<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
For the quarterly period ended: March 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: 000-22197
Physicians' Specialty Corp.
--------------------------------------------------------------
(Exact Name of Registrant as
Specified in its charter)
Delaware 58-2251438
- - - ----------------------------------- ---------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
5555 Peachtree Dunwoody Road, Suite 235
Atlanta, Georgia 30342
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(Address of principal executive offices)
(Zip Code)
404-256-7535
--------------------------------------------------
(Registrant's telephone number, including area code)
N/A
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(Former name or former address, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed 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 No X
------ -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
There are 5,904,648 shares of common stock, par value $.001 per share,
outstanding as of May 12, 1997.
<PAGE> 2
Physicians' Specialty Corp.
Index
<TABLE>
<S> <C>
Part 1 - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets at December 31, 1996
and March 31, 1997............................................................................................ 3
Consolidated Statement of Operations
for the Three Months
Ended March 31, 1997.......................................................................................... 4
Consolidated Statement of Cash Flows
for the Three Months
Ended March 31, 1997.......................................................................................... 5
Notes to Consolidated Financial Statements.................................................................... 6-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................................................................. 9-12
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K.............................................................................. 13
</TABLE>
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PHYSICIANS' SPECIALTY CORP.
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
December 31 March 31
1996 1997
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 123,540 $ 15,986,975
Accounts receivable, net 26,976 4,041,085
Notes Receivable 0 19,003
Prepayments and other 0 56,559
------------- ----------------
150,516 20,103,622
PROPERTY AND EQUIPMENT, net 19,897 1,583,709
OTHER ASSETS 442,567 48,838
------------- ----------------
Total Assets $ 612,980 $ 21,736,169
============= ================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes Payable $ 505,000 $ 2,112,198
Accounts payable and Accrued expenses 118,270 1,908,682
Deferred income taxes 0 1,169,198
------------- ----------------
623,270 5,190,078
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value; 50,000,000 shares authorized;
issued: 599,893 in 1996 and 5,904,648 in 1997 600 5,905
Additional paid-in capital 343,711 16,874,614
Retained earnings (deficit) (354,601) (334,428)
------------- ----------------
Total shareholders' equity (10,290) 16,546,091
------------- ----------------
Total liabilities and shareholders' $ 612,980 $ 21,736,169
============= ================
</TABLE>
See accompanying notes to consolidated financial statements.
3
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PHYSICIANS' SPECIALTY CORP.
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1997
--------------
(Unaudited)
<S> <C>
Patient service revenues $ 26,361
Capitation revenues 55,848
Management fees 156,742
-------------
Net revenue 238,951
Expenses
Provider claims, wages, benefits 183,505
General and administrative 32,784
Depreciation and amortization 2,784
-------------
Operating Expenses 219,073
Operating income (loss) 19,878
Other income (expense), net 13,193
-------------
Pretax income (loss) 33,071
Provision for income taxes 12,898
-------------
Net income (loss) $ 20,173
=============
Earnings per share $ 0.02
=============
Weighted average common and common equivalent
shares outstanding 1,105,636
</TABLE>
See accompanying notes to consolidated financial statements.
4
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PHYSICIANS' SPECIALTY CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Period
January 1, 1997
to March 31, 1997
-----------------
<S> <C>
OPERATING ACTIVITIES:
Net income $ 20,173
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 2,784
Compensation expense 48,000
(Increase) decrease in assets:
Accounts receivable (30,336)
Notes receivable (19,003)
Other assets 415,588
Increase (decrease) in liabilities:
Accounts payable (51,295)
Accrued expenses 59,050
--------------
Total adjustments 424,788
--------------
Net cash provided by operating activities 444,961
INVESTING ACTIVITIES:
Capital expenditures (13,256)
--------------
FINANCING ACTIVITIES:
Borrowings under notes payable 170,000
Payoff of notes payable (146,364)
Net proceeds from issuance of common stock, net of offering costs 15,408,094
--------------
Net cash provided by financing activities 15,431,730
--------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 15,863,435
CASH AND CASH EQUIVALENTS, January 1, 1997 123,540
--------------
CASH AND CASH EQUIVALENTS, March 31, 1997 $ 15,986,975
==============
</TABLE>
See accompanying notes to consolidated financial statements.
5
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Physicians' Specialty Corp.
Notes to the Consolidated Financial Statements (Unaudited)
March 31, 1997
Note 1. ORGANIZATION
Physicians' Specialty Corp. (the "Company") was organized in July 1996 to
provide comprehensive physician practice management services to physician
practices and health care providers specializing in the treatment and
management of diseases and disorders of the ear, nose, throat, head and neck
("ENT"). The Company commenced its business activities upon consummation of
the reorganization, as described in Note 3, on March 26, 1997. The Company
provides financial and administrative management, enhancement of clinical
operations, network development and payor contracting services, including the
negotiation and administration of capitated arrangements.
Note 2. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries and have been prepared in accordance with
generally accepted accounting principles for interim financial reporting and in
accordance with Rule 10-01 of Regulation S-X. Accordingly, they do not include
all of the information and notes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, the
accompanying unaudited consolidated financial statements contain all
adjustments (consisting of normal recurring items) necessary for a fair
presentation of the results for the interim periods presented. These financial
statements and footnote disclosures should be read in conjunction with the
audited financial statements and unaudited pro-forma combined financial
statements and the notes thereto included in the Company's prospectus dated
March 20, 1997.
The Company's consolidated operations for the quarter ended March 31,
1997 consisted of only five business days in light of the closing of the
Company's initial public offering ("IPO") and practice asset acquisitions on
March 26, 1997. Because the Company was incorporated in July 1996 there is no
comparative information available at or for the period ended March 31, 1996.
Note 3. REORGANIZATION
Concurrently with the closing of the IPO, the Company acquired
substantially all of the assets of Atlanta Ear, Nose & Throat Associates, P.C.,
three additional ENT practices in the metropolitan Atlanta area (collectively,
"Atlanta ENT"), and one ENT practice in Birmingham, Alabama ("Birmingham ENT").
In addition the Company purchased the common stock of three corporations (the
"ENT Networks") which at March 31, 1997 held, managed and administered
capitated ENT managed care contracts covering an aggregate of 399,096
enrollees of health maintenance organizations ("HMOs") sponsored by United
Healthcare of Georgia ("United Healthcare"), Aetna Health Plans of Georgia,
("Aetna") and Cigna HealthCare of Georgia ("Cigna").
In connection with the acquisitions, the Company entered into management
services agreements with the physician practices providing for the
comprehensive management of the practices by the Company, while enabling the
practices to retain
6
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authority over the provision of medical care. The management services agreement
with Atlanta ENT provides for the assignment to the Company by Atlanta ENT of
all or substantially all of its non-governmental accounts receivable and all of
its rights and interest in the proceeds of its governmental accounts receivable
and grants to the Company the right to collect and retain the proceeds of the
accounts receivable for the Company's account to be applied in accordance with
the agreement. The Company is responsible for the payment of operating and
non-operating expenses of Atlanta ENT (excluding compensation to physicians and
physician assistants) and is responsible to pay for all such expenses directly
out of the proceeds of the accounts receivable assigned to the Company by
Atlanta ENT. In addition, the Company retains a management fee equal to 12.5%
of all revenues (after adjustment for contractual allowances) generated by or
on behalf of physicians practicing at Atlanta ENT, subject to specified maximum
annual amounts, as payment for the Company's services and non-allocable costs
incurred by the Company attributable to the provision of management services
under the management services agreement. In addition, the Company is entitled
to incentive compensation under the management services agreement upon the
receipt by the Company of specified maximum annual management fees. The
remaining revenues are remitted to Atlanta ENT to pay physician and physician
assistant compensation and benefits.
Simultaneous with the acquisition of substantially all of the assets of
Birmingham ENT, the physicians at Birmingham ENT entered into employment
agreements with PSC Alabama, a wholly-owned subsidiary of the Company ("PSC
Alabama"). The assignment of accounts receivable, realization of revenues, and
allocation of costs and expenses are governed by a management services
agreement between PSC Alabama and the Company which is substantially similar to
the management services agreement between Atlanta ENT and the Company.
At March 31, 1997 the Company was affiliated with 23 physicians, 1
dentist, and 26 allied healthcare professionals operating 19 clinical
facilities
NOTE 4. INITIAL PUBLIC OFFERING
On March 26, 1997, the Company completed its IPO of 2,200,000 shares of
its common stock. The net proceeds of the offering were approximately
$14,981,000, and were and will be used for repayment of indebtedness of the
acquired practices, repayment of indebtedness of the Company, payment of a
consulting fee, and working capital requirements.
NOTE 5. SUBSEQUENT EVENTS
In April 1997 the Company announced that it received notification that
Aetna is modifying its delivery system of physician specialty services in the
Atlanta market. As part of this modification, Aetna is terminating its
capitated managed care contracts with each physician specialty group including
the Company effective June 30, 1997. The Company's affiliated physicians will
be able to continue to provide services to Aetna enrollees subsequent to June
30, 1997 upon execution of new physician provider agreements. The Company
anticipates that these new provider agreements will reimburse physicians on a
modified fee-for-service basis. As described in Note 3, the Company's three
capitated managed care contracts covered an aggregate of
7
<PAGE> 8
399,096 enrollees at March 31, 1997 (of which 50,331 were enrollees covered by
the Aetna contract). The Company does not believe the Aetna contract
termination will have a material adverse effect on the Company's business,
financial condition or results of operations.
On April 30, 1997, the Company closed on a five year $20.0 million
senior working capital and acquisition credit facility provided by NationsBank,
N.A. (South). Advances under the credit facility will bear interest, at the
Company's option, at either a prime-based rate or a LIBOR-based rate with
interest only payments required during the first three years of the credit
agreement. Thereafter, in years four and five of the agreement, the term loan
commitment will be reduced to $13,333,333 and $6,666,666 respectively.
Borrowings under the credit facility are secured by the capital stock of the
Company's subsidiaries and the Company's accounts receivable, and will be
secured by acquisition documents in connection with physician practice equity
or assets acquired.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company is a physician practice management company organized in July
1996 that provides management services to physician practices and health care
providers specializing in the treatment and management of diseases and
disorders of the ear, nose, throat, head and neck . The Company commenced
business activities upon consummation of the reorganization, as described in
Note 3 of the Notes to Consolidated Financial Statements, on March 26, 1997.
Prior to this date, the Company conducted only limited activities primarily
consisting of acquiring computer hardware and negotiating the agreements
relating to the reorganization and the initial public offering. The Company
provides financial and administrative management, enhancement of clinical
operations, network development and payor contracting services, including the
negotiation and administration of capitated arrangements.
The Company's unaudited consolidated results for the quarter ended March
31, 1997 consisted of only five business days of operations following the
consummation of the acquisition of the assets of the acquired practices which
included Atlanta ENT and Birmingham ENT, and the acquisition of the common
stock of the ENT Networks (the "Reorganization"). Each of the acquisitions was
accounted for as a combination of promoter interest at historical costs, and
was based upon the historical statements of each entity. The accounts
receivable were generally purchased at the net realizable value.
The Company's relationships with its affiliated physicians are set
forth in various asset acquisition agreements, management services agreements,
and physician employment agreements. The management services agreements, which
have a term of 40 years, delineate the responsibilities and obligations of the
physician practices and the Company. In connection with the Reorganization, the
Company entered into management services agreements with Atlanta ENT and with
PSC Alabama (which directly employed the physicians of Birmingham ENT. These
management services agreements provide for the affiliated practices to assign
to the Company all of its non-governmental accounts receivable and all of its
right and interest in the proceeds of its governmental accounts receivable and
grant to the Company the right to collect and retain the proceeds of the
accounts receivable for the Company's account to be applied in accordance with
the agreement.
The Company is responsible for the payment of operating expenses of the
affiliated physician practices, including salaries and benefits of non-medical
employees of the practices, lease obligations for office space and equipment,
medical and office supplies,
9
<PAGE> 10
and the non-operating expenses of the affiliated physician practices, including
depreciation, amortization and interest. The Company pays for all such expenses
directly out of the proceeds of the accounts receivable assigned to the Company
by the affiliated physician practices. In addition, under the management
services agreements with Atlanta ENT and PSC Alabama, the Company retains as
a part of its management fee, a stipulated percentage (12.5%) of all revenues
(after adjustment for contractual allowances) generated by or on behalf of
physicians practicing at such practice, as payment for the Company's management
services and non-allocable costs incurred by the Company attributable to the
provision of management services. Contractual allowances are the difference
between the amounts customarily charged by physicians practicing at such
practice and the amounts received pursuant to negotiated fee schedules from
payors under indemnity arrangements, managed care contracts and preferred
provider arrangements.
Under the management services agreements with Atlanta ENT and PSC Alabama,
the Company retains on an annual basis, 12.5% of affiliated physician
practice revenue until such revenue equals 150% of such practice's annual
revenue in the year prior to its affiliation with the Company (the "Threshold
Amount"). In the event the affiliated practice's revenue exceeds the Threshold
Amount in any fiscal year, the Company is entitled to incentive compensation
(in lieu of the 12.5% amount) for the remainder of such fiscal year in amounts
ranging from 20% to 25% of the affiliated practice's income (net practice
revenues less practice expenses), prior to the payment of physician
compensation and benefits. The Company will remit the remaining revenues to the
affiliated practice to pay compensation and benefits to physicians pursuant to
employment agreements between the practice and each physician, and to physician
assistants. The percentage components of the management fee to be retained by
the Company under future management services agreements will be determined
based upon negotiations between the Company and future affiliating practices
and may vary significantly in the future.
At March 31, 1997 the ENT Networks held capitated managed care contracts
with Cigna, Aetna, and United Healthcare which require the ENT Networks to
contract for the provision of substantially all of the ENT medical and surgical
services required by the enrollees of these HMOs in the Atlanta market. In
exchange, the ENT Networks receive pre-determined amounts per patient per
month. The ENT Networks have contracted with participating physicians,
including those at Atlanta ENT, to provide substantially all of such medical
services in exchange for compensation on a discounted fee-for-service basis.
Such contracts pass much of the financial risk of providing care, such as
over-utilization from the payor to the provider.
In April 1997 the Company announced that it received notification that
Aetna is modifying its delivery system of physician specialty services in the
Atlanta market. As part of this modification, Aetna is terminating its
capitated managed care contracts with each physician specialty group including
the Company effective June 30, 1997. The Company's affiliated physicians will
be able to continue to provide services to Aetna enrollees
10
<PAGE> 11
subsequent to June 30, 1997 upon execution of new physician provider
agreements. The Company anticipates that these new provider agreements will
reimburse physicians on a modified fee-for-service basis. The Company's three
capitated managed care contracts covered an aggregate of 399,096 enrollees at
March 31, 1997 (of which 50,331 were enrollees covered by the Aetna contract).
Excluding the Aetna enrollees, the number of enrollees covered under the
remaining contracts with United Healthcare and Cigna increased at March 31,
1997 by 9.5% from the number of enrollees at December 31, 1996. As a result of
the foregoing, the Company does not believe the Aetna contract termination will
have a material adverse effect on the Company's business, financial condition
or results of operation.
The Company's revenues are derived (i) under the management services
agreement with Atlanta ENT, (ii) from patient service revenues generated by the
Company's wholly-owned subsidiary, PSC Alabama, which directly employs the
Birmingham ENT physicians, and (iii) under capitated managed care contracts
held by the ENT Networks, which are wholly-owned subsidiaries of the Company.
Except for the descriptions of historical facts contained herein,
statements concerning future results, performance or expectations are
forward-looking statements. Actual results, performance or developments could
differ materially from those expressed or implied by such forward-looking
statements as a result of known and unknown risks, uncertainties and other
factors including those described from time to time in the Company's filings
with the Securities and Exchange Commission, under "Risk Factors" and
elsewhere, including the Company's limited operating history and risks relating
to acquisitions and managing growth; dependence on affiliated physicians;
dependence on managed care organizations and risks associated with capitated
arrangements, including potential reductions in reimbursement; competition;
regulatory risks; risks relating to credit facility and substantial leverage;
and other risks.
RESULTS OF OPERATIONS
Net revenues were $238,951 for the quarter ended March 31, 1997,
consisting of $156,742 of management fees, $26,361 of patient service revenue,
and $55,848 of capitated revenue.
Total operating expenses were $219,074 for the quarter ended March 31,
1997 consisting largely of provider claims, wages and benefits and
administrative expenses.
Interest income of $13,193 was earned for the quarter ended March 31, 1997
as a result of the investment of the IPO proceeds for a five day period.
The provision for income taxes was established at an estimated 39%
effective tax rate.
11
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LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the three month period ended
March 31, 1997 was $432,063, while cash used in investing activities was
$13,256. Cash provided by financing activities was $15,432,000 for the three
month period primarily due to the net proceeds received from the Company's
initial public offering of 2.2 million shares of common stock
As of March 31, 1997 the Company had working capital of $14,913,544
including cash and cash equivalents of $15,986,975.
During April, 1997, the Company repaid outstanding indebtedness in the
aggregate amount of $1,764,843 incurred in conjunction with the Reorganization
and assumption of certain liabilities of certain of the physician practices,
the assets of which were acquired in the Reorganization.
On April 30, 1997 the Company closed on a five year $20.0 million
senior working capital and acquisition credit facility provided by NationsBank,
N.A. (South). Advances under the credit facility will be governed by a
borrowing base formula and will bear interest, at the Company's option, at
either a prime-based rate or a LIBOR-based rate with interest only payments
required during the first three years of the agreement. Thereafter, in years
four and five of the agreement, the term loan commitment is reduced to
$13,333,333 and $6,666,666, respectively. The bank credit facility contains
affirmative and negative covenants, which among other things require the
Company to maintain certain financial ratios including the ratio of funded debt
(as defined in the credit agreement) to earnings before interest, taxes,
depreciation and amortization (as defined in the credit agreement); the ratio
of funded debt to net worth; the ratio of current assets to current
liabilities; and debt service and interst coverage ratios, and sets certain
restrictions on investments, mergers and sale of assets. Borrowings under the
credit facility are secured by the capital stock of the Company's subsidiaries
and the Company's accounts receivable, and will be secured by acquisition
documents in connection with physician practice equity or assets acquired.
The Company is currently in discussions related to the acquisition of the
assets or the equity of additional ENT and complimentary physician practices,
although it has not executed definitive agreements with respect to any specific
acquisition. The Company intends to fund future acquisitions with cash or cash
equivalents, borrowings under the bank credit facility, issuance of long-term
or short-term indebtedness and/or the issuance of additional equity securities.
There can be no assurance as to the terms of any such acquisitions or as to the
Company's ability to complete future acquisitions.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.33 Credit agreement by and between Physicians' Specialty Corp. and
NationsBank, N.A. (South) dated April 30, 1997.
27 Financial Data Schedule (For SEC use only)
(b) Reports on Form 8-K
None
13
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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.
PHYSICIANS' SPECIALTY CORP.
DATE May 14, 1997 /s/ Robert A. DiProva
------------ ----------------------------
Robert A. DiProva
Executive Vice President and
Chief Financial Officer
14
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EXHIBIT 10.33
THIS CREDIT AGREEMENT is dated as of April 30, 1997, by and between
PHYSICIANS' SPECIALTY CORP., a corporation organized under the laws of the
State of Delaware (the "Borrower"), and NATIONSBANK, N.A. (SOUTH) (the
"Lender").
WHEREAS, the Lender desires to make available to the Borrower certain
financial accommodations on the terms and conditions contained herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.1. DEFINITIONS.
In addition to terms defined elsewhere herein, the following terms
shall have the following meanings for the purposes of this Agreement:
"ACCOUNT DEBTOR" means a Person who is obligated on a Receivable.
"ACQUISITION" means any transaction, or any series of related
transactions, by which the Borrower or and/or any of its Subsidiaries directly
or indirectly (a) acquires any ongoing business or all or substantially all of
the assets of any Person or division or Asset Group thereof, whether through
purchase of assets, merger or otherwise, (b) acquires (in one transaction or as
the most recent transaction in a series of transactions) control of a majority
of the securities of a Person which have ordinary voting power for the election
of directors or (c) otherwise acquires control of 51% or greater ownership
interest in any such Person.
"ACQUISITION CONSIDERATION" means, with respect to an Acquisition by
the Borrower, the aggregate amount of consideration payable by the Borrower and
its Subsidiaries in connection with such Acquisition. For purposes of this
definition, such consideration shall include (without duplication), but shall
not be limited to, the following: (a) the amount of cash paid, together with
the fair market value of all other assets conveyed, by the Borrower and its
Subsidiaries in consideration for such Acquisition, including but not limited
to the fair market value of all capital stock of the Borrower conveyed by the
Borrower in consideration for such Acquisition; (b) the aggregate amount of
Indebtedness acquired, incurred or assumed by the Borrower and its Subsidiaries
in connection with such Acquisition; (c) all amounts paid or to be paid by the
Borrower and its Subsidiaries in respect of any covenant not to compete granted
in connection with such Acquisition and accruing to the benefit of any New
Subsidiary or other Loan Party; (d) the aggregate capitalized amount of
consulting or other similar fees or payments to be paid by such New Subsidiary
or other Loan Party in connection with, or as a result of, such Acquisition;
and (e) the amount of all transaction fees and expenses (including, without
limitation, legal, accounting and brokers' fees and expenses) incurred by the
Borrower and its Subsidiaries in connection with such Acquisition.
"ACQUISITION DOCUMENTS" means, collectively, the asset purchase
agreement, stock purchase agreement, merger agreement or other primary
agreement to which the Borrower and/or one or more of its Subsidiaries is a
party relating to an Acquisition, together with all related
<PAGE> 2
agreements and conveyance instruments executed in connection therewith or
pursuant thereto, including Seller Notes, if any.
"ACQUISITION EBITDA" means the aggregate pro forma amount of the
Management Fee payable with respect to a Target for the four quarters
immediately preceding an Acquisition of such Target, based on the assumption
that the related Management Services Agreement under which the Management Fee
is defined was actually in effect throughout such four-quarter period;
provided, however, if in connection with such Acquisition, no Management
Services Agreement will be entered into because such Target will either combine
with an existing Loan Party or will become a New Subsidiary, then Acquisition
EBITDA shall refer to the pro forma EBITDA of such Target for the four quarters
immediately preceding its Acquisition.
"ACQUISITION HISTORICAL FINANCIAL STATEMENTS" has the meaning given
that term in Section 9.6(c)(iii).
"ADDITIONAL COSTS" has the meaning given that term in Section 4.1.
"AFFILIATE" means any Person (other than the Lender): (a) directly or
indirectly controlling, controlled by, or under common control with, the
Borrower; (b) directly or indirectly owning or holding fifteen percent (15.0%)
or more of any equity interest in the Borrower; or (c) fifteen percent (15.0%)
or more of whose voting stock or other equity interest is directly or
indirectly owned or held by the Borrower. For purposes of this definition,
"control" (including with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with") means the possession directly
or indirectly of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities or
by contract or otherwise.
"AGREEMENT" means this Credit Agreement.
"AGREEMENT DATE" means the date as of which this Agreement is dated.
"APPLICABLE LAW" means all applicable provisions of constitutions,
statutes, rules, regulations and orders of all governmental bodies and all
orders and decrees of all courts, tribunals and arbitrators.
"APPLICABLE MARGIN" means, except as set forth below in this
definition, (a) from the Effective Date through the date of receipt by the
Lender of a Borrowing Base and Compliance Certificate in respect of the fiscal
period of the Borrower and its Subsidiaries ending on March 31, 1997, 0.00% per
annum with respect to Base Rate Loans and 1.20% per annum with respect to LIBOR
Loans and (b) thereafter for each period beginning on the date of receipt by
the Lender of a Borrowing Base and Compliance Certificate in respect of any
quarterly fiscal period of the Borrower and its Subsidiaries ending after March
31, 1997 and ending on the date next following date of receipt by the Lender of
a Borrowing Base and Compliance Certificate in respect of a subsequent fiscal
period, that percent per annum set forth below opposite the Funded Debt to
EBITDA Ratio applicable to the fiscal period of the Borrower and its
Subsidiaries then ended as reflected in the applicable Borrowing Base and
Compliance Certificate:
-2-
<PAGE> 3
<TABLE>
<CAPTION>
=======================================================================================================
APPLICABLE MARGIN FOR BASE APPLICABLE MARGIN FOR LIBOR
FUNDED DEBT TO EBITDA RATIO RATE LOANS LOANS
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Less than or equal to 3.00 to 1.00 but
greater than or equal to 2.50 to 1.00 0.50% 2.00%
-------------------------------------------------------------------------------------------------------
Less than 2.50 to 1.00 but greater than
or equal to 2.00 to 1.00 0.30% 1.85%
-------------------------------------------------------------------------------------------------------
Less than 2.00 to 1.00 but greater than
or equal to 1.00 to 1.00 0.00% 1.40%
-------------------------------------------------------------------------------------------------------
Less than 1.00 to 1.00 0.00% 1.20%
=======================================================================================================
</TABLE>
Notwithstanding the above, if the Borrower shall fail to deliver any such
Borrowing Base and Compliance Certificate within the time period required by
Section 8.3., then the Applicable Margin shall be 0.50% per annum with respect
to Base Rate Loans and 2.00% per annum with respect to LIBOR Loans until the
appropriate Borrowing Base and Compliance Certificate is so delivered.
"APPROVED ACQUISITION" has the meaning given that term in Section
9.6(c).
"ASSET GROUP" means any asset or group of assets with identifiable net
earnings (or loss).
"BASE RATE" means the rate which the Lender publicly announces from
time to time in Atlanta, Georgia as its prime lending rate. The prime lending
rate of the Lender is a reference rate and does not necessarily represent the
lowest or best rate actually charged to any customer. The Lender may make
commercial loans or other loans at rates of interest at, above, or below such
prime lending rate. Any change in the Base Rate hereunder shall be effective
for purposes of this Agreement as of the date of such change in such rate.
"BASE RATE LOAN" means a Loan bearing interest at a rate based on the
Base Rate.
"BORROWER" has the meaning set forth in the introductory paragraph
hereof and shall include the Borrower's successors and assigns.
"BORROWING BASE" means at any time an amount equal to 80% of the
aggregate face value of Eligible Receivables due and owing to each of the Loan
Parties at such time.
"BORROWING BASE AND COMPLIANCE CERTIFICATE" means a certificate of the
chief financial officer of the Borrower setting forth the calculation of the
Borrowing Base and the Maximum Acquisition Loan Amount and such other matters as
are required in Section 8.3., such certificate to be substantially in the form
of Exhibit B.
"BUSINESS DAY" means (a) any day other than a Saturday, Sunday or other
day on which banks in Atlanta, Georgia are authorized or required to close and
(b) with reference to a LIBOR Loan, any such day that is also a day on which
dealings in Dollar deposits are carried out in the London interbank market.
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"BUSINESS UNIT" means the assets constituting the business or a
division or operating unit thereof of any Person.
"CAPITAL ASSET" means any asset not customarily charged directly to
expense or depreciated or amortized over a useful life of twelve months or less
in accordance with GAAP, and shall include fixed assets (including without
limitation, assets subject to Capitalized Lease Obligations, land, buildings,
fixtures, machinery and equipment) and intangible assets (including without
limitation, patents, copyrights, trademarks, service marks, franchises and good
will).
"CAPITAL EXPENDITURES" means, with respect to any Person, all
expenditures made and liabilities incurred for the acquisition of assets which
are not, in accordance with GAAP, treated as expense items for such Person in
the year made or incurred or as a prepaid expense applicable to a future year
or years, and shall include all Capitalized Lease Obligations.
"CAPITALIZED LEASE OBLIGATION" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with such principles.
"CASH EQUIVALENTS" means: (a) securities issued, guaranteed or insured
by the United States of America or any of its agencies with maturities of not
more than one year from the date acquired; (b) certificates of deposit with
maturities of not more than one year from the date acquired issued by a United
States federal or state chartered commercial bank of recognized standing, which
has capital and unimpaired surplus in excess of $500,000,000.00 and which bank
or its holding company has a short-term commercial paper rating of at least A-2
or the equivalent by Standard & Poor's Rating Group, a division of The
McGraw-Hill Companies, Inc. ("S&P"), or at least P-2 or the equivalent by
Moody's Investors Services, Inc. ("Moody's"); (c) reverse repurchase agreements
with terms of not more than seven days from the date acquired, for securities
of the type described in clause (a) above and entered into only with commercial
banks having the qualifications described in clause (b) above; (d) commercial
paper issued by any Person incorporated under the laws of the United States of
America or any State thereof and rated at least A-2 or the equivalent thereof
by S&P or at least P-2 or the equivalent thereof by Moody's, in each case with
maturities of not more than one year from the date acquired; and (e)
investments in money market funds registered under the Investment Company Act
of 1940, which have net assets of at least $500,000,000.00 and at least 85% of
whose assets consist of securities and other obligations of the type described
in clauses (a) through (d) above.
"COLLATERAL" means any collateral security hereafter pledged by any
Loan Party to secure the Obligations or any portion thereof.
"COLLATERAL ASSIGNMENT OF ACQUISITION DOCUMENTS" means each collateral
assignment of rights under the Acquisition Documents executed by any Loan Party
in favor of the Lender after the Effective Date pursuant to Section 9.6., each
such collateral assignment to be in substantially the form of Exhibit A.
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"COLLATERAL ASSIGNMENT OF MANAGEMENT SERVICES AGREEMENTS" means a
Collateral Assignment of Management Services Agreements executed by the Person
serving as manager thereunder, which Person shall be a Wholly-Owned Subsidiary
of the Borrower, in favor of the Lender and substantially in the form of
Exhibit C.
"COMBINED FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 9.6(c)(v) hereof.
"COMMITMENT" means the amount of the Term Loan Commitment plus the
amount of the Revolving Loan Commitment, as each or both may be reduced from
time to time in accordance with the terms of this Agreement.
"COMPLEMENTARY SPECIALTIES" means medical practices that, in the field
of medicine, are deemed complementary to Otolaryngology, including but not
limited to, Audiology, Pulmonology, sleep medicine, allergy, plastic surgery,
oral surgery, diagnostic imaging and vascular testing.
"CONSOLIDATED INTEREST EXPENSE" means, for any fiscal period of the
Borrower, the total interest expense (including without limitation, interest
expense attributable to Capitalized Lease Obligations in accordance with GAAP)
of the Borrower and its Subsidiaries on a consolidated basis.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any
period of computation thereof, the net income (loss) of such Person on a
consolidated basis for such period; provided, however, that the following shall
be excluded when determining Consolidated Net Income: (a) any item of gain or
loss resulting from sale, conversion or other disposition of assets other than
in the ordinary course of business; (b) net gains or losses on the acquisition,
retirement, sale or other disposition of capital stock and other securities of
such Person; (c) the income (loss) for such fiscal period of any other Person
prior to the date such other Person becomes a Subsidiary of such Person or is
merged into or consolidated with such Person or any of its Subsidiaries, or
such other Person's assets are acquired by such Person or any of its
Subsidiaries; (d) net gains or losses on the collection of proceeds of life
insurance policies; (e) any write-up of any asset; (f) any other net gains or
losses of an extraordinary nature as determined in accordance with GAAP; (g) in
the case of the Borrower or any of its Subsidiaries, nonrecurring charges
incurred in connection with an Approved Acquisition and, in connection with any
other Acquisition, nonrecurring charges incurred in an amount not to exceed
twenty percent (20%) of the Acquisition Consideration for such other
Acquisition; (h) any portion of the income of such Person attributable to the
unremitted earnings of any other Person that is not a Subsidiary of such
Person; and (h) any earnings attributable to the amortization of negative
goodwill.
"CONTINGENT OBLIGATIONS" means any agreement, undertaking or
arrangement by which any Person guarantees, endorses, acts as surety for or
otherwise becomes or is contingently liable for (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to supply
funds to, or otherwise to invest in, a debtor, or otherwise to assure a
creditor against loss) the Indebtedness, obligation or other liability of any
other Person (other than by endorsements of
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instruments in the ordinary course of business), or for the payment of
dividends or other distributions upon the shares of any other Person or
undertakes or agrees (contingently or otherwise) to purchase, repurchase or
otherwise acquire or become responsible for any Indebtedness, obligation or
liability or any security therefor, or to provide funds for the payment or
discharge thereof (whether in the form of loans, advances, stock purchases,
capital contributions or otherwise), or to maintain solvency, assets, level of
income, or other financial condition of any other Person, or to transfer
property to any other Person other than for value received. Contingent
Obligations shall not include the obligations evidenced by any Contingent
Seller Notes.
"CONTINGENT SELLER NOTE" means any promissory note issued by the
Borrower or any other Loan Party in connection with an Acquisition as payment
of any of the Acquisition Consideration for such Acquisition which meets all of
the following criteria: (a) the stated amount of such note does not bear
interest (whether as a stated rate, issuance at a discount, or otherwise); (b)
such note would not be required to be reflected as a liability on the balance
sheet of the maker of such note prepared in accordance with GAAP; and (c) all
of the payment obligations under such note are absolutely contingent and in the
nature of earn-out payments required to be made by the maker of such note in
connection with such Acquisition.
"CONTINUE," "CONTINUATION" and "CONTINUED" each refers to the
continuation of a LIBOR Loan from one Interest Period to another Interest
Period pursuant to Section 2.6.
"CONVERT," "CONVERSION" and "CONVERTED" each refers to the conversion
of a Loan of one Type into a Loan of another Type pursuant to Section 2.7.
"CREDIT EVENT" means any of the following: (a) the making (or deemed
making) of any Loan; and (b) the Conversion of a Loan.
"CURRENT ASSETS" means, with respect to any Person, the aggregate
amount of assets of such Person which should properly be classified as current
assets in accordance with GAAP.
"CURRENT DEBT" means, with respect to any Person, all Indebtedness of
such Person which by its terms or by the terms of any instrument or agreement
relating thereto matures on demand or within one year from the date of creation
thereof and is not directly or indirectly renewable or extendible at the option
of the obligor in respect thereof to a date one year or more from such date;
provided that Indebtedness outstanding under a revolving credit or similar
agreement which obligates the lender or lenders to extend credit over a period
of one year or more shall constitute Funded Debt and not Current Debt, even
though such Indebtedness by its terms matures on demand or within one year from
such date. Current Debt shall not include the obligations evidenced by any
Contingent Seller Notes.
"CURRENT LIABILITIES" means, with respect to any Person, the aggregate
amount of all Indebtedness of such Person which should properly be classified
as current liabilities in accordance with GAAP.
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"CURRENT MATURITIES OF FUNDED DEBT" means, at any time and with
respect to any item of Funded Debt, the portion of such Funded Debt outstanding
at such time which by the terms of such Funded Debt or the terms of any
instrument or agreement relating thereto is due on demand or within one year
from such time (whether by sinking fund, other required prepayment or final
payment at maturity) and is not directly or indirectly renewable, extendible or
refundable at the option of the obligor under an agreement or firm commitment
in effect at such time to a date one year or more from such time.
"DEBT SERVICE COVERAGE RATIO" means the ratio of (a) the Borrower's
EBITDA (plus any Acquisition EBITDA not otherwise included in the calculation
of the Borrower's EBITDA) for the four-fiscal quarter period most recently
ended minus the aggregate amount of Restricted Payments made during such period
minus cash payments actually made during such period in respect of taxes on
income to (b) the sum of (i) the total consolidated interest expense
(including, without limitation, capitalized interest expense) of the Borrower
for such period plus (ii) regularly scheduled principal payments on Funded Debt
of the Borrower and its Subsidiaries during such period (excluding any balloon,
bullet or similar principal payment payable on any Indebtedness of such Person
which repays such Indebtedness in full).
"DEFAULT" means any of the events specified in Section 10.1., whether
or not there has been satisfied any requirement for the giving of notice, the
lapse of time, a determination of materiality or the happening of any other
condition.
"DOLLARS" or "$" means the lawful currency of the United States of
America.
"EBITDA" means, with respect to a Person and for a given fiscal
period, the Consolidated Net Income of such Person for such period plus the sum
of the following amounts (but in the case of the amount described in the
following clauses (a) through (d), only to the extent included in determining
the Consolidated Net Income of such Person for such period) determined on a
consolidated basis: (a) income tax expense of such Person in respect of such
period plus (b) interest expense of such Person for such period plus (c)
depreciation and amortization expense and other non-cash charges of such Person
for such period minus (d) payments to any physicians during such period which
were not treated as items of expense. For purposes of determining the
Borrower's EBITDA, (i) the net income (loss) of any Person accrued prior to the
date it became a Subsidiary of the Borrower or was merged into or consolidated
with the Borrower, or of any Asset Group accrued prior to the date such Asset
Group was acquired by the Borrower, shall be excluded from EBITDA if and to the
extent otherwise included in net income (loss) of the Borrower for such period;
and (ii) except as otherwise provided in the definition of the term Maximum
Acquisition Loan Amount, Acquisition EBITDA of any Person accrued prior to the
date it became a Subsidiary of the Borrower or was merged into or consolidated
with the Borrower, or of any Asset Group accrued prior to the date such Asset
Group was acquired by the Borrower, less any incremental overhead of any such
Person or allocated to any such Asset Group, may be included in the Borrower's
EBITDA, but only if the Borrower provides the Lender with evidence of the
calculation of the Acquisition EBITDA of such Person or Asset Group, together
with supporting financial statements, which are acceptable to the Lender in its
sole but reasonable discretion. For purposes of determining whether the
Borrower is in compliance with the financial covenants contained in Section
9.1.(a), (d) and (e),
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the Borrower's EBITDA for the four-fiscal quarter period ending on June 30,
1997, September 30, 1997, December 31, 1997 and March 31, 1998 shall be
calculated using the following adjustments and assumptions: For each of the
fiscal quarters ending June 30, 1997, September 30, 1997, December 31, 1997 and
March 31, 1998, the Borrower's EBITDA for the four-fiscal quarter period then
ended shall be deemed to be the result obtained by multiplying (A) the actual
EBITDA of the Borrower for the period from April 1, 1997 through the last day
of such fiscal quarter times (B) a ratio equal to (1) 365 divided by (2) the
number of days elapsed from April 1, 1997 until the last day of such quarter.
For the fiscal quarter of the Borrower ending June 30, 1998, and for each
fiscal quarter thereafter, the Borrower's EBITDA shall be the actual Borrower's
EBITDA for the four-fiscal quarter period ending on the last day of such fiscal
quarter.
"EFFECTIVE DATE" means the later of: (a) the Agreement Date; and (b)
the date on which all of the conditions precedent set forth in Section 5.1.
shall have been fulfilled or waived in writing by the Lender.
"ELIGIBLE RECEIVABLES" means, as of any date of determination thereof,
all Receivables of a Loan Party at such date other than the following
(determined without duplication): (a) any Receivable which does not represent
a complete bona fide transaction requiring no further action to make such
Receivable payable by the Account Debtor; (b) any Receivable not payable in
Dollars; (b) any Receivable which, at the date of issuance of the invoice
therefor, was by its terms payable more than 60 days after provision of the
related goods or services; (c) any Receivable due from (i) any Subsidiary or
Affiliate of any Loan Party or (ii) any employee, agent or representative of
any Loan Party or any Subsidiary or Affiliate of any Loan Party; (d) any
Receivable with respect to all or part of which a check, promissory note,
draft, trade acceptance or other instrument for the payment of money has been
presented for payment and returned uncollected for any reason; (e) any
Receivable as to which any one or more of the following events has occurred
with respect to the applicable Account Debtor: the filing by or against such
Account Debtor of a request or petition for liquidation, reorganization,
arrangement, adjustment of debts, adjudication as a bankrupt, or other relief
under the bankruptcy, insolvency, or similar laws of the United States, any
state or territory thereof, or any foreign jurisdiction, now or hereafter in
effect; the making of any general assignment by such Account Debtor for the
benefit of creditors; the appointment of a receiver or trustee for such Account
Debtor or for any of the assets of such Account Debtor, including, without
limitation, the appointment of or taking possession by a "custodian," as
defined in the Bankruptcy Code; the institution by or against such Account
Debtor of any other type of insolvency proceeding (under the bankruptcy laws of
the United States or elsewhere) or of any formal or informal proceeding for the
dissolution or liquidation of, settlement of claims against, or winding up of
affairs of, such Account Debtor; the sale, assignment, or transfer of all or
substantially all of the assets of such Account Debtor; the inability to pay or
the nonpayment by such Account Debtor of its debts generally as they become
due; or the cessation of the business of such Account Debtor as a going
concern; (f) any Receivable due from an Account Debtor incorporated under the
laws of any jurisdiction other than the United States of America or any state
thereof or whose principal place of business or substantial portion of whose
assets is located outside of the United States of America; (g) any Receivable
which remains unpaid for more than (i) 120 days after the original invoice in
the case of any and all Governmental Receivables and (ii) 90 days after the
original invoice date in the
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case of all other Receivables; (h) all Receivables from any Account Debtor if
more than 20% of the aggregate amount of the Receivables of such Account Debtor
are ineligible pursuant to clause (g) above; (i) any Receivable with respect to
which there is any unresolved dispute, defense, offset or counterclaim with or
by the respective Account Debtor, but only to the extent of the amount shown to
be due on the invoice(s) with respect to which there is any dispute; (j) any
Receivable as to which either (i) the perfection, enforceability (other than
Governmental Receivables) or validity of the Lender's security interest in such
Receivable, or (ii) in the case of Receivables other than Governmental
Receivables, the Lender's right or ability to obtain direct payment of the
proceeds of such Receivable, is governed by any federal or state statutory
requirements other than those of the UCC (including, without limitation, the
Federal Assignment of Claims Act); (k) any Receivable (i) as to which the
Lender does not have a valid and enforceable first priority security interest,
subject to no other Liens other than Permitted Liens or (ii) in the case of
Receivables other than Governmental Receivables, as to which the Lender does
not have a right of direct payment upon an Event of Default; (l) any Receivable
that has not been created in the ordinary course of business; (m) the portion
of the Receivables (other than Governmental Receivables) of such Loan Party
owing by any Account Debtor or group of affiliated Account Debtors representing
in excess of 25% of the aggregate amount of all Eligible Receivables of such
Loan Party; provided, however, that this clause (m) shall not apply to any
Account Debtor who, on the date of determination, has (1) a rating of B+ or
higher, as rated by A.M. Best ("Best"), if such Account Debtor is rated by
Best; (2) a long term senior unsecured debt rating of BBB- or higher, as rated
by Standard & Poor's Ratings Services ("S&P"), if the long term senior
unsecured debt of such Account Debtor is rated by S&P; and (3) a long term
senior unsecured debt rating of Baa3 or higher, as rated by Moody's Investors
Services, Inc. ("Moody's"; Moody's, S&P and Best, collectively, the "Rating
Agencies"), if the long term senior unsecured debt of such Account Debtor is
rated by Moody's; provided, further, that (X) if such Account Debtor is rated
as described above by more than one of the Rating Agencies, then the
requirements set forth above for each such Rating Agency must be satisfied; (Y)
if such Account Debtor is not rated as described above by any of the Rating
Agencies, then this clause (m) shall apply to such Account Debtor; and (Z) if
such Account Debtor is rated by one or more rating agencies other than the
Rating Agencies, the Lender may, after considering the rating assigned to such
Account Debtor by such other rating agency or agencies, determine that this
clause (m) shall not apply to such Account Debtor, but any such determination
shall be made by the Lender in its sole but reasonable discretion; and (n) any
Receivable arising from a sale on a bill-and-hold, guaranteed sale,
sale-and-return, sale on approval or consignment basis or made pursuant to any
other written agreement providing for repurchase or return.
"EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which (a) is maintained by the Borrower, any
of its Subsidiaries or any of its other ERISA Affiliates or is assumed by the
Borrower, any of its Subsidiaries or any of its other ERISA Affiliates in
connection with any acquisition or other business combination or (b) has at any
time been maintained by the Borrower, any of its Subsidiaries or any other
current or former ERISA Affiliate.
"EMPLOYMENT AGREEMENT" means each employment agreement entered into by
a party to a Management Services Agreement (other than a Loan Party) with any
physician owning an
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equity interest in such party or any other practitioner employed or otherwise
retained by such party.
"ENVIRONMENTAL LAWS" means any Applicable Law relating to
environmental protection or the manufacture, storage, disposal or clean-up of
Hazardous Materials including, without limitation, the following: Clean Air
Act, 42 U.S.C. Section 7401 et seq.; Federal Water Pollution Control Act, 33
U.S.C. Section 1251 et seq.; Solid Waste Disposal Act, 42 U.S.C. Section 6901
et seq.; Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. Section 9601 et seq.; National Environmental Policy Act, 42 U.S.C.
Section 4321 et seq.; regulations of the Environmental Protection Agency and
any applicable rule of common law and any judicial interpretation thereof
relating primarily to the environment or Hazardous Materials.
"EQUITY ISSUANCE" means any issuance or sale by the Borrower or any
other Loan Party of its capital stock or other equity securities, or any
warrants, options or similar rights to acquire, or securities convertible into
or exchangeable for, such capital stock or equity securities.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
in effect from time to time.
"ERISA AFFILIATE" means any entity required at any relevant time to be
aggregated with the Borrower or any Subsidiary under Sections 414(b) or (c) of
the Internal Revenue Code. In addition, for purposes of any provision of this
Agreement that relates to Section 412(n) of the Internal Revenue Code, the term
ERISA Affiliate shall mean any entity aggregated with the Borrower or any
Subsidiary under Sections 414(b), (c), (m) or (o) of the Internal Revenue Code.
"EVENT OF DEFAULT" means any of the events specified in Section 10.1.,
provided that any requirement for notice or lapse of time or any other
condition has been satisfied.
"FAMILY MEMBER" means, with respect to an individual, any of such
individual's spouse and immediate lineal descendants (whether natural or
adopted)and any trusts established for the sole benefit of any of the
foregoing.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upward to the nearest 1/100th of 1%) equal to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers on such day, as published by the
Federal Reserve Bank of New York on the Business Day next succeeding such day,
provided that (a) if such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding Business
Day, and (b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate quoted to
the Lender by federal funds dealers selected by the Lender on such day on such
transaction as determined by the Lender.
"FEES" means the fees and commissions provided for or referred to in
Section 3.3. and any other fees payable by the Borrower hereunder or under any
other Loan Document.
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"FUNDED DEBT" means, with respect to any Person, at the time of
computation thereof, all of the following (without duplication): (a)
obligations of such Person in respect of money borrowed; (b) obligations of
such Person (other than trade debt incurred in the ordinary course of
business), whether or not for money borrowed (i) represented by notes payable,
or drafts accepted, in each case representing extensions of credit, (ii)
evidenced by bonds, debentures, notes or similar instruments, or (iii)
constituting purchase money indebtedness, conditional sales contracts, title
retention debt instruments or other similar instruments, upon which interest
charges are customarily paid or that are issued or assumed as full or partial
payment for property; (c) Capitalized Lease Obligations of such Person; (d) all
reimbursement obligations of such Person under any letters of credit or
acceptances (whether or not the same have been presented for payment); and (e)
all Funded Debt of other Persons which (i) such Person has Guaranteed or (ii)
are secured by a Lien on any property of such Person. Funded Debt shall not
include the obligations evidenced by any Contingent Seller Notes.
"GAAP" means accounting principles as promulgated from time to time in
statements, opinions and pronouncements by the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board and in such
statements, opinions and pronouncements of such other entities with respect to
financial accounting of for-profit entities as shall be accepted by a
substantial segment of the accounting profession in the United States.
"GOVERNMENTAL APPROVALS" means all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings with, and
reports to, all Governmental Authorities.
"GOVERNMENTAL AUTHORITY" means any national, state or local government
(whether domestic or foreign), any political subdivision thereof or any other
governmental, quasi-governmental, judicial, public or statutory
instrumentality, authority, body, agency, bureau or entity (including, without
limitation, the Federal Deposit Insurance Corporation, the Comptroller of the
Currency or the Federal Reserve Board, any central bank or any comparable
authority) or any arbitrator with authority to bind a party at law.
"GOVERNMENTAL RECEIVABLES" means any Receivable payable by an Account
Debtor which is a Governmental Authority, including without limitation,
Medicare and Medicaid Receivables.
"GUARANTY," "GUARANTEED" or to "GUARANTEE" as applied to any
obligation means and includes: (a) a guaranty (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
directly or indirectly, in any manner, of any part or all of such obligation;
or (b) an agreement, direct or indirect, contingent or otherwise, and whether
or not constituting a guaranty, the practical effect of which is to assure the
payment or performance (or payment of damages in the event of nonperformance)
of any part or all of such obligation whether by: (i) the purchase of
securities or obligations; (ii) the purchase, sale or lease (as lessee or
lessor) of property or the purchase or sale of services primarily for the
purpose of enabling the obligor with respect to such obligation to make any
payment or performance (or payment of damages in the event of nonperformance)
of or on account of any part or all of such obligation, or to assure the owner
of such obligation against loss; (iii) the supplying of funds to or in any
other manner investing in the obligor with respect to such obligation; (iv)
repayment of amounts
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drawn down by beneficiaries of letters of credit; or (v) the supplying of funds
to or investing in a Person on account of all or any part of such Person's
obligation under a Guaranty of any obligation or indemnifying or holding
harmless, in any way, such Person against any part or all of such obligation.
As the context requires, "Guaranty" shall also mean each Guaranty substantially
in the form of Exhibit D executed and delivered by a Loan Party pursuant to
Section 5.1. or otherwise.
"HAZARDOUS MATERIALS" means all or any of the following: (a)
substances that are defined or listed in, or otherwise classified pursuant to,
any applicable Environmental Laws as "hazardous substances," "hazardous
materials," "hazardous wastes," "toxic substances" or any other formulation
intended to define, list or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity,
reproductive toxicity or "TLCP" toxicity, "EP toxicity"; (b) oil, petroleum or
petroleum derived substances, natural gas, natural gas liquids or synthetic gas
and drilling fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, natural gas or geothermal
resources; (c) any flammable substances or explosives or any radioactive
materials; (d) asbestos in any form; and (e) electrical equipment which
contains any oil or dielectric fluid containing levels of polychlorinated
biphenyls in excess of fifty parts per million.
"INDEBTEDNESS" as applied to a Person means, without duplication, all
items which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of such Person as
at the date as of which Indebtedness is to be determined, including without
limitation, all Funded Debt.
"INTELLECTUAL PROPERTY" has the meaning given that term in Section
6.1.(t).
"INTEREST COVERAGE RATIO" means the ratio of (a) the Borrower's EBITDA
(plus any Acquisition EBITDA not otherwise included in the calculation of the
Borrower's EBITDA) for the four-fiscal quarter period most recently ended to
(b) the total consolidated interest expense (including without limitation,
capitalized interest expense) of the Borrower for such period.
"INTEREST PERIOD" means, with respect to any LIBOR Loan, each period
commencing on the date such LIBOR Loan is made or the last day of the next
preceding Interest Period for such Loan and ending on the numerically
corresponding day in the first, second or third calendar month thereafter, as
the Borrower may select in a Notice of Borrowing, Notice of Continuation or
Notice of Conversion, as the case may be, except that each Interest Period that
commences on the last Business Day of a calendar month (or on any day for which
there is no numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month. Notwithstanding the foregoing: (a) if any Interest
Period would otherwise end after the Termination Date, such Interest Period
shall end on the Termination Date; (b) each Interest Period that would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (or, if such next succeeding Business Day falls in the
next succeeding calendar month, on the next preceding Business Day); and (c)
notwithstanding the immediately preceding clause (a), no Interest Period for
any LIBOR Loan shall have a duration of less than one month and, if the
Interest Period for any LIBOR Loan would otherwise be a shorter period, such
Loan shall not be available hereunder for such period.
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<PAGE> 13
"INTEREST RATE AGREEMENT" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement intended to protect a Person against fluctuations in
interest rates.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended.
"INVESTMENT" means, with respect to any Person and whether or not such
investment constitutes a controlling interest in such Person:
(a) the purchase or other acquisition of any share of capital
stock, evidence of Indebtedness or other security issued by any other Person;
(b) any loan, advance or extension of credit to, or contribution
(in the form of money or goods) to the capital of, any other Person;
(c) any Guaranty of the Indebtedness of any other Person;
(d) any other investment in any other Person; and
(e) any commitment or option to make an Investment in any other
Person.
"LIBOR" means, for any LIBOR Loan for any Interest Period therefor,
the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Telerate Page 3750 (or any successor page) as the London interbank
offered rate for deposits in Dollars at approximately 11:00 a.m. (London time)
two Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period. If for any reason such rate is not
available, the term "LIBOR" shall mean, for any LIBOR Loan for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest Period
for a term comparable to such Interest Period; provided, however, if more than
one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be
the arithmetic mean of all such rates.
"LIBOR LOANS" means Loans bearing interest at a rate based on LIBOR.
"LIEN" as applied to the property of any Person means: (a) any
security interest, encumbrance, mortgage, deed to secure debt, deed of trust,
pledge, lien, charge or lease constituting a Capitalized Lease Obligation,
conditional sale or other title retention agreement, or other security title or
encumbrance of any kind in respect of any property of such Person, or upon the
income or profits therefrom; (b) any arrangement, express or implied, under
which any property of such Person is transferred, sequestered or otherwise
identified for the purpose of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to the payment
of the general, unsecured creditors of such Person; and (c) the filing of, or
any agreement to give, any financing statement under the Uniform Commercial
Code or its
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<PAGE> 14
equivalent in any jurisdiction, other than in connection with a transaction
evidencing a true lease and not a security interest.
"LOAN" means a Revolving Loan or a Term Loan.
"LOAN DOCUMENT" means this Agreement, each Note, each Security
Document and each other document or instrument now or hereafter executed and
delivered by a Loan Party in connection with, pursuant to or relating to this
Agreement.
"LOAN PARTY" means the Borrower and each of its Subsidiaries (other
than the Shell Subsidiaries). The Loan Parties as of the Agreement Date are
identified on Schedule 1.1.(a).
"MANAGEMENT ACCOUNT" has the meaning given that term in Section 7.12.
"MANAGEMENT FEE," for purposes of calculating Acquisition EBITDA after
consummation of an Acquisition, shall mean the fees payable to PSC Management
or an Other Manager for services rendered in its capacity as manager under the
Management Services Agreement covering or relating to the New Subsidiary or
Asset Group that is a party to such Acquisition.
"MANAGEMENT SERVICES AGREEMENT" means each Management Services
Agreement entered into between PSC Management or an Other Manager and any other
Person offering medical services in the field of Otolaryngology, Related
Subspecialties or Complementary Specialties.
"MATERIAL ADVERSE EFFECT" means a materially adverse effect on (a) the
business, assets, liabilities, financial condition, results of operations or
business prospects of the Borrower and its Subsidiaries taken as a whole, (b)
the ability of the Borrower or any other Loan Party to perform its obligations
under any Loan Document to which it is a party, (c) the validity or
enforceability of any of the Loan Documents, (d) the rights and remedies of the
Lender under any of such Loan Documents or (e) the timely payment of the
principal of or interest on the Loans or other amounts payable in connection
therewith. Except with respect to representations made or deemed made by any
Loan Party in any of the other Loan Documents to which it is a party, all
determinations of materiality shall be made by the Lender in its reasonable
judgment unless expressly provided otherwise.
"MATERIAL CONTRACT" means any contract or other arrangement (other
than any Loan Document), whether written or oral, to which the Borrower or any
other Loan Party is a party as to which the breach, nonperformance,
cancellation or failure to renew by any party thereto could reasonably be
expected to have a Material Adverse Effect.
"MAXIMUM ACQUISITION LOAN AMOUNT" means, at any time of determination,
an amount equal to (a) the Borrower's EBITDA for the four fiscal quarter period
most recently ended times (b) 2.5. For purposes of determination of the
Maximum Acquisition Loan Amount, Acquisition EBITDA attributable to an
Acquisition (i) for which the Acquisition Consideration equaled or exceeded
$7,500,000 and (ii) which was not financed in whole or in part with proceeds of
a Loan
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<PAGE> 15
shall not be included in the Borrower's EBITDA until the Borrower shall have
delivered to the Lender financial statements pursuant to Section 8.1. or 8.2.
which reflect at least one full fiscal quarter of financial performance of the
Target of such Acquisition.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which the Borrower, any of its Subsidiaries or
any other ERISA Affiliate is making, or is accruing an obligation to make,
contributions or has made, or been obligated to make, contributions.
"NET INCOME" means, with respect to any Person for a given period,
such Person's net income for such period.
"NET PROCEEDS" means, in the case of an Equity Issuance, the aggregate
amount of all cash received by the Borrower or any other Loan Party in respect
of such Equity Issuance net of investment banking fees, legal fees, accountants
fees, underwriting discounts and commissions and other customary fees and
expenses actually incurred by the Borrower or such Loan Party in connection
with such Equity Issuance.
"NET WORTH" means, with respect to any Person, such Person's total
consolidated shareholders' equity (including capital stock, additional paid-in
capital and retained earnings, after deducting treasury stock) which would
appear as such on a balance sheet of such Person prepared in accordance with
GAAP.
"NEW SUBSIDIARY" means, with respect to an Acquisition, any Subsidiary
of the Borrower formed in connection with, and for the purpose of effecting,
such Acquisition. If any outstanding capital stock of or other equity interest
in a Person is being acquired by the Borrower or any of its Subsidiaries in
connection with an Acquisition and after giving effect thereto such Person
would be a Subsidiary of the Borrower, then such Person shall also constitute a
New Subsidiary.
"NOTE" means a Revolving Note or a Term Note.
"NOTICE OF BORROWING" means a notice substantially in the form of
Exhibit E to be delivered to the Lender pursuant to Section 2.1.(b) evidencing
the Borrower's request for a Loan.
"NOTICE OF CONTINUATION" means a notice substantially in the form of
Exhibit F to be delivered to the Lender pursuant to Section 2.6. evidencing the
Borrower's request for the Continuation of a LIBOR Loan.
"NOTICE OF CONVERSION" means a notice substantially in the form of
Exhibit G to be delivered to the Lender pursuant to Section 2.7. evidencing the
Borrower's request for the Conversion of a Loan from one Type of Loan to
another Type of Loan.
"OBLIGATIONS" means, individually and collectively: (a) the aggregate
principal balance of, and all accrued and unpaid interest on, all Loans; and
(b) all other indebtedness, liabilities, obligations, covenants and duties of
the Borrower and the other Loan Parties owing to the Lender of every kind,
nature and description, under or in respect of this Agreement or any of the
other
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<PAGE> 16
Loan Documents, including, without limitation, the Fees and indemnification
obligations, whether direct or indirect, absolute or contingent, due or not
due, contractual or tortious, liquidated or unliquidated, and whether or not
evidenced by any promissory note.
"OTHER MANAGER" means any Wholly Owned Subsidiary of the Borrower,
other than PSC Management, who serves as the manager under any Management
Services Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation and any
successor agency.
"PENSION PLAN" means any employee pension benefit plan within the
meaning of Section 3(2) of ERISA, other than a Multiemployer Plan, which is
subject to the provisions of Title IV of ERISA or Section 412 of the Code and
which (a) is maintained by the Borrower, any of its Subsidiaries or any of its
other ERISA Affiliates or is assumed by the Borrower, any of its Subsidiaries
or any of its other ERISA Affiliates in connection with any acquisition or
other business combination or (b) has at any time been maintained by the
Borrower, any of its Subsidiaries or any other current or former ERISA
Affiliate.
"PERMITTED LIENS" means, as to any Person: (a) Liens securing taxes,
assessments and other charges or levies imposed by any Governmental Authority
(excluding any Lien imposed pursuant to any of the provisions of ERISA) or the
claims of materialmen, mechanics, carriers, warehousemen or landlords for
labor, materials, supplies or rentals incurred in the ordinary course of
business, which are not at the time required to be paid or discharged under
Section 7.6.; (b) Liens consisting of deposits or pledges made, in the ordinary
course of business, in connection with, or to secure payment of, obligations
under workmen's compensation, unemployment insurance or similar Applicable
Laws; (c) Liens consisting of encumbrances in the nature of zoning
restrictions, easements, and rights or restrictions of record on the use of
real property, which do not materially detract from the value of such property
or impair the use thereof in the business of such Person; (d) Liens in
existence as of the Agreement Date and set forth in Schedule 6.1.(f); (e)
Purchase Money Liens but only to the extent the Indebtedness secured by such
Liens is permitted pursuant to Section 9.2.(d); (f) Liens securing Funded Debt
permitted under Section 9.2(b) but only to the extent such Liens encumber
assets which are not current assets as determined in accordance with GAAP; and
(g) Liens in favor of the Lender.
"PERSON" means an individual, corporation, partnership, limited
liability company, association, trust or unincorporated organization, or a
government or any agency or political subdivision thereof.
"PLEDGE AGREEMENT" means each Pledge Agreement executed by a Loan
Party in favor of the Lender pursuant to Section 5.1. or otherwise.
"POST-DEFAULT RATE" means, in respect of any principal of any Loan or
any other Obligation that is not paid when due (whether at stated maturity, by
acceleration, by optional or mandatory prepayment or otherwise), a rate per
annum during the period from and including the due date to but excluding the
date on which such amount is paid in full equal to two percent (2.0%) plus the
Base Rate as in effect from time to time plus the Applicable Margin for Base
Rate Loans; provided that, if the amount so in default is the principal of a
LIBOR Loan and the
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<PAGE> 17
due date thereof is a day other than the last day of the Interest Period
therefor, the "Post-Default Rate" for such principal shall be, for the period
from and including such due date to but excluding the last day of the Interest
Period, two percent (2.0%) plus the interest rate for such Loan as provided in
Section 2.2.(a), and thereafter, the rate provided for above in this
definition.
"PRINCIPAL OFFICE" means the main office of the Lender located at 600
Peachtree Street, 18th Floor, Atlanta, Georgia 30308.
"PSC MANAGEMENT" means PSC Management Corp., a Delaware corporation,
together with its successors and assigns.
"PURCHASE MONEY LIEN" means a Lien on any property being acquired by a
Person with proceeds of Funded Debt, which Lien attaches only to the property
being acquired, the Funded Debt incurred in connection with such acquisition
shall not exceed the purchase price of such property and such Lien shall secure
only such Funded Debt.
"REAL PROPERTY" means each parcel of real property owned by a Loan
Party.
"RECEIVABLE" shall mean (a) all rights to the payment of money or
other forms of consideration of any kind (whether classified under the UCC as
accounts, contract rights, chattel paper, general intangibles or otherwise)
including, but not limited to, accounts receivable, letters of credit and the
right to receive payment thereunder, chattel paper, tax refunds, insurance
proceeds, any rights under contracts not yet earned by performance and not
evidenced by an instrument or chattel paper, notes, drafts, instruments,
documents, acceptances and all other debts, obligations and liabilities in
whatever form from any Person, (b) all guaranties, security and Liens securing
payment thereof, (c) all goods, whether now owned or hereafter acquired, and
whether sold, delivered, undelivered, in transit or returned, which may be
represented by, or the sale or lease of which may have given rise to, any such
right to payment or other debt, obligation or liability, and (d) all proceeds
of any of the foregoing.
"REGULATORY CHANGE" means, with respect to the Lender, any change
effective after the Agreement Date in Applicable Law (including without
limitation, Regulation D of the Board of Governors of the Federal Reserve
System) or the adoption or making after such date of any interpretation,
directive or request applying to the Lender, of or under any Applicable Law
(whether or not having the force of law and whether or not failure to comply
therewith would be unlawful) by any Governmental Authority or monetary
authority charged with the interpretation or administration thereof or
compliance by the Lender with any request or directive regarding capital
adequacy.
"RELATED SUBSPECIALTIES" means medical practices that, in the field of
medicine, are deemed subspecialties of Otolaryngology, including but not
limited to, Pediatric Otolaryngology, head and neck surgery, Rhinology,
allergy, facial plastics and reconstructive surgery, Otology, Neurotology and
Laryngology.
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<PAGE> 18
"REPORTABLE EVENT" has the meaning set forth in Section 4043(b) of
ERISA, but shall not include a Reportable Event as to which the provision for
30 days' notice to the PBGC is waived under applicable regulations.
"RESTRICTED PAYMENT" means: (a) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock or other
equity interest of the Borrower or any of its Subsidiaries now or hereafter
outstanding, except a dividend payable solely in shares of that class of stock
to the holders of that class; (b) any redemption, conversion, exchange,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of stock or other equity
interest of the Borrower or any of its Subsidiaries now or hereafter
outstanding; (c) any payment or prepayment of principal of, premium, if any, or
interest on, redemption, conversion, exchange, purchase, retirement,
defeasance, sinking fund or similar payment with respect to, any Subordinated
Debt to the extent not permitted under the related Subordination Agreement; and
(d) any payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of stock of
the Borrower or any of its Subsidiaries now or hereafter outstanding.
"REVOLVING LOAN" means a loan made by a Lender to the Borrower
pursuant to Section 2.1.(a)(ii).
"REVOLVING LOAN COMMITMENT" means $5,000,000, as the same may be
reduced from time to time pursuant to the terms of this Agreement.
"REVOLVING NOTE" has the meaning given that term in Section 2.8.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time, together with all rules and regulations issued thereunder.
"SECURITY AGREEMENT" means each Security Agreement to be executed by
the Borrower and each other Loan Party, if any, in favor of the Lender pursuant
to Section 5.1. or otherwise.
"SECURITY DOCUMENT" means each Security Agreement, Pledge Agreement,
Guaranty, Collateral Assignment of Management Services Agreement, Collateral
Assignment of Acquisition Documents and other document or instrument executed
by the Borrower and each other Loan Party, if any, providing for collateral
security for the Obligations.
"SELLER NOTE" means any promissory note issued by the Borrower in
connection with an Acquisition as payment of any of the Acquisition
Consideration for such Acquisition. The payment obligations under any and all
Seller Notes shall bear interest and shall be subject to a Subordination
Agreement.
"SHELL SUBSIDIARIES" means Atlanta Audiology Associates, Inc. and
Atlanta Facial Plastic Surgery, Inc., both of which are Subsidiaries of PSC
Management Corp.
"SOLVENT" means, when used with respect to any Person, that (a) the
fair value and the fair salable value of its assets (excluding any Indebtedness
due from any Affiliate of such Person) are
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<PAGE> 19
each in excess of the fair valuation of its total liabilities (including all
contingent liabilities); (b) such Person is able to pay its debts or other
obligations in the ordinary course as they mature and (c) that the Person has
capital not unreasonably small to carry on its business and all business in
which it proposes to be engaged.
"SUBORDINATED DEBT" means Indebtedness of the Borrower or any of its
Subsidiaries that is subordinated in right of payment and otherwise to the
Loans and the other Obligations pursuant to the terms of a Subordination
Agreement.
"SUBORDINATION AGREEMENT" means each Subordination Agreement entered
into between the Lender and another Person in accordance with the terms and
conditions of this Agreement substantially in the form of Exhibit H.
"SUBSIDIARY" means, for any Person, any corporation, partnership or
other entity of which at least a majority of the securities or other ownership
interests having by the terms thereof ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions of such
corporation, partnership or other entity (without regard to the occurrence of
any contingency) is at the time directly or indirectly owned or controlled by
such Person or one or more Subsidiaries of such Person or by such Person and
one or more Subsidiaries of such Person. "WHOLLY OWNED SUBSIDIARY" means any
such corporation, partnership or other entity of which all of the equity
securities or other ownership interests (other than, in the case of a
corporation, directors' qualifying shares) are so owned or controlled.
"TARGET" means, in the case of the Acquisition of (i) all or
substantially all of the assets of a Person, such Person; (ii) a division or
Asset Group of a Person, such division or Asset Group and (iii) securities of a
Person, such Person.
"TAXES" has the meaning given that term in Section 3.8.
"TERM LOAN COMMITMENT" means, during each period set forth below, the
amount corresponding to such period:
<TABLE>
<CAPTION>
===========================================================================
PERIOD TERM LOAN COMMITMENT
---------------------------------------------------------------------------
<S> <C>
From the Effective Date to but excluding
April 30, 1998 $20,000,000
---------------------------------------------------------------------------
From April 30, 1998 to but excluding
April 30, 1999 $20,000,000
---------------------------------------------------------------------------
From April 30, 1999 to but excluding
April 30, 2000 $20,000,000
---------------------------------------------------------------------------
From April 30, 2000 to but excluding
April 30, 2001 $13,333,333
---------------------------------------------------------------------------
From April 30, 2001 to but excluding
the Termination Date $ 6,666,666
---------------------------------------------------------------------------
On and after the Termination Date $ 0
===========================================================================
</TABLE>
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<PAGE> 20
Each reduction in the Term Loan Commitment pursuant to Section 2.9., shall
result in a dollar for dollar reduction in each of the amounts set forth above.
"TERM LOANS" means any and all of the term loans made by the Lender to
the Borrower pursuant to Section 2.1.(a)(i).
"TERM NOTE" has the meaning given that term in Section 2.8.
"TERMINATION DATE" means April 30, 2002.
"TERMINATION EVENT" means: (a) a "Reportable Event" described in
Section 4043 of ERISA and the regulations issued thereunder (unless the notice
requirement has been waived by applicable regulation); or (b) the withdrawal of
the Borrower or any ERISA Affiliate from a Pension Plan during a plan year in
which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA
or was deemed such under Section 4068(f) of ERISA; or (c) the termination of a
Pension Plan, the filing of a notice of intent to terminate a Pension Plan or
the treatment of a Pension Plan amendment as a termination under Section 4041
of ERISA; or (d) the institution of proceedings to terminate a Pension Plan by
the PBGC; or (e) any other event or condition which would constitute grounds
under Section 4042(a) of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan; or (f) the partial or complete
withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer Plan; or
(g) the imposition of a Lien pursuant to Section 412 of the Code or Section 302
of ERISA; or (h) any event or condition which results in the reorganization or
insolvency of a Multiemployer Plan under Section 4241 or Section 4245 of ERISA,
respectively; or (i) any event or condition which results in the termination of
a Multiemployer Plan under Section 4041A of ERISA or the institution by the
PBGC of proceedings to terminate a Multiemployer Plan under Section 4042 of
ERISA.
"TRANSACTIONS" shall mean (a) the execution and delivery of each of
the Loan Documents, and the Acquisition Documents, (b) the making by the
Lender, and the borrowing by the Borrower, of the Loans hereunder, (c) any
Acquisition and (d) the consummation of all of the other transactions
contemplated by the Acquisition Documents and the Loan Documents.
"TYPE" with respect to any Loan, refers to whether such Loan is a
LIBOR Loan or Base Rate Loan.
"UCC" shall mean the Uniform Commercial Code as in effect from time to
time in the State of Georgia.
SECTION 1.2. GENERAL.
Unless otherwise indicated, all accounting terms, ratios and
measurements shall be interpreted or determined in accordance with GAAP in
effect as of the Agreement Date. References in this Agreement to "Sections,"
"Articles," "Exhibits" and "Schedules" are to sections, articles, exhibits and
schedules herein and hereto unless otherwise indicated. References in this
Agreement to any document, instrument or agreement (a) shall include all
exhibits, schedules and other attachments thereto, (b) shall include all
documents, instruments or
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<PAGE> 21
agreements issued or executed in replacement thereof, to the extent permitted
hereby and (c) shall mean such document, instrument or agreement, or
replacement or predecessor thereto, as amended, supplemented, restated or
otherwise modified from time to time to the extent permitted hereby and in
effect at any given time. Wherever from the context it appears appropriate,
each term stated in either the singular or plural shall include the singular
and plural, and pronouns stated in the masculine, feminine or neuter gender
shall include the masculine, the feminine and the neuter. Unless explicitly
set forth to the contrary, a reference to "Subsidiary" means a Subsidiary of
the Borrower or a Subsidiary of such Subsidiary and a reference to an
"Affiliate" means a reference to an Affiliate of the Borrower. Titles and
captions of Articles, Sections, subsections and clauses in this Agreement are
for convenience only, and neither limit nor amplify the provisions of this
Agreement. Unless otherwise indicated, all references to time are references
to Eastern Standard Time.
ARTICLE II. CREDIT FACILITY
SECTION 2.1. AMOUNT OF LOANS.
(a) Term Loans and Revolving Loans Generally. The Lender agrees,
on the terms and subject to the conditions contained herein, to make (i) Term
Loans to the Borrower during the period from and including the Effective Date
to but excluding the Termination Date in an aggregate principal amount at any
one time outstanding of up to but not exceeding the lesser of (A) the Maximum
Acquisition Loan Amount and (B) the Term Loan Commitment and (ii) Revolving
Loans to the Borrower during the period from and including the Effective Date
to but excluding the Termination Date in an aggregate principal amount at any
one time outstanding of up to but not exceeding the lesser of (A) the Borrowing
Base and (B) the Revolving Loan Commitment. Notwithstanding anything herein to
the contrary, at no time shall the aggregate.
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<PAGE> 22
outstanding principal amount of all Loans exceed the Term Loan Commitment.
Subject to the terms and conditions of this Agreement, during the period from
the Effective Date to but excluding the Termination Date, the Borrower may
borrow, repay and reborrow Revolving Loans hereunder. Term Loans, once repaid,
may not be reborrowed.
(b) Requesting Loans. The Borrower shall give the Lender notice pursuant
to a Notice of Borrowing or telephonic notice of each borrowing of a Revolving
Loan or a Term Loan. Each Notice of Borrowing shall be delivered to the Lender
before (a) 11:00 a.m. in the case of the borrowing of a LIBOR Loan, on the date
three Business Days prior to the proposed date of such borrowing and (b) 2:00
p.m. in the case of the borrowing of a Base Rate Loan, on the date of such
borrowing. Any such telephonic notice shall include all information to be
specified in a written Notice of Borrowing and shall be promptly confirmed in
writing by the Borrower pursuant to a Notice of Borrowing sent to the Lender by
telecopy on the same day of the giving of such telephonic notice. Each Notice of
Borrowing or telephonic notice of each borrowing shall be irrevocable once given
and binding on the Borrower.
(c) Disbursements of Loan Proceeds. Provided that the applicable
conditions set forth in Article V. for the borrowing of such Loan are fulfilled,
the Lender will make the proceeds of such Loan available to the Borrower no
later than 2:00 p.m. on the date and at the account specified by the Borrower in
such Notice of Borrowing.
SECTION 2.2 RATES AND PAYMENT OF INTEREST ON LOANS.
(a) Rates. The Borrower promises to pay to the Lender interest on the
unpaid principal amount of each Loan for the period from and including the date
of the making of such Loan to but excluding the date such Loan shall be paid in
full, at the following per annum rates:
(i) during such periods as such Loan is a Base Rate Loan, at the
Base Rate (as in effect from time to time) plus the Applicable Margin;
and
(ii) during such periods as such Loan is a LIBOR Loan, at LIBOR
for such Loan for the Interest Period therefor plus the Applicable
Margin.
Notwithstanding the foregoing, the Borrower hereby promises to pay to the Lender
interest at the applicable Post-Default Rate on any principal of any Loan and on
any other amount payable by the Borrower hereunder or under the Notes, which
shall not be paid in full when due (whether at stated maturity, by acceleration,
by mandatory prepayment or otherwise), for the period from and including the due
date thereof to but excluding the date the same is paid in full.
(b) Payment. Accrued interest on each Loan shall be payable (i) in the
case of a Base Rate Loan, on the last day of each calendar month, (ii) in the
case of a LIBOR Loan, on the last day of each Interest Period therefor and (iii)
in the case of any Loan, upon the payment, prepayment or Continuation thereof or
the Conversion of such Loan to a Loan of another Type (but only on the principal
amount so paid, prepaid or Converted). Interest payable at the Post-Default Rate
shall be payable from time to time on demand. Promptly after the determination
of
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<PAGE> 23
any interest rate provided for herein or any change therein, the Lender shall
give notice thereof to the Borrower. All determinations by the Lender of an
interest rate hereunder shall be conclusive and binding on the Borrower for all
purposes, absent manifest error.
SECTION 2.3 NUMBER OF INTEREST PERIODS.
There may be no more than five (5) different Interest Periods outstanding
at the same time.
SECTION 2.4 REPAYMENT OF LOANS.
The entire outstanding principal amount of, and all accrued but unpaid
interest on, the Loans shall be due and payable in full on the Termination Date.
SECTION 2.5 PREPAYMENTS.
(a) Optional. Subject to Section 4.4., the Borrower may prepay any Loan
at any time without premium or penalty upon at least three Business Days prior
written notice.
(b) Mandatory. If at any time (i) the aggregate principal amount of
outstanding Revolving Loans shall exceed the lesser of (A) the Borrowing Base
and (B) the Revolving Loan Commitment, (ii) the aggregate principal amount of
outstanding Term Loans shall exceed the lesser of (A) the Maximum Acquisition
Loan Amount and (B) the Term Loan Commitment or (iii) the aggregate amount of
Loans outstanding shall exceed the Term Loan Commitment, the Borrower shall,
within ten Business Days of the occurrence of such excess in the case of clauses
(i) and (ii) above, and within one Business Day of the occurrence of such excess
in the case of clause (iii) above, prepay the Loans in an amount sufficient to
eliminate such excess. If the Borrower is required to pay any outstanding LIBOR
Loans by reason of this Section prior to the end of the applicable Interest
Period therefor, the Borrower shall pay all amounts due under Section 4.4.
SECTION 2.6 CONTINUATION.
So long as no Default or Event of Default shall have occurred, the
Borrower may on any Business Day, with respect to any LIBOR Loan, elect to
maintain such LIBOR Loan or any portion thereof as a LIBOR Loan by selecting a
new Interest Period for such LIBOR Loan. Each new Interest Period selected under
this Section shall commence on the last day of the immediately preceding
Interest Period. Each selection of a new Interest Period shall be made by the
Borrower giving to the Lender a Notice of Continuation not later than 12:00 noon
on the third Business Day prior to the date of any such Continuation. Such
notice by the Borrower of a Continuation shall be by telephone or telecopy,
confirmed immediately in writing if by telephone, in the form of a Notice of
Continuation, specifying (a) the proposed date of such Continuation, (b) the
LIBOR Loan and portion thereof subject to such Continuation and (c) the duration
of the selected Interest Period, all of which shall be specified in such manner
as is necessary to comply with all limitations on Loans outstanding hereunder.
Each Notice of Continuation shall be irrevocable by and binding on the Borrower
once given. If the Borrower shall fail to select in a timely manner a new
Interest
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Period for any LIBOR Loan in accordance with this Section, such Loan will
automatically, on the last day of the current Interest Period therefore, Convert
into a Base Rate Loan notwithstanding failure of the Borrower to comply with
Section 2.7.
SECTION 2.7 CONVERSION.
So long as no Default or Event of Default shall have occurred, the
Borrower may on any Business Day, upon the Borrower's giving of a Notice of
Conversion to the Lender, Convert all or a portion of a Loan of one Type into a
Loan of another Type. Any Conversion of a LIBOR Loan into a Base Rate Loan shall
be made on, and only on, the last day of an Interest Period for such LIBOR Loan
and, upon Conversion of a Base Rate Loan into a LIBOR Loan, the Borrower shall
pay accrued interest to the date of Conversion on the principal amount so
Converted. Each such Notice of Conversion shall be given not later than 12:00
noon on the Business Day prior to the date of any proposed Conversion into Base
Rate Loans and on the third Business Day prior to the date of any proposed
Conversion into LIBOR Loans. Subject to the restrictions specified above, each
Notice of Conversion shall be by telephone or telecopy, confirmed promptly in
writing if by telephone in the form of a Notice of Conversion specifying (a) the
requested date of such Conversion, (b) the Type of Loan to be Converted, (c) the
portion of such Type of Loan to be Converted, (d) the Type of Loan such Loan is
to be Converted into and (e) if such Conversion is into a LIBOR Loan, the
requested duration of the Interest Period of such Loan. Each Notice of
Conversion shall be irrevocable by and binding on the Borrower once given.
SECTION 2.8 NOTES.
The Revolving Loans made by the Lender shall, in addition to this
Agreement, also be evidenced by a promissory note of the Borrower substantially
in the form of Exhibit I (the "Revolving Note"), payable to the order of the
Lender in a principal amount equal to the Revolving Loan Commitment as
originally in effect and otherwise duly completed. The Term Loans made by the
Lender shall, in addition to this Agreement, also be evidenced by a promissory
note of the Borrower substantially in the form of Exhibit J (the "Term Note"),
payable to the order of the Lender in a principal amount equal to the Term Loan
Commitment as originally in effect and otherwise duly completed.
SECTION 2.9 VOLUNTARY REDUCTIONS OF THE COMMITMENT.
The Borrower shall have the right to terminate or reduce the unused
amount of the Commitment at any time and from time to time without penalty or
premium upon not less than three Business Days prior written notice to the
Lender of each such termination or reduction, which notice shall specify the
effective date thereof, whether such reduction is a reduction of the Revolving
Loan Commitment or the Term Loan Commitment and the amount of any such reduction
and shall be irrevocable once given and effective only upon receipt by the
Lender. The Commitment, once terminated or reduced, may not be increased or
reinstated.
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ARTICLE III. PAYMENTS, FEES AND OTHER GENERAL PROVISIONS
SECTION 3.1 PAYMENTS.
Except to the extent otherwise provided herein, all payments of
principal, interest and other amounts to be made by the Borrower under this
Agreement or any other Loan Document shall be made in Dollars, in immediately
available funds, without deduction, set-off or counterclaim, to the Lender at
its Principal Office, not later than 2:00 p.m. on the date on which such payment
shall become due (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day) and shall be made
as otherwise directed in writing by the Lender from time to time. The Borrower
shall, at the time of making each payment under this Agreement or any Note,
specify to the Lender the amounts payable by the Borrower hereunder to which
such payment is to be applied. If the due date of any payment under this
Agreement or any other Loan Document would otherwise fall on a day which is not
a Business Day such date shall be extended to the next succeeding Business Day
and interest shall be payable for the period of such extension.
SECTION 3.2 MINIMUM AMOUNTS.
(a) Borrowings. Each Base Rate Loan shall be in a minimum amount of
$100,000 and integral multiples of $100,000 in excess thereof. Each LIBOR Loan,
and each Conversion of a Loan to a LIBOR Loan, shall be in a minimum amount of
$1,000,000 and integral multiples of $100,000 in excess of that amount.
(b) Prepayments. Each voluntary prepayment of Revolving Loans shall be in
a minimum amount of $100,000 and integral multiples of $50,000 in excess
thereof. Each voluntary prepayment of a Term Loan shall be in a minimum amount
of $100,000 and integral multiples of $50,000 in excess thereof.
(c) Reductions of Commitment. Each reduction of the Commitment under
Section 2.9. shall be in a minimum amount of $100,000 and integral multiples of
$50,000 in excess thereof.
SECTION 3.3 FEES.
(a) Closing Fee. In consideration of the extension of the credit facility
established hereby, the Borrower agrees to pay to the Lender no later than the
Effective Date a closing fee in an amount equal to $100,000. The Lender
acknowledges receipt of $25,000 of such fee prior to the date hereof.
(b) Facility Fees. The Borrower agrees to pay to the Lender a facility
fee in an amount equal to three-eighths of one percent (0.375%) per annum of the
average daily amount by which the Term Loan Commitment exceeds the aggregate
outstanding principal amount of Loans for the period from and including the
Agreement Date to but excluding the date the Commitment is terminated or reduced
to zero. Such fee shall be payable in arrears on (i) the last Business Day of
March, June, September and December in each year commencing with June 30, 1997,
(ii) the
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date of each reduction in the Commitment (but only on the amount of the
reduction) and (iii) on the Termination Date.
SECTION 3.4 COMPUTATIONS.
Unless otherwise expressly set forth herein, (a) any accrued interest on
any Base Rate Loan and any Fees due hereunder shall be computed on the basis of
a year of 365 or 366 days, as appropriate, and the actual number of days elapsed
and (b) any accrued interest on any LIBOR Loan shall be computed on the basis of
a year of 360 days and the actual number of days elapsed.
SECTION 3.5 USURY.
In no event shall the amount of interest due or payable on the Loans or
other Obligations exceed the maximum rate of interest allowed by Applicable Law
and, if any such payment is paid by the Borrower or received by the Lender, then
such excess sum shall be credited as a payment of principal, unless the Borrower
shall notify the Lender in writing that the Borrower elects to have such excess
sum returned to it forthwith. It is the express intent of the parties hereto
that the Borrower not pay and the Lender not receive, directly or indirectly, in
any manner whatsoever, interest in excess of that which may be lawfully paid by
the Borrower under Applicable Law.
SECTION 3.6 AGREEMENT REGARDING INTEREST AND CHARGES.
The parties hereto hereby agree and stipulate that the only charge
imposed upon the Borrower for the use of money in connection with this Agreement
is and shall be the interest specifically described in Section 2.2.(a).
Notwithstanding the foregoing, the parties hereto further agree and stipulate
that all facility fees, underwriting fees, default charges, late charges,
funding or "breakage" charges, increased cost charges, attorneys' fees and
reimbursement for costs and expenses paid by the Lender to third parties or for
damages incurred by the Lender, are charges made to compensate the Lender for
underwriting or administrative services and costs or losses performed or
incurred, and to be performed or incurred, by the Lender in connection with this
Agreement and shall under no circumstances be deemed to be charges for the use
of money pursuant to Official Code of Georgia Annotated Sections 7-4-2 and
7-4-18. All charges other than charges for the use of money shall be fully
earned and nonrefundable when due.
SECTION 3.7 STATEMENTS OF ACCOUNT.
The Lender will account to the Borrower with a statement of Loans,
accrued interest and Fees, charges and payments made pursuant to this Agreement
and the other Loan Documents, and such account rendered by the Lender shall be
deemed presumptively correct. The failure of the Lender to deliver such a
statement of accounts shall not relieve or discharge the Borrower from any of
its obligations hereunder.
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SECTION 3.8 TAXES.
(a) Taxes Generally. All payments by the Borrower of principal of, and
interest on, the Loans and all other Obligations shall be made free and clear of
and without deduction for any present or future excise, stamp or other taxes,
fees, duties, levies, imposts, charges, deductions, withholdings or other
charges of any nature whatsoever imposed by any taxing authority, but excluding
(i) franchise taxes, (ii) any taxes (other than withholding taxes) that would
not be imposed but for a connection between the Lender and the jurisdiction
imposing such taxes (other than a connection arising solely by virtue of the
activities of the Lender pursuant to or in respect of this Agreement or any
other Loan Document), (iii) any withholding taxes payable with respect to
payments hereunder or under any other Loan Document under Applicable Law in
effect on the Agreement Date, and (iv) any taxes imposed on or measured by the
Lender's assets, net income, receipts or branch profits (such non-excluded items
being collectively called "Taxes"). If any withholding or deduction from any
payment to be made by the Borrower hereunder is required in respect of any Taxes
pursuant to any Applicable Law, then the Borrower will:
(i) pay directly to the relevant Governmental Authority the full
amount required to be so withheld or deducted;
(ii) promptly forward to the Lender an official receipt or other
documentation satisfactory to the Lender evidencing such payment to such
Governmental Authority; and
(iii) pay to the Lender such additional amount or amounts as is
necessary to ensure that the net amount actually received by the Lender
will equal the full amount that the Lender would have received had no
such withholding or deduction been required.
(b) Tax Indemnification. If the Borrower fails to pay any Taxes when
due to the appropriate Governmental Authority or fails to remit to the Lender
the required receipts or other required documentary evidence, the Borrower shall
indemnify the Lender for any incremental Taxes, interest or penalties that may
become payable by the Lender as a result of any such failure.
ARTICLE IV. YIELD PROTECTION, ETC.
SECTION 4.1 ADDITIONAL COSTS; CAPITAL ADEQUACY.
(a) Additional Costs. The Borrower shall promptly pay to the Lender
from time to time such amounts as the Lender may reasonably determine to be
necessary to compensate the Lender for any costs incurred by the Lender that
it determines are attributable to its making or maintaining of any LIBOR Loans
or its obligation to make any LIBOR Loans hereunder, any reduction in any amount
receivable by the Lender under this Agreement or any of the other Loan Documents
in respect of any of such Loans or such obligations or the maintenance by the
Lender of capital in respect of its Loans or its Commitment (such increases in
costs and reductions in amounts receivable being herein called "Additional
Costs"), resulting from any Regulatory Change that: (i) changes the basis of
taxation of any amounts payable to the Lender under this Agreement or any of the
other Loan Documents in respect of any of such Loans or its Commitment (other
than taxes imposed on or measured by the overall net income of the Lender or of
its Principal
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Office for any of such Loans by the jurisdiction in which the Lender has such
Office); or (ii) imposes or modifies any reserve, special deposit or similar
requirements (including, without limitation, any reserves required to be
maintained against (i) "Eurocurrency liabilities" as specified in Regulation D
of the Board of Governors of the Federal Reserve System or (ii) any other
category of liabilities which includes deposits by reference to which the
interest rate on LIBOR Loans is determined or (iii) any category of extensions
of credit or other assets which includes loans by an office of the Lender
outside of the United States of America to residents of the United States of
America)) relating to any extensions of credit or other assets of, or any
deposits with or other liabilities of, the Lender, or any commitment of the
Lender (including, without limitation, the Commitment); or (iii) has or would
have the effect of reducing the rate of return on capital of the Lender to a
level below that which the Lender could have achieved but for such Regulatory
Change (taking into consideration the Lender's policies with respect to capital
adequacy).
(b) Lender's Suspension of LIBOR Loans. Without limiting the effect of
the provisions of the immediately preceding subsection (a), if by reason of any
Regulatory Change, the Lender either (i) incurs Additional Costs based on or
measured by the excess above a specified level of the amount of a category of
deposits or other liabilities of the Lender that includes deposits by reference
to which the interest rate on LIBOR Loans is determined as provided in this
Agreement or a category of extensions of credit or other assets of the Lender
that includes LIBOR Loans or (ii) becomes subject to restrictions on the amount
of such a category of liabilities or assets that it may hold, then, if the
Lender so elects by notice to the Borrower, the obligation of the Lender to make
or Continue, or to Convert Base Rate Loans into, LIBOR Loans hereunder shall be
suspended until such Regulatory Change ceases to be in effect (in which case the
provisions of Section 4.5. shall apply).
(c) Notification and Determination of Additional Costs. The Lender agrees
to notify the Borrower of any event occurring after the Agreement Date entitling
the Lender to compensation under any of the preceding subsections of this
Section as promptly as practicable; provided, however, that the failure of the
Lender to give such notice shall not release the Borrower from any of its
obligations hereunder. The Lender agrees to furnish to the Borrower a
certificate setting forth in reasonable detail the basis and amount of each
request by the Lender for compensation under this Section. Determinations by the
Lender of the effect of any Regulatory Change shall be conclusive, provided that
such determinations are made on a reasonable basis and in good faith. The Lender
shall only be entitled to compensation under this Section for events occurring
during the 180 day period ending on the date the Borrower has actual knowledge
of the occurrence of any such event entitling the Lender to compensation under
this Section.
SECTION 4.2 SUSPENSION OF LIBOR LOANS.
Anything herein to the contrary notwithstanding, if, on or prior to the
determination of LIBOR for any Interest Period:
(a) the Lender reasonably determines (which determination shall be
conclusive) that quotations of interest rates for the relevant deposits
referred to in the definition of LIBOR are not being provided in the
relevant amounts or for the relevant maturities for
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purposes of determining rates of interest for LIBOR Loans as provided
herein or is otherwise unable to determine LIBOR, or
(b) the Lender reasonably determines (which determination shall be
conclusive) that the relevant rates of interest referred to in the
definition of LIBOR upon the basis of which the rate of interest for
LIBOR Loans for such Interest Period is to be determined are not likely
adequately to cover the cost to the Lender of making or maintaining LIBOR
Loans for such Interest Period;
then the Lender shall give the Borrower prompt notice thereof and, so long as
such condition remains in effect, the Lender shall be under no obligation to,
and shall not, make additional LIBOR Loans, Continue LIBOR Loans or Convert
Loans into LIBOR Loans and the Borrower shall, on the last day of each current
Interest Period for each outstanding LIBOR Loan, either prepay such Loan or
Convert such Loan into a Base Rate Loan.
SECTION 4.3 ILLEGALITY.
Notwithstanding any other provision of this Agreement, if it becomes
unlawful for the Lender to honor its obligation to make or maintain LIBOR Loans
hereunder, then the Lender shall promptly notify the Borrower thereof and the
Lender's obligation to make or Continue, or to Convert Loans of any other Type
into, LIBOR Loans shall be suspended until such time as the Lender may again
make and maintain LIBOR Loans (in which case the provisions of Section 4.5.
shall be applicable).
SECTION 4.4 COMPENSATION.
The Borrower shall pay to the Lender, upon the request of the Lender,
such amount or amounts as shall be sufficient (in the reasonable opinion of the
Lender) to compensate it for any loss, cost or expense that the Lender
reasonably determines is attributable to:
(a) any payment or prepayment (whether mandatory or optional) of a
LIBOR Loan, or Conversion of a LIBOR Loan, made by the Lender for any
reason (including, without limitation, acceleration) on a date other than
the last day of the Interest Period for such Loan; or
(b) any failure by the Borrower for any reason (including,
without limitation, the failure of any of the applicable
conditions precedent specified in Article V. to be satisfied) to
borrow a LIBOR Loan from the Lender on the date for such
borrowing, or to Convert a Base Rate Loan into a LIBOR Loan or
Continue a LIBOR Loan on the requested date of such Conversion or
Continuation,
such compensation to include in the case of a LIBOR Loan, without limitation, an
amount equal to the excess, if any, of (i) the amount of interest that otherwise
would have accrued on the principal amount so paid, prepaid or Converted or not
borrowed for the period from the date of such payment, prepayment, Conversion or
failure to borrow or Convert to the last day of the then current Interest Period
for such Loan (or, in the case of a failure to borrow or Convert, the
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Interest Period for such Loan that would have commenced on the date specified
for such borrowing or Conversion) at the applicable rate of interest for such
Loan provided for herein plus the Lender's normal administrative charges, if
any, associated with such payment, prepayment, Conversion or failure to borrow
over (ii) the amount of interest that otherwise would have accrued on such
principal amount at a rate per annum equal to LIBOR at such time for an amount
comparable to such principal amount and for a maturity comparable to such period
(as reasonably determined by the Lender). Upon the Borrower's request, if the
Lender shall request compensation under this Section, the Lender shall provide
the Borrower with a statement setting forth in reasonable detail the basis for
requesting such compensation and the method for determining the amount thereof.
Any such statement shall be conclusive if made on a reasonable basis and in good
faith.
SECTION 4.5 TREATMENT OF AFFECTED LOANS.
If the obligation of the Lender to make LIBOR Loans or to Continue, or to
Convert Base Rate Loans into, LIBOR Loans shall be suspended pursuant to Section
4.1.(b), Section 4.2. or Section 4.3., then all LIBOR Loans shall be
automatically Converted into Base Rate Loans on the last day(s) of the then
current Interest Period(s) for LIBOR Loans (or, in the case of a Conversion
required by Section 4.1.(b) or 4.3., on such earlier date as the Lender may
specify to the Borrower) and, unless and until the Lender gives notice as
provided below that the circumstances specified in Section 4.1., Section 4.2. or
4.3. that gave rise to such Conversion no longer exist:
(a) to the extent that LIBOR Loans have been so Converted, all
payments and prepayments of principal that would otherwise be applied to
such LIBOR Loans shall be applied instead to Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by the
Lender as LIBOR Loans shall be made or Continued instead as Base Rate
Loans, and all Base Rate Loans that would otherwise be Converted into
LIBOR Loans shall remain as Base Rate Loans.
SECTION 4.6 EFFORTS TO MITIGATE CERTAIN LIABILITY.
The Lender agrees that it will take reasonable steps to reduce the
liability of the Borrower under, or avoid the results provided under, Sections
4.1 and 4.3., so long as such steps are not disadvantageous to the Lender as
determined by the Lender in its sole discretion.
ARTICLE V. CONDITIONS PRECEDENT
SECTION 5.1 INITIAL CONDITIONS PRECEDENT.
The obligation of the Lender to make any Loans is subject to the
condition precedent that the Borrower deliver to the Lender each of the
following, each of which shall be satisfactory in form and substance to the
Lender:
(a) a counterpart of this Agreement executed by the Borrower;
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(b) the Revolving Note and the Term Note executed by the Borrower,
payable to the Lender and complying with the terms of Section 2.8.;
(c) a Guaranty executed by each Loan Party other than the Borrower;
(d) a Pledge Agreement executed by each of the Borrower and each other
Loan Party owning any equity interest in any other Loan Party, substantially in
the form of Exhibit K;
(e) the certificates issued in the name of the applicable Loan Party
evidencing the stock and other securities subject to the Lien of the Pledge
Agreement to which such Loan Party is a party;
(f) appropriate stock transfer powers endorsed in blank by each
applicable Loan Party with respect to the certificates referred to in the
immediately preceding subsection;
(g) a Security Agreement executed by each of the Borrower and the other
Loan Parties substantially in the form of Exhibit L;
(h) Uniform Commercial Code financing statements naming each Loan Party
as debtor, the Lender as secured party, and to be filed in each jurisdiction
where the filing of such financing statements may be necessary or appropriate as
determined by the Lender;
(i) favorable UCC, tax, judgment and lien search reports with respect to
each Loan Party in all necessary or appropriate jurisdictions and under all
legal and appropriate trade names indicating that there are no prior Liens on
any of the Collateral other than Permitted Liens or Liens to be terminated prior
to the Effective Date;
(j) an opinion of Troutman Sanders LLP, counsel to the Loan Parties, in
substantially the form of Exhibit M;
(k) the articles of incorporation, articles of organization, certificate
of limited partnership or other comparable organizational instrument (if any) of
each Loan Party certified as of a recent date by the Secretary of State of the
State of formation of such Loan Party;
(l) a Certificate of Good Standing or certificate of similar meaning with
respect to each Loan Party issued as of a recent date by the Secretary of State
of the State of formation of each such Loan Party and certificates of
qualification to transact business or other comparable certificates issued by
each Secretary of State (and any state department of taxation, as applicable) of
each state in which such Loan Party is required to be so qualified;
(m) a certificate of incumbency signed by the Secretary or Assistant
Secretary (or other individual performing similar functions) of each Loan Party
with respect to each of the officers of such Loan Party authorized to execute
and deliver the Loan Documents to which such Loan Party is a party;
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(n) copies certified by the Secretary or Assistant Secretary of each Loan
Party (or other individual performing similar functions) of (i) the by-laws of
such Loan Party, if a corporation, the operating agreement, if a limited
liability company, the partnership agreement, if a limited or general
partnership, or other comparable document in the case of any other form of legal
entity and (ii) all corporate, partnership, member or other necessary action
taken by such Loan Party to authorize the execution, delivery and performance of
the Loan Documents to which it is a party;
(o) a certificate executed by the chief executive officer or chief
financial officer of the Borrower, stating that: (i) on such date, and after
giving effect to the transactions contemplated hereby, no Default or Event of
Default has occurred and is continuing and (ii) the representations and
warranties made or deemed made by the Borrower or any other Loan Party in the
Loan Documents are true and correct in all material respects on and as of such
date with the same effect as though made on and as of such date;
(p) certificates of insurance evidencing the existence of all insurance
required to be maintained by each Loan Party pursuant to the Loan Documents,
together with loss payable clauses as required by such Loan Documents;
(q) key man life insurance policies on Richard D. Ballard and Ramie A.
Tritt, M.D., in the amounts of $1,000,000 and $5,000,000, respectively, each
naming the Borrower as beneficiary;
(r) copies of all executed Management Services Agreements;
(s) a Collateral Assignment of Management Services Agreements executed by
PSC Management, relating to all such Management Services Agreements, together
with the acknowledgment of the professional corporation or Wholly-Owned
Subsidiary of the Borrower, as the case may be, party to each such Management
Services Agreement, in the form satisfactory to the Lender;
(t) copies of all executed Employment Agreements;
(u) copies of all executed Acquisition Documents relating to each
Acquisition consummated on or prior to the Effective Date;
(v) a Collateral Assignment of Acquisition Documents executed by each
Loan Party having rights under any of such Acquisition Document;
(w) a copy of each Uniform Commercial Code financing statement naming PSC
Management as secured party and the applicable parties to the existing
Management Services Agreements as debtors filed in connection with the sale of
Receivables to PSC Management under such Management Services Agreements;
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(x) Uniform Commercial Code assignment statements naming PSC Management
as assignor and the Lender as assignee with respect to each of the financing
statements referred to in the immediately preceding subsection;
(y) a copy of the management succession plan for the Chief Executive
Officer, the Chief Financial Officer, the Chief Operating Officer and the
Chairman of the Board of Directors of the Borrower;
(z) the Fees, if any, then due under Section 3.3.;
(aa) a calculation of the Borrowing Base and of the Maximum Acquisition
Loan Amount as of the date of such initial Loan, such calculations to be in form
and detail satisfactory to the Borrower and the Lender;
(bb) the Lender shall have received (i) a copy of the Borrower's
registration statement on Form S-1 as initially filed with the Securities and
Exchange Commission on November 29, 1996, together with all amendments and
exhibits thereto and (ii) evidence that (A) such registration statement shall
have become effective and (B) the Borrower shall have successfully consummated
the Equity Issuance contemplated thereby yielding Net Proceeds of not less than
$13,000,000;
(cc) any and all financial statements described in Section 6.1.(k) not
previously delivered by the Borrower to the Lender; and
(dd) such other documents, instruments and agreements as the Lender may
reasonably request.
SECTION 5.2 CONDITIONS PRECEDENT TO ALL LOANS.
The obligation of the Lender to make any Loan hereunder (including the
initial Loans) is subject to the further condition precedent that, both
immediately prior to the making of such Loan, and also after giving effect
thereto:
(a) no Default or Event of Default shall have occurred and be continuing;
(b) the representations and warranties made or deemed made by the Loan
Parties in each of the Loan Documents shall be true, complete and correct in all
material respects on and as of the date of the making of such extension of
credit with the same force and effect as if made on and as of such date (or, in
the case of any such representation and warranty made only as of a particular
date, as of such particular date);
(c) the Lender shall have timely received a duly executed Notice of
Borrowing; and
(d) if the proceeds of such Loan are to finance an Acquisition in whole
or in part, the Borrower shall have delivered to the Lender certificate prepared
on a pro forma basis showing the
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calculation of the Borrowing Base and the Maximum Acquisition Loan Amount
immediately after giving effect to such Acquisition, such calculations to be in
form and detail reasonably satisfactory to the Borrower and the Lender.
Each Credit Event shall constitute a certification by the Borrower to the effect
set forth in the preceding clauses (a) and (b) (both as of the date of the
giving of notice relating to such Credit Event and, unless the Borrower
otherwise notifies the Lender prior to the date of such Credit Event, as of the
date of the occurrence of such Credit Event).
ARTICLE VI. REPRESENTATIONS AND WARRANTIES
SECTION 6.1 REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender to enter into this Agreement and to make
Loans, the Borrower represents and warrants to the Lender as follows:
(a) Organization; Power; Qualification. Each of the Loan Parties is a
corporation, duly organized, validly existing and in good standing under the
jurisdiction of its incorporation, has the power and authority to own or lease
its respective properties and to carry on its respective business as now being
and hereafter proposed to be conducted and is duly qualified and is in good
standing as a foreign corporation, and authorized to do business, in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization, except where the failure
to be so qualified and in good standing could not reasonably be expected to have
a Material Adverse Effect.
(b) Ownership Structure. Schedule 6.1.(b) correctly sets forth as of the
Agreement Date the corporate structure of the Borrower and its Subsidiaries, the
correct legal name of the Borrower and each Subsidiary, the Persons holding
equity interests in the Borrower's Subsidiaries and their percentage equity or
voting interest in such Subsidiaries. Except as set forth in such Schedule as of
the Agreement Date: (i) neither the Borrower nor any of its Subsidiaries has
issued to any third party any securities convertible into Borrower's or such
Subsidiary's capital stock or any options, warrants or other rights to acquire
any securities convertible into such capital stock; and (ii) the outstanding
stock and securities of, or other equity interests, as applicable, in the
Borrower's Subsidiaries are owned by the Persons indicated on such Schedule,
free and clear of all Liens, warrants, options and rights of others of any kind
whatsoever. The Shell Subsidiaries were formed only for the purpose of
preserving their respective corporate names. Neither of the Shell Subsidiaries
has conducted any business since the respective date of its formation and
neither of the Shell Subsidiaries has any assets.
(c) Authorization. The Borrower and each other Loan Party has the right
and power, and has taken all necessary action to authorize it, to execute,
deliver and perform each of the Loan Documents and Acquisition Documents to
which it is a party in accordance with their respective terms and to consummate
the Transactions. Each of the Loan Documents and Acquisition Documents to which
the Borrower or any other Loan Party is a party has been duly executed and
delivered by the duly authorized officers or other representatives of such
Person and each is a legal, valid and binding obligation of such Person
enforceable against such Person in
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accordance with its respective terms, except that the enforceability thereof may
be limited by applicable bankruptcy, reorganization, insolvency, moratorium and
other laws from time to time in effect affecting creditors' rights generally and
general equitable principles.
(d) Compliance of Documents With Laws, etc. The execution, delivery and
performance of each of the Loan Documents and the Acquisition Documents to which
any Loan Party is a party in accordance with their respective terms and the
consummation of the Transactions do not and will not, by the passage of time,
the giving of notice, or otherwise: (i) require any Governmental Approval, other
than such as already have been obtained and are in full force and effect or
those the failure to obtain which could not reasonably be expected to have a
Material Adverse Effect, or violate any Applicable Law relating to any Loan
Party, other than violations which could not reasonably be expected, singly or
in the aggregate, to have a Material Adverse Effect; (ii) conflict with, result
in a breach of or constitute a default under the articles of incorporation or
the bylaws of the Borrower or the organizational documents of any other Loan
Party, or any indenture, agreement or other instrument to which any Loan Party
is a party or by which it or any of its properties may be bound; or (iii) result
in or require the creation or imposition of any Lien upon or with respect to any
property now owned or hereafter acquired by any Loan Party other than Liens in
favor of the Lender.
(e) Compliance with Law; Governmental Approvals. The Borrower and each
other Loan Party is in compliance with each Governmental Approval applicable to
it and in compliance with all other Applicable Law relating to the Borrower or
such Loan Party except for noncompliances which, and Governmental Approvals the
failure to possess which, would not, singly or in the aggregate, (i) cause a
Default or Event of Default or (ii) have a Material Adverse Effect.
(f) Title to Properties; Liens. Each of the Loan Parties has good,
marketable and legal title to, or a valid leasehold interest in, its respective
assets, free and clear of all Liens except for those described in Schedule
6.1.(f) and other Permitted Liens.
(g) Indebtedness and Guarantees. Schedule 6.1.(g) is, as of the Agreement
Date, a complete and correct listing of all Funded Debt of the Borrower, its
Subsidiaries and the other Loan Parties. No default or event of default, or
event or condition which with the giving of notice, the lapse of time or
otherwise, would constitute such a default or event of default, exists with
respect to any such Indebtedness.
(h) Material Contracts. Schedule 6.1.(h) is a true, correct and complete
listing of all Material Contracts as of the Agreement Date. No default or event
of default, or event or condition which with the giving of notice, the lapse of
time or otherwise, would constitute such a default or event of default, exists
with respect to any such Material Contract.
(i) Litigation. There are no actions, suits or proceedings pending (nor,
to the knowledge of the Borrower, are there any actions, suits or proceedings
threatened, nor is there any basis therefor) against or in any other way
relating adversely to or affecting the Borrower or any other Loan Party or any
of its respective property in any court or before any arbitrator of any
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kind or before or by any Governmental Authority which (x) relates to any
Acquisition Document or any Transaction or (y) if adversely determined, could
reasonably be expected to have a Material Adverse Effect. There are no strikes,
slow downs, work stoppages or walkouts or other labor disputes in progress or
threatened relating to the Borrower or any other Loan Party which could
reasonably be expected to have a Material Adverse Effect.
(j) Taxes. All federal, state and other tax returns of the Borrower, any
of its Subsidiaries or any of the other Loan Parties required by Applicable Law
to be filed have been duly filed, and all federal, state and other taxes,
assessments and other governmental charges or levies upon the Borrower and each
Loan Party and its respective properties, income, profits and assets which are
due and payable have been paid, except any such nonpayment which is at the time
permitted under Section 7.6. As of the Agreement Date, none of the United States
income tax returns of the Borrower, its Subsidiaries or any other Loan Party are
under audit. No tax liens have been filed and no claims are being asserted with
respect to any such taxes. All charges, accruals and reserves on the books of
the Borrower and each of its Subsidiaries in respect of any taxes or other
governmental charges are in accordance with GAAP.
(k) Financial Statements. The Borrower has furnished to the Lender each
of the following financial statements: (i) audited consolidated balance sheet of
the Borrower and its Subsidiaries as at December 31, 1996, and the related
consolidated statements of income, retained earnings and cash flow for the
fiscal year then ended (the "Historical Financial Statements"); (ii) a pro forma
projected unaudited consolidated balance sheet of the Borrower and its
Subsidiaries as of March 31, 1997 after giving effect to the Transactions being
consummated as of the Effective Date and any Acquisition effected prior to the
Effective Date but after December 31, 1996 (the "Pro Forma Financial
Statements"), and (iii) pro forma projected consolidated financial statements
reflecting the forecasted financial condition and results of operations of the
Borrower and its Subsidiaries on a quarterly and an annual basis for the
five-year period ending March 31, 2001 (the "Projected Financial Statements").
The Historical Financial Statements are complete and correct in all material
respects and fairly present in all material respects the financial condition and
results of operations of the Borrower and its Subsidiaries as of and for the
periods covered thereby. Since December 31, 1996, there has been no material
adverse change in the business, property, assets, liabilities, condition
(financial or otherwise), operations or results of operations of the Borrower
and its Subsidiaries considered as a whole, and after giving effect to each
Transaction each Loan Party will be Solvent. The Pro Forma Financial Statements
fairly present the pro forma financial condition and results of operations of
the Borrower and its Subsidiaries as of and for the periods covered thereby. The
Projected Financial Statements are based on the assumptions set forth in the
supporting schedules thereto and constitute, in the good faith judgment of the
Borrower, reasonable estimations of future performance as of such date. With
respect to any given Acquisition, and except as disclosed by the Borrower to the
Lender in writing, the Borrower is not aware, and the Borrower has no reason to
be aware, that any of the following statements are untrue: (A) the Acquisition
Historical Financial Statements fairly present, in all material respects, the
financial condition and results of operations of the Target as of and for the
periods covered thereby; and (B) the Combined Financial Statements, if any,
delivered under Section 9.6. in connection with such Acquisition, fairly
present, in all material
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respects, the financial condition and results of operations of the Target and
the Company, on a combined basis for the periods covered thereby.
(l) ERISA.
(i) Each of the Borrower, its Subsidiaries, and each other
ERISA Affiliate, is in compliance with all applicable provisions of
ERISA and the regulations and published interpretations thereunder
except for noncompliances which could not, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Each Employee
Benefit Plan that is intended to be qualified under Section 401(a) of
the Internal Revenue Code has been determined by the Internal Revenue
Service to be so qualified, and each trust related to such plan has been
determined to be exempt under Section 501(a) of the Internal Revenue
Code. No liability has been incurred by the Borrower, any Subsidiary or
any other ERISA Affiliate which remains unsatisfied for any taxes or
penalties with respect to any Employee Benefit Plan or any
Multiemployer Plan.
(ii) Neither the Borrower, any Subsidiary nor any other ERISA
Affiliate has (A) engaged in a nonexempt prohibited transaction described
in Section 4975 of the Internal Revenue Code or Section 406 of ERISA
affecting any of the Employee Benefit Plans or the trusts created
thereunder which could subject any such Employee Benefit Plan or trust to
a tax or penalty on prohibited transactions imposed under Section 4975 of
the Internal Revenue Code or under ERISA, (B) incurred any accumulated
funding deficiency with respect to any Employee Benefit Plan, whether or
not waived, or any other liability to the PBGC which remains outstanding
other than the payment of premiums and there are no premium payments
which are due and unpaid, (C) failed to make a required contribution or
payment to a Multiemployer Plan, or (D) failed to make a required
installment or other required payment under Section 412 of the Internal
Revenue Code, Section 302 of ERISA or the terms of such Employee Benefit
Plan.
(iii) No Termination Event has occurred or is reasonably
expected to occur with respect to any Pension Plan or Multiemployer
Plan, and neither the Borrower, any Subsidiary nor any other ERISA
Affiliate has incurred any unpaid withdrawal liability with respect to
any Multiemployer Plan.
(iv) The present value of all vested accrued benefits under
each Employee Benefit Plan which is subject to Title IV of ERISA, did
not, as of the most recent valuation date for each such plan, exceed the
then current value of the assets of such Employee Benefit Plan
allocable to such benefits.
(v) To the best of the Borrower's knowledge, each Employee
Benefit Plan subject to Title IV of ERISA, maintained by the Borrower,
any Subsidiary or any other ERISA Affiliate, has been administered in
accordance with its terms in all respects and is in compliance in all
respects with all applicable requirements of ERISA and other Applicable
Laws, except where the failure to be so administered or in compliance
could not reasonably be expected to have a Material Adverse Effect.
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(vi) The consummation of the Loans provided for herein will
not involve any prohibited transaction under ERISA which is not subject
to a statutory or administrative exemption.
(vii) No proceeding, claim, lawsuit and/or investigation exists
or, to the best knowledge of the Borrower after due inquiry, is
threatened concerning or involving any Employee Benefit Plan which, if
adversely determined, could reasonably be expected to have a Material
Adverse Effect.
(m) Absence of Defaults. No Loan Party is in default under its
articles of incorporation, or other applicable organizational documents, and no
event has occurred, which has not been remedied, cured or waived: (i) which
constitutes a Default or an Event of Default; or (ii) which constitutes, or
which with the passage of time, the giving of notice or otherwise, would
constitute a default or event of default of any Loan Party under any agreement
or judgment, decree or order to which any Loan Party is a party or by which any
Loan Party or any of its properties may be bound which could reasonably be
expected to have a Material Adverse Effect.
(n) Environmental Laws. Each other Loan Party has obtained all
Governmental Approvals which are required under Environmental Laws and is in
compliance with all terms and conditions of such Governmental Approvals, except
where the failure to be in compliance could not reasonably be expected to have a
Material Adverse Effect. Each of the Borrower, its Subsidiaries and each other
Loan Party is also in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules, and
timetables contained in the Environmental Laws, except where the failure to be
in compliance could not reasonably be expected to have a Material Adverse
Effect. The Borrower is not aware of, and has not received notice of, any past,
present, or future events, conditions, circumstances, activities, practices,
incidents, actions, or plans which, with respect to the Borrower, its
Subsidiaries and each other Loan Party, may interfere with or prevent compliance
or continued compliance with Environmental Laws, or may give rise to any
common-law or legal liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study, or investigation, based on or related
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling or the emission, discharge, release or threatened release
into the environment, of any pollutant, contaminant, chemical, or industrial,
toxic, or other Hazardous Material which could reasonably be expected to have a
Material Adverse Effect; and there is no civil, criminal, or administrative
action, suit, demand, claim, hearing, notice, or demand letter, notice of
violation, investigation, or proceeding pending or, to the Borrower's knowledge,
threatened, against the Borrower, its Subsidiaries and each other Loan Party
relating in any way to Environmental Laws which, if adversely determined, could
reasonably be expected to have a Material Adverse Effect.
(o) Adverse Contracts. None of the Loan Parties has assumed
liability under or is a party to nor is it or any of its property subject to or
bound by any forward purchase contract, futures contract, covenant not to
compete, unconditional purchase, take or pay or other
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agreement which restricts its ability to conduct its business, or which, singly
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect.
(p) Investment Company; Public Utility Holding Company. Neither the
Borrower, nor any Subsidiary nor any other Loan Party is (i) an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, (ii) a "holding company" or a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the meaning
of the Public Utility Holding Company Act of 1935, as amended, or (iii) subject
to any other Applicable Law which purports to regulate or restrict its ability
to borrow money or to consummate the Transactions or to perform its obligations
under any Loan Document or Acquisition Document to which it is a party.
(q) Margin Stock. Neither the Borrower nor any other Loan Party is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose, whether immediate, incidental or ultimate, of
buying or carrying "margin stock" within the meaning of Regulations G, U and X
of the Board of Governors of the Federal Reserve System, and no part of the
proceeds of any extension of credit hereunder will be used to buy or carry any
such "margin stock."
(r) Affiliate Transactions. As of the Agreement Date, except as set forth
on Schedule 6.1.(r) and except as otherwise permitted by Section 9.11., neither
the Borrower nor any other Loan Party is a party to or bound by any agreement or
arrangement (whether oral or written) to which any Affiliate is a party.
(s) Fiscal Year. The Borrower's fiscal year is the calendar year.
(t) Intellectual Property. Each of the Borrower, its Subsidiaries and the
other Loan Parties owns, is licensed to use or otherwise has the legal right to
use, all patents, trademarks, trade names, copyrights, technology, know-how and
processes used in or necessary for the conduct of its business as currently
conducted that are material to the condition (financial or other), business or
operations of such Person (collectively called "Intellectual Property"). All
Intellectual Property that is registered or for which application for
registration is pending is identified on Schedule 6.1.(t). Except as disclosed
in such Schedule, no material claim has been asserted by any Person with respect
to the use of any Intellectual Property, or challenging or questioning the
validity or effectiveness of any Intellectual Property. Except as disclosed in
such Schedule, to the knowledge of the Borrower, the use of such Intellectual
Property by the Borrower, its Subsidiaries and the other Loan Parties, does not
infringe on the rights of any Person.
(u) Broker's Fees. No broker's or finder's fee, commission or similar
compensation are or will be payable by any Loan Party with respect to the
Transactions contemplated by the Loan Documents.
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(v) Deposit Accounts and Collection Arrangements. Schedule 6.1.(v) is an
accurate description of how the Borrower, PSC Management and the other Loan
Parties handle the collection of their Receivables and the Receivables of the
various physicians and other service providers covered by any Management
Services Agreement or otherwise affiliated with any of the Loan Parties,
including without limitation, a detailing of the flow of the proceeds of all
such Receivables through collection and other deposit accounts maintained with
depository institutions.
(w) Healthcare Compliance. (i) Each Loan Party, has all Governmental
Approvals required for participation in Medicare, Medicaid, and other similar
government or private programs in which they are participating, all of which
Governmental Approvals are in full force and effect and have not been amended or
otherwise modified, rescinded, revoked or assigned. No condition exists or event
has occurred which will or could reasonably be expected to result in the
suspension, revocation, impairment, forfeiture or non-renewal of any such
Governmental Approval; and (ii) each "Practice," "Physician Shareholder" and
"Practice Employee" (as such terms are defined in each Management Services
Agreement), has all Governmental Approvals required for participation in
Medicare, Medicaid, and other similar government or private programs in which
they are participating, all of which Governmental Approvals are in full force
and effect and have not been amended or otherwise modified, rescinded, revoked
or assigned except where the failure to have such Governmental Approvals could
not reasonably be expected to have a Material Adverse Effect. No condition
exists or event has occurred which will or could reasonably be expected to
result in the suspension, revocation, impairment, forfeiture or non-renewal of
any such Governmental Approval, other than Governmental Approvals the failure to
have which could not reasonably be expected to have a Material Adverse Effect.
(x) Healthcare Billings. All billings by each Loan Party and each
"Practice," "Physician Shareholder" and "Practice Employee" (as such terms are
defined in each Management Services Agreement) to Medicare, Medicaid, and other
similar government or private programs have been made in accordance with
Applicable Law (including, without limitation, in accordance with all applicable
regulations and published policies and procedures and in the case of billings
effective on or after January 1, 1989 in accordance with the provisions of the
Omnibus Budget Reconciliation Act of 1987), except where the failure to comply
could not reasonably be expected to have a Material Adverse Effect, and there
has been no intentional or material overbilling or overcollecting from any such
program, other than as created by routine adjustments and disallowances made in
the ordinary course of business by such programs with respect to the billings.
(y) Conduct. (i) None of the Loan Parties has engaged in any activities
which are prohibited under 42 U.S.C. ss.1320a-7b, or the regulations promulgated
thereunder, or related Applicable Laws, or which are prohibited by rules of
professional conduct, including, without limitation, the following: (A)
knowingly and willfully making or causing to be made a false statement or
misrepresentation of a material fact in any application for any benefit or
payment; (B) knowingly and willfully making or causing to be made any false
statement or misrepresentation of a material fact for use in determining rights
to any benefit or payment; (C) failure to disclose knowledge by a claimant of
the occurrence of any event affecting the initial or continued right to any
benefit or payment on its own behalf or on behalf of another, with intent
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to fraudulently secure such benefit or payment; and (D) 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, of
offering to pay or receive such remuneration (1) in return for referring an
individual to a Person for the furnishing or arranging for the furnishing of any
item or service for which payment may be made in whole or in part by Medicare,
Medicaid or any other similar government or private program, or (2) in return
for purchasing, leasing, or ordering or arranging for or recommending
purchasing, leasing or ordering any good, facility, service, or item for which
payment may be made in whole or in part by Medicare, Medicaid or any other
similar government or private program; and (ii) except where the failure to
comply could not reasonably be expected to have a Material Adverse Effect, no
"Practice," "Physician Shareholder" and "Practice Employee" (as such terms are
defined in each Management Services Agreement) has engaged in any activities
which are prohibited under 42 U.S.C. ss.1320a-7b, or the regulations promulgated
thereunder, or related Applicable Laws, or which are prohibited by rules of
professional conduct, including, without limitation, the following: (A)
knowingly and willfully making or causing to be made a false statement or
misrepresentation of a material fact in any application for any benefit or
payment; (B) knowingly and willfully making or causing to be made any false
statement or misrepresentation of a material fact for use in determining rights
to any benefit or payment; (C) failure to disclose knowledge by a claimant of
the occurrence of any event affecting the initial or continued right to any
benefit or payment on its own behalf or on behalf of another, with intent to
fraudulently secure such benefit or payment; and (D) 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, of
offering to pay or receive such remuneration (1) in return for referring an
individual to a Person for the furnishing or arranging for the furnishing of any
item or service for which payment may be made in whole or in part by Medicare,
Medicaid or any other similar government or private program, or (2) in return
for purchasing, leasing, or ordering or arranging for or recommending
purchasing, leasing or ordering any good, facility, service, or item for which
payment may be made in whole or in part by Medicare, Medicaid or any other
similar government or private program.
(z) Certain Relationships. No Loan Party has unlawfully: (i) offered,
paid, solicited or received anything of value, paid directly or remuneration to
or from any physician, family member of a physician, or an entity in which a
physician or physician family member has an ownership or investment interest,
including, but not limited to: (1) payments for personal or management services
pursuant to a medical director agreement, consulting agreement, management
contract, personal services agreement, or otherwise; (2) payments for the use of
premises leased to or from a physician, a family member of a physician or an
entity in which a physician or family member has an ownership or investment
interest; (3) payments for the acquisition or lease of equipment, goods or
supplies from a physician, a family member of a physician or an entity in which
a physician or family member has an ownership or investment interest; or (ii)
offered, paid, solicited or received any remuneration (excluding fair market
value payments for equipment or supplies) to or from any healthcare provider,
pharmacy, drug or equipment supplier, distributor or manufacturer, including,
but not limited to: (1) payments or exchanges of anything of value under a
warranty provided by a manufacturer or supplier of an item to any Loan Party; or
(2) discounts, rebates, or other reductions in price on good or service received
by any Loan Party; (iii) offered, paid, solicited or received any remuneration
to or from
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any person or entity in order to induce business, including, but not limited to,
payments intended not only to induce referrals of patients, but also to induce
the purchasing, leasing, ordering or arrangement for any good, facility, service
or item; (iv) entered into any joint venture, partnership, co-ownership or other
arrangement involving any ownership or investment interest by any physician, or
family member of a physician, or an entity in which physician or physician
family member has an ownership or investment interest, directly or indirectly,
through equity, debt, or other means, including, but not limited to, an interest
in an entity providing goods or services to any Loan Party; (v) entered into any
joint venture, partnership, co-ownership or other arrangement involving any
ownership or investment interest by any person or entity including, but not
limited to, a hospital, pharmacy, drug or equipment supplier, distributor or
manufacturer, that is or was in a position to make or influence referrals,
furnish items or services to, or otherwise generate business for any Loan Party;
or (vi) entered into any agreement providing for (1) the referral of any patient
for the provision of goods or services by any Loan Party or (2) payments by any
Loan Party as a result of any referrals of patients.
(aa) Accuracy and Completeness of Information. All written information,
reports and other papers and data furnished to the Lender by, on behalf of, or
at the direction of, the Borrower or any other Loan Party were, at the time the
same were so furnished, complete and correct in all material respects, to the
extent necessary to give the recipient a true and accurate knowledge of the
subject matter, or, in the case of financial statements, present fairly, in
accordance with GAAP consistently applied throughout the periods involved, the
financial position of the Persons involved as at the date thereof and the
results of operations for such periods. Except for general economic and industry
conditions (as opposed to economic or industry conditions uniquely applicable to
the Borrower and its Subsidiaries because of the nature of the business in which
they engage), no fact is known to the Borrower which has had, or which would
reasonably be expected in the future to have (so far as the Borrower can
reasonably foresee), a Material Adverse Effect which has not been set forth in
the financial statements, information, reports or other papers or data furnished
to, or otherwise disclosed in writing to, the Lender prior to the Effective
Date. No document furnished or written statement made to the Lender in
connection with the negotiation, preparation of execution of this Agreement or
any of the other Loan Documents contains or will contain any untrue statement of
a fact material to the creditworthiness of the Borrower or any other Loan Party
or omits or will omit to state a material fact necessary in order to make the
statements contained therein not misleading.
SECTION 6.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC.
All statements contained in any certificate, financial statement or other
instrument delivered by or on behalf of any Loan Party to the Lender pursuant to
or in connection with this Agreement or any of the other Loan Documents
(including, but not limited to, any such statement made in or in connection with
any amendment thereto or any statement contained in any certificate, financial
statement or other instrument delivered by or on behalf of any Loan Party prior
to the Agreement Date and delivered to the Lender in connection with closing the
transactions contemplated hereby) shall constitute representations and
warranties made by the Borrower under this Agreement. All representations and
warranties made under this Agreement shall be deemed to be made at and as of the
Agreement Date, the Effective Date, the date of
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consummation of any Acquisition and at and as of the date of any the occurrence
of any Credit Event, except to the extent that such representations and
warranties expressly relate solely to an earlier date (in which case such
representations and warranties shall have been true and accurate on and as of
such earlier date) and except for changes in factual circumstances specifically
permitted hereunder.
SECTION 6.3 REPRESENTATIONS REGARDING ACQUISITIONS
To the extent any representation or warranty contained in this Agreement
or any other Loan Document relates to an Acquisition and the Transactions
relating thereto, such representation or warranty shall be deemed made only on
and as of (a) the date such Acquisition has been consummated and (b) the date of
the making of a Loan any of the proceeds of which are used in whole or in part
to finance such Acquisition.
SECTION 6.4 REPRESENTATIONS AND WARRANTIES IN ACQUISITION DOCUMENTS
Each representation and warranty made or deemed made by any Loan Party in
any of the other Loan Documents or the Acquisition Documents is hereby deemed
made to and for the benefit of the Lender as if the same were set forth herein
in full. Except as disclosed by the Borrower to the Lender in writing, the
Borrower is not aware, and the Borrower has no reason to be aware, that any
representation or warranty by any other party to an Acquisition Document
contained in such Acquisition Document is or was untrue in any material respect
at the time made or deemed made.
ARTICLE VII. AFFIRMATIVE COVENANTS
For so long as any of the Obligations remains outstanding, unpaid or
unperformed, or this Agreement is in effect, unless the Lender shall otherwise
consent in the manner provided for in Section 11.7., the Borrower shall:
SECTION 7.1 PRESERVATION OF EXISTENCE AND SIMILAR MATTERS.
Preserve and maintain, and cause each other Loan Party to preserve and
maintain, its respective existence, and those of its rights, franchises,
licenses and privileges which are necessary to the conduct of its business, in
the jurisdiction of its formation and qualify and remain qualified and
authorized to do business in each jurisdiction in which the character of its
properties or the nature of its business requires such qualification and
authorization, except those jurisdictions where the failure to be so qualified
or authorized could not reasonably be expected to have a Material Adverse
Effect.
SECTION 7.2 COMPLIANCE WITH APPLICABLE LAW AND MATERIAL CONTRACTS.
Comply, and cause each other Loan Party to comply, with (a) all
Applicable Law, including the obtaining of all Governmental Approvals and (b)
all terms and conditions of all Material Contracts to which it is a party,
except in each case in which the failure to so comply could not reasonably be
expected to have a Material Adverse Effect.
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SECTION 7.3 MAINTENANCE OF PROPERTY.
In addition to, and not in derogation of, the requirements of any of the
other Loan Documents, (a) protect and preserve, and cause each other Loan Party
to protect and preserve, all of its material properties, including, but not
limited to, all Intellectual Property (and in the case of Intellectual Property,
shall cause such Intellectual Property, in accordance with prudent business
practices, to be fully protected and/or duly and properly registered, filed or
issued in the appropriate office and jurisdictions for such registrations,
filings and issuance), and maintain in good repair, working order and condition
all tangible properties, allowing for ordinary wear and tear, and (b) from time
to time make or cause to be made all needed and appropriate repairs, renewals,
replacements and additions to such properties, so that the business carried on
in connection therewith may be properly and advantageously conducted at all
times.
SECTION 7.4 CONDUCT OF BUSINESS.
At all times carry on, and cause each other Loan Parties to carry on, its
respective businesses in the same fields as engaged in on the Agreement Date and
not enter, and prohibit its Subsidiaries and the other Loan Parties from
entering, into any field of business other than the fields of Otolaryngology,
the Related Subspecialties and the Complementary Specialties.
SECTION 7.5 INSURANCE.
(a) Property and Casualty. In addition to, and not in derogation of, the
requirements of any of the other Loan Documents, maintain, and cause each
Subsidiary and each other Loan Party to maintain, insurance with financially
sound and reputable insurance companies acceptable to the Lender against such
risks and in such amounts as is customarily maintained by similar businesses, as
may be required by Applicable Law, or as may be satisfactory to the Lender. From
time to time the Borrower will deliver to the Lender upon its request a
reasonably detailed list, together with copies of all policies of insurance then
in effect, stating the names of the insurance companies, the amounts and rates
of the insurance, the dates of the expiration thereof and the properties and
risks covered thereby. Without limiting the obligations of the Borrower and the
other Loan Parties under the foregoing provisions of this Section or under any
other Loan Document, if the Borrower or any of the other Loan Parties shall fail
to maintain insurance as required by the foregoing provisions of this Section or
any of the other Loan Documents, then the Lender may upon notice to the Borrower
or such other Loan Party, but shall have no obligation to, procure insurance
covering the interests of the Lender in such amounts and against such risks as
the Lender shall deem appropriate in its sole but reasonable discretion, and the
Borrower shall reimburse the Lender in respect of any premiums paid by the
Lender as provided in Section 11.2.
(b) Key Man Life Insurance. Maintain key man life insurance policies with
financially sound and reputable insurance companies on the lives of Richard D.
Ballard and Ramie A. Tritt, M.D., in the amounts of $1,000,000 and $5,000,000,
respectively, each naming the Borrower as beneficiary. Within one year after the
Effective Date, the Lender will, at the request of the Borrower, evaluate the
required amount of life insurance to be maintained on the life of Ramie A.
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Tritt pursuant to this subsection (b). The Lender may, but shall have no
obligation to, reduce the amount of such required coverage.
SECTION 7.6 PAYMENT OF TAXES AND CLAIMS.
Pay or discharge, and cause each Subsidiary and other Loan Party to pay
and discharge, when due (a) all taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits or upon any properties
belonging to it, and (b) all lawful claims of materialmen, mechanics, carriers,
warehousemen and landlords for labor, materials, supplies and rentals which, if
unpaid, might become a Lien on any properties of such Person; provided, however,
that this Section shall not require the payment or discharge of any such tax,
assessment, charge, levy or claim which is being contested in good faith by
appropriate proceedings which operate to suspend the collection thereof and for
which adequate reserves have been established on the books of the Borrower or
such other Loan Party, as applicable, in accordance with GAAP.
SECTION 7.7 VISITS AND INSPECTIONS.
Permit, and cause each other Loan Party to permit, representatives or
agents of the Lender, from time to time, as often as may be reasonably
requested, but only during normal business hours, to: (a) visit and inspect all
properties of the Borrower or such other Loan Party; (b) inspect and make
extracts from their respective relevant books and records, including but not
limited to management letters prepared by independent accountants; and (c)
discuss with its principal officers, and its independent accountants, the status
of the business, assets, liabilities, financial conditions, results of
operations and business prospects. If requested by the Lender, the Borrower
shall execute an authorization letter addressed to its accountants authorizing
the Lender to discuss the financial affairs of the Borrower and any Subsidiary
with its accountants.
SECTION 7.8 USE OF PROCEEDS.
(a) Use the proceeds of Loans only to finance Acquisitions by the
Borrower or any of its Subsidiaries (other than the Shell Subsidiaries) of
Persons engaged in, or equipment utilized by Persons engaged in, Otolaryngology
practices as well as Related Subspecialties and Complementary Specialties; (b)
use the proceeds of Revolving Loans for working capital of the Borrower or its
Subsidiaries (other than the Shell Subsidiaries); and (c) not use any part of
such proceeds to purchase or carry, or to reduce or retire or refinance any
credit incurred to purchase or carry, any margin stock (within the meaning of
Regulations U and X of the Board of Governors of the Federal Reserve System) or
to extend credit to others for the purpose of purchasing or carrying any such
margin stock.
SECTION 7.9 ENVIRONMENTAL MATTERS.
Comply, and cause all of the other Loan Parties to comply with all
Environmental Laws, other than those the failure to comply with which could not
reasonably be expected to have a Material Adverse Effect. If the Borrower or any
other Loan Party shall (a) receive notice that any violation of any
Environmental Law may have been committed or is about to be committed by such
Person, (b) receive notice that any administrative or judicial complaint or
order has been filed
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or is about to be filed against the Borrower or any other Loan Party alleging
violations of any Environmental Law or requiring the Borrower or any other Loan
Party to take any action in connection with the release of Hazardous Materials
or (c) receive any notice from a Governmental Authority or private party
alleging that the Borrower or any other Loan Party may be liable or responsible
for costs associated with a response to or cleanup of a release of a Hazardous
Materials or any damages caused thereby, and the same could reasonably be
expected to have a Material Adverse Effect, the Borrower shall provide the
Lender with a copy of such notice within 30 days after the receipt thereof by
the Borrower or any of the other Loan Parties. The Borrower and the other Loan
Parties shall promptly take all actions necessary to prevent the imposition of
any Liens on any of their respective properties arising out of or related to any
Environmental Laws.
SECTION 7.10 BOOKS AND RECORDS.
Maintain, and cause each of the other Loan Parties to maintain, books and
records pertaining to its business operations in such detail, form and scope as
is consistent with good business practice.
SECTION 7.11 ENFORCEMENT OF REMEDIES UNDER ACQUISITION DOCUMENTS
If the Borrower becomes aware of any material claim for indemnification
from any party under any Acquisition Document, assert or cause the assertion of
such claim against such party before the date on which such claim may no longer
be made under such Acquisition Document if, in the Borrower's reasonable
business judgment, asserting such claim is deemed appropriate, and in asserting
any such claim shall comply with all requirements for asserting such claims
under the Acquisition Documents.
SECTION 7.12 DEPOSIT AND COLLECTION PROCEDURES
Cause PSC Management and each Other Manager to establish and maintain an
operating account (each a "Management Account") with the Lender. The Borrower
shall cause PSC Management and each Other Manager to take all acts and execute
all documents necessary to ensure that all Receivables, other than Governmental
Receivables, remitted to any "Practice," "Physician Shareholder" and "Practice
Employee" (as such terms are defined in each Management Services Agreement) are
deposited directly to the appropriate Management Account promptly upon such
Person's receipt thereof in accordance with the terms and conditions and the
procedures set forth in the applicable Management Services Agreement. If and to
the extent permitted under the applicable Management Services Agreement, the
proceeds of any Receivables, other than Governmental Receivables, are deposited
into any deposit account not maintained with the Lender, the Borrower shall
cause PSC Management and each Other Manager to take all acts and execute all
documents necessary to ensure that all collected funds on deposit in such
deposit accounts are swept daily and deposited in the appropriate Management
Account. The Borrower also shall cause PSC Management and each Other Manager to
take all acts and execute all documents necessary to ensure that all
Governmental Receivables remitted to any "Practice," "Physician Shareholder" and
"Practice Employee" (as such terms are defined in each Management Services
Agreement) are deposited directly to a deposit account controlled and
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directed by such Person and that all collected funds on deposit in such accounts
are swept daily and deposited in the appropriate Management Account, all in
accordance with the terms and conditions and the procedures set forth in the
applicable Management Services Agreement.
SECTION 7.13 MANAGEMENT SERVICES AGREEMENTS.
Cause PSC Management or an Other Manager to serve as the sole manager
under any and all Management Services Agreements; provided, however, if an Other
Manager shall serve as the manger under any Management Services Agreement, the
Borrower shall cause such Other Manager, no less than 10 Business Days prior to
becoming the manager thereunder, to execute and deliver to the Lender, Loan
Documents comparable to those which PSC Management has executed and delivered or
is required to execute and deliver to the Lender in accordance with the terms of
this Agreement and the other Loan Documents, including, without limitation, a
Collateral Assignment of Management Services Agreements. Nothing in this Section
7.13. shall limit or otherwise modify the obligations of the Borrower under
Section 9.12.
ARTICLE VIII. INFORMATION
For so long as any of the Obligations remains outstanding, unpaid or
unperformed, or this Agreement is in effect, unless the Lender shall otherwise
consent in the manner set forth in Section 11.7., the Borrower shall furnish to
the Lender at its Principal Office:
SECTION 8.1 QUARTERLY FINANCIAL STATEMENTS.
As soon as available and in any event within 45 days after the close of
each of the first, second and third fiscal quarters of the Borrower, the
consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as at the end of such period and the related consolidated and
consolidating statements of income, retained earnings and cash flows of the
Borrower and its Subsidiaries for such period, setting forth in each case in
comparative form the figures for the corresponding periods of the previous
fiscal year and comparable budgeted figures for the previous year, all of which
shall be certified by the chief financial officer of the Borrower, in his or her
opinion, to present fairly, in accordance with GAAP, the consolidated and
consolidating financial position of the Borrower and its Subsidiaries as at the
date thereof and the results of operations for such period (subject to normal
year-end audit adjustments).
SECTION 8.2 YEAR-END STATEMENTS.
As soon as available and in any event within 120 days after the end of
each fiscal year of the Borrower, the consolidated and consolidating balance
sheet of the Borrower and its Subsidiaries as at the end of such fiscal year and
the related consolidated and consolidating statements of income, retained
earnings and cash flows of the Borrower and its Subsidiaries for such fiscal
year, setting forth in comparative form the figures as at the end of and for the
previous fiscal year, which shall be certified by (a) the chief financial
officer of the Borrower, in his or her opinion, to present fairly, in accordance
with GAAP, the consolidated and consolidating financial position of the Borrower
and its Subsidiaries as at the date thereof and the result of operations for
such period and (b) in the case of the consolidated financial statements, Arthur
Andersen, LLP, or
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other independent certified public accountants of recognized national standing
acceptable to the Lender, whose certificate shall be in scope and substance
satisfactory to the Lender and who shall have authorized the Borrower to deliver
such financial statements and certification thereof to the Lender pursuant to
this Agreement.
SECTION 8.3 BORROWING BASE AND COMPLIANCE CERTIFICATE; ACCOUNTANT'S LETTER
At the time the financial statements are furnished pursuant to Sections
8.1. and 8.2., a Borrowing Base and Compliance Certificate: (i) setting forth in
reasonable detail as at the end of such quarterly accounting period or fiscal
year, as the case may be, the calculations required to establish whether or not
the Borrower, and when appropriate its consolidated Subsidiaries, were in
compliance with the covenants contained in Section 9.1.; and (ii) stating that,
to the best of his or her knowledge, information and belief, no Default or Event
of Default exists, or, if such is not the case, specifying such Default or Event
of Default and its nature, when it occurred and whether it is continuing and the
steps being taken by the Borrower with respect to such event, condition or
failure. At the time the financial statements are furnished pursuant to Section
8.2., the Borrower will deliver to the Lenders a certificate of the independent
accountants performing the audit of such financial statements to the effect
that, in making such audit, they have obtained no knowledge of any Event of
Default or Default, or, if they have obtained knowledge of any Event of Default
or Default, specifying the nature and period of existence thereof.
SECTION 8.4 RELATED BUSINESS INFORMATION AND BUDGETS.
In addition to the financial information to be provided to the lender
under Sections 8.1. through 8.3.:
(a) within 45 days after the end of each fiscal quarter of the Borrower,
a schedule of the Management Fees earned and received by the Borrower's
Subsidiaries which have entered into Management Services Agreements; and
(b) within 30 days prior to the end of each fiscal year of the Borrower,
(i) an operating budget and (ii) a capital expenditure budget for the
immediately succeeding fiscal year of the Borrower.
SECTION 8.5 NOTICE OF LITIGATION AND OTHER MATTERS.
Prompt notice of:
(a) to the extent the Borrower is aware of the same, the commencement of
any proceeding or investigation by or before any Governmental Authority and any
action or proceeding in any court or other tribunal or before any arbitrator
against or in any other way relating adversely to, or adversely affecting, the
Borrower or any other Loan Party or any of their respective properties, assets
or businesses which, if determined or resolved adversely to such Person, could
reasonably be expected to have a Material Adverse Effect;
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(b) any amendment to the articles of incorporation, articles of
organization, certificate of limited partnership, partnership agreement,
operating agreement or other comparable organizational instrument of the
Borrower or any other Loan Party;
(c) any change in the senior management of the Borrower or any other Loan
Party or any change in the management succession plan delivered under Section
5.1.;
(d) any change in the business, assets, liabilities, financial condition,
results of operations or business prospects of the Borrower or any other Loan
Party which could reasonably be expected to have Material Adverse Effect;
(e) the occurrence of any Default or Event of Default or any event which
constitutes or which with the passage of time, the giving of notice, or both,
would constitute a default or event of default by the Borrower or any other Loan
Party under any Material Contract to which any such Person is a party or by
which any such Person or any of its respective properties may be bound;
(f) any order, judgment or decree in excess of $100,000 having been
entered against the Borrower or any other Loan Party or any of their respective
properties or assets;
(g) any notification of a violation of any law or regulation or any
inquiry shall have been received by the Borrower or any other Loan Party from
any Governmental Authority which violation could reasonably be expected to have
a Material Adverse Effect;
(h) promptly upon receipt thereof, copies of any notification or other
communication given or received by any Loan Party with respect to any Management
Services Agreement regarding (i) any alleged failure on the part of any party to
such Management Services Agreement to comply with the terms thereof in any
material respect or (ii) any event or condition which would permit the
termination of such Management Services Agreement;
(i) promptly upon knowledge thereof, copies of any notification or other
communication with respect to any Loan Party's rights or obligations under any
of the Acquisition Documents and, promptly upon discovery thereof, notice and a
written description of all claims or potential claims for indemnification under
the Acquisition Documents, which claims or potential claims are in an aggregate
amount in excess of $100,000 which amount shall be calculated irrespective of
any deductible or similar "carve out" from indemnity that may be granted under
the terms of the applicable Acquisition Documents; and
(j) prompt notice of the terms of any proposed amendment to, or
modification or waiver of any of the material terms of any of the Acquisition
Documents.
SECTION 8.6 ERISA.
The following information at the times specified below:
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(a) Together with the financial statements required to be delivered
pursuant to Section 8.1. and 8.2., notice of (i) the establishment of any new
Pension Plan (which notice shall include a copy of such plan), (ii) the
commencement of contributions to any Employee Benefit Plan to which the
Borrower, any Subsidiary or any of its ERISA Affiliates was not previously
contributing, (iii) any material increase in the benefits of any existing
Employee Benefit Plan, (iv) each funding waiver request filed with respect to
any Employee Benefit Plan and all communications received or sent by the
Borrower, any Subsidiary or any ERISA Affiliate with respect to such request and
(v) the failure of the Borrower, any Subsidiary or any ERISA Affiliate to make a
required installment or payment under Section 302 of ERISA or Section 412 of the
Code by the due date;
(b) Promptly and in any event within fifteen (15) days of becoming aware
of the occurrence of any (i) Termination Event or (ii) nonexempt "prohibited
transaction," as such term is defined in Section 406 of ERISA or Section 4975 of
the Code, in connection with any Pension Plan or any trust created thereunder, a
notice specifying the nature thereof, what action the Borrower, any Subsidiary
or any ERISA Affiliate has taken, is taking or proposes to take with respect
thereto and, when known, any action taken or threatened by the Internal Revenue
Service, the Department of Labor or the PBGC with respect thereto; and
(c) With reasonable promptness (but in any event within 15 days of
receipt thereof for purposes of the following clauses (i) and (ii)), copies of
(i) any unfavorable determination letter from the Internal Revenue Service
regarding the qualification of an Employee Benefit Plan under Section 401(a) of
the Code, (ii) all notices received by the Borrower, any Subsidiary or any ERISA
Affiliate of the PBGC's intent to terminate any Pension Plan or to have a
trustee appointed to administer any Pension Plan, and (iii) all notices received
by the Borrower, any Subsidiary or any ERISA Affiliate from a Multiemployer Plan
sponsor concerning the imposition or amount of withdrawal liability pursuant to
Section 4202 of ERISA. The Borrower will notify the Lender in writing within 5
Business Days of the Borrower, any Subsidiary or any ERISA Affiliate obtaining
knowledge that the Borrower, any Subsidiary or any ERISA Affiliate has filed or
intends to file a notice of intent to terminate any Pension Plan under a
distress termination within the meaning of Section 4041(c) of ERISA.
SECTION 8.7 COPIES OF OTHER REPORTS.
(a) Promptly upon receipt thereof, copies of all reports, if any,
submitted to the Borrower or its Board of Directors by its independent public
accountants including, without limitation, any management report;
(b) Promptly upon their becoming available, copies of all financial
statements or other financial information, all registration statements and other
periodic or special reports, if any, which the Borrower shall file with the
Securities and Exchange Commission (or any Governmental Authority substituted
therefor) or any national securities exchange; and
(c) Promptly upon the mailing thereof to the shareholders of the Borrower
generally, copies of all financial statements, reports and proxy statements so
mailed.
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SECTION 8.8 OTHER INFORMATION.
From time to time and promptly upon each request, such data,
certificates, reports, statements, opinions of counsel, documents or further
information regarding the business, assets, liabilities, financial condition,
results of operations or business prospects of the Borrower, its Subsidiaries
and the other Loan Parties as the Lender may reasonably request. The rights of
the Lender under this Section are in addition to and not in limitation of its
rights under any other provision of this Agreement or any of the other Loan
Documents.
ARTICLE IX. NEGATIVE COVENANTS
For so long as any of the Obligations remains outstanding, unpaid or
unperformed, or this Agreement is in effect, unless the Lender shall otherwise
consent in the manner set forth in Section 11.7., the Borrower shall not,
directly or indirectly:
SECTION 9.1 FINANCIAL COVENANTS.
(a) Permit the ratio of (i) Funded Debt to (ii) the sum of (A) Borrower's
EBITDA for the four-fiscal quarter period most recently ended plus (B)
Acquisition EBITDA for such period not otherwise included in the calculation of
the Borrower's EBITDA, at any time to exceed 3.0 to 1.0.
(b) Permit the ratio of (i) Funded Debt to (ii) Borrower's Net Worth at
any time to exceed 1.0 to 1.0.
(c) Permit the ratio of (i) the Borrower's Current Assets to (ii) the
Borrower's Current Liabilities at any time to be less than 1.1 to 1.0.
(d) Permit the Debt Service Coverage Ratio at any time to be less than
1.5 to 1.0.
(e) Permit the Interest Coverage Ratio at any time to be less than 2.0 to
1.0.
(f) Permit the Borrower's Net Worth to be less than (i) $16,500,000 plus
(ii) 75% of Consolidated Net Income of the Borrower (only if greater than $0)
for each fiscal quarter of the Borrower ending after March 31, 1997 plus (iii)
any and all increases in the Borrower's Net Worth resulting from Equity
Issuances occurring after the date hereof.
SECTION 9.2 INDEBTEDNESS.
Create, incur, assume, or permit or suffer to exist, or permit or other
Loan Party to create, incur, assume, or permit or suffer to exist, any
Indebtedness other than the following:
(a) the Obligations;
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(b) Funded Debt evidenced by Seller Notes, but only to the extent such
Funded Debt is Subordinated Debt;
(c) trade payables incurred by the Borrower and its Subsidiaries in the
ordinary course of business;
(d) Funded Debt secured by Purchase Money Liens; provided, however, that
the aggregate principal amount of such Funded Debt at any one time outstanding
shall not exceed $1,500,000; and
(e) Indebtedness owing from one Loan Party to another Loan Party.
SECTION 9.3 CONTINGENT OBLIGATIONS.
Become or remain liable, or permit any other Loan Party to become or
remain liable, on or under any Contingent Obligation other than Contingent
Obligations in existence as of the Agreement Date and set forth in Schedule 9.3.
and then only in an aggregate amount not to exceed $500,000.
SECTION 9.4 INVESTMENTS.
(a) Acquire or purchase, or permit any other Loan Party to acquire or
purchase, after the Agreement Date, all or substantially all of the assets
constituting the business or a division or an operating unit of any Person, (b)
acquire, make or purchase, or permit any Subsidiary or any other Loan Party to
acquire, make or purchase, after the Agreement Date, any Investment or (c)
permit any Investment of the Borrower or any Subsidiary or any other Loan Party
to be outstanding on and after the Agreement Date, other than the following:
(i) Investments in Subsidiaries in existence on the Agreement Date and
disclosed on Schedule 6.1.(b) and Investment in Subsidiaries permitted to be
created under Section 9.12.;
(ii) Investments in Cash Equivalents;
(iii) Investments in existence on the Agreement Date and set forth on
Schedule 9.4.;
(iv) Acquisitions of all or substantially all of the assets of any
Person or division or Asset Group thereof permitted under Section 9.6. and
Acquisitions of Investments in New Subsidiaries acquired in connection with
Acquisitions permitted under Section 9.6.;
(v) Loans and advances to employees for moving, entertainment,
travel and other similar expenses in the ordinary course of business consis-
tent with past practices;
(vi) Receivables created, and prepaid expenses incurred, in the ordinary
course of business consistent with past practices; and
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(vii) Loans to physicians affiliated with and providing medical services
through Persons with whom the Borrower or any of its Subsidiaries has entered
into a Management Services Agreement in an aggregate amount to all such
physicians not to exceed $500,000 at any one time outstanding.
Notwithstanding the foregoing, the Borrower shall not permit any Investment to
be made to either of the Shell Subsidiaries other than Investments necessary to
maintain the legal existence of either Shell Subsidiary in an aggregate amount
not to exceed $1,000.
SECTION 9.5 LIENS; AGREEMENTS REGARDING LIENS; OTHER MATTERS.
(a) Create, assume, incur or permit or suffer to exist, or permit any
Subsidiary or any other Loan Party to create, assume, incur or permit or suffer
to exist, any Lien upon any of its properties, assets, income or profits of any
character whether now owned or hereafter acquired, other than Permitted Liens;
(b) Enter into or assume any agreement (other than the Loan Documents),
or permit any Subsidiary or any other Loan Party to enter into or assume any
agreement (other than the Loan Documents), prohibiting the creation or
assumption of any Lien upon its properties or assets, whether now owned or
hereafter acquired; provided, however, that this clause (b) shall not apply to
any provisions contained in an agreement evidencing Funded Debt secured by a
Purchase Money Lien which provision prohibits the creation of a Lien upon any
property subject to such Purchase Money Lien; or
(c) Create or otherwise cause or suffer to exist or become effective, or
permit any Subsidiary or any other Loan Party to create or otherwise cause or
suffer to exist or become effective, any consensual encumbrance or restriction
of any kind on the ability of any Subsidiary or any other Loan Party to: (i) pay
dividends or make any other distribution on any of the capital stock or other
equity interests in such Subsidiary or Loan Party owned by any Loan Party; (ii)
pay any Indebtedness owed to the Borrower or any other Loan Party; (iii) make
loans or advances to the Borrower or any other Loan Party; or (iv) transfer any
of its property or assets to the Borrower or any other Loan Party.
SECTION 9.6 ACQUISITIONS.
Consummate, and shall not permit any Subsidiary or other Loan Party to
consummate, an Acquisition unless:
(a) No Default. After giving effect thereto, no Default or Event of
Default shall have occurred and be continuing;
(b) Consent if Required. The Lender shall have given its prior written
consent to such Acquisition, which consent shall be required only, if:
(i) The total amount of Acquisition Consideration payable by the
Borrower and its Subsidiaries in connection with such Acquisition exceeds
either (A) 7 times the
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Acquisition EBITDA of the Target, as reasonably determined by the Lender,
or (B) $5,000,000; or
(ii) The total amount of Acquisition Consideration payable by the
Borrower and its Subsidiaries in connection with such Acquisition,
together with the aggregate amount of Acquisition Consideration paid by
the Borrower during the sixth calendar month period ending on the last
full calendar month immediately preceding the date of consummation of
such Acquisition, equals or exceeds $7,500,000.
The consent required under this clause (b) shall not be unreasonably
withheld or delayed.
(c) Documentation to Lender. The Borrower shall have delivered to the
Lender not less than 10 Business Days (or shorter period as may be specified
below) prior to the date of consummation of an Acquisition requiring the consent
of the Lender under the immediately preceding subsection (b) (an "Approved
Acquisition"), and not more than 10 Business Days after the date of consummation
of any other Acquisition, each of the following:
(i) Description of Transaction. A written description of the
Acquisition in detail reasonably satisfactory to the Lender, such
description to include a description of (A) the purchase price of such
Acquisition, (B) the method and structure of payment thereof and (C) the
other parties to such Acquisition;
(ii) Description of Target. A written description of the
Target of such Acquisition, including the number of physicians,
each physician's field of practice and any specialties, the number of
employees and the locations of clinics, which Target must be engaged
in Otolaryngology practices, Related Subspecialties or Complementary
Specialties;
(iii) Historical Financial Statements. Unaudited balance sheets,
statements of operations and, if available, statements of cash flows for
such Target (if assets which do not constitute an Asset Group are being
acquired from a Person, such financial statement shall be with respect to
such Person) for the two fiscal years most recently ended (the
"Acquisition Historical Financial Statements"). If the Acquisition
Consideration for such Acquisition is equal to or greater than $7,500,000
and the Acquisition was or is to be financed in whole or in part with
proceeds of a Loan, then the Acquisition Historical Financial Statements
must be audited financial statements;
(iv) Pro Forma Compliance Certificate. A certificate of the
chief financial officer of the Borrower (A) setting forth in reasonable
detail the computations necessary to determine whether the Borrower
would have been in compliance with the other covenants contained in
this Article IX determined on a combined basis with the Target as of
the end of the fiscal quarter most recently ended and (B) to the effect
that no Default or Event of Default has occurred and is continuing or
would occur after giving effect to such Acquisition;
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(v) Pro Forma Financial Statements. Pro forma financial
Statements in form reasonably satisfactory to the Lender reflecting
the financial condition and results of operations of the Borrower
and the Target on a combined basis for the prior 12-month period
(the "Combined Financial Statements"), such financial statements to
detail calculation of the Borrower's EBITDA and Acquisition EBITDA
as separate items;
(vi) Corporate Documents. If such Acquisition involves any New
Subsidiary, the Lender shall have received the following documents, each
certified as indicated below:
(A) a copy of the articles of incorporation, articles of
organization, certificate of limited partnership or other
comparable organizational instrument (if any) of such New
Subsidiary, certified as of a recent date by the Secretary of
State of the jurisdiction of its formation, and a certificate as
of a recent date from such Secretary of State as to the good
standing of such New Subsidiary; provided, however, that in the
case of an Approved Acquisition, if such New Subsidiary is being
formed in connection with, and for the purpose of effecting, such
Approved Acquisition, then delivery to the Lender of the items
referenced in this clause (A) shall be effected not less than 2
Business Days prior to the date of consummation of such Approved
Acquisition; and
(B) certificates of qualification to transact business or
other comparable certificates issued by each Secretary of State
(and any state department of taxation, as applicable) of each
state in which such New Subsidiary is required to be so qualified,
or, if unavailable, evidence satisfactory to the Lender that such
New Subsidiary has taken appropriate steps to so qualify;
(C) a certificate of the Secretary or Assistant Secretary
(or other individual performing similar functions) of such New
Subsidiary, dated the date of such Acquisition and certifying (1)
that attached thereto is a true and complete copy of the by-laws
of such New Subsidiary, if a corporation, the operating agreement,
if a limited liability company, the partnership agreement, if a
limited or general partnership, or other comparable document in
the case of any other form of legal entity, as in effect on the
date of such certificate, (2) that attached thereto is a true and
complete copy of all corporate, partnership, member or other
necessary action taken by such New Subsidiary to authorize the
execution, delivery and performance of the Loan Documents to which
such New Subsidiary is or is to be a party, (3) that such New
Subsidiary's articles of incorporation, articles of organization,
certificate of limited partnership or other comparable
organizational instrument has not been amended since the date of
the certification thereto furnished pursuant to subsection (A)
above, and (4) as to the incumbency and specimen signature of each
of such New Subsidiary's officers (or other individual authorized
to execute on its behalf) executing each of such Loan Documents
(and the Lender may conclusively rely on such certificate until
the Lender receives notice in writing from such New Subsidiary, to
the contrary); provided, however, that in the case of an Approved
Acquisition, if such New Subsidiary is being
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formed in connection with, and for the purpose of effecting, such
Approved Acquisition, then delivery to the Lender of the items
referenced in this clause (C) shall be effected not less than 2
Business Days prior to the date of consummation of such Approved
Acquisition;
(vii) Acquisition Documents. Fully executed copies of all of the
Acquisition Documents and any amendments thereto (or if not executed at
the time of delivery as required above, the most current drafts then
available and the Borrower shall deliver to the Lender fully executed
copies thereof promptly upon the execution and delivery thereof), and, in
the case of the asset purchase agreement, stock purchase agreement,
merger agreement or other such similar agreement (the "Operative
Acquisition Document"), the Operative Acquisition Document shall contain
language regarding the assignability thereof to the Lender in form and
substance satisfactory to the Lender;
(viii) Collateral Assignment of Acquisition Documents. A
Collateral Assignment of Acquisition Documents duly executed by any New
Subsidiary or any other existing Loan Party having rights under any of
the Acquisition Documents being executed in connection with such
Acquisition; provided, however, that in the case of an Approved
Acquisition, if such New Subsidiary is being formed in connection with,
and for the purpose of effecting, such Approved Acquisition, then
delivery to the Lender of the Collateral Assignment of Acquisition
Documents shall be effected contemporaneously with the consummation of
such Approved Acquisition;
(ix) Seller Notes and Contingent Seller Notes. If any Seller
Note or Contingent Seller Note was or is to be issued in connection
with such Acquisition, a copy of such note, together with a
Subordination Agreement for each such Seller Note executed by the
holder of such Seller Note; provided, however, that in the case of an
Approved Acquisition, delivery to the Lender of copies of any such
Seller Notes and any related Subordination Agreement and copies of any
such Contingent Seller Notes shall be effected contemporaneously with
the consummation of such Approved Acquisition;
(x) Guaranties. A Guaranty executed by each New Subsidiary
substantially in the form of Exhibit D; provided, however, that in the
case of an Approved Acquisition, delivery to the Lender of each such
Guaranty shall be effected contemporaneously with the consummation of
such Approved Acquisition;
(xi) Management Services Agreement. The Management Services
Agreement entered into in connection with such Acquisition, which
Management Services Agreement must (A) be in substantially the same form
as the Management Services Agreement dated as of March 26, 1997 by and
among New Atlanta Ear, Nose & Throat Associates, P.C., PSC Management and
the Borrower, as amended from time to time as permitted under Section
9.10., or otherwise in from and substance satisfactory to the Lender, and
(B) contain language regarding the assignability thereof to the Lender in
form and substance satisfactory to the Lender; provided, however, that in
the case of an Approved Acquisition, the Borrower shall deliver to the
Lender on the date 10 Business Days prior
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to the date of consummation of such Approved Acquisition the most recent
draft of such Management Services Agreement and as soon as possible, and
no later than contemporaneously with the consummation of the Approved
Acquisition, an executed copy thereof;
(xii) Collateral Assignment of Management Services Agreements.
A supplement to the Collateral Assignment of Management Services
Agreements executed by PSC Management, in form satisfactory to
the Lender, confirming that such Management Services Agreement is
subject to the terms of such Collateral Assignment of Management
Services Agreements; provided, however, that in the case of an Approved
Acquisition, if such New Subsidiary is being formed in connection with,
and for the purpose of effecting, such Approved Acquisition, then the
Borrower shall deliver to the Lender on the date 10 Business Days
prior to the date of consummation of such Approved Acquisition the
most recent draft of such Collateral Assignment of Management Services
Agreements and as soon as possible, and no later than contemporaneously
with the consummation of the Approved Acquisition, an executed copy
thereof;
(xiii) Management Agreement Financing Statements. A copy of each
Uniform Commercial Code financing statement naming PSC Management as
secured party, the "Practice" (as that term is defined in such Management
Services Agreement) to such Management Services Agreement as debtor and
the Lender as assignee filed in connection with the sale of Receivables
to PSC Management under such Management Services Agreement; provided,
however, that in the case of an Approved Acquisition, delivery to the
Lender of each such financing statement shall be effected
contemporaneously with the consummation of such Approved Acquisition;
(xiv) Employment Agreements. A copy of each Employment
Agreement executed in connection with such Acquisition, each of which
Employment Agreements shall contain covenants not to compete
substantially similar in form and substance to such covenants contained
in the Employment Agreements delivered to the Lender under
Section 5.1., subject to revisions necessary to comply with
requirements of Applicable Law; provided, however, that in the case of
an Approved Acquisition, the Borrower shall deliver on the date 10
Business Days prior to the date of consummation of such Approved
Acquisition the form of Employment Agreement to be executed in
connection with the Approved Acquisition and contemporaneously with
the consummation of the Approved Acquisition, the executed copies
thereof;
(xv) Lien Searches. UCC, tax, judgment and lien search
reports in form and substance satisfactory to the Lender with respect
to the Target and each New Subsidiary in all necessary jurisdictions
indicating that there are no prior Liens on any of the Collateral
other than Permitted Liens or Liens to be released prior to or at the
time of the consummation of such Acquisition;
(xvi) Security Agreements. A Security Agreement from each New
Subsidiary involved in such Acquisition, substantially in the form of
Exhibit L, together with
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appropriate UCC financing statements as may be reasonably requested by
the Lender; provided, however, that in the case of an Approved
Acquisition, the Borrower shall deliver on the date 3 Business Days prior
to the date of consummation of such Approved Acquisition the Schedules to
each Security Agreement to be executed in connection with the Approved
Acquisition and contemporaneously with the consummation of the Approved
Acquisition, the complete executed copies thereof;
(xvii) Pledge Agreements. From each Loan Party owning or to own
any issued and outstanding securities of such New Subsidiary, (A) if such
Loan Party has previously executed and delivered a Pledge Agreement, an
amendment (in form and substance satisfactory to the Lender) to such
Pledge Agreement subjecting to the Lien thereof such securities or (B) if
such Loan Party not has previously executed and delivered a Pledge
Agreement, a Pledge Agreement substantially in the form of Exhibit K
granting to the Lender a Lien in such securities. In addition, the Lender
shall have received each of the following: (1) all certificates, if any,
representing all of such securities and (2) stock powers duly endorsed in
blank by the applicable Loan Parties relating to all such certificates;
provided, however, that in the case of an Approved Acquisition, the
Borrower shall deliver on the date 3 Business Days prior to the date of
consummation of such Approved Acquisition the Schedules to each Pledge
Agreement to be executed in connection with the Approved Acquisition and
photostatic copies of all certificated securities pledged thereunder and
contemporaneously with the consummation of the Approved Acquisition, the
complete executed copies thereof together with the originals of all
certificates evidencing the certificated securities pledged thereunder;
(xviii) Opinions of Counsel. An opinion of counsel to the Loan
Parties regarding (A) the due organization of each such New Subsidiary;
(B) the corporate authority of any New Subsidiary or other Loan Party
delivering a Loan Document pursuant to this Section; (C) the execution,
delivery and enforceability of such Loan Documents; (D) non-contravention
of Applicable Law by such Acquisition or by the execution, delivery and
performance by such New Subsidiary and such Loan Parties of such Loan
Documents; (E) validity and perfection of any security interests granted
under any Security Document delivered under this Section, other than as
to Governmental Receivables, as appropriate, and (F) such other matters
as the Lender or its counsel may reasonably request; provided, however,
that in the case of an Approved Acquisition, if such New Subsidiary is
being formed in connection with, and for the purpose of effecting, such
Approved Acquisition, then the Borrower shall deliver on the date 2
Business Days prior to the date of consummation of such Approved
Acquisition a draft of such opinion to be delivered in connection with
the Approved Acquisition and contemporaneously with the consummation of
the Approved Acquisition, the executed copy thereof;
(xix) Reliance Letters. To the extent available after the
Borrower has made reasonable efforts to obtain, a letter from legal
counsel to the Target in such Acquisition allowing the Lender to rely
on the legal opinion of such counsel delivered in connection with such
Acquisition; provided, however, that in the case of an Approved
Acquisition, the
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Borrower shall deliver contemporaneously with the consummation of the
Approved Acquisition, any such reliance letter so obtained; and
(xx) Other Documents. Such other documents, instruments,
agreements and certifications as the Lender or its counsel may reasonably
and in good faith request and which request will not result in undue
expense to the Borrower.
SECTION 9.7 RESTRICTED DISTRIBUTIONS AND PURCHASES.
Declare or make, or permit any Subsidiary or other Loan Party to
declare or make, any Restricted Payment if a Default or Event of Default
has occurred or would occur as a result of such Restricted Payment;
provided, however, that Subsidiaries may pay Restricted Payments to the
Borrower.
SECTION 9.8 MERGER, CONSOLIDATION, SALES OF ASSETS AND OTHER ARRANGEMENTS.
(a) Enter into, or permit any Subsidiary or any other Loan Party to enter
into, any transaction of merger or consolidation; (b) liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution) or permit any
Subsidiary to do any of the foregoing; or (c) convey, sell, lease, sublease,
transfer or otherwise dispose of, in one transaction or a series of
transactions, all or any substantial part of its business or assets, or the
capital stock of or other equity interests in any of its Subsidiaries, whether
now owned or hereafter acquired or permit any Subsidiary to do any of the
foregoing; provided, however, that if no Default or Event of Default exists or
would result therefrom:
(i) the Borrower may merge or consolidate with any other
Person so long as the Borrower is the surviving corporation;
(ii) any Subsidiary of the Borrower may be merged or
consolidated with or into: (x) the Borrower if the Borrower shall be
the continuing or surviving corporation or (y) any other Person so long
as the Person surviving such merger or consolidation is a Wholly Owned
Subsidiary of the Borrower; and
(iii) any such Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to the Borrower or a Wholly-Owned Subsidiary of the Borrower.
SECTION 9.9 FISCAL YEAR.
Change its fiscal year from that in effect as of the Agreement Date.
SECTION 9.10 MODIFICATIONS TO CERTAIN CONTRACTS.
(a) Enter into, or permit any Subsidiary or other Loan Party to enter
into, any amendment or modification to any Material Contract, Acquisition
Document or Management Services Agreement without the prior written consent of
the Lender, other than amendments or
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modifications that do not alter in any significant manner or to any significant
degree the rights or obligations of the parties thereto; (b) default in the
performance of any obligations of the Borrower or any Subsidiary in any Material
Contract or Management Services Agreement except where such default could not
reasonably be expected to have a Material Adverse Effect; (c) permit any
Material Contract or Management Services Agreement to be canceled or terminated
prior to its stated maturity or (d) waive the compliance by any party to a
Management Services Agreement of any term, covenant or condition on the part of
such party to perform, if such party's non-compliance with any such term,
covenant or condition is a basis on which any other party to such Management
Services Agreement may terminate such Management Services Agreement,
irrespective of whether notice of any such termination is given or any other
acts are taken to effectuate such termination.
SECTION 9.11 TRANSACTIONS WITH AFFILIATES.
Permit to exist or enter into, and will not permit any of its
Subsidiaries or any of the other Loan Parties to enter into or permit to exist,
any transaction (including the purchase, sale, lease or exchange of any property
or the rendering of any service) with any Affiliate of the Borrower or with any
director, officer or employee of any Loan Party, except transactions set forth
on Schedule 6.1.(r) and other transactions (a) in the ordinary course of and
pursuant to the reasonable requirements of the business of the Borrower or any
of its Subsidiaries and (b) which (i) were approved of by a disinterested board
of directors (or other group of individuals performing similar duties) of the
Borrower or such Subsidiary or (ii) are on fair and reasonable terms which are
no less favorable to the Borrower or such Subsidiary than would be obtained in a
comparable arm's length transaction with a Person that is not an Affiliate of
the Borrower; provided, however, that this Section 9.11. shall not apply to any
transactions between or among the Borrower and any of its Wholly-Owned
Subsidiaries.
SECTION 9.12 CREATION OF SUBSIDIARIES.
Except as otherwise permitted under Section 9.4., incorporate, create or
acquire any Subsidiary other than (i) Subsidiaries in existence as of the
Agreement Date and (ii) any Subsidiary created after the Agreement Date so long
as the Borrower has delivered to the Lender on or before the date five days
prior to the date of creation of any such Subsidiary any and all agreements,
instruments and other documents that the Borrower would be required to deliver
under Sections 9.6.(vi), (x), (xv), (xvi), (xvii) and (xviii) if such Subsidiary
were the Target in an Acquisition by the Borrower or any other Loan Party of a
New Subsidiary.
SECTION 9.12 BANK ACCOUNTS.
Establish, or permit any other Loan Party to establish, any new bank
accounts unless and until the Lender receives written notice thereof.
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ARTICLE X. DEFAULT
SECTION 10.1 EVENTS OF DEFAULT.
The occurrence of each of the following shall constitute an Event of
Default, whatever the reason for such event and whether it shall be voluntary or
involuntary or be effected by operation of Applicable Law or pursuant to any
judgment or order of any Governmental Authority:
(a) Default in Payment. (i) The Borrower shall fail to pay when due
(whether upon demand, at maturity, by reason of acceleration or otherwise) the
principal of any of the Loans, or (ii) the Borrower shall fail to pay when due
any interest on any of the Loans or any of the other payment Obligations owing
by the Borrower under this Agreement or any other Loan Document or (iii) any
other Loan Party shall fail to pay when due any other payment Obligation owing
by such Loan Party under any Loan Document to which it is a party and, in the
case of clause (ii) or (iii), such failure shall continue for a period of 10
days.
(b) Default in Performance. (i) The Borrower shall fail to perform or
observe any term, covenant, condition or agreement contained in Sections 7.12.,
9.1., 9.6., 9.7., 9.8., 9.9. or 9.12. or (ii) the Borrower or any other Loan
Party shall fail to perform or observe any term, covenant, condition or
agreement contained in this Agreement or any other Loan Document to which it is
a party and not otherwise mentioned in this Section and, in the case of clause
(ii), such failure shall continue for a period of 30 days after the earlier of
(x) the date upon which the Borrower or such Loan Party obtains knowledge of
such failure or (y) the date upon which the Borrower has received written notice
of such failure from the Lender.
(c) Misrepresentations. Any statement, representation or warranty made or
deemed made by or on behalf of the Borrower or any other Loan Party under this
Agreement or under any other Loan Document, or any amendment hereto or thereto,
or in any other writing or statement at any time furnished or made or deemed
made by or on behalf of the Borrower or any other Loan Party to the Lender,
shall at any time prove to have been incorrect or misleading in any material
respect when furnished or made.
(d) Indebtedness Cross-Default.
(i) The Borrower or any other Loan Party shall fail to pay when
due and payable the principal of, or interest on, any Indebtedness other
than the Loans or any Contingent Obligations having an aggregate
outstanding principal amount of $1,500,000 or more; or
(ii) The maturity of any such Indebtedness shall have (A) been
accelerated in accordance with the provisions of any indenture, contract
or instrument evidencing, providing for the creation of or otherwise
concerning such Indebtedness or (B) been required to be prepaid prior to
the stated maturity thereof; or
(iii) Any other event shall have occurred and be continuing which,
with or without the passage of time, the giving of notice, or both, would
permit any holder or
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holders of such Indebtedness or Contingent Obligation, any trustee or
agent acting on behalf of such holder or holders or any other Person, to
accelerate the maturity of any such Indebtedness or require any such
Indebtedness to be prepaid prior to its stated maturity and such Person
shall not have waived its right to so accelerate or require prepayment
with respect to such event.
(e) Voluntary Bankruptcy Proceeding. The Borrower or any other Loan Party
shall: (i) commence a voluntary case under the Bankruptcy Code of 1978, as
amended or other federal bankruptcy laws (as now or hereafter in effect); (ii)
file a petition seeking to take advantage of any other Applicable Laws, domestic
or foreign, relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts; (iii) consent to, or fail to contest in a
timely and appropriate manner, any petition filed against it in an involuntary
case under such bankruptcy laws or other Applicable Laws or consent to any
proceeding or action described in the immediately following subsection; (iv)
apply for or consent to, or fail to contest in a timely and appropriate manner,
the appointment of, or the taking of possession by, a receiver, custodian,
trustee, or liquidator of itself or of a substantial part of its property,
domestic or foreign; (v) admit in writing its inability to pay its debts as they
become due; (vi) make a general assignment for the benefit of creditors; (vii)
make a conveyance fraudulent as to creditors under any Applicable Law; or (viii)
take any corporate or partnership action for the purpose of effecting any of the
foregoing.
(f) Involuntary Bankruptcy Proceeding. A case or other proceeding shall
be commenced against the Borrower or any other Loan Party, in any court of
competent jurisdiction seeking: (i) relief under the Bankruptcy Code of 1978, as
amended or other federal bankruptcy laws (as now or hereafter in effect) or
under any other Applicable Laws, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of debts;
or (ii) the appointment of a trustee, receiver, custodian, liquidator or the
like of such Person, or of all or any substantial part of the assets, domestic
or foreign, of such Person and such case or proceeding shall continue
undismissed or unstayed for a period of 60 consecutive calendar days, or an
order granting the relief requested in such case or proceeding against the
Borrower or such other Loan Party (including, but not limited to, an order for
relief under such Bankruptcy Code or such other federal bankruptcy laws) shall
be entered.
(g) Litigation. The Borrower or any other Loan Party shall disavow,
revoke or terminate any Loan Document to which it is a party or shall otherwise
challenge or contest in any action, suit or proceeding in any court or before
any Governmental Authority the validity or enforceability of this Agreement, any
Note or any other Loan Document.
(h) Judgment. A judgment or order for the payment of money shall be
entered against the Borrower or any Loan Party by any court or other tribunal
which exceeds, individually or together with all other such unpaid judgments or
orders entered against the Borrower and the Loan Parties, $250,000 in amount (or
which shall otherwise have a Material Adverse Effect) and such judgment or order
shall continue for a period of 30 days without being stayed or dismissed through
appropriate appellate proceedings.
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(i) Attachment. A warrant, writ of attachment, execution or similar
process shall be issued against any property of the Borrower or any other Loan
Party which exceeds, individually or together with all other such warrants,
writs, executions and processes, $250,000 in amount and such warrant, writ,
execution or process shall not be discharged, vacated, stayed or bonded for a
period of 30 days; provided, however, that if a bond has been issued in favor of
the claimant or other Person obtaining such warrant, writ, execution or process,
the issuer of such bond shall execute a waiver or subordination agreement in
form and substance satisfactory to the Lender pursuant to which the issuer of
such bond subordinates its right of reimbursement, contribution or subrogation
to the Obligations and waives or subordinates any Lien it may have on the assets
of any Loan Party.
(j) ERISA. (i) The occurrence of any Termination Event which would result
in a liability on the part of the Borrower or any ERISA Affiliate to the PBGC;
(ii) the present value of all benefit liabilities under all Pension Plans shall
exceed by more than $250,000 the current value of the assets of such Pension
Plans allocable to such benefit liabilities; (iii) the occurrence of any
accumulated funding deficiency (as defined in Section 302 of ERISA and Section
412 of the Internal Revenue Code) with respect to any Pension Plan, whether or
not waived; (iv) the Borrower, any Subsidiary or any other ERISA Affiliate shall
fail to make any contribution or payment to any Multiemployer Plan which is
required to make under any agreement relating to such Multiemployer Plan, or any
Applicable Law; or (v) the Borrower, any Subsidiary or any other ERISA Affiliate
shall engage in any prohibited transaction under Section 406 of ERISA or
Sections 4975 of the Internal Revenue Code for which a civil penalty pursuant to
Section 502(I) of ERISA or a tax pursuant to Section 4975 of the Internal
Revenue Code may be imposed.
(k) Loan Documents. An Event of Default (as defined therein) shall occur
under any of the other Loan Documents.
(l) Change of Control/Change in Management.
(i) (A) If any Person (or two or more Persons acting in concert)
(other than Ramie A. Tritt, M.D., Bock Benjamin & Co. Partners, L.P., or
any Family Member) shall acquire "beneficial ownership" within the
meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended,
of the capital stock or securities of the Borrower representing 35% or
more of the aggregate voting power of all classes of capital stock and
securities of the Borrower entitled to vote for the election of directors
or (B) during any twelve-month period (commencing both before and after
the Agreement Date), a majority of the Board of Directors of the Borrower
shall no longer be composed of individuals (I) who were members of such
Board of Directors on the first date of such period, (II) whose election
or nomination to such Board of Directors was approved by individuals
referred to in clause (I) above constituting at the time of such election
or nomination at least a majority of such Board of Directors or (III)
whose election or nomination to such Board of Directors was approved by
individuals referred to in clauses (I) and (II) above constituting at the
time of such election or nomination at least a majority of such Board of
Directors; or
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(ii) (A) If Ramie A. Tritt, M.D. shall cease for any reason to be
the Chairman of the Board or President of the Borrower at any time during
the period from February 10, 1997 to February 9, 2002 or Richard D.
Ballard shall cease for any reason to be the Chief Executive Officer of
the Borrower at any time during the period from November 26, 1996 to
November 25, 1999, or either such individual shall otherwise cease to be
principally involved in the executive and strategic management of the
Borrower during such applicable period.
(m) Injunction. The Borrower or any of its Subsidiaries is enjoined,
restrained or in any way prevented by the order of any Governmental Authority
from conducting all or any material part of its business and such order
continues for more than 5 days.
(n) Licenses and Permits. The loss, suspension or revocation of, or
failure to renew, any license or permit now held or hereafter acquired by the
Borrower or any of its Subsidiaries, if such loss, suspension, revocation or
failure to renew could reasonably be expected to have a Material Adverse Effect.
(o) Failure of Security. The Lender does not have or ceases to have a
valid and perfected first priority security interest in the Collateral (subject
to Permitted Liens), in each case, for any reason other than the failure of the
Lender to take any action within its control.
(p) Dissolution. Any order, judgment or decree is entered against the
Borrower or any other Loan Party decreeing the dissolution or split up of the
Borrower or that Subsidiary and such order remains undischarged or unstayed for
a period in excess of 30 days.
(q) Suspension of Business. The cessation or substantial curtailment
of revenue producing activities of the Borrower or any other Loan Party shall
occur (whether as a result of strike, lockout, labor dispute, embargo,
condemnation, force majeure or otherwise) and continue for a period in excess
of 20 consecutive days.
SECTION 10.2 REMEDIES UPON EVENT OF DEFAULT.
Upon the occurrence and during the continuation of an Event of Default
the following provisions shall apply:
(a) Acceleration; Termination of Facilities.
(i) Automatic. Upon the occurrence of an Event of Default
specified in Sections 10.1.(e) or 10.1.(f), (A)(i) the principal of, and
all accrued interest on, the Loans and the Notes at the time outstanding
and (ii) all of the other Obligations of the Borrower, including, but not
limited to, the other amounts owed to the Lender under this Agreement,
the Notes or any of the other Loan Documents shall become immediately and
automatically due and payable by the Borrower without presentment,
demand, protest, or other notice of any kind, all of which are expressly
waived by the Borrower and (B) the
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credit facility established hereby and the obligation of the Lender to
make Loans hereunder shall immediately and automatically terminate.
(ii) Optional. If any other Event of Default shall have occurred
and be continuing, the Lenders may: (A) declare (1) the principal of, and
accrued interest on, the Loans and the Notes at the time outstanding and
(2) all of the other Obligations, including, but not limited to, the
other amounts owed to the Lender under this Agreement, the Notes or any
of the other Loan Documents to be forthwith due and payable, whereupon
the same shall immediately become due and payable without presentment,
demand, protest or other notice of any kind, all of which are expressly
waived by the Borrower and (B) terminate the credit facility established
hereby and the obligation of the Lender to make Loans hereunder.
(b) Loan Documents. The Lender may exercise any and all of its rights
under any and all of the other Loan Documents.
(c) Applicable Law. The Lender may exercise all other rights and remedies
it may have under any Applicable Law.
(d) Appointment of Receiver. To the extent permitted by Applicable Law,
the Lender shall be entitled to the appointment of a receiver for the assets and
properties of the Borrower and its Subsidiaries, without notice of any kind
whatsoever and without regard to the adequacy of any security for the
Obligations or the solvency of any party bound for its payment, to take
possession of all or any portion of the Collateral and/or the business
operations of the Borrower and its Subsidiaries and to exercise such power as
the court shall confer upon such receiver.
SECTION 10.3 PERFORMANCE BY LENDER.
If the Borrower shall fail to perform any covenant, duty or agreement
contained in any of the Loan Documents, the Lender may perform or attempt to
perform such covenant, duty or agreement on behalf of the Borrower after the
expiration of any cure or grace periods set forth herein. In such event, the
Borrower shall, at the request of the Lender, promptly pay any amount reasonably
expended by the Lender in such performance or attempted performance to the
Lender, together with interest thereon at the applicable Post-Default Rate from
the date of such expenditure until paid. Notwithstanding the foregoing, the
Lender shall not have any liability or responsibility whatsoever for the
performance of any obligation of the Borrower under this Agreement or any other
Loan Document.
SECTION 10.4 RIGHTS CUMULATIVE.
The rights and remedies of the Lender under this Agreement and each of
the other Loan Documents shall be cumulative and not exclusive of any rights or
remedies which it may otherwise have under Applicable Law. In exercising its
rights and remedies the Lender may be selective and no failure or delay by the
Lender in exercising any right shall operate as a waiver of it, nor shall any
single or partial exercise of any power or right preclude its other or further
exercise or the exercise of any other power or right.
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ARTICLE XI MISCELLANEOUS
SECTION 11.1 NOTICES.
Unless otherwise provided herein, communications provided for hereunder
shall be in writing and shall be mailed, telecopied or delivered as follows:
If to the Borrower:
The Medical Quarters
5555 Peachtree Dunwoody Road
Suite 235
Atlanta, Georgia 30342
Attention: Chief Financial Officer
Telecopy Number: (404) 250-0162
Telephone Number: (404) 256-7535
If to the Lender:
600 Peachtree Street, 18th Floor
Atlanta, Georgia 30308
Attention: Laura B. Gray
Telecopy Number: (404) 607-6338
Telephone Number: (404) 607-5861
or, as to each party at such other address as shall be designated by such party
in a written notice to the other parties delivered in compliance with this
Section. All such notices and other communications shall be effective only when
actually received. The Lender shall not incur any liability to the Borrower for
acting upon any telephonic notice referred to in this Agreement which the Lender
believes in good faith to have been given by a Person authorized to deliver such
notice or for otherwise acting in good faith under hereunder.
SECTION 11.2 EXPENSES.
The Borrower will pay all present and future reasonable expenses of the
Lender in connection with the negotiation, preparation, execution and delivery
of each of the Loan Documents, whenever the same shall be executed and
delivered, including appraisers' fees, search fees, recording fees and the fees
and disbursements of each special and local counsel retained by the Lender.
Further, the Borrower shall pay all future reasonable costs and expenses of the
Lender in connection with (a) the negotiation, preparation, execution and
delivery of any waiver, amendment or consent by the Lender relating to any of
the Loan Documents; (b) any restructuring, refinancing or "workout" of the
transactions contemplated by this Agreement and the other Loan Documents, or any
material amendment to the terms of this Agreement or any other Loan Document,
including the reasonable fees and disbursements of counsel to the Lender; (c)
consulting with one or more Persons engaged by the Lender, including appraisers,
accountants
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and lawyers, concerning or related to the servicing of this Agreement or the
nature, scope or value of any right or remedy of the Lender hereunder, under the
Notes or under any of the other Loan Documents, including any review of factual
matters in connection therewith, which expenses shall include the reasonable
fees and disbursements of such Persons; (d) the collection or enforcement of the
obligations of the Borrower or any Loan Party under this Agreement, the Notes or
any other Loan Document including the reasonable fees and disbursements of
counsel to the Lender if such collection or enforcement is done by, through or
with the assistance of an attorney; (e) prosecuting or defending any claim in
any way arising out of, related to, or connected with this Agreement or any of
the other Loan Documents, which expenses shall include the reasonable fees and
disbursements of counsel to the Lender and of experts and other consultants
retained by the Lender; (f) the exercise by the Lender of any right or remedy
granted to it under this Agreement or any of the other Loan Documents, including
the reasonable fees and disbursements of counsel to the Lender if such exercise
is done by, through or with the assistance of any attorney; (g) gaining
possession of, maintaining, handling, preserving, storing, shipping, appraising,
selling, preparing for sale and advertising to sell any Collateral, whether or
not a sale is consummated; and (h) to the extent not already covered by any of
the preceding subsections, any bankruptcy or other proceeding of the type
described in Section 10.1.(e) or 10.1.(f), and the reasonable fees and
disbursements of counsel to the Lender incurred in connection with the
representation of the Lender in any matter relating to or arising out of any
such proceeding including, without limitation (i) any motion for relief from any
stay or similar order, (ii) the negotiation, preparation, execution and delivery
of any document relating to the Obligations and (iii) the negotiation and
preparation of any debtor-in-possession financing or any plan of reorganization
of the Borrower or any other Loan Party, whether proposed by a Loan Party, the
Lender or any other Person, and whether such fees and expenses are incurred
prior to, during or after the commencement of such proceeding or the
confirmation or conclusion of any such proceeding. The Borrower shall pay all
amounts owing under this Section within 10 days of the Lender's demand. As used
in this Section and in Section 11.9, the term "reasonable fees" of legal counsel
shall mean the reasonable fees of such legal counsel actually incurred.
SECTION 11.3 STAMP, INTANGIBLE AND RECORDING TAXES.
The Borrower will pay any and all stamp, intangible, registration,
recordation and similar taxes, fees or charges and shall indemnify the Lender
against any and all liabilities with respect to or resulting from any delay in
the payment or omission to pay any such taxes, fees or charges, which may be
payable or determined to be payable in connection with the execution, delivery,
recording, performance or enforcement of this Agreement, the Notes and any of
the other Loan Documents or the perfection of any rights or Liens thereunder.
SECTION 11.4 SETOFF.
In addition to any rights now or hereafter granted under Applicable Law
and not by way of limitation of any such rights, the Lender is hereby authorized
by the Borrower, at any time or from time to time, without notice to the
Borrower or to any other Person, any such notice being hereby expressly waived,
to set-off and to appropriate and to apply any and all deposits (general or
special, including, but not limited to, indebtedness evidenced by certificates
of deposit, whether matured or unmatured) and any other indebtedness at any time
held or owing by the Lender or
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any affiliate of the Lender, to or for the credit or the account of the Borrower
against and on account of any of the Obligations, irrespective of whether or not
the Lender shall have declared any or all of the Loans and all other Obligations
to be due and payable as permitted by Section 10.2.
SECTION 11.5 ARBITRATION.
ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO INCLUDING
BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED
TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL
ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF
PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF JUDICIAL
ARBITRATION AND MEDIATION SERVICES, INC. (J.A.M.S.) OR THE COMMERCIAL
ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION, AS APPLICABLE, AND
THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE
SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED
IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS AGREEMENT MAY BRING AN
ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF
ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING
JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE CITY OF THE
BORROWER'S DOMICILE AT THE TIME OF THIS AGREEMENT'S EXECUTION AND ADMINISTERED
BY J.A.M.S. OR THE AMERICAN ARBITRATION ASSOCIATION AS AGREED BY THE PARTIES.
ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR
ARBITRATION; FURTHER, THE ARBITRATOR(S) SHALL ONLY, UPON A SHOWING OF CAUSE,
BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL
60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS AGREEMENT SHALL BE DEEMED TO
(I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF LIMITATION
OR REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR (II) BE A WAIVER BY
THE LENDER OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY
SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE LENDER
HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF,
OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO
OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED
TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE
LENDER MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR
OBTAIN SUCH PROVISIONAL OR
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ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION
PROCEEDING BROUGHT PURSUANT TO THIS AGREEMENT. NEITHER THE EXERCISE OF SELF HELP
REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR
PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY
PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
SECTION 11.6 SUCCESSORS AND ASSIGNS.
(a) The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, except that the Borrower may not assign or otherwise transfer any of
its rights under this Agreement without the prior written consent of all
Lenders.
(b) The Lender may assign to one or more Persons, or sell
participations to one or more Persons in, all or a portion of its rights and
obligations hereunder, under the Notes and the other Loan Documents. The Lender
may, in connection with any assignment or proposed assignment or sale or
proposed sale of a participation, disclose to the assignee or proposed assignee
or participant or proposed participant any information relating to the Borrower
or any other Loan Party furnished to the Lender by or on behalf of the Borrower
or any other Loan Party, provided, that such assignee or participant enter into
a confidentiality agreement containing the terms set forth in Section 11.8.
Notice of any such assignment shall be given to the Borrower upon the
occurrence thereof; provided, however, failure to give such notice shall not in
any way affect the validity of such assignment.
SECTION 11.7 AMENDMENTS.
Any consent or approval required or permitted by this Agreement or in any
Loan Document to be given by the Lender may be given, and any term of this
Agreement or of any other Loan Document may be amended, and the performance or
observance by the Borrower or any Loan Party or Subsidiary of any terms of this
Agreement or such other Loan Document or the continuance of any Default or Event
of Default may be waived (either generally or in a particular instance and
either retroactively or prospectively) with, but only with, the written consent
of the Lender (and, in the case of an amendment to any Loan Document, the
written consent of the Borrower). No waiver shall extend to or affect any
obligation not expressly waived or impair any right consequent thereon and any
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose set forth therein. No course of dealing or delay or
omission on the part of the Lender in exercising any right shall operate as a
waiver thereof or otherwise be prejudicial thereto. Except as otherwise
explicitly provided for herein or in any other Loan Document, no notice to or
demand upon the Borrower shall entitle the Borrower to other or further notice
or demand in similar or other circumstances.
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SECTION 11.8 CONFIDENTIALITY.
Except as otherwise provided by Applicable Law, the Lender shall utilize
all non-public information obtained pursuant to the requirements of this
Agreement which has been identified as confidential or proprietary by the
Borrower in accordance with its customary procedure for handling confidential
information of this nature and in accordance with safe and sound banking
practices, but in any event may make disclosure: (a) to any of its affiliates
(provided they shall agree to keep such information confidential in accordance
with the terms of this Section); (b) as reasonably required by any bona fide
Participant or other transferee in connection with the contemplated transfer of
the Commitment or participations therein as permitted hereunder; (c) as required
by any Governmental Authority or representative thereof or pursuant to legal
process; (d) to the Lender's independent auditors and other professional
advisors (provided they shall be notified of the confidential nature of the
information); and (e) after the happening and during the continuance of an Event
of Default, to any other Person, in connection with the exercise by the Lender
of rights hereunder or under any of the other Loan Documents.
SECTION 11.9 INDEMNIFICATION.
The Borrower agrees to indemnify the Lender and its directors, officers,
employees and agents for, and hold each of them harmless against, any and all
losses, liabilities, claims, damages or expenses incurred by any of them arising
out of or by reason of any investigation or litigation or other proceedings
(including any threatened investigation or litigation or other proceedings)
relating to the extensions of credit hereunder or any actual or proposed use by
the Borrower or any other Loan Party of the proceeds of any of the extensions of
credit hereunder or the past, present or future business activities of the
Borrower or any other Loan Party, including without limitation, the reasonable
fees and disbursements of counsel incurred in connection with any such
investigation or litigation or other proceedings (but excluding any such losses,
liabilities, claims, damages or expenses that are determined pursuant to a
final, non-appealable order of a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of the Person to be
indemnified).
SECTION 11.10 SURVIVAL.
Notwithstanding any termination of this Agreement, or of the other Loan
Documents, the indemnities to which the Lender is entitled under the provisions
of Sections 11.2. and 11.9. and any other provision of this Agreement and the
other Loan Documents, and the waivers of jury trial and submission to
jurisdictions contained in Section 11.5., shall continue in full force and
effect and shall protect the Lender against events arising after such
termination as well as before.
SECTION 11.11 SEVERABILITY OF PROVISIONS.
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or unenforceability without invalidating the
remainder of such provision or the remaining provisions or affecting the
validity or enforceability of such provision in any other jurisdiction.
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SECTION 11.12 GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF GEORGIA APPLICABLE TO CONTRACTS EXECUTED, AND TO BE
FULLY PERFORMED, IN SUCH STATE.
SECTION 11.13 COUNTERPARTS.
This Agreement and any amendments, waivers, consents or supplements may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all of which counterparts together shall constitute but
one and the same instrument. This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties hereto.
SECTION 11.14 OBLIGATIONS WITH RESPECT TO LOAN PARTIES.
The obligations of the Borrower to direct or prohibit the taking of
certain actions by the other Loan Parties as specified herein shall be absolute
and not subject to any defense the Borrower may have that the Borrower does not
control such Loan Parties.
SECTION 11.15 ENTIRE AGREEMENT.
This Agreement, the Notes, and the other Loan Documents referred to
herein embody the final, entire agreement among the parties hereto and supersede
any and all prior commitments, agreements, representations, and understandings,
whether written or oral, relating to the subject matter hereof and may not be
contradicted or varied by evidence of prior, contemporaneous, or subsequent oral
agreements or discussions of the parties hereto. There are no oral agreements
among the parties hereto.
SECTION 11.16 CONSTRUCTION.
The Borrower and the Lender acknowledge that each of them has had the
benefit of legal counsel of its own choice and has been afforded an opportunity
to review this Agreement and the other Loan Documents with its legal counsel and
that each of the Lender and the Borrower have participated in negotiating the
terms and conditions of this Agreement and the other Loan Documents.
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IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be executed by their authorized officers all as of the day and year
first above written.
BORROWER:
PHYSICIANS' SPECIALTY CORP.
By: /s/ Richard D. Ballard
------------------------------
Name: Richard D. Ballare
-------------------------
Title: Chief Executive Officer
------------------------
LENDER:
NATIONSBANK, N.A. (SOUTH)
By: /s/ Laura B. Gray
------------------------------
Name: Laura B. Gray
-------------------------
Title: Vice President
------------------------
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EXHIBIT A
FORM OF COLLATERAL ASSIGNMENT OF ACQUISITION DOCUMENTS
THIS COLLATERAL ASSIGNMENT OF ACQUISITION DOCUMENTS dated as of
__________, _____ (this "Assignment"), by [NAME OF ASSIGNING LOAN PARTY], a
corporation organized under the laws of the State of [___________] (the
"Assignor"), in favor of NATIONSBANK, N.A. (SOUTH) (the "Lender").
WHEREAS, [the Assignor][Physicians' Specialty Corp. (the "Borrower")]
and the Lender have entered into a certain Credit Agreement dated as of April
___, 1997 (as amended, supplemented, restated or otherwise modified from time
to time, the "Credit Agreement"), pursuant to which the Lender has agreed,
subject to the terms thereof, to make available to the [Assignor][Borrower]
certain financial accommodations;
WHEREAS, the Assignor and the entities listed as [Sellers] therein
(the "Sellers") have entered into that certain [Asset/Stock Purchase/Merger
Agreement] dated as of __________, _____ (as amended, supplemented, restated or
otherwise modified from time to time, the "Purchase Agreement") regarding the
Acquisition by the Assignor of _______________________ of the Sellers; [and]
[Include the following if Assignor is a Loan Party other than the Borrower]
[WHEREAS, the Borrower owns, directly or indirectly, all of the
outstanding capital stock and other equity interests of the Assignor;
WHEREAS, the Borrower, the Assignor and the other Subsidiaries of the
Borrower, though separate legal entities, are mutually dependent on each other
in the conduct of their respective businesses and have determined it to be in
their mutual best interests to obtain financing from the Lender through their
collective efforts;
WHEREAS, the Assignor acknowledges that it will receive direct and
indirect benefits from the Lender making such financial accommodations
available to the Borrower under the Credit Agreement and, accordingly, the
Assignor agreed to guaranty the Borrower's obligations to the Lender on the
terms and conditions contained in that certain Guaranty dated as of __________,
_____ (as the same may be amended, supplemented, restated or otherwise modified
from time to time in accordance with its terms, the "Guaranty"), executed by
the Assignor in favor of the Lender;
WHEREAS, the Assignor is executing and delivering this Assignment to
secure its obligations owing to the Lender under the Guaranty and the other
Loan Documents to which the Assignor is a party; and]
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WHEREAS, as a condition to the continued extension of such financial
accommodations under the Credit Agreement, the Lender has required, among other
things, that the Assignor assign to the Lender on the terms and conditions
contained herein all of the Assignor's rights and remedies under and with
respect to the Purchase Agreement, including without limitation, all of its
rights and remedies with respect to any and all rights of indemnification
thereunder, all as collateral security for the Obligations;
NOW, THEREFORE, in consideration of the premises set forth herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Assignor agrees as follows:
SECTION 1. ASSIGNMENT. As security for the Obligations, the Assignor
hereby collaterally assigns and transfers to the Lender, and grants to the
Lender a security interest in, all of the Assignor's right, title and interest
in, to and under (a) the Purchase Agreement and all of the documents,
instruments and agreements executed and delivered in connection therewith,
including without limitation, those described on Schedule 1 attached hereto
(collectively, the "Acquisition Documents"), including without limitation (i)
the Assignor's rights and remedies with respect to any breach by any other
party to an Acquisition Document of any of its representations, warranties and
covenants thereunder and (ii) any and all rights of the Assignor to
indemnification arising under or pursuant to any Acquisition Document and (b)
all proceeds of the foregoing (all of the foregoing, collectively, the
"Collateral"); provided, however, the term "Collateral" shall not include any
right, title or interest of the Assignor in, to or under any of the property
described in the preceding clause (a) to the extent that the Assignors'
collateral assignment and transfer thereof, or its grant of a security interest
therein, is not permitted by the terms of the applicable Acquisition Document.
SECTION 2. COVENANTS. The Assignor covenants and agrees as follows:
(a) The Assignor shall at all times duly and punctually perform in
all material respects all of the terms, conditions and covenants of the
Acquisition Documents on the Assignor's part to be kept, observed and
performed.
(b) The Assignor will not sell, assign, grant a Lien in, or
otherwise transfer to any Person any of the Collateral other than to the
Lender.
(c) The Assignor (i) will give the Lender prompt notice of the
terms of any proposed material amendment or modification of any of the terms
of, or the proposed termination of, any Assigned Document; (ii) will not,
without the Lender's prior written consent, amend or otherwise modify, or waive
the application of or consent to the departure from, any of the terms of any
Acquisition Document, other than amendments, modifications, waivers and
consents that do not alter in any significant manner or to any significant
degree the rights or obligations of the parties thereto; and (iii) will not
terminate any Acquisition Document.
(d) The Assignor shall promptly deliver to the Lender a copy of
any material notice given to or by the Assignor under or in connection with any
Acquisition Document.
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SECTION 3. REPRESENTATIONS AND WARRANTIES. The Assignor represents
and warrants to the Lender as follows:
(a) True, correct and complete copies of the Acquisition Documents
(including all amendments, supplements and modifications thereto) have been
delivered to the Lender.
(b) Each Acquisition Document is in full force and effect and is
the legal, valid and binding obligation of the Assignor and each other Person a
party thereto, enforceable against the Assignor and each such Person in
accordance with its terms except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting
the rights of creditors generally and by general principles of equity
(regardless of whether enforcement thereof is sought in a proceeding at law or
in equity); provided, however, no representation or warranty is being made with
respect to the enforceability of provisions of such Acquisition Documents
against such other Persons which, if not enforceable, could not reasonably be
expected to have a Material Adverse Effect.
(c) Neither the Assignor, nor to the Assignor's knowledge any
other Person a party to an Acquisition Document, is in default thereunder.
(d) The Assignor has not assigned any of its right, title or
interest in, to or under any of the Collateral to any Person other than the
Lender.
(e) The Assignor has full authority and the legal right to assign
to the Lender, and to grant to the Lender a security interest in, the
Acquisition Documents and the other Collateral, and the Assignor has obtained
all consents necessary for the valid and binding assignment of and the
effectiveness and enforceability of such security interest and assignment under
this Assignment.
(f) All of the Collateral is free and clear of all Liens.
SECTION 4. PAYMENTS. So long as no Event of Default shall have
occurred and be continuing, the Assignor shall have the right to receive all
amounts paid or payable in connection with the Acquisition Documents. Upon the
occurrence and during the continuance of any Event of Default, the Lender shall
have the right to receive and retain the payments which the Assignor would
otherwise be authorized to receive and retain pursuant to the immediately
preceding sentence. If, notwithstanding the foregoing, the Assignor shall
receive any amount which it is not entitled to receive hereunder, the Assignor
shall hold all such amounts it receives in trust for the Lender, without
commingling the same with other funds or property of or held by the Assignor,
and shall promptly deliver the same to the Lender immediately upon receipt by
the Assignor in the identical form received, together with any necessary
endorsements.
SECTION 5. ENFORCEMENT BY ASSIGNOR. Prior to the occurrence of an
Event of Default, insofar as the Assignor may have any right, privilege or
claim under any Acquisition Document, including without limitation, its rights
and remedies with respect to indemnification, the Assignor will use good faith
business judgment concerning its enforcement of such rights.
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SECTION 6. LENDER NOT OBLIGATED. Notwithstanding any other provision
of this Assignment to the contrary, the Assignor expressly acknowledges and
agrees that neither this Assignment, nor any action taken by the Lender
pursuant hereto, shall cause the Lender to be under any obligation or liability
in any respect whatsoever to any party to any Acquisition Document or to any
other Person for the observance or performance of any of the representations,
warranties, conditions, covenants, agreements or terms contained in any
Acquisition Document.
SECTION 7. REMEDIES. Upon the occurrence and during the continuance
of an Event of Default, the Lender shall, at its election, without notice of
election and without demand except to the extent required under Applicable Law,
have the right to do any one or more of the following, all of which are hereby
authorized by the Assignor: (a) exercise any or all of the rights available to
a secured party under the UCC or any other Applicable Law; and (b) exercise any
or all of its rights and remedies under the Credit Agreement and the other Loan
Documents.
SECTION 8. APPLICATION OF PROCEEDS. All proceeds received by the
Lender in connection with the exercise of any of its rights or remedies
hereunder shall be applied by the Lender in the order provided for in the
applicable Loan Documents. The Assignor shall remain liable and will pay, on
demand, any deficiency remaining in respect of the Obligations.
SECTION 9. FURTHER ASSURANCES. At any time and from time to time,
upon the written request of the Lender, and at the sole cost and expense of the
Assignor, the Assignor will promptly execute and deliver such further
instruments and documents and take such further action as the Lender may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Assignment and of the rights and powers herein granted.
SECTION 10. RIGHTS CUMULATIVE. The rights and remedies of the Lender
under this Assignment are cumulative and not exclusive of any rights or
remedies which it would otherwise have. In exercising its rights and remedies
the Lender may be selective and no failure or delay by the Lender in exercising
any right shall operate as a waiver of it, nor shall any single or partial
exercise of any power or right preclude its other or further exercise or the
exercise of any other power or right.
SECTION 11. LENDER APPOINTED ATTORNEY-IN-FACT. The Assignor hereby
irrevocably appoints the Lender as the Assignor's attorney-in-fact, with full
authority in the place and stead of the Assignor and in the name of the
Assignor or otherwise, from time to time upon the occurrence and during the
continuance of an Event of Default in the Lender's discretion, to take any
action and to execute any instrument or document which the Lender may deem
necessary or advisable to accomplish the purposes of this Assignment and to
exercise any rights and remedies the Lender may have under this Assignment or
Applicable Law. The power-of-attorney granted hereby is irrevocable and
coupled with an interest.
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SECTION 12. NOTICES. Notices, requests and other communications
required or permitted hereunder shall be given in accordance with the
applicable terms of the [Credit Agreement][Guaranty].
SECTION 13. TERMINATION. Upon indefeasible payment in full of all of
the Obligations, this Assignment shall terminate.
SECTION 14. EXPENSES. The Assignor will pay, within 10 days of
demand, all reasonable fees and expenses actually incurred by the Lender in
connection with (a) the collection or enforcement of the Obligations including
the reasonable fees and disbursements of counsel to the Lender actually
incurred by the Lender and (b) the exercise by the Lender of any right or
remedy granted to it under this Agreement if such exercise is done by, through
or with the assistance of any attorney.
SECTION 15. COUNTERPARTS. This Assignment may be executed in several
counterparts, each of which shall be an original and all of which, taken
together, shall constitute but one and the same instrument.
SECTION 16. AMENDMENTS, ETC. No amendment or waiver of any provision
of this Assignment, nor consent to any departure by the Assignor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the parties hereto, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 17. BENEFITS. The terms, covenants and conditions contained
herein shall inure to the benefit of the Lender, and its successors and
assigns, and shall be binding on the Assignor and its successors and assigns.
SECTION 18. APPLICABLE LAW. THIS ASSIGNMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.
SECTION 19. SEVERABILITY. Whenever possible, each provision of this
Assignment shall be interpreted in such a manner as to be effective and valid
under Applicable Law, but if any provision of this Assignment shall be
prohibited by or invalid under Applicable Law, such provisions shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Assignment.
SECTION 20. NO THIRD-PARTY BENEFICIARIES/ASSIGNMENT. This Assignment
is solely for the benefit of the parties hereto and their respective successors
and permitted assigns. There are no other Persons which are intended to be
benefited in any way whatsoever by this Assignment. The Lender may assign,
transfer or sell any of the Obligations, or grant or sell participation
interests in any of the Obligations, to any Person pursuant to the terms of the
Credit Agreement.
SECTION 21. DEFINITIONS. As used herein, the term "Obligations"
shall mean: (a) all obligations and indebtedness of the Assignor owing to the
Lender of every kind, nature and description, under or with respect to the
Guaranty, this Assignment or any of the other Loan
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Documents to which the Assignor is a party, whether direct or indirect,
absolute or contingent, due or not due, contractual or tortious, liquidated or
unliquidated, and whether or not evidenced by any note; and (b) all renewals,
modifications, extensions and supplements to any of the foregoing. Terms not
otherwise defined herein are used herein with the respective definitions given
them in the Credit Agreement.
[Signatures on following page]
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<PAGE> 79
IN WITNESS WHEREOF, the Assignor has executed and delivered this
Assignment of Rights Under Acquisition Documents under seal as of the date
first written above.
[NAME OF LOAN PARTY]
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
ATTEST:
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
(CORPORATE SEAL)
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SCHEDULE 1
ACQUISITION DOCUMENTS
(List Purchase Agreement, Bills of Sale
and other Acquisition Documents)
A-8
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EXHIBIT B
FORM OF BORROWING BASE AND COMPLIANCE CERTIFICATE
For the quarter ending _________, _____
NationsBank, N.A. (South)
600 Peachtree Street, 18th Floor
Atlanta, Georgia 30308
Attention: Laura B. Gray
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement dated as of April
___, 1997 (as it may be amended, modified, restated or supplemented from time
to time, the "Credit Agreement"; capitalized terms used herein, and not
otherwise defined herein, shall have their respective defined meanings as set
forth in the Credit Agreement) among Physicians' Specialty Corp. (the
"Borrower"), and NationsBank, N.A. (South) (the "Lender").
Pursuant to Section 8.3 of the Credit Agreement, the undersigned
hereby certifies to the Lender as follows:
(1) The undersigned is the [Treasurer/Chief Financial
Officer/independent public accountant] of the Borrower.
(2) The undersigned has examined the books and records of the
Borrower and has conducted such other examinations and investigations as are
reasonably necessary to provide this Compliance Certificate.
(3) The Borrower is in compliance with the provisions of Section
9.1 of the Credit Agreement and no Default or Event of Default has occurred and
is continuing [for Compliance Certificate delivered by Treasurer or Chief
Financial Officer only].
The undersigned hereby further certifies to the Lender that the
financial information of the Borrower attached hereto as Schedule 1 is true and
correct as of the date hereof.
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<PAGE> 82
IN WITNESS WHEREOF, the undersigned has executed this certificate as
of the date first above written.
By:
-------------------------------------
Title:
-------------------------------
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<PAGE> 83
SCHEDULE 1
Calculations
[To be provided by the Lender]
B-3
<PAGE> 84
EXHIBIT C
FORM OF COLLATERAL ASSIGNMENT OF
MANAGEMENT SERVICES AGREEMENTS
THIS COLLATERAL ASSIGNMENT OF MANAGEMENT SERVICES AGREEMENTS dated as
of _____________, _______ (this "Assignment"), executed by
_________________________, as assignor (the "Assignor"), in favor of
NATIONSBANK, N.A. (SOUTH), as assignee (the "Lender").
WHEREAS, Physicians' Specialty Corp. (the "Borrower") and the Lender
have entered into that certain Credit Agreement dated as of April ____, 1997
(as amended, supplemented, restated or otherwise modified from time to time
pursuant to its terms, the "Credit Agreement"), pursuant to which the Lender
has agreed, subject to the terms thereof, to make certain financial
accommodations available to the Borrower;
WHEREAS, the Borrower owns, directly or indirectly, all of the
outstanding capital stock and other equity interests of the Assignor;
WHEREAS, the Borrower, the Assignor and the other Subsidiaries of the
Borrower, though separate legal entities, are mutually dependent on each other
in the conduct of their respective businesses and have determined it to be in
their mutual best interests to obtain financing from the Lender through their
collective efforts;
WHEREAS, the Assignor acknowledges that it will receive direct and
indirect benefits from the Lender making such financial accommodations
available to the Borrower under the Credit Agreement and, accordingly, the
Assignor agreed to guaranty the Borrower's obligations to the Lender on the
terms and conditions contained in that certain Guaranty dated as of
________________, _______ (as the same may be amended, supplemented, restated
or otherwise modified from time to time in accordance with its terms, the
"Guaranty"), executed by the Assignor in favor of the Lender;
WHEREAS, the Assignor is executing and delivering this Assignment to
secure its obligations owing to the Lender under the Guaranty and the other
Loan Documents to which the Assignor is a party; and
WHEREAS, as a condition to extending such financial accommodations,
the Lender has required, among other things, that the Assignor assign to the
Lender all of the Assignor's rights and remedies under and with respect to all
Management Services Agreements to which the Assignor is a party in accordance
with the terms hereof;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged by the parties hereto, the parties
hereto hereby agree as follows:
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SECTION 1. ASSIGNMENT. As security for the prompt payment and
performance of the Obligations, the Assignor hereby collaterally assigns to the
Lender, and grants to the Lender a security interest in, all of the following
(collectively the "Collateral"): (a) all of the Assignor's right, title and
interest in, to and under all Management Services Agreements, including without
limitation, those described on Schedule I attached hereto, together with all
other documents, instruments, agreements, certificates and opinions delivered
in connection with any of the Management Services Agreements, all as the same
may be amended, supplemented, restated or otherwise modified from time to time
(the "Management Agreement Documents"), including without limitation, (i) all
rights of the Assignor to receive moneys due and to become due to it thereunder
or in connection therewith; (ii) all rights of the Assignor to damages arising
out of, or for, breach or default in respect thereof and (iii) all rights of
the Assignor to perform and exercise all rights and remedies thereunder; (b)
all of the Assignor's rights under or in respect of any covenant not to
compete, covenant regarding confidentiality, covenant not to solicit, and any
other similar covenant by any partner or shareholder, as the case may be, of a
Practice (as defined below) or any employee of a Practice and any other
covenant pursuant to which any such Person agrees to limit the types of
business in which such Person may engage and which is contained in any
Employment Agreement, including, without limitation (i) all rights of the
Assignor to damages arising out of, or for, breach or default in respect
thereof and (ii) all rights of the Assignor to seek specific performance of the
terms thereof; (c) all of the Assignor's books and records in any way relating
to the Management Agreement Documents and (d) any and all products and proceeds
of any of the foregoing in whatever form, including, but not limited to, cash,
instruments, general intangibles, accounts, goods, documents and chattel paper.
The term "Practice," as used herein, means a Person offering medical services
in the field of Otolaryngology, Related Subspecialties or Complementary
Subspecialties pursuant to the Management Services Agreements.
SECTION 2. REPRESENTATIONS AND WARRANTIES. The Assignor represents
and warrants to the Lender as follows:
(a) None of the Collateral is subject to any Lien, except Permitted Liens.
(b) A true, correct and complete copy of (i) each Employment
Agreement (including all amendments, supplements and modifications thereto)
identified on Schedule II attached hereto and (ii) each Management Services
Agreement to which the Assignor is a party and each other Management Agreement
Document relating thereto (including all amendments, supplements and
modifications thereto), has been delivered to the Lender.
(c) Each such Management Agreement Document is in full force and
effect and is the legal, valid and binding obligation of the Assignor and each
other Person a party thereto, enforceable against the Assignor and each such
Person in accordance with its respective terms except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar laws affecting the rights of creditors generally and by general
principles of equity (regardless of whether enforcement thereof is sought in a
proceeding at law or in equity); provided, however, no representation or
warranty is being made with respect to the enforceability of provisions of any
Management Agreement Documents against such other Persons which, if not
enforceable, (i) would not permit the termination of the applicable
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<PAGE> 86
Management Services Agreement or (ii) could not reasonably be expected to have
a Material Adverse Effect.
(d) Neither the Assignor nor any other Person a party to any
Management Agreement Document is in default under any of the terms, covenants
or conditions of any Management Agreement Document nor, to the Assignor's
knowledge, does there exist any event of default or any state of facts which
would, with the passage of time or the giving of notice, or both, constitute a
default or event of default on the part of the Assignor or any such other
Person under any of said terms, covenants or conditions.
(e) The Assignor has taken all steps necessary or appropriate to
protect and preserve its rights under the Management Agreement Documents,
including without limitation, the filing of financing statements under the
Uniform Commercial Code as in effect in all applicable jurisdictions.
(f) The Assignor has not assigned any of its right, title or
interest in, to or under any of the Collateral to any Person.
(g) The Assignor has full authority and the legal right to assign
to the Lender, and to grant to the Lender a security interest in, the
Management Agreement Documents and the other Collateral and the Assignor has
obtained all consents necessary for the valid and binding assignment of and the
effectiveness and enforceability of such security interest under this
Agreement.
(h) All of the Collateral is free and clear of all Liens other
than Permitted Liens.
SECTION 3. COVENANTS. The Assignor covenants and agrees as to each
Management Agreement Document as follows:
(a) The Assignor will not sell, assign, grant a Lien in, suffer to
exist any Lien in, or otherwise transfer to any Person any of the Assignor's
right, title or interest in, to or under any of the Collateral.
(b) The Assignor will not (i) amend or otherwise modify, or waive
the application of or consent to the departure, any of the terms of any
Management Agreement Document, other than amendments, modifications, waivers
and consents that do not alter in any significant manner or to any significant
degree the rights or obligations of the parties thereto, or (ii) cancel or
terminate any Management Agreement Document or Employment Agreement, without,
in either case, the Lender's prior written consent.
(c) Anything herein to the contrary notwithstanding, (i) the
Assignor shall remain liable under all Management Agreement Documents to the
extent set forth therein to perform its duties and obligations thereunder to
the same extent as if this Agreement had not been executed, (ii) the exercise
by the Lender of any of its rights hereunder shall not release the Assignor
from any of its duties or obligations under any of the Management Agreement
Documents, and (iii) the Lender shall not have any duties, obligations or
liability under any of the Management
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Agreement Documents or duties by reason of this Agreement, nor shall the Lender
be obligated to perform any of the duties or obligations of the Assignor
thereunder, to make any payment, to make any inquiry as to the nature or
sufficiency of any payment received by the Assignor or the sufficiency of any
performance by any party under any such contract or agreement, or to take any
action to collect or enforce any claim for payment assigned hereunder.
(d) The Assignor shall at its sole cost and expense:
(i) Perform and observe all the terms and provisions of
the Management Agreement Documents to be performed or observed by it,
maintain the Management Agreement Documents in full force and effect,
and enforce the Management Agreement Documents in accordance with
their terms; and
(ii) Furnish to the Lender promptly upon receipt thereof
copies of all material notices, requests and other documents received
by the Assignor under or pursuant to the Management Agreement
Documents or any Employment Agreement, and from time to time (A)
furnish to the Lender such information and reports regarding the
Management Agreement Documents as the Lender may reasonably request
and (B) upon request of the Lender and upon the occurrence and during
the continuation of an Event of Default, make to each other party to
the Management Agreement Documents such demands and request for
information and reports or for action as the Assignor is entitled to
make under the Management Agreement Documents.
(e) The Assignor shall give the Lender prompt notice of the
commencement of all proceedings and investigations by or before any
governmental or nongovernmental body and all actions and proceedings in any
court or other tribunal or before any arbitrator against or in any other way
relating adversely to, or adversely affecting the Assignor or any of the
Collateral.
SECTION 4. PAYMENTS. So long as no Event of Default shall have
occurred and be continuing, the Assignor shall have the right to receive all
amounts paid or payable in connection with the Management Agreement Documents.
Upon and after the occurrence and continuation of any Event of Default, all
rights of the Assignor to receive any of the payments pursuant to the
immediately preceding sentence shall cease, and all such rights shall thereupon
become vested in the Lender, and the Lender shall have the sole and exclusive
right to receive and retain the payments which the Assignor would otherwise be
authorized to receive and retain pursuant to such sentence.
SECTION 5. ASSIGNOR'S RIGHT TO ENFORCE. So long as no Event of
Default shall have occurred and be continuing, the Lender will not exercise or
enforce, or seek to exercise or enforce, or avail itself of, any of the rights,
powers, privileges, authorizations and benefits assigned and transferred to the
Lender pursuant to this Agreement, and the Assignor may exercise or enforce, or
seek to exercise or enforce, such rights, powers, privileges, authorizations
and benefits in conformity with the provisions of this Agreement. If the
Assignor shall fail to perform or comply with any term or condition imposed
upon the Assignor under any of the Management Agreement Documents, or the
Assignor shall fail to exercise any right or remedy of the Assignor thereunder,
then, without waiving or releasing the Assignor from any of its
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obligations hereunder or under such Management Agreement Document, the Lender
may (but shall not obligated to) take any action the Lender deems necessary or
desirable to preserve and protect any of the Assignor's rights thereunder or
the Lender's rights thereunder.
SECTION 6. REMEDIES. Upon the occurrence and during the continuation
of an Event of Default, the Lender shall, at its election, without notice of
election and without demand, have the right to do any one or more of the
following acts, all of which are hereby authorized by the Assignor: (a)
exercise any or all of the rights available to a secured party under the UCC or
any other Applicable Law; and (b) exercise any or all of its rights and
remedies under the Credit Agreement and the other Loan Documents.
SECTION 7. LENDER NOT OBLIGATED. Notwithstanding any other provision
of this Assignment to the contrary, the Assignor expressly acknowledges and
agrees that it shall continue to observe and perform in accordance with the
terms of the Management Agreement Documents all of the conditions and
obligations therein contained to be observed and performed by it, and that
neither this Assignment, nor any action taken pursuant hereto, shall cause the
Lender to be under any obligation or liability in any respect whatsoever to any
party to any of the Management Agreement Documents or to any other Person for
the observance or performance of any of the representations, warranties,
conditions, covenants, agreements or terms contained in any of the Management
Agreement Documents or any other document, instrument or agreement relating
thereto.
SECTION 8. FURTHER ASSURANCES. At any time and from time to time,
upon the written request of the Lender, and at the sole expense of the
Assignor, the Assignor will promptly execute and deliver such further
instruments and documents and take such further action as the Lender may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted.
SECTION 9. RIGHTS CUMULATIVE. The rights and remedies of the Lender
under this Agreement are cumulative and not exclusive of any rights or remedies
which it would otherwise have. In exercising its rights and remedies the
Lender may be selective and no failure or delay by the Lender in exercising any
right shall operate as a waiver of it, nor shall any single or partial exercise
of any power or right preclude its other or further exercise or the exercise of
any other power or right.
SECTION 10. LENDER APPOINTED ATTORNEY-IN-FACT. The Assignor hereby
irrevocably appoints the Lender as the Assignor's attorney-in-fact, with full
authority in the place and stead of the Assignor and in the name of the
Assignor or otherwise, from time to time upon the occurrence and during the
continuation of an Event of Default in the Lender's discretion, to take any
action and to execute any instrument or document which the Lender may deem
necessary or advisable to accomplish the purposes of this Agreement and to
exercise any rights and remedies the Lender may have under this Agreement or
Applicable Law, including, without limitation: (i) to ask, demand, collect, sue
for, recover, compromise, receive and give acquittance and receipts for moneys
due and to become due under or in respect of any of the Collateral; (ii) to
receive, endorse, and collect any drafts or other instruments, documents and
chattel paper in connection with clause (i) above and (iii) to file any claims
or take any action or institute any proceedings
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<PAGE> 89
which the Lender may deem necessary or desirable for the collection of any of
the Collateral or otherwise to enforce the rights of the Lender with respect to
any of the Collateral. The power-of-attorney granted hereby is irrevocable and
coupled with an interest.
SECTION 11. EXPENSES. The Assignor will pay, within 10 days of
demand, all reasonable fees and expenses actually incurred by the Lender in
connection with (a) the collection or enforcement of the Obligations including
the reasonable fees and disbursements of counsel to the Lender actually
incurred by the Lender and (b) the exercise by the Lender of any right or
remedy granted to it under this Agreement if such exercise is done by, through
or with the assistance of any attorney.
SECTION 12. NOTICES. Notices, requests and other communications
required or permitted hereunder shall be given in accordance with the
applicable terms of the Guaranty.
SECTION 13. INDEMNIFICATION. The Assignor agrees to indemnify and
hold the Lender harmless from and against any claim, loss, damage, action,
cause of action, liability, cost and expense or suit of any kind or nature
whatsoever (an "Indemnified Claim"), brought against or incurred by the Lender
in any manner arising out of or, directly or indirectly, related to or
connected with this Agreement, including without limitation, the exercise by
the Lender of any of its rights and remedies under this Agreement or under any
of the Management Agreement Documents or any other action taken by the Lender
pursuant to the terms of this Agreement; provided, however, the Assignor shall
not be obligated to indemnify or hold harmless the Lender from any Indemnified
Claim to the extent that it results from the Lender's gross negligence or
willful misconduct. The Lender agrees to give the Assignor prompt notice of
any suit or cause of action brought against the Lender which is covered by this
Section.
SECTION 14. TERMINATION. Upon indefeasible payment in full of all of
the Obligations, this Agreement shall terminate.
SECTION 15. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which, taken
together, shall constitute but one and the same instrument.
SECTION 16. AMENDMENTS, ETC. No amendment or waiver of any provision
of this Agreement, nor consent to any departure by the Assignor herefrom, shall
in any event be effective unless the same shall be in writing and signed by the
parties hereto, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
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SECTION 17. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under Applicable Law, but if any provision of this Agreement shall be
prohibited by or invalid under Applicable Law, such provisions shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Agreement.
SECTION 18. INFORMATION/NEGATIVE COVENANTS. The Assignor shall keep
the Lender informed of all material facts bearing upon the Assignor's rights
and remedies under each of the Management Agreement Documents.
SECTION 19. GOVERNING LAW. THIS ASSIGNMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.
SECTION 20. BENEFITS. This Assignment shall be binding on, and
inure to the benefit of, the parties hereto and their respective successors and
permitted assigns.
SECTION 21. NO THIRD-PARTY BENEFICIARIES. This Assignment is solely
for the benefit of the parties hereto and their respective successors and
permitted assigns. There are no other Persons who are intended to be benefited
in any way whatsoever by this Assignment.
SECTION 22. DEFINITIONS. As used herein, the term "Obligations"
shall mean: (a) all obligations and indebtedness of the Assignor owing to the
Lender of every kind, nature and description, under or with respect to the
Guaranty, this Assignment or any of the other Loan Documents to which the
Assignor is a party, whether direct or indirect, absolute or contingent, due or
not due, contractual or tortious, liquidated or unliquidated, and whether or
not evidenced by any note; and (b) all renewals, modifications, extensions and
supplements to any of the foregoing. All other capitalized terms used herein
and not otherwise defined herein shall have the definitions given them in the
Credit Agreement.
[Signatures on following page]
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IN WITNESS WHEREOF, the Assignor has executed and delivered this
Collateral Assignment of Management Services Agreements under seal as of the
date first written above.
----------------------------------------
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
ATTEST:
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
Agreed to and Accepted:
NATIONSBANK, N.A. (SOUTH)
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
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SCHEDULE I
MANAGEMENT SERVICES AGREEMENTS
[To be provided]
C-9
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SCHEDULE II
EMPLOYMENT AGREEMENTS
[To be provided]
C-10
<PAGE> 94
EXHIBIT D
FORM OF GUARANTY
THIS GUARANTY dated as of ____________, _____ (this "Guaranty"),
executed by [NAME OF LOAN PARTY], a _________________ organized under the laws
of _____________ (the "Guarantor"), in favor of NATIONSBANK, N.A. (SOUTH) (the
"Lender").
WHEREAS, Physicians' Specialty Corp. (the "Borrower") and the Lender
have entered into that certain Credit Agreement dated as of April ___, 1997 (as
amended, supplemented, restated or otherwise modified from time to time in
accordance with its terms, the "Credit Agreement"), pursuant to which the
Lender has agreed, subject to the terms thereof, to extend certain financial
accommodations to the Borrower; and
WHEREAS, the Borrower owns, directly or indirectly, all of the issued
and outstanding capital stock of, or other equity interests in, the Guarantor;
WHEREAS, the Guarantor and the other Subsidiaries of the Borrower,
though separate legal entities, are mutually dependent on each other in the
conduct of their respective businesses as an integrated operation and have
determined it to be in their mutual best interests to obtain financing from the
Lender through their collective efforts;
WHEREAS, the Guarantor acknowledges that it will receive direct and
indirect benefits from the Lender making such financial accommodations
available to the Borrower under the Credit Agreement and, accordingly, the
Guarantor is willing to guarantee the Borrower's obligations to the Lender on
the terms and conditions contained herein; and
WHEREAS, the Guarantor's execution and delivery of this Guaranty is
one of the conditions precedent to the Lender making, or continuing to make,
such financial accommodations to the Borrower;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Guarantor, the Guarantor
agrees as follows:
SECTION 1. GUARANTY. The Guarantor hereby absolutely, irrevocably
and unconditionally guaranties the due and punctual payment and performance
when due, whether at stated maturity, by acceleration or otherwise, of all of
the following (collectively referred to as the "Guarantied Obligations"): (a)
all indebtedness and obligations owing by the Borrower to the Lender under or
in connection with the Credit Agreement and any other Loan Document to which
the Borrower is a party, including without limitation, the repayment of all
principal of the Loans and the payment of all interest, fees, charges,
reasonable attorneys' fees and other amounts payable to the Lender thereunder
or in connection therewith; (b) any and all extensions, renewals,
modifications, amendments or substitutions of the foregoing; (c) all expenses,
including without limitation, reasonable attorneys' fees and disbursements,
that are actually incurred by the Lender
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<PAGE> 95
in the enforcement of any of the foregoing or any obligation of the Guarantor
hereunder; and (d) all other Obligations of the Borrower.
SECTION 2. GUARANTY OF PAYMENT AND NOT OF COLLECTION. This Guaranty
is a guaranty of payment, and not of collection, and a debt of the Guarantor
for its own account. Accordingly, the Lender shall not be obligated or
required before enforcing this Guaranty against the Guarantor: (a) to pursue
any right or remedy the Lender may have against any other Loan Party or any
other Person or commence any suit or other proceeding against any other Loan
Party or any other Person in any court or other tribunal; (b) to make any claim
in a liquidation or bankruptcy of any other Loan Party or any other Person; or
(c) to make demand of any other Loan Party or any other Person or to enforce or
seek to enforce or realize upon any collateral security held by the Lender
which may secure any of the Guarantied Obligations. In this connection, the
Guarantor hereby waives the right of the Guarantor to require any holder of the
Guarantied Obligations to take action against the Borrower as provided in
Official Code of Georgia Annotated Section 10-7-24.
SECTION 3. GUARANTY ABSOLUTE. The Guarantor guarantees that the
Guarantied Obligations will be paid strictly in accordance with the terms of
the documents evidencing the same, regardless of any Applicable Law now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Lender with respect thereto. The liability of the Guarantor
under this Guaranty shall be absolute and unconditional in accordance with its
terms and shall remain in full force and effect without regard to, and shall
not be released, suspended, discharged, terminated or otherwise affected by,
any circumstance or occurrence whatsoever, including without limitation, the
following (whether or not the Guarantor consents thereto or has notice
thereof):
(a) (i) any change in the amount, interest rate or due date or
other term of any of the Guarantied Obligations, (ii) any change in the time,
place or manner of payment of all or any portion of the Guarantied Obligations,
(iii) any amendment or waiver of, or consent to the departure from or other
indulgence with respect to, the Credit Agreement, any other Loan Document, or
any other document or instrument evidencing or relating to any Guarantied
Obligations, or (iv) any waiver, renewal, extension, addition, or supplement
to, or deletion from, or any other action or inaction under or in respect of,
the Credit Agreement, any of the other Loan Documents, or any other documents,
instruments or agreements relating to the Guarantied Obligations or any other
instrument or agreement referred to therein or evidencing any Guarantied
Obligations or any assignment or transfer of any of the foregoing;
(b) any lack of validity or enforceability of the Credit
Agreement, any of the other Loan Documents, or any other document, instrument
or agreement referred to therein or evidencing any Guarantied Obligations or
any assignment or transfer of any of the foregoing;
(c) any furnishing to the Lender of any security for the
Guarantied Obligations, or any sale, exchange, release or surrender of, or
realization on, any collateral securing any of the Guarantied Obligations;
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<PAGE> 96
(d) any settlement or compromise of any of the Guarantied
Obligations, any security therefor, or any liability of any other party with
respect to the Guarantied Obligations, or any subordination of the payment of
the Guarantied Obligations to the payment of any other liability of the
Borrower or any other Loan Party;
(e) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceeding relating to the
Guarantor, any other Loan Party or any other Person, or any action taken with
respect to this Guaranty by any trustee or receiver, or by any court, in any
such proceeding;
(f) any act or failure to act by the Borrower or any other Person
which may adversely affect the Guarantor's subrogation rights, if any, against
the Borrower to recover payments made under this Guaranty;
(g) any application of sums paid by any other Loan Party or any
other Person with respect to the liabilities of the Borrower to the Lender,
regardless of what liabilities of such Borrower remain unpaid;
(h) any defect, limitation or insufficiency in the borrowing
powers of the Borrower or in the exercise thereof; or
(i) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Guarantor hereunder.
SECTION 4. ACTION WITH RESPECT TO OBLIGATIONS. The Lender may, at
any time and from time to time, without the consent of, or notice to, the
Guarantor, and without discharging the Guarantor from its obligations hereunder
take any and all actions described in Section 3. and may otherwise: (a) amend,
modify, alter or supplement the terms of any of the Guarantied Obligations,
including, but not limited to, extending or shortening the time of payment of
any of the Guarantied Obligations or changing the interest rate that may accrue
on any of the Guarantied Obligations; (b) amend, modify, alter or supplement
the Credit Agreement or any other Loan Document; (c) sell, exchange, release or
otherwise deal with all, or any part, of any collateral securing any of the
Guarantied Obligations; (d) release any Loan Party or other Person liable in
any manner for the payment or collection of the Guarantied Obligations; (e)
exercise, or refrain from exercising, any rights against any other Loan Party
or any other Person; and (f) apply any sum, by whomsoever paid or however
realized, to the Guarantied Obligations in such order as the Lender shall elect.
SECTION 5. REPRESENTATIONS AND WARRANTIES. The Guarantor hereby
makes to the Lender all of the representations and warranties made by the
Borrower with respect to or in any way relating to the Guarantor in the Credit
Agreement and the other Loan Documents, as if the same were set forth herein in
full.
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SECTION 6. COVENANTS. The Guarantor will comply with all covenants
which the Borrower is to cause the Guarantor to comply with under the terms of
the Credit Agreement or any of the other Loan Documents.
SECTION 7. WAIVER. The Guarantor, to the fullest extent permitted by
Applicable Law, hereby waives notice of acceptance hereof or any presentment,
demand, protest or notice of any kind, and any other act or thing, or omission
or delay to do any other act or thing, which in any manner or to any extent
might vary the risk of the Guarantor or which otherwise might operate to
discharge the Guarantor from its obligations hereunder.
SECTION 8. INABILITY TO ACCELERATE. If the Lender is prevented under
Applicable Law or otherwise from demanding or accelerating payment of any of
the Guarantied Obligations by reason of any automatic stay or otherwise, the
Lender shall be entitled to receive from the Guarantor, upon demand therefor,
the sums which otherwise would have been due had such demand or acceleration
occurred.
SECTION 9. REINSTATEMENT OF OBLIGATIONS. If claim is ever made on
the Lender for repayment or recovery of any amount or amounts received in
payment or on account of any of the Guarantied Obligations, and the Lender
repays all or part of said amount by reason of (a) any judgment, decree or
order of any court or administrative body of competent jurisdiction, or (b) any
settlement or compromise of any such claim effected by the Lender with any such
claimant (including the Borrower or a trustee in bankruptcy for the Borrower),
then and in such event the Guarantor agrees that any such judgment, decree,
order, settlement or compromise shall be binding on it, notwithstanding any
revocation hereof or the cancellation of the Credit Agreement, any of the other
Loan Documents, or any other instrument evidencing any liability of the
Borrower, and the Guarantor shall be and remain liable to the Lender for the
amounts so repaid or recovered to the same extent as if such amount had never
originally been paid to the Lender.
SECTION 10. SUBROGATION. Upon the making by the Guarantor of any
payment hereunder for the account of the Borrower, the Guarantor shall be
subrogated to the rights of the payee against such Borrower; provided, however,
that the Guarantor shall not enforce any right or receive any payment by way of
subrogation or otherwise take any action in respect of any other claim or cause
of action the Guarantor may have against the Borrower arising by reason of any
payment or performance by the Guarantor pursuant to this Guaranty, unless and
until all of the Guarantied Obligations have been indefeasibly paid and
performed in full. If any amount shall be paid to the Guarantor on account of
or in respect of such subrogation rights or other claims or causes of action,
the Guarantor shall hold such amount in trust for the benefit of the Lender and
shall forthwith pay such amount to the Lender to be credited and applied
against the Guarantied Obligations, whether matured or unmatured, in accordance
with the terms of the Credit Agreement or to be held by the Lender as
collateral security for any Guarantied Obligations existing.
SECTION 11. PAYMENTS FREE AND CLEAR. All sums payable by the
Guarantor hereunder, whether of principal, interest, fees, expenses, premiums
or otherwise, shall be paid in full, without set-off or counterclaim or any
deduction or withholding whatsoever (including any
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Taxes), and if the Guarantor is required by Applicable Law or by any
Governmental Authority to make any such deduction or withholding, the Guarantor
shall pay to the Lender such additional amount as will result in the receipt by
the Lender of the full amount payable hereunder had such deduction or
withholding not occurred or been required.
SECTION 12. SET-OFF. In addition to any rights now or hereafter
granted under any of the other Loan Documents or Applicable Law and not by way
of limitation of any such rights, the Guarantor hereby authorizes the Lender,
at any time or from time to time, without any prior notice to the Guarantor or
to any other Person, any such notice being hereby expressly waived, to set-off
and to appropriate and to apply any and all deposits (general or special,
including, but not limited to, indebtedness evidenced by certificates of
deposit, whether matured or unmatured) and any other indebtedness at any time
held or owing by the Lender, or any affiliate of the Lender, to or for the
credit or the account of the Guarantor against and on account of any of the
Guarantied Obligations, although such obligations shall be contingent or
unmatured.
SECTION 13. SUBORDINATION. The Guarantor hereby expressly covenants
and agrees for the benefit of the Lender that all obligations and liabilities
of the Borrower to the Guarantor of whatever description, including without
limitation, all intercompany receivables of the Guarantor from the Borrower
(collectively, the "Junior Claims") shall be subordinate and junior in right of
payment to all Guarantied Obligations. If an Event of Default shall have
occurred and be continuing, then the Guarantor shall not accept any direct or
indirect payment (in cash, property, securities by setoff or otherwise) from
the Borrower on account of or in any manner in respect of any Junior Claim
until all of the Guarantied Obligations have been indefeasibly paid in full.
SECTION 14. AVOIDANCE PROVISIONS. It is the intent of the Guarantor
and the Lender that in any Proceeding, the Guarantor's maximum obligation
hereunder shall equal, but not exceed, the maximum amount which would not
otherwise cause the obligations of the Guarantor hereunder (or any other
obligations of the Guarantor to the Lender) to be avoidable or unenforceable
against the Guarantor in such Proceeding as a result of Applicable Law,
including without limitation, (a) Section 548 of the Bankruptcy Code of 1978,
as amended (the "Bankruptcy Code") and (b) any state fraudulent transfer or
fraudulent conveyance act or statute applied in such Proceeding, whether by
virtue of Section 544 of the Bankruptcy Code or otherwise. The Applicable Laws
under which the possible avoidance or unenforceability of the obligations of
the Guarantor hereunder (or any other obligations of the Guarantor to the
Lender) shall be determined in any such Proceeding are referred to as the
"Avoidance Provisions". Accordingly, to the extent that the obligations of the
Guarantor hereunder would otherwise be subject to avoidance under the Avoidance
Provisions, the maximum Guarantied Obligations for which the Guarantor shall be
liable hereunder shall be reduced to that amount which, as of the time any of
the Guarantied Obligations are deemed to have been incurred under the Avoidance
Provisions, would not cause the obligations of the Guarantor hereunder (or any
other obligations of the Guarantor to the Lender), to be subject to avoidance
under the Avoidance Provisions. This Section is intended solely to preserve
the rights of the Lender hereunder to the maximum extent that would not cause
the obligations of the Guarantor hereunder to be subject to avoidance under the
Avoidance Provisions, and neither the Guarantor nor any other Person shall have
any right or claim under this Section as against the Lender that would not
otherwise be available to such Person under the Avoidance Provisions.
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SECTION 15. INFORMATION. The Guarantor assumes all responsibility
for being and keeping itself informed of the financial condition of the Loan
Parties, and of all other circumstances bearing upon the risk of nonpayment of
any of the Guarantied Obligations and the nature, scope and extent of the risks
that the Guarantor assumes and incurs hereunder, and agrees that neither the
Lender nor any Lender shall have any duty whatsoever to advise the Guarantor of
information regarding such circumstances or risks.
SECTION 16. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.
SECTION 17. DISPUTE RESOLUTION. ANY CONTROVERSY OR CLAIM BETWEEN THE
GUARANTOR AND THE LENDER, INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR
RELATING TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT, INCLUDING ANY CLAIM BASED
ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION
IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE
APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION
OF COMMERCIAL DISPUTES OF JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC.
(J.A.M.S.), OR THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION
ASSOCIATION, AS APPLICABLE, AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE
EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY
ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY
TO THIS GUARANTY MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED
PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS
GUARANTY APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE CITY
OF THE GUARANTOR'S DOMICILE AT THE TIME OF THIS GUARANTY'S EXECUTION AND
ADMINISTERED BY J.A.M.S. OR THE AMERICAN ARBITRATION ASSOCIATION AS AGREED BY
THE PARTIES. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE
DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR(S) SHALL ONLY, UPON A SHOWING
OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN
ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS AGREEMENT SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS GUARANTY; OR (II) BE A
WAIVER BY THE LENDER OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR
ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE LENDER
HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF,
OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR
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(C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT
LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A
RECEIVER. THE LENDER MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
GUARANTY. NEITHER THE EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR
MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES
SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN
ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM
OCCASIONING RESORT TO SUCH REMEDIES.
SECTION 18. LOAN ACCOUNTS. The Lender may maintain books and
accounts setting forth the amounts of principal, interest and other sums paid
and payable with respect to the Guarantied Obligations, and in the case of any
dispute relating to any of the outstanding amount, payment or receipt of any of
the Guarantied Obligations or otherwise, the entries in such books and accounts
shall, absent manifest error, constitute conclusive evidence of the outstanding
amount of such Guarantied Obligations and the amounts paid and payable with
respect thereto. The failure of the Lender to maintain such books and accounts
shall not in any way relieve or discharge the Guarantor of any of its
obligations hereunder.
SECTION 19. WAIVER OF REMEDIES. No delay or failure on the part of
the Lender in the exercise of any right or remedy it may have against the
Guarantor hereunder or otherwise shall operate as a waiver thereof, and no
single or partial exercise by the Lender of any such right or remedy shall
preclude other or further exercise thereof or the exercise of any other such
right or remedy.
SECTION 20. TERMINATION. This Guaranty shall remain in full force
and effect until the indefeasible payment in full of the Guarantied Obligations
and the termination or cancellation of the Credit Agreement.
SECTION 21. SUCCESSORS AND ASSIGNS. Each reference herein to the
Lender shall be deemed to include the Lender's permitted successors and assigns
(including, but not limited to, any holder of the Guarantied Obligations) in
whose favor the provisions of this Guaranty also shall inure, and each
reference herein to the Guarantor shall be deemed to include the Guarantor's
successors and assigns, upon whom this Guaranty also shall be binding. The
Lender may, in accordance with the applicable provisions of the Credit
Agreement, assign, transfer or sell any Guarantied Obligations, or grant or
sell participations in any Guarantied Obligations, to any Person without the
consent of, or notice to, the Guarantor and without releasing, discharging or
modifying the Guarantor's obligations hereunder. The Guarantor hereby consents
to the delivery by the Lender to any assignee or participant (or any
prospective assignee or participant) of any financial or other information
regarding the Guarantor to the extent permitted by and in accordance with the
Credit Agreement, including, without limitation, the confidentiality provisions
therein. The Guarantor may not assign or transfer its obligations hereunder to
any Person.
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SECTION 22. AMENDMENTS. This Guaranty may not be amended except in
writing signed by the Lender and the Guarantor.
SECTION 23. PAYMENTS. All payments to be made by the Guarantor
pursuant to this Guaranty shall be made in Dollars, in immediately available
funds to the Lender at its Lending Office, not later than 11:00 a.m., on the
date 10 days after demand therefor.
SECTION 24. NOTICES. All notices, requests and other communications
hereunder shall be in writing (including facsimile transmission or similar
writing) and shall be given (a) to the Guarantor at its address set forth below
its signature hereto, (b) to the Lender at its address for notices provided for
in the Credit Agreement, or (c) as to each such party at such other address as
such party shall designate in a written notice to the other party. Each such
notice, request or other communication shall be effective (i) if mailed, when
received; (ii) if telecopied, when transmitted; or (iii) if hand delivered,
when delivered; provided, however, that any notice of a change of address for
notices shall not be effective until received.
SECTION 25. SEVERABILITY. In case any provision of this Guaranty
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 26. HEADINGS. Section headings used in this Guaranty are for
convenience only and shall not affect the construction of this Guaranty.
SECTION 27. EXPENSES. The Guarantor will pay, within 10 days of
demand, all reasonable fees and expenses actually incurred by the Lender in
connection with (a) the collection or enforcement of the Guarantied Obligations
including the reasonable fees and disbursements of counsel to the Lender
actually incurred by the Lender and (b) the exercise by the Lender of any right
or remedy granted to it under this Guaranty if such exercise is done by,
through or with the assistance of any attorney.
SECTION 28. COUNTERPARTS. This Assignment may be executed in several
counterparts, each of which shall be an original and all of which, taken
together, shall constitute but one and the same instrument.
SECTION 29. DEFINITIONS. (a) For the purposes of this Guaranty:
"Proceeding" means any of the following: (i) a voluntary or
involuntary case concerning the Guarantor shall be commenced under the
Bankruptcy Code of 1978, as amended; (ii) a custodian (as defined in such
Bankruptcy Code or any other applicable bankruptcy laws) is appointed for, or
takes charge of, all or any substantial part of the property of the Guarantor;
(iii) any other proceeding under any Applicable Law, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding-up or composition
for adjustment of debts, whether now or hereafter in effect, is commenced
relating to the Guarantor; (iv) the Guarantor is adjudicated insolvent or
bankrupt; (v) any order of relief or other order approving any such case or
proceeding is entered by a court of competent jurisdiction; (vi) the Guarantor
makes a general
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assignment for the benefit of creditors; (vii) the Guarantor shall fail to pay,
or shall state that it is unable to pay, or shall be unable to pay, its debts
generally as they become due; (viii) the Guarantor shall call a meeting of its
creditors with a view to arranging a composition or adjustment of its debts;
(ix) the Guarantor shall by any act or failure to act indicate its consent to,
approval of or acquiescence in any of the foregoing; or (x) any corporate
action shall be taken by the Guarantor for the purpose of effecting any of the
foregoing.
(b) Terms not otherwise defined herein are used herein with the
respective meanings given them in the Credit Agreement.
[Signature on Next Page]
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IN WITNESS WHEREOF, the Guarantor has duly executed and delivered this
Guaranty as of the date and year first written above.
[GUARANTOR]
By:
-------------------------------------
Name
---------------------------------
Title:
-------------------------------
Address for Notices:
----------------------------------------
----------------------------------------
Attention:
------------------------------
Telecopier:
-----------------------------
Telephone:
------------------------------
Agreed to and Accepted:
NATIONSBANK, N.A. (SOUTH)
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
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EXHIBIT E
FORM OF NOTICE OF BORROWING
____________, ____
NationsBank, N.A. (South)
600 Peachtree Street, 18th Floor
Atlanta, Georgia 30308
Attention: Laura B. Gray
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement dated as of April
___, 1997 (as it may be amended, modified, restated or supplemented from time
to time, the "Credit Agreement"; capitalized terms used herein, and not
otherwise defined herein, shall have their respective defined meanings as set
forth in the Credit Agreement) by and between Physicians' Specialty Corp. (the
"Borrower") and NationsBank, N.A. (South) (the "Lender").
1. Pursuant to Section 2.1 or 2.2, as applicable, of the Credit
Agreement, the Borrower hereby requests that the Lender make a
Loan to the Borrower in an amount equal to $________________.
2. The Borrower requests that the Loan be made available to the
Borrower on ____________, _____.
3. The Borrower hereby requests that such Loan be of the
following Type:
[CHECK ONE BOX ONLY]
Base Rate Loan
LIBOR Loan, with an initial Interest Period for a
duration of:
[CHECK ONE BOX ONLY] one month
two months
three months
4. The Lender is instructed to make such proceeds available to
the Borrower as follows:____________________________.
5. The Borrower represents and warrants to the Lender that the
proceeds of the Loan requested hereby are to be used in
accordance with Section 7.8 of the Credit Agreement.
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6. The Borrower further represents and warrants that as of the
date hereof, the statements set forth in Section 5.2(a) and
(b) of the Credit Agreement are true and correct.
If notice of this Loan has been given previously by telephone, then
this notice should be considered a written confirmation of such telephone
notice as required by Section 2.1(b) of the Credit Agreement.
PHYSICIANS' SPECIALTY CORP.
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
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EXHIBIT F
FORM OF NOTICE OF CONTINUATION
____________, ____
NationsBank, N.A. (South)
600 Peachtree Street, 18th Floor
Atlanta, Georgia 30308
Attention: Laura B. Gray
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement dated as of April
___, 1997 (as it may be amended, modified, restated or supplemented from time
to time, the "Credit Agreement"; capitalized terms used herein, and not
otherwise defined herein, shall have their respective defined meanings as set
forth in the Credit Agreement) between Physicians' Specialty Corp. (the
"Borrower") and NationsBank, N.A. (South) (the "Lender").
Pursuant to Section 2.6 of the Credit Agreement, the Borrower hereby
gives notice, irrevocably, that the Borrower hereby requests a Continuation of
a LIBOR Loan under the Credit Agreement, and in that connection sets forth
below the information relating to such Continuation (the "Proposed
Continuation") as required by Section 2.6 of the Credit Agreement:
1. The requested date of such Continuation is ____________, ____.
2. The aggregate principal amount of the Loan subject to the
requested Continuation is $________________________ and the
portion of such principal amount subject to such Continuation
is $__________________________.
3. The current Interest Period of the Loan subject to such
Continuation ends on ________________, ____.
4. The duration of the Interest Period for the Loan or portion
thereof subject to such Continuation is:
[CHECK ONE BOX ONLY] one month
two months
three months
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<PAGE> 107
5. The Company further represents and warrants that as of the
date hereof, the statements set forth in Sections 5.2(a) and
(b) of the Credit Agreement are true and correct.
If notice of this Proposed Continuation has been given previously by
telephone, then this notice should be considered a written confirmation of such
telephone notice as required by Section 2.6 of the Credit Agreement.
PHYSICIANS' SPECIALTY CORP.
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
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<PAGE> 108
EXHIBIT G
FORM OF NOTICE OF CONVERSION
____________, ____
NationsBank, N.A. (South)
600 Peachtree Street, 18th Floor
Atlanta, Georgia 30308
Attention: Laura B. Gray
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement dated as of April
___, 1997 (as it may be amended, modified, restated or supplemented from time
to time, the "Credit Agreement"; capitalized terms used herein, and not
otherwise defined herein, shall have their respective defined meanings as set
forth in the Credit Agreement) between Physicians' Specialty Corp. (the
"Borrower") and NationsBank, N.A. (South) (the "Lender").
Pursuant to Section 2.7 of the Credit Agreement, the Borrower hereby
gives you notice, irrevocably, that the Borrower hereby requests a Conversion
of Loans of one Type into Loans of another Type under the Credit Agreement, and
in that connection sets forth below the information relating to such Conversion
(the "Proposed Conversion") as required by Section 2.7 of the Credit Agreement:
1. The requested date of such Conversion is ____________, _____.
2. The Type of Loan to be Converted pursuant hereto is currently
a:
[CHECK ONE BOX ONLY] Base Rate Loan
LIBOR Loan
3. The aggregate principal amount of the Loan subject to the
requested Conversion is $________________________ and the
portion of such principal amount subject to such Conversion is
$__________________________.
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4. The amount of such Loan to be so Converted is to be converted
into a Loan of the following Type:
[CHECK ONE BOX ONLY]
Base Rate Loan
LIBOR Loan, with an initial Interest Period for a
duration of:
[CHECK ONE BOX ONLY] one month
two months
three months
5. The Company further represents and warrants that as of the
date hereof, the statements set forth in Sections 5.2(a) and
(b) of the Credit Agreement are true and correct.
If notice of this Proposed Conversion has been given previously by
telephone, then this notice should be considered a written confirmation of such
telephone notice as required by Section 2.7 of the Credit Agreement.
PHYSICIANS' SPECIALTY CORP.
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
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<PAGE> 110
EXHIBIT H
FORM OF SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT dated as of __________, _____ by and
among __________________ (the "Junior Creditor") and NATIONSBANK, N.A. (SOUTH)
(the "Lender").
WHEREAS, the Lender and Physicians' Specialty Corp. (the "Borrower")
have entered into that certain Credit Agreement dated as of April ___, 1997 (as
the same may be amended, supplemented, restated or otherwise modified from time
to time in accordance with its terms, the "Credit Agreement"), subject to the
terms of which the Lender has agreed to make available to the Borrower a
$20,000,000 credit facility;
WHEREAS, [PSC Management Corp.] (the "Debtor") has guarantied the
Borrower's obligations to the Lender on the terms and conditions contained in
that certain Guaranty dated as of __________, ____ (as the same may be amended,
supplemented, restated or otherwise modified from time to time in accordance
with its terms, the "Guaranty"), executed by the Debtor in favor of the Lender;
WHEREAS, as security for the indebtedness and other obligations owing
by the Debtor to the Lender under the Guaranty and the other documents,
instruments and agreements executed by the Debtor in favor of the Lender in
connection with the Guaranty, the Debtor has granted to the Lender a security
interest in certain of the Debtor's assets;
WHEREAS, the Junior Creditor has extended certain financial
accommodations to the Debtor as evidenced by that certain [Promissory Note]
dated ________, ____ executed by the Debtor, payable to the order of the Junior
Creditor and in the original principal amount of $__________ (as the same may
be amended, supplement, restated or otherwise modified from time to time in
accordance with its terms, and all notes or other instruments given in
replacement or substitution thereof, the "Subordinated Note");
WHEREAS, as security for the indebtedness and other obligations owing
by the Debtor to the Junior Creditor under the Subordinated Note and the other
documents, instruments and agreements executed by the Debtor in favor of the
Junior Creditor in connection with the Subordinated Note, the Debtor has
granted to the Junior Creditor a security interest in certain of the Debtor's
assets; and
WHEREAS, it is a condition precedent to the Lender's continued
extension of credit to the Borrower under the Credit Agreement that the Junior
Creditor execute and deliver this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto agree as follows:
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<PAGE> 111
Section 1. Subordination of Debt. The Junior Creditor agrees and
covenants that, to the extent set forth herein and on the terms and conditions
set forth herein, the Subordinated Debt is and shall be subordinate in right of
payment and collection to the payment in full of all of the Senior Debt. The
Debtor shall not make, and the Junior Creditor shall not accept, any payment
with respect to, or on account of, any of the Subordinated Debt; provided,
however, so long as the Junior Creditor shall have not received a notice from
the Lender that an Event of Default under and as defined in the Credit
Agreement has occurred and is continuing, the Debtor may pay, and the Junior
Creditor may receive, regularly scheduled payments of interest and principal on
the Subordinated Note, as such Subordinated Note may be amended with the
consent of the Lender. In no event shall the Junior Creditor be entitled to
receive any prepayments of principal or interest in respect of any of the
Subordinated Debt.
Section 2. Subordination of Security Interest. Irrespective of the
order of the execution of any security agreement or the filing of any financing
statements or the lapse thereof or the physical possession of any collateral,
or of the order or method of attachment or perfection of any security interest
or other lien in the Lender Collateral or the Junior Creditor Collateral, and
irrespective of anything contained in any filing or agreement to which the
Lender or the Junior Creditor may now or hereinafter be a party, all of the
rights, claims, liens and security interests, if any, of the Junior Creditor,
whether now existing or hereinafter acquired, arising in any of the Lender
Collateral shall be and are hereby made subject, subordinate and inferior to
the rights, claims, liens and security interests of the Lender, whether now
existing or hereinafter acquired, arising in any of the Lender Collateral.
Accordingly, the proceeds of any repossession, setoff, foreclosure or other
judicial sale or any other disposition of the Lender Collateral shall be
applied first to the payment in full of all amounts owing to the Lender with
respect to the Senior Debt.
Section 3. No Action. Unless and until the Senior Debt shall have
been paid in full, the Junior Creditor shall not, without the prior written
consent of the Lender and whether or not an Event of Default under and as
defined in the Credit Agreement shall have occurred and be continuing, commence
any action or proceeding seeking in any way to collect on the Subordinated
Debt, or commence, or join with any other creditor (other than the Lender) in
commencing, a Bankruptcy Proceeding and if taken any such action shall be
ineffective or if in process of being taken shall be terminated and rescinded.
Not in limitation of the foregoing, the Junior Creditor shall not demand,
institute an action for, take, receive or repossess from the Debtor or any
other person whether by court proceeding, self-help, repossession, setoff or
otherwise, the whole or any portion of the Junior Creditor Collateral or
foreclose upon the whole or any portion of the Junior Creditor Collateral,
whether by judicial action, public or private sale, by notification of account
debtors, by power of sale or otherwise, without first obtaining the prior
written consent of the Lender.
Section 4. Bankruptcy of Debtor. In the event of any Bankruptcy
Proceeding, the Junior Creditor will, at the request of the Lender, file any
claim, proof of claim, or other instrument of similar character necessary to
enforce the obligations of the Debtor in respect of the Subordinated Debt and
will hold in trust for the Lender and assign, transfer and pay over to the
Lender, in the form received, to be applied on the Senior Debt, any and all
monies, dividends or other assets received in any such Bankruptcy Proceeding on
account of the Subordinated Debt, unless and until the Senior Debt shall have
been paid in full. If the Junior Creditor shall fail to
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take such action requested by the Lender, the Lender may, as attorney-in-fact
for the Junior Creditor, take such action on behalf of the Junior Creditor, and
the Junior Creditor hereby appoints the Lender and any of its officers as
attorney-in-fact for the Junior Creditor to demand, sue for, collect and
receive any and all such monies, dividends or other assets and give acquittance
therefor and to file any claim, proof of claim or other instrument of similar
character and to take any such action in any Bankruptcy Proceeding in the
Lender's own name or in the name of the Junior Creditor as the Lender may deem
necessary or advisable for the enforcement of this Agreement. The Junior
Creditor will execute and deliver to the Lender such other and further powers
of attorney or other instruments as the Lender may request in order to
accomplish the foregoing. The Junior Creditor further grants to the Lender an
irrevocable proxy to exercise any voting rights the Junior Creditor may have
with respect to the approval or disapproval of a plan of reorganization of the
Debtor proposed by any person or class of persons in any Bankruptcy Proceeding.
Section 5. Warranties and Representations of the Junior Creditor.
The Junior Creditor represents and warrants to the Lender that: (a) no part of
the Subordinated Debt is evidenced by any instrument other than the
Subordinated Note; (b) except for the Junior Creditor's security interest in
the Junior Creditor Collateral, none of the Subordinated Debt is secured by any
security interest, lien or other encumbrance in any of the assets of the Debtor
or any other person or entity; (c) the Junior Creditor is the lawful owner of
the Subordinated Debt; (d) the Junior Creditor has not assigned or transferred
any of the Subordinated Debt, or any interest therein; (e) the Junior Creditor
has not given any subordination in respect of the Subordinated Debt; and (f) no
default is in existence with respect to the Subordinated Debt.
Section 6. Covenants. For so long as this Agreement is in effect the
Junior Creditor agrees that it will not: (a) accept any instrument, security or
other writing evidencing any part of the Subordinated Debt other than the
Subordinated Note, (b) amend, alter or modify any provision of the Subordinated
Note without the prior written consent of the Lender or (c) except for the
Junior Creditor's security interest in the Junior Creditor Collateral, accept
any security interest, lien or other encumbrance in any of the assets of the
Debtor or any other person or entity as security for any of the Subordinated
Debt.
Section 7. Turnover of Prohibited Transfers. If the Junior Creditor
shall receive any payment or other transfer of property which it is not
entitled to receive or accept under the terms hereof, the Junior Creditor shall
forthwith deliver same to the Lender in the form received (together with any
endorsement necessary to effect a transfer of all rights therein to the Lender)
for application to the Senior Debt. The Junior Creditor irrevocably authorizes
the Lender to supply any required endorsement or assignment which may have been
omitted. Until so delivered any such payment or property shall be held by the
Junior Creditor in trust for the Lender and shall not be commingled with other
funds or property of the Junior Creditor.
Section 8. Waivers. To the fullest extent permitted by law, the
Junior Creditor each hereby waives the right to require the Lender to marshal
any assets, or to enforce any security interest or lien the Lender may now or
hereafter have in any collateral securing the Senior Debt or to pursue any
claim it may have against any guarantor of the Senior Debt, as a condition to
the Lender's entitlement to receive any payment on account of the Subordinated
Debt. The Lender
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may, at any time and from time to time, without the consent of or notice to the
Junior Creditor and without incurring any responsibility or liability to the
Junior Creditor and without impairing or releasing the obligations of the
Junior Creditor hereunder: (a) change the manner, place or terms of payment or
change or extend the time of payment of or renew or alter the Senior Debt or
any portion thereof; (b) sell, exchange, release or otherwise deal with any
collateral or any other property by whomsoever at any time pledged or mortgaged
to secure, or however securing, the Senior Debt or any portion thereof; (c)
release anyone liable in any manner for the payment or collection of the Senior
Debt or any portion thereof; (d) exercise or refrain from exercising any rights
against the Debtor and others; and (e) apply any sums by whomsoever paid or
however realized to the Senior Debt or any portion thereof.
Section 9. Validity of Subordinated Debt. This Agreement defines the
relative rights of the Junior Creditor and the Lender. Nothing in this
Agreement shall impair, as between the Debtor and the Junior Creditor, the
obligation of the Debtor, which is absolute and unconditional, to pay the
Subordinated Debt in accordance with its terms, except as payment thereof may
be postponed or otherwise directed in accordance with this Agreement.
Section 10. Specific Performance. In addition to any other remedies
available to the Lender hereunder or otherwise, at any time the Junior Creditor
fails to comply with any provision of this Agreement applicable to the Junior
Creditor, the Lender may demand specific performance of this Agreement. The
Junior Creditor hereby irrevocably waives any defense based on the adequacy of
a remedy at law that might be asserted as a bar to such remedy of specific
performance. If the Junior Creditor, in violation of this Agreement, shall
institute or participate in any action, suit or proceeding against the Debtor,
the Debtor may interpose as a defense or dilatory plea this Agreement and the
Lender is irrevocably authorized to intervene and to interpose such defense or
plea in the Debtor's name.
Section 11. Indulgences Not Waivers. Neither the failure nor any
delay on the part of the Lender to exercise any right, remedy, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver by a party hereunder shall be
effective unless it is in writing and signed by the party making such waiver,
and then only to the extent specifically stated in such writing.
Section 12. Duration. This Agreement shall become effective when
executed by the Debtor and the Junior Creditor and accepted by the Lender, and,
when so accepted, shall constitute a continuing agreement of subordination, and
shall remain in effect until all of the Senior Debt has been paid in full.
Section 13. LITIGATION. IN THE EVENT OF ANY LITIGATION WITH RESPECT
TO ANY MATTER CONCERNED WITH THIS AGREEMENT OR THE SENIOR DEBT, THE JUNIOR
CREDITOR AND THE LENDER EACH HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY. THE
JUNIOR CREDITOR HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE COURTS
OF THE STATE OF GEORGIA AND OF ANY FEDERAL COURT LOCATED IN THE STATE OF
GEORGIA, IN CONNECTION WITH
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ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY OR ALL OF THE SENIOR
DEBT OR THIS AGREEMENT.
Section 14. Adequate Assurances. The Junior Creditor agrees to
execute any further documents, instruments and agreements and take such other
actions as may be necessary to effect the purposes of this Agreement, including
the filing of any financing statements or other instruments in any applicable
public records, all as directed by the Lender. The Junior Creditor agrees that
it shall cause to be added to the Subordinated Note, each other document
evidencing the Subordinated Debt, and each document or instrument creating or
otherwise evidencing the Junior Creditor's security interest in the Junior
Creditor Collateral, the following legend:
"The rights and remedies of [Junior Creditor], and its successors and
assigns, under this instrument are subject to the terms and conditions of that
certain Subordination Agreement dated as of _____________, ____, as amended
from time to time, by and between [Junior Creditor] and NationsBank, N.A.
(South)."
Section 15. Notices. All notices and other communications provided
for hereunder shall be in writing and shall be mailed, telecopied or delivered,
as follows:
(a) If to the Lender:
NationsBank, N.A. (South)
600 Peachtree Street, 18th Floor
Atlanta, Georgia 30308
Attention: Laura B. Gray
Telecopy Number: (404) 607-6338
Telephone Number: (404) 607-5861
(b) If to the Junior Creditor:
_____________________________
_____________________________
_____________________________
Attention:_______________________
Telecopy Number: (___) ___-____
Telephone Number: (___) ___-____
All such notices and communications shall be effective upon receipt thereof.
Any party may alter the address to which notices are to be sent by giving
notice to the other parties hereto of such change of address in conformity with
the provisions of this Section.
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Section 16. Successors and Assigns. This Agreement shall inure to
the benefit of the Lender and its successors and assigns, and shall be binding
upon the Junior Creditor and its successors and assigns.
Section 17. Acknowledgment. The Junior Creditor acknowledges that
the Lender, in continuing to make loans and other financial accommodations
under the Credit Agreement, has relied upon the terms of this Agreement.
Section 18. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.
Section 19. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall constitute an original but which
together shall constitute one instrument.
Section 20. Definitions. In addition to such other terms as are
elsewhere defined herein, as used in this Agreement the following terms shall
have the following meanings:
"Bankruptcy Proceeding" means any receivership, insolvency, bankruptcy
proceeding under the Bankruptcy Code of 1978, as amended or other bankruptcy or
reorganization law, assignment for the benefit of creditors, reorganization or
other arrangement with creditors, sale of all or substantially all of the
assets of the Debtor, or any other marshaling of the assets or liabilities of
the Debtor.
"Junior Creditor Collateral" means any and all assets of the Debtor or
any other person or entity in which the Junior Creditor holds, or has been
granted, a security interest, lien or other encumbrance as security for any of
the indebtedness or other obligations owing by the Debtor to the Junior
Creditor.
"Lender Collateral" means any and all assets of the Debtor, the
Borrower or any of the Borrower's subsidiaries in which the Lender holds, or
has been granted, a security interest, lien or other encumbrance as security
for any of the indebtedness or other obligations owing by the Debtor, the
Borrower or any of the Borrower's subsidiaries to the Lender.
"Payment in full" or "paid in full" shall mean, with respect to the
Lender, the indefeasible payment in full in cash or cash equivalents of the
entire amount of the Senior Debt in the manner provided under the terms of the
Guaranty.
"Senior Debt" means all obligations and liabilities at any time owed
by the Debtor or the Borrower to the Lender, whether direct or indirect,
absolute or contingent, secured or unsecured, due or to become due, now
existing or hereafter arising, including, without limitation, any and all
liabilities and obligations now or hereafter owing (a) by the Borrower to the
Lender under or in connection with the Credit Agreement or any other document,
instrument or agreement executed by the Borrower in connection with any of the
foregoing and (b) by the Debtor to the Lender under the Guaranty, in all cases
together with all interest, fees, charges, expenses and attorney's
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fees for which the Borrower or the Debtor is now or hereafter becomes liable to
pay to the Lender under any agreement or by law.
"Subordinated Debt" means all principal, interest and all other
amounts at any time owing by the Debtor to the Junior Creditor under or in
respect of the Subordinated Note, whether direct or indirect, absolute or
contingent, secured or unsecured, due or to become due, now existing or
hereafter arising.
[Signatures on Next Page]
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IN WITNESS WHEREOF, the parties hereto have caused this Subordination
Agreement to be signed, sealed and delivered as of the date first above
written.
THE JUNIOR CREDITOR:
----------------------------------------
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
THE LENDER:
NATIONSBANK, N.A. (SOUTH)
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
The undersigned acknowledges and consents to the
foregoing Subordination Agreement and confirms
that it is not a party thereto.
[PSC MANAGEMENT CORP.]
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
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EXHIBIT I
FORM OF REVOLVING NOTE
$5,000,000 April ___, 1997
FOR VALUE RECEIVED, the undersigned, PHYSICIANS' SPECIALTY CORP., a
corporation organized under the laws of the State of Delaware (the "Borrower"),
promises to pay to the order of NATIONSBANK, N.A. (SOUTH) (the "Lender") at its
office located at 600 Peachtree Street, 18th Floor, Atlanta, Georgia 30308, or
at such other location as the Lender shall notify the Borrower in writing, in
lawful money of the United States of America and in immediately available
funds, the principal amount of FIVE MILLION AND NO/100 DOLLARS ($5,000,000), or
such lesser principal amount, as may then constitute the unpaid aggregate
principal amount of the Revolving Loans made by the Lender to the Borrower
pursuant to the Credit Agreement (as defined below) on the Termination Date.
The Borrower agrees to pay principal at said office, in like money,
from time to time on the dates and at the times specified in the Credit
Agreement. The Borrower further agrees to pay interest at said office, in like
money, on the unpaid principal amount owing hereunder from time to time on the
dates and at the rates and at the times specified in the Credit Agreement.
The date and amount of each Revolving Loan made by the Lender to the
Borrower under the Credit Agreement, each payment of principal in respect
thereof and the accrual of interest under this Note, shall be recorded by the
Lender on its books; provided, however, that the failure of the Lender to make
any such recordation shall not affect the obligation of the Borrower to make a
payment when due of any amount owing under this Note. Any such recordations
made by the Lender on its books shall be prima facie evidence of the amounts
recorded therein.
This Note is the "Revolving Note" referred to in that certain Credit
Agreement dated as of April ____, 1997 (as amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement"), by and between
the Borrower and the Lender, and is subject to, and entitled to, all provisions
and benefits thereof. Capitalized terms used herein and not defined herein
shall have the respective meanings given to such terms in the Credit Agreement.
The Credit Agreement, among other things, (a) provides for the making of
Revolving Loans by the Lender to the Borrower from time to time in an aggregate
amount not to exceed at any time outstanding the Dollar amount first
above-mentioned, (b) permits the prepayment of the Revolving Loans by the
Borrower subject to certain terms and conditions and (c) provides for the
acceleration of the Revolving Loans upon the occurrence of certain specified
events.
This Note is secured by the Collateral and the holder hereof shall be
entitled to the benefits thereof and to the other Loan Documents (to the extent
and with the effect as therein provided).
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The Borrower hereby waives presentment, demand, protest and notice of
any kind. No failure to exercise, and no delay in exercising any rights
hereunder on the part of the holder hereof shall operate as a waiver of such
rights.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF GEORGIA.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Revolving Note under seal as of the date written above.
PHYSICIANS' SPECIALTY CORP.
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
ATTEST:
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
(CORPORATE SEAL)
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<PAGE> 120
EXHIBIT J
FORM OF TERM NOTE
$20,000,000 April ___, 1997
FOR VALUE RECEIVED, the undersigned, PHYSICIANS' SPECIALTY CORP., a corporation
organized under the laws of the State of Delaware (the "Borrower"), promises to
pay to the order of NATIONSBANK, N.A. (SOUTH) (the "Lender") at its office
located at 600 Peachtree Street, 18th Floor, Atlanta, Georgia 30308, or at
such other location as the Lender shall notify the Borrower in writing, in
lawful money of the United States of America and in immediately available
funds, the principal amount of TWENTY MILLION AND NO/100 DOLLARS ($20,000,000),
or such lesser principal amount, as may then constitute the unpaid aggregate
principal amount of the Term Loans made by the Lender to the Borrower pursuant
to the Credit Agreement (as defined below) on the Termination Date.
The Borrower agrees to pay principal at said office, in like money,
from time to time on the dates and at the times specified in the Credit
Agreement. The Borrower further agrees to pay interest at said office, in like
money, on the unpaid principal amount owing hereunder from time to time on the
dates and at the rates and at the times specified in the Credit Agreement.
The date and amount of each Term Loan made by the Lender to the
Borrower under the Credit Agreement, each payment of principal in respect
thereof and the accrual of interest under this Note, shall be recorded by the
Lender on its books; provided, however, that the failure of the Lender to make
any such recordation shall not affect the obligation of the Borrower to make a
payment when due of any amount owing under this Note. Any such recordations
made by the Lender on its books shall be prima facie evidence of the amounts
recorded therein.
This Note is the "Term Note" referred to in that certain Credit
Agreement dated as of April ___, 1997 (as amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement"), by and between
the Borrower and the Lender, and is subject to, and entitled to, all provisions
and benefits thereof. Capitalized terms used herein and not defined herein
shall have the respective meanings given to such terms in the Credit Agreement.
The Credit Agreement, among other things, (a) provides for the making of Term
Loans by the Lender to the Borrower from time to time in an aggregate amount
not to exceed at any time outstanding the Dollar amount first above-mentioned,
(b) permits the prepayment of the Term Loans by the Borrower subject to certain
terms and conditions and (c) provides for the acceleration of the Term Loans
upon the occurrence of certain specified events.
This Note is secured by the Collateral and the holder hereof shall be
entitled to the benefits thereof and to the other Loan Documents (to the extent
and with the effect as therein provided).
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<PAGE> 121
The Borrower hereby waives presentment, demand, protest and notice of
any kind. No failure to exercise, and no delay in exercising any rights
hereunder on the part of the holder hereof shall operate as a waiver of such
rights.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF GEORGIA.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Term Note under seal as of the date written above.
PHYSICIANS' SPECIALTY CORP.
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
ATTEST:
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
(CORPORATE SEAL)
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<PAGE> 122
EXHIBIT K
FORM OF PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT is dated as of __________, _____ (this "Pledge
Agreement"), and executed and delivered by [NAME OF LOAN PARTY], a
_____________________ (the "Pledgor"), in favor of NATIONSBANK, N.A. (SOUTH)
(the "Pledgee").
[Include the following if Pledgor is Physicians' Specialty Corp.]
[WHEREAS, the Pledgor and the Pledgee have entered into that certain
Credit Agreement dated as of April ____, 1997 (as the same may be amended,
supplemented, restated or otherwise modified from time to time, the "Credit
Agreement") pursuant to which the Pledgee has agreed to extend certain
financial accommodations to the Pledgor subject to the terms thereof; and]
[Include the following if Pledgor is a Loan Party other than the Borrower]
[WHEREAS, Physicians' Specialty Corp. (the "Borrower") and the Pledgee
have entered into that certain Credit Agreement dated as of April ___, 1997 (as
the same may be amended, supplemented, restated or otherwise modified from time
to time, the "Credit Agreement") pursuant to which the Pledgee has agreed to
extend certain financial accommodations to the Borrower subject to the terms
thereof;
WHEREAS, the Pledgor is an Affiliate of the Borrower;
WHEREAS, the Pledgor, the Borrower and the other Subsidiaries of the
Borrower, though separate legal entities, are mutually dependent on each other
in the conduct of their respective businesses as an integrated operation and
have determined it to be in their mutual best interests to obtain financing
from the Lender through their collective efforts;
WHEREAS, the Pledgor acknowledges that it will receive direct and
indirect benefits from the Pledgee making such financial accommodations
available to the Borrower under the Credit Agreement and, accordingly, the
Pledgor agreed to guaranty the Borrower's obligations to the Pledgee on the
terms and conditions contained in that certain Guaranty dated as of the date
hereof (as the same may be amended, supplemented, restated or otherwise
modified from time to time in accordance with its terms, the "Guaranty")
executed by the Pledgor in favor of the Pledgee;
WHEREAS, the Pledgor is executing and delivering this Pledge Agreement
to secure its obligations owing to the Pledgee under the Guaranty and the other
Loan Documents to which the Pledgor is a party; and]
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<PAGE> 123
WHEREAS, it is a condition precedent to the effectiveness of the
Credit Agreement and the extension of such financial accommodations under the
Credit Agreement that the Pledgor execute and deliver this Pledge Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
SECTION 1. PLEDGE. The Pledgor hereby pledges, hypothecates,
assigns, transfers, sets over and delivers unto the Pledgee, and grants to the
Pledgee a security interest in, all of the Pledgor's right, title and interest
in, to and under the following (collectively, the "Pledged Collateral"): (a)
all of the common stock, shares, equity interest and other securities
(collectively, "Securities") of each Person (each an "Issuer") described in
Schedule 1 attached hereto; (b) any additional Securities of any of such
Issuers as may from time to time be issued to the Pledgor or otherwise acquired
by the Pledgor; (c) any additional Securities of any Issuer as may hereafter at
any time be delivered to the Pledgee by or on behalf of the Pledgor; (d) any
cash or additional Securities or other property at any time and from time to
time receivable or otherwise distributable in respect of, in exchange for, or
in substitution of, any of the property referred to in any of the immediately
preceding clauses (a) through (c); and (e) any and all products and proceeds of
any of the foregoing, together with any and all other rights, titles,
interests, powers, privileges and preferences pertaining to said property.
SECTION 2. OBLIGATIONS SECURED. This Agreement is made, and the
security interest created hereby is granted to the Pledgee, to secure the
prompt performance and payment in full of the following (collectively, the
"Secured Obligations"): (a) all obligations and indebtedness of the Pledgor
owing to the Pledgee of every kind, nature and description, under or with
respect to the [Credit Agreement][Guaranty], this Pledge Agreement or any of
the other Loan Documents; (b) all other obligations of the Pledgor under the
[Credit Agreement][Guaranty], this Pledge Agreement and the other Loan
Documents; and (c) any reasonable costs or expenses actually incurred by the
Pledgee or Pledgee's counsel in connection with the realization of the security
for which this Pledge Agreement provides, including, without limitation, any
reasonable costs or expenses of any proceedings to which this Pledge Agreement
may give rise.
SECTION 3. REPRESENTATIONS AND WARRANTIES. The Pledgor hereby
represents and warrants to the Pledgee as follows:
(a) Validly Issued, etc. All of the Securities of each Issuer
have been validly issued and are fully paid and nonassessable.
(b) Title and Liens. The Pledgor is, and will at all times
continue to be, the legal and beneficial owner of the Pledged Collateral and
none of the Pledged Collateral is subject to any Lien other than Permitted
Liens. No financing statement under the Uniform Commercial Code of any
jurisdiction which names the Pledgor as debtor or covers any of the Pledged
Collateral, or any other notice filed in the public records indicating the
existence of a Lien thereon, has been filed and is still effective in any state
or other jurisdiction, other than Uniform Commercial Code financing statements
filed in favor of the Pledgee, and the Pledgor has not signed any such
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<PAGE> 124
financing statement or notice or any security agreement authorizing the filing
of any such financing statement or notice, other than Uniform Commercial Code
financing statements filed in favor of the Pledgee.
(c) Name; Chief Executive Office; Taxpayer ID Number. The correct
corporate name of the Pledgor is set forth in the first paragraph of this
Pledge Agreement. The chief executive office and principal place of business
of the Pledgor and the location of the Pledgor's books and records relating to
the Pledged Collateral are located at ___________________, ______ County,
____________. [The Pledgor has no offices or places of business other than (i)
as set forth in Schedule 3(c) and (ii) as set forth in the immediate preceding
sentence of this Section 3(c). The Social Security number, or the Internal
Revenue Service taxpayer identification number, as applicable, of the Pledgor
is _____________________.
(d) Authority, etc. The Pledgor (i) has the power and authority
to pledge the Collateral in the manner hereby done or contemplated and (ii)
will defend its title or interest thereto or therein against any and all Liens
(other than the Lien created by this Pledge Agreement and Permitted Liens),
however arising, of all persons.
(e) No Approval. No consent or approval of any Governmental
Authority or any securities exchange was or is necessary to the validity of the
pledge effected hereby.
(f) Outstanding Shares. The Securities pledged by the Pledgor
hereunder constitute [____%] of the issued and outstanding [______________]
stock of [the] [each] Issuer.
SECTION 4. COVENANTS. The Pledgor hereby unconditionally covenants
and agrees as follows:
(a) No Liens; No Sale of Pledged Collateral. The Pledgor will not
create, assume, incur or permit or suffer to exist or to be created, assumed or
incurred, any Lien on any of the Pledged Collateral (or any interest therein),
other than Permitted Liens, and will not, without the prior written consent of
the Pledgee, sell, lease, assign, transfer or otherwise dispose of all or any
portion of the Pledged Collateral (or any interest therein).
(b) Change of Locations, Name, Etc. Without giving the Pledgor
sixty-day's prior written notice, the Pledgor will not (i) change the Pledgor's
chief executive office, principal place of business, or the location of its
books and records relating to the Pledged Collateral or (ii) change its name,
identity or structure.
SECTION 5. ADDITIONAL SHARES.
(a) During the period this Pledge Agreement is in effect, the
Pledgor shall not permit any Issuer to issue any additional shares of capital
stock or other equity securities or interests to any Person other than the
Pledgor. Further, the Pledgor shall not permit any Issuer to amend or modify
its articles or certificate of incorporation in a manner which would affect the
voting, liquidation, preference or other rights of a holder of the shares of
stock pledged hereunder.
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(b) The Pledgor agrees that, until this Pledge Agreement has
terminated in accordance with its terms, any additional Securities of an Issuer
at any time issued to the Pledgor or otherwise acquired by the Pledgor shall be
promptly delivered or otherwise transferred to the Pledgee as additional
Pledged Collateral and shall be subject to the Lien of, and the terms and
conditions of, this Pledge Agreement.
SECTION 6. REGISTRATION IN NOMINEE NAME, DENOMINATIONS. The Pledgee
shall have the right (in its sole and absolute discretion) to hold the Pledged
Securities in its own name as pledgee, the name of its nominee (as Pledgee or
as sub-agent) or the name of the applicable Pledgor, endorsed or assigned in
blank or in favor of the Pledgee. The Pledgor will promptly give to the
Pledgee copies of any notices or other communications received by it with
respect to Pledged Securities registered in the name of the Pledgor. The
Pledgee shall at all times have the right to exchange the certificates
representing Pledged Securities for certificates of smaller or larger numbers
of shares for any purpose consistent with this Pledge Agreement.
SECTION 7. VOTING RIGHTS; DIVIDENDS, ETC.
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) the Pledgor shall be entitled to exercise any and all
voting and/or consensual rights and powers accruing to an owner of the
Pledged Collateral or any part thereof for any purpose not
inconsistent with the terms and conditions of this Pledge Agreement or
any agreement giving rise to or otherwise relating to any of the
Secured Obligations; provided, however, that the Pledgor shall not
exercise, or refrain from exercising, any such right or power if any
such action would have a materially adverse effect on the value of
such Pledged Collateral in the reasonable judgment of the Pledgee;
(ii) the Pledgor shall be entitled to retain and use any
and all cash dividends paid on the Pledged Collateral, but any and all
stock and/or liquidating dividends, other distributions in property,
return of capital or other distributions made on or in respect of
Pledged Securities, whether resulting from a subdivision, combination
or reclassification of outstanding Securities of an Issuer which are
pledged hereunder or received in exchange for Pledged Collateral or
any part thereof or as a result of any merger, consolidation,
acquisition or other exchange of assets or on the liquidation, whether
voluntary or involuntary, of an Issuer, or otherwise, shall be and
become part of the Pledged Collateral pledged hereunder and, if
received by the Pledgor, shall forthwith be delivered to the Pledgee
to be held as collateral subject to the terms and conditions of this
Pledge Agreement.
The Pledgee agrees to execute and deliver to the Pledgor, or cause to be
executed and delivered to the Pledgor, as appropriate, at the sole cost and
expense of the Pledgor, all such proxies, powers of attorney, dividend orders
and other instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to exercise the voting and/or consensual rights and powers
which Pledgor is entitled to exercise pursuant to clause (i) above and/or to
receive the dividends which Pledgor is authorized to retain pursuant to clause
(ii) above.
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(b) Upon the occurrence and during the continuation of an Event of
Default, all rights of the Pledgor to exercise the voting and/or consensual
rights and powers which Pledgor is entitled to exercise pursuant to subsection
(a)(i) above and/or to receive the dividends which Pledgor is authorized to
receive and retain pursuant to subsection (a)(ii) above shall cease, and all
such rights thereupon shall become immediately vested in the Pledgee, which
shall have, to the extent permitted by law, the sole and exclusive right and
authority to exercise such voting and/or consensual rights and powers which the
Pledgor shall otherwise be entitled to exercise pursuant to subsection (a)(i)
above and/or to receive and retain the dividends which the Pledgor shall
otherwise be authorized to retain pursuant to subsection (a)(ii) above. Any
and all money and other property paid over to or received by the Pledgee
pursuant to the provisions of this subsection (b) shall be retained by the
Pledgee as additional collateral hereunder and shall be applied in accordance
with the provisions of Section 10. If the Pledgor shall receive any dividends
or other property which it is not entitled to receive under this Section, the
Pledgor shall hold the same in trust for the Pledgee, without commingling the
same with other funds or property of or held by the Pledgor, and shall promptly
deliver the same to the Pledgee upon receipt by the Pledgor in the identical
form received, together with any necessary endorsements.
SECTION 8. EVENT OF DEFAULT DEFINED. For purposes of this Pledge
Agreement, "Event of Default" shall mean:
(a) The Pledgor shall fail to observe or perform any covenant or
agreement contained in Sections 4(a), 5, or 7(b) hereof;
(b) The Pledgor shall fail to observe or perform any covenant or
agreement contained in this Pledge Agreement (other than those covered by the
immediately preceding clause (a)) for a period of 30 days after written notice
thereof has been given to the Pledgor by the Pledgee; and
(c) an Event of Default under and as defined in the [Credit
Agreement][Guaranty] shall occur.
SECTION 9. REMEDIES UPON DEFAULT.
(a) In addition to any right or remedy that the Pledgee may have
under the Credit Agreement, the other Loan Documents or otherwise under
Applicable Law, if an Event of Default shall have occurred and be continuing,
the Pledgee may exercise any and all the rights and remedies of a secured party
under the Uniform Commercial Code as in effect in any applicable jurisdiction
(the "Code") and may otherwise sell, assign, transfer, endorse and deliver the
whole or, from time to time, any part of the Pledged Collateral at a public or
private sale or on any securities exchange, for cash, upon credit or for other
property, for immediate or future delivery, and for such price or prices and on
such terms as the Pledgee in its discretion shall deem appropriate. The
Pledgee shall be authorized at any sale (if it deems it advisable to do so) to
restrict the prospective bidders or purchasers to Persons who will represent
and agree that they are purchasing the Pledged Collateral for their own account
in compliance with the Securities Act and upon consummation of any such sale
the Pledgee shall have the right to assign, transfer, endorse and deliver to
the purchaser or purchasers thereof the Pledged Collateral so sold. Each
purchaser at any sale of Pledged Collateral shall take and hold the property
sold absolutely free
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from any claim or right on the part of the Pledgor, and the Pledgor hereby
waives (to the fullest extent permitted by Applicable Law) all rights of
redemption, stay and/or appraisal which the Pledgor now has or may at any time
in the future have under any Applicable Law now existing or hereafter enacted.
The Pledgor agrees that, to the extent notice of sale shall be required by
Applicable Law, at least ten days' prior written notice to the Pledgor of the
time and place of any public sale or the time after which any private sale is
to be made shall constitute reasonable notification, but notice given in any
other reasonable manner or at any other reasonable time shall constitute
reasonable notification. Such notice, in case of public sale, shall state the
time and place for such sale, and, in the case of sale on a securities
exchange, shall state the exchange on which such sale is to be made and the day
on which the Pledged Collateral, or portion thereof, will first be offered for
sale at such exchange. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as the Pledgee
may fix and shall state in the notice or publication (if any) of such sale. At
any such sale, the Pledged Collateral, or portion thereof to be sold, may be
sold in one lot as an entirety or in separate parcels, as the Pledgee may
determine in its sole and absolute discretion. The Pledgee shall not be
obligated to make any sale of the Pledged Collateral if it shall determine not
to do so regardless of the fact that notice of sale of the Pledged Collateral
may have been given. The Pledgee may, without notice or publication, adjourn
any public or private sale or cause the same to be adjourned from time to time
by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. In case the sale of all or any part of the Pledged Collateral is
made on credit or for future delivery, the Pledged Collateral so sold may be
retained by the Pledgee until the sale price is paid by the purchaser or
purchasers thereof, but the Pledgee shall not incur any liability to the
Pledgor in case any such purchaser or purchasers shall fail to take up and pay
for the Pledged Collateral so sold and, in case of any such failure, such
Pledged Collateral may be sold again upon like notice. At any public sale made
pursuant to this Pledge Agreement, the Pledgee, to the extent permitted by
Applicable Law, may bid for or purchase, free from any right of redemption,
stay and/or appraisal on the part of the Pledgor (all said rights being also
hereby waived and released to the extent permitted by Applicable Law), any part
of or all the Pledged Collateral offered for sale and may make payment on
account thereof by using any claim then due and payable to the Pledgee from the
Pledgor as a credit against the purchase price, and the Pledgee may, upon
compliance with the terms of sale and to the extent permitted by Applicable
Law, hold, retain and dispose of such property without further accountability
to the Pledgor therefor. For purposes hereof, a written agreement to purchase
all or any part of the Pledged Collateral shall be treated as a sale thereof;
the Pledgee shall be free to carry out such sale pursuant to such agreement and
the Pledgor shall not be entitled to the return of any Pledged Collateral
subject thereto, notwithstanding the fact that after the Pledgee shall have
entered into such an agreement all Events of Default may have been remedied or
the Secured Obligations may have been paid in full as herein provided. The
Pledgor hereby waives any right to require any marshaling of assets and any
similar right.
(b) In addition to exercising the power of sale herein conferred
upon it, the Pledgee shall also have the option to proceed by suit or suits at
law or in equity to foreclose this Pledge Agreement and sell the Pledged
Collateral or any portion thereof pursuant to judgment or decree of a court or
courts having competent jurisdiction.
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(c) The rights and remedies of the Pledgee under this Pledge
Agreement are cumulative and not exclusive of any rights or remedies which it
would otherwise have.
SECTION 10. APPLICATION OF PROCEEDS OF SALE AND CASH. The proceeds
of any sale of the whole or any part of the Pledged Collateral, together with
any other moneys held by the Pledgee under the provisions of this Pledge
Agreement, shall be applied by the Pledgee in the following order:
(a) First: to the payment of all reasonable costs and expenses
actually incurred in connection with such sale or other realization, including
reasonable attorneys' fees incurred if the Pledgee endeavored to collect the
Secured Obligations by or through an attorney at law;
(b) Second: to the payment of the interest due upon any of the
Secured Obligations, in any order which the Pledgee may elect;
(c) Third: to the payment of the principal due upon any of the
Secured Obligations in any order which the Pledgee may elect; and
(d) Fourth: the balance (if any) of such proceeds shall be paid
to the Pledgor or to whomsoever may be legally entitled thereto.
The Pledgor shall remain liable and will pay, on demand, any deficiency
remaining in respect of the Secured Obligations.
SECTION 11. PLEDGEE APPOINTED ATTORNEY-IN-FACT. The Pledgor hereby
constitutes and appoints the Pledgee as the attorney-in-fact of the Pledgor
upon the occurrence and during the continuation of an Event of Default with
full power of substitution either in the Pledgee's name or in the name of the
Pledgor to do any of the following: (a) to perform any obligation of the
Pledgor hereunder in the Pledgor's name or otherwise; (b) to ask for, demand,
sue for, collect, receive, receipt and give acquittance for any and all moneys
due or to become due under and by virtue of any Pledged Collateral; (c) to
prepare, execute, file, record or deliver notices, assignments, financing
statements, continuation statements, applications for registration or like
papers to perfect, preserve or release the Pledgee's security interest in the
Pledged Collateral or any of the documents, instruments, certificates and
agreements described in Section 13(b); (d) to verify facts concerning the
Pledged Collateral in its own name or a fictitious name; (e) to endorse checks,
drafts, orders and other instruments for the payment of money payable to the
Pledgor, representing any interest or dividend or other distribution payable in
respect of the Pledged Collateral or any part thereof or on account thereof and
to give full discharge for the same; (f) to exercise all rights, powers and
remedies which the Pledgor would have, but for this Pledge Agreement, under the
Pledged Collateral; and (g) to carry out the provisions of this Pledge
Agreement and to take any action and execute any instrument which the Pledgee
may deem necessary or advisable to accomplish the purposes hereof, and to do
all acts and things and execute all documents in the name of the Pledgor or
otherwise, deemed by the Pledgee as necessary, proper and convenient in
connection with the preservation, perfection or enforcement of its rights
hereunder. Nothing herein contained shall be construed as requiring or
obligating the Pledgee to make any commitment or to make any inquiry as to the
nature or sufficiency of any
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payment received by it, or to present or file any claim or notice, or to take
any action with respect to the Pledged Collateral or any part thereof or the
moneys due or to become due in respect thereof or any property covered thereby,
and no action taken by the Pledgee or omitted to be taken with respect to the
Pledged Collateral or any part thereof shall give rise to any defense,
counterclaim or offset in favor of the Pledgor or to any claim or action
against the Pledgee. The power of attorney granted herein is irrevocable and
coupled with an interest.
SECTION 12. REIMBURSEMENT OF PLEDGEE. The Pledgor agrees to pay upon
demand to the Pledgee the amount of any and all reasonable expenses, including
the reasonable fees disbursements and other charges of its counsel and of any
experts or agents, and its fully allocated internal costs, that the Pledgee may
incur in connection with (i) the administration of this Pledge Agreement, (ii)
the custody or preservation of, or any sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iii) the exercise or
enforcement of any of the rights of the Pledgee hereunder, or (iv) the failure
by the Pledgor to perform or observe any of the provisions hereof. Any such
amounts payable as provided hereunder shall be additional obligations secured
hereby and by the other Security Documents.
SECTION 13. FURTHER ASSURANCES. The Pledgor shall, at its sole cost
and expense, take all action that may be necessary or desirable in the
Pledgee's sole but reasonable discretion, so as at all times to maintain the
validity, perfection, enforceability and priority of the Pledgee's security
interest in the Pledged Collateral, or to enable the Pledgee to exercise or
enforce its rights hereunder, including without limitation (a) delivering to
the Pledgee, endorsed or accompanied by such instruments of assignment as the
Pledgee may specify, any and all chattel paper, instruments, letters of credit
and all other advices of guaranty and documents evidencing or forming a part of
the Pledged Collateral and (b) executing and delivering financing statements,
pledges, designations, notices and assignments, in each case in form and
substance satisfactory to the Pledgee, relating to the creation, validity,
perfection, priority or continuation of the security interest granted
hereunder. The Pledgor agrees to take, and authorizes the Pledgee to take on
the Pledgor's behalf, any or all of the following actions with respect to any
Pledged Collateral as the Pledgee shall deem necessary to perfect the security
interest and pledge created hereby or to enable the Pledgee to enforce its
rights and remedies hereunder: (i) to register on the books of the Issuer in
the name of the Pledgee any Pledged Collateral in certificated or
uncertificated form; (ii) to endorse in the name of the Pledgee any Pledged
Collateral issued in certificated form; and (iii) by book entry or otherwise,
identify as belonging to the Pledgee a quantity of securities that constitutes
all or part of the Pledged Collateral registered in the name of the Pledgee.
Notwithstanding the foregoing the Pledgor agrees that Pledged Collateral which
is not in certificated form or is otherwise in book-entry form shall be held
for the account of the Pledgee. The Pledgor hereby authorizes the Pledgee to
execute and file in all necessary and appropriate jurisdictions (as determined
by the Pledgee) one or more financing or continuation statements (or any other
document or instrument referred to in the immediately preceding clause (b)) in
the name of the Pledgor and to sign the Pledgor's name thereto. The Pledgor
authorizes the Pledgee to file any such financing statement, document or
instrument without the signature of the Pledgor to the extent permitted by
applicable law. To the extent permitted by Applicable Law, a carbon,
photographic, xerographic or other reproduction of this Pledge Agreement or any
financing statement is sufficient as a financing statement. Any property
comprising part of the Pledged Collateral required to be delivered to the
Pledgee pursuant to this Pledge Agreement shall be
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accompanied by proper instruments of assignment duly executed by the Pledgor
and by such other instruments or documents as the Pledgee may reasonably
request. In the event any Pledged Collateral in certificated form becomes
eligible for book-entry treatment, the Pledgor will use its best efforts to
effectuate such book-entry treatment with respect to such Pledged Collateral.
SECTION 14. SECURITIES ACT. In view of the position of the Pledgor
in relation to the Pledged Collateral, or because of other current or future
circumstances, a question may arise under the Securities Act of 1933, as now or
hereafter in effect, or any similar Applicable Law hereafter enacted analogous
in purpose or effect (such Act and any such similar Applicable Law as from time
to time in effect being called the "Federal Securities Laws") with respect to
any disposition of the Pledged Collateral permitted hereunder. The Pledgor
understands that compliance with the Federal Securities Laws might very
strictly limit the course of conduct of the Pledgee if the Pledgee were to
attempt to dispose of all or any part of the Pledged Collateral in accordance
with the terms hereof, and might also limit the extent to which or the manner
in which any subsequent transferee of any Pledged Collateral could dispose of
the same. Similarly, there may be other legal restrictions or limitations
affecting the Pledgee in any attempt to dispose of all or part of the Pledged
Collateral in accordance with the terms hereof under applicable Blue Sky or
other state securities laws or similar Applicable Law analogous in purpose or
effect. The Pledgor recognizes that in light of the foregoing restrictions and
limitations the Pledgee may, with respect to any sale of the Pledged
Collateral, limit the purchasers to those who will agree, among other things,
to acquire such Pledged Collateral for their own account, for investment, and
not with a view to the distribution or resale thereof. The Pledgor
acknowledges and agrees that in light of the foregoing restrictions and
limitations, the Pledgee, in its sole and absolute discretion, may, in
accordance with Applicable Law, (a) proceed to make such a sale whether or not
a registration statement for the purpose of registering such Pledged Collateral
or part thereof shall have been filed under the Federal Securities Laws and (b)
approach and negotiate with a single potential purchaser to effect such sale.
The Pledgor acknowledges and agrees that any such sale might result in prices
and other terms less favorable to the seller than if such sale were a public
sale without such restrictions. In the event of any such sale, the Pledgee
shall incur no responsibility or liability for selling all or any part of the
Pledged Collateral in accordance with the terms hereof at a price that the
Pledgee, in its sole and absolute discretion, may in good faith deem reasonable
under the circumstances, notwithstanding the possibility that a substantially
higher price might have been realized if the sale were deferred until after
registration as aforesaid or if more than a single purchaser were approached.
The provisions of this Section will apply notwithstanding the existence of
public or private market upon which the quotations or sales prices may exceed
substantially the price at which the Pledgee sells.
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SECTION 15. INDEMNIFICATION. The Pledgor agrees to indemnify and
hold the Pledgee and any corporation controlling, controlled by, or under
common control with, the Pledgee and any officer, attorney, director,
shareholder, agent or employee of the Pledgee or any such corporation (each an
"Indemnified Person"), harmless from and against any claim, loss, damage,
action, cause of action, liability, cost and expense or suit of any kind or
nature whatsoever (collectively, "Losses"), brought against or incurred by an
Indemnified Person, in any manner arising out of or, directly or indirectly,
related to or connected with this Pledge Agreement, including without
limitation, the exercise by the Pledgee of any of its rights and remedies under
this Pledge Agreement or any other action taken by the Pledgee pursuant to the
terms of this Pledge Agreement; provided, however, the Pledgor shall not be
liable to an Indemnified Person for any Losses to the extent that such Losses
result from the gross negligence or willful misconduct of such Indemnified
Person. The Pledgor's obligations under this section shall survive the
termination of this Pledge Agreement and the payment in full of the Secured
Obligations.
SECTION 16. CONTINUING SECURITY INTEREST. This Agreement shall
create a continuing security interest in the Pledged Collateral and shall
remain in full force and effect until it terminates in accordance with its
terms. The Pledgor and the Pledgee hereby agree that the security interest
created by this Pledge Agreement in the Pledged Collateral shall not terminate
and shall continue and remain in full force and effect notwithstanding the
transfer to the Pledgor or any person designated by it of all or any portion of
the Pledged Collateral.
SECTION 17. NO WAIVER. Neither the failure on the part of the
Pledgee to exercise, nor the delay on its part in exercising any right, power
or remedy hereunder, nor any course of dealing between the Pledgee and the
Pledgor shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power, or remedy hereunder preclude any other or
the further exercise thereof or the exercise of any other right, power or
remedy.
SECTION 18. NOTICES. Notices, requests and other communications
required or permitted hereunder shall be given in accordance with the
applicable terms of the [Credit Agreement][Guaranty] (or at such other address
a party may specify to the other party by like notice. All such notices and
other communications shall be effective (i) if mailed, when received; (ii) if
telecopied, when transmitted; or (iii) if hand delivered, when delivered.
SECTION 19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.
SECTION 20. AMENDMENTS. No amendment or waiver of any provision of
this Pledge Agreement nor consent to any departure by the Pledgor herefrom
shall in any event be effective unless the same shall be in writing and signed
by the parties hereto, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
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SECTION 21. ARBITRATION.
ANY CONTROVERSY OR CLAIM BETWEEN THE PLEDGOR AND THE PLEDGEE,
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS PLEDGE
AGREEMENT, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF JUDICIAL ARBITRATION
AND MEDIATION SERVICES, INC. (J.A.M.S.) OR THE COMMERCIAL ARBITRATION RULES OF
THE AMERICAN ARBITRATION ASSOCIATION, AS APPLICABLE, AND THE "SPECIAL RULES"
SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL
CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT
HAVING JURISDICTION. ANY PARTY TO THIS PLEDGE AGREEMENT MAY BRING AN ACTION,
INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY
CONTROVERSY OR CLAIM TO WHICH THIS PLEDGE AGREEMENT APPLIES IN ANY COURT HAVING
JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE CITY OF THE
PLEDGOR'S DOMICILE AT THE TIME OF THIS PLEDGE AGREEMENT'S EXECUTION AND
ADMINISTERED BY J.A.M.S. OR THE AMERICAN ARBITRATION ASSOCIATION AS AGREED BY
THE PARTIES. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE
DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR(S) SHALL ONLY, UPON A SHOWING
OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN
ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS PLEDGE AGREEMENT SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS PLEDGE AGREEMENT; OR
(II) BE A WAIVER BY THE PLEDGEE OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C.
SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF
THE PLEDGEE HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES
SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE
APPOINTMENT OF A RECEIVER. THE PLEDGEE MAY EXERCISE SUCH SELF HELP RIGHTS,
FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES
BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT
PURSUANT TO THIS PLEDGE AGREEMENT. NEITHER THE EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL
OR ANCILLARY REMEDIES SHALL CONSTITUTE
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A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION,
TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH
REMEDIES.
SECTION 22. BINDING AGREEMENT; ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, except that the Pledgor shall not
be permitted to assign this Pledge Agreement or any interest herein or in the
Pledged Collateral, or any part thereof, or any cash or property held by the
Pledgee as collateral under this Pledge Agreement.
SECTION 23. TERMINATION. Upon indefeasible payment in full of all of
the Secured Obligations, this Pledge Agreement shall terminate. Upon
termination of this Pledge Agreement in accordance with its terms the Pledgee
agrees to take such actions as the Pledgor may reasonably request, and at the
sole cost and expense of the Pledgor, (a) to return the Pledged Collateral to
the Pledgor, and (b) to evidence the termination of this Pledge Agreement,
including, without limitation, the filing of any releases or any termination
statements under the Uniform Commercial Code.
SECTION 24. SEVERABILITY. Whenever possible, each provision of this
Pledge Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under applicable law, such provisions shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Pledge Agreement.
SECTION 25. HEADINGS. Section headings used herein are for
convenience only and are not to affect the construction of or be taken into
consideration in interpreting this Pledge Agreement.
SECTION 26. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original and all of
which shall constitute but one agreement.
SECTION 27. EXPENSES. The Pledgor will pay, within 10 days of
demand, all reasonable fees and expenses actually incurred by the Lender in
connection with (a) the collection or enforcement of the Obligations including
the reasonable fees and disbursements of counsel to the Lender actually
incurred by the Lender and (b) the exercise by the Lender of any right or
remedy granted to it under this Agreement if such exercise is done by, through
or with the assistance of any attorney.
SECTION 28. DEFINITIONS. Terms not otherwise defined herein are used
herein with the respective meanings given to them in the [Credit
Agreement][Guaranty].
[Signatures on following page]
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IN WITNESS WHEREOF, the Pledgor has executed and delivered this Pledge
Agreement under seal as of this the date first written above.
[THE PLEDGOR]
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
Agreed to and Accepted:
NATIONSBANK, N.A. (SOUTH)
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
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SCHEDULE 1 TO PLEDGE AGREEMENT
PLEDGED SHARES
<TABLE>
<CAPTION>
================================================================================
Issuer No. of Securities Type of Securities Certificate Nos.
- - - ------ ----------------- ------------------ ----------------
<S> <C> <C> <C>
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
================================================================================
</TABLE>
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EXHIBIT L
FORM OF SECURITY AGREEMENT
THIS SECURITY AGREEMENT is dated as of ___________, _____ (this
"Security Agreement"), and executed and delivered by ______________, a
_____________ organized under the laws of _______________, with its principal
place of business and chief executive office located at _____________________
County, ____________________________ (the "Debtor"), in favor of NATIONSBANK,
N.A. (SOUTH) with an office located at 600 Peachtree Street, 18th Floor,
Atlanta, Georgia 30308 (the "Secured Party").
[Include the following if Debtor is Physicians' Specialty Corp.]
[WHEREAS, the Debtor and the Secured Party have entered into that
certain Credit Agreement dated as of April ___, 1997 (as the same may be
amended, supplemented, restated or otherwise modified from time to time, the
"Credit Agreement") pursuant to which the Secured Party has agreed to extend
certain financial accommodations to the Debtor subject to the terms thereof;
and]
[Include the following if Debtor is a Loan Party other than the Borrower]
[WHEREAS, Physicians' Specialty Corp. (the "Borrower") and the Secured
Party have entered into that certain Credit Agreement dated as of April ___,
1997 (as the same may be amended, supplemented, restated or otherwise modified
from time to time, the "Credit Agreement"), pursuant to which the Secured Party
has agreed to extend certain financial accommodations to the Borrower subject
to the terms thereof,
WHEREAS, the Debtor is an Affiliate of the Borrower;
WHEREAS, the Debtor, the Borrower and the other Subsidiaries of the
Borrower, though separate legal entities, are mutually dependent on each other
in the conduct of their respective businesses as an integrated operation and
have determined it to be in their mutual best interests to obtain financing
from the Lender through their collective efforts;
WHEREAS, the Debtor acknowledges that it will receive direct and indirect
benefits from the Secured Party making such financial accommodations available
to the Borrower under the Credit Agreement and, accordingly, the Debtor agreed
to guaranty the Borrower's obligations to the Secured Party on the terms and
conditions contained in that certain Guaranty dated as of the date hereof (as
the same may be amended, supplemented, restated or otherwise modified from time
to time in accordance with its terms, the "Guaranty") executed by the Debtor in
favor of the Secured Party;
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WHEREAS, the Debtor is executing and delivering this Security
Agreement to secure its obligations owing to the Secured Party under the
Guaranty and the other Loan Documents to which the Debtor is a party; and]
WHEREAS, it is a condition precedent to the Secured Party's extension
of such financial accommodations under the Credit Agreement that the
Debtor execute and deliver this Security Agreement;
NOW, THEREFORE, in consideration of the above premises and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by the Debtor, the Debtor hereby agrees with the Secured
Party as follows:
SECTION 1. GRANT OF SECURITY. To secure the prompt and complete
payment, observance and performance when due (whether at stated maturity, by
acceleration or otherwise) of all of the Obligations, the Debtor hereby
collaterally assigns and pledges to the Lender, and grants to the Lender a
security interest and lien in and upon, the Collateral.
SECTION 2. REPRESENTATIONS AND WARRANTIES. The Debtor represents and
warrants to the Lender as follows:
(a) Name; Taxpayer ID Number. The exact legal name of the Debtor
is set forth in the introductory paragraph of this Security Agreement, and the
Debtor does not conduct and, during the five-year period immediately preceding
the date of this Security Agreement, has not conducted, business under any
trade name or other fictitious name other than those set forth on Schedule 2(a)
attached hereto. The social security number or Internal Revenue Service
taxpayer identification number, as applicable of the Debtor is ________________.
(b) Organization; Power; Qualification. The Debtor is a
corporation, duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation, has the power and authority to own
its properties and to carry on its business as now being and hereafter proposed
to be conducted and is duly qualified and authorized to do business as a
foreign corporation in each jurisdiction in which the character of its
properties or the nature of its business requires such qualification or
authorization.
(c) Authorization. The Debtor has the right and power, and has
taken all necessary action to authorize it, to execute, deliver and perform
this Security Agreement in accordance with its terms. This Security Agreement,
the Financing Statements and the instruments, agreements and other documents to
which the Debtor is a party and which evidence or relate in any way to the
Obligations have been duly executed and delivered by the authorized officers of
the Debtor and each is a legal, valid and binding obligation of the Debtor
enforceable against the Debtor in accordance with its terms.
(d) Compliance of Agreement With Laws, etc. The execution,
delivery and performance of this Security Agreement by the Debtor in accordance
with its terms, including the granting of the Security Interest, do not and
will not, by the passage of time, the giving of notice or otherwise:
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(i) Require any Governmental Approval or violate any
Applicable Law relating to the Debtor;
(ii) Conflict with, result in a breach of or constitute a
default under, the articles or certificate of incorporation or bylaws
of the Debtor, or any indenture, instrument or other agreement to
which the Debtor is a party or by which it or any of its properties
may be bound; or
(iii) Result in, or require the creation or imposition of,
any Lien upon or with respect to any property in which the Debtor now
or may hereafter have rights.
(e) Liens. None of the Collateral or other properties of the
Debtor is, as of the date hereof, subject to any Lien, except Permitted Liens.
No financing statement under the Uniform Commercial Code of any jurisdiction
which names the Debtor as debtor or covers any of the Collateral or any other
property of the Debtor, or any other notice filed in the public records
indicating the existence of a Lien thereon, has been filed and is still
effective in any state or other jurisdiction, and the Debtor has not signed any
such financing statement or notice or any security agreement authorizing any
Person to file any such financing statement or notice other than relating to
Permitted Liens of the type described in any of clauses (d) through (g) of the
definition of the term "Permitted Liens".
(f) Chief Executive Office. The chief executive office and
principal place of business of the Debtor and the books and records relating to
the Receivables and the other Collateral are located at the address set forth
in the introductory paragraph of this Security Agreement, and have been located
there for the five-year period immediately preceding the date hereof. During
such five-year period, the Debtor has not changed its name, identity or
corporate structure in any way.
(g) Places of Business. The addresses (including the applicable
counties) of all of the places of business of the Debtor are set forth on
Schedule 2(g) attached hereto.
(h) Security Interest. It is the intent of the Debtor that this
Security Agreement create a valid and perfected first-priority security
interest in the Collateral (subject only to Permitted Liens), securing the
payment of the Obligations, and all filings and other actions necessary or
desirable to perfect such security interest under the Uniform Commercial Code
as enacted in any relevant jurisdiction have been duly taken.
(i) Title to Properties. The Debtor has good, marketable and
legal title to its properties and assets, including, but not limited to, those
reflected on the balance sheet of the Debtor, as at ___________________, except
those which have been disposed of by the Debtor subsequent to such date in the
ordinary course of business.
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SECTION 3. CONTINUED PRIORITY OF SECURITY INTEREST.
(a) The Security Interest shall at all times be valid, perfected
and of first priority and enforceable against the Debtor and all other Persons,
in accordance with the terms of this Security Agreement, as security for the
Obligations.
(b) The Debtor shall, at its sole cost and expense, take all
action that may be necessary or desirable, or that the Lender may request, so
as at all times to maintain the validity, perfection, enforceability and
priority of the Security Interest in the Collateral in conformity with the
requirements of Section 3(a), or to enable the Lender to exercise or enforce
its rights hereunder including, without limitation:
(i) Paying all taxes, assessments and other claims
lawfully levied or assessed on any of the Collateral, except to the
extent that such taxes, assessments and other claims constitute
Permitted Liens;
(ii) Obtaining landlords', mortgagees', mechanics',
bailees', warehousemen's or processors' releases, subordinations or
waivers with respect to any or all of the Collateral, in form and
substance reasonably satisfactory to the Lender;
(iii) Delivering to the Lender, endorsed or accompanied by
such instruments of assignment as the Lender may specify, any and all
chattel paper, instruments, letters of credit and all other advices of
guaranty and documents evidencing or forming a part of the Collateral;
(iv) At the request of the Lender, marking conspicuously
each document included in the Collateral and marking all chattel paper
and each of its records pertaining to the Collateral, with a legend,
in form and substance satisfactory to the Lender, indicating that such
document, chattel paper, or Collateral is subject to the Security
Interest; and
(v) Executing and delivering financing statements,
pledges, designations, hypothecations, notices and assignments, in
each case in form and substance satisfactory to the Lender, relating
to the creation, validity, perfection, priority or continuation of the
Security Interest under the Uniform Commercial Code or other
Applicable Law.
(c) The Lender is hereby authorized to execute and file in all
necessary and appropriate jurisdictions (as determined by the Lender) one or
more financing or continuation statements (or any other document or instrument
referred to in Section 3(b)(v) above) in the name of the Debtor and to sign the
Debtor's name thereto. The Debtor authorizes the Lender to file any such
financing statement, document or instrument without the signature of the Debtor
to the extent permitted by Applicable Law. Further, to the extent permitted by
Applicable Law, a carbon, photographic, xerographic or other reproduction of
this Security Agreement or of any Financing Statement is sufficient as a
financing statement.
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(d) The Debtor shall mark its books and records as may be
necessary or appropriate to evidence, protect and perfect the Security Interest
and shall cause its financial statements to reflect the Security Interest.
SECTION 4. COVENANTS REGARDING COLLATERAL GENERALLY.
(a) Verification. The Lender shall have the right at any time and
from time to time, in its name in the name of the Debtor, to verify the
validity, amount or any other matter relating to any Receivables by mail,
telephone or otherwise.
(b) Delivery of Instruments. In the event any of the Collateral
becomes evidenced by a promissory note, trade acceptance or any other
instrument, the Debtor will immediately thereafter deliver such instrument to
the Lender, appropriately endorsed to the Lender.
(c) Defense of Title. The Debtor shall at all times be the sole
owner of each and every item of Collateral and shall defend, at its sole cost
and expense, its title in and to, and the Security Interest in, the Collateral
against the claims and demands of all Persons.
(d) Maintenance of Collateral. The Debtor shall maintain all
physical property that constitutes Collateral in good and workable condition,
with reasonable allowance for wear and tear, and shall exercise proper custody
over all such property.
(e) Insurance. The Debtor shall at all times maintain insurance
on its inventory and equipment against loss or damage by fire, theft, burglary,
pilferage, loss in transit and such other hazards and risks as the Lender shall
reasonably specify, under policies issued by the Debtor's present insurers or
other insurers acceptable to the Lender and in such amounts as is customarily
maintained by similar businesses, as may be required by Applicable Law or as
may be satisfactory to the Lender. All premiums on such insurance shall be
paid by the Debtor and certified copies of the policies, or other evidence of
insurance acceptable to the Lender, shall be delivered to the Lender promptly
upon the Lender's request. The Debtor will not use or permit the Collateral to
be used unlawfully or outside of any insurance coverage. All insurance
policies required under this Section shall contain loss payable clauses on New
York standard loss payee forms or other forms satisfactory to the Lender,
naming the Lender as loss payee, and providing that:
(i) All proceeds thereunder shall be payable directly to
the Lender as its interest may appear;
(ii) No such insurance shall be affected by any act or
neglect of the insured or owner of the property described in such
policy;
(iii) Such policies and loss payable clauses may not be
canceled, amended or terminated with respect to the Lender unless at
least thirty days' prior written notice is given to the Lender; and
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(iv) There shall be no recourse against the Lender for
payment of premiums or other amounts with respect thereto.
Any proceeds of insurance referred to in this Section shall be applied in
accordance with Section 9 hereof.
(f) Location of Office. The Debtor's chief executive office,
principal place of business, and its books and records relating to the
Collateral will continue to be kept at the address set forth in the first
paragraph of this Security Agreement and the Debtor will not change the
location of such office and place of business or such books and records without
giving the Lender thirty days' prior written notice thereof.
(g) Change of Name, Structure, Etc. Without giving the Lender
thirty days' prior written notice, the Debtor will not (i) change its name,
identity or structure (ii) conduct business under any trade name or other
fictitious name other than those set forth on Schedule 2(a), as modified from
time to time.
(h) Records Relating to Collateral. The Debtor will at all times
keep complete and accurate records of all other Collateral.
(i) Inspection. The Lender (by any of its officers, employees or
agents) shall have the right, to the extent that the exercise of such right
shall be within the control of the Debtor, at any time or times during normal
business hours: (i) to inspect all files relating to the Collateral and the
premises upon which any information relating to the Collateral is located, (ii)
to discuss the Debtor's affairs and finances, insofar as the same are
reasonably related to the rights of the Lender hereunder with any Person, to
verify the amount, quantity, value and condition of, or any other matter
relating to, any of the Collateral and (iii) to review, audit and make extracts
from all records and files related to any of the Collateral.
(j) Other Information. The Debtor shall furnish to the Lender
such other information with respect to the Collateral as the Lender may
reasonably request from time to time.
(k) Payments Directly to Lender. The Lender may at any time and
from time to time after the occurrence and continuation of a Default or Event
of Default notify, or request the Debtor to notify, in writing or otherwise,
any account debtor or other obligor with respect to any one or more of the
Receivables to make payment to the Lender or any agent or designee of the
Lender directly, at such address as may be specified by the Lender. If,
notwithstanding the giving of any notice, any account debtor or other such
obligor shall make payment to the Debtor, the Debtor shall hold all such
payments it receives in trust for the Lender, without commingling the same with
other funds or property of or held by the Debtor, and shall promptly deliver
the same to the Lender or any such agent or designee immediately upon receipt
by the Debtor in the identical form received, together with any necessary
endorsements.
(l) Sale of Collateral. Except as permitted under the terms of
the Credit Agreement, the Debtor shall not sell, transfer, convey or dispose of
any Collateral outside the ordinary course of its business. The inclusion of
"proceeds" of the Collateral under the Security Interest shall not
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be deemed a consent by the Lender to any other sale or other disposition of any
part or all of the Collateral.
(m) Proceeds of Collateral. The Debtor shall account fully and
faithfully for, and upon the Lender's request during the continuance of an
Event of Default, promptly pay or turn over to the Lender, proceeds in whatever
form received in disposition in any manner of any of the Collateral. To the
extent practicable, the Debtor shall at all times keep the Collateral and
proceeds thereof separate and distinct from other property of the Debtor and
shall keep accurate and complete records of the Collateral and proceeds thereof.
SECTION 5. THE LENDER APPOINTED ATTORNEY-IN-FACT. The Debtor hereby
irrevocably appoints the Lender the Debtor's attorney-in-fact, with full
authority in the place and stead of the Debtor and in the name of the Debtor or
otherwise, from time to time upon the occurrence and during the continuance of
a Default or Event of Default in the Lender's discretion to take any action and
to execute any instrument or document which the Lender may deem necessary or
advisable to accomplish the purposes of this Security Agreement and to exercise
any rights and remedies the Lender may have under this Security Agreement or
Applicable Law, including, without limitation: (i) to obtain and adjust
insurance required to be maintained pursuant to Section 5(e) hereof; (ii) to
ask, demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in respect
of any of the Collateral including any Receivable; (iii) to receive, endorse,
and collect any drafts or other instruments, documents and chattel paper, in
connection with clause (i) or (ii) above; (iv) to sell or assign any Receivable
upon such terms, for such amount and at such time or times as the Lender deems
advisable, to settle, adjust, compromise, extend or renew any Receivable or to
discharge and release any Receivable; and (v) to file any claims or take any
action or institute any proceedings which the Lender may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of the Lender with respect to any of the Collateral. The
power-of-attorney granted hereby shall be irrevocable and coupled with an
interest.
SECTION 6. THE LENDER MAY PERFORM. If the Debtor fails to perform
any agreement contained herein, the Lender may, with notice to the Debtor,
itself perform, or cause performance of, such agreement, and the reasonable
expenses of the Lender incurred in connection therewith shall be payable by the
Debtor under Section 12 hereof; provided, however, the Lender's failure to give
such notice shall not in any way affect the validity of any action taken by the
Lender under this Section.
SECTION 7. THE LENDER'S DUTIES. The powers conferred on the Lender
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon the Lender to exercise any such powers. Except for the
safe custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Lender shall have no duty as to any
Collateral. The Lender shall be deemed to have exercised reasonable care in
the custody of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which the Lender accords its own
property; it being understood that the Lender shall be under no obligation to
take any necessary steps to preserve rights against prior parties or any other
rights pertaining to any Collateral, but may do so at its option, and all
reasonable expenses incurred in
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connection therewith shall be for the sole account of the Debtor and shall be
added to the Obligations.
SECTION 8. REMEDIES. The Lender may take any or all of the following
actions upon the occurrence and during the continuation of an Event of Default.
(a) Use of Premises and Patents. The Lender may:
(i) without notice, demand or other process, and without
payment of any rent or any other charge enter any of the Debtor's
premises and, without breach of the peace, until the Lender completes
the enforcement of its rights in the Collateral, take possession of
such premises or place custodians in exclusive control thereof, remain
on such premises and use the same and any of the Debtor's equipment;
and
(ii) in the exercise of the rights of the Lender under
this Security Agreement, without payment or compensation of any kind,
use any and all trademarks, trade styles, trade names, patents, patent
applications, licenses, franchises and the like to the extent of the
rights of the Debtor therein, and the Debtor hereby grants a license
to the Lender for this purpose.
(b) Rights as a Secured Creditor. The Lender may exercise all of
the rights and remedies of a secured party under the Uniform Commercial Code
and under any other Applicable Law, including, without limitation, the right,
without notice except as specified below and with or without taking possession
thereof, to sell the Collateral or any part thereof in one or more parcels at
public or private sale at any location chosen by the Lender, for cash, on
credit or for future delivery, and at such price or prices and upon such other
terms as the Lender may deem commercially reasonable. The Debtor agrees that,
to the extent notice of sale shall be required by law, at least ten days'
notice to the Debtor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification,
but notice given in any other reasonable manner or at any other reasonable time
shall constitute reasonable notification. The Lender shall not be obligated to
make any sale of Collateral regardless of notice of sale having been given.
The Lender may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
The Lender may bid all or any portion of the Obligations at any such sale.
(c) Waiver of Marshaling. The Debtor hereby waives any right to
require any marshaling of assets and any similar right.
(d) Appointment of Receiver. The Lender shall be entitled to the
appointment of a receiver, without notice of any kind whatsoever and without
regard to the adequacy of any security for the Obligations or the solvency of
any party bound for its payment, to take possession of all or any portion of
the Collateral and/or the business operations of the Debtor and to exercise
such power as the court shall confer upon such receiver.
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(e) Receivables. The Lender shall have the exclusive right to
assert, either directly or on behalf of the Debtor, any and all rights and
claims the Debtor may have under any Receivables as the Lender may deem proper
and to receive and collect any and all Receivables and any and all fees,
damages, awards and other monies arising thereunder or resulting therefrom and
to apply the same on account of any of the Obligations.
SECTION 9. APPLICATION OF PROCEEDS. All proceeds from each sale of,
or other realization upon, all or any part of the Collateral following the
occurrence and continuation of an Event of Default, and all insurance proceeds
payable following the occurrence and continuation of an Event of Default by
reason of any damage or destruction of any of the Collateral, shall be applied
or paid over as follows:
(a) First: to the payment of all reasonable costs and expenses
actually incurred in connection with such sale or other realization, including
reasonable attorneys' fees actually incurred if the Lender endeavored to
collect the Obligations by or through an attorney at law;
(b) Second: to the payment of the accrued interest upon any of
the Obligations in any order which the Lender may elect;
(c) Third: to the payment of the outstanding principal of the
Obligations in any order which the Lender may elect; and
(d) Fourth: the balance (if any) of such proceeds shall be paid
to the Debtor or to whomsoever may be legally entitled thereto.
The Debtor shall remain liable and shall pay, on demand, any deficiency
remaining in respect of the Obligations, together with interest thereon at a
rate per annum equal to the Post-Default Rate then payable hereunder on such
Obligations, which interest shall constitute part of the Obligations. So long
as no Event of Default shall have occurred and be continuing, the Debtor may
receive any insurance proceeds payable by reason of any damage or destruction
of any of the Collateral. If the Lender shall receive any such insurance
proceeds which it is not otherwise entitled to retain, the Lender shall
promptly turn over such proceeds to the Debtor or to whomsoever may be legally
entitled thereto.
SECTION 10. RIGHTS CUMULATIVE. The rights and remedies of the Lender
under this Security Agreement, the Credit Agreement and each other document or
instrument evidencing or securing the Obligations shall be cumulative and not
exclusive of any rights or remedies which it would otherwise have, including,
but not limited to, those rights afforded by the Uniform Commercial Code and
other Applicable Laws. In exercising its rights and remedies the Lender may be
selective and no failure or delay by the Lender in exercising any right shall
operate as a waiver of it, nor shall any single or partial exercise of any
power or right preclude its other or further exercise or the exercise of any
other power or right.
SECTION 11. EXPENSES. The Debtor will pay, within 10 days of
demand, all reasonable fees and expenses actually incurred by the Lender in
connection with (a) the collection or enforcement of the Obligations including
the reasonable fees and disbursements of counsel to the
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Lender actually incurred by the Lender and (b) the exercise by the Lender of
any right or remedy granted to it under this Agreement if such exercise is done
by, through or with the assistance of an attorney.
SECTION 12. AMENDMENTS, ETC. No amendment or waiver of any provision
of this Security Agreement nor consent to any departure by the Debtor herefrom
shall in any event be effective unless the same shall be in writing and signed
by the parties hereto, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 13. NOTICES. Unless otherwise provided herein,
communications provided for hereunder shall be in writing and shall be mailed,
telecopied or delivered, in accordance with the notice provision set forth in
the [Credit Agreement][Guaranty].
SECTION 14. CONTINUING SECURITY INTEREST. This Security Agreement
shall create a continuing security interest in the Collateral and shall (i)
remain in full force and effect until indefeasible payment in full of the
Obligations, (ii) be binding upon the Debtor, its successors and assigns and
(iii) inure the benefit of the Lender, and its successors and assigns. The
Debtor's successors and assigns shall include, without limitation, a receiver,
trustee or debtor-in-possession thereof or therefore.
SECTION 15. APPLICABLE LAW; SEVERABILITY. THIS SECURITY AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF GEORGIA. Whenever possible, each provision of this Security Agreement shall
be interpreted in such a manner as to be effective and valid under Applicable
Law, but if any provision of this Security Agreement shall be prohibited by or
invalid under Applicable Law, such provisions shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provisions or the remaining provisions of this Security Agreement. The
Secured Party may assign, transfer or sell any of the Obligations, or grant or
sell participation interests in any of the Obligations, to any Person pursuant
to the terms of the Credit Agreement.
SECTION 16. ARBITRATION.
ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO INCLUDING
BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT
OR ANY OTHER LOAN DOCUMENT, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN
ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE
FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE
RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF
JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC. (J.A.M.S.) OR THE COMMERCIAL
ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION, AS APPLICABLE, AND
THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE
SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE
ENTERED IN ANY COURT
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HAVING JURISDICTION. ANY PARTY TO THIS SECURITY AGREEMENT MAY BRING AN ACTION,
INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY
CONTROVERSY OR CLAIM TO WHICH THIS SECURITY AGREEMENT APPLIES IN ANY COURT
HAVING JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE CITY
OF THE BORROWER'S DOMICILE AT THE TIME OF THIS SECURITY AGREEMENT'S EXECUTION
AND ADMINISTERED BY J.A.M.S. OR THE AMERICAN ARBITRATION ASSOCIATION AS AGREED
BY THE PARTIES. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF
THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR(S) SHALL ONLY, UPON A
SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR
UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS SECURITY AGREEMENT
SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE
STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS SECURITY
AGREEMENT; OR (II) BE A WAIVER BY THE LENDER OF THE PROTECTION AFFORDED TO IT
BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT
THE RIGHT OF THE LENDER HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT
NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL
PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY
REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR
THE APPOINTMENT OF A RECEIVER. THE LENDER MAY EXERCISE SUCH SELF HELP RIGHTS,
FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES
BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT
PURSUANT TO THIS SECURITY AGREEMENT. NEITHER THE EXERCISE OF SELF HELP
REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR
PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY
PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF
THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
SECTION 17. INDEMNIFICATION. The Debtor agrees to indemnify the
Lender, from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may at any time be imposed on, incurred by, or
asserted against the Lender in any way relating to or arising out of the
operation of the Debtor's business, any action taken by the Lender with respect
to any Receivable pursuant to this Security Agreement or any other action taken
by the Lender pursuant to the terms of this Security Agreement; provided,
however, that the Debtor shall not be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Lender's gross
negligence or willful misconduct. Without limiting the generality of the
foregoing, the Debtor agrees to reimburse the
L-11
<PAGE> 147
Lender promptly upon demand for any reasonable out-of-pocket expenses
(including reasonable counsel fees of the counsel(s) of the Lender's own
choosing) incurred by the Lender in connection with the preparation, execution,
administration, or enforcement of, or legal advice with respect to the rights
or responsibilities of the parties under, this Security Agreement, any suit or
action brought by the Lender to enforce the terms of this Security Agreement,
and any claim or suit brought against the Lender arising under any federal or
state environmental statute, rule or regulation, including, without limitation,
the Superfund Act, or the Federal Resource Conservation and Recovery Act of
1976, as amended. The agreements in this Section shall survive the termination
of this Security Agreement. The Lender agrees to give the Debtor prompt notice
of any suit or cause of action brought against the Lender which is covered by
this Section.
SECTION 18. COUNTERPARTS. This Security Agreement may be executed in
several counterparts, each of which shall be an original and all of which,
taken together, shall constitute but one and the same instrument.
SECTION 19. DEFINITIONS. (a) For the purposes of this Security
Agreement:
"Collateral" means all of the Debtor's right, title and interest in
and to each of the following, wherever located and whether now or hereafter
existing, or now owned or hereafter acquired or arising:
(a) all Receivables;
(b) all books, records, files, computer programs, data processing
records, computer software, documents, correspondence and other information at
any time evidencing, describing or pertaining to or in any way related to any
of the foregoing or otherwise pertaining or relating to the business or
operations of the Debtor;
(c) any and all balances, credits, deposits, accounts, items and
monies of the Debtor now or hereafter with the Lender or any affiliate of the
Lender or deposited with the Lender or any financial institution selected by
the Lender pursuant to any lock box, deposit, escrow or other collection
agreement or otherwise, and all property of the Debtor of every kind and
description now or hereafter in the possession or control of the Lender for any
reason; and
(d) any and all products and proceeds of any of the foregoing
(including, but not limited to, any claims to any items referred to in this
definition, and any claims of the Debtor against third parties for loss of,
damage to or destruction of, any or all of the Collateral or for proceeds
payable under, or unearned premiums with respect to, policies of insurance) in
whatever form, including, but not limited to, cash, instruments, general
intangibles, accounts, equipment, inventory, farm products, other goods,
documents and chattel paper and all proceeds of such proceeds.
"Debtor" has the meaning set forth in the first paragraph hereof.
L-12
<PAGE> 148
"Default" means any of the events specified in the definition of Event
of Default, whether or not there has been satisfied any requirement for giving
of notice, lapse of time or the happening of any other condition.
"Financing Statements" means any and all financing statements executed
and delivered by or on behalf of the Debtor in connection with the perfection
of the Security Interest, together with any amendments thereto and any
continuations thereof.
"Receivables" means all accounts and any and all rights to the payment
of money or other forms of consideration of any kind (whether classified under
the Uniform Commercial Code as accounts, chattel paper, general intangibles, or
otherwise) for goods sold or leased or for services rendered including, but not
limited to, accounts receivable, proceeds of any letters of credit naming the
Debtor as beneficiary, all contract rights, notes, drafts, instruments,
documents, acceptances in favor of the Debtor, and all other debts, obligations
and liabilities in whatever form owing by any Person to the Debtor.
"Security Agreement" means this Security Agreement, as the same may be
amended, supplemented, restated or otherwise modified from time to time.
"Security Interest" means the Lien of the Lender upon, and the
collateral assignments to the Lender of, the Collateral effected hereby or
pursuant to the terms hereof.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
effect in the State of Georgia, as the same may be amended from time to time.
(b) Unless otherwise set forth herein to the contrary, all terms
not otherwise defined herein and which are defined in the Uniform Commercial
Code are used herein with the meanings ascribed to them in the Uniform
Commercial Code.
(c) Capitalized terms used herein and not defined herein are used
herein with the meaning ascribed to them in the Credit Agreement.
[Signature on following page]
L-13
<PAGE> 149
IN WITNESS WHEREOF, the Debtor has caused this Security Agreement to
be duly executed and delivered under seal by its duly authorized officers as of
the day first above written.
[DEBTOR]
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
ATTEST:
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
(CORPORATE SEAL)
Agreed to and Accepted:
NATIONSBANK, N.A. (SOUTH)
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
L-14
<PAGE> 150
SCHEDULE 2(A)
Trade Names
(To be Completed by Debtor)
L-15
<PAGE> 151
SCHEDULE 2(G)
Places of Business
(To be Completed by Debtor)
L-16
<PAGE> 152
EXHIBIT M
FORM OF OPINION OF COUNSEL
[A Georgia White Paper Opinion typical for transactions of this type
to be negotiated directly with Troutman Sanders LLP]
M-1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PHYSICIAN'S SPECIALTY CORP. FOR THE THREE MONTH PERIOD
ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 15,986,975
<SECURITIES> 0
<RECEIVABLES> 4,060,088
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,103,622
<PP&E> 1,583,709
<DEPRECIATION> 0
<TOTAL-ASSETS> 21,736,169
<CURRENT-LIABILITIES> 5,190,078
<BONDS> 0
0
0
<COMMON> 5,905
<OTHER-SE> 16,540,186
<TOTAL-LIABILITY-AND-EQUITY> 21,736,169
<SALES> 238,951
<TOTAL-REVENUES> 238,951
<CGS> 0
<TOTAL-COSTS> 219,074
<OTHER-EXPENSES> (13,193)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 33,071
<INCOME-TAX> 12,898
<INCOME-CONTINUING> 20,173
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,173
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
