EXHIBIT 10.21
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
Dated as of November 1, ▇▇▇▇
▇▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, NATIONAL ASSOCIATION,
as the Lender,
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PEDIATRIC SERVICES OF AMERICA, INC.,
a Delaware corporation,
individually and as the Borrowers' Agent,
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and
PEDIATRIC SERVICES OF AMERICA, INC.,
a Delaware corporation,
AND EACH OF THE SUBSIDIARIES OF
PEDIATRIC SERVICES OF AMERICA, INC. FROM
TIME TO TIME PARTY HERETO,
as the Borrowers
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TABLE OF CONTENTS
1. DEFINITIONS.......................................................... 1
1.1 Defined Terms................................................... 1
1.2 Accounting Terms................................................ 19
1.3 Interpretive Provisions......................................... 19
2. LOANS AND LETTERS OF CREDIT.......................................... 20
2.1 Total Facility.................................................. 20
2.2 Loans........................................................... 20
2.3 Letters of Credit............................................... 21
2.4 The Borrowers' Agent............................................ 23
3. INTEREST AND OTHER CHARGES........................................... 23
3.1 Interest........................................................ 23
3.2 Conversion and Continuation Elections........................... 24
3.3 Maximum Interest Rate........................................... 25
3.4 Closing Fee..................................................... 26
3.5 Loan Administration and Collateral Management Fee............... 27
3.6 Letter of Credit Fee............................................ 27
4. PAYMENTS AND PREPAYMENTS............................................. 27
4.1 Loans and Letters of Credit..................................... 27
4.2 Place and Form of Payments; Extension of Time................... 27
4.3 Application and Reversal of Payments............................ 27
4.4 INDEMNITY FOR RETURNED PAYMENTS................................. 28
5. LENDER'S BOOKS AND RECORDS; MONTHLY STATEMENTS........................ 28
6. TAXES, YIELD PROTECTION AND ILLEGALITY................................ 29
6.1 Taxes........................................................... 29
6.2 Illegality...................................................... 30
6.3 Increased Costs and Reduction of Return......................... 30
6.4 Funding Losses.................................................. 31
6.5 Inability to Determine Rates.................................... 31
6.6 Survival........................................................ 32
7. COLLATERAL........................................................... 32
7.1 Grant of Security Interest...................................... 32
7.2 Perfection and Protection of Security Interest.................. 33
7.3 Chief Executive Office.......................................... 33
7.4 Title to, Liens on, and Sale and Use of Collateral.............. 34
7.5 [Reserved]...................................................... 34
7.6 Access and Examination.......................................... 34
7.7 Insurance....................................................... 35
7.8 Collateral Reporting............................................ 35
7.9 Accounts...................................................... 37
7.10 Collection of Accounts; Payments.............................. 39
7.11 [Reserved].................................................... 40
7.12 Equipment..................................................... 40
7.13 Material Contracts............................................ 40
7.14 Documents, Instruments, and Chattel Paper..................... 41
7.15 Right to Cure................................................. 41
7.16 Power of Attorney............................................. 41
7.17 Lender's Rights, Duties, and Liabilities...................... 42
7.18 [Reserved].................................................... 42
7.19 License for use of Software and Other Intellectual Property... 42
8. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES................... 43
8.1 Books and Records.............................................. 43
8.2 Financial and Other Information................................ 43
8.3 Notices to Lender.............................................. 45
9. GENERAL WARRANTIES AND REPRESENTATIONS.............................. 46
9.1 Authorization, Validity, and Enforceability of this Agreement
and the Loan Documents......................................... 47
9.2 Validity and Priority of Security Interest..................... 47
9.3 Organization and Qualification................................. 47
9.4 Name; Prior Transactions....................................... 47
9.5 Subsidiaries and Affiliates.................................... 48
9.6 Financial Statements and Plan.................................. 48
9.7 [Reserved]..................................................... 49
9.8 Solvency....................................................... 49
9.9 Debt........................................................... 49
9.10 Distributions................................................. 49
9.11 Title to Property............................................. 49
9.12 Adequate Assets............................................... 49
9.13 Real Property; Leases......................................... 49
9.14 Proprietary Rights............................................ 49
9.15 Trade Names and Terms of Sale................................. 50
9.16 Litigation.................................................... 50
9.17 Restrictive Agreements........................................ 50
9.18 Labor Disputes................................................ 50
9.19 Environmental Laws............................................ 51
9.20 Health Care Laws.............................................. 52
9.21 No Violation of Law........................................... 53
9.22 No Default.................................................... 53
9.23 ERISA Compliance.............................................. 53
9.24 Taxes......................................................... 53
9.25 Use of Proceeds............................................... 54
9.26 Private Offerings............................................. 54
9.27 Broker's Fees................................................. 54
9.28 Government Regulation......................................... 54
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9.29 No Material Adverse Change..................................... 54
9.30 Disclosure..................................................... 54
10. AFFIRMATIVE AND NEGATIVE COVENANTS................................... 55
10.1 Taxes and Other Obligations.................................... 55
10.2 Existence and Good Standing.................................... 55
10.3 Compliance with Law and Agreements............................. 55
10.4 Maintenance of Property and Insurance.......................... 55
10.5 Environmental Laws............................................. 55
10.6 Health Care Laws............................................... 56
10.7 ERISA.......................................................... 56
10.8 Mergers, Consolidations or Sales............................... 56
10.9 Distributions.................................................. 56
10.10 Transactions Having a Material Adverse Effect................. 57
10.11 Guaranties.................................................... 57
10.12 Debt.......................................................... 57
10.13 Prepayment.................................................... 57
10.14 Transactions with Affiliates.................................. 57
10.15 Business Conducted............................................ 57
10.16 Liens......................................................... 57
10.17 Sale and Leaseback Transactions............................... 58
10.18 New Subsidiaries.............................................. 58
10.19 Restricted Investments........................................ 58
10.20 Availability................................................... 58
10.21 Fixed Charge Coverage......................................... 58
10.22 Loan Documents................................................ 58
10.23 Further Assurances............................................ 59
11. CONDITIONS PRECEDENT................................................. 59
11.1 Conditions Precedent to Making of Initial Loan and Issuance
of Initial Letters of Credit................................... 59
11.2 Conditions Precedent to Each Loan and Letter of
Credit......................................................... 62
12. DEFAULT.............................................................. 63
12.1 Events of Default.............................................. 63
13. REMEDIES............................................................. 65
14. TERM AND TERMINATION................................................. 67
15. MISCELLANEOUS........................................................ 68
15.1 Cumulative Remedies; No Prior Recourse to Collateral........... 68
15.2 No Implied Waivers............................................. 68
15.3 Severability................................................... 68
15.4 Governing Law.................................................. 68
15.5 Consent to Jurisdiction and Venue; Service of Process.......... 68
15.6 Waiver of Jury Trial........................................... 69
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15.7 Survival of Representations and Warranties..................... 69
15.8 Other Security and Guaranties.................................. 69
15.9 Fees and Expenses.............................................. 69
15.10 Notices....................................................... 70
15.11 Indemnification............................................... 72
15.12 Waiver of Notices............................................. 73
15.13 Binding Effect; Assignment.................................... 73
15.14 Modification.................................................. 73
15.15 Counterparts.................................................. 73
15.16 Captions...................................................... 74
15.17 Right of Set-Off.............................................. 74
15.18 Participating Lender's Security Interests..................... 74
15.19 Additional Borrowers.......................................... 74
15.20 Joint and Several Liability................................... 75
15.21 Release and Indemnity......................................... 76
15.22 Effect on the Existing Credit Agreement and the Existing
Security Agreement............................................ 76
iv
Schedules
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Schedule 7.3 Location of Chief Executive Office
Schedule 7.14 Certain Liens
Schedule 9.5 Subsidiaries and Affiliates
Schedule 9.9 Debt
Schedule 9.13 Real Property; Leases
Schedule 9.14 Proprietary Rights
Schedule 9.15 Trade Names
Schedule 9.16 Litigation
Exhibits
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Exhibit A Form of Account Debtor Notice
Exhibit B Additional Borrower Agreement
Exhibit C Additional Borrower Consent Notice
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AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT, dated as of November
1, 1999 (this "Agreement"), by and among Bank of America, National Association,
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a national banking association, with offices at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Lender"), Pediatric Services of America,
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Inc., a Delaware corporation, with offices at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, individually (the "Company") and as the Borrowers' Agent, and the
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Company and each of the Company's Subsidiaries from time to time party hereto
(the Company and such Subsidiaries party hereto being referred to herein
individually as a "Borrower" and collectively as the "Borrowers").
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W I T N E S S E T H
- - - - - - - - - -
WHEREAS, certain of the parties hereto are parties to the Existing
Credit Agreement and the Existing Security Agreement (as defined herein); and
WHEREAS, the parties hereto desire to amend and restate the Existing
Credit Agreement and the Existing Security Agreement.
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth in this Agreement, and for good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto
hereby agree to amend and restate the Existing Credit Agreement and the Existing
Security Agreement as follows:
1. DEFINITIONS.
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1.1 Defined Terms. As used herein:
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"Account" means, with respect to any Borrower Party, such Borrower
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Party's right to payment for a sale or lease and delivery of goods or rendition
of services, including without limitation health care goods and services.
"Account Debtor" means each Person obligated in any way on or in
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connection with an Account.
"Account Debtor Notice" means a notice to an Account Debtor (other
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than a Government Account Debtor or a Self-Pay Account Debtor) substantially in
the form of Exhibit A.
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"Additional Borrower Agreement" is defined in Section 15.19.
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"Additional Borrower Consent Notice" is defined in Section 15.19.
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"Adjusted Net Earnings from Operations" means, with respect to any
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fiscal period of the Company, the net income of the Company after provision for
income taxes for such fiscal period, as determined on a consolidated basis in
accordance with GAAP and reported on the Financial Statements for such period,
excluding, without duplication, any and all of the following included in such
net income: (a) gain or loss arising from the sale of capital assets; (b) gain
arising from any write-up in the book value of any asset; (c) earnings of any
corporation, substantially all the assets of which have been acquired by any
Borrower Party in any manner, to the extent realized by such other corporation
prior to the date of acquisition; (d) earnings of any Person that is not
consolidated with the Company in accordance with GAAP, unless (and only to the
extent) such earnings shall
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actually have been received by the Company or a consolidated Subsidiary in the
form of distributions of cash or cash equivalents; (e) earnings of any Person to
which assets of any Borrower Party shall have been sold, transferred or disposed
of, or into which any Borrower Party shall have been merged, or which has been a
party with any Borrower Party to any consolidation or other form of
reorganization, prior to the date of such transaction; (f) gain arising from the
acquisition of debt or equity securities of any Borrower Party or from
cancellation or forgiveness of Debt; (g) amortization of goodwill and related
intangibles; and (h) gain or loss arising from extraordinary items, as
determined in accordance with GAAP, or from any other non-recurring transaction.
"Affiliate" means: (a) a Person which, directly or indirectly,
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controls, is controlled by or is under common control with, any Borrower Party;
(b) a Person (other than a Person which (i) is a stockholder of the Company and
(ii) is not otherwise an Affiliate of the Company) which beneficially owns or
holds, directly or indirectly, five percent (5%) or more of any class of voting
stock of any Borrower Party; (c) a Person in which five percent (5%) of any
class of the voting stock is beneficially owned or held, directly or indirectly,
by any Borrower Party; or (d) a joint venture in which any Borrower Party is a
participant, or in which any Borrower Party has made an investment, and such
Borrower Party owns or controls more than fifty percent (50%) of the voting
power of such joint venture. The term control (including the terms "controlled
by" and "under common control with"), means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of the Person in question.
"Anniversary Date" means each anniversary of the Closing Date.
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"Availability" means at any time the lesser of:
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(a) thirty million dollars ($30,000,000) (the "Maximum Revolving
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Credit Line"), or
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(b) the sum of (i) eighty-five percent (85%) of the Expected Net
Receivables (excluding Unbilled Accounts), plus (ii) eighty-five percent (85%)
of the Expected Net Receivables which are Unbilled Accounts; provided, however,
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that at all times Availability shall be reduced by the sum of:
(A) the unpaid balance of Loans at that time;
(B) the aggregate amount of Letter of Credit Obligations;
(C) the amount of cash received by the Borrower Parties from
Account Debtors but not yet applied to Accounts;
(D) without duplication, the Offset Reserve;
(E) without duplication, any "credit balances" owed by any
Borrower Party to any Account Debtor; and
(F) any reserve which the Lender in its reasonable discretion,
based upon the Lender's customary credit and collateral standards
as modified from time to time, deems necessary or desirable to
maintain, including in respect of: (i) any Lien for delinquent
taxes applicable to any Borrower Party, (ii) accrued interest on
the Loans,
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(iii) any amounts which the Lender is obligated from time to time
to pay for the account of any Borrower Party, (iv) any Borrower
Party's ability to ▇▇▇▇ and collect Accounts or (v) any Borrower
Party's ability to prepare and provide timely and accurate
reporting to the Lender; provided that, unless an Event of
Default has occurred and is continuing, no reserve shall be
maintained under clause (F)(iv) or clause (F)(v) unless the
Lender shall have given the Borrowers' Agent at least ten (10)
Business Days' prior notice with respect thereto.
"Blocked Account" means a bank account subject to a Blocked Account
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Agreement.
"Blocked Account Agreement" means an agreement among one or more
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Borrower Parties, the Lender and a Blocked Account Bank, in form and substance
reasonably satisfactory to the Lender, as the same may be amended, amended and
restated or otherwise modified from time to time in accordance with its terms.
"Blocked Account Bank" means a bank that is acceptable to the Lender.
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For purposes of this definition, each of Albany First Bank, Bank One, NA,
Crestar Bank, Imperial Bank and First Union National Bank is a bank that is
acceptable to the Lender.
"Borrower" is defined in the preamble.
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"Borrower Party" means any of (a) the Company (both individually and
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in its capacity as the Borrowers' Agent), (b) the Company as a Borrower, and (c)
any other Borrower, and "Borrower Parties" means, collectively, all of such
Persons.
"Borrowers' Agent" is defined in Section 2.4(a).
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"Borrowing" means a borrowing hereunder consisting of Loans by the
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Lender to one or more Borrowers.
"Borrowing Base Certificate" means a certificate, in form and
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substance reasonably satisfactory to the Lender, signed by the president,
controller, chief financial officer or a vice-president of the Borrowers' Agent.
"Business Day" means (a) any day that is not a Saturday, Sunday, or a
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day on which banks in Norcross, Georgia or Chicago, Illinois, are required or
permitted to be closed, and (b) with respect to all notices, determinations,
fundings and payments in connection with the LIBOR Rate or LIBOR Rate Loans, any
day that is a Business Day pursuant to clause (a) above and that is also a day
on which trading is carried on by and between banks in the London interbank
market.
"Capital Adequacy Regulation" means any guideline, request or
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directive of any central bank or other Public Authority, or any other law, rule
or regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling any bank.
"Capital Expenditures" means, for any period, all payments due during
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such period (whether or not paid) in respect of the cost of any fixed asset or
improvement, or replacement, substitution, or addition thereto, which has a
useful life of more than one year, including, without limitation, those arising
in connection with the direct or indirect acquisition of such assets by way of
increased product or service charges or offset items or in
3
connection with Capital Leases.
"Capital Lease" means, with respect to any Borrower Party, any lease
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of Property by such Borrower Party that, in accordance with GAAP, should be
reflected as a capital lease on the balance sheet of such Borrower Party.
"CHAMPUS" means the Civilian Health and Medical Program of the
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Uniformed Services.
"CHAMPVA" means the Civilian Health and Medical Program of Veterans
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Affairs.
"Closing Date" means the date of this Agreement.
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"Closing Fee" is defined in Section 3.4.
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"Code" means the Internal Revenue Code of 1986, as amended.
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"Collateral" is defined in Section 7.1.
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"Collections" means all cash, funds, checks, notes, instruments,
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warrants and any other form of remittance tendered by an Account Debtor in
payment (in whole or part) of an Account.
"Company" is defined in the preamble.
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"Contaminant" means any waste, pollutant, hazardous substance, toxic
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substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos in any form or condition, polychlorinated biphenyls
("PCBs"), or other substance or material, the handling, release, or possession
of which is regulated to protect health, safety or the environment, or any
constituent of any such substance, material or waste.
"Contractual Rights" means, collectively, all of the rights and
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remedies of any Borrower Party under, and all moneys and claims for money due or
to become due to any Borrower Party under, any contracts or agreements with an
Account Debtor and any and all amendments, supplements, extensions, and renewals
thereof including, without limitation, all rights and claims of any Borrower
Party now or hereafter existing: (a) under any insurance, indemnities,
warranties, and guarantees provided for or arising out of or in connection with
the foregoing contracts or agreements; (b) for any damages arising out of or for
breach or default under or in connection with the foregoing contracts or
agreements; (c) to all other amounts from time to time paid or payable under or
in connection with the foregoing contracts or agreements; or (d) to exercise or
enforce any and all covenants, remedies, powers and privileges thereunder.
"Date of Service" means, with respect to an Account, a date on which
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services or goods giving rise to such Account or any portion thereof were
rendered or provided.
"Debt" means, with respect to any Borrower Party at any time: (a) all
----
indebtedness, obligations or other liabilities of such Person (i) for borrowed
money or evidenced by debt securities, debentures, acceptances, notes or other
similar instruments, and any accrued interest, fees and charges relating
thereto; (ii) under profit payment agreements or similar agreements; (iii) with
respect to letters of credit issued for such Person's account; (iv) to pay the
deferred purchase price of Property or services, except unsecured accounts
4
payable and accrued expenses arising in the ordinary course of business which in
each case are less than ninety (90) days past due; or (v) Capital Lease
obligations; (b) all indebtedness, obligations or other liabilities of such
Person or others secured by a Lien on any Property of such Person, whether or
not such indebtedness, obligations or liabilities are assumed by such Person,
all as of such time; (c) all indebtedness, obligations or other liabilities of
such Person in respect of any foreign exchange contract or interest hedge
agreement, net of liabilities owed to such Person thereunder by the
counterparties thereon; (d) all capital stock of such Person subject (upon the
occurrence of any contingency or otherwise) to mandatory redemption; (e) all
obligations and liabilities under Guaranties; and (f) all other Obligations.
"Distribution" means, in respect of any corporation: (a) the payment
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or making of any dividend or other distribution of Property in respect of
capital stock (including in respect of any options or warrants for such stock)
of such corporation, other than distributions in capital stock of the same
class; or (b) the redemption or other acquisition by such corporation of any
capital stock (or options or warrants for such stock) of such corporation.
"DOL" means the United States Department of Labor or any successor
---
department or agency.
"Dollars" and "$" means dollars constituting lawful currency of the
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United States.
"EBITDA" means, with respect to any fiscal period, the Adjusted Net
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Earnings from Operations for such fiscal period plus all Interest Expense,
federal and state income taxes, depreciation, and amortization deducted from
revenue in determining such Adjusted Net Earnings from Operations.
"Eligible Accounts" means those Accounts which are not ineligible as
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the basis for Loans, based on the following criteria and on such other criteria
of eligibility ("Other Criteria") as the Lender may from time to time establish
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in its reasonable commercial discretion; provided, however, that unless an Event
of Default has occurred and is continuing, no Other Criteria shall take effect
unless the Lender shall have given the Borrowers' Agent at least fifteen (15)
Business Days' prior written notice with respect thereto. Without intending to
limit the Lender's discretion to establish Other Criteria, Eligible Accounts
shall not include any Account:
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(a) with respect to which more than one hundred eighty (180) days
have elapsed since the Invoice Date; or
(b) with respect to which any of the representations, warranties,
covenants, and agreements contained in this Agreement are not or have ceased to
be complete and correct or have been breached, without regard to any
qualifications relating to materiality or knowledge set forth in such
representations, warranties, covenants and agreements; or
(c) with respect to which, in whole or in part, a check,
promissory note, draft, trade acceptance or other instrument for the payment of
money has been received, presented for payment and returned uncollected for any
reason (other than items returned uncollected for insufficient funds not in
excess of two hundred fifty thousand dollars ($250,000) during any Fiscal Year
of the Company); or
(d) as to which any one or more of the following events has
occurred with respect to the Account Debtor on such Account: the filing by or
against the Account Debtor of a request or petition for liquidation,
reorganization, arrangement, adjustment of debts, adjudication as a bankrupt,
winding-up, or other relief under the bankruptcy, insolvency, or similar laws of
the United States, any state or territory thereof, or any
5
foreign jurisdiction, now or hereafter in effect; the making of any general
assignment by the Account Debtor for the benefit of creditors; the appointment
of a receiver or trustee for the Account Debtor or for any of the assets of the
Account Debtor, including, without limitation, the appointment of or taking
possession by a "custodian," as defined in the Federal Bankruptcy Code; the
institution by or against the Account Debtor of any other type of insolvency
proceeding (under bankruptcy laws or insurance laws or otherwise) or of any
formal or informal proceeding for the dissolution or liquidation of, settlement
of claims against, or winding up of affairs of, the Account Debtor; the sale,
assignment, or transfer of all or any material part of the assets of the Account
Debtor; the nonpayment generally by the Account Debtor of its debts as they
become due; or the cessation of the business of the Account Debtor as a going
concern; or
(e) owed by an Account Debtor which does not maintain its chief
executive office in the United States or is not organized under the laws of the
United States or any state or commonwealth thereof; or
(f) owed by an Account Debtor which is an Affiliate of any
Borrower; or
(g) as to which either (x) the perfection, enforceability, or
validity of the Security Interest in such Account, or (y) the Lender's right or
ability to obtain direct payment to the Lender of the Proceeds of such Account
(other than, in the case of this clause (y), an Account payable by a Government
Account Debtor), is governed by any federal, state, or local statutory
requirements other than those of the UCC; or
(h) which is evidenced by a promissory note, warrant or other
instrument or by chattel paper; or
(i) if fifty percent (50%) or more of the aggregate dollar amount
of outstanding Accounts owed at such time by the Account Debtor (other than a
Government Account Debtor or an Account Debtor which is an insurance company) to
any Borrower is classified as ineligible under any criteria set forth elsewhere
in this definition of Eligible Accounts; or
(j) if the Account Debtor is located in any state requiring the
filing of a notice of business activities report or similar report in order to
permit the Borrower to seek judicial enforcement in such state of payment of
such Account, unless the Borrower has qualified to do business in such state; or
(k) which arises out of a sale made, or service performed,
outside of the ordinary course of the business of the Borrower which originated
such Account; or
(l) with respect to which the goods giving rise to such Account
have not been delivered to and accepted by the applicable patient or the
services giving rise to such Account have not been performed by a Borrower, and,
if applicable, accepted by the applicable patient, or the applicable patient
revokes its acceptance of such goods (other than services which are billed prior
to performance in the ordinary course of business of the Borrowers, in an amount
not to exceed one million dollars ($1,000,000) for all Eligible Accounts during
any Fiscal Year of the Company); or
(m) which is not subject to a first priority and perfected
security interest in favor of the Lender; or
(n) which arises under a healthcare capitation contract or
similar arrangement
6
under which a Borrower receives payments (i) in advance of providing the
applicable goods and services or (ii) without regard to whether a Borrower
provides any goods or services; provided that if a capitation contract or
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similar arrangement includes provisions for a Borrower to be paid on a "fee for
service" basis, then the related Accounts, to the extent they represent the
right to payment on such "fee for service" basis, shall not be excluded as
Eligible Accounts solely because of this clause (n); or
(o) to the extent such Account is a Self-Pay Account; or
(p) as to which more than sixty (60) days have elapsed since any
Date of Service and such Account was an Unbilled Account on such sixtieth (60th)
day; or
(q) owed by an Account Debtor (other than a Government Account
Debtor or a Self-Pay Account Debtor) if such Account Debtor has not received an
Account Debtor Notice, provided that this clause (q) shall not apply until the
thirtieth (30th) day after the earlier of (i) the date that the first Loan is
made and (ii) the date that the first Letter of Credit is issued; or
(r) which represents a right of payment under a servicing
contract other than equipment maintenance agreements between Borrowers and
Account Debtors; or
(s) unless such Account is denominated in Dollars; or
(t) (i) if the goods or services giving rise to such Account were
not authorized by a physician's prescription, or (ii) to the extent that the
Account Debtor (other than a Self-Pay Account Debtor) informs any Borrower Party
(whether by EOB or otherwise) that it will not pay some or all of such Account
because such goods or services were not medically necessary; or
(u) to the extent that the fees charged for the services or goods
constituting the basis for such Account exceed limitations imposed by applicable
law, regulation or contract; or
(v) which is not owned free and clear of all Liens (other than
Permitted Liens) by the Borrower which originated such Account; or
(w) which represents a royalty or other right to receive a
franchise payment from any franchisee of any Borrower Party; or
(x) which represents amounts due to a Borrower in respect of a
"settlement" with respect to Medicare or Medicaid relating to the filing of a
"cost report"; or
(y) which represents a right to payment for a sale or lease and
delivery of computer software or hardware or rendition of services pertaining to
computer software or hardware.
If any Account at any time ceases to be an Eligible Account by reason of
any of the foregoing exclusions or any failure to meet any Other Criteria, then
such Account shall promptly be excluded from the calculation of Eligible
Accounts.
"Environmental Laws" means all present and future federal, state and
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local laws, rules, regulations, ordinances, programs, permits, guidance, orders
and consent decrees relating to health, safety,
7
hazardous substances, and environmental matters applicable to any Borrower
Party's business and facilities (whether or not owned by it). Such laws and
regulations include but are not limited to the Resource Conservation and
Recovery Act, 42 U.S.C. (S) 6901 et seq., as amended; the Comprehensive
Environmental Response Compensation and Liability Act, 42 U.S.C. (S) 9601 et
seq., as amended; the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq.,
as amended; the Clean Water Act, 33 U.S.C. (S) 466 et seq., as amended; the
Clean Air Act, 42 U.S.C. (S) 7401 et seq., as amended; state and federal lien
and environmental cleanup programs; and U.S. Department of Transportation
regulations.
"Environmental Lien" means a Lien in favor of any Public Authority for
------------------
(a) any liability under any Environmental Laws, or (b) damages arising from, or
costs incurred by such Public Authority in response to, a Release or threatened
Release of a Contaminant into the environment.
"EOB" means the explanation of benefits, remittance advice or other
---
record that is provided by an Account Debtor explaining how it determined the
amount it shall or shall not pay with respect to an Account of which it is the
Account Debtor.
"Equipment" means any and all machinery, equipment, furniture,
---------
furnishings, fixtures, and other tangible personal property (except Inventory),
including, without limitation, data processing hardware and software, motor
vehicles, aircraft, dies, tools, jigs, and office equipment, whether owned or
leased, and all rights and interests with respect thereto under such leases
(including, without limitation, options to purchase); together with all present
and future additions and accessions thereto, replacements therefor, component
and auxiliary parts and supplies used or to be used in connection therewith, and
all substitutes for any of the foregoing, and all manuals, drawings,
instructions, warranties and rights with respect thereto; wherever any of the
foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"ERISA Affiliate" means any trade or business (whether or not
---------------
incorporated) which is a member of a controlled group or under common control
with any Borrower Party within the meaning of Section 414(b) or (c) of the Code
(and Sections 414(m) and (o) of the Code for purposes of provisions relating to
Section 412 of the Code).
"ERISA Event" means, with respect to any Borrower Party, any ERISA
-----------
Affiliate or any Pension Plan, the occurrence of any of the following: (a) a
Reportable Event; (b) a withdrawal by a substantial employer (as defined in
Section 4001(a)(12) of ERISA) subject to Section 4063 of ERISA; (c) a cessation
of operations which is treated as a withdrawal under Section 4062(e) of ERISA;
(d) a complete or partial withdrawal under Section 4203 or 4205 of ERISA from a
Multiemployer Plan; (e) a notification that a Multiemployer Plan is in
reorganization under Section 4242 of ERISA; (f) the filing of a notice of intent
to terminate a Pension Plan under 4041 of ERISA; (g) the treatment of an
amendment of a Pension Plan as a termination under 4041 of ERISA; (h) the
termination of a Multiemployer Plan under Section 4041A of ERISA; (i) the
commencement of proceedings by the PBGC to terminate a Pension Plan under 4042
of ERISA; (j) an event or condition which could reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, a Pension Plan; or (k) the imposition of
any liability under Title IV of ERISA, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA.
"Event" means any event or condition which, with notice, the passage
-----
of time, the happening of any other condition or event, or any combination
thereof, would constitute an Event of Default.
8
"Event of Default" is defined in Section 12.1.
---------------- ------------
"Existing Credit Agreement" means that certain Credit Agreement dated
-------------------------
as of a date in August, 1997 among Pediatric Services of America, Inc., a
Georgia corporation, the other parties thereto, and NationsBank, N.A., which has
been succeeded by Bank of America, National Association, as administrative
agent, as the same has been amended or otherwise modified.
"Existing Security Agreement" means that certain Security Agreement
---------------------------
dated as of August 13, 1998 among the Company, Pediatric Services of America,
Inc., a Georgia corporation, the other parties thereto, and NationsBank, N.A.,
which has been succeeded by Bank of America, National Association, as the same
has been amended or otherwise modified.
"Expected Net Receivables" means the amount of the Net Amount of
------------------------
Eligible Accounts reasonably expected by the Lender to be collected within one
hundred eighty (180) days from Invoice Date.
"Federal Bankruptcy Code" or "Bankruptcy Code" means the bankruptcy
----------------------- ---------------
code of the United States of America codified in Title 11 of the United States
Code.
"Financial Statements" means, according to the context in which it is
--------------------
used, the financial statements contained in the Company's Form 10-Q for the
quarterly period ended June 30, 1999, any financial statements required to be
given to the Lender pursuant to Sections 8.2(a), (b) or (c), or any combination
--------------- --- ---
thereof.
"Fiscal Year" means each Borrower's fiscal year for financial
-----------
accounting purposes. The current Fiscal Year of each Borrower shall end on
September 30, 2000.
"Funding Date" means the date on which a Borrowing occurs.
------------
"GAAP" means at any particular time generally accepted accounting
----
principles as in effect at such time in the United States.
"Government Account Debtor" means the United States of America, any
-------------------------
state, any political subdivision of a state and any agency or instrumentality of
the United States of America or any state, political subdivision or fiscal
intermediary thereof (including any insurance company or other Person acting
solely in its capacity as a Medicare or Medicaid intermediary) that is
obligated to make any payments under (i) Medicare or Medicaid or (ii) with
respect to Accounts representing amounts owing under any other program
established by federal or state law that provides for payments for health care
goods or services to be made to providers thereof (including CHAMPUS and
CHAMPVA).
"Government Offset" means any amount determined by a Government
-----------------
Account Debtor, or any agent or governmental agency acting on behalf of a
Government Account Debtor or governmental agency, to constitute an overpayment
made to any Borrower Party with respect to an Account and that is to be paid to
such Government Account Debtor by any Borrower Party or is to be offset against
amounts then due to any Borrower Party from such Government Account Debtor,
including any amounts determined by HCFA or any agent acting on behalf thereof.
9
"Guaranty" by any Person means all obligations of such Person which in
--------
any manner directly or indirectly guarantee or assure, or in effect guarantee or
assure, the payment or performance of any indebtedness, dividend or other
obligation of any other Person (the "guaranteed obligations"), or assure or in
effect assure the holder of the guaranteed obligations against loss in respect
thereof, including, without limitation, any such obligations incurred through an
agreement, contingent or otherwise: (a) to purchase the guaranteed obligations
or any Property constituting security therefor; (b) to advance or supply funds
for the purchase or payment of the guaranteed obligations or to maintain a
working capital or other balance sheet condition; or (c) to lease Property or to
purchase any debt or equity securities or other Property or services.
"HCFA" means the Health Care Financing Administration or any successor
----
thereto.
"Health Care Laws" means any and all federal, state and local laws and
----------------
regulations governing the licensure, certification, good standing, accreditation
and approval of the provision of health care goods and services provided by any
Borrower Party or any of its Subsidiaries, including but not limited to laws and
regulations relating to licensure of operation, certificates of need,
certificates of operations, insurance, fraud and abuse, kickbacks, false claims,
physician self-referral arrangements, Medicaid, Medicare, CHAMPUS, CHAMPVA, the
federal Food, Drug & Cosmetic Act (FDCA) and the Food and Drug Administration.
"Indenture" means the Indenture dated as of April 16, 1998 among the
---------
Company, the Guaranteeing Subsidiaries parties thereto and SunTrust Bank,
Atlanta, as trustee, as in effect on the Closing Date and without giving effect
to any amendments, amendments and restatements or other modifications thereto
after the Closing Date.
"Intercompany Accounts" means all assets and liabilities, however
---------------------
arising, which are due to any Borrower Party from, which are due from any
Borrower Party to, or which otherwise arise from any transaction by any Borrower
Party with, any Affiliate of such Borrower Party.
"Interest Expense" means, with respect to any period, the consolidated
----------------
gross interest expense of the Company and its Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP.
"Interest Period" means, as to any LIBOR Rate Loan, the period
---------------
commencing on the Funding Date of such Loan or on the Conversion/Continuation
Date on which the Loan is converted into or continued as a LIBOR Rate Loan, and
ending on the date one, two, three or six months thereafter as selected by the
Borrowers' Agent in its Notice of Borrowing or Notice of
Conversion/Continuation; provided, however, that:
-------- -------
(i) if any Interest Period would otherwise end on a day that is
not a Business Day, that Interest Period shall be extended to the
following Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month, in which event
such Interest Period shall end on the preceding Business Day;
(ii) any Interest Period pertaining to a LIBOR Rate Loan that
begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Business Day
of the calendar month at the end of such Interest Period; and
(iii) no Interest Period shall extend beyond the Stated
Termination Date.
10
"Inventory" means any and all inventory, goods and merchandise,
---------
wherever located, to be furnished under any contract of service or held for sale
or lease, all raw materials, work-in-process, finished goods, returned goods,
and materials and supplies of any kind, nature or description, and all documents
of title or other documents representing them.
"Invoice Date" means, with respect to an Account, the date on which
------------
any Borrower Party first submitted a claim to an Account Debtor (other than a
Self-Pay Account Debtor) with regard to such Account. For avoidance of doubt,
if any Borrower Party submits a claim in respect of an Account to an Account
Debtor and such claim is not paid in full (the "Initial Claim"), and the
-------------
Borrower Party then submits a claim in respect of such Account to another
Account Debtor, the Initial Claim shall be treated as the "claim" for purposes
of the first sentence of this definition of Invoice Date.
"IRS" means the Internal Revenue Service or any successor agency.
---
"Latest Plan" means: (a) on the Closing Date and thereafter until the
-----------
Lender receives new projections pursuant to Section 8.2(f), the Company's
--------------
projections dated June 10, 1999, a true, complete and correct copy of which was
provided by the Company to the Lender prior to the Closing Date; and (b)
thereafter, the business plan most recently received by the Lender pursuant to
Section 8.2(f).
--------------
"Lender" is defined in the preamble.
------
"Letter of Credit" means a standby letter of credit issued by the
----------------
Lender pursuant to Section 2.3 hereof.
"Letter of Credit Obligations" means, at any date of determination
----------------------------
thereof, the sum, without duplication, of (i) the amount available for drawing
under all Letters of Credit then outstanding (without regard to whether any
conditions to drawing thereunder can then be met) plus (ii) the aggregate unpaid
amount of all Letter of Credit Reimbursement Obligations in respect of previous
drawings made under any Letters of Credit.
"Letter of Credit Limit" means five million dollars ($5,000,000).
----------------------
"Letter of Credit Reimbursement Obligations" means, at any date, the
------------------------------------------
obligations of the Borrowers then outstanding to reimburse the Lender for
payments made by the Lender under the Letters of Credit.
"Letter of Credit Request" has the meaning specified in Section 2.3.
------------------------ -----------
"LIBOR Interest Payment Date" means, with respect to a LIBOR Rate
---------------------------
Loan, the last day of each Interest Period applicable to such Loan.
"LIBOR Interest Rate Determination Date" means each date of
--------------------------------------
calculating the LIBOR Rate for purposes of determining the interest rate with
respect to an Interest Period. The LIBOR Interest Rate Determination Date for
any LIBOR Rate Loan shall be the second Business Day prior to the first day of
the related Interest Period for such LIBOR Rate Loan.
"LIBOR Margin" is defined in Section 3.1(a)(ii).
------------ ------------------
"LIBOR Rate" means, for any Interest Period, with respect to LIBOR
----------
Rate Loans comprising
11
part of the same Borrowing, the rate of interest per annum (rounded upward to
the next 1/1000th of 1.0%) determined as follows:
LIBOR Rate = LIBOR
------------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for any Interest
-----------------------------
Period the maximum reserve percentage (expressed as a decimal, rounded
upward to the next 1/100th of 1.0%) in effect on such day (whether or not
applicable to the Lender) under regulations issued from time to time by the
Board of Governors of the Federal Reserve for determining the maximum
reserve requirement (including any emergency, supplemental or other
marginal reserve requirement) with respect to Eurocurrency funding
(currently referred to as "Eurocurrency liabilities"); and
"LIBOR" means the rate of interest per annum (rounded upward to the
-----
next 1/16 of 1%) at which United States Dollar deposits in the approximate
amount of the Loan to be made or continued as, or converted into, a LIBOR
Rate Loan and having a maturity comparable to such Interest Period would be
offered by the Lender's applicable lending office to major banks in the
London interbank market at their request at approximately 11:00 a.m.
(London time) two Business Days prior to the commencement of such Interest
Period.
"LIBOR Rate Loans" means a Loan during any period in which it bears
----------------
interest based on the LIBOR Rate.
"Lien" means any mortgage or deed of trust, pledge, hypothecation,
----
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give or file, any financing statement perfecting a security
interest under the UCC or comparable law of any jurisdiction), regardless of
whether any of the foregoing is consensual or arises by operation of law or
otherwise is non-consensual.
"Loan Administration and Collateral Management Fee" is defined in
-------------------------------------------------
Section 3.5.
-----------
"Loans" means, collectively, all loans and advances provided for in
-----
Section 2.
---------
"Loan Documents" means this Agreement, each Letter of Credit, each
--------------
Blocked Account Agreement, each Additional Borrower Agreement, the Account
Debtor Notices, the Borrowing Base Certificates, the Trademark Security
Agreements, all Uniform Commercial Code financing statements, and all other
agreements, letters of credit, notices, instruments, and documents heretofore,
now or hereafter evidencing, securing, guaranteeing or otherwise relating to the
Obligations, the Collateral, the Security Interest, or any other aspect of the
transactions contemplated by this Agreement.
"Lockbox" means a lockbox or post office box which is subject to a
-------
Blocked Account Agreement.
12
"Material Adverse Effect" means a material adverse effect on any of
-----------------------
the following: (a) the Collateral; (b) the complete and timely repayment of the
Obligations; (c) the Lender's rights or remedies under any Loan Document (other
than, in the case of this clause (c), solely as a result of the Lender's failure
to qualify to do business in a particular jurisdiction); (d) the Property,
business, performance, operations, prospects, or condition (financial or
otherwise) of all Borrower Parties, taken as a whole; or (e) without limiting
the foregoing, the ability of all Borrower Parties, taken as a whole, to perform
their obligations under the Loan Documents in a manner which is reasonably
satisfactory to the Lender.
"Maximum Rate" has the meaning specified in Section 3.3.
------------ -----------
"Maximum Revolving Credit Line" has the meaning specified in clause
-----------------------------
(a) of the definition of Availability.
"Medicaid" means the medical assistance program established by Title
--------
XIX of the Social Security Act.
"Medicaid Account" means an Account representing a claim payable under
----------------
Medicaid.
"Medicare" means the health insurance program established by Title
--------
XVIII of the Social Security Act.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc.
-------
"Multiemployer Plan" means a multiemployer plan as defined in Section
------------------
4001(a)(3) of ERISA to which any Borrower Party or any ERISA Affiliate makes, is
making, made, or was at any time during the current year or the immediately
preceding six (6) years obligated to make contributions.
"Net Amount of Eligible Accounts" means, with respect to any Eligible
-------------------------------
Accounts, the gross amount of such Eligible Accounts less sales, excise or
similar taxes, and less discounts, claims, credits and allowances of any nature
at any time issued, owing, granted, outstanding, available or claimed in respect
of such Eligible Accounts (including without limitation discounts, claims and
allowances based on any fee schedule, discount formula, cost-based reimbursement
or other adjustment or limitation required by the related Account Debtors) and
disregarding interest, if any, payable by the related Account Debtors.
"Notice of Borrowing" has the meaning specified in Section 2.2(b).
------------------- --------------
"Notice of Conversion/Continuation" has the meaning specified in
---------------------------------
Section 3.2(b).
--------------
"Obligations" means all Loans, Letter of Credit Obligations, and all
-----------
other present and future loans, advances, liabilities, obligations (monetary or
otherwise), covenants, duties, and Debt owing by any Borrower Party to the
Lender, whether or not arising under this Agreement, whether or not evidenced by
any note or other instrument or document, whether arising from an extension of
credit, opening of a letter of credit, acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment from others, and any participation by
the Lender in any Borrower Party's debts owing to others), absolute or
contingent, due or to become due, primary or secondary, as principal or
guarantor, and including, without limitation, all interest, charges, expenses,
fees, attorneys' fees, filing fees and any other sums chargeable to or payable
by any Borrower Party hereunder, under another Loan Document, or under any
13
other agreement or instrument with the Lender. "Obligations" includes, without
-----------
limitation, all debts, liabilities and obligations now or hereafter owing from
any Borrower Party to the Lender arising from or related to any payment made by
the Lender to a Blocked Account Bank pursuant to a Blocked Account Agreement.
"Offset Reserve" means, with respect to all Accounts and Account
--------------
Debtors (other than Self-Pay Account Debtors), the result (but not less than
zero) of (a) the sum of the amounts which such Account Debtors have requested or
directed any Borrower Party to pay, or as to which any such Account Debtors have
notified any Borrower Party that such Account Debtors shall withhold, setoff or
recoup from any Borrower Party, in respect of actual or alleged overpayments by
any such Account Debtor in respect of any Account, plus (b) the sum of the
amounts due by the Borrower Parties to any Government Account Debtor relating to
any "cost report" settlements, plus (c) the aggregate amount which any Borrower
Party is indebted to such Account Debtors arising from the fact that an Account
Debtor, in addition to being an Account Debtor, has an additional relationship
with any Borrower Party (e.g., any Borrower Party is a tenant or customer of a
Person that is an Account Debtor), minus (d) the amount paid by any Borrower
Party to Account Debtors described in clause (a) as a refund of the overpayments
contemplated by clause (a).
"Other Criteria" has the meaning set forth in the definition of
--------------
Eligible Accounts.
"Other Taxes" means any present or future stamp or documentary taxes
-----------
or any other excise or property taxes, charges or similar levies which arise
from any payment made hereunder or from the execution, delivery or registration
of, or otherwise with respect to, this Agreement or any other Loan Documents.
"Participating Lender" means any Person that shall have been granted
--------------------
the right by the Lender to participate in the Loans and that shall have entered
into a participation agreement in form and substance satisfactory to the Lender.
"Payment Account" means a bank account maintained in the name of the
---------------
Lender on terms acceptable to the Lender and with the Lender or another bank
acceptable to the Lender.
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
----
succeeding to the functions thereof.
"Pension Plan" means a pension plan (as defined in Section 3(2) of
------------
ERISA) subject to Title IV of ERISA which any Borrower Party or an ERISA
Affiliate sponsors, maintains, or to which it makes, is making, or is obligated
to make contributions or, in the case of a Multiemployer Plan, has made
contributions at any time during the current year or the immediately preceding
six (6) plan years.
"Permitted Liens" means:
---------------
(a) Liens for taxes not yet delinquent or Liens for taxes in an amount
not to exceed three hundred fifty thousand dollars ($350,000) being
contested in good faith by appropriate proceedings diligently pursued,
provided that a reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor on the applicable Financial
Statements and that a stay of enforcement of any such Lien is in effect;
(b) Liens in favor of the Lender;
14
(c) Liens arising by operation of law in favor of warehousemen,
landlords, carriers, mechanics, materialmen, laborers, employees or
suppliers, incurred in the ordinary course of business of any Borrower
Party and not in connection with the borrowing of money, for sums not yet
delinquent or which are being contested in good faith and by proper
proceedings diligently pursued, provided that a reserve or other
appropriate provision, if any, required by GAAP shall have been made
therefor on the applicable Financial Statements and a stay of enforcement
of any such Lien is in effect;
(d) Liens in favor of any Person if such Liens are subordinated to the
Security Interest in a manner reasonably acceptable to the Lender pursuant
to an agreement, in form and substance reasonably satisfactory to the
Lender, among the Lender, such Person and, if the Lender so requires, one
or more Borrower Parties;
(e) Liens arising from cash deposits in connection with workers'
compensation or other unemployment insurance incurred in the ordinary
course of business of any Borrower Party;
(f) Liens created by deposits of cash to secure performance of bids,
tenders, leases (to the extent permitted under this Agreement), or trade
contracts, incurred in the ordinary course of business of any Borrower
Party and not in connection with the borrowing of money;
(g) Liens of or resulting from any judgment or award, the time for the
appeal or petition for rehearing of which has not yet expired, or in
respect of which any Borrower Party is in good faith prosecuting an appeal
or proceeding for a review, and in respect of which a stay of execution
pending such appeal or proceeding for review has been secured; and
(h) purchase money security interests in equipment and liens of
lessors under Capital Leases, the security interest or lien only encumbers
the asset purchased or leased, and so long as the security interest or lien
only secures the purchase price of the asset.
"Person" means any individual, sole proprietorship, partnership, joint
------
venture, trust, unincorporated organization, limited liability company,
association, corporation, Public Authority, or any other entity.
"Plan" means an employee benefit plan (as defined in Section 3(3) of
----
ERISA) which any Borrower Party or an ERISA Affiliate sponsors or maintains or
to which any Borrower Party or an ERISA Affiliate makes, is making, or is
obligated to make contributions and includes any Pension Plan.
"Premises" means the land identified by addresses on Schedule 9.13
-------- -------------
together with all buildings, improvements, and fixtures thereon and all
tenements, hereditaments, and appurtenances belonging or in any way appertaining
thereto, and which constitutes all of the real property in which any Borrower
Party has any interests on the Closing Date.
"Proceeds" means all products and proceeds of any Collateral, and all
--------
proceeds of such proceeds and products, including, without limitation: all
Collections, cash and credit balances, all payments under any indemnity,
warranty, or guaranty payable with respect to any Collateral, all awards for
taking by eminent domain, all proceeds of fire or other insurance, and all money
and other Property obtained as a result of any claims against third parties or
any legal action or proceeding with respect to Collateral.
15
"Property" means any interest in any kind of property or asset,
--------
whether real, personal or mixed, or tangible or intangible.
"Proprietary Rights" means any and all licenses, franchises, permits,
------------------
patents, patent rights, copyrights, works which are the subject matter of
copyrights, trademarks, trade names, trade styles, patent and trademark
applications and licenses and rights thereunder, including without limitation
those patents, trademarks and copyrights referred to on Schedule 9.14, and all
-------------
other rights under any of the foregoing, all extensions, renewals, reissues,
divisions, continuations, and continuations-in-part of any of the foregoing, and
all rights to ▇▇▇ for past, present, and future infringement of any of the
foregoing; inventions, trade secrets, formulae, processes, compounds, drawings,
designs, blueprints, surveys, reports, manuals, and operating standards;
goodwill; customer and other lists in whatever form maintained; and trade secret
rights, copyright rights, rights in works of authorship, and contract rights
relating to computer software programs, in whatever form created or maintained.
"Public Authority" means the government of any country or sovereign
----------------
state, or of any state, province, municipality, or other political subdivision
thereof, or any department, agency, public corporation or other instrumentality
of any of the foregoing and, without limiting the foregoing, any official,
attorney, employee, agent or "ombudsman", whether elected, appointed or
otherwise employed or retained, by any of the foregoing.
"Receivables" means any and all Accounts (whether or not earned by
-----------
performance), including without limitation Accounts owed to any Borrower Party
by any of its Subsidiaries or Affiliates, together with all interest, late
charges, penalties, collection fees, and other sums which shall be due and
payable in connection with any Account; proceeds of any letters of credit naming
any Borrower Party as beneficiary; contract rights relating to Accounts; chattel
paper relating to Accounts; instruments relating to Accounts; documents relating
to Accounts; investment property; royalty fees and other payments from
franchisees; general intangibles relating to Accounts; tort claims relating to
Accounts; contract claims relating to Accounts; choses in action relating to
Accounts; causes of action relating to Accounts; tax refunds; tax refund claims;
Reversions and other amounts payable to any Borrower Party from or with respect
to any Plan; interests in or claims under any policy of insurance; and all forms
of obligations owing to any Borrower Party (including, without limitation, in
respect of loans, advances, and extensions of credit by any Borrower Party to
its Subsidiaries and Affiliates); and guarantees and other security for any of
the foregoing.
"Records" means books, documents, EOBs, instruments, files and other
-------
records (including without limitation computer programs, tapes and disks) that
evidence an Account or are otherwise necessary or desirable to collect an
Account.
"Reference Rate" means the rate of interest publicly announced from
--------------
time to time by the Lender as its reference rate. It is a rate set by the
Lender based upon various factors including the Lender's costs and desired
return, general economic conditions, and other factors, and is used as a
reference point for pricing some loans. However, the Lender may price loans at,
above, or below such announced rate. Any changes in the Reference Rate shall
take effect on the day specified in the public announcement of such change.
"Reference Rate Margin" is defined in Section 3.1(a)(i).
--------------------- -----------------
"Reference Rate Loan" means a Loan during any period in which it bears
-------------------
interest based on the Reference Rate.
16
"Release" means a release, spill, emission, leaking, pumping,
-------
injection, deposit, disposal, discharge, dispersal, leaching or migration of a
Contaminant into the indoor or outdoor environment or into or out of any real
estate or other property, including the movement of Contaminants through or in
the air, soil, surface water, groundwater or real estate or other property.
"Reportable Event" means any of the events set forth in Section
----------------
4043(b) of ERISA or the regulations thereunder, other than any such event for
which the 30-day notice requirement under ERISA has been waived in regulations
issued by the PBGC.
"Requirement of Law" means any law (statutory or common), treaty, rule
------------------
or regulation or determination of an arbitrator or of a Public Authority.
"Restricted Investment" means any acquisition of Property by any
---------------------
Borrower Party or any of its Subsidiaries in exchange for cash or other
Property, whether in the form of an acquisition of stock, debt security, or
other indebtedness or obligation, or the purchase or acquisition of any other
Property, or a loan, advance, capital contribution, or subscription, except
acquisitions of the following: (a) fixed assets or certificates of need to be
used in the business of any Borrower Party or any of its Subsidiaries, in each
case in the ordinary course of business; (b) goods held for sale or lease or to
be used in the rendition of services by any Borrower Party and its Subsidiaries,
in each case in the ordinary course of business; (c) direct obligations of the
United States of America, or any agency thereof, or obligations guaranteed by
the United States of America, provided that such obligations mature within one
year from the date of acquisition thereof; (d) certificates of deposit maturing
within one year from the date of acquisition, bankers acceptances, Eurodollar
bank deposits, or overnight bank deposits, in each case issued by, created by,
or with a bank or trust company organized under the laws of the United States or
any state thereof having capital and surplus aggregating at least $100,000,000;
and (e) commercial paper given the highest rating by S&P or ▇▇▇▇▇'▇ and maturing
not more than 270 days from the date of creation thereof.
"Reversions" means any funds which may become due to any Borrower
----------
Party in connection with the termination of any Plan or other employee benefit
plan.
"S&P" means Standard & Poor's Ratings Services, a division of The
---
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc.
"Security Interest" means collectively the Liens granted to the Lender
-----------------
in the Collateral pursuant to this Agreement, the other Loan Documents, or any
other agreement or instrument.
"Self-Pay Account" means (i) the "co-pay" or "deductible" portion of
----------------
an Account payable by a Self-Pay Account Debtor, or (ii) the entire Account when
the entire amount is payable by a Self-Pay Account Debtor.
"Self-Pay Account Debtor" means an individual "natural" person.
-----------------------
"Solvent" means when used with respect to any Person that at the time
-------
of determination:
(i) the assets of such Person, at a fair valuation, are in excess
of the total amount of its debts (including, without limitation,
contingent liabilities); and
(ii) the realizable value of its assets is greater than its
probable liability on
17
its existing debts as such debts become absolute and matured; and
(iii) it is then able and expects to be able to pay its debts
(including, without limitation, contingent debts and other
commitments) as they mature; and
(iv) it has capital sufficient to carry on its business as
conducted and as proposed to be conducted.
For purposes of determining whether a Person is Solvent, the amount of any
contingent liability shall be computed as the amount that, in light of all the
facts and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Specified Bad Debt Expense Amount" means, for any period of four
---------------------------------
consecutive fiscal quarters, the excess, if any, of (i) the amount of "bad debt
expense" of the Company and its Subsidiaries on a consolidated basis for such
period over (ii) four percent (4%) of the "net revenues" of the Company and its
Subsidiaries on a consolidated basis for such period; provided that for any
period of four consecutive fiscal quarters ending with the last fiscal quarter
of any Fiscal Year (commencing with the Fiscal Year beginning October 1, 1999),
the Specified Bad Debt Expense Amount shall be zero if the "actual writeoffs" of
the Company and its Subsidiaries on a consolidated basis for such period do not
exceed four percent (4%) of the "net revenues" of the Company and its
Subsidiaries on a consolidated basis for such period.
"Stated Termination Date" has the meaning specified in Section 14.
----------------------- ----------
"Subordinated Notes" means the Company's $100,000,000 10% Senior
------------------
Subordinated Notes due 2008 issued under the Indenture, of which $75,000,000 is
outstanding on the Closing Date.
"Subsidiary" of a Person means any corporation, association,
----------
partnership, limited liability company, joint venture or other business entity
of which more than fifty percent (50%) of the voting stock or other equity
interests (in the case of Persons other than corporations), is owned or
controlled directly or indirectly by the Person, or one or more of the
Subsidiaries of the Person, or a combination thereof. Unless the context
otherwise clearly requires, references herein to a "Subsidiary" refer to a
Subsidiary of a Borrower Party.
"Taxes" means any and all present or future taxes, assessments,
-----
levies, imposts, impositions, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of the Lender, such
taxes (including income taxes or franchise taxes) as are imposed on or measured
by the Lender's net income by the jurisdiction (or any political subdivision
thereof) under the laws of which the Lender is organized or maintains a lending
office.
"Termination Fee" means (x) three hundred thousand dollars ($300,000)
---------------
if this Agreement is terminated on or prior to the first Anniversary Date, and
(y) one hundred fifty thousand dollars ($150,000) if this Agreement is
terminated after the first Anniversary Date but on or prior to the second
Anniversary Date.
"Total Facility" has the meaning specified in Section 2.1.
-------------- -----------
"Trademark Security Agreement" has the meaning specified in Section
---------------------------- -------
11.1.
----
18
"Trigger Period" means that (i) an Event of Default has occurred and
--------------
is continuing, or (ii) the sum of the unpaid balance of the Loans plus the
Letter of Credit Obligations exceeds ninety percent (90%) of Availability
(without subtracting from Availability the unpaid balance of the Loans and the
Letter of Credit Obligations at that time).
"UCC" means the Uniform Commercial Code (or any successor statute) of
---
the State of New York or of any other state the laws of which are required by
Section 9-103 thereof to be applied in connection with the issue of perfection
of security interests.
"Unbilled Account" means an Account as to which a Borrower Party has
----------------
not submitted to the related Account Debtor (other than a Self-Pay Account
Debtor) all necessary claim forms, other documentation and information required
in order for such Account Debtor to make payment of such Account.
"Unused Line Fee" has the meaning specified in Section 3.1(c).
--------------- --------------
1.2 Accounting Terms. Any accounting term used in this Agreement
----------------
shall have, unless otherwise specifically provided herein, the meaning
customarily given in accordance with GAAP, and all financial computations
hereunder shall be computed, unless otherwise specifically provided herein, in
accordance with GAAP as consistently applied and using the same method for
inventory valuation as used in the preparation of the Financial Statements.
1.3 Interpretive Provisions. (a) All other undefined terms contained
-----------------------
in this Agreement shall, unless the context indicates otherwise, have the
meanings provided for by the UCC to the extent the same are used or defined
therein.
(b) Wherever appropriate in the context, terms used herein in the
singular also include the plural, and vice versa, and each masculine, feminine,
---- -----
or neuter pronoun shall also include the other genders.
(c) The words "hereof," "herein," "hereunder" and similar words refer
to this Agreement as a whole and not to any particular provision of this
Agreement; and Subsection, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(d) The term "documents" includes any and all instruments, documents,
agreements, certificates, indentures, notices and other writings.
(e) The term "including" is not limiting and means "including without
limitation" (even though in some places in this Agreement the words "without
limitation" are set forth after the word "including").
(f) In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including," the words "to"
and "until" each mean "to but excluding" and the word "through" means "to and
including."
(g) Any statement, condition or requirement in this Agreement that a
fact, circumstance, event, representation and warranty or occurrence exist or be
true as of the date a Loan is made shall also be deemed to be a statement,
condition or requirement that such fact, circumstance, event, representation or
warranty or occurrence also exist or be true as of the date any Letter of Credit
is issued (regardless of whether a Loan is being made at the time that a Letter
of Credit is being issued); provided that this sentence shall not require a
19
representation and warranty that relates only to a specific date in the past to
be updated unless this Agreement requires such update.
(h) Unless specified herein, references herein to times of day are to
Chicago time.
(i) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments, amendments and restatements and
other modifications thereto, but only to the extent such amendments, amendments
and restatements and other modifications are not prohibited by the terms of any
Loan Document, and (ii) references to any statute or regulation are to be
construed as including all statutory and regulatory provisions consolidating,
amending, replacing, supplementing or interpreting the statute or regulation.
(j) This Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and shall each be
performed in accordance with its terms.
(k) This Agreement and the other Loan Documents are the result of
negotiations among, and have been reviewed by counsel to, each of the parties
hereto and thereto and are the products of all parties. Accordingly, neither
this Agreement nor any other Loan Document shall be construed against the Lender
because of the Lender's involvement in the preparation of this Agreement and the
other Loan Documents.
2. LOANS AND LETTERS OF CREDIT.
---------------------------
1 Total Facility. Subject to all of the terms and conditions of this
--------------
Agreement, the Lender shall make available a total credit facility of up to
thirty million dollars ($30,000,000) (the "Total Facility") for the Borrowers'
--------------
use from time to time during the term of this Agreement. The Total Facility
shall be comprised of a revolving line of credit up to the limits of the
Availability, consisting of Loans and Letters of Credit as described in Sections
--------
2.2 and 2.3.
--- ---
2 Loans.
-----
(a) The Lender shall, upon request of the Borrowers' Agent
from time to time, make revolving loans (the "Loans") to the Borrowers up to the
-----
limits of the Availability calculated on a consolidated basis with respect to
all Borrower Parties. The Lender, in its discretion, may elect to make Loans in
excess of the Availability on one or more occasions, but if it does so, the
Lender shall not be deemed thereby to have changed the limits of the
Availability or to be obligated to exceed the limits of the Availability on any
other occasion. If the unpaid balance of the Loans exceeds the Availability
(with Availability determined for this purpose without subtracting the unpaid
balance of the Loans) then the Lender may refuse to make Loans or may otherwise
restrict Loans on such terms as the Lender determines until such excess has been
eliminated. The Lender shall charge all Loans and other Obligations to a loan
account of the Company maintained with the Lender (and all references in this
Agreement to the "loan account" of the Company shall be references to such
account). All Loans shall be requested by and advanced to the Borrowers' Agent.
All reasonable fees, commissions, costs, expenses, and other charges under or
pursuant to the Loan Documents, and all reasonable payments made and out-of-
pocket expenses incurred by the Lender pursuant to the Loan Documents, shall be
charged as Loans to the loan account of the Company as of the date due or the
date paid or incurred by the Lender, as the case may be.
20
(b) Procedure for Borrowing.
-----------------------
(i) Each Borrowing shall be made upon the irrevocable
written notice ("Notice of Borrowing") from the Borrowers' Agent to the Lender,
-------------------
which notice must be received by the Lender not later than (1) 12:00 noon,
Chicago time, three Business Days prior to the requested Funding Date in the
case of LIBOR Rate Loans, and (2) 12:00 noon, Chicago time, on the requested
Funding Date in the case of Reference Rate Loans, specifying:
(A) the amount of the Borrowing which, in the case
of LIBOR Rate Loans, shall be in an amount not less than one million five
hundred thousand dollars ($1,500,000) and in an integral multiple of two hundred
fifty thousand dollars ($250,000) in excess thereof;
(B) the requested Funding Date, which shall be a
Business Day;
(C) whether the Loans requested are to be Reference
Rate Loans or LIBOR Rate Loans; and
(D) the duration of the Interest Period if the
requested Loans are to be LIBOR Rate Loans. If the Notice of Borrowing fails to
specify the duration of the Interest Period for any Borrowing comprised of LIBOR
Rate Loans, such Interest Period shall be one month; provided, however, that
with respect to the Borrowings to be made on the Closing Date, such Borrowings
shall consist of Reference Rate Loans only.
(ii) After giving effect to any Borrowing, there shall
not be more than five different Interest Periods in effect.
3 Letters of Credit.
-----------------
(a) Issuance of Letters of Credit.
-----------------------------
(i) Subject to the terms and conditions hereof and such
additional terms and conditions as the Lender may require, the Lender agrees to
issue upon the written request of the Borrowers' Agent therefor from time to
time up to but not including thirty (30) days prior to the Stated Termination
Date, Letters of Credit for the account of a Borrower; provided that the
aggregate amount of the Letter of Credit Obligations shall not at any time
exceed the Letter of Credit Limit.
(ii) Each Letter of Credit shall (x) have an expiration
date not later than the Stated Termination Date unless otherwise agreed to by
the Lender in its sole discretion, and (y) be otherwise in form and substance
satisfactory to the Lender in all respects.
(iii) The Borrowers' Agent shall deliver to the Lender
prior to noon (Chicago time) at least three (3) Business Days before the
requested date of issuance of a Letter of Credit, a written request for the
issuance of such Letter of Credit (a "Letter of Credit Request"), together with
------------------------
any documents required to be delivered to the Lender pursuant to Section 11.2
------------
prior to the issuance of such Letter of Credit. Such request shall set forth:
(v) the beneficiary of the Letter of Credit, (w) the stated amount thereof, (x)
the requested issue date, (y) the requested expiration date and (z) the drawing
conditions applicable thereto. On
21
the requested date of issuance of such Letter of Credit the Borrowers' Agent
shall deliver to the Lender such documents as shall be required by Section 11.2.
------------
This clause (iii) shall be subject to, and shall not limit, clauses (i) and
------------ -----------
(ii) of this Section 2.3(a).
---- --------------
(b) Reimbursement Obligations of the Borrowers. Each of the Borrowers
------------------------------------------
agrees, as a separate obligation, independent from any other obligation it may
have hereunder, to reimburse the Lender for any drawing under any Letter of
Credit for the full amount of such drawing on the date of such drawing, in like
currency, without presentment, demand, protest or other formalities of any kind.
All amounts paid by the Lender under any Letter of Credit not reimbursed by a
Borrower as provided herein shall bear interest, payable on demand, for each day
until the Borrowers reimburse the Lender therefor, at a rate per annum equal to
the weighted average LIBOR Rate determined for the applicable Interest Periods
in which such day occurs plus the LIBOR Margin (provide that if no LIBOR Rate
Loans are outstanding on any such day, the LIBOR Rate for purposes of this
sentence shall be calculated based on a hypothetical three month Interest Period
for a hypothetical LIBOR Rate Loan in the approximate aggregate amount of such
unreimbursed amounts).
(c) Reimbursement and Other Payment by the Borrowers. The obligations
------------------------------------------------
of the Borrowers to reimburse the Lender in respect of any Letter of Credit
shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Agreement, under all circumstance
whatsoever, including without limitation the following circumstances:
(i) any lack of validity or enforceability of any Letter of
Credit or any related document;
(ii) any amendment or waiver of or any consent to departure
from any Letter of Credit or any related document;
(iii) the existence of any claim, set-off, defense or other
right which any Borrower may have at any time against the beneficiary of any
Letter of Credit (or any Person for whom such beneficiary may be acting), the
Lender or any other Person, whether in connection with this Agreement, any other
Loan Document or any unrelated transaction;
(iv) any statement or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect
whatsoever;
(v) payment by the Lender under any Letter of Credit against
presentation of a draft or document which does not comply with the terms of such
Letter of Credit; or
(vi) to the extent permitted under applicable law, any other
circumstance or happening whatsoever, whether or not similar to any of the
foregoing.
(d) Cash Collateralization of Letter of Credit Liabilities. Upon any
------------------------------------------------------
optional payment in full of the Loans and termination of this Agreement and upon
the occurrence and during the continuance of any Event of Default, the Borrowers
on demand of the Lender shall deposit into an account established pursuant to
arrangements satisfactory to the Lender in its sole discretion, immediately
available funds in an amount equal to all Letter of Credit Obligations then
outstanding.
22
4 The Borrowers' Agent.
--------------------
(a) Each Borrower hereby irrevocably appoints, designates and
authorizes the Company as the agent and attorney-in-fact of such Borrower (the
Company, in such capacity for all of the Borrowers, being referred to as the
"Borrowers' Agent") to give and receive notices, statements, requests and
-----------------
instructions on such Borrower's behalf under this Agreement and any other Loan
Document and otherwise communicate on such Borrower's behalf with the Lender,
and, without limiting the foregoing, to take such action on such Borrower's
behalf under the provisions of this Agreement and each other Loan Document and
to exercise such powers and perform such duties as are delegated to the
Borrowers' Agent by the terms of this Agreement or any other Loan Document,
together with such powers as are incidental thereto. Such appointment is
coupled with an interest. The Company hereby accepts such appointment,
designation and authorization.
(b) Without limiting the foregoing, the Lender may give notices,
statements, requests and instructions to any Borrower through the Borrowers'
Agent and may accept and act upon any notices, statements, requests and
instructions given by the Borrowers' Agent, and each such notice, statement,
request and instruction shall be binding upon the Borrowers. Notwithstanding
such appointment, designation, and authorization, the Lender may also deal
directly with, and give and receive notices, statements, requests and
instructions to and from, any Borrower, provided that the Lender shall promptly
give notice of any such communications with any Borrower to the Borrowers'
Agent. Any communications transmitted by the Lender to a Borrower shall be sent
to such Borrower in care of the Company at the address of the Company determined
in accordance with Section 15.10. If conflicting instructions are received from
-------------
any Borrower Party and from the Borrowers' Agent, the notice, statement, request
or instruction of the Borrowers' Agent shall prevail.
(c) The Borrowers' Agent shall promptly forward to the Lender or the
Borrowers, as appropriate, all notices, documents, certificates, financial
statements and reports received by it in the performance of its duties
hereunder.
(d) The Borrowers' Agent shall perform its duties hereunder and under
the other Loan Documents on behalf of the Borrowers. All actions of the
Borrowers' Agent shall in each case bind all the Borrowers, whether or not any
such action has been authorized by such Borrowers.
3. INTEREST AND OTHER CHARGES.
--------------------------
1 Interest.
--------
(a) All Obligations shall bear interest on the unpaid
principal amount thereof from the date made until paid in full in cash at a rate
determined by reference to the Reference Rate or the LIBOR Rate and Sections
--------
3.1(a)(i) or (ii), as applicable, but not to exceed the Maximum Rate. Subject to
--------- ----
the provisions of Section 3.2, any of the Loans may be converted into, or
-----------
continued as, Reference Rate Loans or LIBOR Rate Loans in the manner provided in
Section 3.2. If at any time Loans are outstanding with respect to which notice
-----------
has not been delivered to Lender in accordance with the terms of this Agreement
specifying the basis for determining the interest rate applicable thereto, then
those Loans shall be Reference Rate Loans and shall bear interest at a rate
determined by reference to the Reference Rate until notice to the contrary has
been given to the Lender and such notice has become effective. Except as
otherwise provided herein, the Obligations shall bear interest as follows:
(i) For all Obligations, other than LIBOR Rate Loans, then at a
fluctuating per
23
annum rate equal to one-quarter of one percent (0.25%) (the "Reference Rate
--------------
Margin") plus the Reference Rate; and
------
(ii) If the Loans are LIBOR Rate Loans, then at a per annum rate
equal to two and three-quarters percent (2.75%) (the "LIBOR Margin") plus the
------------
LIBOR Rate determined for the applicable Interest Period.
Each change in the Reference Rate shall be reflected in the interest rate
described in clause (i) above as of the effective date of such change. All
interest charges in respect of the Obligations shall be computed on the basis of
a year of three hundred sixty (360) days and actual days elapsed. All interest
on the Obligations shall be payable to the Lender on the first day of each month
hereafter; provided that interest on all LIBOR Rate Loans shall be payable to
the Lender on the last day of the applicable Interest Period, but not less
frequently than every three months.
(b) If any Event of Default occurs, then, from the date such Event of
Default occurs until it is cured or waived, or if not cured or waived until all
Obligations are paid and performed in full, the Borrowers shall pay interest on
the unpaid principal balances of the Loans (and all amounts paid under any
Letter of Credit but not reimbursed by the Borrowers) at a per annum rate two
percent (2%) greater than the rate of interest otherwise specified herein.
(c) For every month during the term of this Agreement, the Borrowers
shall pay the Lender a fee (the "Unused Line Fee") in an amount equal to one-
---------------
quarter of one percent (0.25%) per annum, multiplied by the average daily amount
-------------
by which the Maximum Revolving Credit Line exceeds the sum of (i) the average
daily outstanding amount of Loans during such month and (ii) the average daily
undrawn face amount of all outstanding Letters of Credit during such month, with
the outstanding amount of Loans calculated for this purpose by applying payments
immediately upon receipt. Such a fee, if any, shall be calculated on the basis
of a year of three hundred sixty (360) days and actual days elapsed, and shall
be payable to the Lender on the first day of each month and on the termination
of this Agreement, in each case with respect to the prior month or portion
thereof.
2 Conversion and Continuation Elections.
-------------------------------------
(a) The Borrowers' Agent may, upon irrevocable written notice to
the Lender in accordance with subsection 3.2(b):
-----------------
(i) elect, as of any Business Day, in the case of Reference
Rate Loans to convert any such Loans (or any part thereof in an amount not
less than one million five hundred thousand dollars ($1,500,000), or that
is in an integral multiple of two hundred fifty thousand dollars ($250,000)
in excess thereof) into LIBOR Rate Loans; or
(ii) elect, as of the last day of the applicable Interest
Period, to continue any LIBOR Rate Loans having Interest Periods expiring
on such day (or any part thereof in an amount not less than one million
five hundred thousand dollars ($1,500,000), or that is in an integral
multiple of two hundred fifty thousand dollars ($250,000) in excess
thereof);
provided, that if at any time the aggregate amount of LIBOR Rate Loans in
--------
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than one million five hundred thousand dollars
24
($1,500,000), such LIBOR Rate Loans shall automatically convert into Reference
Rate Loans, and on and after such date the right of the Borrowers' Agent to
continue such Loans as, and convert such Loans into, LIBOR Rate Loans, as the
case may be, shall terminate.
(b) The Borrowers' Agent shall deliver a written notice of
conversion or continuation ("Notice of Conversion/Continuation") to be received
---------------------------------
by the Lender not later than 12:00 noon, Chicago time, at least three Business
Days in advance of the date of conversion or continuation, if the Loans are to
be converted into or continued as LIBOR Rate Loans and specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Loans to be converted or
continued;
(C) the type of Loans resulting from the proposed
conversion or continuation; and
(D) the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to
LIBOR Rate Loans, the Borrowers' Agent has failed to select timely a new
Interest Period to be applicable to LIBOR Rate Loans or if any Event or Event of
Default then exists, the Borrowers' Agent shall be deemed to have elected to
convert such LIBOR Rate Loans into Reference Rate Loans effective as of the
expiration date of such Interest Period.
(d) Following the occurrence and during the continuance of an
Event of Default, the Lender shall have the right to decline to permit a Loan to
be converted into or continued as a LIBOR Rate Loan. Following the occurrence
and during the continuance of an Event of Default, the Borrowers' Agent shall
not elect to have a Loan converted into or continued as a LIBOR Rate Loan.
(e) After giving effect to any conversion or continuation of
Loans, there may not be more than five different Interest Periods in effect.
3 Maximum Interest Rate.
---------------------
(a) Notwithstanding the provisions of this Agreement regarding
the rates of interest applicable to the Loans and other Obligations, if at any
time the amount of such interest would exceed the amount of such interest
computed upon the basis of the maximum rate of interest permitted by applicable
law in effect from time to time, after taking into account, to the extent
required by applicable law, any and all fees, payments, charges and calculations
provided for in this Agreement or in any other Loan Document (the "Maximum
-------
Rate"), the interest payable under this Agreement shall be computed upon the
----
basis of the Maximum Rate, but any subsequent reduction in the Reference Rate or
in the LIBOR Rate shall not reduce such interest thereafter payable hereunder
below the amount computed on the basis of the Maximum Rate until the aggregate
amount of such interest accrued and payable under this Agreement equals the
total amount of interest which would have accrued if such interest had not been
limited by the Maximum Rate.
(b) No agreements, conditions, provisions or stipulations
contained in this
25
Agreement or any other Loan Document or default of any Borrower Party, or
the exercise by the Lender of any right (including in respect of the
acceleration of payment of principal or interest) under or in connection with
this Agreement or any other Loan Document, or the arising of any contingency
whatsoever, shall entitle the Lender to collect, in any event, interest
exceeding the Maximum Rate and in no event shall any Borrower Party be obligated
to pay interest exceeding the Maximum Rate, and all agreements, conditions or
stipulations, if any, which may in any event or contingency whatsoever operate
to bind, obligate or compel any Borrower Party to pay a rate of interest
exceeding the Maximum Rate, shall be without binding force or effect, at law or
in equity, to the extent only of the excess of interest over such Maximum Rate.
In the event any interest is charged in excess of the Maximum Rate ("Excess
------
Interest"), each Borrower Party acknowledges and stipulates that any such charge
---------
shall be the result of an accidental and bona fide error, and such Excess
---- ----
Interest shall be, first, applied to reduce the principal then unpaid hereunder;
second, applied to reduce the other Obligations then payable; and third,
returned to the applicable Borrower Party, it being the intention of the parties
hereto not to enter at any time into a usurious or otherwise illegal
relationship. Each Borrower Party recognizes that, considering, among other
things, fluctuations in the Reference Rate, the LIBOR Rate or the Maximum Rate,
such an unintentional result could inadvertently occur. The Borrower Parties
covenant that (i) the credit or return of any Excess Interest shall constitute
the acceptance by the Borrower Parties of such Excess Interest, and (ii) the
Borrower Parties shall not seek or pursue any other remedy, legal or equitable,
against the Lender, based in whole or in part upon the charging or receiving of
any interest in excess of the maximum authorized by applicable law. For the
purpose of determining whether or not any Excess Interest has been contracted
for, charged or received by the Lender, all interest at any time contracted for,
charged or received by the Lender in connection with this Agreement shall be
amortized, prorated, allocated and spread in equal parts during the entire term
of this Agreement.
(c) The provisions of this Section 3.3 shall be deemed to be
-----------
incorporated into every document or communication relating to the Obligations
which sets forth or prescribes any account, right or claim or alleged account,
right or claim of the Lender with respect to any Borrower Party (or any other
obligor in respect of Obligations), whether or not any provision of this Section
-------
3.3 is referred to therein. All such documents and communications and all
---
figures set forth therein shall, for the sole purpose of computing the extent of
the liabilities and obligations of any Borrower Party (or other obligor)
asserted by the Lender thereunder, be automatically recomputed by such Borrower
Party or other obligor, and by any court considering the same, to give effect to
the adjustments or credits required by this Section 3.3.
-----------
(d) If applicable law is amended in the future to allow a greater
rate of interest (after taking into account, to the extent required by law, any
and all other fees, payments, charges and calculations provided for in this
Agreement or in any other Loan Document) to be charged under this Agreement or
any other Loan Document than is presently allowed by applicable law, then the
limitation of interest under this Section 3.3 shall be increased to the maximum
-----------
rate of interest allowed by applicable law as amended, which increase shall be
effective hereunder on the effective date of such amendment, and all interest
charges owing to the Lender by reason thereof, if any, shall be payable upon
demand.
4 Closing Fee. The Borrowers shall pay the Lender on the Closing Date
-----------
a closing fee in the amount of two hundred twenty-five thousand dollars
($225,000) (the "Closing Fee"), less fifty thousand dollars ($50,000) previously
-----------
paid as a commitment fee by the Company in respect thereof pursuant to the
letter agreement dated September 9, 1999 between the Company and the Lender.
26
3.5 Loan Administration and Collateral Management Fee. The Borrowers
-------------------------------------------------
shall pay the Lender an annual loan administration and collateral monitoring fee
(the "Loan Administration and Collateral Management Fee") on the Closing Date
-------------------------------------------------
and on each Anniversary Date, in the amount of twenty-five thousand dollars
($25,000).
3.6 Letter of Credit Fee. The Borrowers shall pay the Lender a fee
--------------------
(the "Letter of Credit Fee") equal to two and three-quarters percent (2.75%) per
--------------------
annum of the aggregate amount of each outstanding Letter of Credit that is
undrawn but available for drawing from time to time (whether or not any
conditions to drawing can then be met), computed for each day from and including
the date of issuance of such Letter of Credit to but excluding the date that is
two (2) Business Days after the last day a drawing is available under such
Letter of Credit. The Letter of Credit Fee shall be payable monthly in arrears
on the first day of each month following any month in which a Letter of Credit
was issued and/or in which a Letter of Credit remains outstanding and on the
termination of this Agreement, in each case with respect to the prior month or
portion thereof. The Letter of Credit Fee shall be computed on the basis of a
360-day year for the actual number of days elapsed. If any Event of Default
occurs, then, from the date such Event of Default occurs until it is cured or
waived, or if not cured or waived until all Obligations are paid and performed
in full, the Letter of Credit Fee shall be automatically increased to four and
three-quarters percent (4.75%) per annum.
4. PAYMENTS AND PREPAYMENTS.
------------------------
1 Loans and Letters of Credit. The Borrowers shall repay the
---------------------------
outstanding principal balance of the Loans and the aggregate unpaid amount of
all Letter of Credit Reimbursement Obligations in respect of previous drawings
made under any Letter of Credit, plus all accrued but unpaid interest with
respect thereto, upon the termination of this Agreement for any reason. In
addition, and without limiting the generality of the foregoing, the Borrowers
shall pay to the Lender, on demand (unless the Lender agrees otherwise), the
amount by which (a) the sum of the unpaid principal balance of the Loans at any
time plus the Letter of Credit Obligations at such time exceeds (b) the
Availability at such time (determined for this purpose as if the sum of the
unpaid principal balance of the Loans plus the Letter of Credit Obligations were
zero), regardless of whether the Lender elected to make Loans or issue Letters
of Credit in excess of the Availability.
2 Place and Form of Payments; Extension of Time. All payments of
---------------------------------------------
principal, interest, and other sums due to the Lender shall be made at the
Lender's address determined in accordance with Section 15.10. Except for
-------------
Proceeds received directly by the Lender, all such payments shall be made in
immediately available funds. If any payment of principal, interest, or other
sum to be made hereunder becomes due and payable on a day other than a Business
Day, the due date of such payment shall be extended to the next succeeding
Business Day and interest thereon shall be payable at the applicable interest
rate during such extension.
3 Application and Reversal of Payments. Proceeds of Collateral and
------------------------------------
other payments that the Lender receives shall be applied in the following order:
(i) first, to fees, costs and expenses then due and payable by the Borrower
Parties, (ii) second, to sums owed in respect of indemnification and
27
other Obligations not covered by clauses (i), (iii), (iv) or (v) of this
sentence, (iii) third, to accrued but unpaid interest then due and owing on the
Obligations, (iv) fourth, to the principal balance of the Loans then
outstanding, (v) fifth, to the aggregate unpaid amount of all Letter of Credit
Reimbursement Obligations, and (vi) the remainder, if any, to the Borrower's
Agent for the account of the Borrowers. The Lender shall have the continuing and
exclusive right to apply and reverse and reapply any and all such Proceeds and
payments to any portion of the Obligations.
4 INDEMNITY FOR RETURNED PAYMENTS. IF AFTER RECEIPT OF ANY PAYMENT
-------------------------------
WHICH IS APPLIED TO THE PAYMENT OF ALL OR ANY PART OF THE OBLIGATIONS, THE
LENDER IS FOR ANY REASON COMPELLED TO SURRENDER SUCH PAYMENT TO ANY PERSON
BECAUSE SUCH PAYMENT IS INVALIDATED, DECLARED FRAUDULENT, SET ASIDE, DETERMINED
TO BE VOID OR VOIDABLE AS A PREFERENCE, IMPERMISSIBLE SETOFF, OR A DIVERSION OF
TRUST FUNDS, OR FOR ANY OTHER REASON, THEN: THE OBLIGATIONS OR PART THEREOF
INTENDED TO BE SATISFIED SHALL BE REVIVED AND CONTINUE AND THIS AGREEMENT SHALL
CONTINUE IN FULL FORCE AS IF SUCH PAYMENT HAD NOT BEEN RECEIVED BY THE LENDER
AND EACH BORROWER PARTY SHALL BE LIABLE TO PAY TO THE LENDER AND HEREBY DOES
INDEMNIFY THE LENDER AND HOLD THE LENDER HARMLESS FOR THE AMOUNT OF SUCH PAYMENT
SURRENDERED. The provisions of this Section 4.4 shall be and remain effective
-----------
notwithstanding any contrary action which may have been taken by the Lender in
reliance upon such payment, and any such contrary action so taken shall be
without prejudice to the Lender's rights under this Agreement and shall be
deemed to have been conditioned upon such payment having become final and
irrevocable. The provisions of this Section 4.4 shall survive the termination
-----------
of this Agreement.
5. LENDER'S BOOKS AND RECORDS; MONTHLY STATEMENTS'. Each Borrower Party
-----------------------------------------------
agrees that the Lender's books and records showing the Obligations and the
transactions pursuant to this Agreement and the other Loan Documents shall be
admissible in any action or proceeding arising therefrom, and absent manifest
error shall constitute prime facie evidence thereof, irrespective of whether any
Obligation is also evidenced by a promissory note or other instrument. The
Lender shall provide to the Borrowers' Agent a monthly statement of Loans,
payments, and other transactions pursuant to this Agreement. Such statement
absent manifest error shall be deemed correct, accurate, and binding on the
Borrower Parties and as an account stated (except for reversals and
reapplications of payments made as provided in Section 4.3 and corrections of
-----------
errors discovered by the Lender), unless the Borrowers' Agent notifies the
Lender in writing to the contrary within one hundred twenty (120) days after
such statement is given to the Borrowers' Agent. In the event a timely written
notice of objections is given by the Borrowers' Agent, only the items to which
exception is expressly made shall be considered to be disputed by the Borrower
Parties.
28
6. TAXES, YIELD PROTECTION AND ILLEGALITY
--------------------------------------
1 Taxes.
-----
(a) Any and all payments by any Borrower Party to the Lender
under this Agreement and any other Loan Document shall be made free and clear
of, and without deduction or withholding for any Taxes. In addition, the
Borrower Parties shall pay all Other Taxes.
(b) Each Borrower Party agrees to indemnify and hold harmless
the Lender for the full amount of Taxes or Other Taxes (including any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section)
paid by the Lender and any liability (including penalties, interest, additions
to tax and expenses) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within thirty (30) days after the date the Lender
makes written demand therefor.
(c) If any Borrower Party shall be required by law to deduct
or withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to the Lender, then:
(i) the sum payable shall be increased as necessary so
that after making all required deductions and withholdings (including deductions
and withholdings applicable to additional sums payable under this Section) the
Lender receives an amount equal to the sum it would have received had no such
deductions or withholdings been made;
(ii) such Borrower Party shall make such deductions and
withholdings;
(iii) such Borrower Party shall pay the full amount
deducted or withheld to the relevant taxing authority or other authority in
accordance with applicable law; and
(iv) such Borrower Party shall also pay to the Lender
at the time interest is paid, all additional amounts which the Lender specifies
as necessary to preserve the after tax yield the Lender would have received if
such Taxes or Other Taxes had not been imposed.
(d) Within thirty (30) days after the date of any payment by
any Borrower Party of Taxes or Other Taxes, such Borrower Party shall furnish
the Lender the original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment reasonably satisfactory to the Lender,
which such satisfactory evidence shall include, without limitation, cancelled
checks.
29
2 Illegality.
----------
(a) If the Lender determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Public Authority has asserted that
it is unlawful, for the Lender or its applicable lending office to make LIBOR
Rate Loans, then, on notice thereof by the Lender to the Borrowers' Agent, (i)
any obligation of the Lender to make LIBOR Rate Loans shall be suspended, and
(ii) interest on unreimbursed amounts under the Letters of Credit shall bear
interest at a per annum rate equal to the Reference Rate plus the Reference Rate
Margin rather than at the per annum rate determined in accordance with Section
-------
2.3(b), in each case until the Lender notifies the Borrowers' Agent that the
------
circumstances giving rise to such determination no longer exist. The Lender
shall notify the Borrowers' Agent promptly upon becoming aware that the
circumstances giving rise to such determination no longer exist.
(b) If the Lender determines that it is unlawful to maintain
any LIBOR Rate Loan, then, upon demand by the Lender, each Borrower shall prepay
in full all of the LIBOR Rate Loans relating to such Borrower and then
outstanding, together with interest accrued thereon and amounts required under
Section 6.4, either on the last day of the Interest Period thereof, if the
-----------
Lender may lawfully continue to maintain such LIBOR Rate Loans to such day, or
immediately, if the Lender may not lawfully continue to maintain such LIBOR Rate
Loan. If any Borrower is required to so prepay any LIBOR Rate Loan, then
concurrently with such prepayment, such Borrower shall borrow from the Lender,
in the amount of such repayment, a Reference Rate Loan.
3 Increased Costs and Reduction of Return.
---------------------------------------
(a) If the Lender reasonably determines that, due to either
(i) the introduction of or any change in the interpretation of any law or
regulation or (ii) the compliance by the Lender with any guideline or request
from any central bank or other Public Authority (whether or not having the force
of law), there shall be any increase in the cost to the Lender of agreeing to
make or making, funding or maintaining any LIBOR Rate Loans or any Letter of
Credit, then the Borrowers shall be liable for, and, upon demand to the
Borrowers' Agent by the Lender from time to time, shall pay to the Lender
additional amounts as are sufficient to compensate the Lender for such increased
costs; provided that the Borrowers shall not be liable under this clause (a) for
any such increase arising more than one hundred twenty (120) days prior to the
date of such demand by the Lender.
(b) If the Lender shall have reasonably determined that (i)
the introduction of any Capital Adequacy Regulation, (ii) any change in any
Capital Adequacy Regulation, (iii) any change in the interpretation or
administration of any Capital Adequacy Regulation by any central bank or other
Public Authority charged with the interpretation or administration thereof, or
(iv) compliance by the Lender or any corporation controlling the Lender with any
Capital Adequacy Regulation, affects or would affect the amount of capital,
reserves, or special deposits required or expected to be maintained by the
Lender or any corporation controlling the Lender and (taking into consideration
such Lender's or such corporation's policies with respect to capital adequacy
and such Lender's anticipated
30
return on capital based on the underwriting criteria involved in the
internal approval by the Lender of the Total Facility) reasonably determines
that the amount of such capital, reserves, or special deposits is increased as a
consequence of its loans, credits or obligations under this Agreement, including
with respect to any Letter of Credit, then each Borrower shall be liable for,
and, upon demand by the Lender to the Borrowers' Agent from time to time, shall
pay to the Lender additional amounts sufficient to compensate the Lender for
such increase; provided that the Borrowers shall not be liable under this clause
(b) for any such increase arising more then one hundred twenty (120) days prior
to the date of such demand by the Lender. Notwithstanding the foregoing, all
such amounts shall be subject to the provisions of Section 3.3.
-----------
4 Funding Losses. The Borrowers shall reimburse the Lender and hold
--------------
the Lender harmless from any direct loss or expense which the Lender may sustain
or incur as a consequence of:
(a) the failure of any Borrower to make on a timely basis any
payment of principal of any LIBOR Rate Loan;
(b) the failure of any Borrower to borrow, continue or convert a
Loan after the Borrowers' Agent has given (or is deemed to have given) a Notice
of Borrowing or a Notice of Conversion/Continuation;
(c) the prepayment or other payment (including after acceleration
thereof) of an LIBOR Rate Loan on a day that is not the last day of the relevant
Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its LIBOR Rate Loans or from fees payable to
terminate the deposits from which such funds were obtained. The limitation in
this Section 6.4 to direct loss or expense shall not be deemed to have been
-----------
expanded by the language in Section 15.11.
-------------
5 Inability to Determine Rates.
----------------------------
(a) If the Lender reasonably determines that for any reason
adequate and reasonable means do not exist for determining the LIBOR Rate for
any requested Interest Period with respect to a proposed LIBOR Rate Loan or with
respect to any Letter of Credit, or that the LIBOR Rate for any requested
Interest Period with respect to a proposed LIBOR Rate Loan or with respect to
any Letter of Credit does not adequately and fairly reflect the cost to the
Lender of funding such Loan or Letter of Credit, the Lender shall so notify the
Borrowers' Agent. Thereafter, (i) the obligation of the Lender to make or
maintain LIBOR Rate Loans hereunder shall be suspended, and (ii) interest on
unreimbursed amounts under the Letters of Credit shall bear interest at a per
annum rate equal to the Reference Rate plus the Reference Rate Margin rather
than at the per annum rate determined in accordance with Section 2.3(b), in each
--------------
case until the Lender revokes such notice in writing.
(b) Upon receipt of such notice, the Borrowers' Agent may revoke
any Notice of Borrowing or Notice of Conversion/Continuation then submitted by
it. If the Borrowers' Agent does not revoke such Notice, the Lender shall make,
convert or continue the Loans, as proposed by the
31
Borrowers' Agent, in the amount specified in the applicable notice submitted by
the Borrowers' Agent, but such Loans shall be made, converted or continued as
Reference Rate Loans instead of LIBOR Rate Loans. This Section 6.5(b) shall not
--------------
give rise to any liability of a Borrower under Section 6.4(b).
--------------
6 Survival. The agreements and obligations of the Borrower Parties
--------
in this Section 6 shall survive the payment of all other Obligations.
---------
7. COLLATERAL.
----------
1 Grant of Security Interest.
--------------------------
(a) As security for the payment and performance of all of the
Obligations, each Borrower Party hereby grants to the Lender a continuing
security interest in, lien on, and assignment of all of such Borrower Party's
right, title and interest in, to and under (but none of such Borrower Party's
obligations under) all of the following, in each case wherever located and
whether now owned or existing or hereafter arising or acquired: (i) all
Receivables, Contractual Rights, Proprietary Rights, Lockboxes, Blocked
Accounts, Payment Accounts, and Proceeds; (ii) all moneys, securities and other
property and the Proceeds thereof, now or hereafter held or received by, or in
transit to, the Lender from or for any Borrower Party, whether for safekeeping,
pledge, custody, transmission, collection or otherwise, including, without
limitation, all of the deposit accounts, credits, and balances of any Borrower
Party with the Lender and all claims of any Borrower Party against the Lender at
any time existing; (iii) all deposit accounts with any financial institutions
(including without limitation any bank which holds a Blocked Account or a
Lockbox) with which any Borrower Party maintains deposits and in which any
Collateral or any Proceeds of Collateral is deposited; (iv) the Loan Documents;
(v) all checks, monies and other items on deposit from time to time in any
Lockbox or Blocked Account; and (vi) all books, Records and other Property
(excluding Inventory and Equipment) relating to or referring to any of the
foregoing, including, without limitation, all books, records, ledger cards, data
processing records, computer software and other property and general intangibles
at any time evidencing or relating to the Receivables, Contractual Rights,
Proprietary Rights, Proceeds, or other items referred to above (all of the
foregoing, and all other property in which the Lender may at any time be granted
a Lien, being herein collectively referred to as the "Collateral"). The Lender
----------
shall have all of the rights of a secured party with respect to the Collateral
under the UCC and other applicable laws (except to the extent, if any,
prohibited by applicable law).
Notwithstanding the foregoing, (a) the Collateral shall not
include the cash proceeds of the sale of the assets of Paramedical Services of
America, Inc., and (b) during the first six (6) months after the Closing Date,
the Collateral shall not include the proceeds of accounts receivable owed to
Paramedical Services of America, Inc. that were sold as part of such asset sale
to the purchaser of the assets of Paramedical Services of America, Inc. and that
are deposited in a Lockbox or a Blocked Account.
(b) All Obligations shall constitute a single loan secured by the
Collateral. The Lender may, in its sole discretion, (i) exchange, waive, or
release any of the Collateral, (ii) following the occurrence of and during the
continuance of an Event of Default, apply Collateral and direct the
32
order or manner of sale thereof as the Lender may determine, and (iii) following
the occurrence of and during the continuance of an Event of Default, settle,
compromise, collect, or otherwise liquidate any Collateral in any manner, all
without affecting the Obligations or the Lender's right to take any other action
with respect to any other Collateral.
2 Perfection and Protection of Security Interest. Each Borrower
----------------------------------------------
Party shall, at its expense, perform all steps requested by the Lender at any
time and from time to time to perfect, maintain, protect, and enforce the
Security Interest including, without limitation: (a) executing and filing UCC
financing or continuation statements, and amendments thereof, in form and
substance satisfactory to the Lender; (b) delivering to the Lender the originals
of all instruments, documents, and chattel paper, and all other Collateral of
which the Lender reasonably determines it should have physical possession in
order to perfect and protect the Security Interest therein, duly endorsed or
assigned to the Lender without restriction; (c) executing and delivering to the
Lender a security agreement relating to the Reversions in form and substance
satisfactory to the Lender; (d) placing notations on such Borrower Party's books
and records to disclose the Security Interest; (e) delivering to the Lender each
letter of credit on which such Borrower Party is named beneficiary if such
letter of credit supports payment of one or more Eligible Accounts; and (f)
taking such other steps as are reasonably deemed necessary or appropriate by the
Lender to maintain the Security Interest. To the extent permitted by applicable
law, the Lender may file, without any Borrower Party's signature, one or more
financing statements disclosing the Security Interest. Each Borrower Party
agrees that a carbon, photographic, photostatic, or other reproduction of this
Agreement or of a financing statement is sufficient as a financing statement.
If any Collateral is at any time in the possession or control of any
warehouseman, bailee or any of the agents or processors of any Borrower Party,
then such Borrower Party shall notify the Lender thereof and shall notify such
Person of the Security Interest in such Collateral and, upon the Lender's
request, instruct such Person to hold all such Collateral for the Lender's
account subject to the Lender's instructions. If at any time any Collateral is
located on any Premises that are not owned by any Borrower Party, other than
equipment located at a patient's premises, then, at the request of the Lender,
each Borrower Party shall use reasonable efforts to obtain written waivers, in
form and substance satisfactory to the Lender, of all present and future Liens
to which the owner or lessor or any mortgagee of such Premises may be entitled
to assert against the Collateral. From time to time, each Borrower Party shall,
upon Lender's request, execute and deliver confirmatory written instruments
pledging to the Lender the Collateral, but an Borrower Party's failure to do so
shall not affect or limit the Security Interest or the Lender's other rights in
and to the Collateral. So long as this Agreement is in effect and until all
Obligations have been fully satisfied, the Security Interest shall continue in
full force and effect in all Collateral (whether or not deemed eligible for the
purpose of calculating the Availability or as the basis for any advance, loan,
extension of credit, or other financial accommodation).
3 Chief Executive Office. Each Borrower Party represents and
----------------------
warrants to the Lender that as of the Closing Date the place of business, or if
such Borrower Party has more than one place of business, the chief executive
office (as such term is used in the UCC) of such Borrower Party is located (and
at all times during the five years prior to the Closing Date, except as set
forth in Schedule 7.3, the place of business, or if such Borrower Party has or
------------
has had more than one place of business, the chief executive office, as such
term is used in the UCC, of such Borrower Party has been located) at the
33
address of such Borrower Party set forth under "Current Address" in Schedule
--------
7.3. All of such addresses are located in Gwinnett County, Georgia, except that
---
the Delaware addresses listed therein are located in New Castle County,
Delaware. Each Borrower Party covenants and agrees that it shall not change the
location of its place of business or, if at any time it has more than one place
of business, its chief executive office (as such term is used in the UCC) unless
it gives the Lender written notice thereof within thirty (30) days prior to such
change in or addition of location, and executes any and all UCC financing
statements and other documents that the Lender requests in connection therewith.
4 Title to, Liens on, and Sale and Use of Collateral. Each Borrower
--------------------------------------------------
Party represents and warrants to, and each Borrower Party covenants with, the
Lender that: (a) all Collateral is and shall continue to be owned by the
Borrower Parties free and clear of all Liens whatsoever, except for the Security
Interest and other Permitted Liens; (b) the Security Interest is not and shall
not be subject to any prior Lien; (c) each Borrower Party shall use, store, and
maintain the Collateral with all reasonable care customary for its industry and
shall use the Collateral for lawful purposes only; and (d) no Borrower Party
shall, without the Lender's prior written approval, sell, assign, transfer,
lease, or dispose of or permit the sale, assignment, transfer, lease or
disposition of the Collateral or any portion thereof; provided, that this
sentence shall not prevent sublicenses of licenses by the Borrower Parties if
either: (a) (i) such sublicenses constitute arm's-length transactions with
independent third parties, and (ii) the aggregate consideration for such
sublicenses does not exceed two hundred fifty thousand dollars ($250,000) during
any calendar year, or (b) such sublicenses are entered into in favor of the
purchaser of the assets of Paramedical Services of America, Inc. on or about
the Closing Date. The inclusion of Proceeds in the Collateral shall not be
deemed the Lender's consent to any sale or other disposition of the Collateral
except as expressly permitted herein.
5 [Reserved].
--------
6 Access and Examination. The Lender may at all reasonable times and
----------------------
from time to time have access to, examine, audit, make extracts from and inspect
the records, files, and books of account of the Borrower Parties and the
Collateral and may discuss the affairs of the Borrower Parties with the officers
and management of the Borrower Parties; provided that so long as (i) no Event of
Default has occurred and continuing, and (ii) the sum of the unpaid balance of
the Loans plus the Letter of Credit Obligations is less than fifty percent (50%)
of Availability (without subtracting from Availability the unpaid balance of the
Loans and the Letter of Credit Obligations at that time), then such examinations
shall not occur more than two times each year.
Each Borrower Party shall deliver to the Lender any instrument necessary
for the Lender to obtain records from any service bureau maintaining records for
any Borrower Party. The Lender may, at the expense of the Borrower Parties,
make copies of all of the books and records of the Borrower Parties, or require
the Borrower Parties to deliver such copies to the Lender (provided that, prior
to an Event of Default, if the Lender requests that more than one copy of a
particular book or record be made such extra copy shall not be at the Borrower
Parties' expense). The Lender may, without expense to the Lender, use such of
the personnel, supplies, and Premises of the Borrower Parties as may be
necessary or appropriate for maintaining or enforcing the Security Interest.
The Lender shall have the right, at any time, in Lender's name or in the name of
a nominee of the Lender, to verify the validity,
34
amount or any other matter relating to the Accounts, by mail, telephone, or
otherwise.
7 Insurance. The Borrower Parties shall insure the Collateral
---------
against loss or damage by fire with extended coverage, theft, burglary,
pilferage, loss in transit, and such other hazards in such amounts as is
customary for Persons of established reputation engaged in the same or a similar
business and similarly situated. The Borrower Parties shall cause the Lender to
be named in each such policy as secured party and loss payee or additional
insured, in a manner acceptable to the Lender. Each policy of insurance shall
contain a clause or endorsement requiring the insurer to give not less than
thirty (30) days' prior written notice to the Lender in the event of
cancellation of the policy for any reason other than for failure to pay premiums
when due, and requiring the insurer to give not less than ten (10) days' prior
written notice to the Lender in the event of cancellation of the policy for
failure to pay premiums when due. Each Borrower Party shall also pay all
premiums for such insurance when due, and shall deliver to the Lender
certificates of insurance and, if requested, photocopies of the policies.
If the Borrower Parties fail to pay such fees or to procure such insurance
or the premiums therefor when due, the Lender may (but shall not be required to)
do so and charge the costs thereof to the loan account of the Company as a Loan.
The insurance referred to in the preceding sentence may, but need not, protect
the interests of the Borrower Parties. The coverage purchased by the Lender
hereunder may not pay any claim made by any Borrower Party or any claim that is
made against any Borrower Party in connection with the Collateral. The Borrower
Parties may later cancel any insurance purchased by the Lender hereunder, but
only after providing the Lender with evidence that the Borrower Parties have
obtained insurance as required by this Agreement. If the Lender purchases
insurance for the Collateral, each Borrower Party shall be responsible for the
costs of such insurance, including interest and any other charges that the
Lender may impose in connection with the placement of such insurance, until the
effective date of the cancellation or expiration of such insurance. The costs
of the insurance may be added to the total outstanding Obligations. The costs
of the insurance obtained by the Lender hereunder may be more than the cost of
insurance that the Borrower Parties may be able to obtain on their own.
Each Borrower Party shall promptly notify the Lender of each instance of
any loss, damage, or destruction to the Collateral in excess of one hundred
thousand dollars ($100,000) or arising from its use, whether or not covered by
insurance. The Borrower Parties shall apply all insurance proceeds contemplated
by this Section 7.7 to the reduction of the Obligations; provided that the
-----------
Borrowers' Agent may request the Lender to consent to another use of such
insurance proceeds, which consent shall not be unreasonably withheld. Following
the occurrence and during the continuance of an Event of Default, the Lender
shall have the right but not the obligation to collect all insurance proceeds
directly (other than proceeds of insurance which the Lender procured pursuant to
this Section 7.7, which may be collected directly by the Lender regardless of
-----------
whether an Event of Default exists); provided that any insurance proceeds that
the Lender collects pursuant to this Section 7.7 shall be applied in accordance
-----------
with Section 4.3; provided that the Borrowers' Agent may request the Lender to
-----------
consent to another use of such insurance proceeds, which consent shall not be
unreasonably withheld.
8 Collateral Reporting. The Borrowers' Agent shall provide the
--------------------
Lender with the following documents and information at the following times in
form satisfactory to the Lender: (a)
35
monthly schedules of accounts receivable created and cash received, not later
than the twenty-fifth day of each month respecting the immediately preceding
month; (b) in writing upon request by the Lender, copies of invoices, EOBs (and
any similar correspondence from any Account Debtor which is or which at any time
has been an Account Debtor of an Eligible Account), credit memos, shipping and
delivery documents no later than fifteen Business Days following such written
request; (c) monthly agings and reconciliations of accounts receivable to be
delivered no later than the twenty-fifth day of each month respecting the
immediately preceding month (including detail as to applications of collections
thereon); (d) monthly reports as to "dilutions", contractual allowances and
credits with respect to accounts receivable, not later than the twenty-fifth day
of each month respecting the immediately preceding month; (e) a monthly
Borrowing Base Certificate, not later than the twenty-fifth day of each month
respecting the immediately preceding month; (f) such other reports as to the
Collateral (including without limitation reports as to adjusting entries) as the
Lender shall request in writing from time to time; and (g) certificates of an
officer of the Borrowers' Agent certifying as to the foregoing.
If (x) an Event of Default has occurred, or (y) the sum of the unpaid
balance of the Loans plus the Letter of Credit Obligations exceeds ninety-five
percent (95%) of Availability (without subtracting the unpaid balance of the
Loans and the Letter of Credit Obligations from Availability), the Lender shall
have the right to retain the services of a collateral monitoring company (at the
reasonable expense of the Borrower Parties) to review, monitor and report on
Accounts and collections in such manner as may be required by the Lender from
time to time.
If any of the records or reports of the Borrower Parties with respect to
the Collateral are prepared by an accounting service or other agent, each
Borrower Party hereby authorizes such service or agent to deliver such records,
reports, and related documents to the Lender.
36
9 Accounts.
--------
(a) Each Borrower Party hereby represents and warrants to the Lender
and covenants with the Lender that: (i) except for immaterial mistakes made in
the ordinary course of business, each existing Account represents, and each
future Account shall represent, a bona fide sale or lease and delivery of goods
---- ----
by any Borrower Party, or rendition of services by any Borrower Party, in the
ordinary course of business of any Borrower Party; (ii) except for immaterial
mistakes made in the ordinary course of business, each existing Account is, and
each future Account shall be, at the time any such Account arose and at the time
any such Account is billed, for a liquidated amount payable by the Account
Debtor thereon on the terms set forth in the invoice therefor or in the schedule
thereof delivered to the Lender, without offset, deduction, defense, or
counterclaim, other than discounts required by law or contract, and corrections
of billing errors, in the ordinary course of business of any Borrower Party;
(iii) no payment shall be received with respect to any Account, and no credit,
discount, extension, or agreement therefor shall be granted on any Account,
except as reported to the Lender in accordance with this Agreement; (iv) each
copy of an invoice or claim form delivered to the Lender by any Borrower Party
shall be a genuine copy of the original invoice or claim form sent to the
Account Debtor named therein (except that some of such copies delivered to the
Lender may not reflect immaterial typographical-type changes made in the
ordinary course of business); (v) except for immaterial mistakes made in the
ordinary course of business, all goods described in any invoice or claim form
representing a sale of goods shall have been delivered to the applicable patient
and all services of any Borrower Party described in any invoice or claim form
shall have been performed; (vi) each of the Accounts and the related contracts
is in full force and effect and represents and constitutes, in all material
respects, a legal, valid and binding obligation of the related Account Debtor,
enforceable against such Account Debtor in accordance with its terms; (vii)
promptly following notice from an Account Debtor as to an earlier undisputed
overpayment by such Account Debtor to any Borrower Party, such Borrower Party
has made all payments to such Account Debtor which are necessary to prevent such
Account Debtor from offsetting such overpayment against any amount which such
Account Debtor owes on the Accounts; (viii) (A) no direction of any Borrower
Party or any other Person is in effect directing Account Debtors to remit
payments in respect of the Accounts other than to a Lockbox or a Blocked Account
(except that until the ninetieth (90th) day after the Closing Date, an
immaterial amount of payments from Account Debtors may be paid to post office
boxes or deposit accounts being sold to the purchaser of the assets of
Paramedical Services of America, Inc.), and (B) no direction of any Borrower
Party or any other Person is in effect directing Account Debtors to remit EOBs
in respect of the Accounts to any Person or address other than to any Borrower
Party at its chief executive office or at another office of such Borrower Party,
or to the office of an independent billing company previously notified to the
Lender in writing, provided that commencing not later than sixty (60) days after
the Closing Date the Borrower shall cause all such independent billing companies
to send such EOBs to one or more Lockboxes on a regular basis, and in any event
not less often than once per week; and (ix) during the one year prior to the
Closing Date, no Borrower Party has been subject to any Government Offset
involving in excess of one hundred fifty thousand dollars ($150,000). As of the
date of each Borrowing, each Borrower Party is unaware of any potential
Government Offset involving in excess of one hundred fifty thousand dollars
($150,000) for any single Governmental Offset and in excess of five hundred
thousand dollars ($500,000) for all such Government Offsets that has not been
disclosed by such Borrower Party to the Lender in writing prior to that date.
All of the Medicaid and Medicare reports required to be filed by any Borrower
Party for all reporting periods have been filed with the applicable Government
Account Debtor, or HCFA designated agents or agents of such
37
Government Account Debtor. Each Borrower Party hereby represents and warrants to
the Lender that Account Debtor Notices, signed by the Borrowers, have been
delivered to all of the Account Debtors (other than Government Account Debtors
and Self-Pay Account Debtors) with respect to Accounts that are treated as
Eligible Accounts (starting thirty (30) days after the earlier of (i) the date
that the first Loan is made and (ii) the date that the first Letter of Credit is
issued).
(b) No Borrower Party shall re-date any invoice, claim form or sale
or make sales on extended dating or extend or modify any Account (other than to
correct billing errors in the ordinary course of business). The Lender
acknowledges that if an Account Debtor which is the "primary" payor does not pay
a claim in full or denies such claim, any Borrower Party may send a separate
invoice to an Account Debtor which is a "secondary" payor. If any Borrower
Party becomes aware of any matter which could materially adversely affect any
Account Debtor (other than a Self-Pay Account Debtor), of an Eligible Account
including information regarding the Account Debtor's creditworthiness, such
Borrower Party shall promptly so advise the Lender.
(c) No Borrower Party shall accept any note, warrant or other
instrument (except a check or other instrument for the immediate payment of
money, subject to compliance with Section 7.10) with respect to any Account
------------
(other than a Self-Pay Account) without the Lender's written consent; provided
that the Borrower Parties may accept notes with respect to Accounts which are
not Eligible Accounts (i) in an aggregate amount outstanding at any one time not
to exceed one million dollars ($1,000,000) or (ii) with respect to the
Aetna/Coram situation previously disclosed to the Lender. If the Lender
consents to the acceptance of any such note, warrant or other instrument, it
shall be considered as evidence of the Account and not payment thereof, and the
Borrower Parties shall promptly deliver such note, warrant or instrument to the
Lender appropriately endorsed. Regardless of the form of presentment, demand,
notice of dishonor, protest, and notice of protest with respect thereto, the
Borrower Parties shall remain liable thereon until such note, warrant or
instrument is paid in full.
(d) Each Borrower Party shall notify the Lender promptly of (i) all
disputes and claims (other than as to discounts required by law or contract, and
corrections of billing errors, in the ordinary course of business) with Persons
which are Account Debtors (other than Self-Pay Account Debtors), involving in
excess of one hundred fifty thousand dollars ($150,000) for any single dispute
or claim and in excess of five hundred thousand dollars ($500,000) for all such
disputes and claims, whether any such Person is acting in its capacity as an
Account Debtor or in its individual capacity (e.g., as a landlord or supplier of
any Borrower Party); and (ii) all alleged or asserted Government Offsets
involving in excess of one hundred fifty thousand dollars ($150,000) for any
single Government Offset and in excess of five hundred thousand dollars
($500,000) for all such Government Offsets. No discount, credit or allowance
shall be granted with respect to any Eligible Account to any Account Debtor
(other than in respect of Self-Pay Accounts) without the Lender's consent,
except for: (i) discounts required by law or contract, and corrections of
billing errors, in the ordinary course of business; and (ii) any other discount
which does not exceed fifty thousand dollars ($50,000), provided that the
aggregate amount of discounts permitted pursuant to this clause (ii) during any
calendar year shall not exceed five hundred thousand dollars ($500,000). The
Lender may at all times following the occurrence and during the continuance of
an Event of Default hereunder settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which the Lender considers
38
reasonable and, in all cases, the Lender shall credit the loan account of the
Company with only the net amounts received by the Lender in payment of any
Accounts.
10 Collection of Accounts; Payments.
--------------------------------
(a) Each Borrower Party shall (and all invoices and claim forms with
respect to the Accounts shall) instruct all Account Debtors to make all payments
only to a Lockbox or a Blocked Account. If, notwithstanding such instructions,
any Borrower Party receives any Proceeds of Accounts, it shall receive such
payments as the Lender's trustee, and shall immediately deliver such payments to
the Lender in their original form duly endorsed in blank or deposit them into a
Lockbox, Blocked Account or a Payment Account, as the Lender may direct. Except
as otherwise provided under applicable law with respect to Accounts owed by
Government Account Debtors during a Trigger Period or following the occurrence
and during the continuance of an Event of Default, all collections received in
any such Lockbox, Blocked Account or Payment Account or directly by any Borrower
Party or the Lender, and all funds in any Lockbox, Blocked Account or Payment
Account or other account to which such collections are deposited, shall be the
sole property of the Lender and subject to the Lender's sole control. The
Lender or the Lender's designee may, at any time after the occurrence of an
Event of Default, notify Account Debtors that the Accounts have been assigned to
the Lender and of the Security Interest therein, and may collect them directly
(except to the extent prohibited under applicable law with respect to Accounts
owed by Government Account Debtors) and charge the collection costs and expenses
to the loan account of the Company as a Loan. At the Lender's request, each
Borrower Party shall execute and deliver to the Lender such documents as the
Lender shall require to grant the Lender access to any post office box, lockbox
or bank account in which collections of Accounts are received or deposited.
(b) During a Trigger Period, the Lender shall have the right at any
time and from time to time to direct any Blocked Account Bank to remit, by
automatic standing wire transfer, on a daily basis, all available amounts in the
Blocked Accounts to or at the direction of the Lender. Such amounts shall be
applied in accordance with Section 4.3.
-----------
(c) All payments received by the Lender on account of Accounts or
other Collateral (including Proceeds) shall be the Lender's sole property and
subject to the Lender's sole control, subject further to Section 4.3. If such
-----------
payments are received by the Lender at or prior to 1:00 p.m., Chicago time, on
any Business Day, such payments shall be credited to the loan account of the
Company (conditional upon final collection) on such Business Day. If such
payments are received by the Lender after 1:00 p.m., Chicago time, on any
Business Day, such payments shall be credited to the loan account of the Company
(conditional upon final collection) on the next Business Day.
(d) In the event the Borrowers repay all of the Obligations upon the
termination of this Agreement, other than through the Lender's receipt of
payments on account of Accounts or Proceeds of other Collateral, such payment
shall be credited (conditional upon final collection) to the loan account of the
Company in accordance with Section 7.10(c).
---------------
39
11 [Reserved]
12 Equipment. Each Borrower Party represents and warrants to the
---------
Lender that all of the Equipment used or held for use in the business of any
Borrower Party is adequate for its current use except where the failure of such
Equipment to be adequate would not have a Material Adverse Effect. Each
Borrower Party shall keep and maintain such Equipment (or cause such Equipment
to be kept and maintained) in good operating condition and repair (ordinary wear
and tear and obsolescence excepted) and shall make all necessary replacements
thereof.
13 Material Contracts. Each Borrower Party shall fully perform all of
------------------
its obligations under each of the contracts and agreements to which it is a
party and shall enforce all of its rights and remedies thereunder, in each case,
as it deems appropriate in its business judgment; provided, however, no Borrower
-------- -------
Party shall take any action or fail to take any action with respect to any such
contract or agreement that would cause the termination of any Material Contract
unless the other party to such Material Contract is in default under such
Material Contract. As used in this Section 7.13, "Material Contract" means any
------------ -----------------
contract or agreement to which any Borrower Party is a party if such contract or
agreement involves amounts paid or payable to or by any Borrower Party in excess
of five hundred thousand dollars ($500,000) during any calendar year. No
Borrower Party shall, without the Lender's prior written consent, modify, amend,
supplement, compromise, satisfy, waive, release, terminate or discharge any
Material Contract, the Contractual Rights relating to any Material Contract, or
any collateral securing the same, or the identity of any Person liable directly
or indirectly with respect thereto. Each Borrower Party shall notify the Lender
in writing, promptly after it becomes aware thereof, of any event or fact which
could reasonably be expected to give rise to a claim by it for indemnification
under any Material Contract and shall diligently pursue such right and report to
the Lender on all further developments with respect thereto. Each Borrower Party
shall remit directly to the Lender, for application to the Obligations in such
order as the Lender determines, all amounts received by such Borrower Party as
indemnification or otherwise pursuant to any Material Contract. If a Borrower
Party shall fail after the Lender's demand to diligently pursue any right under
any Material Contract, or if an Event of Default exists, then the Lender may
directly enforce such right in its own name or in the name of any Borrower Party
and may enter into such settlements or other agreements with respect thereto as
the Lender determines. All amounts thereby recovered by the Lender, after
deducting the Lender's costs and expenses in connection therewith, shall be
applied to the Obligations in accordance with Section 4.3. In any suit,
-----------
proceeding or action brought by the Lender under any contract or agreement
relating to a Contractual Right for any sum owing thereunder or to enforce any
provision thereof, each Borrower Party shall indemnify and hold the Lender
harmless from and against all, loss or damage or reasonable expense suffered by
reason of any defense, setoff, counterclaim, recoupment, or reduction of
liability whatsoever of the obligor thereunder arising out of a breach by any
Borrower Party of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing from any Borrower Party
to or in favor of such obligor or its successors. All such obligations of any
Borrower Party shall be and remain enforceable only against such Borrower Party
and shall not be enforceable against the Lender. Notwithstanding any provision
hereof to the contrary, each Borrower Party shall at all times remain liable to
observe and perform all of its duties and obligations under each contract or
agreement relating to Contractual Rights and the Lender's
40
exercise of any of its rights with respect to the Collateral shall not release
any Borrower Party from any of such duties and obligations. The Lender shall not
be obligated to perform or fulfill any of duties or obligations under any
contract or agreement relating to Contractual Rights or to make any payment
thereunder or to make any inquiry as to the nature or sufficiency of any payment
or Property received by it thereunder or the sufficiency of performance by any
party thereunder, or to present or file any claim, or to take any action to
collect or enforce any performance or payment of any amounts due.
14 Documents, Instruments, and Chattel Paper. Each Borrower Party
-----------------------------------------
represents and warrants to the Lender, and covenants with the Lender, that: (a)
all documents, instruments, and chattel paper describing, evidencing, or
constituting Collateral, and to such Borrower Party's knowledge all signatures
and endorsements thereon, are and shall be complete, valid, and genuine in all
material respects; and (b) all such documents, instruments, and chattel paper
are and shall be owned by the applicable Borrower Party free and clear of all
Liens (i) other than Permitted Liens and (ii) other than, during the period of
ten (10) days after the Closing Date, the Liens listed on Schedule 7.14.
-------------
15 Right to Cure. The Lender may, in its sole discretion and at any
-------------
time, pay any amount or do any act reasonably required of any Borrower Party
hereunder to preserve, protect, maintain or enforce the Obligations, the
Collateral, the Security Interest, which any Borrower Party fails to pay or do,
including, without limitation, payment of any judgment against any Borrower
Party, any insurance premium, any warehouse charge, any landlord's claim, and
any other obligation giving rise to any Lien upon or with respect to the
Collateral. All payments that the Lender makes under this Section 7.15 and all
------------
reasonable out-of-pocket costs and expenses that the Lender pays or incurs in
connection with any action taken by it hereunder shall be charged to the loan
account of the Company as a Loan. Any payment made or other action taken by the
Lender under this Section 7.15 shall be without prejudice to any right to assert
------------
an Event of Default hereunder.
16 Power of Attorney. Each Borrower Party hereby appoints the Lender
-----------------
and the Lender's designees as such Borrower Party's attorney, subject to the
provisions of applicable law, with power when an Event of Default exists: (a)
to endorse such Borrower Party's name on any checks, notes, acceptances, money
orders, or other forms of payment or security that come into the Lender's
possession; (b) to sign such Borrower Party's name on any invoice, ▇▇▇▇ of
lading, or other document of title relating to any Collateral, on drafts against
customers, on assignments of Accounts, on notices of assignment, UCC financing
statements and other public records, on verifications of Accounts and on notices
to Account Debtors and to file any such financing statements by electronic means
with or without a signature as authorized or required by applicable law or
filing procedure; (c) to notify the post office authorities to change the
address for delivery of such Borrower Party's mail to an address designated by
the Lender and to receive, open and dispose of all mail addressed to such
Borrower Party; (d) to send requests for verification of Accounts to Account
Debtors; and (e) to do all things necessary to carry out this Agreement;
provided that to the extent that applicable law prohibits the Lender from
collecting any payment directly from a Government Account Debtor, the Lender
shall not collect such payment directly from such Government Account Debtor;
provided further that nothing in this Agreement shall prevent the Lender from
obtaining a court order (to the extent not prohibited by applicable law) to
enable or facilitate any such collection activity. Each Borrower Party ratifies
and approves all lawful acts of such attorney taken in accordance with this
Section 7.16. Neither the Lender
------------
41
nor the attorney, as the case may be, shall be liable for any acts or omissions
or for any error of judgment or mistake of fact or law other than for gross
negligence and willful misconduct by the Lender and such attorney. This power,
being coupled with an interest, is irrevocable until this Agreement has been
terminated and the Obligations have been fully satisfied.
17 Lender's Rights, Duties, and Liabilities'. Each Borrower Party
-----------------------------------------
assumes all responsibility and liability arising from or relating to the use,
sale, or other disposition of the Collateral. The Obligations shall not be
affected by any failure of the Lender to take any steps to perfect the Security
Interest or to collect or realize upon the Collateral, nor shall loss of or
damage to the Collateral release any Borrower Party from any of the Obligations.
Following the occurrence of an Event of Default, the Lender may (but shall not
be required to), without notice to or consent from any Borrower Party, ▇▇▇ upon
or otherwise collect, extend the time for payment of, modify or amend the terms
of, compromise or settle for cash, credit, or otherwise upon any terms, grant
other indulgences, extensions, renewals, compositions, or releases, and take or
omit to take any other action with respect to the Collateral, any security
therefor, any agreement relating thereto, any insurance applicable thereto, or
any Person liable directly or indirectly in connection with any of the
foregoing, without discharging or otherwise affecting the liability of any
Borrower Party for the Obligations or under this Agreement or any other
agreement now or hereafter existing between the Lender and any Borrower Party;
provided that to the extent that applicable law prohibits the Lender from
collecting any payment directly from a Government Account Debtor, the Lender
shall not collect such payment directly from such Government Account Debtor;
provided further that nothing in this Agreement shall prevent the Lender from
obtaining a court order (to the extent not prohibited by applicable law) to
enable or facilitate any such collection activity.
18 [Reserved]
19 License for use of Software and Other Intellectual Property.
-----------------------------------------------------------
Except to the extent prohibited by applicable law, each Borrower Party hereby
grants the Lender a non-exclusive, royalty-free license (with the right to
sublicense) to use, without payment or royalty of any kind, all books,
documents, EOBs, instruments, files, records, computer software programs, tapes,
disks, data bases, processes and materials used by such Borrower Party in
connection with the administration, servicing, tracking, billing, collection or
other liquidation of Accounts and other items covered by the definition of
Collateral, which license shall be irrevocable so long as any of the Obligations
remain outstanding or this Agreement is in effect; provided that should the
consent of any licensor of any Borrower Party to such grant of the license
described herein be required, each Borrower Party (upon the request of the
Lender) shall use its best efforts to obtain the consent of such third-party
licensor and, in the absence of obtaining such consent, shall, upon request of
the Lender, download all information contained in such licensed computer
software programs, tapes, disks, data bases, processes and materials in a format
which is accessible by the Lender or otherwise print out such information (but
only to the extent such downloading and printing out shall not result in
termination of, or a material liability under, any such license); provided
further, that the license granted pursuant to this Section 7.19 shall not be
------------
used by the Lender unless an Event of Default has occurred and is continuing.
42
8. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES.
-------------------------------------------------
1 Books and Records. Each Borrower Party shall maintain, at all
-----------------
times, correct and complete books, records and accounts in which complete,
correct and timely entries are made of its transactions in accordance with GAAP
consistent with those applied in the preparation of the Financial Statements.
Each Borrower Party shall, by means of appropriate entries, reflect in such
accounts and in all Financial Statements liabilities and reserves for all taxes
and provision for depreciation and amortization of Property and bad debts, all
in accordance with GAAP.
2 Financial and Other Information. Each Borrower Party shall promptly
-------------------------------
furnish to the Lender or its agents all such information as the Lender shall
from time to time reasonably request through the Borrowers' Agent, and notify
its auditors and accountants that the Lender is authorized by each Borrower
Party to obtain such information directly from them. Without limiting the
foregoing, each Borrower Party shall furnish to the Lender through the
Borrowers' Agent, in such detail as the Lender shall request, the following:
(a) As soon as available, but in any event not later than one
hundred five (105) days after the close of each Fiscal Year, a copy of the
Company's annual report on Form 10-K filed with the Securities and Exchange
Commission or, if the Company is no longer required to file an annual report on
Form 10-K with the Securities and Exchange Commission, consolidated and
consolidating audited balance sheets, and statements of operation, and
stockholders equity and cash flows for the Company and its consolidated
Subsidiaries for such Fiscal Year, and the accompanying notes thereto, setting
forth in each case in comparative form figures for the previous Fiscal Year, all
in reasonable detail, fairly presenting the financial position and the results
of operations of the Company and its consolidated Subsidiaries as at the date
thereof and for the Fiscal Year then ended, and prepared in accordance with
GAAP. Such statements shall be examined in accordance with generally accepted
auditing standards and accompanied by a report thereon unqualified as to scope
by independent certified public accountants selected by the Company and
reasonably satisfactory to the Lender.
(b) As soon as available, but in any event not later than fifty
(50) days after the close of each fiscal quarter other than the fourth quarter
of a Fiscal Year, a copy of the Company's quarterly report on Form 10-Q filed
with the Securities and Exchange Commission or, if the Company is no longer
required to file quarterly reports on Form 10-Q with the Securities and Exchange
Commission, consolidated and consolidating unaudited balance sheets of the
Company and its consolidated Subsidiaries as at the end of such quarter, and
consolidated and consolidating unaudited statements of income and cash flows for
the Company and its consolidated Subsidiaries for such quarter and for the
period from the beginning of the Fiscal Year to the end of such quarter,
together with the accompanying notes, if any, thereto, all in reasonable detail,
fairly presenting the financial position and results of operation of the Company
and its consolidated Subsidiaries as at the date thereof and for such periods,
prepared in accordance with GAAP consistent with the audited Financial
Statements required pursuant to Section 8.2(a). Such statements shall be
--------------
certified to be fairly stated in all material respects by the chief financial or
accounting officer of the Company, subject to normal year-end adjustments.
43
(c) As soon as available, but in any event not later than thirty
(30) days after the end of each month, consolidated and consolidating unaudited
balance sheets of the Company and its consolidated Subsidiaries as at the end of
such month, and consolidated and consolidating unaudited statements of income
and expenses for the Company and its consolidated Subsidiaries for such month
and for the period from the beginning of the Fiscal Year to the end of such
month, all in reasonable detail, fairly presenting the financial position and
results of operation of the Company and its consolidated Subsidiaries as at the
date thereof and for such periods, and prepared in accordance with GAAP
consistent with the audited Financial Statements required pursuant to Section
-------
8.2(a). Such statements shall be certified to be correct by the chief financial
------
or accounting officer of the Company, subject to normal quarter-end and year-end
adjustments, if any.
(d) With each of the audited Financial Statements delivered
pursuant to Section 8.2(a), a certificate of the independent certified public
--------------
accountants that examined such statements to the effect that they have reviewed
and are familiar with the Loan Documents and that, in examining such Financial
Statements, they did not become aware of any fact or condition which then
constituted an Event or Event of Default under Section 10.20 or 10.21, except
------------- -----
for those, if any, described in reasonable detail in such certificate.
(e) With each of the annual audited and quarterly unaudited
Financial Statements delivered pursuant to Sections 8.2(a) and 8.2(b), a
--------------- ------
certificate of the chief executive or chief financial officer of the Company (i)
setting forth in reasonable detail the calculations required to establish that
each Borrower Party was in compliance with its covenants set forth in Sections
--------
10.20 and 10.21 during the period covered in such Financial Statements, (ii)
----- -----
stating that, except as explained in reasonable detail in such certificate, (A)
all of the representations and warranties of each Borrower Party contained in
this Agreement and the other Loan Documents are correct and complete as at the
date of such certificate as if made at such time, (B) no Event or Event of
Default then exists or existed during the period covered by such Financial
Statements and (iii) describing and analyzing in reasonable detail all material
trends, changes and developments in such Financial Statements. If such
certificate discloses that a representation or warranty is not correct or
complete, or that a covenant has not been complied with, or that an Event or
Event of Default existed or exists, such certificate shall set forth what action
the applicable Borrower Party has taken or proposes to take with respect
thereto.
(f) No sooner than ninety (90) days prior to the beginning of,
and not later than October 31 of, each Fiscal Year (beginning with Fiscal Year
commencing October 1, 2000), consolidated and consolidating projected balance
sheets, statements of income and expense, and statements of cash flow for the
Company and its Subsidiaries on a consolidated basis as at the end of and for
each month of such Fiscal Year.
(g) Within fifty (50) days after the end of each fiscal quarter,
if the Company is no longer required to file quarterly reports on Form 10-Q with
the Securities and Exchange Commission, a statement of cash flow for the Company
and its Subsidiaries for the period from the beginning of the then current
Fiscal Year to the end of such quarter, prepared in accordance with GAAP
consistent with the audited Financial Statements required pursuant to Section
-------
8.2(a).
------
44
(h) Copies of any and all proxy statements, financial statements,
and reports which the Company makes available to its stockholders, promptly
after any such item is made available to its stockholders.
(i) Promptly after the filing of any regular, periodic or special
reports (other than those delivered pursuant to a different clause of this
Section 8.2), registration statement, prospectus or any amendment to any of the
------------
foregoing by the Company or any of its Subsidiaries with the Securities and
Exchange Commission, copies of each such report, registration statement,
prospectus or amendment.
(j) Promptly after filing with the PBGC, DOL, or IRS, a copy of
each annual report or other filing or notice filed with respect to each Plan of
any Borrower Party or any ERISA Affiliate with the PBGC, DOL, or IRS.
(k) Such additional information as the Lender may from time to
time reasonably request regarding the financial and business affairs of any
Borrower Party or any Subsidiary, including, without limitation: (i) projections
of future operations on both a consolidated and consolidating basis; and (ii)
the status and prospects of all outstanding litigation and proceedings affecting
any Borrower Party or any officer of any Borrower Party and the terms and
conditions of any settlements involving any Borrower Party or any officer of any
Borrower Party.
3 Notices to Lender. Each Borrower Party shall notify the Lender in
-----------------
writing through the Borrowers' Agent, of the following matters at the following
times:
(a) Promptly after becoming aware of the existence of any Event
or Event of Default.
(b) Promptly after becoming aware that (i) the holder of any
capital stock issued by any Borrower Party has taken any legal action against a
Borrower Party, or (ii) the holder of any Debt of any Borrower Party has given
notice or taken any action with respect to a default or alleged default of such
Borrower Party in respect of such Debt.
(c) Promptly after becoming aware of (i) any adverse change,
development, or occurrence in the litigation listed in Schedule 9.16 (whether or
not such change, development or occurrence is covered by clause (ii) of this
-----------
clause (c)), or (ii) any material adverse change in the Property, business,
----------
performance, operations, prospects, or condition (financial or otherwise) of any
Borrower Party.
(d) Promptly after becoming aware of any pending or threatened
action, suit, proceeding, or counterclaim by any Person, or any pending or
threatened investigation by a Public Authority, or any actual or potential
Government Offset, which individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect.
(e) Promptly after becoming aware of any pending or threatened
strike, work
45
stoppage, material unfair labor practice claim, or other material labor dispute
affecting any Borrower Party or any of its Subsidiaries.
(f) Promptly after becoming aware of any violation of any law,
statute, regulation, or ordinance of a Public Authority applicable to any
Borrower Party, any Subsidiary, or their respective Properties which could
reasonably be expected to have a Material Adverse Effect.
(g) Promptly after becoming aware of any violation by any
Borrower Party of Environmental Law (which violation could reasonably be
expected to have a Material Adverse Effect) or immediately upon receipt of any
notice that a Public Authority has asserted that any Borrower Party is not in
compliance with Environmental Laws or that its compliance is being investigated.
(h) Thirty (30) days prior to any Borrower Party (x) changing its
name or the address of its place of business, and, if it has more than one place
of business, the address of its chief executive office, (y) entering into any
merger or consolidation or (z) taking any other action which could result in the
Security Interest ceasing to be a first priority perfected security interest in
favor of the Lender.
(i) Promptly after becoming aware of any ERISA Event, accompanied
by any materials required to be filed with the PBGC with respect thereto;
immediately after any Borrower Party's receipt of any notice concerning the
imposition of any withdrawal liability under Section 4042 of ERISA with respect
to a Plan; immediately upon the establishment of any Pension Plan not existing
at the Closing Date or the commencement of contributions by any Borrower Party
to any Pension Plan to which any Borrower Party was not contributing at the
Closing Date; and immediately upon becoming aware of any other event or
condition regarding a Plan or regarding compliance by any Borrower Party or an
ERISA Affiliate with ERISA, which could have a Material Adverse Effect.
(j) Promptly upon becoming aware of any delinquent taxes of any
Borrower Party which, individually or in the aggregate, exceed two hundred fifty
thousand dollars ($250,000).
Each notice given under this Section 8.3 shall describe the subject
-----------
matter thereof in reasonable detail and shall set forth the action that the
Borrower Parties have taken or propose to take with respect thereto.
The foregoing shall not limit the obligations of the Borrower Parties
to give other notices under this Agreement, including without limitation to
notify the Lender in accordance with Section 7.9(d) as to disputes and claims
--------------
and alleged or asserted Government Offsets.
9. GENERAL WARRANTIES AND REPRESENTATIONS.
--------------------------------------
Each Borrower Party continuously warrants and represents to the
Lender, at all times during the term of this Agreement and until all Obligations
have been satisfied, that, except as hereafter disclosed to and accepted by the
Lender in writing:
46
1 Authorization, Validity, and Enforceability of this Agreement and
-----------------------------------------------------------------
the Loan Documents. Each Borrower Party has the power and authority to execute,
------------------
deliver and perform this Agreement and the other Loan Documents, to incur the
Obligations, and to grant the Security Interest. Each Borrower Party has taken
all necessary action (including, without limitation, obtaining approval of its
stockholders if applicable) to authorize its execution, delivery, and
performance of this Agreement and the other Loan Documents to which it is a
party. No consent, approval, or authorization of, or declaration or filing
with, any Public Authority, and no consent of any other Person, is required in
connection with the execution, delivery, and performance of this Agreement and
the other Loan Documents by any Borrower Party, except for those already duly
obtained. This Agreement and the other Loan Documents to which it is a party
have been duly executed and delivered by each Borrower Party and constitute the
legal, valid and binding obligations of each Borrower Party, enforceable against
it in accordance with their respective terms without defense, setoff, or
counterclaim, except as may be limited by bankruptcy or insolvency laws or
similar laws affecting creditors' rights generally or by general equitable
principles. The execution, delivery, and performance of this Agreement and the
other Loan Documents by each Borrower Party do not and shall not conflict with,
or constitute a violation or breach of, or constitute a default under, or result
in the creation or imposition of any Lien upon the Property of any Borrower
Party or any of its Subsidiaries (except as contemplated by this Agreement and
the other Loan Documents) by reason of the terms of (a) the Indenture or any
mortgage, lease, agreement, or instrument to which any Borrower Party or any of
its Subsidiaries is a party or which is binding upon it, (b) any judgment, law,
statute, rule or governmental regulation applicable to any Borrower Party or any
of its Subsidiaries, or (c) the certificate or articles of incorporation, bylaws
or other organizational documents of any Borrower Party or any of its
Subsidiaries.
2 Validity and Priority of Security Interest. The provisions of this
------------------------------------------
Agreement and the other Loan Documents create legal and valid Liens on all the
Collateral in the Lender's favor, and when all proper filings, recordings, and
other actions necessary to perfect such Liens have been made or taken, such
Liens shall constitute perfected and continuing Liens on all the Collateral,
having priority over all other Liens on the Collateral and enforceable against
each Borrower Party and all other Persons.
3 Organization and Qualification. Each Borrower Party: (a) is duly
------------------------------
organized and validly existing in good standing under the laws of the state of
its incorporation; (b) is qualified to do business and is in good standing in
all jurisdictions in which the failure to be so qualified and in good standing
could reasonably be expected to result in a Material Adverse Effect; and (c) has
all requisite power and authority to conduct its business and to own its
Property.
4 Name; Prior Transactions. The corporate name of each Borrower
------------------------
Party is set forth on its signature page to this Agreement (or, in the case of a
Person which becomes a Borrower pursuant to an Additional Borrower Agreement,
set forth on its signature page to such Additional Borrower Agreement), and such
Borrower Party has not used any other corporate company name during the past
five years. Since January 1, 1999, no Borrower Party has: been known by or used
any doing business as or fictitious name (except as set forth in Schedule 9.15),
-------------
or been a party to any merger or consolidation, or acquired all or substantially
all of the assets of any Person, or acquired any of its Property out of the
ordinary course of business, or been subject to any event, occurrence or
proceeding of the type
47
contemplated by any of clause (f), clause (g), clause (h), or clause (i) of
---------- ---------- ---------- ----------
Section 12.1.
------------
5 Subsidiaries and Affiliates. Schedule 9.5 is a correct and
--------------------------- ------------
complete list as of the Closing Date of the name and relationship to each
Borrower Party of each and all of its Subsidiaries and other Affiliates. Since
the Closing Date, each Borrower Party has notified the Lender as to the name and
relationship to such Borrower Party of any other Person which became a
Subsidiary or other Affiliate of such Borrower Party after the Closing Date.
The Borrower Parties and/or the applicable Subsidiary of Borrower Parties are
the only record and beneficial owner of all of the shares of capital stock,
partnership interests or other ownership interests of each of the Subsidiaries,
except as specified in Schedule 9.5 or as specified in such notification. There
------------
are no proxies, irrevocable or otherwise, with respect to such shares,
partnership interests or ownership interests, and no equity securities of any of
such Subsidiaries are or may become required to be issued by reason of any
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of any capital stock of, partnership interests or
ownership interests in any such Subsidiary, and there are no contracts,
commitments, understandings or arrangements by which any such Subsidiary is or
may become bound to issue additional shares of its capital stock, securities
convertible into or exchangeable for such shares, partnership interests or any
other ownership interests. All of such shares, partnership interests or
ownership interests so owned by each Borrower Party are owned by such Borrower
Party free and clear of any Liens other than Permitted Liens. Each Subsidiary
of a Borrower Party is (a) duly incorporated or formed, and duly organized and
validly existing in good standing under the laws of its state of formation set
forth on Schedule 9.5, and (b) qualified to do business as a foreign
------------
corporation, partnership, or limited liability company and in good standing in
each jurisdiction in which the failure to be so qualified could result in a
Material Adverse Effect.
6 Financial Statements and Plan.
-----------------------------
(a) The Company has delivered to the Lender the audited
consolidated balance sheet and related consolidated statements of operations,
cash flows, and changes in stockholders equity for the Company and its
Subsidiaries as of September 30, 1998 and for the Fiscal Year then ended,
accompanied by the report thereon of the Company's independent certified public
accountants, Ernst & Young LLP. The Company has also delivered to the Lender the
Borrower's Form 10-Q for the quarterly period ended June 30, 1999. All such
financial statements have been prepared in accordance with GAAP and present
accurately and fairly the Company's financial position as at the dates thereof
and its results of operations for the periods then ended.
(b) The Latest Plan represents the Company's best estimate of the
future financial performance of the Company and its Subsidiaries for the periods
set forth therein. The Latest Plan has been prepared on the basis of the
assumptions set forth therein, which the Company believes are fair and
reasonable in light of current and reasonably foreseeable business conditions.
(c) During the past three (3) years, the Company has not
discharged or replaced its independent certified public accountants, and such
accountants have not resigned as such, except as disclosed by the Company in
writing to the Lender.
48
7 [Reserved]
8 Solvency. Each Borrower Party is Solvent prior to and after giving
--------
effect to the making of each Loan.
9 Debt. Except for the two promissory notes included in Schedule
---- --------
9.9, both of which are unsecured, no Borrower Party has any Debt, except as
---
permitted by Section 10.12.
-------------
10 Distributions. Except as disclosed in writing to the Lender,
-------------
since June 30, 1999 no Distribution has been declared, paid, or made upon or in
respect of any capital stock or other securities of the Company.
11 Title to Property. Except for Property which any Borrower Party
-----------------
leases, each Borrower Party has good, indefeasible, and merchantable title to
all of its Property including, without limitation, the assets reflected on the
most recent Financial Statements delivered to the Lender, except as disposed of
since the date thereof in the ordinary course of business, subject only to
Permitted Liens and purchase money security interests; provided that this
Section 9.11 is subject to and shall not limit Section 9.2,
12 Adequate Assets. Each Borrower Party possesses adequate assets
---------------
for the conduct of its business.
13 Real Property; Leases. Schedule 9.13 contains a correct and
--------------------- -------------
complete list, as of the Closing Date, of all real property owned by any
Borrower Party, all material leases and subleases of real or personal property
by any Borrower Party as lessee or sublessee, and all material leases and
subleases of real or personal property by any Borrower Party as lessor or
sublessor; provided that the Lender acknowledges that certain of such leases are
being assigned on or about the Closing Date to the purchaser of the assets of
Paramedical Services of America, Inc. Since the Closing Date, each Borrower
Party has notified the Lender as to all other real property acquired by such
Borrower Party, and all leases and subleases of real property (and all leases or
subleases of personal property involving payments by any Borrower Party during
any Fiscal Year in excess of five hundred thousand dollars ($500,000), entered
into by any Borrower Party after the Closing Date. Each of such leases and
subleases is valid and enforceable in accordance with its terms and is in full
force and effect and, to each Borrower Party's knowledge, no default by any
party to any such lease or sublease exists, except where the failure to be valid
and enforceable would not have a Material Adverse Effect.
14 Proprietary Rights. Schedule 9.14 contains a correct and complete
------------------ -------------
list, as of the Closing Date, of all the material Proprietary Rights of each
Borrower Party. Since the Closing Date, each Borrower Party has notified the
Lender as to all other material Proprietary Rights of which such Borrower Party
became the owner after the Closing Date. None of the material Proprietary
Rights of any Borrower Party are subject to any licensing agreement, assignment
agreement or similar arrangement except as set forth on Schedule 9.14 or in such
-------------
notification. The Borrower Parties shall notify the Lender promptly following
any amendment, modification, expiration or termination of any
49
such agreement or arrangement. To each Borrower Party's knowledge none of the
Proprietary Rights infringe on or conflict with any other Person's Property and
no other Person's Property infringes on or conflicts with the Proprietary
Rights. The Proprietary Rights described on Schedule 9.14 or in such
-------------
notification constitute all of the Proprietary Rights which are, in the
reasonable judgment of each Borrower Party, necessary to the current and
anticipated future conduct of the business of each Borrower Party.
15 Trade Names and Terms of Sale. All trade names or styles under
-----------------------------
which any Borrower shall sell Inventory or create Accounts, or to which
instruments in payment of Accounts may be made payable, are listed on Schedule
--------
9.15. No Borrower redates any invoice or claim form after such invoice or claim
----
form has been sent to an Account Debtor. The Lender acknowledges that if an
Account Debtor which is the "primary" payor does not pay a claim in full or
denies such claim, any Borrower Party may send a separate invoice to an Account
Debtor which is a "secondary" payor.
16 Litigation. Except for the two cases identified on Schedule 9.16,
---------- -------------
there is no pending or, to the best knowledge of any Borrower Party, threatened
action, suit, proceeding, or counterclaim by any Person, or investigation by any
Public Authority, or any basis for any of the foregoing, which would reasonably
be expected to result in a Material Adverse Effect.
17 Restrictive Agreements. No Borrower Party is a party to any
----------------------
contract or agreement, or is subject to any charter or other corporate
restriction, which affects its ability to execute, deliver, and perform the Loan
Documents, or which could otherwise reasonably be expected to result in a
Material Adverse Effect.
18 Labor Disputes. As of the Closing Date: (a) there is no
--------------
collective bargaining agreement or other labor contract covering employees of
any Borrower Party or any of its Subsidiaries; (b) no such collective bargaining
agreement or other labor contract is scheduled to expire during the term of this
Agreement; (c) no union or other labor organization is seeking to organize, or
to be recognized as, a collective bargaining unit of employees of any Borrower
Party or any of its Subsidiaries or for any similar purpose; and (d) there is no
pending or, to the best knowledge of any Borrower Party, threatened strike, work
stoppage, material unfair labor practice claim, or other material labor dispute
against or affecting any Borrower Party, or any of its Subsidiaries or their
respective employees. Since the Closing Date, each Borrower Party has notified
the Lender as to any matters covered by clause (a), (b), (c) or (d) of the
previous sentence which first arose or existed after the Closing Date.
50
19 Environmental Laws.
------------------
(a) Each Borrower Party and its Subsidiaries have complied in all
material respects with all Environmental Laws applicable to its Premises and
business, and no Borrower Party or any of its Subsidiaries or any of its present
Premises or operations, or to the knowledge of any Borrower Party, any of its
past property or operations, is subject to any enforcement order from or
liability agreement with any Public Authority or private Person respecting (i)
compliance with or violation of any Environmental Law or (ii) any potential
liabilities and costs or remedial action arising from the Release or threatened
Release of a Contaminant.
(b) Each Borrower Party and its Subsidiaries have obtained all
permits necessary for their current operations under Environmental Laws, and all
such permits are valid and each Borrower Party and its Subsidiaries are in
material compliance with all terms and conditions of such permits.
(c) No Borrower Party or any of its Subsidiaries, or, to the best
knowledge of any Borrower Party, any of its predecessors in interest, has in
violation of applicable law stored, treated or disposed of any Contaminant on
any Premises, as defined pursuant to 40 CFR Part 261 or any equivalent
Environmental Law.
(d) No Borrower Party or any of its Subsidiaries has received any
summons, complaint, order or similar written notice that it is not currently in
compliance with, or that any Public Authority is investigating its compliance
with, any Environmental Laws or that it is or may be liable to any other Person
as a result of a Release or threatened Release of a Contaminant.
(e) To the best knowledge of each Borrower Party, none of the
present or past operations of any Borrower Party or any of its Subsidiaries is
the subject of any investigation by any Public Authority evaluating whether any
remedial action is needed to respond to a Release or threatened Release of a
Contaminant.
(f) To the best knowledge of each Borrower Party, there is not
now, nor has there ever been on or in the Premises:
(i) any underground storage tanks or surface impoundments,
(ii) any asbestos-containing material, or
(iii) any polychlorinated biphenyls (PCBs) used in
hydraulic oils, electrical transformers or other equipment.
(g) No Borrower Party or any of its Subsidiaries has filed any
notice under any applicable requirement of Environmental Law reporting a spill
or accidental and unpermitted release or discharge of a Contaminant into the
environment.
51
(h) No Borrower Party or any of its Subsidiaries has entered into
any negotiations or settlement agreements with any Person (including, without
limitation, the prior owner of its property) imposing material obligations or
liabilities on any Borrower Party or any of its Subsidiaries with respect to any
remedial action in response to the Release of a Contaminant or environmentally
related claim.
(i) To the best knowledge of each Borrower Party, none of the
products manufactured, distributed or sold by any Borrower Party or any of its
Subsidiaries contains asbestos-containing material.
(j) To the best knowledge of each Borrower Party, no
Environmental Lien has attached to any Premises of any Borrower Party or any of
its Subsidiaries.
20 Health Care Laws.
----------------
(a) To the best knowledge of each Borrower Party, each Borrower
Party and its Subsidiaries have complied in all material respects with all
Health Care Laws applicable to its business, and no Borrower Party or any of its
Subsidiaries or any of its present operations, nor its past operations, is
subject to any action, order from or agreement respecting (i) to the best
knowledge of each Borrower Party, compliance with any Health Care Law or (ii) to
the best knowledge of each Borrower Party, any potential liabilities under
Health Care Laws.
(b) Each Borrower Party and its Subsidiaries have obtained all
licenses, permits, accreditations, certifications and approvals necessary for
their current operations under Health Care Laws, and all such licenses, permits,
accreditations, certifications and approvals are in good standing, and each
Borrower Party and its Subsidiaries are in compliance with all material terms
and conditions thereof except where the failure to comply would not have a
Material Adverse Effect.
(c) No Borrower Party or any of its Subsidiaries has received any
summons, complaint, subpoena, order or other notice that it is not currently in
compliance with any Health Care Laws or that it is or may be liable to any other
Person under or in connection with any Health Care Laws, other than two matters
which (i) were disclosed to the Lender prior to the Closing Date, (ii) have been
settled for less than eighty-six thousand dollars ($86,000), and (iii) did not
involve the filing of any criminal charges.
(d) To the best knowledge of each Borrower Party, none of the
present or past operations of any Borrower Party or any of its Subsidiaries is
the subject of any investigation by any Public Authority concerning alleged or
potential material violations of Health Care Laws.
(e) No Borrower Party or any of its Subsidiaries is involved in
any negotiations or settlement agreements with any Person which impose or could
impose material obligations or liabilities on any Borrower Party or any of its
Subsidiaries with respect to any Health Care Law.
52
21 No Violation of Law. No Borrower Party is in violation of any
-------------------
law, statute, regulation, ordinance, judgment, order, or decree applicable to it
which violation could reasonably be expected to result in a Material Adverse
Effect.
22 No Default. No Borrower Party is in default with respect to any
----------
note, indenture, loan agreement, mortgage, lease, deed, or other agreement to
which any Borrower Party is a party or bound, which default could reasonably be
expected to result in a Material Adverse Effect.
23 ERISA Compliance.
----------------
(a) Each Plan is in compliance in all respects with the
applicable provisions of ERISA, the Code and other federal or state law, except
where any failure to comply would not reasonably be expected to have a Material
Adverse Effect. Each Plan which is intended to qualify under Section 401(a) of
the Code has received a favorable determination letter from the IRS or is
maintained in the form of a standardized prototype plan which has received a
favorable opinion letter or a favorable notification letter from the IRS, and to
the best knowledge of each Borrower Party, nothing has occurred which would
affect its reliance on such determination letter, plan, opinion letter or
notification letter. Each Borrower Party and each ERISA Affiliate have made all
required contributions to any Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code, except where any failure to contribute
would not reasonably be expected to have a Material Adverse Effect, has been
made with respect to any Plan.
(b) There are no pending or, to the best knowledge of any
Borrower Party, threatened claims, actions or lawsuits, or action by any Public
Authority, with respect to any Plan which has resulted or could reasonably be
expected to have a Material Adverse Effect. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan which has resulted in or could reasonably be expected to have a
Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any unfunded liability; (iii) no Borrower Party
or any ERISA Affiliate has incurred, or reasonably expects to incur, any
material liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA); (iv)
no Borrower Party or any ERISA Affiliate has incurred, or reasonably expects to
incur, any material liability (and no event has occurred which, with the giving
of notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) no
Borrower Party or any ERISA Affiliate has engaged in a transaction that could
subject any Person to Section 4069 or 4212(c) of ERISA.
24 Taxes. Each Borrower Party and its Subsidiaries has filed all tax
-----
returns and other reports required to be filed (or has filed proper extensions
of time to file) and has paid all Taxes, assessments, fees and other
governmental charges levied or imposed upon it or its properties, income or
assets that are otherwise due and payable, except for those Taxes, assessments,
fees and other governmental charges which are being contested in good faith by
appropriate proceedings diligently
53
pursued.
25 Use of Proceeds. The Borrowers shall use the proceeds of the
---------------
Loans for working capital purposes and to retire a portion of the Subordinated
Notes. None of the transactions contemplated in this Agreement or any other
Loan Document (including the use of proceeds from any Loan or Letter of Credit)
shall violate or result in the violation of any law, rule or regulation,
including Section 7 of the Securities Exchange Act of 1934, as amended, or any
regulations issued pursuant thereto, including the regulations of the Board of
Governors of the Federal Reserve System ("Federal Reserve Board"), 12 CFR,
Chapter II. No Borrower Party owns or intends to carry or purchase any "margin
stock" within the meaning of the regulations of the Federal Reserve Board.
Except as permitted by Section 10.19, no Borrower Party has used proceeds of the
-------------
Loans to invest in any Restricted Investments.
26 Private Offerings. No Borrower Party has, directly or indirectly,
-----------------
offered the Loans for sale to, or solicited offers to buy part thereof from, or
otherwise approached or negotiated with respect thereto with any prospective
purchaser other than Lender. No Borrower Party or any Person acting on its
behalf has offered or shall offer the Loans or any part thereof or any similar
securities for issue or sale to or solicit any offer to acquire any of the same
from anyone so as to bring the issuance thereof within the provisions of Section
5 of the Securities Act of 1933, as amended.
27 Broker's Fees'. No Person is entitled to any brokerage or finder's
--------------
fee with respect to the transactions described in this Agreement.
28 Government Regulation. No Borrower Party or any of its
---------------------
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Investment Company Act of 1940, or any
other Requirement of Law that limits its ability to incur indebtedness or its
ability to enter into or consummate the transactions contemplated in this
Agreement and the other Loan Documents.
29 No Material Adverse Change. Except as disclosed in the Company's
--------------------------
Form 10-Q for the quarterly periods ending December 31, 1998, March 31, 1999 and
June 30, 1999, respectively, no material adverse change has occurred in the
Property, business, performance, operations, prospects or condition (financial
or otherwise) of any Borrower Party since September 30, 1998. On the basis of a
comprehensive review and assessment undertaken by the Company of the computer
applications of the Company and its Subsidiaries and inquiry made of the
material suppliers and vendors of the Company and its Subsidiaries, the Company
reasonably believes that the "Year 2000 problem" (that is, the risk that
computer applications used by any Person may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
after December 31, 1999) shall not result in a Material Adverse Effect.
30 Disclosure. Neither this Agreement nor any Borrowing Base
----------
Certificate, report, notice, document or statement furnished to the Lender by or
on behalf of any Borrower Party under this Agreement or any other Loan Document
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements contained herein or therein not
54
misleading.
10. AFFIRMATIVE AND NEGATIVE COVENANTS. Each Borrower Party covenants
----------------------------------
that, so long as any of the Obligations remain outstanding or this Agreement is
in effect:
1 Taxes and Other Obligations. Each Borrower Party and each of its
---------------------------
Subsidiaries shall: (a) file when due (subject to any extensions permitted
under applicable law) all tax returns and other reports which it is required to
file, pay, or provide for the payment, when due, of all Taxes, fees, assessments
and other governmental charges against it or upon its Property, income, and
franchises, make all required withholding and other tax deposits, and establish
adequate reserves for the payment of all such items, and shall provide to the
Lender, upon request, satisfactory evidence of its timely compliance with the
foregoing; and (b) pay when due all Debt owed by it and perform and discharge in
a timely manner all other obligations undertaken by it; provided, however, that
-------- -------
each Borrower Party and its Subsidiaries need not pay any tax, fee, assessment,
governmental charge, or Debt, or perform or discharge any other obligation, that
it is contesting in good faith by appropriate proceedings diligently pursued.
2 Existence and Good Standing. Each Borrower Party shall maintain its
---------------------------
existence and its qualification and good standing in all states necessary to
conduct its business and own its Property, except where the failure to remain
qualified and in good standing could not reasonably be expected to result in a
Material Adverse Effect, and shall obtain and maintain all material licenses,
permits, franchises and governmental authorizations necessary to conduct its
business and own its Property.
3 Compliance with Law and Agreements. Each Borrower Party and each of
----------------------------------
its Subsidiaries shall comply in all material respects with the terms and
provisions of each judgment, law, statute, rule, and governmental regulation
applicable to it and each material contract, mortgage, lien, lease, indenture,
order, instrument, agreement, or document to which it is a party or by which it
is bound.
4 Maintenance of Property and Insurance. Each Borrower Party and each
-------------------------------------
of its Subsidiaries shall: (a) maintain all of its Property necessary and
useful in its business in good operating condition and repair, ordinary wear and
tear excepted; and (b) in addition to the insurance required by Section 7.7,
-----------
maintain with financially sound and reputable insurers such other insurance with
respect to its Property and business against casualties and contingencies of
such types (including, without limitation, business interruption, environmental
liability, public liability, product liability, and larceny, embezzlement or
other criminal misappropriation) and in such amounts as is customary for Persons
of established reputation engaged in the same or a similar business and
similarly situated, naming the Lender, at its request, as additional insured
under each such policy.
5 Environmental Laws. Each Borrower Party shall conduct its business
------------------
in all material respects in compliance with all Environmental Laws applicable to
it, including, without limitation, those relating to the generation, handling,
use, storage, and disposal of Contaminants. Each Borrower Party shall take (and
shall cause each of its Subsidiaries to take) prompt and appropriate action to
respond to and remediate any non-compliance with Environmental Laws if the
failure to so act is
55
reasonably likely to have a Material Adverse Effect, and shall regularly report
to the Lender on such response and remediation. Without limiting the generality
of the foregoing, whenever any Borrower Party gives notice to the Lender
pursuant to Section 8.3(g) the Borrower Parties shall, at the Lender's request
--------------
and the expense of the Borrower Parties: (a) cause an independent environmental
engineer acceptable to the Lender and the Borrowers' Agent to conduct such tests
of the site where the noncompliance or alleged non-compliance with Environmental
Laws has occurred and prepare and deliver to the Lender a report setting forth
the results of such tests, a proposed plan for responding to any environmental
problems described therein, and an estimate of the costs thereof; and (b)
provide to the Lender a supplemental report of such engineer whenever the scope
of the environmental problems, or any Borrower Party's response thereto or the
estimated costs thereof, shall change.
6 Health Care Laws. Each Borrower Party and each of its Subsidiaries
----------------
shall conduct its business in all material respects in compliance with all
Health Care Laws applicable to it. Each Borrower Party and its Subsidiaries
shall take prompt and appropriate action to respond to and remediate any
material non-compliance with any Health Care Law Each Borrower Party and each of
its Subsidiaries shall promptly report to the Lender on any such non-compliance
and any such response and remediation in each case if such non-compliance or
such response and remediation is reasonably likely to have a Material Adverse
Effect.
7 ERISA. Each Borrower Party shall cause each Plan, which has been
-----
designated to be so, to be qualified within the meaning of Section 401(a) of the
Code and to be administered in all respects in compliance with Section 401(a) of
the Code, except where any such failure to comply would not reasonably be
expected to have a Material Adverse Effect. Each Borrower Party shall cause each
Plan to be administered in all respects in compliance with ERISA, except where
any such failure to comply would not reasonably be expected to have a Material
Adverse Effect.
8 Mergers, Consolidations or Sales. Without the prior written
--------------------------------
consent of the Lender, no Borrower Party or any of its Subsidiaries shall enter
into any transaction of merger, reorganization, or consolidation, or transfer,
sell, assign, lease, or otherwise dispose of all or any substantial part of its
Property, or wind up, liquidate or dissolve, or acquire or purchase any Person
or a substantial portion of any of the assets of any Person or agree to do any
of the foregoing, except acquisitions of assets excluded from the definition of
Restricted Investment and sales of Inventory in the ordinary course of its
business; provided that this Section 10.8 does not authorize any transfer, sale,
assignment, lease or disposition of any Collateral by any Borrower Party or any
of its Subsidiaries. Notwithstanding the foregoing sentence, a Borrower Party
or any of its Subsidiaries may (i) sell or otherwise dispose of obsolete or non-
useful Equipment and (ii) sell, wind up, liquidate or dissolve any non-material
Subsidiary which is not a Borrower Party.
9 Distributions. Except as permitted by Section 10.14, no Borrower
------------- -------------
Party or any of its Subsidiaries shall directly or indirectly declare or make,
or incur any liability to make, any Distribution, except Distributions (a) to a
Borrower by a Subsidiary wholly owned by such Borrower or (b) to a stockholder
of such Borrower Party in connection with a settlement of a lawsuit in which
such stockholder is a plaintiff or a member of a class of plaintiffs.
56
10 Transactions Having a Material Adverse Effect. No Borrower Party
---------------------------------------------
or any of its Subsidiaries shall enter into any transaction after the Closing
Date which is reasonably likely to have a Material Adverse Effect.
11 Guaranties. No Borrower Party or any of its Subsidiaries shall
----------
make, issue or become liable on any Guaranty, except: (a) Guaranties in favor
of the Lender and endorsements of instruments for deposit, (b) Guaranties of
Debt otherwise expressly permitted hereunder, and (c) Guaranties of obligations
of other Borrower Parties.
12 Debt. No Borrower Party or any of its Subsidiaries shall incur or
----
maintain any Debt, other than: (a) the Obligations; (b) trade payables, lease
rental payments and contractual obligations to suppliers and customers incurred
in the ordinary course of business; (c) other Debt existing on the Closing Date
and reflected in the financial statements contained in the Company's Form 10-Q
for the quarterly period ending June 30, 1999, or evidenced by the two unsecured
promissory notes included in Schedule 9.9; (d) accruals required in connection
------------
with any Plan; and (e) other unsecured Debt in an aggregate amount not to exceed
one million dollars ($1,000,000) at any one time outstanding.
13 Prepayment. No Borrower Party or any of its Subsidiaries shall
----------
voluntarily prepay any Debt, except: (a) prepayments of the Obligations in
accordance with their terms; (b) repayment of the Subordinated Notes in
accordance with the terms of the Indenture; (c) repayment of the Subordinated
Notes with the proceeds of the sale of Paramedical Services of America, Inc.; or
(d) otherwise with the prior written consent of the Lender.
14 Transactions with Affiliates. Except as set forth in the next
----------------------------
sentence, no Borrower Party or any of its Subsidiaries shall: (a) sell,
transfer, distribute, or pay any money or Property to any Affiliate (other than
dividends made in compliance with applicable law), (b) lend or advance money or
Property to any Affiliate (other than unsecured loans between the Borrower
Parties in the ordinary course of business), (c) invest in (by capital
contribution or otherwise) or purchase or repurchase any stock or indebtedness
or any Property of any Affiliate, or (d) become liable on any Guaranty of the
indebtedness, dividends, or other obligations of any Affiliate other than
Guarantees by one Borrower Party of the indebtedness and obligations of one or
more other Borrower Parties. Notwithstanding the foregoing, if no Event of
Default has occurred and is continuing, each Borrower Party and its Subsidiaries
may engage in transactions with Affiliates in the ordinary course of business in
amounts and upon terms fully disclosed to the Lender and no less favorable to
each Borrower Party and its Subsidiaries than would obtain in a comparable arm's
length transaction with a third party who is not an Affiliate.
15 Business Conducted. Except with the prior written consent of the
------------------
Lender, no Borrower Party or any of its Subsidiaries shall engage, directly or
indirectly, in any line of business other than (a) the businesses in which such
Borrower Party and its Subsidiaries are engaged on the Closing Date and (b)
businesses directly related to such businesses.
16 Liens. No Borrower Party or any of its Subsidiaries shall create,
-----
incur, assume, or
57
permit to exist any Lien on any Property (including on any capital stock,
membership interests, partnership interests and joint venture interests of or
issued by any Person) now owned or hereafter acquired by any of them, except
Permitted Liens.
17 Sale and Leaseback Transactions. Except with the prior written
-------------------------------
consent of the Lender, no Borrower Party or any of its Subsidiaries shall,
directly or indirectly, enter into any arrangement with any Person providing for
such Borrower Party or any such Subsidiary to lease or rent Property that such
Borrower Party or Subsidiary has or shall sell or otherwise transfer to such
Person, unless the aggregate amount of consideration for all such arrangements
during any calendar year is less than two hundred fifty thousand dollars
($250,000).
18 New Subsidiaries. Except with the prior written consent of the
----------------
Lender, no Borrower Party shall, directly or indirectly, organize or acquire any
Subsidiary other than those listed on Schedule 9.5.
------------
19 Restricted Investments. Except with the prior written consent of
----------------------
the Lender, no Borrower Party or any of its Subsidiaries shall make any
Restricted Investment during any calendar year if the aggregate amount of
Restricted Investments made during such calendar year exceeds one million
dollars ($1,000,000).
20 Availability. The Borrower Parties shall not permit or cause
------------
Availability to be less than twenty million dollars ($20,000,000); provided that
for purposes of this Section 10.20 only, Availability shall be calculated
-------------
without reference to the Maximum Revolving Credit Line.
21 Fixed Charge Coverage. As of the last day of each fiscal quarter
---------------------
of the Company, commencing with the fiscal quarter ending December 31, 1999, the
Company shall maintain a ratio of
(a) the sum of (i) EBITDA for the four consecutive fiscal
quarters ending on such last day plus (ii) the Specified Bad Debt Expense Amount
for such four fiscal quarters, to
(b) the sum of (i) Interest Expense for such four fiscal
quarters, (ii) Capital Expenditures of the Company and its Subsidiaries during
such four fiscal quarters, (iii) actual payments of taxes by the Borrower
Parties during such four fiscal quarters, and (iv) principal payments which any
Borrower Party was required to make on Debt for borrowed money during such four
fiscal quarters, which Debt had an original term of at least one year,
of not less than 1.1 to 1.
22 Loan Documents. No Borrower Party shall enter into or permit to
--------------
exist any amendment, modification, termination, supplement, compromise,
satisfaction, release, discharge or waiver of any Loan Document without the
prior written consent of the Lender. Except as otherwise provided in this
Agreement, no Borrower Party shall sell, assign, pledge or otherwise transfer
any of its rights or obligations under any Loan Document without the prior
written consent of the Lender.
58
23 Further Assurances. Each Borrower Party shall execute and
------------------
deliver, or cause to be executed and delivered, to the Lender such documents,
financing statements, instruments and agreements, and shall take or cause to be
taken such actions, as the Lender may, from time to time, reasonably request to
carry out the terms and conditions of this Agreement and the other Loan
Documents.
11. CONDITIONS PRECEDENT. The Lender shall not be obligated to make the
--------------------
initial Loan or issue the initial Letter of Credit, unless the following
conditions precedent have been satisfied in a manner satisfactory to the Lender
both at the time that the initial Loan is made and at the time that the initial
Letter of Credit is issued:
1 Conditions Precedent to Making of Initial Loan and Issuance of
--------------------------------------------------------------
Initial Letters of Credit.
-------------------------
(a) Representations of each Borrower Party and Warranties;
------------------------------------------------------
Covenants. The representations and warranties contained in this Agreement and
---------
the other Loan Documents shall be true, correct and complete; each Borrower
Party shall have performed and complied with all covenants, agreements, and
conditions contained herein and in the other Loan Documents which are required
to have been performed or complied with.
(b) Secretary's Certificate. The Lender shall have received a
-----------------------
certificate of the Secretary or Assistant Secretary of each Borrower Party
certifying (i) the certificate of incorporation referred to in Section 11.1(c),
---------------
(ii) the by-laws of such Borrower Party, (iii) a copy of the resolutions of the
board of directors of such Borrower Party approving this Agreement and the other
Loan Documents and the transactions contemplated hereby and thereby and (iv) the
names and true signatures of the officers of such Borrower Party authorized to
sign the Loan Documents (on which certificate the Lender conclusively may rely
until such time as the Lender receives a revised certificate meeting the
requirements hereof).
(c) Certificate of Incorporation. The Lender shall have received
----------------------------
the certificate of incorporation of each Borrower Party certified by the
Secretary of State of the state of incorporation of such Person.
(d) Good Standing Certificates. The Lender shall have received
--------------------------
good standing certificates of each Borrower Party issued by the Secretary of
State of the state of incorporation of such Borrower Party and (not later than
thirty (30) days after the Closing Date) the state in which the principal place
of business and corporate office of such Borrower Party is located.
(e) Legal Opinions. The Lender shall have received legal opinions
--------------
from counsel to the Borrower Parties, in each case in form and substance
satisfactory to the Lender and its counsel.
59
(f) UCC Matters. The Lender shall have received:
-----------
(x) Acknowledgment copies of UCC financing statements
or other similar instruments or documents, as may be necessary or, in the
opinion of the Lender, desirable under the UCC or any comparable law of all
appropriate jurisdictions to be filed to perfect the Lender's interests in the
Collateral.
(y) A search report provided in writing by a Person
acceptable to the Lender listing all effective UCC financing statements that
name any Borrower Party as debtor and that are filed in the jurisdictions in
which filings were made pursuant to clause (x) and in such other jurisdictions
----------
as the Lender reasonably may request, together with copies of such financing
statements and reflecting searches of applicable records showing any liens
affecting the Collateral or any Borrower Party.
(z) One or more UCC financing statements signed by the
Borrower Parties and each secured party that has a Lien on the Collateral that
are necessary or, in the opinion of the Lender, desirable under the UCC or any
comparable law of all appropriate jurisdictions to terminate or subordinate such
Lien, together with, if applicable, signed payoff letters from each such secured
party (or in the case of Liens under the Existing Security Agreement, if the
Lender so requests, such UCC financing statements as are necessary or, in the
opinion of the Lender, desirable, to cause the Collateral to be reflected
therein and to otherwise reflect the current names and addresses of applicable
parties referred to in the UCC financing statements filed in connection with the
Existing Security Agreement).
(g) Trademark Security Agreements. The Lender shall have received
-----------------------------
security agreements in form and substance satisfactory to the Lender (each such
security agreement, as amended, amended and restated or otherwise modified from
time to time, may be referred to herein as a "Trademark Security Agreement"),
----------------------------
covering the trademarks listed in Schedule 9.14 and signed by the owners of such
-------------
trademarks.
(h) Financial Statements and Business Plan. The Lender shall have
--------------------------------------
received the Company's audited financial statements for Fiscal Year 1998, and
the Company's business plan for Fiscal Year 2000, in each case in form and
substance satisfactory to the Lender.
(i) Litigation. There shall exist no action, suit, investigation,
----------
litigation, or proceeding pending or threatened in any court or before any
arbitrator or governmental instrumentality that in the Lender's reasonable
judgment (x) could reasonably be expected to have a material adverse effect on
the business, condition (financial or otherwise), operations, performance, or
properties of any Borrower Party or which could impair the ability of any
Borrower Party to perform satisfactorily under this Agreement or (y) could
reasonably be expected to materially and adversely affect the transactions
contemplated hereby. The Lender shall be satisfied with the prospects of all
outstanding litigation and proceedings affecting any Borrower Party and the
terms and conditions of any settlements involving any Borrower Party.
60
(j) Corporate Structure. The Lender shall be satisfied with each
-------------------
Borrower Party's corporate structure and ownership of Accounts and other assets.
(k) Blocked Account Agreement. The Lender shall have received
-------------------------
initial Blocked Account Agreements, signed by the parties thereto, with the
following Blocked Account Banks: Albany First Bank, Bank One, NA, Crestar Bank,
First Union National Bank and Imperial Bank.
(l) Closing Fee; Loan Administration and Collateral Monitoring
----------------------------------------------------------
Fee. The Lender shall have received payment of the Closing Fee and the Loan
---
Administration and Collateral Monitoring Fee.
(m) Payment of Fees and Expenses. The Company shall have paid, to
----------------------------
the extent invoiced, the fees and other charges of the Lender's outside counsel,
▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇ (plus an estimate of fees and other charges relating to
anticipated post-closing matters including (i) organizing, photocopying and
distributing closing documents and (ii) post-closing searches of UCC records
with respect to UCC financing statements filed in connection herewith), and all
other reasonable fees and expenses of the Lender incurred in connection with any
of the Loan Documents and the transactions contemplated thereby.
(n) Required Approvals. The Lender shall have received certified
------------------
copies of all consents or approvals of any Public Authority or other Person
which the Lender determines is required in connection with the transactions
contemplated by this Agreement.
(o) No Material Adverse Change. No material adverse change shall
--------------------------
have occurred, as determined by the Lender in its reasonable and customary
credit judgment, in the business, operations, profits, prospects, or financial
condition of any Borrower Party or in the Collateral since April 30, 1999, and
at all times from May 11, 1999 to the Closing Date the Company shall have
achieved the financial performance projected in the Latest Plan, except to the
extent that such projections are based upon a sale of the Company's paramedical
testing division and relate to a time period prior to the actual sale thereof,
and the Lender shall have received a certificate from the Company to such
effect.
(p) Year 2000 Issues. Each Borrower Party shall have satisfied
----------------
the Lender that (a) such Borrower Party is taking all necessary and appropriate
steps to ascertain the extent of, quantify and successfully address the business
and financial risks facing such Borrower Party as a result of what is commonly
referred to as the "Year 2000 problem" (i.e., the inability of certain computer
applications to recognize correctly and perform properly date sensitive
functions involving certain dates prior to and any date after December 31,
1999), including risks resulting from the failure of key customers and suppliers
of such Borrower Party to address successfully the Year 2000 problem, and (b)
the material computer applications of such Borrower Party will on a timely basis
adequately address the Year 2000 problem in all material respects.
61
(q) Pro Forma Balance Sheet. The Lender shall have received a pro
-----------------------
forma balance sheet of the Company dated as of the last day of the month
immediately preceding the month in which the Closing Date occurs, which pro
forma balance sheet (i) gives effect to the transaction to occur on the Closing
Date and (ii) reflects no material changes from the most recent pro forma
balance sheet of the Company previously delivered to the Lender.
(r) Excess Availability. After taking into account the Loans and
-------------------
any Letter of Credit issued on the Closing Date, and with all obligations of the
Borrower Parties being current, there shall be remaining Availability of at
least twenty million dollars ($20,000,000).
(s) Sale of Assets of Paramedical Services of America, Inc. The
-------------------------------------------------------
Lender shall have received evidence, in form and substance satisfactory to the
Lender, that the assets of Paramedical Services of America, Inc. shall have been
sold.
(t) Repayment of Existing Credit Agreement. The Lender shall have
--------------------------------------
received evidence, in form and substance satisfactory to the Lender, that all
existing Debt owed under the Existing Credit Agreement shall have been paid in
full or will be paid simultaneously with the proceeds of the initial Loan
hereunder.
(u) Indenture. The Lender shall be fully satisfied with all terms
---------
and conditions of the Indenture, and the Lender shall be fully satisfied that
this Agreement shall constitute "senior debt" that is permitted under the
Indenture.
(v) Proceedings. All proceedings to be taken in connection with
-----------
the transactions contemplated by this Agreement, all exhibits and schedules to
this Agreement, and all documents contemplated in connection with this
Agreement, shall be satisfactory in form and substance to the Lender and its
counsel.
(w) Delivery of Documents. The Borrower Parties shall have
---------------------
delivered, or caused to be delivered, to the Lender such other certifications,
documents (including, without limitation, evidence of the federal taxpayer
identification number of each Borrower Party), instruments and agreements as the
Lender may reasonably request in connection herewith, duly executed by all
parties thereto other than the Lender, and in form and substance satisfactory to
the Lender and its counsel.
2 Conditions Precedent to Each Loan and Letter of Credit. The
------------------------------------------------------
obligation of the Lender to make each Loan and to issue any Letter of Credit
shall be subject to the conditions precedent that:
(a) on the date any such Loan is made or Letter of Credit is
issued, as applicable, the following statements shall be true, and the
acceptance by any Borrower of any extension of credit shall be deemed to be a
statement, representation and warranty by the Borrower Parties to the effect
that (i) the representations and warranties contained in this Agreement and the
other Loan Documents are correct in all material respects on and as of the date
such Loan is made or Letter of
62
Credit is issued, as applicable, as though made on and as of such date, except
to the extent the Lender has been notified by the Borrower's Agent that any
representation or warranty is not correct and the Lender has explicitly waived
in writing compliance with such representation or warranty and except for any
representation or warranty that relates only to a specific date in the past and
(ii) no Event or Event of Default has occurred and is continuing, or would
result from the making of such Loan or the issuance of such Letter of Credit;
and
(b) the Lender shall have received (i) a Borrowing Base
Certificate by 9:00 a.m., Chicago time, on the date on which such Loan is made
or such Letter of Credit is issued, (ii) in the case of Loans, a Notice of
Borrowing in accordance with Section 2.2(b), and (iii) in the case of Letters of
--------------
Credit, a Letter of Credit Request in accordance with Section 2.3.
-----------
12. DEFAULT.
-------
1 Events of Default. It shall constitute an event of default
-----------------
("Event of Default") if any one or more of the following shall occur for any
----------------
reason:
(a) any Borrower Party shall (i) fail to make payment of
principal on any Loan when due, or (ii) fail to make payment of interest, fees
or any other Obligation when due (and, in the case of this clause (ii), such
failure with respect to interest shall continue for a period of two (2) days, or
with respect to fees or other Obligations shall continue for a period of ten
(10) days, after the earlier to occur of (x) the date on which any Borrower
Party discovers, or should have discovered any such failure and (y) the date on
which the Lender notifies the Borrowers' Agent in writing of any such failure);
(b) any representation or warranty made (or deemed made pursuant
to Section 11.2) by any Borrower Party in this Agreement, any of the other Loan
------------
Documents, any Financial Statement, or any certificate furnished by any Borrower
Party or any Subsidiary at any time to the Lender shall prove to be untrue in
any material adverse respect as of the date when made, deemed made, or
furnished, except for any representation or warranty that relates only to a
specific date in the past;
(c) any Borrower Party shall (i) fail to comply with any of the
covenants set forth in any of Sections 7.1 through 7.19, 8.1, 8.2, 8.3, 10.6,
------------ ---- --- --- --- ----
10.8 through 10.22, or (ii) fail to comply with any of the covenants set forth
---- -----
in any of Sections 10.1, 10.2, 10.3, 10.4(b), 10.5, 10.7, or 10.23 (if such
------------- ---- ---- ------- ---- ---- -----
failure specified this clause (ii) shall have existed for more than ten (10)
days after the earlier to occur of (x) the date that any Borrower Party
discovers, or reasonably should have discovered, any such failure and (y) the
date on which the Lender notifies the Borrowers' Agent in writing of any such
failure); provided, however, that to the extent that any covenant in Section 8.2
-------- ------- -----------
or 8.3 specifies the number of days within which any Borrower Party must comply
---
with any reporting requirement therein, such failure shall have existed for the
number of days specified in such covenant, plus three (3) days;
(d) any Borrower Party shall fail to comply with any of the other
terms, covenants or agreements contained in this Agreement, the other Loan
Documents, or any other
63
agreement entered into at any time to which any Borrower Party and the Lender
are party and such failure shall continue for a period of fifteen (15) days
after the earlier to occur of (i) the date on which the Lender notifies the
Borrower's Agent in writing of any such failure and (ii) the date on which any
Borrower Party discovers, or reasonably should have discovered, any such
failure, or if any such Loan Document or agreement shall terminate (other than
in accordance with its terms or with the written consent of the Lender) or
become void or unenforceable without the written consent of the Lender; or any
Person shall contest in any manner the validity or enforceability of this
Agreement or any of the other Loan Documents or shall deny that any Borrower
Party has any further liability or obligation thereunder;
(e) any Borrower Party shall fail to make any payment when due in
respect of any Debt (other than the Obligations) in an aggregate amount in
excess of one million dollars ($1,000,000) beyond any period of grace or cure
provided with respect thereto;
(f) any Borrower Party or any Subsidiary of any Borrower Party
shall: (i) file a voluntary petition in bankruptcy or file a voluntary petition
or an answer or otherwise commence any action or proceeding seeking
reorganization, arrangement or readjustment of its debts or for any other relief
under the Federal Bankruptcy Code, as amended, or under any other bankruptcy or
insolvency act or law, state or federal, now or hereafter existing, or consent
to, approve of, or acquiesce in, any such petition, action or proceeding; (ii)
apply for or acquiesce in the appointment of a receiver, assignee, liquidator,
sequestrator, custodian, trustee or similar officer for it or for all or any
part of its Property; (iii) make an assignment for the benefit of creditors; or
(iv) admit its inability, or be unable generally, to pay its debts as they
become due;
(g) an involuntary petition shall be filed or an action or
proceeding otherwise commenced seeking reorganization, arrangement or
readjustment of the debts of any Borrower Party or any Subsidiary of any
Borrower Party or for any other relief under the Federal Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency act or law, state or
federal, now or hereafter existing, and sixty (60) days shall pass from the date
of such filing or commencement without such action being dismissed;
(h) a receiver, assignee, liquidator, sequestrator, custodian,
trustee or similar officer for any Borrower Party or any material Subsidiary of
any Borrower Party or for all or any part of the Property of such Borrower Party
or such Subsidiary shall be appointed involuntarily and sixty (60) days shall
pass from the date of such appointment without such appointment being revoked;
or a warrant of attachment, execution or similar process shall be issued against
any part of the Property of any Borrower Party or any such Subsidiary and sixty
(60) days shall pass from the date of such issuance without such issuance being
revoked;
(i) any Borrower Party shall file a certificate of dissolution
under applicable state law or shall be liquidated, dissolved or wound-up or
shall commence or have commenced against it any action or proceeding for
dissolution, winding-up or liquidation, or shall take any corporate action in
furtherance thereof, except in each case with the Lender's prior written
consent;
64
(j) all or any material part of the Property of any Borrower
Party shall be nationalized, expropriated or condemned, seized or otherwise
appropriated, or custody or control of such Property or of any Borrower Party
shall be assumed by any Public Authority or any court of competent jurisdiction
at the instance of any Public Authority, except where contested in good faith by
proper proceedings diligently pursued where a stay of enforcement is in effect;
(k) one or more final judgments for the payment of money
aggregating in excess of one million dollars ($1,000,000) shall be rendered
against any Borrower Party or any Subsidiary of any Borrower Party and such
Borrower Party or such Subsidiary shall fail to discharge the same within thirty
(30) days from the date of notice of entry thereof or to appeal therefrom;
(l) any loss, theft, damage or destruction of any item or items
of Collateral occurs which: (i) materially and adversely affects the operation
of any Borrower Party's business or (ii) is material in amount and is not
adequately covered by insurance;
(m) any event or condition shall occur or exist with respect to a
Plan that could, in the Lender's reasonable judgment, subject any Borrower Party
or any Subsidiary of any Borrower Party to any tax, penalty or liability under
ERISA, the Code or otherwise which in the aggregate is material in relation to
the business, performance, operations, Property, prospects or condition
(financial or otherwise) of any Borrower Party;
(n) there occurs any material adverse change in the business,
performance, operations, Property, prospects or condition (financial or
otherwise) of any Borrower Party, which change would reasonably be expected to
have a Material Adverse Effect; or
(o) any Borrower Party shall: (i) other than in accordance with a
Blocked Account Agreement, withdraw or attempt to withdraw any funds or other
items on deposit in any Lockbox or any Blocked Account; (ii) without the written
consent of the Lender, direct or attempt to direct a Blocked Account Bank not to
make, or to cease making, transfers of any funds or other items (x) from a
Lockbox to a Blocked Account, or (y) from a Blocked Account to the Lender or at
the direction of the Lender; or (iii) without limiting the foregoing, give a
"Revocation Order" (as defined in the applicable Blocked Account Agreement) to a
Blocked Account Bank without the written consent of the Lender.
13. REMEDIES.
--------
(a) If an Event of Default has occurred and is continuing, the
Lender may, without notice to or demand on any Borrower Party, do one or more of
the following at any time or times and in any order: (i) reduce the Availability
or one or more of the elements thereof; (ii) restrict the amount of or refuse to
make Loans and restrict the amount of or refuse to issue Letters of Credit;
(iii) terminate this Agreement; (iv) declare any or all Obligations to be
immediately due and payable (provided, however, that upon the occurrence of any
-----------------
Event of Default described in Sections 12.1(f), 12.1(g), 12.1(h) or 12.1(i), all
---------------- ------- ------- -------
Obligations shall automatically become immediately due and payable); and (v)
pursue its other rights and remedies under the Loan Documents and applicable
law.
65
(b) If any Event of Default specified in clause (f), (g), (h) or (i)
---------- --- --- ---
of Section 12.1 shall have occurred and be continuing or any of the Obligations
------------
shall have otherwise been accelerated pursuant to this Section 13, then without
----------
any request or the taking of any other action by the Lender, the Borrowers shall
forthwith deposit into an account established pursuant to arrangements
satisfactory to the Lender in its sole discretion an amount in immediately
available funds equal to all the Letter of Credit Obligations then outstanding.
(c) If an Event of Default has occurred and is continuing: (i) the
Lender shall have, in addition to all other rights, the rights and remedies of a
secured party under the UCC; (ii) the Lender may, at any time, take possession
of the Collateral and keep it on the Premises of any Borrower Party, at no cost
to the Lender, or remove any part of it to such other place or places as the
Lender may desire, and each Borrower Party shall, upon the Lender's demand, at
the expense of the Borrower Parties, assemble the Collateral and make it
available to the Lender at a place reasonably convenient to the Lender; and
(iii) the Lender may sell and deliver any Collateral at public or private sales,
for cash, upon credit or otherwise, at commercially reasonable prices and upon
such commercially reasonable terms as the Lender deems advisable, in the
exercise of its reasonable credit judgment and may, if the Lender deems it
reasonable, postpone or adjourn any sale of the Collateral by an announcement at
the time and place of sale or of such postponed or adjourned sale without giving
a new notice of sale. Without in any way requiring notice to be given in the
following manner, each Borrower Party agrees that any notice by the Lender of
sale, disposition or other intended action hereunder or in connection herewith,
whether required by the UCC or otherwise, shall constitute reasonable notice to
such Borrower Party if such notice is mailed by registered or certified mail,
return receipt requested, postage prepaid, or is delivered personally against
receipt, at least five (5) days prior to such action to the Borrowers' Agent at
the address for notices to the Borrowers' Agent determined in accordance with
Section 15.10. If any Collateral is sold on terms other than payment in full at
-------------
the time of sale, no credit shall be given against the Obligations until the
Lender receives payment, and if the buyer defaults in payment, the Lender may
resell the Collateral without further notice to any Borrower Party. In the
event the Lender seeks to take possession of all or any portion of the
Collateral by judicial process, each Borrower Party irrevocably waives: (a) the
posting of any bond, surety or security with respect thereto which might
otherwise be required; (b) any demand for possession prior to the commencement
of any suit or action to recover the Collateral; and (c) any requirement that
the Lender retain possession and not dispose of any Collateral until after trial
or final judgment. Each Borrower Party agrees that the Lender has no obligation
to preserve rights to the Collateral or marshal any Collateral for the benefit
of any Person. The Lender is hereby granted a license or other right to use
following the occurrence and during the continuance of an Event of Default,
without charge, each Borrower Party's labels, patents, copyrights, name, trade
secrets, trade names, trademarks, and advertising matter, or any similar
property, in completing production of, advertising or selling any Collateral,
and each Borrower Party's rights under all licenses and all franchise agreements
shall inure to the Lender's benefit. The proceeds of sale shall be applied
first to all expenses of sale, including reasonable attorney's fees, and second,
in whatever order the Lender elects, to all Obligations. The Lender shall
return any excess to the Borrower Parties or such other Person as shall be
legally entitled thereto and the Borrower Parties shall remain liable for any
deficiency.
66
(d) Each Borrower Party hereby waives to the extent permitted by
applicable law (i) all rights to notice and hearing prior to the exercise by the
Lender of the Lender's rights to repossess the Collateral without judicial
process following the occurrence of an Event of Default or to replevy, attach or
levy upon the Collateral without notice or hearing following the occurrence of
an Event of Default, and (ii) all rights of set-off and counterclaim against the
Lender.
14. TERM AND TERMINATION.
--------------------
(a) This Agreement shall terminate, without premium or penalty, on
the second anniversary of the Closing Date (the "Stated Termination Date")
-----------------------
unless earlier terminated as provided in this Section.
(b) The Borrowers' Agent may terminate this Agreement at any time
prior to the Stated Termination Date or during any renewal term if all of the
following conditions have been satisfied: (i) it gives the Lender at least
thirty (30) days' prior written notice of termination; (ii) it pays and performs
(or causes to be paid and performed) all Obligations on or prior to the
effective date of termination; (iii) it pays the Termination Fee (or causes the
Termination Fee to be paid) to the Lender, on or prior to the effective date of
termination, which payment shall be in addition to the fees required by Section
-------
6.4; and (iv) unless the Lender shall otherwise consent in writing, all of the
---
Letters of Credit then outstanding shall have been cancelled; provided, however,
that the Borrowers' Agent shall not be obligated to pay the Termination Fee if
the reason for termination of this Agreement is that any unit of Bank of America
Corporation, as agent, or sole lender or co-lender, has provided a revolving
loan facility to the Borrowers which completely refinances the credit facility
provided for in this Agreement.
(c) The Lender may terminate this Agreement at any time prior to the
Stated Termination Date without notice while an Event of Default exists.
(d) Upon the effective date of termination of this Agreement for any
reason whatsoever, all Obligations shall become immediately due and payable and
the Borrower Parties shall immediately arrange for the cancellation of all
Letters of Credit then outstanding unless the Lender shall otherwise consent in
writing.
(e) Notwithstanding the termination of this Agreement, until all
Obligations are paid and performed in full, the Lender shall retain all its
rights and remedies hereunder (including, without limitation, in all then
existing and after-arising Collateral).
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15. MISCELLANEOUS.
-------------
1 Cumulative Remedies; No Prior Recourse to Collateral. The
----------------------------------------------------
enumeration in this Agreement or any other Loan Document of the Lender's rights
and remedies is not intended to be exclusive, and such rights and remedies are
in addition to and not by way of limitation of any other rights or remedies that
the Lender may have under the UCC or other applicable law. The Lender shall
have the right, in its sole discretion, to determine which rights and remedies
are to be exercised and in which order. The exercise of one right or remedy
under or in connection with this Agreement or any other Loan Document shall not
preclude the exercise of any others, all of which shall be cumulative. The
Lender may, without limitation, proceed directly against any Borrower Party to
collect the Obligations without any prior recourse to the Collateral.
2 No Implied Waivers. No act, failure or delay by the Lender under
------------------
or in connection with this Agreement or any other Loan Document shall constitute
a waiver of any of its rights and remedies. No single or partial waiver by the
Lender of any provision of this Agreement or any other Loan Document, or of
breach or default hereunder or thereunder, or of any right or remedy which the
Lender may have, shall operate as a waiver of any other provision, breach,
default, right or remedy or of the same provision, breach, default, right or
remedy on a future occasion. No waiver by the Lender shall affect its rights to
require strict performance of this Agreement or any other Loan Document except
to the extent, if any, that such waiver expressly waives the Lender's rights to
require strict performance of this Agreement or any other Loan Document.
3 Severability. Whenever possible, each provision of this
------------
Agreement and each other Loan Document shall be interpreted in such a manner as
to be effective and valid under applicable law, but if any provision of this
Agreement or any other Loan Document shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement or such other Loan Document.
4 Governing Law. This Agreement and each other Loan Document shall
-------------
be deemed to have been made in the State of New York and shall be governed by
and interpreted in accordance with the laws of such state, except that no
doctrine of choice of law shall be used to apply the laws of any other state or
jurisdiction.
5 Consent to Jurisdiction and Venue; Service of Process. Each
-----------------------------------------------------
Borrower Party agrees that, in addition to any other courts that may have
jurisdiction under applicable laws, any action or proceeding to enforce or
arising out of this Agreement or any of the other Loan Documents may be
commenced in the courts of the State of New York, or in the United States
District Court for the Southern District of New York, and each Borrower Party
consents and submits in advance to such jurisdiction and agrees that venue shall
be proper in such courts on any such matter. The choice of forum set forth in
this section shall not be deemed to preclude the enforcement of any judgment
obtained in such forum, or the taking of any action under this Agreement to
enforce the same, in any appropriate jurisdiction. Each Borrower Party hereby
waives personal service of process and agrees
68
that a summons and complaint commencing an action or proceeding in any such
court shall be properly served and shall confer personal jurisdiction if served
by registered or certified mail to the Borrowers' Agent, at the address for
notices to the Borrowers' Agent determined in accordance with Section 15.10.
-------------
Should any Borrower Party fail to appear or answer any summons, complaint,
process or papers so served within thirty (30) days after the mailing or other
service thereof (or within such longer period of time as may be agreed upon by
all of the parties to the applicable action or proceeding or as may be ordered
by the court having jurisdiction over such matter), it shall be deemed in
default and an order or judgment may be entered against it as demanded or prayed
for in such summons, complaint, process or papers.
6 Waiver of Jury Trial. EACH BORROWER PARTY HEREBY WAIVES TRIAL BY
--------------------
JURY, RIGHTS OF SETOFF, AND THE RIGHT TO IMPOSE COUNTERCLAIMS IN ANY LITIGATION
IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL, OR ANY
INSTRUMENT OR DOCUMENT DELIVERED PURSUANT HERETO OR THERETO, OR ANY OTHER CLAIM
OR DISPUTE HOWSOEVER ARISING, BETWEEN OR AMONG THE BORROWER PARTIES AND THE
LENDER. EACH BORROWER PARTY CONFIRMS THAT THE FOREGOING WAIVERS ARE INFORMED
AND FREELY MADE.
7 Survival of Representations and Warranties. All of the
------------------------------------------
representations and warranties of the Borrower Parties contained in this
Agreement shall survive the execution, delivery, and acceptance thereof by the
parties, notwithstanding any investigation by the Lender or its agents, until
the later of (a) the termination of this Agreement and (b) payment and
performance in full of all of the Obligations.
8 Other Security and Guaranties. The Lender may, without notice or
-----------------------------
demand and without affecting the Obligations, from time to time: (a) take from
any Person and hold collateral (other than the Collateral) for the payment of
all or any part of the Obligations and exchange, enforce or release such
collateral or any part thereof; and (b) accept and hold any endorsement or
guaranty of payment of all or any part of the Obligations and release or
substitute any such endorser or guarantor, or any Person who has given any Lien
in any other collateral as security for the payment of all or any part of the
Obligations, or any other Person in any way obligated to pay all or any part of
the Obligations.
9 Fees and Expenses. The Borrower Parties agree to pay to the Lender
-----------------
on demand (whether or not any transaction contemplated by this Agreement is
consummated unless due to the willful refusal of Lender to close despite the
Borrower Parties' satisfaction of all conditions precedent) all reasonable costs
and expenses that the Lender pays or incurs in connection with the negotiation,
preparation, consummation, administration, enforcement, and termination of this
Agreement and the other Loan Documents, including, without limitation: (a)
attorneys' and paralegals' fees and disbursements of counsel to the Lender
(including, without limitation, the allocable cost of in-house counsel and staff
for non-duplicative work) in connection with or relating to any matter, event,
action, remedy, right or circumstance referred to in or contemplated by this
Section (including without limitation any matter, event, action, remedy, right
or circumstance referred to in or contemplated by any
69
of clauses (b) through (j) below); (b) costs and expenses for any amendment,
supplement, waiver, consent, or subsequent closing in connection with any Loan
Document and the transactions contemplated hereby or thereby; (c) costs and
expenses of lien searches (but not, prior to the occurrence of an Event of
Default, costs and expenses of expedited lien searches); (d) Taxes, fees and
other charges for filing UCC financing statements and amendments and
continuations thereof, and other actions to perfect, protect, and continue the
Security Interest; (e) sums paid or incurred to pay any amount or take any
action required of any Borrower Party under the Loan Documents that such
Borrower Party fails to pay or take; (f) (x) costs of review, due diligence,
appraisals, audits, inspections, and verifications of the Collateral and the
operations of any Borrower Party, including, without limitation, necessary
travel, lodging, meals, and other expenses subject (prior to the occurrence of
an Event of Default) to an agreed upon per diem per person based on customary
practices of the Lender at the time such expenses are being considered, and (y)
allocated customary "charge" per day for each auditor employed or utilized by
the Lender for any such purpose (such "charge" per day to be specified from time
to time by the Lender); (g) costs and expenses of forwarding loan proceeds,
collecting checks and other items of payment, and establishing and maintaining
Payment Accounts and lock boxes; (h) costs and expenses of preserving and
protecting the Collateral (including without limitation costs and expenses
relating to Sections 7.16 and 7.17); (i) costs and expenses in connection with
------------- ----
any Letter of Credit; and (j) costs and expenses paid or incurred to obtain
payment of the Obligations, enforce the Security Interest, sell or otherwise
realize upon the Collateral, and otherwise enforce the provisions of any Loan
Document (including without limitation costs and expenses relating to Sections
--------
7.16 and 7.17), or to defend any claims made or threatened against the Lender
---- ----
arising out of the transactions contemplated by this Agreement or any other Loan
Document (including without limitation, preparations for and consultations
concerning any such matters). The foregoing shall not be construed to limit any
other provisions of the Loan Documents regarding costs and expenses to be paid
by any Borrower Party. All of the foregoing costs and expenses shall be charged
to the loan account of the Company as Loans if any such cost or expense shall
not have been paid within ten (10) days after the Lender shall have requested
payment of the same from the Borrowers' Agent. The Lender acknowledges receipt
of the Company's advance payment of twenty-five thousand dollars ($25,000)
toward the fees and expenses described in this Section 15.9. The Lender shall
------------
apply the Collateral and Management Fee toward payment of the items referred to
in clause (g) of this Section 15.9.
------------
10 Notices. Except as otherwise expressly provided herein, all
-------
notices, demands, and requests that any party hereto is required or elects to
give to any other party hereto shall be in writing, shall be delivered
personally against receipt, or sent by recognized overnight courier services, or
sent by facsimile transmission, or mailed by registered or certified mail,
return receipt requested, postage prepaid, and shall be addressed to the party
to be notified as follows:
If to the Lender: Bank of America, National Association
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: 312/974-9035
70
with a copy to: Bank of America, National Association
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Legal Department
Facsimile: 203/423-4032
If to the Company: Pediatric Services of America, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Facsimile: 770/263-9340
with a copy to: Holland & Knight LLP
▇▇▇▇ ▇▇▇ Atlantic Center
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: 404/881-0470
or to such other address as each party may designate for itself by like notice.
Any such notice, demand, or request shall be deemed given when received if
personally delivered or sent by overnight courier or facsimile transmission, or
when deposited in the United States mails, postage paid, if sent by registered
or certified mail.
71
11 Indemnification.
---------------
(a) EACH BORROWER PARTY HEREBY INDEMNIFIES, DEFENDS AND HOLDS THE
LENDER, AND ITS DIRECTORS, OFFICERS, AGENTS, EMPLOYEES AND COUNSEL, HARMLESS
FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES, DEFICIENCIES,
JUDGMENTS, PENALTIES OR EXPENSES IMPOSED ON, INCURRED BY OR ASSERTED AGAINST ANY
OF THEM, WHETHER DIRECT, INDIRECT OR CONSEQUENTIAL ARISING OUT OF OR BY REASON
OF ANY LITIGATION, INVESTIGATIONS, CLAIMS, OR PROCEEDINGS (WHETHER BASED ON ANY
FEDERAL, STATE OR LOCAL LAWS OR OTHER STATUTES OR REGULATIONS, INCLUDING,
WITHOUT LIMITATION, SECURITIES, ENVIRONMENTAL, OR COMMERCIAL LAWS AND
REGULATIONS, UNDER COMMON LAW OR AT EQUITY, OR ON CONTRACT OR OTHERWISE)
COMMENCED OR THREATENED, WHICH ARISE OUT OF OR ARE IN ANY WAY BASED UPON THE
NEGOTIATION, PREPARATION, EXECUTION, DELIVERY, ENFORCEMENT, PERFORMANCE OR
ADMINISTRATION OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR ANY UNDERTAKING OR
PROCEEDING RELATED TO ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACT,
OMISSION TO ACT, EVENT OR TRANSACTION RELATED OR ATTENDANT THERETO, INCLUDING,
WITHOUT LIMITATION, AMOUNTS PAID IN SETTLEMENT, COURT COSTS, AND THE REASONABLE
FEES AND EXPENSES OF COUNSEL INCURRED IN CONNECTION WITH ANY SUCH LITIGATION,
INVESTIGATION, CLAIM OR PROCEEDING AND FURTHER INCLUDING, WITHOUT LIMITATION,
ALL LOSSES, DAMAGES (INCLUDING CONSEQUENTIAL DAMAGES), EXPENSES OR LIABILITIES
SUSTAINED BY THE LENDER IN CONNECTION WITH ANY ENVIRONMENTAL INSPECTION,
MONITORING, SAMPLING, OR CLEANUP OF THE ENCUMBERED REAL ESTATE REQUIRED OR
MANDATED BY ANY ENVIRONMENTAL LAW; PROVIDED, HOWEVER, THAT THE BORROWER PARTIES
SHALL NOT INDEMNIFY THE LENDER, ITS DIRECTORS, OFFICERS, AGENTS, EMPLOYEES AND
COUNSEL FROM SUCH DAMAGES RESULTING FROM THE GROSS NEGLIGENCE, BAD FAITH OR
WILLFUL MISCONDUCT OF THE LENDER, ITS DIRECTORS, OFFICERS, AGENTS, EMPLOYEES AND
COUNSEL.
(b) Each Borrower Party hereby indemnifies, defends and holds harmless
the Lender from any loss or liability directly or indirectly arising out of the
use, generation, manufacture, production, storage, release, threatened release,
discharge, disposal or presence of a Hazardous Substance. This indemnity shall
apply whether the Hazardous Substance is on, under or about any Borrower Party's
property or operations or property leased to any Borrower Party. The indemnity
includes but is not limited to attorneys' fees (including the reasonable
estimate of the allocated cost of in-house counsel and staff). The indemnity
extends to the Lender, its parent, subsidiaries and all of their directors,
officers, employees, agents, successors, attorneys and assigns. "Hazardous
Substances" means any substance, material or waste that is or becomes designated
or regulated as "toxic," "hazardous," "pollutant," or "contaminant" or a similar
designation or regulation under any federal,
72
state or local law (whether under common law, statute, regulation or otherwise)
or judicial or administrative interpretation of such, including without
limitation petroleum or natural gas.
(c) Without limiting the foregoing, if, by reason of any suit or
proceeding of any kind, nature, or description against any Borrower Party or by
any Borrower Party or any other Person against the Lender, which in the Lender's
reasonable discretion makes it advisable for the Lender to seek counsel for
protection and preservation of its liens and security assets, or to defend its
own interest, such reasonable expenses and reasonable counsel fees shall be
allowed to the Lender. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in this Section 15.11 may be unenforceable because it is
-------------
violative of any law or public policy, each Borrower Party shall contribute the
maximum portion which it is permitted to pay and satisfy under applicable law,
to the payment and satisfaction of all indemnified matters incurred by the
Lender. The indemnity contained in this Section 15.11 shall survive the payment
-------------
of the Obligations and the termination of this Agreement. All of the foregoing
costs and expenses shall be part of the Obligations and secured by the
Collateral.
(d) Without limiting the foregoing, the Borrower Parties shall
reimburse the Lender on demand for any amount paid by the Lender to a Blocked
Account Bank pursuant to a Blocked Account Agreement.
12 Waiver of Notices. Unless otherwise expressly provided herein,
-----------------
each Borrower Party waives presentment, protest and notice of demand or dishonor
and protest as to any instrument.
13 Binding Effect; Assignment. The provisions of this Agreement
--------------------------
shall be binding upon and inure to the benefit of the respective
representatives, successors and assigns of the parties hereto; provided,
--------
however, that no interest in this Agreement may be assigned by any Borrower
-------
Party without the prior written consent of the Lender. The rights and benefits
of the Lender under this Agreement and the other Loan Documents shall, if the
Lender so agrees, inure to any assignee of the Obligations or any part thereof.
The Lender agrees that, unless an Event of Default has occurred and is
continuing, the Lender (a) shall not assign more than forty-nine percent (49%)
of the outstanding balance of its Loans to third parties and (b) shall not
assign the outstanding balance of its Loans to more than three co-lenders.
14 Modification. This Agreement is intended by the parties hereto to
------------
be the final, complete, and exclusive expression of the agreement between them.
This Agreement supersedes any and all prior oral or written agreements relating
to the subject matter hereof and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements of the parties. There are no oral
agreements between the parties. No modification, rescission, waiver, release,
or amendment of any provision of this Agreement (including the Schedules and
Exhibits hereto) shall be made, except by a written agreement signed by the
parties hereto.
15 Counterparts. This Agreement may be executed in any number of
------------
counterparts, and by the parties hereto in separate counterparts, each of which
shall be an original, but all of which shall together constitute one and the
same agreement.
73
16 Captions. The captions contained in this Agreement or any other
--------
Loan Document (including without limitation the table of contents and the
exhibits and schedules hereto or thereto) are for convenience only, are without
substantive meaning and should not be construed to modify, enlarge, or restrict
any provision.
17 Right of Set-Off. Whenever an Event of Default exists, the Lender
----------------
is hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Lender or any Affiliate of the Lender to or for the credit
or the account of any Borrower Party against any and all of the Obligations,
whether or not then due and payable.
18 Participating Lender's Security Interests'. The Lender may,
------------------------------------------
without notice to or consent by any Borrower Party, grant one or more
participations in the Loans to Participating Lenders. If a Participating Lender
shall at any time with the knowledge of any Borrower Party participate with the
Lender in the Loans, such Borrower Party hereby grants to such Participating
Lender, and the Lender and such Participating Lender shall have and are hereby
given, a continuing lien on and security interest in any money, securities and
other property of such Borrower Party in the custody or possession of the
Participating Lender, including the right of setoff, to the extent of the
Participating Lender's participation in the Obligations, and such Participating
Lender shall be deemed to have the same right of setoff to the extent of
Participating Lender's participation in the Obligations under this Agreement as
it would have if it were a direct lender.
19 Additional Borrowers. Any Subsidiary wholly owned by the
--------------------
Company (or wholly owned by any Subsidiary of the Company) that is not a
Borrower party hereto on the Closing Date may become a Borrower party to this
Agreement upon the satisfaction of the following conditions: (a) such Subsidiary
and the Company shall have signed and delivered to the Lender an agreement
substantially in the form of Exhibit B hereto (an "Additional Borrower
-------------------
Agreement"); (b) the Lender shall have received such other documents,
---------
agreements, instruments and opinions as it may reasonably request in connection
with such Subsidiary becoming a Borrower, which shall be in form and substance
reasonably satisfactory to the Lender, including without limitation items of the
type delivered pursuant to Section 11.1; (c) the Lender shall have had a
-------------
reasonable period of time to conduct (and to cause one or more of its agents or
representatives to conduct) due diligence with respect to such Subsidiary, such
Subsidiary and the Borrower Parties shall have fully cooperated with the Lender
and such agents and representatives in connection with such due diligence, and
the results of such due diligence are satisfactory to the Lender; (d) such
Subsidiary shall be in the same or related lines of business that one or more of
the Borrowers were engaged in on the Closing Date; and (e) the Lender shall have
sent the Borrowers' Agent a notice substantially in the form of Exhibit C hereto
(an "Additional Borrower Consent Notice").
----------------------------------
74
20 Joint and Several Liability.
---------------------------
(a) The Borrower Parties shall be jointly and severally liable for all
Loans and other amounts due to the Lender under this Agreement, regardless of
which Borrower Party actually receives Loans or other extensions of credit
hereunder or the amount of such Loans received or the manner in which the Lender
accounts for such Loans or other extensions of credit on its books and records.
Each Borrower Party's Obligations with respect to Loans made to it, and each
Borrower Party's Obligations arising as a result of the joint and several
liability of the Borrower Parties hereunder with respect to Loans made to the
other Borrower Parties hereunder, shall be separate and distinct obligations,
but all such Obligations shall be primary obligations of such Borrower Party.
(b) Each Borrower Party's Obligations arising as a result of the joint
and several liability of such Borrower Party hereunder with respect to Loans or
other extensions of credit made to the other Borrower Parties hereunder shall,
to the fullest extent permitted by law, be absolute and unconditional
irrespective of (i) the validity, legality, enforceability, avoidance or
subordination of the Obligations of any other Borrower Party or of any
promissory note or other document evidencing all or any part of the Obligations
of any other Borrower Party, (ii) the absence of any attempt to collect the
Obligations from any other Borrower Party, any other guarantor, or any other
security therefor, or the absence of any other action to enforce the same, (iii)
the waiver, consent, extension, forbearance or granting of any indulgence by the
Lender with respect to any Obligations or any provision of any instrument
evidencing the Obligations of any other Borrower Party, or any part thereof, or
any other agreement now or hereafter executed by any other Borrower Party and
delivered to the Lender, (iv) the failure by the Lender to take any steps to
perfect and maintain its security interest in, or to preserve its rights to, any
security or collateral for the Obligations of any other Borrower Party, (v) the
Lender's election, in any proceeding instituted under the Federal Bankruptcy
Code, of the application of Section 1111(b)(2) of the Federal Bankruptcy Code,
(vi) any borrowing or grant of a security interest by any other Borrower Party,
as debtor-in-possession, under Section 364 of the Federal Bankruptcy Code, (vii)
the disallowance of all or any portion of the Lender's claim(s) for the
repayment of the Obligations of any other Borrower Party under Section 502 of
the Federal Bankruptcy Code, or (viii) any other events, conditions or
circumstances which might constitute a legal or equitable discharge or defense
of a guarantor or of a surety or of any Borrower Party. With respect to any
Borrower Party's Obligations arising as a result of the joint and several
liability of the Borrowers Parties hereunder with respect to Loans or other
extensions or credit made to any other Borrower Party hereunder, each Borrower
Party waives, until all of the Obligations shall have been paid in full and this
Agreement shall have been terminated, any right to enforce any right of
subrogation or any remedy which the Lender now has or may hereafter have against
any Borrower Party, any endorser or any guarantor of all or any part of the
Obligations, and any benefit of, and any right to participate in, any security
or collateral given to the Lender to secure payment of the Obligations or any
other liability of any Borrower Party to the Lender.
(c) Upon any Event of Default, the Lender may proceed directly and at
once, without notice, against any Borrower Party to collect and recover the full
amount, or any portion of, the Obligations, without first proceeding against any
other Borrower Party or any other Person, or against any security or collateral
for the Obligations. Each Borrower Party consents and agrees that the Lender
shall be under no obligation to marshal any assets in favor of any Borrower
Party or against or in
75
payment of any or all of the Obligations.
(d) Notwithstanding the other provisions of this Agreement, each
Borrower Party shall be liable under this Agreement only for the maximum amount
of such liability that can hereby be incurred without rendering its obligations
under this Agreement voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer, and not for any greater amount.
21 Release and Indemnity. In consideration of the agreement of
---------------------
the Lender to enter into this Agreement, each Borrower hereby unconditionally
releases, discharges, waives and acquits forever the Lender and each of the
Lender's subsidiaries, affiliates, officers, directors, servants, agents,
employees and attorneys, past and present, and their successors and assigns,
from any and all claims, demands, obligations, liabilities, costs, expenses and
causes of action and rights of action, of whatever nature, whether in contract
or tort, accrued or to accrue, contingent or vested, known or unknown, arising
out of or relating to the Existing Credit Agreement or any actions or omissions
by any Person pursuant to or in connection with the Existing Credit Agreement or
under any document or instrument relating to the Existing Credit Agreement (or
evidencing loans made under the Existing Credit Agreement) including, without
limitation, the administration by the Lender of the Existing Credit Agreement or
any such document, instrument or loan. Each Borrower hereby further indemnifies
and holds the Lender and each of Lender's subsidiaries, affiliates, officers,
directors, servants, agents, employees and attorneys, past or present, and their
successors and assigns, harmless from and against any and all such claims,
demands, obligations, liabilities, costs, expenses and causes of action and
rights of action by any Borrower, or any Person claiming by, through or under
any Borrower, said indemnity to cover all losses and expenses incurred by the
Lender and each of the Lender's subsidiaries, affiliates, officers, directors,
servants, agents, employees and attorneys, past or present, and their successors
and assigns, in connection with any such claims, demands, obligations,
liabilities, costs, expenses or causes of action and rights of action,
including, without limitation, all attorneys' fees and costs.
15.22 Effect on the Existing Credit Agreement and the Existing
--------------------------------------------------------
Security Agreement. This Agreement amends and restates the Existing Credit
------------------
Agreement and the Existing Security Agreement effective as of the date hereof.
This Agreement shall not effect a novation of the obligations of the parties
under the Existing Credit Agreement and the Existing Security Agreement, but
instead shall be merely a restatement and, where applicable, an amendment of the
terms governing such obligations.
[SIGNATURES FOLLOW]
76
IN WITNESS WHEREOF, the parties have entered into this Agreement on
the date first above written.
BANK OF AMERICA,
NATIONAL ASSOCIATION,
as the Lender
By:
------------------------------------
Vice President
PEDIATRIC SERVICES OF AMERICA, INC.,
and as the Borrowers' Agent
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
BORROWERS:
PEDIATRIC SERVICES OF AMERICA, INC.,
a Delaware corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
PEDIATRIC SERVICES OF AMERICA, INC., a Georgia
corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
PSA LICENSING CORPORATION
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
PSA PROPERTIES CORPORATION
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
PSA CAPITAL CORPORATION
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
PREMIER MEDICAL SERVICES, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
PEDIATRIC PARTNERS, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
PEDIATRIC HOME NURSING SERVICES, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
PEDIATRIC SERVICES OF AMERICA (CONNECTICUT), INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
PREMIER CERTIFIED HOME HEALTH SERVICES, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
PREMIER NURSE STAFFING, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
ARO HEALTH SERVICES, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------