Exhibit 10.18
SECOND AMENDED AND RESTATED LOAN AGREEMENT
Among
DIAGNOSTIC HEALTH SERVICES, INC.,
as Borrower,
and
THE SUBSIDIARIES OF BORROWER
IDENTIFIED ON THE SIGNATURE
PAGES HERETO,
as Guarantors,
and
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Bank
as of December 31, 1998
$9,952,930.10
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 1
TABLE OF CONTENTS
PAGE
1. Definitions................................................. 1
2. Commitments of Bank......................................... 11
3. Notes Evidencing Loans...................................... 13
4. Interest Rates for Loans.................................... 14
5. Collateral Security and Guaranties.......................... 14
6. Waiver of Reporting, Financial Covenant and Other Defaults.. 15
7. Fees........................................................ 16
8. Prepayments................................................. 16
9. Representations and Warranties.............................. 17
10. Conditions of Lending....................................... 21
11. Affirmative Covenants....................................... 23
12. Negative Covenants.......................................... 30
13. Events of Default........................................... 34
14. Exercise of Rights.......................................... 37
15. Notices..................................................... 38
16. Expenses.................................................... 38
17. Indemnity; Capital Adequacy................................. 38
18. GOVERNING LAW............................................... 40
19. Invalid Provisions.......................................... 40
20. Maximum Interest Rate....................................... 40
21. Amendments.................................................. 41
22. Multiple Counterparts, Etc.................................. 41
23. Conflict.................................................... 41
24. Survival.................................................... 41
25. Parties Bound............................................... 41
26. Participations.............................................. 41
27. WAIVER OF TRIAL BY JURY..................................... 42
28. WAIVER OF CONSUMER RIGHTS................................... 42
29. OTHER AGREEMENTS............................................ 42
i
SECOND AMENDED AND RESTATED LOAN AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AGREEMENT (hereinafter referred to as
this "Agreement") is executed as of December 31, 1998, among DIAGNOSTIC HEALTH
SERVICES, INC., a Delaware corporation (hereinafter referred to as "Borrower"),
the SUBSIDIARIES OF BORROWER IDENTIFIED ON THE SIGNATURE PAGES HERETO
(hereinafter collectively referred to, together with any other corporations or
other entities that pursuant to Section 11 (q) shall become a "Guarantor"
hereunder, as "Guarantors," and singularly as a "Guarantor"), and CHASE BANK OF
TEXAS, NATIONAL ASSOCIATION, a national banking association (hereinafter
sometimes referred to as "Bank").
W I T N E S S E T H:
WHEREAS, Borrower, certain of Guarantors and Bank entered into that certain
Amended and Restated Loan Agreement dated July 24, 1996, as amended by that
certain First Amendment to Amended and Restated Loan Agreement dated as of April
16, 1997, that certain Second Amendment to Amended and Restated Loan Agreement
dated as of May 1, 1997, that certain Third Amendment to Amended and Restated
Loan Agreement dated as of May 7, 1998 and that certain Fourth Amendment to
Amended and Restated Loan Agreement, dated as of June 18, 1998 (as so amended,
the "Prior Agreement");
WHEREAS, Borrower is indebted to Bank in the principal amount of
$7,952,930.10, exclusive of accrued interest, under the terms of the Prior
Agreement, which indebtedness represents advances under a multiple draw advance
term loan then available to Borrower and the commitment with respect to which is
now extinguished;
WHEREAS, as of the date hereof, Borrower is in default of the Prior
Agreement;
WHEREAS, on the terms and conditions set forth herein Bank has agreed to
waive Reporting Defaults and Financial Covenant Defaults under the Prior
Agreement outstanding through and including November 30, 1998 and all Lease
Defaults under the Prior Agreement as of the date hereof, in each case subject
to the conditions as stated herein;
WHEREAS, Borrower, Guarantors and Bank desire to confirm the extinguishment
of the commitment of Bank under the Prior Agreement; and
WHEREAS, Borrower has requested that Bank provide Borrower with a revolving
credit facility in the principal amount of up to $2,000,000, and Bank is willing
to make such facility available to the Borrower on the terms and conditions set
forth below.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. DEFINITIONS. When used herein the terms "Agreement," "Borrower,"
"Bank" and "Guarantors" shall have the meanings indicated above. When used
herein the following terms shall have the following meanings:
Accounts - All present and future accounts, accounts receivable and
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other rights of Borrower and Guarantors to payment for the sale or lease of
goods or the rendition of services (except those evidenced by instruments
or chattel paper), whether now existing or hereafter arising and wherever
arising.
Acquisition - The acquisition by Borrower or any Guarantor of the
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stock of, any other equity security or other interest in, or, in a
transaction outside the ordinary course of business, the assets of, any
other Person.
Advance or Advances - A loan or loans under the Revolving Loan or the
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Advance Term Loan.
Advance Term Loan Maturity Date - June 30, 2001.
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Advance Term Loan - The multiple advance term loan made under the
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Prior Agreement.
Advance Term Loan Commitment - The commitment contained in Section
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2(a) of the Prior Agreement.
Advance Term Note - That certain amended and restated multiple advance
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term note in the stated principal amount of $7,952,930.10 and further
described in Section 3(a).
Borrowing Base Certificate - A certificate the form of which is set
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forth as Exhibit "E" hereto to be delivered to Bank by Borrower at the
times and on the dates specified herein, showing the status of Borrower's
Accounts as of the date of such Borrowing Base Certificate.
Borrowing Date - The date, which shall be a Business Day, elected by
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Borrower pursuant to Section 2(a)(2) for an Advance on the Revolving Loan.
Borrowing Increase Event - An event, or series of events, which, in
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the sole discretion of Bank, warrants (i) an increase in the Revolving Loan
Commitment from $1,000,000 to $2,000,000; (ii) an extension of the
Revolving Maturity Date; or (iii) both (i) and (ii).
Business Day - The normal banking hours during any day (other than
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Saturdays or Sundays) that banks are legally open for business in Dallas,
Texas.
Change of Control - If (a) ▇▇▇▇ ▇. ▇▇▇▇▇▇ (and any trust controlled by
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such individual as sole trustee and for his benefit and/or the benefit of
his immediate family members) (i) owns outstanding capital stock of
Borrower in an aggregate amount equal to or less than fifty percent (50%)
of the shares of Borrower's capital stock owned by him on November 30,
1998, or (ii) transfers any stock options exercisable for shares of
Borrower's capital stock (except any deemed transfer resulting from the
exercise,
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 2
expiration or surrender thereof), unless in either case the transaction
giving rise to such sale or transfer results in the payment in full of the
Advance Term Loan or (b) a Change in Control (as defined in the
Subordinated Note Agreement) occurs.
Change of Management - If ▇▇▇▇ ▇▇▇▇▇▇ ever ceases to be the President
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and Chief Executive Officer of Borrower.
Commitment Fee - As defined in Section 7.
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Contract Accounting Contract - Any contract or agreement (a) whose
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value and related expenses are recognized by Borrower or a Guarantor on a
present value basis at the inception of such contract or agreement
(regardless of whether rights under such contract or agreement have or have
not been sold) or (b) accounted for consistent with Borrower's or a
Guarantor's accounting policy for its long-term contracts prior to the
change in such policy, effective October 1, 1998, announced in Borrower's
Form 10-Q for the fiscal quarter ended September 30, 1998.
Cure Evidence - As defined in Section 6.
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Current Assets - The total amount of Borrower's consolidated current
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assets, determined in accordance with GAAP.
Current Liabilities - The total amount of Borrower's consolidated
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current liabilities, determined in accordance with GAAP.
Current Ratio - The ratio of Current Assets to Current Liabilities,
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determined in accordance with GAAP.
EBITDA - Borrower's consolidated net income, determined in accordance
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with GAAP, before provision for income taxes, interest expense,
depreciation and amortization to the extent actually deducted in arriving
at net income (and in any event before provision for that certain
restructuring and impairment expense in the amount of $5,518,489 incurred
by Borrower and its consolidated subsidiaries in the fiscal quarter ended
June 30, 1998, as reported on Borrower's Form 10-Q for such quarter filed
with the Securities and Exchange Commission), minus extraordinary income,
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plus extraordinary loss, minus amounts that would otherwise constitute
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EBITDA in the subject twelve-month period which are derived from Contract
Accounting Contracts, with all of the foregoing being determined in
accordance with GAAP, in all cases without duplication.
Eligible Accounts - All Accounts that (i) are not due from a Person
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related to or affiliated with Borrower or any Guarantor; (ii) are not
subject to pending disputes or counterclaims, or offset; (iii) are not
outstanding for more than ninety (90) days from the date of invoice for
such Account; (iv) are not due from an account debtor that is failing,
generally, to pay its debts as they become due or that has suffered the
termination of its existence or as to which a dissolution or insolvency
proceeding is pending or an
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 3
assignment for the benefit of creditors has been made, or for which a
trustee, receiver or conservator has been appointed, for all or any part of
the property belonging to said account debtor; (v) are not due from an
account debtor that does not reside in or is not subject to process in the
United States of America, except to the extent payment of the subject
Account(s) is secured by a letter of credit issued by a domestic bank,
which letter of credit and bank are acceptable to Bank in all respects;
(vi) are subject to a valid, first priority perfected Lien in favor of
Bank; and (vii) are not Accounts commonly known as consignment or "▇▇▇▇ and
hold." In addition, monies due from any federal, state, county, city or
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local government or governmental agency in connection with the payment of
any and all taxes or assessments, including, but not limited to, any
federal income tax refunds shall not be deemed Eligible Accounts. In
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addition, the total balance of any Account that has in excess of twenty
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percent (20%) of its balance outstanding over ninety (90) days from the
date of invoice for such account shall not be deemed an Eligible Account;
and provided, further, that if any Accounts due from any single account
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debtor would exceed ten percent (10%) of Borrower's total aggregate
Accounts, then the amount of such Accounts owed by such account debtor
constituting such excess shall not be deemed Eligible Accounts.
Environmental Laws - The Comprehensive Environmental Response,
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Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, 42 U.S.C.A. (S) 9601, et seq.,
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the Resource Conservation and Recovery Act, as amended by the Hazardous
Solid Waste Amendment of 1984, 42 U.S.C.A. (S) 6901, et seq., the Clean Air
-- ---
Act, 42 U.S.C.A. (S) 1251, et seq., the Toxic Substances Control Act, 15
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U.S.C.A. (S) 2601, et seq., The Oil Pollution Act of 1990, 33 U.S.C. (S)
-- ---
2701, et seq., and all other laws, statutes, codes, acts, ordinances,
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orders, judgments, decrees, injunctions, rules, regulations, order and
restrictions of any federal, state, county, municipal and other
governments, departments, commissions, boards, agencies, courts,
authorities, officials and officers, domestic or foreign, relating to air
pollution, water pollution, noise control and/or the handling, discharge,
disposal or recovery of on-site or off-site asbestos or "hazardous
substances" as defined by 42 U.S.C. (S) 9601, et seq., as amended, as each
-- ---
of the foregoing may be amended from time to time.
Environmental Liability - Any claim, demand, obligation, cause of
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action, accusation, allegation, order, violation, damage, injury, judgment,
penalty or fine, cost of enforcement, cost of remedial action or any other
costs or expense whatsoever, including reasonable attorneys' fees and
disbursements, resulting from the violation or alleged violation of any
Environmental Law or the imposition of any Environmental Lien.
Environmental Lien - A Lien in favor of any court, governmental agency
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or instrumentality or any other Person (i) for any Environmental Liability
or (ii) for damages arising from or cost incurred by such court or
governmental agency or instrumentality or other person in response to a
release or threatened release of hazardous or toxic waste, substance or
constituent into the environment.
Equipment - All of Borrower's and Guarantors' present and future (i)
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equipment and fixtures, including, without limitation, wherever located,
machinery, manufacturing,
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 4
distribution, selling, data processing and office equipment, furniture,
furnishings, assembly systems, tools, tooling, molds, dies, appliances and
vehicles and any accessories thereto, (ii) other tangible personal property
(exclusive of Inventory), and (iii) any and all accessories, parts and
appurtenances attached to any of the foregoing or used in connection
therewith, and any substitutions therefor and replacements, products and
proceeds thereof.
ERISA - The Employee Retirement Income Security Act of 1974, as
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amended.
Event of Default - An event constituting an Event of Default as
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defined by and pursuant to Section 13.
Excess Cash Flow - An amount, for Borrower's immediately preceding
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fiscal year, equal to Borrower's consolidated net income plus:
----
depreciation, amortization, non-cash taxes and other non-cash charges,
minus: non-cash gains, scheduled principal payments on Funded Debt
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(including, without limitation, the principal component of any payments in
respect of capital lease obligations), any voluntary prepayments of the
Advance Term Loan, interest expense paid in cash and Unleveraged Capital
Expenditures (the latter being limited to $500,000 for purposes of this
definition), with all such amounts being determined on a consolidated basis
for Borrower's immediately preceding fiscal year.
Federal Funds Effective Rate - Federal Funds Effective Rate means, for
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any period, a fluctuating interest rate per annum equal for each day during
such period to the weighted average of the rates on overnight Federal fund
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business
Day, of the next preceding Business Day) by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day that is a Business
Day, the average of the quotations for such day on such transactions
received by Bank from three Federal funds brokers of recognized standing
selected by Bank.
Financial Default - As defined in Section 6.
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Fixed Charges - An amount, for the most recently completed twelve
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calendar months, determined on a consolidated basis in accordance with
GAAP, equal to Borrower's (i) current maturities of long-term indebtedness
and current maturities of capitalized lease obligations, in both cases
determined as of end of such period plus (ii) interest expense (including,
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without limitation, the interest component of any payments in respect of
capital lease obligations) paid, payable or accrued in such period, each as
determined in accordance with GAAP.
Fixed Charge Coverage Ratio - As at any date, a ratio equal to (i) the
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sum of EBITDA for the period of the twelve calendar months ending on, or
most recently ended prior to, such date, less cash taxes paid or payable in
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such period, less Unleveraged Capital Expenditures paid or payable in such
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period, divided by (ii) Fixed Charges for such period.
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SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 5
Funded Debt - For Borrower and Guarantors, the sum (determined on a
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consolidated basis without duplication in accordance with GAAP) of the
following: (i) obligations created, issued or incurred for borrowed money
(whether by loan, the issuance and sale of debt securities or the sale of
property to another Person subject to an understanding or agreement,
contingent or otherwise, to repurchase such property from such Person);
(ii) obligations to pay the deferred purchase or acquisition price of
property or services, other than trade accounts payable (other than for
borrowed money) arising, and accrued expenses incurred, in the ordinary
course of business so long as such trade accounts payable are payable
within 90 days of the date the respective goods are delivered or the
respective services are rendered; (iii) Funded Debt of others secured by a
Lien on property of Borrower or any Guarantor, whether or not the
respective indebtedness so secured has been assumed; (iv) obligations in
respect of letters of credit or similar instruments issued or accepted by
banks and other financial institutions for account of Borrower or a
Guarantor; (v) capital lease obligations; and (vi) Funded Debt of others
guaranteed by Borrower or a Guarantor.
Funded Debt Ratio - As of any date, the ratio of (i) Funded Debt as of
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such date to (ii) EBITDA for the period of the twelve calendar months
ending on, or most recently ended prior to, such date.
For purposes of determining the Commitment Fees earned and payable in
accordance with Section 7 and the Prime Rate Margin, the Funded Debt Ratio
is subject to adjustment quarterly (by increase or decrease, as
appropriate), effective only as of the first day of the calendar month next
following the month in which Borrower delivers a Compliance Certificate (in
the form of Exhibit "D") contemporaneously with the quarterly financial
information delivered to Bank pursuant to Section 11(a)(ii) (each such day,
an "Adjustment Date"). After each adjustment of the Commitment Fee or the
Prime Rate Margin resulting from an adjustment in the Funded Debt Ratio, in
accordance herewith, each such Commitment Fee shall thereafter apply, or
each such Prime Rate Margin shall thereafter apply to all Loans then
outstanding or made (i.e., with no retroactivity), until the next
Adjustment Date that a Compliance Certificate delivered contemporaneously
with quarterly financial information required pursuant to Section 11(a)(ii)
demonstrates a change in the Funded Debt Ratio such that other Commitment
Fees or Prime Rate Margin apply. Upon request of Bank, Borrower shall
demonstrate to the reasonable satisfaction of Bank the numerically required
applicable ratio in order to obtain an adjustment to a lower applicable
Commitment Fee or Prime Rate Margin. If Borrower fails to furnish to Bank
any Compliance Certificate by the date required by this Agreement, then the
maximum Commitment Fees shall thereafter apply, or the maximum Prime Rate
Margin shall thereafter apply to all Loans then outstanding or made (i.e.,
with no retroactivity), until Borrower furnishes the required Compliance
Certificate to Bank.
For purposes of this Agreement, as of the date hereof, the Prime Rate
Margin is one and three quarters percent (1.75%) and the Commitment Fee is
one-half of one percent (.50%). The Prime Rate Margin and Commitment Fee
will remain such until an adjustment to the Prime Rate Margin is made in
accordance with the terms of this
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 6
Agreement on March 1, 1999, being the first Adjustment Date following
execution of this Agreement.
GAAP - Generally accepted accounting principles, applied on a
----
consistent basis, as set forth in Opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants and/or in
statements of the Financial Accounting Standards Board and/or their
respective successors and that are applicable in the circumstances as of
the date in question. Accounting principles are applied on a "consistent
basis" when the accounting principles applied in a current period are
comparable in all material respects to those accounting principles applied
in a preceding period.
General Intangibles - All of Borrower's and Guarantors' present and
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future choses in action, causes of action and all other intangible personal
property of every kind and nature, including, without limitation,
corporate, partnership and other business books and records, inventions,
designs, patents, patent applications, trademarks, trademark applications,
trade names, trade secrets, service marks, goodwill, registrations,
copyrights, licenses, franchises, customer lists, computer programs,
software and other computer materials, tax refunds, tax refund claims,
rights and claims against charters, carriers, shippers, franchisees,
lessors, and lessees, and rights to indemnification, intercompany
receivables and any security documents executed in connection therewith,
deposit accounts, proceeds of any letters of credit, indemnity, warranty or
guaranty payable to Borrower or any Guarantor from time to time with
respect to the foregoing or proceeds of any insurance policies on which
Borrower or any Guarantor is named as beneficiary, claims against third
parties for advances and other financial accommodations and any other
obligations whatsoever owing to Borrower or any Guarantor, contract rights,
customer and supplier contracts, rights in and to all security agreements,
security interests or other security held by Borrower or any Guarantor to
secure payment of Borrower's or any Guarantors' accounts, all right, title
and interest under leases, subleases, and concessions and other agreements
relating to real or personal property (including, without limitation, all
rents, issues and profits related thereto), rights in and under guarantees,
instruments, securities, documents of title and other contracts securing,
evidencing, supporting or otherwise relating to any of the foregoing,
together with all rights in any goods, merchandise or Inventory which any
of the foregoing may represent.
Guaranties - The unlimited guaranties heretofore executed and/or
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joined in by each of Guarantors for the benefit of Bank.
Interest Payment Date - The last day of each Prime Rate Interest
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Period.
Inventory - All of Borrower's and Guarantors' present and future (i)
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inventory, (ii) goods, merchandise and other personal property furnished or
to be furnished under any contract or service or intended for sale or
lease, and all goods consigned by Borrower or any Guarantor and all other
items which have previously constituted Equipment but are then currently
being held for sale or lease in the ordinary course of Borrower's or any
Guarantor's business, (iii) raw materials, work-in-process and finished
goods, (iv) materials, components and supplies of any kind, nature or
description used or consumed
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 7
in Borrower's or any Guarantor's business or in connection with the
manufacture, production, packing, shipping, advertising, finishing or sale
of any of the Property described in clauses (i) through (iii) above, (v)
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goods in which Borrower or any Guarantor has a joint or other interest to
the extent of Borrower's or any Guarantor's interest therein or right of
any kind (including, without limitation, goods in which Borrower or any
Guarantor has an interest or right as consignee), and (vi) goods that are
returned to or repossessed by Borrower or any Guarantor; in each case
whether in the possession of Borrower or any Guarantor, a bailee, a
consignee, or any other Person for sale, storage, transit, processing, use
or otherwise, and any and all documents relating to any of the foregoing.
"Key Man" Policies - A life insurance policy issued on the life of Max
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▇. ▇▇▇▇▇▇ in the amount of not less than $1,000,000, and a life insurance
policy issued on the life of ▇▇▇▇ ▇. ▇▇▇▇▇▇ in the amount of not less than
$1,000,000.
Lease Default - As defined in Section 6.
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Lien - Any mortgage, deed of trust, pledge, security interest,
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assignment, encumbrance or lien (statutory or otherwise) of every kind and
character.
Loan Documents - This Agreement, the Notes, the Security Instruments
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and all other documents heretofore, herewith or hereafter executed in
connection with the lending, credit and security transactions described in
this Agreement, including those described in the Prior Agreement.
Loans - Collectively, the Advance Term Loan and the Revolving Loan.
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Material Adverse Effect - Any set of circumstances or events that has
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a material adverse effect on (i) the assets or properties, liabilities,
financial condition, business, operations, affairs or circumstances of
Borrower and Guarantors, taken as a whole, (ii) the ability of Borrower and
Guarantors to carry out their consolidated business as it exists on the
date of this Agreement or as proposed at the date of this Agreement to be
conducted, (iii) the ability of Borrower to meet its obligations under the
Notes, this Agreement, any of the other Loan Documents or the Subordinated
Debt, in each case on a timely basis, or (iv) the ability of Borrower and
Guarantors, taken as a whole, to meet their obligations under this
Agreement or any of the other Loan Documents.
Maximum Rate - At any particular time in question, the maximum rate of
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interest that under applicable law may then be charged on the Notes. If
such maximum rate changes after the date of this Agreement, then the
Maximum Rate shall be automatically increased or decreased, as the case may
be, without notice to Borrower, from time to time as of the effective date
of each change in such maximum rate.
Notes - Collectively, the Advance Term Note and the Revolving Note,
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together with all renewals, modifications, amendments and extensions
thereof or any part thereof.
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 8
Obligations - Any and all obligations of Borrower or any of Guarantors
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for (i) the payment of money, whether principal, interest, fees, costs or
otherwise, and (ii) the performance of agreements, promises, covenants and
acts, in both cases arising under or in connection with this Agreement, the
Notes, any of the Security Instruments or any of the other Loan Documents.
Permitted Liens - The term Permitted Lien shall mean (i) easements,
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rights of way, servitudes, permits, conditions, covenants and other
restrictions, and easements of streets, alleys, highways, pipelines,
telephone lines, power lines, railways and other easements and rights of
way on, over or in respect of any of Borrower's or Guarantors' assets or
properties and that do not, individually or in the aggregate, cause a
Material Adverse Effect; (ii) materialmen's, mechanic's, repairman's,
employee's, warehousemen's, landlord's, carrier's, contractor's, sub-
contractor's, and other Liens (including any financing statements filed in
respect thereof) incidental to the construction, maintenance, development,
transportation, storage or operation of Borrower's or Guarantors' assets or
properties to the extent not delinquent (or which, if delinquent, are being
contested in good faith by appropriate proceedings and for which Borrower
or any Guarantor has set aside on its books adequate reserves in accordance
with GAAP); (iii) all contracts, agreements and instruments (but not any
contract, agreement or instrument that affirmatively or expressly creates a
security interest, except as described in clause (vii) below), and all
defects and irregularities and other matters affecting Borrower's or
Guarantors' assets and properties which were in existence at the time
Borrower's or Guarantors' assets and properties were originally acquired by
Borrower or such Guarantor and all routine operational agreements entered
into in the ordinary course of business, which contracts, agreements,
instruments, defects, irregularities and other matters and routine
operational agreements are not such as to, individually or in the
aggregate, interfere materially with the operation, value or use of
Borrower's and Guarantors' assets and properties, considered in the
aggregate; (iv) liens in connection with worker's compensation,
unemployment insurance or other social security, old age pension or public
liability obligations; (v) legal or equitable encumbrances deemed to exist
by reason of the existence of any litigation or other legal proceeding or
arising out of a judgment or award with respect to which an appeal is being
prosecuted in good faith and levy and execution thereon have been stayed
and continue to be stayed; (vi) rights reserved to or vested in any
municipality, governmental, statutory or other public authority to control
or regulate any of Borrower's or Guarantors' assets and properties in any
manner, and all applicable laws, rules, regulations and orders from any
governmental authority; (vii) purchase money security interests incurred in
the ordinary course of Borrower's or any Guarantor's business in connection
with the acquisition of Equipment (provided that the related indebtedness
shall be subject to Section 12(g)) or Inventory; (viii) Liens created by or
pursuant to this Agreement or the other Security Instruments; (ix) Liens
existing as of November 30, 1998 and disclosed on Schedule 9(j) attached
hereto; and (x) any and all renewals and extensions of all or any of the
foregoing.
Person - An individual, a corporation, a partnership, an association,
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a trust or any other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 9
Plan - Any plan subject to Title IV of ERISA and maintained by
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Borrower or a Guarantor, or any such plan to which Borrower or a Guarantor
is required to contribute on behalf of its employees.
Prime Rate - The "Prime Rate" as announced by Bank at its principal
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banking office in Dallas, Texas from time to time, but, for any day, never
less than the Federal Funds Effective Rate in effect for such day plus one-
half of one percent ( 1/2%) per annum. Without notice to Borrower,
Guarantors or any other Person, the Prime Rate shall change automatically
from time to time as and in the amount by which said Prime Rate shall
fluctuate, with each such change to be effective as of the date of each
change in the Prime Rate. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate charged to any customer by
Bank.
Prime Rate Interest Period - With respect to any Prime Rate Loan, the
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quarterly period ending on the first (1st) day of each February, May,
August and November, provided, however, that (i) if any Prime Rate Interest
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Period would end on a day that is not a Business Day, such Prime Rate
Interest Period shall be extended to the next succeeding Business Day, and
(ii) if any Prime Rate Interest Period would otherwise end after the
Advance Term Loan Maturity Date or Revolving Maturity Date, as applicable,
then such Prime Rate Interest Period shall end on the Advance Term Loan
Maturity Date or Revolving Maturity Date, respectively.
Prime Rate Loan - Any Loan, or a portion thereof, during any period
---------------
that bears interest at the Prime Rate plus the Prime Rate Margin, or which
----
would bear interest at such rate if the Maximum Rate ceiling was not in
effect at a particular time. (Although certain Loans under the Prior
Agreement may not have been Prime Rate Loans, all Loans under this
Agreement are Prime Rate Loans.)
Prime Rate Margin - One-quarter of one percent (0.25%) whenever the
-----------------
Funded Debt Ratio is less than or equal to 1.0:1.0; one-half of one percent
(0.50%) whenever the Funded Debt Ratio is greater than 1.0:1.0, but less
than or equal to 2.0:1.0; one percent (1.00%) whenever the Funded Debt
Ratio is greater than 2.0:1.0, but less than or equal to 3.0:1.0; and one
and three-quarters percent (1.75%) whenever the Funded Debt Ratio is
greater than 3.0:1.0.
Prudential - The Prudential Insurance Company of America.
----------
Reporting Default - As defined in Section 6.
-----------------
Revolving Loan - The Loan or Loans made under the Revolving Loan
--------------
Commitment pursuant to Section 2(a).
Revolving Loan Commitment - The commitment contained in Section 2(a)
-------------------------
of this Agreement.
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 10
Revolving Maturity Date - January 31, 1999.
-----------------------
Revolving Note - That certain revolving note in the stated principal
--------------
amount of $2,000,000 and further described in Section 3(a).
Security Instruments - The term Security Instruments is used
--------------------
collectively herein to mean this Agreement, all security agreements, pledge
agreements and financing statements, the Guaranties and other collateral
documents covering certain of Borrower's and Guarantors' assets and
properties, all such documents in form and substance reasonably
satisfactory to Bank.
Senior Funded Debt Ratio - As of any date, the ratio of (i) Funded
------------------------
Debt as of such date minus Subordinated Debt as of such date to (ii) EBITDA
for the period of the twelve calendar months ending on, or most recently
ended prior to, such date.
Subordinated Debt - The outstanding principal of and accrued interest
-----------------
on the Subordinated Notes, and any other Funded Debt that by its express
terms is junior or subordinate in right of payment in full to the
Obligations.
Subordinated Note Agreement - That certain Note Agreement dated as of
---------------------------
April 16, 1997 between Borrower and Prudential, as, subject to Section
12(u), amended from time to time.
Subordinated Notes - The Notes issued pursuant to the Subordinated
------------------
Note Agreement.
Subsidiary - Any corporation or other Person of which securities or
----------
other ownership interests having ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions are
at the time directly or indirectly owned by Borrower or any Guarantor.
Tax Refund - As defined in Subsection 11(t).
----------
Unleveraged Capital Expenditures - For any period, the total cost of
--------------------------------
capital expenditures in such period by Borrower on a consolidated basis for
the purpose of acquiring, or acquiring the use of, Equipment or other
tangible capital assets, less the total amount of Funded Debt incurred in
connection with such expenditures.
2. COMMITMENTS OF BANK.
(a) Current Commitment
(1) Revolving Loan. On the terms and conditions hereinafter set
--------------
forth, Bank agrees to make a revolving loan consisting of one or more
Advances to Borrower from time to time during the period beginning on
the date of this Agreement and ending on (but not including) the
Revolving Maturity Date in such
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 11
amounts as Borrower may request up to an amount not to exceed, in the
aggregate principal amount outstanding at any time $1,000,000.
Provided, however, that if a Borrowing Increase Event occurs, Borrower
may request up to an amount not to exceed, in the aggregate principal
amount outstanding at any time, $2,000,000. Within the limit of this
Section 2(a), Borrower may borrow, repay without premium or penalty,
and reborrow. Notwithstanding any other provision of this Agreement,
no Advance shall be required to be made hereunder if any Event of
Default has occurred and is continuing or if any event or condition
has occurred that may, with notice, be an Event of Default.
(2) Procedure for Borrowing Under Revolving Loan Commitment.
-------------------------------------------------------
Whenever Borrower desires an Advance under the Revolving Loan, it
shall give Bank telegraphic, facsimile, telex or telephonic notice (an
"Advance Request") of such requested Advance, which in the case of
telephonic notice, shall be promptly confirmed in writing. Each
Advance Request for an Advance under the Revolving Loan shall be in
the form of Exhibit "A" attached hereto. Each Advance Request shall
be executed by the President, Chief Executive Officer or Chief
Financial Officer of Borrower and shall be received by Bank not later
than 11:00 a.m. Dallas, Texas time, on the Borrowing Date. Each
Advance Request shall specify the Borrowing Date, and the principal
amount to be borrowed (which shall not be less than $100,000).
(3) Voluntary Reduction of Revolving Loan Commitment. Borrower
------------------------------------------------
may at any time, or from time to time, upon not less than three (3)
Business Days prior written notice to Bank, reduce or terminate the
Revolving Loan Commitment; provided, however, that each reduction in
-------- -------
the Revolving Loan Commitment must (i) be in a minimum amount of at
least $100,000, and (ii) be accompanied by a prepayment of the
Revolving Note in at least the amount by which the then-outstanding
principal balance of the Revolving Note exceeds the Revolving Loan
Commitment as reduced in accordance with this Section 2(a)(3).
(b) Expired Commitment. Borrower currently has outstanding Advances of
$7,952,930.10 in the aggregate principal amount under the Prior Agreement.
Borrower hereby confirms and acknowledges that the Advance Term Loan
Commitment under the Prior Agreement is and has been extinguished, and that
Bank does not have any obligations whatsoever to make available to Borrower
any further Advances under the Advance Term Loan. Notwithstanding, all
Advances made by Bank to Borrower pursuant to the Advance Term Loan
Commitment contained in the Prior Agreement remain subject to all of the
provisions contained in this Agreement.
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 12
3. NOTES EVIDENCING LOANS.
(a) The facilities described above in Section 2 shall be evidenced by
two promissory notes of Borrower as follows:
(i) Form of Advance Term Note - The Advance Term Loan shall be
-------------------------
evidenced by an amended and restated note in the stated or face amount
of $7,952,930.10, and shall be in the form of Exhibit "B" hereto with
appropriate insertion. Notwithstanding the principal amount of the
Advance Term Note, as stated on the face thereof, the actual principal
amount due from Borrower to Bank on account of the Advance Term Note,
as of any date of computation, shall be the sum of Advance Term Loan
Advances then and theretofore made on account thereof, less all
principal payments actually received by Bank in collected funds with
respect thereto. Although the Advance Term Note shall be dated as of
the date of this Agreement, interest in respect thereof shall be
payable for the period during which the Advance Term Loan Advances
evidenced thereby are outstanding and, although the face amount of the
Advance Term Note may be higher, the Advance Term Note shall be
enforceable, with respect to Borrower's obligation to pay the
principal amount thereof, only to the extent of the unpaid principal
amount of such Advance Term Loan Advances.
(ii) Form of Revolving Note - The Revolving Loan shall be
----------------------
evidenced by a note in the face amount of $2,000,000, and shall be in
the form of Exhibit "C" hereto with appropriate insertion.
Notwithstanding the principal amount of the Revolving Note, as stated
on the face thereof, the actual principal amount due from Borrower to
Bank on account of the Revolving Note, as of any date of computation,
shall be the sum of Revolving Loan Advances then and theretofore made
on account thereof, less all principal payments actually received by
Bank in collected funds with respect thereto. Although the Revolving
Note shall be dated as of the date of this Agreement, interest in
respect thereof shall be payable for the period during which the
Revolving Loan Advances evidenced thereby are outstanding and,
although the face amount of the Revolving Note may be higher, the
Revolving Note shall be enforceable, with respect to Borrower's
obligation to pay the principal amount thereof, only to the extent of
the unpaid principal amount of such Revolving Loan Advances.
(b) Interest Rates - The unpaid principal balances of the Notes
--------------
shall bear interest from time to time as set forth in Section 4.
(c) Payment of Interest on Advance Term Note - Interest on the
----------------------------------------
Advance Term Note shall be payable quarterly, in arrears, on each Interest
Payment Date and on the Advance Term Loan Maturity Date.
(d) Payment of Principal of Advance Term Loan - The principal of the
-----------------------------------------
Advance Term Loan shall be payable as follows:
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 13
(i) Borrower shall make quarterly principal payments of $400,000
each, the first such payment to be due and payable on the fifteenth
(15th) day of July, 1999, and continuing on the fifteenth (15th) day
of each October, January, April and July thereafter; and
(ii) Borrower shall make one (1) final payment equal to the
entire outstanding principal balance of the Advance Term Loan, which
final payment shall be due and payable on the Advance Term Loan
Maturity Date.
(e) Payment of Interest on Revolving Note - Interest on the
-------------------------------------
Revolving Note shall be payable quarterly, in arrears, on each Interest
Payment Date and on the Revolving Maturity Date.
(f) Payment of Principal of Revolving Loan - Principal of the
--------------------------------------
Revolving Note shall be due and payable on the Revolving Maturity Date.
4. INTEREST RATES FOR LOANS.
(a) Calculation. With respect to the unpaid principal amount of a
-----------
Prime Rate Loan, Borrower agrees to pay interest on the Advance Term Note
or the Revolving Note, as the case may be, calculated on the basis of the
actual days elapsed (including the first day but excluding the last day) in
a year consisting of 360 days (unless such calculation would result in a
usurious rate, in which case interest shall be calculated on the basis of a
year or 365 or 366 days, as the case may be) from the date the proceeds
thereof are or were made available to Borrower until maturity (whether by
acceleration or otherwise), at a varying rate per annum equal to the lesser
of (i) the Maximum Rate, or (ii) the Prime Rate plus the Prime Rate Margin.
----
Past due principal and, to the extent permitted by law, past due interest
in respect to a Prime Rate Loan shall bear interest, payable on demand, at
a rate per annum equal to the Prime Rate plus four percent (4%).
----
(b) Recoupment. If at any time the applicable rate of interest
----------
pursuant to Section 4(a) above shall exceed the Maximum Rate, thereby
causing the interest on one or more of the Notes to be limited to the
Maximum Rate, then any subsequent reduction in the interest rate shall not
reduce the rate of interest on such Notes below the Maximum Rate until the
total amount of interest accrued on such Notes equals the amount of
interest that would have accrued on the Note if the rate pursuant to
Section 4(a) had at all times been in effect.
5. COLLATERAL SECURITY AND GUARANTIES. Borrower and each Guarantor hereby
confirm and acknowledge that the Liens previously granted to Bank in connection
with the Prior Agreement, to secure the performance of their obligations
thereunder, also secure the Obligations, whether now or hereafter incurred,
matured or unmatured, direct or contingent, joint or several, or joint and
several, including extensions, modifications and renewals thereof, and
substitutions therefor, and as such remain in force and full effect.
Additionally, Borrower acknowledges that in connection with the Prior Agreement
there has been pledged and delivered to Bank one hundred percent (100%) of the
issued and outstanding shares of the capital stock of
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 14
each Guarantor. Borrower and each Guarantor hereby confirm that each such pledge
secures the Obligations, whether now or hereafter incurred, matured or
unmatured, direct or contingent, joint or several, or joint and several,
including extensions, modifications and renewals thereof, and substitutions
therefor, and as such remain in force and full effect. All collateral in which
Borrower or any Guarantor has herewith granted or hereafter grants to Bank a
Lien (to the satisfaction of Bank) in accordance with this Section 5, as such
properties and interests are from time to time constituted, are hereinafter
collectively called the "Collateral." Bank's Lien on the Collateral shall be a
first and prior Lien, subject only to such priority as may be afforded a
Permitted Lien under applicable law.
In addition to the grant of Liens against the Collateral in favor of Bank,
Guarantors acknowledge the execution and delivery of the Guaranties to Bank in
connection with the Prior Agreement and confirm that the Guaranties apply to the
Obligations to the same extent as they applied to the "Obligations" under and as
defined in the Prior Agreement. Without limiting the foregoing, each Guarantor
hereby acknowledges and consents to this Loan Agreement and (a) acknowledges
that its obligations under that certain Guaranty dated on or before the date of
this Agreement in favor of Bank includes a guaranty of all of the obligations,
indebtedness and liabilities of Borrower under (i) this Agreement and (ii) the
Notes, (b) represents to Bank that such Guaranty remains in full force and
effect, and (c) agrees that this Agreement and all documents executed in
connection herewith do not operate to reduce or discharge its obligations under
such Guaranty.
6. WAIVER OF REPORTING, FINANCIAL COVENANT AND OTHER DEFAULTS. Borrower
and Guarantors acknowledge that (a) as of October 31, 1998, Borrower did not
comply with the financial and reporting covenants ("Financial Covenant Default"
and "Reporting Default," respectively) set forth in Sections 11, 12 and 13,
respectively, of the Prior Agreement and (b) as previously disclosed to Bank in
writing, on the date hereof, Borrower and Guarantors are in default of payment
in the approximate aggregate principal amount of $1,223,294, under capitalized
leases ("Lease Defaults"), which capital leases are in the approximate aggregate
principal amount of $14,582,251. As a result, as of November 30, 1998 and the
date hereof, Events of Default (as defined in the Prior Agreement) existed and
continue to exist under the Prior Agreement.
Pursuant to this Section 6, Bank waives all Financial Covenant Defaults,
Reporting Defaults and Events of Default extant on November 30, 1998 and
previously disclosed to Bank in writing. In addition, Bank waives all Lease
Defaults extant as of the date hereof and previously disclosed to Bank in
writing. Bank's waiver of Lease Defaults is subject to the condition subsequent
that all Lease Defaults are cured by 5:00 p.m. central standard time on January
15, 1999. Borrower must submit to Bank by 5:00 p.m. central standard time on
January 15, 1999 evidence of such cure, which evidence must be acceptable to
Bank in its sole discretion ("Cure Evidence"). In the absence of Bank's
receipt of Cure Evidence, an Event of Default hereunder will exist. This waiver
is with respect to the foregoing defaults only, and does not create any
obligation on Bank's part to grant any similar waivers or extensions under
similar or dissimilar circumstances. Without limiting the foregoing, any Events
of Default arising after November 30, 1998 (other than those described in the
immediately preceding paragraph) are not waived by this Section 6. This waiver
shall become effective only upon Borrower's and Guarantors' execution of this
Agreement. It is understood and
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 15
agreed that, except as set forth in this Section 6, Bank waives no rights
---------
whatsoever with respect to remedies available to it with respect to this
----------
Agreement and the other Loan Documents.
Borrower and Guarantors (a) represent and warrant that no Event of Default
as defined in the Prior Agreement (or any event that would, with the giving of
notice or passage of time, or both, would constitute an Event of Default) has
occurred and is continuing under the Prior Loan Agreement or the other Loan
Documents, other than those described in this Section 6; and (b) represent and
agree that Borrower and Guarantors in no way expect, have been led to expect, or
will rely upon any other waiver, extension, forbearance or consent not agreed to
by Bank in writing in this Section 6 or prior to the date of this Agreement.
7. FEES. Borrower shall pay to Bank a commitment fee on the daily average
unused amount of Bank's Revolving Loan Commitment ("Commitment Fee") for the
period from and including the date hereof to but not including the Revolving
Maturity Date, at a rate per annum of (a) one-quarter of one percent (0.25%)
whenever the Funded Debt Ratio is less than or equal to 2.0:1.0, (b) three-
eighths of one percent (0.375%) whenever the Funded Debt Ratio is greater than
2.0:1.0 and less than or equal to 3.0:1.0 and (c) one-half of one percent
(0.50%) whenever the Funded Debt Ratio is greater than 3.0:1.0.
Accrued Commitment Fees (together with any accrued and unpaid Commitment
Fees under the Prior Agreement) shall be payable quarterly in arrears on the
first day of each February, May, August and November with respect to the
preceding quarter and on the Revolving Maturity Date.
8. PREPAYMENTS.
(a) Voluntary Prepayments. Borrower may at any time and from time
---------------------
to time, without penalty or premium, prepay any of the Notes, in whole or
in part. Each prepayment of the Advance Term Note shall be made on at least
one (1) Business Day's notice to Bank and shall be in a minimum amount of
$100,000 or the unpaid balance of the Advance Term Note, whichever is less,
and shall be applied to amounts of outstanding principal, in reverse order
of maturity.
(b) Mandatory Prepayment of Advance Term Loan. On or before April
-----------------------------------------
15 of each year, beginning April 15, 1999, Borrower shall make a mandatory
prepayment of the Advance Term Loan in an amount equal to fifty percent
(50%) of Excess Cash Flow attributable to Borrower's immediately preceding
fiscal year, calculated on the basis of the annual audited consolidated
financial statements for such fiscal year delivered pursuant to Section
11(a)(i). All such prepayments of the Advance Term Loan shall be
accompanied with accrued interest to the date of prepayment on the amount
so prepaid and shall be applied to the installments due thereunder in the
inverse order of maturity. Concurrently with the making of any such
payment, Borrower shall deliver to Bank a certificate in the form of
Exhibit "D" attached hereto demonstrating its calculation of the amount
required to be paid.
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 16
(c) Tax Refund as Prepayment. Borrower shall make a mandatory
------------------------
prepayment in the amount of its Tax Refund. This prepayment shall be
applied by Bank to the Revolving Note or the Advance Term Note in its sole
discretion. If Bank chooses to apply the Tax Refund as a prepayment of the
Advance Term Note, such prepayment shall be applied in inverse order of
installment maturity.
9. REPRESENTATIONS AND WARRANTIES. In order to induce Bank to enter into
this Agreement, Borrower and, to the extent applicable, each Guarantor hereby
represents and warrants to Bank (which representations and warranties will
survive the execution and delivery of this Agreement and the Notes) that:
(a) Existence. Each of Borrower and Guarantors is a corporation duly
---------
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and is duly qualified to conduct business
in all jurisdictions wherein the failure to qualify could result in a
Material Adverse Effect.
(b) Power and Authorization. Borrower is duly authorized and
-----------------------
empowered to create and issue the Notes; and Borrower and Guarantors are
duly authorized and empowered to execute, deliver and perform this
Agreement and the other Loan Documents to which each is a party; and all
action on Borrower's and Guarantors' part requisite for the due creation
and issuance of the Notes and for the due execution, delivery and
performance of the other Loan Documents, including this Agreement, has been
duly and effectively taken.
(c) Binding Obligations. This Agreement does, and the Notes and
-------------------
other Loan Documents upon their creation, issuance, execution and delivery
will, constitute valid and binding obligations of Borrower and Guarantors,
as the case may be, enforceable in accordance with their terms (except that
enforcement may be subject to any applicable bankruptcy, insolvency, or
similar debtor relief laws now or hereafter in effect and relating to or
affecting the enforcement of creditors rights generally, and to general
principles of equity).
(d) No Legal Bar or Resultant Lien. The Notes and the other Loan
------------------------------
Documents, including this Agreement, do not and will not violate any
provisions of any contract, agreement, law, regulation, order, injunction,
judgment, decree or writ to which Borrower or any Guarantor is subject, or
result in the creation or imposition of any Lien upon any assets or
properties of Borrower or any Guarantor, other than those contemplated by
this Agreement.
(e) No Consent. The execution, delivery and performance by Borrower
----------
and Guarantors of the Notes and the other Loan Documents, including this
Agreement, does not require the consent or approval of any other Person,
including without limitation any regulatory authority or governmental body
of the United States or any state thereof or any political subdivision of
the United States or any state thereof (except for consents which have been
obtained by Borrower or such Guarantor as to which such consent may be
applicable).
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 17
(f) Financial Condition. The consolidated balance sheets of
-------------------
Borrower and its consolidated Subsidiaries as at December 31, 1997 and the
related consolidated statements of income and of cash flows for the fiscal
year ended on such date, reported on by ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, L.L.P.,
copies of which have heretofore been furnished to Bank, present fairly the
consolidated financial condition of Borrower and its consolidated
Subsidiaries as at such dates, and the consolidated results of their
operations and cash flows for the fiscal year then ended. The unaudited
consolidated balance sheet of Borrower and its consolidated Subsidiaries as
at September 30, 1998, and the related unaudited consolidated statements of
income and of cash flows for the nine-month period ended on such date,
copies of which have heretofore been filed with the Securities and Exchange
Commission and furnished to Bank (in the case of all such statements),
present fairly the consolidated financial condition of Borrower and its
consolidated Subsidiaries as at such respective dates, and the consolidated
results of their operations and changes in cash flows for the nine-month
period then ended (subject to normal year-end audit adjustments). All such
financial statements, including the related schedules and notes thereto,
have been prepared in accordance with GAAP applied consistently throughout
the periods involved (except as approved by such accountants, and as
disclosed therein and except that the quarterly statements and the
statements as at September 30, 1998 and for the nine-month period then
ended are unaudited and do not include footnotes as would be required for
audited financial statements). Neither Borrower nor any of its Subsidiaries
had, at the date of the most recent balance sheet referred to above, any
guarantee obligation, contingent liability or liability for taxes, or any
long-term lease or any interest rate or foreign currency swap of exchange
transaction, that is not reflected in the foregoing statements or in the
notes thereto and which, in the aggregate, would be material to Borrower
and Guarantors, taken as a whole, except as set forth on Schedule 9(f).
Since December 31, 1997, no change has occurred in the condition, financial
or otherwise, of Borrower or a Subsidiary thereof that could have a
Material Adverse Effect, except as set forth in Schedule 9(f).
(g) Liabilities. As of the date of this Agreement, neither Borrower
-----------
nor any Guarantor has any material (individually or in the aggregate)
liability, direct or contingent, except as disclosed in the financial
statements referenced in Section 9(f) or on Schedule 9(g) attached hereto.
No unusual or unduly burdensome restrictions, restraint, or hazard exists
by contract, law or governmental regulation or otherwise relative to the
business, assets or properties of Borrower or any Guarantor that could have
a Material Adverse Effect.
(h) Litigation. Except as described in Borrower's annual audited
----------
consolidated financial statements, or as otherwise disclosed to Bank in
Schedule 9(h) attached hereto, there is no litigation, legal or
administrative proceeding, investigation or other action of any nature
pending or, to the knowledge of Borrower, threatened against or affecting
Borrower or any Guarantor that could have a Material Adverse Effect.
(i) Taxes; Governmental Charges. Borrower and each Guarantor have
---------------------------
filed all tax returns and reports required to be filed and have paid all
taxes, assessments, fees
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 18
and other governmental charges levied upon them or their assets, properties
or income which are due and payable, including interest and penalties, the
failure of which to pay could have a Material Adverse Effect, except such
as are being contested in good faith by appropriate proceedings and for
which adequate reserves for the payment thereof as required by GAAP have
been provided and with respect to which levy and execution thereon have
been stayed and continue to be stayed.
(j) Titles, Liens. Borrower and each Guarantor have good and
-------------
marketable title to all of their assets and properties, free and clear of
all Liens or other encumbrances except Permitted Liens, including, without
limitation, those Permitted Liens identified on Schedule 9(j).
(k) Defaults. Except for those defaults being waived pursuant to
--------
Section 6 of this Agreement, neither Borrower nor any Guarantor is in
default and no event or circumstance has occurred that, but for the passage
of time or the giving of notice, or both, would constitute a default under
any loan or credit agreement, indenture, mortgage, deed of trust, security
agreement or other agreement or instrument to which Borrower or any
Guarantor is a party that could in any respect have a Material Adverse
Effect. No Event of Default hereunder has occurred and is continuing.
(l) Casualties; Taking of Properties. After the date of the most
--------------------------------
recent consolidated financial statements of Borrower delivered to Bank,
neither the business nor the assets or properties of Borrower or any
Guarantor have been affected (to the extent the same could cause a Material
Adverse Effect) as a result of any fire, explosion, earthquake, flood,
drought, windstorm, accident, strike or other labor disturbance, embargo,
requisition or taking of property or cancellation of contracts, permits or
concessions by any domestic or foreign government or any agency thereof,
riot, activities of armed forces or acts of God or of any public enemy.
(m) Use of Proceeds; Margin Stock. Subject to the terms and
-----------------------------
conditions hereof, Borrower will use the proceeds of the Revolving Loan
solely for working capital. Neither Borrower nor any Guarantor is engaged
principally or as one of its important activities in the business of
extending credit for the purpose of purchasing or carrying any "margin
stock" as defined in Regulation U of the Board of Governors of the Federal
Reserve System (12 C.F.R. Part 221), or for the purpose of reducing or
retiring any indebtedness that was originally incurred to purchase or carry
a margin stock or for any other purpose which might constitute this
transaction a "purpose credit" within the meaning of said Regulation U.
(n) Location of Business and Offices. The principal place of
--------------------------------
business of Borrower is located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇. All names (including prior corporate names and past
and present trade names) used by any of Borrower and Guarantors during the
past five years (expressly including any such names used by a predecessor
to Borrower or a Guarantor, or used by a Guarantor prior to its becoming a
Subsidiary) are set forth on Schedule 9(n). The locations of business at
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 19
which any such names were used during such five years, or presently, is
also set forth on Schedule 9(n).
(o) Compliance with Law. Neither Borrower nor any Guarantor:
-------------------
(i) is in violation of any law, judgment, decree, order,
ordinance, or governmental rule or regulation to which Borrower, any
Guarantor, or any of its or their assets or properties is subject; and
(ii) has failed to obtain any license, permit, franchise or other
governmental authorization necessary to the ownership of any of its
assets or properties or the conduct of business;
which violation or failure could have a Material Adverse Effect.
(p) No Material Misstatements. No information, exhibit or report
-------------------------
furnished by Borrower to Bank or its counsel in connection with this
Agreement contains any material misstatement of fact or omits to state a
material fact or any fact necessary to make the statement contained therein
not materially misleading.
(q) ERISA. Borrower and each Guarantor are in compliance in all
-----
material respects with the applicable provisions of ERISA, and no
"reportable event," as such term is defined in Section 4043 of ERISA, has
occurred with respect to any Plan of Borrower or any Guarantor that could
cause a Material Adverse Effect.
(r) Subsidiaries. Borrower has no Subsidiaries other than
------------
Guarantors. The corporate name, federal tax identification number, state
of incorporation and states of qualification to do business as a foreign
corporation, location of principal place of business or chief executive
office, number of authorized and issued and outstanding shares of capital
stock (and their record and beneficial holder or holders) of each Guarantor
are disclosed on Schedule 9(r).
(s) Environmental Matters. Except as disclosed on Schedule 9(s),
---------------------
neither Borrower nor any Guarantor has received notice or otherwise has
knowledge of (i) any Environmental Liability that could individually or in
the aggregate have a Material Adverse Effect arising in connection with (A)
any non-compliance with or violation of the requirements of any
Environmental Law or (B) the release or threatened release of any toxic or
hazardous waste into the environment, (ii) any threatened or actual
liability in connection with the release or threatened release of any toxic
or hazardous waste into the environment which could individually or in the
aggregate have a Material Adverse Effect or (iii) any federal or state
investigation evaluating whether any remedial action is needed to respond
to a release or threatened release of any toxic or hazardous waste into the
environment for which Borrower or any Guarantor is or may be liable.
(t) Ownership. Both as of November 30, 1998 and as of the date of
---------
this Agreement, ▇▇▇▇ ▇. ▇▇▇▇▇▇ owned and owns the number of shares, and
options
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 20
exercisable for shares, of capital stock of Borrower set forth opposite his
name on Schedule 9(t). As of November 30, 1998, the authorized capital
stock of Borrower consisted of 50,000,000 shares of common stock and
10,000,000 shares of preferred stock, of which 11,424,083 shares of common
stock, and 695,593 shares of preferred stock, were issued and outstanding.
As of November 30, 1998, approximately 1,916,251 shares of common stock
were reserved for issuance upon the exercise of previously granted stock
options or warrants.
(u) Investments and Guaranties. Neither Borrower nor any Guarantor
--------------------------
has made any investment in, advances to or guaranties of the obligations of
any Person (other than Borrower or a Guarantor that is a wholly-owned
Subsidiary of Borrower), except as reflected in its financial statements
previously delivered to Bank or as otherwise disclosed in writing to Bank.
(v) Year 2000. Any reprogramming required to permit the proper
---------
functioning, in and following the year 2000, of (i) Borrower's and
Guarantors' computer systems and (ii) equipment containing embedded
microchips (including systems and equipment supplied by others or with
which Borrower's and Guarantors' systems interface) and the testing of all
such systems and equipment, as so reprogrammed, will be completed by June
30, 1999. The cost to Borrower and Guarantors of such reprogramming and
testing and of the reasonably foreseeable consequences of year 2000 to
Borrower and Guarantors (including, without limitation, reprogramming
errors and the failure of others' systems or equipment) will not result in
a Default or a Material Adverse Effect. Except for such of the
reprogramming referred to in the preceding sentence as may be necessary,
the computer and management information systems of Borrower and Guarantors
are and, with ordinary course upgrading and maintenance, will continue for
the term of this Agreement to be, sufficient to permit Borrower and
Guarantors to conduct their business without Material Adverse Effect.
10. CONDITIONS OF LENDING.
(a) The obligation of Bank to make the initial Advance under the
Revolving Loan shall be subject to the following conditions precedent:
(i) Asset Audit. Bank shall have received an asset audit of
-----------
Borrower, based on financial statements current as of September 30,
1998, with such asset audit prepared in accordance with GAAP and
acceptable to Bank;
(ii) Waiver of Defaults by Holders of Subordinated Debt.
--------------------------------------------------
Borrower and Bank shall have received in writing a waiver from
Prudential waiving any and all known defaults of Borrower and
Guarantors, including, but not limited to, those defaults which
correspond to those waived in Section 6 hereof, arising under the
Subordinated Note Agreement and any other agreement between or among
Borrower and Prudential or between or among them and/or their
affiliates;
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 21
(iii) Amendment to Subordinated Note Agreement. Borrower shall
----------------------------------------
have caused the Subordinated Note Agreement and any other agreement
between or among Borrower and Prudential or between or among them
and/or their affiliates to be amended so that the terms thereof are in
form and substance satisfactory to Bank in its sole discretion,
including, without limitation so that the covenants therein are
consistent with the covenants herein, as consistency shall be
determined by Bank in its sole discretion. Borrower shall have
delivered to Bank a fully executed copy of the Subordinated Note
Agreement, which shall be effective, and any other agreement between
or among Borrower and Prudential or between or among them and/or their
affiliates, in each case as amended.
(iv) Execution and Delivery. Borrower shall have executed and
----------------------
delivered to Bank the Notes and the other Loan Documents required to
be executed by Borrower and all other required documents, all in form
and substance satisfactory to Bank;
(v) Landlord's Subordinations. To the extent not previously
-------------------------
delivered, Bank shall have received by January 31, 1999, from each
landlord of Borrower and each Guarantor an executed landlord's
subordination or waiver agreement in form and content satisfactory to
Bank;
(vi) Legal Opinion. Bank shall have received from ▇▇▇▇▇▇▇▇▇
-------------
Traurig, Borrower's and Guarantors' legal counsel, a favorable legal
opinion in form and substance satisfactory to Bank (i) as to the
matters set forth in Subsections 9(a), (b), (c), (d), (e), (h) and (k)
(to counsel's knowledge) and (ii) as to such other matters as Bank or
its counsel shall reasonably request;
(vii) Secretary's Certificate. Bank shall have received a
-----------------------
Secretary's Certificate from the secretary or assistant secretary of
Borrower and each Guarantor certifying and attaching appropriate
corporate resolutions regarding the transactions contemplated hereby
and statements of incumbency;
(viii) Good Standing and Existence. Bank shall have received
---------------------------
evidence satisfactory to it of the existence and good standing of
Borrower and each Guarantor (including, without limitation, in
jurisdictions other than their respective jurisdictions of
incorporation);
(ix) Articles and Bylaws. Bank shall have received from
-------------------
Borrower and each Guarantor certified copies of their Articles or
Certificate of Incorporation and Bylaws, or, in the alternative,
Borrower may deliver to Bank a certificate, dated as of even date
herewith, and signed by an authorized officer of Borrower on its
behalf that there have been no changes to Borrower's and Guarantors'
Articles or Certificate of Incorporation and Bylaws since July 23,
1996 (or, as to any Guarantor that became such subsequent to July 23,
1996, since the most recent date thereafter for which a similar
certification was made to Bank);
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 22
(x) Priority of Liens. Bank shall have received satisfactory
-----------------
evidence that the Liens granted to Bank in the Security Instruments
covering the Collateral constitute perfected, first priority Liens,
subject only to Permitted Liens;
(xi) UCC Searches. Bank shall have received Uniform
------------
Commercial Code searches covering Borrower, Guarantors and the
Collateral, the results of which searches shall be satisfactory to
Bank;
(xii) Fees. Borrower shall have paid Bank all accrued
----
Commitment Fees, and Borrower shall have paid all accrued fees and
expenses of ▇▇▇▇▇ ▇▇▇▇▇▇▇ Rain ▇▇▇▇▇▇▇ (A Professional Corporation).
(xiii) Insurance. Borrower shall have provided evidence of its
---------
insurance of such types and in such amounts as is satisfactory to
Bank; and
(xiv) Legal Matters Satisfactory. All legal matters incident
--------------------------
to the consummation of the transactions contemplated hereby shall be
reasonably satisfactory to special counsel for Bank retained at the
expense of Borrower.
(b) The obligation of Bank to make any subsequent Advance on the
Revolving Loan shall be subject to the following additional conditions
precedent that, at the date of making each such Advance and after giving
effect thereto:
(i) Representations and Warranties. With respect to any
------------------------------
Advance, the representations and warranties of Borrower and Guarantors
under this Agreement are true and correct in all material respects as
of such date, as if then made (except to the extent that such
representations and warranties related solely to an earlier date);
(ii) No Event of Default. No Event of Default shall have
-------------------
occurred and be continuing nor shall any event have occurred or failed
to occur which, with the passage of time or service of notice, or
both, would constitute an Event of Default; and
(iii) Senior Debt. Notwithstanding any provision in any Loan
-----------
Document to the contrary, Bank shall have no obligation to make loans
or Advances pursuant to Section 2 of this Agreement unless the same
shall constitute Senior Debt (as defined in the Subordinated Note
Agreement).
11. AFFIRMATIVE COVENANTS. Borrower and, to the extent applicable, each
Guarantor will at all times comply with the covenants contained in this Section
11 from the date of this Agreement and for so long as any part of the Loans are
in existence.
(a) Financial Statements and Reports. Borrower shall promptly
--------------------------------
furnish to Bank from time to time upon request such information regarding
the business and affairs
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 23
and financial condition of any of Borrower and Guarantors, as Bank may
reasonably request, and will furnish to Bank:
(i) Annual Financial Statements - as soon as available, and in
---------------------------
any event within ninety (90) days after the end of each fiscal year of
Borrower, beginning with the fiscal year ending December 31, 1998, a
copy of the annual audit report of Borrower and its consolidated
Subsidiaries for such fiscal year containing, on a consolidated and
consolidating basis, balance sheets and statements of income, retained
earnings, and cash flows as at the end of such fiscal year and for the
12-month period then ended, in each case setting forth in comparative
form the figures for the preceding fiscal year, all in reasonable
detail and audited by, and accompanied by the unqualified opinion of,
an accounting firm acceptable to Bank, to the effect that such report
has been prepared in accordance with GAAP and presents fairly the
financial condition and results of operations of Borrower and its
consolidated Subsidiaries as of the dates and for the periods
presented;
(ii) Quarterly Financial Statements - as soon as available, and
------------------------------
in any event within forty-five (45) days after the end of each fiscal
quarter, a copy of an unaudited financial report of Borrower and its
consolidated Subsidiaries as of the end of such fiscal quarter and for
the portion of the fiscal year then ended, containing, on a
consolidated and consolidating basis, balance sheets and statements of
income, and cash flows, in each case setting forth in comparative form
the figures for the corresponding period of the preceding fiscal year,
all in reasonable detail and prepared in accordance with GAAP to
fairly and accurately present (subject to year-end audit adjustments
and disclosures) the financial condition and results of operations of
Borrower and its consolidated Subsidiaries, on a consolidated and
consolidating basis, at the date and for the periods indicated
therein;
(iii) Monthly Financial Statements - as soon as available, and in
----------------------------
any event within forty-five (45) days after the end of each calendar
month (other than the last calendar month in a fiscal quarter), a copy
of an unaudited financial report of Borrower and its consolidated
Subsidiaries as of the end of such month and for the portion of the
fiscal year then ended, containing, on a consolidated basis for each
of Borrower and such Subsidiaries, balance sheets and statements of
income, and cash flows, in each case setting forth in comparative form
the figures for the corresponding period of the preceding fiscal year,
all in reasonable detail and prepared in accordance with GAAP to
fairly and accurately present (subject to year-end audit adjustments
and disclosures) the financial condition and results of operations of
Borrower and its consolidated Subsidiaries, on a consolidated and
consolidating basis, at the date and for the periods indicated
therein;
(iv) SEC/Exchange Filings - as soon as available, copies of all
--------------------
registration statements and regular periodic reports, if any, that
Borrower shall have filed with the Securities and Exchange Commission
(or any successor
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 24
agency), any securities exchange or any automated trading system
maintained by the National Association of Securities Dealers, Inc.;
(v) Borrowing Base Certificate - as soon as available, and in
--------------------------
any event within forty-five (45) days of the end of each month and
forty-five (45) days of the end of each fiscal quarter, an accurately
completed Borrowing Base Certificate and an Accounts aging report,
each as of the end of such month or fiscal quarter, as applicable;
(vi) Stockholder Information - promptly upon the mailing
-----------------------
thereof to the stockholders of Borrower generally, copies of all
financial statements, reports, notices, correspondence and proxy and
information statements so mailed;
(vii) Management Letters - promptly following delivery thereof
------------------
to Borrower, or the board of directors or management of Borrower, a
copy of any management letter or report by independent public
accountants with respect to the financial condition, operations,
business or prospects of Borrower and its Subsidiaries; and
(viii) Additional Information - (A) Contemporaneously with
----------------------
delivery ofthe same to holders of the Subordinated Notes, any reports
or notices delivered by Borrower pursuant to the Subordinated Note
Agreement, and (B) promptly upon request of Bank from time to time any
additional financial information or other information that Bank may
reasonably request.
All such information, reports, balance sheets and financial statements
referred to in Subsection 11(a) above shall be in such detail as Bank may
reasonably request. All accounting terms used herein shall be interpreted,
and all financial statements and certificates and reports as to financial
matters required to be delivered to Bank hereunder shall be prepared, in
accordance with GAAP applied on a basis consistent with (i.e., without any
change in, or other modification of accounting principles without the prior
written consent of Bank) those used in the preparation of the most recent
financial statements furnished to Bank by Borrower.
(b) Certificates of Compliance. Contemporaneously with the delivery
--------------------------
of the information required by Sections 11(a)(i), (ii) and (iii), Borrower
will furnish or cause to be furnished to Bank a certificate in the form of
Exhibit "D" attached hereto, signed by any of the President, Chief
Executive Officer or Chief Financial Officer of Borrower on behalf of
Borrower (i) stating that Borrower and Guarantors have fulfilled in all
material respects their obligations under this Agreement, the Notes, the
Security Instruments and all other Loan Documents and that all
representations and warranties made herein and therein continue (except to
the extent they relate solely to an earlier date) to be true and correct in
all material respects (or specifying the nature of any change), or if an
Event of Default has occurred, specifying the Event of Default and the
nature and status thereof; (ii) to the extent requested from time to time
by Bank, specifically affirming compliance of Borrower and Guarantors, as
applicable, in all material respects with any of their
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 25
representations (except to the extent they relate solely to an earlier
date) or obligations under said instruments; (iii) for certificates
delivered in respect of a quarterly period, setting forth the computation,
in reasonable detail as of the end of such quarterly period, of compliance
with Sections 12(c), (d) and (e); and (iv) containing or accompanied by
such financial or other details, information and material as Bank may
reasonably request to evidence such compliance.
(c) Accountants' Certificate. Concurrently with the furnishing of the
------------------------
annual audited financial statements pursuant to Section 11(a)(i), Borrower
will furnish a statement from the firm of independent public accountants
which prepared such statements to the effect that nothing has come to their
attention to cause them to believe that there existed on the date of such
statements any Event of Default.
(d) Taxes and Other Liens. Borrower and each Guarantor will pay and
---------------------
discharge promptly when due all taxes, assessments and governmental charges
or levies imposed upon Borrower or any Guarantor or upon the income or any
assets or property of Borrower or any Guarantor as well as all claims of
any kind (including claims for labor, materials, supplies and rent) that,
if unpaid, might become a Lien or other encumbrance upon any or all of the
assets or property of Borrower or any Guarantor and which could result in a
Material Adverse Effect; provided, however, that neither Borrower nor any
Guarantor shall be required to pay any such tax, assessment, charge, levy
or claim if the amount, applicability or validity thereof shall currently
be contested in good faith by appropriate proceedings diligently conducted,
levy and execution thereon have been stayed and continue to be stayed, and
Borrower or such Guarantor shall have set up adequate reserves therefor, if
required, under GAAP.
(e) Compliance with Laws. Borrower and each Guarantor will observe
--------------------
and comply, in all material respects, with all applicable laws, statutes,
codes, acts, ordinances, orders, judgments, decrees, injunctions, rules,
regulations, orders and restrictions relating to environmental standards or
controls or to energy regulations of all federal, state, county, municipal
and other governments, departments, commissions, boards, agencies, courts,
authorities, officials and officers, domestic or foreign.
(f) Further Assurances. Borrower will cure promptly any defects in
------------------
the creation and issuance of the Notes and the execution and delivery of
the Notes and Borrower and Guarantor will cure promptly any defects in the
execution and delivery of the Loan Documents, including this Agreement.
Borrower and Guarantors at their sole expense will promptly execute and
deliver to Bank upon its reasonable request all such other and further
documents, agreements and instruments in compliance with or accomplishment
of the covenants and agreements in this Agreement, or to correct any
omissions in the Notes or more fully to state the obligations set out
herein.
(g) Performance of Obligations. Borrower will pay the Notes and other
--------------------------
obligations incurred by it hereunder according to the reading, tenor and
effect thereof and hereof; and Borrower and Guarantors will do and perform
every act and discharge all of the obligations provided to be performed and
discharged by Borrower and Guarantors
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 26
under the Loan Documents, including this Agreement, at the time or times
and in the manner specified.
(h) Insurance. Borrower will maintain, and will cause each of its
---------
Subsidiaries to maintain, insurance (including, without limitation,
property and casualty insurance in amounts reasonably acceptable to Bank)
with financially sound and reputable insurance companies in such amounts
and covering such risks as are usually carried by business entities engaged
in similar businesses and owning similar properties in the same general
areas in which Borrower and its Subsidiaries operate, provided that in any
event Borrower and its Subsidiaries will maintain medical professional
liability insurance coverage for each Subsidiary of at least $1,000,000 per
incident and $3,000,000 maximum coverage. Each insurance policy covering
Collateral or general liability shall name Bank as loss payee or as an
additional insured and shall provide that such policy shall not be canceled
or reduced without thirty (30) days prior written notice to Bank.
(i) Accounts and Records. Borrower and Guarantors will keep books,
--------------------
records and accounts in which full, true and correct entries will be made
of all dealings or transactions in relation to its business and activities,
prepared in a manner consistent with prior years, subject to changes
required by GAAP or suggested by Borrower's auditors.
(j) Right of Inspection. Borrower and Guarantors will permit any
-------------------
officer, employee or agent of Bank to examine Borrower's and Guarantors'
books, records and accounts, and make and retain copies and extracts
therefrom, all at such reasonable times and as often as Bank may reasonably
request.
(k) Notice of Certain Events. Borrower and Guarantors shall promptly
------------------------
notify Bank if Borrower or any such Guarantor learns of the occurrence of
(i) any event which constitutes, or which with the giving of notice or the
passage of time would constitute, an Event of Default (including, but not
limited to, a Change of Control or a Change of Management) together with a
detailed statement by Borrower or such Guarantor of the steps being taken
to cure the Event of Default or prospective Event of Default; or (ii) any
legal, judicial or regulatory proceedings affecting Borrower or any such
Guarantor, or any of the assets or properties of Borrower or any such
Guarantor, which, if adversely determined, could have a Material Adverse
Effect (determined for purposes of this Section 11(k) with respect to
Borrower or any Guarantor individually and not taken as a whole); or (iii)
any dispute between Borrower or any such Guarantor and any governmental or
regulatory body or any other Person which, if adversely determined, could
cause a Material Adverse Effect; or (iv) any other matter that is
reasonably likely to have a Material Adverse Effect.
(l) ERISA Information and Compliance. Borrower and Guarantors will
--------------------------------
promptly furnish to Bank, immediately upon becoming aware of the occurrence
of any "reportable event," as such term is defined in Section 4043 of
ERISA, or of any "prohibited transaction," as such term is defined in
Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986,
as amended, in connection with any Plan or any trust created thereunder, a
written notice signed by the President, Chief Executive
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 27
Officer or the Chief Financial Officer of Borrower or such Guarantor, on
behalf of Borrower or such Guarantor, as applicable, specifying the nature
thereof, what action Borrower or such Guarantor is taking or proposes to
take with respect thereto, and, when known, any action taken by the
Internal Revenue Service with respect thereto.
(m) Environmental Reports and Notices. Borrower and Guarantors will
---------------------------------
deliver to Bank (i) promptly upon its becoming available, one copy of each
report sent by Borrower or any Guarantor to any court, governmental agency
or instrumentality pursuant to any Environmental Law, (ii) notice, in
writing, promptly upon Borrower's or any Guarantor's learning that it has
received notice or otherwise learned of any claim, demand, action, event,
condition, report or investigation indicating any potential or actual
liability arising in connection with (x) the non-compliance with or
violation of the requirements of any Environmental Law which could have a
Material Adverse Effect (determined for purposes of this Section 11(m) with
respect to Borrower or any Guarantor individually and not taken as a
whole); (y) the release or threatened release of any toxic or hazardous
waste into the environment which could have a Material Adverse Effect or
which release Borrower or any such Guarantor would have a duty to report to
any court or government agency or instrumentality, or (iii) the existence
of any Environmental Lien on any properties or assets of Borrower or any
such Guarantor, and Borrower or any such Guarantor shall immediately
deliver a copy of any such notice to Bank.
(n) Sale of Certain Assets/Prepayment of Proceeds. Without limiting
---------------------------------------------
Section 12(o), except for Inventory sold in the ordinary course of
business, Borrower will immediately pay Bank an amount equal to one hundred
percent (100%) of the proceeds (net of federal income taxes and direct
costs of sale) in excess of $25,000 in any fiscal year of Borrower,
received by Borrower and/or Guarantors from the sale of any of the
Collateral, to be applied against the Advance Term Loan. In addition,
Borrower shall notify Bank in writing of each such sale as soon as
practical and in no event later than three (3) Business Days after the
earlier of (y) the execution and delivery by Borrower or a Guarantor, as
applicable, of a letter of intent or similar instrument or document
relating to such sale, (z) the execution and delivery by Borrower or a
Guarantor, as applicable, of definitive agreements relating to such sale.
Borrower shall also, contemporaneously with such notice, provide Bank with
copies of such letter of intent, similar document or definitive agreements,
as applicable.
(o) "Key Man" Policies. Borrower will pay all premiums due on, and in
------------------
all other respects maintain in full force and effect and assigned to Bank
as collateral, the "Key Man" Policies. Provided, however, that Borrower may
cancel or allow to lapse the "Key Man" Policy on the life of ▇▇▇ ▇. ▇▇▇▇▇▇,
without being in violation of this Section 11 and without causing an Event
of Default; provided, further, however, that unless such "Key Man" Policy
on the life of ▇▇▇ ▇. ▇▇▇▇▇▇ is so cancelled or allowed to lapse, the same
shall be assigned to Bank as collateral.
(p) Vehicles Subject to Certificates. To the extent Borrower has not
--------------------------------
previously done so, Borrower will, within thirty (30) days of the date of
this Agreement,
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 28
deliver to Bank or to Automotive Rentals, Inc. pursuant to that certain
Custody and Agency Agreement dated as of January 8, 1998, a certificate of
title, or similar document, covering any vehicle owned by Borrower or any
Guarantor that is subject to any certificate of title or similar statute by
the jurisdiction in which any such vehicle is registered or located, which
certificate of title, or similar document, shall name Bank as secured party
or lienholder.
(q) Additional Subsidiary Guarantors. Borrower will take such action,
--------------------------------
and will cause each of its Subsidiaries to take such action, from time to
time as shall be necessary to ensure that all Subsidiaries of Borrower are
"Guarantors" hereunder. Without limiting the generality of the foregoing,
if Borrower or any of its Subsidiaries shall form or acquire any new
Subsidiary that shall constitute a Subsidiary hereunder (including, without
limitation, any Subsidiary of Borrower that shall become a Subsidiary of
Borrower in connection with any acquisition not prohibited by this
Agreement or with respect to which Bank has consented in writing), then
Borrower and its Subsidiaries will cause such new Subsidiary to
(i) become a "Guarantor" hereunder, and execute and deliver to
Bank a Guaranty in form and substance equivalent to the Guaranty
executed and delivered by each Guarantor on or prior to the date of
this Agreement;
(ii) execute and deliver to Bank a Security Agreement in form
and substance equivalent to the Security Agreement executed and
delivered by each Guarantor on or prior to the date of this Agreement;
(iii) cause such Subsidiary to take such action (including,
without limitation, delivering such shares of stock, executing and
delivering such Uniform Commercial Code financing statements and
executing and delivering mortgages covering any real property and
fixtures owned or leased by such Subsidiary) as shall be necessary to
create and perfect valid and enforceable first priority Liens (subject
only to Permitted Liens) on substantially all of the property of such
new Subsidiary as collateral security for the obligations of such new
Subsidiary hereunder and under its Guaranty; and
(iv) deliver such proof of corporate action, incumbency of
officers, opinions of counsel and other documents as are consistent
with those delivered by each of Borrower and Guarantors pursuant to
Section 10 upon the date of this Agreement or the date of the Prior
Agreement, as applicable, or as Bank shall have reasonably requested.
(r) Additional Collateral. With respect to any personal property
---------------------
assets of Borrower or any Guarantor currently subject to a Permitted Lien
or capital lease obligation, including vehicles, upon satisfaction of such
Permitted Lien or capital lease obligation, Borrower or any such Guarantor
shall execute and deliver such documents or instruments as may be necessary
to create and perfect in favor of Bank a first priority lien thereon
(subject to any other Permitted Lien).
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 29
(s) Maintenance of Existence; Conduct of Business. Borrower will
---------------------------------------------
preserve and maintain, and will cause each Subsidiary to preserve and
maintain, its corporate existence and all of its leases, privileges,
licenses, permits, franchises, qualifications, and rights that are
necessary or desirable in the ordinary conduct of its business, except
where the failure to do so does not and will not have a Material Adverse
Effect. Without limiting the foregoing, Borrower will preserve and
maintain, and will cause each Subsidiary to preserve and maintain, to the
extent necessary or desirable in the ordinary conduct of its business, its
status as an approved provider with all governmental authorities
(including, without limitation, all agencies administering or enforcing
health care laws and regulations). Borrower will conduct, and will cause
each Subsidiary to conduct, its business in an orderly and efficient manner
in accordance with good business practices.
(t) Assignment of Tax Refund. As allowable by law, including
------------------------
applicable regulations under the Internal Revenue Code of 1986, as amended,
Borrower shall use its commercially reasonable best efforts to promptly
file and thereafter assign to Bank Borrower's 1998 federal income tax
refund ("Tax Refund"). Borrower agrees to cooperate with Bank and take all
steps required to assign and transfer to Bank its right, title and interest
in any and all monies due or payable to Borrower in connection with its
1998 federal income taxes, including, without limitation, execution of any
Lien instrument reasonably requested by Bank. Nothing in this Subsection
11(t) shall require or allow Borrower to disregard or violate any law,
statute, code, act, ordinance, order, judgment, decree, injunction, rule,
regulation, order promulgated by any federal, state, county, municipal or
other domestic government, department, commission, board, agency, court,
authority, official or officer.
(u) Borrower shall at all times maintain Eligible Accounts of
$6,500,000 or more.
12. NEGATIVE COVENANTS. A deviation from the provisions of this Section 12
shall not constitute an Event of Default under this Agreement if such deviation
is consented to in writing by Bank. Without the prior written consent of Bank,
Borrower, and to the extent applicable, each Guarantor, will at all times comply
with the covenants contained in this Section 12 from the date of this Agreement
and for so long as any part of the Loans are in existence.
(a) Liens. Neither Borrower nor any Guarantor will create, incur,
-----
assume or permit to exist any Lien on any of its assets or properties
except Permitted Liens.
(b) Consolidations, Mergers. Neither Borrower nor any Guarantor will
-----------------------
consolidate or merge with or into any other Person, except that (i) any
Guarantor or Guarantors may merge with any other Guarantor or Guarantors at
any time and from time to time, and (ii) Borrower or any such Guarantor may
at any time and from time to time merge with another Person if Borrower or
such Guarantor is the corporation surviving such merger and if, after
giving effect thereto, no Event of Default (or event that, with the
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 30
passage of time or the giving of notice, or both, would constitute an Event
of Default) shall result or have occurred and be continuing.
(c) Minimum Quarterly EBITDA. Borrower shall cause EBITDA to be at
------------------------
least the following minimum amounts during the fiscal quarters indicated:
(i) for the quarter ending December 31, 1998, EBITDA shall be
at least $1,400,000;
(ii) for the quarter ending March 31, 1999, EBITDA shall be at
least $2,100,000; and
(iii) for the quarter ending June 30, 1999, EBITDA shall be at
least $2,850,000.
(d) Fixed Charge Coverage Ratio. Borrower will not permit the Fixed
---------------------------
Charge Coverage Ratio to ever be less than or equal to 1.0:1.0 at any time
during the period commencing on and including June 30, 1999 and ending on
and including December 31, 1999. Thereafter, Borrower will not permit the
Fixed Charge Coverage Ratio to ever be less than or equal to 1.2:1.0.
(e) Debt Ratios. Commencing on and including September 30, 1999,
-----------
Borrower will not permit the Funded Debt Ratio to ever be greater than
4.0:1.0, and will not permit the Senior Debt Ratio to ever be greater than
2.0:1.0.
(f) Current Ratio. Borrower will not permit the Current Ratio to ever
-------------
be less than 1.2:1.0.
(g) Debts, Guaranties and Other Obligations. Neither Borrower nor any
---------------------------------------
Guarantor will incur, create, assume or in any manner become or be liable
in respect of any indebtedness, nor will Borrower or any Guarantor
guarantee or otherwise in any manner become or be liable in respect of any
indebtedness, liabilities or other obligations of any other Person, whether
by agreement to purchase the indebtedness of any other Person or agreement
for the furnishing of funds to any other Person through the purchase or
lease of goods, supplies or services (or by way of stock purchase, capital
contribution, advance or loan) for the purpose of paying or discharging the
indebtedness of any other Person, or otherwise, except that the foregoing
restrictions shall not apply to:
(i) the Notes, and other indebtedness of Borrower or Guarantors
disclosed in Borrower's financial statements as set forth in its Form
10-Q for the fiscal quarter ended September 30, 1998 and also
disclosed (and specifically itemized) on Schedule 12(g) hereto;
(ii) taxes, assessments or other government charges that are not
yet due or are being contested in good faith by appropriate action
promptly initiated and diligently conducted, if such reserves as shall
be required by GAAP shall
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 31
have been made therefor and levy and execution thereon have been
stayed and continue to be stayed;
(iii) any renewals, extensions, substitutions, refundings,
refinancings or replacements (collectively, a "refinancing") of any
indebtedness described in clause (i) above, including any successive
refinancings, so long as the aggregate principal amount of
indebtedness represented thereby is not increased by such refinancing
plus the amount of direct expenses of Borrower or a Guarantor, as
applicable, incurred in connection with such refinancing;
(iv) (A) the Subordinated Notes and (B) the guaranty thereof
contemplated by the Subordinated Note Agreement; and
(v) Accounts payable incurred in the ordinary course of
business consistent with past practice.
(h) Dividends. Neither Borrower nor any Guarantor will declare or pay
---------
any cash dividend, purchase, redeem or otherwise acquire for value any of
its stock now or hereafter outstanding, return any capital to stockholders,
or make any distribution of its assets to its stockholders as such;
provided, however, that the foregoing shall not prohibit any direct or
-------- -------
indirect wholly-owned Subsidiary of Borrower from paying dividends to, or
making distributions or paying management fees to, at any time and from
time to time, Borrower or any wholly-owned Subsidiary of Borrower.
(i) Loans and Advances. Neither Borrower nor any Guarantor shall make
------------------
or permit to remain outstanding any loans or advances to any Person, except
that the foregoing restriction shall not apply to (i) loans or advances
(and renewals and extensions thereof that do not increase the amount
thereof) the material details of which have been set forth in the financial
statements of Borrower as of and for the fiscal quarter ended September 30,
1998 and also disclosed (and specifically itemized) on Schedule 12(i); (ii)
loans or advances to Guarantors; and (iii) temporary advances to employees
of Borrower and its Subsidiaries for business or personal needs, not to
exceed $100,000 until March 31, 1999, $75,000 until June 30, 1999 and
$50,000 thereafter, in the aggregate at any time outstanding.
(j) Investments. Neither Borrower nor any Guarantor shall make
-----------
investments in (including for purposes of this clause (j), without
limitation, loan and advances to) any Person, except the foregoing
restriction shall not apply to:
(i) investments in direct or guaranteed obligations of the
United States of America or any agency thereof maturing within one
year from the date of acquisition;
(ii) expense accounts for directors, officers, and employees of
Borrower and Guarantors in the ordinary course of business and not to
exceed
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 32
$10,000 in the aggregate outstanding at any time for any one director,
officer, or employee;
(iii) certificates of deposit issued by commercial banks
organized under the laws of the United States of America or any state
thereof and having (A) combined capital, surplus, and undivided
profits of not less than $100,000,000 and (B) a commercial paper
rating from ▇▇▇▇▇'▇ Investors Service, Inc. or Standard & Poor's
Corporation of at least P-1 and A-1, respectively;
(iv) Eurodollar investments with financial institutions having
(A) combined capital, surplus, and undivided profits of not less than
U.S. $100,000,000, and (B) a commercial paper rated at least P-1 or ▇-
▇ by ▇▇▇▇▇'▇ Investors Service, Inc., or Standard & Poor's
Corporation, respectively, or, if any institution does not have a
commercial paper rating, a comparable bond rating of a least A or ▇▇▇-
▇ by Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors Service, Inc.,
respectively;
(v) extensions of credit in connection with trade receivables
and overpayments of trade payables, in each case resulting from
transactions in the ordinary course of business; and
(vi) loans or advances permitted by Section 12(i) and
investments disclosed on Schedule 12(j).
(k) Sale or Discount of Receivables. Neither Borrower nor any
-------------------------------
Guarantor will discount, sell or otherwise transfer, directly or
indirectly, any of their notes receivable or Accounts.
(l) Maximum Unleveraged Capital Expenditures. Neither Borrower nor
----------------------------------------
any Guarantor will make any Unleveraged Capital Expenditures in excess of
$500,000 in the aggregate during any fiscal year.
(m) Nature of Business. Neither Borrower nor any Guarantor will
------------------
permit any material change to be made in the character of their businesses
as carried on at the date of this Agreement.
(n) Amendment of Articles or Bylaws. Except for a change of name upon
-------------------------------
not less than thirty (30) days' prior written notice to Bank, neither
Borrower nor any Guarantor will permit any amendment to, or alteration of,
its Articles or Certificate of Incorporation (or equivalent charter
document) or bylaws, other than amendments to Borrower's Certificate of
Incorporation (i) to increase its authorized capital stock or (ii) to
create one or more series of preferred stock..
(o) Sale of Assets. Neither Borrower nor any Guarantor shall sell,
--------------
transfer or otherwise dispose of any of its assets except for Inventory and
obsolete Equipment in both cases sold in the ordinary course of business.
SECOND AMENDED AND
RESTATED LOAN AGREEMENT _ Page 33
(p) Transactions with Affiliates. Neither Borrower nor any Guarantor
----------------------------
will enter into any transaction with any affiliate, except transactions
previously disclosed in Borrower's most recent reports on Form 10-KSB and
Form 10-Q and otherwise upon terms no less favorable to it than would be
obtained in a transaction negotiated at arm's length with an unrelated
third party.
(q) Acquisitions. Borrower shall not, and shall cause each of its
------------
Subsidiaries not to, consummate any Acquisition without Bank's prior
written consent (which may be given or withheld for any reason or no
reason, in either case in Bank's sole discretion). However, nothing in this
-------
Section 12(q) shall be construed to limit the prohibitions of Section
12(g).
(r) Regulation U. Neither Borrower, any Guarantor, nor any Person
------------
acting on behalf of Borrower or any of Guarantors has taken or will take
any action which might cause the loans hereunder or any of the Loan
Documents, including this Agreement, to violate Regulation U or any other
regulation of the Board of Governors of the Federal Reserve System or to
violate the Securities Exchange Act of 1934, as amended, or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereafter be in effect.
(s) Subsidiary Stock. Borrower shall not permit any of its
----------------
Subsidiaries to, at any time, issue, sell, assign or otherwise dispose of
(a) any of its capital stock, (b) any securities exchangeable for or
convertible into or carrying any rights to acquire any of its capital
stock, or (c) any option, warrant, or other right to acquire any of its
capital stock, except, in each case, to Borrower or a wholly-owned
Subsidiary of Borrower.
(t) Fiscal Year. Neither Borrower nor any Guarantor shall change its
-----------
fiscal year.
(u) Modification of Subordinated Notes or Subordinated Note
-------------------------------------------------------
Agreement. Neither Borrower nor any Guarantor shall amend or otherwise
---------
modify any one or more of the Subordinated Notes, the Subordinated Note
Agreement or the guaranty thereof contemplated by the Subordinated Note
Agreement.
(v) Payment, Redemption or Purchase of Subordinated Notes. Except for
-----------------------------------------------------
regular, scheduled quarterly interest payments, required principal payments
of $6,666,667 on April 17 in each of the years 2003, 2004 and 2005, and the
repurchase of the Subordinated Notes by Borrower as a result of, and not
earlier than sixty (60) days after the occurrence of, a Change in Control
(as defined in the Subordinated Note Agreement) that is not at the time of
repurchase an Event of Default hereunder, neither Borrower nor any
Guarantor shall pay, redeem, purchase, repurchase, prepay or otherwise
acquire for value any of the Subordinated Notes.
13. EVENTS OF DEFAULT. Any one or more of the following events shall be
considered an "Event of Default" as that term is used herein:
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 34
(a) Borrower or, to the extent applicable, any Guarantor shall fail
to pay when due or declared due the principal of, and the interest on any
of, the Obligations, including the Notes or any fee or any other
indebtedness of Borrower or any Guarantor incurred pursuant to this
Agreement, any of the other Security Instruments or any of the other Loan
Documents; or
(b) Any representation or warranty made under this Agreement, or in
any certificate or statement furnished or made to Bank pursuant hereto, or
in connection herewith, or in connection with any document furnished
hereunder, shall prove to be untrue in any material respect as of the date
on which such representation or warranty is made (or deemed made), or any
representation, statement (including financial statements), certificate,
report or other data furnished or to be furnished or made by Borrower or
any Guarantor under any of the Loan Documents, including this Agreement,
proves to have been untrue in any material respect, as of the date as of
which the facts therein set forth were stated or certified; or
(c) Borrower or a Guarantor (i) shall fail to perform or to observe
any covenant contained in Sections 11(a), (b), (c), (h), (n), (o), (p),
(q), or (s) or any provision of Section 12; or (ii) shall fail to perform
or to observe any covenant or agreement contained herein or in any of the
other Loan Documents, other than covenants referred to in Sections 13(a),
(b) and (c) (i) above, and, if such failure is subject to being remedied,
such failure shall remain unremedied for twenty (20) days after the earlier
of an officer of such corporation becoming aware thereof or notice thereof
being given by Bank to Borrower; or
(d) Default shall be made in respect of (i)(A) any payment obligation
(regardless of amount) for borrowed money, other than the Notes, for which
Borrower or any Guarantor is liable (directly, by assumption, as guarantor
or otherwise) in an aggregate principal amount in excess of $50,000, (B)
any payment obligation (regardless of amount) secured by any Lien on any
asset or property of Borrower or any Guarantor having an aggregate book
value or fair market value, whichever is greater, in excess of $50,000, or
(C) any lease payment (regardless of amount) relating to a capital lease
obligation of Borrower or a Guarantor in an aggregate principal amount in
excess of $50,000, or (ii) any performance obligation (other than a payment
obligation) with respect to an agreement involving $50,000 or more;
provided, however, that such default, (i) if a payment default, shall
-------- -------
continue beyond the greater of (A) ten days and (B) the lesser of (x)
twenty days and (y) the applicable grace period, if any, and (ii) if a non-
payment default, shall continue beyond the greater of (C) ten days and (D)
the applicable grace period, if any; provided, further, however, that the
-------- ------- -------
foregoing proviso shall apply only if Borrower promptly gives Bank notice
of such default; and further provided, that this Section 13(d)(i)(C) shall
not be applicable with respect to those capitalized leases referenced in
Section 6 as being in default on the date of this Agreement, but only for
so long as (and in any event not beyond January 15, 1999) and only to the
extent that Borrower continues to negotiate in good faith with the subject
lessors with respect to the refinancing of the obligations under such
leases; or
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 35
(e) Borrower or any Guarantor shall commence a voluntary case or
other proceedings seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking an appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, or shall consent to any such relief
or to the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it, or shall make a
general assignment for the benefit of creditors, or shall fail generally to
pay its debts as they become due, or shall take any corporate action
authorizing the foregoing; or
(f) An involuntary case or other proceeding shall be commenced
against Borrower or any Guarantor seeking liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy,
insolvency or similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed
for a period of sixty (60) days; or an order for relief shall be entered
against Borrower or any Guarantor under the federal bankruptcy laws as now
or hereinafter in effect; or
(g) A final judgment or order for the payment of money in excess of
$50,000 (or judgments or orders for the payment of money aggregating in
excess of $50,000), exclusive of amounts covered by insurance (as the
applicability of insurance coverage is determined by Borrower in good
faith, but in any event excluding from coverage matters as to which the
applicable insurance company has stated specific grounds for denying, or
for reserving its right to deny, coverage (excluding any such reservation
of rights that is customary for such insurance company)) shall be rendered
against Borrower or any Guarantor and such judgments or orders shall
continue unsatisfied or unstayed for a period of thirty (30) days; or
(h) Borrower shall fail to comply in any respect with the mandatory
prepayment provisions set forth in Section 8; or
(i) A Change of Control shall occur; provided, however, that a
-------- -------
Change of Control shall not be an Event of Default hereunder after the
sixtieth (60th) day after the date the same occurs if the same occurs
pursuant to clause (ii) of the definition thereof, if Bank receives written
notice thereof not later than the day after the same occurs and if, on such
sixtieth (60th) day (A) Borrower remains under a contractual obligation as
provided in the Subordinated Note Agreement to repurchase the Subordinated
Notes and (B) Bank has not done any of the following in connection with
such Change of Control: (1) declared an Obligation to be forthwith due and
payable, (2) otherwise exercised rights under the Loan Documents to collect
an Obligation, or (3) availed itself of the benefit of the subordination
provisions set forth in the Subordinated Note Agreement; or
(j) A Change of Management shall occur; or
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 36
(k) Any Loan Document or any provision thereof shall be alleged by
Borrower or confirmed by any court of competent jurisdiction to be
unenforceable in any respect; or
(l) An "Event of Default" (as defined in the Subordinated Note
Agreement) occurs and is continuing under the Subordinated Note Agreement.
Upon occurrence of any Event of Default specified in Subsections 13(e) and
(f), the Revolving Loan Commitment shall terminate and the entire principal
amount due under the Notes and all interest then accrued thereon, and any other
liabilities of Borrower and any Guarantor hereunder and under the other Loan
Documents, shall become immediately due and payable, all without notice and
without presentment, demand, protest, notice of protest or dishonor, notice of
intent to accelerate, notice of acceleration, or any other notice of any kind,
all of which are hereby expressly waived by Borrower and each Guarantor. Upon
any other Event of Default that has occurred and is continuing, Bank may by
notice to Borrower terminate the Revolving Loan Commitment and declare the
principal of, and all interest then accrued on, the Notes and any other
liabilities of Borrower and any Guarantor and under the other Loan Documents
hereunder to be forthwith due and payable, whereupon the same shall forthwith
become due and payable without presentment, demand, protest, notice of protest
or dishonor, notice of intent to accelerate, notice of acceleration or any other
notice of any kind, all of which Borrower and each Guarantor hereby expressly
waive, anything contained herein or in the Notes to the contrary
notwithstanding. Nothing contained in this Section 13 shall be construed to
limit or amend in any way events of default enumerated in any other Loan
Documents.
Upon the occurrence and during the continuance of any Event of Default,
Bank is hereby authorized at any time and from time to time, without notice to
Borrower and Guarantors (any such notice being expressly waived by Borrower and
each Guarantor), to set-off and apply any and all deposits (general or special,
time or demand, provisional or final, or otherwise) at any time held and other
indebtedness at any time owing by Bank to or for the credit or the account of
Borrower and Guarantors (other than amounts specifically held in trust for
others) against any and all of the indebtedness of Borrower and Guarantors under
the Notes and the other Loan Documents, including this Agreement, irrespective
of whether or not Bank shall have made any demand under the Loan Documents,
including this Agreement or the Notes and although such indebtedness may be
unmatured. Any amount set-off by Bank shall be applied against the indebtedness
owed Bank by Borrower or Guarantors pursuant to this Agreement and the Notes.
Bank agrees promptly to notify Borrower and Guarantors after any such set-off
and application, provided that the failure to give such notice shall not affect
the validity of such set-off and application. The rights of Bank under this
Section 13 are in addition to other rights and remedies (including, without
limitation, other rights of set-off) that Bank may have, including at common
law.
14. EXERCISE OF RIGHTS. No failure to exercise, and no delay in
exercising, on the part of Bank, any right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right. The rights of Bank
hereunder shall be in addition to all other rights provided by law. No
modification or waiver of any provision of the Loan Documents, including this
Agreement, or
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 37
the Notes, nor consent to departure therefrom, shall be effective unless in
writing, and no such consent or waiver shall extend beyond the particular case
and purpose involved. No notice or demand given in any case shall constitute a
waiver of the right to take other action in the same, similar or other
circumstances without such notice or demand.
15. NOTICES. Any notices or other communications required or permitted to
be given by this Agreement or any other Loan Documents must be given in writing
(which may be by facsimile transmission) and must be personally delivered,
telecopied or mailed by prepaid certified or registered mail to the party to
whom such notice or communication is directed at the address of such party as
follows: (a) BORROWER and GUARANTORS: DIAGNOSTIC HEALTH SERVICES, INC., ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Facsimile No. ▇▇▇-▇▇▇-▇▇▇▇,
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇, President; (b) BANK: CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ Facsimile No. 214-
965-2384, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Vice President. Any such notice or
other communication shall be deemed to have been given (whether actually
received or not) on the day it is personally delivered or telecopied as
aforesaid or, if mailed as aforesaid, on the fifth day after it is mailed. Any
party may change its address for purposes of this Agreement by giving notice of
such change to the other party pursuant to this Section 15.
16. EXPENSES. Borrower and Guarantors, jointly and severally, shall pay
(i) all reasonable and necessary out-of-pocket expenses of Bank, including
reasonable fees and disbursements of special counsel for Bank, in connection
with (A) the negotiation, preparation, execution, filing, recording, re-filing,
recording, re-filing, re-recording, modification, amendment, supplementation and
waiver of any one or more of the Loan Documents, and (B) any default or Event of
Default hereunder, (ii) all reasonable and necessary out-of-pocket expenses of
Bank, including reasonable fees and disbursements of Locke, Purnell, Rain,
▇▇▇▇▇▇▇ (a Professional Corporation) or ▇▇▇▇▇, Liddell & ▇▇▇▇, L.L.P., its
contemplated successor, or other special counsel for Bank, in connection with
the preparation of any participation agreement for a participant or participants
requested by Borrower or any amendment thereof and (iii) if a default or an
Event of Default occurs, all reasonable and necessary out-of-pocket expenses
incurred by Bank, including fees and disbursements of counsel, in connection
with such default or Event of Default, as applicable, and collection and other
enforcement proceedings resulting therefrom. Borrower shall indemnify Bank
against any transfer taxes, document taxes, and other like assessments and
charges, made by any governmental authority by reason of the execution and
delivery of this Agreement or the Notes. The obligation of Borrower and
Guarantors set forth in this Section 16 shall survive any termination of this
Agreement, the expiration of the Loans and the payment of all indebtedness of
Borrower to Bank hereunder and under the Notes and the other Loan Documents.
17. INDEMNITY; CAPITAL ADEQUACY.
(a) Borrower and each Guarantor agree to indemnify and hold harmless
Bank and its officers, employees, agents, attorneys and representatives
(singularly, an "Indemnified Party", and collectively, the "Indemnified
Parties") from and against any loss, cost, liability, damage or expense
(including the reasonable fees and out-of-pocket expenses of counsel to
Bank, including all local counsel hired by such counsel) ("Claim")
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 38
incurred by Bank in investigating or preparing for, defending against, or
providing evidence, producing documents or taking any other action in
respect of any commenced or threatened litigation, administrative
proceeding or investigation under any federal securities law, federal or
state environmental law, or any other statute of any jurisdiction, or any
regulation, or at common law or otherwise, which is alleged to arise out of
or is based upon any acts, practices or omissions or alleged acts,
practices or omissions of Borrower, any of Guarantors or their agents or
arises in connection with the duties, obligations or performance of the
Indemnified Parties in negotiating, preparing, executing, accepting,
keeping, completing, countersigning, issuing, selling, delivering,
releasing, assigning, handling, certifying, processing or receiving or
taking any other action with respect to the Loan Documents and all
documents, items and materials contemplated thereby, even if any of the
foregoing arises out of an Indemnified Party's ordinary negligence. The
indemnity set forth herein shall be in addition to any other obligations or
liabilities of Borrower and Guarantors to Bank hereunder or at common law
or otherwise, and shall survive any termination of this Agreement, the
expiration of the Loans and the payment of all indebtedness of Borrower to
Bank hereunder and under the Notes, provided that neither Borrower nor any
Guarantor shall have any obligation under this Section 17 to Bank with
respect to any of the foregoing arising out of the gross negligence or
willful misconduct of Bank or any other Indemnified Party. If any Claim is
asserted against any Indemnified Party, the Indemnified Party shall
endeavor to notify Borrower of such Claim (but failure to do so shall not
affect the indemnification herein made except to the extent of the actual
harm caused by such failure). The Indemnified Party shall have the right to
employ, at Borrower's expense, counsel of the Indemnified Parties' choosing
and to control the defense of the Claim. Borrower may at its own expense
also participate in the defense of any Claim. Each Indemnified Party may at
Borrower's expense employ separate counsel in connection with any Claim to
the extent such Indemnified Party believes it reasonably prudent to protect
such Indemnified Party.
THE PARTIES INTEND FOR THE PROVISIONS OF THIS SUBSECTION 17(A) TO
APPLY TO AND PROTECT EACH INDEMNIFIED PARTY FROM THE CONSEQUENCES OF ITS
OWN NEGLIGENCE, WHETHER OR NOT THAT NEGLIGENCE IS THE SOLE, CONTRIBUTING,
OR CONCURRING CAUSE OF ANY CLAIM.
(b) (i) If after the date of this Agreement, Bank shall have
determined that the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof, or compliance by Bank
with any request or directive regarding capital adequacy (whether or
not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate
of return on Bank's capital as a consequence of its obligations
hereunder to a level below that which Bank could have achieved but for
such adoption, change or compliance (taking into consideration Bank's
policies with respect to capital adequacy) by an amount deemed by Bank
to be material, then from time to time, Borrower shall pay to Bank
such additional amount or amounts as will compensate Bank for such
reduction.
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 39
(ii) A certificate of Bank setting forth such amount or amounts
as shall be necessary to compensate Bank as specified in paragraph (i)
above shall be delivered as soon as practicable to Borrower and shall
be conclusive and binding, absent manifest error. Borrower shall pay
Bank the amount shown as due on any such certificate within 15 days
after Bank delivers such certificate. In preparing such certificate,
Bank may employ such assumptions and allocations of costs and expenses
as it shall in good ▇▇▇▇▇ ▇▇▇▇ reasonable and may use any reasonable
averaging and attribution method.
18. GOVERNING LAW. THIS AGREEMENT IS BEING EXECUTED AND DELIVERED, AND IS
INTENDED TO BE PERFORMED, IN DALLAS, DALLAS COUNTY, TEXAS, AND THE APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA AND THE SUBSTANTIVE LAWS OF TEXAS SHALL
GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND INTERPRETATION OF THIS
AGREEMENT AND ALL OTHER LOAN DOCUMENTS, UNLESS OTHERWISE SPECIFIED THEREIN.
19. INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective during
the term of this Agreement, then such provisions shall be fully severable and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Agreement, and the
remaining provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance from this Agreement.
20. MAXIMUM INTEREST RATE. Regardless of any provisions contained in this
Agreement or in any other Loan Documents, Bank shall never be deemed to have
contracted for or be entitled to receive, collect or apply as interest on the
Notes or otherwise any amount in excess of the maximum rate of interest
permitted to be charged by applicable law, and if Bank ever receives, collects
or applies as interest any such excess, or if acceleration of the maturity of
the Notes or if any prepayment by Borrower results in Borrower having paid any
interest in excess of the maximum rate, such amount which would be excessive
interest shall be applied to the reduction of the unpaid principal balance of
the Notes for which such excess was received, collected or applied, and, if the
principal balances of Notes are paid in full, any remaining excess shall
forthwith be paid to Borrower. All sums paid or agreed to be paid to Bank for
the use, forbearance or detention of the indebtedness evidenced by the Notes
and/or this Agreement shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of such
indebtedness until payment in full so that the rate or amount of interest on
account of such indebtedness does not exceed the maximum lawful rate permitted
under applicable law. In determining whether or not the interest paid or payable
under any specific contingency exceeds the maximum rate of interest permitted by
law, Borrower and Bank shall, to the maximum extent permitted under applicable
law, (i) characterize any non-principal payment as an expense, fee or premium,
rather than as interest; and (ii) exclude voluntary prepayments and the effect
thereof; and (iii) compare the total amount of interest contracted for, charged
or received with the total amount of interest which could be contracted for,
charged or
SECOND AMENDED AND
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received throughout the entire contemplated term of the Notes at the maximum
lawful rate under applicable law.
21. AMENDMENTS. This Agreement may be amended only by an instrument in
writing executed by an authorized officer of the party against whom such
amendment is sought to be enforced.
22. MULTIPLE COUNTERPARTS, ETC. This Agreement may be executed in a number
of identical separate counterparts, each of which for all purposes is to be
deemed an original, but all of which shall constitute, collectively, one
agreement. No party to this Agreement shall be bound hereby until a counterpart
of this Agreement has been executed by all parties hereto. References herein to
Sections are references to Sections of this Agreement unless the context
indicates to the contrary.
23. CONFLICT. If any term or provision of this Agreement is inconsistent
with or conflicts with any provision of the other Loan Documents, then the terms
or provisions contained in this Agreement shall be controlling.
24. SURVIVAL. All covenants, agreements, undertakings, representations
and warranties made in the Loan Documents, including this Agreement and the
Notes, shall survive all closings hereunder and shall not be affected by any
investigation made by any party.
25. PARTIES BOUND. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, assigns, heirs,
legal representatives and estates; provided, however, that neither Borrower nor
-------- -------
any Guarantor may, without the prior written consent of Bank, assign any rights,
powers, duties or obligations hereunder.
26. PARTICIPATIONS. Bank shall have the right at any time and from time
to time to sell one or more participations in the Notes or any Advance or other
portion thereof; provided, however, that Bank will not at any time retain less
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than a fifty percent (50%) interest in the indebtedness represented by the
Notes. To the extent of any such participation the provisions of this Agreement
shall inure to the benefit of, and be binding on, each participant, including,
but not limited to, any indemnity from Borrower to Bank. Borrower shall have no
obligation or liability to and no obligation to negotiate or confer with, any
participant, and Borrower shall be entitled to treat Bank as the sole owner of
the Notes without regard to notice or actual knowledge of any such
participation. Upon the occurrence of a default or an Event of Default, each
participant will have and is hereby granted the right to setoff against and to
appropriate and apply from time to time, without prior notice to Borrower or any
other party, any such notice being hereby expressly waived, any and all deposits
(general or special or other indebtedness or claims, direct or indirect,
contingent or otherwise), at any time held or owing by the participant to or for
the credit or account of Borrower against the payment of the Notes and any other
obligations of Borrower hereunder or under the other Loan Documents; provided,
--------
however, that none of the rights granted in this Section 25 shall apply to any
-------
deposits held by any participant constituting trust funds and so identified to
such participant at the time the applicable deposit account is created.
Immediately after such setoff or appropriation by a participant, that
participant shall
SECOND AMENDED AND
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give Borrower and Bank written notice thereof. However, a failure to give such
notice will not affect the validity of such setoff or appropriation.
27. WAIVER OF TRIAL BY JURY. EACH OF BORROWER AND GUARANTORS WAIVES ANY
AND ALL RIGHTS THAT IT MAY HAVE TO A TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM OR
OTHER ACTION, OF ANY NATURE WHATSOEVER, RELATING TO OR ARISING OUT OF THIS
AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS OR THE OBLIGATIONS. EACH OF BORROWER
AND GUARANTORS ACKNOWLEDGES THAT THE FOREGOING JURY TRIAL WAIVER IS A MATERIAL
INDUCEMENT TO BANK'S ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
AND THAT BANK IS RELYING ON SUCH WAIVER IN ITS FUTURE DEALINGS WITH SUCH
CORPORATION. EACH SUCH CORPORATION WARRANTS AND REPRESENTS TO BANK THAT SUCH
CORPORATION HAS REVIEWED THE FOREGOING JURY TRIAL WAIVER WITH ITS LEGAL COUNSEL
AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH SUCH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THE FOREGOING
JURY TRIAL WAIVER MY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
28. WAIVER OF CONSUMER RIGHTS. EACH OF BORROWER AND GUARANTORS HEREBY
WAIVES ALL OF ITS RIGHTS UNDER THE TEXAS DECEPTIVE TRADE PRACTICES - CONSUMER
PROTECTION ACT (TEX. BUS. & COM. CODE (S) 17.41 ET SEQ.), A LAW THAT GIVES
CONSUMERS SPECIAL RIGHTS AND PROTECTIONS, AND REPRESENTS AND WARRANTS TO BANK
THAT SUCH CORPORATION (A) VOLUNTARILY CONSENTS TO THIS WAIVER, (B) HAS KNOWLEDGE
AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE SUCH CORPORATION TO
EVALUATE THE MERITS AND RISKS OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT, INCLUDING THIS WAIVER, (C) IS NOT IN A SIGNIFICANTLY DISPARATE
BARGAINING POSITION RELATIVE TO BANK, AND (D) HAS BEEN REPRESENTED BY, AND
CONSULTED WITH, LEGAL COUNSEL OF ITS OWN SELECTION IN CONNECTION WITH SUCH
TRANSACTIONS, INCLUDING THIS WAIVER.
29. OTHER AGREEMENTS. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL
AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
SECOND AMENDED AND
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
BORROWER:
DIAGNOSTIC HEALTH SERVICES, INC.
a Delaware corporation
By:_____________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
GUARANTORS:
DHS MANAGEMENT SERVICES, INC., MOBILE DIAGNOSTIC SYSTEMS, INC., a Texas
a Texas corporation corporation
By:______________________________ By:_____________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President Title: President
ALPHA SCANNING SERVICE, INC., HEART INSTITUTE OF TULSA, INC.,
a Louisiana corporation an Oklahoma corporation
By:______________________________ By:_____________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Operating Officer Title: President
SPECIALIZED IMAGING SERVICES INC., MOBILE DIAGNOSTIC IMAGING, INC.,
an Illinois corporation a Delaware corporation
By:______________________________ By:_____________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President Title: President
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 43
ST. LOUIS MOBILE ULTRASOUND, INC., ULTRASOUND DIAGNOSTIC
a Delaware corporation SERVICES, LTD.,
an Arizona corporation
By:_______________________________ By:_____________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President Title: President
SOCAL SUBSIDIARY I, INC., SOCAL SUBSIDIARY II, INC.,
a California corporation a California corporation
By:_______________________________ By:_____________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President Title: President
HOMECARE INTERNATIONAL, INC., SANTA ▇▇▇▇▇▇ IMAGING CENTER
a Texas corporation LIMITED PARTNERSHIP,
a California limited partnership
By:_______________________________ By:_____________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President Title: President
SONOMED, INC., DIAGNOSTIC HEALTH SERVICES DE
an Alabama corporation MEXICO, S.A. DE C.V. a corporation
incorporated under the laws of the
Republic of Mexico
By:_______________________________ By:_____________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President Title: Director
SECOND AMENDED AND
RESTATED LOAN AGREEMENT - Page 44
SOCAL DIAGNOSTIC SERVICES, INC. ADVANCED DIAGNOSTIC IMAGING,
a California corporation INC., a Texas corporation
By:__________________________________ By:_____________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President Title: President
PEDIATRIC ECHOCARDIOGRAPHIC DIAGNOSTIC CARDIAC CONCEPTS, INC.,
IMAGING, INC., a Texas corporation
a Texas corporation
By:__________________________________ By:_____________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President Title: President
BANK:
CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION,
a national banking association
By:__________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Vice President
SECOND AMENDED AND
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