EXHIBIT 10.35
LOAN AND SECURITY AGREEMENT
among
US DIAGNOSTIC INC.
Borrower,
and
DVI BUSINESS CREDIT CORPORATION
Lender
Dated as of February 25, 1997
TABLE OF CONTENTS
PAGE
Section 1 DEFINITIONS........................................1
Section 1.1. Specific Definitions.................................1
Section 1.2. Generally Accepted Accounting Principles
and Uniform Commercial Code..........................6
Section 1.3. Construction.........................................6
Section 2 LOAN......................................................6
Section 2.1. The Loan.............................................6
Section 2.2. Note.................................................6
Section 2.3. Borrowing Base.......................................7
Section 2.4. Notice of Borrowing..................................7
Section 2.5. Use of Proceeds......................................7
Section 2.6. Repayment of Loan....................................7
Section 2.7. Term of Agreement....................................8
Section 2.8. Lender's Fees........................................8
Section 2.9. Interest on the Loans................................8
Section 2.10. Late Payments.......................................8
Section 2.11. Conditions to the Closing...........................9
Section 3 SECURITY INTEREST........................................11
Section 3.1. Grant of Security Interest..........................11
Section 4 SPECIFIC REPRESENTATIONS.................................11
Section 4.1. Name of Guarantors; Borrower........................11
Section 4.2. Mergers and Consolidations..........................12
Section 4.3. Purchase of Assets..................................12
Section 4.4. Change of Name or Identity..........................12
Section 4.5. Corporate Structure.................................12
Section 5 PROVISIONS CONCERNING ACCOUNTS...........................12
Section 5.1. Office and Records of Borrower......................12
Section 5.2. Representations.....................................12
Section 5.3. Returns and Repossessions...........................13
Section 5.4. Borrowing Base Reports..............................13
Section 5.5. Compliance Certificate..............................13
Section 5.6. Lender's Rights.....................................13
Section 5.7. Disclaimer of Liability.............................13
Section 5.8. Post Default Rights.................................13
Section 5.9. Accounts Owed by Federal Government.................14
Section 5.10. Business Activity Reports..........................14
Section 5.11. Post Closing Checklist.............................14
i
Section 6 PROVISIONS CONCERNING GENERAL INTANGIBLES................14
Section 6.1. Contracts...........................................14
Section 7 PROVISIONS CONCERNING COLLATERAL.........................15
Section 7.1. Further Assurances..................................15
Section 7.2. Lender's Duty of Care...............................15
Section 7.3. Reinstatement of Liens..............................15
Section 7.4. Lender Expenses.....................................16
Section 7.5. Inspection of Records...............................16
Section 7.6. Waivers.............................................16
Section 8 REPRESENTATIONS AND WARRANTIES...........................17
Section 8.1. Corporate Status....................................17
Section 8.2. Authorization.......................................17
Section 8.3. No Breach...........................................17
Section 8.4. Taxes...............................................17
Section 8.5. Deferred Compensation Plans.........................17
Section 8.6. Litigation and Proceedings..........................18
Section 8.7. Business............................................18
Section 8.8. Laws and Agreements.................................18
Section 8.9. Ownership of Accounts...............................18
Section 8.10. Security Interest..................................18
Section 8.11. No Defaults........................................18
Section 8.12. Origination........................................18
Section 8.13. Legality...........................................18
Section 8.14. Consents...........................................18
Section 8.15. Financial Condition................................19
Section 8.16. Health Care Laws...................................19
Section 8.17. Guarantor Solvency.................................19
Section 8.18. Cumulative Representations.........................19
Section 8.19. Full Disclosure....................................20
Section 9 COVENANTS................................................20
Section 9.1. Encumbrance of Collateral...........................20
Section 9.2. Business............................................20
Section 9.3. Condition and Repair................................20
Section 9.4. Taxes...............................................20
Section 9.5. Accounting System...................................20
Section 9.6. Quarterly Financial Statements......................21
Section 9.7. Annual Financial Statements.........................21
Section 9.8. Further Information.................................21
Section 9.9. ERISA Covenants.....................................21
Section 9.10. Restrictions on Merger, Consolidation,
Sale of Assets, Issuance of Stock, etc.............21
Section 9.11. Health Care Covenants..............................22
ii
Section 9.12. Distributions......................................22
Section 10 EVENTS OF DEFAULT........................................22
Section 11 REMEDIES.................................................24
Section 11.1. Specific Remedies..................................24
Section 11.2. Power of Attorney..................................25
Section 11.3. Expenses Secured...................................25
Section 11.4. Equitable Relief...................................25
Section 11.5. Remedies Are Cumulative............................25
Section 12 INDEMNITY................................................26
Section 12.1. General Indemnity.................................26
Section 13 MISCELLANEOUS............................................26
Section 13.1. Delay and Waiver...................................27
Section 13.2. Complete Agreement.................................27
Section 13.3. Severability; Headings.............................27
Section 13.4. Binding Effect.....................................27
Section 13.5. Notices............................................27
Section 13.6. Governing Law......................................28
Section 13.7. Waiver of Trial by Jury............................28
Section 13.8. Submission to Jurisdiction.........................28
SCHEDULES
1.1 Permitted Liens
4.1 Guarantors
4.2 Mergers and Consolidations
4.3 Purchase of Assets
4.5 Stock Ownership
5.1 Guarantor Offices
5.11 Post Closing Checklist
6.1 Contracts
8.6 Litigation and Proceedings
9.13 Permitted Distributions
EXHIBITS
1.1 Net Collectible Percentage
2.2 Promissory Note
5.5 Compliance Certification
iii
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "AGREEMENT") is entered into as
of February 25, 1997 by and between DVI Business Credit Corporation, a Delaware
corporation ("LENDER"), and US Diagnostic Inc., a Delaware corporation
("BORROWER").
In consideration of the mutual covenants and agreements set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and affirmed, the parties agree as
follows:
SECTION 1
DEFINITIONS
SECTION 1.1 SPECIFIC DEFINITIONS. The following definitions apply:
"ACCOUNT DEBTORS" mean Borrower's and each Guarantor's customers, the
insurance companies or other payors responsible for their customers' obligations
and all other persons who are obligated or indebted to Borrower or a Guarantor
in any manner, whether directly or indirectly, primarily or secondarily,
contingently or otherwise, with respect to Accounts.
"ACCOUNTS" mean all accounts, contract rights, instruments, documents,
general intangibles, chattel paper and obligations in any form owing to Borrower
or a Guarantor arising out of the sale or lease of goods or the rendition of
services by Borrower or a Guarantor whether or not earned by performance,
including any management fees paid to Borrower by a Subsidiary; all credit
insurance, guaranties, letters of credit, advises of credit and other security
for any of the above; all merchandise returned to or reclaimed by Borrower or a
Guarantor; and Borrower's Books relating to any of the foregoing.
"ADVANCE" means an advance of loan proceeds constituting all or a part
of the Loan.
"AFFILIATE" means with respect to any Person any other Person which
directly or indirectly Controls, is Controlled by or is under common Control
with that Person.
"BASE RATE" means the rate of interest announced publicly by Bank of
America, NT&SA in San Francisco, California, from time to time as its base rate.
"BORROWER'S BOOKS" means all of Borrower's and each Guarantor's books
and records including but not limited to: minute books; ledgers; records
indicating, summarizing or
1
evidencing Borrower's and each Guarantor's assets, liabilities and the Accounts;
all information relating to Borrower's and each Guarantor's business operations
or financial condition; and all computer programs, disk or tape files,
printouts, runs and other computer-prepared information and the equipment
containing such information; provided, however, that confidential patient
records are not included therein, except to the extent otherwise permitted by
law.
"BORROWING BASE" means, on the date of determination thereof, an amount
equal to eighty percent (80%) of the Net Collectible Value for each type of
Eligible Account; provided, however, that workers compensation liens and
personal injury claims may never exceed twenty percent (20%) of the Borrowing
Base.
"BUSINESS DAY" means any day which is not a Saturday or Sunday, a legal
holiday or a banking holiday in the State of California.
"CLOSING DATE" means the date of the first Advance of the Loan.
"COLLATERAL" has the meaning specified in Section 3.1 hereof.
"COMMITMENT AMOUNT" means Twenty-Five Million Dollars ($25,000,000).
"CONTROL" means (i) the ownership of a majority of the voting power of
all classes of voting stock of a corporation, or (ii) the ownership of a
majority of the beneficial interest in income and capital of a person other than
a corporation.
"DISTRIBUTION" means, with respect to any shares of capital stock or
any warrant or right to acquire shares of capital stock or any other equity
security, (i) the retirement, redemption, purchase or other acquisition,
directly or indirectly, for value by the issuer of any such security, except to
the extent that the consideration therefor consists of shares of stock, (ii) the
declaration or (without duplication) payment of any dividend in cash, directly
or indirectly, on or with respect to any such security, (iii) any investment in
the holder of five percent (5%) or more of any such security if a purpose of
such investment is to avoid characterization of the transaction as a
Distribution, and (iv) any other cash payment constituting a distribution under
applicable laws with respect to such security.
"ELIGIBLE ACCOUNTS" means each Guarantor's accounts receivable from
commercial insurance, Medicare, Medicaid, managed care providers, workers'
compensation approved liens and claims and personal injury claims, or from
radiologists and other medical practices which collect receivables from such
payors with respect to services provided by the Guarantor, which have been due
and payable for one hundred eighty (180) or fewer days.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all references to sections thereof include such sections and any
predecessor provisions thereto, including any rules or regulations issued in
connection therewith.
"ERISA AFFILIATE" means each trade or business (whether or not
incorporated)
2
that together with Borrower would be deemed a "contributing sponsor" to a single
employee plan within the meaning of Section 4001 of ERISA.
"EVENT OF DEFAULT" has the meaning specified in Section 10 hereof.
"GAAP" means generally accepted accounting principles set forth in the
opinions of the Accounting Principles Board of the American Institute of
Certified Public Accountants or in statements of the Financial Accounting
Standards Board, consistently applied.
"GOVERNMENTAL AUTHORITY" means any governmental or political
subdivision or any agency, authority, bureau, central bank, commission,
department or instrumentality thereof, or any court, tribunal, grand jury or
arbitrator, in any case whether foreign or domestic.
"GUARANTY" means each Unconditional Continuing Guaranty executed by
Guarantors unconditionally guaranteeing Borrower's Obligations under this
Agreement.
"GUARANTOR" means each of Borrower's material Subsidiaries all of which
are listed on SCHEDULE 4.1.
"HEALTH CARE LAWS" mean all federal, state and local laws relating to
health care providers and health care services, including, Section 1877(a) of
the Social Security Act as amended by the Omnibus Budget Reconciliation Act of
1993, 42 USC /section/ 1395nn.
"INDEBTEDNESS" of a Person means (i) all items (except items of capital
stock, capital or paid-in surplus or of retained earnings) which, in accordance
with GAAP, would be included in determining total liabilities as shown on the
liability side of the balance sheet of such Person as at the date as of which
Indebtedness is to be determined, including any lease which, in accordance with
GAAP, would constitute indebtedness; (ii) all indebtedness secured by any
mortgage, pledge, security, lien or conditional sale or other title retention
agreement to which any property or asset owned or held by such Person is
subject, whether or not the indebtedness secured thereby has been assumed; and
(iii) all indebtedness of others which such Person has directly or indirectly
guaranteed, endorsed (otherwise than for the collection or deposit in the
ordinary course of business), discounted or sold with recourse or agreed
(contingently or otherwise) to purchase or repurchase or otherwise acquire, or
in respect of which such Person has agreed to supply or advance funds (whether
by way of loan, stock or equity purchase, capital contribution or otherwise) or
otherwise to become directly or indirectly liable.
"LENDER EXPENSES" means (i) all costs or expenses (including taxes and
insurance premiums) required to be paid by Borrower under this Agreement or
under any of the other Loan Documents that are paid or advanced by Lender; (ii)
filing, recording, publication and search fees paid or incurred by Lender in
connection with Lender's transactions with Borrower; (iii) costs and expenses
reasonably incurred by Lender to correct any Event of Default or enforce any
provision of the Loan Documents or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, and preparing for sale or
advertising to sell the Collateral, whether or not a sale is consummated, after
the occurrence of an Event of Default; (iv) costs and expenses of
3
suit reasonably incurred by Lender in enforcing or defending the Loan Documents
or any portion thereof; (v) all costs or expenses reasonably incurred by Lender
to convert any data submitted to Lender by Borrower to an acceptable form; and
(vi) Lender's reasonable attorney fees and expenses incurred (before or after
execution of this Agreement) in advising Lender with respect to, or in
structuring, drafting, reviewing, negotiating, amending, terminating, enforcing,
defending or otherwise concerning, the Loan Documents or any portion thereof,
irrespective of whether suit is brought.
"LIEN" means any security interest, mortgage, pledge, assignment, lien
or other encumbrance of any kind, including any interest of a vendor under a
conditional sale contract or consignment and any interest of a lessor under a
capital lease.
"LOAN" means each loan or any other loan or loans made by Lender to
Borrower pursuant to this Agreement.
"LOAN AVAILABILITY" means the lesser of (a) the Commitment Amount or
(b) the Borrowing Base minus the aggregate Advances and other monetary
Obligations outstanding under this Agreement. Loan Availability will be
calculated as of the end of each calendar month; provided however, that during
the first three full calendar months following the Closing Date, Loan
Availability equals the Commitment Amount.
"LOAN DOCUMENTS" mean (i) this Agreement; (ii) the Note; (iii) the
Security Documents; (iv) the Lock Box Agreements; and (v) any other Exhibits,
Schedules, certificates, documents or instruments delivered by Borrower to
Lender pursuant to the terms of this Agreement.
"LOCK BOX AGREEMENTS" means those certain four Lock Box Agreements
between Borrower, and the lock box servicers chosen by Lender and Borrower and
the letter of instructions with respect thereto.
"MERGER AGREEMENT" means the Agreement and Plan of Merger dated as of
January 20, 1997 among Borrower, MDI Acquisition Corporation, Medical
Diagnostics, Inc. and Advanced NMR Systems, Inc.
"NET COLLECTIBLE PERCENTAGE" means the percentage described on EXHIBIT
1.1 attached hereto for each type of Eligible Account. The Net Collectible
Percentage may change from time to time in Lender's sole and absolute
discretion, written notification of which must be given to Borrower by Lender.
"NET COLLECTIBLE VALUE" means, for each type of Eligible Account, the
Net Collectible Percentage times the aggregate current outstanding amount for
such type of Eligible Account.
"NOTE" means the Secured Promissory Note executed by Borrower pursuant
to Section 2.2.
4
"OBLIGATIONS" mean all obligations (monetary or otherwise) of Borrower
to Lender under or in connection with this Agreement, the Note and the other
Loan Documents.
"PERMITTED LIENS" mean (i) Liens for property taxes and assessments or
governmental charges or levies and Liens securing claims or demands of mechanics
and materialmen, provided that payment thereof is not yet due or is being
contested as permitted in this Agreement; (ii) Liens and priority claims
incidental to the conduct of business or the ownership of properties and assets
(including warehouse's and attorney's Liens and statutory landlord's Liens);
deposits, pledges or Liens to secure the performance of bids, tenders, or trade
contracts, or to secure statutory obligations; and surety or appeal bonds or
other Liens of like general nature incurred in the ordinary course of business
and not in connection with the borrowing of money; provided that in each case
the obligation secured is not overdue or, if overdue, is being contested in good
faith by appropriate actions or proceedings; and further provided that any such
warehouse's or statutory landlord's Liens have been subordinated to the Liens of
Lender in a manner satisfactory to Lender; (iii) Liens granted to Lender or any
Affiliate of Lender; and (iv) Liens existing on the date of this Agreement that
secure indebtedness outstanding on such date and that are disclosed on SCHEDULE
1.1 hereto.
"PERSON" means an individual, corporation, partnership, limited
liability company, trust, unincorporated association, joint venture, joint-stock
company, government (including political subdivisions), Governmental Authority
or any other entity.
"PROCEEDS" mean all proceeds and products of Collateral and all
additions and accessions to, replacements of, insurance or condemnation proceeds
of, and documents covering Collateral; all property received wholly or partly in
trade or exchange for Collateral; all claims against third parties arising out
of damage, destruction, or decrease in value of the Collateral; all leases of
Collateral; and all rents, revenues, issues, profits and proceeds arising from
the sale, lease, license, encumbrance, collection or any other temporary or
permanent disposition of the Collateral or any interest therein.
"SECURITY AGREEMENT" means each Security Agreement dated on or about
the date hereof between Lender and Guarantors.
"SECURITY DOCUMENTS" means the Guaranties, the Security Agreements and
any agreement or instrument entered into between Borrower or Guarantors and
Lender or executed by Borrower or Guarantors and delivered to Lender in
connection with this Agreement to secure repayment of the Loan.
"SUBSIDIARY" means any Affiliate of Borrower which is at the time,
directly or indirectly, owned or Controlled by Borrower or one or more
Subsidiaries.
"TERMINATION DATE" means the last day of any term as to which a written
notice of non-renewal pursuant to Section 2.7 has been received.
5
"UNMATURED DEFAULT" means any event or condition that, with notice,
passage of time, or a determination by Lender or any combination of the
foregoing would constitute an Event of Default.
SECTION 1.2. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND UNIFORM
COMMERCIAL CODE. All financial terms used in this Agreement other than those
defined in Section 1, have the meanings accorded to them under GAAP. All other
terms used in this Agreement, other than those defined in this Section 1, have
the meanings accorded to them in the Uniform Commercial Code as is enacted in
any applicable jurisdiction.
SECTION 1.3. CONSTRUCTION
(a) Unless the context of this Agreement clearly requires otherwise,
the plural includes the singular, the singular includes the plural, the part
includes the whole, "including" is not limiting, and "or" has the inclusive
meaning of the phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder," and other similar terms in this Agreement refer to this Agreement
as a whole and not exclusively to any particular provision of this Agreement.
(b) Neither this Agreement nor any uncertainty or ambiguity herein may
be construed or resolved against any party hereto, whether under any rule of
construction or otherwise. On the contrary, this Agreement has been reviewed by
each of the parties and their respective counsel and is entitled to be construed
and interpreted according to the ordinary meaning of the words used so as to
accomplish the purposes and intentions of all parties hereto fairly.
SECTION 2
LOAN
SECTION 2.1 LOAN. Subject to the terms and conditions and relying on
the representations and warranties set forth herein, Lender shall advance to
Borrower from time to time, and Borrower shall borrow from Lender, a revolving
loan in an amount not to exceed Loan Availability. Within the limits of the Loan
Availability, Borrower may borrow, make repayments pursuant to Section 2.6 and
reborrow. If, at any time, the aggregate Advances and other Obligations
outstanding exceed the then Loan Availability, then Borrower shall pay to Lender
a sum sufficient to reduce the Advances and other Obligations outstanding to an
amount not greater than the Loan Availability. Lender's commitment to make
Advances expires and the amount of the Loan then outstanding matures and must be
repaid by Borrower, without further action on the part of Lender, on the
Termination Date.
SECTION 2.2 NOTE. All Advances made by Lender under this Agreement are
6
evidenced by, and must be repaid with interest in accordance with a single
promissory note of Borrower in substantially the form of EXHIBIT 2.2 duly
completed, in the original principal amount equal to the Commitment Amount,
dated the Closing Date, payable to the Lender and maturing as to principal on
the Termination Date (the "NOTE"). The daily remittance to Borrower of deposits
and receipts received in the lock boxes pursuant to Section 2.6 are not Advances
made by Lender. The amount of each Advance and payment of principal amount
received by the Lender will be recorded in the books and records of the Lender,
which books and records, in the absence of manifest error, are conclusive as to
the outstanding balance of and other information related to the Loan. Lender is
entitled at any time to endorse on a schedule attached to the Note the amount
and type of each Advance and information relating thereto.
SECTION 2.3 BORROWING BASE. On a monthly basis, the Borrowing Base will
be recalculated by adding monthly ▇▇▇▇▇▇▇▇ to the prior month's Eligible
Accounts and subtracting deposits and adjustments, if applicable and then
multiplying this amount by the Net Collectable Percentage. The Borrowing Base
will be calculated on a monthly basis on the reports delivered to Lender
pursuant to Section 5.4. Loan Availability will be recalculated on the basis of
each month's Borrowing Base.
SECTION 2.4 NOTICE OF BORROWING. Whenever Borrower desires to borrow
under Section 2.1, Borrower shall deliver to Lender a Drawdown Request Form, in
a form reasonably satisfactory to Lender, signed by an authorized officer no
later than 2:00 p.m. Pacific Standard Time at least one (1) business day in
advance of the proposed funding date. The Drawdown Request Form must specify (i)
the funding date (which shall be a business day) with respect to the requested
Loan and (ii) the amount of the proposed Advance.
SECTION 2.5 USE OF PROCEEDS. The proceeds of the Loan must be used by
Borrower for the acquisition by Borrower of substantially all of the assets of
Medical Diagnostics, Inc. pursuant to the Merger Agreement, to fund the closing
costs incurred in connection with the transactions contemplated in this
Agreement and to fund Borrower's and each Guarantor's working capital
requirements from time to time.
SECTION 2.6. REPAYMENT OF LOAN
(a) Upon the execution hereof, Borrower shall become a party to the
Lock Box Agreements which provide for the receipt and processing of Account
payments. Within ten (10) days after the Closing Date, Borrower and each
Guarantor shall irrevocably direct: (i) all non-government payors to remit
payment to the servicer's post office box in Lender's name and control; and (ii)
all government payors to remit payment to a second post office box of such
servicer in Borrower's name. At the end of such ten (10) day period Borrower
shall certify to Lender that the required re-direct letters (in a form
satisfactory to Lender) have been sent to all Account Debtors. Prior to the
Closing Date, Borrower shall modify its billing system to direct all Account
Debtors billed on or after the Closing Date to make all payments to a lock box
account. Prior to the initial Advance, Borrower shall certify to Lender that the
required change in its billing system has been made. The Lock Box Agreements
provide for the servicer to deposit daily all receipts of the post office boxes
into deposit accounts, with non-government
7
payor receipts paid into an account subject to Lender's control and, government
payor receipts paid into an account in Borrower's name; such accounts must be
(i) at a financial institution acceptable to Lender, and (ii) governed by terms
and conditions acceptable to Lender. All government payor receipts will be
immediately transferred to an account in the name and control of Lender. Any
receipts from Accounts received by Borrower or a Guarantor must be deposited in
the lock box account promptly upon receipt.
(b) Lender will debit the lock box account at the end of each day in
payment of (i) all Lender and other fees, reimbursements, principal payments and
other amounts then due and payable; and (ii) on the first day of each month with
respect to interest accrued on the Loan during the preceding month. Lender shall
apply excess receipts remaining in the lock box account after the payment of
fees, interest, reimbursements and other amounts to the principal amount of the
Loan on a daily basis. Deposits and receipts to the lock box account will reduce
the Borrowing Base on a monthly basis in accordance with Section 2.3 above.
(c) Borrower shall pay all charges for establishing and maintaining the
post office box accounts and all bank charges for such deposit accounts. Lender
shall deduct from the deposit accounts all sums Borrower owes to it hereunder,
including fees, interest, reimbursements and principal payments. Borrower shall
satisfy any Obligations not paid by such deduction by direct payment to Lender
at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
SECTION 2.7. TERM OF AGREEMENT.The Term of this Agreement is one (1)
year from the Closing Date. This Agreement will be renewed for consecutive one
(1) year terms unless this Agreement is terminated, effective as of the last day
of a term, by written notice by Lender or Borrower no later than thirty (30)
days before the expiration of such term. All of Lender's obligations,
responsibilities and duties shall cease upon the date of termination of this
Agreement, except for its obligation to remit excess receipts from the lock box
deposit accounts in accordance with the terms of this Agreement.
SECTION 2.8. LENDER'S FEE. Upon execution hereof, Borrower shall pay
Lender an origination fee equal to one percent (1.0%) of the Commitment Amount
less $50,000 currently on deposit with Lender. Increases to the Commitment
Amount during the term will be charged on the incremental increase at the same
origination percentage. On or before the first day of each month, Borrower shall
pay Lender an unutilized loan fee of equal to one-quarter of one percent (0.25%)
of the difference between the Commitment Amount and the average outstanding Loan
amount for the immediately previous month. Lender's fees will be deducted, when
due, directly from receipts from accounts receivable deposited in accordance
with Section 2.6.
SECTION 2.9. INTEREST ON THE LOANS. All Advances shall bear interest on
the unpaid principal amount thereof from the date made until paid in full at a
fluctuating rate equal to the Base Rate plus two percent (2.0%). The outstanding
principal balance of all other Obligations shall bear interest from the date
such Obligations are due until paid in full at a fluctuating rate equal to the
Base Rate plus two percent (2.0%). Interest accrued but not paid
8
pursuant to Section 2.5 shall be treated as an Advance if not otherwise paid
within five (5) days of the end of the month in which it accrues.
SECTION 2.10. LATE PAYMENTS. If Borrower fails to make any payment of
interest or principal, including the payment due upon maturity, when the same is
due and payable and such failure continues for five (5) days after nonpayment, a
late charge by way of damages to the extent provided in this Section 2.10 is
immediately due and payable. Borrower recognizes that default by Borrower in
making the payments herein agreed to be paid when due will result in the Lender
incurring additional expenses, in loss to the Lender of the use of the money due
and in frustration to the Lender in meeting its other commitments. Lender is
entitled to damages for the detriment caused thereby, but it is extremely
difficult and impractical to ascertain the extent of such damages. Borrower
shall pay on demand a sum equal to five cents ($.05) for each one dollar ($1.00)
of each payment which is not received within five (5) days after the date it is
due and payable is a reasonable estimate of the damages to the Lender. If any
part of the principal or interest is not paid when due, it thereafter bears
interest at the rate of eighteen percent (18%) per annum from and as of the date
of delinquency until paid; provided, however that the total amount payable
pursuant to this sentence and the immediately preceding sentence may not exceed
the greater of the two amounts due in accordance with the separate applications
of each sentence. If the specified interest rate at any time exceeds the maximum
rate allowed by law, then the applicable interest rate is reduced to the maximum
rate allowed by law.
SECTION 2.11 CONDITION TO THE CLOSING. The obligation of Lender to make
an Advance on the Closing Date is subject to Lender's determination that
Borrower has satisfied the following conditions on the Closing Date:
(a) The representations and warranties set forth in this Agreement are
true and correct on and as of the date hereof and are true and correct in all
material respects as of the Closing Date and Borrower has performed all
obligations required to have been performed by it hereunder prior to Closing
Date.
(b) Borrower has executed and delivered to Lender (or caused to be
executed and delivered to Lender by the appropriate Persons) the following:
(i) this Agreement;
(ii) the Note;
(iii) UCC-1 Financing Statements;
(iv) the Guaranties;
(v) the Security Agreements;
(vi) the Lock Box Agreements;
9
(vii) a certification from an authorized officer that
Borrower has modified its billing system in accordance with Section 2.6;
(viii) evidence satisfactory to Lender that Borrower and each
Guarantor is a corporation or partnership duly formed, validly existing and in
good standing in the state in which it was formed and in each state in which it
is authorized to do business;
(ix) pay-off letters, UCC Termination Statements, and Lien
Releases as required to grant Lender a first priority security interest other
than Permitted Liens in Collateral pledged as security for repayment of the
Loan;
(x) signature and incumbency certificate of Borrower and
each Guarantor or the corporate general partner of a Guarantor which is a
partnership;
(xi) certified copies of resolutions of the Board of
Directors of Borrower, each corporate Guarantor and each corporate general
partner of a Guarantor which is a partnership, authorizing the execution and
delivery of the Loan Documents to be executed by Borrower and each Guarantor;
(xii) copies of the Articles of Incorporation of Borrower,
each corporate Guarantor and each corporate general partner of a Guarantor which
is a partnership, certified by the Secretary of State of each such Person's
jurisdiction of incorporation;
(xiii) copies of the certificate of limited partnership of
each Guarantor which is a partnership, certified by the Secretary of State
of each such Guarantor's jurisdiction of formation;
(xiv) copies of the Bylaws of Borrower, each corporate
Guarantor or the corporate general partner of a Guarantor which is a
partnership, certified by an officer thereof;
(xv) copies of the partnership agreement of each Guarantor
which is a partnership, certified by an officer of the corporate general partner
of such Guarantor;
(xvi) certified copies of the Merger Agreement and all
documents executed and delivered in connection with the transactions
contemplated thereby;
(xvii) the written opinion of counsel to Borrower with respect
to Borrower and each Guarantor issued on the Closing Date and satisfactory to
Lender in scope and substance; and
(xviii) a certificate from an officer of Borrower indicating
that the representations and warranties contained herein are true and correct as
of the Closing Date.
(c) Borrower has paid closing fees to Lender including Lender's legal
fees incurred by Lender for the negotiation and preparation of the Loan
Documents.
10
(d) Neither an Event of Default nor an Unmatured Default has occurred
and is continuing.
(e) Neither Borrower nor any Guarantor has suffered a material or
adverse change in its business, operations or financial condition from that
reflected in the financial statements of Borrower delivered to Lender or
otherwise.
(f) Lender has received such additional supporting documents,
certificates and assurances as Lender reasonably requests which are satisfactory
to Lender in form and substance.
SECTION 3
SECURITY INTEREST
SECTION 3.1. GRANT OF SECURITY INTEREST. In order to secure prompt
payment and performance of the Obligations, Borrower hereby grants to Lender a
continuing first-priority pledge and security interest in all of Borrower's and
Guarantor's Accounts, together with such third-party consents, lien waivers and
estoppel certificates as Lender reasonably requires (the "COLLATERAL"), whether
now owned or existing or hereafter acquired or arising and regardless of where
located, subject only to Permitted Liens. This security interest in the
Collateral attaches to all Collateral without further action on the part of
Lender or Borrower.
SECTION 4
SPECIFIC REPRESENTATIONS
SECTION 4.1. NAME OF GUARANTORS; BORROWER
(a) The exact corporate name of Borrower is US Diagnostic Inc. Borrower
was incorporated under the laws of the State of Delaware. The following are all
previous legal names of Borrower: U.S. Diagnostic Labs Inc. Borrower uses the
following trade names: None. The following are all other trade names used by
Borrower in the past: None. The exact corporate name of each Guarantor is set
forth on the attached SCHEDULE 4.1. Each material Subsidiary of Borrower is
listed on SCHEDULE 4.1 and has executed a Guaranty and a Security Agreement.
(b) SCHEDULE 4.1 may be revised from time to time by Borrower and
Lender.
11
If Borrower fails to remedy any item listed on SCHEDULE 5.11, Lender may
revise SCHEDULE 4.1 by deleting the Subsidiary with respect to which the
deficiency remains uncorrected from the list of Guarantors. The Accounts of such
Guarantor will no longer be considered Eligible Accounts and Lender shall
release such Subsidiary from its obligations under the Security Documents. If
Borrower desires to addd any Subsidiary to SCHEDULE 4.1, such Subsidiary may be
added to SCHEDULE 4.1 and the Accounts of such Subsidiary may be considered
Eligible Accounts upon the satisfaction of the following conditions:
(i) The representations and warranties set forth in this
Agreement, to the extent applicable, are true and correct in all material
respects with respect to the Subsidiary;
(ii) The Subsidiary delivers to Lender executed copies of
the documents listed in Section 2.11(b), to the extent applicable; and
(iii) Lender has (x) completed a review of the Subsidiary and
its Accounts, similar in scope to the review of Borrower and the Guarantors
completed prior to the Closing Date, satisfactory to Lender in its sole
discretion and (y) received such additional supporting documents, certificates
and assurances as Lender reasonably requests, which are satisfactory to Lender
in form and substance.
SECTION 4.2. MERGERS AND CONSOLIDATIONS. Except as disclosed on
SCHEDULE 4.2, no entity has merged into Borrower or any Subsidiary or been
consolidated with Borrower or any Subsidiary.
SECTION 4.3 PURCHASE OF ASSETS. Except as disclosed on SCHEDULE 4.3, no
entity has sold substantially all of its assets to Borrower or any Subsidiary or
sold assets to Borrower or any Subsidiary outside the ordinary course of such
seller's business at any time in the past.
SECTION 4.4 CHANGE OF NAME OR IDENTITY. Borrower shall not change its
or any Subsidiary's name, business structure, or identity or use or permit any
Subsidiary to use any new trade name without prior notification of Lender.
SECTION 4.5 CORPORATE STRUCTURE. Except as set forth on SCHEDULE 4.5,
Borrower, directly or indirectly, owns one hundred percent (100%) of each class
of the capital stock of each Guarantor.
SECTION 5
PROVISIONS CONCERNING ACCOUNTS
SECTION 5.1 OFFICE AND RECORDS OF BORROWER. Borrower's and each
Guarantor's
12
chief executive offices are located at: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ or as otherwise indicated on the attached SCHEDULE 5.1.
Borrower and each Guarantor maintains all of their records with respect to
Accounts at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ or as
otherwise indicated on the attached SCHEDULE 5.1. Borrower and each Guarantor
has not at any time within the past four (4) months maintained their chief
executive office or their records with respect to Accounts at any other location
and shall not do so hereafter except with the prior written consent of Lender.
SECTION 5.2 REPRESENTATIVES. Borrower represents and warrants that each
Account at the time of its assignment to Lender (a) will be owned solely by
Borrower or a Guarantor, (b) will be for a liquidated amount maturing as stated
in Borrower's Books; (c) will be a bona fide existing obligation created by the
rendition of services to Account Debtors or their insured by Borrower or a
Guarantor in the ordinary course of its business; and (d) will not be subject to
any known deduction, offset, counterclaim, return privilege, or other condition,
except as reflected on Borrower's Books. Borrower shall not nor will it permit
any Guarantor to redate any invoices nor reissue new invoices in full or partial
satisfaction of old invoices. Allowances, if any, as between Borrower or a
Guarantor and its customers will be on the same basis and in accordance with the
usual customary practices of Borrower as they exist on the date of this
Agreement.
SECTION 5.3. RETURNS AND REPOSSESSIONS. Borrower shall notify Lender
within five (5) business days of occurrence of all material claims asserted by
Account Debtors.
SECTION 5.4. BORROWING BASE REPORTS. No later than the 15th day of each
month, Borrower shall execute and deliver to Lender, in a form satisfactory to
Lender, (i) a monthly Borrowing Base report; (ii) a detailed Accounts aging
report as of the last day of the preceding month and a summary by payor class
aging of Accounts; (iii) a charges, collections and adjustment summary for the
preceding month; and (iv) a payor concentration schedule. Borrower shall upon
the request of Lender execute and deliver to Lender an updated Borrowing Base
report reflecting additional ▇▇▇▇▇▇▇▇, writeoffs and deposits and all of
Borrower's accounts receivable data in a computer disc or tape format acceptable
to Lender. Lender shall periodically review Borrower's actual adjustments to
cash receipts and writeoffs, as well as Borrower's payor profile. To the extent
Borrower's adjustments, writeoffs and payor profile materially changes, Lender
may, in its sole discretion, change the Net Collectible Percentage attributable
to each type of Account by 15 days written notice to Borrower of such change.
SECTION 5.5. COMPLIANCE CERTIFICATE. With each final month-end
Borrowing Base report which Borrower delivers to Lender, Borrower shall deliver
to Lender a Compliance Certificate in the form of EXHIBIT 5.5 attached hereto,
which Compliance Certificate is completed and signed by an officer of Borrower.
SECTION 5.6. LENDER'S RIGHTS. Any officer, employee or agent of Lender
has the right, at any time or times hereafter, in the name of Lender or its
nominee (including Borrower), with prior notice to Borrower, to verify the
validity, amount or any other matter relating to any Accounts by mail, telephone
or otherwise; and all reasonable costs thereof are payable by
13
Borrower to Lender. Lender, or its designee may at any time after the occurrence
and during the continuance of an Event of Default notify customers or Account
Debtors that Accounts have been assigned to Lender or of Lender's security
interest therein and collect the same directly and charge all reasonable
collection costs and expenses to Borrower's account.
SECTION 5.7. DISCLAIMER OF LIABILITY. Lender shall not be liable to
Borrower or any third person for the correctness, validity or genuineness of any
instruments or documents released or endorsed to Borrower by Lender (which shall
automatically be deemed to be without recourse to Lender in any event) or for
the existence, character, quantity, quality, condition, value or delivery of any
goods purporting to be represented by any such documents; and Lender, by
accepting a Lien on the Collateral or by releasing any Collateral to Borrower,
shall not be deemed to have assumed any obligation or liability to any supplier
or creditor of Borrower or to any other third party. Borrower agrees to
indemnify and defend Lender and hold it harmless in respect to any claim or
proceeding arising out of any matter referred to in this Section 5.7.
SECTION 5.8 POST DEFAULT RIGHTS. If an Event of Default has occurred
and is continuing hereunder, no discount, credit or allowance may be granted or
permitted by Borrower to any Account Debtor; provided, however, that,
notwithstanding the existence of an Event of Default, (i) each Guarantor may
continue to invoice and ▇▇▇▇ Account Debtors under discount, credit and
allowance arrangements that such Guarantor maintained in the ordinary course of
business prior to such Event of Default occurring, and (ii) Account Debtors may,
during the continuance of an Event of Default, utilize discount, credit and
allowance arrangements that a Guarantor extended to them in the ordinary course
of business. Lender may, if an Event of Default has occurred and is continuing,
settle or adjust disputes and claims directly with Account Debtors for amounts
and upon terms that Lender considers advisable, and in such cases, Lender will
credit Borrower's account with only the net amounts received by Lender in
payment of such disputed Accounts, after deducting all Lender Expenses incurred
in connection therewith.
SECTION 5.9. ACCOUNTS OWED BY FEDERAL GOVERNMENT. If any Accounts shall
arise out of a contract with the United States of America or any department,
agency, subdivision or instrumentality thereof, Borrower shall promptly notify
Lender thereof in writing and take all other action reasonably requested by
Lender to protect Lender's Lien on such Accounts under the provisions of the
federal laws on assignment of claims.
SECTION 5.10. BUSINESS ACTIVITY REPORTS. Borrower and its Affiliates
have filed and shall file all legally required notices and reports of its
business activities with all appropriate state taxing authorities and the
appropriate Governmental Authority of each other jurisdiction in which Borrower
or an Affiliate is legally required to file such a notice or report.
SECTION 5.11. POST CLOSING CHECKLIST. Lender has waived certain
deficiencies in the Accounts with respect to its usual closing requirements and
criteria. Lender has compiled a list of such deficiencies which is attached
hereto as SCHEDULE 5.11. Within ninety (90) days of the Closing Date, Borrower
shall correct the deficiencies to Lender's satisfaction. After the end of such
period, the Accounts of any Guarantor with respect to which a deficiency remains
14
uncorrected will no longer be considered Eligible Accounts and will be excluded
from the calculation of the Borrowing Base. If as a result of the reduction of
the Borrowing Base outstanding Advances and other monetary Obligations exceed
Loan Availability, Borrower shall immediately repay the Loan in an amount
sufficient to reduce outstanding amounts to Loan Availability.
SECTION 6
PROVISIONS CONCERNING GENERAL INTANGIBLES
SECTION 6.1. CONTRACTS
(a) SCHEDULE 6.1. is a true and complete list of all radiology
and partnership agreements to which Borrower or any Subsidiary is a party and
all contracts and agreements listed in a filing by Borrower with the Securities
and Exchange Commission.
(b) Neither Borrower nor any of its Subsidiaries may amend,
modify or supplement any contract or agreement included in the Collateral or
waive any provision thereof other than in accordance with Borrower's standard
business practice, nor may such standard business practice be materially changed
without Lender's consent, which shall not be unreasonably withheld.
(c) Borrower and its Subsidiaries shall remain liable to perform
all of its duties and obligations under any contracts and agreements included in
the Collateral to the same extent as if this Agreement had not been executed;
and Lender shall not have any obligation or liability under such contracts and
agreements by reason of this Agreement or otherwise.
(d) Borrower and its Subsidiaries need not pay any amount due
under any contract or agreement listed on Schedule 6.1, nor otherwise perform
any action required under the terms of any such contract or agreement, if such
payment or performance is being contested in good faith by appropriate
proceedings promptly initiated and diligently conducted, if Lender is notified
in advance of such contest, and if Borrower or a Subsidiary establishes any
reserve or other appropriate provision required by GAAP.
SECTION 7
PROVISIONS CONCERNING COLLATERAL
SECTION 7.1. FURTHER ASSURANCES. Borrower shall execute and
deliver to Lender, concurrent with Borrower's execution of this Agreement and at
any time or times hereafter at the
15
request of Lender, all financing statements, continuation financing statements,
security agreements, chattel mortgages, assignments, endorsements of
certificates of title, applications for titles, affidavits, reports, notices,
schedules of accounts, letters of authority and all other documents Lender may
reasonably request, in form satisfactory to Lender, to perfect and maintain
perfected Lender's Liens in the Collateral and in order to consummate fully all
of the transactions contemplated under the Loan Documents. Borrower hereby
irrevocably make, constitute, and appoint Lender (and any of Lender's officers,
employees or agents designated by Lender) as Borrower's true and lawful attorney
with power to sign the name of Borrower on any of the above-described documents
or on any other similar documents that need to be executed, recorded, or filed
in order to perfect or continue perfected Lender's Liens in the Collateral. The
appointment of Lender as Borrower's attorney is irrevocable as long as any
Obligations are outstanding. Any person dealing with Lender is entitled to rely
conclusively on any written or oral statement of Lender that this power of
attorney is in effect.
SECTION 7.2. LENDER'S DUTY OF CARE. Lender has no duty of care
with respect to the Collateral except that Lender shall exercise reasonable care
with respect to the Collateral in Lender's custody. Lender will be deemed to
have exercised reasonable care if such property is accorded treatment
substantially equal to that which Lender accords its own property or if Lender
takes such action with respect to the Collateral as the Borrower requests or
agrees to in writing, provided that no failure to comply with any such request
nor any omission to do any such act requested by the Borrower may be deemed a
failure to exercise reasonable care. Lender's failure to take steps to preserve
rights against any parties or property may not be deemed to be failure to
exercise reasonable care with respect to the Collateral in Lender's custody. All
risk, loss, damage or destruction of the Collateral is borne by Borrower.
SECTION 7.3. REINSTATEMENT OF LIENS. If, at any time after
payment in full by Borrower of all Obligations and termination of Lender's
Liens, any payments on Obligations previously made by Borrower or any other
Person must be disgorged by Lender for any reason whatsoever (including, the
insolvency, bankruptcy, or reorganization of Borrower or such other Person),
this Agreement and Lender's Liens granted hereunder are reinstated as to all
disgorged payments as though such payments had not been made, and Borrower shall
sign and deliver to Lender all documents and things necessary to perfect all
terminated Liens.
SECTION 7.4. LENDER EXPENSES. If Borrower fails to pay any moneys
(whether taxes, assessments, insurance premiums or otherwise) due to third
persons or entities, fails to make any deposits or furnish any required proof of
payment or deposit or fails to discharge any Lien not permitted hereby, all as
required under the terms of this Agreement, then Lender may, to the extent that
it determines that such failure by Borrower could have a material adverse effect
on Lender's interest in the Collateral, in its discretion and without prior
notice to Borrower, make payment of the same or any part thereof. Any amounts
paid or deposited by Lender constitute Advances, become part of the Obligations,
and are secured by the Collateral. Any payments made by Lender do not constitute
(a) an agreement by Lender to make similar payments in the future or (b) a
waiver by Lender of any Event of Default under this Agreement. Lender need not
inquire as to, or contest the validity of, any such expense, tax, security
interest, encumbrance or Lien, and the receipt of the usual official notice for
the payment of moneys to a governmental
16
entity is conclusive evidence that the same was validly due and owing.
Borrower shall immediately and without demand reimburse Lender
for all sums expended by Lender that constitute Lender Expenses, and Borrower
hereby authorizes and approves all advances and payments by Lender for items
constituting Lender Expenses.
SECTION 7.5. INSPECTION OF RECORDS. During usual business hours
and upon reasonable advance notice to Borrower, Lender may inspect and examine
the Collateral and check and test the same as to quality, quantity, value and
condition and Borrower shall reimburse Lender for its costs and expenses in so
doing. Lender also has the right at any time or times hereafter, during usual
business hours and upon reasonable advance notice to Borrower to inspect and
verify Borrower's Books in order to verify the amount or condition of, or any
other matter relating to, the Collateral and Borrower's financial condition and
to copy and make extracts therefrom. Borrower waives the right to assert a
confidential relationship, if any, it may have with any accounting firm or
service bureau in connection with any information requested by Lender pursuant
to this Agreement. Lender may directly contact any such accounting firm or
service bureau in order to obtain such information.
SECTION 7.6. WAIVERS. Except as specifically provided for herein,
Borrower waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, documents, instruments, chattel paper, and
guaranties at any time held by Lender on which Borrower may in any way be
liable.
SECTION 8
REPRESENTATIONS AND WARRANTIES
As of the date hereof Borrower hereby warrants and represents to
Lender the following:
SECTION 8.1. CORPORATE STATUS. Borrower, each corporate Guarantor
and each corporate general partner of a Guarantor which is a partnership is a
corporation and each Guarantor which is a partnership is a limited partnership
validly existing and in good standing under the laws of the state of its
incorporation or formation; and each of such entities is qualified and licensed
to do business and is in good standing in any state in which the conduct of its
business or its ownership of property requires that it be so qualified or
licensed, and has the power and authority (corporate and otherwise) to execute
and carry out the terms of the Loan Documents to which it is a party, to own its
assets and to carry on its business as currently conducted.
SECTION 8.2. AUTHORIZATION. The execution, delivery, and
performance by
17
Borrower and Guarantors of this Agreement and each Loan Document to which they
are a party have been duly authorized by all necessary corporate or partnership
action. Borrower and Guarantors have duly executed and delivered this Agreement
and each Loan Document to which they are a party, and each of them constitutes a
valid and binding obligation of Borrower and Guarantors.
SECTION 8.3. NO BREACH. The execution, delivery and performance
by Borrower and Guarantors of this Agreement and each Loan Document to which
they are a party (a) will not contravene any law or any governmental rule or
order binding on Collateral; (b) will not violate any provision of the articles
of incorporation, bylaws or partnership agreements of Borrower, Guarantors or
any Guarantors' general partners; (c) will not violate any agreement or
instrument by which Borrower or Guarantors or their assets, is bound; (d) do not
require any notice to consent by any Governmental Authority; and (e) will not
result in the creation of a Lien on any assets of Borrower except the Lien to
Lender granted herein.
SECTION 8.4. TAXES. All assessments and taxes, whether real,
personal or otherwise, due or payable by or imposed, levied or assessed against
Borrower, Guarantor's or their property have been paid in full before
delinquency or before the expiration of any extension period; and Borrower and
Guarantors have made due and timely payment or deposit of all federal, state,
and local taxes, assessments, or contributions required of it by law, except
only for items that Borrower are currently contesting diligently and in good
faith and that have been fully disclosed in writing to Lender.
SECTION 8.5. DEFERRED COMPENSATION PLANS. Borrower and each ERISA
Affiliate have made all required contributions to all deferred compensation
plans to which such person is required to contribute, and neither Borrower nor
any ERISA Affiliate has any liability for any unfunded benefits of any
single-employer or multi-employer plans. Neither Borrower nor any ERISA
Affiliate is or at any time has been a sponsor of, provided, or maintained for
any employees any defined benefit plan.
SECTION 8.6. LITIGATION AND PROCEEDINGS. Except as set forth on
SCHEDULE 8.6 attached hereto, there are no outstanding judgments against
Borrower, Guarantors or their assets and there are no actions or proceedings
pending by or against Borrower or Guarantors before any court or administrative
agency. Borrower has no knowledge of any pending, threatened, or imminent
litigation, governmental investigations, or claims, complaints, actions, or
prosecutions involving Borrower or Guarantors, except for ongoing collection
matters in which Borrower or a Guarantor is the plaintiff and except as set
forth in SCHEDULE 8.6 hereto.
SECTION 8.7. BUSINESS. Borrower and each Guarantor had all
franchises, authorizations, patents, trademarks, copyrights and other rights
necessary to advantageously conduct their business. They are all in full force
and effect and are not in known conflict with the rights of others. Neither
Borrower nor any Guarantor is a party to or subject to any agreement or
restriction that is so unusual or burdensome that it might have a material
adverse effect on Borrower's business, properties or prospects.
SECTION 8.8. LAWS AND AGREEMENTS. Borrower and each Guarantor is
in
18
compliance with all material contracts and agreements applicable to it,
including obligations to contribute to any employee benefit plan or pension plan
regulated by ERISA. Borrower and each Guarantor is in material compliance with
all laws applicable to it.
SECTION 8.9. OWNERSHIP OF ACCOUNTS. Prior to the Lender making
any Advance, Borrower or a Guarantor will be the sole owner of, and have good
and marketable title to the Accounts pledged as security for such Loan.
SECTION 8.10. SECURITY INTEREST. After giving effect to each Loan
contemplated by this Agreement, the Lender will be the holder of a valid
perfected first priority security interest in the pledged Accounts. Accounts
pledged to the Lender in connection with any Loan will be free and clear of all
liens other than Permitted Liens.
SECTION 8.11. NO DEFAULTS. As of the date on which an Eligible
Account is pledged to the Lender pursuant to the terms hereof there has been no
default under such Account.
SECTION 8.12. ORIGINATION. Each Account will have been originated
by Borrower or a Guarantor in the ordinary course of its business in accordance
with Borrower's or a Guarantor's regular credit approval process and does not
contravene any laws, rules or regulations applicable thereto.
SECTION 8.13. LEGALITY. No Eligible Account will have been
originated in, or be subject to the laws of, any jurisdiction whose laws would
make the terms hereof or any transaction contemplated hereby unlawful.
SECTION 8.14. CONSENTS. Except as set forth on SCHEDULE 8.14, no
consent or approval is required for the pledging of any Accounts to the Lender
pursuant to the terms of this Agreement, except for such consents or approvals
as have been obtained prior to the Closing Date.
SECTION 8.15. FINANCIAL CONDITION. All financial statements and
information relating to Borrower, Guarantors or their assets that have been or
may hereafter be delivered by Borrower to Lender are accurate and complete in
all material respects and have been prepared in accordance with GAAP. Borrower
and Guarantors have no material obligations or liabilities of any kind not
disclosed in that financial information, and there has been no material adverse
change in the financial condition of Borrower or Guarantors since the date of
the most recent financial statements submitted to Lender.
SECTION 8.16. HEALTH CARE LAWS.
(a) Borrower has obtained all permits, licenses and other
authorizations that are required under Health Care Laws applicable to Borrower
and is in compliance in all material respects with all terms and conditions of
the required permits, licenses and authorizations, and are also in compliance in
all material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in such
19
Health Care Laws.
(b) Borrower is not aware of, and has not received notice of, any
past, present or future events, conditions, circumstances, activities,
practices, incidents, actions or plans that may interfere with or prevent
compliance or continued compliance in any material respect with Health Care
Laws.
(c) There is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice or demand letter, notice of violation,
investigation or proceeding pending or threatened against Borrower, relating in
any way to Health Care Laws.
SECTION 8.17. GUARANTOR SOLVENCY.
(a) Immediately following the execution of this Agreement and the
Loan Documents, and the completion of the transactions contemplated thereby each
Guarantor will be solvent, able to pay its debts as they mature, will have
capital sufficient to carry on its business and all businesses in which it is
about to engage, and will have assets which will have a present fair salable
value greater than the amount of its Indebtedness.
(b) No Guarantor intends to incur debts beyond its ability to pay
them as they mature and the aggregate of each Guarantor's property at a fair
valuation is sufficient in amount to pay its debts.
(c) No Guarantor is contemplating filing a petition in bankruptcy
or for an arrangement or reorganization under the Bankruptcy Reform Act, Title
11 of the United States Code, as amended from time to time, or any successor
statute, nor is there any threatened bankruptcy or insolvency proceedings
against any Guarantor.
SECTION 8.18. CUMULATIVE REPRESENTATIONS. The warranties,
representations and agreements set forth herein are cumulative and in addition
to any and all other warranties, representations and agreements that Borrower
gives, or cause to be given, to Lender, either now or hereafter.
SECTION 8.19. FULL DISCLOSURE. No representation, warranty or
statement by Borrower or Guarantors contained in this Agreement, any Schedule or
any document, instrument or certificate furnished by or on behalf of any of them
pursuant to this Agreement contains any untrue, incorrect, incomplete or
misleading statement of material fact, or knowingly omits to state a material
fact necessary to make the statements contained therein not misleading.
SECTION 9
COVENANTS
20
SECTION 9.1. ENCUMBRANCE OF COLLATERAL. Borrower shall not
create, incur, assume or permit to exist any Lien on any Collateral now owned or
hereafter acquired by Borrower or its Subsidiaries, except for Liens to Lender
and Permitted Liens.
SECTION 9.2. BUSINESS. Borrower and Guarantors shall engage
primarily in business of the same general character as that now conducted by
Borrower and Guarantors.
SECTION 9.3. CONDITION AND REPAIR. Borrower and Guarantors shall
maintain in good repair and working order all material properties used in its
business and from time to time shall make all appropriate repairs and
replacements thereof.
SECTION 9.4. TAXES. Borrower and Guarantors shall pay all taxes,
assessments and other governmental charges imposed upon them or any of their
assets or in respect of any of their franchises, business, income or profits
before any penalty or interest accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials and supplies) for sums
that have become due and payable and that by law have or might become a Lien or
charge upon any of their assets, provided that (unless any material item or
property would be lost, forfeited or materially impaired as a result thereof) no
such charge or claim need be paid if it is being contested in good faith by
appropriate proceedings promptly initiated and diligently conducted, if Lender
is notified in advance of such contest, and if Borrower establishes any reserve
or other appropriate provision required by GAAP. Borrower and Guarantors shall
make timely payment or deposit of all FICA payments and withholding taxes
required of it by applicable laws and will, upon request, furnish Lender with
proof satisfactory to Lender indicating that Borrower or a Guarantor has made
such payments or deposits.
SECTION 9.5. ACCOUNTING SYSTEM. Borrower at all times hereafter
shall maintain a standard and modern system of accounting in accordance with
GAAP, with ledger and account cards or computer tapes, disks, printouts, and
records that contain information pertaining to the Collateral that may from time
to time be requested by Lender. Borrower shall not modify or change its method
of accounting or enter into any agreement hereafter with any third-party
accounting firm or service bureau for the preparation or storage of Borrower's
accounting records without the accounting firm's or service bureau's agreeing to
provide to Lender information regarding the Collateral and Borrower's financial
condition.
SECTION 9.6. QUARTERLY FINANCIAL STATEMENTS. Borrower shall
furnish Lender as soon as practicable but in no event later than forty-five (45)
days after the end of each of the first three quarterly fiscal periods of each
fiscal year with unaudited quarterly financial statements in form and substance
as reasonably required by Lender, including a balance sheet, an income statement
and a statement of cash flows, prepared in accordance with GAAP, together with a
certificate executed by the chief financial officer of Borrower stating that the
financial statements fairly present the financial condition of Borrower as of
the date and for the periods covered and that as of the date of such certificate
there has not been a violation of any provision of this Agreement and no Event
of Default or Unmatured Default has occurred and is continuing.
21
SECTION 9.7. ANNUAL FINANCIAL STATEMENTS. Borrower shall furnish
Lender as soon as practicable but in no event later than ninety (90) days after
the close of each fiscal year commencing with fiscal 1996 with audited annual
financial statements, which financial statements are prepared in accordance with
GAAP and certified without qualification by an independent certified public
accounting firm reasonably satisfactory to Lender. Borrower's current certified
public accounting firm, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, is satisfactory to Lender. With the
annual financial statements, Borrower shall deliver a certificate of its chief
financial officer attesting that there has not been a violation of any provision
of this Agreement and no Event of Default or Unmatured Default under the
Agreement has occurred and is continuing.
SECTION 9.8. FURTHER INFORMATION. Borrower shall furnish Lender
as soon as practicable with copies of all documents or reports filed by it with
the Securities and Exchange Commission. Borrower shall promptly supply Lender
with such other information concerning its affairs as Lender may reasonably
request from time to time hereafter and shall promptly notify Lender of any
material adverse change in Borrower's financial condition and any condition or
event that constitutes a breach of, or event that constitutes an Event of
Default under, this Agreement. In addition, Borrower authorizes Lender to
contact credit reporting agencies concerning Borrower's credit standing.
SECTION 9.9. ERISA COVENANTS. Borrower shall, and shall cause
each ERISA Affiliate to, comply with all applicable provisions of ERISA and all
other laws applicable to any deferred compensation plans with which Borrower or
any ERISA Affiliate is associated, and shall promptly notify Lender of the
occurrence of any event that could result in any material liability of Borrower
to any person to any person whatsoever with respect to any such plan.
SECTION 9.10. RESTRICTIONS ON MERGER, CONSOLIDATION, SALE OF
ASSETS, ISSUANCE OF STOCK, ETC. Unless authorized by Lender, neither Borrower
nor any of its Subsidiary may:
(a) merge or consolidate with any Person unless Borrower or its
Subsidiary is the surviving entity or the surviving entity becomes a Subsidiary
of Borrower;
(b) sell, lease or otherwise dispose of its assets in any
transaction or series of related transactions (other than sales in the ordinary
course of business);
(c) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction;
(d) become subject to any agreement or instrument which by its
terms would restrict Borrower's right or ability to perform any of its
obligations to Lender pursuant to the terms of the Loan Documents; or
(e) only with respect to each Guarantor, authorize or issue any
additional stock or equity interest.
SECTION 9.11. HEALTH CARE COVENANTS.
22
(a) Borrower and its Subsidiaries shall comply in all material
respects with, and will obtain all permits required by, all Health Care Laws
applicable to them.
(b) any governmental authority concerning any possible violation
of any Health Care Laws or any occurrence of which Borrower would be required to
notify any Governmental Authority with jurisdiction over Health Care Laws.
SECTION 9.12. DISTRIBUTIONS. Except as set forth on SCHEDULE 9.12
hereto, neither Borrower nor its Subsidiaries may make any Distributions, other
than a Distribution to Borrower or a Subsidiary without the prior written
consent of Lender, which consent may not be unreasonably withheld and which
consent will not be deemed to authorize any Distributions while an Event of
Default is continuing or if such Distribution would cause an Event of Default to
occur.
SECTION 10
EVENTS OF DEFAULT
An Event of Default is deemed to exist if any of the following
events have occurred and is continuing:
(a) Borrower fails to make any payment of principal or interest
or any other payment on the Note or any other Obligation when due and payable,
by acceleration or otherwise, and such failure continues for five (5) days after
notice of non-payment is received by Borrower;
(b) Borrower or a Guarantor fails to observe or perform any
covenant, condition or agreement to be observed or performed pursuant to the
terms hereof or any Loan Document to which it is a party and such failure is not
cured as soon as reasonably practicable and in any event within thirty (30) days
after written notice thereof by Lender;
(c) A court enters a decree or order for relief in respect of
Borrower in an involuntary case under any applicable bankruptcy, insolvency, or
other similar law then in effect, or appoints a receiver, liquidator, assignee,
custodian, trustee, or sequestrator (or other similar official) of Borrower or
for any substantial part of their property, or orders the windup or liquidation
of Borrower's affairs; or a petition initiating an involuntary case under any
such bankruptcy, insolvency, or similar law is filed against Borrower and is
pending for sixty (60) days without dismissal;
(d) Borrower commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law then in effect, makes any general
assignment for the benefit of
23
creditors, fails generally to pay its debts as such debts become due, or takes
corporate action in furtherance of any of the foregoing;
(e) Final judgment for the payment of money on any claim in
excess of $250,000 is rendered against Borrower or any Guarantor and remains
undischarged for twenty (20) days during which execution is not effectively
stayed;
(f) Any of the Guarantors revokes or attempts to revoke its
guaranty of any of the Obligations, or becomes the subject of an insolvency
proceeding of the type described in clauses (c) or (d) above with respect to
Borrower or fails to observe or perform any material covenant, condition or
agreement to be performed under any Loan Document to which it is a party;
(g) Any Collateral or any part thereof is sold, agreed to be
sold, conveyed or allocated by operation of law or otherwise;
(h) Borrower or a Guarantor defaults under the terms of any
Indebtedness or lease involving total payment obligations of Borrower or a
Guarantor in excess of $250,000 and such default is not cured within the time
period permitted pursuant to the terms and conditions of such Indebtedness or
lease, or an event occurs that gives any creditor or lessor the right to
accelerate the maturity of any such indebtedness or lease payments;
(i) Demand is made for payment of any Indebtedness in excess of
$250,000 that was not originally payable upon demand when incurred but the terms
of which were later changed to provide for payment upon demand;
(j) Borrower is enjoined, restrained or in any way prevented by
court order from continuing to conduct all or any material part of its business
affairs;
(k) A judgment or other claim in excess of $250,000 becomes a
Lien upon any or all of Borrower's assets or the Collateral, other than a
Permitted Lien;
(l) A notice of Lien, levy or assessment in excess of $250,000 is
filed of record with respect to any or all of Borrower's assets or the
Collateral by any Governmental Authority or any tax or debt owing at any time
hereafter to any one or more of such entities becomes a Lien upon any or all of
Borrower's assets or the Collateral and the same is not paid on the payment date
thereof, except to the extent such tax or debt is being contested by Borrower as
permitted in Section 8.4;
(m) There is a material impairment of the value of the Collateral
or priority of Lender's Liens on the Collateral;
(n) Any of Borrower's assets in excess of $250,000 or any
Collateral are seized, subjected to a distress warrant, levied upon or come into
the possession of any judicial officer;
24
(o) Any representation or warranty made in writing to Lender by
any officer of Borrower or a Guarantor in connection with the transaction
contemplated in this Agreement is materially incorrect when made;
(p) If the aggregate dollar value of all judgments, defaults,
demands, claims and notices of Liens under clauses (e), (h), (i), (k), (l) and
(p) hereof exceeds $1,000,000; or
(q) Borrower or a Guarantor fails to direct all receipts for
Accounts to the lock boxes.
SECTION 11
REMEDIES
SECTION 11.1. SPECIFIC REMEDIES. Upon the occurrence and during
the continuance of any Event of Default:
(a) Lender may cease advancing money or extending credit to or
for the benefit of Borrower under this Agreement, under any other Loan Document,
or under any other agreement between Borrower and Lender.
(b) Lender may declare all Obligations to be due and payable
immediately, whereupon they shall immediately become due and payable without
presentment, demand, protest, or notice of any kind, all of which are hereby
expressly waived by Borrower.
(c) Lender may set off against the Obligations all Collateral,
balances, credits, deposits, accounts, or moneys of Borrower then or thereafter
held with Lender, including amounts represented by certificates of deposit.
(d) Lender may pay, purchase, contest, or compromise any
encumbrance, charge or Lien that, in the opinion of Lender, appears to be prior
or superior to its Lien and pay all reasonable expenses incurred in connection
therewith.
(e) Lender may (i) notify Account Debtors to make payment on
Account directly to Lender; (ii) settle, adjust, compromise, extend or renew
Accounts, whether before or after legal proceedings to collect such Accounts
have commenced; (iii) prepare and file any bankruptcy proofs of claim or similar
documents against any Account Debtor; (iv) prepare and file any notice,
assignment, satisfaction, or release of Lien, UCC termination statement or any
similar document; (v) sell or assign Accounts, individually or in bulk, upon
such terms, for such amounts, and at such time or times as Lender deems
advisable; and (vi) complete the performance required of Borrower or a Guarantor
under any contract or agreement to which Borrower is a party and out of which
Accounts arise or may arise.
25
(f) Lender may (i) endorse Borrower's name on all checks, notes,
drafts, money orders or other forms of payment of or security for Accounts or
other Collateral; (ii) sign Borrower's name on drafts drawn on Account Debtors
or issuers of letters of credit; and (iii) notify the postal authorities in
Borrower's name to change the address for delivery of Borrower's mail to an
address designated by Lender, receive and open all mail addressed to Borrower,
copy all mail, return all mail relating to Collateral, and hold all other mail
available for pickup by Borrower.
SECTION 11.2. POWER OF ATTORNEY. Borrower hereby appoints Lender
(and any of Lender's officers, employees, or agents designated by Lender) as
Borrower's attorney, with power whether before or after the occurrence of an
Event of Default: (a) to endorse Borrower's name on any checks, notes,
acceptances, money orders, drafts or other forms of payment or security that may
come into Lender's possession; (b) to sign Borrower's name on drafts against
Account Debtors, on schedules and assignments of Accounts, on verifications of
Accounts, and on notices to Account Debtors; (c) to notify the post office
authorities to change the address for delivery of Borrower's mail to an address
designated by Lender, to receive and open all mail addressed to Borrower and to
retain all mail relating to the Collateral and forward all other mail to
Borrower; (d) to send requests for verification of Accounts; (e) to execute UCC
Financing Statements; and (f) to do all things necessary to carry out this
Agreement. The appointment of Lender as Borrower's attorney and each and every
one of Lender's rights and powers, being coupled with an interest, are
irrevocable as long as any Obligations are outstanding. Lender shall not
exercise the power granted in clauses 11.2(a) through 11.2(c) unless an Event of
Default has occurred and is continuing and shall not to exercise the power
granted in clause 11.2(d) prior to notification of Borrower of its intent to do
so, but such limitations do not limit the effectiveness of such power of
attorney at any time. Any person dealing with Lender is entitled to rely
conclusively on any written or oral statement of Lender that this power of
attorney is in effect. Lender may also use Borrower's stationery in connection
with exercising its rights and remedies and performing the Obligations of
Borrower.
SECTION 11.3. EXPENSES SECURED. All expenses, including attorney
fees, incurred by Lender in the exercise of its rights and remedies provided in
this Agreement, or by law shall be payable by Borrower to Lender, are part of
the Obligations, and are secured by the Collateral.
SECTION 11.4. EQUITABLE RELIEF. Borrower recognizes that in the
event Borrower fails to perform, observe, or discharge any of its Obligations or
liabilities under this Agreement, no remedy of law will provide adequate relief
to Lender, and Lender is entitled to temporary and permanent injunctive relief
in any such case without the necessity of proving actual damages.
SECTION 11.5. REMEDIES ARE CUMULATIVE. No remedy set forth herein
is exclusive of any other available remedy or remedies, but each is cumulative
and in addition to every other right or remedy given under this Agreement or
under any other agreement between Lender and Borrower or any Guarantor or now or
hereafter existing at law or in equity or by statute. Lender may pursue its
rights and remedies concurrently or in any sequence, and no exercise of one
right or remedy may be deemed to be an election. No delay by Lender
26
constitutes a waiver, election, or acquiescence by it. Borrower on its behalf
waives any rights to require Lender to proceed against any Guarantor or any
other party; or proceed against or exhaust any security held from any Guarantor.
Lender may at any time and from time to time, without notice to, or consent of,
Borrower, and without affecting or impairing the obligation of Borrower
hereunder do any of the following: (i) renew or extend any obligations of any
Guarantor, or of any other party at any time directly or contingently liable for
payment of any of the obligations of any Guarantor; (ii) accept partial payments
of the obligations of any Guarantor; (iii) settle, release (by operation of law
or otherwise), compound, compromise, collect or liquidate any of the obligations
of any Guarantor and the security therefor in any manner; (iv) consent to the
transfer or sale of any security or bid and purchase at any sale of any security
of any Guarantor. The validity of this Agreement and the Obligations of Borrower
are not terminated, affected or impaired by reason of the waiving, delaying,
exercising or non-exercising, of any of Lender's rights against any Guarantor or
as a result of the substitution, release, repossession, sale, disposition or
destruction of any Collateral securing any obligations of any Guarantor.
Borrower is not released or discharged, either in whole or in part, by Lender's
failure or delay to perfect or continue the perfection of any security interest
in any Collateral which secures the obligations of any Guarantor or to protect
the property covered by such security interest.
SECTION 12
INDEMNITY
SECTION 12.1. GENERAL INDEMNITY. Borrower shall protect,
indemnify and defend and save harmless Lender and its directors, officers,
agents and employees from and against any and all loss, cost, liability
(including negligence, tort and strict liability), expense, damage, suits or
demands (including fees and disbursements of counsel) on account of any suit or
proceeding before any Governmental Authority which arises from the transactions
contemplated in this Agreement or otherwise arising in connection with or
relating to the Loan and any security therefor, unless such suit, claim or
damages are caused by the gross negligence or intentional malfeasance of Lender
or its directors, officer, agents or employees. Upon receiving knowledge of any
suit, claim or demand asserted by a third-party that Lender believes is covered
by this indemnity, Lender shall give Borrower timely notice of the matter and an
opportunity to defend it, at Borrower's sole cost and expense, with legal
counsel acceptable to Lender. Lender may, at its option, also require Borrower
to so defend the matter. This obligation on the part of Borrower survives the
termination of this Agreement and the repayment of the Note.
SECTION 13
MISCELLANEOUS
27
SECTION 13.1. DELAY AND WAIVER. No delay or omission to exercise
any right impairs any such right or be a waiver thereof, but any such right may
be exercised from time to time and as often as may be deemed expedient. A waiver
on one occasion is limited to that particular occasion.
SECTION 13.2. COMPLETE AGREEMENT. This Agreement, the Schedules
and the other Loan Documents are the complete agreement of the parties hereto
and supersede all previous understandings relating to the subject matter hereof.
This Agreement may be amended only by an instrument in writing that explicitly
states that it amends this Agreement and is signed by the party against whom
enforcement of the amendment is sought. This Agreement may be executed in
counterparts, each of which will be an original and all of which will constitute
a single agreement.
SECTION 13.3. SEVERABILITY; HEADINGS. If any part of this
Agreement or the application thereof to any person or circumstance is held
invalid, the remainder of this Agreement is unaffected thereby. The section
headings herein are included for convenience only and may not be deemed to be a
part of this Agreement.
SECTION 13.4. BINDING EFFECT. This Agreement is binding upon and
inures to the benefit of the respective legal representatives, successors and
assigns of the parties hereto; provided however, Borrower may not assign any of
its rights or delegate any of its Obligations hereunder. Lender (and any
subsequent assignee) may transfer and assign this Agreement and deliver the
Collateral to the assignee, who thereupon has all of the rights of Lender; and
Lender (or such subsequent assignee who in turn assigns as aforesaid) is then
relieved and discharged of any responsibility or liability with respect to this
Agreement and said Collateral.
SECTION 13.5. NOTICES. Any notices under or pursuant to this
Agreement are deemed duly sent when delivered in hand or when mailed by
registered or certified mail, return receipt requested, or when delivered by
courier or when transmitted by telex, telecopy, or similar electronic medium to
the following addresses:
To Borrower: US Diagnostic Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇, #▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇, President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Copies To: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Aldhadeff & Setterson, P.A.
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
28
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
To Lender: DVI Business Credit Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Copies to: DVI Business Credit Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may change such address by sending notice of the change
to the other parties; such change of address is effective only upon actual
receipt of the notice by the other parties.
SECTION 13.6. GOVERNING LAW. ALL ACTS AND TRANSACTIONS HEREUNDER
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED,
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF CALIFORNIA WITHOUT
GIVING EFFECT TO CONFLICTS OF LAW PRINCIPLES.
SECTION 13.7. WAIVER OF TRIAL BY JURY. LENDER AND BORROWER HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS AGREEMENT OR
ANY OF THE LOAN DOCUMENTS OR THE RELATIONSHIP BETWEEN LENDER AND BORROWER.
SECTION 13.8. SUBMISSION TO JURISDICTION.
(a) BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
ANY CALIFORNIA OR FEDERAL COURT SITTING IN ORANGE COUNTY, CALIFORNIA, OVER ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. BORROWER
HEREBY AGREES THAT SERVICE OF COPIES OF SUMMONS AND COMPLAINTS AND ANY OTHER
PROCESS WHICH MAY BE SERVED IN ANY ACTION OR PROCEEDING ARISING HEREUNDER MAY BE
MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS BY REGISTERED
29
OR CERTIFIED MAIL, POSTAGE PREPAID, TO BORROWER AT ITS ADDRESS SET FORTH AT THE
BEGINNING OF THIS AGREEMENT.
(b) NOTHING IN THIS PARAGRAPH 13.8 SHALL AFFECT THE RIGHT OF
LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE
RIGHT OF LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ANY OF ITS
PROPERTIES IN THE COURTS OF OTHER JURISDICTIONS TO THE EXTENT OTHERWISE
PERMITTED BY LAW.
(c) TO THE EXTENT THAT BORROWER HAS OR HEREAFTER MAY ACQUIRE (i)
ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF CALIFORNIA OR ANY FEDERAL COURT
SITTING IN ORANGE COUNTY, CALIFORNIA OR FROM ANY LEGAL PROCESS OUT OF ANY SUCH
COURT (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF
OR ITS PROPERTY, OR (ii) ANY OBJECTION TO THE LAYING OF THE VENUE OR OF AN
INCONVENIENT FORUM OF ANY SUIT, ACTION OR PROCEEDING, IF BROUGHT IN CALIFORNIA
OR FEDERAL COURT SITTING IN ORANGE COUNTY, CALIFORNIA UNDER PROCESS SERVED IN
ACCORDANCE WITH SUBPARAGRAPH (a) ABOVE, BORROWER HEREBY IRREVOCABLY WAIVES SUCH
IMMUNITY OR OBJECTION IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE LOANS.
IN WITNESS WHEREOF, Borrower and Lender have executed this
Agreement by their duly authorized officers as of the date first above written.
BORROWER: LENDER:
US DIAGNOSTIC INC. DVI BUSINESS CREDIT CORPORATION
By: By:
----------------------------- ---------------------------
Name: Name:
Title: Title:
30
Schedule 1.1
Permitted Liens
Schedule 4.1
Guarantors
[List the exact corporate name of all material Subsidiaries of Borrower]
Schedule 4.2
Mergers and Consolidations
[List all Mergers and Consolidations]
Schedule 4.3
Purchase of Assets
[List all Asset Purchase Acquisitions]
Schedule 4.5
Stock Ownership
[Describe all Guarantors which are not wholly-owned]
Schedule 5.1
Guarantor Offices
[List the executive office and location at which records
are kept for each Guarantor]
Schedule 5.11
Post Closing Checklist
[To be prepared by DVI]
Schedule 6.1
Contracts
[List all radiology agreements, partnership agreements and SEC filings]
Schedule 8.6
Litigation and Proceedings
[List outstanding judgments against Borrower or any of its assets, actions or
proceedings pending by or against Borrower other threatened or imminent actions
against Borrower and governmental investigations.]
Schedule 8.14
[List required consents not obtained]
Consents
Schedule 9.12
Permitted Distributions
[List permitted distributions, if any]
Exhibit 5.5
Borrowing Base Report
COMPLIANCE CERTIFICATION
In connection with the Borrowing Base report dated the date hereof
delivered by US Diagnostic Inc. ("Borrower") pursuant to that certain Loan and
Security Agreement by and among Borrower and DVI Business Credit Corporation,
the undersigned hereby certifies as follows:
1. Borrower has complied and is in compliance in all material respects
with all of the terms, covenants and conditions of the Loan and
Security Agreement;
2. No Default or Event of Default exists under the Loan and Security
Agreement; and
3. The representations, warranties and covenants contained in Section
8 of the Loan and Security Agreement are true in all material
respects as of the date hereof.
Capitalized terms used herein not otherwise defined shall have the
respective earnings ascribed thereto in the Loan and Security Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
duly executed and delivered as of the ______ day of _______________, 199__.
Borrower:
US DIAGNOSTIC INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
SECURED PROMISSORY NOTE
Due March 1, 1998
FOR VALUE RECEIVED, US DIAGNOSTIC INC., a Delaware corporation
("MAKER") hereby promises to pay to DVI BUSINESS CREDIT CORPORATION or its
assignee ("HOLDER"), or order, principal in the sum of TWENTY-FIVE MILLION
DOLLARS ($25,000,000), or such amount as may be advance thereon from time to
time, with interest on the unpaid principal balance from time to time
outstanding at the fluctuating rate of interest announced publicly by Bank of
Amercia, NT&SA in San Francisco, California, from time to time as its base rate
plus Two percent (2%) per annum, computed on the basis of a 360-day year and
actual days elapsed, until paid. Interest is payable on the first business day
of each calendar month for the preceding month, with all unpaid principal and
interest due and payable in full on March 1, 1998.
1. If any part of the principal or interest of the Note is not paid when
due, it will be added to the principal amount of this Note and thereafter bear
interest at the rate provided above If the specified interest rate at any time
exceeds the maximum rate allowed by law, then the applicable interest rate is
reduced to the maximum rate allowed by law.
2. This Note may be prepaid in accordance with Section 2.6 of that certain
Loan and Security Agreement dated as of February 25, 1997 between Holder as
Lender and Maker as Borrower (the "AGREEMENT"). Notwithstanding the foregoing,
the Agreement may not be terminated, and is not terminated by any prepayment.
3. Principal and interest are payable to Holder at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other place as the Holder
may, from time to time in writing, designate.
4. This Note is made pursuant to, and secured by the Agreement. All
capitalized terms used but not defined herein have the meanings ascribed to them
in the Agreement, the terms of which are incorporated herein by reference
thereto. This Note is also secured by the Security Documents referred to in the
Agreement. The Agreement and the Security Documents create a lien on and
security interest in, the personal property described therein ("COLLATERAL").
The Agreement and the Security Documents are collectively referred to as the
"LOAN AND SECURITY DOCUMENTS" and are hereby incorporated herein by reference
thereto and made a part of this Note.
5. The occurrence of an Event of Default under the Agreement may, at the
election of the Holder, make the entire unpaid balance of the principal amount
of this Note and accrued interest thereon immediately due and payable without
notice of default, presentment or demand for payment, protest or notice of
nonpayment or dishonor, or other notices or demands of any kind or character.
1
6. Failure of the Holder to exercise the acceleration option of paragraph 5
of this Note on the occurrence of an Event of Default does constitute a waiver
of the right to exercise such option on the subsequent occurrence of an Event of
Default.
7. Principal and interest are payable in lawful money of the United States
of America which is legal tender in payment of all debts and dues, public and
private, at the time of payment. If any payment of principal or interest under
this Note becomes due on a Saturday, Sunday or legal or banking holiday, such
payment is due on the next succeeding business day. Maker waives presentment,
demand for payment, notice of nonpayment, protest, and notice of protest, and
all other notices and demands in connection with the delivery, acceptance,
performance, default, or enforcement of this Note, except as specifically
provided in the Agreement. Maker consents to any and all assignments of this
Note, extensions of time, renewals, and waivers that may be made or granted by
the Holder. Maker expressly agrees that such assignments, extensions of time,
renewals, or waivers do not affect Maker's liability hereunder. Maker agrees
that Holder may, without notice to Maker and without affecting the liability of
Maker, accept additional or substitute security for this Note, or release any
security or any party liable for this Note, or extend or renew this Note.
8. If Maker fails to make any payment of interest or principal under this
Note, including the payment due upon maturity, when the same is due and payable
and such failure continues for five (5) days after nonpayment, a late charge by
way of damages to the extent provided in this paragraph is immediately due and
payable. Maker recognizes that default by Maker in making the payments herein
agreed to be paid when due will result in the Holder incurring additional
expenses, in loss to the Holder of the use of the money due and in frustration
to the Holder in meeting its other commitments. Maker agrees that, if for any
reason Maker fails to pay any amount due under this Note when due, the Holder is
entitled to damages for the detriment caused thereby, but that it is extremely
difficult and impractical to ascertain the extent of such damages. Maker
therefore agrees that a sum equal to five cents ($.05) for each one dollar
($1.00) of each payment which is not received within five (5) days after the
date it is due and payable is a reasonable estimate of the damages to the
Holder, which sum Maker agrees to pay on demand.
9. If action is instituted on this Note (including without limitation, any
proceedings for collection hereof in any bankruptcy or probate matter or case),
or if proceedings are commenced on or under any of the Loan and Security
Documents, and Holder prevails in such proceedings Maker promises to pay the
Holder all costs of collection and enforcement including, without limitation,
reasonable attorneys' fees plus interest on any defaulted amount at the rate of
eighteen percent (18%) per annum.
10. Any and all notices or other communications or payments required or
permitted to be given hereunder are effective when received or refused if given
or rendered in writing, in the manner provided in the Agreement.
2
11. This Note inures to the benefit of and is binding upon the Holder's
successors and assigns. References to the "Holder" are deemed to refer to the
holders of this Note at the time such reference becomes relevant.
12. If any term, provision, covenant, or condition of this Note is held by
a court of competent jurisdiction to be invalid, void, or unenforceable, the
rest of this Note remains in full force and effect to the greatest extent
permitted by law and is in no other way affected, impaired or invalidated.
13. Nothing contained herein or in the Loan and Security Documents may be
deemed to prevent recourse to and the enforcement against Maker and the
Collateral of all liabilities, obligations and undertakings contained herein and
in the Loan and Security Documents.
14. THIS NOTE IS GOVERNED BY AND MUST BE CONSTRUED UNDER THE LAWS OF THE
STATE OF CALIFORNIA AND MAKER AGREES TO SUBMIT TO THE JURISDICTION OF THE STATE
OR FEDERAL COURTS IN THE STATE OF CALIFORNIA.
Dated: February 25, 1997
US DIAGNOSTIC INC.
By:
--------------------------------
Name:
Title:
3
Please FILL IN COMPLETELY
DATE IN:_____________________________ DATE NEEDED:____________________________
TIME IN:_____________________________ TIME NEEDED:_________ [ ] a.m. [ ] p.m.
CLIENT NAME: DVI BUSINESS CREDIT CORPORATION 10584/21___________________________
CLIENT/MATTER #
DOCUMENT NAME: PROMISSORY NOTE
ORIGINATOR: MJS1 RETURN TO: MJS1 [ ] CALL:_____________
(extension)
[ ] MAKE A COMPLETELY NEW COPY OF THIS DOCUMENT:
NEW CLIENT NAME:_____________________________ CLIENT/MATTER #:___________
NEW DOCUMENT TITLE:_________________________________________________________
[ ] CREATE A NEW VERSION OF THIS DOCUMENT FOR COMPARE-RITE LATER
[ ] TAPE INSERTIONS: Number of Tapes:________ Total Length:_______ mins.
[ ] COMPARE: Old Document:________________ New (Revised) Document:______________
OUTPUT OPTIONS
[ ] DRAFT: [ ] DOUBLE SPACE [ ] SINGLE SPACE
[ ] DOUBLE SPACE DRAFT--SETUP FOR SINGLE SPACE FINAL
[ ] FINAL: [ ] DOUBLE SPACE [ ] SINGLE SPACE
PAPER TYPES
[ ] 11" Draft [ ] 11" Bond [ ] Pleading [ ] Letterhead
[ ] 14" Draft/Bond [ ] Will [ ] Other____________________________
SPECIAL INSTRUCTIONS:___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_______________________________________________________ [ ] Continued on reverse
FOR WORD PROCESSING USE ONLY
DOCUMENT LOCATOR: 198008.2 TOTAL PAGES: 4
DOCUMENT TYPE CODE: NONLIT
Non-Litigation Documents
TYPIST: *5/VME1 RETURN TO:___________________________________
COMMENTS/QUESTIONS/PROBLEMS/ACTIONS: 03/24/97 - 5:09pm
duped 195576.2
4