceeds the Aggregate Commitment, provided
the entire principal of and interest on the Construction Loan Advances
shall have been paid in full. The obligations and liability of the
Guarantors under this Section 2(b) shall not be limited or restricted
by the existence of (or any limitation on) the guaranty of payment
under Section 2(a). For the purposes hereof, all of the Obligations of
the Borrower to the Administrative Agent or any Lender under the Loan
Agreement and the other Loan Documents, including all of the
Obligations specified in Section 2(a) and this Section 2(b), shall be
hereinafter collectively referred to as the "Guaranteed Obligations".
(c) Bankruptcy Limitations on Guarantors. Notwithstanding
anything to the contrary contained in paragraph (a) above, it is the
intention of each Guarantor and the Lenders that, in any proceeding
involving the bankruptcy, reorganization, arrangement, adjustment of
debts, relief of debtors, dissolution or insolvency or any similar
proceeding with respect to any Guarantor or its assets, the amount of
such Guarantor's obligations with respect to the Guaranteed Obligations
shall be in, but not in excess of, the maximum amount thereof not
subject to avoidance or recovery by operation of any Applicable
Insolvency Laws. To that end, but only in the event and to the extent
that such Guarantor's obligations with respect to the Guaranteed
Obligations or any payment made pursuant to the Guaranteed Obligations
would, but for the operation of the first sentence of this Section
2(c), be subject to avoidance or recovery in any such proceeding under
Applicable Insolvency Laws, the amount of such Guarantor's obligations
with respect to the Guaranteed Obligations shall be limited to the
largest amount which, after giving effect thereto, would not, under
Applicable Insolvency Laws, render such Guarantor's obligations with
respect to such Guaranteed Obligations unenforceable or avoidable or
otherwise subject to recovery under Applicable Insolvency Laws. To the
extent any payment actually made pursuant to the Guaranteed Obligations
exceeds the limitation of the first sentence of this Section 2(c) and
is otherwise subject to avoidance and recovery in any such proceeding
under Applicable Insolvency Laws, the amount subject to avoidance shall
in all events be limited to the amount by which such actual payment
exceeds such limitation and the Guaranteed Obligations as limited by
the first sentence of this Section 2(c) shall in all events remain in
full force and effect
14
and be fully enforceable against such Guarantor. The first sentence of
this Section 2(c) is intended solely to preserve the rights of the
Administrative Agent hereunder against such Guarantor in such
proceeding to the maximum extent permitted by Applicable Insolvency
Laws and neither such Guarantor, the Borrower, any other guarantor nor
any other Person shall have any right or claim under such sentence that
would not otherwise be available under Applicable Insolvency Laws in
such proceeding.
(d) Mutual Grant of Present Right of Contribution and
Indemnity. To the extent that the value as of the time of execution of
this Guaranty of the benefits received by any Guarantor by reason of
matters stated in the preamble (whether determined under a standard of
"fair value," "reasonably equivalent value" or any other valuation
standard under Applicable Law) is less than the sum of the Guaranteed
Obligations incurred by such Guarantor to the Administrative Agent and
the Lenders plus such Guarantor's liability under this Section 2(d),
then subject only to Section 15 hereof and in addition to all other
rights and remedies such Guarantor has or may have under Applicable
Law, each remaining Guarantor respectively agrees that such Guarantor
has the present right to recover the amount of such excess from the
remaining Guarantors, which right shall be enforceable jointly and
severally against the remaining Guarantors to the full extent that the
Guaranteed Obligations are enforceable against such Guarantor. Without
limiting the foregoing, in the event any Guarantor is required, by
reason of this Guaranty, to pay an amount in excess of the value of the
benefit such Guarantor is deemed to have received by reason of matters
described in the preamble of this Guaranty, the remaining Guarantors
jointly and severally agree to pay such Guarantor, upon demand, the
amount of such excess. Subject only to the provisions of Section 15
hereof, such Guarantor shall be subrogated to any and all rights of the
Administrative Agent and the Lenders against the remaining Guarantors
to the extent of such excess payment.
SECTION 3. Nature of Guaranty. Each Guarantor agrees that this
Guaranty is a continuing, unconditional guaranty of payment and performance and
not of collection, and that its obligations under this Guaranty shall be
primary, absolute and unconditional, irrespective of, and unaffected by:
(a) the genuineness, validity, regularity, enforceability
or any future amendment of, or change in, this Guaranty, the Loan
Agreement or any other Loan Document or any other agreement, document
or instrument to which the Borrower, any Subsidiary thereof or any
Affiliate thereof is or may become a party;
(b) the absence of any action to enforce this Guaranty,
the Loan Agreement or any other Loan Document or the waiver or consent
by the Administrative Agent or any Lender with respect to any of the
provisions of this Guaranty, the Loan Agreement or any other Loan
Document;
15
(c) the existence, value or condition of, or failure to
perfect its Lien against, any security (including, without limitation,
the Collateral) for or other guaranty of the Guaranteed Obligations or
any action, or the absence of any action, by the Administrative Agent
or any Lender in respect of such security or guaranty (including,
without limitation, the release of any such security or guaranty);
(d) any structural change in, restructuring of or other
similar change of the Borrower or any of its Subsidiaries; or
(e) any other action or circumstances which might
otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor;
it being agreed by each Guarantor that, subject to the first sentence in Section
2(c) hereof, its obligations under this Guaranty shall not be discharged until
the final indefeasible payment and performance, in full, of the Guaranteed
Obligations and the termination of the Aggregate Commitment. To the extent
permitted by Applicable Law, each Guarantor expressly waives all rights it may
now or in the future have under any statute (including, without limitation,
North Carolina General Statutes Section 26-7, et seq. or similar law), or at law
or in equity, or otherwise, to compel the Administrative Agent or any Lender to
proceed in respect of the Guaranteed Obligations against the Borrower or any
other party or against any security (including, without limitation, the
Collateral) for or other guaranty of the payment and performance of the
Guaranteed Obligations before proceeding against, or as a condition to
proceeding against, such Guarantor. To the extent permitted by Applicable Law,
each Guarantor further expressly waives and agrees not to assert or take
advantage of any defense based upon the failure of the Administrative Agent or
any Lender to commence an action in respect of the Guaranteed Obligations
against the Borrower, such Guarantor, any other guarantor or any other Person or
any security (including, without limitation, the Collateral) for the payment and
performance of the Guaranteed Obligations. Each Guarantor agrees that any notice
or directive given at any time to the Administrative Agent or any Lender which
is inconsistent with the waivers in the preceding two sentences shall be null
and void and may be ignored by the Administrative Agent or such Lender, and, in
addition, may not be pleaded or introduced as evidence in any litigation
relating to this Guaranty for the reason that such pleading or introduction
would be at variance with the written terms of this Guaranty, unless the
Administrative Agent and the Required Lenders have specifically agreed otherwise
in writing. The foregoing waivers are of the essence of the transaction
contemplated by the Loan Agreement and the other Loan Documents and, but for
this Guaranty and such waivers, the Administrative Agent and the Lenders would
decline to enter into the Loan Agreement and the other Loan Documents.
SECTION 4. Demand by the Administrative Agent. In addition to
the terms set forth in Section 3 hereof, and in no manner imposing any
limitation on such terms, if all or any portion of the then outstanding
Guaranteed Obligations under the Loan Agreement are declared to be immediately
due and payable, then the Guarantors shall, upon demand in writing therefor by
the Administrative Agent to the Guarantors, pay all or such portion of the
outstanding Guaranteed Obligations then declared due and payable. Payment by the
Guarantors shall be
16
made to the Administrative Agent, to be credited and applied upon the Guaranteed
Obligations, in immediately available Dollars to an account designated by the
Administrative Agent or at the address referenced herein for the giving of
notice to the Administrative Agent or at any other address that may be specified
in writing from time to time by the Administrative Agent.
SECTION 5. Waivers. In addition to the waivers contained in
Section 3 hereof, each Guarantor, to the extent permitted by Applicable Law,
waives and agrees that it shall not at any time insist upon, plead or in any
manner whatever claim or take the benefit or advantage of, any appraisal,
valuation, stay, extension, marshalling of assets or redemption laws, or
exemption, whether now or at any time hereafter in force, which may delay,
prevent or otherwise affect the performance by such Guarantor of its obligations
under, or the enforcement by the Administrative Agent or the Lenders of, this
Guaranty. Each Guarantor further hereby waives, to the extent permitted by
Applicable Law, diligence, presentment, demand, protest and notice (except as
specifically required herein) of whatever kind or nature with respect to any of
the Guaranteed Obligations and waives, to the extent permitted by Applicable
Law, the benefit of all provisions of law which are or might be in conflict with
the terms of this Guaranty. Each Guarantor represents, warrants and agrees that
its obligations under this Guaranty are not and shall not be subject to any
counterclaims, offsets or defenses of any kind against the Administrative Agent,
the Lenders or the Borrower whether now existing or which may arise in the
future.
SECTION 6. Benefits of Guaranty. The provisions of this Guaranty
are for the benefit of the Administrative Agent and the Lenders and their
respective permitted successors, transferees, endorsees and assigns, and nothing
herein contained shall impair, as between the Borrower, the Administrative Agent
and the Lenders, the obligations of the Borrower under the Loan Documents. In
the event all or any part of the Guaranteed Obligations are transferred,
endorsed or assigned by the Administrative Agent or any Lender to any Person or
Persons as permitted under the Loan Agreement, any reference to the
"Administrative Agent", or the "Lenders" herein shall be deemed to refer equally
to such Person or Persons.
SECTION 7. Modification of Loan Documents etc. If the
Administrative Agent or the Lenders shall at any time or from time to time, with
or without the consent of, or notice to, the Guarantors:
(f) change or extend the manner, place or terms of
payment of, or renew or alter all or any portion of, the Guaranteed
Obligations;
(g) take any action under or in respect of the Loan
Agreement or the other Loan Documents in the exercise of any remedy,
power or privilege contained therein or available to it at law, in
equity or otherwise, or waive or refrain from exercising any such
remedies, powers or privileges;
(h) amend or modify, in any manner whatsoever, the Loan
Agreement or the other Loan Documents;
17
(i) extend or waive the time for performance by any
Guarantor, any other guarantor, the Borrower or any other Person of, or
compliance with, any term, covenant or agreement on its part to be
performed or observed under the Loan Agreement or any other Loan
Document, or waive such performance or compliance or consent to a
failure of, or departure from, such performance or compliance;
(j) take and hold security or collateral (including,
without limitation, the Collateral) for the payment of the Guaranteed
Obligations or sell, exchange, release, dispose of, or otherwise deal
with, any property (including, without limitation, the Collateral)
pledged, mortgaged or conveyed, or in which the Administrative Agent or
the Lenders have been granted a Lien, to secure any Debt of any
Guarantor, any other guarantor or the Borrower to the Administrative
Agent or the Lenders;
(k) release anyone who may be liable in any manner for
the payment of any amounts owed by any Guarantor, any other guarantor
or the Borrower to the Administrative Agent or any Lender;
(l) modify or terminate the terms of any intercreditor or
subordination agreement pursuant to which claims of other creditors of
any Guarantor, any other guarantor or the Borrower are subordinated to
the claims of the Administrative Agent or any Lender; or
(m) apply any sums by whomever paid or however realized
to any Guaranteed Obligations owing by any Guarantor, any other
guarantor or the Borrower to the Administrative Agent or any Lender in
such manner as the Administrative Agent or any Lender shall determine
in its reasonable discretion;
then neither the Administrative Agent nor any Lender shall incur any liability
to any Guarantor as a result thereof, and no such action shall impair or release
the obligations of any Guarantor under this Guaranty.
SECTION 8. Reinstatement. Each Guarantor agrees that, if any
payment made by the Borrower or any other Person applied to the Obligations is
at any time annulled, set aside, rescinded, invalidated, declared to be
fraudulent or preferential or otherwise required to be refunded or repaid or the
proceeds of any collateral are required to be refunded by the Administrative
Agent or any Lender to the Borrower, its estate, trustee, receiver or any other
party, including, without limitation, any Guarantor, under any Applicable Law or
equitable cause, then, to the extent of such payment or repayment, each
Guarantor's liability hereunder (and any Lien securing such liability) shall be
and remain in full force and effect, as fully as if such payment had never been
made, and, if prior thereto, this Guaranty shall have been canceled or
surrendered (and if any Lien or collateral securing such Guarantor's liability
hereunder shall have been released or terminated by virtue of such cancellation
or surrender), this Guaranty (and such Lien) shall be reinstated in full force
and effect, and such prior cancellation or surrender
18
shall not diminish, release, discharge, impair or otherwise affect the
obligations of such Guarantor in respect of the amount of such payment (or any
Lien securing such obligation).
SECTION 9. Representations and Warranties.
(a) Representations and Warranties. To induce the Lenders to make
the Construction Loan Advances, each Guarantor hereby represents and warrants to
the Administrative Agent and the Lenders both before and after giving effect to
the transactions contemplated under the Loan Agreement:
(i) Ownership. Each Subsidiary and each Hospital Joint
Venture owned by the Parent, either directly or indirectly, is listed
on Schedule 9(a)(i) (as updated from time to time pursuant to Section
11(j)). As of the Closing Date, the capitalization of the Parent, its
Subsidiaries and each Hospital Joint Venture consists of the number of
shares or other ownership interests, authorized, issued and
outstanding, of such classes and series, with or without par value,
described on Schedule 9(a)(i). All outstanding shares or other
ownership interests have been duly authorized and validly issued and
are fully paid and nonassessable, with no personal liability attaching
to the ownership thereof, and not subject to any preemptive or similar
rights. The shareholders of the Subsidiaries and the Hospital Joint
Ventures owned by the Parent, either directly or indirectly, and the
number of shares or other ownership interests owned by each as of the
Closing Date are described on Schedule 9(a)(i). As of the Closing Date,
there are no outstanding stock purchase warrants, subscriptions,
options, securities, instruments or other rights of any type or nature
whatsoever, which are convertible into, exchangeable for or otherwise
provide for or permit the issuance of capital stock or other ownership
interests of the Parent, any Subsidiary, or any Hospital Joint Venture
except as described on Schedule 9(a)(i).
(ii) Organization; Power; Qualification. Each Guarantor is
duly organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or formation, has the power and
authority to own its properties and to carry on its business as now
being and hereafter proposed to be conducted and is duly qualified and
authorized to do business in each jurisdiction in which the character
of its properties or the nature of its business requires such
qualification and authorization, except where the failure to so qualify
could not reasonably be expected to have a Material Adverse Effect. The
jurisdictions in which each Guarantor is organized and qualified to do
business as of the Closing Date are described on Schedule 9(a)(ii) (as
updated from time to time pursuant to Section 11(j)).
(iii) Authorization of Guaranty and Loan Documents. Each
Guarantor has the corporate or limited liability company right, power
and authority to execute, deliver and perform this Guaranty and each of
the other Loan Documents to which such Guarantor is a party and has
taken all necessary corporate or limited liability company action to
authorize its execution, delivery and
19
performance of, this Guaranty and each of the other Loan Documents to
which such Guarantor is a party.
(iv) Enforceability of Guaranty and Loan Documents. This
Guaranty and each of the other Loan Documents to which each Guarantor
is a party constitutes the legal, valid and binding obligation of such
Guarantor enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by the availability of equitable
remedies.
(v) Compliance with Laws, Etc. The execution, delivery
and performance of this Guaranty and each of the other Loan Documents
to which each Guarantor is a party will not violate any Applicable Law
or contractual obligation of such Guarantor and will not result in the
creation or imposition of any Lien upon or with respect to any property
or revenues of such Guarantor.
(vi) Consents and Authorizations. No consent or
authorization of, filing with, or other act by or in respect of, any
arbitrator or Governmental Authority and no consent of any other Person
(including, without limitation, any stockholder or creditor of each
Guarantor), is required in connection with the execution, delivery,
performance, validity or enforceability of this Guaranty or any of the
other Loan Documents to which such Guarantor is a party, other than the
approval of the board of directors of each Guarantor (which approval
has been obtained prior to the date hereof).
(vii) Litigation. Except for matters set forth on Schedule
9(a)(vii), no actions, suits or proceedings before any arbitrator or
Governmental Authority are pending or, to the knowledge of each
Guarantor, threatened by or against such Guarantor or against any of
its properties with respect to this Guaranty, any other Loan Document
or any of the transactions contemplated hereby or thereby which could
reasonably be expected to have a Material Adverse Effect.
(viii) Title to Properties. Each Guarantor has such title to
the real property owned by it and a valid leasehold interest in the
real property leased by it, and has good and marketable title to all of
its personal property sufficient to carry on its business free of any
and all Liens of any type whatsoever.
(ix) Solvency. As of the Closing Date (or such later date
upon which such Guarantor became a party hereto), each Guarantor (A)
has capital sufficient to carry on its business and transactions and
all business and transactions in which it engages and is able to pay
its debts as they mature, (B) owns property having a value, both at
fair valuation and at present fair saleable value on a going concern
basis, greater than the amount required to pay its probable liabilities
(including contingencies) and (C) does not believe that it will incur
debts or liabilities
20
beyond its ability to pay such debts or liabilities as they mature,
subject in each case to the first sentence in Section 2(c) hereof.
(x) Financial Statements. The (A) audited Consolidated
balance sheet of the Parent and its Subsidiaries as of September 30,
2001 and the related audited statements of income and retained earnings
and cash flows for the Fiscal Year of the Parent and its Subsidiaries
then ended and (B) unaudited Consolidated balance sheet of the Parent
and its Subsidiaries as of June 30, 2002 and the related unaudited
statements of income and retained earnings and cash flows for the
fiscal quarter of the Parent and its Subsidiaries then ended, copies of
which has been furnished to Administrative Agent and the Lenders, are
complete and correct in all material respects and fairly present on a
Consolidated basis the assets, liabilities and financial position of
the Parent and its Subsidiaries as of such dates and the results of its
operations and cash flows for the periods then ended.
(xi) No Material Adverse Change. Since September 30, 2001,
there has been no Material Adverse Effect with respect to any Guarantor
or the Guarantors taken as a whole, as applicable, and no event has
occurred or condition arisen that could reasonably be expected to have
a Material Adverse Effect.
(xii) Tax Returns and Payments. Each Guarantor has duly
filed or caused to be filed all federal, state, local and other tax
returns required by Applicable Law to be filed, and has paid, or made
adequate provision for the payment of, all federal, state, local and
other material taxes, assessments and governmental charges or levies
upon it and its property, income, profits and assets which are due and
payable, except for taxes (i) that are not yet delinquent or (ii) that
are being contested in good faith and against which adequate reserves
are being maintained in accordance with GAAP; such returns accurately
reflect in all material respects all liability for taxes of such
Guarantor for the periods covered thereby; there is no ongoing audit or
examination or, to the knowledge of the such Guarantor, other
investigation by any Governmental Authority of the tax liability of
such Guarantor; no Governmental Authority has asserted any Lien or
other claim against such Guarantor with respect to unpaid taxes which
has not been discharged or resolved; and the charges, accruals and
reserves on the books of such Guarantor in respect of federal, state,
local and other taxes for all Fiscal Years and portions thereof since
the organization of such Guarantor are in the judgment of such
Guarantor adequate, and such Guarantor does not anticipate any
additional material taxes or assessments for any of such periods.
(xiii) Environmental Matters.
(A) The properties owned, leased or operated by
each Guarantor now or in the past do not contain, and to its
knowledge have not previously contained, any Hazardous
Materials in amounts or concentrations which (1) constitute or
constituted a material violation of applicable Environmental
21
Laws or (2) could give rise to a material liability under
applicable Environmental Laws;
(B) Each Guarantor and such properties and all
operations conducted in connection therewith are in compliance
in all material respects with all applicable Environmental
Laws, and there is no contamination at, under or about such
properties or such operations which could reasonably interfere
with the continued operation of such properties or impair the
fair saleable value thereof;
(C) No Guarantor has received any notice of
violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters, Hazardous
Materials, or compliance with Environmental Laws from (A) any
Governmental Authority or (B) to the extent any such
violation, alleged violation, non-compliance, liability or
potential liability could reasonably be expected to have a
Material Adverse Effect, any other Person, nor does any
Guarantor have knowledge or reason to believe that any such
notice will be received or is being threatened;
(D) Hazardous Materials have not been
transported or disposed of to or from the properties owned,
leased or operated by of any Guarantor in violation of, or in
a manner or to a location which could give rise to a material
liability under, Environmental Laws, nor have any Hazardous
Materials been generated, treated, stored or disposed of at,
on or under any of such properties in violation of, or in a
manner that could give rise to a material liability under, any
applicable Environmental Laws;
(E) No judicial proceedings or governmental or
administrative action is pending, or, to the knowledge of any
Guarantor, threatened, under any Environmental Law to which
such Guarantor is or will be named as a potentially
responsible party with respect to such properties or
operations conducted in connection therewith, nor are there
any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative
or judicial requirements outstanding under any Environmental
Law with respect to such Guarantor or such properties or such
operations; and
(F) There has been no release, or to the best of
any Guarantor's knowledge, threat of release, of Hazardous
Materials at or from properties owned, leased or operated by
such Guarantor, now or in the past, in violation of or in
amounts or in a manner that could give rise to a material
liability under Environmental Laws.
22
(xiv) ERISA.
(A) The Parent and each ERISA Affiliate is in
material compliance with all applicable provisions of ERISA
and the regulations and published interpretations thereunder
with respect to all Employee Benefit Plans except for any
required amendments for which the remedial amendment period as
defined in Section 401(b) of the Code has not yet expired and
except where a failure to so comply could not reasonably be
expected to have a Material Adverse Effect. Each Employee
Benefit Plan that is intended to be qualified under Section
401(a) of the Code has been determined by the Internal Revenue
Service to be so qualified, and each trust related to such
plan has been determined to be exempt under Section 501(a) of
the Code except for such plans that have not yet received
determination letters but for which the remedial amendment
period for submitting a determination letter has not yet
expired. No liability has been incurred by the Parent or any
ERISA Affiliate which remains unsatisfied for any taxes or
penalties with respect to any Employee Benefit Plan or any
Multiemployer Plan except for a liability that could not
reasonably be expected to have a Material Adverse Effect;
(B) As of the Closing Date, no Pension Plan has
been terminated, nor has any accumulated funding deficiency
(as defined in Section 412 of the Code) been incurred (without
regard to any waiver granted under Section 412 of the Code),
nor has any funding waiver from the Internal Revenue Service
been received or requested with respect to any Pension Plan,
nor has the Parent or any ERISA Affiliate failed to make any
contributions or to pay any amounts due and owing as required
by Section 412 of the Code, Section 302 of ERISA or the terms
of any Pension Plan prior to the due dates of such
contributions under Section 412 of the Code or Section 302 of
ERISA, nor has there been any event requiring any disclosure
under Section 4041(c)(3)(C) or 4063(a) of ERISA with respect
to any Pension Plan;
(C) Except where the failure of any of the
following representations to be correct in all material
respects could not reasonably be expected to have a Material
Adverse Effect, neither the Parent nor any ERISA Affiliate
has: (1) engaged in a nonexempt prohibited transaction
described in Section 406 of the ERISA or Section 4975 of the
Code, (2) incurred any liability to the PBGC which remains
outstanding other than the payment of premiums and there are
no premium payments which are due and unpaid, (3) failed to
make a required contribution or payment to a Multiemployer
Plan, or (4) failed to make a required installment or other
required payment under Section 412 of the Code;
(D) No Termination Event has occurred or is
reasonably expected to occur; and
23
(E) Except where the failure of any of the
following representations to be correct in all material
respects could not reasonably be expected to have a Material
Adverse Effect, no proceeding, claim (other than a benefits
claim in the ordinary course of business), lawsuit and/or
investigation is existing or, to the best knowledge of the
Parent after due inquiry, threatened concerning or involving
any (1) employee welfare benefit plan (as defined in Section
3(1) of ERISA) currently maintained or contributed to by the
Parent or any ERISA Affiliate, (2) Pension Plan or (3)
Multiemployer Plan.
(xv) Accuracy and Completeness of Information. All written
information, reports, statements and other papers and data produced by
or on behalf of the Parent or any Subsidiary thereof and furnished to
the Administrative Agent or any Lender in connection with this
Guaranty, or any of the other Loan Documents, were, at the time the
same were so furnished, complete and correct in all material respects
to the extent necessary to give the Administrative Agent or any Lender
complete, true and accurate knowledge of the subject matter based on
Parent's knowledge thereof (other than projections, budgets or other
estimates which shall be determined in good faith utilizing reasonable
assumptions). No document furnished or written statement made to the
Administrative Agent or the Lenders by the Parent or any Subsidiary
thereof in connection with the negotiation, preparation or execution of
this Guaranty or any of the Loan Documents contains or will contain any
untrue statement of a fact material to the creditworthiness of the
Parent or its Subsidiaries or omits or will omit to state a fact
necessary in order to make the statements contained therein not
misleading to the extent material to the creditworthiness of the Parent
or its Subsidiaries. The Parent is not aware of any facts which it has
not disclosed in writing to the Administrative Agent having a Material
Adverse Effect, or insofar as the Parent can now foresee, which could
reasonably be expected to have a Material Adverse Effect.
(b) Survival of Representations and Warranties, Etc. All
representations and warranties set forth in this Section 9 and all
representations and warranties of the Guarantors contained in any certificate,
or any of the Loan Documents (including, but not limited to, any such
representation or warranty made in or in connection with any amendment thereto)
shall constitute representations and warranties made under this Guaranty. All
representations and warranties made under this Guaranty shall be made or deemed
to be made at and as of the Closing Date (except those that are expressly made
as of a specific date), shall survive the Closing Date and shall not be waived
by the execution and delivery of this Guaranty, any investigation made by or on
behalf of the Lenders or any borrowing hereunder.
SECTION 10. Financial Information and Reports. Until all
Obligations have been finally and indefeasibly paid and satisfied in full and
the Commitments of the Lenders under the Loan Agreement have been terminated,
unless consent has been obtained in the manner provided for in Section 19, the
Parent will furnish, or cause to be furnished to the Administrative Agent and
the Lenders at their respective addresses as set forth on Schedule 1, or
24
such other office as may be designated by the Administrative Agent and the
Lenders from time to time:
(a) Financial Statements.
(i) Quarterly and Annual Financial Statements.
(A) As soon as practicable and in any event
within fifty-five (55) days after the end of each fiscal
quarter, an unaudited Consolidated and consolidating balance
sheet of the Parent and its Subsidiaries as of the close of
such fiscal quarter and unaudited Consolidated and
consolidating statements of income and expenses and cash flow
for the fiscal quarter then ended and that portion of the
Fiscal Year then ended, all in reasonable detail and prepared
by the Parent and its Subsidiaries in accordance with GAAP and
certified by a Responsible Officer of Parent to present fairly
in all material respects the financial condition of the Parent
and its Subsidiaries as of their respective dates and the
results of operations of the Parent and its Subsidiaries for
the respective periods then ended, subject to normal year end
adjustments.
(B) As soon as practicable and in any event
within one hundred (100) days after the end of each Fiscal
Year of Parent and its Subsidiaries, commencing with Fiscal
Year ending September 30, 2002, an audited Consolidated and
unaudited consolidating balance sheet of Parent and its
Subsidiaries as of the close of such Fiscal Year and audited
Consolidated and unaudited consolidating statements of income
and expenses, retained earnings and cash flows for the Fiscal
Year then ended, including the notes thereto, all in
reasonable detail and prepared in accordance with GAAP and
accompanied by a report thereon prepared by Deloitte & Touche,
LLP, or another independent certified public accounting firm
of nationally recognized standing which is reasonably
acceptable to the Administrative Agent, that such financial
statements are not qualified with respect to scope limitations
imposed by Parent and its Subsidiaries or with respect to
accounting principles followed by Parent and its Subsidiaries
not in accordance with GAAP.
(ii) Annual Forecasts. As soon as practicable and in any
event no later than thirty (30) days after the beginning of each Fiscal
Year, an annual forecast prepared by management of the Parent, in
reasonable detail and in the form customarily prepared by management of
the Parent for its internal use and setting forth an explanation for
the principal assumptions on which such forecasts were based, of
balance sheets, income statements and cash flow statements with respect
to the Parent and its Subsidiaries on a quarterly basis for each Fiscal
Year thereafter until the Maturity Date.
(iii) SEC Reports. Promptly after the same become publicly
available, copies of all periodic and other reports, proxy statements
and other materials filed with the Securities and Exchange Commission,
or any Governmental Authority succeeding to any or all of the functions
of said Commission, or with any national securities exchange.
25
(iv) Other Information. Such other information regarding
the operations, business affairs and financial condition of the Parent
and its Subsidiaries as the Administrative Agent may reasonably
request, in each case in the form regularly prepared by the Parent and
its Subsidiaries (if applicable).
(b) Officer's Compliance Certificate. At each time financial
statements are delivered pursuant to Sections 10(a)(i)(A) or 10(a)(i)(B) and at
such other times as the Administrative Agent shall reasonably request a
certificate of the chief financial officer or the treasurer of Parent in the
form of Exhibit B attached hereto (an "Officer's Compliance Certificate"):
(i) stating that such officer has reviewed such financial
statements and, to the best of his knowledge, such financial statements
fairly present in all material respects the financial condition of the
Parent and its Subsidiaries as of the dates indicated and the results
of their operations and cash flows for the periods indicated;
(ii) stating that to such officer's knowledge, based on a
reasonable examination, no Default or Event of Default exists, or, if
such is not the case, specifying such Default or Event of Default and
its nature, when it occurred, whether it is continuing and the steps
being taken by the Parent and its Subsidiaries with respect to such
Default;
(iii) stating that Parent and its Subsidiaries are in
compliance with the covenants and restrictions set forth in Section 11,
Section 12 and Section 13 of this Guaranty applicable to Parent and its
Subsidiaries and, with respect to the covenants set forth in Section
12, the calculations applicable thereto; and
(iv) setting forth any other information reasonably
required by the Administrative Agent to ensure compliance with this
Guaranty.
(c) Accountant's Certificate. At each time financial statements
are delivered pursuant to Section 10(a)(i)(B), a certificate of the independent
public accountants certifying such financial statements addressed to the
Administrative Agent for the benefit of the Lenders:
(i) stating that in making the examination necessary for
the certification of such financial statements, they obtained no
knowledge of any Default or Event of Default or, if such is not the
case, specifying such Default or Event of Default and its nature and
period of existence; and
(ii) including the calculations prepared by such
accountants required to establish whether or not the Parent and its
Subsidiaries are in compliance with the financial covenants set forth
in Section 12 hereof as at the end of each respective period.
26
(d) Other Reports.
(i) Accountants Reports. Promptly upon receipt thereof,
copies of all reports, if any, submitted to the Parent or its Board of
Directors by its independent public accountants in connection with
their auditing function, including, without limitation, any management
report and any management responses thereto.
(ii) Other Reports. Such other information regarding the
operations, business affairs and financial condition of the Parent and
its Subsidiaries as the Administrative Agent or any Lender may
reasonably request.
(e) Notice of Litigation and Other Matters. Prompt (but in
no event later than ten (10) days after an officer of the Parent obtains
knowledge thereof) telephonic and written notice of:
(i) the commencement of all proceedings and
investigations by or before any Governmental Authority and all actions
and proceedings in any court or before any arbitrator against or
involving the Parent or any Subsidiary thereof or any of its
properties, assets or businesses which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse
Effect;
(ii) any violation by the Parent or any Subsidiary thereof
of any Applicable Law or any notice of any violation received by the
Parent or any Subsidiary thereof from any Governmental Authority
including, without limitation, any notice of violation of Environmental
Laws, which in any such case could reasonably be expected to have a
Material Adverse Effect;
(iii) any labor controversy that has resulted in, or
threatens to result in, a strike or other work action against the
Parent or any Subsidiary thereof or any contractor or any material
development in any labor controversy which if adversely determined
could reasonably be expected to have a Material Adverse Effect;
(iv) any attachment, judgment, lien, levy or order
exceeding $1,000,000 that may be assessed against the Parent or any
Subsidiary thereof (to the extent such attachment, judgment, lien, levy
or order is not fully covered by insurance and with respect to which
the applicable insurance carrier has not acknowledged that such
attachment, judgment, lien, levy or order is fully covered by
insurance);
(v) (A) any Default or Event of Default or (B) any event
which constitutes or which with the passage of time or giving of notice
or both would constitute a default or event of default under any
Material Contract to which the Parent or any Subsidiary thereof is a
party or by which the Parent or any Subsidiary thereof or any of their
respective properties may be bound which could reasonably be expected
to have a Material Adverse Effect;
(vi) (A) any unfavorable determination letter from the
Internal Revenue Service regarding the qualification of an Employee
Benefit Plan under Section 401(a) of the Code (along with a copy
thereof), (B) all notices received by the Parent or any ERISA Affiliate
of
27
the PBGC's intent to terminate any Pension Plan or to have a trustee
appointed to administer any Pension Plan, (C) all notices received by
the Parent or any ERISA Affiliate from a Multiemployer Plan sponsor
concerning the imposition or amount of withdrawal liability pursuant to
Section 4202 of ERISA and (D) the Parent obtaining knowledge or reason
to know that the Parent or any ERISA Affiliate has filed or intends to
file a notice of intent to terminate any Pension Plan under a distress
termination within the meaning of Section 4041(c) of ERISA; and
(vii) any event which makes any of the representations set
forth in Section 9 inaccurate in any respect.
(f) Accuracy of Information. All written information, reports,
statements and other papers and data furnished by or on behalf of the Parent or
its Subsidiaries to the Administrative Agent or any Lender pursuant to this
Section 10, or any other provision of this Guaranty or any of the other Loan
Documents, shall be, at the time the same is so furnished, in compliance with
the representations and warranties set forth in Section 9(a)(xv).
SECTION 11. Affirmative Covenants. Until all of the Obligations
have been paid and satisfied in full and the Commitments of the Lenders under
the Loan Agreement have been terminated, unless consent has been obtained in the
manner provided for in Section 19, each Guarantor will, and will cause each of
its Subsidiaries to:
(a) Preservation of Existence and Related Matters. Preserve and
maintain:
(i) its separate corporate existence, and will not sell,
lease or otherwise dispose of all or substantially all of its business
or assets; provided that any Subsidiary Guarantor may be merged or
consolidated with or into, or be liquidated, wound up or dissolved, or
all or substantially all of its business or assets may be conveyed,
sold, assigned, leased, transferred or otherwise disposed of, in one
transaction or a series of transactions, to the Parent, any other
Subsidiary Guarantor or the Borrower; and
(ii) all rights, franchises, licenses and privileges
necessary to the conduct of its business, and qualify and remain
qualified to do business in each jurisdiction in which the failure to
so qualify would have a Material Adverse Effect.
(b) Compliance with Laws and Approvals. Observe and remain in
compliance with all Applicable Laws and maintain in full force and effect all
Governmental Approvals, in each case applicable to the conduct of its business,
except were the failure to observe or comply could not reasonably be expected to
have a Material Adverse Effect.
(c) Compliance with Agreements. Comply in all respects with each
term, condition and provision of each Material Contract to which it is a party
or by which it is bound and with all other material leases, agreements and other
instruments entered into in the conduct of its business, except (i) where the
failure to so comply could not reasonably be expected to have a Material Adverse
Effect or (ii) where any such term, condition or provision is contested in good
28
faith through applicable proceedings and where adequate reserves are maintained
in accordance with GAAP.
(d) Maintenance of Properties. Protect and preserve all properties
useful in and material to its business, including copyrights, patents, trade
names, service marks and trademarks material to the conduct of its business;
maintain in good working order and condition, reasonable wear and tear and
casualty excepted, all buildings, items of equipment and other items of tangible
real and personal property material to the conduct of its business; and from
time to time make or cause to be made all renewals, replacements and additions
to such property necessary for the conduct of its business, so that the business
carried on in connection therewith may be properly conducted at all times.
(e) Accounting Methods and Financial Records. Maintain a system of
accounting, and keep such books, records and accounts (which shall be true and
complete in all material respects) as may be required or as may be necessary to
permit the preparation of financial statements in accordance with GAAP and in
compliance with the regulations of any Governmental Authority having
jurisdiction over it or any of its properties.
(f) Payment and Performance of Obligations. Pay and perform all
obligations under this Guaranty and the other Loan Documents, and pay or perform
(i) all taxes, assessments and other governmental charges that may be levied or
assessed upon it or any of its property, and (ii) all other indebtedness,
obligations and liabilities in accordance with customary trade practices;
provided, that each Guarantor and each of its Subsidiaries may contest any item
described in clauses (i) or (ii) of this Section 11(f) in good faith so long as
adequate reserves are maintained with respect thereto in accordance with GAAP.
(g) Visits and Inspections. Upon reasonable notice to the Parent
(unless there exists any Default or Event of Default), permit representatives of
the Administrative Agent or any Lender, from time to time, to visit and inspect
its properties and any materials thereon; inspect, audit and make extracts from
its books, records and files, including, but not limited to, management letters
prepared by independent accountants; and discuss with its principal officers,
and its independent accountants, its business, assets, liabilities, financial
condition, results of operations and business prospects.
(h) Insurance. Maintain insurance with financially sound and
reputable insurance companies against such risks and in such amounts as are
customarily maintained by similar businesses and as may be required by
Applicable Law, and on the Closing Date and from time to time thereafter deliver
to the Administrative Agent upon its request a detailed list of the insurance
then in effect, stating the names of the insurance companies, the amounts and
rates of the insurance, the dates of the expiration thereof and the properties
and risks covered thereby.
(i) Conduct of Business. Engage only in businesses in
substantially the same fields as the businesses conducted or proposed to be
conducted in accordance with business plans delivered to the Administrative
Agent and the Lenders on or prior to the Closing Date or in lines of business
reasonably related thereto.
29
(j) New Subsidiaries. Concurrently with the creation or
acquisition of any Subsidiary by the Parent (other than any Hospital Joint
Venture) which is not a "controlled foreign corporation" under Section 957 of
the Code, cause such Subsidiary to:
(i) execute a Joinder Agreement in substantially the same
form as Exhibit A attached hereto; and
(ii) deliver to the Administrative Agent, with the Joinder
Agreement, such other documentation as the Administrative Agent may
reasonably request, including, certified resolutions and other
organizational and authorizing documents of such Subsidiary, favorable
opinions of counsel to such Subsidiary (which shall cover, among other
things, the legality, validity, binding effect and enforceability of
the Joinder Agreement), all in form and substance satisfactory to the
Administrative Agent.
For the purposes of this Section 11(j), a Subsidiary shall not be deemed to have
been created or acquired until the earlier of (i) the date upon which such
Subsidiary begins to conduct business operations, (ii) the date upon which such
Subsidiary obtains assets with a fair market value in excess of $10,000.00 or
(iii) the date upon which such Subsidiary is initially capitalized.
(k) Transactions with Affiliates. Conduct all transactions
otherwise permitted under this Guaranty, the Loan Agreement and the other Loan
Documents with any of their Affiliates on terms that are fair and reasonable and
no less favorable to such Guarantor or such Subsidiary than it would obtain in a
comparable arm's length transaction with a Person not an Affiliate.
(l) Subordinated Working Capital Loan.
(i) Cause MedCath Incorporated to make working capital
advances to the Borrower in an amount necessary to ensure that the
Borrower can meet all of its working capital and other general
corporate needs (the "Working Capital Advances");
(ii) Immediately upon the request of the Administrative
Agent or the Required Lenders, cause MedCath Incorporated to make
additional Working Capital Advances to the Borrower (in addition to any
Working Capital Advances made to the Borrower pursuant to clause (i)
above); provided that MedCath Incorporated shall not be required to
make such Working Capital Advances to the extent that the sum of (A)
the aggregate amount of such Working Capital Advances plus (B) the
aggregate amount of Subordinated Working Capital Loans outstanding as
of any applicable date of determination would exceed $8,000,000; and
(iii) Cause all Working Capital Advances to be subordinated
pursuant to an Intercompany Loan Subordination Agreement in form and
substance satisfactory to the Administrative Agent.
SECTION 12. Financial Covenants. Until all of the Obligations
have been paid and satisfied in full and the Commitments of the Lenders under
the Loan Agreement have been
30
terminated, unless consent has been obtained in the manner provided for in
Section 19, the Parent and its Subsidiaries on a Consolidated basis will not:
(a) Minimum Fixed Charge Ratio. As of the end of any
fiscal quarter, permit the ratio of:
(i) the sum of (A) Adjusted EBITDA for the
period of four (4) consecutive fiscal quarters ending on or
immediately prior to such date plus (B) the aggregate amount
of Lease Expense of the Parent and its Subsidiaries for such
period of four (4) consecutive fiscal quarters plus (C)
Unconsolidated Lease Expense of the Unconsolidated Entities
for such period of four (4) consecutive fiscal quarters minus
(D) Lease Expense of the Developmental Pool (to the extent
added above) for such period of four (4) consecutive fiscal
quarters, to
(ii) the sum of:
(A) the aggregate amount of Cash
Interest Expense of the Parent and its Subsidiaries
for such period of four (4) consecutive fiscal
quarters plus the aggregate amount of Unconsolidated
Cash Interest Expense of the Unconsolidated Entities
for such period of four (4) consecutive fiscal
quarters minus the aggregate amount of Cash Interest
Expense of the Developmental Pool (to the extent
added above) for such period of four (4) consecutive
fiscal quarters minus the aggregate amount of Cash
Interest Expense paid by the Parent, its Subsidiaries
and each Unconsolidated Entity to MedCath
Incorporated for such period of four (4) consecutive
fiscal quarters plus or minus the aggregate amount of
certain adjustments related to Cash Interest Expense
approved by the Administrative Agent and the Lenders
as set forth on Schedule 12(a)(ii)(B); plus
(B) the aggregate amount of Permanent
Principal Payments of the Parent and its Subsidiaries
for such period of four (4) consecutive fiscal
quarters plus the aggregate amount of Unconsolidated
Permanent Principal Payments of the Unconsolidated
Entities for such period of four (4) consecutive
fiscal quarters minus the aggregate amount of
Permanent Principal Payments of the Developmental
Pool (to the extent added above) for such period of
four (4) consecutive fiscal quarters plus or minus
the aggregate amount of certain adjustments related
to Permanent Principal Payments approved by the
Administrative Agent and the Lenders as set forth on
Schedule 12(a)(ii)(B); plus
(C) the aggregate amount of Lease
Expense of the Parent and its Subsidiaries for such
period of four (4) consecutive fiscal quarters plus
the aggregate amount of Unconsolidated Lease Expense
of the Unconsolidated Entities for such period of
four (4) consecutive fiscal quarters minus the
aggregate amount of Lease Expense of the
31
Developmental Pool (to the extent added above) for
such period of four (4) consecutive fiscal quarters
plus or minus the aggregate amount of certain
adjustments related to Lease Expense approved by the
Administrative Agent and the Lenders as set forth on
Schedule 12(a)(ii)(B),
to be less than 1.25 to 1.00
(b) Maximum Debt to Capitalization Ratio. As of the end
of any fiscal quarter, permit the ratio of (i) Total Debt on such date
to (ii) Total Capitalization on such date to exceed 0.60 to 1.00.
(c) Maximum Leverage Ratio. As of the end of any fiscal
quarter, permit the ratio of (i) the sum of (A) Total Debt on such date
less (B) Debt of or attributable to the Developmental Pool (to the
extent included in the calculation of Total Debt) on such date to (ii)
Adjusted EBITDA for the period of four (4) consecutive fiscal quarters
ending on or immediately prior to such date, to exceed 3.00 to 1.00:
(d) Consolidated Net Worth. As of the Closing Date and as
of the end of any fiscal quarter thereafter, permit Consolidated Net
Worth on such date to be less than the sum of (i) $130,000,000 plus
(ii) fifty percent (50%) of cumulative Net Income of the Parent and its
Subsidiaries (if positive) after July 27, 2001 plus (iii) an amount
equal to one hundred percent (100%) of the net cash proceeds received
by the Parent or any Subsidiary thereof from any issuance of equity
after July 27, 2001.
(e) Minimum Liquid Assets. As of the end of any fiscal
quarter, permit the sum of (i) Available Cash as of such date of
determination plus (ii) the Maximum Available Corporate Revolver
Commitment as of such date of determination (in each case to be
calculated on a Consolidated basis, without duplication, in accordance
with GAAP) to be less than $30,000,000.
SECTION 13. Negative Covenants.
(a) Negative Covenants. Until all of the Obligations have been
paid and satisfied in full and the Commitments of the Lenders under the Loan
Agreement have been terminated, unless consent has been obtained in the manner
provided for in Section 19, the Guarantors will:
(i) Comply with each and every covenant and agreement set
forth in Section 5.02 of the Corporate Revolver (as such agreement may
be amended from time to time) as if such Section 5.02 of the Corporate
Revolver (including, without limitation, each defined term, article,
section, exhibit or schedule referenced in or relating to such Section
5.02 of the Corporate Revolver) was written herein; provided that the
aggregate amount of Debt permitted under Section 5.02(b)(iii) of the
Corporate Revolver (including any amendment, restatement, refinancing
or replacement thereof, the "Corporate Revolver Debt") shall not exceed
$125,000,000 unless (A) the Obligations, the Guaranteed Obligations and
all other obligations under the Related Credit Documents (as defined in
the
32
Loan Agreement) shall be secured on a pari passu basis with the
Corporate Revolver Debt or (B) the Corporate Revolver Debt shall be
unsecured; and
(ii) Notify the Administrative Agent and the Lenders
promptly upon the execution of any amendment, restatement, supplement
or other modification to the Corporate Revolver.
(b) Rules of Construction.
(i) The terms and conditions of the Corporate Revolver
which are incorporated in this Guaranty by reference shall continue as
such terms and conditions are set forth in the Corporate Revolver
irrespective of any termination of the Corporate Revolver. Such terms
and conditions shall include any amendments, restatements, supplements
or other modifications which are approved by the Required Lender
pursuant to Section 5(a)(ii).
(ii) All definitions and other provisions of the Corporate
Revolver which are incorporated herein by reference shall be construed
in such a manner so as to give such incorporated terms legal effect and
meaning hereunder. More specifically, any references to the terms
defined in both the Corporate Revolver and this Guaranty shall be
deemed references to such terms as defined herein; provided that any
references to the "Borrower" and the "Parent" in the Corporate Revolver
shall be deemed to be references to MedCath Intermediate Holdings, Inc.
and MedCath Holdings, Inc. hereunder. For example, references in the
Corporate Revolver to the "Loan Documents", the "Commitments", the
"Obligations", the "Administrative Agent" and the "Lenders" shall be
deemed to be references to the Loan Documents, the Commitments, the
Obligations, the Administrative Agent and the Lenders as defined in
this Guaranty, in each case to the extent necessary to give any such
incorporated provisions legal effect and meaning hereunder. In
addition, any references to defined terms in the Corporate Revolver
which are similarly defined in this Guaranty shall be deemed references
to such similar terms as defined herein. For example, references in the
Corporate Revolver to an "Advance" shall be deemed to be references to
a "Construction Loan Advance" hereunder, in each case to the extent
necessary to give any such incorporated provisions legal effect and
meaning hereunder.
SECTION 14. Remedies. Upon the occurrence and during the
continuance of any Default or Event of Default, with the consent of the Required
Lenders, the Administrative Agent may, or upon the request of the Required
Lenders, the Administrative Agent shall, enforce against the Guarantors their
respective obligations and liabilities hereunder and exercise such other rights
and remedies as may be available to the Administrative Agent hereunder, under
the Loan Agreement or the other Loan Documents or otherwise.
SECTION 15. No Subrogation. Notwithstanding any payment or
payments by any of the Guarantors hereunder, or any set-off or application of
funds of any of the Guarantors by the Administrative Agent or any Lender, or the
receipt of any amounts by the Administrative Agent or any Lender with respect to
any of the Guaranteed Obligations, none of the Guarantors shall be entitled to
be subrogated to any of the rights of the Administrative Agent or any Lender
33
against the Borrower or the other Guarantors or any other guarantor or against
any collateral security (including, without limitation, the Collateral) held by
the Administrative Agent or any Lender for the payment of the Guaranteed
Obligations nor shall any of the Guarantors seek any reimbursement from the
Borrower or any of the other Guarantors in respect of payments made by such
Guarantor in connection with the Guaranteed Obligations, until all amounts owing
to the Administrative Agent and the Lenders on account of the Guaranteed
Obligations are paid in full and the Aggregate Commitment is terminated. If any
amount shall be paid to any Guarantor on account of such subrogation rights at
any time when all of the Guaranteed Obligations shall not have been paid in
full, such amount shall be held by such Guarantor in trust for the
Administrative Agent and the Lenders, segregated from other funds of such
Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over
to the Administrative Agent in the exact form received by such Guarantor (duly
endorsed by such Guarantor to the Administrative Agent, if required) to be
applied against the Guaranteed Obligations, whether matured or unmatured, in
such order as set forth in the Loan Agreement.
SECTION 16. Expenses. All costs and expenses (including
reasonable attorneys' fees, legal expenses and court costs) incurred by the
Administrative Agent or any Lender in enforcing or protecting their rights or
remedies hereunder shall be payable by the Guarantors on demand and shall bear
interest (after as well as before judgment) until paid at the interest rate then
applicable to Base Rate Loans under the Loan Agreement and shall be additional
Guaranteed Obligations hereunder.
SECTION 17. Notices. All notices and communications hereunder
shall be made in accordance with Section 12.1 of the Loan Agreement; provided
that notices and communications to the Guarantors shall be directed to the
Guarantors at the address of the Parent set forth in Section 12.1 of the Loan
Agreement.
SECTION 18. Successors and Assigns. This Guaranty is for the
benefit of the Administrative Agent and the Lenders and their permitted
successors and assigns. This Guaranty shall be binding on each Guarantor and its
successors and assigns; provided that no Guarantor may assign any of its rights
or obligations hereunder without the prior written consent of the Administrative
Agent and the Lenders.
SECTION 19. Amendments, Waivers and Consents. No term, covenant,
agreement or condition of this Guaranty may be amended or waived, nor may any
consent be given, except in the manner set forth in Section 12.11 of the Loan
Agreement.
SECTION 20. Powers Coupled with an Interest. All authorizations
and agencies herein contained with respect to the Collateral are irrevocable and
powers coupled with an interest.
SECTION 21. Governing Law. THIS GUARANTY SHALL BE GOVERNED BY,
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES
THEREOF; PROVIDED, THAT THE ADMINISTRATIVE AGENT AND EACH LENDER SHALL RETAIN
ALL RIGHTS ARISING UNDER FEDERAL LAW.
34
SECTION 22. Jurisdiction and Venue.
(a) Jurisdiction. The Guarantors hereby irrevocably consent to the
personal jurisdiction of the state and federal courts located in Mecklenburg
County, North Carolina, in any action, claim or other proceeding arising out of
any dispute in connection with this Guaranty and the other Loan Documents, any
rights or obligations hereunder, or the performance of such rights and
obligations. The Guarantors hereby irrevocably consent to the service of a
summons and complaint and other process in any action, claim or proceeding
brought by the Administrative Agent or any Lender in connection with this
Guaranty any the other Loan Documents, any rights or obligations hereunder, or
the performance of such rights and obligations, on behalf of itself or its
property, in the manner specified in Section 12.1 of the Loan Agreement. Nothing
in this Section 22 shall affect the right of the Administrative Agent or any
Lender to serve legal process in any other manner permitted by Applicable Law or
affect the right of the Administrative Agent or any Lender to bring any action
or proceeding against any Guarantor or its properties in the courts of any other
jurisdictions.
(b) Venue. Each Guarantor hereby irrevocably waives any objection
it may have now or in the future to the laying of venue in the aforesaid
jurisdiction in any action, claim or other proceeding arising out of or in
connection with this Guaranty, any other Loan Document or the rights and
obligations of the parties hereunder. Each Guarantor irrevocably waives, in
connection with such action, claim or proceeding, any plea or claim that the
action, claim or other proceeding has been brought in an inconvenient forum.
SECTION 23. Waiver of Right to Trial by Jury. EACH PARTY TO THIS
GUARANTY HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS GUARANTY OR IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR
ANY OF THEM WITH RESPECT TO THIS GUARANTY, OR THE TRANSACTIONS RELATED THERETO,
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN
CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS GUARANTY MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION 23 WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY
JURY.
SECTION 24. Injunctive Relief; Punitive Damages.
(a) Injunctive Relief. Each Guarantor recognizes that, in the
event such Guarantor fails to perform, observe or discharge any of its
obligations or liabilities under this Guaranty, any remedy of law may prove to
be inadequate relief to the Lenders. Therefore, each Guarantor agrees that the
Lenders, at the Lenders' option, shall be entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages.
35
(b) Punitive Damages. Each Guarantor agrees that it shall not have
a remedy of punitive or exemplary damages against any other party to a Loan
Document and each such Guarantor hereby waives any right or claim to punitive or
exemplary damages that it may now have or which may arise in the future in
connection with any dispute, whether the dispute is resolved by arbitration or
judicially.
SECTION 25. Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(a) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Administrative
Agent and the Lenders in order to carry out the intentions of the parties hereto
as nearly as may be possible; and (b) the invalidity or unenforceability of any
provisions hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
SECTION 26. Headings. The various headings of this Guaranty are
inserted for convenience only and shall not affect the meaning or interpretation
of this Guaranty or any provisions hereof.
SECTION 27. Counterparts. This Guaranty may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
SECTION 28. Accounting Matters. All financial and accounting
calculations, measurements and computations made for any purpose relating to
this Guaranty, including, without limitation, all computations utilized by the
Guarantors to determine compliance with any covenant contained herein, shall,
except as otherwise expressly contemplated hereby or unless there is an express
written direction by the Administrative Agent to the contrary agreed to by the
Parent, be performed in accordance with GAAP as in effect on the Closing Date.
In the event that changes in GAAP shall be mandated by the Financial Accounting
Standards Board, or any similar accounting body of comparable standing, or shall
be recommended by the Parent's certified public accountants, to the extent that
such changes would modify such accounting terms or the interpretation or
computation thereof, such changes shall be followed in defining such accounting
terms only from and after the date the Parent and the Required Lenders shall
have amended this Guaranty to the extent necessary to reflect any such changes
in the financial covenants and other terms and conditions of this Guaranty.
[Signature Pages Follow]
36
IN WITNESS WHEREOF, each of the Guarantors has executed and delivered
this Guaranty under seal as of the date first above written.
PARENT:
MEDCATH CORPORATION
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Executive Vice President, Chief Financial
Officer and Secretary
SUBSIDIARY GUARANTORS:
MEDCATH HOLDINGS, INC.
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President, Assistant Secretary and
Assistant Treasurer
MEDCATH INTERMEDIATE HOLDINGS, INC.
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Treasurer
MEDCATH INCORPORATED
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Senior Vice President and Treasurer
[Signature Pages Continue]
CONSTRUCTION LOAN GUARANTY
MEDCATH DIAGNOSTICS, LLC
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Treasurer
HEART RESEARCH CENTERS
INTERNATIONAL, LLC
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Treasurer
MEDCATH CARDIOLOGY CONSULTING &
MANAGEMENT, INC.
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Treasurer
MEDCATH MANAGEMENT OF OHIO, INC.
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Treasurer
[Signature Pages Continue]
CONSTRUCTION LOAN GUARANTY
WMS MANAGEMENT, INC.
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Treasurer
AUSTIN MOB, INC.
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Treasurer
MEDCATH NUCLEAR SERVICES, LLC
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Treasurer
SAN ANTONIO HOSPITAL
MANAGEMENT, INC.
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Treasurer
SAN ANTONIO HOLDINGS, INC.
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Treasurer
METUCHEN NUCLEAR MANAGEMENT, LLC
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Treasurer
CONSTRUCTION LOAN GUARANTY
Schedule 1
Addresses of Administrative Agent and Lenders
Bank of America, N.A.
ILI-231-08-30
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Deutsch Bank Trust Company Americas
00 Xxxxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Location: Desk 100 O
Wachovia Bank, National Association
000 Xxxxx Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
GE Healthcare Financial Services
00000 Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxx 00000
The Foothill Group, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 0000 Xxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
JPMorgan Chase Bank
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fifth Third Bank (Western Ohio)
000 Xxxxx Xxxx Xxxxxx
Xxxxxx, Xxxx 00000
Schedule 1(a)(i)
Quarterly Adjustments to Adjusted EBITDA ($ in Thousands)
QUARTER ENDED MARCH 31, 2001
Disposition of McAllen Heart Hospital $(1,968.0)
Consolidation of Tucson Heart Hospital $ 2,683.0
QUARTER ENDED JUNE 30, 2001
Disposition of McAllen Heart Hospital $ 0.0
Consolidation of Tucson Heart Hospital To be determined
QUARTER ENDED SEPTEMBER 30, 2001
Disposition of McAllen Heart Hospital $ 0.0
Consolidation of Tucson Heart Hospital To be determined
Schedule 9(a)(i)
Capitalization
--------------------------------------------------------------------------------------------------------------------------
NAME OF ENTITY SHAREHOLDER/INVESTORS NO. SHARES PERCENTAGE
--------------------------------------------------------------------------------------------------------------------------
MedCath Corporation Existing Stockholders 65.9
Physician Investors .7
Public 33.4
--------------------------------------------------------------------------------------------------------------------------
MedCath Holdings, Inc. MedCath Corporation 200 100%
--------------------------------------------------------------------------------------------------------------------------
MedCath Intermediate Holdings, Inc. MedCath Holdings, Inc. 100 100%
--------------------------------------------------------------------------------------------------------------------------
MedCath of Arkansas, Inc. MedCath Incorporated 100 100%
--------------------------------------------------------------------------------------------------------------------------
MedCath Management of Ohio, Inc. MedCath Cardiology 100 100%
Consulting & Management,
Inc.
--------------------------------------------------------------------------------------------------------------------------
MedCath of Texas, Inc. MedCath Incorporated 100 100%
--------------------------------------------------------------------------------------------------------------------------
MedCath Cardiology Consulting & MedCath Incorporated 2,600 100%
Management, Inc.
--------------------------------------------------------------------------------------------------------------------------
AHH Management, Inc. MedCath Incorporated 100 100%
--------------------------------------------------------------------------------------------------------------------------
Austin MOB, Inc. MedCath Incorporated 100 100%
--------------------------------------------------------------------------------------------------------------------------
DTO Management, Inc. MedCath Incorporated 100 100%
--------------------------------------------------------------------------------------------------------------------------
HHBF, Inc. MedCath Incorporated 1,000 100%
--------------------------------------------------------------------------------------------------------------------------
Hospital Management IV, Inc. MedCath Incorporated 100 100%
--------------------------------------------------------------------------------------------------------------------------
Hospital Pharmacy of Bakersfield, Inc. MedCath Incorporated 100 100%
--------------------------------------------------------------------------------------------------------------------------
Harlingen Hospital Management, Inc. MedCath Incorporated 100 100%
--------------------------------------------------------------------------------------------------------------------------
Lafayette Hospital Management, Inc. MedCath Incorporated 100 100%
--------------------------------------------------------------------------------------------------------------------------
Louisiana Hospital Management, Inc. MedCath Incorporated 100 100%
--------------------------------------------------------------------------------------------------------------------------
San Antonio Holdings, Inc. MedCath Incorporated 100 100%
--------------------------------------------------------------------------------------------------------------------------
NM Hospital Management, Inc. MedCath Incorporated 100 100%
--------------------------------------------------------------------------------------------------------------------------
San Antonio Hospital Management, Inc. MedCath Incorporated 100 100%
--------------------------------------------------------------------------------------------------------------------------
Sioux Falls Hospital Management, Inc. MedCath Incorporated 100 100%
--------------------------------------------------------------------------------------------------------------------------
Southern Arizona Heart, Inc. MedCath Incorporated 100 100%
--------------------------------------------------------------------------------------------------------------------------
Venture Holdings, Inc. MedCath Incorporated 100 100%
--------------------------------------------------------------------------------------------------------------------------
WMS Management, Inc. MedCath Cardiology 270 100%
Consulting & Management,
Inc.
--------------------------------------------------------------------------------------------------------------------------
Arizona Heart Hospital , LLC Management Company N/A 70.6%
Physician Investors 29.4%
--------------------------------------------------------------------------------------------------------------------------
Greensboro Heart Center, LLC MedCath Diagnostics, LLC N/A 51%
Physician Investors 49%
--------------------------------------------------------------------------------------------------------------------------
Harlingen Medical Center, Limited Harlingen Hospital N/A
Partnership Management, Inc. 1.00%
Harlingen Partnership 50.06%
Holdings, Inc.
Physician Investors 48.94%
--------------------------------------------------------------------------------------------------------------------------
Harlingen Partnership Holdings, Inc. MedCath Incorporated 100 100%
--------------------------------------------------------------------------------------------------------------------------
Heart Hospital of BK, LLC Management Company N/A 53.3%
Physician Investors 46.7%
--------------------------------------------------------------------------------------------------------------------------
Heart Hospital of DTO, LLC Management Company N/A 66.5%
Physician Investors 33.5%
--------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
NAME OF ENTITY SHAREHOLDER/INVESTORS NO. SHARES PERCENTAGE
--------------------------------------------------------------------------------------------------------------------------
Heart Hospital IV, L.P. Management Company N/A 70.9%
Physician Investors 29.1%
--------------------------------------------------------------------------------------------------------------------------
Heart Hospital of San Antonio, LP San Antonio Hospital N/A
Management, Inc. 1.00%
Venture Holdings, Inc. 50.00%
S.A.H.H. Hospital
Management, LLC 1.00%
S.A.H.H. Investment
Group, Ltd. 48.00%
--------------------------------------------------------------------------------------------------------------------------
Heart Hospital of New Mexico, LLC Management Company N/A 24.00%
Physician Investors 41.00%
St. Xxxxxx Healthcare
System 35.00%
--------------------------------------------------------------------------------------------------------------------------
Heart Hospital of South Dakota, LLC Management Company N/A 33.33%
Physician Investors 33.33%
Xxxxx XxXxxxxx 33.33%
--------------------------------------------------------------------------------------------------------------------------
Heart Research Centers International, LLC MedCath Diagnostics, LLC N/A 100%
--------------------------------------------------------------------------------------------------------------------------
Heart Hospital of Lafayette, LLC Management Company N/A 51%
Physician Investors. 49%
--------------------------------------------------------------------------------------------------------------------------
Louisiana Heart Hospital, LLC Management Company. N/A 51%
Physician Investors 49%
--------------------------------------------------------------------------------------------------------------------------
MedCath Diagnostics, LLC MedCath Incorporated N/A 100%
--------------------------------------------------------------------------------------------------------------------------
MedCath of Little Rock, L.L.C. Management Company N/A 70.3%
Physician Investors 29.7%
--------------------------------------------------------------------------------------------------------------------------
MedCath Nuclear Services, LLC MedCath Diagnostics, LLC N/A 100%
--------------------------------------------------------------------------------------------------------------------------
MedCath of Tucson, L.L.C. Management Company N/A 58.6%
Physician Investors 41.4%
--------------------------------------------------------------------------------------------------------------------------
Ohio Cardiac Management, LLC MedCath Diagnostics, LLC N/A 16.67%
Physician Investors 83.33%
--------------------------------------------------------------------------------------------------------------------------
Wilmington Heart Center, LLC Management Company N/A 51%
Physician Investors 49%
--------------------------------------------------------------------------------------------------------------------------
Central Park Medical Office Building, X.X. Xxxxxx MOB, Inc. N/A 1%
Venture Holdings, Inc. 49%
Other 50%
--------------------------------------------------------------------------------------------------------------------------
Cape Cod Cardiology Services, LP MedCath of N/A
Massachusetts, Inc. 51%
Cape Cod Cardiac Cath,
Inc. 49%
--------------------------------------------------------------------------------------------------------------------------
Xxxxxx Cardiology Services, LLC MedCath Incorproated N/A 60%
Xxxxxx Memorial
Hospital 40%
--------------------------------------------------------------------------------------------------------------------------
Colorado Springs Cardiology Services, LLC MedCath Diagnostics, N/A
LLC 51%
Pikes Peak Cardiology,
PLLP 42%
Xxxxxxx X. Xxxxxx 7%
--------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
NAME OF ENTITY SHAREHOLDER/INVESTORS NO. SHARES PERCENTAGE
--------------------------------------------------------------------------------------------------------------------------
Sun City Cardiac Center Associates, L.P. MedCath Diagnostics, LLC N/A 65%
Sun City Cardiac Center,
Inc. 35%
--------------------------------------------------------------------------------------------------------------------------
MedCath of New Jersey Cardiac Testing MedCath Diagnostics, LLC N/A 90%
Centers, LP Cardiology Diagnostics
Associates, P.A. 10%
--------------------------------------------------------------------------------------------------------------------------
Heart South Imaging, LLC MedCath Diagnostics, LLC N/A 50%
Heart South Imaging, Inc. 50%
--------------------------------------------------------------------------------------------------------------------------
Metuchen Nuclear Management, LLC MedCath Diagnostics, LLC N/A 100%
--------------------------------------------------------------------------------------------------------------------------
MedCath Corporation Option Plans
Shares issuable upon exercise of the outstanding options
under the Employee Option Plan 2,241,595
Shares issuable upon exercise of the outstanding options
under the Directors Plan 250,000
Exchange Rights
Until June 1, 2009, physician partners in Harlingen Medical Center Limited
Partnership have the right exercisable upon notice from MedCath Corporation
of a public offering of common stock to exchange up to 25% of their
interest in the limited partnership for shares of the common stock.
Schedule 9(a)(ii)
Jurisdictions of Organization and Qualification
--------------------------------------------------------------------------------------------------------------------------
NAME OF ENTITY JURISDICTION OF JURISDICTION OF ASSUMED/FICTITIOUS
INCORPORATION QUALIFICATION NAME
--------------------------------------------------------------------------------------------------------------------------
MedCath Incorporated North Carolina AZ, AR, FL, GA, IL, MMS Cardiac
IN, KS, KY, LA, MD, Associates (AR, TN)
MA, MI,MS, MO, NJ,
NY, OH, OK, PA, SC,
TN, TX, VA, WI
--------------------------------------------------------------------------------------------------------------------------
MedCath Corporation Delaware NC d/b/a MedCath
Corporation of Delaware
--------------------------------------------------------------------------------------------------------------------------
MedCath Holdings, Inc. Delaware
--------------------------------------------------------------------------------------------------------------------------
MedCath Intermediate Holdings, Inc. Delaware
--------------------------------------------------------------------------------------------------------------------------
MedCath Management of Ohio, Inc. Ohio
--------------------------------------------------------------------------------------------------------------------------
MedCath Cardiology Consulting & Management, Arizona OH, NC, TX Pima Heart
Inc. Management (AZ)
--------------------------------------------------------------------------------------------------------------------------
WMS Management, Inc. Ohio
--------------------------------------------------------------------------------------------------------------------------
Heart Research Centers International, LLC North Carolina
--------------------------------------------------------------------------------------------------------------------------
MedCath Diagnostics, LLC North Carolina AL, AR, FL, GA, IL,
IN,LA, MA, MS, MO,
NJ, NY, OH, OK, PA,
SC, TN, TX, WI
--------------------------------------------------------------------------------------------------------------------------
Austin MOB, Inc. North Carolina TX
--------------------------------------------------------------------------------------------------------------------------
MedCath Nuclear Services, LLC North Carolina
--------------------------------------------------------------------------------------------------------------------------
San Antonio Hospital Management, Inc. North Carolina Texas
--------------------------------------------------------------------------------------------------------------------------
San Antonio Holdings, Inc. Arizona
--------------------------------------------------------------------------------------------------------------------------
Metuchen Nuclear Management, LLC Delaware
--------------------------------------------------------------------------------------------------------------------------
Schedule 9(a)(vii)
Litigation
1. While the following litigation is not anticipated to have a Material
Adverse Effect on the Borrower or its operations, Borrower desires that
Lender be aware that Methodist Hospital in San Antonio that is using
the name "Heart Hospital of South Texas" has filed suit against the
Borrower in Federal Court claiming that Borrower's use of the name
"Heart Hospital of San Antonio" is confusingly similar to their name
and asking that the court require the Borrower to change the name of
its hospital.
Schedule 12(a)(ii)(B)
Quarterly Adjustments to: I. Interest Expense, II. Lease Expense and III.
Required Principal Payment ($ in Thousands)
Quarter Ended Xxxxx 00, 0000
X. II. III.
Disposition of McAllen Heart Hospital $(379.0) $(96.0) $ (422.0)
Consolidation of Tucson Heart Hospital $ 706.0 $ 222.0 $ 708.0
Quarter Ended June 30, 2001
I. II. III.
Disposition of McAllen Heart Hospital $ 0.0 $ 0.0 $ 0.0
Consolidation of Tucson Heart Hospital To be determined To be determined $ 707.0
Quarter Ended September 30, 2001
I. II. III.
Disposition of McAllen Heart Hospital $ 0.0 $ 0.0 $ 0.0
Consolidation of Tucson Heart Hospital To be determined To be determined $ 698.0
Exhibit A
to
Guaranty Agreement
FORM OF JOINDER AGREEMENT
Joinder Agreement
THIS JOINDER AGREEMENT, dated as of the ____ day of __________, ____
(the "Agreement"), to the Guaranty Agreement referred to below is entered into
by and among MedCath Corporation, a corporation organized under the laws of
Delaware (the "Parent"), ____________, a corporation organized under the laws of
__________ (the "New Subsidiary Guarantor"), and Bank of America, N.A., as
administrative agent (the "Administrative Agent") for the ratable benefit of
itself and the financial institutions (the "Lenders") from time to time party to
the Loan Agreement referred to below.
Statement of Purpose
____________________, a __________ organized under the laws of
__________ (the "Borrower"), the Lenders and the Administrative Agent are
parties to that certain Amended and Restated Loan Agreement dated as of November
7, 2002 (as amended, restated, supplemented or otherwise modified, the "Loan
Agreement). In connection with the Loan Agreement, the Parent and certain
Subsidiaries of the Parent who are or may become party thereto (collectively,
the "Guarantors") entered into that certain Guaranty Agreement dated as of
November 7, 2002 in favor of the Administrative Agent for the ratable benefit of
itself and the Lenders (as supplemented hereby and as further amended, restated,
supplemented or otherwise modified, the "Guaranty Agreement").
The New Subsidiary Guarantor has become a direct or indirect Subsidiary
of the Parent pursuant to [insert description of agreement or transaction
relating to creation of the New Subsidiary Guarantor]. Pursuant to Section 11(j)
of the Guaranty Agreement, the New Subsidiary Guarantor is required to execute
and deliver this joinder agreement.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto hereby agree as follows:
1.01 Guaranty Agreement Supplement. Pursuant to Section 11(j) of
the Guaranty Agreement, the New Subsidiary Guarantor hereby agrees that it is a
Guarantor and a Subsidiary Guarantor under the Guaranty Agreement as if a
signatory thereof on the Closing Date, and the New Subsidiary Guarantor shall
comply with and be subject to and have the benefit of all of the terms,
conditions, covenants, agreements and obligations set forth therein. The New
Subsidiary Guarantor hereby agrees that each reference to a "Guarantor", the
"Guarantors", a "Subsidiary Guarantor" or the "Subsidiary Guarantors" in the
Loan Agreement, the Guaranty Agreement and other Loan Documents shall include
the New Subsidiary Guarantor, and each reference to the "Guaranty Agreement" or
"Guaranty" as used therein shall mean the Guaranty Agreement as supplemented
hereby.
2.01 Effectiveness. This Agreement shall become effective upon
receipt by the Administrative Agent of (a) an originally executed counterpart
hereof, (b) an update of Schedule (a)(i) and Schedule 9(a)(ii) and (c) any other
agreement or document required to be delivered in accordance with Section 11(j)
of the Guaranty Agreement (including, without limitation, any other agreement or
document required to be delivered in connection with any Loan Document) and (c)
all fees and expenses required to be paid by the Borrower pursuant to Section
12.2 of the Loan Agreement.
3.01 General Provisions.
(a) Representations and Warranties of the New Subsidiary
Guarantor.
(i) The New Subsidiary Guarantor hereby confirms that
each representation and warranty made under the Guaranty Agreement is true and
correct with respect to such New Subsidiary Guarantor as of the date hereof
(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 the earlier
date).
(ii) The New Subsidiary Guarantor hereby acknowledges it
has received a copy of the Loan Agreement, the Guaranty Agreement and the other
Loan Documents and that it has read and understands the terms thereof.
(b) Representations and Warranties of the Parent.
(i) The Parent hereby confirms that that no Default or
Event of Default has occurred or is continuing under the Loan Agreement, the
Guaranty Agreement and the other Loan Documents.
(ii) The Parent hereby represents and warrants that as of
the date hereof there are no claims or offsets against or defenses or
counterclaims to the obligations of the Borrower and the Guarantors under the
Loan Agreement, the Guaranty Agreement and the other Loan Documents and the
other Loan Documents.
(b) Limited Effect. Except as supplemented hereby, the Loan
Agreement, the Guaranty Agreement and each other Loan Document shall continue to
be, and shall remain, in full force and effect. This Agreement shall not be
deemed (i) to be a waiver of, or consent to, or a modification or amendment of,
any other term or condition of the Loan Agreement, the Guaranty Agreement or any
other Loan Document or (ii) to prejudice any right or rights which the
Administrative Agent or any Lender may now have or may have in the future under
or in connection with the Loan Agreement, the Guaranty Agreement or any other
Loan Document or any of the instruments or agreements referred to therein, as
the same may be amended or modified from time to time.
(c) Counterparts. This Agreement may be executed by one or more
of the parties hereto in any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
(d) Definitions. All capitalized terms used and not defined
herein shall have the meanings given thereto in the Guaranty Agreement.
(e) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA, WITHOUT
REFERENCE TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES THEREOF; PROVIDED, THAT
THE ADMINISTRATIVE AGENT AND EACH LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER
FEDERAL LAW.
IN WITNESS WHEREOF the undersigned hereby causes this Agreement to be
executed and delivered as of the date first above written.
PARENT:
[CORPORATE SEAL] MEDCATH CORPORATION
By:_________________________________________
Name:____________________________________
Title:___________________________________
NEW SUBSIDIARY GUARANTOR:
[CORPORATE SEAL] ____________________________________________
By:_________________________________________
Name:____________________________________
Title:___________________________________
ADMINISTRATIVE AGENT:
BANK OF AMERICA, N.A., as Administrative
Agent
By: ______________________________________
Name: ______________________________________
Title:______________________________________
Exhibit B
to
Guaranty Agreement
FORM OF OFFICER'S COMPLIANCE CERTIFICATE
Officer's Compliance Certificate
The undersigned, on behalf of MedCath Corporation, a corporation
organized under the laws of Delaware (the "Parent"), hereby certifies to the
Administrative Agent and the Lenders, each as defined below, as follows:
1. This Certificate is delivered to you pursuant to Section 10(b)
of the Guaranty Agreement dated as of November 7, 2002 (as amended, restated,
supplemented or otherwise modified from time to time, the "Guaranty Agreement"),
made by the Parent and certain Subsidiaries of the Parent who are or may become
party thereto (collectively, the "Guarantors"), in favor of Bank of America,
N.A., as administrative agent (the "Administrative Agent") for the ratable
benefit of itself and the financial institutions (collectively, the "Lenders")
from time to time party to the Loan Agreement referred to therein. Capitalized
terms used herein and not defined herein shall have the meanings assigned
thereto in the Guaranty Agreement.
2. I have reviewed the financial statements of the Parent and its
Subsidiaries dated as of _______________ and for the _______________ period[s]
then ended and, to the best of my knowledge, such statements fairly present in
all material respects the financial condition of the Parent and its Subsidiaries
as of the dates indicated and the results of their operations and cash flows for
the period[s] indicated.
3. I have reviewed the terms of the Guaranty Agreement, the Loan
Agreement, and the other related Loan Documents and have made, or caused to be
made under my supervision, a review in reasonable detail of the transactions and
the condition of the Parent and its Subsidiaries during the accounting period
covered by the financial statements referred to in Paragraph 2 above. Such
review has not disclosed, to my knowledge, the existence during or at the end of
such accounting period of any condition or event that constitutes a Default or
an Event of Default, nor do I have any knowledge of the existence of any such
condition or event as at the date of this Certificate [except, if such condition
or event existed or exists, describe the nature and period of existence thereof
and what action the Parent and its Subsidiaries have taken, are taking and
propose to take with respect thereto].
4. The Parent and its Subsidiaries are in compliance with the
financial covenants contained in Section 12 of the Guaranty Agreement as shown
on such Schedule 1 and the Parent and its Subsidiaries are in compliance with
the other covenants and restrictions contained in the Guaranty Agreement.
[Signature Page Follows]
WITNESS the following signature as of the _____ day of _________, ____.
[CORPORATE SEAL] MEDCATH CORPORATION
By:_________________________________________
Name:____________________________________
Title:___________________________________
Schedule 1
to
Officer's Compliance Certificate
[To be provided by Parent in form acceptable to Administrative Agent]
