SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------------
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended October 31, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period from ________ to
Commission file number 0-27568
PhyMatrix Corp.
(Exact name of registrant as specified in its charter)
Delaware 65-0617076
(State of incorporation) (I.R.S. Employer Identification No.)
Phillips Point, Suite 1000E
777 S. Flagler Drive, West Palm Beach, Florida 33401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 655-3500
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $ 0.01 per share
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such Reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
On December 8, 1997, the number of outstanding shares of the registrant's
Common Stock, par value $0.01 per share, was 30,047,168.
<PAGE>
PHYMATRIX CORP.
QUARTERLY REPORT ON FORM 10-Q
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets -- October 31, 1997 (unaudited)
and January 31, 1997 3
Consolidated Statements of Operations (unaudited) -Three and
Nine Months Ended October 31, 1997 and 1996 4
Consolidated Statements of Cash Flows (unaudited) -Nine
Months Ended October 31, 1997 and 1996 5
Notes to Consolidated Financial Statements (unaudited) -
Three and Nine Months Ended October 31, 1997 and 1996 6-12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13-21
PART II - OTHER INFORMATION
Item 2. Changes in Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 6. Exhibits and Reports on Form 8-K 22
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PHYMATRIX CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 31, January 31,
1997 1997
----- ----
(unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 52,179,477 $ 81,321,955
Receivables:
Accounts receivable, net 60,261,910 41,743,737
Other receivables 4,431,635 2,318,395
Notes receivable 1,835,000 10,125,000
Prepaid expenses and other current assets 5,454,722 3,680,709
------------- ------------
Total current assets 124,162,744 139,189,796
Property, plant and equipment, net 45,673,927 39,128,292
Notes receivable 8,260,200 4,938,700
Goodwill, net 114,073,518 74,426,572
Management service agreements, net 55,767,629 40,196,102
Investment in affiliates 3,580,090 3,399,859
Other assets (including restricted cash) 9,875,632 12,030,884
------------- ------------
Total assets $ 361,393,740 $313,310,205
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of debt and capital leases $ 18,662,048 $ 3,835,569
Accounts payable 9,850,670 9,436,189
Accrued compensation 2,814,166 1,480,250
Accrued liabilities 14,333,924 12,627,164
------------- ------------
Total current liabilities 45,660,808 27,379,172
Long-term debt and capital leases, less current portion 24,838,325 14,994,690
Convertible subordinated debentures 100,000,000 100,000,000
Other long term liabilities 5,807,240 14,004,143
Deferred tax liability -- 1,354,182
Minority interest 1,836,000 1,798,321
------------- -----------
Total liabilities 178,142,373 159,530,508
Commitments and contingencies
Shareholders' equity:
Common Stock, par value $.01; 40,000,000 shares
authorized; 29,590,176 and 27,625,338 shares
issued and outstanding at October 31, 1997
and January 31, 1997, respectively 295,902 276,253
Treasury Stock (74,626) -
Additional paid in capital 175,869,914 150,025,403
Retained earnings 7,160,177 3,478,041
------------ -----------
Total shareholders' equity 183,251,367 153,779,697
------------ -----------
Total liabilities and shareholders' equity $ 361,393,740 $313,310,205
============== =============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
-3-
<PAGE>
PHYMATRIX CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenues from services $49,283,594 $30,481,102 $132,373,540 $ 78,620,169
Net revenue from management service agreements 42,283,922 24,957,207 117,969,145 61,480,762
----------- ----------- ------------ ------------
Total revenue 91,567,516 55,438,309 250,342,685 140,100,931
----------- ----------- ------------ ------------
Operating costs and administrative expenses:
Cost of affiliated physician management services 16,864,444 12,251,717 50,399,435 29,663,964
Salaries, wages and benefits 24,447,463 15,851,170 63,579,932 42,540,447
Professional fees 2,635,639 1,519,337 6,890,360 4,584,474
Supplies 11,980,407 7,393,090 31,880,852 19,058,174
Utilities 1,166,688 800,062 3,274,134 2,121,884
Depreciation and amortization 2,975,797 1,979,010 7,832,793 5,292,429
Rent 4,574,988 2,417,970 11,731,733 6,254,468
Provision for bad debts 923,202 457,044 3,238,273 1,777,821
Merger and other noncontinuing expenses 10,150,000 234,971 11,057,000 1,715,638
Other 16,379,409 6,769,991 46,356,106 12,087,163
----------- ----------- ------------ ------------
Total operating costs and
administrative expenses 92,098,037 49,674,362 236,240,618 125,096,462
----------- ----------- ------------ ------------
Interest expense, net 1,471,896 278,046 3,145,855 671,019
Interest expense shareholder - - - 369,366
Income from investment in affiliates (172,556) (226,838) (585,541) (495,836)
----------- ----------- ------------ ------------
1,299,340 51,208 2,560,314 544,549
----------- ----------- ------------ ------------
Income (loss) before provision for income taxes (1,829,861) 5,712,739 11,541,753 14,459,920
Income tax expense 2,538,800 1,885,769 7,084,704 4,917,650
----------- ----------- ------------ ------------
Net income (loss) (Note 3) $(4,368,661) $ 3,826,970 $ 4,457,049 $ 9,542,270
=========== =========== ============ ============
Net income (loss) per weighted average share $ (0.15) $ 0.14 $ 0.15 $ 0.35
----------- ----------- ------------ ------------
Pro forma information (Note 3):
Adjustment to income tax expense 372,504 217,589 624,296 478,705
Net income (loss) (4,741,165) 3,609,381 3,832,753 9,063,565
Net income (loss) per weighted average share $ (0.16) $ 0.13 $ 0.13 $ 0.33
Weighted average shares outstanding 30,058,813 27,804,471 29,467,843 27,265,778
=========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
-4-
<PAGE>
PHYMATRIX CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
October 31,
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,457,049 $ 9,542,270
Noncash items included in net income:
Depreciation and amortization 7,832,793 5,292,429
Issuance of common stock as compensation - 627,640
Other (1,744,495) (272,635)
Changes in receivables (12,476,287) (10,975,186)
Changes in accounts payable and accrued liabilities 674,925 662,144
Changes in other assets (2,990,886) (3,969,859)
------------ ------------
Net cash provided (used) by operating activities (4,246,901) 906,803
------------ ------------
Cash flows from investing activities:
Capital expenditures (9,113,278) (4,730,152)
Sale of assets 3,011,062 1,500,000
Advances under notes receivable (3,456,500) (11,831,000)
Repayments of notes receivable 10,000,000 -
Other assets (515,442) (1,457,594)
Acquisitions, net of cash acquired (33,354,557) (15,006,916)
------------ ------------
Net cash used by investing activities (33,428,715) (31,525,662)
------------ ------------
Cash flows from financing activities:
Repayment to Shareholder - (15,523,287)
Proceeds from issuance of common stock 742,884 243,010
Proceeds from issuance of convertible
subordinated debentures - 96,661,882
Proceeds from issuance of debt 12,021,782 -
Release of cash collateral 4,504,116 1,996,786
Offering costs and other (37,291) (2,458,181)
Payment of dividends (1,760,100) (1,279,188)
Repayment of debt (7,266,193) (6,264,137)
------------ ------------
Net cash provided by financing activities 8,205,198 73,376,885
------------ ------------
Increase (decrease) in cash and cash equivalents $(29,470,418) $ 42,758,026
============= ============
Cash and cash equivalents, beginning of period $ 81,649,895 $ 49,709,073
============= ============
Cash and cash equivalents, end of period $ 52,179,477 $ 92,467,099
============= ============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
-5-
<PAGE>
PHYMATRIX CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three and Nine Months Ended October 31, 1997 and 1996 (Unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements
include the accounts of PhyMatrix Corp. ("the Company"). These interim
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles and the requirements of the Securities
and Exchange Commission. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted. It
is management's opinion that the accompanying interim financial statements
reflect all adjustments (which are normal and recurring) necessary for a fair
presentation of the results for the interim periods. During October 1997, a
subsidiary of the Company merged with Clinical Studies Ltd. ("CSL"). This
business combination was accounted for as a pooling of interests. Accordingly,
the financial statements for all periods prior to the effective date of the
merger have been restated to include CSL and Clinical Marketing Ltd. ("CML")
which was merged into CSL on January 1, 1997. These interim financial statements
should be read in conjunction with the audited financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
January 31, 1997 as well as the supplemental financial statements and notes
thereto included in the Company's Current Report on Form 8-K filed on October
27, 1997. Operating results for the three and nine months ended October 31, 1997
are not necessarily indicative of results that may be expected for the year.
2. ACQUISITIONS AND CSL MERGER
Acquisitions
During February 1997, the Company purchased the stock of a six physician
practice pursuant to a merger and entered into a 40-year management agreement
with the practice in exchange for 159,312 shares of Common Stock of the Company
having a value of approximately $2,440,000. The transaction has been accounted
for using the pooling-of-interests method of accounting.
During February 1997, the Company purchased the assets of and entered into
a 40-year management agreement with five physicians in Utah. The purchase price
was $2,498,148. Of such purchase price, $1,378,148 was paid in cash and 75,293
shares of Common Stock of the Company were issued having a value of $1,120,000.
The purchase price was allocated to the assets at their fair market value,
including management service agreements of $1,499,013. The resulting intangible
is being amortized over 40 years.
During April 1997, the Company acquired a pulmonary physician network
company for a base purchase price of $2,966,058. Of such purchase price,
$673,211 was paid in cash and 180,717 shares of Common Stock of the Company were
issued during May 1997 having a value of $2,292,847. There is also a contingent
payment up to a maximum of $2,000,000 based on the acquired entities' earnings
before taxes during the next three years which will be paid in cash and/or
Common Stock of the Company. The purchase price was allocated to goodwill and is
being amortized over 30 years.
During April 1997, the Company acquired the business and certain assets of
a clinical research company in the Washington, D.C. area for $725,000 in the
form of a promissory note plus contingent consideration based on revenue and
profitability measures over the next five years. The contingent payments will
equal 10% of the excess gross revenue, as defined, provided the gross operating
margins of the acquired business exceed 30%. The purchase price was allocated to
goodwill. The note and contingent payments are, in certain circumstances,
convertible into shares of Common Stock.
During May 1997, the Company entered into a 40-year management agreement
with a radiation therapy center in Westchester, New York. The purchase price was
$2,550,000. Of such purchase price $1,200,000 was
-6-
<PAGE>
PHYMATRIX CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three and Nine Months Ended October 31, 1997 and 1996 (Unaudited)
paid in cash and $1,350,000 is payable during May 1998 in Common Stock of the
Company with the number of shares to be issued based upon the average price of
the stock during the five business days prior to the issuance. The value of the
Common Stock to be issued has been recorded in other long-term liabilities at
October 31, 1997. The purchase price has been allocated to management service
agreements and is being amortized over 40 years.
During June 1997, the Company purchased the assets of two diagnostic
imaging centers in Dade County, Florida. The purchase price was approximately
$12,500,000 plus the assumption of debt and capital leases totaling $1,570,078.
Of such purchase price, $500,000 was paid in cash and the remaining $12,000,000
was paid by the issuance of 773,026 shares of Common Stock of the Company. The
purchase price was allocated to the assets at their fair market value, including
goodwill of $10,180,273. The resulting intangible is being amortized over 30
years.
During June 1997, the Company acquired the remaining 20% interest in a
lithotripsy company that it purchased during 1994. The interest was acquired in
exchange for cash and 54,500 shares of Common Stock of the Company having a
total value of $2,005,000. The purchase price was allocated to goodwill and is
being amortized over 20 years.
During June 1997, the Company issued 100,002 shares of Common Stock of the
Company having a value of approximately $1,500,000 to the former shareholders of
Pinnacle Associates, Inc. ("Pinnacle"). The issuance of the shares represented
the merger consideration for Pinnacle which was purchased during 1995.
During July 1997, the Company entered into a management services agreement
with Beth Israel Hospital to manage its DOCS Division which consists of more
than 100 physicians located throughout the greater metropolitan New York area.
In addition, the Company and Beth Israel Hospital will be completing the
formation of an MSO to manage medical risk contracting to the more than 2,000
physicians affiliated with Beth Israel Hospital and its parent corporation. The
Management Services Agreement became effective July 1, 1997, and will remain in
effect for 40 years contingent upon the closing of the MSO joint venture prior
to January 15, 1998. The Company has committed up to $40 million in conjunction
with the transaction to be utilized for the expansion of the Beth Israel
delivery system throughout the New York region. In connection with the
agreement, the Company paid $13,560,000 in cash, which was allocated to
management service agreements and is being amortized over 40 years.
During August 1997, the Company purchased certain assets of, and entered
into a 20-year administrative services agreement with BAB Nuclear Radiology,
P.C., to operate five diagnostic imaging centers on Long Island, New York. The
purchase price was approximately $10,000,000 in cash, plus $15,000,000 in
convertible notes which are included in the current portion of debt at October
31, 1997. The notes bear interest at 5% and are payable in three equal
installments in November 1997 and February and May 1998. At the option of the
Company, the notes are payable in either cash or shares of Common Stock of the
Company. The first installment on the notes was paid during November 1997 in
336,135 shares of Common Stock of the Company.
During the nine months ended October 31, 1997, the Company issued
741,370 shares of stock, having a value of $10,470,434, which had been committed
to be issued in conjunction with acquisitions completed during the fiscal year
ending January 31, 1997 and the nine months ended October 31, 1997, and were
registered with the Securities and Exchange Commission pursuant to a
Registration Statement on Form S-4. Prior to issuance, the value of the shares
to be issued was included in long term liabilities on the balance sheet. The
number of shares issued was generally determined based on the average price of
the stock prior to the issuance. As of October 31, 1997, the Company has
committed to issue an additional $5,046,000 in Common Stock over the next 12
months. This amount has been included in other long-term liabilities on the
balance sheet.
-7-
<PAGE>
PHYMATRIX CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three and Nine Months Ended October 31, 1997 and 1996 (Unaudited)
CSL Merger
Effective October 15, 1997, a subsidiary of the Company merged with CSL in
a transaction that was accounted for as a pooling of interests. The Company
exchanged 5,204,305 shares of its Common Stock for all of the outstanding common
stock of CSL. The Company's historical financial statements for all periods have
been restated to include the results of CSL. As a result of using the pooling of
interests method of accounting, the transaction expenses of $10,150,000,
primarily composed of investment banking, accounting and legal fees and a buyout
of a consulting contract, have been recorded as a one-time charge in PhyMatrix's
statement of operations during the three months ended October 31, 1997. In
addition, as a result of the merger certain costs incurred by CSL will be
noncontinuing.
The following table reflects in the As Reported column the restated
consolidated net revenues, merger and other noncontinuing costs, net income, net
income per share and weighted average number of shares outstanding for the
indicated periods. The Pro Forma column adjusts the historical net income for
CSL to reflect the results of operations as if CSL had been a C corporation
rather than an S corporation for income tax purposes. The Adjusted Pro Forma
column adjusts the Pro Forma column by eliminating merger costs and certain
noncontinuing charges incurred by CSL.
<TABLE>
<CAPTION>
(B)
(A) Adjusted
As Reported Pro Forma Pro Forma
----------- --------- ---------
(In thousands, except per share data)
<S> <C> <C> <C>
FOR THE THREE MONTHS ENDED OCTOBER 31, 1997
Net revenue $ 91,568 $ 91,568 $ 91,568
Merger and other noncontinuing costs 10,150 10,150 -
Net income (loss) (4,369) (4,742) 5,408
Net income (loss) per weighted average share $ (0.15) $ (0.16) $ 0.18
Weighted average number of shares outstanding 30,059 30,059 30,059
FOR THE THREE MONTHS ENDED OCTOBER 31, 1996
Net revenue $ 55,438 $ 55,438 $ 55,438
Merger and other noncontinuing costs 235 235 -
Net income 3,827 3,609 3,750
Net income per weighted average share $ 0.14 $ 0.13 $ 0.13
Weighted average number of shares outstanding 27,804 27,804 27,804
FOR THE NINE MONTHS ENDED OCTOBER 31, 1997
Net revenue $ 250,344 $ 250,344 $ 250,344
Merger and other noncontinuing costs 11,057 11,057 -
Net income 4,457 3,832 14,526
Net income per weighted average share $ 0.15 $ 0.13 $ 0.49
Weighted average number of shares outstanding 29,468 29,468 29,468
FOR THE NINE MONTHS ENDED OCTOBER 31, 1996
Net revenue $ 140,102 $ 140,102 $ 140,102
Merger and other noncontinuing costs 1,716 1,716 -
Net income 9,542 9,063 10,093
Net income per weighted average share $ 0.35 $ 0.33 $ 0.37
Weighted average number of shares outstanding 27,266 27,266 27,266
</TABLE>
-8-
<PAGE>
PHYMATRIX CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three and Nine Months Ended October 31, 1997 and 1996 (Unaudited)
(A) Adjusts the As Reported results for CSL to reflect the operations of CSL as
if CSL had been a C corporation rather than an S corporation for income tax
purposes.
(B) Adjusts the As Reported results by eliminating CSL merger expenses and
certain noncontinuing costs of CSL and providing for income tax expense as
if CSL had been a C corporation rather than an S corporation for income tax
purposes.
The following items reflect the noncontinuing charges referred to above,
incurred by CSL during the respective periods (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Salaries expense related to the equity interest
granted to an officer of CSL. During January 1997,
the officer entered into an employment agreement
with no provisions for sharing of profits or proceeds. - - - 628
Consulting fees based on a profit sharing arrangement.
The profit sharing arrangement was terminated during 1997. - 57 - 202
Management fees paid to the principal shareholders of CSL. - 178 907 886
---- ---- --- -----
Total nonrecurring items - 235 907 1,716
After tax impact of nonrecurring items - 141 544 1,030
==== ==== === =====
</TABLE>
Prior to its merger with the Company, CSL reported on a fiscal year ended
December 31. Prior to its initial public offering during January 1996, the
Company reported on a fiscal year ended December 31. The fiscal year end of the
Company was changed to January 31 beginning with the one-month period ended
January 31, 1996. The restated financial statements for the year ended January
31, 1997 are based on a combination of the Company's results for its January 31
fiscal year and a December 31 fiscal year for CSL. CSL's historical results of
operations for the month ending January 31, 1997 are not included in the
Company's consolidated statements of operations or cash flows. An adjustment has
been made to stockholder's equity as of February 1, 1997 to adjust for the
effect of excluding CSL's results of operations for the month ended January 31,
1997.
-9-
<PAGE>
PHYMATRIX CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three and Nine Months Ended October 31, 1997 and 1996 (Unaudited)
As a result of using the pooling of interests method of accounting,
transaction expenses of $10,150,000 were recorded as a one-time charge to the
Company's statement of operations during the quarter ended October 31, 1997,
which is the period in which the transaction closed. A summary of these expenses
is as shown below:
CSL PhyMatrix Total
---------- -------- -----------
Legal $ 200,000 $300,000 $ 500,000
Accounting 200,000 175,000 375,000
Investment banking 3,600,000 325,000 3,925,000
Other 250,000 100,000 350,000
---------- -------- -----------
Subtotal transaction expenses 4,250,000 900,000 5,150,000
CNS consulting (1) 5,000,000 - 5,000,000
---------- -------- -----------
Total $9,250,000 $900,000 $10,150,000
========== ======== ===========
(1) Represents buyout of consulting contract.
During the nine months ended October 31, 1997 and 1996, the Company
acquired the assets and/or stock, entered into management and employment
agreements, and/or assumed certain liabilities of various physician practices,
medical support services companies, networks and organizations. During the nine
months ended October 31, 1997, the Company also issued shares of stock which had
been committed to be issued in conjunction with acquisitions completed during
the year ended January 31, 1997. The transactions had the following non-cash
impact on the balance sheets of the Company as of the indicated dates:
October 31,
-------------------------------------
1997 1996
--------------- ----------------
Current assets $ 6,546,251 $ 2,910,958
Property, plant and equipment 4,102,751 4,026,529
Intangibles 59,537,382 31,167,707
Other noncurrent assets 1,108,627 20,441
Current liabilities (683,824) (5,204,234)
Debt (18,616,470) (1,947,102)
Noncurrent liabilities (5,833,233) (6,754,572)
Equity (25,841,041) (9,212,811)
-10-
<PAGE>
PHYMATRIX CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three and Nine Months Ended October 31, 1997 and 1996 (Unaudited)
3. PRO FORMA INFORMATION
Prior to the CSL merger, CSL was treated as an S corporation under the
Internal Revenue Code (the "Code") and its stockholders recognized its income
for income tax purposes. Accordingly, the Company's statements of operations do
not include provisions for income taxes for income related to CSL. Prior to the
CSL merger, dividends were paid primarily to reimburse stockholders for income
tax liabilities incurred by them.
The pro forma net income and net income per share information in the
consolidated statement of operations reflect the effect on historical results as
if CSL had been a C corporation rather than an S corporation and had paid income
taxes.
4. LONG TERM DEBT
In September 1997, the Company entered into a secured credit agreement with
a bank providing for a $100 million revolving line of credit for working capital
and acquisition purposes. The credit agreement (i) prohibits the payment of
dividends by the Company, (ii) limits the Company's ability to incur
indebtedness and make acquisitions except as permitted under the credit
agreement and (iii) requires the Company to comply with certain financial
covenants. As of October 31, 1997, the Company had $12,000,000 outstanding under
the line of credit.
5. NET INCOME PER SHARE
Net income per common share is based upon the weighted average number of
common shares outstanding (including stock required to be issued in the future
pursuant to acquisition agreements) during the period. For the three and nine
months ended October 31, 1997 and 1996, the weighted average number of common
shares outstanding was 30,058,813, 29,467,843, 27,804,471, and 27,265,778,
respectively. When dilutive, stock options (less the number of treasury shares
assumed to be purchased from the proceeds) are included in the calculation of
the weighted average number of common shares outstanding. For the three and nine
months ended October 31, 1997, conversion of the 6-3/4% Convertible Subordinated
Debentures issued in June 1996, is not assumed because the effect is
anti-dilutive.
6. RATIO OF EARNINGS TO FIXED CHARGES
For the three and nine months ended October 31, 1997, the ratio of earnings
to fixed charges was 0.5 and 2.1, respectively. Prior to merger and
noncontinuing costs, for the three and nine months ended October 31, 1997 the
ratio of earnings to fixed charges would have been 3.1 and 3.1, respectively.
For purposes of computing the ratio of earnings to fixed charges, earnings
represent income from operations before minority interest and income taxes, plus
fixed charges. Earnings also includes the equity in less-than-fifty-
percent-owned investments only to the extent of distributions. Fixed charges
include interest, amortization of financing costs and the portion of operating
rental expense which management believes is representative of the interest
component of the rental expense.
7. ACCOUNTING DEVELOPMENTS AND PRONOUNCEMENTS
The Emerging Issues Task Force (the "Task Force") of the Financial
Accounting Standards Board has recently issued tentative conclusions on the
various accounting and reporting matters related to the physician practice
management industry, which it has been reviewing during the past year. Among
other things, the Task Force has addressed the consolidation of revenues of
professional associations and accounting for business combinations. These
tentative conclusions provide for one year to implement the requirements for all
existing arrangements. The Company will review its existing arrangements to
determine if there is any financial statement impact. The Company does not
believe that this, in any event, will negatively affect net income of the
Company for any past or future period.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share", which is
effective for fiscal year 1997. SFAS No. 128 is designed to improve the EPS
information provided in financial statements by simplifying the existing
computational guidelines, revising the disclosure requirements and increasing
the comparability of EPS data on an international basis. The Company will
implement the new Standard in its fiscal year ending January 31, 1998.
Management believes that the Company's adoption of this Standard, when
effective, will not have a significant impact on the Company's financial
statements.
-11-
<PAGE>
PHYMATRIX CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three and Nine Months Ended October 31, 1997 and 1996 (Unaudited)
8. LEGAL PROCEEDINGS
On October 18, 1997, the Florida Board of Medicine, which governs
physicians in Florida, declared that the payment of percentage-based fees by a
physician to a physician practice management company in connection with
practice-enhancement activities subjects a physician to disciplinary action for
a violation of a statute which prohibits fee-splitting. Some of the Company's
contracts with Florida physicians include provisions providing for such
payments. The Company is currently in the process of appealing the ruling to a
Florida District Court of Appeals and the Board has stayed the enforceability of
its ruling pending the appeal. In the event the Board of Medicine's ruling is
eventually upheld, the Company may be forced to renegotiate those provisions of
the contracts which are affected by the ruling. While these contracts call for
renegotiation in the event that a provision is not found to comply with state
law, there can be no assurance that the Company would be able to renegotiate
such provision on acceptable terms.
9. SUBSEQUENT EVENTS
During November 1997, the Company acquired a urology independent physician
association ("IPA") in South Florida for $3,480,000. The total purchase price is
payable in shares of the Company's Common Stock. Thirty percent, or 73,263
shares, was paid on the closing date and 70% is payable within 30 days of the
closing date. There is also a contingent payment, up to a maximum of $2,000,000,
based on the entity's earnings before taxes during the next three years which
will be paid in cash and/or Common Stock of the Company.
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<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Introduction
The Company is a multispecialty physician practice management company that
provides management services to the medical community. The Company also develops
medical malls, medical office buildings, and health parks, both for its own
account and for leading hospitals and health systems. The Company's primary
strategy is to develop management networks in specific geographic locations by
affiliating with physicians, medical providers and medical networks. The Company
affiliates with physicians by acquiring their practices and entering into
long-term management agreements with the acquired practices and by managing
independent physician associations ("IPAs") and specialty care physician
networks through management service organizations ("MSOs") in which the Company
has ownership interests. Where appropriate, the Company supports its affiliated
physicians with related diagnostic and therapeutic medical support services. The
Company's medical support services include radiation therapy, diagnostic
imaging, infusion therapy, home health care, lithotripsy services, ambulatory
surgery and clinical research studies. Since its first acquisition in September
1994, the Company has acquired the practices of and entered into long-term
agreements to affiliate with approximately 372 physicians; has obtained
interests in MSOs in Connecticut, Georgia, New Jersey, New York and Florida that
provide management services to IPAs composed of over 3,800 multispecialty
physicians; purchased a company that provides contract management services to
over 2,500 physicians in specialty care networks; purchased CSL, a site
management organization conducting clinical research for pharmaceutical
companies and clinical research organizations at 24 centers located in 13
states; and acquired several medical support services companies and a medical
facility development company.
In January 1996, the Company changed its fiscal year end from December 31
to January 31.
Acquisitions and CSL Merger
Acquisitions
During February 1997, the Company purchased the stock of a six physician
practice pursuant to a merger and entered into a 40-year management agreement
with the practice in exchange for 159,312 shares of Common Stock of the Company
having a value of approximately $2,440,000. The transaction has been accounted
for using the pooling-of-interests method of accounting.
During February 1997, the Company purchased the assets of and entered into
a 40-year management agreement with five physicians in Utah. The purchase price
was $2,498,148. Of such purchase price, $1,378,148 was paid in cash and 75,293
shares of Common Stock of the Company were issued having a value of $1,120,000.
The purchase price was allocated to the assets at their fair market value,
including management service agreements of $1,499,013. The resulting intangible
is being amortized over 40 years.
During April 1997, the Company acquired a pulmonary physician network
company for a base purchase price of $2,966,058. Of such purchase price,
$673,211 was paid in cash and 180,717 shares of Common Stock of the Company were
issued during May 1997 having a value of $2,292,847. There is also a contingent
payment up to a maximum of $2,000,000 based on the acquired entities' earnings
before taxes during the next three years which will be paid in cash and/or
Common Stock of the Company. The purchase price was allocated to management
service agreements and is being amortized over 30 years.
During April 1997, the Company acquired the business and certain assets of
a clinical research company in the Washington, D.C. area for $725,000 in the
form of a promissory note plus contingent consideration based on revenue and
profitability measures over the next five years. The contingent payments will
equal 10% of the excess gross revenue, as defined, provided the gross operating
margins of the acquired business exceed 30%. The purchase price was allocated to
goodwill. The note and contingent payments are, in certain circumstances,
convertible into shares of Common Stock.
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<PAGE>
During May 1997, the Company entered into a 40-year management agreement
with a radiation therapy center in Westchester, New York. The purchase price was
$2,550,000. Of such purchase price $1,200,000 was paid in cash and $1,350,000 is
payable during May 1998 in Common Stock of the Company the number of shares to
be issued based upon the average price of the stock during the five business
days prior to the issuance. The value of the Common Stock to be issued has been
recorded in other long-term liabilities at July 31, 1997. The purchase price has
been allocated to management service agreements and is being amortized over 40
years.
During June 1997, the Company purchased the assets of two diagnostic
imaging centers in Dade County, Florida. The purchase price was approximately
$12,500,000 plus the assumption of debt and capital leases totaling $1,570,078.
Of such purchase price, $500,000 was paid in cash and the remaining $12,000,000
was paid by the issuance of 773,026 shares of Common Stock of the Company. The
purchase price was allocated to the assets at their fair market value, including
goodwill of $10,180,273. The resulting intangible is being amortized over 30
years.
During June 1997, the Company acquired the remaining 20% interest in a
lithotripsy company that it purchased during 1994. The interest was acquired in
exchange for cash and 54,500 shares of Common Stock of the Company having a
total value of $2,005,000. The purchase price was allocated to goodwill and is
being amortized over 20 years.
During June 1997, the Company issued 100,002 shares of Common Stock of the
Company having a value of approximately $1,500,000 to the former shareholders of
Pinnacle Associates, Inc. ("Pinnacle"). The issuance of the shares represented
the merger consideration for Pinnacle which was purchased during 1995.
During July 1997, the Company entered into a management services agreement
with Beth Israel Hospital to manage its DOCS Division which consists of more
than 100 physicians located throughout the greater metropolitan New York area.
In addition, the Company and Beth Israel Hospital will be completing the
formation of an MSO to manage medical risk contracting to the more than 2,000
physicians affiliated with Beth Israel Hospital and its parent corporation. The
Management Services Agreement became effective July 1, 1997, and will remain in
effect for 40 years contingent upon the closing of the MSO joint venture prior
to January 15, 1998. The Company has committed up to $40 million in conjunction
with the transaction to be utilized for the expansion of the Beth Israel
delivery system throughout the New York region. In connection with the
agreement, the Company paid $13,560,000 in cash, which was allocated to
management service agreements and is being amortized over 40 years.
During August 1997, the Company purchased certain assets of, and entered
into a 20-year administrative services agreement with BAB Nuclear Radiology,
P.C., to operate five diagnostic imaging centers on Long Island, New York. The
purchase price was approximately $10,000,000 in cash, plus $15,000,000 in
convertible notes. The notes bear interest at 5% and are payable in three equal
installments in November 1997 and February and May 1998. At the option of the
Company, the notes are payable in either cash or shares of Common Stock of the
Company.
CSL Merger
Effective October 15, 1997, a subsidiary of the Company merged with CSL in
a transaction that was accounted for as a pooling of interests. The Company
exchanged 5,204,305 shares of its Common Stock for all of the outstanding common
stock of CSL. The Company's historical financial statements for all periods have
been restated to include the results of CSL. As a result of using the pooling of
interests method of accounting, the transaction expenses of $10,150,000,
primarily composed of investment banking, accounting and legal fees and a buyout
of a consulting contract, have been recorded as a one-time charge in PhyMatrix's
statement of operations during the three months ended October 31, 1997. In
addition, as a result of the merger certain costs incurred by CSL will be
noncontinuing.
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<PAGE>
The following table reflects in the As Reported column the restated
consolidated net revenues, merger and other noncontinuing costs, net income, net
income per share and weighted average number of shares outstanding for the
indicated periods. The Pro Forma column adjusts the historical net income for
CSL to reflect the results of operations as if CSL had been a C corporation
rather than an S corporation for income tax purposes. The Adjusted Pro Forma
column adjusts the Pro Forma column by eliminating merger costs and certain
noncontinuing charges incurred by CSL.
<TABLE>
<CAPTION>
(B)
(A) Adjusted
As Reported Pro Forma Pro Forma
----------- --------- ---------
(In thousands, except per share data)
<S> <C> <C> <C>
FOR THE THREE MONTHS ENDED OCTOBER 31, 1997
Net revenue $ 91,568 $ 91,568 $ 91,568
Merger and other noncontinuing costs 10,150 10,150 -
Net income (loss) (4,369) (4,742) 5,408
Net income (loss) per weighted average share $ (0.15) $ (0.16) $ 0.18
Weighted average number of shares outstanding 30,059 30,059 30,059
FOR THE THREE MONTHS ENDED OCTOBER 31, 1996
Net revenue $ 55,438 $ 55,438 $ 55,438
Merger and other noncontinuing costs 235 235 -
Net income 3,827 3,609 3,750
Net income per weighted average share $ 0.14 $ 0.13 $ 0.13
Weighted average number of shares outstanding 27,804 27,804 27,804
FOR THE NINE MONTHS ENDED OCTOBER 31, 1997
Net revenue $ 250,344 $ 250,344 $ 250,344
Merger and other noncontinuing costs 11,057 11,057 -
Net income 4,457 3,832 14,526
Net income per weighted average share $ 0.15 $ 0.13 $ 0.49
Weighted average number of shares outstanding 29,468 29,468 29,468
FOR THE NINE MONTHS ENDED OCTOBER 31, 1996
Net revenue $ 140,102 $ 140,102 $ 140,102
Merger and other noncontinuing costs 1,716 1,716 -
Net income 9,542 9,063 10,093
Net income per weighted average share $ 0.35 $ 0.33 $ 0.37
Weighted average number of shares outstanding 27,266 27,266 27,266
</TABLE>
(A) Adjusts the As Reported results for CSL to reflect the operations of CSL as
if CSL had been a C corporation rather than an S corporation for income tax
purposes.
(B) Adjusts the As Reported results by eliminating CSL merger expenses and
certain noncontinuing costs of CSL and providing for income tax expense as
if CSL had been a C corporation rather than an S corporation for income tax
purposes.
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<PAGE>
The following items reflect the noncontinuing charges referred to above,
incurred by CSL during the respective periods (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Salaries expense related to the equity
interest granted to an officer of CSL.
During January 1997, the officer entered
into an employment agreement with no provisions
for sharing of profits or proceeds. - - - 628
Consulting fees based on a profit sharing
arrangement. The profit sharing arrangement was
terminated during 1997. - 57 - 202
Management fees paid to the principal
shareholders of CSL. - 178 907 886
---- ---- ---- ------
Total nonrecurring items - 235 907 1,716
After tax impact of nonrecurring items - 141 544 1,030
==== ==== ==== ======
</TABLE>
Prior to its merger with the Company, CSL reported on a fiscal year ending
December 31. Prior to its initial public offering during January 1996, the
Company reported on a fiscal year ending December 31. The fiscal year end of the
Company was changed to January beginning with the one month period ended January
31, 1996. The restated financial statements for the year ended January 31, 1997
are based on a combination of the Company's results for its January 31 fiscal
year and a December 31 fiscal year for CSL. CSL's historical results of
operations for the month ending January 31, 197 are not included in the
Company's consolidated statements of operations or cash flows. An adjustment has
been made to stockholder's equity as of February 1, 1997 to adjust for the
effect of excluding CSL's results of operations for the month ended January 31,
1997.
As a result of using the pooling of interests method of accounting,
transaction expenses of $10,150,000 were recorded as a one-time charge to the
Company's statement of operations during the quarter ended October 31, 1997,
which is the period in which the transaction closed. A summary of these
estimated expenses is as shown below:
CSL PhyMatrix Total
---------- -------- -----------
Legal $ 200,000 $300,000 $ 500,000
Accounting 200,000 175,000 375,000
Investment banking 3,600,000 325,000 3,925,000
Other 250,000 100,000 350,000
---------- -------- -----------
Subtotal transaction expenses 4,250,000 900,000 5,150,000
CNS consulting (1) 5,000,000 - 5,000,000
---------- -------- -----------
Total $9,250,000 $900,000 $10,150,000
========== ======== ===========
(1) Represents buyout of consulting contract.
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<PAGE>
Accounting Treatment
The terms of the Company's relationships with its affiliated physicians are
set forth in various asset and stock purchase agreements, management service
agreements, and employment and consulting agreements. Through the asset and/or
stock purchase agreement, the Company acquires the equipment, furniture,
fixtures, supplies and, in certain instances, service agreements, of a physician
practice at the fair market value of the assets. The accounts receivable are
typically purchased at the net realizable value. The purchase price of the
practice generally consists of cash, notes and/or Common Stock of the Company
and the assumption of certain debt, leases and other contracts necessary for the
operation of the practice. The management services or employment agreements
delineate the responsibilities and obligations of each party.
Net revenue from management service agreements include the revenues
generated by the physician practices. The Company is responsible and at risk for
the operating costs of the physician practices. Expenses include the
reimbursement of all medical practice operating costs and all payments to
physicians (which are reflected as cost of affiliated physician management
services) as required under the various management agreements. For providing
services under management services agreements entered into prior to April 30,
1996, physicians generally received a fixed percentage of net revenue of the
practice. "Net revenues" is defined as all revenue computed on an accrual basis
generated by or on behalf of the practice after taking into account certain
contractual adjustments or allowances. The revenue is generated from
professional medical services furnished to patients by physicians or other
clinicians under physician supervision. In several of the practices, the Company
has guaranteed that the net revenues of the practice will not decrease below the
net revenues that existed immediately prior to the agreement with the Company.
Under management services agreements entered into after April 30, 1996, the
physicians receive a portion of the operating income of the practice which
amounts vary depending on the profitability of the practice. Net revenues under
management services agreements for the three and nine months ended October 31,
1997, were $42.3 and $118.0 million, respectively.
Results of Operations
Three and Nine Months Ended October 31, 1997 Compared to Three and Nine Months
Ended October 31, 1996
The following discussion reviews the results of operations for the three
and nine months ended October 31, 1997 (the "1997 Quarter" and "1997 Period"),
respectively, compared to the three and nine months ended October 31, 1996 (the
"1996 Quarter" and "1996 Period"), respectively.
Revenues
The Company derives revenues from health care services and medical facility
development services. Within the health care segment, the Company distinguishes
between revenues from cancer services, noncancer physician services and other
medical support services. Cancer services include physician practice management
services to oncology practices and certain medical support services, including
radiation therapy, diagnostic imaging and infusion therapy. Noncancer physician
services include physician practice management services to all practices managed
by the Company other than oncology practices and administrative services to
health plans which include reviewing, processing, and paying claims and
subcontracting with specialty care physicians to provide covered services. Other
medical support services include home health care services, lithotripsy, various
health care management services, diagnostic imaging, ambulatory surgery, and
clinical research studies.
Net revenues were $91.6 million and $250.3 million for the 1997 Quarter and
1997 Period, respectively. Of this amount, $27.7 million and $80.0 million or
30.3% and 31.9% of such revenues was attributable to cancer services; $38.6
million and $106.5 million or 42.2% and 42.6% was related to noncancer physician
services; $20.1 million and $48.2 million or 21.9% and 19.3% of such revenues
was attributable to other medical support services; and $5.2 million and $15.6
million or 5.6% and 6.2% related to medical facility development.
Net revenues were $55.4 million and $140.1 million for the 1996 Quarter and
the 1996 Period. Such revenues consisted of $25.3 million and $69.6 million or
45.7% and 49.7% related to cancer services; $16.7
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<PAGE>
million and $32.6 million or 30.1% and 23.2% related to noncancer physician
services; $8.8 million and $25.9 million or 15.9% and 18.5% related to other
medical support services; and $4.6 million and $12.0 million or 8.3% and 8.6%
related to medical facility development.
Expenses
The Company's cost of affiliated physician management services was $16.9
million and $50.4 million or 39.9% and 42.7% of net revenue from management
services agreements during the 1997 Quarter and 1997 Period, respectively. The
cost of affiliated physician management services was $12.3 million and $29.7
million or 49.1% and 48.2% of net revenue from management services agreements
during the 1996 Quarter and 1996 Period, respectively. Net revenue for the
physician practices managed by the Company was $42.3 million and $118.0 million
during the 1997 Quarter and 1997 Period and $25.0 million and $61.5 million
during the 1996 Quarter and 1996 Period, respectively. The cost of affiliated
physician management services as a percentage of net revenue from management
services varies based upon the type of physician practices.
The Company's salaries, wages, and benefits increased by $8.6 million from
$15.9 million or 28.6% of net revenues during the 1996 Quarter to $24.5 million
or 26.7% of net revenues during the 1997 Quarter and $21.0 million from $42.5
million or 30.4% of net revenues during the 1996 Period to $63.6 million or
25.4% of net revenues during the 1997 Period. The change as a percentage of net
revenues is primarily attributable to the fact that (i) salaries, wages, and
benefits varies depending on whether the physician practice is owned or managed
and (ii) salaries, wages, and benefits varies as the Company expands its other
medical support services.
The Company's supplies expense increased by $4.6 million from $7.4 million
or 13.3% of net revenues during the 1996 Quarter to $12.0 million or 13.1% of
net revenues during the 1997 Quarter and $12.8 million from $19.1 million or
13.6% of net revenues during the 1996 Period to $31.9 million or 12.7% of net
revenues during the 1997 Period. The increase in supplies expense is primarily a
result of the acquisition of additional physician practices. Supplies expense as
a percentage of net revenues varies depending upon the type of physician
practices.
The Company's depreciation and amortization expense increased by $1.0
million from $2.0 million or 3.6% of net revenues during the 1996 Quarter to
$3.0 million or 3.3% of net revenues during the 1997 Quarter and $2.5 million
from $5.3 million or 3.8% of net revenues during the 1996 Period to $7.8 million
or 3.1% of net revenues during the 1997 Period. The increase is primarily a
result of the acquisitions completed after the 1996 Period and the allocation of
the purchase prices as required by purchase accounting. During the 1997 Period,
the Company sold assets which resulted in total gains of $1.9 million. In
addition, the Company recorded nonrecurring charges of $0.4 million during the
1997 Period. These nonrecurring items have been included in other expenses on
the statement of operations.
The Company's rent expense increased by $2.2 million from $2.4 million or
4.4% of net revenues during the 1996 Quarter to $4.6 million or 5.0% of net
revenues during the 1997 Quarter and $5.5 million from $6.3 million or 4.5% of
net revenues during the 1996 Period to $11.7 million or 4.7% of net revenues
during the 1997 Period. Rent expense as a percentage of net revenue varies
depending upon the size of each of the affiliated practice's offices, the number
of satellite offices and the current market rental rate for medical office space
in a particular geographic market.
The Company's merger and other noncontinuing costs of $10.2 million, $11.1
million, $0.2 million and $1.7 million during the 1997 Quarter, the 1997 Period,
the 1996 Quarter, and the 1996 Period, respectively, represent the merger
transaction costs related to the CSL merger as well as certain noncontinuing
salary, consulting and management fee expenses incurred by CSL. The merger
transaction costs were recorded during the 1997 Quarter which represents the
quarter in which the transaction closed.
Prior to the CSL merger, CSL was treated as an S corporation under the
Internal Revenue Code (the "Code") and its stockholders recognized its income
for income tax purposes. Accordingly, the Company's
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<PAGE>
statements of operations do not include provisions for income taxes for income
related to CSL. Prior to the CSL merger, dividends were paid primarily to
reimburse stockholders for income tax liabilities incurred by them.
The Company's income tax expense increased by $2.2 million from $4.9
million or 34.0% of pre-tax income during the 1996 Period to $7.1 million or
32.7% of pretax income (prior to merger costs of $10.2 million which are not tax
deductible) during the 1997 Period. The pro forma net income and net income per
share information in the consolidated statement of operations reflect the effect
on historical results as if CSL had been a C corporation rather than an S
corporation and had paid income taxes. The Company's pro forma income tax
expense increased by $2.3 million from $5.4 million or 37.3% of pretax income
during the 1996 Period to $7.7 million or 35.5% of pretax income (prior to
merger costs of $10.2 million which are not tax deductible) during the 1997
Period. The Company follows the provisions of Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes."
Medical Facility Development
The Company provides medical facility development services to related and
unrelated third parties in connection with the establishment of health parks,
medical malls and medical office buildings. The Company believes that the
development of such facilities, in certain markets, will aid in the integration
of its affiliated physicians and medical support services and will provide
future opportunities to affiliate with physicians and acquire future physician
practices or support services. Further, the Company believes that the
development of health parks, medical malls and medical office buildings in
certain markets will aid in the integration of its affiliated physicians and
medical support services.
The Company derives its medical facility development service revenues from
the provision of a variety of services. In rendering such services, the Company
generates income without bearing the costs of construction, expending
significant capital or incurring substantial indebtedness. Net revenues from
medical facility development are recognized at the time services are performed.
In some cases fees are earned upon the achievement of certain milestones in the
development process, including the receipt of a building permit and a
certificate of occupancy of the building. Unearned revenue relates to all fees
received in advance of services being completed on development projects.
The Company typically receives the following compensation for its services:
development fees (including management of land acquisition, subdivision, zoning,
surveying, site planning, permitting and building design), general contracting
management fees, leasing and marketing fees, project cost savings income (based
on the difference between total budgeted project costs and actual costs) and
consulting fees.
The amount of development fees and leasing and marketing fees are stated in
the development and marketing agreements. Those agreements also provide the
basis for payment of the fees. The financing fees and consulting fees are
generally not included in specific agreements but are negotiated and disclosed
in project pro formas provided to the owners of the buildings and hospital
clients. Specific agreements usually incorporate those pro formas and provide
that the projects will be developed in conformity therewith. General contracting
management fees and project cost savings income are included in guaranteed
maximum cost contracts entered into with the general contractor. These contracts
are usually approved by the owners which in many cases include hospital clients
and prospective tenants. During the 1997 Quarter and the 1997 Period, the
Company's medical facility development generated revenues of $5.2 and $15.6
million, respectively, and pretax income of $3.6 and $10.1 million,
respectively.
Liquidity and Capital Resources
Cash used by operating activities was $4.2 million for the 1997 Period.
Cash provided by operating activities was $0.9 million for the 1996 Period. At
October 31, 1997, the Company's principal sources of liquidity consisted of
working capital of $78.5 million which included $52.2 million in cash. The
Company also had $45.7 million of current liabilities, including approximately
$18.7 million of indebtedness, which includes $15 million of convertible debt,
maturing before October 31, 1998.
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<PAGE>
Cash used by investing activities was $33.4 million for the 1997 Period.
This primarily represents the funds required by the Company for acquisitions and
capital expenditures of $42.5 million and the advances under notes receivable of
$3.5 million, partially offset by the repayments of notes receivable of $10.0
million and proceeds from the sale of assets of $3.0 million during the 1997
Period. Cash used by investing activities was $31.5 million for the 1996 Period.
This primarily represents funds required by the Company for acquisitions and
capital expenditures of $19.7 million and advances under notes receivable of
$11.8 million, offset by proceeds of $1.5 million from the sale of assets during
the 1996 Period.
Cash provided by financing activities was $8.2 million for the 1997
Period and primarily represented the proceeds from issuance of debt of $12.0
million and the release of cash collateralizing debt of $4.5 million offset by
the repayment of debt of $7.3 million and the payment of dividends of $1.8
million. Cash provided by financing activities was $73.4 million for the 1996
Period, which was primarily comprised of the proceeds (net of offering costs)
from the issuance of the Convertible Subordinated Debentures of $96.7 million
and the release of cash collateral of $2.0 million offset by the repayment of
advances from shareholder, the payment of dividends, and the repayment of other
debt of $15.5 million and $6.3 million, respectively.
During 1996, the Company purchased the stock of a company based in Florida
that provides the managed health care industry with assistance in provider
relations, utilization review and quality assurance. In conjunction with this
acquisition, the Company may be required to make a contingent payment up to a
maximum of $10 million based on the acquired company's earnings before taxes
during the next five years. The payment, if required, shall be paid in cash
and/or Common Stock of the Company.
During July 1997, the Company entered into a management services
agreement to manage a network of over 100 physicians in New York. In connection
with this transaction, the Company has committed to expend up to $40 million to
be utilized for the expansion of the network.
In conjunction with certain of its acquisitions the Company has agreed to
make payments in shares of Common Stock of the Company which are generally
issued one year from the closing date of such acquisitions. The number of shares
to be issued are generally determined based upon the average price of the
Company's Common Stock during the five business days prior to the date of
issuance. As of October 31, 1997, the Company had committed to issue $5.0
million of Common Stock of the Company using the methodology discussed above.
The Company's acquisition and expansion programs will require substantial
capital resources. In addition, the operation of physician groups, integrated
networks and related medical support services companies, and the development and
implementation of the Company's management information systems, will require
ongoing capital expenditures. The Company expects that its capital needs over
the next several years will substantially exceed capital generated from
operations. To finance its capital needs, the Company plans both to incur
indebtedness and to issue, from time to time, additional debt or equity
securities, including Common Stock or convertible notes, in connection with its
acquisitions and affiliations.
In September 1997, the Company entered into a secured credit agreement with
a bank providing for a $100 million revolving line of credit for working capital
and acquisition purposes. The credit agreement (i) prohibits the payment of
dividends by the Company, (ii) limits the Company's ability to incur
indebtedness and make acquisitions except as permitted under the credit
agreement and (iii) requires the Company to comply with certain financial
covenants.
The Company expects that the existing working capital of $78.5 million,
which includes cash of $52.2 million, and the $88 million which is available
under the revolving line of credit will be adequate to satisfy the Company's
cash requirements for the next 12 months. However, there can be no assurance
that the Company will not be required to seek additional financing during this
period. The failure to raise the funds necessary to finance its future cash
requirements would adversely affect the Company's ability to pursue its strategy
and could adversely affect its results of operations for future periods.
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<PAGE>
Factors to be Considered
The part of this Quarterly Report on Form 10-Q captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contains certain forward-looking statements which involve risks and
uncertainties. Readers should refer to a discussion under "Factors to be
Considered" contained in Part I, Item 1 of the Company's Annual Report on Form
10-K for the year ended January 31, 1997 concerning certain factors that could
cause the Company's actual results to differ materially from the results
anticipated in such forward-looking statements. This discussion is hereby
incorporated by reference into this Quarterly Report.
PART II--OTHER INFORMATION
Item 2. Changes in Securities - Recent Sales of Unregistered Securities
During August, September and October 1997, the Company issued a total of
227,496 shares of Common Stock pursuant to acquisition agreements entered into
during the fiscal year ended January 31, 1997. The sale of these shares and the
acquisitions in connection with which they were sold were reported and described
in the Company's Annual Report on Form 10-K for the year ended January 31, 1997.
On October 15, 1997, in connection with the acquisition of CSL and pursuant
to the terms of an Amended and Restated Agreement and Plan of Merger dated as of
July 15, 1997, the Company issued 5,204,305 shares of Common Stock to the former
stockholders of CSL. The acquisition is more fully described herein under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The above referenced sales of shares of Common Stock were not
registered under the Securities Act of 1933, as amended, in reliance upon
Section 4(2) thereof.
Item 4. Submission of Matters to a Vote of Security Holders.
The following matters were approved at the Annual Meeting of the Company's
stockholders held on September 8, 1997:
(a) Election of the following directors in the class of the Board of Directors
whose terms expired at the Annual Meeting:
Number of Shares/Votes
--------------------------------
For Authority Withheld
---------- ------------------
Joseph N. Cassese 12,960,052 25,013
David M. Livingston, M.D. 12,958,892 26,173
Eric Moskow, M.D. 12,959,317 25,748
(b) Amendment to the Company's 1995 Equity Incentive Plan to increase the total
number of shares of Common Stock which may be awarded under such plan by
1,100,000 shares and limiting the number of shares of Common Stock
available for issuance under the Equity Plan to any participant in any
fiscal year to 300,000 shares.
For 11,184,432
Against 1,757,084
Abstain 43,549
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<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 2.1 Amended and Restated Agreement and Plan of Merger dated as
of July 15, 1997 by and among the Company, PhyMatrix
Acquisition I, Inc., Clinical Studies Ltd., Dr. Michael
Rothman, Dr. Walter Brown, Michael T. Heffernan and Ronald
Phillips as Trustee of The Alexander Rothman 1993 Qualified
Sub-Chapter S Trust and as Trustee of The Julie Rothman
Qualified Sub-Chapter S Trust (incorporated by Reference
from the Company's Current Report of Form 8-K filed on
October 6, 1997).
Exhibit 10.1 Credit Agreement dated September 17, 1997 among the Company,
various subsidiaries of the Company, PNC Bank, National
Association and certain other banks.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed Current Reports on Form 8-K on October 6, 1997 and
October 27, 1997 with the Securities and Exchange Commission reporting under
Item 2 the acquisition of CSL.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 12th day of December, 1997.
PHYMATRIX CORP.
By: /s/ Frederick R. Leathers
--------------------------------
Financial Officer, Treasurer
and Principal Accounting Officer
-23-
execution
$100,000,000 REVOLVING CREDIT FACILITY
CREDIT AGREEMENT
by and among
PHYMATRIX CORP.
and
THE OTHER BORROWERS PARTY HERETO
and
THE BANKS PARTY HERETO
and
PNC BANK, NATIONAL ASSOCIATION, As Agent
Dated September 17, 1997
<PAGE>
TABLE OF CONTENTS
Article Page
- ------- ----
1. CERTAIN DEFINITIONS........................................................1
1.1 Certain Definitions....................................................1
1.2 Construction..........................................................17
1.2.1 Number; Inclusion...............................................17
1.2.2 Determination...................................................17
1.2.3 Agent's Discretion and Consent..................................17
1.2.4 Documents Taken as a Whole......................................17
1.2.5 Headings........................................................17
1.2.6 Implied References to this Agreement............................17
1.2.7 Persons.........................................................17
1.2.8 Modifications to Documents......................................18
1.2.9 From, To and Through............................................18
1.2.10 Shall; Will.....................................................18
1.3 Accounting Principles.................................................18
2. REVOLVING CREDIT FACILITY.................................................18
2.1 Revolving Credit Commitments..........................................18
2.1.1 Establishment of Revolving Credit Commitments....................18
2.1.2 Voluntary Reduction of Commitment................................18
2.2 Nature of Banks' Obligations with Respect to
Revolving Credit Loans................................................19
2.3 Commitment Fees.......................................................19
2.4 [Reserved]............................................................19
2.5 Revolving Credit Loan Requests........................................19
2.6 Making Revolving Credit Loans.........................................20
2.7 Revolving Credit Notes................................................20
2.8 Use of Proceeds.......................................................20
2.9 Letter of Credit Subfacility..........................................21
2.9.1 Issuance of Letters of Credit....................................21
2.9.2 Participations...................................................21
2.9.3 Letter of Credit Fees............................................21
2.9.4 Disbursements, Reimbursement.....................................21
2.9.5 Documentation....................................................22
2.9.6 Determinations to Honor Drawing Requests.........................22
2.9.7 Nature of Participation and Reimbursement Obligations............22
2.9.8 Indemnity........................................................23
2.9.9 Liability for Acts and Omissions.................................24
3. [RESERVED]................................................................24
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TABLE OF CONTENTS
Article Page
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4. INTEREST RATES............................................................24
4.1 Interest Rate Options.................................................24
4.1.1 Revolving Credit Interest Rate Options...........................25
4.1.2 Interest Rate Margins............................................25
4.1.3 Rate Quotations..................................................26
4.2 Interest Periods......................................................26
4.2.1 Ending Date and Business Day.....................................26
4.2.2 Amount of Borrowing Tranche......................................26
4.2.3 Termination Before Expiration Date...............................26
4.2.4 Renewals.........................................................27
4.3 Interest After Default................................................27
4.3.1 Letter of Credit Fees, Interest Rate.............................27
4.3.2 Other Obligations................................................27
4.3.3 Acknowledgment...................................................27
4.4 Euro-Rate Unascertainable.............................................27
4.4.1 Unascertainable..................................................27
4.4.2 Illegality; Increased Costs; Deposits Not Available..............28
4.4.3 Agent's and Bank's Rights........................................28
4.5 Selection of Interest Rate Options....................................29
5. PAYMENTS..................................................................29
5.1 Payments..............................................................29
5.2 Pro Rata Treatment of Banks...........................................29
5.3 Interest Payment Dates................................................29
5.4 Voluntary Prepayments.................................................30
5.4.1 Right to Prepay..................................................30
5.4.2 Replacement of a Bank............................................31
5.5 Mandatory Prepayments.................................................31
5.5.1 Sale of Assets...................................................31
5.5.2 Application Among Interest Rate Options..........................32
5.6 Additional Compensation in Certain Circumstances......................32
5.6.1 Increased Costs or Reduced Return Resulting From Taxes,
Reserves, Capital Adequacy Requirements, Expenses, Etc.................32
5.6.2 Indemnity........................................................33
6. REPRESENTATIONS AND WARRANTIES............................................33
6.1 Representations and Warranties........................................33
6.1.1 Organization and Qualification...................................34
6.1.2 Capitalization and Ownership.....................................34
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TABLE OF CONTENTS
Article Page
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6.1.3 Subsidiaries.....................................................34
6.1.4 Power and Authority..............................................34
6.1.5 Validity and Binding Effect......................................35
6.1.6 No Conflict......................................................35
6.1.7 Litigation.......................................................35
6.1.8 Title to Properties..............................................35
6.1.9 Financial Statements.............................................36
6.1.10 Margin Stock....................................................36
6.1.11 Full Disclosure.................................................37
6.1.12 Taxes...........................................................37
6.1.13 Consents and Approvals..........................................37
6.1.14 No Event of Default; Compliance with Instruments................37
6.1.15 Patents, Trademarks, Copyrights, Licenses, Etc..................38
6.1.16 Security Interests..............................................38
6.1.17 [RESERVED]......................................................38
6.1.18 Status of the Pledged Collateral................................38
6.1.19 Insurance.......................................................39
6.1.20 Compliance with Laws............................................39
6.1.21 Material Contracts..............................................39
6.1.22 Investment Companies............................................40
6.1.23 Plans and Benefit Arrangements..................................40
6.1.24 Employment Matters..............................................41
6.1.25 Environmental Matters...........................................42
6.1.26 Senior Debt Status..............................................43
6.1.27 Reimbursement from Third Party Payors...........................43
6.2 Updates to Schedules..................................................43
7. CONDITIONS OF LENDING.....................................................44
7.1 First Revolving Credit Loans..........................................44
7.1.1 Officer's Certificate............................................44
7.1.2 Secretary's Certificate..........................................44
7.1.3 Delivery of Loan Documents.......................................45
7.1.4 Opinion of Counsel...............................................45
7.1.5 Legal Details....................................................45
7.1.6 Payment of Fees..................................................45
7.1.7 [RESERVED].......................................................45
7.1.8 [RESERVED].......................................................45
7.1.9 Consents.........................................................45
7.1.10 Officer's Certificate Regarding Material Adverse Changes........45
7.1.11 No Violation of Laws............................................46
7.1.12 No Actions or Proceedings.......................................46
7.1.13 Insurance Policies; Certificates of Insurance; Endorsements.....46
7.1.14 [RESERVED]......................................................46
7.1.15 [RESERVED]......................................................46
7.1.16 Landlord's Waiver...............................................46
7.1.17 Satisfaction of Special Conditions..............................46
7.2 Each Additional Revolving Credit Loan.................................47
7.3 Special Conditions for All Revolving Credit Loans.....................47
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TABLE OF CONTENTS
Article Page
- ------- ----
8. COVENANTS.................................................................47
8.1 Affirmative Covenants.................................................47
8.1.1 Preservation of Existence, Etc...................................47
8.1.2 Payment of Liabilities, Including Taxes, Etc.....................48
8.1.3 Maintenance of Insurance.........................................48
8.1.4 Maintenance of Properties and Leases.............................49
8.1.5 Maintenance of Patents, Trademarks, Etc..........................49
8.1.6 Visitation Rights................................................50
8.1.7 Keeping of Records and Books of Account..........................50
8.1.8 Plans and Benefit Arrangements...................................50
8.1.9 Compliance with Laws.............................................50
8.1.10 Use of Proceeds.................................................51
8.1.11 Further Assurances..............................................51
8.1.12 Subordination of Intercompany Revolving Credit Loans............51
8.2 Negative Covenants....................................................51
8.2.1 Indebtedness.....................................................51
8.2.2 Liens............................................................52
8.2.3 Guaranties.......................................................52
8.2.4 Loans and Investments............................................53
8.2.5 Dividends and Related Distributions..............................53
8.2.6 Liquidations, Mergers, Consolidations, Acquisitions..............53
8.2.7 Dispositions of Assets or Subsidiaries...........................54
8.2.8 Affiliate Transactions...........................................54
8.2.9 Subsidiaries, Partnerships and Joint Ventures....................55
8.2.10 Continuation of or Change in Business...........................55
8.2.11 Plans and Benefit Arrangements..................................55
8.2.12 [RESERVED]......................................................56
8.2.13 Issuance of Stock...............................................56
8.2.14 Changes in Organizational Documents.............................56
8.2.15 Capital Expenditures and Leases.................................57
8.2.16 Minimum Interest Coverage Ratio.................................57
8.2.17 Minimum Net Worth...............................................57
8.2.18 Senior Leverage Ratio...........................................57
8.2.19 Total Leverage Ratio............................................57
8.3 Reporting Requirements................................................57
8.3.1 Monthly Reports..................................................57
8.3.2 Quarterly Financial Statements...................................58
8.3.3 Annual Financial Statements......................................58
8.3.4 Certificate of the Borrowers.....................................58
8.3.5 Notice of Default................................................59
8.3.6 Notice of Litigation.............................................59
8.3.7 Certain Events...................................................59
8.3.8 Budgets, Forecasts, Other Reports and Information................59
8.3.9 Notices Regarding Plans and Benefit Arrangements.................60
8.3.10 Acquisitions Summary............................................61
9. DEFAULT...................................................................62
9.1 Events of Default.....................................................62
9.1.1 Payments Under Loan Documents....................................62
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TABLE OF CONTENTS
Article Page
- ------- ----
9.1.2 Breach of Warranty...............................................62
9.1.3 Breach of Negative Covenants on Visitation Rights................62
9.1.4 Breach of Other Covenants........................................62
9.1.5 Defaults in Other Agreements or Indebtedness.....................62
9.1.6 Final Judgments or Orders........................................63
9.1.7 Loan Document Unenforceable......................................63
9.1.8 Uninsured Losses; Proceedings Against Assets.....................63
9.1.9 Notice of Lien or Assessment.....................................63
9.1.10 Insolvency......................................................63
9.1.11 Events Relating to Plans and Benefit Arrangements...............63
9.1.12 Cessation of Business...........................................64
9.1.13 Change of Control...............................................64
9.1.14 Involuntary Proceedings.........................................64
9.1.15 Voluntary Proceedings...........................................65
9.2 Consequences of Event of Default......................................65
9.2.1 Events of Default Other Than Bankruptcy, Insolvency or
Reorganization Proceedings.......................................65
9.2.2 Bankruptcy, Insolvency or Reorganization Proceedings.............65
9.2.3 Set-off..........................................................66
9.2.4 Suits, Actions, Proceedings......................................66
9.2.5 Application of Proceeds..........................................66
9.2.6 Other Rights and Remedies........................................67
9.3 Notice of Sale........................................................67
10. THE AGENT................................................................67
10.1 Appointment..........................................................67
10.2 Delegation of Duties.................................................67
10.3 Nature of Duties; Independent Credit Investigation...................68
10.4 Actions in Discretion of Agent; Instructions from the Banks..........68
10.5 Reimbursement and Indemnification of Agent by the Borrowers..........68
10.6 Exculpatory Provisions...............................................69
10.7 Reimbursement and Indemnification of Agent by Banks..................69
10.8 Reliance by Agent....................................................70
10.9 Notice of Default....................................................70
10.10 Notices.............................................................70
10.11 Banks in Their Individual Capacities................................70
10.12 Holders of Notes....................................................71
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<PAGE>
TABLE OF CONTENTS
Article Page
- ------- ----
10.13 Equalization of Banks...............................................71
10.14 Successor Agent.....................................................71
10.15 Agent's Fees........................................................72
10.16 Availability of Funds...............................................72
10.17 Calculations........................................................72
10.18 Beneficiaries.......................................................73
11. MISCELLANEOUS............................................................73
11.1 Modifications, Amendments or Waivers.................................73
11.1.1 Increase of Revolving Credit Commitment; Extension
or Expiration Date..............................................73
11.1.2 Extension of Payment; Reduction of Principal Interest
or Fees; Modification of Terms of Payment.......................73
11.1.3 Release of Collateral or Guarantor..............................73
11.1.4 Miscellaneous...................................................74
11.2 No Implied Waivers; Cumulative Remedies; Writing Required............74
11.3 Reimbursement and Indemnification of Banks by the
Borrowers; Taxes.....................................................74
11.4 Holidays.............................................................75
11.5 Funding by Branch, Subsidiary or Affiliate...........................75
11.5.1 Notional Funding................................................75
11.5.2 Actual Funding..................................................75
11.6 Notices..............................................................76
11.7 Severability.........................................................76
11.8 Governing Law........................................................76
11.9 Prior Understanding..................................................76
11.10 Duration; Survival..................................................77
11.11 Successors and Assigns..............................................77
11.12 Confidentiality.....................................................78
11.13 Counterparts........................................................78
11.14 Agent's or Bank's Consent...........................................78
11.15 Exceptions..........................................................78
11.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL..............................79
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TABLE OF CONTENTS
Article Page
- ------- ----
11.17 Tax Withholding Clause..............................................79
11.18 Joinder of Guarantors...............................................80
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<PAGE>
LIST OF SCHEDULE AND EXHIBITS
SCHEDULE
SCHEDULE 1.1(B) - REVOLVING CREDIT COMMITMENTS OF BANKS
SCHEDULE 1.1(P) - PERMITTED LIENS
SCHEDULE 1.1(PI) - PERMITTED INVESTMENTS
SCHEDULE 1.1(S) - PERMITTED SUBORDINATED INDEBTEDNESS
SCHEDULE 1.1(T) - TEXT OF SUBORDINATION PROVISIONS FOR PERMITTED
SUBORDINATED INDEBTEDNESS
SCHEDULE 6.1.1 - QUALIFICATIONS TO DO BUSINESS
SCHEDULE 6.1.2 - CAPITALIZATION
SCHEDULE 6.1.3(A) - SUBSIDIARIES
SCHEDULE 6.1.3(B) - EXCLUDED ENTITIES
SCHEDULE 6.1.7 - LITIGATION
SCHEDULE 6.1.8 - OWNED AND LEASED REAL PROPERTY
SCHEDULE 6.1.13 - CONSENTS AND APPROVALS
SCHEDULE 6.1.15 - PATENTS, TRADEMARKS, COPYRIGHTS,
LICENSES, ETC.
SCHEDULE 6.1.18 - AGREEMENTS
SCHEDULE 6.1.19 - INSURANCE POLICIES
SCHEDULE 6.1.23 - EMPLOYEE BENEFIT PLAN DISCLOSURES
SCHEDULE 6.1.25 - ENVIRONMENTAL DISCLOSURES
SCHEDULE 8.2.1 - PERMITTED INDEBTEDNESS
EXHIBITS
EXHIBIT 1.1(A) - ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT 1.1(B) - BORROWER AGENCY AGREEMENT
EXHIBIT 1.1(G) - GUARANTOR JOINDER
EXHIBIT 1.1(P) - FORM OF PERMITTED ACQUISITION CERTIFICATE
EXHIBIT 1.1(R) - FORM OF REVOLVING CREDIT NOTE
EXHIBIT 2.5 - REVOLVING CREDIT LOAN REQUEST
EXHIBIT 8.3.4 - COMPLIANCE CERTIFICATE
-viii-
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated September 17, 1997 and is made by and among
PHYMATRIX CORP., a Delaware corporation and EACH OF THE SUBSIDIARIES LISTED ON
THE ATTACHED SUBSIDIARIES SCHEDULE I (each, a "Borrower" and together, the
"Borrowers"), each of the Guarantors (as hereinafter defined), the BANKS (as
hereinafter defined), and PNC BANK, NATIONAL ASSOCIATION, in its capacity as
agent for the Banks under this Agreement (hereinafter referred to in such
capacity as the "Agent").
WITNESSETH:
WHEREAS, the Borrowers have requested the Banks to provide a revolving
credit facility to the Borrowers in an aggregate principal amount not to exceed
$100,000,000; and
WHEREAS, the revolving credit facility shall be used for general corporate
purposes, including working capital, capital expenditures and Permitted
Acquisitions; and
WHEREAS, the Banks are willing to provide such credit upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, covenant and agree as follows:
1. CERTAIN DEFINITIONS
1.1 Certain Definitions.
In addition to words and terms defined elsewhere in this Agreement, the
following words and terms shall have the following meanings, respectively,
unless the context hereof clearly requires otherwise:
Accounts shall mean "Accounts" as defined in the Uniform Commercial Code.
Affiliate as to any Person shall mean any other Person (i) which directly
or indirectly controls, is controlled by, or is under common control with such
Person, (ii) which beneficially owns or holds 25% or more of any class of the
voting or other equity interests of such Person, or (iii) 25% or more of any
class of voting interests or other equity interests of which is beneficially
owned or held, directly or indirectly, by such Person. Control, as used in this
definition, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise, including
the power to elect a majority of the directors or trustees of a corporation or
trust, as the case may be.
<PAGE>
Agent shall mean PNC Bank, National Association, and its successors and
assigns.
Agent's Fees shall have the meaning assigned to that term in Section 10.15.
Agreement shall mean this Credit Agreement, as the same may be supplemented
or amended from time to time, including all schedules and exhibits.
Annual Statements shall have the meaning assigned to that term in Section
6.1.9(i).
Applicable Base Rate Margin shall have the meaning assigned to that term in
Section 4.1.2.
Applicable Euro-Rate Margin shall have the meaning assigned to that term in
Section 4.1.2.
Assignment and Assumption Agreement shall mean an Assignment and Assumption
Agreement by and among a Purchasing Bank, the Transferor Bank and the Agent, as
Agent and on behalf of the remaining Banks, substantially in the form of Exhibit
1.1(A).
Authorized Officer shall mean those individuals, designated by written
notice to the Agent from each of the Borrowers, authorized to execute notices,
reports and other documents on behalf of the Loan Parties required hereunder.
Any Borrower may amend such list of individuals from time to time by giving
written notice of such amendment to the Agent.
Banks shall mean the financial institutions named on Schedule 1.1(B) and
their respective successors and assigns as permitted hereunder, each of which is
referred to herein as a Bank.
Base Rate shall mean the greater of (i) the interest rate per annum
announced from time to time by the Agent at its Principal Office as its then
prime rate, which rate may not necessarily be the lowest rate then being charged
commercial borrowers by the Agent, or (ii) the Federal Funds Effective Rate plus
one-half percent (1/2%) per annum.
Base Rate Option shall mean the option of the Borrowers to have Revolving
Credit Loans bear interest at the rate and under the terms and conditions set
forth in Section 4.1.1(i).
Benefit Arrangement shall mean at any time an "employee benefit plan,"
within the meaning of Section 3(3) of ERISA, which is neither a Plan nor a
Multiemployer Plan and which is maintained, sponsored or otherwise contributed
to by any member of the ERISA Group.
-2-
<PAGE>
Borrower Agency Agreement shall mean the Borrower Agency Agreement in the
form attached hereto as Exhibit 1.1(B) executed by each Borrower and otherwise
acceptable to the Agent.
Borrowers shall mean PhyMatrix and its Subsidiaries; notwithstanding that
it is a Subsidiary of PhyMatrix, DASCO shall not be a "Borrower" hereunder and
the Excluded Entities now or hereafter existing shall not be "Borrowers"
hereunder.
Borrowing Date shall mean, with respect to any Revolving Credit Loan, the
date for the making thereof or the renewal or conversion thereof to the same or
a different Interest Rate Option, which shall be a Business Day.
Borrowing Tranche shall mean specified portions of Revolving Credit Loans
outstanding as follows: (i) any Revolving Credit Loans to which a Euro-Rate
Option applies which become subject to the same Interest Rate Option under the
Revolving Credit Loan Request by the Borrowers and which have the same Interest
Period shall constitute one Borrowing Tranche, and (ii) all Revolving Credit
Loans to which a Base Rate Option applies shall constitute one Borrowing
Tranche.
Business Day shall mean any day other than a Saturday or Sunday or a legal
holiday on which commercial banks are authorized or required to be closed for
business in Pittsburgh, Pennsylvania.
Cash Flow from Operations for any consecutive four (4) quarter period
ending on the date of determination shall mean (i) the sum of net income,
depreciation, amortization, other non-cash charges to net income, interest
expense and income tax expense of PhyMatrix for such period determined and
consolidated in accordance with GAAP (but excluding that of the Excluded
Entities) minus (ii) non-cash credits to net income, of PhyMatrix for such
period determined and consolidated in accordance with GAAP (but excluding that
of the Excluded Entities) plus (iii) the actual amount of cash dividends paid to
a Borrower by an Excluded Entity, as and when received plus (iv) net amounts of
the type described in, and for the same period as described in, items (i), (ii)
and (iii) in respect of the target of Permitted Acquisitions made during such
four (4) quarter period.
Closing Date shall mean the date hereof.
Collateral shall mean the Pledged Collateral, the UCC Collateral, the
Intellectual Property Collateral and, to the extent required by the Banks, any
real property acquired after the Closing Date.
Commitment Fee shall have the meaning assigned to that term in Section 2.3.
Consolidated Net Worth shall mean as of any date of determination total
stockholders' equity of PhyMatrix as of such date determined and consolidated in
accordance with GAAP.
-3-
<PAGE>
DASCO shall mean DASCO Development Corporation, a Florida corporation, and
DASCO Development West, Inc., a California corporation.
Dollar, Dollars, U.S. Dollars and the symbol $ shall mean lawful money of
the United States of America.
Earn-outs shall mean that portion of the total consideration paid or to be
paid to the seller by a Loan Party or an Excluded Entity in connection with any
acquisition which has occurred prior to the Closing Date or a Permitted
Acquisition which is a contingent payment calculated in respect of the
post-acquisition performance of a practice or Person and which is not classified
as "purchase price" under GAAP at the time of acquisition.
Environmental Complaint shall mean any written complaint filed with an
Official Body pursuant to any Environmental Law setting forth a cause of action
for personal or property damage or natural resource damage or equitable relief,
order, notice of violation, citation, request for information issued pursuant to
any Environmental Laws by an Official Body, subpoena or other written notice of
any type relating to, arising out of, or issued pursuant to any of the
Environmental Laws or any Environmental Conditions, as the case may be with
respect to alleged violations relating to the Property.
Environmental Conditions shall mean any conditions of the environment,
including the workplace, the ocean, natural resources (including flora or
fauna), soil, surface water, groundwater, any actual or potential drinking water
supply sources, substrata or the ambient air, relating to or arising out of, or
caused by the use, handling, storage, treatment, recycling, generation,
transportation, release, spilling, leaking, pumping, emptying, discharging,
injecting, escaping, leaching, disposal, dumping, threatened release or other
management or mismanagement of Regulated Substances resulting from any
Borrower's use of, or operations on, the Property.
Environmental Laws shall mean all federal, state, local and foreign Laws
and regulations, including permits, licenses, authorizations, bonds, orders,
judgments, consent decrees issued, or entered into, pursuant thereto, relating
to pollution or protection of human health or the environment or employee safety
in the workplace.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as
the same may be amended or supplemented from time to time, and any successor
statute of similar import, and the rules and regulations thereunder, as from
time to time in effect.
ERISA Group shall mean, at any time, the Borrowers and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control and all other entities which, together with
the Borrowers, are treated as a single employer under Section 414 of the
Internal Revenue Code.
Euro-Rate shall mean, with respect to the Revolving Credit Loans comprising
any Borrowing Tranche to which the Euro-Rate Option applies for any Interest
Period, the interest rate per annum determined by the Agent by dividing (the
resulting quotient
-4-
<PAGE>
rounded upward to the nearest 1/100th of 1% per annum) (i) the rate of interest
determined by the Agent in accordance with its usual procedures (which
determination shall be conclusive absent manifest error) to be the average of
the London interbank offered rates of interest per annum for U.S. Dollars set
forth on Telerate display page 3750 or such other display page on the Telerate
System as may replace such page to evidence the average of rates quoted by banks
designated by the British Bankers' Association (or appropriate successor or, if
the British Bankers' Association or its successor ceases to provide such quotes,
a comparable replacement as reasonably determined by the Agent) two (2) Business
Days prior to the first day of such Interest Period for an amount comparable to
such Borrowing Tranche and having a borrowing date and a maturity comparable to
such Interest Period by (ii) a number equal to 1.00 minus the Euro-Rate Reserve
Percentage. The Euro-Rate may also be expressed by the following formula:
Telerate page 3750 quoted by British Bankers'
Euro-Rate = Association or appropriate successor
---------------------------------------------
1.00 - Euro-Rate Reserve Percentage
The Euro-Rate shall be adjusted with respect to any Euro-Rate Option outstanding
on the effective date of any change in the Euro-Rate Reserve Percentage as of
such effective date. The Agent shall give prompt notice to the Borrowers of the
Euro-Rate as determined or adjusted in accordance herewith, which determination
shall be conclusive absent manifest error.
Euro-Rate Option shall mean the option of the Borrowers to have Revolving
Credit Loans bear interest at the rate and under the terms and conditions set
forth in Section 4.1.1(ii).
Euro-Rate Reserve Percentage shall mean the maximum percentage (expressed
as a decimal rounded upward to the nearest 1/100th of 1%) as determined by the
Agent which is in effect during any relevant period, as prescribed by the Board
of Governors of the Federal Reserve System (or any successor) for determining
the reserve requirements (including supplemental, marginal and emergency reserve
requirements) with respect to eurocurrency funding (currently referred to as
"Eurocurrency Liabilities") of a member bank in such System.
Event of Default shall mean any of the Events of Default described in
Section 9.1.
Excluded Entity shall mean any Person less than 80% and greater than 0% of
whose capital stock or ownership equity is owned by a Borrower and which is not
a Guarantor; if any Person is (or becomes) a Guarantor, then it shall not be an
Excluded Entity.
Expiration Date shall mean, with respect to the Revolving Credit
Commitment, September 17, 2000.
Federal Funds Effective Rate for any day shall mean the rate per annum
(based on a year of 360 days and actual days elapsed and rounded upward to the
nearest 1/100th of 1%) announced by the Federal Reserve Bank of New York (or any
successor) on such day as
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being the weighted average of the rates on overnight federal funds transactions
arranged by federal funds brokers on the previous trading day, as computed and
announced by such Federal Reserve Bank (or any successor) in substantially the
same manner as such Federal Reserve Bank computes and announces the weighted
average it refers to as the "Federal Funds Effective Rate" as of the date of
this Agreement; provided, if such Federal Reserve Bank (or its successor) does
not announce such rate on any day, the "Federal Funds Effective Rate" for such
day shall be the Federal Funds Effective Rate for the last day of which such
rate was announced.
GAAP shall mean generally accepted accounting principles as are in effect
from time to time, subject to the provisions of Section 1.3, and applied on a
consistent basis both as to classification of items and amounts.
Governmental Acts shall have the meaning assigned to that term in Section
2.9.8.
Guarantor shall mean each of the parties to this Agreement which is
designated as a "Guarantor" on the signature page hereof and each other Person
which joins this Agreement as a Guarantor after the date hereof pursuant to
Section 11.18, including without limitation, DASCO, but not the Excluded
Entities.
Guarantor Joinder shall mean a joinder by a Person as a Guarantor under
this Agreement, the Guaranty Agreement and the other Loan Documents
substantially in the form attached hereto as Exhibit 1.1(G) and acceptable to
the Agent.
Guaranty of any Person shall mean any obligation of such Person
guaranteeing or in effect guaranteeing any liability or obligation of any other
Person in any manner, whether directly or indirectly, including any agreement to
indemnify or hold harmless any other Person, any performance bond or other
suretyship arrangement and any other form of assurance against loss, except
endorsement of negotiable or other instruments for deposit or collection in the
ordinary course of business and except unsecured guarantees of trade debt
relating to the acquisition of goods and supplies.
Guaranty Agreement shall mean the Guaranty and Suretyship Agreement
prepared by and acceptable to the Agent and the Banks on the Closing Date and
executed and delivered by the Guarantors to the Agent for the benefit of the
Banks.
Historical Statements shall have the meaning assigned to that term in
Section 6.1.9(i).
Indebtedness shall mean, as to any Person at any time, without duplication,
any and all indebtedness, obligations or liabilities (whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, or joint or several) of such Person for or in respect of: (i)
borrowed money, (ii) amounts raised under or liabilities in respect of any note
purchase or acceptance credit facility, (iii) reimbursement obligations under
any letter of credit that is not collateralized, currency swap agreement,
interest rate swap, cap, collar or floor agreement or other interest rate
management device, (iv) any other transaction (including forward
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sale or purchase agreements, capitalized leases and conditional sales
agreements) having the commercial effect of a borrowing of money entered into by
such Person to finance its operations or capital requirements (but not including
trade payables and accrued expenses incurred in the ordinary course of business
which are not represented by a promissory note or other evidence of indebtedness
and which are not more than thirty (30) days past due), (v) except as provided
in item (vi), any Guaranty of Indebtedness for borrowed money, or (vi) as to
DASCO only, obligations to pay money under performance or completion bonds or
guaranties or similar items but only at such time as amounts are required or due
to be paid thereunder. For purposes of the covenants set forth in Section 8, the
Indebtedness of Excluded Entities shall not be used to calculate the
Indebtedness of PhyMatrix and its Subsidiaries unless such is Indebtedness of
PhyMatrix and its Subsidiaries excluding Excluded Entities.
Intellectual Property Collateral shall mean all of the property described
in the Patent, Trademark and Copyright Assignment.
Intercompany Subordination Agreement shall mean a Subordination Agreement
among the Loan Parties prepared by and acceptable to the Agent and the Banks on
the Closing Date.
Interest Coverage Ratio shall mean for any consecutive four (4) quarter
period ending on the date of determination the ratio of (x) Cash Flow from
Operations to (y) consolidated interest expense of PhyMatrix (excluding that of
Excluded Entities).
Interest Payment Date shall mean each date specified for the payment of
interest in Section 5.3.
Interest Period shall have the meaning assigned to such term in Section
4.2.
Interest Rate Option shall mean any Euro-Rate Option or Base Rate Option.
Interim Statements shall have the meaning assigned to that term in Section
6.1.9(i).
Internal Revenue Code shall mean the Internal Revenue Code of 1986, as the
same may be amended or supplemented from time to time, and any successor statute
of similar import, and the rules and regulations thereunder, as from time to
time in effect.
Labor Contracts shall mean all employment agreements, employment contracts,
collective bargaining agreements and other agreements among any Loan Party and
its employees.
Law shall mean any law (including common law), constitution, statute,
treaty, regulation, rule, ordinance, opinion, release, ruling, order,
injunction, writ, decree or award of any Official Body.
Letter of Credit shall have the meaning assigned to that term in Section
2.9.1.
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Letter of Credit Fee shall have the meaning assigned to that term in
Section 2.9.3.
Letter of Credit Outstandings shall mean at any time the sum of (i) the
aggregate undrawn face amount of outstanding Letters of Credit and (ii) the
aggregate amount of all unpaid and outstanding Reimbursement Obligations.
Lien shall mean any mortgage, deed of trust, pledge, lien, security
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, whether voluntarily or involuntarily given, including any
conditional sale or title retention arrangement, and any assignment, deposit
arrangement or lease intended as, or having the effect of, security and any
filed financing statement or other notice of any of the foregoing (whether or
not a lien or other encumbrance is created or exists at the time of the filing).
Loan Documents shall mean this Agreement, the Guaranty Agreement, the
Intercompany Subordination Agreement, the Notes, the Pledge Agreement, the
Security Agreement, the Patent, Trademark and Copyright Assignment, documents
evidencing liens on or relating to the Property, and any other instruments,
certificates or documents delivered or contemplated to be delivered hereunder or
thereunder or in connection herewith or therewith, as the same may be
supplemented or amended from time to time in accordance herewith or therewith,
and Loan Document shall mean any of the Loan Documents.
Loan Parties shall mean the Borrowers and the Guarantors.
Loan Request shall mean a request for Revolving Credit Loans made in
accordance with Section 2.5 or a request to select, convert to or renew a
Euro-Rate Option in accordance with Section 4.2.
Marketable Securities shall mean securities classified as "current assets"
according to GAAP and otherwise capable of immediate liquidation.
Material Adverse Change shall mean any set of circumstances or events which
(a) has or could reasonably be expected to have any material adverse effect
whatsoever upon the validity or enforceability of this Agreement, the Note, the
Security Agreement or the Loan Documents taken as a whole, (b) is or could
reasonably be expected to be material and adverse to the business, properties,
assets, financial condition, results of operations or prospects of the Loan
Parties taken as a whole, (c) impairs materially or could reasonably be expected
to impair materially the ability of the Loan Parties taken as a whole to duly
and punctually pay or perform their Indebtedness, or (d) impairs materially or
could reasonably be expected to impair materially the ability of the Agent or
any of the Banks, to the extent permitted, to enforce their legal remedies
pursuant to this Agreement, the Note, the Security Agreement or the Loan
Documents taken as a whole.
Minimum Net Worth shall mean the sum of (i) 95% of the net worth of
PhyMatrix, calculated on a consolidated basis in accordance with GAAP, as of the
end of the quarter ended April 30, 1997 plus (ii) 75% of consolidated net income
(determined in accordance
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with GAAP) of PhyMatrix for each fiscal quarter in which net income was earned
(as opposed to a net loss) plus (iii) 100% of all increases in "equity",
"Shareholders equity" or "additional paid in capital," or similar items
(including equity securities issued and increases in equity effected in
connection with Permitted Acquisitions), of PhyMatrix on a consolidated basis
(determined in accordance with GAAP) occurring for any reason, all as calculated
for the period from the Closing Date through the date of determination.
Month, with respect to an Interest Period under the Euro-Rate Option, shall
mean the interval between the days in consecutive calendar months numerically
corresponding to the first day of such Interest Period. If any Euro-Rate
Interest Period begins on a day of a calendar month for which there is no
numerically corresponding day in the month in which such Interest Period is to
end, the final month of such Interest Period shall be deemed to end on the last
Business Day of such final month.
Multiemployer Plan shall mean any employee benefit plan which is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which the Borrowers or any member of the ERISA Group is then making or accruing
an obligation to make contributions or, within the preceding five Plan years,
has made or had an obligation to make such contributions.
Multiple Employer Plan shall mean a Plan which has two or more contributing
sponsors (including the Borrowers or any member of the ERISA Group) at least two
of whom are not under common control, as such a plan is described in Sections
4063 and 4064 of ERISA.
Notes shall mean collectively and Note shall mean separately all the
Revolving Credit Notes of the Borrowers in the form of Exhibit 1.1(R) evidencing
the Revolving Credit Loans together with all amendments, extensions, renewals,
replacements, refinancings or refundings thereof in whole or in part.
Notices shall have the meaning assigned to that term in Section 11.6.
Obligation shall mean any obligation or liability of any of the Loan
Parties to the Agent or any of the Banks, howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, now or hereafter
existing, or due or to become due, under or in connection with this Agreement,
the Notes, the Letters of Credit or any other Loan Documents.
Official Body shall mean any national, federal, state, local or other
government or political subdivision or any agency, authority, bureau, central
bank, commission, department or instrumentality of either, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.
Partnership Interests shall have the meaning given to such term in Section
6.1.3.
Patent, Trademark and Copyright Assignment shall mean the Patent, Trademark
and Copyright Collateral Assignment prepared by and acceptable to the Agent and
the
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Banks on the Closing Date executed and delivered by each of the Loan Parties
to the Agent for the benefit of the Banks.
PBGC shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA or any successor.
Permitted Acquisition shall mean the acquisition of Clinical Studies, Ltd.
and any other merger, acquisition or the entering into of management
arrangements, whether accounted for under GAAP as a purchase or a pooling of
interests and regardless of whether the value of the consideration paid or
received is comprised of cash, common stock, notes, preferred stock, assets,
partnership interests or other means which satisfies all of the following
conditions:
(i) the transaction is initiated and completed with the consent of the
target's management; and
(ii) a Borrower or Excluded Entity shall be the survivor of, or manager
under, such transactions or arrangements and shall have voting control of, or
management responsibilities for, the target entity or combined entity; and
(iii) the target is and after the transaction shall be substantially
engaged in a Permitted Line of Business; and
(iv) the Borrowers shall have demonstrated to the Banks that, on a pro
forma basis, the consummation of the transaction would not cause or constitute
an Event of Default or Potential Default, such demonstration to include
calculations relating to the financial covenants in this Agreement;
(v) such transaction shall have been approved by the Required Banks except
that no such approval is required if the Purchase Price does not exceed
$15,000,000 individually and if all such transactions' Purchase Prices do not
exceed $75,000,000 in the aggregate on an annual basis (provided that the
Purchase Price of the acquisition of Clinical Studies, Ltd. shall not be applied
to reduce the unused portion of such $75,000,000 amount); and
(vi) in connection with which PhyMatrix has delivered to the Agent a
completed Permitted Acquisition Certificate in the form attached as Exhibit
1.1(P) (a) not less than ten (10) days prior to the consummation thereof for
acquisitions which require approval and (b) within five (5) days after the
consummation thereof for acquisitions which do not require approval.
Permitted Interest Rate Protection Agreements shall mean any one or more
interest rate swap, cap, collar, hedge or forward agreements or arrangements
(conforming to ISDA standards and the counterparty of which is reasonably
satisfactory to the Agent) pursuant to which the Borrowers cause a portion of
their Indebtedness to bear interest at a fixed or floating rate and containing
such intercreditor provisions as may be reasonably required by the Agent and
providing for security to the extent permitted by the Agent.
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Permitted Investments shall mean:
(i) direct obligations of the United States of America or any agency or
instrumentality thereof or obligations backed by the full faith and credit of
the United States of America maturing in twelve (12) months or less from the
date of acquisition;
(ii) commercial paper maturing in 180 days or less rated not lower than
A-1, by Standard & Poor's Rating Services, a division of the McGraw-Hill
Companies, Inc. or P-1 by Moody's Investors Service, Inc. on the date of
acquisition;
(iii) demand deposits, time deposits or certificates of deposit maturing
within one year in commercial banks whose obligations are rated A+, A-1 or the
equivalent or better by Standard & Poor's Rating Services, a division of the
McGraw-Hill Companies, Inc. or Moody's Investors Service, Inc., respectively on
the date of acquisition;
(iv) Permitted Acquisitions;
(v) other investments existing on the Closing Date listed on Schedule
1.1(PI); and
(vi) long-term corporate bonds rated A+, A-1 or the equivalent or better by
Standard & Poor's Rating Services, a division of the McGraw-Hill Companies, Inc.
or Moody's Investors Service, Inc., respectively.
Permitted Liens shall mean:
(i) Liens for taxes, assessments, or similar charges, incurred in the
ordinary course of business and which are not yet due and payable;
(ii) Pledges or deposits made in the ordinary course of business to secure
payment of workmen's compensation, or to participate in any fund in connection
with workmen's compensation, unemployment insurance, old-age pensions or other
social security programs;
(iii) Liens of mechanics, materialmen, warehousemen, carriers, or other
like Liens, securing obligations incurred in the ordinary course of business
that are not yet due and payable and Liens of landlords securing obligations to
pay lease payments that are not yet due and payable or in default;
(iv) Good-faith pledges or deposits made in the ordinary course of business
to secure performance of bids, tenders, contracts (other than for the repayment
of borrowed money) or leases, not in excess of the aggregate amount due
thereunder, or to secure statutory obligations, or surety, appeal, indemnity,
performance or other similar bonds required in the ordinary course of business;
(v) Encumbrances consisting of zoning restrictions, easements or other
restrictions on the use of real property, none of which materially impairs the
use of such
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property or the value thereof, and none of which is violated in any material
respect by existing or proposed structures or land use;
(vi) Liens, security interests and mortgages in favor of the Agent for
the benefit of the Banks;
(vii) Liens on property leased by any Loan Party or Subsidiary of a Loan
Party under capital and operating leases permitted in Section 8.2.15 securing
obligations of such Loan Party or Subsidiary to the lessor under such leases;
(viii) Any Lien existing on the date of this Agreement and described on
Schedule 1.1(P), provided that the principal amount secured thereby is not
hereafter increased, and no additional assets become subject to such Lien;
(ix) Purchase Money Security Interests permitted under Section 8.2.1(v),
provided that the aggregate amount of loans and deferred payments secured by
such Purchase Money Security Interests shall not exceed the lesser of (x)
$3,000,000 or (y) 2% of PhyMatrix' tangible assets on a consolidated basis
(excluding Excluded Entities) (excluding for the purpose of this computation any
loans or deferred payments secured by Liens described on Schedule 1.1(P));
(x) The following, (A) if the validity or amount thereof is being contested
in good-faith by appropriate and lawful proceedings diligently conducted so long
as levy and execution thereon have been stayed and continue to be stayed or (B)
if a final judgment is entered and such judgment is discharged within thirty
(30) days of entry, and in either case they do not materially and adversely
affect the Collateral or, in the aggregate, materially impair the ability of any
Loan Party to perform its Obligations hereunder or under the other Loan
Documents:
(1) Claims or Liens for taxes, assessments or charges due and payable
and subject to interest or penalty, provided that the Loan Party maintains
such reserves or other appropriate provisions as shall be required by GAAP
and pays all such taxes, assessments or charges forthwith upon the
commencement of proceedings to foreclose any such Lien;
(2) Claims, Liens or encumbrances upon, and defects of title to, real
or personal property other than the Collateral, including any attachment of
personal or real property or other legal process prior to adjudication of a
dispute on the merits; or
(3) Claims or Liens of mechanics, materialmen, warehousemen, carriers,
or other statutory nonconsensual Liens;
(xi) Pari passu Liens to secure Permitted Interest Rate Agreements;
(xii) Liens on assets acquired in Permitted Acquisitions; and
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(xiii) Other Liens not to exceed in the aggregate the lesser of (x)
$3,000,000 or (y) 2% of PhyMatrix' tangible assets on a consolidated basis
(excluding Excluded Entities).
Permitted Line of Business shall mean (x) as to Loan Parties other than
DASCO, the management of medical services, independent practice associations and
specialty care networks, including billing, non-medical staffing and the
delivery of medical support services including, among others, radiation,
infusion and lithotripsy therapy, diagnostic imaging, home health care and
clinical testings and trial services; and (y) as to DASCO, medical facility
development management including project and construction management,
construction design and engineering, physician recruitment, leasing and
marketing assistance and assistance with financing.
Permitted Subordinated Indebtedness shall mean (i) public subordinated
debt, including the $100,000,000 convertible subordinated debt issued by
PhyMatrix in June, 1996 and due 2003; (ii) existing subordinated indebtedness
described on Schedule 1.1(S); or (iii) Indebtedness subordinated by its terms in
accordance with Schedule 1.1(T).
Person shall mean any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, joint venture,
government or political subdivision or agency thereof, or any other entity.
PhyMatrix shall mean PhyMatrix Corp., a Delaware corporation.
Plan shall mean at any time an employee pension benefit plan (including a
Multiple Employer Plan, but not a Multiemployer Plan) which is covered by Title
IV of ERISA or is subject to the minimum funding standards under Section 412 of
the Internal Revenue Code and either (i) is maintained by any member of the
ERISA Group for employees of any member of the ERISA Group or (ii) has at any
time within the preceding five years been maintained by any entity which was at
such time a member of the ERISA Group for employees of any entity which was at
such time a member of the ERISA Group.
Pledge Agreement shall mean the Pledge Agreement prepared by and acceptable
to the Agent and the Banks on the Closing Date executed and delivered to the
Agent for the benefit of the Banks by any Loan Party with equity or ownership
interests in any other Loan Party or Excluded Entity.
Pledged Collateral shall mean the property of the Loan Parties in which
security interests are to be granted under the Pledge Agreement.
PNC Bank shall mean PNC Bank, National Association, its successors and
assigns.
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Potential Default shall mean any event or condition which with notice,
passage of time or a determination by the Agent or the Required Banks, or any
combination of the foregoing, would constitute an Event of Default.
Principal Office shall mean the main banking office of the Agent in
Pittsburgh, Pennsylvania.
Prior Security Interest shall mean a valid and enforceable perfected
first-priority security interest under the Uniform Commercial Code in the UCC
Collateral and the Pledged Collateral which is subject only to Liens for taxes
not yet due and payable to the extent such prospective tax payments are given
priority by statute or Purchase Money Security Interests as permitted hereunder.
Prohibited Transaction shall mean any prohibited transaction as defined in
Section 4975 of the Internal Revenue Code or Section 406 of ERISA for which
neither an individual nor a class exemption has been issued by the United States
Department of Labor.
Property shall mean all real property, both owned and leased, of any Loan
Party.
Purchase Money Security Interest shall mean Liens upon personal property
securing loans to any Loan Party or Subsidiary of a Loan Party or deferred
payments by such Loan Party or Subsidiary for the purchase of such tangible
personal property.
Purchase Price shall mean with respect to any Permitted Acquisition the
purchase price paid or other consideration provided, including all forms of
consideration (whether cash, common or preferred stock, notes, assets,
partnership or other equity interests, or otherwise), all computed irrespective
of GAAP and including in all events Indebtedness payable to or incurred,
assumed, refinanced or repaid on behalf of sellers (but not by such sellers), in
connection with Permitted Acquisitions and including the Borrowers' good faith
estimate of the present value of amounts to be paid as Earn-outs in such
Permitted Acquisition. The components of typical, hypothetical, historic or
prospective Purchase Prices are described in greater detail on Schedule 1.1(C).
Purchasing Bank shall mean a Bank which becomes a party to this Agreement
by executing an Assignment and Assumption Agreement.
Ratable Share shall mean the proportion that a Bank's Revolving Credit
Commitment bears to the Revolving Credit Commitments of all of the Banks.
Regulated Substances shall mean any substance, including any solid, liquid,
semisolid, gaseous, thermal, thoriated or radioactive material, refuse, garbage,
wastes, chemicals, petroleum products, by-products, co-products, impurities,
dust, scrap, heavy metals, any substance defined as a "hazardous substance,"
"pollutant," "pollution," "contaminant," "hazardous or toxic substance,"
"extremely hazardous substance," "toxic chemical," "toxic waste," "hazardous
waste," "industrial waste," "residual waste," "solid waste," "municipal waste,"
"mixed waste," "infectious waste," "chemotherapeutic waste," "medical waste,"
"regulated
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substance" or any related materials, substances or wastes as now or hereafter
defined pursuant to any Environmental Laws, ordinances, rules, regulations or
other directives of any Official Body, the generation, manufacture, extraction,
processing, distribution, treatment, storage, disposal, transport, recycling,
reclamation, use, reuse, spilling, leaking, dumping, injection, pumping,
leaching, emptying, discharge, escape, release or other management or
mismanagement of which is regulated by the Environmental Laws.
Reimbursement Obligation shall mean all amounts advanced by the Agent or
any Bank pursuant to any Letter of Credit, or any Letter of Credit Fee,
including payments to be made pursuant to Section 2.9.4(i).
Regulation U shall mean Regulation U, T, G or X as promulgated by the Board
of Governors of the Federal Reserve System, as amended from time to time.
Reportable Event means a reportable event described in Section 4043 of
ERISA and regulations thereunder with respect to a Plan or Multiemployer Plan.
Required Banks shall mean (i) if there are no Revolving Credit Loans
outstanding, Banks whose Revolving Credit Commitments aggregate at least 66 2/3%
of the Revolving Credit Commitments of all of the Banks, or (ii) if there are
Revolving Credit Loans outstanding, Banks whose Revolving Credit Loans
outstanding aggregate at least 66 2/3% of the total principal amount of the
Revolving Credit Loans outstanding hereunder.
Revolving Credit Commitment shall mean, as to any Bank at any time, the
amount initially set forth opposite its name on Schedule 1.1(B) in the column
labeled "Amount of Revolving Credit Commitment for Revolving Credit Loans," and
thereafter on Schedule I to the most recent Assignment and Assumption Agreement,
and Revolving Credit Commitments shall mean the aggregate Revolving Credit
Commitments of all of the Banks.
Revolving Credit Loan Request shall have the meaning assigned to such term
in Section 2.5.
Revolving Credit Loans shall mean collectively and Revolving Credit Loan
shall mean separately all Revolving Credit Loans or any Revolving Credit Loan
made by the Banks or one of the Banks to the Borrowers pursuant to Section 2.1
or 2.9.4 hereof.
Revolving Facility Usage shall mean at any time the sum of the Revolving
Credit Loans outstanding and the Letter of Credit Outstandings.
Security Agreement shall mean the Security Agreement prepared by and
acceptable to the Agent and the Banks on the Closing Date and executed and
delivered by each of the Loan Parties to the Agent for the benefit of the Banks.
Senior Funded Debt shall mean all Indebtedness of PhyMatrix on a
consolidated basis (but excluding Excluded Entities) but excluding Permitted
Subordinated Indebtedness.
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Senior Leverage Ratio shall mean the ratio of (x)(i) Senior Funded Debt
minus (ii) the excess of the cash, cash equivalents and the value of the
Marketable Securities of PhyMatrix on a consolidated basis (but excluding
Excluded Entities) over $20,000,000 to (y) Cash Flow from Operations for the
prior four (4) fiscal quarters.
Shares shall have the meaning assigned to that term in Section 6.1.2.
Subsidiary of any Person at any time shall mean (i) any corporation or
trust of which 50% or more (by number of shares or number of votes) of the
outstanding capital stock or shares of beneficial interest normally entitled to
vote for the election of one or more directors or trustees (regardless of any
contingency which does or may suspend or dilute the voting rights) is at such
time owned directly or indirectly by such Person or one or more of such Person's
Subsidiaries, or any partnership of which such Person is a general partner or of
which 50% or more of the partnership interests is at the time directly or
indirectly owned by such Person or one or more of such Person's Subsidiaries, or
(ii) any corporation, trust, partnership or other entity which is controlled or
capable of being controlled by such Person or one or more of such Person's
Subsidiaries.
Subsidiary Shares shall have the meaning assigned to that term in Section
6.1.3.
Total Leverage Ratio shall mean the ratio of (x)(i) the Indebtedness on a
consolidated basis minus (ii) the excess of cash, cash equivalents and the value
of the Marketable Securities of PhyMatrix on a consolidated basis (but excluding
Excluded Entities) over $20,000,000 to (y) Cash Flow from Operations for the
prior four (4) fiscal quarters.
Transferor Bank shall mean the selling Bank pursuant to an Assignment and
Assumption Agreement.
UCC Collateral shall mean the property of the Loan Parties in which
security interests are to be granted under the Security Agreement.
Uniform Commercial Code shall have the meaning assigned to that term in
Section 6.1.16.
1.2 Construction.
Unless the context of this Agreement otherwise clearly requires, the
following rules of construction shall apply to this Agreement and each of the
other Loan Documents:
1.2.1 Number; Inclusion.
References to the plural include the singular, the plural, the part
and the whole; "or" has the inclusive meaning represented by the phrase
"and/or," and "including" has the meaning represented by the phrase "including
without limitation";
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1.2.2 Determination.
References to "determination" of or by the Agent or the Banks shall
mean good-faith estimates by the Agent or the Banks (in the case of quantitative
determinations) and good-faith beliefs by the Agent or the Banks (in the case of
qualitative determinations) and such determination shall be conclusive absent
manifest error;
1.2.3 Agent's Discretion and Consent.
Whenever the Agent or the Banks are granted the right herein to act in
its or their sole discretion or to grant or withhold consent such right shall be
exercised in good-faith and shall not be unreasonably withheld, conditioned or
delayed;
1.2.4 Documents Taken as a Whole.
The words "hereof," "herein," "hereunder," "hereto" and similar terms
in this Agreement or any other Loan Document refer to this Agreement or such
other Loan Document as a whole and not to any particular provision of this
Agreement or such other Loan Document;
1.2.5 Headings.
The section and other headings contained in this Agreement or such
other Loan Document and the Table of Contents (if any), preceding this Agreement
or such other Loan Document are for reference purposes only and shall not
control or affect the construction of this Agreement or such other Loan Document
or the interpretation thereof in any respect;
1.2.6 Implied References to this Agreement.
Article, section, subsection, clause, schedule and exhibit references
are to this Agreement or other Loan Documents, as the case may be, unless
otherwise specified;
1.2.7 Persons.
Reference to any Person includes such Person's successors and assigns
but, if applicable, only if such successors and assigns are permitted by this
Agreement or other Loan Document, as the case may be, and reference to a Person
in a particular capacity excludes such Person in any other capacity;
1.2.8 Modifications to Documents.
Reference to any agreement (including this Agreement and any other
Loan Document together with the schedules and exhibits hereto or thereto),
document or instrument means such agreement, document or instrument as amended,
modified, replaced, substituted for, superseded or restated;
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1.2.9 From, To and Through.
Relative to the determination of any period of time, "from" means
"from and including," "to" means "to but excluding," and "through" means
"through and including"; and
1.2.10 Shall; Will.
References to "shall" and "will" are intended to have the same
meaning.
1.3 Accounting Principles.
Except as otherwise provided in this Agreement, all computations and
determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and prepared
in accordance with GAAP (including principles of consolidation where
appropriate), and all accounting or financial terms shall have the meanings
ascribed to such terms by GAAP.
2. REVOLVING CREDIT FACILITY
2.1 Revolving Credit Commitments.
2.1.1 Establishment of Revolving Credit Commitments.
Subject to the terms and conditions hereof and relying upon the
representations and warranties herein set forth, each Bank severally agrees to
make Revolving Credit Loans to the Borrowers at any time or from time to time on
or after the date hereof to the Expiration Date in an aggregate principal amount
not to exceed at any one time such Bank's Revolving Credit Commitment minus such
Bank's Ratable Share of the Letter of Credit Outstandings. Within such limits of
time and amount and subject to the other provisions of this Agreement, the
Borrowers may borrow, repay and reborrow pursuant to this Section 2.1.
2.1.2 Voluntary Reduction of Commitment.
The Borrowers shall have the right at any time and from time to time
upon five (5) Business Days' prior written notice to the Agent to permanently
reduce, in a minimum amount of $5,000,000 and whole multiples of $1,000,000 of
principal, or terminate the Revolving Credit Commitment, without penalty or
premium except as hereinafter set forth, provided that any such reduction or
termination shall be accompanied by prepayment of the Notes, together with the
full amount of interest accrued on the principal sum to be prepaid (and all
amounts referred to in Section 5.4 hereof), to the extent that the aggregate
amount thereof then outstanding exceeds the Revolving Credit Commitment as so
reduced or terminated.
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2.2 Nature of Banks' Obligations with Respect to
Revolving Credit Loans.
Each Bank shall be obligated to participate in each request for Revolving
Credit Loans pursuant to Section 2.5 in accordance with its Ratable Share. The
aggregate of each Bank's Revolving Credit Loans outstanding hereunder to the
Borrowers at any time shall never exceed its Revolving Credit Commitment . The
obligations of each Bank hereunder are several. The failure of any Bank to
perform its obligations hereunder shall not affect the Obligations of the
Borrowers to any other party nor shall any other party be liable for the failure
of such Bank to perform its obligations hereunder. The Banks shall have no
obligation to make Revolving Credit Loans hereunder on or after the Expiration
Date.
2.3 Commitment Fees.
Accruing from the date hereof until the Expiration Date, the Borrowers
agree to pay to the Agent for the account of each Bank, as consideration for
such Bank's Revolving Credit Commitment hereunder, a nonrefundable Commitment
Fee (the "Commitment Fee"), (computed on the basis of a year of 360 days, as the
case may be, and actual days elapsed), equal to (x) the average daily difference
between the amount of such Bank's Revolving Credit Commitment as the same may be
constituted from time to time and the Revolving Facility Usage multiplied by (y)
an annual rate of .375% in respect of fiscal quarters in which the ratio of
Senior Funded Debt at the end of the relevant quarter to Cash Flow from
Operations for the prior four (4) fiscal quarters exceeds 2.0 to 1.0 or .25% per
annum in respect of fiscal quarters in which such ratio is less than or equal to
2.0 to 1.0. All Commitment Fees shall be payable in arrears on the first
Business Day of each August, November, February and May after the date hereof;
such amount shall be calculated based on the period for which the annual and
quarterly financial statements are delivered pursuant to Section 8.3 and on the
Expiration Date or upon acceleration of the Notes.
2.4 [Reserved].
2.5 Revolving Credit Loan Requests.
Except as otherwise provided herein, the Borrowers may from time to time
prior to the Expiration Date request the Banks to make Revolving Credit Loans,
or renew or convert the Interest Rate Option applicable to existing Revolving
Credit Loans pursuant to Section 4.2, by delivering to the Agent, not later than
10:00 a.m., Pittsburgh time, (i) two (2) Business Days prior to the proposed
Borrowing Date with respect to the making of Revolving Credit Loans to which the
Euro-Rate Option applies or the conversion to or the renewal of the Euro-Rate
Option for any Revolving Credit Loans; and (ii) one (1) Business Day prior to
either the proposed Borrowing Date with respect to the making of a Revolving
Credit Loan to which the Base Rate Option applies or the last day of the
preceding Interest Period with respect to the conversion to the Base Rate Option
for any Revolving Credit Loan, of a duly completed request therefor
substantially in the form of Exhibit 2.5 or a request by telephone immediately
confirmed in writing by letter, facsimile in such form (each, a "Revolving
Credit Loan Request"), it being understood that the Agent may rely on the
authority of any individual making such a telephonic request without the
necessity of receipt of such written confirmation. Each Revolving Credit Loan
Request shall be
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irrevocable and shall specify (i) the proposed Borrowing Date; (ii) the
aggregate amount of the proposed Revolving Credit Loans comprising each
Borrowing Tranche, which shall be in integral multiples of $250,000 and not less
than $1,000,000 for each Borrowing Tranche to which the Euro-Rate Option applies
and not less than the lesser of $250,000 or the maximum amount available for
Borrowing Tranches to which the Base Rate Option applies; (iii) whether the
Euro-Rate Option or Base Rate Option shall apply to the proposed Revolving
Credit Loans comprising the Borrowing Tranche; and (iv) in the case of a
Borrowing Tranche to which the Euro-Rate Option applies, an appropriate Interest
Period for the proposed Revolving Credit Loans comprising such Borrowing
Tranche.
2.6 Making Revolving Credit Loans.
The Agent shall, promptly after receipt by it of a Revolving Credit Loan
Request pursuant to Section 2.5, notify the Banks of its receipt of such
Revolving Credit Loan Request specifying: (i) the proposed Borrowing Date and
the time and method of disbursement of such Revolving Credit Loans; (ii) the
amount and type of each such Revolving Credit Loan and the applicable Interest
Period (if any); and (iii) the apportionment among the Banks of the Revolving
Credit Loans as determined by the Agent in accordance with Section 2.2. Each
Bank shall remit the principal amount of each Revolving Credit Loan to the Agent
such that the Agent is able to, and the Agent shall, to the extent the Banks
have made funds available to it for such purpose, fund such Revolving Credit
Loans to the Borrowers in U.S. Dollars and immediately available funds at the
Principal Office prior to 2:00 p.m., Pittsburgh time, on the Borrowing Date,
provided that if any Bank fails to remit such funds to the Agent in a timely
manner, the Agent may elect in its sole discretion to fund with its own funds
the Revolving Credit Loans of such Bank on the Borrowing Date, and such Bank
shall be subject to the repayment obligation in Section 10.16.
2.7 Revolving Credit Notes.
The Obligation of each Borrower to repay the aggregate unpaid principal
amount of the Revolving Credit Loans made to it by each Bank, together with
interest thereon, shall be evidenced by a Revolving Credit Note dated the
Closing Date payable to the order of such Bank in a face amount equal to the
Revolving Credit Commitment of such Bank.
2.8 Use of Proceeds.
The proceeds of the Revolving Credit Loans shall be used for working
capital and general corporate purposes and to fund Permitted Acquisitions.
2.9 Letter of Credit Subfacility.
2.9.1 Issuance of Letters of Credit.
PhyMatrix as agent for the Borrowers may request the issuance of a
letter of credit (each a "Letter of Credit") on behalf of itself or another Loan
Party by delivering to the Agent a completed application and agreement for
letters of credit in such form as the Agent may reasonably specify from time to
time by no later than 10:00 a.m., Pittsburgh time, at least two (2) Business
Days, or such shorter period as may be agreed to by the Agent, in advance of the
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proposed date of issuance. Subject to the terms and conditions hereof and in
reliance on the agreements of the other Banks set forth in this Section 2.9, the
Agent will issue a Letter of Credit provided that each Letter of Credit shall
(A) have a maximum maturity of twelve (12) months from the date of issuance, (B)
in no event expire later than one Business Day prior to the Expiration Date and
provided further that in no event shall (i) the Letter of Credit Outstandings
exceed, at any one time, $20,000,000 or (ii) the Revolving Facility Usage
exceed, at any one time, the Revolving Credit Commitments.
2.9.2 Participations.
Immediately upon issuance of each Letter of Credit, and without
further action, each Bank shall be deemed to, and hereby agrees that it shall,
have irrevocably purchased for such Bank's own account and risk from the Agent
an individual participation interest in such Letter of Credit and drawings
thereunder in an amount equal to such Bank's Ratable Share of the maximum amount
which is or at any time may become available to be drawn thereunder, and each
such Bank shall be responsible to reimburse the Agent immediately for its
Ratable Share of any disbursement under any Letter of Credit which has not been
reimbursed by Borrowers in accordance with Section 2.9.4.
2.9.3 Letter of Credit Fees.
The Borrowers shall pay (i) to the Agent for the ratable account of
the Banks a fee (the "Letter of Credit Fee") equal to the then prevailing
Applicable Euro-Rate Margin, and (ii) to the Agent for its own account a
fronting fee equal to 1/8% per annum, which fees shall be computed on the daily
average Letter of Credit Outstandings and shall be payable quarterly in arrears
commencing with the first Business Day of each August, November, February and
May following issuance of each Letter of Credit and on the Expiration Date. The
Borrowers shall also pay to the Agent for the Agent's sole account the Agent's
then in effect customary fees and administrative expense payable with respect to
the Letters of Credit as the Agent may generally charge or incur from time to
time in connection with the issuance, maintenance, modification (if any),
assignment or transfer (if any), negotiation, and administration of Letters of
Credit.
2.9.4 Disbursements, Reimbursement.
(i) The Borrowers shall be obligated immediately to reimburse the
Agent for all amounts which the Agent is required to advance pursuant to the
Letters of Credit. Such amounts advanced shall become, at the time the amounts
are advanced, Revolving Credit Loans from the Banks. Such Revolving Credit Loans
shall bear interest at the rate applicable under the Base Rate Option unless the
Borrowers elect to have a different Interest Rate Option apply to such Revolving
Credit Loans pursuant to and in accordance with the provisions contained in
Section 4.1.
(ii) The Agent will notify (A) PhyMatrix, as agent for the Borrowers of
each demand or presentment for payment or other drawing under each Letter of
Credit, and (B) the Banks of the amount required to be advanced pursuant to the
Letters of
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Credit. Before 10:00 a.m., Pittsburgh time, on the date of any advance the Agent
is required to make pursuant to the Letters of Credit, each Bank shall make
available such Bank's Ratable Share of such advance in immediately available
funds to the Agent.
2.9.5 Documentation.
The Borrowers, jointly and severally, agree to be bound by the terms
of the Agent's customary and reasonable application and agreement for Letters of
Credit and the Agent's written regulations and customary practices relating to
Letters of Credit, though such interpretation may be different from the
Borrowers' own. In the event of a conflict between such application or agreement
and this Agreement, this Agreement shall govern. It is understood and agreed
that, except in the case of gross negligence or willful misconduct, the Agent
shall not be liable for any error, negligence and/or mistakes, whether of
omission or commission, in following any Borrower's instructions or those
contained in the Letters of Credit or any modifications, amendments or
supplements thereto.
2.9.6 Determinations to Honor Drawing Requests.
In determining whether to honor any request for drawing under any
Letter of Credit by the beneficiary thereof, the Agent shall be responsible only
to determine that the documents and certificates required to be delivered under
such Letter of Credit have been delivered and that they comply on their face
with the requirements of such Letter of Credit.
2.9.7 Nature of Participation and Reimbursement Obligations.
The obligation of the Banks to participate in Letters of Credit
pursuant to Section 2.9.2 and the obligation of the Banks pursuant to Section
2.9.4 to fund Revolving Credit Loans upon a draw under a Letter of Credit and
the Obligations of the Borrowers to reimburse the Agent upon a draw under a
Letter of Credit pursuant to Section 2.9 shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
such sections under all circumstances, including the following circumstances:
(i) the failure of any Loan Party or any other Person to comply with
the conditions set forth in Sections 2.1, 2.5, 2.6 or 7.2 or as otherwise set
forth in this Agreement for the making of a Revolving Credit Loan, it being
acknowledged that such conditions are not required for the making of a Revolving
Credit Loan under Section 2.9.4;
(ii) any lack of validity or enforceability of any Letter of Credit;
(iii) the existence of any claim, set-off, defense or other right which
any Loan Party or any Bank may have at any time against a beneficiary or any
transferee of any Letter of Credit (or any Persons for whom any such transferee
may be acting), the Agent or other bank or any other Person or, whether in
connection with this Agreement, the transactions contemplated herein or any
unrelated transaction (including any underlying transaction between any Loan
Party or Subsidiaries of a Loan Party and the beneficiary for which any Letter
of Credit was procured);
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(iv) any draft, demand, certificate or other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect;
(v) payment by the Agent under any Letter of Credit against
presentation of a demand, draft or certificate or other document which does not
comply with the terms of such Letter of Credit;
(vi) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of any Loan Party or
Subsidiaries of a Loan Party;
(vii) any breach of this Agreement or any other Loan Document by any
party thereto;
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing;
(ix) the fact that an Event of Default or a Potential Default shall
have occurred and be continuing; or
(x) the Expiration Date shall have passed or this Agreement or the
Revolving Credit Commitments hereunder shall have been terminated.
2.9.8 Indemnity.
In addition to amounts payable as provided in Section 10.5 the
Borrowers hereby agree to protect, indemnify, pay and save harmless the Agent
from and against any and all claims, demands, liabilities, damages, losses,
costs, charges and expenses (including reasonable fees, expenses and
disbursements of counsel) which the Agent may incur or be subject to as a
consequence, direct or indirect, of (i) the issuance of any Letter of Credit,
other than as a result of (A) the gross negligence or willful misconduct of the
Agent as determined by a final judgment of a court of competent jurisdiction or
(B) subject to the following clause (ii), the wrongful dishonor by the Agent of
a proper demand for payment made under any Letter of Credit or (ii) the failure
of the Agent to honor a drawing under any such Letter of Credit as a result of
any act or omission, whether rightful or wrongful, of any present or future de
jure or de facto government or governmental authority (all such acts or
omissions herein called "Governmental Acts").
2.9.9 Liability for Acts and Omissions.
As between any Loan Party and the Agent, such Loan Party assumes all
risks of the acts and omissions of, or misuse of the Letters of Credit by, the
respective beneficiaries of such Letters of Credit. In furtherance and not in
limitation of the foregoing, the Agent shall not be responsible for: (i) the
form, validity, sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the application for an
issuance of any such Letter of Credit, even if it should in fact prove to be in
any or all respects invalid, insufficient, inaccurate, fraudulent or forged;
(ii) the validity or sufficiency of any
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instrument transferring or assigning or purporting to transfer or assign any
such Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, which may prove to be invalid or ineffective for any
reason; (iii) failure of the beneficiary of any such Letter of Credit to comply
fully with any conditions required in order to draw upon such Letter of Credit;
(iv) errors, omissions, interruptions or delays in transmission or delivery of
any messages, by mail, cable, telegraph, or otherwise, whether or not they be in
cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay
in the transmission or otherwise of any document required in order to make a
drawing under any such Letter of Credit or of the proceeds thereof; (vii) the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit; or (viii) any consequences arising
from causes beyond the control of the Agent, including any Governmental Acts,
and none of the above shall affect or impair, or prevent the vesting of, any of
the Agent's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions set forth above, any action taken or omitted by the Agent under or in
connection with the Letters of Credit issued by it or any documents and
certificates delivered thereunder, if taken or omitted in good-faith, shall not
put the Agent under any resulting liability to the Borrowers.
3. [RESERVED]
4. INTEREST RATES
4.1 Interest Rate Options.
Each Borrower shall pay interest in respect of the outstanding unpaid
principal amount of the Revolving Credit Loans as selected by PhyMatrix, as
agent for such Borrower, from the Base Rate Option or Euro-Rate Option set forth
below applicable to the Revolving Credit Loans, it being understood that,
subject to the provisions of this Agreement, PhyMatrix, as such agent, may
select different Interest Rate Options and different Interest Periods to apply
simultaneously to the Revolving Credit Loans comprising different Borrowing
Tranches and may convert to or renew one or more Interest Rate Options with
respect to all or any portion of the Revolving Credit Loans comprising any
Borrowing Tranche, provided that there shall not be at any one time outstanding
more than five (5) Borrowing Tranches in the aggregate among all the Revolving
Credit Loans accruing interest at either the Euro-Rate Option or the Base-Rate
Option. If at any time the designated rate applicable to any Revolving Credit
Loan made by any Bank exceeds such Bank's highest lawful rate, the rate of
interest on such Bank's Revolving Credit Loan shall be limited to such Bank's
highest lawful rate.
4.1.1 Revolving Credit Interest Rate Options.
PhyMatrix, as agent for the Borrowers, shall have the right to select
from the following Interest Rate Options applicable to the Revolving Credit
Loans:
(i) Base Rate Option: A fluctuating rate per annum (computed on the
basis of a year of 365 or 366 days, as the case may be, and actual days elapsed)
equal to
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the Base Rate plus the Applicable Base Rate Margin (as defined in Section
4.1.2), such interest rate to change automatically from time to time effective
as of the effective date of each change in the Base Rate; and
(ii) Euro-Rate Option: A rate per annum (computed on the basis of a
year of 360 days and actual days elapsed) equal to the Euro-Rate plus the
Applicable Euro-Rate Margin (as defined in Section 4.1.2) in respect of the
Interest Period selected by PhyMatrix.
4.1.2 Interest Rate Margins
As used herein in respect of any fiscal quarter, the "Applicable Base
Rate Margin" and the "Applicable Euro-Rate Margin" shall be the margins,
expressed as percentage points per annum, described below in relation to the
ratio of Senior Funded Debt at the end of the relevant quarter to (y) Cash Flow
from Operations for the fiscal quarter for which the Borrowers have delivered
the material required by Sections 8.3.2 and 8.3.3, annualized in each case to
express a period of four (4) rolling quarters beginning with the quarter ended
July 31, 1997, adjusted as of the date such statements are due.
(i) If the ratio is less than or equal to 1.25 to 1.0, then the
Applicable Base Rate Margin shall be zero percent (0%) and the Applicable
Euro-Rate Margin shall be seven-eighths percent (.875%).
(ii) If the ratio is greater than 1.25 to 1.0 but less than or equal to
1.6 to 1.0, then the Applicable Base Rate Margin shall be zero percent (0%) and
the Applicable Euro-Rate Margin shall be one and one-eighth percent (1.125%).
(iii) If the ratio is greater than 1.6 to 1.0 but less than or equal to
2.0 to 1.0, then the Applicable Base Rate Margin shall be zero percent (0%) and
the Applicable Euro-Rate Margin shall be one and three eighths percent (1.375%).
(iv) If the ratio is greater than 2.0 to 1.0 but less than or equal to
2.4 to 1.0, then the Applicable Base Rate Margin shall be one eighth of one
percent (.125%) and the Applicable Euro-Rate Margin shall be one and
five-eighths percent (1.625%).
(v) If the ratio is greater than 2.4 to 1.0, then the Applicable Base
Rate Margin shall be three-eighths percent (.375%) and the Applicable Euro-Rate
Margin shall be one and seven-eighths percent (1.875%).
4.1.3 Rate Quotations.
PhyMatrix, as agent for the Borrowers, may call the Agent on or before
the date on which a Revolving Credit Loan Request is to be delivered to receive
an indication of the rates then in effect, but it is acknowledged that such
projection shall not be binding on the Agent or the Banks nor affect the rate of
interest which thereafter is actually in effect when the election is made.
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4.2 Interest Periods.
At any time when PhyMatrix, as agent for the Borrowers, shall select,
convert to or renew a Euro-Rate Option, PhyMatrix shall notify the Agent thereof
at least two (2) Business Days prior to the effective date of such Euro-Rate
Option by delivering a Revolving Credit Loan Request. The notice shall specify
an interest period (the "Interest Period") during which such Interest Rate
Option shall apply, such Interest Period to be one, two, three or six Months in
the event of a Euro-Rate Option, provided, that:
4.2.1 Ending Date and Business Day.
any Interest Period which would otherwise end on a date which is not a
Business Day shall be extended to the next succeeding Business Day unless such
Business Day falls in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day;
4.2.2 Amount of Borrowing Tranche.
each Borrowing Tranche of Euro-Rate Revolving Credit Loans shall be in
integral multiples of $250,000 and not less than $1,000,000;
4.2.3 Termination Before Expiration Date.
PhyMatrix shall not select, convert to or renew an Interest Period for
any portion of the Revolving Credit Loans that would end after the Expiration
Date; and
4.2.4 Renewals.
in the case of the renewal of a Euro-Rate Option at the end of an
Interest Period, the first day of the new Interest Period shall be the last day
of the preceding Interest Period, without duplication in payment of interest for
such day.
4.3 Interest After Default.
To the extent permitted by Law, upon the occurrence of an Event of Default
and until such time such Event of Default shall have been cured or waived:
4.3.1 Letter of Credit Fees, Interest Rate.
The Letter of Credit Fees and the rate of interest for each Revolving
Credit Loan otherwise applicable pursuant to Section 2.9 or Section 4.1
respectively shall be increased by 2.0% per annum; and
4.3.2 Other Obligations.
Each other Obligation hereunder if not paid when due shall bear
interest at a rate per annum equal to the sum of the rate of interest applicable
under the Base Rate Option
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(including the Applicable Base Rate Margin) plus an additional 2% per annum from
the time such Obligation becomes due and payable and until it is paid in full.
4.3.3 Acknowledgment.
Each Borrower acknowledges that such increased rates reflect, among
other things, the fact that such Revolving Credit Loans or other amounts have
become a substantially greater risk given their default status and that the
Banks are entitled to additional compensation for such risk; and, all such
interest shall be payable by the Borrowers upon demand by Agent.
4.4 Euro-Rate Unascertainable.
4.4.1 Unascertainable.
If on any date on which a Euro-Rate would otherwise be determined, the
Agent shall have determined that:
(i) adequate and reasonable means do not exist for ascertaining such
Euro-Rate, or
(i) a contingency has occurred which materially and adversely affects
the secondary market for negotiable certificates of deposit maintained by
dealers of recognized standing relating to the London interbank eurodollar
market relating to the Euro-Rate, the Agent shall have the rights specified in
Section 4.4.3.
4.4.2 Illegality; Increased Costs; Deposits Not Available.
If at any time any Bank shall have determined that:
(i) the making, maintenance or funding of any Revolving Credit Loan to
which a Euro-Rate Option applies has been made impracticable or unlawful by
compliance by such Bank in good-faith with any Law or any interpretation or
application thereof by any Official Body or with any request or directive of any
such Official Body (whether or not having the force of Law), or
(ii) such Euro-Rate Option will not adequately and fairly reflect the
cost to such Bank of the establishment or maintenance of any such Revolving
Credit Loan, or
(iii) after making all reasonable efforts, deposits of the relevant
amount in Dollars for the relevant Interest Period for a Revolving Credit Loan
to which a Euro-Rate Option applies, respectively, are not available to such
Bank in the London interbank market, then the Agent shall have the rights
specified in Section 4.4.3.
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4.4.3 Agent's and Bank's Rights.
In the case of any event specified in subsection 4.4.1 above, the
Agent shall promptly so notify the Banks and PhyMatrix, as agent for the
Borrowers, thereof, and in the case of an event specified in subsection 4.4.2
above, such Bank shall promptly so notify the Agent and endorse a certificate to
such notice as to the specific circumstances of such notice, and the Agent shall
promptly send copies of such notice and certificate to the other Banks and
PhyMatrix. Upon such date as shall be specified in such notice (which shall not
be earlier than the date such notice is given) the obligation of (A) the Banks,
in the case of such notice given by the Agent, or (B) such Bank, in the case of
such notice given by such Bank, to allow PhyMatrix, as agent for the Borrowers,
to select, convert to or renew a Euro-Rate Option shall be suspended until the
Agent shall have later notified PhyMatrix, in such capacity, or such Bank shall
have later notified the Agent, of the Agent's or such Bank's, as the case may
be, determination that the circumstances giving rise to such previous
determination no longer exist. If at any time the Agent makes a determination
under subsection 4.4.1 of this Section 4.4 and PhyMatrix has previously notified
the Agent of its selection of, conversion to or renewal of a Euro-Rate Option
and such Interest Rate Option has not yet gone into effect, such notification
shall be deemed to provide for selection of, conversion to or renewal of the
Base Rate Option otherwise available with respect to such Revolving Credit
Loans. If any Bank notifies the Agent of a determination under subsection 4.4.2
of this Section 4.4, the Borrowers shall, subject to the Borrowers'
indemnification Obligations under Section 5.6.2, as to any Revolving Credit Loan
of the Bank to which a Euro-Rate Option applies, on the date specified in such
notice either convert such Revolving Credit Loan to the Base Rate Option
otherwise available with respect to such Revolving Credit Loan or prepay such
Revolving Credit Loan in accordance with Section 5.4. Absent due notice from
PhyMatrix of conversion or prepayment, such Revolving Credit Loan shall
automatically be converted to the Base Rate Option otherwise available with
respect to such Revolving Credit Loan upon such specified date.
4.5 Selection of Interest Rate Options.
If PhyMatrix, as agent for the Borrowers, fails to select a new Interest
Period to apply to any Borrowing Tranche of Euro-Rate Revolving Credit Loans at
the expiration of an existing Interest Period applicable to such Borrowing
Tranche in accordance with the provisions of Section 4.2, the Borrowers shall be
deemed to have converted such Borrowing Tranche to the Base Rate Option
commencing upon the last day of the existing Interest Period.
5. PAYMENTS
5.1 Payments.
All payments and prepayments to be made in respect of principal, interest,
Commitment Fees, Facility Fees, Letter of Credit Fees, Agent's Fees or other
fees or amounts due from the Borrowers hereunder shall be payable prior to 11:00
a.m., Pittsburgh time, on the date when due without presentment, demand, protest
or notice of any kind, all of which are hereby expressly waived by the
Borrowers, and without set-off, counterclaim or other deduction of any
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nature, and an action therefor shall immediately accrue. Such payments (other
than the Agent's Fees) shall be made to the Agent at the Principal Office for
the ratable accounts of the Banks with respect to the Revolving Credit Loans in
U.S. Dollars and in immediately available funds, and the Agent shall promptly
distribute such amounts to the Banks in immediately available funds, provided
that in the event payments are received by 11:00 a.m., Pittsburgh time, by the
Agent with respect to the Revolving Credit Loans and such payments are not
distributed to the Banks on the same day received by the Agent, the Agent shall
pay the Banks the Federal Funds Effective Rate with respect to the amount of
such payments for each day held by the Agent and not distributed to the Banks.
The Agent's and each Bank's statement of account, ledger or other relevant
record shall, in the absence of manifest error, be conclusive as the statement
of the amount of principal of and interest on the Revolving Credit Loans and
other amounts owing under this Agreement and shall be deemed an "account
stated."
5.2 Pro Rata Treatment of Banks.
Each borrowing shall be allocated to each Bank according to its Ratable
Share, and each selection of, conversion to or renewal of any Interest Rate
Option and each payment or prepayment by the Borrowers with respect to
principal, interest, Commitment Fees, Facility Fees, Letter of Credit Fees or
other fees (except for the Agent's Fees) or amounts due from the Borrowers
hereunder to the Banks with respect to the Revolving Credit Loans, shall (except
as provided in Section 4.4.2, 5.4.2 or 5.6.1) be made in proportion to the
applicable Revolving Credit Loans outstanding from each Bank and, if no such
Revolving Credit Loans are then outstanding, in proportion to the Ratable Share
of each Bank.
5.3 Interest Payment Dates.
Interest on Revolving Credit Loans at the prevailing rate to which the Base
Rate Option applies shall be due and payable in arrears on the first Business
Day of each August, November, February and May after the date hereof and on the
Expiration Date or upon acceleration of the Notes. Interest on Revolving Credit
Loans to which the Euro-Rate Option applies shall be due and payable on the last
day of each Interest Period for those Revolving Credit Loans and, if any such
Interest Period is longer than three months, also on the day which is three (3)
months after the first day of such Interest Period and the last day of such
Interest Period. Interest on mandatory prepayments of principal under Section
5.5 shall be due on the date such mandatory prepayment is due. Interest on the
principal amount of each Revolving Credit Loan or other monetary Obligation
shall be due and payable on demand after such principal amount or other monetary
Obligation becomes due and payable (whether on the stated maturity date, upon
acceleration or otherwise).
5.4 Voluntary Prepayments.
5.4.1 Right to Prepay.
Each Borrower shall have the right at its option from time to time to
prepay the Revolving Credit Loans in whole or part without premium or penalty
(except as provided in subsection 5.4.2 below or in Section 5.6):
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(i) at any time with respect to any Revolving Credit Loan to which the
Base Rate Option applies,
(ii) on the last day of the applicable Interest Period with respect to
Revolving Credit Loans to which a Euro-Rate Option applies, or
(iii) on the date specified in a notice by any Bank pursuant to
Section 4.4.2 with respect to any Revolving Credit Loan to which a Euro-Rate
Option applies.
Whenever a Borrower desires to prepay any part of the Revolving Credit
Loans, it shall cause PhyMatrix, as its agent, to provide a prepayment notice to
the Agent by 1:00 p.m. at least one (1) Business Day prior to the date of
prepayment of Revolving Credit Loans setting forth the following information:
(x) the date, which shall be a Business Day, on which the
proposed prepayment is to be made; and
(y) a statement indicating the application of the prepayment
between the Revolving Credit Loans.
All prepayment notices shall be irrevocable. The principal amount of
the Revolving Credit Loans for which a prepayment notice is given, together with
interest on such principal amount except with respect to Revolving Credit Loans
to which the Base Rate Option applies, shall be due and payable on the date
specified in such prepayment notice as the date on which the proposed prepayment
is to be made. If a Borrower prepays a Revolving Credit Loan but fails to
specify the applicable Borrowing Tranche which the Borrower is prepaying, the
prepayment shall be applied first to Revolving Credit Loans to which the Base
Rate Option applies, then to Revolving Credit Loans to which the Euro-Rate
Option applies. Any prepayment hereunder shall be subject to the Borrowers'
Obligation to indemnify the Banks under Section 5.6.2.
5.4.2 Replacement of a Bank.
In the event any Bank (i) gives notice under Section 4.4.2 or Section
5.6.1, (ii) does not fund Revolving Credit Loans because the making of such
Revolving Credit Loans would contravene any Law applicable to such Bank, (iii)
does not approve any action as to which consent of the Required Banks is
requested by PhyMatrix and obtained hereunder, or (iv) becomes subject to the
control of an Official Body (other than normal and customary supervision), then
PhyMatrix shall have the right at its option, with the consent of the Agent,
which shall not be unreasonably withheld, conditioned or delayed to prepay the
Revolving Credit Loans of such Bank in whole, together with all interest accrued
thereon, and terminate such Bank's Revolving Credit Commitment within ninety
(90) days after (w) receipt of such Bank's notice under Section 4.4.2 or 5.6.1,
(x) the date such Bank has failed to fund Revolving Credit Loans because the
making of such Revolving Credit Loans would contravene Law applicable to such
Bank, (y) the date of obtaining the consent which such Bank has not approved, or
(z) the date such Bank became subject to the control of an Official Body, as
applicable; provided that the
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Borrowers shall also pay to such Bank at the time of such prepayment any amounts
required under Section 5.6 and any accrued interest due on such amount and any
related fees; provided, however, that the Revolving Credit Commitment of such
Bank shall be provided by one or more of the remaining Banks or a replacement
bank acceptable to the Agent and PhyMatrix; provided, further, the remaining
Banks shall have no obligation hereunder to increase their Revolving Credit
Commitments. Notwithstanding the foregoing, the Agent may only be replaced
subject to the requirements of Section 10.14 and provided that all Letters of
Credit have expired or been terminated or replaced.
5.5 Mandatory Prepayments.
5.5.1 Sale of Assets.
In respect of any sale of assets authorized by Section 8.2.7(v)
yielding after-tax proceeds in excess of $3,000,000, the Borrowers shall make a
mandatory prepayment of principal and accrued interest thereunder on the
Revolving Credit Loans equal to the after-tax proceeds of such sale (as
estimated in good-faith by the Borrowers). Notwithstanding the foregoing, the
Borrowers may apply up to an aggregate of $3,000,000 (after-tax) proceeds of any
one or more such sales to the purchase of assets to be used in a Permitted Line
of Business and the assets so acquired become Collateral (to the extent and in
the manner contemplated in the Loan Documents) for the Obligations subject to a
perfected first-priority lien in favor of the Agents on behalf of the Banks, so
long as such substitute assets are acquired within ninety (90) days after such
sale of assets; if such assets are not so acquired, the Borrowers shall pay the
amount required hereunder not later than five (5) days after the end of such
ninety (90) day period.
5.5.2 Application Among Interest Rate Options.
All prepayments required pursuant to this Section 5.5 shall first be
applied among the Interest Rate Options to the principal amount of the Revolving
Credit Loans subject to a Base Rate Option, then to Revolving Credit Loans
subject to the Euro-Rate Option. In accordance with Section 5.6.2, the Borrowers
shall indemnify the Banks for any loss or expense, including loss of margin,
incurred with respect to any such prepayments applied against Revolving Credit
Loans subject to a Euro-Rate Option on any day other than the last day of the
applicable Interest Period. In order to avoid the payment of fees under Section
5.6.2(i) when proceeds of asset sales are to be applied pursuant to this Section
5.5, the Borrowers may establish on terms acceptable to the Banks a cash
collateral account with, and under the exclusive control of, the Agent on behalf
of the Banks into which proceeds described in this Section 5.5 may be placed and
later applied to repay Revolving Credit Loans subject to the Euro-Rate Option at
the end of their respective Interest Periods.
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5.6 Additional Compensation in Certain Circumstances.
5.6.1 Increased Costs or Reduced Return Resulting From Taxes,
Reserves, Capital Adequacy Requirements, Expenses, Etc.
If any Law, guideline or interpretation or any change in any Law,
guideline or interpretation or application thereof by any Official Body charged
with the interpretation or administration thereof or compliance with any request
or directive (whether or not having the force of Law) of any central bank or
other Official Body:
(i) subjects any Bank to any tax or changes the basis of taxation with
respect to this Agreement, the Notes, the Revolving Credit Loans or payments by
the Borrowers of principal, interest, Commitment Fees, or other amounts due from
the Borrowers hereunder or under the Notes (except for taxes on the overall net
income of such Bank),
(ii) imposes, modifies or deems applicable any reserve, special
deposit or similar requirement against credits or Revolving Credit Commitments
to extend credit extended by, or assets (funded or contingent) of, deposits with
or for the account of, or other acquisitions of funds by, any Bank, or
(iii) imposes, modifies or deems applicable any capital adequacy or
similar requirement (A) against assets (funded or contingent) of, or letters of
credit, other credits or Revolving Credit Commitments to extend credit extended
by, any Bank, or (B) otherwise applicable to the obligations of any Bank under
this Agreement,
and the result of any of the foregoing is to increase the cost to, reduce the
income receivable by, or impose any expense (including loss of margin) upon any
Bank with respect to this Agreement, the Notes or the making, maintenance or
funding of any part of the Revolving Credit Loans (or, in the case of any
capital adequacy or similar requirement, to have the effect of reducing the rate
of return on any Bank's capital, taking into consideration such Bank's customary
policies with respect to capital adequacy) by an amount which such Bank in its
sole discretion deems to be material, such Bank shall from time to time notify
PhyMatrix, as agent for the Borrowers, and the Agent of the amount determined in
good-faith (using any averaging and attribution methods employed in good-faith)
by such Bank to be necessary to compensate such Bank for such increase in cost,
reduction of income or additional expense. Such notice shall set forth in
reasonable detail the basis for such determination. Such amount shall be due and
payable by the Borrowers to such Bank ten (10) Business Days after such notice
is given.
5.6.2 Indemnity.
In addition to the compensation required by subsection 5.6.1 of this
Section 5.6, the Borrowers shall indemnify each Bank against all reasonable and
customary liabilities, losses or expenses (including loss of margin, any loss or
expense incurred in liquidating or employing deposits from third parties and any
loss or expense incurred in connection with funds acquired by a Bank to fund or
maintain Revolving Credit Loans subject to the Euro-Rate Option) which such Bank
sustains or incurs as a consequence of any
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(i) payment, prepayment, conversion or renewal of any Revolving Credit
Loan to which the Euro-Rate Option applies on a day other than the last day of
the corresponding Interest Period (whether or not such payment or prepayment is
mandatory, voluntary or automatic and whether or not such payment or prepayment
is then due),
(ii) attempt by the Borrowers to revoke (expressly, by later
inconsistent notices or otherwise) in whole or part any notice relating to
Revolving Credit Loan Requests under Section 2.5 or Section 4.2 or prepayments
under Section 5.4, or
(iii) default by any Borrower in the performance or observance of any
covenant or condition contained in this Agreement or any other Revolving Credit
Loan Document, including any failure of any Borrower to pay when due (by
acceleration or otherwise) any principal, interest, Commitment Fee or any other
amount due hereunder.
If any Bank sustains or incurs any such loss or expense, it shall from
time to time notify PhyMatrix, as agent for the Borrowers, of the amount
determined in good-faith by such Bank (which determination may include such
assumptions, allocations of costs and expenses and averaging or attribution
methods as such Bank shall deem reasonable) to be necessary to indemnify such
Bank for such loss or expense. Such notice shall set forth in reasonable detail
the basis for such determination. Such amount shall be due and payable by the
Borrowers to such Bank ten (10) Business Days after such notice is given.
6. REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties.
The Loan Parties, jointly and severally, represent and warrant to the Agent
and each of the Banks as follows (for purposes of this Section 6 other than
Sections 6.1.3, 6.1.9 and 6.1.20, the term "Subsidiary" shall be deemed to
exclude Excluded Entities):
6.1.1 Organization and Qualification.
Each Loan Party and each Subsidiary of each Loan Party is a
corporation, limited liability company or partnership, duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization. Each Loan Party and each Subsidiary of each Loan Party has the
lawful power to own or lease its properties and to engage in the business it
presently conducts. Each Loan Party and each Subsidiary of each Loan Party is
duly licensed or qualified and in good standing in each jurisdiction listed on
Schedule 6.1.1 and in all other jurisdictions where the failure so to license or
qualify would have or cause a Material Adverse Change.
6.1.2 Capitalization and Ownership.
The authorized capital stock of PhyMatrix (referred to herein as the
"Shares") as of the Closing Date is as shown on Schedule 6.1.2. All of the
Shares have been
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validly issued and are fully paid and nonassessable. There are no options,
warrants or other rights outstanding to purchase any such shares except as
indicated on Schedule 6.1.2.
6.1.3 Subsidiaries.
Schedule 6.1.3(A) states the name of each Subsidiary of PhyMatrix, its
jurisdiction of incorporation, its authorized capital stock, the issued and
outstanding shares (referred to herein collectively as the "Subsidiary Shares")
and the owners thereof if it is a corporation and its outstanding limited
liability company or partnership interests (the "Partnership Interests") if it
is a limited liability company or partnership. PhyMatrix has good and marketable
title to all of the Subsidiary Shares and Partnership Interests it purports to
own, free and clear in each case of any Lien. All Subsidiary Shares and
Partnership Interests have been validly issued, and all Subsidiary Shares are
fully paid and nonassessable. All capital contributions and other consideration
required to be made or paid in connection with the issuance of the Partnership
Interests have been made or paid, as the case may be. There are no options,
warrants or other rights outstanding to purchase any such Subsidiary Shares or
Partnership Interests except as indicated on Schedule 6.1.3(A). Except as shown
on Schedule 6.1.3(B), each Subsidiary of PhyMatrix is a Loan Party hereunder and
is listed on the signature lines and Schedule 6.1.3(A), as a Guarantor or a
Borrower. Schedule 6.1.3(B) lists all Excluded Entities, the jurisdiction of
their formation and any Loan Party's equity interest and cash investment
therein.
6.1.4 Power and Authority.
Each Loan Party has full power to enter into, execute, deliver and
carry out this Agreement and the other Loan Documents to which it is a party, to
incur the Indebtedness contemplated by the Loan Documents and to perform its
Obligations under the Loan Documents to which it is a party, and all such
actions have been duly authorized by all necessary proceedings on its part.
6.1.5 Validity and Binding Effect.
This Agreement has been duly and validly executed and delivered by
each Loan Party, and each other Loan Document which any Loan Party is required
to execute and deliver on or after the date hereof will have been duly executed
and delivered by such Loan Party on the required date of delivery of such Loan
Document. This Agreement and each other Loan Document constitutes, or will
constitute, legal, valid and binding obligations of each Loan Party which is or
will be a party thereto on and after its date of delivery thereof, enforceable
against such Loan Party in accordance with its terms, except to the extent that
enforceability of any of such Loan Documents may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforceability of creditors' rights generally or limiting the right of specific
performance.
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6.1.6 No Conflict.
Neither the execution and delivery of this Agreement or the other Loan
Documents by any Loan Party nor the consummation of the transactions herein or
therein contemplated or compliance with the terms and provisions hereof or
thereof by them will conflict with, constitute a default under or result in any
breach of (i) the terms and conditions of the certificate of incorporation,
bylaws or other organizational documents of any Loan Party or (ii) any Law or of
any material agreement or instrument or order, writ, judgment, injunction or
decree to which any Loan Party is a party or by which it is bound or to which it
is subject, or result in the creation or enforcement of any Lien, charge or
encumbrance whatsoever upon any property (now or hereafter acquired) of any Loan
Party (other than Liens granted under the Loan Documents).
6.1.7 Litigation.
Except as disclosed on Schedule 6.1.7, there are no actions, suits,
proceedings or investigations pending or, to the knowledge of any Loan Party,
threatened against such Loan Party or any Subsidiary of such Loan Party at law
or equity before any Official Body which individually or in the aggregate may
result in any Material Adverse Change. None of the Loan Parties or any
Subsidiaries of any Loan Party is in violation of any order, writ, injunction or
any decree of any Official Body which may result in any Material Adverse Change.
6.1.8 Title to Properties.
The real property owned or leased by each Loan Party and each
Subsidiary of each Loan Party is described on Schedule 6.1.8. Each Loan Party
and each Subsidiary of each Loan Party has good and marketable title to or valid
leasehold interest in all material properties, assets and other rights which it
purports to own or lease or which are reflected as owned or leased on its books
and records, free and clear of all Liens and encumbrances except Permitted
Liens, and subject to the terms and conditions of the applicable leases. All
leases of property are in full force and effect without the necessity for any
consent which has not previously been obtained upon consummation of the
transactions contemplated hereby.
6.1.9 Financial Statements.
(i) Historical Statements. PhyMatrix has delivered to the Agent copies
of its audited combined year-end financial statements for and as of the end of
the fiscal year ended December 31, 1995, the one month stub period ended January
31, 1996 and the fiscal year ended January 31, 1997 (the "Annual Statements").
In addition, PhyMatrix has delivered to the Agent copies of its unaudited
consolidated interim financial statements for the fiscal year to date and as of
the end of the fiscal quarter ended April 30, 1997 (the "Interim Statements")
(the Annual and Interim Statements being collectively referred to as the
"Historical Statements"). The Historical Statements were compiled from the books
and records maintained by PhyMatrix' management, are correct and complete in all
material respects and fairly represent the financial condition of PhyMatrix and
its Subsidiaries as of their dates and the results of operations for the fiscal
periods then ended and have been prepared in accordance with GAAP
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consistently applied, subject (in the case of the Interim Statements) to normal
year-end audit adjustments.
(i) Financial Projections. PhyMatrix has delivered to the Agent
financial projections of PhyMatrix and its Subsidiaries for the years 1998,
1999, 2000 and 2001 derived from various assumptions of PhyMatrix' management.
(ii) Accuracy of Financial Statements. Neither PhyMatrix nor any
Subsidiary of PhyMatrix has any liabilities, contingent or otherwise, or forward
or long-term revolving credit commitments that are not disclosed in the
Historical Statements or in the notes thereto, and except as disclosed therein
there are no unrealized or anticipated losses from any revolving credit
commitments of PhyMatrix or any Subsidiary of PhyMatrix which may cause a
Material Adverse Change. Since January 31, 1997, no Material Adverse Change has
occurred.
6.1.10 Margin Stock.
None of the Loan Parties or any Subsidiaries of any Loan Party engages
or intends to engage principally, or as one of its important activities, in the
business of extending credit for the purpose, immediately, incidentally or
ultimately, of purchasing or carrying margin stock (within the meaning of
Regulation U). No part of the proceeds of any Revolving Credit Loan has been or
will be used, immediately, incidentally or ultimately, to purchase or carry any
margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock or to refund Indebtedness originally incurred for such
purpose, or for any purpose which entails a violation of or which is
inconsistent with the provisions of the regulations of the Board of Governors of
the Federal Reserve System. None of the Loan Parties or any Subsidiary of any
Loan Party holds or intends to hold margin stock in such amounts that more than
25% of the reasonable value of the assets of any Loan Party or Subsidiary of any
Loan Party are or will be represented by margin stock.
6.1.11 Full Disclosure.
Neither this Agreement nor any other Loan Document, nor any
certificate, statement, agreement or other documents furnished to the Agent or
any Bank in connection herewith or therewith, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under
which they were made, not misleading. There is no fact known to any Loan Party
which materially adversely affects the business, property, assets, financial
condition, results of operations or prospects of any Loan Party or Subsidiary of
any Loan Party which has not been set forth in this Agreement or in the
certificates, statements, agreements or other documents furnished to the Agent
and the Banks prior to or at the date hereof in connection with the transactions
contemplated hereby.
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6.1.12 Taxes.
All federal, state, local and other tax returns required to have been
filed with respect to each Loan Party and each Subsidiary of each Loan Party
have been filed, and payment or adequate provision has been made for the payment
of all taxes, fees, assessments and other governmental charges which have or may
become due pursuant to said returns or to assessments received, except to the
extent that such taxes, fees, assessments and other charges are being contested
in good faith by appropriate proceedings diligently conducted and for which such
reserves or other appropriate provisions, if any, as shall be required by GAAP
shall have been made. There are no agreements or waivers extending the statutory
period of limitations applicable to any federal income tax return of any Loan
Party or Subsidiary of any Loan Party for any period.
6.1.13 Consents and Approvals.
Except for the filing of financing statements in the state and county
filing offices, no consent, approval, exemption, order or authorization of, or a
registration or filing with, any Official Body or any other Person is required
by any Law or any agreement in connection with the execution, delivery and
carrying out of this Agreement and the other Loan Documents by any Loan Party,
except as listed on Schedule 6.1.13, all of which shall have been obtained or
made on or prior to the Closing Date except as otherwise indicated on Schedule
6.1.13.
6.1.14 No Event of Default; Compliance with Instruments.
No event has occurred and is continuing and no condition exists or
will exist after giving effect to the borrowings to be made on the Closing Date
under the Loan Documents which constitutes an Event of Default or Potential
Default. None of the Loan Parties or any Subsidiaries of any Loan Party is in
violation in any material respect of (i) any term of its certificate of
incorporation, bylaws, or other organizational documents or (ii) any material
agreement or instrument to which it is a party or by which it or any of its
properties may be subject or bound where such violation would constitute a
Material Adverse Change.
6.1.15 Patents, Trademarks, Copyrights, Licenses, Etc.
Each Loan Party and each Subsidiary of each Loan Party owns or
possesses all the material patents, trademarks, service marks, trade names,
copyrights, licenses, registrations, franchises, permits and rights necessary to
own and operate its properties and to carry on its business as presently
conducted by such Loan Party or Subsidiary, without known conflict with the
rights of others. All material patents, trademarks, service marks, trade names,
copyrights, licenses, registrations, franchises and permits of each Loan Party
and each Subsidiary of each Loan Party are listed and described on Schedule
6.1.15.
6.1.16 Security Interests.
The Liens and security interests granted to the Agent for the benefit
of the Banks pursuant to the Patent, Trademark and Copyright Assignment, the
Pledge Agreement and
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the Security Agreement in the Collateral (other than the Real Property)
constitute and will continue to constitute Prior Security Interests under the
Uniform Commercial Code as in effect in each applicable jurisdiction (the
"Uniform Commercial Code") or other applicable Law entitled to all the rights,
benefits and priorities provided by the Uniform Commercial Code or such Law.
Upon the filing of financing statements relating to said security interests in
each office and in each jurisdiction where required in order to perfect the
security interests described above, taking possession of any stock certificates
or other certificates evidencing the Pledged Collateral and recordation of the
Patent, Trademark and Copyright Assignment in the United States Patent and
Trademark Office and United States Copyright Office, as applicable, all such
action as is necessary or advisable to establish such rights of the Agent will
have been taken, and there will be upon execution and delivery of the Collateral
Assignment, the Patent, Trademark and Copyright Assignment, the Pledge Agreement
and the Security Agreement, such filings and such taking of possession, no
necessity for any further action in order to preserve, protect and continue such
rights, except the filing of continuation statements with respect to such
financing statements within six months prior to each five-year anniversary of
the filing of such financing statements. All filing fees and other expenses in
connection with each such action have been or will be paid by the Borrowers.
6.1.17 [RESERVED]
6.1.18 Status of the Pledged Collateral.
All the shares of capital stock or Partnership Interests included in
the Pledged Collateral to be pledged pursuant to the Pledge Agreement are or
will be upon issuance validly issued and nonassessable and owned beneficially
and of record by the pledgor free and clear of any Lien or restriction on
transfer, except as otherwise provided by the Pledge Agreement and except as the
right of the Banks to dispose of the Shares or Partnership Interests may be
limited by the Securities Act of 1933, as amended, and the regulations
promulgated by the Securities and Exchange Commission thereunder and by
applicable state securities laws. There are no Partnership Interests except for
the Partnership Interests described on Schedule 6.1.18. The Loan Parties have
delivered to the Agent true and correct copies of all partnership agreements
under which such Partnership Interests arise.
6.1.19 Insurance.
Schedule 6.1.19 lists all insurance policies and other bonds to which
any Loan Party or Subsidiary of any Loan Party is a party, all of which are
valid and in full force and effect. No notice has been given or claim made and
no grounds exist to cancel or avoid any of such policies or bonds or to reduce
the coverage provided thereby. Such policies and bonds provide adequate coverage
from reputable and financially sound insurers in amounts sufficient to insure
the assets and risks of each Loan Party and each Subsidiary of each Loan Party
in accordance with prudent business practice in the industry of the Loan Parties
and their Subsidiaries.
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6.1.20 Compliance with Laws.
6.1.20.1 The Loan Parties and their Subsidiaries are in
compliance in all material respects with all applicable Laws (other than
Environmental Laws which are specifically addressed in subsection 6.1.25) in all
jurisdictions in which any Loan Party or Subsidiary of any Loan Party is
presently doing business except where the failure to do so would not constitute
a Material Adverse Change.
6.1.20.2 Without limiting the foregoing, except as disclosed in
PhyMatrix' filings with the Securities and Exchange Commission and timely
delivered to the Banks pursuant to Section 8.3, neither the Borrower, any
Subsidiary, nor any of their respective stockholders, officers or directors,
have engaged on behalf of Borrower or any Subsidiary in any of the following:
(i) knowingly and willfully making or causing to be made a false statement or
representation of a material fact in any applications for any benefit or payment
under the Medicare or Medicaid program; (ii) knowingly and willfully making or
causing to be made any false statement or representation of a material fact for
use in determining rights to any benefit or payment under the Medicare or
Medicaid program; (iii) failing to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right to any benefit
or payment under the Medicare or Medicaid program on its own behalf or on the
behalf of another, with intent to secure such benefit or payment fraudulently;
(iv) knowingly and willfully soliciting or receiving any remuneration (including
any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in
cash or in kind or offering to pay such remuneration (a) in return for referring
an individual to a Person for the furnishing or arranging for the furnishing of
any item or service for which payment may be made in whole or in part by
Medicare or Medicaid, or (b) in return for purchasing, leasing or ordering or
arranging for or recommending the purchasing, leasing or ordering of any good,
facility, service or item for which payment may be made in whole or in part by
Medicare or Medicaid. No activity of the Borrower or any Subsidiary shall be
considered to be a breach of this Section, except in the case of a knowing and
willful violation thereof, until the Borrowers or such Subsidiary has received
notification, written or oral, by a governmental authority of competent
jurisdiction as to any such violation.
6.1.21 Material Contracts.
To the best of the Loan Parties' knowledge, all material governmental
approvals of the Loan Parties are in full force and effect and have not been
amended or otherwise modified (except for modifications which would not
constitute a Material Adverse Change), rescinded, revoked or assigned, and no
notice has been received of any material violation of applicable Laws or any
refusal to renew any material approval which could reasonably be expected to
cause any such approvals to be modified, rescinded or revoked (except for
modifications, rescissions or revocations which would not constitute a Material
Adverse Change). The continuation, validity and effectiveness of all such
approvals will in no way be adversely affected by the transactions contemplated
by this Agreement. No Loan Party knows of any reason why any of them will not be
able to maintain, after the Closing Date, all material approvals necessary or
appropriate to construct, own, lease, manage, and operate all of their
facilities and to otherwise conduct their businesses as now conducted. There are
no material deficiencies to the conditions for participation by any Loan Party
in any Medicare, Medicaid or
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other reimbursement programs which would preclude such participation, nor, other
than routine, scheduled audits, is there any pending or, to the knowledge of the
Borrowers, threatened investigation, proceeding or other action by Medicare or
Medicaid to exclude any Loan Party from participation in such programs.
6.1.22 Investment Companies.
None of the Loan Parties or any Subsidiaries of any Loan Party is an
"investment company" registered or required to be registered under the
Investment Company Act of 1940 or under the "control" of an "investment company"
as such terms are defined in the Investment Company Act of 1940 and shall not
become such an "investment company" or under such "control."
6.1.23 Plans and Benefit Arrangements.
Except as set forth on Schedule 6.1.23:
(i) PhyMatrix, its Subsidiaries and each member of the ERISA Group are
in compliance in all material respects with any applicable provisions of ERISA
with respect to all Benefit Arrangements, Plans and Multiemployer Plans. There
has been no Prohibited Transaction with respect to any Benefit Arrangement or
any Plan or, to the best knowledge of PhyMatrix and its Subsidiaries, with
respect to any Multiemployer Plan or Multiple Employer Plan, which could result
in any material liability of PhyMatrix, its Subsidiaries or any other member of
the ERISA Group. PhyMatrix, its Subsidiaries and all members of the ERISA Group
have made when due any and all payments required to be made under any agreement
relating to a Multiemployer Plan or a Multiple Employer Plan or any Law
pertaining thereto. With respect to each Plan and Multiemployer Plan, PhyMatrix,
its Subsidiaries and each member of the ERISA Group (i) have fulfilled in all
material respects their obligations under the minimum funding standards of
ERISA, (ii) have not incurred any liability to the PBGC, and (iii) have not had
asserted against them any penalty for failure to fulfill the minimum funding
requirements of ERISA.
(ii) To the best of each Loan Parties' knowledge, each Multiemployer
Plan and Multiple Employer Plan is able to pay benefits thereunder when due.
(iii) Neither PhyMatrix, its Subsidiaries nor any other member of the
ERISA Group has instituted or intends to institute proceedings to terminate any
Plan.
(iv) No event requiring notice to the PBGC under Section 302(f)(4)(A)
of ERISA has occurred or is reasonably expected to occur with respect to any
Plan, and no amendment with respect to which security is required under Section
307 of ERISA has been made or is reasonably expected to be made to any Plan.
(v) The aggregate actuarial present value of all benefit liabilities
(whether or not vested) under each Plan, determined on a plan termination basis,
as
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disclosed in, and as of the date of, the most recent actuarial report for such
Plan, does not exceed the aggregate fair market value of the assets of such
Plan.
(vi) Neither PhyMatrix, its Subsidiaries nor any other member of the
ERISA Group has incurred or reasonably expects to incur any material withdrawal
liability under ERISA to any Multiemployer Plan or Multiple Employer Plan.
Neither PhyMatrix, its Subsidiaries nor any other member of the ERISA Group has
been notified by any Multiemployer Plan or Multiple Employer Plan that such
Multiemployer Plan or Multiple Employer Plan has been terminated within the
meaning of Title IV of ERISA and, to the best knowledge of PhyMatrix and its
Subsidiaries, no Multiemployer Plan or Multiple Employer Plan is reasonably
expected to be reorganized or terminated, within the meaning of Title IV of
ERISA.
(vii) To the extent that any Benefit Arrangement is insured,
PhyMatrix, its Subsidiaries and all members of the ERISA Group have paid when
due all premiums required to be paid for all periods through the Closing Date.
To the extent that any Benefit Arrangement is funded other than with insurance,
PhyMatrix, its Subsidiaries and all members of the ERISA Group have made when
due all contributions required to be paid for all periods through the Closing
Date.
(viii) All Plans, Benefit Arrangements and Multiemployer Plans have
been administered in accordance with their terms and applicable Law.
6.1.24 Employment Matters.
Each of the Loan Parties is in compliance with the Labor Contracts and
all applicable federal, state and local labor and employment Laws including
those related to equal employment opportunity and affirmative action, labor
relations, minimum wage, overtime, child labor, medical insurance continuation,
worker adjustment and relocation notices, immigration controls and worker and
unemployment compensation, where the failure to comply would constitute a
Material Adverse Change. There are no outstanding grievances, arbitration awards
or appeals therefrom arising out of the Labor Contracts or current or threatened
strikes, picketing, handbilling or other work stoppages or slowdowns at
facilities of any of the Loan Parties which in any case would constitute a
Material Adverse Change. The Borrowers shall deliver to the Agent upon the
Agent's request true and correct copies of each of the Labor Contracts.
6.1.25 Environmental Matters.
Except as disclosed on Schedule 6.1.25:
(i) None of the Loan Parties or any Subsidiaries of any Loan Party has
received any Environmental Complaint from any Official Body or private Person
alleging that such Loan Party or Subsidiary or any prior or subsequent owner of
the Property is a potentially responsible party under the Comprehensive
Environmental Response, Cleanup and Liability Act, 42 U.S.C. ss. 9601, et seq.,
and none of the Loan Parties has received notice that such an Environmental
Complaint might be received. None of the Loan Parties or any Subsidiary of any
Loan Party has received notice of pending or threatened Environmental
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Complaints relating to any Loan Party or Subsidiary of any Loan Party or, to any
Loan Party's knowledge, any prior or subsequent owner of the Property pertaining
to, or arising out of, any Environmental Conditions.
(ii) Except for conditions, violations or failures which individually
and in the aggregate are not reasonably likely to result in a Material Adverse
Change, there are no circumstances at, on or under the Property that constitute
a breach of or non-compliance with any of the Environmental Laws, and there are
no past or present Environmental Conditions at, on or under the Property or, to
any Loan Party's knowledge, at, on or under adjacent property, that prevent
compliance with the Environmental Laws at the Property.
(iii) Neither the Property nor any structures, improvements, equipment,
fixtures, activities or facilities thereon or thereunder contain or use
Regulated Substances except in compliance with Environmental Laws. There are no
processes, facilities, operations, equipment or any other activities at, on or
under the Property, or, to any Loan Party's knowledge, at, on or under adjacent
property, that currently result in the release or threatened release of
Regulated Substances onto the Property, except to the extent that such releases
or threatened releases are not a breach of or otherwise not a violation of the
Environmental Laws or are not likely to result in a Material Adverse Change.
(iv) There are no aboveground storage tanks, underground storage tanks
or underground piping associated with such tanks, used for the management of
Regulated Substances at, on or under the Property that (a) do not have, to the
extent required by Environmental Laws, a full operational secondary containment
system in place, and (b) are not otherwise in compliance with all Environmental
Laws. There are no abandoned underground storage tanks or underground piping
associated with such tanks, previously used for the management of Regulated
Substances at, on or under the Property that have not either been closed in
place in accordance with Environmental Laws or removed in compliance with all
applicable Environmental Laws and no contamination associated with the use of
such tanks exists on the Property that is not in compliance with Environmental
Laws.
(v) Each Loan Party and each Subsidiary of any Loan Party has all
material permits, licenses, authorizations, plans and approvals necessary under
the Environmental Laws for the conduct of the business of such Loan Party and
Subsidiary as presently conducted. Each Loan Party and each Subsidiary of any
Loan Party has submitted all material notices, reports and other filings
required by the Environmental Laws to be submitted to an Official Body which
pertain to past and current operations on the Property.
(vi) Except for violations which individually and in the aggregate are
not likely to result in a Material Adverse Change, all past and present on-site
generation, storage, processing, treatment, recycling, reclamation, disposal or
other use or management of Regulated Substances at, on, or under the Property
and all off-site transportation, storage, processing, treatment, recycling,
reclamation, disposal or other use or management of Regulated Substances has
been done in accordance with the Environmental Laws.
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6.1.26 Senior Debt Status.
The Obligations of each Loan Party under this Agreement, the Notes,
the Guaranty Agreement and each of the other Loan Documents to which it is a
party do rank and will rank superior in priority of payment to all other
Indebtedness of such Loan Party except Indebtedness of such Loan Party to the
extent secured by Permitted Liens. There is no Lien upon or with respect to any
of the properties or income of any Loan Party or Subsidiary of any Loan Party
which secures indebtedness or other obligations of any Person except for
Permitted Liens.
6.1.27 Reimbursement from Third Party Payors.
The Accounts for the Loan Parties and for the physician groups for
which the Borrowers provide management services have been and will continue to
be adjusted in all material respects to reflect the reimbursement policies of
third party payors such as Medicare, Medicaid, Blue Cross/Blue Shield, private
insurance companies, health maintenance organizations, preferred provider
organizations, alternate delivery systems, managed care systems and other third
party payors. In particular, the Accounts relating to such third party payors do
not and shall not exceed amounts the relevant Loan Party or physician group is
entitled to receive under any capitation arrangement, fee schedule, discount
formula, cost-based reimbursement or other adjustment or limitation to the usual
charges of such physician group.
6.2 Updates to Schedules.
Should any of the information or disclosures provided on any of the
Schedules (other than Schedule 6.1.2) attached hereto become outdated or
incorrect in any material respect, the Loan Party shall promptly provide the
Agent in writing with such revisions or updates to such Schedule as may be
necessary or appropriate to update or correct same; provided, however, that no
Schedule shall be deemed to have been amended, modified or superseded by any
such correction or update, nor shall any breach of warranty or representation
resulting from the inaccuracy or incompleteness of any such Schedule be deemed
to have been cured thereby, unless either (i) such revisions or updates to such
Schedules result in, reflect or describe no Material Adverse Change or (ii)
until the Required Banks, in their reasonable discretion, shall have accepted in
writing such revisions or updates to such Schedule.
7. CONDITIONS OF LENDING
The obligation of each Bank to make Revolving Credit Loans hereunder and of
the Agent to issue Letters of Credit is subject to the performance by each of
the Loan Parties of its Obligations to be performed hereunder at or prior to the
making of any such Revolving Credit Loans or issuance of such Letters of Credit
and to the satisfaction of the following further conditions:
7.1 First Revolving Credit Loans.
On the Closing Date:
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7.1.1 Officer's Certificate.
The representations and warranties of each of the Loan Parties
contained in Article 6 shall be true and accurate on and as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of such date (except representations and warranties which relate
solely to an earlier date or time, which representations and warranties shall be
true and correct on and as of the specific dates or times referred to therein),
and each of the Loan Parties shall have performed and complied with all
covenants and conditions hereof, no Event of Default or Potential Default under
this Agreement shall have occurred and be continuing or shall exist; and there
shall be delivered to the Agent for the benefit of each Bank a certificate of
each of the Loan Parties, dated the Closing Date and signed by the Chief
Executive Officer, President or Chief Financial Officer of each of the Loan
Parties, to each such effect.
7.1.2 Secretary's Certificate.
There shall be delivered to the Agent for the benefit of each Bank a
certificate dated the Closing Date and signed by the Secretary or an Assistant
Secretary of each of the Loan Parties, certifying as appropriate as to:
(i) all action taken by each Loan Party in connection with this
Agreement and the other Loan Documents;
(ii) the names of the officer or officers authorized to sign this
Agreement and the other Loan Documents and the true signatures of such officer
or officers and specifying the Authorized Officers permitted to act on behalf of
each Loan Party for purposes of this Agreement and the true signatures of such
officers, on which the Agent and each Bank may conclusively rely; and
(iii) copies of its organizational documents, including its charter and
bylaws as in effect on the Closing Date certified by the appropriate state
official where such documents are filed in a state office together with
certificates from the appropriate state officials as to the continued existence
and good standing of each Loan Party in each state where organized or qualified
to do business.
7.1.3 Delivery of Loan Documents.
The Guaranty Agreement, Notes, Patent, Trademark and Copyright
Assignment, Pledge Agreement, Intercompany Subordination Agreement, Security
Agreement and the Borrower Agency Agreement shall have been duly executed and
delivered to the Agent for the benefit of the Banks, together with all
appropriate financing statements and appropriate stock powers and certificates
evidencing the Shares and the Partnership Interests.
7.1.4 Opinion of Counsel.
There shall be delivered to the Agent for the benefit of each Bank a
written opinion of Nutter, McClennen & Fish, LLP, counsel for the Loan Parties
(who may rely on the
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opinions of such other counsel as may be acceptable to the Agent), dated the
Closing Date and in form and substance satisfactory to the Agent and its counsel
as to the matters required by the Agent and the Banks on the Closing Date.
7.1.5 Legal Details.
All legal details and proceedings in connection with the transactions
contemplated by the Agreement and the other Loan Documents shall be in form and
substance satisfactory to the Agent and counsel for the Agent, and the Agent
shall have received all such other counterpart originals or certified or other
copies of such documents and proceedings in connection with such transactions,
in form and substance satisfactory to the Agent and said counsel, as the Agent
or said counsel may reasonably request.
7.1.6 Payment of Fees.
The Borrowers shall pay or cause to be paid to the Agent for itself
and for the account of the Banks to the extent not previously paid the
appropriate fees accrued through the Closing Date and the costs and expenses for
which the Agent and the Banks are entitled to be reimbursed.
7.1.7 [RESERVED]
7.1.8 [RESERVED].
7.1.9 Consents.
All material consents required to effectuate the transactions
contemplated hereby as set forth on Schedule 6.1.13 shall have been obtained
except that the Borrowers are only required to use their best efforts to obtain
landlord waivers.
7.1.10 Officer's Certificate Regarding Material Adverse Changes.
Since January 31, 1997 , no Material Adverse Change in the condition
of the Loan Parties or Subsidiaries of any Loan Parties, taken as a whole, shall
have occurred; prior to the Closing Date, there shall be no material adverse
change in the management of the Borrowers taken as a whole; and there shall be
delivered to the Agent for the benefit of each Bank a certificate dated the
Closing Date and signed by the Chief Executive Officer, President or Chief
Financial Officer of each Loan Party to each such effect.
7.1.11 No Violation of Laws.
The making of the Revolving Credit Loans shall not contravene any Law
applicable to any Loan Party or any of the Banks.
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7.1.12 No Actions or Proceedings.
No action, proceeding, investigation, regulation or legislation shall
have been instituted, threatened or proposed before any court, governmental
agency or legislative body to enjoin, restrain or prohibit, or to obtain damages
in respect of this Agreement or the consummation of the transactions
contemplated hereby or which, in the Agent's sole discretion, would make it
inadvisable to consummate the transactions contemplated by this Agreement or any
of the other Loan Documents.
7.1.13 Insurance Policies; Certificates of Insurance; Endorsements.
The Loan Parties shall deliver evidence acceptable to the Agent that
adequate insurance in compliance with Section 8.1.3 is in full force and effect
and that all premiums then due thereon have been paid, together with a certified
copy of each Loan Party's casualty insurance policy or policies evidencing
coverage satisfactory to the Agent, with additional insured, mortgagee and
lender loss payable special endorsements attached thereto in form and substance
satisfactory to the Agent and its counsel naming the Agent as additional
insured, mortgagee and lender loss payee.
7.1.14 [RESERVED]
7.1.15 [RESERVED]
7.1.16 Landlord's Waiver.
The Loan Parties shall have delivered (or shall have certified their
best efforts to obtain) an executed Landlord's Waiver prepared by and acceptable
to the Agent and the Banks on the Closing Date from the lessor for each leased
Collateral location, as listed on Schedule A to the Security Agreement.
7.1.17 Satisfaction of Special Conditions.
The applicable conditions described in Section 7.3 shall have been
satisfied.
7.2 Each Additional Revolving Credit Loan.
At the time of making any Revolving Credit Loans or issuing any Letters of
Credit other than Revolving Credit Loans made or Letters of Credit issued on the
Closing Date, and after giving effect to the proposed borrowings: the
representations and warranties of the Loan Parties contained in Article 6 shall
be true in all material respects on and as of the date of such additional
Revolving Credit Loan or Letter of Credit with the same effect as though such
representations and warranties had been made on and as of such date (except
representations and warranties which expressly relate solely to an earlier date
or time, which representations and warranties shall be true and correct in all
material respects on and as of the specific dates or times referred to therein)
and the Loan Parties shall have performed and complied in all material respects
with all covenants and conditions hereof; no Event of Default or Potential
Default shall
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have occurred and be continuing or shall exist; the making of the Revolving
Credit Loans or issuance of such Letter of Credit shall not contravene any Law
applicable to any Loan Party or Subsidiary of any Loan Party or any of the
Banks; PhyMatrix, as agent for the Borrowers, shall have delivered to the Agent
a duly executed and completed Revolving Credit Loan Request or application for a
Letter of Credit as the case may be; and the applicable conditions described in
Section 7.3 shall have been satisfied.
7.3 Special Conditions for All Revolving Credit Loans.
Notwithstanding the other provisions of this Agreement, no Bank shall be
obligated to make any Revolving Credit Loan if the Senior Leverage Ratio exceeds
3.5 to 1 for the prior four (4) fiscal quarters.
8. COVENANTS
8.1 Affirmative Covenants.
The Loan Parties, jointly and severally, covenant and agree that until
payment in full of the Revolving Credit Loans and interest thereon, expiration
or termination of all Letters of Credit, satisfaction of all of the Loan
Parties' other Obligations under the Loan Documents and termination of the
Revolving Credit Commitments, the Borrowers shall comply in all material
respects at all times with the following affirmative covenants (for purposes of
this Section 8.1, the term "Subsidiary" shall be deemed to exclude Excluded
Entities):
8.1.1 Preservation of Existence, Etc.
Each Loan Party shall, and shall cause each of its Subsidiaries which
has assets to, maintain its corporate existence and its license or qualification
and good standing in each jurisdiction in which its ownership or lease of
property or the nature of its business makes such license or qualification
necessary.
8.1.2 Payment of Liabilities, Including Taxes, Etc.
Each Loan Party shall, and shall cause each of its Subsidiaries to,
duly pay and discharge all liabilities to which it is subject or which are
asserted against it, promptly as and when the same shall become due and payable,
including all taxes, assessments and governmental charges upon it or any of its
properties, assets, income or profits, prior to the date on which penalties
attach thereto, except to the extent that such liabilities, including taxes,
assessments or charges, are being contested in good-faith and by appropriate and
lawful proceedings diligently conducted and for which such reserve or other
appropriate provisions, if any, as shall be required by GAAP shall have been
made, but only to the extent that failure to discharge any such liabilities
would not result in any additional liability which would have or cause a
Material Adverse Change, provided that the Loan Parties and their Subsidiaries
will pay all such liabilities forthwith upon the commencement of proceedings to
foreclose any Lien which may have attached as security therefor.
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8.1.3 Maintenance of Insurance.
Each Loan Party shall, and shall cause each of its Subsidiaries to,
insure its properties and assets against loss or damage by fire and such other
insurable hazards as such assets are commonly insured (including fire, extended
coverage, property damage, workers' compensation, public liability and business
interruption insurance) and against other risks (including errors and omissions)
in such amounts as similar properties and assets are insured by prudent
companies in similar circumstances carrying on similar businesses, and with
reputable and financially sound insurers, including self-insurance to the extent
customary, all as reasonably determined by the Agent. The Loan Parties shall
deliver (x) on the Closing Date and annually thereafter an original certificate
of insurance signed by the Loan Parties' independent insurance broker describing
and certifying as to the existence of the insurance on the Collateral required
to be maintained by this Agreement and the other Loan Documents, together with a
copy of the endorsement described in the next sentence attached to such
certificate and (y) from time to time a summary schedule indicating all
insurance then in force with respect to each of the Loan Parties. Such policies
of insurance shall contain special endorsements to the extent commercially
available, in form and substance reasonably acceptable to the Agent, which
shall, except with respect to items or types of insurance which by their nature
do not generally so specify or provide (such as workers' compensation,
professional liability or errors and omissions coverage) (i) specify the Agent
as an additional insured, lender loss payee as its interests may appear, with
the understanding that any obligation imposed upon the insured (including the
liability to pay premiums) shall be the sole obligation of the applicable Loan
Parties and not that of the insured, (ii) to the extent generally available,
provide that the interest of the Banks shall be insured regardless of any breach
or violation by the applicable Loan Parties of any warranties, declarations or
conditions contained in such policies or any action or inaction of the
applicable Loan Parties or others insured under such policies, (iii) provide a
waiver of any right of the insurers to set off or counterclaim or any other
deduction, whether by attachment or otherwise, (iv) to the extent generally
available, provide that any and all rights of subrogation which the insurers may
have or acquire shall be, at all times and in all respects, junior and
subordinate to the prior payment in full of the Indebtedness hereunder and that
no insurer shall exercise or assert any right of subrogation until such time as
the Indebtedness hereunder has been paid in full and the Revolving Credit
Commitments have terminated, (v) provide, except in the case of public liability
insurance and workmen's compensation insurance, that all insurance proceeds for
losses of less than $2,000,000 shall be adjusted with and payable to the
applicable Loan Parties and that all insurance proceeds for losses of more than
$2,000,000 or more shall be adjusted with and payable to the Agent, (vi) include
effective waivers by the insurer of all claims for insurance premiums against
the Agent, (vii) provide that no cancellation of such policies for any reason
nor any material reduction in the terms and conditions of coverage therein shall
be effective until at least thirty (30) days after receipt by the Agent of
written notice of such cancellation or change, (viii) be primary without right
of contribution of any other insurance carried by or on behalf of any additional
insureds with respect to their respective interests in the Collateral, and (ix)
provide that inasmuch as the policy covers more than one insured, all terms,
conditions, insuring agreements and endorsements (except limits of liability)
shall operate as if there were a separate policy covering each insured. The
applicable Loan Parties shall notify the Agent promptly of any occurrence
causing a material loss or decline in value of the Collateral and the estimated
(or
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actual, if available) amount of such loss or decline. Any monies received by the
Agent constituting insurance proceeds or condemnation proceeds may, at the
option of the Agent, (i) be applied by the Agent to the payment of the Revolving
Credit Loans in such manner as the Agent may reasonably determine, or (ii) be
disbursed to the applicable Loan Parties on such terms as are deemed reasonably
appropriate by the Agent for the repair, restoration and/or replacement of
property in respect of which such proceeds were received; provided that proceeds
shall be applied as the Loan Parties direct if, either (x) there are no
principal amounts of Revolving Credit Loans outstanding either at the time of
such casualty and at the time of the payment of such proceeds or (y) within
fifteen (15) Business Days of such a casualty in respect of tangible property,
the Loan Parties demonstrate to the reasonable satisfaction of the Banks that
such tangible property can be replaced within 45 days.
8.1.4 Maintenance of Properties and Leases.
Each Loan Party shall, and shall cause each of its Subsidiaries to,
maintain in good repair, working order and condition (ordinary wear and tear,
condemnation or insured casualty excepted) in accordance with the general
practice of other businesses of similar character and size, all of those
properties useful or necessary to its business, and from time to time, such Loan
Party will make or cause to be made all appropriate repairs, renewals or
replacements thereof if the failure to do so would cause or constitute a
Material Adverse Change.
8.1.5 Maintenance of Patents, Trademarks, Etc.
Each Loan Party shall, and shall cause each of its Subsidiaries to,
maintain in full force and effect all patents, trademarks, trade names,
copyrights, licenses, franchises, permits and other authorizations necessary for
the ownership and operation of its properties and business if the failure so to
maintain the same would constitute a Material Adverse Change.
8.1.6 Visitation Rights.
Each Loan Party shall, and shall cause each of its Subsidiaries to,
permit any of the officers or authorized employees or representatives of the
Agent or any of the Banks to visit and inspect any of its properties and to
examine and make excerpts from its books and records and discuss its business
affairs, finances and accounts with its officers, all in such detail and at such
times and as often as any of the Banks may reasonably request and, in all
events, during each of the four (4) fiscal quarters following the Closing Date,
provided that each Bank shall provide the Borrowers and the Agent with
reasonable notice prior to any visit or inspection. In the event any Bank
desires to conduct an audit or visit of any Loan Party, such Bank shall make a
reasonable effort to conduct such audit contemporaneously with any audit or
visit to be performed by the Agent.
8.1.7 Keeping of Records and Books of Account.
The Loan Parties shall maintain and keep proper books of record and
account which enable the Loan Parties to issue financial statements in
accordance with GAAP and as otherwise required by applicable Laws of any
Official Body having jurisdiction over the
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Loan Parties, and in which full, true and correct entries shall be made in all
material respects of all its dealings and business and financial affairs.
8.1.8 Plans and Benefit Arrangements.
PhyMatrix shall, and shall cause each member of the ERISA Group to,
comply with ERISA, the Internal Revenue Code and other applicable Laws
applicable to Plans and Benefit Arrangements except where such failure, alone or
in conjunction with any other failure, would not result in a Material Adverse
Change. Without limiting the generality of the foregoing, PhyMatrix shall cause
all of its Plans and all Plans maintained by any member of the ERISA Group to be
funded in accordance with the minimum funding requirements of ERISA and shall
make, and cause each member of the ERISA Group to make, in a timely manner, all
contributions due to Plans, Benefit Arrangements and Multiemployer Plans except
where such failure, alone or in conjunction with any other failure, would not
result in a Material Adverse Change.
8.1.9 Compliance with Laws.
Each Loan Party shall, and shall cause each of its Subsidiaries to,
comply with all applicable Laws, including all Environmental Laws, in all
respects, provided that it shall not be deemed to be a violation of this Section
if any failure to comply with any Law would not result in fines, penalties,
remediation costs, other similar liabilities or injunctive relief which in the
aggregate would constitute a Material Adverse Change.
8.1.10 Use of Proceeds.
The Borrowers will use the proceeds of the Revolving Credit Loans only
for lawful purposes in accordance with Sections 2.8 and such uses shall not
contravene any applicable Law or any other provision hereof.
8.1.11 Further Assurances.
Each Loan Party shall, from time to time, at its expense, faithfully
preserve and protect the Agent's Lien on and Prior Security Interest in the
Collateral as a continuing first priority perfected Lien, subject only to
Permitted Liens, and shall do such other acts and things as the Agent in its
reasonable discretion may deem necessary or advisable from time to time in order
to preserve, perfect and protect the Liens granted under the Loan Documents and
to exercise and enforce its rights and remedies thereunder with respect to the
Collateral.
8.1.12 Subordination of Intercompany Revolving Credit Loans.
Each Loan Party shall cause any intercompany Indebtedness, loans or
advances owed by any Loan Party to any other Loan Party to be subordinated
pursuant to the terms of the Intercompany Subordination Agreement.
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8.2 Negative Covenants.
The Loan Parties, jointly and severally, covenant and agree that until
payment in full of the Revolving Credit Loans and interest thereon, expiration
or termination of all Letters of Credit, satisfaction of all of the Loan
Parties' other Obligations hereunder and termination of the Revolving Credit
Commitments, the Loan Parties shall comply with the following negative covenants
(for purposes of this Section 8.2, the term "Subsidiary" shall be deemed to
exclude Excluded Entities):
8.2.1 Indebtedness.
Each of the Loan Parties shall not at any time create, incur, assume
or suffer to exist any Indebtedness, except:
(i) Indebtedness under the Loan Documents;
(ii) Existing Indebtedness as set forth on Schedule 8.2.1 (including
any extensions or renewals thereof, provided there is no increase in the amount
thereof or other significant change in the terms thereof unless otherwise
specified on Schedule 8.2.1;
(iii) Capitalized leases as and to the extent not prohibited by
Section 8.2.15;
(iv) Indebtedness which is subordinated in accordance with the
provisions of Section 8.1.12;
(v) Indebtedness secured by Purchase Money Security Interests not
exceeding the lesser of $3,000,000 or two percent (2%) of the Borrowers'
tangible assets;
(vi) Indebtedness of a Loan Party to another Loan Party other than to,
or for the benefit of, DASCO except as permitted by Sections 8.2.4(v) and
8.2.4(vi);
(vii) Permitted Subordinated Indebtedness;
(vii) Unsecured or secured debt incurred through Permitted Interest
Rate Protection Agreements;
(ix) Indebtedness secured by Permitted Liens;
(x) Unsecured or secured debt payable as part of the Purchase Price in
Permitted Acquisitions;
(xi) Existing Indebtedness assumed as part of a Permitted Acquisition;
and
(xii) Indebtedness of the type described in, and permitted under,
Section 8.2.8(ii).
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8.2.2 Liens.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, at any time create, incur, assume or suffer to exist any Lien
on any of its property or assets, tangible or intangible, now owned or hereafter
acquired, or agree or become liable to do so, except Permitted Liens and no Loan
Party shall agree with any Person other than the Agent and the Banks pursuant to
this Agreement not so to incur, assume or suffer to exist any Lien.
8.2.3 Guaranties.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, at any time, directly or indirectly, become or be liable in
respect of any Guaranty, or assume, guarantee, become surety for, endorse or
otherwise agree, become or remain directly or contingently liable upon or with
respect to any obligation or liability of any other Person, except for (a)
Guaranties of Indebtedness of the Loan Parties permitted hereunder, (b) existing
Guaranties assumed as part of a Permitted Acquisition, and (c) a guarantee
provided by PhyMatrix in respect of Indebtedness of Radcorp, Inc. under a master
equipment lease involving a lease obligation not in excess of $4,500,000.
8.2.4 Loans and Investments.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, at any time make or suffer to remain outstanding any loan or
advance to, or purchase, acquire or own any stock, bonds, notes or securities
of, or any partnership interest (whether general or limited) in, or any other
investment or interest in, or make any capital contribution to, any other
Person, or agree, become or remain liable to do any of the foregoing, except:
(i) trade credit extended on usual and customary terms in the ordinary
course of business;
(ii) advances to employees to meet expenses incurred by such employees
in the ordinary course of business;
(iii) Permitted Investments;
(iv) except as provided in item (v) below, loans, advances and
investments in other Loan Parties, other than in, or for the benefit of, DASCO;
(v) loans, advances, guaranties and investments made by the Borrowers
in or for the benefit of DASCO (x) made at any time when no Revolving Credit
Loans are outstanding and (y) made at any time when Revolving Credit Loans are
outstanding so long as they do not exceed $5,000,000 in the aggregate at any one
time; and
(vi) advances, loans, guaranties and investments in or for the benefit
of DASCO or any Excluded Entities or third parties permitted by Section
8.2.8(ii).
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8.2.5 Dividends and Related Distributions.
Each of the Loan Parties shall not make or pay, or agree to become or
remain liable to make or pay, any dividend or other distribution of any nature
(whether in cash, property, securities or otherwise) on account of or in respect
of its shares of capital stock or partnership interests on account of the
purchase, redemption, retirement or acquisition of its shares of capital stock
(or warrants, options or rights therefor) or partnership interests, except
dividends or other distributions payable to another Loan Party.
8.2.6 Liquidations, Mergers, Consolidations, Acquisitions.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, dissolve, liquidate or wind-up its affairs, or become a party
to any merger or consolidation, or acquire by purchase, lease or otherwise all
or substantially all of the assets or capital stock of any other Person,
provided that any Loan Party may consolidate or merge into another Loan Party
and any Loan Party may make a Permitted Acquisition, any Loan Party or
Subsidiary with no assets may dissolve or be liquidated, and any Loan Party may
merge if it is the surviving entity, but no Borrower may merge unless the
surviving entity is a Borrower.
8.2.7 Dispositions of Assets or Subsidiaries.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, sell, convey, assign, lease, abandon or otherwise transfer or
dispose of, voluntarily or involuntarily, any of its properties or assets,
tangible or intangible (including sale, assignment, discount or other
disposition of accounts, contract rights, chattel paper, equipment or general
intangibles with or without recourse or of capital stock, shares of beneficial
interest or partnership interests of a Subsidiary of such Loan Party), except:
(i) transactions involving the sale of inventory in the ordinary
course of business;
(ii) any sale, transfer or lease of assets in the ordinary course of
business which are no longer necessary or required in the conduct of the Loan
Party's business;
(iii) any sale, transfer or lease of assets by any Loan Party to a
Borrower;
(iv) any sale, transfer or lease of assets in the ordinary course of
business which are replaced by substitute assets acquired or leased within the
parameters of Section 8.2.15, provided such substitute assets are subject to the
Banks' Prior Security Interest;
(v) any sale, transfer or lease of assets, other than those
specifically excepted pursuant to clauses (i) through (iv) above, which is
approved by the Required Banks so long as the after-tax proceeds (as reasonably
estimated by the Borrowers) are applied as a mandatory prepayment of the
Revolving Credit Loans in accordance with the provisions of Section 5.5.1 above;
or
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(vi) any sale, transfer or lease of assets not otherwise described in
clauses (i) through (v) which involves assets, the value of which, when added to
all other such sales, transfers or leases, does not exceed 5.0% of the
Consolidated Net Worth of PhyMatrix as of the latest financial reporting date.
8.2.8 Affiliate Transactions.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to:
(i) enter into or carry out any transaction with any Affiliate
(including purchasing property or services from or selling property or services
to any Affiliate of any Loan Party) unless such transaction is not otherwise
prohibited by this Agreement, is entered into upon fair and reasonable
arm's-length terms and conditions which, upon the Agent's request, are fully
disclosed to the Agent and is in accordance with all applicable Law; or
(ii) whenever the outstanding amount of the Revolving Credit Loans is
greater than zero ($0), provide any guarantee, make any investment in, incur any
Indebtedness for or on behalf of or make any loan or any payment or transfer of
the type described in Section 8.2.5 to or for the benefit of DASCO or any
Excluded Entity or third party in an amount in the aggregate exceeding at any
one time $25,000,000.
8.2.9 Subsidiaries, Partnerships and Joint Ventures.
8.2.9.1 Each of the Loan Parties shall not, and shall not permit
any of its Subsidiaries to, own or create directly or indirectly any
Subsidiaries except Excluded Entities other than (i) any Subsidiary which has
joined this Agreement as Guarantor on the Closing Date; and (ii) any Subsidiary
formed or acquired by any Loan Party after the Closing Date which joins this
Agreement as a Guarantor pursuant to Section 11.18, provided that the Required
Banks shall have consented to such formation and joinder if required by Section
8.2.9.2, and that such Subsidiary and the Loan Parties, as applicable, shall
grant and cause to be perfected first priority Liens to the Agent in the assets
held by, and stock of or other ownership interests in, such Subsidiary. Each of
the Loan Parties shall not become or agree to become a general or limited
partner in any general or limited partnership or a joint venturer in any joint
venture, except that the Loan Parties may be general or limited partners in
other Loan Parties. Any Person 80% or more of whose capital stock or equity is
owned by a Borrower shall be a Guarantor or Borrower and shall not be an
Excluded Entity.
8.2.9.2 Designation of or Change in Excluded Entity Status.
Without the consent of the Banks, (x) no Loan Party may be
designated by the Borrowers as an Excluded Entity and (y) no Excluded Entity may
later cease to be an Excluded Entity unless such person becomes a Borrower or
the ownership of such Person by the Loan Parties is reduced to zero.
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8.2.10 Continuation of or Change in Business.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, engage in any business other than a Permitted Line of Business,
and such Loan Party or Subsidiary shall not permit any material change in such
business.
8.2.11 Plans and Benefit Arrangements.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to do any of the following if it would result in a Material Adverse
Change:
(i) fail to satisfy the minimum funding requirements of ERISA and the
Internal Revenue Code with respect to any Plan;
(ii) request a minimum funding waiver from the Internal Revenue
Service with respect to any Plan;
(iii) engage in a Prohibited Transaction with any Plan, Benefit
Arrangement or Multiemployer Plan which, alone or in conjunction with any other
circumstances or set of circumstances resulting in liability under ERISA, would
constitute a Material Adverse Change;
(iv) permit the aggregate actuarial present value of all benefit
liabilities (whether or not vested) under each Plan, determined on a plan
termination basis, as disclosed in the most recent actuarial report completed
with respect to such Plan, to exceed, as of any actuarial valuation date, the
fair market value of the assets of such Plan;
(v) fail to make when due any contribution to any Multiemployer Plan
that the Borrowers or any member of the ERISA Group may be required to make
under any agreement relating to such Multiemployer Plan, or any Law pertaining
thereto;
(vi) withdraw (completely or partially) from any Multiemployer Plan or
withdraw (or be deemed under Section 4062(e) of ERISA to withdraw) from any
Multiple Employer Plan, where any such withdrawal is likely to result in a
material liability of the Borrowers or any member of the ERISA Group;
(vii) terminate, or institute proceedings to terminate, any Plan,
where such termination is likely to result in a material liability to the
Borrowers or any member of the ERISA Group;
(viii) make any amendment to any Plan with respect to which security
is required under Section 307 of ERISA; or
(ix) fail to give any and all notices and make all disclosures and
governmental filings required under ERISA or the Internal Revenue Code, where
such failure is likely to result in a Material Adverse Change.
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8.2.12 [RESERVED].
8.2.13 Issuance of Stock.
Each of the Loan Parties other than PhyMatrix shall not, and shall not
permit any of its Subsidiaries to, issue any additional shares of its capital
stock or any options, warrants or other rights in respect thereof.
8.2.14 Changes in Organizational Documents.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, amend in any respect its certificate of incorporation
(including any provisions or resolutions relating to capital stock), bylaws or
other organizational documents without providing at least thirty (30) calendar
days' prior written notice to the Agent and the Banks and, in the event such
change would be adverse to the Banks as determined by the Agent in its
reasonable discretion, obtaining the prior written consent of the Required
Banks.
8.2.15 Capital Expenditures and Leases.
Each of the Loan Parties shall not, and shall not permit any of its
Subsidiaries to, make any payments exceeding $20,000,000 in the aggregate in any
fiscal year on account of the purchase or lease of any assets which if purchased
would constitute fixed assets or which if leased would constitute a capitalized
lease, or any payments exceeding $30,000,000 in the aggregate in any fiscal year
on account of the rental or lease of real or personal property of any other
Person which does not constitute a capitalized lease, and all such capital
expenditures and leases shall be made under usual and customary terms and in the
ordinary course of business.
8.2.16 Minimum Interest Coverage Ratio.
The Loan Parties shall not permit the Interest Coverage Ratio,
calculated as of the end of each fiscal quarter, to be less than 2.50 to 1.0 for
any quarter.
8.2.17 Minimum Net Worth.
The Loan Parties shall not at any time permit Consolidated Net Worth
to be less than Minimum Net Worth.
8.2.18 Senior Leverage Ratio.
The Loan Parties shall not at any time permit the Senior Leverage
Ratio to exceed 3.5 to 1.0 for any quarter.
8.2.19 Total Leverage Ratio.
The Loan Parties shall not permit the Total Leverage Ratio to exceed
at any time 5.5 to 1.0.
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8.3 Reporting Requirements.
The Loan Parties, jointly and severally, covenant and agree that until
payment in full of the Revolving Credit Loans and interest thereon, expiration
or termination of all Letters of Credit, satisfaction of all of the Loan
Parties' other Obligations hereunder and under the other Loan Documents and
termination of the Revolving Credit Commitments, the Loan Parties will furnish
or cause to be furnished to the Agent and each of the Banks:
8.3.1 Monthly Reports.
As soon as available and in any event within thirty (30) calendar days
after the end of each calendar month, (i) PhyMatrix' consolidated and
consolidating financial statements of PhyMatrix and its Subsidiary, consisting
of a balance sheet as of the end of such month and related statements of income,
stockholders' equity and cash flows for the month then ended and the fiscal year
through that date, all in reasonable detail and certified (subject to normal
year-end adjustments) by the Chief Executive Officer, President or Chief
Financial Officer of the Borrowers as having been prepared in accordance with
GAAP, consistently applied, and (ii) PhyMatrix' statement of operations,
describing (A) "line of business" data, (B) "utilization statistics," (C)
pending acquisitions, and (D) accounts receivable aging (by class of payor,
payee and in the aggregate).
8.3.2 Quarterly Financial Statements.
As soon as available and in any event within forty-five (45) calendar
days after the end of each of the first three fiscal quarters in each fiscal
year, PhyMatrix' report on Form 10-Q and consolidated and consolidating
financial statements of PhyMatrix and its Subsidiaries, consisting of a balance
sheet as of the end of such fiscal quarter and related statements of income,
stockholders' equity and cash flows for the fiscal quarter then ended and the
fiscal year through that date, all in reasonable detail and certified (subject
to normal year-end audit adjustments) by the Chief Executive Officer, President
or Chief Financial Officer of the Borrowers as having been prepared in
accordance with GAAP, consistently applied, and setting forth in comparative
form the respective financial statements for the corresponding (or other
appropriate) date and period in the previous fiscal year.
8.3.3 Annual Financial Statements.
As soon as available and in any event within ninety (90) days after
the end of each fiscal year of PhyMatrix, PhyMatrix' report on Form 10-K and
PhyMatrix' and its Subsidiaries consolidated and consolidating financial
statements consisting of a balance sheet as of the end of such fiscal year, and
related statements of income, stockholders' equity and cash flows for the fiscal
year then ended, all in reasonable detail and setting forth in comparative form
the financial statements as of the end of and for the preceding fiscal year, and
certified by Coopers & Lybrand, L.L.P. or other independent certified public
accountants of nationally recognized standing reasonably satisfactory to the
Agent. The certificate or report of accountants shall be free of qualifications
(other than any consistency qualification that may result from a change in the
method used to prepare the financial statements as to which such accountants
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concur) and shall not indicate the occurrence or existence of any event,
condition or contingency which would materially impair the prospect of payment
or performance of any covenant, agreement or duty of the Borrowers under any of
the Loan Documents.
8.3.4 Certificate of the Borrowers.
Concurrently with the financial statements of the Borrowers furnished
to the Agent and to the Banks pursuant to Sections 8.3.2 and 8.3.3, a
certificate of the Borrowers signed by the Chief Executive Officer, President or
Chief Financial Officer of each such Borrower, in the form of Exhibit 8.3.4, to
the effect that, except as described pursuant to Section 8.3.5, (i) the
representations and warranties of each such Borrower contained in Article 6 are
true in all material respects on and as of the date of such certificate with the
same effect as though such representations and warranties had been made on and
as of such date (except representations and warranties which expressly relate
solely to an earlier date or time) and each such Borrower has performed and
complied with in all material respects all covenants and conditions hereof, (ii)
no Event of Default or Potential Default exists and is continuing on the date of
such certificate and (iii) containing calculations in sufficient detail to
demonstrate compliance as of the date of the financial statements with all
financial covenants contained in Section 8.2.
8.3.5 Notice of Default.
Promptly after any officer of any Loan Party has learned of the
occurrence of an Event of Default or Potential Default, a certificate signed by
the Chief Executive Officer, President or Chief Financial Officer of such Loan
Party setting forth the details of such Event of Default or Potential Default
and the action which the such Loan Party proposes to take with respect thereto.
8.3.6 Notice of Litigation.
Promptly after the commencement thereof, notice of all actions, suits,
proceedings or investigations before or by any Official Body or any other Person
against any Loan Party or Subsidiary of any Loan Party which if adversely
determined would constitute a Material Adverse Change.
8.3.7 Certain Events.
Written notice to the Agent:
(i) at least thirty (30) calendar days prior thereto, with respect to
any proposed sale or transfer of assets pursuant to Section 8.2.7 (iv) or
8.2.7(v);
(ii) within the time limits set forth in Section 8.2.14, any amendment
to the organizational documents of any Loan Party; and
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(iii) at least thirty (30) calendar days prior thereto, with respect
to any change in any Loan Party's locations from the locations set forth in
Schedule A to the Security Agreement.
8.3.8 Budgets, Forecasts, Other Reports and Information.
8.3.8.1 Promptly upon their becoming available to the Borrowers:
(i) the annual budget and any forecasts or projections of the
Borrowers, to be supplied not later than thirty (30) days prior to commencement
of the fiscal year to which any of the foregoing may be applicable,
(ii) any reports including management letters submitted to the
Borrowers by independent accountants in connection with any annual, interim or
special audit,
(iii) any reports, notices or proxy statements generally
distributed by the Borrowers to their stockholders on a date no later than the
date supplied to the stockholders,
(iv) regular or periodic reports, including Forms 10-K, 10-Q and
8-K, registration statements and prospectuses, filed by PhyMatrix with the
Securities and Exchange Commission,
(v) a copy of any order in any proceeding to which PhyMatrix or
any of its Subsidiaries is a party issued by any Official Body, or
(vi) such other reports and information as the Banks may from
time to time reasonably request.
8.3.8.2 PhyMatrix, as agent for the Borrowers, shall notify the
Banks promptly of the enactment or adoption of any Law which may result in a
Material Adverse Change with respect to the Borrowers.
8.3.9 Notices Regarding Plans and Benefit Arrangements.
8.3.9.1 Certain Events.
Promptly upon becoming aware of the occurrence thereof, notice
(including the nature of the event and, when known, any action taken or
threatened by the Internal Revenue Service or the PBGC with respect thereto) of:
(i) any Reportable Event with respect to PhyMatrix, its
Subsidiaries or any member of the ERISA Group (regardless of whether the
obligation to report said Reportable Event to the PBGC has been waived),
(ii) any Prohibited Transaction which could subject PhyMatrix,
its Subsidiaries or any member of the ERISA Group to a civil penalty assessed
pursuant to
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Section 502(i) of ERISA or a tax imposed by Section 4975 of the Internal Revenue
Code in connection with any Plan, Benefit Arrangement or any trust created
thereunder,
(iii) any assertion of material withdrawal liability with respect
to any Multiemployer Plan,
(iv) any partial or complete withdrawal from a Multiemployer Plan
by PhyMatrix, its Subsidiaries or any member of the ERISA Group under Title IV
of ERISA (or assertion thereof), where such withdrawal is likely to result in
material withdrawal liability,
(v) any cessation of operations (by PhyMatrix, its Subsidiaries
or any member of the ERISA Group) at a facility in the circumstances described
in Section 4063(e) of ERISA,
(vi) withdrawal by PhyMatrix, its Subsidiaries or any member of
the ERISA Group from a Multiple Employer Plan,
(vii) a failure by PhyMatrix, its Subsidiaries or any member of
the ERISA Group to make a payment to a Plan required to avoid imposition of a
lien under Section 302(f) of ERISA,
(viii) the adoption of an amendment to a Plan requiring the
provision of security to such Plan pursuant to Section 307 of ERISA, or
(ix) any change in the actuarial assumptions or funding methods
used for any Plan, where the effect of such change is to materially increase or
materially reduce the unfunded benefit liability or obligation to make periodic
contributions.
8.3.9.2 Notices of Involuntary Termination and Annual Reports.
Promptly after receipt thereof, copies of (a) all notices
received by PhyMatrix, as agent for the Borrowers or any member of the ERISA
Group of the PBGC's intent to terminate any Plan administered or maintained by
PhyMatrix, its Subsidiaries or any member of the ERISA Group, or to have a
trustee appointed to administer any such Plan; and (b) at the request of the
Agent or any Bank each annual report (IRS Form 5500 series) and all accompanying
schedules, the most recent actuarial reports, the most recent financial
information concerning the financial status of each Plan administered or
maintained by PhyMatrix, its Subsidiaries or any member of the ERISA Group, and
schedules showing the amounts contributed to each such Plan by or on behalf of
PhyMatrix, its Subsidiaries or any member of the ERISA Group in which any of
their personnel participate or from which such personnel may derive a benefit,
and each Schedule B (Actuarial Information) to the annual report filed by
PhyMatrix, its Subsidiaries or any member of the ERISA Group with the Internal
Revenue Service with respect to each such Plan.
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8.3.9.3 Notice of Voluntary Termination.
Promptly upon the filing thereof, copies of any Form 5310, or any
successor or equivalent form to Form 5310, filed with the PBGC in connection
with the termination of any Plan.
8.3.10 Acquisitions Summary
Concurrently with the financial statements of the Borrowers furnished
to the Agent and the Banks pursuant to Sections 8.3.2 and 8.3.3 a report of all
acquisitions for such quarter and year-to-date, showing trailing twelve (12)
month Cash Flow from Operations (showing separately any dividends received) and
of each of the individual Persons or practices acquired and a disclosure of any
Indebtedness assumed or incurred in connection therewith.
9. DEFAULT
9.1 Events of Default.
An Event of Default shall mean the occurrence or existence of any one
or more of the following events or conditions (whatever the reason therefor and
whether voluntary, involuntary or effected by operation of Law):
9.1.1 Payments Under Loan Documents.
Any Borrower shall fail to pay any principal of any Revolving Credit
Loan (including scheduled installments, mandatory prepayments or the payment due
at maturity) or shall fail to pay any interest on any Revolving Credit Loan or
any other amount owing hereunder or under the other Loan Documents after such
principal, interest or other amount becomes due in accordance with the terms
hereof or thereof;
9.1.2 Breach of Warranty.
Any representation or warranty made at any time by any of the Loan
Parties herein or by any of the Loan Parties in any other Loan Document, or in
any certificate, other instrument or statement furnished pursuant to the
provisions hereof or thereof, shall prove to have been false or misleading in
any material respect as of the time it was made or furnished;
9.1.3 Breach of Negative Covenants on Visitation Rights.
Any of the Loan Parties shall default in the observance or performance
of any covenant contained in Section 8.1.6. or Section 8.2 (other than Sections
8.2.11 or 8.2.14 or 8.2.2 to the extent Section 8.2.2 refers to voluntary acts
of the Loan Parties) and not cured within five (5) Business Days;
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9.1.4 Breach of Other Covenants.
Any of the Loan Parties shall default in the observance or performance
of any other covenant, condition or provision hereof or of any other Loan
Document and such default shall continue unremedied for a period of twenty (20)
Business Days after any officer of any Loan Party becomes aware of the
occurrence thereof (such grace period to be applicable only in the event such
default can be remedied by corrective action of the Loan Parties as determined
by the Agent in its sole discretion);
9.1.5 Defaults in Other Agreements or Indebtedness.
A default or event of default shall occur at any time under the terms
of any other agreement involving borrowed money or the extension of credit or
any other Indebtedness under which any Loan Party or Subsidiary of any Loan
Party may be obligated as a borrower or guarantor in excess of $1,000,000 in the
aggregate, and such breach, default or event of default consists of the failure
to pay (beyond any period of grace permitted with respect thereto, whether
waived or not) any indebtedness when due (whether at stated maturity, by
acceleration or otherwise) or if such breach or default permits or causes the
acceleration of any indebtedness (whether or not such right shall have been
waived) or the termination of any commitment to lend;
9.1.6 Final Judgments or Orders.
Any final judgments or orders for the payment of money in excess of
$1,000,000 in the aggregate shall be entered against any Loan Party by a court
having jurisdiction in the premises, which judgment is not discharged, vacated,
bonded or stayed pending appeal within a period of thirty (30) days from the
date of entry;
9.1.7 Loan Document Unenforceable.
Any of the Loan Documents shall cease to be legal, valid and binding
agreements enforceable against the party executing the same or such party's
successors and assigns (as permitted under the Loan Documents) in accordance
with the respective terms thereof or shall in any way be terminated (except in
accordance with its terms) or become or be declared ineffective or inoperative
or shall in any way be challenged or contested or cease to give or provide the
respective Liens, security interests, rights, titles, interests, remedies,
powers or privileges intended to be created thereby;
9.1.8 Uninsured Losses; Proceedings Against Assets.
There shall occur any material uninsured damage to or loss, theft or
destruction of any of the Collateral in excess of $1,000,000 or the Collateral
or any other of the Loan Parties' assets whose value is in excess of $1,000,000
are attached, seized, levied upon or subjected to a writ or distress warrant; or
such come within the possession of any receiver, trustee, custodian or assignee
for the benefit of creditors and the same is not cured within thirty (30) days
thereafter;
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9.1.9 Notice of Lien or Assessment.
A notice of Lien or assessment in excess of $250,000 which is not a
Permitted Lien is filed of record with respect to all or any part of any of the
Loan Parties' assets by the United States, or any department, agency or
instrumentality thereof, or by any state, county, municipal or other
governmental agency, including the PBGC, or if any taxes or debts owing at any
time or times hereafter to any one of these becomes payable and the same is not
paid within thirty (30) days after the same becomes payable;
9.1.10 Insolvency.
Any Loan Party ceases to be solvent or admits in writing its inability
to pay its debts as they mature;
9.1.11 Events Relating to Plans and Benefit Arrangements.
Any of the following occurs: (i) any Reportable Event, which the Agent
determines in good-faith constitutes grounds for the termination of any Plan by
the PBGC or the appointment of a trustee to administer or liquidate any Plan,
shall have occurred and be continuing; (ii) proceedings shall have been
instituted or other action taken to terminate any Plan, or a termination notice
shall have been filed with respect to any Plan; (iii) a trustee shall be
appointed to administer or liquidate any Plan; (iv) the PBGC shall give notice
of its intent to institute proceedings to terminate any Plan or Plans or to
appoint a trustee to administer or liquidate any Plan; and, in the case of the
occurrence of (i), (ii), (iii) or (iv) above, the Agent determines in good-faith
that the amount of the Borrowers' liability is likely to exceed 10% of
PhyMatrix' Consolidated Net Worth; (v) PhyMatrix, its Subsidiaries or any member
of the ERISA Group shall fail to make any contributions when due to a Plan or a
Multiemployer Plan; (vi) PhyMatrix, its Subsidiaries or any member of the ERISA
Group shall make any amendment to a Plan with respect to which security is
required under Section 307 of ERISA; (vii) PhyMatrix, its Subsidiaries or any
member of the ERISA Group shall withdraw completely or partially from a
Multiemployer Plan; (viii) PhyMatrix, its Subsidiaries or any member of the
ERISA Group shall withdraw (or shall be deemed under Section 4062(e) of ERISA to
withdraw) from a Multiple Employer Plan; or (ix) any applicable Law is adopted,
changed or interpreted by any Official Body with respect to or otherwise
affecting one or more Plans, Multiemployer Plans or Benefit Arrangements and,
with respect to any of the events specified in (v), (vi), (vii), (viii) or (ix),
the Agent determines in good-faith that any such occurrence would be reasonably
likely to materially and adversely affect the total enterprise represented by
the Borrowers and the other members of the ERISA Group;
9.1.12 Cessation of Business.
Any Loan Party ceases to conduct its business as contemplated or such
Loan Party is enjoined, restrained or in any way prevented by court order from
conducting all or any material part of its business and such injunction,
restraint or other preventive order is not dismissed within thirty (30) days
after the entry thereof;
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9.1.13 Change of Control.
Any person or group of persons (within the meaning of Sections 13(a)
or 14(a) of the Securities Exchange Act of 1934, as amended) shall have acquired
beneficial ownership of (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under said Act) more than fifty percent (50%)
of the voting capital stock of PhyMatrix.
9.1.14 Involuntary Proceedings.
A proceeding shall have been instituted in a court having jurisdiction
in the premises seeking a decree or order for relief in respect of any Loan
Party in an involuntary case under any applicable bankruptcy, insolvency,
reorganization or other similar law now or hereafter in effect, or for the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator, conservator (or similar official) of any Loan Party for any
substantial part of its property, or for the winding-up or liquidation of its
affairs, and such proceeding shall remain undismissed or unstayed and in effect
for a period of sixty (60) consecutive days or such court shall enter a decree
or order granting any of the relief sought in such proceeding; or
9.1.15 Voluntary Proceedings.
Any Loan Party shall commence a voluntary case under any applicable
bankruptcy, insolvency, reorganization or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall consent to the appointment or taking possession by
a receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator
(or other similar official) of itself or for any substantial part of its
property 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
action in furtherance of any of the foregoing.
9.2 Consequences of Event of Default.
9.2.1 Events of Default Other Than Bankruptcy, Insolvency or
Reorganization Proceedings.
If an Event of Default specified under subsections 9.1.1 through
9.1.13 of Section 9.1 shall occur and be continuing, the Banks and the Agent
shall be under no further obligation to make Revolving Credit Loans or issue
Letters of Credit as the case may be, and the Agent may, and upon the request of
the Required Banks, shall (i) by written notice to PhyMatrix as agent for the
Borrowers, declare the unpaid principal amount of the Notes then outstanding and
all interest accrued thereon, any unpaid fees and all other Indebtedness of the
Borrowers to the Banks hereunder and thereunder to be forthwith due and payable,
and the same shall thereupon become and be immediately due and payable to the
Agent for the benefit of each Bank without presentment, demand, protest or any
other notice of any kind, all of which are hereby expressly waived, and (ii)
require each Borrower to, and each Borrower shall thereupon, deposit in a
non-interest bearing account with the Agent, as cash collateral for its
Obligations under the
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Loan Documents, an amount equal to the maximum amount currently or at any time
thereafter available to be drawn on all outstanding Letters of Credit, and each
Borrower hereby pledges to the Agent and the Banks, and grants to the Agent and
the Banks a security interest in, all such cash as security for such
Obligations. Upon the curing of all existing Events of Default to the
satisfaction of the Required Banks, the Agent shall return such cash collateral
to the Borrowers; and
9.2.2 Bankruptcy, Insolvency or Reorganization Proceedings.
If an Event of Default specified under subsections 9.1.14 or 9.1.15 of
Section 9.1 shall occur, the Banks shall be under no further obligations to make
Revolving Credit Loans hereunder and the unpaid principal amount of the Notes
then outstanding and all interest accrued thereon, any unpaid fees and all other
Indebtedness of the Borrowers to the Banks hereunder and thereunder shall be
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived; and
9.2.3 Set-off.
If an Event of Default shall occur and be continuing, any Bank to whom
any Obligation is owed by any Loan Party hereunder or under any other Loan
Document or any branch, Subsidiary or Affiliate of such Bank anywhere in the
world shall have the right, in addition to all other rights and remedies
available to it, without notice to such Loan Party, to set-off against and apply
to the then unpaid balance of all the Revolving Credit Loans and all other
Obligations of the Borrowers and the other Loan Parties hereunder or under any
other Loan Document any debt owing to, and any other funds held in any manner
for the account of, the Borrowers or such other Loan Party by such Bank or
participant or by such branch, Subsidiary or Affiliate, including all funds in
all deposit accounts (whether time or demand, general or special, provisionally
credited or finally credited, or otherwise) now or hereafter maintained by the
Borrowers or such other Loan Party for its own account (but not including funds
held in custodian or trust accounts) with such Bank or participant or such
branch, Subsidiary or Affiliate. Such right shall exist whether or not any Bank
or the Agent shall have made any demand under this Agreement or any other Loan
Document, whether or not such debt owing to or funds held for the account of the
Borrowers or such other Loan Party is or are matured or unmatured and regardless
of the existence or adequacy of any Collateral, Guaranty or any other security,
right or remedy available to any Bank or the Agent; and
9.2.4 Suits, Actions, Proceedings.
If an Event of Default shall occur and be continuing, and whether or
not the Agent shall have accelerated the maturity of Revolving Credit Loans to
the Borrowers pursuant to any of the foregoing provisions of this Section, the
Agent or any Bank, if owed any amount with respect to the Notes, may proceed to
protect and enforce its rights by suit in equity, action at law and/or other
appropriate proceeding, whether for the specific performance of any covenant or
agreement contained in this Agreement or the Notes, including as permitted by
applicable Law the obtaining of the ex parte appointment of a receiver, and, if
such amount shall
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have become due, by declaration or otherwise, proceed to enforce the payment
thereof or any other legal or equitable right of the Agent or such Bank; and
9.2.5 Application of Proceeds.
From and after the date on which the Agent has taken any action
pursuant to this Section 9.2 and until all Obligations of the Loan Parties have
been paid in full, any and all proceeds received by the Agent from any sale or
other disposition of the Collateral, or any part thereof, or the exercise of any
other remedy by the Agent, shall be applied as follows:
(i) first, to reimburse the Agent and the Banks for reasonable
out-of-pocket costs, expenses and disbursements, including reasonable attorneys'
and paralegals' fees and legal expenses, incurred by the Agent or the Banks in
connection with realizing on the Collateral or collection of any Obligations of
any of the Loan Parties under any of the Loan Documents, including advances made
by the Banks or any one of them or the Agent for the reasonable maintenance,
preservation, protection or enforcement of, or realization upon, the Collateral,
including advances for taxes, insurance, repairs and the like and reasonable
expenses incurred to sell or otherwise realize on, or prepare for sale or other
realization on, any of the Collateral;
(ii) second, to the repayment of all Indebtedness then due and unpaid
of the Loan Parties to the Banks incurred under this Agreement or any of the
Loan Documents, whether of principal, interest, fees, expenses or otherwise, in
such manner as the Agent may determine in its discretion; and
(iii) the balance, if any, as required by Law; and
9.2.6 Other Rights and Remedies.
In addition to all of the rights and remedies contained in this
Agreement or in any of the other Loan Documents, the Agent shall have all of the
rights and remedies of a secured party under the Uniform Commercial Code or
other applicable Law, all of which rights and remedies shall be cumulative and
non-exclusive, to the extent permitted by Law. The Agent may, and upon the
request of the Required Banks shall, exercise all post-default rights granted to
the Agent and the Banks under the Loan Documents or applicable Law.
9.3 Notice of Sale.
Any notice required to be given by the Agent of a sale, lease, or other
disposition of the Collateral or any other intended action by the Agent, if
given ten (10) days prior to such proposed action, shall constitute commercially
reasonable and fair notice thereof to the Borrowers.
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10. THE AGENT
10.1 Appointment.
Each Bank hereby irrevocably designates, appoints and authorizes PNC Bank
to act as Agent for such Bank under this Agreement to execute and deliver or
accept on behalf of each of the Banks the other Loan Documents. Each Bank hereby
irrevocably authorizes, and each holder of any Note by the acceptance of a Note
shall be deemed irrevocably to authorize, the Agent to take such action on its
behalf under the provisions of this Agreement and the other Loan Documents and
any other instruments and agreements referred to herein, and to exercise such
powers and to perform such duties hereunder as are specifically delegated to or
required of the Agent by the terms hereof, together with such powers as are
reasonably incidental thereto. PNC Bank agrees to act as the Agent on behalf of
the Banks to the extent provided in this Agreement.
10.2 Delegation of Duties.
The Agent may perform any of its duties hereunder by or through agents or
employees (provided such delegation does not constitute a relinquishment of its
duties as Agent) and, subject to Sections 10.5 and 10.6, shall be entitled to
engage and pay for the advice or services of any attorneys, accountants or other
experts concerning all matters pertaining to its duties hereunder and to rely
upon any advice so obtained.
10.3 Nature of Duties; Independent Credit Investigation.
The Agent shall have no duties or responsibilities except those expressly
set forth in this Agreement and no implied covenants, functions,
responsibilities, duties, obligations, or liabilities shall be read into this
Agreement or otherwise exist. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of this Agreement a
fiduciary or trust relationship in respect of any Bank; and nothing in this
Agreement, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of this Agreement except as
expressly set forth herein. Each Bank expressly acknowledges (i) that the Agent
has not made any representations or warranties to it and that no act by the
Agent hereafter taken, including any review of the affairs of any of the Loan
Parties, shall be deemed to constitute any representation or warranty by the
Agent to any Bank; (ii) that it has made and will continue to make, without
reliance upon the Agent, its own independent investigation of the financial
condition and affairs and its own appraisal of the creditworthiness of each of
the Loan Parties in connection with this Agreement and the making and
continuance of the Revolving Credit Loans hereunder; and (iii) except as
expressly provided herein, that the Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Bank with any credit
or other information with respect thereto, whether coming into its possession
before the making of any Revolving Credit Loan or at any time or times
thereafter.
10.4 Actions in Discretion of Agent; Instructions from the Banks.
The Agent agrees, upon the written request of the Required Banks, to take
or refrain from taking any action of the type specified as being within the
Agent's rights, powers or
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discretion herein, provided that the Agent shall not be required to take any
action which exposes the Agent to personal liability or which is contrary to
this Agreement or any other Loan Document or applicable Law. In the absence of a
request by the Required Banks, the Agent shall have authority, in its sole
discretion, to take or not to take any such action, unless this Agreement
specifically requires the consent of the Required Banks or all of the Banks. Any
action taken or failure to act pursuant to such instructions or discretion shall
be binding on the Banks, subject to Section 10.6. Subject to the provisions of
Section 10.6, no Bank shall have any right of action whatsoever against the
Agent as a result of the Agent acting or refraining from acting hereunder in
accordance with the instructions of the Required Banks, or in the absence of
such instructions, in the absolute discretion of the Agent.
10.5 Reimbursement and Indemnification of Agent by the Borrowers.
The Borrowers jointly and severally unconditionally agree to pay or
reimburse the Agent and save the Agent harmless against (a) liability for the
payment of all reasonable out-of-pocket costs, expenses and disbursements,
including fees and expenses of counsel, appraisers and environmental
consultants, incurred by the Agent (i) in connection with the development,
negotiation, preparation, printing, execution, administration, syndication,
interpretation and performance of this Agreement and the other Loan Documents,
(ii) relating to any requested amendments, waivers or consents pursuant to the
provisions hereof, (iii) in connection with the enforcement of this Agreement or
any other Loan Document or collection of amounts due hereunder or thereunder or
the proof and allowability of any claim arising under this Agreement or any
other Loan Document, whether in bankruptcy or receivership proceedings or
otherwise, and (iv) in any workout, restructuring or in connection with the
protection, preservation, exercise or enforcement of any of the terms hereof or
of any rights hereunder or under any other Loan Document or in connection with
any foreclosure, collection or bankruptcy proceedings, and (b) all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against the Agent, in its capacity as such, in any
way relating to or arising out of this Agreement or any other Loan Documents or
any action taken or omitted by the Agent hereunder or thereunder, provided that
the Borrowers shall not be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements if the same results from the Agent's gross negligence
or willful misconduct, or if PhyMatrix was not given notice of the subject claim
and the opportunity to participate in the defense thereof, at its expense
(except that the Borrowers shall remain liable to the extent such failure to
give notice does not result in a loss to the Borrowers), or if the same results
from a compromise or settlement agreement entered into without the consent of
PhyMatrix, which shall not be unreasonably withheld. In addition, the Borrowers
agrees to reimburse and pay all reasonable out-of-pocket expenses of the Agent's
regular employees and agents engaged periodically to perform audits of the Loan
Parties' books, records and business properties.
10.6 Exculpatory Provisions.
Neither the Agent nor any of its directors, officers, employees, agents,
attorneys or Affiliates shall (a) be liable to any Bank for any action taken or
omitted to be taken by it or them hereunder, or in connection herewith including
pursuant to any Loan Document, unless caused by
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its or their own gross negligence or willful misconduct, (b) be responsible in
any manner to any of the Banks for the effectiveness, enforceability,
genuineness, validity or the due execution of this Agreement or any other Loan
Documents or for any recital, representation, warranty, document, certificate,
report or statement herein or made or furnished under or in connection with this
Agreement or any other Loan Documents, or (c) be under any obligation to any of
the Banks to ascertain or to inquire as to the performance or observance of any
of the terms, covenants or conditions hereof or thereof on the part of the Loan
Parties, or the financial condition of the Loan Parties, or the existence or
possible existence of any Event of Default or Potential Default. Neither the
Agent nor any Bank nor any of their respective directors, officers, employees,
agents, attorneys or Affiliates shall be liable to any of the Loan Parties for
consequential damages resulting from any breach of contract, tort or other wrong
in connection with the negotiation, documentation, administration or collection
of the Revolving Credit Loans or any of the Loan Documents.
10.7 Reimbursement and Indemnification of Agent by Banks.
Each Bank agrees to reimburse and indemnify the Agent (to the extent not
reimbursed by the Borrowers and without limiting the Obligation of the Borrowers
to do so) in proportion to its Ratable Share from and against all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against the Agent, in its capacity as such, in any
way relating to or arising out of this Agreement or any other Loan Documents or
any action taken or omitted by the Agent hereunder or thereunder, provided that
no Bank shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements (a) if the same results from the Agent's gross negligence or
willful misconduct, or (b) if such Bank was not given notice of the subject
claim and the opportunity to participate in the defense thereof, at its expense
(except that such Bank shall remain liable to the extent such failure to give
notice does not result in a loss to the Bank), or (c) if the same results from a
compromise and settlement agreement entered into without the consent of such
Bank, which shall not be unreasonably withheld. In addition, each Bank agrees
promptly upon demand to reimburse the Agent (to the extent not reimbursed by the
Borrowers and without limiting the Obligation of the Borrowers to do so) in
proportion to its Ratable Share for all amounts due and payable by the Borrowers
to the Agent in connection with the Agent's periodic audit of the Loan Parties'
books, records and business properties.
10.8 Reliance by Agent.
The Agent shall be entitled to rely upon any writing, telegram, resolution,
notice, consent, certificate, letter, cablegram, statement, order or other
document or conversation by telephone or otherwise believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons, and upon the advice and opinions of counsel and other professional
advisers selected by the Agent. The Agent shall be fully justified in failing or
refusing to take any action hereunder unless it shall first be indemnified to
its satisfaction by the Banks against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
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10.9 Notice of Default.
The Agent shall not be deemed to have knowledge or notice of the occurrence
of any Potential Default or Event of Default unless the Agent has received
written notice from a Bank or the Borrowers referring to this Agreement,
describing such Potential Default or Event of Default and stating that such
notice is a "notice of default."
10.10 Notices.
The Agent shall promptly send to each Bank a copy of all notices received
from PhyMatrix pursuant to the provisions of this Agreement or the other Loan
Documents promptly upon receipt thereof. The Agent shall promptly notify
PhyMatrix as agent for the Borrowers and the other Banks of each change in the
Base Rate and the effective date thereof.
10.11 Banks in Their Individual Capacities.
With respect to its Revolving Credit Commitments and the Revolving Credit
Loans made by it, the Agent shall have the same rights and powers hereunder as
any other Bank and may exercise the same as though it were not the Agent, and
the term "Banks" shall, unless the context otherwise indicates, include the
Agent in its individual capacity. PNC Bank and its Affiliates and each of the
Banks and their respective Affiliates may, without liability to account, except
as prohibited herein, make Revolving Credit Loans to, accept deposits from,
discount drafts for, act as trustee under indentures of, and generally engage in
any kind of banking or trust business with, the Loan Parties and their
Affiliates, in the case of the Agent, as though it were not acting as Agent
hereunder and in the case of each Bank, as though such Bank were not a Bank
hereunder.
10.12 Holders of Notes.
The Agent may deem and treat any payee of any Note as the owner thereof for
all purposes hereof unless and until written notice of the assignment or
transfer thereof shall have been filed with the Agent. Any request, authority or
consent of any Person who at the time of making such request or giving such
authority or consent is the holder of any Note shall be conclusive and binding
on any subsequent holder, transferee or assignee of such Note or of any Note or
Notes issued in exchange therefor.
10.13 Equalization of Banks.
The Banks and the holders of any participations in any Notes agree among
themselves that, with respect to all amounts received by any Bank or any such
holder for application on any Obligation hereunder or under any Note or under
any such participation, whether received by voluntary payment, by realization
upon security, by the exercise of the right of set-off or banker's lien, by
counterclaim or by any other non-pro rata source, equitable adjustment will be
made in the manner stated in the following sentence so that, in effect, all such
excess amounts will be shared ratably among the Banks and such holders in
proportion to their interests in payments under the Notes, except as otherwise
provided in Sections 4.4.2, 5.4.2 or 5.6.1. The Banks or any such holder
receiving any such amount shall purchase for cash from each of the
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other Banks an interest in such Bank's Revolving Credit Loans in such amount as
shall result in a ratable participation by the Banks and each such holder in the
aggregate unpaid amount under the Notes, provided that if all or any portion of
such excess amount is thereafter recovered from the Bank or the holder making
such purchase, such purchase shall be rescinded and the purchase price restored
to the extent of such recovery, together with interest or other amounts, if any,
required by law (including court order) to be paid by the Bank or the holder
making such purchase.
10.14 Successor Agent.
The Agent (i) may resign as Agent or (ii) shall resign if such resignation
is requested by the Required Banks (if the Agent is a Bank, the Agent's
Revolving Credit Loans and its Revolving Credit Commitment shall be considered
in determining whether the Required Banks have requested such resignation) or
required by Section 5.4.2, in either case of (i) or (ii) by giving not less than
thirty (30) days' prior written notice to PhyMatrix as agent for the Borrowers.
If the Agent shall resign under this Agreement, then either (a) the Required
Banks shall appoint from among the Banks a successor agent for the Banks,
subject to the consent of PhyMatrix as agent for the Borrowers, such consent not
to be unreasonably withheld, or (b) if a successor agent shall not be so
appointed and approved within the thirty (30) day period following the Agent's
notice to the Banks of its resignation, then the Agent shall appoint, with the
consent of PhyMatrix as agent for the Borrowers, such consent not to be
unreasonably withheld, a successor agent who shall serve as Agent until such
time as the Required Banks appoint and PhyMatrix as agent for the Borrowers
consents to the appointment of a successor agent. Upon its appointment pursuant
to either clause (a) or (b) above, such successor agent shall succeed to the
rights, powers and duties of the Agent, and the term "Agent" shall mean such
successor agent, effective upon its appointment, and the former Agent's rights,
powers and duties as Agent shall be terminated without any other or further act
or deed on the part of such former Agent or any of the parties to this
Agreement. After the resignation of any Agent hereunder, the provisions of this
Article 10 shall inure to the benefit of such former Agent and such former Agent
shall not by reason of such resignation be deemed to be released from liability
for any actions taken or not taken by it while it was an Agent under this
Agreement.
10.15 Agent's Fees.
The Borrowers shall pay to the Agent certain fees (the "Agent's Fees")
calculated and paid pursuant to the terms of an engagement letter executed and
delivered on or about July 1, 1997, which shall be payable, as required, through
the date on which all of the Obligations are satisfied.
10.16 Availability of Funds.
Unless the Agent shall have been notified by a Bank prior to the date upon
which a Revolving Credit Loan is to be made that such Bank does not intend to
make available to the Agent such Bank's portion of such Revolving Credit Loan,
the Agent may assume that such Bank has made or will make such proceeds
available to the Agent on such date and the Agent may, in reliance upon such
assumption (but shall not be required to), make available to the Borrowers a
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corresponding amount. If such corresponding amount is not in fact made available
to the Agent by such Bank, the Agent shall be entitled to recover such amount on
demand from such Bank (or, if such Bank fails to pay such amount forthwith upon
such demand from the Borrowers) together with interest thereon, in respect of
each day during the period commencing on the date such amount was made available
to the Borrowers and ending on the date the Agent recovers such amount, at a
rate per annum equal to the applicable interest rate in respect of the Revolving
Credit Loan.
10.17 Calculations.
In the absence of gross negligence or willful misconduct, the Agent shall
not be liable for any error in computing the amount payable to any Bank whether
in respect of the Revolving Credit Loans, fees or any other amounts due to the
Banks under this Agreement. In the event an error in computing any amount
payable to any Bank is made, the Agent, the Borrowers and each affected Bank
shall, forthwith upon discovery of such error, make such adjustments as shall be
required to correct such error, and any compensation therefor will be calculated
at the Federal Funds Effective Rate.
10.18 Beneficiaries.
Except as expressly provided herein, the provisions of this Article 10 are
solely for the benefit of the Agent and the Banks, and the Loan Parties shall
not have any rights to rely on or enforce any of the provisions hereof (except
for the right to grant or withhold consent described in Section 10.14). In
performing its functions and duties under this Agreement, the Agent shall act
solely as agent of the Banks and does not assume and shall not be deemed to have
assumed any obligation toward or relationship of agency or trust with or for any
of the Loan Parties.
11. MISCELLANEOUS
11.1 Modifications, Amendments or Waivers.
With the written consent of the Required Banks, the Agent, acting on behalf
of all the Banks, and PhyMatrix, on behalf of the Loan Parties, may from time to
time enter into written agreements amending or changing any provision of this
Agreement or any other Loan Document or the rights of the Banks or the Loan
Parties hereunder or thereunder, or may grant written waivers or consents to a
departure from the due performance of the Obligations of the Loan Parties
hereunder or thereunder. Any such agreement, waiver or consent made with such
written consent shall be effective to bind all the Banks and the Loan Parties;
provided, that, without the written consent of all the Banks, no such agreement,
waiver or consent may be made which will:
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11.1.1 Increase of Revolving Credit Commitment; Extension or
Expiration Date.
Increase the amount of the Revolving Credit Commitment of any Bank
hereunder or extend the Expiration Date;
11.1.2 Extension of Payment; Reduction of Principal Interest or Fees;
Modification of Terms of Payment.
Whether or not any Revolving Credit Loans are outstanding, extend the
time for payment of principal or interest of any Revolving Credit Loan, the
Commitment Fee or any other fee payable to any Bank, or reduce the principal
amount of or the rate of interest borne by any Revolving Credit Loan or reduce
the Commitment Fee or any other fee payable to any Bank, or otherwise affect the
terms of payment of the principal of or interest of any Revolving Credit Loan,
the Commitment Fee or any other fee payable to any Bank;
11.1.3 Release of Collateral or Guarantor.
Except for sales of assets permitted by Section 8.2.7, release any
Collateral, any Guarantor from its Obligations under the Guaranty Agreement or
any other security for any of the Loan Parties' Obligations; or
11.1.4 Miscellaneous.
Amend Sections 5.2, 10.6 or 10.13 or this Section, alter any provision
regarding the pro rata treatment of the Banks, change the definition of Required
Banks, or change any requirement providing for the Banks or the Required Banks
to authorize the taking of any action hereunder.
No agreement, waiver or consent which would modify the interests,
rights or obligations of the Agent in its capacity as Agent or as the issuer of
Letters of Credit shall be effective without the written consent of the Agent.
11.2 No Implied Waivers; Cumulative Remedies; Writing Required.
No course of dealing and no delay or failure of the Agent or any Bank in
exercising any right, power, remedy or privilege under this Agreement or any
other Loan Document shall affect any other or future exercise thereof or operate
as a waiver thereof, nor shall any single or partial exercise thereof or any
abandonment or discontinuance of steps to enforce such a right, power, remedy or
privilege preclude any further exercise thereof or of any other right, power,
remedy or privilege. The rights and remedies of the Agent and the Banks under
this Agreement and any other Loan Documents are cumulative and not exclusive of
any rights or remedies which they would otherwise have. Any waiver, permit,
consent or approval of any kind or character on the part of any Bank of any
breach or default under this Agreement or any such waiver of any provision or
condition of this Agreement must be in writing and shall be effective only to
the extent specifically set forth in such writing.
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11.3 Reimbursement and Indemnification of Banks by the Borrowers; Taxes.
The Borrowers jointly and severally agree unconditionally upon demand to
pay or reimburse to each Bank (other than the Agent, as to which the Borrowers'
Obligations are set forth in Section 10.5) and to save such Bank harmless
against all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against such Bank,
in its capacity as such, in any way relating to or arising out of this Agreement
or any other Loan Documents or any action taken or omitted by such Bank
hereunder or thereunder, provided that the Borrowers shall not be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements (A) if the same results from
such Bank's gross negligence or willful misconduct, or (B) if PhyMatrix was not
given notice of the subject claim and the opportunity to participate in the
defense thereof, at its expense (except that the Borrowers shall remain liable
to the extent such failure to give notice does not result in a loss to the
Borrowers), or (C) if the same results from a compromise or settlement agreement
entered into without the consent of PhyMatrix as agent for the Borrowers, which
shall not be unreasonably withheld. The Banks will attempt to minimize the fees
and expenses of legal counsel for the Banks which are subject to reimbursement
by the Borrowers hereunder by considering the usage of one law firm to represent
the Banks and the Agent if appropriate under the circumstances. The Borrowers
jointly and severally agree unconditionally to pay all stamp, document,
transfer, recording or filing taxes or fees and similar impositions now or
hereafter determined by the Agent or any Bank to be payable in connection with
this Agreement or any other Loan Document, and the Borrowers jointly and
severally agree unconditionally to save the Agent and the Banks harmless from
and against any and all present or future claims, liabilities or losses with
respect to or resulting from any omission to pay or delay in paying any such
taxes, fees or impositions.
11.4 Holidays.
Whenever any payment or action to be made or taken hereunder shall be
stated to be due on a day which is not a Business Day, such payment or action
shall be made or taken on the next following Business Day (except as provided in
Section 4.2.1 with respect to Interest Periods under the Euro-Rate Option), and
such extension of time shall be included in computing interest or fees, if any,
in connection with such payment or action.
11.5 Funding by Branch, Subsidiary or Affiliate.
11.5.1 Notional Funding.
Each Bank shall have the right from time to time, without notice to
the Borrowers, to deem any branch, Subsidiary or Affiliate (which for the
purposes of this Section 11.5 shall mean any corporation or association which is
directly or indirectly controlled by or is under direct or indirect common
control with any corporation or association which directly or indirectly
controls such Bank) of such Bank to have made, maintained or funded any
Revolving Credit Loan to which the Euro-Rate Option applies at any time,
provided that immediately following (on the assumption that a payment were then
due from the Borrowers to
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<PAGE>
such other office), and as a result of such change, the Borrowers would not be
under any greater financial obligation pursuant to Section 5.6 than it would
have been in the absence of such change. Notional funding offices may be
selected by each Bank without regard to the Bank's actual methods of making,
maintaining or funding the Revolving Credit Loans or any sources of funding
actually used by or available to such Bank.
11.5.2 Actual Funding.
Each Bank shall have the right from time to time to make or maintain
any Revolving Credit Loan by arranging for a branch, Subsidiary or Affiliate of
such Bank to make or maintain such Revolving Credit Loan subject to the last
sentence of this Section. If any Bank causes a branch, Subsidiary or Affiliate
to make or maintain any part of the Revolving Credit Loans hereunder, all terms
and conditions of this Agreement shall, except where the context clearly
requires otherwise, be applicable to such part of the Revolving Credit Loans to
the same extent as if such Revolving Credit Loans were made or maintained by
such Bank, but in no event shall any Bank's use of such a branch, Subsidiary or
Affiliate to make or maintain any part of the Revolving Credit Loans hereunder
cause such Bank or such branch, Subsidiary or Affiliate to incur any cost or
expenses payable by the Borrowers hereunder or require the Borrowers to pay any
other compensation to any Bank (including any expenses incurred or payable
pursuant to Section 5.6) which would otherwise not be incurred.
11.6 Notices.
All notices, requests, demands, directions and other communications (as
used in this Section, collectively referred to as "notices") given to or made
upon any party hereto under the provisions of this Agreement shall be by
telephone or in writing (including facsimile communication) unless otherwise
expressly permitted hereunder and shall be delivered or sent by facsimile to the
respective parties at the addresses and numbers set forth under their respective
names on the signature pages hereof or in accordance with any subsequent
unrevoked written direction from any party to the others. All notices shall,
except as otherwise expressly herein provided, be effective (a) in the case of
facsimile, when received, (b) in the case of hand-delivered notice, when
hand-delivered, (c) in the case of telephone, when telephoned, provided,
however, that in order to be effective, telephonic notices must be confirmed in
writing no later than the next day by letter, facsimile, (d) if given by mail,
four (4) days after such communication is deposited in the mail with first-class
postage prepaid, return receipt requested, and (e) if given by any other means
(including by air courier), when delivered; provided, that notices to the Agent
shall not be effective until received. Any Bank giving any notice to any Loan
Party shall simultaneously send a copy thereof to the Agent, and the Agent shall
promptly notify the other Banks of the receipt by it of any such notice.
11.7 Severability.
The provisions of this Agreement are intended to be severable. If any
provision of this Agreement shall be held invalid or unenforceable in whole or
in part in any jurisdiction, such provision shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or
-75-
<PAGE>
unenforceability without in any manner affecting the validity or enforceability
thereof in any other jurisdiction or the remaining provisions hereof in any
jurisdiction.
11.8 Governing Law.
Each Letter of Credit and Section 2.9 shall be subject to the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500, as the same may be revised or amended
from time to time, and to the extent not inconsistent therewith, the internal
laws of the Commonwealth of Pennsylvania without regard to its conflict of laws
principles and the balance of this Agreement shall be deemed to be a contract
under the Laws of the Commonwealth of Pennsylvania and for all purposes shall be
governed by and construed and enforced in accordance with the internal laws of
the Commonwealth of Pennsylvania without regard to its conflict of laws
principles.
11.9 Prior Understanding.
This Agreement supersedes all prior understandings and agreements, whether
written or oral, between the parties hereto and thereto relating to the
transactions provided for herein and therein, including any prior
confidentiality agreements and commitments.
11.10 Duration; Survival.
All representations and warranties of the Loan Parties contained herein or
made in connection herewith shall survive the making of Revolving Credit Loans,
issuance of Letters of Credit and shall not be waived by the execution and
delivery of this Agreement, any investigation by the Agent or the Banks, the
making of Revolving Credit Loans or issuance of Letters of Credit, but shall
terminate on payment in full of the Revolving Credit Loans. All covenants and
agreements of the Loan Parties contained in Sections 8.1, 8.2 and 8.3 herein
shall continue in full force and effect from and after the date hereof so long
as the Borrowers may borrow or request Letters of Credit hereunder and until
termination of the Revolving Credit Commitments and expiration or termination of
all Letters of Credit. All covenants and agreements of the Borrowers contained
herein relating to the payment of principal, interest, premiums, additional
compensation or expenses and indemnification, including those set forth in the
Notes, Article 5 and Sections 10.5, 10.7 and 11.3, shall survive payment in full
of the Revolving Credit Loans, expiration or termination of the Letters of
Credit and termination of the Revolving Credit Commitments.
11.11 Successors and Assigns.
This Agreement shall be binding upon and shall inure to the benefit of the
Banks, the Agent, the Loan Parties and their respective successors and assigns,
except that none of the Loan Parties may assign or transfer any of its rights
and Obligations hereunder or any interest herein. Each Bank may, at its own
cost, make assignments of or sell participations in all or any part of its
Revolving Credit Commitment and the Revolving Credit Loans made by it to one or
more banks or other entities, subject to the consent of the Borrowers and the
Agent with respect to any assignee, such consent not to be unreasonably
withheld, and provided that assignments
-76-
<PAGE>
may not be made in amounts less than $5,000,000 and provided further no consent
of the Borrowers shall be required (x) if there exists any Potential Default or
Event of Default or (y) in the case of any assignment from any Bank to any other
Bank or any Affiliate thereof. In the case of an assignment, upon receipt by the
Agent of the Assignment and Assumption Agreement, the assignee shall have, to
the extent of such assignment (unless otherwise provided therein), the same
rights, benefits and obligations as it would have if it had been a signatory
Bank hereunder, the Revolving Credit Commitments in Section 2.1 shall be
adjusted accordingly, and upon surrender of any Note subject to such assignment,
the Borrowers shall execute and deliver a new Note to the assignee in an amount
equal to the amount of the Revolving Credit Commitment assumed by it and a new
Note to the assigning Bank in an amount equal to the Revolving Credit Commitment
retained by it hereunder. The assigning Bank shall pay to the Agent a service
fee in the amount of $3,500 for each assignment. In the case of a participation,
the participant shall only have the rights specified in Section 9.2.3 (the
participant's rights against such Bank in respect of such participation to be
those set forth in the agreement executed by such Bank in favor of the
participant relating thereto and not to include any voting rights except with
respect to changes of the type referenced in clauses 11.1.1, 11.1.2, or 11.1.3
under Section 11.1), all of such Bank's obligations under this Agreement or any
other Loan Document shall remain unchanged, and all amounts payable by any Loan
Party hereunder or thereunder shall be determined as if such Bank had not sold
such participation. Any assignee or participant which is not incorporated under
the Laws of the United States of America or a state thereof shall deliver to the
Borrowers and the Agent the form of certificate described in Section 11.17
relating to federal income tax withholding. Each Bank may furnish any publicly
available information concerning any Loan Party or its Subsidiaries and any
other information concerning any Loan Party or its Subsidiaries in the
possession of such Bank from time to time to assignees and participants
(including prospective assignees or participants), provided that such assignees
and participants agree to be bound by the provisions of Section 11.12.
11.12 Confidentiality.
The Agent and the Banks each agree to keep confidential all information
obtained from any Loan Party or its Subsidiaries which is nonpublic and
confidential or proprietary in nature (including any information the Borrowers
specifically designate as confidential), except as provided below, and to use
such information only in connection with their respective capacities under this
Agreement and for the purposes contemplated hereby. The Agent and the Banks
shall be permitted to disclose such information (i) to outside legal counsel,
accountants and other professional advisors who need to know such information in
connection with the administration and enforcement of this Agreement, subject to
agreement of such Persons to maintain the confidentiality, (ii) to assignees and
participants as contemplated by Section 11.11, (iii) to the extent requested by
any bank regulatory authority or, with notice to PhyMatrix as agent for the
Borrowers, as otherwise required by applicable Law or by any subpoena or similar
legal process, or in connection with any investigation or proceeding arising out
of the transactions contemplated by this Agreement, (iv) if it becomes publicly
available other than as a result of a breach of this Agreement or becomes
available from a source not subject to confidentiality restrictions, or (v) if
the Borrowers shall have consented to such disclosure.
-77-
<PAGE>
11.13 Counterparts.
This Agreement may be executed by different parties hereto on any number of
separate counterparts, each of which, when so executed and delivered, shall be
an original, and all such counterparts shall together constitute one and the
same instrument.
11.14 Agent's or Bank's Consent.
Whenever the Agent's or any Bank's consent is required to be obtained under
this Agreement or any of the other Loan Documents as a condition to any action,
inaction, condition or event, the Agent and each Bank shall be authorized to
give or withhold such consent in its reasonable discretion and to condition its
consent upon the giving of additional collateral, the payment of money or any
other matter.
11.15 Exceptions.
The representations, warranties and covenants contained herein shall be
independent of each other, and no exception to any representation, warranty or
covenant shall be deemed to be an exception to any other representation,
warranty or covenant contained herein unless expressly provided, nor shall any
such exceptions be deemed to permit any action or omission that would be in
contravention of applicable Law.
11.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL.
EACH LOAN PARTY HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY AND THE UNITED
STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA, AND WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO SUCH LOAN
PARTY AT THE ADDRESSES PROVIDED FOR IN SECTION 11.6 AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. EACH LOAN PARTY WAIVES ANY
OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS
PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE. EACH LOAN PARTY, THE AGENT AND THE BANKS HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND
ARISING OUT OF OR RELATED TO THIS AGREEMENT, ANY OTHER REVOLVING CREDIT LOAN
DOCUMENT OR THE COLLATERAL TO THE FULL EXTENT PERMITTED BY LAW.
11.17 Tax Withholding Clause.
Each Bank or assignee or participant of a bank that is not incorporated
under the Laws of the United States of America or a state thereof agrees that it
will deliver to each of the Borrowers and the Agent two (2) duly completed
copies of the following: (i) Internal Revenue
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<PAGE>
Service Form W-9, 4224 or 1001, or other applicable form prescribed by the
Internal Revenue Service, certifying that such Bank, assignee or participant is
entitled to receive payments under this Agreement and the other Loan Documents
without deduction or withholding of any United States federal income taxes, or
is subject to such tax at a reduced rate under an applicable tax treaty, or (ii)
Internal Revenue Service Form W-8 or other applicable form or a certificate of
the Bank, assignee or participant indicating that no such exemption or reduced
rate is allowable with respect to such payments. Each Bank, assignee or
participant required to deliver to the Borrowers and the Agent a form or
certificate pursuant to the preceding sentence shall deliver such form or
certificate as follows: (A) each Bank which is a party hereto on the Closing
Date shall deliver such form or certificate at least five (5) Business Days
prior to the first date on which any interest or fees are payable by the
Borrowers hereunder for the account of each Bank; (B) each assignee or
participant shall deliver such form or certificate at least five (5) Business
Days before the effective date of such assignment or participation (unless the
Agent in its sole discretion shall permit such assignee or participant to
deliver such form or certificate less than five (5) Business Days before such
date in which case it shall be due on the date specified by the Agent). Each
Bank, assignee or participant which so delivers a Form W-8, W-9, 4224 or 1001
further undertakes to deliver to each of the Borrowers and the Agent two (2)
additional copies of such form (or a successor form) on or before the date that
such form expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Borrowers or the Agent, either certifying that such Bank,
assignee or participant is entitled to receive payments under this Agreement and
the other Loan Documents without deduction or withholding of any United States
federal income taxes or is subject to such tax at a reduced rate under an
applicable tax treaty or stating that no such exemption or reduced rate is
allowable. The Agent shall be entitled to withhold United States federal income
taxes at the full withholding rate unless the Bank, assignee or participant
establishes an exemption or that it is subject to a reduced rate as established
pursuant to the above provisions.
11.18 Joinder of Guarantors.
Any Subsidiary of any Borrower which is required to join this Agreement as
a Guarantor pursuant to Section 8.2.9 shall execute and deliver to the Agent (i)
a Guarantor Joinder in substantially the form attached hereto as Exhibit 1.1(G)
pursuant to which it shall join as a Guarantor each of the documents to which
the Guarantors are parties, (ii) documents in the forms described in Section 7.1
modified as appropriate to relate to such Subsidiary; and (iii) documents
necessary to grant and perfect Prior Security Interests to the Agent for the
benefit of the Banks in all Collateral held by such Subsidiary. The Loan Parties
shall deliver such Guarantor Joinder and related documents to the Agent within
fifteen (15) Business Days after the date of the filing of such Subsidiary's
articles of incorporation if the Subsidiary is a corporation, the date of the
filing of its certificate of limited partnership if it is a limited partnership
or the date of its organization if it is an entity other than a limited
partnership or corporation or, if later, the date a Borrower acquires such
Subsidiary.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed this Agreement as of the day and year first above
written.
PHYMATRIX CORP. and each of the
Subsidiaries listed on the attached
Subsidiaries Schedule I
By: /s/ Frederick R. Leathers
------------------------------------
Title: Chief Financial Officer
---------------------------------
Address for Notices:
197 First Avenue
Needham, MA 02194
Attention: Frederick R. Leathers
Telephone No. (781) 433-1120
Telecopier No. (781) 433-1191
With a copy to:
Paul Eklund, Esquire
Nutter, McClennen & Fish, LLP
One International Place
Boston, MA 02110-2699
Telephone No. (617) 439-2303
Telecopier No. (617) 973-9748
-80-
<PAGE>
and
PhyMatrix Corp.
777 South Flagler Drive
Phillips Point, Suite 1000E
West Palm Beach, Florida 33401
Attention: General Counsel
Telephone (407) 655-3500
Telecopier (407) 833-7175
GUARANTORS:
PHYMATRIX CORP. and each of the
Guarantors listed on the attached
Guarantors Schedule I
By: /s/ Frederick R. Leathers
-------------------------------------
Title: Chief Financial Officer
----------------------------------
Address for Notices:
197 First Avenue
Needham, MA 02194
Attention: Frederick R. Leathers
Telephone No. (617) 433-1120
Telecopier No. (617) 433-1191
With a copy to:
Paul Eklund, Esquire
Nutter, McClennen & Fish, LLP
One International Place
Boston, MA 02110-2699
Telephone No. (617) 439-2303
Telecopier No. (617) 973-9748
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<PAGE>
and
PhyMatrix Corp.
777 South Flagler Drive
Phillips Point, Suite 1000E
West Palm Beach, Florida 33401
Attention: General Counsel
Telecopier (407) 833-7175
Telephone (407) 655-3500
PNC BANK, NATIONAL ASSOCIATION,
individually and as Agent
By: /s/ Scott D. Colcombe
------------------------------------
Title: Assistant Vice President
---------------------------------
Address for Notices:
Scott D. Colcombe
Assistant Vice President
PNC Bank, N.A.
249 Fifth Avenue
One PNC Plaza, 6th Floor
Pittsburgh, PA 15222-2707
Telephone No. (412) 762-2149
Telecopier No. (412) 768-5149
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<PAGE>
With a copy to:
Arlene Ohler
Multi-Bank Loan Administration
PNC Bank, N.A.
One PNC Plaza, 4th Floor Annex
249 Fifth Avenue
Pittsburgh, PA 15222-2707
Telephone No. (412) 762-3627
Telecopier No. (412) 762-8672
and
Peter W. Laberee, Esquire
Buchanan Ingersoll Professional Corporation
Eleven Penn Center, 14th Floor
1835 Market Street
Philadelphia, PA 19103
Telephone No. (215) 665-3817
Telecopier No. (215) 665-8760
-83-
<PAGE>
SUBSIDIARIES SCHEDULE I
CCC Duramed, Inc. (a Florida corporation)
CCC-Infusion, Inc. (a Florida corporation)
CCC-Indiana Lithotripsy, Inc. (a Florida corporation)
CCC-Lithotripsy, Inc. (a Florida corporation)
CCC National Lithotripsy, Inc. (a Florida corporation)
CCC Rehab, Inc. (a Florida corporation)
First Choice Health Care Services, Inc. (a Delaware corporation)
First Choice Health Care Services of Fort Lauderdale, Inc. (a Delaware corp.)
First Choice Home Cares, Inc. (a Delaware corporation)
Lithotripsy America, Inc. (a Florida corporation)
Oncology Therapies of America, Inc. (a Florida corporation)
PhyMatrix of Atlanta, Inc. (a Delaware corporation)
PhyMatrix of Central Georgia, Inc. (a Delaware corporation)
PhyMatrix Management Company, Inc. (a Florida corporation)
PhyMatrix Physician Management, Inc. (a Delaware corporation)
Pinnacle Associates, Inc. (a Georgia corporation)
Nutrichem, Inc. (a Maryland corporation)
Oncology Therapies, Inc. (a Delaware corporation)
Atlanta Radiation Care, Inc. (a Delaware corporation)
Biltmore Advanced Imaging Center, Inc. (an Arizona corporation)
Charlotte Radiation Care, Inc. (a Delaware corporation)
Chattanooga Radiation Care, Inc. (a Delaware corporation)
College Park Radiation Care, Inc. (a Delaware corporation)
Computerized Tomography Center, Inc. (a Delaware corporation)
Falls Church Radiation Care, Inc. (a Delaware corporation)
Greenville Radiation Care, Inc. (a Delaware corporation)
Montgomery Radiation Care at Baptist, Inc. (a Delaware corporation)
Montgomery Radiation Care, Inc. (a Delaware corporation)
Nashville Radiation Care, Inc. (a Delaware corporation)
North Atlanta Radiation Care, Inc. (a Delaware corporation)
North Fulton Radiation Care, Inc. (a Delaware corporation)
Northern Virginia Radiation Care, Inc. (a Delaware corporation)
Orlando Radiation Care, Inc. (a Delaware corporation)
Rockville Radiation Care, Inc. (a Delaware corporation)
University Place Radiation Care, Inc. (a Delaware corporation)
Vista Radiation Care, Inc. (a Delaware corporation)
Waldorf Radiation Care, Inc. (a Delaware corporation)
PhyMatrix Psychological Management, Inc. (a Delaware corporation)
PhyMatrix of Tampa, Inc. (a Delaware corporation)
PhyMatrix Mid-Atlantic Management, Inc. (a Delaware corporation)
PhyMatrix Endoscopy Center, Inc. (a Florida corporation)
PhyMatrix Northeast, Inc. (a Delaware corporation)
First Phynet, Inc. (a Delaware Corporation)
First Phynet, LLC (a Delaware Corporation)
<PAGE>
New Jersey Medical Management, L.L.C. (a New York corporation)
PhyMatrix Acquisition I, Inc. ( a Delaware corporation)
PhyMatrix Dade County, Inc. (a Delaware corporation)
PhyMatrix Network Management, Inc. (a Delaware corporation)
PhyMatrix of Brooklyn, Inc. (a Delaware corporation)
PhyMatrix of New Jersey, Inc. (a Delaware corporation)
PhyMatrix Pulmonary Network, Inc. (a Florida corporation)
Physicians Consultant and Management Corporation (a Florida corporation)
Physicians Consultant and Management Corporation of New York (a New York
corporation)
Physicians Consultant and Management Corporation of North Carolina (a Florida
corporation)
Gardens Surgery Center of Palm Beach County (a Florida corporation)
-2-
<PAGE>
GUARANTORS SCHEDULE I
CCC Duramed, Inc. (a Florida corporation)
CCC-Infusion, Inc. (a Florida corporation)
CCC-Indiana Lithotripsy, Inc. (a Florida corporation)
CCC-Lithotripsy, Inc. (a Florida corporation)
CCC National Lithotripsy, Inc. (a Florida corporation)
CCC Rehab, Inc. (a Florida corporation)
First Choice Health Care Services, Inc. (a Delaware corporation)
First Choice Health Care Services of Fort Lauderdale, Inc.
(a Delaware corporation)
First Choice Home Cares, Inc. (a Delaware corporation)
Lithotripsy America, Inc. (a Florida corporation)
Oncology Therapies of America, Inc. (a Florida corporation)
PhyMatrix of Atlanta, Inc. (a Delaware corporation)
PhyMatrix of Central Georgia, Inc. (a Delaware corporation)
PhyMatrix Management Company, Inc. (a Florida corporation)
PhyMatrix Physician Management, Inc. (a Delaware corporation)
Pinnacle Associates, Inc. (a Georgia corporation)
Nutrichem, Inc. (a Maryland corporation)
Oncology Therapies, Inc. (a Delaware corporation)
Atlanta Radiation Care, Inc. (a Delaware corporation)
Biltmore Advanced Imaging Center, Inc. (an Arizona corporation)
Charlotte Radiation Care, Inc. (a Delaware corporation)
Chattanooga Radiation Care, Inc. (a Delaware corporation)
College Park Radiation Care, Inc. (a Delaware corporation)
Computerized Tomography Center, Inc. (a Delaware corporation)
Falls Church Radiation Care, Inc. (a Delaware corporation)
Greenville Radiation Care, Inc. (a Delaware corporation)
Montgomery Radiation Care at Baptist, Inc. (a Delaware corporation)
Montgomery Radiation Care, Inc. (a Delaware corporation)
Nashville Radiation Care, Inc. (a Delaware corporation)
North Atlanta Radiation Care, Inc. (a Delaware corporation)
North Fulton Radiation Care, Inc. (a Delaware corporation)
Northern Virginia Radiation Care, Inc. (a Delaware corporation)
Orlando Radiation Care, Inc. (a Delaware corporation)
Rockville Radiation Care, Inc. (a Delaware corporation)
University Place Radiation Care, Inc. (a Delaware corporation)
Vista Radiation Care, Inc. (a Delaware corporation)
Waldorf Radiation Care, Inc. (a Delaware corporation)
PhyMatrix Psychological Management, Inc. (a Delaware corporation)
PhyMatrix of Tampa, Inc. (a Delaware corporation)
PhyMatrix Mid-Atlantic Management, Inc. (a Delaware corporation)
PhyMatrix Endoscopy Center, Inc. (a Florida corporation)
PhyMatrix Northeast, Inc. (a Delaware corporation)
First Phynet, Inc. (a Delaware Corporation)
<PAGE>
First Phynet, LLC (a Delaware Corporation)
New Jersey Medical Management, L.L.C. (a New York corporation)
PhyMatrix Acquisition I, Inc. ( a Delaware corporation)
PhyMatrix Dade County, Inc. (a Delaware corporation)
PhyMatrix Network Management, Inc. (a Delaware corporation)
PhyMatrix of Brooklyn, Inc. (a Delaware corporation)
PhyMatrix of New Jersey, Inc. (a Delaware corporation)
PhyMatrix Pulmonary Network, Inc. (a Florida corporation)
Physicians Consultant and Management Corporation (a Florida corporation)
Physicians Consultant and Management Corporation of New York (a New York
corporation)
Physicians Consultant and Management Corporation of North Carolina (a Florida
corporation)
Gardens Surgery Center of Palm Beach County (a Florida corporation)
DASCO Development Corporation (a Florida corporation)
DASCO Development West, Inc. (a California corporation)
-2-
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> JAN-31-1997 JAN-31-1998
<PERIOD-START> FEB-01-1996 FEB-01-1997
<PERIOD-END> OCT-31-1996 OCT-31-1997
<EXCHANGE-RATE> 1 1
<CASH> 0 52,179,477
<SECURITIES> 0 0
<RECEIVABLES> 0 97,339,057
<ALLOWANCES> 0 (37,077,147)
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 124,162,744
<PP&E> 0 57,859,478
<DEPRECIATION> 0 (12,185,551)
<TOTAL-ASSETS> 0 361,393,740
<CURRENT-LIABILITIES> 0 45,660,808
<BONDS> 0 100,000,000
0 0
0 0
<COMMON> 0 295,902
<OTHER-SE> 0 182,955,465
<TOTAL-LIABILITY-AND-EQUITY> 0 361,393,740
<SALES> 140,100,931 250,342,685
<TOTAL-REVENUES> 140,100,931 250,342,685
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 124,600,626 235,655,077
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,040,385 3,145,855
<INCOME-PRETAX> 14,459,920 11,541,753
<INCOME-TAX> 4,917,650 7,084,704
<INCOME-CONTINUING> 9,542,270 4,457,049
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 9,542,270 4,457,049
<EPS-PRIMARY> 0.35 0.15
<EPS-DILUTED> 0.35 0.15
</TABLE>
