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EXHIBIT (a)(3)
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT (this "AGREEMENT") is made as of November 1,
1999 by and between (i) PHYSICIANS' SPECIALTY CORP., a Delaware corporation (the
"COMPANY") and (ii) ALLIED CAPITAL CORPORATION ("Allied"), a Maryland
corporation ("ALLIED").
RECITALS:
A. The Company has requested that Allied invest the aggregate sum of
approximately Sixteen Million and no/100 Dollars ($16,000,000.00) in the
Company, in exchange for (i) certain subordinated debentures of the Company in
the aggregate principal amount of $15,000,000.00, (ii) Warrants to purchase
shares of common stock of the Company, and (iii) $850,000.00 in redeemable
preferred stock and $149,998.00 in convertible preferred stock of the Company.
Allied is willing to make such investment (the "ALLIED INVESTMENT") in the
company on the terms and conditions set forth herein.
B. The parties desire to set forth herein their understandings and
agreements pertaining to this transaction.
NOW, THEREFORE, in consideration of the foregoing Recitals and the
mutual covenants contained herein, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Allied and its
successors and permitted assigns with respect to this Agreement and the
Debenture (as these terms are hereinafter defined) (individually, a "HOLDER" and
collectively, the "HOLDERS" if there is more than one Holder) and the Company
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Defined Terms. As used in this Agreement, the following
terms have the meanings specified below:
"Acquisition" shall mean any transaction or series of related
transactions, consummated on or after the date hereof, by which the Company
directly, or indirectly through one or more Subsidiaries, (i) acquires any going
business, or all or substantially all of the assets, of any Person, whether
through purchase of assets, merger or otherwise, or (ii) acquires securities or
other ownership interests of any Person having at least a majority of (or fifty
percent (50%), combined with direct or indirect management control of) the
combined voting power of the then outstanding securities or other ownership
interests of such Person. Acquisitions of less than a majority of (or fifty
percent (50%), combined with direct or indirect management control of) the
combined voting power of the then outstanding securities or other ownership
interests of a Person shall constitute a Minority Investment and not an
Acquisition.
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"Act of Bankruptcy," when used in reference to any Person, means the
occurrence of any of the following with respect to such Person: (i) such Person
shall have made an assignment for the benefit of his or its creditors; (ii) such
Person shall have admitted in writing his or its inability to pay his or its
debts as they become due; (iii) such Person shall have filed a voluntary
petition in bankruptcy; (iv) such Person shall have been adjudicated a bankrupt
or insolvent; (v) such Person shall have filed any petition or answer seeking
for himself or itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future Applicable Law pertinent to such circumstances; (vi) such Person shall
have filed or shall file any answer admitting or not contesting the material
allegations of a bankruptcy, insolvency or similar petition filed against such
Person; (vii) such Person shall have sought or consented to, or acquiesced in,
the appointment of any trustee, receiver, or liquidator of such Person or of all
or substantially all of the properties of such Person; (viii) 60 days shall have
elapsed after the commencement of an action against such Person seeking
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or future Applicable Law without such action
having been dismissed or without all orders or proceedings thereunder affecting
the operations or the business of such Person having been stayed, or if a stay
of any such order or proceedings shall thereafter be set aside and the action
setting it aside shall not be timely appealed; or (ix) 60 days shall have
expired after the appointment, without the consent or acquiescence of such
Person of any trustee, receiver or liquidator of such Person or of all or any
substantial part of the assets and properties of such Person without such
appointment having been vacated.
"Act of Dissolution," when used in reference to any Person (other than
an individual), shall mean the occurrence of any action initiating, or any event
that results in, the dissolution, liquidation, winding-up or termination of such
Person.
"Affiliate" shall mean, as to any Person, each other Person that
directly, or indirectly through one or more intermediaries, owns or controls, is
controlled by or under common control with, such Person. For purposes of this
definition, with respect to any Person "control" shall mean (i) the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise, or (ii) the beneficial ownership of
securities or other ownership interests of such Person having 15% or more of the
combined voting power of the then outstanding securities or other ownership
interests of such Person ordinarily (and apart from rights accruing under
special circumstances) having the right to vote in the election of directors or
other governing body of such Person.
"Allied Investment" See Recital A.
"Annualized Consolidated EBITDA" shall mean, as of the last day of any
fiscal quarter, Consolidated EBITDA for the fiscal quarter ending on such date,
multiplied by four (4).
"Annualized Consolidated Interest Expense" shall mean, as of the last
day of any fiscal quarter, Consolidated Interest Expense for the fiscal quarter
ending on such date, multiplied by four (4).
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"Applicable Law(s)," when used in the singular, shall mean any
applicable federal, state or local law, ordinance, order, regulation, rule or
requirement of any governmental or quasi-governmental agency, instrumentality,
board, commission, bureau or other authority having jurisdiction, and, when used
in the plural, shall mean all such applicable federal, state and local laws,
ordinances, orders, regulations, rules and requirements.
"Assigned Life Insurance Policies" means collectively (i) the policy of
life insurance issued by Zurich Xxxxxx Life on the life of Xxxxx X. Xxxxx in the
policy amount of Two Million Dollars ($2,000,000) and (ii) the policy of life
insurance issued by The Equitable Life Assurance Society of the United States on
the life of Xxxxxx X. Xxxxxxxx in the policy amount of Two Million Dollars
($2,000,000).
"Assignment of Life Insurance Policies" means the Assignment of Life
Insurance Policy as Collateral from the Company (and any other policyholder or
beneficiary) to the Holders, in form and substance satisfactory to Allied,
assigning to the Holders all of the Company's (and any such other policyholder's
or beneficiary's) right, title and interest in the Assigned Life Insurance
Policies to secure the Indebtedness evidenced by the Debenture.
"Audited Financials" See Section 4.5.
"Business Day" means any day other than a Saturday, Sunday or day on
which banks in Washington, D.C. are authorized or required by law to close.
"Capital Stock" shall mean (i) with respect to any Person that is a
corporation, any and all shares, interests or equivalents in capital stock
(whether voting or nonvoting, and whether common or preferred) of such
corporation, and (ii) with respect to any Person that is not a corporation, any
and all partnership, membership, limited liability company or other equity
interests of such Person; and in each case, any and all warrants, rights or
options to purchase any of the foregoing.
"Cash Equivalents" shall mean (i) securities issued or unconditionally
guaranteed by the United States of America or any agency or instrumentality
thereof, backed by the full faith and credit of the United States of America and
maturing within 90 days from the date of acquisition, (ii) commercial paper
issued by any Person organized under the laws of the United States of America,
maturing within 90 days from the date of acquisition and, at the time of
acquisition, having a rating of at least A-1 or the equivalent thereof by
Standard & Poor's Ratings Services or at least P-1 or the equivalent thereof by
Xxxxx'x Investors Service, Inc., (iii) time deposits and certificates of deposit
maturing within 90 days from the date of issuance and issued by a bank or trust
company organized under the laws of the United States of America or any state
thereof that has combined capital and surplus of at least $500,000,000 and that
has (or is a subsidiary of a bank holding company that has) a long-term
unsecured debt rating of at least A or the equivalent thereof by Standard &
Poor's Ratings Services or at least A2 or the equivalent thereof by Xxxxx'x
Investors Service, Inc., (iv) repurchase obligations with a term not exceeding
seven (7) days with respect to underlying securities of the types described in
clause (i) above entered into with any bank or trust company meeting the
qualifications specified in clause (iii) above, and
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(v) money market funds at least 95% of the assets of which are continuously
invested in securities of the type described in clause (i) above.
"Change of Control" means the issuance by the Company or Transfer or
series of Transfers of the Capital Stock of the Company or any securities
convertible into or exchangeable for Capital Stock of the Company, which results
in one or more Persons other than the stockholders of the Company that are
existing as of the date hereof either (A) owning in excess of 50% of the
outstanding Capital Stock of the Company or (B) being able to elect a majority
of the board of directors of the Company. For the purposes of this definition,
Transfers by Xxxxx X. Xxxxx to a trust established for estate planning purposes
and controlled by Xxxxx X. Xxxxx, Transfers to Subsidiaries of the transferring
shareholder, and Transfers to affiliates Controlling, Controlled by or under
common Control with the transferring shareholder shall not trigger a Change of
Control, and each such transferee shall be deemed a "stockholder of the Company
existing as of the date hereof."
"Charges" See Section 8.9.
"Closing" See Section 2.1.
"Closing Date" means the date of the Allied Investment hereunder.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Company's Business" means the business of the Company as described in
Section 6.8.
"Consolidated EBITDA" shall mean, for any period, without duplication,
the aggregate of (i) Consolidated Net Income for such period, plus (ii) the sum
of Consolidated Interest Expense, federal, state, local and other income taxes,
depreciation, amortization of intangible assets, PIK Dividends, compensation
charges related to the non-cash exercise of stock options to the extent not
capitalized, and PIK Interest, all to the extent taken into account in the
calculation of Consolidated Net Income for such period and all calculated on a
consolidated basis in accordance with GAAP, minus (iii) the sum of extraordinary
or nonrecurring gains (including in connection with the sale or write-up of
assets), all to the extent taken into account in the calculation of Consolidated
Net Income for such period and calculated on a consolidated basis in accordance
with GAAP, plus (iv) the sum of reasonable extraordinary or nonrecurring losses,
taken into account in the calculation of Consolidated Net Income for such period
and calculated on a consolidated basis in accordance with GAAP. Consolidated
EBITDA shall be deemed to include, without duplication, historical Consolidated
EBITDA of any business acquired and operated by the Company or any Material
Subsidiary after the commencement of the relevant measurement period, as if such
business had been acquired by the Company or such Material Subsidiary as of the
first day of such measurement period; provided that such Consolidated EBITDA is
supported by financial statements, tax returns or other financial data in
reasonable detail. Calculations of Consolidated EBITDA shall exclude the results
of operations of any entity disposed of by the Company or any Material
Subsidiary at any time after the first day of the relevant measurement period.
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"Consolidated Interest Expense" shall mean, for any period, the sum
(without duplication) of (i) total cash interest expense of the Company and its
Material Subsidiaries for such period in respect of Consolidated Total
Indebtedness (including, without limitation, all such interest expense accrued
or capitalized during such period, whether or not actually paid during such
period, but excluding PIK Interest), determined on a consolidated basis and
calculated in accordance with GAAP, (ii) all net amounts payable under or in
respect of Hedge Agreements, to the extent paid or accrued by the Company and
its Material Subsidiaries during such period, and (iii) all commitment fees and
other ongoing fees in respect of Consolidated Total Indebtedness (including the
commitment fee provided for under Section 2.9(b) of the Senior Credit Agreement
and the fees provided for under the Fee Letter [as defined in the Senior Credit
Agreement] other than the underwriting and arrangement fee set forth in clause
(1) of the second paragraph of the Fee Letter) paid, accrued or capitalized by
the Company and its Material Subsidiaries during such period.
"Consolidated Net Income" shall mean, for any period, the net income
(or loss) of the Company and its Material Subsidiaries for such period,
determined on a consolidated basis and calculated in accordance with GAAP.
Consolidated Net Income shall exclude any net income (or loss) attributable to
Non-Wholly Owned Subsidiaries to the extent (a) such net income (or loss) is
attributable to the proportionate share of the Capital Stock in such entities
owned by Persons other than the Company or a Wholly Owned Subsidiary, or (b)
such net income has not been distributed to the Company or a Wholly Owned
Subsidiary of the Company; provided that actual transaction expenses in
connection with the Transactions of up to $5,500,000 shall be added back to
Consolidated Net Income to the extent actually expensed and not capitalized.
"Consolidated Senior Indebtedness" shall mean, at any date,
Consolidated Total Indebtedness as of such date less Subordinated Indebtedness
of the Company and its Material Subsidiaries as of such date, determined on a
consolidated basis.
"Consolidated Total Indebtedness" shall mean, at any date, all
Indebtedness of the Company and its Material Subsidiaries as of such date,
determined on a consolidated basis.
"Contingent Obligation" shall mean, with respect to any Person, any
direct or indirect liability of such Person with respect to any Indebtedness,
liability or other obligation (the "primary obligation") of another Person (the
"primary obligor"), whether or not contingent, (a) to purchase, repurchase or
otherwise acquire such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or provide funds (i) for the payment
or discharge of any such primary obligation or (ii) to maintain working capital
or equity capital of the primary obligor or otherwise to maintain the net worth
or solvency or any balance sheet item, level of income or financial condition of
the primary obligor, (c) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor in respect thereof to make payment of such
primary obligation or (d) otherwise to assure or hold harmless the owner of any
such primary obligation against loss or failure or inability to perform in
respect thereof; provided, however, that, with respect to the Company and its
Subsidiaries, the term Contingent Obligation shall not include endorsements for
collection or deposit in the ordinary course of business.
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"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise, and the
terms "CONTROLLING" and "CONTROLLED" have meanings correlative thereto.
"Debenture" means, the Senior Subordinated Debenture dated the date of
this Agreement in the aggregate principal amount of $15,000,000 from the Company
made payable to Allied, which evidences the Company's repayment obligation for
the investment by Allied in the Company.
"Default" means any event or condition that upon notice, lapse of time
or both would constitute an Event of Default.
"Disqualified Capital Stock" shall mean, with respect to any Person,
any Capital Stock of such Person that, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable), or upon
the happening of any event or otherwise, (i) matures or is mandatorily
redeemable or subject to any mandatory repurchase requirement, pursuant to a
sinking fund obligation or otherwise, (ii) is redeemable or subject to any
mandatory repurchase requirement at the sole option of the holder thereof, or
(iii) is convertible into or exchangeable for (whether at the option of the
issuer or the holder thereof) (a) debt securities or (b) any Capital Stock
referred to in (i) or (ii) above, in each case under (i), (ii) or (iii) above at
any time on or prior to the first anniversary of the Maturity Date; provided,
however, that only the portion of Capital Stock that so matures or is
mandatorily redeemable, is so redeemable at the option of the holder thereof, or
is so convertible or exchangeable on or prior to such date shall be deemed to be
Disqualified Capital Stock; provided, further, that the shares of convertible
participating preferred stock and redeemable preferred stock issued to TA
Associates, the other shareholders of the Company and the Holders in connection
with the Transactions shall not constitute Disqualified Capital Stock as long as
the terms and conditions of such shares remain unchanged as such terms and
conditions exist on the Closing Date.
"Dollars" or "$" means lawful money of the United States of America.
"EBITDA" shall mean, for any Person during any period, the aggregate of
(i) net income (or loss) of such Person for such period, plus (ii) the sum of
interest expense, federal, state, local and other income taxes, depreciation,
amortization of intangible assets of such Person, all to the extent taken into
account in the calculation of such Person's net income for such period and all
calculated on a consolidated basis in accordance with GAAP, minus (iii) the sum
of extraordinary or nonrecurring gains (including in connection with the sale or
write-up of assets), all to the extent taken into account in the calculation of
such Person's net income for such period and calculated on a consolidated basis
in accordance with GAAP, plus (iv) the sum of reasonable extraordinary or
nonrecurring losses, taken into account in the calculation of Consolidated Net
Income for such period and calculated on a consolidated basis in accordance with
GAAP.
"Environmental Claim" shall mean any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, claims, liens, allegations,
notices of noncompliance or violation, investigations (other than internal
reports prepared by any Person in the ordinary
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course of its business and not in response to any third party action or request
of any kind) or proceedings relating in any way to any actual or alleged
violation of or liability under any Environmental Law or relating to any permit
issued, or any approval given, under any such Environmental Law (collectively,
"Claims"), including, without limitation, (i) any and all Claims by Governmental
Authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law and (ii) any and
all Claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from Hazardous
Substances or arising from alleged injury or threat of injury to human health or
the environment.
"Environmental Laws" shall mean any and all federal, state and local
laws, statutes, ordinances, rules, regulations, permits, licenses, approvals,
and orders of courts or Governmental Authorities, relating primarily to the
protection of human health or occupational safety or the environment, now or
hereafter in effect and in each case as amended from time to time.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
the same may be amended from time to time, and any successor statute, and all
rules and regulations from time to time promulgated thereunder.
"ERISA Affiliate" shall mean any Person (including any trade or
business, whether or not incorporated) that would be deemed to be under "common
control" with, or a member of the same "controlled group" as, the Company or any
Subsidiary, within the meaning of Sections 414(b), (c), (m) or (o) of the
Internal Revenue Code or Section 4001 of ERISA.
"ERISA Event" shall mean any of the following with respect to a Plan or
Multiemployer Plan, as applicable: (i) a Reportable Event with respect to a Plan
or a Multiemployer Plan, (ii) a complete or partial withdrawal by the Company or
any ERISA Affiliate from a Multiemployer Plan that results in liability under
Section 4201 or 4204 of ERISA, or the receipt by the Company or any ERISA
Affiliate of notice from a Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to
terminate or has terminated under Section 4041A of ERISA, (iii) the distribution
by the Company or any ERISA Affiliate under Section 4041 or 4041A of ERISA of a
notice of intent to terminate any Plan or the taking of any action to terminate
any Plan, (iv) the commencement of proceedings by the PBGC under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan, or the receipt by the Company or any ERISA Affiliate of a notice from any
Multiemployer Plan that such action has been taken by the PBGC with respect to
such Multiemployer Plan, (v) the institution of a proceeding by any fiduciary of
any Multiemployer Plan against the Company or any ERISA Affiliate to enforce
Section 515 of ERISA, which is not dismissed within thirty (30) days, (vi) the
imposition upon the Company or any ERISA Affiliate of any liability under Title
IV of ERISA, other than for PBGC premiums due but not delinquent under Section
4007 of ERISA, or the imposition or threatened imposition of any Lien upon any
assets of the Company or any ERISA Affiliate as a result of any alleged failure
to comply with the Internal Revenue Code or ERISA in respect of any Plan, (vii)
the engaging in or otherwise becoming liable for a nonexempt Prohibited
Transaction by the Company or any ERISA Affiliate, (viii) a violation of the
applicable requirements of Section 404 or 405 of ERISA or the exclusive benefit
rule under Section 401(a) of the Internal Revenue Code by any fiduciary of any
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Plan for which the Company or any of its ERISA Affiliates may be directly or
indirectly liable or (ix) the adoption of an amendment to any Plan that,
pursuant to Section 401(a)(29) of the Internal Revenue Code or Section 307 of
ERISA, would result in the loss of tax-exempt status of the trust of which such
Plan is a part if the Company or an ERISA Affiliate fails to timely provide
security to such Plan in accordance with the provisions of such sections.
"Events of Default" has the meaning assigned to such term in Article
VII.
"Financial Covenants" See Section 5.11.
"Fair Market Value" shall mean, with respect to any Capital Stock of
the Company given in connection with an Acquisition or Minority Investment, the
value given to such Capital Stock for purposes of such Acquisition or Minority
Investment by the parties thereto, as determined in good faith pursuant to the
relevant acquisition agreement or otherwise in connection with such Acquisition
or Minority Investment.
"Financial Officer" shall mean, with respect to the Company, the chief
financial officer, vice president - finance, principal accounting officer or
treasurer of the Company.
"Financials" means, collectively, the Audited Financials and the
Interim Financials, as defined in Section 4.5.
"GAAP" means generally accepted accounting principles applied on a
consistent basis.
"Governmental Authority(ies)" means any Federal, state, local,
quasi-governmental instrumentality or foreign court, or governmental agency,
authority, instrumentality, agency, bureau, commission, department or regulatory
body.
"Hazardous Substances" shall mean any substances or materials (i) that
are or become defined or regulated as hazardous wastes, hazardous substances,
pollutants, contaminants or toxic substances under any Environmental Law, (ii)
that are defined or regulated by any Environmental Law as toxic, explosive,
corrosive, ignitable, infectious, radioactive, mutagenic or otherwise hazardous,
or (iii) that contain greater than 1% asbestos, in excess of 50 parts per
million polychlorinated biphenyls, urea formaldehyde foam insulation or
petroleum hydrocarbons.
"HCFA" shall mean the United States Health Care Financing
Administration and any successor agency.
"Hedge Agreement" shall mean any interest or foreign currency rate
swap, cap, collar, option, hedge, forward rate or other similar agreement or
arrangement designed to protect against fluctuations in interest rates or
currency exchange rates.
"Indebtedness" shall mean, with respect to any Person (without
duplication), (i) all indebtedness and obligations of such Person for borrowed
money or in respect of loans or advances of any kind, (ii) all obligations of
such Person evidenced by notes, bonds, debentures or similar instruments, (iii)
all reimbursement obligations of such Person with respect to surety
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bonds, letters of credit and bankers' acceptances (in each case, whether or not
drawn or matured and in the stated amount thereof), (iv) all obligations of such
Person to pay the deferred purchase price of property or services (including
earnouts, seller notes and other contingent obligations, to the extent required
to be recorded on the Company's balance sheet in accordance with GAAP), (v) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person, (vi) all
obligations of such Person as lessee under leases that are or are required to
be, in accordance with GAAP, recorded as capital leases, to the extent such
obligations are required to be so recorded, (vii) all Disqualified Capital Stock
issued by such Person, with the amount of Indebtedness represented by such
Disqualified Capital Stock being equal to the greater of its voluntary or
involuntary liquidation preference and its maximum fixed repurchase price, but
excluding accrued dividends, if any (for purposes hereof, the "maximum fixed
repurchase price" of any Disqualified Capital Stock that does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were purchased
on any date on which Indebtedness shall be required to be determined pursuant to
this Agreement, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock, such fair market value shall be
determined reasonably and in good faith by the board of directors or other
governing body of the issuer of such Disqualified Capital Stock), (viii) the net
termination obligations of such Person under any Hedge Agreements, calculated as
of any date as if such agreement or arrangement were terminated as of such date,
(ix) all Contingent Obligations of such Person, to the extent required to be
recorded on the Company's balance sheet in accordance with GAAP, and (x) all
indebtedness referred to in clauses (i) through (ix) above secured by any Lien
on any property or asset owned or held by such Person regardless of whether the
indebtedness secured thereby shall have been assumed by such Person or is
nonrecourse to the credit of such Person, to the extent required to be recorded
on the Company's balance sheet in accordance with GAAP.
"Indemnitee" See Section 8.5.
"Intellectual Property" shall mean (i) all inventions (whether or not
patentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissues, continuations, continuations-in-part, divisions, revisions,
extensions, and reexaminations thereof; (ii) all trademarks, service marks,
trade dress, logos, trade names, and corporate names, together with all goodwill
associated therewith, and all applications, registrations, and renewals in
connection therewith; (iii) all copyrightable works and all copyrights
(registered and unregistered); (iv) all trade secrets and confidential
information (including, without limitation, financial, business and marketing
plans and customer and supplier lists and related information); (v) all computer
software and software systems (including, without limitation, data, databases
and related documentation); (vi) all Internet web sites and domain names; (vii)
all other proprietary rights, and (viii) all licenses or other agreements to or
from third parties regarding the foregoing.
"Interest Coverage Ratio" shall mean, as of the last day of any fiscal
quarter, the ratio of (i) Annualized Consolidated EBITDA to (ii) Annualized
Consolidated Interest Expense.
"Interim Financials" See Section 4.5.
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"Investment Documents" means, collectively, this Agreement, the
Debenture, the Subsidiary Guaranty, the Assignment of Life Insurance Policies,
the Warrants, the Shareholder Agreement (Allied), and all other instruments and
documents executed and delivered in connection with the Allied Investment.
"Investments" means, collectively, (a) the purchase, ownership,
investment in or other acquisition of any Capital Stock, evidence of
indebtedness or other obligation or security or any interest whatsoever in any
other Person; or (b) the making or permitting to exist any loans, advances or
extensions of credit to, or any investment in cash or by delivery of property
in, any other Person; or (c) the purchase or other acquisition (whether in one
or a series of related transactions) of any portion of the assets, business or
properties of another Person (including pursuant to an Acquisition); or (d) the
creation or acquisition of any Material Subsidiary; or (e) entry into any
partnership or joint venture.
"IPO" means an initial public offering and sale of equity securities by
the Company which are registered under the Securities Act of 1933, as amended.
"Licenses" shall mean, collectively, all rights, licenses, permits and
authorizations now or hereafter issued by any Governmental Authority reasonably
necessary in connection with the operation or conduct of the Company's Business.
"Lien" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, and (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset.
"Limitation" shall mean a revocation, suspension, termination,
impairment, probation, limitation, non-renewal, forfeiture, declaration of
ineligibility, loss of status as a participating provider in a Third Party Payor
Arrangement, and the loss of any other material rights.
"Managed Practice" shall mean any professional association,
professional corporation, partnership or similar Person that provides ear, nose,
throat, head, neck or related services (including, without limitation, services
in the fields of allergy, audiology, oral surgery, pulmonology, plastic surgery
or sleep medicine) which has entered into a Service Agreement with the Company
or any of its Subsidiaries.
"Material Adverse Change" means a material adverse change in the
condition (financial or otherwise), operations, properties, or business of the
Company and its Subsidiaries, taken as a whole.
"Material Adverse Effect" means (a) a materially adverse effect on the
business, operations, or condition, financial or otherwise, of the Company and
its Subsidiaries, taken as a whole, (b) material impairment of the ability of
the Company and its Subsidiaries, taken as a whole, to perform any of their
obligations under any Investment Document or (c) material
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adverse effect upon the legality, validity or enforceability of this Agreement
or any of the other Investment Documents or the rights and remedies of the
Holders hereunder and thereunder.
"Material Contract" shall mean any contract or other arrangement (other
than any Investment Document), whether written or oral, to which the Company or
any other Subsidiary is a party as to which the breach, nonperformance,
cancellation or failure to renew by any party thereto would reasonably likely be
expected to have a Material Adverse Effect.
"Material Subsidiary" means, as of the date of any determination
thereof, any Subsidiary that (a) directly or indirectly owns any Capital Stock
of any other Material Subsidiary or (b) either (i) has total assets greater than
or equal to 3.0% of total assets (based on book value or fair market value) of
the Company and its Subsidiaries, determined on a consolidated basis and
calculated as of the fiscal quarter most recently ended or (ii) has EBITDA for
any fiscal quarter greater than or equal to 3.0% of the Consolidated EBITDA of
the Company and its Subsidiaries, determined on a consolidated basis and
calculated as of the fiscal quarter most recently ended. In any event, the term
"Material Subsidiaries" shall mean all Subsidiaries of the Company, that
together with the Company have assets equal to not less than 97% of the total
assets (calculated as described above) and EBITDA of not less than 97% of
Consolidated EBITDA (calculated as described above) and if more than one
combination of Subsidiaries satisfies such threshold, then those Subsidiaries so
determined to be "Material Subsidiaries" shall be specified by the Company;
provided that once a Subsidiary is deemed a Material Subsidiary, it shall remain
a Material Subsidiary hereunder.
"Maturity Date" means November 1, 2006.
"Maximum Rate" See Section 8.9.
"Medicaid Certification" shall mean, with respect to any facility,
certification by HCFA or another Governmental Authority, or any Person under
contract with HCFA, that such facility is in compliance with all conditions of
participation set forth in the Medicaid Regulations, except where the failure to
so comply would not have a Material Adverse Effect.
"Medicaid Provider Agreement" shall mean an agreement entered into
between any Person administering the Medicaid program and a facility under which
the facility agrees to provide services for Medicaid patients in accordance with
the terms of the agreement and Medicaid Regulations.
"Medicaid Regulations" shall mean, collectively, (i) all federal
statutes (whether set forth in Title XIX of the Social Security Act, 42 USC ss.
1395 et seq., or elsewhere) affecting the medical assistance program established
by Title XIX of the Social Security Act, and any statutes succeeding thereto;
(ii) 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 (i) above and all federal administrative,
reimbursement and other guidelines of all Governmental Authorities affecting any
Managed Practice having the force of law promulgated pursuant to or in
connection with the statutes described in clause (i) above; (iii) all state
statutes and plans for medical assistance enacted in connection with the
statutes and
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provisions described in clauses (i) and (ii) above; and (iv) all applicable
provisions of all rules, regulations and orders of all Governmental Authorities
promulgated pursuant to or in connection with the statutes described in clause
(iii) 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 (iii) above, in each case as
may be amended, supplemented or otherwise modified from time to time.
"Medicare Certification" shall mean, with respect to any facility,
certification by HCFA or any other Governmental Authority, or any Person under
contract with HCFA, that such facility is in compliance with all the conditions
of participation set forth in the Medicare Regulations, except where the failure
to so comply would not have a Material Adverse Effect.
"Medicare Provider Agreement" shall mean an agreement entered into
between any Person administering the Medicare program and a facility under which
the facility agrees to provide services for Medicare patients in accordance with
the terms of the agreement and Medicare Regulations.
"Medicare Regulations" shall mean, collectively, all federal statutes
(whether set forth in Title XVIII of the Social Security Act, 42 USC ss. 1395 et
seq., 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; together with all applicable provisions of all rules,
regulations, and orders and administrative, reimbursement and other guidelines
having the force of law of all Governmental Authorities (including without
limitation, Health and Human Services ("HHS"), HCFA, 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, in each case as may be amended, supplemented or
otherwise modified from time to time.
"Merger" shall have the meaning given to such term in the Merger
Agreement, as in effect as of the Closing Date.
"Merger Agreement" means the Agreement and Plan of Merger, dated as of
June 14, 1999, by and among Merger Sub, the Company, and certain guarantors
party thereto, including all schedules and exhibits thereto and other related
documentation.
"Merger Sub" shall mean TA Mergerco, Inc., a Delaware corporation, and
its successors.
"Merger Transaction Documents" means, collectively, the Merger
Agreement, the Voting Agreement, the Roll-Over Agreement, the Stock Purchase
Agreement, and the other documents executed pursuant to the Merger Agreement to
effect the transactions described therein.
"Minority Investment" shall mean an Investment by the Company or a
Subsidiary of the Company in an unrelated Person where the Company and its
Subsidiaries own less than fifty percent (50%) (or fifty percent (50%) without
direct or indirect management control) of the combined voting power of the
Capital Stock of such Person on a fully diluted basis.
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"Multiemployer Plan" shall mean any "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA to which the Company or any ERISA
Affiliate makes, is making or is obligated to make contributions or has made or
been obligated to make contributions.
"New Lending Office" See Section 2.12.
"Net Cash Proceeds" shall mean, in the case of any IPO, the aggregate
cash payments received by the Company and its Material Subsidiaries less actual
and reasonable fees and expenses (including underwriting discounts and
commissions) incurred by the Company and its Subsidiaries in connection
therewith.
"Non-Wholly Owned Subsidiary" shall mean any Subsidiary of which less
than one-hundred percent (100%) of the outstanding Capital Stock is, directly or
indirectly, owned by the Company or its Wholly Owned Subsidiaries.
"Non-U.S. Lender" See Section 2.12.
"Obligations" means all indebtedness, advances pursuant to this
Agreement, debts, liabilities and obligations, for the performance of covenants,
tasks or duties or for payment of monetary amounts (whether or not such
performance is then required or contingent, or such amounts are liquidated or
determinable) owing by the Company and the Subsidiary Guarantors to the Holders,
and all covenants and duties regarding such amounts, of any kind or nature,
present or future, whether or not evidenced by any note, debenture, agreement or
other instrument, arising under this Agreement, the Debenture, or the Subsidiary
Guaranty. The term includes all principal, interest (including all interest that
accrues after the commencement of any case or proceeding in bankruptcy after the
insolvency of, or for the reorganization of the Company or any Subsidiary
Guarantor, whether or not allowed in such proceeding), prepayment premiums,
fees, charges, expenses, attorneys' fees, and any other sum chargeable to the
Company or Subsidiary Guarantors under this Agreement, the Debenture, or the
Subsidiary Guaranty.
"Other Taxes" See Section 2.12.
"Permitted Acquisition" shall mean (a) any Acquisition with respect to
which all of the following conditions are satisfied: (i) each business acquired
or investment made shall be within the scope of business described in Section
6.8; (ii) no Default or Event of Default has occurred or is continuing
hereunder; (iii) the Company provides pro forma financial statements to the
Holders showing the 12-month period ended with the month preceding the month in
which the Acquisition is to be closed and assuming the Acquisition was closed on
the first day of such 12-month period; (iv) such pro forma financial statements
demonstrate that, giving effect to the proposed Acquisition and the incurrence
of all indebtedness related thereto, the Company would have been in compliance
with the Financial Covenants as of the end of the 12-month period depicted in
such pro forma financial statements; (v) on a cumulative basis, no more than 75%
of the aggregate Purchase Amount for all Acquisitions completed during a rolling
12-month period is made in cash; and (vi) the consummation of such Acquisition
will not cause a Default or an Event of Default hereunder.
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"Permitted Joint Venture" shall mean (a) each of the Non-Wholly Owned
Subsidiaries identified on Schedule 4.12 and (b) a Non-Wholly Owned Subsidiary
identified as a Permitted Joint Venture by the Company to the Holders at the
time of the Acquisition or creation thereof: (i) of which at least fifty percent
(50%) of the Capital Stock is owned by the Company and/or a Subsidiary
Guarantor, (ii) over which the Company or a Subsidiary Guarantor has direct or
indirect management control, either as general partner, managing partner, by
contract or as holder of the controlling interest and over which the Company
and/or its Wholly Owned Subsidiaries has control over major decisions, including
without limitation, the decision to sell substantially all of the assets of such
joint venture or to merge such joint venture with another entity, (iii) the
activity of which is within the scope of business described in Section 6.8, (iv)
which is subject to no provision in its organizational documents or any contract
to which it is a party (A) that restricts the payment of dividends and
distributions from such entity to the Company or any Subsidiary thereof that
owns the Capital Stock of such Permitted Joint Venture, (B) that restricts the
pledge of such Capital Stock held by the Company and/or its Wholly Owned
Subsidiaries to the Senior Lender Agent for the benefit of the Senior Lenders or
(C) that restricts the exercise of remedies by the Senior Lender Agent with
respect to such Capital Stock under the Senior Loan Documents, (v) which does
not own any Capital Stock of any other Subsidiary, (vi) for which any Capital
Stock of such Permitted Joint Venture acquired from the Company or any
Subsidiary by Persons other than the Company or a Wholly Owned Subsidiary of the
Company are acquired for Fair Market Value (reasonable evidence of which shall
be provided to the Holders upon their request), and (vii) with respect to which,
after giving effect to the designation of a Subsidiary as a Permitted Joint
Venture, no Default or Event of Default would exist.
"Permitted Junior Debt" means (a) existing seller notes of the Company
or any of its Subsidiaries listed on Schedule 4.7 and (b) future seller notes
that are executed in connection with a Permitted Acquisition and that are fully
subordinated to the Obligations pursuant to one or more subordination agreements
between the Holders and each holder of such seller notes.
"Permitted Lien" is defined in Section 6.3.
"Permitted Minority Investment" shall mean (a) each of the Minority
Investments set forth on Schedule 4.12, (b) any Minority Investment with respect
to which all of the following conditions are satisfied: (i) the Minority
Investment shall be within the scope of business described in Section 6.8, (ii)
any Capital Stock given as consideration in connection therewith shall be
Capital Stock of the Company, (iii) the investors shall be the Company, a Wholly
Owned Subsidiary or a Permitted Joint Venture, (iv) the amount of any Physician
Minority Investment Loan issued in connection with such Minority Investment
shall not constitute more than forty percent (40%) of the Purchase Amount for
such Minority Investment; and (v) all of the conditions and requirements of
Section 5.15 applicable to such Minority Investment are satisfied; or (c) any
other Minority Investment to which the Holders shall have given their prior
written consent (which consent shall not be unreasonably withheld and may be
given subject to such additional terms and conditions as the Holders shall
reasonably establish) and with respect to which all of the conditions and
requirements set forth in this definition and in Section 5.15 and in or pursuant
to any such consent have been satisfied or waived in writing by the Holders;
provided that the Purchase Amount of a Minority Investment approved pursuant to
this clause (c)
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shall count toward the $25,000,000 basket set forth in Section 5.15(a)(iii)
unless the exclusion of such Purchase Amount from such basket is expressly
consented to by the Holders.
"Permitted Senior Debt" See Section 6.2(a).
"Person" means any natural person, corporation, business trust, joint
venture, association, company, partnership or government, or any agency or
political subdivision thereof.
"Physician Minority Investment Loan" shall mean a loan to a physician
or a physician-controlled entity in connection with a Minority Investment, which
loan (a) is used by such physician to acquire Capital Stock in the Target of
such Minority Investment, (b) is secured by Capital Stock owned by such
physician or physician-controlled entity in a Permitted Joint Venture and (c) is
evidenced by a promissory note.
"PIK Dividends" shall mean dividends paid in kind (but not in cash) by
the Company pursuant to its redeemable preferred stock or any like instrument or
security issued by the Company in the future.
"PIK Interest" means the difference between the interest accrued at the
Accrual Rate and the interest paid at the Pay Rate under the Debenture and as
those terms are defined in the Debenture, which difference is capitalized into
the outstanding principal balance under the Debenture quarterly.
"Plan" shall mean any "employee pension benefit plan" within the
meaning of Section 3(2) of ERISA that is subject to the provisions of Title IV
of ERISA (other than a Multiemployer Plan) and to which the Company or any ERISA
Affiliate may have any liability.
"Prohibited Transaction" shall mean any transaction described in (i)
Section 406 of ERISA that is not exempt by reason of Section 408 of ERISA or by
reason of a Department of Labor prohibited transaction individual or class
exemption or (ii) Section 4975(c) of the Internal Revenue Code that is not
exempt by reason of Section 4975(c)(2) or 4975(d) of the Internal Revenue Code.
"Purchase" shall mean an Acquisition or a Minority Investment.
"Purchase Amount" shall mean, with respect to any Purchase, the sum
(without duplication) of (i) the amount of cash paid by the Company and its
Subsidiaries in connection with such Purchase, (ii) the Fair Market Value of all
Capital Stock of the Company issued or given in connection with such Purchase,
(iii) the amount (determined by using the face amount or the amount payable at
maturity, whichever is greater) of all Indebtedness incurred, assumed or
acquired by the Company and its Subsidiaries in connection with such Purchase,
(iv) all additional purchase price amounts in connection with such Purchase in
the form of earnouts and other contingent obligations that should be recorded as
a liability on the balance sheet of the Company and its Subsidiaries or
expensed, in either event in accordance with GAAP, (v) all amounts paid in
respect of covenants not to compete, consulting agreements and other affiliated
contracts in connection with such Purchase, (vi) the aggregate fair market value
of all other consideration given by the Company and its Subsidiaries in
connection with such Purchase; and
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(vii) with respect to Minority Investments, the amount (determined by using the
face amount or the amount payable at maturity, whichever is greater) of any
Physician Minority Investment Loans issued by the Company and its Subsidiaries
in connection with such Minority Investment.
"Purchased Shares" means 850.00 shares of redeemable preferred stock
and 97,411 shares of convertible preferred stock in the Company purchased by
Allied pursuant to Section 2.2.
"Real Property" shall mean, collectively, all real property owned by
the Company or any of its Subsidiaries or in which the Company or any of its
Subsidiaries has a leasehold interest and all real property hereafter acquired
by the Company in fee or by means of a leasehold interest, including all real
property on which the Company's Business is now or hereafter conducted, together
with all goods located on any such real property that are or may become
"fixtures" under the law of the jurisdiction in which such real property is
located.
"Reimbursement Approvals" shall mean, with respect to all Third Party
Payor Arrangements, any and all certifications, provider numbers, provider
agreements, participation agreements, accreditations and any other similar
agreements with or approvals by Governmental Authorities or other Persons.
"Reportable Event" shall mean (i) any "reportable event" within the
meaning of Section 4043(c) of ERISA for which the 30-day notice under Section
4043(a) of ERISA has not been waived by the PBGC (including any failure to meet
the minimum funding standard of, or timely make any required installment under,
Section 412 of the Internal Revenue Code or Section 302 of ERISA, regardless of
the issuance of any waivers in accordance with Section 412(d) of the Internal
Revenue Code), (ii) any such "reportable event" subject to advance notice to the
PBGC under Section 4043(b)(3) of ERISA, (iii) any application for a funding
waiver or an extension of any amortization period pursuant to Section 412 of the
Internal Revenue Code, and (iv) a cessation of operations described in Section
4062(e) of ERISA.
"Requirement of Law" shall mean, with respect to any Person, the
charter, articles or certificate of organization or incorporation and bylaws or
other organizational or governing documents of such Person, and any statute,
law, treaty, rule, regulation, order, decree, writ, injunction or determination
of any arbitrator or court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject or otherwise pertaining to any or
all of the transactions contemplated by this Agreement and the other Investment
Documents.
"Responsible Officer" shall mean, with respect to the Company, the
president, the chief executive officer, the chief operating officer, any
Financial Officer, and any other officer or similar official thereof responsible
for the administration of the obligations of the Company in respect of this
Agreement.
"Roll-Over Agreement" shall mean the Roll-Over Agreement, dated as of
June 14 and October 22, 1999 among Merger Sub and the stockholders and
optionholders of the Company party thereto.
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"Roll-Over Agreement Shares" shall mean 2,058,607 shares of Capital
Stock of the Company subject to the Roll-Over Agreement.
"Senior Credit Agreement" means the Credit Agreement dated as of the
date of this Agreement by and among the Company, the Senior Lender Agent, and
the Senior Lenders in connection with the Senior Loan, as amended, supplemented,
restated, otherwise modified, extended, renewed, refunded, restructured, or
replaced from time to time in accordance with Section 6.2(a).
"Senior Lender Agent" means First Union National Bank, as agent for the
Senior Lenders, and any agent for the lenders with respect to future Permitted
Senior Debt, and their respective successors and assigns.
"Senior Lenders" means collectively the lenders who are or become
parties as lender to the Senior Credit Agreement and, with respect to future
Permitted Senior Debt, the holders of such Permitted Senior Debt. In the phrase
"approval of the Senior Lenders" or similar phases, the term "Senior Lenders"
means those Senior Lenders holding the percentage interest in the Permitted
Senior Debt required for approval under the terms of the Senior Credit
Agreement.
"Senior Leverage Ratio" means, as of the last day of any fiscal
quarter, the ratio of Consolidated Senior Indebtedness as of such date to
Annualized Consolidated EBITDA calculated with respect to the fiscal quarter
ending on such date.
"Senior Loan" means all of the following: (a) the aggregate principal
indebtedness advanced from time to time under the Senior Credit Agreement
(including reimbursement obligations in respect of letters of credit issued
thereunder) up to a maximum aggregate principal indebtedness of $60,000,000,
subject to increases that are permitted in the definition of Permitted Senior
Debt; (b) all interest accrued and accruing on the aggregate principal
outstanding under the Senior Loan Documents from time to time (including any
interest accruing after the filing of a petition for bankruptcy or for
reorganization relating to the Company [whether or not a claim for post-filing
interest is allowed in such proceedings to the extent such interest constitutes
an allowed claim]); (c) all other fees, indemnities, or monetary obligations
owed to the Senior Lenders under the Senior Loan Documents, including
indebtedness under Hedge Agreements; (d) all costs incurred by the Senior
Lenders in commencing or pursuing any enforcement action(s) with respect to the
amounts described in clauses (a) through (c), including, without limitation,
attorneys' fees and disbursements; and (e) any advances made by the Senior
Lenders to protect any collateral securing the Senior Loan.
"Senior Loan Documents" means the Senior Credit Agreement, and all
notes, collateral and security documents, guaranties, and other documents
delivered at any time in connection with Permitted Senior Debt all as amended,
supplemented, restated, otherwise modified, extended, renewed, refunded,
restructured or replaced from time to time in accordance with their respective
terms and as permitted in Section 6.2(a) and any credit or loan agreements
entered into between the Company and any bank or other lender at any time
subsequent to the Closing Date that evidences any replacement, supplemental or
new financing (other than financing that by its terms refers explicitly to this
Agreement or the Debenture and states that the indebtedness
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evidenced by such financing shall not be senior to this Agreement or the
Debenture), whether secured or unsecured, whether incurred in connection with a
refinancing of the obligations under the Senior Credit Agreement to which the
Company is a party on the Closing Date and the replacement of such financing
with a new credit facility or facilities, or any supplemental financing or any
new financing (whether or not a refinancing of existing indebtedness) to the
extent permitted under Section 6.2(a).
"Service Agreement" shall mean any agreement or arrangement between the
Company or any of its Subsidiaries and one or more Managed Practices pursuant to
which the Company or any such Subsidiary agrees to provide or arrange for
comprehensive management, administrative and other non-medical, non-dental
support services to such Managed Practice or Practices in exchange for payment
to the Company or such Subsidiary of a service, management or similar fee.
"Shareholder Agreement (Allied)" means the Shareholder Agreement
(Allied), dated of even date herewith, by and between the Company and Allied.
"Stockholders Agreement" shall mean the Stockholders Agreement, dated
as of June 14, 1999, among the stockholders of the Company and the stockholders
of Merger Sub party thereto and Merger Sub.
"Stock Purchase Agreement" shall mean the Stock Purchase Agreement,
dated as of June 14, 1999, among the TA Funds, the Company, and the Voting
Agreement Stockholders.
"Subordinated Indebtedness" means (a) subordinated indebtedness
existing on the Closing Date and described in Schedule 4.6, (b) the Indebtedness
evidenced by the Debenture, and (c) other unsecured Indebtedness of the Company
that is expressly subordinated and made junior in right and time of payment to
the Permitted Senior Debt and that is evidenced by one or more written
agreements or instruments having terms, conditions and provisions (including,
without limitation, provisions relating to principal amount, maturity,
covenants, defaults, interest, and subordination) satisfactory in form and
substance to the Senior Lenders.
"Subordination Agreement" means that certain Subordination Agreement,
dated as of the date hereof, by and among the Company, the Subsidiary Guarantors
and any of the Company's additional Subsidiaries that become Subsidiary
Guarantors from time to time after the Closing Date, Allied, and the Senior
Lender Agent, as amended, modified or supplemented from time to time.
"Subsidiary" shall mean, with respect to any Person, any corporation or
other Person of which more than fifty percent (50%) of the outstanding Capital
Stock having ordinary voting power to elect a majority of the board of
directors, board of managers or other governing body of such Person, is at the
time, directly or indirectly, owned or controlled by such Person and/or one or
more of its other Subsidiaries or a combination thereof (irrespective of
whether, at the time, securities of any other class or classes of any such
corporation or other Person shall or might have voting power by reason of the
happening of any contingency); provided that for purposes of Articles IV, V
(excluding Section 5.11), VI, and VII, a Permitted Joint Venture of which
greater
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than fifty percent (50%), or fifty percent (50%) with direct or indirect
management control, of the Capital Stock is owned by the Company and/or its
Subsidiaries shall be deemed a "Subsidiary". When used without reference to a
parent entity, the term "Subsidiary" shall be deemed to refer to a Subsidiary of
the Company.
"Subsidiary Guarantor" means any Material Subsidiary that is a
guarantor under the Subsidiary Guaranty.
"Subsidiary Guaranty" means the guaranty agreement made by the
Subsidiary Guarantors in favor of the Holders, as amended, modified or
supplemented from time to time.
"TA Associates" means TA Associates Inc., a Delaware corporation.
"TA Funds" means collectively, TA/Advent VIII, L.P., TA/Atlantic and
Pacific IV L.P., TA Executive Fund LLC, TA Investors LLC, Allied Capital
Corporation, 1998 GP&H Fund LLC, and GP&H PSC Partners.
"Target" shall have the meaning given to such term in Section
5.15(b)(i).
"Taxes" See Section 2.12.
"Third Party Payor Arrangements" shall mean any and all arrangements
with Medicare, Medicaid, CHAMPUS and any other Governmental Authority or
quasi-public agency, Blue Cross, Blue Shield, any managed care plans, and
organizations including, without limitation, health maintenance organizations
and preferred provider organizations, private commercial insurance companies and
any similar third party arrangements, plans or programs for payment or
reimbursement in connection with health care services, products or supplies.
"Total Leverage Ratio" shall mean, as of the last day of any fiscal
quarter, the ratio of (i) Consolidated Total Indebtedness as of such date to
(ii) Annualized Consolidated EBITDA calculated with respect to the fiscal
quarter ending on such date.
"Transactions" shall mean a series of transactions involving the
Company in which (i) certain TA Funds will purchase approximately 1,874,000
shares of common stock of the Company from certain stockholders of the Company
for an aggregate purchase price of approximately $19,675,000; (ii) Merger Sub
will receive approximately $13,125,000 in cash, together with the shares of
common stock of the Company purchased pursuant to the preceding clause (i) from
the TA Funds in exchange for convertible participating preferred stock and
redeemable preferred stock of Merger Sub; (iii) Merger Sub will be merged with
and into the Company with the Company as the survivor; (iv) in the Merger, the
Company's shareholders will receive approximately $10.50 per share in cash for
their common stock in the Company (other than those shares directly purchased by
certain TA Funds pursuant to clause (I) of this definition and the Roll-Over
Agreement Shares); (v) in connection with the Merger, the Roll-Over Agreement
Shares shall remain outstanding as shares of common stock of the Company (as the
surviving corporation in the Merger) and each outstanding share of common stock,
convertible participating preferred stock and 6% redeemable preferred stock,
respectively, of Merger Sub will be converted to one share of common stock,
convertible participating preferred
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stock and 6% redeemable preferred stock, respectively, of the Company, having
such terms as set forth in the Certificate of Incorporation of the surviving
corporation; (vi) the Company will issue the Debenture to the Holders for
aggregate cash proceeds of $15,000,000; (vii) the Certificate of Incorporation
of the surviving corporation shall be amended and restated as set forth in
Exhibit 1.1 to the Merger Agreement; (viii) the Company will issue Warrants to
the Holders, and the Holders will purchase redeemable preferred stock and
convertible preferred stock for an aggregate purchase price of $999,998.00;
(ix) the Company will make the initial borrowing under the Senior Loan to
finance, in part, the Transactions; (x) all outstanding borrowings and letters
of credit under the Company's existing credit facility will be refinanced or
replaced and such credit facility will be terminated; (xi) approximately
$11,100,000 of existing Subordinated Indebtedness of the Company and its
Subsidiaries shall remain outstanding; and (xii) after giving effect to the
Merger and the other transactions described above, no less than approximately
57% of the common stock of the Company on a fully diluted (and as converted)
basis will be owned by the TA Funds and their assigns.
"Transfer" means the sale, assignment, lease, transfer, mortgaging,
encumbering or other disposition, whether voluntary or involuntary, and whether
or not consideration is received therefor.
"Transfer Affecting the Company's Business" means (a) one or a series
of transactions undertaken by the Company resulting in (i) the Transfer of all
or substantially all of the assets of the Company; or (ii) a merger or
consolidation of the Company with another Person in which the Company is not the
surviving or successor entity or (b) a Change of Control.
"Unfunded Pension Liability" shall mean, with respect to any Plan or
Multiemployer Plan, the excess of its benefit liabilities under Section
4001(a)(16) of ERISA over the current value of its assets, determined in
accordance with the applicable assumptions used for funding under Section 412 of
the Code for the applicable plan year.
"Voting Agreement" shall mean the Voting Agreement, dated as of June
14, 1999, among Merger Sub and the Voting Agreement Stockholders.
"Voting Agreement Stockholders" shall mean the stockholders of the
Company party to the Voting Agreement.
"Warrant Shares" means all shares of common stock of the Company
issuable upon the exercise of the Warrants.
"Warrants" means the warrant issued to Allied to purchase 101,658
shares of the common stock of the Company.
"Wholly Owned" shall mean, with respect to any Subsidiary of any
Person, that 100% of the outstanding Capital Stock of such Subsidiary is owned,
directly or indirectly, by such Person.
SECTION 1.2 Terms Generally. The definitions in Section 1.1 apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun includes the corresponding masculine, feminine
and neuter forms. The words
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"include," "includes" and "including" are deemed to be followed by the phrase
"without limitation." All references herein to Articles, Sections, Exhibits and
Schedules are deemed references to Articles and Sections of, and Exhibits and
Schedules to, this Agreement unless the context shall otherwise require. Except
as otherwise expressly provided herein, (a) any reference in this Agreement to
any Investment Document means such document as amended, restated, supplemented
or otherwise modified from time to time and (b) all terms of an accounting or
financial nature are construed in accordance with GAAP, as in effect from time
to time. Notwithstanding anything to the contrary in this Agreement, for
purposes of calculation of the Financial Covenants, all accounting
determinations and computations hereunder shall be made in accordance with GAAP
as in effect as of the date of this Agreement applied on a basis consistent with
the application used in preparing the most recent financial statements of the
Company referred to in Section 4.5. In the event that any changes in GAAP after
the Closing Date are applied to the Company, the Company, the Holders and the
Senior Lender Agent will meet to determine whether such change would materially
affect the computation of the Financial Covenants. If such changes would
materially affect the computation of the Financial Covenants, the Company and
the Senior Lenders will undertake to promptly amend the Senior Credit Agreement
and the Company and the Holders will undertake to comparably amend this
Agreement to take into account such changes such that neither the Company, the
Senior Lenders, nor the Holders are advantaged or disadvantaged by such changes.
ARTICLE II
THE INVESTMENT
SECTION 2.1 Debenture. The Company will borrow, and the Holder will
invest the sum of FIFTEEN MILLION AND 00/100 DOLLARS ($15,000,000.00) in the
Company. At the closing under this Agreement (the "CLOSING"), the Holder will
advance FIFTEEN MILLION AND 00/100 DOLLARS ($15,000,000.00), such indebtedness
to be evidenced by, and to be repaid according to the terms of, the Debenture.
In the event of any inconsistency between this Article II and the Debenture, the
Debenture shall control.
SECTION 2.2 Purchased Shares. Subject to the terms and conditions
hereof, and relying on the representations and warranties set forth in this
Agreement, Allied will purchase at Closing the Purchased Shares for an aggregate
purchase price of One million Dollars ($1,000,000.00) pursuant to the
Stockholders Agreement, as amended.
SECTION 2.3 Senior Debt. The rights of the Holders under the Debenture
and this Agreement as to right of payment are subordinate only to the Permitted
Senior Debt. The Subordination Agreement governs the relative rights and
obligations of the Holders and the Senior Lenders with respect to payments by
the Company and/or Subsidiary Guarantors, the exercise of remedies by the
Holders under the Debentures and hereunder and by the Senior Lenders under the
Senior Loan Documents, and other related intercreditor matters. To the extent
there are any inconsistencies between the terms of this Agreement and the
Subordination Agreement, the Subordination Agreement shall control.
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SECTION 2.4 Repayment of Debenture. The Company shall pay interest only
on the Debenture throughout the term of the Debenture. Subject to the terms of
Section 2.8 and if not sooner paid, all unpaid principal amounts, accrued and
unpaid interest, and other obligations of the Company to the Holder due and
owing under the Debenture shall be paid upon the earliest of (i) the date of
acceleration of the Debenture pursuant to Article VII, and (ii) the Maturity
Date.
SECTION 2.5 Interest on the Debenture. Subject to the provisions of
Section 2.6, the Debenture shall bear interest (computed on the basis of a
360-day year assuming twelve equal 30-day months) at the interest rate stated in
the Debenture and be payable in accordance with the Debenture.
SECTION 2.6 Default Interest. During the continuation of an Event of
Default, the Company shall on demand from time to time pay interest, to the
extent permitted by law, on the outstanding principal balance of the Debenture
at the default rate of interest stated in the Debenture. Such default rate of
interest shall be in effect after as well as before judgment.
SECTION 2.7 Prepayment. The Company may at any time and from time to
time prepay the principal indebtedness evidenced by the Debenture, in whole or
in part, upon at least three Business Days' prior written or telecopy notice (or
telephone notice promptly confirmed by written or telecopy notice) to Allied
before 12:00 (noon), Washington, DC time, subject to the Company's obligation to
pay a prepayment premium of 4% of any principal prepaid prior to the first
anniversary of the Closing Date and a prepayment premium of 2% of any principal
prepaid prior to the second anniversary of the Closing Date. There shall be no
prepayment premium on any prepayment made from and after the second anniversary
of the Closing Date. Any partial prepayments shall be made in increments of
$500,000. Notwithstanding the foregoing, from and after the completion of a IPO
by the Company, the prepayment premiums applicable during the first and second
years after the Closing Date shall be reduced to 2% and 1% respectively.
SECTION 2.8 Mandatory Prepayment of the Debenture at Option of Holder.
(a) The obligations of the Company under the Debenture and
this Agreement are not assumable; upon the occurrence of any of the following
triggering events, the Holder shall have the right (but not the obligation) to
require the Company to prepay the then outstanding principal balance, all
accrued but unpaid interest thereon, and all prepayment premiums then due and
owing under the Debenture, and to pay all of the other Obligations, if any, in
full. The occurrence of any of the following is a triggering event: (i) a
Transfer Affecting the Company's Business; (ii) a loss of Control by TA
Associates on behalf of the TA Funds to designate the two TA Directors (as
defined in the Stockholders Agreement) of the Company and, upon a default by the
Company under the Stockholders Agreement to unilaterally designate the
Independent Directors (as defined in the Stockholders Agreement); (iii) a
Transfer or series of Transfers of stock in the Company that results in either
TA Associates or Xxxxx X. Xxxxx owning less than 67% of its or his equity
holdings in the Company as of the Closing Date after giving effect to the Merger
Transaction (provided that any Transfer upon the death of Xxxxx X. Xxxxx
pursuant to a will or the laws of descent and distribution or pursuant to a
trust established by Xxxxx X. Xxxxx whose beneficiaries consist of family
members shall not be a triggering event); or (iv) the completion of an IPO by
the Company. Failure of the Holders to
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demand prepayment following the occurrence of any of the foregoing triggering
events shall not be deemed a waiver of the Holders' right to demand prepayment
following any future occurrence of any triggering event.
(b) If (i) the Holders elect to demand prepayment after the
completion of an IPO in accordance with this Section 2.8 and the Debenture, (ii)
the Net Cash Proceeds of the IPO are insufficient to prepay the Obligations
under the Debenture in full and to pay the Permitted Senior Debt in full, and
(iii) the Senior Lenders agree to accept a prepayment less than the amount
needed to repay the Permitted Senior Debt in full, the Holders will agree to
accept a principal prepayment under the Debenture equal to the same percentage
prepayment accepted by the Senior Lenders (i.e., if the Senior Lenders accept
the amount required to reduce the outstanding balance of the Permitted Senior
Debt by 50%, the Holders will accept a prepayment sufficient to reduce the
Obligations by 50%) on condition that upon application of the prepayment (x) the
maximum Permitted Senior Debt that may be outstanding is permanently reduced by
the amount of such principal prepayment to the Senior Lenders and (y) the Total
Leverage Ratio is not greater than 3.00:1.
SECTION 2.9 Payments.
(a) The Company shall make each payment (including principal
of or interest on the Debenture or other amounts) hereunder and under any other
Investment Document to which the Company or any Subsidiary Guarantor is a party
not later than 12:00 (noon), Washington, D.C. time, on the date when due in
immediately available dollars, without setoff, defense or counterclaim. Each
such payment shall be made to Allied at its offices at 0000 Xxxxxxxxxxxx Xxxxxx,
X.X., Xxxxxxxxxx, X.X. 00000-0000, attention of J. Xxxxxxxx Xxx, or by wire
transfer to the account designated by Allied.
(b) Whenever any payment (including principal of or interest
on the Debenture) hereunder or under any other Investment Document shall become
due, or otherwise would occur, on a day that is not a Business Day, such payment
may be made on the next succeeding Business Day, and such extension of time
shall in such case be included in the computation of interest.
SECTION 2.10 Use of Proceeds. The proceeds of the investment by Allied
shall be used to consummate the transactions contemplated by the Merger
Transaction Documents. At Allied's sole discretion, Allied shall be permitted to
conduct a review of the Company's financial records to determine the disposition
of the proceeds of the investment, and, upon request by Allied, the Financial
Officer of the Company shall certify in writing to Allied that the proceeds of
the investment were used in accordance with this Section 2.10.
SECTION 2.11 Warrants. At Closing, the Company will issue and sell to
the Holders the Warrants. The Warrants will entitle the Holders to purchase
shares of Common Stock of the Company, subject to adjustment as provided in the
Warrants. The aggregate purchase price for the Warrants and the aggregate
exercise price for the Warrants are set forth in the Warrants.
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SECTION 2.12 Taxes.
(a) Any and all payments by or on behalf of the Company
hereunder and under the Debenture shall be made, in accordance with Section 2.9,
free and clear of and without deduction for any and all taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding (i) income taxes imposed on the net income of a Holder and (ii)
franchise taxes imposed on the net income, gross revenues, or capital of a
Holder, in each case by the jurisdiction under the laws of which such Holder is
organized or in which the principal or relevant lending office of a Holder is
located, or in which such Holder is managed or controlled, or any political
subdivision thereof (all such nonexcluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities, collectively or individually, being
called "TAXES"). If any Holder is a foreign Person, it shall be qualified to
transact business in the United States as a foreign person. If the Company must
deduct any Taxes from or in respect of any sum payable hereunder or under the
Debenture to a Holder, (i) the sum payable shall be increased by the amount (an
"ADDITIONAL AMOUNT") necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
2.12) such Holder shall receive an amount equal to the sum it would have
received had no such deductions been made, (ii) the Company shall make such
deductions and (iii) the Company shall pay the full amount deducted to the
relevant Governmental Authority in accordance with Applicable Law.
(b) In addition, the Company will pay to the relevant
Governmental Authority in accordance with Applicable Law any current or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or under the Debenture
or from the execution, delivery or registration of, or otherwise with respect
to, this Agreement or the Debenture ("OTHER TAXES").
(c) The Company will indemnify each Holder for the full amount
of Taxes and Other Taxes paid by such Holder and any liability (including
penalties, interest and expenses (including reasonable attorney's fees and
expenses)) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted by the relevant Governmental
Authority. A certificate as to the amount of such payment or liability and the
method of calculating thereof prepared by such Holder absent demonstrable error,
shall be final conclusive and binding for all purposes. Such indemnification
shall be made within 45 days after the date such Holder makes written demand
therefor.
(d) As soon as practicable after the date of any payment of
Taxes or Other Taxes by the Company to the relevant Governmental Authority, the
Company will deliver to each Holder the original or a certified copy of a
receipt issued by such Governmental Authority evidencing payment thereof. If
there is a refund of any additional amount paid by the Company, the Company
shall be entitled to receive such refund.
(e) Any transferee of Allied, with respect to the investment,
if organized under the laws of a jurisdiction other than the United States, any
State thereof or the District of Columbia (a "NON-U.S. LENDER") shall deliver to
the Company two copies of either United States Internal Revenue Service Form
1001 or Form 4224, or, in the case of a Non-U.S. Lender
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claiming exemption from U.S. Federal withholding tax under Section 871(h) or
881(c) of the Code with respect to payments of "portfolio interest", a Form W-8
or W-9, as applicable, or any subsequent versions thereof or successors thereto
(and, if such Non-U.S. Lender delivers a Form W-8 or W-9, as applicable, a
certificate representing that such Non-U.S. Lender is not a bank for purposes of
Section 881(c) of the Code, is not a 10% shareholder (within the meaning of
Section 871(h)(3)(B) of the Code) of the Company and is not a controlled foreign
corporation related to the Company (within the meaning of Section 864(d)(4) of
the Code)), properly completed and duly executed by such Non-U.S. Lender
claiming complete exemption from, or reduced rate of U.S. Federal withholding
tax on payments by the Company under this Agreement and the other Investment
Documents. Such forms shall be delivered by each Non-U.S. Lender on or before
the date it becomes a party to this Agreement and on or before the date, if any,
such Non-U.S. Lender changes its applicable lending office by designating a
different lending office (a "NEW LENDING OFFICE"). In addition, each Non-U.S.
Lender shall deliver such forms promptly upon the obsolescence or invalidity of
any form previously delivered by such Non-U.S. Lender.
(f) The Company shall not be required to indemnify any Holder
or to pay any additional amounts to any Holder, in respect of United States
Federal withholding tax pursuant to paragraph (a) or (c) above to the extent
that (i) the obligation to withhold amounts with respect to United States
Federal withholding tax existed on the date such Holder became a party to this
Agreement or, with respect to payments to a New Lending Office, the date such
Holder designated such New Lending Office with respect to the Debenture;
provided, however, that this paragraph (f) shall not apply to the extent the
indemnity payment or additional amounts any Holder would be entitled to receive
pursuant to this Section 2.12 (without regard to this paragraph (f)) do not
exceed the indemnity payment or additional amounts that the Person making the
assignment, participation or transfer to such Holder would have been entitled to
receive in the absence of such assignment, participation, or transfer or (ii)
the obligation to pay such additional amounts would not have arisen but for a
failure by such Holder to comply with the provisions of paragraph (e) above.
(g) Nothing contained in this Section 2.12 shall require a
Holder to make available any of its tax returns (or any other information that
it reasonably deems to be confidential or proprietary).
(h) If any Holder requests compensation pursuant to paragraph
(a) or (c) above, then such Holder shall use reasonable efforts to designate a
New Lending Office for funding or booking the investment made hereunder that
would not result in such Taxes or Other Taxes being claimed. The Company may
also, upon notice to such Holder, require such Holder to assign all of its
interests, rights and obligations under this Agreement and the Debenture to any
assignee selected by the Company provided that such Holder shall have received
payment of an amount equal to the outstanding principal amount owing to it under
the Debenture, accrued interest thereon, and accrued fees required to be paid to
it hereunder or under the Debenture.
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ARTICLE III
CONDITIONS
SECTION 3.1 Conditions to Closing. The obligation of Allied to enter
into this Agreement and to perform its obligations hereunder is subject to the
satisfaction of the following conditions on or prior to the Closing Date:
(a) The representations and warranties set forth in Article IV
hereof shall be true and correct in all material respects on and as of the
Closing Date.
(b) The Company and each Subsidiary Guarantor shall be in
compliance with all the terms and provisions set forth herein and in each other
Investment Document on its part to be observed or performed, and at the time of
and immediately after the Allied Investment, no Event of Default or Default
shall have occurred and be continuing.
(c) Allied shall have received the following items:
(i) a favorable written opinion of counsel for
the Company and the Subsidiary Guarantors (A) dated the Closing Date, (B)
addressed to Allied, and (C) covering such matters relating to the Investment
Documents and the Allied Investment as Allied shall reasonably request, and the
Company hereby requests such counsel to deliver such opinion;
(ii) the Debenture, duly executed by the Company,
and each of the other Investment Documents, executed by each of the parties
thereto (other than Allied);
(iii) the Warrants;
(iv) the Purchased Shares;
(v) the Shareholder Agreement (Allied), in form
and substance acceptable to the parties;
(vi) the Assignment of Life Insurance Policies
and accompanying questionnaires, duly executed by the Company, the insurer, and,
if applicable, any other beneficiaries of the Assigned Life Insurance Policies;
(vii) the Subordination Agreement relating to the
Senior Loan, duly executed by the Senior Lender Agent on behalf of the Senior
Lenders;
(viii) (A) a copy of the certificate or articles of
incorporation, including all amendments thereto, of the Company and each
Subsidiary Guarantor, certified as of a recent date by the Secretary of State of
the state of its organization, and a certificate as to the good standing of the
Company and each Subsidiary Guarantor as of a recent date, from such Secretary
of State; (B) a certificate of the Secretary or Assistant Secretary of the
Company and each Subsidiary Guarantor dated the Closing Date and certifying (1)
that attached thereto is a true and complete copy of the by-laws of the Company
or Subsidiary Guarantor, as applicable, as in effect on the Closing Date and at
all times since a date prior to the date of the resolutions
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described in clause (2) below, (2) that attached thereto is a true and complete
copy of resolutions duly adopted by the Board of Directors of the Company and
each Subsidiary Guarantor authorizing the execution, delivery and performance of
the Investment Documents to which such Person is a party and that such
resolutions have not been modified, rescinded or amended and are in full force
and effect, (3) that the certificate or articles of incorporation of the Company
and each Subsidiary Guarantor have not been amended since the date of the last
amendment thereto shown on the certificate of good standing furnished pursuant
to clause (A) above other than pursuant to the Merger and the Merger Agreement,
and (4) as to the incumbency and specimen signature of each officer executing
any Investment Document or any other document delivered in connection herewith
on behalf of the Company each Subsidiary Guarantor; (C) a certificate of another
officer as to the incumbency and specimen signature of the Secretary or
Assistant Secretary executing the certificates pursuant to (B) above; and (D)
such other documents as Allied may reasonably request; and
(ix) all amounts due and payable on or prior to
the Closing Date, including, to the extent invoiced, reimbursement or payment of
all out-of-pocket expenses required to be reimbursed or paid by the Company
hereunder or under any other Investment Document.
(d) After giving effect to the transactions contemplated
hereby, the Company shall have outstanding no Indebtedness other than (A) the
Permitted Senior Debt, (B) the extension of credit under this Agreement, (C)
Permitted Junior Debt listed on Schedule 4.7, and (D) the Indebtedness listed on
Schedule 4.6.
(e) Allied shall have received fully executed conformed copies
of the Merger Transaction Documents. The Merger shall have been consummated in
accordance with the terms of the Merger Transaction Documents, as evidenced by a
copy of the certificate of Merger, certified by the Secretary of State of the
State of Delaware. Without limiting the generality of the foregoing, the closing
of the Senior Loan shall have occurred and the Senior Lenders shall have
advanced at least $38,000,000 of the Senior Loan to consummate the Merger, and
the TA Funds shall have contributed at least $27,800,000 in redeemable preferred
stock and $5,000,000 in convertible preferred stock to consummate the Merger.
(f) As of immediately prior to the effective time of the
Merger, the holders of no more than five percent (5%) of the outstanding shares
of common stock of the Company shall have taken all required actions to assert
appraisal rights under Section 262 of the Delaware General Corporation Law and
not withdrawn or otherwise permitted to lapse such appraisal rights or demands
therefor.
(g) All material legal requirements to this Agreement, the
Debenture and the other Investment Documents and the Merger Transaction
Documents shall have been completed to Allied's satisfaction.
(h) The existing Permitted Junior Debt listed on Schedule 4.7
shall have been subordinated to the Debenture except to the extent Allied shall
have expressly waived such subordination requirement.
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(i) No event that has a Material Adverse Effect shall have
occurred.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce Allied to enter into the Allied Investment, the
Company represents and warrants to the Holders that, after giving effect to the
Merger:
SECTION 4.1 Organization; Powers. The Company and each Material
Subsidiary (a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has all
requisite power and authority to own its property and assets and to carry on its
business as now conducted, (c) is qualified to do business in, and is in good
standing in, every jurisdiction where such qualification is required, except
where the failure so to qualify would not reasonably be expected to result in a
Material Adverse Effect, and (d) has the corporate power and authority to
execute, deliver and perform its obligations under each of the Investment
Documents and each other agreement or instrument contemplated hereby, and to
borrow hereunder.
SECTION 4.2 Authorization; Enforceability. The Company and each of its
Material Subsidiaries has taken, or on the Closing Date will have taken, all
necessary action to execute, deliver and perform each of the Investment
Documents to which it is or will be a party, and has, or on the Closing Date (or
any later date of execution and delivery) will have, validly executed and
delivered each of the Investment Documents to which it is or will be a party.
This Agreement constitutes, and each of the other Investment Documents upon
execution and delivery will constitute, the legal, valid and binding obligation
of each of the Company and each of its Material Subsidiaries that is a party
hereto or thereto, enforceable against it in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally, by
general equitable principles or by principles of good faith and fair dealing.
SECTION 4.3 No Violation. The execution, delivery and performance by
the Company and each of its Material Subsidiaries of this Agreement and each of
the other Investment Documents to which it is or will be a party, and compliance
by it with the terms hereof and thereof, do not and will not (i) violate any
provision of its articles or certificate of incorporation, certificate of
formation, bylaws, operating agreement, partnership agreement or other organic
documents of the Company or any of its Subsidiaries or contravene any other
Requirement of Law applicable to it, (ii) conflict with, result in a breach of
or constitute (with notice, lapse of time or both) a default under any material
indenture, agreement or other instrument to which it is a party (including any
Service Agreement), by which it or any of its properties is bound or to which it
is subject, (iii) result in a Limitation on any Licenses applicable to the
business, operations or properties of the Company or any Subsidiary or adversely
affect the ability of the Company or any Subsidiary to participate in any Third
Party Payor Arrangement, or (iv) except for the Liens granted in favor of the
Senior Lender Agent for the benefit of the Senior Lenders pursuant to the Senior
Loan Documents, result in or require the creation or imposition of any Lien upon
any of its properties or assets. No Subsidiary is a party to any agreement or
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instrument or otherwise subject to any restriction or encumbrance that restricts
or limits its ability to make dividend payments or other distributions in
respect of its Capital Stock, to repay Indebtedness owed to the Company or any
Subsidiary, to make loans or advances to the Company or any Subsidiary, or to
transfer any of its assets or properties to the Company or any Subsidiary, in
each case other than such restrictions or encumbrances existing under or by
reason of the Investment Documents or applicable Requirements of Law.
SECTION 4.4 Governmental Approvals.
(a) No consent, approval, authorization or other action by,
notice to, or registration or filing with, any Governmental Authority or other
Person is or will be required as a condition to or otherwise in connection with
the due execution, delivery and performance by each of the Company and its
Material Subsidiaries of this Agreement or any of the other Investment Documents
to which it is or will be a party or the legality, validity or enforceability
hereof or thereof, other than (i) consents, authorizations and filings that have
been (or on or prior to the Closing Date will have been) made or obtained and
that are (or on the Closing Date will be) in full force and effect, (ii)
consents and filings the failure to obtain or make which would not, individually
or in the aggregate, have a Material Adverse Effect, and (iii) consents,
authorizations and filings listed on Schedule 4.4.
(b) The Company, each Subsidiary and, to the knowledge of the
Company as of the Closing Date, each Managed Practice (i) has, and is in good
standing with respect to, all approvals, permits and other Licenses and (to the
extent applicable) all Reimbursement Approvals necessary to conduct its business
as presently conducted and to own or lease and operate its properties, (ii) to
the extent applicable, has obtained and maintains accreditation from all
generally recognized accrediting agencies for the Company and its Subsidiaries
to the extent prudent and customary in the industry in which the Company, any of
its Subsidiaries or any Managed Practice is engaged or to the extent required
for facilities owned, operated or managed by the Company, any of its
Subsidiaries or any Managed Practice and (iii) if required, has obtained and
maintains Medicaid Certification and Medicare Certification; (iv) if required,
has entered into and maintains in good standing its Medicare Provider Agreement
and its Medicaid Provider Agreement, except, in each case referred to in clauses
(i) through (iv), for those instances the failure to obtain or enter into would
not be reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect. There is no pending or, to the knowledge of the Company,
threatened Limitation of any such approval, permit or other License or
Reimbursement Approval of the Company, any Subsidiary or any Managed Practice
(as of the Closing Date), except for such Limitations as would not be reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect.
(c) Each professional employee, officer and director of the
Company, its Subsidiaries, and, to the knowledge of the Company as of the
Closing Date, any Managed Practices providing professional services to patients
of the Company or any such Subsidiary is duly Licensed (where License is
required) by each state or state agency or commission, or any other Governmental
Authority having jurisdiction over the provisions of such services by such
employee, officer or director, in which the Company or Subsidiary is located,
required to enable such employee, officer or director to provide the
professional services necessary to enable the
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Company or Subsidiary to operate as currently operated and as presently
contemplated to be operated, except for those Licenses the failure of which to
obtain would not be reasonably likely, individually or in the aggregate, to have
a Material Adverse Effect. All such required Licenses are in full force and
effect on the date hereof and have not been revoked or suspended or otherwise
limited, except for those instances that would not be reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect. Each
physician retained or otherwise engaged as an independent contractor by the
Company or its Subsidiaries possesses a valid narcotics number issued by the
United States Drug Enforcement Administration and a valid state narcotics
registration, except for those instances that would not be reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect.
SECTION 4.5 Financial Condition.
(a) The Company has previously provided to Allied a true and
complete copy of the audited financial statements summarizing the financial
results of operations of the Company and its Subsidiaries for its fiscal year
ended December 31, 1998 (the "AUDITED FINANCIALS"). The Audited Financials were
prepared in accordance with GAAP, are true and correct in all material respects,
and fairly present the Company's consolidated operating income and financial
condition at such date and for the period then ended; and
(b) The Company has previously provided to Allied a true and
complete copy of preliminary unaudited financial statements summarizing the
financial results of operation of the Company and its Subsidiaries for the nine
month period ended September 30, 1999 (collectively, the "INTERIM FINANCIALS").
The Interim Financials were prepared in accordance with GAAP (except that
footnotes are omitted), are true and correct in all material respects, and
fairly present the Company's consolidated operating income and financial
condition at such date and for the period then ended, subject to normal year-end
adjustments; and
(c) The financial projections of the Company and its
Subsidiaries previously provided to Allied have been prepared in good faith by
the Company, are complete and are based on assumptions believed to be reasonable
estimates of the future performance and financial condition of the Company and
its Subsidiaries, subject to the uncertainties and approximations inherent in
any projections and that such projections are estimates and not a guarantee of
actual results.
SECTION 4.6 Indebtedness. Except as disclosed in the Financials or
listed on Schedule 4.6 attached hereto, or listed on Schedule 4.7 with respect
to existing Permitted Junior Debt, on a consolidated basis, there are no
material liabilities or obligations with respect to the Company or any Material
Subsidiary of any nature whatsoever (whether absolute, contingent or otherwise
and whether or not due)
SECTION 4.7 Existing Permitted Junior Debt. All existing Permitted
Junior Debt is described on Schedule 4.7 attached hereto and made a part hereof.
True and complete copies of each of the notes or other instruments of
indebtedness evidencing such Permitted Junior Debt have been made available to
Allied.
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SECTION 4.8 Merger.
(a) The copy of the Merger Transaction Documents (including
all schedules, exhibits, amendments, supplements, modifications, assignments and
all other documents delivered pursuant thereto or in connection therewith)
delivered or made available to Allied as of the Closing Date is complete and
correct in all material respects. Neither the Company nor, to the Company's
knowledge, any other party thereto is in default in the performance or
compliance with any material provisions thereof. The Merger Agreement complies
with, and prior to the Closing the Merger has been consummated in accordance
with, all Applicable Laws that apply to the Company. All requisite approvals by
Governmental Authorities having jurisdiction over the Company, Merger Sub, and
any other Persons referenced therein, with respect to the transactions
contemplated by the Merger Agreement, have been obtained on or before the
Closing Date, and no such approvals impose or will impose any material adverse
conditions to the consummation of the transactions contemplated by the Merger
Agreement or to the conduct by the Company and its Material Subsidiaries of
their business thereafter.
(b) As of the Closing Date, the Merger Certificate has been
duly filed with the Secretary of State of Delaware and the Merger has become
effective.
SECTION 4.9 Ownership and Control. Attached hereto as Schedule 4.9 is
an accurate and complete list of the following information for the Company: (a)
the authorized capitalization of the Company as of the date hereof; (b) the
number of shares of each class of the Company's issued capital stock and the
number of outstanding shares thereof; (c) a description of all convertible
securities and all options, warrants and similar rights held with respect to the
Company's capital stock; (d) the names of the record owners of all such shares
of capital stock and all such convertible securities, options, warrants and
similar rights; and (e) the number of shares held by each such record owner. All
shares of capital stock of the Company and all convertible securities, options,
warrants and similar rights held with respect to the Company's capital stock
have been duly authorized and validly issued, are fully paid and nonassessable
(in the case of capital stock), and are owned of record as set forth on Schedule
4.9 attached hereto. Except as listed in Schedule 4.9 attached hereto, there are
no outstanding options, warrants, convertible securities or other stock purchase
rights issued by the Company as of the date hereof, and there are no sale
agreements, pledges, proxies, voting trusts, powers of attorney or other
agreements or instruments binding upon the Company's shareholders with respect
to beneficial and record ownership of, or voting rights with respect to, the
Company's capital stock as of the date hereof.
SECTION 4.10 No Material Adverse Change. There has been no Material
Adverse Change since December 31, 1998, and there exists no event, condition or
state of facts that would reasonably be expected to result in a Material Adverse
Change.
SECTION 4.11 Title to Properties; Possession Under Leases. Except as
set forth in Schedule 4.11, the Company and each Subsidiary (i) holds interests
as lessee under valid leases in full force and effect with respect to all
material leased real and personal property used in connection with its business,
(ii) possesses or has rights to use licenses, patents, copyrights, trademarks,
service marks, trade names and other assets sufficient to enable it to continue
to
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conduct its business substantially as heretofore conducted and without any
material conflict with the rights of others, and (iii) has good title to all of
its other properties and assets reflected in the most recent financial
statements referred to in Section 4.5) (except as sold or otherwise disposed of
since the date thereof in the ordinary course of business and except those
properties which would not be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect), in each case under (i), (ii) and
(iii) above free and clear of all Liens other than Permitted Liens. The Company
and its Material Subsidiaries own no fee interests in the Real Property.
SECTION 4.12 Subsidiaries; Minority Investments. Schedule 4.12 sets
forth a list, as of the Closing Date, of all of the Material Subsidiaries and
other Subsidiaries of the Company and all Minority Investments and, as to each
such Subsidiary and Minority Investment, the percentage ownership (direct and
indirect) of the Company in each class of its Capital Stock and each direct
owner thereof. Except for the shares of Capital Stock expressly indicated on
Schedule 4.12, there are no shares of Capital Stock of any Subsidiary of the
Company outstanding or reserved for any purpose. All outstanding shares of
Capital Stock of each Subsidiary of the Company are duly and validly issued,
fully paid and nonassessable. The Company is the sole legal, record and
beneficial owner of, and has good and valid title to, all such Capital Stock,
free and clear of all Liens other than the Liens created pursuant to the Senior
Loan Documents.
SECTION 4.13 Litigation; Compliance with Laws
(a) Except as set forth on Schedule 4.13, there are no
actions, investigations, suits or proceedings pending or, to the knowledge of
the Company, threatened, at law, in equity or in arbitration, before any court,
other Governmental Authority or other Person, (i) against or affecting the
Company, any Subsidiary, to the knowledge of the Company as of the Closing Date,
any Managed Practice, or any of their respective properties that would, if
adversely determined, be reasonably likely to have a Material Adverse Effect, or
(ii) with respect to this Agreement or any of the other Investment Documents.
(b) The Company, each Subsidiary and, to the knowledge of the
Company as of the Closing Date, each Managed Practice, has timely filed all
material reports, documents and other materials required to be filed by it under
all Applicable Laws with any Governmental Authority, has retained all material
records and documents required to be retained by it under all Applicable Laws,
and is otherwise in compliance with all Applicable Laws in respect of the
conduct of its business and the ownership and operation of its properties
(including, without limitation, all applicable Medicare Regulations and Medicaid
Regulations), except for such Applicable Laws the failure to comply with which,
individually or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect.
SECTION 4.14 Material Contracts. Schedule 4.14 lists, as of the Closing
Date, each Material Contract to which the Company or any Subsidiary is a party,
by which any of them or their respective properties is bound or to which any of
them is subject. As of the Closing Date, (i) to the knowledge of the Company
with respect to third parties, each Material Contract is in full force and
effect and is enforceable by the Company or the Subsidiary that is a party
thereto in accordance with its terms, and (ii) neither the Company nor any
Subsidiary (nor, to the
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knowledge of the Company, any other party thereto) is in breach of or default
under any Material Contract in any material respect or has given notice of
termination or cancellation of any Material Contract. No Subsidiary other than a
Material Subsidiary is party to a Material Contract.
SECTION 4.15 Investment Company Act; Public Utility Holding Company
Act. Neither the Company nor any Material Subsidiary is (a) an "investment
company" as defined in, or subject to regulation under, the Investment Company
Act of 1940 or (b) a "holding company" as defined in, or subject to regulation
under, the Public Utility Holding Company Act of 1935.
SECTION 4.16 Use of Proceeds. The Company will use the proceeds of the
investment only for the purposes specified in Article II.
SECTION 4.17 Taxes. The Company and each of its Material Subsidiaries
has timely filed all federal, state and local tax returns and reports required
to be filed by it and has paid all taxes, assessments, fees and other charges
levied upon it or upon its properties that are shown thereon as due and payable,
other than those that are being contested in good faith and by proper
proceedings and for which adequate reserves have been established in accordance
with GAAP. Such returns accurately reflect in all material respects all
liability for taxes of the Company and its Subsidiaries for the periods covered
thereby. There is no ongoing audit or examination or, to the knowledge of the
Company, other investigation by any Governmental Authority of the tax liability
of the Company or any Material Subsidiary, and there is no unresolved claim by
any Governmental Authority concerning the tax liability of the Company or any
Material Subsidiary for any period for which tax returns have been or were
required to have been filed, other than claims for which adequate reserves have
been established in accordance with GAAP. Neither the Company nor any Material
Subsidiary has waived or extended or has been requested to waive or extend the
statute of limitations relating to the payment of any taxes.
SECTION 4.18 Full Disclosure. All factual information heretofore or
contemporaneously furnished to Allied in writing by or on behalf of the Company
or any Subsidiary for purposes of or in connection with this Agreement and the
transactions contemplated hereby is, and all other such factual information
hereafter furnished to Allied in writing by or on behalf of the Company or any
Subsidiary will be, true and accurate in all material respects on the date as of
which such information is dated or certified (or, if such information has been
amended or supplemented, on the date as of which any such amendment or
supplement is dated or certified) and not made incomplete by omitting to state a
material fact necessary to make the statements contained therein, in light of
the circumstances under which such information was provided, not misleading.
This Section 4.18 does not apply to the financial projections of the Company,
which are separately covered by Section 4.5 hereof.
SECTION 4.19 Employee Benefit Matters.
(a) Each of the Company and its ERISA Affiliates is in
compliance in all material respects with the applicable provisions of ERISA, and
each Plan is and has been administered in compliance in all material respects
with all applicable Requirements of Law, including, without limitation, the
applicable provisions of ERISA and the Internal Revenue
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Code. No ERISA Event (i) has occurred within the five-year period prior to the
Closing Date, (ii) has occurred and is continuing, or (iii) to the knowledge of
the Company, is reasonably expected to occur with respect to any Plan. No Plan
has any Unfunded Pension Liability as of the most recent annual valuation date
applicable thereto, and neither the Company nor any ERISA Affiliate has engaged
in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.
(b) Neither the Company nor any ERISA Affiliate has had a
complete or partial withdrawal from any Multiemployer Plan, and neither the
Company nor any ERISA Affiliate would become subject to any liability under
ERISA if the Company or any ERISA Affiliate were to withdraw completely from all
Multiemployer Plans as of the most recent valuation date. No Multiemployer Plan
is in "reorganization" or is "insolvent" within the meaning of such terms under
ERISA.
SECTION 4.20 Environmental Matters.
(a) No Hazardous Substances are or have been generated, used,
released, treated, disposed of or stored by the Company or any Subsidiary or, to
the knowledge of the Company, by any other Person (including any Managed
Practice or predecessor in interest) or otherwise, in, on or under any portion
of any real property, leased or owned, of the Company or any Subsidiary, except
in material compliance with all applicable Environmental Laws, and, to the
knowledge of the Company, no portion of any such real property or any other real
property at any time leased, owned or operated by the Company or any Subsidiary,
has been contaminated by any Hazardous Substance; and no portion of any real
property, leased or owned, of the Company or any Subsidiary has been or is
presently the subject of a non-routine environmental audit, assessment or
remedial action.
(b) No portion of any real property, leased or owned, of the
Company or any Subsidiary has been used by the Company or any Subsidiary or, to
the knowledge of the Company, by any other Person, as or for a mine, a landfill,
a dump or other disposal facility, a gasoline service station, or (other than
for petroleum substances stored in the ordinary course of business) a petroleum
products storage facility; no portion of such real property or any other real
property at any time leased, owned or operated by the Company or any Subsidiary
has, pursuant to any Environmental Law, been placed on the "National Priorities
List" or "CERCLIS List" (or any similar state or local list) of sites subject to
possible environmental problems; and to the knowledge of the Company, there are
not and have never been any underground storage tanks situated on any real
property, leased or owned, of the Company or any Subsidiary.
(c) All activities and operations of the Company and each
Subsidiary are in compliance with the requirements of all applicable
Environmental Laws, except to the extent the failure so to comply, individually
or in the aggregate, would not be reasonably likely to have a Material Adverse
Effect. Each of the Company and each Subsidiary has obtained all licenses and
permits under Environmental Laws necessary to its respective operations; all
such licenses and permits are being maintained in good standing; and each of the
Company and each Subsidiary is in compliance with all terms and conditions of
such licenses and permits, except for such licenses and permits the failure to
obtain, maintain or comply with which would not be
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reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect. Neither the Company nor any Subsidiary is involved in any suit, action
or proceeding, or has received any notice, complaint or other request for
information from any Governmental Authority or other Person, with respect to any
actual or alleged Environmental Claims that, if adversely determined, would be
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect; and, to the knowledge of the Company, there are no threatened actions,
suits, proceedings or investigations with respect to any such Environmental
Claims, nor does the Company have reason to believe any such actions, suits or
proceedings will be forthcoming.
SECTION 4.21 Insurance. Schedule 4.21 sets forth a true and complete
summary of all insurance policies or arrangements carried or maintained by the
Company and each Subsidiary as of the Closing Date, indicating in each case the
insurer, policy number, expiration, amount and type of coverage and deductibles.
The assets, properties and business of the Company and each Subsidiary are
insured against such hazards and liabilities, under such coverages and in such
amounts, as are customarily maintained by prudent companies similarly situated
and under policies issued by insurers of recognized responsibility.
SECTION 4.22 Labor Matters. Neither the Company nor any Subsidiary is
engaged in any unfair labor practice within the meaning of the National Labor
Relations Act of 1947, as amended. There is (i) no unfair labor practice
complaint before the National Labor Relations Board, or grievance or arbitration
proceeding arising out of or under any collective bargaining agreement, pending
or, to the knowledge of the Company, threatened, against the Company or any
Subsidiary, (ii) no strike, lock-out, slowdown, stoppage, walkout or other labor
dispute pending or, to the knowledge of the Company, threatened, against the
Company or any Subsidiary, and (iii) to the knowledge of the Company, no
petition for certification or union election or union organizing activities
taking place with respect to the Company or any Subsidiary.
SECTION 4.23 Management History. To the knowledge of the Company,
during the past ten years, neither Xxxxx X. Xxxxx nor Xxxxxx X. Xxxxxxxx has
been arrested for, or convicted of, any criminal offense, or been the subject of
an Act of Bankruptcy. Further, neither Xx. Xxxxx nor Xx. Xxxxxxxx has served as
an officer, director, general partner, member, or manager of any Person that has
been or is the subject of an Act of Bankruptcy during Xx. Xxxxx'x or Xx.
Xxxxxxxx'x service in such capacity with such Person.
SECTION 4.24 Solvency. Each of the Company and its Subsidiaries, after
giving effect to the consummation of the Transactions contemplated hereby, (i)
has capital sufficient to carry on its businesses as conducted and as proposed
to be conducted, (ii) has assets with a fair saleable value, determined on a
going concern basis, (y) not less than the amount required to pay the probable
liability on its existing debts as they become absolute and matured and (z)
greater than the total amount of its liabilities (including identified
contingent liabilities, valued at the amount that can reasonably be expected to
become absolute and matured), and (iii) does not intend to, and does not believe
that it will, incur debts or liabilities beyond its ability to pay such debts
and liabilities as they mature.
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SECTION 4.25 Licenses. The Company and each Subsidiary has good title
to all of the Licenses needed to properly operate the Company's Business except
where the failure to obtain such Licenses would not reasonably be expected to
have a Material Adverse Effect.
SECTION 4.26 Warrant Shares. All of the Warrant Shares have been duly
authorized and reserved for issuance, and upon issuance subsequent to the
payment of the exercise price in accordance with the terms of the Warrants, the
Warrant Shares will be validly issued, fully paid and non-assessable.
SECTION 4.27 Purchased Shares. All of the Purchased Shares have been
duly and validly issued and are fully paid and non-assessable.
SECTION 4.28 Brokers. The Company has not engaged the services of a
broker in connection with the Allied Investment.
SECTION 4.29 Year 2000 Representation. Any reprogramming required to
permit the proper functioning, before, on and after January 1, 2000, of (i) the
Company's and its Subsidiaries' computer-based systems and (ii) equipment
containing embedded microchips (including, to the Company's knowledge, systems
and equipment supplied by others or with which the Company's or any of its
Subsidiaries' systems interface), and the testing of all such systems and
equipment, as so reprogrammed, will be completed by the Closing Date. The cost
to the Company and its Subsidiaries of such reprogramming and testing and of the
reasonably foreseeable consequences of the year 2000 to the Company and its
Subsidiaries (including, without limitation, to the knowledge of the Company,
reprogramming errors and the failure of others' systems or equipment) will not
result in a Default or Material Adverse Effect. Except for such of the
reprogramming referred to in the preceding sentence as may be necessary, the
computer and management information systems of the Company and its Subsidiaries
(and, to the knowledge of the Company, the computer and management information
systems of suppliers and vendors material to the business of the Company and its
Subsidiaries) are sufficient to permit the Company and its Subsidiaries to
conduct their respective businesses without a Material Adverse Effect.
SECTION 4.30 Service Agreements. No Service Agreement to which the
Company or any Subsidiary is a party, nor any of the transactions contemplated
thereunder, violates any Applicable Law (i) relating to the eligibility of a
Managed Practice to enter into or participate in any Third Party Payor
Arrangement or otherwise applicable to such Managed Practice as a result of such
participation, (ii) relating to any License or Reimbursement Approval of a
Managed Practice required in connection with any Third Party Payor Arrangement
in which it participates, or (iii) relating to the practice of medicine or the
sharing of fees in connection therewith, except in each case under (i), (ii) and
(iii) above for such violations as would not, individually or in the aggregate,
be reasonably likely to have a Material Adverse Effect.
SECTION 4.31 Reimbursements. All xxxxxxxx by the Company, each
Subsidiary and, to the knowledge of the Company as of the Closing Date, each
Managed Practice, pursuant to Third Party Payor Arrangements have been made in
compliance with all Applicable Laws, except where the failure to comply would
not, individually or in the aggregate, be reasonably likely to
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have a Material Adverse Effect; and to the knowledge of the Company, there has
been no intentional or material overbilling or overcollection pursuant to any
Third Party Payor Arrangements, other than as created by routine adjustments and
disallowances made in the ordinary course of business by the payors with respect
to such xxxxxxxx.
SECTION 4.32 Fraud and Abuse. None of the Company, any Subsidiary, to
the knowledge of the Company, any Managed Practice as of the Closing Date, or,
to the knowledge of the Company as of the Closing Date, any physician
shareholder or employee of any Managed Practice, has engaged in any activities
that are prohibited under 42 U.S.C. ss. 1320a-7b, or the regulations promulgated
thereunder, or related Requirements of Law, or that are prohibited by rules of
professional conduct, including, without limitation, the following: (i)
knowingly and willfully making or causing to be made a false statement or
misrepresentation of a material fact in any application for any benefit or
payment; (ii) knowingly and willfully making or causing to be made any false
statement or misrepresentation of a material fact for use in determining rights
to any benefit or payment; (iii) failure to disclose knowledge by a claimant of
the occurrence of any event affecting the initial or continued right to any
benefit or payment on its own behalf or on behalf of another, with intent to
secure such benefit or payment fraudulently; and (iv) knowingly and willfully
soliciting or receiving any remuneration (including any kickback, bribe or
rebate), directly or indirectly, overtly or covertly, in cash or in kind, or
offering to pay or receive such remuneration (y) in return for referring an
individual to a Person for the furnishing or arranging for the furnishing of any
item or service for which payment may be made in whole or in part by Medicare,
Medicaid or any other government or private third party payor, or (z) in return
for purchasing, leasing, or ordering or arranging for or recommending
purchasing, leasing or ordering any good, facility, service, or item for which
payment may be made in whole or in part by Medicare, Medicaid or any other
government or private third party payor.
ARTICLE V
AFFIRMATIVE COVENANTS
Subject to Section 5.17, the Company covenants and agrees with the
Holders to do all of the following:
SECTION 5.1 Existence; Businesses and Properties.
(a) The Company will, and will cause each Material Subsidiary
to, (i) maintain and preserve in full force and effect its corporate existence,
except as expressly permitted otherwise by Section 6.5, (ii) obtain, maintain
and preserve in full force and effect all other rights, franchises, licenses,
permits, certifications, approvals and authorizations and other Licenses, and
all Reimbursement Approvals, required by Governmental Authorities and necessary
to the ownership, occupation or use of its properties or the conduct of its
business, except to the extent the failure to do so would not be reasonably
likely to have a Material Adverse Effect, and (iii) keep all material properties
in good working order and condition (normal wear and tear excepted) and from
time to time make all necessary repairs to and renewals and replacements of such
properties, except to the extent that any of such properties are obsolete or are
being replaced.
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(b) The Company will exercise commercially reasonable efforts
to cause each Managed Practice to obtain, maintain and preserve in full force
and effect all other rights, franchises, permits, certifications, approvals,
authorizations and other Licenses (including with respect to physician and
dentist employees), and all Reimbursement Approvals, required by Governmental
Authorities and necessary to the ownership, occupation or use of its properties
or the conduct of its business, except to the extent the failure to do so would
not be reasonably likely to have a Material Adverse Effect.
SECTION 5.2 Insurance. The Company will, and will cause each Material
Subsidiary to, will keep its insurable properties adequately insured at all
times by financially sound and reputable insurers; maintain such other
insurance, to such extent and against such risks, including fire and other risks
insured against by extended coverage, as is customary with companies in the same
or similar businesses operating in the same or similar locations, including
commercial general liability insurance against claims for personal injury or
death or property damage occurring upon, in, about or in connection with the use
of any properties owned, occupied or controlled by it; and maintain such other
insurance as may be required by law. The Company will, and will cause each
Material Subsidiary to, shall maintain business interruption insurance in such
amount as Company management determines in good faith is reasonable and adequate
for the Company's Business. This Section 5.2 shall be deemed satisfied so long
as the Company is in compliance with the insurance covenants of the Senior Loan
Documents.
SECTION 5.3 Obligations and Taxes. The Company will, and will cause
each Subsidiary to, (i) pay all liabilities and obligations as and when due
(subject to any applicable subordination provisions), except to the extent
failure to do so would not be reasonably likely to have a Material Adverse
Effect, and (ii) pay and discharge all taxes, assessments and governmental
charges or levies imposed upon it, upon its income or profits or upon any of its
properties, prior to the date on which penalties would attach thereto, and all
lawful claims that, if unpaid, might become a Lien upon any of the properties of
the Company or any Subsidiary; provided, however, that neither the Company nor
any Subsidiary shall be required to pay any such tax, assessment, charge, levy
or claim that is being contested in good faith and by proper proceedings and as
to which the Company or such Subsidiary is maintaining adequate reserves with
respect thereto in accordance with GAAP.
SECTION 5.4 Financial Statements, Reports, etc. The Company will
furnish to the Holders
(a) within 90 days after the end of each fiscal year,
beginning with the fiscal year ending December 31, 1999, its consolidated
balance sheet and related statements of operations, stockholders' equity and
cash flows showing the financial condition of the Company, as of the close of
such fiscal year and the results of its operations during such year, all audited
by the independent certified public accounting firm regularly retained by the
Company or another independent certified public accounting firm of recognized
national standing and accompanied by an opinion of such accountant (which shall
not be qualified as to going concern or scope of audit) to the effect that such
financial statements fairly present the financial condition and results of
operations of the Company on a consolidated basis in accordance with GAAP;
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(b) within 45 days after the end of each of the first three
fiscal quarters of each fiscal year, beginning with the fiscal quarter ending
September 30, 1999, its unaudited consolidated balance sheet and related
statements of operations, stockholders' equity and cash flows showing the
financial condition of the Company, as of the close of such fiscal quarter and
the results of its operations during such fiscal quarter and the then elapsed
portion of the fiscal year, including comparisons to the previous year's results
for such period and comparisons to budget, all certified by its Financial
Officer as fairly presenting the financial condition and results of operations
of the Company on a consolidated basis in accordance with GAAP, subject to the
absence of notes required by GAAP and subject to normal year-end audit
adjustments;
(c) within 45 days after the end of each fiscal quarter,
monthly operating statements for each Managed Practice for the three months in
the fiscal quarter then ended, all in reasonable detail; provided that such
statements need not be submitted to the Holders if such submission is no longer
required under the Senior Loan Documents;
(d) within 45 days after the end of each fiscal quarter, a
covenant compliance certificate in the form attached hereto as Exhibit A;
(e) at least 30 days prior to fiscal year end, a copy of the
Company's consolidated operating budget and cash flow projections for the next
fiscal year, all certified by the Financial Officer;
(f) promptly upon receipt thereof, copies of any "management
letter" submitted to the Company or any Material Subsidiary by its certified
public accountants in connection with each annual, interim or special audit, and
promptly upon completion thereof, any response reports from the Company or any
such Material Subsidiary in respect thereof;
(g) promptly upon the sending, filing or receipt thereof,
copies of (i) all financial statements, reports, notices and proxy statements
that the Company or any Subsidiary shall send or make available generally to its
shareholders, (ii) all regular, periodic and special reports, registration
statements and prospectuses (other than on Form S-8) that the Company or any
Subsidiary shall render to or file with the Securities and Exchange Commission,
the National Association of Securities Dealers, Inc. or any national securities
exchange, (iii) all press releases and other statements made available generally
by the Company or any Material Subsidiary to the public concerning material
developments in the business of the Company or any Subsidiary; and (iv) all
material regulatory reports and notices of Governmental Authorities;
(h) within thirty (30) days after filing, copies of all
material documents filed with the Internal Revenue Service, the Environmental
Protection Agency, the Occupational Safety and Health Administration, and
comparable state agencies;
(i) promptly, from time to time, such other information
regarding the operations, business affairs and financial condition of the
Company, or compliance with the terms of any Investment Document, as the Holders
may reasonably request, including any information reasonably requested by the
Holders to enable the Holders to file any form required by any Governmental
Authority.
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SECTION 5.5 Litigation and Other Notices. The Company will furnish to
the Holders prompt written notice of the following:
(a) any Event of Default or Default, specifying the nature and
extent thereof and the corrective action (if any) taken or proposed to be taken
with respect thereto;
(b) the institution or threatened in writing institution of
any action, suit, investigation or proceeding against or affecting the Company
or any Subsidiary or any Managed Practice, including any such investigation or
proceeding by any Governmental Authority (other than routine periodic inquiries,
investigations or reviews), that would, if adversely determined, be reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect, and
any material development in any litigation or other proceeding previously
reported pursuant to Section 4.13(a) or this subsection;
(c) the receipt by the Company or any Material Subsidiary from
any Governmental Authority of (y) any notice asserting any failure by the
Company or any Material Subsidiary or any Managed Practice to be in compliance
with Applicable Law or that threatens the taking of any action against such
Person or sets forth circumstances that, if taken or adversely determined, would
be reasonably likely to have a Material Adverse Effect, or (z) any notice of any
actual or threatened suspension, or Limitation with respect to any License or
Reimbursement Approval of the Company or any Material Subsidiary or any Managed
Practice, where such action would be reasonably likely to have a Material
Adverse Effect;
(d) promptly upon (and in any event within five (5) Business
Days after) any Responsible Officer of the Company obtaining knowledge thereof,
the occurrence of any material default under, or any proposed or threatened
termination or cancellation of, any Material Contract;
(e) promptly upon (and in any event within five (5) Business
Days after) any Responsible Officer of the Company obtaining knowledge thereof,
the occurrence of any ERISA Event, together with (x) a written statement of a
Responsible Officer of the Company specifying the details of such ERISA Event
and the action that the Company has taken and proposes to take with respect
thereto, (y) a copy of any notice with respect to such ERISA Event that may be
required to be filed with the PBGC and (z) a copy of any notice delivered by the
PBGC to the Company or such ERISA Affiliate with respect to such ERISA Event;
and
(f) any event that has resulted in, or would reasonably be
expected to result in, a Material Adverse Effect.
SECTION 5.6 Maintaining Records; Access to Properties and Inspections.
The Company will, and will cause each Material Subsidiary to, keep proper books
of record and account in which full, true and correct entries in conformity with
GAAP and all requirements of law are made of all dealings and transactions in
relation to its business and activities. The Company will, and will cause each
Material Subsidiary to, permit any representatives designated by the Holders to
visit and inspect the financial records and the properties of the Company and
its Subsidiaries at reasonable times during normal business hours and as often
as reasonably
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requested and to make extracts from and copies of such financial records, and
permit any representatives designated by the Holders to discuss the affairs,
finances and condition of the Company with the officers thereof and independent
accountants therefor.
SECTION 5.7 Compliance with Laws. The Company will, and will cause each
Subsidiary to, comply in all respects with all Requirements of Law applicable in
respect of the conduct of its business and the ownership and operation of its
properties, except to the extent the failure so to comply would not be
reasonably likely to have a Material Adverse Effect.
SECTION 5.8 Year 2000 Compatibility. The Company will, and will cause
each Material Subsidiary to, take all action necessary to ensure that its
computer-based systems are able to operate and effectively process data
including dates on and after January 1, 2000, except where failure to so comply
would not be expected to result in a Material Adverse Effect. At the request of
the Holders, the Company will provide reasonable assurance of its Year 2000
compatibility.
SECTION 5.9 Further Assurances. The Company and each Material
Subsidiary will execute any and all further documents, agreements and
instruments, and take all further action that may be required under Applicable
Law, or that the Holders may reasonably request, in order to effectuate the
transactions contemplated by the Investment Documents.
SECTION 5.10 Maintenance of Office or Agency. The Company shall
maintain an office or agency (i) where the Debenture may be presented for
payment, or for registration and transfer and for exchange as provided in this
Agreement; and (ii) where notices and demands to or upon the Company in respect
of the Debenture may be served. The location of such office or agency initially
shall be Physicians' Specialty Corp., 0000 Xxxx Xxxxx Xxxxx, Xxxxxxx, XX 00000.
The Company shall give the Holders written notice of any change of location
thereof.
SECTION 5.11 Financial Ratios and Covenants. Beginning with the fiscal
quarter ended September 30, 1999, the Company and its Subsidiaries, on a
consolidated basis, shall, with respect to such fiscal quarter and each fiscal
quarter thereafter, have complied or comply with and maintain each of the
following financial ratios and financial covenants (collectively, the "FINANCIAL
COVENANTS"), measured in accordance with GAAP, based upon results for the
immediately preceding fiscal quarter, and using the information set forth in the
financial statements provided by the Company in accordance with Section 5.4
above:
(a) Senior Leverage Ratio. The Company will not permit the
Senior Leverage Ratio as of the last day of any fiscal quarter during the
periods set forth below to be greater than the ratio set forth below such
period:
--------------------------------------------
CLOSING - 9/30/2000 THEREAFTER
--------------------------------------------
3.50:1 3.21:1
--------------------------------------------
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(b) Total Leverage Ratio. The Company will not permit the
Total Leverage Ratio as of the last day of any fiscal quarter during the periods
set forth below to be greater than the ratio set forth below opposite such
period:
-----------------------------------------------------------
CLOSING - 9/30/2000 10/1/2000 - THEREAFTER
12/31/2001
-----------------------------------------------------------
4.80:1 4.52:1 4.24:1
-----------------------------------------------------------
(c) Minimum Interest Coverage Ratio. Commencing with the
fiscal quarter ending September 30, 1999 and prior to the Maturity Date, the
Company will not permit the Interest Coverage Ratio as of the last day of any
fiscal quarter to be less than 2.1 to 1.0.
SECTION 5.12 Right of First Negotiation.
(a) For purposes of this Section 5.12, the term "COVERED
FINANCINGS" means the issuance of any subordinated debt in the Company; provided
that Covered Financings expressly excludes (i) debt securities issued or sold in
connection with the Transactions; (ii) any public offering and sale of any debt
securities by the Company which are registered under the Securities Act; and
(iii) debt securities issued or sold in connection with any Permitted
Acquisition or Permitted Minority Investment and constituting all or a portion
of the Purchase Amount for any such Permitted Acquisition or Permitted Minority
Investment.
(b) Commencing upon the date hereof and continuing until such
time as the Debenture has been paid in full and the Obligations have been fully
discharged, Allied shall have the rights described in this Section 5.12 with
respect to any Covered Financings proposed to be undertaken by the Company. If
the Company desires to undertake any Covered Financing, then, prior to doing so,
the Company shall be obligated to first comply with the following requirements:
(i) Prior to investigating any alternatives for
a Covered Financing with any third-parties, Company shall provide written notice
to Holders of its intent to enter into a Covered Financing (such notice, the
"FINANCING NOTICE").
(ii) The Holders shall have the exclusive right
during the period commencing on Holders' receipt of the Financing Notice and
expiring 14 calendar days thereafter (the "HOLDERS' EXCLUSIVE PERIOD") to
furnish to Company a written term sheet that provides the basic business terms
under which Holders would be willing to enter into the Covered Financing (any
such, a "HOLDERS' OFFER").
(iii) If Holders shall submit a Holders' Offer
during the Holders' Exclusive Period, then Company shall have a period of ten
calendar days commencing upon receipt of Holders' Offer to determine whether or
not to accept it and to notify Holders in writing of Company's decision. If the
Company accepts the Holders' Offer, the Company and Holders shall proceed in
good faith to consummate the Covered Financing transaction upon the terms and
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conditions contained in the Holders' Offer and such additional terms and
conditions as may be required, customary, and consistent with the terms and
conditions contained in Holders' Offer.
(iv) If the Holders shall fail to submit a Holders'
Offer during the Holders' Exclusive Period or if Company shall notify Holders in
writing of Company's decision not to accept Holders' Offer, then the Company
shall be entitled to pursue and obtain the Covered Financing from sources other
than the Holders, subject to the satisfaction of each of the requirements
specified in the following subsection (v) below.
(v) If, in accordance with subsection (iv), the
Company obtains a written commitment or written expression of interest (any
such, a "THIRD PARTY OFFER") from a third party or third parties (all such
parties are collectively referred to as the "THIRD PARTY OFFEROR") to provide
the Covered Financing, then the Company shall promptly furnish to Holders a true
and complete copy of the Third Party Offer. The Company shall be entitled to
proceed to obtain the Covered Financing from the Third Party Offeror only if
each of the following requirements is satisfied: (i) the Covered Financing is
being made upon the terms and conditions contained in the Third Party Offer and
such additional terms and conditions as may be required, customary, and
consistent with the terms and conditions contained in the Third-Party Offer;
(ii) the Third Party Offer contains pricing and material terms which are not
collectively more restrictive or higher in cost to the Company than those
contained in the most recent Holders' Offer; and (iii) the Covered Financing
will be fully funded prior to the expiration of 180 calendar days from the date
of the Third Party Offer; and
(vi) If, for any reason whatsoever, the Company
fails to obtain the Covered Financing from the Third-Party Offeror within the
time limit specified in subsection (v) of this Section 5.12 and in conformity
with each of the other requirements specified in clause (v) of this Section
5.12, then the Company shall promptly notify Allied to that effect in writing,
and the Company shall comply anew with the requirements of this Section 5.12
prior to obtaining any Covered Financing.
SECTION 5.13 Observation Rights. The Company shall permit one
authorized representative of Allied to attend all meetings of the Board and
shall provide such representative with such notice and other information with
respect to such meetings as are delivered to the directors of the Company. The
Company shall pay such representative's reasonable travel expenses (including,
without limitation, the cost of airfare, meals and lodging) in connection with
the attendance of such meetings.
SECTION 5.14 Assignment of Life Insurance. Until the Debenture is paid
in full, the Company shall pay, or cause to be paid, when due all premiums on
the Assigned Life Insurance Policies and otherwise cause the Assigned Life
Insurance Policies to be maintained in full force and effect at all times. Upon
the Holders' request from time to time, the Company shall cause the insurer on
each Assigned Life Insurance Policy to acknowledge the assignment of the
Assigned Life Insurance Policies to the Holders, and will execute and deliver to
the Holders, or cause such insurer to execute and deliver to the Holders, any
documents or questionnaires necessary or useful to further evidence such
assignment and to provide or confirm information about the Assigned Life
Insurance Policies. Any payments received by the Holders under the
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Assigned Life Insurance Policies may be applied by the Holders to any part of
the Obligations then outstanding, and such payment shall not postpone or reduce
the amount of any payment due thereafter; provided that the Holders shall have
no interest in any portion of the insurance proceeds exceeding $2,000,000.00.
Any payments received by the Company shall be immediately delivered by the
Company to the Holders in the form received with any endorsement necessary for
the negotiation of any such item of payment and until so paid to the Holders
such payments shall be deemed held in trust for the Holders. If Xxxxxx X.
Xxxxxxxx ceases to be an employee of the Company before the Debenture is paid in
full, the Holders will release their security interest in the Assigned Life
Insurance Policy on Xxxxxx X. Xxxxxxxx on condition that the Company assign its
rights under a $2,000,000 life insurance policy on another "key man," whose
identity will be subject to the reasonable approval of Allied. If the substitute
assignment will involve a life insurance policy on the individual who replaces
Xxxxxx X. Xxxxxxxx, the Company must designate such person within 180 days after
Xx. Xxxxxxxx'x departure. In any event, the Company must deliver to the Holders
a substitute Assignment of Life Insurance Policy fully executed by the Company
and the insurer within 60 days after Allied's approval of the designated
individual.
SECTION 5.15 Permitted Acquisitions and Permitted Minority Investments.
(a) Subject to the provisions of subsection (b) below and the
requirements contained in the definition of Permitted Acquisition and Permitted
Minority Investment, and subject to the other terms and conditions of this
Agreement, the Company may from time to time on or after the Closing Date effect
Permitted Acquisitions and Permitted Minority Investment; provided that, with
respect to each Permitted Acquisition and Permitted Minority Investment (unless
otherwise consented to in writing by the Holders pursuant to the definition of
Permitted Acquisition or Permitted Minority Investment, as the case may be):
(i) no Default or Event of Default shall have
occurred and be continuing at the time of the consummation of such Permitted
Acquisition or Permitted Minority Investment, as the case may be, or would exist
immediately after giving effect thereto;
(ii) the Purchase Amount with respect to a
Permitted Minority Investment shall not exceed $3,000,000; and
(iii) the Purchase Amounts for all Permitted
Minority Investments during the term of this Agreement shall not exceed
$25,000,000.
(b) Not less than ten (10) Business Days prior to the proposed
consummation of any Permitted Minority Investment with respect to which the
Purchase Amount exceeds $1,000,000, the Company shall have delivered to the
Holders the following:
(i) a reasonably detailed description of the
material terms of such Permitted Minority Investment (including, without
limitation, the Purchase Amount and method and structure of payment) and of each
Person or business that is the subject of such Permitted Minority Investment
(each, a "TARGET"); and
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(ii) a certificate, in form and substance
required by the Senior Lenders, executed by a Financial Officer setting forth
the Purchase Amount and further to the effect that, to the best of such
individual's knowledge, (x) the consummation of such Permitted Minority
Investment will not result in a violation of any provision of this Section, and
after giving effect to such Permitted Minority Investment the Company will be in
compliance with the Financial Covenants at the most recent calculation period,
such compliance determined with regard to good faith calculations made on a pro
forma basis in accordance with GAAP, (y) after giving effect to such Permitted
Minority Investment the Company believes in good faith that it will have
sufficient availability under the Permitted Senior Debt commitment to meet its
ongoing working capital requirements, and (z) no Event of Default exists before
or after giving effect to such Permitted Minority Investment and giving effect
to the annual delivery of operating budget cash flow projections prepared on a
quarterly basis for the fiscal year following the date of such Permitted
Minority Investment.
(c) If a Minority Investment requires the prior approval of
the Holders, the Holders shall use commercially reasonable efforts to respond to
the request of the Company for the consent of the Holders with respect to a
Minority Investment promptly (and in any event within five (5) Business Days)
after receipt of all information required in connection with such Minority
Investment, including without limitation all information required under this
Section 5.15; provided that the failure of the Holders to respond within such
five (5) Business day period shall not be deemed a consent of the Holders to
such Minority Investment.
(d) Concurrently with each delivery of the financial
statements described in Section 5.4, the Company shall deliver to the Holders
the following information (to the extent such information is delivered to the
Senior Lender Agent) with respect to any Permitted Acquisition or Permitted
Minority Investment occurring during the period covered by the financial
statements then being delivered (and for purposes of the financial statements
described in Section 5.4(b), any Permitted Acquisition or Permitted Minority
Investment not previously disclosed under this subsection (f)) and not requiring
the Holders' consent under Section 5.15(a)(ii) or the definition of Permitted
Acquisition:
(i) a reasonably detailed description of the
material terms of such Permitted Acquisition or Permitted Minority Investment
(including, without limitation the Purchase Amount and the method and structure
of payment) and of the Target; and
(ii) solely with respect to a Permitted
Acquisition, projected income statements of the Target for the two-year period
following the consummation of the Permitted Acquisition for such Target, in
reasonable detail, together with any appropriate statement of assumptions and
pro forma adjustments.
SECTION 5.16 Creation or Acquisition of Subsidiaries. Subject to the
provisions of Section 6.5, the Company may from time to time create or acquire
new Subsidiaries in connection with Permitted Acquisitions or otherwise, and the
Subsidiaries of the Company may create or acquire new Subsidiaries, provided
that concurrently with (and in any event within ten (10) Business Days
thereafter) the creation or direct or indirect acquisition by the Company
thereof, each such new Subsidiary that would be deemed a Material Subsidiary
(excluding
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Permitted Joint Ventures), will execute and deliver to the Holders (a) a joinder
to the Subsidiary Guaranty, pursuant to which such new Material Subsidiary shall
become a party thereto and shall guarantee the payment in full of the
Obligations of the Company under this Agreement and the Debenture and (b) a
joinder to the Subordination Agreement, pursuant to which such new Material
Subsidiary shall become a party thereto and agree to be bound thereby.
Calculations for determining whether the new Subsidiary qualifies as a Material
Subsidiary shall be based upon the financial statements of the new Subsidiary or
group of purchased assets, as applicable, for the most recently ended fiscal
quarter. Such calculations shall be made in accordance with GAAP as if such
Subsidiary or group of assets had been consolidated with the Company as of such
fiscal quarter.
SECTION 5.17 Duration of Affirmative Covenants. At such time as the
Debentures have been paid in full, all of the covenants set forth in this
Article V shall terminate except the covenants in the following Sections: the
portion of Section 5.1(a) regarding maintenance of the Company's existence and
Sections 5.4(a), 5.4(b), 5.4(d) (as long as the Permitted Senior Debt is
outstanding) and 5.4(e). Thereafter, at such time as the Company has completed
an IPO and its common stock is listed for trading on a national securities
exchange or the National Association of Securities Dealers, Inc. National Market
System, all of the covenants in this Article V shall terminate.
ARTICLE VI
NEGATIVE COVENANTS
Subject to Section 6.11, the Company covenants and agrees NOT to do any
of the following without the prior written consent of the Holders:
SECTION 6.1 Mergers, Consolidations. The Company shall not, and shall
not permit any Material Subsidiary to, liquidate, wind up or dissolve, and the
Company will not, and will not permit or cause any Subsidiary to, enter into any
consolidation, merger or other combination, or agree to do any of the foregoing;
provided, however, that:
(a) the Company may merge or consolidate with another Person
so long as (x) the Company is the surviving entity, (y) such merger or
consolidation shall constitute a Permitted Acquisition and the applicable
conditions and requirements of Sections 5.15 and 5.16 shall be satisfied, and
(z) immediately after giving effect thereto, no Default or Event of Default
would exist;
(b) any Subsidiary may merge or consolidate with another
Person so long as (x) the surviving entity is the Company or a Subsidiary
Guarantor (or in the case of an immaterial Subsidiary, the surviving entity is
another immaterial Subsidiary or a Subsidiary Guarantor), (y) such merger or
consolidation shall constitute a Permitted Acquisition and the applicable
conditions and requirements of Section 5.15 and 5.16 shall be satisfied, and (z)
immediately after giving effect thereto, no Default or Event of Default would
exist;
(c) the Company and its Subsidiaries may consummate the
Transactions.
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SECTION 6.2 Indebtedness. The Company will not, and will not permit or
cause any Subsidiary to, incur, create, assume or permit to exist any
Indebtedness other than:
(a) the Senior Loan and any amendments, modifications,
extensions, restatements, renewals, additions, or replacements of the Senior
Loan; provided that as amended, modified, extended, restated, renewed, or
replaced, the Senior Loan may not, without the consent of the Holders, (i)
permit maximum principal indebtedness, including reimbursement obligations for
letters of credit, outstanding at any one time to exceed $70,000,000 (exclusive
of interest, fees, indemnities and expense reimbursements); (ii) cause a pro
forma breach of the Financial Covenants; (iii) extend the maturity date longer
than one (1) year nor shorten the maturity or weighted average life to maturity;
(iv) place any new restrictions on the Obligations hereunder or under any other
the other Investment Documents; (v) increase the interest rate on the Senior
Loan by more than 200 basis points (exclusive of default rate), as more
specifically set forth in the Subordination Agreement; (vi) require any
amendment to or modification of the Subordination Agreement; (the Senior Loan
and any amendment, modification, extension or replacement meeting the terms of
this Section 6.2(a) being referred to as "PERMITTED SENIOR DEBT");
(b) Permitted Junior Debt; provided that (i) any debt
securities issued in connection with a Permitted Acquisition occurring after the
Closing Date shall (A) have a term of not less than five (5) years, (B) amortize
principal in no greater than equal annual installments over the term thereof,
and (C) be fully subordinated to the Obligations on terms acceptable to the
Holders or (ii) the terms of such debt securities shall be expressly consented
to by the Holders;
(c) Indebtedness existing on the date hereof and set forth in
the Financials or Schedule 4.6;
(d) Indebtedness created hereunder and under the Debenture;
(e) unsecured intercompany Indebtedness (x) of any Subsidiary
to the Company, (y) of any Subsidiary Guarantor to any other Subsidiary, and (z)
of the Company to any Subsidiary; provided that any such Indebtedness under this
clause (e) is incurred in the ordinary course of business and is payable on
demand and is fully subordinated in right of payment to the Obligations;
(f) accrued expenses (including salaries, accrued vacation and
other compensation), current trade or other accounts payable and other current
liabilities arising in the ordinary course of business and not incurred through
the borrowing of money, provided that the same shall be paid when due except to
the extent being contested in good faith and by appropriate proceedings;
(g) Indebtedness of the Company under Hedge Agreements
permitted under the Senior Credit Agreement;
(h) purchase money Indebtedness of the Company and its
Subsidiaries incurred solely to finance the payment of all or part of the
purchase price of any equipment, real
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property or other fixed assets acquired in the ordinary course of business,
including Indebtedness in respect of capital lease obligations, and any
renewals, refinancings or replacements thereof (subject to the limitations on
the principal amount thereof set forth in this clause (h)), which Indebtedness
shall not exceed $8,750,000 in aggregate principal amount during the term of
this Agreement; provided that purchase money Indebtedness expressly approved by
the Senior Lenders in connection with a Permitted Acquisition (as that term is
defined in the Senior Credit Agreement) shall not count toward the $8,750,000
basket included in this clause (h);
(i) Contingent Obligations incurred by the Company or any
Subsidiary in connection with (i) endorsements by the Company or any such
Subsidiary of negotiable instruments in the ordinary course of business, (ii)
obligations of the Subsidiary Guarantors under the Subsidiary Guaranty, and
(iii) guaranties of any of the Indebtedness permitted under this Section 6.2;
and
(j) other unsecured Indebtedness not exceeding $1,250,000 in
aggregate principal amount outstanding at any time.
SECTION 6.3 Liens. The Company will not, and will not permit or cause
any Material Subsidiary to, directly or indirectly, make, create, incur, assume
or suffer to exist, any Lien upon or with respect to any part of its property or
assets, whether now owned or hereafter acquired, or file or permit the filing
of, or permit to remain in effect, any financing statement or other similar
notice of any Lien with respect to any such property, asset, income or profits
under the Uniform Commercial Code of any state or under any similar recording or
notice statute, or agree to do any of the foregoing, other than the following
(collectively, "PERMITTED LIENS"):
(a) Liens securing the Permitted Senior Debt;
(b) Liens in existence on the Closing Date and set forth on
Schedule 6.3;
(c) Liens imposed by law, such as Liens of carriers,
warehousemen, mechanics, materialmen and landlords, and other similar Liens
incurred in the ordinary course of business for sums not constituting borrowed
money that are not overdue for a period of more than forty five (45) days or
that are being contested in good faith by appropriate proceedings and for which
adequate reserves have been established in accordance with GAAP (if so
required);
(d) Liens incurred in the ordinary course of business in
connection with worker's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure the performance of letters of
credit, bids, tenders, statutory obligations, surety and appeal bonds, leases,
government contracts and other similar obligations (other than obligations for
borrowed money) entered into in the ordinary course of business;
(e) Liens for taxes, assessments or other governmental charges
or statutory obligations that are not delinquent or remain payable without any
penalty or that are being contested in good faith by appropriate proceedings and
for which adequate reserves have been established in accordance with GAAP (if so
required);
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(f) Liens securing the purchase money Indebtedness permitted
under clause (h) of Section 6.2; provided that any such Lien (i) shall attach to
such property concurrently with or within ten (10) days after the acquisition
thereof by the Company or such Subsidiary, (ii) shall not exceed the lesser of
(y) the fair market value of such property or (z) the cost thereof to the
Company or such Subsidiary and (iii) shall not encumber any other property of
the Company or any Subsidiary;
(g) any attachment or judgment Lien under $275,000 that is
being contested in good faith by appropriate proceedings and for which adequate
reserves have been established in accordance with GAAP (if so required);
(h) Liens arising from the filing, for notice purposes only,
of financing statements in respect of true leases;
(i) with respect to any real property occupied by the Company
or any Subsidiary, all easements, rights of way, licenses and similar
encumbrances on title that do not materially impair the use of such property for
its intended purposes; and
(j) Liens securing the Permitted Junior Debt permitted under
clause (b) of Section 6.2; provided that such Liens (i) shall apply solely to
furniture, fixtures and equipment acquired from a Target in a Permitted
Acquisition, (ii) shall attach to such property concurrently with or within ten
(10) days after the acquisition thereof by the Company or such Subsidiary, (iii)
shall not encumber any other property of the Company or any Subsidiary.
SECTION 6.4 Disposition of Assets. The Company will not, and will not
permit or cause any Subsidiary to, sell, assign, lease, convey, transfer or
otherwise dispose (whether in one or a series of transactions throughout the
term of this Agreement) of an equitable, beneficial or legal interest in assets
having an aggregate value in excess of twenty percent (20%) of the value of the
consolidated assets of the Company at any one time outstanding, determined in
accordance with GAAP, unless the Company applies the proceeds to replace or
upgrade the transferred assets or to make related capital expenditures, to repay
Permitted Senior Debt in accordance with the Senior Credit Agreement, or, after
repayment of the Permitted Senior Debt, to repay the Debenture. This limitation
on disposition of assets shall not apply to inventory sold and equipment
disposed of in the ordinary course of business.
SECTION 6.5 Investments, Notes, and Advances. The Company will not, and
will not permit or cause any Subsidiary to make any Investments, or make a
commitment or otherwise agree to do any of the foregoing, other than:
(a) Cash Equivalents;
(b) Investments consisting of purchases and acquisitions of
inventory, supplies, materials and equipment or licenses or leases of
Intellectual Property, real property and other assets, in each case in the
ordinary course of business;
(c) Investments consisting of loans and advances to employees
for reasonable travel, relocation and business expenses in the ordinary course
of business, extensions of trade
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credit in the ordinary course of business, and receivables created and prepaid
expenses incurred in the ordinary course of business;
(d) without duplication, Investments consisting of
intercompany Indebtedness permitted under clause (e) of Section 6.2;
(e) Investments existing on the Closing Date and described in
Schedule 6.5;
(f) Investments of the Company under Hedge Agreements with any
Senior Lender as permitted under the Senior Loan Documents;
(g) Investments consisting of the making of capital
contributions or the purchase of Capital Stock (i) by the Company or any
Subsidiary in any other Person that is (or immediately after giving effect to
such Investment will be) a Subsidiary Guarantor and (ii) by any Subsidiary in
the Company; and
(h) Permitted Acquisitions and Permitted Minority Investments;
(i) Physician Minority Investment Loans permitted under the
Senior Loan Documents incurred in connection with a Permitted Minority
Investment, excluding the investments set forth in Schedule 6.5;
(j) loans to physicians in Managed Practices of up to $625,000
in the aggregate during any consecutive twelve month period, but excluding the
loans set forth on Schedule 6.5; provided that Physician Minority Investment
Loans and other loans to physicians expressly approved by the Senior Lenders
under the Senior Credit Agreement in connection with a Permitted Minority
Investment shall not count toward the $625,000 basket included in this clause
(j); and
(k) other Investments in an aggregate amount, as valued at the
time each such Investment is made, not exceeding $125,000 for all such
Investments from and after the Closing Date.
SECTION 6.6 Restricted Payments.
(a) The Company will not, and will not permit or cause any
Subsidiary to, directly or indirectly, declare or make any dividend payment, or
make any other distribution of cash, property or assets, in respect of any of
its Capital Stock or any warrants, rights or options to acquire its Capital
Stock, or purchase, redeem, retire or otherwise acquire for value any shares of
its Capital Stock or any warrants, rights or options (it being understood that
the Company may issue options) to acquire its Capital Stock, or set aside funds
for any of the foregoing, except that:
(i) the Company may declare and make dividend
payments or other distributions payable solely in its common stock and preferred
stock (as long as such preferred stock does not constitute Disqualified Capital
Stock); and
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(ii) each Subsidiary may declare and make
dividend payments or other distributions to the Company or another Subsidiary
Guarantor, to the extent not prohibited under applicable Requirements of Law;
provided, that Permitted Joint Ventures may make distributions in accordance
with distribution provisions of organizational documents reasonably approved by
the Senior Lenders so long as no Default or Event of Default then exists or
would result immediately after giving effect thereto.
(b) The Company will not, and will not permit or cause any of
its Subsidiaries to, make (or give any notice in respect of) any voluntary.
optional, or required payment or prepayment of principal on any Subordinated
Indebtedness, except as permitted herein subject to the Subordination Agreement,
or directly or indirectly make any redemption (including pursuant to any change
of control provision), retirement, defeasance or other acquisition for value of
any Subordinated Indebtedness, or make any deposit or otherwise set aside funds
for any of the foregoing purposes; provided that, subject to the terms of any
subordination agreement applicable to the seller debt securities evidencing
Permitted Junior Debt, the Company and its Subsidiaries may make scheduled
payments (but not prepayments) of principal and interest under such seller debt
securities. Notwithstanding the foregoing, the Company will not, and will not
permit or cause any of its Subsidiaries to, make any payment of principal,
interest, or any other sum due under Permitted Junior Debt during the
continuation of an Event of Default.
(c) The Company will not, and will not permit or cause any of
its Subsidiaries to, make any payment (whether voluntary, optional or required)
or prepayment of principal on the existing Permitted Junior Debt set forth on
Schedule 6.6(c) other than in common stock of the Company in accordance with the
terms of such notes.
SECTION 6.7 Transactions with Affiliates. The Company will not, and
will not permit or cause any Subsidiary to, enter into any transaction
(including, without limitation, any purchase, sale, lease or exchange of
property or the rendering of any service) with any officer, director,
stockholder or other Affiliate of the Company or any Subsidiary, except in the
ordinary course of its business and upon fair and reasonable terms that are no
less favorable to it than would obtain in a comparable arm's length transaction
with a Person other than an Affiliate of the Company or such Subsidiary;
provided, however, that nothing contained in this Section shall prohibit:
(a) transactions described on Schedule 6.7 or otherwise
expressly permitted under this Agreement; and
(b) the payment by the Company of reasonable and customary
fees to members of its board of directors.
SECTION 6.8 Business of Company, Change of Location, and Subsidiaries.
The Company will not, and will not permit or cause any Material Subsidiary to,
engage in any business other than the business of providing management services
to providers of ear, nose, throat, head and neck healthcare services (and
related fields of allergy, audiology, pulmonology, oral surgery, plastic surgery
and sleep medicine), within the United States of America and services,
businesses and activities ancillary thereto, including, but not limited to,
investments in
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and management of ambulatory surgery centers, diagnostic imaging centers and
managed care and similar plans.
SECTION 6.9 Stay, Extension and Usury Laws. The Company and each
Subsidiary Guarantor covenants and agrees (to the extent that it may lawfully do
so) that it will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, and will use its best efforts to
resist any attempts to claim or take the benefit of, any stay, extension or
usury law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of its obligations under this Agreement
or the Debenture. The Company and each Subsidiary Guarantor (to the extent it
may lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Holders, but will suffer
and permit the execution of every such power as though no such law has been
enacted.
SECTION 6.10 Limitation on Certain Restrictions. The Company will not,
and will not permit or cause any Subsidiary to, directly or indirectly, create
or otherwise cause or suffer to exist or become effective any restriction or
encumbrance on (i) the ability of the Company and its Subsidiaries to perform
and comply with their respective obligations under the Senior Loan Documents or
the Investment Documents, including the Subordination Agreement, or (ii) the
ability of any Subsidiary to make any dividend payments or other distributions
in respect of its Capital Stock, to repay Indebtedness owed to the Company or
any Subsidiary Guarantor, to make loans or advances to the Company or any
Subsidiary Guarantor, or to transfer any of its assets or properties to the
Company or any Subsidiary Guarantor, in each case other than such restrictions
or encumbrances existing under or by reason of the Senior Loan Documents, the
Investment Documents, the Subordination Agreement, or applicable Requirements of
Law.
SECTION 6.11 Duration of Negative Covenants. Upon repayment of the
Debenture in full, all of the covenants set forth in this Article VI shall
terminate.
ARTICLE VII
EVENTS OF DEFAULT
AND REMEDIES
SECTION 7.1 Events of Default. If any of the following events occurs
and is continuing, it shall be an "EVENT OF DEFAULT":
(a) any representation or warranty made or deemed made in or
in connection with this Agreement or the Debenture, or any representation,
warranty, statement or information contained in any report, certificate,
financial statement or other instrument furnished in connection with or pursuant
to this Agreement or the Debenture, proves to have been materially false or
misleading when so made, deemed made or furnished;
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(b) default is made in the payment of any principal of the
Debenture within ten (10) Business Days after the same shall become due and
payable, whether at the due date thereof or at a date fixed for prepayment
thereof or by acceleration thereof or otherwise;
(c) default is made in the payment of any interest on the
Debenture or any other amount (other than an amount referred to in (b) above)
due under any Investment Document, within ten (10) Business Days after the same
becomes due and payable;
(d) failure of the Company to perform or comply with any
Financial Covenant;
(e) with respect to the Permitted Senior Debt or any other
Indebtedness in a principal amount in excess of $1,000,000, the Company or any
Material Subsidiary (i) fails to pay any principal or interest, regardless of
amount due, within any applicable notice and cure periods after the same becomes
due and payable and the holder of the Permitted Senior Debt or such Indebtedness
has accelerated its maturity date, or (ii) fails to observe or perform any other
term, covenant, condition or agreement contained in any agreement or instrument
evidencing or governing any such Indebtedness and such failure is not cured
within any applicable notice and cure periods and the holder of the Permitted
Senior Debt or such Indebtedness has accelerated its maturity date;
(f) a default is declared against the Company or any Material
Subsidiary under any Material Contract (after giving effect to any applicable
notice and cure periods provided for therein) and the failure to cure such
default would reasonably be expected to result in a Material Adverse Effect;
(g) an Act of Bankruptcy or Act of Dissolution shall have
occurred with respect to the Company;
(h) Any one or more money judgments, writs or warrants of
attachment, executions or similar processes involving an aggregate amount
(exclusive of amounts fully bonded or covered by insurance as to which the
surety or insurer, as the case may be, has acknowledged its liability in
writing) in excess of $275,000 shall be entered or filed against the Company or
any Material Subsidiary or any of their respective properties and the same shall
not be dismissed, stayed, bonded pending appeal, or discharged within a period
of thirty (30) days or in any event later than five days prior to the date of
any proposed sale thereunder;
(i) as a result of a Transfer or series of Transfer, either
Xxxxx X. Xxxxx or Xxxxxx X. Xxxxxxxx ceases to own at least 67% of the shares of
stock or other equity interest he controls in the Company on the Closing Date
following completion of the Merger Transaction; provided that any Transfer to
trusts established for estate planning purposes by Xxxxx X. Xxxxx or General X.
Xxxxxxxx and controlled by either of them and any Transfer pursuant to a will or
the laws of descent and distribution upon the death of either Xxxxx X. Xxxxx or
Xxxxxx Xxxxxxxx shall not be an Event of Default;
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(j) Xxxxx X. Xxxxx ceases to devote his full time and
attention to the management of the Company and/or the affiliated practice,
Atlanta Ear Nose & Throat Associates and a suitable replacement reasonably
satisfactory to the Holders is not found within 180 days;
(k) default is made in the due observance or performance by
the Company of any material covenant, condition or agreement or any
representation or warranty contained in any Investment Document (other than
those specified in (a) through (j) above) and such default continues unremedied
for a period of 30 days after notice thereof from the Holders to the Company.
Upon the occurrence of an Event of Default, (other than an event with respect to
the Company or any Subsidiary Guarantors described in paragraph (g) above) and
at any time thereafter during the continuance of such event, the Holders may by
notice to the Company and the Subsidiary Guarantors, take either or both of the
following actions, at the same or different times: declare the principal amount
then outstanding under the Debenture to be forthwith due and payable in whole or
in part, whereupon the principal amount so declared to be due and payable,
together with accrued interest thereon, prepayment premium (if acceleration
occurs during the first two years after the Closing Date), and all other
liabilities of the Company and the Subsidiary Guarantors accrued hereunder and
under the Subsidiary Guaranty, shall become forthwith due and payable, without
presentment demand, protest or any other notice of any kind, all of which are
hereby expressly waived by the Company and the Subsidiary Guarantors, anything
contained herein or in any other Investment Document to the contrary
notwithstanding; and in any event with respect to the Company and the Subsidiary
Guarantors described in paragraph (g) above, the principal of the Debenture then
outstanding, together with accrued interest thereon, prepayment premium (if
acceleration occurs during the first two years after the Closing Date), and all
other liabilities of the Company and the Subsidiary Guarantors accrued hereunder
and under the Subsidiary Guaranty, shall automatically become due and payable,
without presentment demand, protest or any other notice of any kind, all of
which are hereby expressly waived by the Company and the Subsidiary Guarantors,
anything contained herein or in any other Investment Document to the contrary
notwithstanding.
SECTION 7.2 Waivers. The Company and the Subsidiary Guarantors waive
presentment, demand, notice of dishonor, and protest, and all demands and
notices of any action taken by the Holders under this Agreement, except as
otherwise provided herein.
SECTION 7.3 Enforcement Actions. The Holders may, at their option,
collect all or any portion of the Obligations or enforce against the Company and
the Subsidiary Guarantors any of their respective rights and remedies including,
but not limited to: (i) commencing or pursuing legal proceedings to collect any
amounts owed with respect to the Obligations; or (ii) executing upon, or
otherwise enforcing, any judgment obtained with respect to amounts owed with
respect to the Obligations.
SECTION 7.4 Costs. The Company shall pay all expenses of any nature,
whether incurred in or out of court, and whether incurred before or after the
Debenture shall become due at its maturity date or otherwise (including, but not
limited to, reasonable and actual attorneys'
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fees and costs) which the Holders may reasonably incur in connection with the
collection of any of the Obligations. The Holders are authorized to pay at any
time and from time to time any or all of such expenses, to add the amount of
such payment to the amount of principal outstanding under the Debenture, and to
charge interest thereon at the rate of 12% per annum.
SECTION 7.5 Remedies Non-Exclusive. None of the rights, remedies,
privileges or powers of the Holders expressly provided for herein are exclusive,
but each of them is cumulative with, and in addition to, every other right,
remedy, privilege and power now or hereafter existing in favor of each of the
Holders, whether pursuant to the other Investment Documents, at law or in
equity, by statute or otherwise.
SECTION 7.6 Subordination Agreement. Without limiting the application
of the Subordination Agreement generally to this Agreement and the other
Investment Documents, the exercise of remedies by the Holders shall be subject
to the operation and effect of the Subordination Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Notices. Notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as follows:
(a) if to the Company, to Physicians' Specialty Corp., 0000
Xxxx Xxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000, Telecopy No. (404)
250-0162, with a copy to Xxxxxxx, Procter & Xxxx LLP, Exchange Place, Boston,
Massachusetts 02109-2881, Attention: Xxxxxx X. Xxxxx, Telecopy No. (617)
523-1231;
(b) if to Allied, to Allied Capital Corporation, at its
offices at 0000 Xxxxxxxxxxxx Xxxxxx XX, Xxxxxxxxxx, XX 00000-0000, Attention of
J. Xxxxxxxx Xxx (Telecopy No. 202-659-2053), with a copy to Piper & Marbury
L.L.P., 0000 Xxxxxxxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000 Attention of
Xxxxxxx Xxxxxxx (Telecopy No. 202-223-2085).
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy (provided a copy is contemporaneously sent by first class mail) or on
the date five Business Days after dispatch by certified or registered mail if
mailed, in each case delivered, sent or mailed (properly addressed) to such
party as provided in this Section 8.1 or in accordance with the latest unrevoked
direction from such party given in accordance with this Section 8.1.
SECTION 8.2 Survival of Agreement. All covenants, agreements,
representations and warranties made by the Company and Subsidiary Guarantors
herein and in the certificates or other instruments prepared or delivered in
connection with or pursuant to this Agreement shall be considered to have been
relied upon by Allied and shall survive the making by Allied of the investment,
regardless of any investigation made by Allied or on its behalf and shall
continue in
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full force and effect as long as the principal of or any accrued interest
on the Debenture or any other amount payable under this Agreement or the
Subsidiary Guaranty is outstanding and unpaid. The provisions of
Section 8.6 shall remain operative and in full force and effect regardless
of the expiration of the term of this Agreement, the consummation of the
transactions contemplated hereby, the repayment of the Debenture, the
invalidity or unenforceability of any term or provision of this Agreement or
any other Investment Document, or any investigation made by or on behalf of
Allied.
SECTION 8.3 Binding Effect. This Agreement shall become effective when
it shall have been executed by each of the Company, Subsidiary Guarantors and
Allied, and when Allied shall have received counterparts hereof which, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective permitted successors and assigns.
SECTION 8.4 Successors and Assigns.
(a) Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the permitted successors
and assigns of such party; and all covenants, promises and agreements by or on
behalf of the Company, the Subsidiary Guarantors or Allied that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns.
(b) Neither the Company nor any Subsidiary Guarantor shall
assign or delegate any of its rights or duties hereunder without the prior
written consent of the Holders, and any attempted assignment or delegation
without such consent shall be null and void. Each Holder may assign all or a
portion of its rights and obligations under this Agreement; provided that any
such assignment shall not be made without the Company's prior written consent,
which consent shall not be unreasonably withheld or delayed; provided further
that the Company's consent shall not be required in the event a Default or Event
of Default shall have occurred and be continuing.
SECTION 8.5 Expenses; Indemnity.
(a) The Company will pay a loan origination fee of $150,000
and all out-of-pocket expenses incurred by Allied in connection with the
preparation and administration of this Agreement and the other Investment
Documents, or in connection with any amendments, modifications or waivers of the
provisions hereof or thereof (whether or not the transactions hereby or thereby
contemplated shall be consummated) or incurred by Allied in connection with the
enforcement or protection of its rights in connection with this Agreement and
the other Investment Documents, including any suit, action, claim or other
activity of Allied to collect the Obligations or any portion thereof, or in
connection with the Allied Investment hereunder, including the reasonable fees,
charges and disbursements of Piper & Marbury L.L.P., counsel for Allied, and, in
connection with any such enforcement or protection, the reasonable fees, charges
and disbursements of any other counsel for Allied.
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(b) The Company and each Subsidiary Guarantor will indemnify
each Holder, and its directors, officers, employees and agents (each such Person
being called an "INDEMNITEE") against, and to hold each Indemnitee harmless
from, any and all losses, claims, damages, liabilities and related expenses,
including reasonable and actual counsel fees, charges and disbursements,
incurred by or asserted against any Indemnitee arising out of in any way
connected with, or as a result of (i) the execution or delivery of this
Agreement or any other Investment Document or any agreement or instrument
contemplated thereby, the performance by the parties thereto of their respective
obligations thereunder or the consummation of the Allied Investment and the
other transactions contemplated thereby, (ii) the use of the proceeds of the
Debenture, (iii) any claim, litigation investigation or proceeding relating to
any of the foregoing, whether or not any Indemnitee is a party thereto, or (iv)
any actual or alleged presence or release of Hazardous Substances on any
property owned or operated by the Company or any Subsidiary, or any
Environmental Claim related in any way to the Company or any Subsidiary;
provided that such indemnity shall not as to any Indemnitee, be available to the
extent that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee.
(c) The provisions of this Section 8.5 shall remain operative
and in full force and effect regardless of the expiration of the term of this
Agreement the consummation of the transactions contemplated hereby, the
repayment of the Debenture, the invalidity or unenforceability of any term or
provision of this Agreement or any other Investment Document, or any
investigation made by or on behalf of Allied. All amounts due under this Section
8.5 shall be payable on written demand therefor.
SECTION 8.6 Waiver of Consequential and Punitive Damages. The Company,
each Subsidiary Guarantor and each Holder hereby waive to the fullest extent
permitted by law all claims to consequential and punitive damages in any lawsuit
or other legal action brought by any of them against any other of them in
respect of any claim among or between any of them arising under this Agreement,
the other Investment Documents, or any other agreement or agreements between or
among any of them at any time, including any such agreements, whether written or
oral, made or alleged to have been made at any time prior to the Closing Date,
and all agreements made hereafter or otherwise, and any and all claims arising
under common law or under any statute of any state or the United States of
America, including any thereof in contract, tort, strict liability or otherwise,
whether any such claims be now existing or hereafter arising, now known or
unknown. In making this waiver, each Holder, the Company and each Subsidiary
Guarantor acknowledge and agree that there shall be no claims for consequential
or punitive damages made by any Holder against the Company and the Subsidiary
Guarantors and there shall be no claims for consequential or punitive damages
made against the Holders by the Company or any Subsidiary Guarantor. The
Holders, the Company and the Subsidiary Guarantors acknowledge and agree that
this waiver of claims for consequential damages and punitive damages is a
material element of the consideration for this Agreement.
SECTION 8.7 Applicable Law. THIS AGREEMENT AND THE OTHER INVESTMENT
DOCUMENTS (OTHER THAN AS EXPRESSLY SET FORTH IN THE OTHER INVESTMENT DOCUMENTS)
SHALL BE CONSTRUED IN ACCORDANCE
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WITH AND GOVERNED BY THE LAWS OF THE STATE OF MARYLAND (EXCLUDING MARYLAND
CONFLICTS OF LAWS PROVISIONS).
SECTION 8.8 Waivers; Amendment.
(a) No failure or delay of the Holders in exercising any power
or right hereunder or under any other Investment Document shall operate as a
waiver thereof nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Holders hereunder and under
the other Investment Documents are cumulative and are not exclusive of any
rights or remedies that it would otherwise have. No waiver of any provision of
this Agreement or any other Investment Document or consent to any departure by
the Company or any Subsidiary Guarantor therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice or demand on the Company and the
Subsidiary Guarantors in any case shall entitle any of them to any other or
further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Company and the Holders.
SECTION 8.9 Interest Rate Limitation. Notwithstanding anything herein
to the contrary, if at any time the interest rate applicable to the investment,
together with all fees, charges, warrants and other amounts which are treated as
interest on the investment under Applicable Law (collectively the "CHARGES"),
shall exceed the maximum lawful rate (the "MAXIMUM RATE") which may be
contracted for, charged, taken, received or reserved by the Holders holding the
investment in accordance with applicable law, the rate of interest payable in
respect of the investment hereunder, together with all Charges payable in
respect thereof shall be limited to the Maximum Rate.
SECTION 8.10 Entire Agreement. This Agreement and the other Investment
Documents constitute the entire contract between the parties relative to the
subject matter hereof; provided that this Agreement and the other Investment
Documents are subject to the Subordination Agreement. Any other previous
agreement among the parties with respect to the subject matter hereof is
superseded by this Agreement and the other Investment Documents. Nothing in this
Agreement or in the other Investment Documents, expressed or implied, is
intended to confer upon any party other than the parties hereto and thereto any
rights, remedies, obligations or liabilities under or by reason of this
Agreement or the other Investment Documents. In the event of any conflict
between this Agreement and the Subordination Agreement, the provisions of the
Subordination Agreement shall control.
SECTION 8.11 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
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OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OF THE OTHER INVESTMENT DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER
INVESTMENT DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 8.11.
SECTION 8.12 Severability. In the event any one or more of the
provisions contained in this Agreement or in any other Investment Document
should be held invalid, illegal or unenforceable in any way the validity,
legality and enforceability of the remaining provisions contained herein and
therein shall not in any way be affected or impaired thereby (it being
understood that the invalidity of a particular provision in a particular
jurisdiction shall not in and of itself affect the validity of such provision in
any other jurisdiction).
SECTION 8.13 Counterparts. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original but all of which when taken together shall
constitute a single contract and shall become effective as provided in Section
8.3. Delivery of an executed signature page to this Agreement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Agreement.
SECTION 8.14 Heading. Article and Section headings used herein are for
convenience of reference only, are not part of this Agreement and are not to
affect the construction of or to be taken into consideration in interpreting,
this Agreement.
SECTION 8.15 Jurisdiction; Consent to Service of Process.
(a) Each of the Company and each Subsidiary Guarantor hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any Maryland State court or Federal court of the
United States of America sitting in the State of Maryland, and any appellate
court from any thereof, in any action or proceeding arising out of or relating
to this Agreement or the other Investment Documents, or for recognition or
enforcement of any judgment and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in the State of Maryland or, to the
extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Holders may otherwise have to bring any action or proceeding
relating to this Agreement or the other Investment Documents against the Company
or its properties in the courts of any jurisdiction.
(b) Each of the Company and each Subsidiary Guarantor hereby
irrevocably and unconditionally waives, to the fullest extent it may legally and
effectively do so, any objection that it may now or hereafter have to the laying
of venue of any suit action or
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proceeding arising out of or relating to this Agreement or the other Investment
Documents in any Maryland State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 8.1. Nothing in
this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
SECTION 8.16 Relationship of the Parties; Advice of Counsel. This
Agreement provides for the making of an investment by Allied, in its capacity as
an investor, in the Company, in its capacity as a borrower, and for the payment
of interest and repayment of principal by the Company to Allied. The provisions
herein for compliance with Financial Covenants and delivery of financial
statements are intended solely for the benefit of the Holders to protect their
interests as lenders in assuring payments of interest and repayment of
principal, and nothing contained in this Agreement shall be construed as
permitting or obligating Allied to act as a financial or business advisor or
consultant to the Company, as permitting or obligating Allied to control the
Company or to conduct the Company's operations, as creating any fiduciary
obligation on the part of Allied to the Company, or as creating any joint
venture, agency or other relationship between the parties other than as
explicitly and specifically stated in this Agreement. Allied is not (and shall
not be construed as) partner, joint venturer, alter-ego, manager, controlling
person, operator or other business participant of any kind of the Company or any
Subsidiary Guarantor; neither Allied nor the Company nor any Subsidiary
Guarantor intends that Allied assume such status, and, accordingly, Allied shall
not be deemed responsible for (or a participant in) any acts or omissions of the
Company or any Subsidiary Guarantor. Each of Allied, the Company and each
Subsidiary Guarantor represents and warrants to the other that it has had the
advice of experienced counsel of its own choosing in connection with the
negotiation and execution of this Agreement and with respect to all matters
contained herein.
SECTION 8.17 Representations of Allied Regarding Investment.
(a) Purchase for Investment. Each Holder represents that it is
purchasing the Debenture for its own account or for one or more separate
accounts maintained by it or for the account of one or more pension or trust
funds and not with a view to the distribution thereof; provided that the
disposition of its property shall at all times be within its control. Each
Holder understands that its Debenture has not been registered under the
Securities Act or applicable state securities laws and may be resold only if
registered pursuant to the provisions of the Securities Act and applicable state
securities laws or if an exemption from registration is available, except under
circumstances where neither such registration nor such an exemption is required
by law, and that the Company is not required to register the Debenture.
(b) Source of Funds. Each Holder represents that at least one
of the following statements is an accurate representation as to each source of
funds (a "SOURCE") to be used by it to pay the purchase price of the Debenture
to be purchased by it hereunder:
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(i) the Source is an "insurance company general account"
as defined in United States Department of Labor Prohibited Transaction
Exemption ("PTE") 95-60 (60 FR 35925, July 12, 1995) and in respect
thereof each Holder represents that there is no "employee benefit plan"
(as defined in section 3(3) of ERISA and section 4975(e)(1) of the
Code, treating as a single plan all plans maintained by the same
employer or employee organization or affiliate thereof) with respect to
which the amount of the general account reserves and liabilities of all
contracts held by or on behalf of such plan exceeds 10% of the total
reserves and liabilities of such general account (exclusive of separate
account liabilities plus surplus, as set forth in the National
Association of Insurance Commissioners' Annual Statement filed with
each Holder's state of domicile and that such acquisition is eligible
for and satisfies the other requirements of such exemption; or
(ii) if the Holder is an insurance company, the source
does not include assets allocated to any separate account maintained by
it in which any employee benefit plan (or its related trust) has any
interest, other than a separate account that is maintained solely in
connection with such Holder's fixed contractual obligations under which
the amounts payable, or credited, to such plan and to any participant
or beneficiary of such plan (including any annuitant) are not affected
in any manner by the investment performance of the separate account; or
(iii) the Source is either (i) an insurance company pooled
separate account, within the meaning of PTE 90-1 (issued January 29,
1990), or (ii) a bank collective investment fund, within the meaning of
the PTE 91-38 (issued July 12, 1991) and, except as either Holder has
disclosed to the Company in writing pursuant to this paragraph (c), no
employee benefit plan or group of plans maintained by the same employer
or employee organization beneficially owns more than 10% of all assets
allocated to such pooled separate account or collective investment
fund; or
(iv) the Source constitutes assets of an "investment fund"
(within the meaning of part V of PTE 84-14 (the "QPAM EXEMPTION"))
managed by a "qualified professional asset manager" or "QPAM" (within
the meaning of part V of the QPAM Exemption), no employee benefit
plan's assets that are included in such investment fund, when combined
with the assets of all other employee benefit plans established or
maintained by the same employer or by an affiliate (within the meaning
of section V(c)(1) of the QPAM Exemption) of such employer or by the
same employee organization and managed by such QPAM, exceed 20% of the
total client assets managed by such QPAM, the conditions of part I(c)
and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a
person controlling or controlled by the QPAM (applying the definition
of "control" in section V(e) of the QPAM Exemption) owns a 5% or more
interest in the Company and (i) the identity of such QPAM and (ii) the
names of all employee benefit plans whose assets are included in such
investment fund have been disclosed to the Company in writing pursuant
to this paragraph (d); or
(v) the Source is a governmental plan; or
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(vi) the Source is one or more employee benefit plans, or
a separate account or trust fund comprised of one or more employee
benefit plans, each of which has been identified to the Company in
writing pursuant to this paragraph (vi); or
(vii) the Source does not include assets of any employee
benefit plan, other than a plan exempt from the coverage of ERISA.
As used in this Section 8.17, the terms "EMPLOYEE BENEFIT PLAN," "GOVERNMENTAL
PLAN" and "SEPARATE ACCOUNT" shall have the respective meanings assigned to such
terms in Section 3 of ERISA.
(c) Investment Representation. Each Holder acknowledges that
it has been provided access to all information requested by it in order to
evaluate the merits and risks of the transactions contemplated by this
Agreement. Without limiting the effect of the Company's representations and
warranties elsewhere in this Agreement, each Holder has relied solely upon the
advise of its own counsel, accountant and other advisors, with regard to the
legal, investment, tax and other considerations regarding the Allied Investment.
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THIS PAGE INTENTIONALLY BLANK.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers under seal as of the day
and year first above written.
ATTEST: COMPANY:
PHYSICIANS' SPECIALTY CORP.
a Delaware corporation
By: (SEAL)
--------------------------------- ------------------------------
Name: Name:
Title: Title:
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65
ATTEST: ALLIED:
ALLIED CAPITAL CORPORATION
a Maryland corporation
By: (SEAL)
--------------------------------- ------------------------------
Name: Name:
Title: Title:
-65-
66
EXHIBITS AND SCHEDULES
Schedule 4.4 Consents and Approvals
Schedule 4.6 Exceptions to Financial Statements
Schedule 4.7 Permitted Junior Debt
Schedule 4.9 Ownership and Control of Company
Schedule 4.11 Ownership of Properties
Schedule 4.12 Subsidiaries
Schedule 4.13 Litigation
Schedule 4.14 Material Contracts
Schedule 4.21 Insurance
Schedule 6.3 Liens
Schedule 6.5 Investments
Schedule 6.6(c) Permitted Junior Debt to be paid in common stock
Schedule 6.7 Transactions with Affiliates
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