<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
For the quarterly period ended: September 30, 1998
OR
( ) 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: 001-12759
Physicians' Specialty Corp.
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(Exact Name of Registrant as Specified in its charter)
<TABLE>
<S> <C>
Delaware 58-2251438
- ------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
</TABLE>
1150 Lake Hearn Drive, Suite 640 Atlanta, Georgia 30342
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(Address of principal executive offices)
404-256-7535
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(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 X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
There were 8,975,646 shares of the Registrants' common stock, par value $.001
per share, outstanding as of November 13, 1998.
<PAGE> 2
Physicians' Specialty Corp.
Index
Part 1 - Financial Information
<TABLE>
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at September 30, 1998
and December 31, 1997............................................................ 3
Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 1998
and 1997......................................................................... 4
Consolidated Statements of Cash Flows for the Nine Months Ended September 30,
1998 and 1997.................................................................... 5
Notes to Consolidated Financial Statements....................................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................................... 11
Part II - Other Information
Item 2. Changes in Securities and Use of Proceeds........................................ 16
Item 5. Other Information................................................................ 16
Item 6. Exhibits and Reports on Form 8-K................................................. 16
</TABLE>
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Part 1: Financial Information
Item 1: Financial Statements
PHYSICIANS' SPECIALTY CORP.
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,798,144 $ 5,351,639
Accounts receivable, net of allowance for doubtful
accounts of $683,733 and $261,714 in
1998 and 1997, respectively 15,277,166 9,273,565
Notes receivable 80,000 81,682
Prepayments and other 1,149,280 335,650
----------- -----------
Total current assets 21,304,590 15,042,536
PROPERTY AND EQUIPMENT, net 7,532,013 3,431,707
INTANGIBLE ASSETS, net 24,136,929 11,793,777
INVESTMENT IN UNCONSOLIDATED SUBSIDIARY 5,308,584 --
OTHER ASSETS 314,035 330,338
----------- -----------
Total Assets $58,596,151 $30,598,358
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Due to physicians $ 1,062,123 $ 1,177,009
Accounts payable and accrued expenses 2,904,723 3,057,880
Deferred income taxes 851,701 338,218
----------- -----------
Total current liabilities 4,818,547 4,573,107
SUBORDINATED SELLER NOTES 7,563,701 911,715
----------- -----------
Total liabilities 12,382,248 5,484,822
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value; 50,000,000 shares authorized
issued: 8,975,646 in 1998 and 6,503,098 in 1997 8,975 6,503
Additional paid-in capital 41,062,216 23,401,657
Retained earnings 5,142,712 1,705,376
----------- -----------
Total shareholders' equity 46,213,903 25,113,536
----------- -----------
Total liabilities and shareholders' equity $58,596,151 $30,598,358
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
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PHYSICIANS' SPECIALTY CORP.
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES
Patient service revenues $ 410,793 $ 339,886 $ 984,317 $ 660,061
Capitation revenues 1,208,506 1,135,825 3,519,180 2,493,376
Management fees 9,185,413 3,462,249 22,344,815 6,287,909
Earnings in unconsolidated subsidiary 267,440 -- 267,440 --
---------- ----------- ---------- -----------
Net revenue 11,072,152 4,937,960 27,115,752 9,441,346
EXPENSES
Provider claims, wages, benefits 4,868,739 2,436,570 12,149,296 4,980,961
General and administrative 3,376,666 1,409,034 8,196,425 2,531,771
Depreciation and amortization 519,987 130,166 1,206,107 226,721
----------- ---------- ----------- -----------
Operating expenses 8,765,392 3,975,770 21,551,828 7,739,453
Operating income (loss) 2,306,760 962,190 5,563,924 1,701,893
Other income (expense) (83,773) 126,877 69,786 259,376
----------- ---------- ----------- -----------
Pretax income (loss) 2,222,987 1,089,067 5,633,710 1,961,269
Provision for income taxes 866,343 424,736 2,196,374 764,895
----------- ---------- ----------- -----------
Net income (loss) $ 1,356,644 664,331 $ 3,437,336 $ 1,196,374
=========== ========== =========== ===========
Earnings per share:
Basic earnings per share $ 0.15 $ 0.11 $ 0.45 $ 0.27
Diluted earnings per share $ 0.15 $ 0.11 $ 0.42 $ 0.27
Weighted average shares
Outstanding
Basic 8,866,514 6,211,618 7,699,863 4,389,746
Diluted 9,298,644 6,279,665 8,199,259 4,457,756
</TABLE>
See accompanying notes to consolidated financial statements
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PHYSICIAN'S SPECIALTY CORP.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,437,336 $ 1,196,374
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,206,107 226,721
Compensation expense 32,987 48,000
Increase in accounts receivable (2,262,251) (901,134)
(Increase) decrease in prepayments and other (796,903) 89,482
Increase (decrease) in accounts payable and accrued liabilities 605,272 (1,378,133)
------------ ------------
Total Adjustments (2,425,332) (1,915,064)
------------ ------------
Net cash (used in) provided by operating activities 1,012,004 (718,690)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for acquisitions, net of cash acquired (16,721,158) (1,498,000)
Purchase of property and equipment (1,494,855) (284,824)
------------ ------------
Net cash used in investing activities (18,216,013) (1,782,824)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock, net of offering costs 16,577,826 15,408,094
Borrowing under short-term debt 72,685 170,000
Repayment of short-term debt 0 (2,258,562)
Repayment of long-term debt 0 0
Deferred offering costs 0 0
------------ ------------
Net cash provided by financing activities 16,650,511 13,319,532
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (553,498) 10,818,018
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,351,639 123,540
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 4,798,141 $ 10,941,558
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
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Physicians' Specialty Corp.
Notes to the Consolidated Financial Statements (Unaudited)
September 30, 1998
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") and
related specialties. The Company commenced its business activities upon
consummation of the reorganization, as described in Note 3, and its initial
public offering ("IPO") 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. The Company has operations in greater
Atlanta, Georgia; Chicago, Illinois; Birmingham, Alabama; the South Florida
area; Southern New York and Northern New Jersey and in metropolitan Cleveland,
Ohio.
NOTE 2. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its wholly owned and unconsolidated 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 the notes thereto included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997.
NOTE 3. REORGANIZATION
The Company acquired substantially all of the assets (other than certain
excluded assets such as employment agreements and patient charts, records and
files) and certain liabilities of (i) Atlanta Ear, Nose & Throat Associates,
P.C., (ii) ENT & Allergy Associates, Inc. (iii) Metropolitan Ear, Nose & Throat,
P.C., (iv) Atlanta Head and Neck Surgery, P.C. and (v) Ear, Nose & Throat
Associates, P.C. (collectively, the "Initial Practices"), and all of the
outstanding shares of common stock of three corporations holding managed care
contracts (the "ENT Networks") in March 1997 (the "Reorganization"). In
connection with the acquisition of assets of the Initial Practices and the
common stock of the ENT Networks, the Company issued an aggregate of 3,104,755
shares of its Common Stock (valued at the time of issuance at approximately
$24.8 million).
POST REORGANIZATION ACQUISITIONS THROUGH JUNE 30, 1998
Since the Reorganization, the Company acquired (a) substantially all of the
assets (other than certain excluded assets such as employment agreements and
patient charts, records and files) and assumed certain contractual liabilities
of (i) Allatoona Ear, Nose & Throat Associates, P.C, (ii) Ear Nose & Throat
Specialists, P.C., (iii) Ear, Nose & Throat Specialists, Head & Neck Surgery,
P.C., (iv) Northside Ear, Nose & Throat Associates, P.C., (v) Otolaryngology
Medical & Surgical Associates, Ltd., (vi) Cobb Ear, Nose & Throat Associates,
P.C., (vii) James J. Murata. M.D., P.A., (viii) John C. Westerkamm, M.D., P.A.,
(ix) Napoleon G. Bequer, M.D., P.A. and (b) the stock of six professional
associations owned by seven ENT physicians and a partnership owned and operated
by the professional associations in Palm Beach and Broward Counties, Florida.
In connection with the acquisition of assets or equity of these practices,
the Company (i) paid an aggregate of approximately $5.5 million in cash, (ii)
discharged approximately $260,000 of liabilities, (iii) issued an aggregate of
629,171 shares of Common Stock (valued at an aggregate of approximately $4.8
million), (iv) agreed to issue an aggregate of 319,735 additional shares of
Common Stock (valued at an aggregate of approximately $2.9 million) to four of
the affiliated practices beginning in September 1998, (v) issued subordinated
convertible promissory notes in the aggregate principal amount of approximately
$912,000, which notes mature in October 2000 and accrue interest at a rate of
5.61% per annum and are convertible into shares of Common Stock at a conversion
price of $10.00 per share (vi) issued a subordinated promissory note in the
principal amount of $250,000 which note matures in April 2000 and accrues
interest at a rate of 6% per annum, (vii) issued non-interest bearing contingent
subordinated promissory notes in the
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aggregate principal amount of approximately $3.0 million. The payment of these
notes is contingent upon the physicians or practice holding such notes reaching
certain performance targets. Substantially all of these contingent notes are
payable by the Company, at the Company's option, in shares of Common Stock,
valued at the average closing price of the Common Stock for the ten trading days
preceding the date of delivery of such shares. In connection with these
acquisitions, the Company paid an aggregate of approximately $492,000 to Premier
HealthCare, an affiliate of the Company's Vice Chairman and Secretary, for
advisory services rendered.
On May 27, 1998, pursuant to a Stock Purchase Agreement, the Company,
through PSC Acquisition Corp., a wholly-owned subsidiary of the Company,
acquired (i) substantially all of the tangible assets and assumed certain
contractual liabilities of Physicians' Domain, Inc., a White Plains, New York
based ENT physician practice management company ("Physicians' Domain") and (ii)
the stock of three corporations that are successors to three ENT physician
practices affiliated with Physicians' Domain employing an aggregate of 20
physicians and 16 allied health care professionals with 11 clinical offices in
Southern New York and Northern New Jersey (collectively, "PDI"). In connection
with the PDI transaction, the Company (i) paid approximately $5.4 million in
cash, (ii) discharged approximately $3.8 million of liabilities of PDI and (iii)
issued a subordinated long-term promissory note in the principal amount of
approximately $6.4 million , which note matures in May 2003, accrues interest at
a rate of 6.0% per annum, payable quarterly, is secured by the fixed assets
acquired by the Company in the transaction and is subordinate to senior
indebtedness, including borrowings under the Company's credit facility. In
addition, the Company will pay an additional $500,000, in cash or shares of
Common Stock at the Company's option, if the PDI practices achieve stipulated
performance targets. Pursuant to the stock purchase agreement. The physicians at
PDI have the right to nominate one member to the Board of Directors of the
Company, Steven H. Sacks, M.D., a nominee of the physicians at PDI, was
appointed to the Board of Directors of the Company on August 12, 1998. In
connection with the PDI transaction, the Company paid approximately $260,000 to
Premier HealthCare for advisory services rendered
The Company also entered into management services agreements with two
newly organized ENT practices employing the 20 ENT physicians in connection with
the PDI transaction. The management services agreements provide for an aggregate
fixed annual management fee of approximately $2.0 million, plus reimbursement of
practice operating expenses. Pursuant to the management services agreements, the
fixed management fee is subject to annual increases after May 27, 2003
consistent with the annual percentage increase in the consumer price index for
the prior year. The management services agreements also provide for mutually
agreed increases in the fixed management fee upon (i) the management by the
Company of ancillary business developed or acquired or (ii) the acquisition of
additional physician practices which are merged into the existing PDI practices.
The Company used a portion of the net proceeds received from the Company's
public offering in May 1998 to pay the cash component of and to discharge the
indebtedness of PDI assumed by the Company in connection with the PDI
transaction.
ACQUISITIONS FROM JULY 1, 1998 THROUGH SEPTEMBER 30, 1998
During the three month period ended September 30, 1998, the Company
acquired substantially all of the assets (other than certain excluded assets
such as employment agreements and patient charts, records and files), of (i)
Robert H. Maliner, M.D., P.A., ("Maliner"), and (ii) James R. Leonard, M.D.,
P.C. ("Leonard").
In addition, on August 31, 1998, PSC Ambulatory Surgery, Ltd., a Georgia
limited partnership (the "PSC Partnership"), of which the Company is the sole
general partner and Atlanta Ear, Nose & Throat Associates, P.C. ("Atlanta ENT"),
one of the Company's affiliated practices, is the sole limited partner, acquired
in the aggregate a 17.5% limited partnership interest in Atlanta Surgery Center,
Ltd., a Georgia limited partnership ("Atlanta Surgery Center"). The aggregate
purchase price was paid by the Company (the "Purchase Price"). Pursuant to the
terms of the transaction, the Company and Atlanta ENT own 99% and 1%,
respectively of the partnership interest in the PSC Partnership; provided that
Atlanta ENT has an option to purchase up to 40% of the partnership interest from
the Company for an amount equal to the percentage of the PSC Partnership
acquired by Atlanta ENT multiplied by the Purchase Price. Atlanta Surgery Center
operates three (multi-specialty ambulatory surgery centers, consisting of 14
operating rooms, in the metropolitan Atlanta area. As a result of the
transaction, effective July 1, 1998, the PSC Partnership will receive 17.5% of
the distributions made by Atlanta Surgery Center and the Company and Atlanta ENT
will receive their pro rata share of such distributions based on their ownership
interest in the PSC Partnership.
In connection with the Maliner, Leonard and the Atlanta Surgery Center
transactions completed by the Company during the three month period ended
September 30, 1998, the Company, (i) paid an aggregate of $5,455,000 in cash,
(ii) issued an aggregate of 34,552 shares of Common Stock of the Company, (iii)
agreed to issue an aggregate of 34,552 shares of Common Stock of the Company and
(iv) issued a $150,000 non-interest bearing contingent promissory note which is
payable, at the Company's option, in cash or the Company's Common Stock, upon
the holder achieving certain performance targets. In connection with these
transactions, the
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Company paid approximately $219,500 in fees to Premier HealthCare, an affiliate
of the Company's Vice Chairman and Secretary, for advisory services rendered.
NOTE 4. PUBLIC OFFERINGS
On March 26, 1997, the Company completed its IPO of 2,200,000 shares of its
Common Stock. The net proceeds of the IPO were approximately $14,275,000 and a
portion of which were used for repayment of indebtedness of the acquired
practices, repayment of indebtedness of the Company, payment of a consulting
fee, and for general corporate purposes and working capital requirements.
On May 15, 1998, the Company completed a public offering of 2,050,263 shares
of its Common Stock (i) 2,000,000 of which shares were sold by the Company and
(ii) 50,263 of which were sold by certain stockholders of the Company. On May
19, 1998 the Company's underwriters exercised their option to purchase 307,540
additional shares of Common Stock from the Company to cover over-allotments. The
net proceeds to the Company from the offering and exercise of the over-allotment
shares were approximately $16,520,000, with approximately $5,400,000 and
$3,800,000 respectively, used to pay the cash portion of the purchase price of
the PDI transaction and to repay outstanding indebtedness of PDI.
On May 12, 1998 the Company also registered under the Securities Act of
1933, as amended (the "Act"), an aggregate of 3,146,514 shares of Common Stock,
of which (i) 2,750,000 shares may be issued from time to time by the Company in
connection with potential future affiliation transactions with ENT physicians or
related specialty practices or the merger with or acquisition by the Company of
other related businesses or assets, (ii) 220,000 shares of Common Stock are
issuable upon exercise of warrants issued to the representatives of the
underwriters in the IPO which may be sold from time to time by the holders of
the warrants after issuance and (iii) 176,514 shares of Common Stock are
issuable in December 1998 in connection with a practice asset acquisition
completed in December 1997, which may be sold from time to time by the physician
stockholders after issuance.
NOTE 5. MANAGEMENT FEE REVENUE
The Company records revenue on a management fee basis as derived from
physician practices managed by the Company. Management fees are composed of (i)
a varying percentage of affiliated practice patient service revenue (typically
12.5%), (ii) a fixed management fee in connection with the PDI affiliation of
approximately $2,045,000 per year, subject to certain increases, and (iii)
reimbursement of practice operating expenses (excluding compensation to
physicians and physician assistants). Management fee revenue earned by the
Company is detailed as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
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1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Percentage of affiliated practice patient service
revenue and fixed management fee $2,293,343 $ 955,953 $ 5,509,388 $1,685,626
Reimbursement of practice operating expenses 6,892,070 2,506,296 16,835,427 4,602,283
--------- --------- ---------- ---------
Total management fee revenue $9,185,413 $3,462,249 $22,344,815 $6,287,909
========== ========== =========== ==========
</TABLE>
There currently exists wide disparity in the methods of recording revenue in
the physician practice management (PPM) industry. The Company believes the
following unaudited supplemental information, which includes patient service
revenue of both owned as well as managed practices ("system wide" revenue)
allows a reader of the Company's financial statements to evaluate comparability
with other PPM companies recording patient services revenue on a consolidated
basis for financial reporting purposes. The unaudited supplemental "system wide"
information is being presented for supplemental purposes only and should be read
in conjunction with the Company's financial statements.
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Supplemental System Wide Information
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<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
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1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Supplemental Net Patient Service
Revenue:
Owned Practice $ 410,793 $ 339,886 $ 984,317 $ 660,061
Managed Practices 14,239,478 6,266,398 37,246,145 11,397,240
----------- ---------- ----------- -----------
Total Supplemental Patient
Service Revenue 14,650,271 6,606,284 38,230,462 12,057,301
Plus:
Capitation Revenue $ 1,208,506 $1,135,825 $ 3,519,180 $ 2,493,376
Management Fees 486,349 42,486 813,039 130,804
Earnings in unconsolidated subsidiary 267,440 0 267,440 0
----------- ---------- ----------- -----------
Total Supplemental
System wide Revenue $16,612,566 $7,784,595 $42,830,121 $14,681,481
Less:
Amounts Retained by
Physicians Groups 5,540,414 2,846,635 15,714,369 5,240,135
----------- ---------- ----------- -----------
Total Net Revenue $11,072,152 $4,937,960 $27,115,752 $ 9,441,346
=========== ========== =========== ===========
</TABLE>
NOTE 6. INTANGIBLE ASSETS
The Company's physician practice acquisitions involve the purchase of
tangible and intangible assets and the assumption of certain liabilities of the
acquired practices. As part of the purchase price allocation, the Company
allocates the purchase price to the tangible and identifiable intangible assets
acquired and liabilities assumed based on estimated fair market values. Costs of
acquisitions in excess of the net estimated fair value of tangible and
identifiable intangible assets acquired and liabilities assumed are amortized
using the straight line method over a period of 25 years. At September 30, 1998,
the amount of such intangible assets was approximately $24,907,000, with
accumulated amortization totaling approximately $770,000.
NOTE 7. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." SFAS No. 130 is designed to improve the reporting of
changes in equity from period to period. SFAS No. 130 is effective for fiscal
years beginning after December 15, 1997. The adoption of SFAS No. 130 for fiscal
1998 was not material to the Company's financial statements.
In March 1998, the Emerging Issues Task Force of the FASB issued its
Consensus on Issue 97-2 ("EITF 97-2"). EITF 97-2 addresses certain specific
matters pertaining to the physician practice management industry. EITF 97-2
would be effective for the Company for its year ending December 31, 1998. EITF
97-2 addresses the ability of physician practice management companies to
consolidate the results of physician practices with which it has an existing
contractual relationship. The Company is in the process of analyzing the effect
of all its contractual relationships but currently believes that certain
contracts would meet the criteria of EITF 97-2 for consolidating the results of
operations of the related physician practices, which would require the Company
to restate its prior period financial statements to conform to such
consideration. The Company anticipates incorporating the provisions of EITF97-2
effective for its year ending December 31, 1998. EITF 97-2 also has addressed
the accounting method for future combinations with individual physician
practices. The Company believes that, based on the criteria set forth in EITF
97-2, virtually all of its future acquisitions of individual physician practices
will continue to be accounted for under the purchase method of accounting.
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NOTE 8. EARNINGS PER SHARE
The Company has calculated its basic and diluted earnings per share in
accordance with SFAS No. 128, "Earnings Per Share". Basic earnings per share are
calculated by dividing net income available to common stockholders by the
weighted average number of common shares outstanding for the periods presented.
Diluted earnings per share reflects the potential dilution that could occur if
securities and other contracts to issue common stock where exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity.
A reconciliation of the number of weighted average shares used in
calculating basic and diluted earnings per share is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding - basic 8,866,514 6,211,618 7,699,863 4,389,746
Effect of potentially dilutive shares outstanding 312,354 68,047 393,901 68,010
Effect of convertible debt 119,776 -- 105,495 --
--------- --------- --------- ---------
Weighted average number of common shares
Outstanding - diluted 9,298,644 6,279,665 8,199,259 4,457,756
========= ========= ========= =========
</TABLE>
NOTE 9. CREDIT AGREEMENT
On July 31, 1998, the Company closed on a four year $45 million amended and
restated senior credit facility syndicated by Nationsbanc Montgomery Securities
LLC. Syndicate lenders include NationsBank, N.A., PNC Bank and Rabobank
Nederland (the "Credit Facility"). The Credit Facility replaced the Company's
$20 million senior credit facility. Borrowings under the Credit Facility (i) are
secured by the assignment to the banks of the Company's stock in all of its
subsidiaries and the Company's accounts receivable, including the accounts
receivable assigned to the Company by affiliated practices pursuant to
management services agreements, (ii) are guaranteed by all subsidiaries
(including future subsidiaries) and (iii) restrict the Company from pledging its
assets to any other party. Advances under the Credit Facility will be used to
fund acquisitions and working capital, will be governed by a borrowing base
related primarily to the Company's earnings before interest, taxes, depreciation
and amortization ("EBITDA") and will bear interest, at the Company's option,
based upon either a prime-based or LIBOR-based rate. EBITDA is used by the
Company as an indicator of a company's ability to incur and service debt. EBITDA
should not be considered an alternative to operating income, net income, cash
flows or any other measure of performance as determined in accordance with
generally accepted accounting principles, as an indicator of operating
performance, or as a measure of liquidity. The Credit Facility contains
affirmative and negative covenants which, among other things, require the
company to maintain certain financial ratios (including maximum indebtedness to
pro forma EBITDA, maximum indebtedness to capital, minimum net worth, minimum
current ratio and minimum fixed charges coverage), limit the amounts of
additional indebtedness, dividends, advances to officers, shareholders and
physicians, acquisitions, investments and advances to subsidiaries, and restrict
changes in management and the Company's business. As of November 13, 1998, the
Company had approximately $3.7 million of borrowings under the Credit Facility.
NOTE 10. SUBSEQUENT EVENTS
On October 12, 1998, pursuant to an asset acquisition agreement, the Company
completed the acquisition of the assets of Cleveland Ear, Nose and Throat
Center, Inc. ("Cleveland ENT"), a ten physician ENT physician practice with
eight allied health care professionals and eight clinical offices in
metropolitan Cleveland, Ohio. Cleveland ENT had previously been affiliated with
MedPartners, Inc. ("MedPartners"). In connection with the transaction, the
Company entered into an amended and restated Clinic
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Services Agreement with Cleveland ENT maintaining the percentage of net income
management fee structure which existed in the MedPartners/Cleveland ENT Clinic
Services Agreement. The Company is discussing modifying the percentage of net
income arrangement consistent with the Company's historical practices. In
connection therewith, the Company has granted Cleveland ENT a one time option,
which expires on December 15, 1998, to unwind the transaction with the Company
as of December 31, 1998 and repurchase all Cleveland ENT non-medical assets
acquired by the Company for a total cash purchase price equal to the price paid
by the Company to MedPartners for such assets, plus amounts invested by the
Company in Cleveland ENT.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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; risks associated with combined operations; and risks
relating to acquisitions and managing growth; dependence on affiliated
physicians; dependence on managed care organizations; risks associated with
capitated arrangements, including potential reductions in reimbursement;
competition; regulatory risks; risks relating to credit facility and substantial
leverage; and other risks.
GENERAL
The Company is a physician practice management company which provides
comprehensive management services to physician practices specializing in the
treatment and management of ENT diseases and disorders, including specialists
practicing in the fields of allergy, audiology, oral surgery, plastic surgery
and sleep medicine. In March 1997, simultaneously with the closing of the
Company's IPO, the Company effected the Reorganization in which the Company
acquired all of the common stock of the ENT Networks and substantially all of
the assets of the Initial Practices. Since the consummation of the
Reorganization through November 3, 1998, the Company has acquired substantially
all of the assets of (i) four ENT physician practices with ten physicians in the
metropolitan Atlanta area, (ii) one ENT physician practice with two physicians
in North Georgia, (iii) one ENT physician practice with four physicians in the
metropolitan Chicago area, (iv) four ENT physician practices with five
physicians in South Florida, and (v) one ENT physician practice with ten
physicians in the metropolitan Cleveland, Ohio area. In addition, the Company
has acquired (i) the stock and related assets of six professional associations
comprising one ENT physician practice group with seven physicians in South
Florida, and (ii) the stock and related assets of three corporations that are
successors to three ENT physician practices employing an aggregate of 20
physicians in Southern New York and Northern New Jersey. The Company also
acquired substantially all of the tangible assets of Physicians' Domain, a White
Plains, New York based ENT physician practice management company and a 17.5%
equity interest in 3 ambulatory surgery centers containing 14 operating rooms.
As a result of these acquisitions as of November 3, 1998, the Company was
affiliated with 81 physicians, one TMJ specialist and 79 allied health care
professionals with 66 clinical offices in Alabama, Florida, Georgia, Illinois,
New York, New Jersey and Ohio.
The Company's revenue is derived (i) under management services agreements
with affiliated practices; (ii) from capitated managed care contracts held by
the ENT Networks, wholly-owned subsidiaries of the Company; (iii) from patient
service revenue generated by the Company's wholly owned subsidiary, ENT &
Allergy Associates, which directly employs physicians in Birmingham, Alabama;
and (iv) from earnings from the Company's unconsolidated subsidiary determined
on the equity basis of accounting.
Management fees consist of either a stipulated percentage of revenue
generated by or on behalf of physicians practicing at (non-owned) affiliated
practices, a fixed dollar amount of management fee or a stipulated percentage of
practice income before physician compensation, along with reimbursement of
Practice Expenses (as defined). Capitation revenue consists of fixed monthly
payments received by the Company directly from health maintenance organizations
("HMOs") (or payors subcontracting with HMOs) or third party payors. Patient
service revenue consists of gross charges, less allowances for bad debts and
contractual adjustments, generated by or on behalf of physicians practicing at
the Company's wholly-owned subsidiary, ENT & Allergy Associates.
Operating expenses consist of (i) provider claims, wages and benefits, (ii)
general and administrative expenses and (iii) depreciation and amortization.
Provider claims include claims paid or incurred in connection with medical
surgical services provided to managed care enrollees covered under the Company's
capitated managed care agreements. Wages and benefits include all salary and
benefit costs associated with corporate and clinic level personnel. General and
administrative expenses include all other corporate and clinic level operating
expenses, including real and personal property rent, medical and office
supplies, utilities and professional
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<PAGE> 12
fees. Depreciation and amortization expense includes non-cash charges related to
corporate and clinic level equipment depreciation, along with amortization of
intangible assets, including the costs of acquisitions in excess of the fair
value of tangible and identifiable intangible assets acquired. Depreciation is
computed utilizing the straight-line method over lives ranging from three to
seven years, while intangible assets are amortized utilizing the straight-line
method primarily over a period of 25 years.
The Company's relationships with its affiliated physicians are set forth in
various asset acquisition agreements and management services agreements. The
management services agreements, which have a term of 40 years, delineate the
responsibilities and obligations of the physician practices and the Company.
These agreements provide for the affiliated practices to assign to the Company
all of its non-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, 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, the Company retains as a
part of its management fee, a stipulated percentage (typically 12.5%) of all
revenues (after adjustment for contractual allowances) generated by or on behalf
of physicians practicing at such practice, a fixed dollar amount of management
fee or a stipulated percentage of practice income before physician compensation,
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. 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.
The Company holds, manages and administers capitated managed care contracts
with Cigna HealthCare of Georgia, Inc. ("CIGNA"), United HealthCare of Georgia,
Inc. ("United"), and The Morgan Health Group, Inc. ("Morgan"), which require the
Company to contract for the provision of substantially all of the ENT medical
and surgical professional services required by the enrollees of these managed
care companies in the metropolitan Atlanta area. The Company has contracted with
associated physicians, including those at the Company's affiliated practices in
Atlanta and North Georgia, to provide substantially all of such medical
professional services in exchange for compensation on a discounted
fee-for-service basis. At September 30, 1998, the Company's three capitated
managed care contracts covered an aggregate of 347,390 enrollees.
In September 1998, the Company entered into an exclusive specialty provider
contract with United HealthCare of Alabama, Inc. covering approximately 80,000
commercial and Medicare members of United HealthCare of Alabama, Inc., in the
Birmingham, Alabama, metropolitan area. United HealthCare of Alabama, Inc. will
pay Alabama ENT on a prepaid basis for the provision of such services.
Additionally, the contract provides for the expansion of the exclusive prepaid
arrangement into other United HealthCare of Alabama, Inc., markets throughout
Alabama. The contract, effective October 1, 1998, has an initial term of two (2)
years and automatically renews for successive one (1) year terms thereafter upon
the mutual agreement of the parties.
RESULTS OF OPERATIONS
Comparisons of the nine month period ended September 30, 1998 with data
for the nine month period ended September 30, 1997 are not meaningful since the
Company did not commence business operations until the closing of the
reorganization and its IPO on March 26, 1997.
Revenue. Management fees increased to $9,185,413 for the three months
ended September 30, 1998 as compared with $3,462,249 for the same period in
1997, an increase of $5,723,164 or 165%. The increase in management fees is
primarily attributable to an increase in the number of physicians affiliated
with the Company at September 30, 1998 to 82 as compared with 33 for the same
period in 1997 as a result of the Company's acquisitions since the
Reorganization. Capitation revenues increased to $1,208,506 for the three months
ended September 30, 1998 as compared with $1,135,825 for the same period in
1997, an increase of $72,681 or 6%. The increase in capitation revenues is
primarily attributable to an increase in the aggregate number of enrollees to
approximately 347,000 at September 30, 1998, an increase of approximately 6%.
Patient service revenues increased to $410,743 for the three months ended
September 30, 1998 as compared with $339,886 for the same period in 1997, an
increase of $70,907 or 20.1%. The increase in patient service revenues is
primarily attributable to an increase in the aggregate number of patient office
visits and surgeries performed during the three months period ended September
30, 1998 as compared with the same period in 1997.
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For the three month period ended September 30, 1998, the Company recorded
as revenue earnings from its 17.5% equity interest in Atlanta Surgery Center in
the amount of $267,440.
On a supplemental basis, patient service revenue generated by physicians
who were affiliated with the Company for both periods ended September 30, 1997
and 1998 increased on average approximately 2% per physician.
As a result of the foregoing factors, the Company's net revenue increased
to $11,072,152 for the three months ended September 30, 1998 as compared with
$4,937,960 for the same period in 1997, an increase of $6,134,192 or 124%.
Provider claims, wages, and benefits. Provider claims, wages and benefits,
increased to $4,868,739 for the three months ended September 30, 1998 as
compared with $2,436,570 for the same period in 1997, an increase of $2,432,169
or 99%. The dollar increase in provider claims, wages and benefits was primarily
attributable to the addition of non-medical personnel at the Company's
affiliated practices required to support the increase in the number of
affiliated physician groups managed by the Company. As a percent of net revenue,
provider claims, wages and benefits decreased to 44% for the three months ended
September 30, 1998 as compared to 49% for the same period in 1997. This decrease
was primarily attributable to the increase in net revenue that was greater than
the incremental increase in wages and benefits.
General and administrative. General and administrative expenses increased
to $3,376,666 for the three months ended September 30, 1998 as compared with
$1,409,034 for the same period in 1997, an increase of $1,967,632 or 140%. This
increase was primarily attributable to the addition of personnel and greater
support costs associated with the Company's rapid expansion since September 30,
1997. As a percent of net revenue, general and administrative expenses increased
to 30% for the three months ended September 30, 1998 as compared to 29% for the
same period in 1997, as a result of the foregoing factors.
Depreciation and Amortization. Depreciation and amortization expenses
increased to $519,987 for the three months ended September 30, 1998 as compared
with $130,166 for the same period in 1997, an increase of $389,821 or 300%. This
increase was primarily the result of the increases in intangible assets
resulting from additional acquisitions and resulting increases in amortization
of intangible assets associated with the Company's affiliation with physician
groups, as well as investments in equipment, leasehold improvements and
management information systems. As a percent of net revenue, depreciation and
amortization expense increased to 5% for the three months ended September 30,
1998 as compared with 3% for the same period in 1997, as a result of the
foregoing factors.
Other Income (expense). Other expense for the three months ended September
30, 1998 was $83,773 and is derived from interest income earned on the short
term investment of excess cash and cash equivalents which was offset by (i)
interest charges to affiliated practices for additions to clinical equipment,
leasehold improvements and other fixed assets and (ii) interest expense related
primarily to the subordinated seller notes and the commitment fee in conjunction
with the $45 million senior credit facility. Other income for the three months
ended September 30, 1997 was $126,877 and is derived from interest income earned
on the short term investment in cash and cash equivalents of the IPO proceeds,
net of amounts of immaterial interest expense.
Income Taxes. Income taxes for the quarters ended September 30, 1998 and
1997 were provided for at 39% effective tax rate.
LIQUIDITY AND CAPITAL RESOURCES
The Company utilizes capital primarily (i) to acquire assets or equity of
physician practices, (ii) to acquire equipment utilized by affiliated practices,
(iii) to fund corporate capital expenditures including management information
systems and (iv) to fund ongoing corporate working capital requirements.
At September 30, 1998, the Company had working capital of $16,486,043,
compared to $10,469,429 at December 31, 1997, an increase of $6,016,614. The
increase in working capital was due primarily to an increase in net accounts
receivable of $6,003,601.
For the nine month period ended September 30, 1998 net cash provided by
operating activities was $1,012,004 compared to net cash used in operating
activities of $718,690 for the same period in 1997. Net cash used in investing
activities for the nine months ended September 30, 1998 was $18,216,013 with
$16,577,826 expended as cash consideration for acquisitions. Net cash provided
by financing activities for the nine months ended September 30, 1998 was
$16,650,511 with $16,577,826 received pursuant to the Company's public offering
in May 1998, net of offering costs.
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During the three month period ended September 30, 1998, the Company
acquired substantially all of the assets (other than certain excluded assets
such as employment agreements and patient charts, records and files) and assumed
certain contractual liabilities of (i) Maliner, (ii) Leonard, and (iii) acquired
in the aggregate a 17.5% limited partnership interest in Atlanta Surgery Center.
In connection with the acquisition of assets of Maliner, Leonard and limited
partnership interest, the Company (i) paid an aggregate of $5,455,000 in cash,
(ii) issued an aggregate of 34,552 shares of Common Stock of the Company, (iii)
agreed to issue an aggregate of 34,552 shares of Common Stock of the Company and
(iv) issued a $150,000 non-interest bearing contingent promissory note which is
payable at the Company's option, in cash or the Company's Common Stock, upon the
holder achieving certain performance targets. In connection with these
transactions, the Company paid approximately $219,500 in fees to Premier
HealthCare, an affiliate of the Company's Vice Chairman and Secretary, for
advisory services rendered.
On October 12, 1998, pursuant to an asset acquisition agreement, the
Company completed the acquisition of the assets of Cleveland ENT, a ten
physician ENT physician practice with eight allied health care professionals and
eight clinical offices in metropolitan Cleveland, Ohio. Cleveland ENT had
previously been affiliated with MedPartners. In connection with the transaction,
the Company entered into an amended and restated Clinic Services Agreement with
Cleveland ENT maintaining the percentage of net income management fee structure
which existed in the MedPartners/Cleveland ENT Clinic Services Agreement. The
Company is discussing modifying the percentage of net income arrangement
consistent with the Company's historical practices. In connection therewith, the
Company has granted Cleveland ENT a one time option, which expires on December
15, 1998, to unwind the transaction with the Company as of December 31, 1998 and
repurchase all Cleveland ENT non-medical assets acquired by the Company for a
total cash purchase price equal to the price paid by the Company to MedPartners
for such assets, plus amounts invested by the Company in Cleveland ENT. In
connection with this transaction, the Company borrowed approximately $3.7
million under the Company's Credit Facility and used a portion of the net
proceeds received from the Company's public offering in May 1998.
Several multi-specialty companies in the physician practice management
("PPM") industry have recently announced that they will be discontinuing PPM
activities or will be divesting certain assets related to physician practice
management. The Company believes that as a result of this and other market
conditions, there has been and will continue to be a decrease in acquisition
activity in the PPM industry which will likely affect the Company. As a result,
the Company believes that it and other PPM companies may see a slow down in
revenue growth attributable to acquisitions. As previously announced, the
Company intends to focus its efforts on ancillary service development, practice
acquisitions in the Company's existing markets and enhancing the operations of
affiliated practices. The Company also intends to continue to pursue new market
acquisitions on a highly selective basis. There are additional factors, such as
health care and government regulation and general economic conditions which may
also affect the PPM industry. As a result of these and other conditions, there
can be no assurance that acquisition opportunities will be available to the
Company or that the Company will be able to consummate future acquisitions.
YEAR 2000
The Year 2000 issue is the result of using only the last two digits to
indicate the year in computer hardware and software programs and embedded
technology such as micro-controllers. As a result, these programs do not
properly recognize a year that begins with "20" instead of the familiar "19." If
uncorrected, such programs will be unable to interpret dates beyond the year
1999, which could cause computer system failure or miscalculations which could
disrupt the Company's operations and adversely affect its cash flows and results
of operations.
The Company recognizes the importance of the Year 2000 issue and has given
it high priority. The Company's objective is to ensure an uninterrupted
transition to the year 2000 by assessing, testing and modifying products and
information technology ("IT") systems and non-IT systems so that such systems
and software will perform as intended and information and dates can be processed
with expected results ("Year 2000 Compliant"). The scope of the Company's
compliance efforts include (i) identifying and assessment of risks, including
the risks of non-compliance by third parties, (ii) development of remediation
and contingency plans, (iii) implementation and (iv) testing. The Company has
not yet determined the extent of contingency planning that may be required.
There are three major IT system applications that the Company relies upon
to process transactions and provide information for managing its operations.
These applications have been identified as follows:
- Accounting and financial reporting system
- Practice management billing and accounts receivable systems
- Capitated claims processing and reporting system
Accounting and financial reporting system - During 1998 the Company fully
implemented the Great Plains accounting and financial reporting software
applications at all of its affiliated practices, its subsidiaries and its
corporate locations. The Great Plains accounting package has been modified and
tested and is Year 2000 compliant.
Practice management billing and accounts receivable systems - The
Company's affiliated practices currently utilize software packages which were
developed by large third party software development companies such as Medic,
Medical Manager, Verysis and Reynolds & Reynolds. The Company has been in
contact with all of these companies and believes that all
Year 2000 compliant modified programs will be fully tested and implemented by
the Company and its affiliates during the first quarter of 1999.
Capitated claims processing and reporting system - The Company has
developed internally a capitated claims processing and reporting system which is
Year 2000 compliant.
The Company is also highly dependent on receiving payments from third
party payors for capitated fees and for insurance reimbursement for claims
submitted by its affiliated practices, and as such, the ability of such payors
to process claims submitted by affiliated practices accurately and timely,
constitutes a significant risk to the Company's cash flow and could materially
adversely affect the Company's operations. The Company and its affiliated
practices have been or will be in communication with these payors to insure that
these payors will be Year 2000 Compliant and will be able to process claims
uninterrupted. However, there can be no assurance that such third party payors
will be Year 2000 Compliant.
Like virtually every company, the Company is at risk for the failure of
major infrastructure providers to adequately address potential Year 2000
problems. The Company is highly dependent on a variety of public and private
infrastructure providers to conduct its business. Failures of banking systems,
basic utility providers, telecommunication providers and other services to
achieve Year 2000 compliance, could have a material adverse effect on the
ability of the Company and its affiliated practices to conduct business. While
the Company is aware of these risks, a complete assessment of all such risks is
beyond the scope of the Company's Year 2000 project or ability to address.
Through September 30, 1998, the Company has incurred costs of
approximately $125,000 related to the Year 2000 issue. The Company does not
anticipate that it will incur any additional material costs associated with
addressing Year 2000 issues.
The Company's current estimates of the amount of time and costs necessary
to remediate and test its computer systems are based on the facts and
circumstances existing at this time. The estimates were made using assumptions
of future events including the continued availability of certain resources, Year
2000 modification plans, implementation success by key third-parties, and other
factors. New developments may occur that could affect the Company's estimates of
the amount of time and costs needed to modify and test its IT and non-IT systems
for Year 2000 compliance. These developments include, but are not limited to:
(i) the availability and cost of personnel trained in this area; (ii) the
ability to locate and correct all relevant date-sensitive codes in both IT and
non-IT systems; (iii) unanticipated failures in its IT and non-IT systems; and
(iv) the planning and Year 2000 compliance success that third-parties attain.
The Company cannot determine the impact of these potential developments on
the current estimate of probable costs of making its products and IT and non-IT
systems Year 2000 Compliant. Accordingly, the Company is not able to estimate
its possible future costs beyond the current estimates of costs. As new
developments occur, these cost estimates may be revised to reflect the impact
of these developments on the costs to the Company of making its products and IT
and non-IT systems Year 2000 Compliant. Such revisions in costs could have a
material adverse impact on the Company's results of operations in the quarterly
period in which they are recorded. Although the Company considers it unlikely,
such revisions could also have a material adverse effect on the business,
financial condition or results of operations of the Company.
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PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the three months ended September 30, 1998, the Company granted
options to purchase 33,000 shares of Common Stock under the Company's 1996
Health Care Professionals Stock Option Plan.
ITEM 5. OTHER INFORMATION
On October 12, 1998, pursuant to an asset acquisition agreement, the
Company completed the acquisition of the assets of Cleveland ENT, a ten
physician ENT physician practice with eight allied health care professionals and
eight clinical offices in metropolitan Cleveland, Ohio. Cleveland ENT had
previously been affiliated with MedPartners. In connection with the transaction,
the Company entered into an amended and restated Clinic Services Agreement with
Cleveland ENT maintaining the percentage of net income management fee structure
which existed in the MedPartners/Cleveland ENT Clinic Services Agreement. The
Company is discussing modifying the percentage of net income arrangement
consistent with the Company's historical practices. In connection therewith, the
Company has granted Cleveland ENT a one time option, which expires on December
15, 1998, to unwind the transaction with the Company as of December 31, 1998 and
repurchase all Cleveland ENT non-medical assets acquired by the Company for a
total cash purchase price equal to the price paid by the Company to MedPartners
for such assets, plus amounts invested by the Company in Cleveland ENT. In
connection with this transaction, the Company borrowed approximately $3,700,000
under the Company's credit facility and used a portion of the net proceeds
received from the Company's public offering in May 1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.53 Amended and Restated Credit Agreement dated as of July 31, 1998
by and among the Registrant, as borrower, and the financial
institutions party thereto.
10.54 Network Agreement dated October 1, 1998 between United HealthCare
of Alabama, Inc. and Alabama ENT Center, Inc.*
10.55 Amended and Restated Clinic Services Agreement date October 1,
1998 by and among Cleveland Ear, Nose and Throat Center, Inc.,
PSC Management Corp. and the Registrant.
27 Financial Data Schedule (for SEC use only)
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* Confidential treatment has been requested with respect to portions of this
exhibit.
(b) Report on Form 8-K
The Registrant filed a Form 8-K on October 28, 1998 reporting information
under Item 5.
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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 November 16, 1998 /s/ Robert A. DiProva
----------------- ----------------------------------------
Robert A. DiProva
Executive Vice President and
Chief Financial Officer
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EXHIBIT 10.53
EXECUTION COPY
===============================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of July 31, 1998
by and among
PHYSICIANS' SPECIALTY CORP.,
as Borrower
THE FINANCIAL INSTITUTIONS PARTY HERETO
AND THEIR ASSIGNEES UNDER SECTION 12.6.,
as Lenders
and
NATIONSBANK, N.A.,
as Agent
===============================================================================
<PAGE> 2
TABLE OF CONTENTS*
<TABLE>
<S> <C>
Article I. Definitions........................................................................... 1
Section 1.1. Definitions............................................................... 1
Section 1.2. General................................................................... 21
Article II. Credit Facility...................................................................... 21
Section 2.1. Amount of Revolving Loans................................................. 21
Section 2.2. Rates and Payment of Interest on Loans.................................... 22
Section 2.3. Number of Interest Periods................................................ 23
Section 2.4. Repayment of Loans........................................................ 23
Section 2.5. Prepayments............................................................... 23
Section 2.6. Continuation.............................................................. 23
Section 2.7. Conversion................................................................ 24
Section 2.8. Notes..................................................................... 24
Section 2.9. Voluntary Reductions of the Commitment.................................... 24
Section 2.10. Swingline Loans........................................................... 25
Section 2.11. Amount Limitations........................................................ 27
Article III. Payments, Fees and Other General Provisions......................................... 27
Section 3.1. Payments.................................................................. 27
Section 3.2. Pro Rata Treatment........................................................ 28
Section 3.3. Sharing of Payments, Etc.................................................. 28
Section 3.4. Several Obligations....................................................... 29
Section 3.5. Minimum Amounts........................................................... 29
Section 3.6. Fees...................................................................... 29
Section 3.7. Computations.............................................................. 30
Section 3.8. Usury..................................................................... 30
Section 3.9. Agreement Regarding Interest and Charges.................................. 30
Section 3.10. Statements of Account..................................................... 31
Section 3.11. Defaulting Lenders........................................................ 31
Section 3.12. Taxes..................................................................... 32
Article IV. Yield Protection, Etc................................................................ 33
Section 4.1. Additional Costs; Capital Adequacy........................................ 33
Section 4.2. Suspension of LIBOR Loans................................................. 34
Section 4.3. Illegality................................................................ 35
Section 4.4. Compensation.............................................................. 35
Section 4.5. Affected Lenders.......................................................... 36
Section 4.6. Treatment of Affected Loans............................................... 36
Section 4.7. Change of Lending Office.................................................. 37
</TABLE>
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* THIS TABLE OF CONTENTS IS NOT PART OF THE CREDIT AGREEMENT AND IS
PROVIDED AS A CONVENIENCE ONLY.
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<TABLE>
<S> <C>
Article V. Conditions Precedent................................................................. 37
Section 5.1. Initial Conditions Precedent.............................................. 37
Section 5.2. Conditions Precedent to All Loans......................................... 39
Article VI. Representations and Warranties...................................................... 40
Section 6.1. Representations and Warranties............................................ 40
Section 6.2. Survival of Representations and Warranties, Etc........................... 49
Section 6.3. Representations Regarding Acquisitions.................................... 49
Section 6.4. Representations and Warranties in Acquisition Documents................... 49
Article VII. Affirmative Covenants.............................................................. 49
Section 7.1. Preservation of Existence and Similar Matters............................. 50
Section 7.2. Compliance With Applicable Law and Material Contracts..................... 50
Section 7.3. Maintenance of Property................................................... 50
Section 7.4. Conduct of Business....................................................... 50
Section 7.5. Insurance................................................................. 50
Section 7.6. Payment of Taxes and Claims............................................... 51
Section 7.7. Visits and Inspections.................................................... 51
Section 7.8. Use of Proceeds........................................................... 52
Section 7.9. Environmental Matters..................................................... 52
Section 7.10. Books and Records......................................................... 52
Section 7.11. Enforcement of Remedies under Acquisition Documents....................... 53
Section 7.12. Deposit and Collection Procedures......................................... 53
Section 7.13. Management Services Agreements............................................ 53
Section 7.14. Additional Material Subsidiaries.......................................... 53
Article VIII. Information....................................................................... 54
Section 8.1. Quarterly Financial Statements............................................ 54
Section 8.2. Year-End Statements....................................................... 54
Section 8.3. Compliance Certificate.................................................... 55
Section 8.4. Accountants' Letters and Budgets.......................................... 55
Section 8.5. Notice of Litigation and Other Matters.................................... 55
Section 8.6. ERISA..................................................................... 56
Section 8.7. Copies of Other Reports................................................... 57
Section 8.8. Other Information......................................................... 57
Article IX. Negative Covenants................................................................... 58
Section 9.1. Financial Covenants....................................................... 58
Section 9.2. Indebtedness.............................................................. 58
Section 9.3. Contingent Obligations.................................................... 59
Section 9.4. Investments............................................................... 59
Section 9.5. Liens; Agreements Regarding Liens; Other Matters.......................... 60
Section 9.6. Acquisitions.............................................................. 60
Section 9.7. Restricted Distributions and Purchases.................................... 63
</TABLE>
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<TABLE>
<S> <C>
Section 9.8. Merger, Consolidation, Sales of Assets and Other Arrangements............. 63
Section 9.9. Fiscal Year............................................................... 64
Section 9.10. Modifications to Certain Contracts........................................ 64
Section 9.11. Transactions With Affiliates.............................................. 64
Section 9.12. Bank Accounts............................................................. 65
Article X. Default.............................................................................. 65
Section 10.1. Events of Default........................................................ 65
Section 10.2. Remedies Upon Event of Default........................................... 68
Section 10.3. Allocation of Proceeds................................................... 69
Section 10.4. Performance by Agent..................................................... 70
Section 10.5. Rights Cumulative........................................................ 70
Article XI. The Agent............................................................................ 71
Section 11.1. Authorization and Action................................................. 71
Section 11.2. Agent's Reliance, Etc.................................................... 71
Section 11.3. Notice of Defaults....................................................... 72
Section 11.4. NationsBank as Lender.................................................... 72
Section 11.5. Approvals of Lenders..................................................... 72
Section 11.6. Lender Credit Decision, Etc.............................................. 73
Section 11.7. Indemnification of Agent................................................. 73
Section 11.8. Collateral Matters....................................................... 74
Section 11.9. Successor Agent.......................................................... 75
Article XII. Miscellaneous...................................................................... 76
Section 12.1. Notices.................................................................. 76
Section 12.2. Expenses................................................................. 77
Section 12.3. Stamp, Intangible and Recording Taxes.................................... 78
Section 12.4. Setoff................................................................... 78
Section 12.5. Litigation; Jurisdiction; Other Matters; Waivers......................... 78
Section 12.6. Successors and Assigns................................................... 79
Section 12.7. Amendments............................................................... 81
Section 12.8. Confidentiality.......................................................... 82
Section 12.9. Indemnification.......................................................... 82
Section 12.10. Survival................................................................. 83
Section 12.11. Severability of Provisions............................................... 83
Section 12.12. GOVERNING LAW............................................................ 83
Section 12.13. Counterparts............................................................. 83
Section 12.14. Obligations With Respect to Loan Parties................................. 83
Section 12.15. Entire Agreement......................................................... 84
Section 12.16. Construction............................................................. 84
Section 12.17. No Novation; Effect of Amendment and Restatement......................... 84
SCHEDULE 1.1.(a) List of Loan Parties
SCHEDULE 6.1.(b) Ownership Structure
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C>
SCHEDULE 6.1.(f) Title to Properties; Liens
SCHEDULE 6.1.(g) Indebtedness and Guaranties
SCHEDULE 6.1.(h) Material Contracts
SCHEDULE 6.1.(r) Affiliate Transactions
SCHEDULE 6.1.(t) Intellectual Property
SCHEDULE 6.1.(v) Deposit Accounts and Collection Arrangements
SCHEDULE 9.3. Existing Contingent Obligations
SCHEDULE 9.4. Existing Investments
EXHIBIT A Form of Accession Agreement
EXHIBIT B Form of Assignment and Acceptance Agreement
EXHIBIT C Form of Collateral Assignment of Management Services Agreements
EXHIBIT D Form of Guaranty
EXHIBIT E Form of Notice of Borrowing
EXHIBIT F Form of Notice of Continuation
EXHIBIT G Form of Notice of Conversion
EXHIBIT H Form of Notice of Swingline Borrowing
EXHIBIT I Form of Subordination Agreement
EXHIBIT J Form of Swingline Note
EXHIBIT K Form of Revolving Note
EXHIBIT L Form of Pledge Agreement
EXHIBIT M Form of Security Agreement
EXHIBIT N Form of Opinion of Counsel
EXHIBIT O Form of Compliance Certificate
EXHIBIT P Form of Acquisition Certificate
</TABLE>
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<PAGE> 6
THIS AMENDED AND RESTATED CREDIT AGREEMENT is dated as of July 31,
1998, by and among PHYSICIANS' SPECIALTY CORP., a corporation organized under
the laws of the State of Delaware (the "Borrower"), each of the financial
institutions initially a signatory hereto together with their assignees pursuant
to Section 12.6. and NATIONSBANK, N.A., successor to NationsBank, N.A. (South),
as Agent (the "Agent").
WHEREAS, NationsBank, N.A., successor to NationsBank, N.A. (South)
("NationsBank"), and the Borrower entered into that certain Credit Agreement
dated as of April 30, 1997 (as amended and in effect immediately prior to the
date hereof, the "Existing Credit Agreement"), pursuant to which NationsBank
made available to the Borrower a credit facility, all on the terms and
conditions contained therein; and
WHEREAS, the parties hereto desire to amend and restate the Existing
Credit Agreement to increase the amount of such credit facility to $45,000,000,
to permit all of the Lenders to provide credit to the Borrower on the terms
contained herein, to appoint NationsBank as contractual representative for the
Lenders, and for the other purposes provided 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 that the Existing Credit Agreement is amended and restated 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.
"ACCESSION AGREEMENT" means an Accession Agreement substantially in the
form of Exhibit A.
"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
<PAGE> 7
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 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 Agent or any 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.
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<PAGE> 8
"AGREEMENT DATE" means the date as of which this Agreement is dated.
"AGENT" means NationsBank, N.A., as contractual representative for the
Lenders under the terms of this Agreement, and any of its successors.
"APPLICABLE COMMITMENT FEE" means at any time the percentage set forth
in the table below corresponding to the Level at which the "Applicable Margin"
is then determined in accordance with the definition thereof:
<TABLE>
<CAPTION> ---------------------------------------
LEVEL COMMITMENT FEE
---------------------------------------
<S> <C>
5 0.375%
---------------------------------------
4 0.300%
---------------------------------------
3 0.300%
---------------------------------------
2 0.250%
---------------------------------------
1 0.200%
---------------------------------------
</TABLE>
Any change in the applicable Level at which the Applicable Margin is determined
shall result in a corresponding and simultaneous change in the Applicable
Commitment Fee.
"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 Agent
of a Compliance Certificate in respect of the fiscal period of the Borrower and
its Subsidiaries ending on June 30, 1998, 0.00% per annum with respect to Base
Rate Loans and 1.50% per annum with respect to LIBOR Loans and (b) thereafter
for each period beginning on the date five Business Days following the date of
receipt by the Agent of a Compliance Certificate in respect of any quarterly
fiscal period of the Borrower and its Subsidiaries ending after June 30, 1998
and ending on the date four Business Days following the date of receipt by the
Agent of a Compliance Certificate in respect of a subsequent fiscal period, that
percent per annum set forth below opposite the Funded Debt to EBITDA Ratio
(calculated consistent with Section 9.1.(b)) applicable to the fiscal period of
the Borrower and its Subsidiaries then ended as reflected in the applicable
Compliance Certificate:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
FUNDED DEBT TO APPLICABLE MARGIN FOR APPLICABLE MARGIN FOR
LEVEL EBITDA RATIO BASE RATE LOANS LIBOR LOANS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5 Greater than or equal to 3.00 to 1.00 0.75% 2.125%
- ---------------------------------------------------------------------------------------------------------------------
4 Less than 3.00 to 1.00 but greater than or equal to 0.25% 1.75%
2.50 to 1.00
- ---------------------------------------------------------------------------------------------------------------------
3 Less than 2.50 to 1.00 but greater than or equal to 0.00% 1.50%
2.00 to 1.00
- ---------------------------------------------------------------------------------------------------------------------
2 Less than 2.00 to 1.00 but greater than or equal to 0.00% 1.25%
1.50 to 1.00
- ---------------------------------------------------------------------------------------------------------------------
1 Less than 1.50 to 1.00 0.00% 1.00%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 9
Notwithstanding the above, if the Borrower shall fail to deliver any such
Compliance Certificate within the time period required by Section 8.3., then the
Applicable Margin shall be 0.25% per annum with respect to Base Rate Loans and
1.75% per annum with respect to LIBOR Loans until the appropriate 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).
"ASSIGNEE" has the meaning given that term in Section 12.6.(d).
"ASSIGNMENT AND ACCEPTANCE AGREEMENT" means an Assignment and
Acceptance Agreement among a Lender, an Assignee and the Agent, substantially in
the form of Exhibit B.
"BASE RATE" means the rate which the Agent publicly announces from time
to time in Atlanta, Georgia as its prime lending rate. The prime lending rate of
the Agent is a reference rate and does not necessarily represent the lowest or
best rate actually charged to any customer by the Agent or any Lender. The Agent
and the Lenders 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 Revolving 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 permitted assigns.
"BUSINESS DAY" means (a) any day other than a Saturday, Sunday or other
day on which banks in Atlanta, Georgia or Charlotte, North Carolina 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.
"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).
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<PAGE> 10
"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 S&P, or at least P-2 or the equivalent by 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 MANAGEMENT SERVICES AGREEMENTS" means the
Collateral Assignment of Management Services Agreements executed by PSC
Management and each Other Manager in favor of the Agent for the benefit of the
Lenders 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, as to each Lender, such Lender's obligation to make
Revolving Loans pursuant to Section 2.1. in an amount up to, but not exceeding,
the amount set forth for such Lender on its signature page hereto as such
Lender's "Commitment Amount" or as set forth in the applicable Assignment and
Acceptance Agreement, as the same may be reduced from time to time pursuant to
Section 2.9., or as appropriate to reflect assignments to or by such Lender
effected in accordance with Section 12.6.
-5-
<PAGE> 11
"COMMITMENT PERCENTAGE" means, as to each Lender, the ratio, expressed
as a percentage, of (a) the amount of such Lender's Commitment to (b) the sum of
the aggregate amount of the Commitments of all Lenders hereunder; provided,
however, that if at the time of determination the Commitments have terminated or
been reduced to zero, the "Commitment Percentage" of each Lender shall be the
Commitment Percentage of such Lender in effect immediately prior to such
termination or reduction.
"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.
"COMPLIANCE CERTIFICATE" has the meaning given such term in Section
8.3.
"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 instruments in the ordinary course of
business), or for the payment of dividends or other
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<PAGE> 12
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.
"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.
"DEFAULTING LENDER" has the meaning set forth in Section 3.11.
"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) Acquisition EBITDA of any Person accrued prior to the date it became a
Subsidiary of the Borrower or was merged into or consolidated with
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<PAGE> 13
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 Agent 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 Agent in its sole but
reasonable discretion.
"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 Agent.
"ELIGIBLE ASSIGNEE" means any Person who is: (i) currently a Lender;
(ii) a commercial bank, trust company, insurance company, investment bank or
pension fund organized under the laws of the United States of America, or any
state thereof, and having total assets in excess of $5,000,000,000; (iii) a
savings and loan association or savings bank organized under the laws of the
United States of America, or any state thereof, and having a tangible net worth
of a least $500,000,000; or (iv) a commercial bank organized under the laws of
any other country which is a member of the Organization for Economic Cooperation
and Development ("OECD"), or a political subdivision of any such country, and
having total assets in excess of $10,000,000,000, provided that such bank is
acting through a branch or agency located in the United States of America. If
such Person is not currently a Lender, such Person's senior unsecured long term
indebtedness must be rated A or higher by S&P, A2 or higher by Moody's, or the
equivalent or higher of either such rating by another credit rating agency
acceptable to the Agent.
"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.
"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.
ss. 7401 et seq.; Federal Water Pollution Control Act, 33 U.S.C. ss.1251 et
seq.; Solid Waste Disposal Act, 42 U.S.C. ss.6901 et seq.; Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. ss.9601 et
seq.; National Environmental Policy Act, 42 U.S.C. ss.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.
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<PAGE> 14
"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
Agent by federal funds dealers selected by the Agent on such day on such
transaction as determined by the Agent.
"FEES" means the fees and commissions provided for or referred to in
Section 3.6. and any other fees payable by the Borrower hereunder or under any
other Loan Document.
"FIXED CHARGE COVERAGE RATIO" means the ratio of (a) the sum of (i) the
Borrower's EBITDA (plus any Acquisition EBITDA not otherwise included in the
calculation of the Borrower's EBITDA) for the period of four consecutive fiscal
quarters most recently ended plus (ii) to the extent deducted in arriving at
Borrower's EBITDA, lease, rental and all other payments made in respect of or in
connection with operating leases ("Rents") to (b) the sum of (i) the total
consolidated interest expense (including, without limitation, capitalized
interest expense) ("Interest Expense") of the Borrower for such period plus (ii)
regularly scheduled principal payments on Funded Debt during such period
(excluding any balloon, bullet or similar principal payment payable on any such
Funded Debt which repays such Funded Debt in full) ("Debt Service") of the
Borrower and its Subsidiaries plus (iii) Rents. When calculating the Fixed
Charge Coverage Ratio for any four-quarter period during which any Acquisition
occurred, the following amounts with respect to the Target of such Acquisition
shall be included: (A) pro
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<PAGE> 15
forma Interest Expense calculated based on the prevailing interest rate payable
by the Borrower under this Agreement (or the Existing Credit Agreement, as
applicable) rather than the actual rate of interest charged to such Target; (B)
Debt Service of such Target on any Funded Debt which remained outstanding
following such Acquisition and (C) Rents paid by such Target under operating
leases which remained in effect following such Acquisition.
"FOREIGN LENDER" means any Lender organized under the laws of a
jurisdiction other than the United States of America.
"FOREIGN SUBSIDIARY" means, with respect to a Person, any Subsidiary of
such Person that is a "controlled foreign corporation" as defined in 26 U.S.C.A.
ss.957(a).
"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.
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"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 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 the Guaranty substantially in the form of
Exhibit D executed and delivered by the Material Subsidiaries 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 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, third or sixth 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
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<PAGE> 17
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.
"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.
"LENDER" means each financial institution from time to time party
hereto as a "Lender", together with its respective successors and permitted
assigns.
"LENDING OFFICE" means, for each Lender and for each Type of Loan, the
office of such Lender specified as such on its signature page hereto or in the
applicable Assignment and Acceptance Agreement, or such other office of such
Lender as such Lender may notify the Agent in writing from time to time.
"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
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<PAGE> 18
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 LOAN" means a Revolving Loan 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 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 Swingline 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 Material 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 GROUP" means Ramie A. Tritt, Gerald R. Benjamin and Richard
D. Ballard.
"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.
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"MATERIAL ADVERSE EFFECT" means a materially adverse effect on (a) the
business, assets, liabilities, financial condition, or results of operations 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 Agent or the Lenders
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 Requisite Lenders in their 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.
"MATERIAL SUBSIDIARY" means, as of the date of any determination
thereof, any Subsidiary which (a) directly or indirectly owns any capital stock
of, or other equity interest in, any other Material Subsidiary or (b) either:
(i) has total assets greater than or equal to 5.0% of total assets of the
Borrower and its Subsidiaries determined on a consolidated basis (calculated as
of the fiscal quarter most recently ending) or (ii) has EBITDA greater than or
equal to 5.0% of the EBITDA of the Borrower and its Subsidiaries determined on a
consolidated basis (calculated as of the fiscal quarter most recently ending).
In any event, the term "Material Subsidiaries" shall mean Subsidiaries of the
Borrower, that together with the Borrower have assets equal to not less than 95%
of the total assets (calculated as described above) and EBITDA of not less than
95% of EBITDA (calculated as described above) and if more than one combination
of Subsidiaries satisfies such threshold, then those Subsidiaries so determined
to be "Material Subsidiaries" shall be specified by the Borrower.
Notwithstanding the foregoing, a Subsidiary which satisfies the following
requirements shall not be considered to be a "Material Subsidiary" as long as it
continues to satisfy such requirements: (1) such Subsidiary was acquired in
connection with an Acquisition; (2) such Subsidiary is a Wholly-Owned
Subsidiary; (3) at no time following the consummation of such Acquisition does
such Subsidiary have any significant assets other than Receivables created prior
to such Acquisition; and (4) such Receivables are to be collected in the
ordinary course of business, and the proceeds of such Receivables, as collected,
will be promptly distributed to the Borrower or a Guarantor.
"MOODY'S" means Moody's Investors Service, Inc.
"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.
"NATIONSBANK" means NationsBank, N.A., and its successors and permitted
assigns.
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<PAGE> 20
"NET INCOME" means, with respect to any Person for a given period, such
Person's net income for such period.
"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.
"NMS" means NationsBanc Montgomery Securities LLC, a Delaware limited
liability company.
"NOTE" means a Revolving Note or the Swingline Note.
"NOTICE OF BORROWING" means a notice substantially in the form of
Exhibit E to be delivered to the Agent pursuant to Section 2.1.(b) evidencing
the Borrower's request for a borrowing of Loans.
"NOTICE OF CONTINUATION" means a notice substantially in the form of
Exhibit F to be delivered to the Agent 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 Agent 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.
"NOTICE OF SWINGLINE BORROWING" means a notice in the form of Exhibit H
to be delivered to Swingline Lender pursuant to Section 2.10.(b) evidencing the
Borrower's request for a Swingline 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 Agent, any Lender or the
Swingline Lender of every kind, nature and description, under or in respect of
this Agreement or any of the other 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.
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<PAGE> 21
"OPERATING ACCOUNT" shall mean the account maintained by the Borrower
with the Agent which the Borrower and the Agent have designated in writing as
the "Operating Account."
"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; (g) any Lien securing a
Capitalized Lease Obligation to the extent such Capitalized Lease Obligation is
permitted pursuant to Section 9.2.(e) and provided that such Lien (i) attaches
only to the property the subject of the applicable capital lease and (ii)
secures only such Capitalized Lease Obligation (and customary indemnity
obligations, expense reimbursement obligations and other similar obligations
owing in connection with the applicable capital lease) and (h) Liens in favor of
the Agent for the benefit of the Lenders.
"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 the Pledge Agreement executed by various Loan
Parties in favor of the Agent for the benefit of the Lenders pursuant to Section
5.1. or otherwise.
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"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 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 Agent located at 101
North Tryon Street, Charlotte, North Carolina 28255, or such other office of the
Agent as the Agent may designate from time to time.
"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.
"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.
"REGISTER" has the meaning given that term in Section 12.6.(e).
"REGULATORY CHANGE" means, with respect to any 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 such 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 such
Lender with any request or directive regarding capital adequacy.
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"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.
"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.
"REQUISITE LENDERS" means, as of any date, Lenders having at least
66-2/3% of the aggregate amount of the Commitments, or, if the Commitments have
been terminated or reduced to zero, Lenders holding at least 66-2/3% of the
principal amount of the Loans.
"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 applicable terms of subordination; 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).
"REVOLVING NOTE" has the meaning given that term in Section 2.8.
"S&P" means Standard & Poor's Rating Group, a division of McGraw-Hill
Companies, Inc.
"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 the Security Agreement executed by the Loan
Parties in favor of the Agent for the benefit of the Lenders pursuant to Section
5.1.
"SECURITY DOCUMENT" means the Security Agreement, the Pledge Agreement,
the Guaranty, the Collateral Assignment of Management Services Agreement, the
Collateral Assignment of Acquisition Documents and each other document or
instrument executed by the Borrower and each other Loan Party, if any, providing
for collateral security for the Obligations.
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"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 expressly subordinated in right of
payment and otherwise to the Loans and the other Obligations pursuant to a
Subordination Agreement or otherwise on terms approved in writing by the Agent
in its sole discretion.
"SENIOR FUNDED DEBT" means, with respect to a Person and at any time as
of which the amount thereof is to be determined, all Funded Debt of such Person
then outstanding minus the aggregate principal amount of any Funded Debt of such
Person then outstanding which is Subordinated Debt.
"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 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 expressly subordinated in right of payment and otherwise to
the Loans and the other Obligations pursuant to a Subordination Agreement or
otherwise on terms approved in writing by the Agent in its sole discretion.
"SUBORDINATION AGREEMENT" means each Subordination Agreement entered
into between the Agent and another Person in accordance with the terms and
conditions of this Agreement substantially in the form of Exhibit I.
"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.
"SWINGLINE COMMITMENT" means Swingline Lender's obligation to make
Swingline Loans pursuant to Section 2.10. in an amount up to, but not exceeding,
$2,500,000, as such amount may be reduced from time to time in accordance with
the terms hereof.
"SWINGLINE LENDER" means NationsBank, N.A., together with its
successors and permitted assigns.
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"SWINGLINE LOAN" means a loan made by the Swingline Lender to the
Borrower pursuant to Section 2.10.(a).
"SWINGLINE NOTE" means the promissory note of the Borrower payable to
the order of the Swingline Lender in a maximum principal amount equal to the
amount of the Swingline Commitment as originally in effect and otherwise duly
completed, substantially in the form of Exhibit I.
"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 3.12.
"TERMINATION DATE" means July 31, 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 Lenders and
the Swingline 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 Revolving Loan, refers to whether such
Revolving 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.
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"WHOLLY OWNED SUBSIDIARY" means any Subsidiary of a Person which all of
the equity securities or other ownership interests (other than, in the case of a
corporation, directors' qualifying shares) are at the time directly or
indirectly owned or controlled by such Person or one or more other Subsidiaries
of such Person or by such Person and one or more other Subsidiaries of such
Person.
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 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
Atlanta, Georgia time.
ARTICLE II. CREDIT FACILITY
SECTION 2.1. AMOUNT OF REVOLVING LOANS.
(a) Generally. Each Lender severally and not jointly agrees, on the
terms and subject to the conditions contained herein, to make 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 such Lender's 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.
(b) Requesting Loans. The Borrower shall give the Agent notice pursuant
to a Notice of Borrowing or telephonic notice of each borrowing of Revolving
Loans. Each Notice of Borrowing shall be delivered to the Agent before (a) 11:00
a.m. in the case of the borrowing of LIBOR Loans, on the date three Business
Days prior to the proposed date of such borrowing and (b) 11:00 a.m. in the case
of the borrowing of Base Rate Loans, on the date of such borrowing. Any such
telephonic notice shall include all information to be specified in a written
Notice of
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Borrowing and shall be promptly confirmed in writing by the Borrower pursuant to
a Notice of Borrowing sent to the Agent by telecopy on the same day of the
giving of such telephonic notice. The Agent will transmit by telecopy the Notice
of Borrowing (or the information contained in such Notice of Borrowing) to each
Lender promptly upon receipt by the Agent. 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. No later than 1:00 p.m. on the date
specified in the Notice of Borrowing, each Lender will make available for the
account of its applicable Lending Office to the Agent at the Principal Office,
in immediately available funds, the proceeds of the Loan to be made by such
Lender. With respect to Loans to be made after the Effective Date, unless the
Agent shall have been notified by any Lender prior to the specified date of
borrowing that such Lender does not intend to make available to the Agent the
Loan to be made by such Lender on such date, the Agent may assume that such
Lender will make the proceeds of such Loan available to the Agent on the date of
the requested borrowing as set forth in the Notice of Borrowing and the Agent
may (but shall not be obligated to, in reliance upon such assumption, make
available to the Borrower the amount of such Loan to be provided by such Lender.
Provided that the applicable conditions set forth in Article V. for the
borrowing of such Loan are fulfilled, the Agent will make the proceeds of such
borrowing of Loans 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 Agent for the account of
each Lender interest on the unpaid principal amount of each Loan made by such
Lender 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 Agent
for the account of the applicable Lender interest at the applicable Post-Default
Rate on any principal of any Loan made by such Lender and on any other amount
payable by the Borrower hereunder or under the Notes to such Lender, 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, if
such Interest Period is longer than three months, at
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three-month intervals following the first day of such Interest Period, 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 any interest rate provided for herein or any change therein, the Agent shall
give notice thereof to the Lenders to which such interest is payable and to the
Borrower. All determinations by the Agent of an interest rate hereunder shall be
conclusive and binding on the Lenders and 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
without premium or penalty upon prior written notice to the Agent given no later
than 11:00 a.m. (i) on date of prepayment of any Base Rate Loan and (ii) three
Business Days prior to the date of prepayment of any LIBOR Loan.
(b) Mandatory. If at any time the aggregate principal amount of
outstanding Revolving Loans, together with the aggregate principal amount of all
outstanding Swingline Loans, shall exceed the aggregate amount of the
Commitments, the Borrower shall, within one Business Day of the occurrence of
such excess, 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 Agent 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
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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. Promptly after receipt of a Notice of Continuation, the
Agent shall notify each Lender by telex or telecopy, or other similar form of
transmission of the proposed Continuation. If the Borrower shall fail to select
in a timely manner a new Interest 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 Agent, 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. Promptly after receipt of a Notice of Conversion,
the Agent shall notify each Lender by telex or telecopy, or other similar form
of transmission of the proposed Conversion. 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 each Lender shall, in addition to this
Agreement, also be evidenced by a promissory note of the Borrower substantially
in the form of Exhibit K (each a "Revolving Note"), payable to the order of such
Lender in a maximum principal amount equal to the amount of such Lender's
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 aggregate
unused amount of the Commitments (for which purpose use of the Commitments shall
be deemed to include the aggregate principal amount of all outstanding Swingline
Loans) at any time and from time to time without penalty or premium upon not
less than three Business Days prior written notice to the Agent and the Lenders
of each such termination or reduction, which notice shall specify the effective
date thereof, and the amount of any such reduction and shall be irrevocable once
given and effective only upon receipt by the Agent. The Agent will promptly
transmit such notice to
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each Lender. The Commitments, once terminated or reduced, may not be increased
or reinstated. Any reduction in the aggregate amount of the Commitments shall
result in a proportionate reduction (rounded to the next lowest integral
multiple of multiple of $100,000) in the Swingline Commitment.
SECTION 2.10. SWINGLINE LOANS.
(a) Swingline Loans. Subject to the terms and conditions hereof,
including without limitation, Section 2.11., if necessary to meet the Borrower's
funding deadline, Swingline Lender agrees to make Swingline Loans to the
Borrower, during the period from the Effective Date to but excluding the
Termination Date, in an aggregate principal amount at any one time outstanding
up to, but not exceeding, the amount of the Swingline Commitment. If at any time
the aggregate outstanding principal amount of the Swingline Loans exceeds the
Swingline Commitment in effect at such time, the Borrower shall immediately pay
to the Agent for the account of Swingline Lender the amount of such excess.
Subject to the terms and conditions of this Agreement, the Borrower may borrow,
repay and reborrow Swingline Loans hereunder. Except as otherwise provided in
Section 2.9., the borrowing of a Swingline Loan shall not constitute usage of
any Lender's Commitment for purposes of calculation of the fee payable under
Section 3.6.(b) or otherwise.
(b) Procedure for Borrowing Swingline Loans. With respect to any
Swingline Loan not being made to the Borrower as contemplated under subsection
(f) below, the Borrower shall give the Agent and Swingline Lender notice
pursuant to a Notice of Swingline Borrowing or otherwise given to the Agent and
Swingline Lender in such manner, and no later than such time, as may be agreed
to by the Borrower and the Swingline Lender in writing from time to time. Each
Swingline Loan, other than one deemed requested as contemplated by subsection
(f) below, shall be in the minimum amount of $100,000 and integral multiples of
$50,000 in excess thereof, or such other minimum amounts agreed to by the
Swingline Lender and the Borrower. Not later than such time as may be agreed to
by the Borrower and the Swingline Lender from time to time and subject to
satisfaction of the applicable conditions set forth in Article V. for such
borrowing, the Swingline Lender will make the proceeds of such Swingline Loan
available to the Borrower in Dollars, in immediately available funds, at the
account specified by the Borrower in the Notice of Swingline Borrowing or as
otherwise directed by the Borrower in writing.
(c) Interest. Swingline Loans shall bear interest (i) at a per annum
rate equal to the Base Rate (as in effect from time to time) per annum or (ii)
at such other rate or rates as the Borrower and Swingline Lender may agree from
time to time in writing. Interest payable on Swingline Loans is solely for the
account of the Swingline Lender. All accrued and unpaid interest on Swingline
Loans shall be payable on the dates and in the manner provided in Section 2.2.
with respect to interest on Base Rate Loans (except as the Swingline Lender and
the Borrower may otherwise agree in writing in connection with any particular
Swingline Loan).
(d) Swingline Note. The Swingline Loans shall, in addition to this
Agreement, be evidenced by the Swingline Note.
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(e) Repayment and Participations of Swingline Loans. The Borrower
agrees to repay each Swingline Loan within one Business Day of demand therefor
by the Swingline Lender and in any event, within 10 Business Days after the date
such Swingline Loan was made. Notwithstanding the foregoing, the Borrower shall
repay the entire outstanding principal amount of, and all accrued but unpaid
interest on, the Swingline Loans on the Termination Date (or such earlier date
as the Swingline Lender and the Borrower may agree in writing). In lieu of
demanding repayment of any outstanding Swingline Loan from the Borrower, the
Swingline Lender may at any time, on behalf of the Borrower (which hereby
irrevocably directs the Swingline Lender to act on its behalf), request a
borrowing of Base Rate Loans from the Lenders in an amount equal to the
principal balance of such Swingline Loan. The Swingline Lender shall give notice
to the Agent of any such borrowing of Base Rate Loans not later than 11:00 a.m.
on the proposed date of such borrowing. Each Lender will make available to the
Agent for the account of the Swingline Lender, in immediately available funds,
the proceeds of the Loan to be made by such Lender. The Agent shall pay the
proceeds of such Loans to the Swingline Lender, which shall apply such proceeds
to repay such Swingline Loan. If Lenders are prohibited from making Loans
required to be made under this subsection for any reason whatsoever, including
without limitation, the occurrence of any of the Defaults or Events of Default
described in Sections 10.1.(e) or 10.1.(f), each Lender shall purchase from the
Swingline Lender, without recourse or warranty, an undivided interest and
participation to the extent of such Lender's Pro Rata Share of such Swingline
Loan, by directly purchasing a participation in such Swingline Loan in such
amount and paying the proceeds thereof to the Agent for the account of the
Swingline Lender in Dollars and in immediately available funds. A Lender's
obligation to purchase such a participation in a Swingline Loan shall be
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including without limitation, (i) any claim of setoff, counterclaim,
recoupment, defense or other right which such Lender or any other Person may
have or claim against the Agent, the Swingline Lender or any other Person
whatsoever, (ii) the occurrence or continuation of a Default or Event of Default
(including without limitation, any of the Defaults or Events of Default
described in Sections 10.1.(e) or (f)) or the termination of any Lender's
Commitment, (iii) the existence (or alleged existence) of an event of condition
which has had or could have a Material Adverse Effect, (iv) any breach of any
Loan Document by the Agent, any Lender or the Borrower or (v) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing. If such amount is not in fact made available to the Swingline
Lender by any Lender, the Swingline Lender shall be entitled to recover such
amount on demand from such Lender, together with accrued interest thereon for
each day from the date of demand thereof, at the Federal Funds Rate. If such
Lender does not pay such amount forthwith upon the Swingline Lender's demand
therefor, and until such time as such Lender makes the required payment, the
Swingline Lender shall be deemed to continue to have outstanding Swingline Loans
in the amount of such unpaid participation obligation for all purposes of the
Loan Documents (other than those provisions requiring the other Lenders to
purchase a participation therein). Further, such Lender shall be deemed to have
assigned any and all payments made of principal and interest on its Loans, and
any other amounts due to it hereunder, to the Swingline Lender to fund Swingline
Loans in the amount of the participation in Swingline Loans that such Lender
failed to purchase pursuant to this Section until such amount has been purchased
(as a result of such assignment or otherwise).
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(f) Auto Borrow/Auto Sweep Programs. At 5:00 p.m. on each Business Day
the Borrower shall be deemed to have requested that the Swingline Lender make to
the Borrower a Swingline Loan in an amount equal to the amount by which drafts
against the Operating Account exceed the available balance of funds then on
deposit in the Operating Account. The Agent shall notify the Swingline Lender of
the amount of such excess. The Swingline Lender shall make the proceeds of each
such Swingline Loan available to the Borrower by paying the same to the Agent
for deposit into the Operating Account. At 5:00 p.m. on each Business Day, the
Borrower shall repay a principal amount of Swingline Loans by an amount equal to
the positive balance, if any, of available funds then on deposit in the
Operating Account as determined by the Agent at such time. The Borrower hereby
authorizes the Agent to deduct such amount from the Operating Account without
notice to the Borrower, and to pay such amount to the Swingline Lender in
repayment of the then outstanding principal balance of Swingline Loans. The
provisions of this subsection shall not become effective until the Borrower has
executed and delivered the Swingline Lender's customary documentation relating
to its "Auto Borrow" and "Auto Sweep" programs.
SECTION 2.11. AMOUNT LIMITATIONS.
Notwithstanding any other term of this Agreement or any other Loan
Document, at no time may the aggregate principal amount of all outstanding
Revolving Loans, together with the aggregate principal amount of all outstanding
Swingline Loans, exceed the aggregate amount of the Commitments.
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 Agent 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 Agent from time to time. The Borrower
shall, at the time of making each payment under this Agreement or any Note,
specify to the Agent the amounts payable by the Borrower hereunder to which such
payment is to be applied. Each payment received by the Agent for the account of
a Lender under this Agreement or any Note shall be paid to such Lender at the
applicable Lending Office of such Lender no later than 5:00 p.m. on the date of
receipt. Each payment received by Agent for the account of Swingline Lender
under this Agreement or the Swingline Note shall be paid to Swingline Lender by
wire transfer of immediately available funds in accordance with the wiring
instructions provided by Swingline Lender to the Agent from time to time. 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.
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SECTION 3.2. PRO RATA TREATMENT.
Except to the extent otherwise provided herein: (a) each borrowing from
the Lenders under Section 2.1.(a) shall be made from the Lenders, each payment
of the Fees under Section 3.6.(a) and 3.6.(b) shall be made for the account of
the Lenders, and each termination or reduction of the amount of the Commitments
under Section 2.9. shall be applied to the respective Commitments of the
Lenders, pro rata according to the amounts of their respective Commitments; (b)
each payment or prepayment of principal of Revolving Loans by the Borrower shall
be made for the account of the Lenders pro rata in accordance with the
respective unpaid principal amounts of the Revolving Loans held by them,
provided that if immediately prior to giving effect to any such payment in
respect of any Revolving Loans the outstanding principal amount of the Revolving
Loans shall not be held by the Lenders pro rata in accordance with their
respective Commitments in effect at the time such Loans were made, then such
payment shall be applied to the Revolving Loans in such manner as shall result,
as nearly as is practicable, in the outstanding principal amount of the
Revolving Loans being held by the Lenders pro rata in accordance with their
respective Commitments; (c) each payment of interest on Revolving Loans by the
Borrower shall be made for the account of the Lenders pro rata in accordance
with the amounts of interest on such Loans then due and payable to the
respective Lenders; (d) the making, Conversion and Continuation of Revolving
Loans of a particular Type (other than Conversions provided for by Section 4.6.)
shall be made pro rata among the Lenders according to the amounts of their
respective Commitments (in the case of making of Loans) or their respective
Loans of such Type (in the case of Conversions and Continuations of Loans) and
the then current Interest Period for each Lender's portion of each Loan of such
Type shall be coterminous and (e) the Lenders' participation in, and payment
obligations in respect of, Swingline Loans under Section 2.10., shall be pro
rata in accordance with their respective Commitments.
SECTION 3.3. SHARING OF PAYMENTS, ETC.
The Borrower agrees that, in addition to (and without limitation of)
any right of set-off, banker's lien or counterclaim a Lender or the Agent may
otherwise have, each Lender shall be entitled, at its option but subject to
receipt of the Agent's prior written consent, to offset balances held by such
Lender for the account of the Borrower at any of such Lender's offices, in
Dollars or in any other currency, against any principal of, or interest on, any
of such Lender's Loans hereunder (or other Obligations owing to such Lender
hereunder) which is not paid when due (regardless of whether such balances are
then due to the Borrower), in which case such Lender shall promptly notify the
Borrower, all other Lenders and the Agent thereof; provided, however, such
Lender's failure to give such notice shall not affect the validity of such
offset. If a Lender shall obtain payment of any principal of, or interest on,
any Loan made by it to the Borrower under this Agreement, or shall obtain
payment on any other Obligation owing by the Borrower or a Loan Party through
the exercise of any right of set-off, banker's lien or counterclaim or similar
right or otherwise or through voluntary prepayments directly to a Lender or
other payments made by the Borrower to a Lender not in accordance with the terms
of this Agreement and such payment should be distributed to the Lenders pro rata
in accordance with Section 3.2. or Section 10.3., as applicable, such Lender
shall promptly purchase from the other Lenders participations in (or, if and to
the extent specified by such Lender, direct interests in) the Loans made by the
other Lenders or other Obligations owed to such other Lenders in such amounts,
pay
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such amounts to the other Lenders and make such other adjustments from time to
time as shall be equitable, to the end that all the Lenders shall share the
benefit of such payment (net of any reasonable expenses which may be incurred by
such Lender in obtaining or preserving such benefit) pro rata in accordance with
Section 3.2. or Section 10.3. To such end, all the Lenders shall make
appropriate adjustments among themselves (by the resale of participations sold
or otherwise) if such payment is rescinded or must otherwise be restored. The
Borrower agrees that any Lender so purchasing a participation (or direct
interest) in the Loans or other Obligations owed to such other Lenders may
exercise all rights of set-off, banker's lien, counterclaim or similar rights
with respect to such participation as fully as if such Lender were a direct
holder of Loans in the amount of such participation. Nothing contained herein
shall require any Lender to exercise any such right or shall affect the right of
any Lender to exercise, and retain the benefits of exercising, any such right
with respect to any other indebtedness or obligation of the Borrower. All
payments of principal, interest, fees and other amounts in respect of the
Swingline Loans shall be for the account of Swingline Lender only (except to the
extent any Lender shall have acquired a participating interest in any such
Swingline Loan pursuant to Section 2.10.(e)).
SECTION 3.4. SEVERAL OBLIGATIONS.
No Lender shall be responsible for the failure of any other Lender to
make a Loan or to perform any other obligation to be made or performed by such
other Lender hereunder, and the failure of any Lender to make a Loan or to
perform any other obligation to be made or performed by it hereunder shall not
relieve the obligation of any other Lender to make any Loan or to perform any
other obligation to be made or performed by such other Lender.
SECTION 3.5. MINIMUM AMOUNTS.
(a) Borrowings. Each borrowing of Base Rate Loans shall be in an
aggregate minimum amount of $1,000,000 and integral multiples of $100,000 in
excess thereof. Each borrowing of LIBOR Loans, and each Conversion of a Loan to
a LIBOR Loan, shall be in an aggregate minimum amount of $1,000,000 and integral
multiples of $100,000 in excess thereof.
(b) Prepayments. Each voluntary prepayment of Revolving Loans shall be
in an aggregate minimum amount of $1,000,000 and integral multiples of $100,000
in excess thereof.
(c) Reductions of Commitment. Each reduction of the Commitments under
Section 2.9. shall be in an aggregate minimum amount of $100,000 and integral
multiples of $50,000 in excess thereof.
SECTION 3.6. FEES.
(a) Closing Fee. In consideration of the extension of the credit
facility established hereby, the Borrower agrees to pay to the Agent for the
account of each Lender on the Effective Date a closing fee in an amount equal to
one-quarter of one percent (0.25%) of the amount of such Lender's Commitment.
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(b) Commitment Fee. The Borrower agrees to pay to the Agent for the
account of the Lenders a commitment fee on the average daily amount by which the
Commitments (as the amount of the Commitments may be reduced from time to time
pursuant to Section 2.9. or otherwise) exceed the aggregate outstanding
principal balance of Revolving Loans at a rate per annum equal to the Applicable
Commitment Fee for the period from and including the Agreement Date to but
excluding the date the Commitments are terminated or reduced to zero or the
Termination Date. Such facility fee shall be payable in arrears on (i) the last
Business Day of March, June, September and December in each year commencing with
September 30, 1998, (ii) on the Termination Date, (iii) on the date the
Commitments are otherwise terminated or reduced to zero and (iv) thereafter from
time to time on demand of the Agent.
(c) Agent, Arranger and Other Fees. The Borrower agrees to pay the
administrative fees, arrangement fees and other fees of the Agent and NMS as may
be agreed to in writing from time to time.
SECTION 3.7. 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 3.8. 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 any Lender, then
such excess sum shall be credited as a payment of principal, unless the Borrower
shall notify the respective Lender (with a copy to the Agent) 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 Lenders
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 3.9. 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) and, with
respect to Swingline Loans, in Section 2.10.(c). Notwithstanding the foregoing,
the parties hereto further agree and stipulate that all commitment fees,
underwriting fees, agency fees, syndication fees, default charges, late charges,
funding or "breakage" charges, increased cost charges, attorneys' fees and
reimbursement for costs and expenses paid by the Agent or any Lender to third
parties or for damages incurred by the Agent or any Lender, are charges made to
compensate the Agent or such Lender for underwriting or administrative services
and costs or losses performed or incurred, and to be performed or incurred, by
the Agent and the Lenders in connection with this Agreement and shall under no
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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 3.10. STATEMENTS OF ACCOUNT.
The Agent 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 Agent shall be
deemed presumptively correct. The failure of the Agent to deliver such a
statement of accounts shall not relieve or discharge the Borrower from any of
its obligations hereunder.
SECTION 3.11. DEFAULTING LENDERS.
(a) Generally. If for any reason any Lender (a "Defaulting Lender")
shall fail or refuse to perform any of its obligations under this Agreement or
any other Loan Document to which it is a party within the time period specified
for performance of such obligation or, if no time period is specified, if such
failure or refusal continues for a period of two Business Days after notice from
the Agent, then, in addition to the rights and remedies that may be available to
the Agent or the Borrower under this Agreement or Applicable Law, such
Defaulting Lender's right to participate in the administration of the Loans,
this Agreement and the other Loan Documents, including without limitation, any
right to vote in respect of, to consent to or to direct any action or inaction
of the Agent or to be taken into account in the calculation of the Requisite
Lenders, shall be suspended during the pendency of such failure or refusal. If a
Lender is a Defaulting Lender because it has failed to make timely payment to
the Agent of any amount required to be paid to the Agent hereunder (without
giving effect to any notice or cure periods), in addition to other rights and
remedies which the Agent or the Borrower may have under the immediately
preceding provisions or otherwise, the Agent shall be entitled (i) to collect
interest from such Defaulting Lender on such delinquent payment for the period
from the date on which the payment was due until the date on which the payment
is made at the Federal Funds Rate, (ii) to withhold or setoff and to apply in
satisfaction of the defaulted payment and any related interest, any amounts
otherwise payable to such Defaulting Lender under this Agreement or any other
Loan Document and (iii) to bring an action or suit against such Defaulting
Lender in a court of competent jurisdiction to recover the defaulted amount and
any related interest. Any amounts received by the Agent in respect of a
Defaulting Lender's Loans shall not be paid to such Defaulting Lender and shall
be held uninvested by the Agent and either applied against the purchase price of
such Loans under the following subsection (b) or paid to such Defaulting Lender
upon the Defaulting Lender's curing of its default.
(b) Purchase of Defaulting Lender's Commitment. Any Lender who is not a
Defaulting Lender shall have the right, but not the obligation, in its sole
discretion, to acquire all of a Defaulting Lender's Commitment. Any Lender
desiring to exercise such right shall give written notice thereof to the Agent
no sooner than 10 Business Days and not later than 15 Business Days after such
Defaulting Lender became a Defaulting Lender. If more than one Lender exercises
such right, each such Lender shall have the right to acquire an amount of such
Defaulting Lender's Commitment in proportion to the Commitments of the other
Lenders
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exercising such right. Upon any such purchase, the Defaulting Lender's
interest in the Loans and its rights hereunder (but not its liability in respect
thereof or under the Loan Documents or this Agreement to the extent the same
relate to the period prior to the effective date of the purchase) shall
terminate on the date of purchase, and the Defaulting Lender shall promptly
execute all documents reasonably requested to surrender and transfer such
interest to the purchaser thereof, including an appropriate Assignment and
Acceptance Agreement and, notwithstanding Section 12.6.(d), shall pay to the
Agent an assignment fee in the amount of $7,000. The purchase price for the
Commitment of a Defaulting Lender shall be equal to the amount of the principal
balance of the Loans outstanding and owed by the Borrower to the Defaulting
Lender. Prior to payment of such purchase price to a Defaulting Lender, the
Agent shall apply against such purchase price any amounts retained by the Agent
pursuant to the last sentence of the immediately preceding subsection (a). The
Defaulting Lender shall be entitled to receive amounts owed to it by the
Borrower under the Loan Documents which accrued prior to the date of the default
by the Defaulting Lender, to the extent the same are received by the Agent from
or on behalf of the Borrower. There shall be no recourse against any Lender or
the Agent for the payment of such sums except to the extent of the receipt of
payments from any other party or in respect of the Loans.
SECTION 3.12. 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 Agent or a Lender and the
jurisdiction imposing such taxes (other than a connection arising solely by
virtue of the activities of the Agent or such 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, (iv) any taxes imposed on
or measured by the Agent's or any Lender's assets, net income, receipts or
branch profits and (v) any taxes arising after the Agreement Date solely as a
result of or attributable to a Lender changing its designated Lending Office
after the date such Lender becomes a party hereto (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 Agent an official receipt or
other documentation satisfactory to the Agent evidencing such payment
to such Governmental Authority; and
(iii) pay to the Agent for its account or the account of the
applicable Lender, as the case may be, such additional amount or
amounts as is necessary to ensure that the net
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amount actually received by the Agent or such Lender will equal the
full amount that the Agent or such 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 Agent for
its account or the account of the respective Lender, as the case may be, the
required receipts or other required documentary evidence, the Borrower shall
indemnify the Agent and the Lenders for any incremental Taxes, interest or
penalties that may become payable by the Agent or any Lender as a result of any
such failure. For purposes of this Section, a distribution hereunder by the
Agent or any Lender to or for the account of any Lender shall be deemed a
payment by the Borrower.
(c) Tax Forms. Prior to the date that any Lender or participant
organized under the laws of a jurisdiction outside the United States of America
becomes a party hereto, such Person shall deliver to the Borrower and the Agent
such certificates, documents or other evidence, as required by the Internal
Revenue Code or Treasury Regulations issued pursuant thereto (including Internal
Revenue Service Forms 4224 or 1001, as applicable, or appropriate successor
forms), properly completed, currently effective and duly executed by such Lender
or participant establishing that payments to it hereunder and under the Notes
are (i) not subject to United States Federal backup withholding tax or (ii) not
subject to United States Federal withholding tax under the Code because such
payment is either effectively connected with the conduct by such Lender or
participant of a trade or business in the United States or totally exempt from
United States Federal withholding tax by reason of the application of the
provisions of a treaty to which the United States is a party or such Lender is
otherwise exempt.
ARTICLE IV. YIELD PROTECTION, ETC.
SECTION 4.1. ADDITIONAL COSTS; CAPITAL ADEQUACY.
(a) Additional Costs. The Borrower shall promptly pay to the Agent for
the account of a Lender from time to time such amounts as such Lender may
reasonably determine to be necessary to compensate such Lender for any costs
incurred by such 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 such 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 such 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 such Lender under this Agreement or any of the other Loan Documents in
respect of any of such Loans or its Commitments (other than taxes imposed on or
measured by the overall net income of such Lender or of its Lending Office for
any of such Loans by the jurisdiction in which such Lender has its principal
office or such Lending Office); or (ii) imposes or modifies any reserve, special
deposit or similar requirements (including, without limitation, any reserves
required to be maintained against (1) "Eurocurrency liabilities" as specified in
Regulation D of the Board of Governors of the Federal Reserve System or (2) any
other category of liabilities which includes deposits by reference to which the
interest rate on
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LIBOR Loans is determined or (3) any category of extensions of credit or other
assets which includes loans by an office of any 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, such Lender, or any commitment of such Lender (including,
without limitation, the Commitments of such Lender); or (iii) has or would have
the effect of reducing the rate of return on capital of such Lender to a level
below that which such Lender could have achieved but for such Regulatory Change
(taking into consideration such 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, any 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 such 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 such 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 such
Lender so elects by notice to the Borrower (with a copy to the Agent), the
obligation of such 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 4.6. shall
apply).
(c) Notification and Determination of Additional Costs. Each Lender
agrees to notify the Borrower (with a copy to the Agent) of any event occurring
after the Agreement Date entitling such Lender to compensation under any of the
preceding subsections of this Section as promptly as practicable; provided,
however, subject to the last sentence of this subsection, the failure of any
Lender to give such notice shall not release the Borrower from any of its
obligations hereunder. Such Lender agrees to furnish to the Borrower a
certificate setting forth in reasonable detail the basis and amount of each
request by such Lender for compensation under this Section. Determinations by
such 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. A
Lender shall only be entitled to compensation under this Section for events of
which the Borrower has been provided notice during the 180 day period after the
occurrence of any such event entitling such 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 Agent determines (which determination shall be
conclusive) that by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining
LIBOR for such Interest Period, or
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(b) the Agent determines (which determination shall be
conclusive) that LIBOR will not adequately and fairly reflect the cost
to the Lenders of making or maintaining LIBOR Loans for such Interest
Period;
then the Agent shall give the Borrower and each Lender prompt notice thereof
and, so long as such condition remains in effect, the Lenders 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 any Lender or its Lending Office to honor its obligation to make or
maintain LIBOR Loans hereunder, then such Lender shall promptly notify the
Borrower thereof (with a copy to the Agent) and such 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 such Lender may again make and maintain LIBOR Loans
(in which case the provisions of Section 4.6. shall be applicable).
SECTION 4.4 COMPENSATION.
The Borrower shall pay to the Agent for the account of each Lender,
upon the request of such Lender through the Agent, such amount or amounts as
shall be sufficient (in the reasonable opinion of such Lender) to compensate it
for any loss, cost or expense that such 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 such 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 such 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 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 such 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
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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 such Lender). Upon the Borrower's
request, if any Lender shall request compensation under this Section, such
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. AFFECTED LENDERS.
If any Lender requests compensation pursuant to Section 3.12. or 4.1.,
or the obligation of any 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), 4.2. or 4.3., then, so long as there does not then exist any Default or
Event of Default, the Borrower may either (a) demand that such Lender (the
"Affected Lender"), and upon such demand the Affected Lender shall promptly,
assign its Commitments to an Eligible Assignee subject to and in accordance with
the provisions of Section 12.6.(d) for a purchase price equal to the aggregate
principal balance of Loans then owing to the Affected Lender plus any accrued
but unpaid interest thereon and accrued but unpaid fees owing to the Affected
Lender, or (b) pay to the Affected Lender the aggregate principal balance of
Loans then owing to the Affected Lender plus any accrued but unpaid interest
thereon and accrued but unpaid fees owing to the Affected Lender, whereupon the
Affected Lender shall no longer be a party hereto or have any rights or
obligations hereunder or under any of the other Loan Documents. Each of the
Agent and the Affected Lender shall reasonably cooperate in effectuating the
replacement of such Affected Lender under this Section, but at no time shall the
Agent, such Affected Lender nor any other Lender be obligated in any way
whatsoever to initiate any such replacement or to assist in finding an Eligible
Assignee. The exercise by the Borrower of its rights under this Section shall be
at the Borrower's sole cost and expenses and at no cost or expense to the Agent,
the Affected Lender or any of the other Lenders. The terms of this Section shall
not in any way limit the Borrower's obligation to pay to any Affected Lender
compensation owing to such Affected Lender pursuant to Section 3.12. or 4.1.
SECTION 4.6. TREATMENT OF AFFECTED LOANS.
If the obligation of any 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 of such Lender's 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 such
Lender may specify to the Borrower (with a copy to the Agent)) and, unless and
until such 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 such Lender's LIBOR Loans have been so
Converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's LIBOR Loans shall be applied
instead to its Base Rate Loans; and
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(b) all Loans that would otherwise be made or Continued by
such Lender as LIBOR Loans shall be made or Continued instead as Base
Rate Loans, and all Base Rate Loans of such Lender that would otherwise
be Converted into LIBOR Loans shall remain as Base Rate Loans.
If such Lender gives notice to the Borrower (with a copy to the Agent) that the
circumstances specified in Section 4.1. or 4.3. that gave rise to the Conversion
of such Lender's LIBOR Loans pursuant to this Section no longer exist (which
such Lender agrees to do promptly upon such circumstances ceasing to exist) at a
time when LIBOR Loans made by other Lenders are outstanding, then such Lender's
Base Rate Loans shall be automatically Converted, on the first day(s) of the
next succeeding Interest Period(s) for such outstanding LIBOR Loans, to the
extent necessary so that, after giving effect thereto, all Loans held by the
Lenders holding LIBOR Loans and by such Lender are held pro rata (as to
principal amounts, Types and Interest Periods) in accordance with their
respective Commitments.
SECTION 4.7. CHANGE OF LENDING OFFICE.
Each Lender agrees that it will use reasonable efforts to designate an
alternate Lending Office with respect to any of its Loans affected by the
matters or circumstances described in Sections 3.12., 4.1. or 4.3. to reduce the
liability of the Borrower or avoid the results provided thereunder, so long as
such designation is not disadvantageous to such Lender as determined by such
Lender in its sole discretion, except that such Lender shall have no obligation
to designate a Lending Office located in the United States of America.
ARTICLE V. CONDITIONS PRECEDENT
SECTION 5.1. INITIAL CONDITIONS PRECEDENT.
The obligation of any Lender to make any Loan, or the Swingline Lender
to make any Swingline Loan to Borrower, in each case is subject to the condition
precedent that the Agent shall have received each of the following, each of
which shall be satisfactory in form and substance to the Agent:
(i) a counterpart of this Agreement executed by the Borrower and each
of the Lenders;
(ii) the Revolving Notes executed by the Borrower, payable to each of
the Lenders and complying with the terms of Section 2.8., and the Swingline Note
executed by the Borrower, payable to the Swingline Lender;
(iii) the Guaranty executed by each Loan Party other than the Borrower;
(iv) the 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 L;
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(v) 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;
(vi) appropriate stock transfer powers endorsed in blank by each
applicable Loan Party with respect to the certificates referred to in the
immediately preceding subsection;
(vii) the Security Agreement executed by each of the Borrower and the
other Loan Parties substantially in the form of Exhibit M;
(viii) with respect to each of the Uniform Commercial Code financing
statements naming each Loan Party as debtor, NationsBank as secured party, and
filed pursuant to the Existing Credit Agreement, a Uniform Commercial Code
assignment statement executed by NationsBank as assignor in favor of the Agent
as assignee;
(ix) favorable UCC, tax 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;
(x) an opinion of Troutman Sanders LLP, counsel to the Loan Parties,
in substantially the form of Exhibit N;
(xi) 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;
(xii) 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 of each state in which such Loan Party is required to be
so qualified;
(xiii) 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 and to
execute and deliver Notices of Borrowing, Notices of Conversion, Notices of
Continuation and Notices of Swingline Borrowing;
(xiv) 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;
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(xv) 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;
(xvi) 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;
(xvii) a key man life insurance policy on the life of Ramie A. Tritt,
M.D., in the amount of $2,500,000, naming the Borrower as beneficiary;
(xviii) copies of all executed Management Services Agreements;
(xix) the Collateral Assignment of Management Services Agreements
executed by PSC Management and each Other Manager, if any, relating to all such
Management Services Agreements;
(xx) the Fees, if any, then due under Section 3.6.;
(xxi) any and all financial statements described in Section 6.1.(k)
not previously delivered by the Borrower to the Lenders; and
(xxii) such other documents, instruments and agreements as the Agent
or any Lender through the Agent may reasonably request.
SECTION 5.2. CONDITIONS PRECEDENT TO ALL LOANS.
The obligation of any Lender to make any Loan hereunder (including the
initial Loans), and of Swingline Lender to make any Swingline Loan, 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); and
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(c) the Agent shall have timely received a duly executed Notice of
Borrowing, or in the case of a Swingline Loan, timely receipt by Swingline
Lender of a Notice of Swingline Borrowing.
Each Credit Event (including without limitation, the borrowing of a Swingline
Loan as provided in Section 2.10.(f)) 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 Agent and the Lenders 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 Lenders and the Swingline Lender to enter into
this Agreement and to make Loans and the Swingline Loans, as applicable, the
Borrower represents and warrants to the Agent, the Lenders and the Swingline
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) no Subsidiary of the Borrower has issued to any third
party any securities convertible into 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.
(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 accordance with its respective terms, except
that the enforceability thereof may be limited by
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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 Agent for the benefit of the Lenders.
(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
material 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, any other Loan Party, any
of their respective property or any Transaction in any court or before any
arbitrator of any kind or before or by any Governmental Authority which if
adversely
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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 Agent and
each Lender each of the following financial statements: (i) the audited
consolidated balance sheets of the Borrower and its Subsidiaries as at December
31, 1996 and December 31, 1997, and the related consolidated statements of
income, retained earnings and cash flow for the fiscal years then ended; (ii) an
unaudited consolidated balance sheet of the Borrower and its Subsidiaries as at
March 31, 1998, and the related unaudited consolidated statements of income,
retained earnings and cash flow for the fiscal quarter then ended (together with
the financial statements referenced in the immediately proceeding clause (i),
the "Historical Financial Statements"); (iii) a pro forma projected unaudited
consolidated balance sheet of the Borrower and its Subsidiaries as of March 31,
1998 after giving effect to any Acquisition effected prior to the Effective Date
but after December 31, 1997 (the "Pro Forma Financial Statements"); and (iv) 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 four-year period ending
December 31, 2002 (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, 1997, 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
Agent and the Lenders 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
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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 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 shall be submitted (within the applicable
remedial amendment period, as described in Section 401(b) of the
Internal Revenue Code) to the Internal Revenue Service for
determination that it isso qualified, and each trust related to such
plan shall also be timely submitted to the Internal Revenue Service for
a determination that it is 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
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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.
(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.
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(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 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 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 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.
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(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.
(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
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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; 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
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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 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 (other than Projections (as defined below))
furnished to the Agent, any Lender or the Swingline 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. All financial projections concerning the
Borrower or any of its Subsidiaries that have been or are hereafter made
available to the Agent or any Lender by, on behalf of, or at the direction of,
the Borrower or any other Loan Party ("Projections") have been or will be
prepared in good faith based on reasonable assumptions. 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 Agent, the
Lenders and the Swingline Lender prior to the Effective Date. No document
furnished or written statement made to the Agent, any Lender or the Swingline
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.
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(bb) Year 2000. The Borrower reasonably believes that the "Year 2000
Problem" (that is, the inability of computers, as well as embedded microchips in
non-computing devices, to perform properly, including performance of
date-sensitive functions with respect to certain dates prior to and after
December 31, 1999), including costs of remediation, could not reasonably be
expected to result in a Default or Event of Default or to have a Material
Adverse Effect. The computer systems of the Borrower and its Subsidiaries are
and, with ordinary course upgrading and maintenance, will continue for the term
of this Agreement to be, sufficient for the conduct of their business as
currently conducted.
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 Agent, any
Lender or the Swingline 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 Agent, any Lender or the Swingline 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 and at and as of the date of 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 Agent, the Lenders and the Swingline Lender
as if the same were set forth herein in full. Except as disclosed by the
Borrower to the Agent, the Lenders and the Swingline 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.
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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 Requisite Lenders (or,
if required pursuant to Section 12.7., all of the Lenders) shall otherwise
consent in the manner provided for in Section 12.7., 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.
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 (and the
management of other Persons engaged in the business of) Otolaryngology, the
Related Subspecialties and the Complementary Specialties, and ancillary services
thereto.
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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
other Loan Party to maintain, insurance with financially sound and reputable
insurance companies acceptable to the Agent 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 Agent. From time to time the
Borrower will deliver to the Agent or any 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 Agent may upon notice to the Borrower
or such other Loan Party, but shall have no obligation to, procure insurance
covering the interests of the Agent, the Lenders and the Swingline Lenders in
such amounts and against such risks as the Requisite Lenders shall deem
appropriate in their sole but reasonable discretion, and the Borrower shall
reimburse the Agent and the Lenders in respect of any premiums paid by the Agent
or the Lenders as provided in Section 12.2.
(b) Key Man Life Insurance. Maintain a key man life insurance policy a
with financially sound and reputable insurance company on the life of Ramie A.
Tritt, M.D., in the amount of $2,500,000, naming the Borrower as beneficiary.
Within one year after the Effective Date, the Requisite Lenders will, at the
request of the Borrower, evaluate the required amount of such life insurance.
The Requisite Lenders 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 Agent or any 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
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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 Requisite Lenders, the Borrower shall
execute an authorization letter addressed to its accountants authorizing the
Agent and the Lenders 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 (i) to finance Acquisitions by the
Borrower or any of its Subsidiaries of Persons engaged in, or equipment or other
assets utilized by Persons engaged in, Otolaryngology practices as well as
Related Subspecialties and Complementary Specialties and ancillary services
thereto, as well as Persons engaged in, or assets of Persons engaged in, the
physician practice management business of managing Otolaryngology practices and
Related Subspecialties and Complimentary Specialties; (ii) to refinance existing
Funded Debt; (iii) to finance the making of Investments by the Borrower and its
Subsidiaries to the extent permitted to be made under Section 9.4. and (iv) for
the working capital and general corporate purposes of, and to finance capital
expenditures by, the Borrower and its Subsidiaries; and (b) 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. The proceeds of the initial Loans hereunder shall be used to pay
in full all amounts owing under the Existing Credit Agreement.
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 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 Agent 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.
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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 Agent. 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 Agent, 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 (to the extent automated clearing house mechanisms are
available) but in any event no less frequently than weekly, 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 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.
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SECTION 7.14. ADDITIONAL MATERIAL SUBSIDIARIES.
Within 10 Business Days of any Person becoming a Material Subsidiary
after the Agreement Date, the Borrower shall deliver to the Agent each of the
items that would be required to be delivered under Section 9.6. if such Material
Subsidiary were a New Subsidiary being acquired pursuant to an Acquisition (but
only to the extent such items have not otherwise been delivered to the Agent
under such Section or otherwise). Notwithstanding any provision of this
Agreement or any other Loan Document, (a) no Foreign Subsidiary shall be
required to execute and deliver a Guaranty and (b) a Loan Party shall only be
obligated to pledge under the Pledge Agreement the maximum amount of the total
combined voting power of all classes of stock entitled to vote of its respective
Foreign Subsidiaries that it may so pledge without such Foreign Subsidiary being
deemed to be holding United States property by virtue of 26 C.F.R. ss.
1.956-2(c)(2).
ARTICLE VIII. INFORMATION
For so long as any of the Obligations remains outstanding, unpaid or
unperformed, or this Agreement is in effect, unless the Requisite Lenders (or,
if required pursuant to Section 12.7., all of the Lenders) shall otherwise
consent in the manner set forth in Section 12.7., the Borrower shall furnish to
each Lender (or to the Agent if so provided below) at its Lending 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 balance sheets of the Borrower and its Subsidiaries as at the end
of such period and the related consolidated 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 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 other independent certified public accountants of recognized
national standing acceptable to
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the Requisite Lenders, whose certificate shall be in scope and substance
satisfactory to the Requisite Lenders and who shall have authorized the Borrower
to deliver such financial statements and certification thereof to the Agent and
the Lenders pursuant to this Agreement.
SECTION 8.3. COMPLIANCE CERTIFICATE
At the time the financial statements are furnished pursuant to Sections
8.1. and 8.2., a certificate substantially in the form of Exhibit O (a
"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.
SECTION 8.4. ACCOUNTANTS' LETTERS AND BUDGETS.
In addition to the financial information to be provided to the Agent
and the Lenders under Sections 8.1. through 8.3.:
(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 reports; 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, any other Loan Party or any other Subsidiary 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;
(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 which could reasonably be expected to have a
Material Adverse Effect;
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(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, or results of operations 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,
and of which any officer of the Borrower has actual knowledge;
(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; and
(i) promptly upon discovery thereof, notice and a written description
of all claims or potential claims asserted against the Borrower or any other
Loan Party 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).
SECTION 8.6. ERISA.
The following information at the times specified below:
(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 Pension Plan or Multiemployer 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
Pension Plan or Multiemployer Plan, (iv) each funding waiver request filed with
respect to any Pension Plan or Multiemployer 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
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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 thirty (30) 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 20 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 Agent 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.
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 Agent or any Lender may reasonably request.
The rights of the Agent and the Lenders under this Section are in addition to
and not in limitation of their rights under any other provision of this
Agreement or any of the other Loan Documents.
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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 Requisite Lenders (or,
if required pursuant to Section 12.7., all of the Lenders) shall otherwise
consent in the manner set forth in Section 12.7., the Borrower shall not,
directly or indirectly:
SECTION 9.1. FINANCIAL COVENANTS.
(a) Senior Funded Debt to EBITDA. Permit the ratio of (i) Senior Funded
Debt of the Borrower and its Subsidiaries determined on a consolidated basis to
(ii) the sum of (A) Borrower's EBITDA for the period of four consecutive fiscal
quarters 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) Funded Debt to EBITDA. Permit the ratio of (i) Funded Debt of the
Borrower and its Subsidiaries determined on a consolidated basis to (ii) the sum
of (A) Borrower's EBITDA for the period of four consecutive fiscal quarters 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 4.0
to 1.0.
(c) Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio
at any time to be less than 1.5 to 1.0.
(d) Net Worth. Permit the Borrower's Net Worth to be less than (i)
$39,900,000 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,
1998 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;
(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 $3,000,000;
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(e) Capitalized Lease Obligations in an aggregate principal amount not
to exceed $3,000,000 at any one time outstanding; and
(f) 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);
(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 consistent with
past practices;
(vi) Receivables created, and prepaid expenses incurred, in the
ordinary course of business consistent with past practices;
(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 $1,500,000 at any one time outstanding and which loans
(x) are evidenced by promissory notes and (y) are required to be repaid no later
than two years after the making thereof; and
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(viii) Investments in other Persons that are not Subsidiaries in an
aggregate amount not to exceed (x) $10,000,000 at any time outstanding in the
case of Investments relating to ambulatory surgery centers in Atlanta, Georgia
and (y) $5,500,000 at any time outstanding in the case of all other such
Investment in Persons engaged in any business in which the Borrower and its
Subsidiaries are permitted to engage under Section 7.4.
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. If the aggregate cash portion of the
Acquisition Consideration payable by the Borrower and its Subsidiaries in
connection with such Acquisition exceeds $10,000,000, all of the Lenders shall
have given their prior written consent to such Acquisition, which consent shall
not be arbitrarily withheld. The Lenders shall respond to the Borrower's request
for any such consent within 4 Business Days following receipt by the Agent and
the Lenders of all of the items to be delivered under the immediately following
subsection (c).
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(c) Documentation to Agent and Lenders Prior to Acquisition Requiring
Approval. The Borrower shall have caused to be delivered to the Agent (and each
Lender only in the case of the immediately following clauses (i), (iii), and
(iv)) on a timely basis prior to the date of consummation of an Acquisition
requiring the consent of the Lenders under the immediately preceding subsection
(b) (an "Approved Acquisition"), each of the following:
(i) Acquisition Certificate. A completed Acquisition
Certificate substantially in the form of Exhibit P-1;
(ii) Acquisition Documents. A copy of the most current letter
of intent relating to such Acquisition, and the current draft (or
executed copies if then available) of such other Acquisition Documents
relating to such Acquisition as the Requisite Lenders may request
through the Agent;
(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 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 Financial Statements. Pro forma financial
statements in form reasonably satisfactory to the Agent 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; and
(v) Other Documents. Such other documents, instruments,
agreements and certifications as the Agent or the Requisite Lenders may
reasonably and in good faith request and which request will not result
in undue expense to the Borrower.
(d) Documentation to Agent Following Closing of Each Acquisition. The
Borrower shall cause to be delivered to the Agent not more than 10 Business Days
after the date of consummation of any Acquisition, each of the following:
(i) Acquisition Certificate. In the case of any Acquisition
other than an Approved Acquisition, a completed Acquisition Certificate
substantially in the form of Exhibit P-2;
(ii) Corporate Documents. If such Acquisition involves any New
Subsidiary that is a Material Subsidiary:
(A) a copy of the articles of incorporation, articles
of organization, certificate of limited partnership or other
comparable organizational instrument (if
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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;
(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 Agent 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 Agent and the
Lenders may conclusively rely on such certificate until the
Agent receives notice in writing from such New Subsidiary, to
the contrary);
(iii) Management Services Agreement. The Management Services
Agreement entered into in connection with such Acquisition, which
Management Services Agreement must contain language regarding the
assignability thereof to the Agent in form and substance satisfactory
to the Agent;
(iv) Management Agreement Financing Statements. A copy of
each Uniform Commercial Code financing statement naming PSC Management
(or any applicable New Subsidiary to be an Other Manager) as secured
party, the "Practice" (as that term is defined in such Management
Services Agreement) to such Management Services Agreement as debtor and
the Agent as assignee filed in connection with the sale of Receivables
to PSC Management (or such Other Manager) under such Management
Services Agreement;
(v) Lien Searches. UCC, tax, judgment and lien search reports
in form and substance satisfactory to the Agent with respect to the
Target and each New Subsidiary
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that is a Material 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;
(vi) Accession Agreement. An Accession Agreement executed by
each New Subsidiary to make it a party to (A) the Guaranty and the
Security Agreement (but only if such New Subsidiary is a Material
Subsidiary); (B) the Pledge Agreement (but only if such New Subsidiary
owns or is to own any outstanding equity interest in another New
Subsidiary that will be a Material Subsidiary upon the consummation of
such Acquisition or in any Loan Party); and (C) the Collateral
Assignment of Management Services Agreement (but only if such New
Subsidiary is to be an Other Manager). Together with such Accession
Agreement, the Borrower shall also deliver to the Agent each of the
following:
(1) UCC Financing Statements. Such UCC financing
statements executed by any New Subsidiary becoming a party to
any Security Document as the Agent may reasonably request to
perfect any Lien granted by such New Subsidiary under such
Security Document; and
(2) Stock Certificates and Powers. From each New
Subsidiary becoming a party to the Pledge Agreement: (I) all
certificates, if any, representing all equity interests in
other New Subsidiaries or Loan Parties owned or to be owned by
such New Subsidiary and (II) stock powers duly endorsed in
blank by such New Subsidiary relating to all such
certificates; and
(vii) From each Loan Party already a party to the Pledge
Agreement and which owns or is to own any equity interests of any New
Subsidiary that will be a Material Subsidiary upon the consummation of
such Acquisition, (1) all certificates, if any, representing all of
such equity interests and (2) stock powers duly endorsed in blank by
such Loan Party relating to all such certificates.
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
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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 (i) any Material Contract, (ii) 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 Approved Acquisition or (iii) any Management Services
Agreement, in each case without the prior written consent of the Requisite
Lenders, other than amendments or modifications that do not, in any adverse way,
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; or (c) permit any Material Contract
or Management Services Agreement to be canceled or terminated prior to its
stated maturity.
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;
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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. BANK ACCOUNTS.
Establish, or permit any other Loan Party to establish, any new bank
accounts unless and until the Agent receives written notice thereof.
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., 9.5., 9.6., 9.7., 9.8., or 9.9. 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 Agent.
(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
Agent, any Lender or the Swingline 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 (any such
Indebtedness or Contingent Obligation, a "Material Obligation"); or
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(ii) the maturity of any such Material Obligation 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 Material Obligation 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 holders of such Material Obligation,
any trustee or agent acting on behalf of such holder or holders or any
other Person, to accelerate the maturity of any such Material
Obligation or require any such Material Obligation 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.
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(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, $500,000 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.
(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, $500,000 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 Requisite Lenders 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 $500,000 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 is imposed and the amount of such civil penalty or tax is in excess
of $500,000 and has not been discharged, vacated, stayed or bonded for a period
of 30 days.
(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
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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
(ii) If two or more members of the Management Group shall
terminate their employment with the Borrower or otherwise cease to be
principally involved in the executive and strategic management of the
Borrower and within 120 days after the second such member shall
terminate his employment or shall otherwise cease to be so involved,
the Borrower shall fail to replace all such members with individuals
having comparable industry experience.
(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 Agent 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
Agent 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:
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(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 Lenders,
the Agent and the Swingline 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 Commitments and the
Swingline Commitment shall immediately and automatically terminate.
(ii) Optional. If any other Event of Default shall have
occurred and be continuing, the Agent may, and at the written direction
of the Requisite Lenders shall: (A) declare (1) the principal of, and
accrued interest on, the Revolving Loans and the Revolving Notes at the
time outstanding and (2) all of the other Obligations owing to the
Agent and the Lenders, 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 Commitments. If the Agent
has exercised any of the rights provided under the preceding sentence,
the Swingline Lender shall: (x) declare the principal of, and accrued
interest on, the Swingline Loans and the Swingline Note at the time
outstanding, and all of the other Obligations owing to Swingline
Lender, 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 (y) terminate the Swingline Commitment.
(b) Loan Documents. The Requisite Lenders may direct the Agent to, and
the Agent if so directed shall, exercise any and all of its rights under any and
all of the other Loan Documents.
(c) Applicable Law. The Requisite Lenders may direct the Agent to, and
the Agent if so directed shall, 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 Agent and the Lenders shall be entitled to seek 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.
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SECTION 10.3. ALLOCATION OF PROCEEDS.
If an Event of Default shall have occurred and be continuing and
maturity of any of the Obligations has been accelerated, all payments received
by the Agent under any of the Loan Documents, in respect of any principal of or
interest on the Obligations or any other amounts payable by the Borrower
hereunder or thereunder, shall be applied in the following order and priority:
(a) amounts due to Agent, and the Lenders in respect of
Fees and expenses due under Sections 3.6. and 12.2., ratably in
accordance with the amounts then payable;
(b) payments of interest on Swingline Loans;
(c) payments of principal on Swingline Loans;
(d) payments of interest on Loans, to be applied for the
ratable benefit of Lenders;
(e) payments of principal of Loans, to be applied for the
ratable benefit of Lenders;
(f) amounts due the Agent and the Lenders pursuant to
Sections 11.7. and 12.9., ratably in accordance with such amounts then
payable;
(g) payments of all other amounts due under any of the
Loan Documents, if any, to be applied for the ratable benefit of
Lenders; and
(h) any amount remaining after application as provided
above, shall be paid to whomever may be legally entitled thereto.
SECTION 10.4. PERFORMANCE BY AGENT.
If the Borrower shall fail to perform any covenant, duty or agreement
contained in any of the Loan Documents, the Agent 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 Agent, promptly pay any amount reasonably
expended by the Agent in such performance or attempted performance to the Agent,
together with interest thereon at the applicable Post-Default Rate from the date
of such expenditure until paid. Notwithstanding the foregoing, neither the Agent
nor any Lender shall have any liability or responsibility whatsoever for the
performance of any obligation of the Borrower under this Agreement or any other
Loan Document.
SECTION 10.5. RIGHTS CUMULATIVE.
The rights and remedies of the Agent and the Lenders under this
Agreement and each of the other Loan Documents shall be cumulative and not
exclusive of any rights or remedies which
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any of them may otherwise have under Applicable Law. In exercising their
respective rights and remedies the Agent and the Lenders may be selective and no
failure or delay by the Agent or any 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.
ARTICLE XI. THE AGENT
SECTION 11.1. AUTHORIZATION AND ACTION.
Each Lender hereby appoints and authorizes the Agent to take such
action as contractual representative on such Lender's behalf and to exercise
such powers under this Agreement and the other Loan Documents as are
specifically delegated to the Agent by the terms hereof and thereof, together
with such powers as are reasonably incidental thereto. Nothing herein shall be
construed to deem the Agent a trustee or fiduciary for any Lender nor to impose
on the Agent duties or obligations other than those expressly provided for
herein. At the request of a Lender, the Agent will forward to such Lender copies
or, where appropriate, originals of the documents delivered to the Agent
pursuant to this Agreement or the other Loan Documents. The Agent will also
furnish to any Lender, upon the request of such Lender, a copy of any
certificate or notice furnished to the Agent by the Borrower, any Loan Party or
any other Affiliate of the Borrower, pursuant to this Agreement or any other
Loan Document not already delivered to such Lender pursuant to the terms of this
Agreement or any such other Loan Document. As to any matters not expressly
provided for by the Loan Documents (including, without limitation, enforcement
or collection of any of the Obligations), the Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Requisite Lenders (or all of the
Lenders if explicitly required under any other provision of this Agreement), and
such instructions shall be binding upon all Lenders and all holders of any of
the Obligations; provided, however, that, notwithstanding anything in this
Agreement to the contrary, the Agent shall not be required to take any action
which exposes the Agent to personal liability or which is contrary to this
Agreement or any other Loan Document or Applicable Law. Not in limitation of the
foregoing, the Agent shall not exercise any right or remedy it or the Lenders
may have under any Loan Document upon the occurrence of a Default or an Event of
Default unless the Requisite Lenders have so directed the Agent to exercise such
right or remedy.
SECTION 11.2. AGENT'S RELIANCE, ETC.
Notwithstanding any other provisions of this Agreement or any other
Loan Documents, neither the Agent nor any of its directors, officers, agents,
employees or counsel shall be liable for any action taken or omitted to be taken
by it or them under or in connection with this Agreement, except for its or
their own gross negligence or willful misconduct. Without limiting the
generality of the foregoing, the Agent: (a) may treat the payee of any Note as
the holder thereof until the Agent receives written notice of the assignment or
transfer thereof signed by such payee and in form satisfactory to the Agent; (b)
may consult with legal counsel (including its own counsel or counsel for the
Borrower or any Loan Party), independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken
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in good faith by it in accordance with the advice of such counsel, accountants
or experts; (c) makes no warranty or representation to any Lender or any other
Person and shall not be responsible to any Lender or any other Person for any
statements, warranties or representations made by any Person in or in connection
with this Agreement or any other Loan Document; (d) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants or conditions of any of this Agreement or any other Loan Document or
the satisfaction of any conditions precedent under this Agreement or any Loan
Document on the part of the Borrower or other Persons or inspect the property,
books or records of the Borrower or any other Person; (e) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Loan Document, any other instrument or document furnished pursuant thereto or
any Collateral covered thereby or the perfection or priority of any Lien in
favor of the Agent on behalf of the Lenders in any such Collateral; and (f)
shall incur no liability under or in respect of this Agreement or any other Loan
Document by acting upon any notice, consent, certificate or other instrument or
writing (which may be by telephone or telecopy) believed by it to be genuine and
signed, sent or given by the proper party or parties.
SECTION 11.3. NOTICE OF DEFAULTS.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of a Default or Event of Default unless the Agent has received notice
from a Lender or the Borrower referring to this Agreement, describing with
reasonable specificity such Default or Event of Default and stating that such
notice is a "notice of default." If any Lender becomes aware of any Default or
Event of Default, it shall promptly send to the Agent such a "notice of
default." Further, if the Agent receives such a "notice of default", the Agent
shall give prompt notice thereof to the Lenders.
SECTION 11.4. NATIONSBANK AS LENDER.
NationsBank, as a Lender, shall have the same rights and powers under
this Agreement and any other Loan Document as any other Lender and may exercise
the same as though it were not the Agent; and the term "Lender" or "Lenders"
shall, unless otherwise expressly indicated, include NationsBank in each case in
its individual capacity. NationsBank and its affiliates may each accept deposits
from, maintain deposits or credit balances for, invest in, lend money to, act as
trustee under indentures of, serve as financial advisor to, and generally engage
in any kind of business with the Borrower, any other Loan Party or any other
affiliate thereof as if it were any other bank and without any duty to account
therefor to the other Lenders. Further, the Agent and any affiliate may accept
fees and other consideration from the Borrower for services in connection with
this Agreement and otherwise without having to account for the same to the other
Lenders.
SECTION 11.5. APPROVALS OF LENDERS.
All communications from the Agent to any Lender requesting such
Lender's determination, consent, approval or disapproval (a) shall be given in
the form of a written notice to such Lender, (b) shall be accompanied by a
description of the matter or issue as to which such
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determination, approval, consent or disapproval is requested, or shall advise
such Lender where information, if any, regarding such matter or issue may be
inspected, or shall otherwise describe the matter or issue to be resolved, (c)
shall include, if reasonably requested by such Lender and to the extent not
previously provided to such Lender, written materials and a summary of all oral
information provided to the Agent by the Borrower in respect of the matter or
issue to be resolved, and (d) shall include the Agent's recommended course of
action or determination in respect thereof. Each Lender shall reply promptly,
but in any event within 10 Business Days (or such lesser period as may be
required under the Loan Documents for the Agent to respond). Unless a Lender
shall give written notice to the Agent that it objects to the recommendation or
determination of the Agent (together with a written explanation of the reasons
behind such objection) within the applicable time period for reply, such Lender
shall be deemed to have conclusively approved of or consented to such
recommendation or determination.
SECTION 11.6. LENDER CREDIT DECISION, ETC.
Each Lender expressly acknowledges and agrees that neither the Agent,
NMS nor any of their respective officers, directors, employees, agents, counsel,
attorneys-in-fact or other affiliates has made any representations or warranties
as to the financial condition, operations, creditworthiness, solvency or other
information concerning the business or affairs of the Borrower, any other Loan
Party, any Subsidiary or other Person to such Lender and that no act by the
Agent hereinafter taken, including any review of the affairs of the Borrower,
shall be deemed to constitute any such representation or warranty by the Agent
to any Lender. Each Lender acknowledges that it has, independently and without
reliance upon the Agent, NMS, any other Lender or counsel to the Agent or any of
their respective officers, directors, employees and agents, and based on the
financial statements of the Borrower, the Subsidiaries or any other Affiliate
thereof, and inquiries of such Persons, its independent due diligence of the
business and affairs of the Borrower, the Loan Parties, the Subsidiaries and
other Persons, its review of the Loan Documents, the legal opinions required to
be delivered to it hereunder, the advice of its own counsel and such other
documents and information as it has deemed appropriate, made its own credit and
legal analysis and decision to enter into this Agreement and the transaction
contemplated hereby. Each Lender also acknowledges that it will, independently
and without reliance upon the Agent, NMS, any other Lender or counsel to the
Agent or any of their respective officers, directors, employees and agents, and
based on such review, advice, documents and information as it shall deem
appropriate at the time, continue to make its own decisions in taking or not
taking action under the Loan Documents. Except for notices, reports and other
documents and information expressly required to be furnished to the Lenders by
the Agent under this Agreement or any of the other Loan Documents, the Agent
shall have no duty or responsibility to provide any Lender with any credit or
other information concerning the business, operations, property, financial and
other condition or creditworthiness of the Borrower, any other Loan Party or any
other Affiliate thereof which may come into possession of the Agent or any of
its officers, directors, employees, agents, attorneys-in-fact or other
Affiliates. Each Lender acknowledges that the Agent's legal counsel in
connection with the transactions contemplated by this Agreement is only acting
as counsel to the Agent and is not acting as counsel to such Lender.
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SECTION 11.7. INDEMNIFICATION OF AGENT.
Each Lender agrees to indemnify the Agent (to the extent not reimbursed
by the Borrower and without limiting the obligation of the Borrower to do so)
pro rata in accordance with such Lender's respective Commitment Percentage, 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 Agent (in its capacity as Agent but not as a Lender) in any way
relating to or arising out of the Loan Documents, any transaction contemplated
hereby or thereby or any action taken or omitted by the Agent under the Loan
Documents (collectively, "Indemnifiable Amounts"); provided, however, that no
Lender shall be liable for any portion of such Indemnifiable Amounts to the
extent resulting from the Agent's gross negligence or willful misconduct or if
the Agent fails to follow the written direction of the Requisite Lenders unless
such failure is pursuant to the advice of counsel of which the Lenders have
received notice. Without limiting the generality of the foregoing, each Lender
agrees to reimburse the Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including counsel fees of the counsel(s) of the Agent's
own choosing) incurred by the Agent in connection with the preparation,
execution, administration, or enforcement of, or legal advice with respect to
the rights or responsibilities of the parties under, the Loan Documents, any
suit or action brought by the Agent to enforce the terms of the Loan Documents
and/or collect any Obligations, any "lender liability" suit or claim brought
against the Agent and/or the Lenders, and any claim or suit brought against the
Agent and/or the Lenders arising under any Environmental Laws, to the extent
that the Agent is not reimbursed for such expenses by the Borrower. Such
out-of-pocket expenses (including counsel fees) shall be advanced by the Lenders
on the request of the Agent notwithstanding any claim or assertion that the
Agent is not entitled to indemnification hereunder upon receipt of an
undertaking by the Agent that the Agent will reimburse the Lenders if it is
actually and finally determined by a court of competent jurisdiction that the
Agent is not so entitled to indemnification. The agreements in this Section
shall survive the payment of the Loans and all other amounts payable hereunder
or under the other Loan Documents and the termination of this Agreement. If the
Borrower shall reimburse the Agent for any Indemnifiable Amount following
payment by any Lender to the Agent in respect of such Indemnifiable Amount
pursuant to this Section, the Agent shall share such reimbursement on a ratable
basis with each Lender making any such payment.
SECTION 11.8. COLLATERAL MATTERS.
(a) The Agent is authorized on behalf of all of the Lenders, without
the necessity of any notice to or further consent from any Lender, from time to
time prior to an Event of Default, to take any action with respect to any
Collateral or Loan Documents which may be necessary to perfect and maintain
perfected the Liens upon the Collateral granted pursuant to any of the Loan
Documents.
(b) The Lenders hereby authorize the Agent, at its option and in its
discretion, to release any Lien granted to or held by the Agent upon any
Collateral (i) upon termination of the Commitments and payment and satisfaction
of all of the Obligations at any time arising under or in respect of this
Agreement or the Loan Documents or the transactions contemplated hereby or
thereby; (ii) as explicitly permitted by, but only in accordance with, the terms
of the applicable
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Loan Document; or (iii) if approved, authorized or ratified in writing by the
Requisite Lenders, unless such release is required to be approved by all of the
Lenders hereunder. Upon request by the Agent at any time, the Lenders will
confirm in writing the Agent's authority to release particular types or items of
Collateral pursuant to this Section.
(c) Upon any sale and transfer of Collateral which is expressly
permitted pursuant to the terms of this Agreement, or consented to in writing by
the Requisite Lenders or all of the Lenders, as applicable, and upon at least 5
Business Days' prior written request by the Borrower, the Agent shall (and is
hereby irrevocably authorized by the Lenders to) execute such documents as may
be necessary to evidence the release of the Liens granted to the Agent for the
benefit of the Lenders herein or pursuant hereto upon the Collateral that was
sold or transferred; provided, however, that (i) the Agent shall not be required
to execute any such document on terms which, in the Agent's opinion, would
expose the Agent to liability or create any obligation or entail any consequence
other than the release of such Liens without recourse or warranty; and (ii) such
release shall not in any manner discharge, affect or impair the Obligations or
any Liens upon (or obligations of the Borrower or any Loan Party in respect of)
all interests retained by the Borrower or any Subsidiary, including (without
limitation) the proceeds of the sale, all of which shall continue to constitute
part of the Collateral. In the event of any sale or transfer of Collateral, or
any foreclosure with respect to any of the Collateral, the Agent shall be
authorized to deduct all of the expenses reasonably incurred by the Agent from
the proceeds of any such sale, transfer or foreclosure.
(d) The Agent shall have no obligation whatsoever to the Lenders or to
any other Person to assure that the Collateral exists or is owned by the
Borrower or any Subsidiary or is cared for, protected or insured or that the
Liens granted to the Agent herein or pursuant hereto have been properly or
sufficiently or lawfully created, perfected, protected or enforced or are
entitled to any particular priority, or to exercise or to continue exercising at
all or in any manner or under any duty of care, disclosure or fidelity any of
the rights, authorities and powers granted or available to the Agent in this
Section or in any of the Loan Documents, it being understood and agreed that in
respect of the Collateral, or any act, omission or event related thereto, the
Agent may act in any manner it may deem appropriate, in its sole discretion,
given the Agent's own interest in the Collateral as one of the Lenders and that
the Agent shall have no duty or liability whatsoever to the Lenders, except for
its gross negligence or willful misconduct.
SECTION 11.9. SUCCESSOR AGENT.
The Agent may resign at any time as Agent under the Loan Documents by
giving written notice thereof to the Lenders and the Borrower. Upon any such
resignation or removal, the Requisite Lenders shall have the right to appoint a
successor Agent which appointment shall, provided no Default or Event of Default
shall have occurred and be continuing, be subject to the Borrower's approval,
which approval shall not be unreasonably withheld or delayed (except that
Borrower shall, in all events, be deemed to have approved each Lender as a
successor Agent). If no successor Agent shall have been so appointed by the
Requisite Lenders, and shall have accepted such appointment, within 30 days
after the resigning Agent's giving of notice of resignation or the Requisite
Lenders' removal of the resigning Agent, then the resigning or
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removed Agent may, on behalf of the Lenders, appoint a successor Agent, which
shall be a Lender, if any Lender shall be willing to serve, and otherwise shall
be a commercial bank having total combined assets of at least $50,000,000,000.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the resigning Agent, and the retiring
Agent shall be discharged from its duties and obligations under the Loan
Documents. After any resigning Agent's resignation or removal hereunder as
Agent, the provisions of this Article XI. shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under the Loan
Documents.
ARTICLE XII. MISCELLANEOUS
SECTION 12.1. 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:
1150 Lake Hearn Drive, Suite 640
Atlanta, Georgia 30342
Attention: Chief Financial Officer
Telecopy Number: (404) 250-0162
Telephone Number: (404) 256-1078
If to the Agent:
NationsBank, N.A.
600 Peachtree Street, 19th Floor
Atlanta, Georgia 30308
Attention: Walter Bland
Telecopy Number: (404) 607-6338
Telephone Number: (404) 607-5861
with a copy to:
NationsBank, N.A.
101 North Tryon Street
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Angela M. Berry, Agency Services,
Corporate Credit Services
Telecopy Number: (704) 388-9436
Telephone Number: (704) 386-8958
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If to a Lender:
To such Lender's address or telecopy number, as applicable,
set forth on its signature page hereto or in the applicable
Assignment and Acceptance Agreement.
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. Neither the Agent, any Lender, nor the Swingline Lender shall
incur any liability to the Borrower for acting upon any telephonic notice
referred to in this Agreement which the Agent, such Lender or Swingline 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 12.2. EXPENSES.
The Borrower will pay all present and future reasonable expenses of the
Agent 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 Agent, subject,
however to the limitation contained in the letter agreement dated May 15, 1998
among the Borrower, the Agent and NMS. Further, the Borrower shall pay all
future reasonable costs and expenses (a) of the Agent in connection with the
negotiation, preparation, execution and delivery of any waiver, amendment or
consent by the Agent and the Lenders relating to any of the Loan Documents; (b)
of the Agent and the Lenders in connection with any restructuring, refinancing
or "workout" of the transactions contemplated by this Agreement and the other
Loan Documents, including the reasonable fees and disbursements of counsel to
the Agent and each Lender; (c) of the Agent and the Lenders in connection with
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 Agent and each Lender if
such collection or enforcement is done by, through or with the assistance of an
attorney; (d) of the Agent and the Lenders in connection with 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 Agent and each Lender
and of experts and other consultants retained by the Agent or the Requisite
Lenders, except to the extent any such claim resulted from the gross negligence
or wilful misconduct of the Agent or a Lender, as the case may be, or a breach
of this Agreement by the Agent or a Lender, as the case may be; (e) of the Agent
and the Lenders in connection with the exercise by the Agent and the Lenders of
any right or remedy granted to it or them under this Agreement or any of the
other Loan Documents, including the reasonable fees and disbursements of counsel
to the Agent and each Lender if such exercise is done by, through or with the
assistance of any attorney; (f) of the Agent in connection with 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 (g) to the extent not already covered by any of
the preceding subsections, of the Agent and the Lenders in connection with any
bankruptcy or other proceeding of the type
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described in Section 10.1.(e) or 10.1.(f), and the reasonable fees and
disbursements of counsel to the Agent and each Lender incurred in connection
with the representation of the Agent or such 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 Agent, any 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
demand. As used in this Section and in Section 12.9., the term "reasonable fees"
of legal counsel shall mean the reasonable fees of such legal counsel actually
incurred.
SECTION 12.3. 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 Agent and
each 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 12.4. SETOFF.
Subject to Section 3.3. and in addition to any rights now or hereafter
granted under Applicable Law and not by way of limitation of any such rights,
the Agent and each 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 Agent, such Lender
or any affiliate of the Agent or such 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 any or all of the Loans and all other Obligations
have been declared to be due and payable as permitted by Section 10.2.
SECTION 12.5. LITIGATION; JURISDICTION; OTHER MATTERS; WAIVERS.
(a) EACH PARTY HERETO ACKNOWLEDGES THAT ANY DISPUTE OR CONTROVERSY
BETWEEN OR AMONG THE BORROWER, THE AGENT OR ANY OF THE LENDERS WOULD BE BASED ON
DIFFICULT AND COMPLEX ISSUES OF LAW AND FACT AND WOULD RESULT IN DELAY AND
EXPENSE TO THE PARTIES. ACCORDINGLY, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH OF THE LENDERS, THE AGENT AND THE BORROWER HEREBY WAIVES ITS RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT OR
TRIBUNAL IN WHICH AN ACTION MAY BE COMMENCED BY OR AGAINST ANY PARTY HERETO
ARISING OUT OF THIS AGREEMENT, THE NOTES,
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OR ANY OTHER LOAN DOCUMENT OR IN CONNECTION WITH ANY COLLATERAL OR ANY LIEN OR
BY REASON OF ANY OTHER SUIT, CAUSE OF ACTION OR DISPUTE WHATSOEVER BETWEEN OR
AMONG THE BORROWER, THE AGENT OR ANY OF THE LENDERS OF ANY KIND OR NATURE.
(b) EACH OF THE BORROWER, THE AGENT AND EACH LENDER HEREBY AGREES
THAT THE FEDERAL DISTRICT COURT OF THE NORTHERN DISTRICT OF GEORGIA OR, AT THE
OPTION OF THE AGENT, ANY STATE COURT LOCATED IN FULTON COUNTY, GEORGIA SHALL
HAVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN OR AMONG
THE BORROWER, THE AGENT OR ANY OF THE LENDERS, PERTAINING DIRECTLY OR INDIRECTLY
TO THIS AGREEMENT, THE LOANS, THE NOTES OR ANY OTHER LOAN DOCUMENT OR TO ANY
MATTER ARISING HEREFROM OR THEREFROM OR THE COLLATERAL. THE BORROWER AND EACH OF
THE LENDERS EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS.
(c) EACH PARTY FURTHER WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT
OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT FORUM AND EACH
AGREES NOT TO PLEAD OR CLAIM THE SAME.
(d) THE CHOICE OF FORUM SET FORTH IN THIS SECTION SHALL NOT BE
DEEMED TO PRECLUDE THE BRINGING OF ANY ACTION BY THE AGENT OR ANY LENDER OR THE
ENFORCEMENT BY THE AGENT OR ANY LENDER OF ANY JUDGMENT OBTAINED IN SUCH FORUM IN
ANY OTHER APPROPRIATE JURISDICTION.
SECTION 12.6. 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 of the
Lenders.
(b) Any Lender may make, carry or transfer Loans at, to or for the
account of, any of its branch offices or the office of an affiliate of such
Lender except to the extent such transfer would result in increased costs to the
Borrower.
(c) Any Lender may at any time grant to one or more banks or other
financial institutions (each a "Participant") participating interests in its
Commitment or the Obligations owing to such Lender; provided, however, (i) any
such participating interest must be for a constant and not a varying percentage
interest, and (ii) after giving effect to any such participation by a Lender,
the amount of its Commitment, or if the Commitments have been terminated, the
aggregate outstanding principal balance of the Note held by it, in which it has
not
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granted any participating interests must be at least $5,000,000. Except as
otherwise provided in Section 12.4., no Participant shall have any rights or
benefits under this Agreement or any other Loan Document. In the event of any
such grant by a Lender of a participating interest to a Participant, such Lender
shall remain responsible for the performance of its obligations hereunder, and
the Borrower and the Agent shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement. Any agreement pursuant to which any Lender may grant such a
participating interest shall provide that such Lender shall retain the sole
right and responsibility to enforce the obligations of the Borrower hereunder
including, without limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement; provided, however, such Lender may
agree with the Participant that it will not, without the consent of the
Participant, agree to (i) increase, or extend the term or extend the time or
waive any requirement for the reduction or termination of, such Lender's
Commitment, (ii) extend the date fixed for the payment of principal of or
interest on the Loans or portions thereof owing to such Lender, (iii) reduce the
amount of any such payment of principal, (iv) reduce the rate at which interest
is payable thereon or (v) any release of all or substantially all of the
Collateral. An assignment or other transfer which is not permitted by subsection
(d) or (f) below shall be given effect for purposes of this Agreement only to
the extent of a participating interest granted in accordance with this
subsection (c). The selling Lender shall notify the Agent and the Borrower of
the sale of any participation hereunder and the terms thereof.
(d) Any Lender may with the prior written consent of the Agent and
the Borrower (which consent, in each case, shall not be unreasonably withheld)
assign to one or more Eligible Assignees (each an "Assignee") all or a portion
of its Commitment and its other rights and obligations under this Agreement and
the Notes; provided, however, (i) no such consent by the Borrower shall be
required in the case of any assignment to another Lender or any affiliate of
such Lender or another Lender or if an Event of Default shall have occurred and
be continuing; (ii) any partial assignment shall be in an amount at least equal
to $5,000,000 and after giving effect to such assignment the assigning Lender
retains Commitment, or if the Commitments have been terminated, holds a Note
having an aggregate outstanding principal balance, of at least $5,000,000; and
(iii) each such assignment shall be effected by means of an Assignment and
Acceptance Agreement. Upon execution and delivery of such instrument and payment
by such Assignee to such transferor Lender of an amount equal to the purchase
price agreed between such transferor Lender and such Assignee, such Assignee
shall be deemed to be a Lender party to this Agreement as of the effective date
of the Assignment and Acceptance Agreement and shall have all the rights and
obligations of a Lender with a Commitment as set forth in such Assignment and
Acceptance Agreement, and the transferor Lender shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (d), the transferor Lender, the Agent and the
Borrower shall make appropriate arrangements so that new Notes are issued to the
Assignee and such transferor Lender, as appropriate. In connection with any such
assignment, the transferor Lender shall pay to the Agent an administrative fee
for processing such assignment in the amount of $3,500.
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(e) The Agent shall maintain at the Principal Office a copy of
each Assignment and Acceptance Agreement delivered to and accepted by it and a
register for the recordation of the names and addresses of the Lenders and the
Commitment of each Lender from time to time (the "Register"). The Agent shall
give each Lender and the Borrower notice of the assignment by any Lender of its
rights as contemplated by this Section. The Borrower, the Agent and the Lenders
may treat each Person whose name is recorded in the Register as a Lender
hereunder for all purposes of this Agreement. The Register and copies of each
Assignment and Acceptance Agreement shall be available for inspection by the
Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice to the Agent. Upon its receipt of an Assignment and
Acceptance Agreement executed by an assigning Lender, together with each Note
subject to such assignment (the "Surrendered Note"), the Agent shall, if such
Assignment and Acceptance Agreement has been completed and if the Agent receives
the processing and recording fee described in subsection (d) above, (i) accept
such Assignment and Acceptance Agreement, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the Borrower.
(f) In addition to the assignments and participations permitted
under the foregoing provisions of this Section, any Lender may assign and pledge
all or any portion of its Loans and its Notes to any Federal Reserve Bank as
collateral security pursuant to Regulation A and any Operating Circular issued
by such Federal Reserve Bank, and such Loans and Notes shall be fully
transferable as provided therein. No such assignment shall release the assigning
Lender from its obligations hereunder.
(g) A Lender may furnish any information concerning the Borrower,
any other Loan Party or any of their respective Subsidiaries in the possession
of such Lender from time to time to Assignees and Participants (including
prospective Assignees and Participants) subject to compliance with Section 12.8.
(h) Anything in this Section to the contrary notwithstanding, no
Lender may assign or participate any interest in any Loan held by it hereunder
to the Borrower, any other Loan Party or any of their respective Affiliates or
Subsidiaries.
(i) Each Lender agrees that, without the prior written consent of
the Borrower and the Agent, it will not make any assignment hereunder in any
manner or under any circumstances that would require registration or
qualification of, or filings in respect of, any Loan or Note under the
Securities Act or any other securities laws United States of America or of any
other jurisdiction.
SECTION 12.7. AMENDMENTS.
Except as otherwise provided in this Agreement, any consent or approval
required or permitted by this Agreement or in any Loan Document to be given by
the Lenders 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
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prospectively) with, but only with, the written consent of the Requisite Lenders
(and, in the case of an amendment to any Loan Document, the written consent of
the Borrower). Notwithstanding the foregoing, no amendment, waiver or consent
shall, unless in writing, and signed by all of the Lenders (or the Agent at the
written direction of the Lenders), do any of the following: (i) increase the
Commitments of the Lenders or subject the Lenders to any additional obligations;
(ii) reduce the principal of, or interest rates that have accrued or that will
be charged on the outstanding principal amount of, any Loans or other
Obligations; (iii) reduce the amount of any fees payable hereunder; (iv)
postpone any date fixed for any payment of any principal of, interest on, or
fees with respect to, any Loans or any other Obligations; (v) amend this Section
or amend the definitions of the terms used in this Agreement or the other Loan
Documents insofar as such definitions affect the substance of this Section; (vi)
modify the definition of the terms "Commitment Percentage" or "Requisite
Lenders" or modify in any other manner the number or percentage of the Lenders
required to make any determinations or waive any rights hereunder or to modify
any provision hereof; (vii) modify, or waive any Default or Event of Default
resulting from the Borrower's failure to comply with, any of the terms of
Section 9.1.; and (viii) release any Guarantor from its obligations under its
Guaranty. Further, no amendment, waiver or consent unless in writing and signed
by the Agent, in addition to the Lenders required hereinabove to take such
action, shall affect the rights or duties of the Agent under this Agreement or
any of the other Loan Documents. Any amendment, waiver or consent relating to
Section 2.10. or the obligations of Swingline Lender under this Agreement or any
other Loan Document shall, in addition to Lenders required hereinabove to take
such action, require the written consent of Swingline Lender. Further, no
Collateral shall be released or disposed of by the Agent unless all of the
Lenders so direct the Agent or unless released or disposed of as permitted by,
and in accordance with, Section 11.8. 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 Agent or any 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.
SECTION 12.8. CONFIDENTIALITY.
Except as otherwise provided by Applicable Law, the Agent and each
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 Assignee, Participant or other transferee in connection with the
contemplated transfer of any Commitment or participations therein as permitted
hereunder (provided such Assignee, Participant or other transferee shall agree
in writing to keep such information confidential on the same terms and
conditions of this Section); (c) as required by any Governmental Authority or
representative thereof or pursuant to
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legal process; (d) to the Agent's or such 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 Agent or the Lenders of rights hereunder or under any of the
other Loan Documents.
SECTION 12.9. INDEMNIFICATION.
The Borrower agrees to indemnify the Agent, NMS and each Lender and its
respective 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 to the
extent resulting from (i) the gross negligence or willful misconduct of the
Person to be indemnified, or (ii) in the case of the Agent or any Lender, a
breach of this Agreement).
SECTION 12.10. SURVIVAL.
Notwithstanding any termination of this Agreement, or of the other Loan
Documents, the indemnities to which the Agent and the Lenders are entitled under
the provisions of Sections 11.7., 12.2. and 12.9. 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 12.5., shall continue in full
force and effect and shall protect the Agent, the Lenders and the Swingline
Lender against events arising after such termination as well as before.
SECTION 12.11. 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.
SECTION 12.12. 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.
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<PAGE> 89
SECTION 12.13. 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 12.14. 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 12.15. 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 12.16. CONSTRUCTION.
The Agent, the Borrower and each 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 Agent, each Lender and the Borrower have
participated in negotiating the terms and conditions of this Agreement and the
other Loan Documents.
SECTION 12.17. NO NOVATION; EFFECT OF AMENDMENT AND RESTATEMENT.
THE PARTIES HERETO HAVE ENTERED INTO THIS AGREEMENT SOLELY TO AMEND AND
RESTATE THE TERMS OF THE EXISTING CREDIT AGREEMENT. THE PARTIES DO NOT INTEND
THIS AGREEMENT NOR THE TRANSACTIONS CONTEMPLATED HEREBY TO BE, AND THIS
AGREEMENT AND THE TRANSACTION CONTEMPLATED HEREBY SHALL NOT BE CONSTRUED TO BE,
A NOVATION OF ANY OF THE OBLIGATIONS OWING BY THE BORROWER UNDER OR IN
CONNECTION WITH THE EXISTING CREDIT AGREEMENT. FURTHER, THE PARTIES DO NOT
INTEND THIS AGREEMENT NOR THE TRANSACTIONS CONTEMPLATED HEREBY TO AFFECT THE
PERFECTION OR PRIORITY OF ANY LIEN OF AGENT (INCLUDING ANY LIEN PREVIOUSLY HELD
BY NATIONSBANK BUT NOW HELD BY THE AGENT) IN ANY OF THE COLLATERAL IN ANY WAY
WHATSOEVER. THE PARTIES ACKNOWLEDGE AND AGREE THAT ANY LIEN HELD BY NATIONSBANK
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<PAGE> 90
IN ANY OF THE COLLATERAL (AS DEFINED HEREIN) PURSUANT TO ANY OF THE LOAN
DOCUMENTS (AS DEFINED IN THE EXISTING CREDIT AGREEMENT) CONTINUES IN SUCH
COLLATERAL BUT SHALL BE DEEMED TO BE HELD BY NATIONSBANK IN ITS CAPACITY AS
AGENT FOR THE BENEFIT OF THE LENDERS AND THE SWINGLINE LENDER. THE AMENDMENT AND
RESTATEMENT OF THE EXISTING CREDIT AGREEMENT EFFECTED BY THIS AGREEMENT SHALL BE
DEEMED TO HAVE PROSPECTIVE APPLICATION ONLY UNLESS OTHERWISE SPECIFICALLY STATED
HEREIN.
[Signatures on Following Pages]
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<PAGE> 91
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Credit Agreement to be executed by their authorized officers all as of
the day and year first above written.
PHYSICIANS' SPECIALTY CORP.
By: /s/ Richard D. Ballard
----------------------------------------
Name: Richard D. Ballard
-------------------------------------
Title: CHIEF EXECUTIVE OFFICER
-------------------------------------
[Signatures Continued on Next Page]
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<PAGE> 92
[SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF
JULY 31, 1998 WITH PHYSICIANS' SPECIALTY CORP.]
NATIONSBANK, N.A., individually, as Swingline
Lender and as Agent
By: /s/ J. Walter Bland
----------------------------------------
Name: J. Walter Bland
-------------------------------------
Title: VICE PRESIDENT
-------------------------------------
COMMITMENT AMOUNT:
$25,000,000
LENDING OFFICE (ALL TYPES OF LOANS)
NationsBank, N.A.
101 North Tryon Street
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Angela M. Berry, Agency Services
Corporate Credit Services
Telecopy Number: (704) 388-9436
Telephone Number: (704) 386-8958
[Signatures Continued on Next Page]
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<PAGE> 93
[SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF
JULY 31, 1998 WITH PHYSICIANS' SPECIALTY CORP.]
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK, B.A., "RABOBANK,
NEDERLAND", NEW YORK BRANCH
By: /s/ Michel de Ronkoby Thege
----------------------------------------
Name: Michel de Ronkoby Thege
-------------------------------------
Title: SVP
-------------------------------------
By: /s/ Angela R. Reilly
----------------------------------------
Name: Angela R. Reilly
-------------------------------------
Title: Vice President
-------------------------------------
COMMITMENT AMOUNT:
$10,000,000
LENDING OFFICE (ALL TYPES OF LOANS):
Rabobank Nederland New York Branch
245 Park Avenue
New York, New York 10167
Attn: Corporate Services
Telecopier: (212) 818-0233
Telephone: (212) 916-7800
[Signatures Continued on Next Page]
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<PAGE> 94
[SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF
JULY 31, 1998 WITH PHYSICIANS' SPECIALTY CORP.]
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Jeffrey R. Dickson
----------------------------------------
Name: Jeffrey R. Dickson
-------------------------------------
Title: Vice President
-------------------------------------
COMMITMENT AMOUNT:
$10,000,000
LENDING OFFICE (ALL TYPES OF LOANS):
PNC Bank, N.A.
249 Fifth Avenue
Pittsburgh, Pennsylvania 15222
Attn: Jeff Dickson/Glenda Appleton
Telecopier: 412-768-5149
Telephone: 412-768-8538/412-762-6786
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<PAGE> 95
EXHIBIT A
FORM OF ACCESSION AGREEMENT
THIS ACCESSION AGREEMENT dated as of ______________ executed and
delivered by ______________________, a _____________ (the "New Subsidiary") in
favor of (a) NATIONSBANK, N.A., in its capacity as Agent (the "Agent") for the
financial institutions a party to the Credit Agreement (as defined below) and
their assignees under Section 12.6 thereof (the "Lenders") and (b) the Lenders
and the Swingline Lender.
WHEREAS, Physicians' Specialty Corp. (the "Borrower"), the Lenders and
the Agent entered into that certain Amended and Restated Credit Agreement dated
as of July 31, 1998 (as the same may be amended, supplemented, restated or
otherwise modified from time to time, the "Credit Agreement") pursuant to which
the Lenders and the Swingline Lender have agreed to extend certain financial
accommodations to the Borrower subject to the terms thereof;
WHEREAS, the New Subsidiary is a Subsidiary of the Borrower;
WHEREAS, the Borrower has agreed to make available to New Subsidiary
from time to time some of the proceeds of the Loans pursuant to intercompany
loans and otherwise;
WHEREAS, it is a condition precedent to the Lenders' continued
extension of such financial accommodations to the Borrower that the New
Subsidiary become a party to the following Loan Documents: (a) that certain
Guaranty dated as of July 31, 1998 (as the same may be amended, restated,
supplemented or otherwise modified from time to time in accordance with its
terms, the "Guaranty") executed by certain Subsidiaries of the Borrower in favor
of the Agent, the Lenders and the Swingline Lender [and]; (b) that certain
Security Agreement dated as of July 31, 1998 (as the same may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with its terms, the "Security Agreement") by and among the Borrower, certain
Subsidiaries of the Borrower and the Agent; [[; (c) that certain Pledge
Agreement dated as of July 31, 1998 (as the same may be amended, restated,
supplemented or otherwise modified from time to time in accordance with its
terms, the "Pledge Agreement") by and among the Borrower, certain Subsidiaries
of the Borrower and the Agent; (d) and (d) that certain Collateral Assignment of
Management Services Agreement dated as of July 31, 1998 (as the same may be
amended, restated, supplemented or otherwise modified from time to time in
accordance with its terms, the "Collateral Assignment of Management Services
Agreement") by and among PSC Management, certain other Subsidiaries of the
Borrower and the Agent].
WHEREAS, the Borrower, the New Subsidiary 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 Lenders and the
Swingline Lender through their collective efforts;
A-1
<PAGE> 96
WHEREAS, the New Subsidiary acknowledges that it will receive direct
and indirect benefits from the Lenders making such financial accommodations
available to the Borrower under the Credit Agreement and, accordingly, the New
Subsidiary is willing to become a party to the above Loan Documents on the terms
and conditions contained herein;
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 New Subsidiary, the New Subsidiary hereby agrees as follows:
SECTION 1. ACCESSION TO GUARANTY. The New Subsidiary hereby agrees that
it is a "Guarantor" under the Guaranty and assumes all obligations of a
"Guarantor" thereunder, all as if the New Subsidiary had been an original
signatory to the Guaranty. Without limiting the generality of the foregoing, the
New Subsidiary hereby:
(a) irrevocably and unconditionally guarantees the due and punctual
payment and performance when due, whether at stated maturity, by acceleration or
otherwise, of all Guarantied Obligations;
(b) makes to the Agent and the Lenders as of the date hereof each of
the representations and warranties contained in Section 5 of the Guaranty and
agrees to be bound by each of the covenants contained in Section 6 of the
Guaranty; and
(c) consents and agrees to each provision set forth in the Guaranty.
SECTION 2. ACCESSION TO SECURITY AGREEMENT; GRANT OF SECURITY INTEREST.
The New Subsidiary agrees that it is a "Debtor" under the Security Agreement and
assumes all obligations of a "Debtor" thereunder, all as if the New Subsidiary
had been an original signatory to the Security Agreement. Without limiting the
generality of the foregoing, the New Subsidiary hereby:
(a) collaterally assigns and pledges to the Agent for its benefit and
the benefit of the Lenders and the Swingline Lender, and grants to the Agent for
its benefit and the benefit of the Lenders and the Swingline Lender, a security
interest in the Collateral (as defined in the Security Agreement) as security
for the prompt and complete payment, observance and performance when due
(whether at stated maturity, by acceleration or otherwise) of all of the
Obligations (as defined in the Security Agreement);
(b) makes to the Agent, the Lenders and the Swingline Lender as of the
date hereof each of the representations and warranties contained in Section 2 of
the Security Agreement, as supplemented by Schedule I attached hereto, and
agrees to be bound by each of the covenants contained in Section 4 of the
Security Agreement;
(c) agrees that the Agent, the Lenders and the Swingline Lender shall
have the rights and remedies in respect of the New Subsidiary and the Collateral
as set forth in Section 8 of the Security Agreement; and
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<PAGE> 97
(d) consents and agrees to each other provision set forth in the
Security Agreement.
[INCLUDE FOLLOWING SECTION IF NEW SUBSIDIARY HAS MATERIAL SUBSIDIARIES]
[SECTION 3. ACCESSION TO PLEDGE AGREEMENT; GRANT OF SECURITY INTEREST. The New
Subsidiary agrees that it is a "Pledgor" under the Pledge Agreement and assumes
all obligations of a "Pledgor" thereunder, all as if the New Subsidiary had been
an original signatory to the Pledge Agreement. Without limiting the generality
of the foregoing, the New Subsidiary hereby:
(a) pledges, hypothecates, assigns, transfers, sets over and delivers
unto the Agent for its benefit and the benefit of the Lenders and the Swingline
Lender, and grants to the Agent for its benefit and the benefit of the Lenders
and the Swingline Lenders a security interest in, all of the New Subsidiary's
right, title and interest in, to and under the Pledged Collateral (as defined in
the Pledge Agreement as supplemented by Schedule I attached hereto), including
the Securities (as defined in the Pledge Agreement) of each Person described on
Schedule I attached hereto;
(b) makes to the Lender as of the date hereof each of the
representations and warranties contained in Section 3 of the Pledge Agreement
and agrees to be bound by each of the covenants contained in Section 4 of the
Pledge Agreement;
(c) agrees that the Agent and Lenders shall have the rights and
remedies in respect of the New Subsidiary and the Pledged Collateral as set
forth in Section 6 of the Pledge Agreement; and
(d) consents and agrees to each other provision set forth in the Pledge
Agreement.]
[INCLUDE FOLLOWING SECTION IF NEW SUBSIDIARY IS AN OTHER MANAGER]
[SECTION 4. ACCESSION TO COLLATERAL ASSIGNMENT OF MANAGEMENT SERVICES AGREEMENT;
GRANT OF SECURITY INTEREST. The New Subsidiary agrees that it is a "Assignor"
under the Collateral Assignment of Management Services Agreement and assumes all
obligations of a "Assignor" thereunder, all as if the New Subsidiary had been an
original signatory to the Collateral Assignment of Management Services
Agreement. Without limiting the generality of the foregoing, the New Subsidiary
hereby:
(a) collaterally assigns to the Agent for its benefit and the benefit
of the Lenders and the Swingline Lender, and grants to the Agent for its benefit
and the benefit of the Lenders and the Swingline Lender a security interest in,
all of the New Subsidiary's right, title and interest in, to and under the
Collateral (as defined in the Collateral Assignment of Management Services
Agreement);
(b) makes to the Agent, the Lenders and the Swingline Lender as of the
date hereof each of the representations and warranties contained in Section 2 of
the Collateral Assignment of Management Services Agreement and agrees to be
bound by each of the covenants contained in Section 3 of the Collateral
Assignment of Management Services Agreement;
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<PAGE> 98
(c) agrees that the Agent, the Lenders and the Swingline Lender shall
have the rights and remedies in respect of the New Subsidiary and the Collateral
as set forth in Sections 4, 5 and 6 of the Collateral Assignment of Management
Services Agreement; and
(d) consents and agrees to each other provision set forth in the
Collateral Assignment of Management Services Agreement.
SECTION #. GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Georgia.
SECTION #. DEFINITIONS. Capitalized terms used herein and not otherwise
defined herein shall have their respective defined meanings given them in the
Credit Agreement.
[Signatures on Following Page]
A-4
<PAGE> 99
IN WITNESS WHEREOF, the New Subsidiary has caused this Accession
Agreement to be duly executed and delivered under seal by its duly authorized
officers as of the date first written above.
[NEW SUBSIDIARY]
By:
--------------------------------
Name:
--------------------------
Title:
-------------------------
ATTEST:
By:
--------------------------------
Name:
--------------------------
Title:
-------------------------
(CORPORATE SEAL)
Address for Notices:
c/o Physicians' Specialty Corp.
1150 Lake Hearn Drive, Suite 640
Atlanta, Georgia 30342
Attention: Chief Financial Officer
Telecopy No: (404) 256-1078
Accepted:
NATIONSBANK, N.A., as Agent
By:
--------------------------------
Name:
---------------------------
Title:
--------------------------
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<PAGE> 100
SCHEDULE I
[To be completed if acceeding to Pledge Agreement]
Pledged Shares:
<TABLE>
<CAPTION>
- ------------------------------------------ ----------------------- -------------------------- ----------------------------
Issuer No. of Securities Type of Securities Certificate Nos.
- ------ ----------------- ------------------ ----------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-6
<PAGE> 101
EXHIBIT B
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
Reference is made to that certain Amended and Restated Credit Agreement
dated as of July 31, 1998 (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 among Physicians'
Specialty Corp. (the "Borrower"), each of the financial institutions initially a
signatory thereto and their assignees pursuant to Section 12.6 thereof (the
"Lenders") and NationsBank, N.A., as Agent (the "Agent").
The "Assignor" and the "Assignee" referred to on Schedule 1 attached
hereto agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, without
recourse and without representation or warranty except as expressly set forth
herein, and the Assignee hereby purchases and assumes from the Assignor, an
interest in and to the Assignor's rights and obligations under the Credit
Agreement and the other Loan Documents as of the date hereof equal to the
percentage interest specified on Schedule 1 attached hereto of all outstanding
rights and obligations under the Credit Agreement and the other Loan Documents.
After giving effect to such sale and assignment, the Assignee's Commitment and
the amount of the Loans owing to the Assignee will be as set forth on Schedule 1
attached hereto.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim created by it; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the Loan
Documents or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Documents or any other instrument or document
furnished pursuant thereto; (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of any Loan
Party or the performance or observance by any Loan Party of any of its
obligations under the Loan Documents or any other instrument or document
furnished pursuant thereto; and (iv) attaches the Revolving Note held by the
Assignor and requests that the Agent exchange such Revolving Note for a new
Revolving Notes payable to the order of the Assignee in an amount equal to the
Commitment assumed by the Assignee pursuant hereto and to the Assignor in an
amount equal to the Commitment retained by the Assignor, if any, as specified on
Schedule 1 attached hereto.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Sections 8.1. and 8.2. thereof and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment and Acceptance Agreement; (ii) agrees that it will,
independently and without reliance upon the Agent, the Assignor or any other
Lender and
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<PAGE> 102
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Agent to take such action as contractual
representative on its behalf and to exercise such powers and discretion under
the Credit Agreement as are specifically delegated to the Agent by the terms
thereof, together with such powers and discretion as are reasonably incidental
thereto and (v) agrees that it will perform in accordance with their terms all
of the obligations that by the terms of the Credit Agreement are required to be
performed by it as a Lender.
4. Following the execution of this Assignment and Acceptance Agreement,
it will be delivered to the Agent for acceptance and recording by the Agent. The
effective date for this Assignment and Acceptance Agreement (the "Effective
Date") shall be the date of acceptance hereof by the Agent, unless otherwise
specified on Schedule 1 attached hereto.
5. Upon such acceptance and recording by the Agent, as of the Effective
Date, (i) the Assignee shall be "Lender" party to the Credit Agreement and, to
the extent provided in this Assignment and Acceptance Agreement, have the rights
and obligations of a Lender thereunder and (ii) the Assignor shall, to the
extent provided in this Assignment and Acceptance Agreement, relinquish its
rights and be released from its obligations under the Credit Agreement and the
other Loan Documents.
6. Upon such acceptance and recording by the Agent, from and after the
Effective Date, the Agent shall make all payments under the Credit Agreement and
the Revolving Notes in respect of the interest assigned hereby (including,
without limitation, all payments of principal, interest and Fees with respect
thereto) to the Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Agreement and the Revolving Notes for
periods prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance Agreement shall be governed by, and
construed in accordance with, the laws of the State of Georgia.
8. This Assignment and Acceptance Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of Schedule 1 to this Assignment and Acceptance Agreement
by telecopier shall be effective as delivery of a manually executed counterpart
of this Assignment and Acceptance Agreement.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule
1 to this Assignment and Acceptance Agreement to be executed by their officers
thereunto duly authorized as of the date specified thereon.
B-2
<PAGE> 103
SCHEDULE 1
to
ASSIGNMENT AND ASSUMPTION AGREEMENT
Percentage interest assigned: ________%
Assignee's Commitment: $_______
Aggregate outstanding principal amount
of Revolving Loans assigned: $_______
Principal amount of Revolving Note payable to Assignee: $_______
Principal amount of Revolving Note payable to Assignor: $_______
Effective Date (if other than date
of acceptance by Agent): *_______, ____
[NAME OF ASSIGNOR], as Assignor
By:_____________________________________
Name:________________________________
Title:_______________________________
Dated: _________, ___
[NAME OF ASSIGNEE], as Assignee
By:_____________________________________
Name:________________________________
Title:_______________________________
Lending Office (for all Types of Loans):
________________________________________
________________________________________
________________________________________
________________________
* This date should be no earlier than five Business Days after the delivery
of this Assignment and Acceptance Agreement to the Agent.
B-3
<PAGE> 104
Accepted and Approved
this ___ day of ___________, ___
NATIONSBANK, N.A., as Agent
By:_____________________________________
Name:________________________________
Title:_______________________________
Consented to this ____ day
of ____________, ____
PHYSICIANS' SPECIALTY CORP.
By:_____________________________________
Name:________________________________
Title:_______________________________
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EXHIBIT C
FORM OF AMENDED, RESTATED AND CONSOLIDATED
COLLATERAL ASSIGNMENT OF
MANAGEMENT SERVICES AGREEMENTS
THIS AMENDED, RESTATED AND CONSOLIDATED COLLATERAL ASSIGNMENT OF
MANAGEMENT SERVICES AGREEMENTS dated as of July 31, 1998 (this "Assignment"),
executed by each of the undersigned "Assignors" and the other Persons from time
to time party hereto pursuant to the execution and delivery of an Accession
Agreement in the form of Exhibit A to the Credit Agreement (as defined below)
(all of such undersigned, together with such other Persons each an "Assignor"
and collectively, the "Assignors"), in favor of NATIONSBANK, N.A., successor to
NationsBank, N.A. (South), as Agent, as assignee (the "Agent").
WHEREAS, Physicians' Specialty Corp. (the "Borrower"), the financial
institutions initially party thereto and their assignees under Section 12.6
thereof (the "Lenders"), and the Agent have entered into that certain Amended
and Restated Credit Agreement dated as of the date hereof (as amended,
supplemented, restated or otherwise modified from time to time pursuant to its
terms, the "Credit Agreement"), pursuant to which the Lenders and the Swingline
Lender have 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 other Assignors;
WHEREAS, the Borrower, the other Assignors and the other Subsidiaries
of the Borrower, though separate legal entities, are mutually dependent on each
other as an integrated operation in the conduct of their respective businesses
and have determined it to be in their mutual best interests to obtain financing
from the Lenders and the Swingline Lender through their collective efforts;
WHEREAS, each Assignor other than the Borrower acknowledges that it
will receive direct and indirect benefits from the Lenders and the Swingline
Lender making such financial accommodations available to the Borrower under the
Credit Agreement and, accordingly, each Assignor guarantied the Borrower's
obligations to the Lenders and the Swingline Lender 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 each such Assignor in
favor of the Agent, the Lenders and the Swingline Lender;
WHEREAS, as a condition to extending such financial accommodations, the
Lenders have required, among other things, that each Assignor assign to the
Agent for its benefit and the benefit of the Lenders and the Swingline Lender
all of such Assignor's rights and remedies under
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and with respect to all Management Services Agreements to which such 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:
SECTION 1. ASSIGNMENT. As security for the prompt payment and
performance of the Obligations, each Assignor hereby collaterally assigns to the
Agent for its benefit and the benefit of the Lenders and the Swingline Lender,
and grants to the Agent for its benefit and the benefit of the Lenders and the
Swingline Lender a security interest in, all of the following (collectively the
"Collateral"): (a) all of such Assignor's right, title and interest in, to and
under all Management Services Agreements, 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 such
Assignor to receive moneys due and to become due to it thereunder or in
connection therewith; (ii) all rights of such Assignor to damages arising out
of, or for, breach or default in respect thereof and (iii) all rights of such
Assignor to perform and exercise all rights and remedies thereunder, including
without limitation, (x) all of such 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, (y) all rights of such Assignor to
damages arising out of, or for, breach or default in respect thereof and (z) all
rights of such Assignor to seek specific performance of the terms thereof; (b)
all of such Assignor's books and records in any way relating to the Management
Agreement Documents and (c) 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. Each Assignor
represents and warrants to the Agent, each Lender and the Swingline Lender as
follows:
(a) None of the Collateral is subject to any Lien, except
Permitted Liens.
(b) A true, correct and complete copy of each Management Services
Agreement to which such Assignor is a party (including all amendments,
supplements and modifications thereto), has been delivered to the Agent.
(c) Each Management Agreement Document to which such Assignor is a
party is in full force and effect and is the legal, valid and binding obligation
of such Assignor and each other Person a party thereto, enforceable against such
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
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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 Management
Services Agreement or (ii) could not reasonably be expected to have a Material
Adverse Effect.
(d) Neither such 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 such 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 such Assignor or any such other
Person under any of said terms, covenants or conditions, which, in either case,
could reasonably be expected to have a Material Adverse Effect.
(e) Such 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) Such Assignor has not assigned any of its right, title or
interest in, to or under any of the Collateral to any Person.
(g) Such Assignor has full authority and the legal right to assign
to the Agent, and to grant to the Agent a security interest in, the Management
Agreement Documents and the other Collateral and such 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. Each Assignor covenants and agrees as to
each Management Agreement Document as follows:
(a) Such Assignor will not sell, assign, grant a Lien in, suffer
to exist any Lien in, or otherwise transfer to any Person any of such Assignor's
right, title or interest in, to or under any of the Collateral.
(b) Anything herein to the contrary notwithstanding, (i) such
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
Agent of any of its rights hereunder shall not release such Assignor from any of
its duties or obligations under any of the Management Agreement Documents, and
(iii) neither the Agent, any Lender nor the Swingline Lender shall have any
duties, obligations or liability under any of the Management Agreement Documents
or duties by reason of this Agreement, nor shall the Agent, any Lender or the
Swingline Lender be obligated to perform any
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of the duties or obligations of such Assignor thereunder, to make any payment,
to make any inquiry as to the nature or sufficiency of any payment received by
such 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.
(c) Such 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, except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect; and
(ii) From time to time (A) furnish to the Agent such
information and reports regarding the Management Agreement Documents as
the Agent may reasonably request and (B) upon request of the Agent 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 such
Assignor is entitled to make under the Management Agreement Documents.
SECTION 4. PAYMENTS. So long as no Event of Default shall have
occurred and be continuing, each 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 any 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 Agent, and the Agent shall have the sole and exclusive
right to receive and retain the payments which any 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 Agent 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
Agent pursuant to this Agreement, and each 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 any Assignor
shall fail to perform or comply with any term or condition imposed upon such
Assignor under any of the Management Agreement Documents, or any Assignor shall
fail to exercise any right or remedy of such Assignor thereunder, and in either
such case either (a) such failure could reasonably be excepted to have a
Material Adverse Effect or (b) an Event of Default shall have occurred and be
continuing, then, without waiving or releasing such Assignor from any of its
obligations hereunder or under such Management Agreement Document, the Agent may
(but shall not obligated to) take any action the Agent deems necessary or
desirable to preserve and protect any of such Assignor's rights thereunder or
the Agent's rights thereunder.
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SECTION 6. REMEDIES. Upon the occurrence and during the
continuation of an Event of Default, the Agent 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 each 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. AGENT AND LENDERS NOT OBLIGATED. Notwithstanding any
other provision of this Assignment to the contrary, each 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 Agent, any Lender or the Swingline 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 Agent, and at the sole expense of the Assignors,
each Assignor will promptly execute and deliver such further instruments and
documents and take such further action as the Agent 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
Agent, the Lenders and the Swingline Lender under this Agreement are cumulative
and not exclusive of any rights or remedies which any of them would otherwise
have. In exercising their rights and remedies the Agent, the Lenders and the
Swingline 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. AGENT APPOINTED ATTORNEY-IN-FACT. Each Assignor hereby
irrevocably appoints the Agent as such Assignor's attorney-in-fact, with full
authority in the place and stead of such Assignor and in the name of such
Assignor or otherwise, from time to time upon the occurrence and during the
continuation of an Event of Default in the Agent's discretion, to take any
action and to execute any instrument or document which the Agent may deem
necessary or advisable to accomplish the purposes of this Agreement and to
exercise any rights and remedies the Agent, the Lenders and the Swingline 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 which
the Agent may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of the Agent with respect
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to any of the Collateral. The power-of-attorney granted hereby is irrevocable
and coupled with an interest.
SECTION 11. EXPENSES. Each Assignor will pay, within 10 days of
demand, all reasonable fees and expenses actually incurred by the Agent in
connection with (a) the collection or enforcement of the Obligations including
the reasonable fees and disbursements of counsel to the Agent actually incurred
by the Agent and (b) the exercise by the Agent 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. TERMINATION. Upon indefeasible payment in full of all
of the Obligations, this Agreement shall terminate.
SECTION 14. 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 15. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by any Assignor
herefrom, shall in any event be effective unless the same shall be done in
accordance with the applicable provisions of the Credit Agreement.
SECTION 16. 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 17. GOVERNING LAW. THIS ASSIGNMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.
SECTION 18. BENEFITS. This Assignment shall be binding on, and
inure to the benefit of, the parties hereto and their respective successors and
permitted assigns.
SECTION 19. 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 20. DEFINITIONS. As used herein, the term "Obligations"
shall mean: (a) all Obligations (as defined in the Credit Agreement); (b) all
obligations and indebtedness of each Assignor owing to the Agent, any Lenders or
the Swingline Lender of every kind, nature and description, under or with
respect to the Credit Agreement, the Guaranty, this Assignment or any
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of the other Loan Documents, 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; (c) all renewals, modifications, extensions and
supplements to any of the foregoing; and (d) any reasonable costs or expenses
actually incurred by the Agent or Agent's counsel in connection with the
realization of the security for which this Assignment provides, including,
without limitation, any reasonable costs or expenses of any proceedings to which
this Assignment may give rise. All other capitalized terms used herein and not
otherwise defined herein shall have the definitions given them in the Credit
Agreement.
SECTION 21. JOINT AND SEVERAL OBLIGATIONS. THE OBLIGATIONS OF THE
ASSIGNORS HEREUNDER SHALL BE JOINT AND SEVERAL, AND ACCORDINGLY, EACH ASSIGNOR
CONFIRMS THAT IT IS LIABLE FOR ALL OF THE OBLIGATIONS AND LIABILITIES OF THE
OTHER ASSIGNORS HEREUNDER.
SECTION 22. AMENDMENT, RESTATEMENT AND CONSOLIDATION. PRIOR TO THE
DATE HEREOF, THE UNDERSIGNED ASSIGNOR (THE "EXISTING ASSIGNOR") EXECUTED AND
DELIVERED COLLATERAL ASSIGNMENTS OF MANAGEMENT SERVICES AGREEMENTS IN FAVOR OF
NATIONSBANK IN CONNECTION WITH THE EXISTING CREDIT AGREEMENT (THE "EXISTING
COLLATERAL ASSIGNMENTS OF MANAGEMENT SERVICES AGREEMENTS"). THE EXISTING
ASSIGNOR AND THE AGENT ARE ENTERING INTO THIS AGREEMENT SOLELY TO AMEND, RESTATE
AND CONSOLIDATE IN THEIR ENTIRETY THE TERMS OF, AND THE OBLIGATIONS OWING UNDER
AND IN CONNECTION WITH, THE EXISTING COLLATERAL ASSIGNMENTS OF MANAGEMENT
SERVICES AGREEMENTS. THE PARTIES DO NOT INTEND THIS AGREEMENT NOR THE
TRANSACTIONS CONTEMPLATED HEREBY TO BE, AND THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREBY SHALL NOT BE DEEMED OR CONSTRUED TO BE, A NOVATION OF ANY OF
THE OBLIGATIONS OWING BY THE EXISTING ASSIGNOR UNDER OR IN CONNECTION WITH ANY
OF THE EXISTING COLLATERAL ASSIGNMENTS OF MANAGEMENT SERVICES AGREEMENTS.
FURTHER, THE PARTIES DO NOT INTEND THIS AGREEMENT NOR THE TRANSACTIONS
CONTEMPLATED HEREBY TO AFFECT THE PERFECTION OR PRIORITY OF ANY LIEN (INCLUDING
ANY LIEN PREVIOUSLY HELD BY NATIONSBANK BUT NOW HELD BY THE AGENT) HELD BY THE
AGENT IN ANY OF THE COLLATERAL IN ANY WAY WHATSOEVER.
[Signatures on Following Page]
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IN WITNESS WHEREOF, each Assignor has executed and delivered this
Amended, Restated and Consolidated Collateral Assignment of Management Services
Agreements under seal as of the date first written above.
ASSIGNORS:
PSC MANAGEMENT CORP.
By:__________________________________
Name:_____________________________
Title:____________________________
ATTEST:
By:__________________________________
Name:_____________________________
Title:____________________________
Agreed to and Accepted:
NATIONSBANK, N.A., as Agent
By:___________________________________
Name:______________________________
Title:_____________________________
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EXHIBIT D
FORM OF AMENDED, RESTATED AND CONSOLIDATED GUARANTY
THIS AMENDED, RESTATED AND CONSOLIDATED GUARANTY dated as of July 31,
1998 (this "Guaranty"), executed by each of the undersigned "Guarantors" and the
other Persons from time to time party hereto pursuant to the execution and
delivery of an Accession Agreement in the form of Exhibit A to the Credit
Agreement (as defined below) (all of the undersigned, together with such other
Persons each a "Guarantor" and collectively, the "Guarantors"), in favor of (a)
NATIONSBANK, N.A., successor to NationsBank, N.A. (South), in its capacity as
Agent (the "Agent") for the Lenders under that certain Amended and Restated
Credit Agreement dated as of the date hereof (as the same may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with its terms, the "Credit Agreement") by and among Physicians' Specialty Corp.
(the "Borrower"), the financial institutions initially party thereto and their
assignees under Section 12.6 thereof (the "Lenders") and the Agent and (b) the
Lenders and the Swingline Lender.
WHEREAS, pursuant to the Credit Agreement the Lenders and the Swingline
Lender have agreed to make available to the Borrower certain financial
accommodations on the terms and conditions set forth in the Credit Agreement;
WHEREAS, all of the Guarantors are Subsidiaries of the Borrower;
WHEREAS, the Borrower, each of the Guarantors 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 Lenders and the Swingline Lender through their
collective efforts;
WHEREAS, each Guarantor acknowledges that it will receive direct and
indirect benefits from the Lenders and the Swingline Lender making such
financial accommodations available to the Borrower under the Credit Agreement
and, accordingly, each Guarantor is willing to guaranty the Borrower's
obligations to the Agent, the Lenders and the Swingline Lender on the terms and
conditions contained herein;
WHEREAS, it is a condition precedent to the continued extension of such
financial accommodations to the Borrower by the Lenders and the Swingline Lender
that each Guarantor execute and deliver this Guaranty.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each Guarantor, each Guarantor
agrees as follows:
SECTION 1. GUARANTY. Each 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
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Agent, the Lenders or the Swingline 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 Revolving
Loans and the Swingline Loans and the payment of all interest, fees, charges,
reasonable attorneys' fees and other amounts payable to the Agent, the Lenders
or the Swingline 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 Agent, the Lenders or
the Swingline Lender in the enforcement of any of the foregoing or any
obligation of such 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 each Guarantor for
its own account. Accordingly, none of the Agent, the Lenders or the Swingline
Lender shall be obligated or required before enforcing this Guaranty against any
Guarantor: (a) to pursue any right or remedy the Agent, any Lender or the
Swingline 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 Agent, any Lender or the
Swingline Lender which may secure any of the Guarantied Obligations. In this
connection, each Guarantor hereby waives the right of such Guarantor to require
any holder of the Guarantied Obligations to take action against the Borrower as
provided in Official Code of Georgia Annotated ss.10-7-24.
SECTION 3. GUARANTY ABSOLUTE. Each 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
Agent, the Lenders or the Swingline Lender with respect thereto. The liability
of each 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 such 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;
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(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 Agent, any Lender or the Swingline
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;
(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 such
Guarantor, the Borrower, 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, any other Loan
Party or any other Person which may adversely affect such 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 Agent, the
Lenders or the Swingline 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, such Guarantor hereunder.
SECTION 4. ACTION WITH RESPECT TO GUARANTIED OBLIGATIONS. Each of the
Agent, the Lenders and the Swingline Lender may, at any time and from time to
time, without the consent of, or notice to, any Guarantor, and without
discharging any 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,
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to the Guarantied Obligations in such order as the Agent, the Lenders or the
Swingline Lender shall elect.
SECTION 5. REPRESENTATIONS AND WARRANTIES. Each Guarantor hereby makes
to the Agent, the Lenders and the Swingline Lender all of the representations
and warranties made by the Borrower with respect to or in any way relating to
such Guarantor in the Credit Agreement and the other Loan Documents, as if the
same were set forth herein in full.
SECTION 6. COVENANTS. Each Guarantor will comply with all covenants
which the Borrower is to cause such Guarantor to comply with under the terms of
the Credit Agreement or any of the other Loan Documents.
SECTION 7. WAIVER. Each 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 such Guarantor or which otherwise might operate to
discharge such Guarantor from its obligations hereunder.
SECTION 8. INABILITY TO ACCELERATE. If the Agent, any Lender or the
Swingline 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 Agent, such Lender or the Swingline Lender
shall be entitled to receive from such 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
Agent, any Lender or the Swingline Lender for repayment or recovery of any
amount or amounts received in payment or on account of any of the Guarantied
Obligations, and the Agent, such Lender or the Swingline 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 Agent, such Lender or the Swingline
Lender with any such claimant (including the Borrower or a trustee in bankruptcy
for the Borrower), then and in such event such 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, except as expressly provided otherwise in
such judgment, decree, order, settlement or compromise, such Guarantor shall be
and remain liable to the Agent, such Lender and the Swingline Lender for the
amounts so repaid or recovered to the same extent as if such amount had never
originally been paid to the Agent, such Lender or the Swingline Lender.
SECTION 10. SUBROGATION. Upon the making by any Guarantor of any
payment hereunder for the account of the Borrower, such Guarantor shall be
subrogated to the rights of the payee against such Borrower; provided, however,
that such 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 such Guarantor may have against the Borrower arising by reason of any
payment or performance by such Guarantor pursuant to this Guaranty, unless and
until all of the
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Guarantied Obligations have been indefeasibly paid and performed in full. If any
amount shall be paid to such Guarantor on account of or in respect of such
subrogation rights or other claims or causes of action, such Guarantor shall
hold such amount in trust for the benefit of the Agent, the Lenders and the
Swingline Lender and shall forthwith pay such amount to the Agent, the Lenders
and the Swingline 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 Agent, the Lenders or the Swingline Lender
as collateral security for any Guarantied Obligations existing.
SECTION 11. PAYMENTS FREE AND CLEAR. All sums payable by each 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 Taxes), and if a Guarantor is
required by Applicable Law or by any Governmental Authority to make any such
deduction or withholding, such Guarantor shall pay to the Agent, the Lenders or
the Swingline Lender such additional amount as will result in the receipt by the
Agent, the Lenders or the Swingline 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, each Guarantor hereby authorizes each of the
Agent, the Lenders and the Swingline Lender, at any time or from time to time,
without any prior notice to such Guarantor or to any other Person, any such
notice being hereby expressly waived, but subject to receipt of the Agent's
prior written consent, 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 Agent, the Lenders or the
Swingline Lender, or any affiliate of the Agent, the Lenders or the Swingline
Lender, to or for the credit or the account of such Guarantor against and on
account of any of the Guarantied Obligations, although such obligations shall be
contingent or unmatured.
SECTION 13. SUBORDINATION. Each Guarantor hereby expressly covenants
and agrees for the benefit of the Agent, the Lenders and the Swingline Lender
that all obligations and liabilities of the Borrower to such Guarantor of
whatever description, including without limitation, all intercompany receivables
of such 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 no Guarantor shall
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 each Guarantor,
the Agent, each Lender and the Swingline Lender that in any Proceeding, such
Guarantor's maximum obligation hereunder shall equal, but not exceed, the
maximum amount which would not otherwise cause the obligations of such Guarantor
hereunder (or any other obligations of such Guarantor to the Agent, the Lenders
or the Swingline Lender) to be avoidable or unenforceable against such
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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 such Guarantor
hereunder (or any other obligations of such Guarantor to the Agent, the Lenders
or the Swingline Lender) shall be determined in any such Proceeding are referred
to as the "Avoidance Provisions". Accordingly, to the extent that the
obligations of any Guarantor hereunder would otherwise be subject to avoidance
under the Avoidance Provisions, the maximum Guarantied Obligations for which
such 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 such
Guarantor hereunder (or any other obligations of such Guarantor to the Agent,
the Lenders or the Swingline Lender), to be subject to avoidance under the
Avoidance Provisions. This Section is intended solely to preserve the rights of
the Agent, the Lenders and the Swingline Lender hereunder to the maximum extent
that would not cause the obligations of any Guarantor hereunder to be subject to
avoidance under the Avoidance Provisions, and no Guarantor or any other Person
shall have any right or claim under this Section as against the Agent, the
Lenders or the Swingline Lender that would not otherwise be available to such
Person under the Avoidance Provisions.
SECTION 15. INFORMATION. Each Guarantor assumes all responsibility for
being and keeping itself informed of the financial condition of the Borrower and
the other 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 such Guarantor assumes and incurs hereunder, and agrees that
neither the Agent, the Lenders nor the Swingline Lender nor any Lender shall
have any duty whatsoever to advise any 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. LITIGATION; JURISDICTION; OTHER MATTERS; WAIVERS.
(a) EACH GUARANTOR AND THE AGENT, AND EACH LENDER AND THE
SWINGLINE LENDER BY ACCEPTING THE BENEFITS HEREOF, ACKNOWLEDGES THAT ANY DISPUTE
OR CONTROVERSY BETWEEN OR AMONG A GUARANTOR, THE AGENT, ANY OF THE LENDERS OR
THE SWINGLINE LENDER WOULD BE BASED ON DIFFICULT AND COMPLEX ISSUES OF LAW AND
FACT AND WOULD RESULT IN DELAY AND EXPENSE TO THE PARTIES. ACCORDINGLY, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE GUARANTORS, THE AGENT, THE
LENDERS AND THE SWINGLINE LENDER HEREBY WAIVES ITS RIGHT TO A TRIAL BY JURY IN
ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT OR TRIBUNAL IN WHICH
AN ACTION MAY BE COMMENCED BY OR AGAINST ANY SUCH PARTY ARISING OUT OF THIS
GUARANTY, OR ANY OTHER
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LOAN DOCUMENT OR IN CONNECTION WITH ANY COLLATERAL OR ANY LIEN OR BY REASON OF
ANY OTHER SUIT, CAUSE OF ACTION OR DISPUTE WHATSOEVER BETWEEN OR AMONG A
GUARANTOR, THE AGENT, ANY LENDER OR THE SWINGLINE LENDER OF ANY KIND OR NATURE.
(b) EACH GUARANTOR AND THE AGENT, AND EACH LENDER AND THE
SWINGLINE LENDER BY ACCEPTING THE BENEFITS HEREOF, HEREBY AGREES THAT THE
FEDERAL DISTRICT COURT OF THE NORTHERN DISTRICT OF GEORGIA OR, AT THE OPTION OF
THE AGENT, ANY STATE COURT LOCATED IN FULTON COUNTY, GEORGIA, SHALL HAVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN OR AMONG EACH
GUARANTOR, THE AGENT, ANY LENDER OR THE SWINGLINE LENDER, PERTAINING DIRECTLY OR
INDIRECTLY TO THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR TO ANY MATTER ARISING
HEREFROM OR THEREFROM OR ANY OF THE COLLATERAL. EACH GUARANTOR, THE AGENT AND
EACH LENDER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS.
(c) EACH PARTY FURTHER WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT
OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT FORUM AND EACH
AGREES NOT TO PLEAD OR CLAIM THE SAME.
(d) THE CHOICE OF FORUM SET FORTH IN THIS SECTION SHALL NOT BE
DEEMED TO PRECLUDE THE BRINGING OF ANY ACTION BY ANY GUARANTOR, THE AGENT, ANY
LENDER OR THE SWINGLINE LENDER OR THE ENFORCEMENT BY ANY GUARANTOR, THE AGENT,
ANY LENDER OR THE SWINGLINE LENDER OF ANY JUDGMENT OBTAINED IN SUCH FORUM IN ANY
OTHER APPROPRIATE JURISDICTION.
SECTION 18. LOAN ACCOUNTS. The Agent 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 Agent to maintain such books and accounts
shall not in any way relieve or discharge any Guarantor of any of its
obligations hereunder.
SECTION 19. WAIVER OF REMEDIES. No delay or failure on the part of the
Agent, any Lender or the Swingline Lender in the exercise of any right or remedy
it may have against any Guarantor hereunder or otherwise shall operate as a
waiver thereof, and no single or partial exercise by the Agent, any Lender or
the Swingline Lender of any such right or remedy shall preclude other or further
exercise thereof or the exercise of any other such right or remedy.
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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 Agent,
any Lender or the Swingline Lender shall be deemed to include the permitted
successors and assigns of the Agent, such Lender and the Swingline Lender
(including, but not limited to, any holder of any of the Guarantied Obligations)
in whose favor the provisions of this Guaranty also shall inure, and each
reference herein to each Guarantor shall be deemed to include such Guarantor's
successors and assigns, upon whom this Guaranty also shall be binding. The
Lenders and the Swingline 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, any Guarantor and without
releasing, discharging or modifying any Guarantor's obligations hereunder. Each
Guarantor hereby consents to the delivery by the Agent, the Lenders or the
Swingline Lender to any Assignee or Participant (or any prospective Assignee or
Participant) of any financial or other information regarding any Guarantor to
the extent permitted by and in accordance with the Credit Agreement, including,
without limitation, the confidentiality provisions therein. A Guarantor may not
assign or transfer its obligations hereunder to any Person.
SECTION 22. JOINT AND SEVERAL OBLIGATIONS. THE OBLIGATIONS OF THE
GUARANTORS HEREUNDER SHALL BE JOINT AND SEVERAL AND ACCORDINGLY, EACH GUARANTOR
CONFIRMS THAT IT IS LIABLE FOR THE FULL AMOUNT OF THE "GUARANTEED OBLIGATIONS"
AND ALL OF THE OBLIGATIONS AND LIABILITIES OF EACH OF THE OTHER GUARANTORS
HEREUNDER.
SECTION 23. AMENDMENTS. This Guaranty may not be amended, and the
application of the terms hereof may not be waived, except as provided under the
applicable provisions of the Credit Agreement.
SECTION 24. PAYMENTS. All payments to be made by any Guarantor pursuant
to this Guaranty shall be made in Dollars, in immediately available funds to the
Agent at its Principal Office, not later than 11:00 a.m., on the date 10 days
after demand therefor.
SECTION 25. NOTICES. All notices, requests and other communications
hereunder shall be in writing (including facsimile transmission or similar
writing) and shall be given (a) to each Guarantor at its address set forth below
its signature hereto, (b) to the Agent, each Lender or the Swingline 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 parties. 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.
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SECTION 26. 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 27. HEADINGS. Section headings used in this Guaranty are for
convenience only and shall not affect the construction of this Guaranty.
SECTION 28. EXPENSES. Each Guarantor will pay, within 10 days of
demand, all reasonable fees and expenses actually incurred by the Agent, any
Lender or the Swingline Lender in connection with (a) the collection or
enforcement of the Guarantied Obligations including the reasonable fees and
disbursements of counsel to the Agent, such Lender or the Swingline Lender
actually incurred by the Agent, such Lender or the Swingline Lender and (b) the
exercise by the Agent, any Lender or the Swingline 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 29. 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 30. DEFINITIONS. (a) For the purposes of this Guaranty:
"Proceeding" means any of the following: (i) a voluntary or involuntary
case concerning any 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 any 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 any
Guarantor; (iv) any 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) any Guarantor makes a general
assignment for the benefit of creditors; (vii) any 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) any Guarantor shall call a meeting of its
creditors with a view to arranging a composition or adjustment of its debts;
(ix) any 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 any 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.
SECTION 31. AMENDMENT, RESTATEMENT AND CONSOLIDATION. PRIOR TO THE DATE
HEREOF, CERTAIN OF THE GUARANTORS EXECUTED AND DELIVERED GUARANTIES IN FAVOR OF
NATIONSBANK IN CONNECTION WITH THE EXISTING CREDIT AGREEMENT (THE "EXISTING
GUARANTIES"). SUCH GUARANTORS ARE ENTERING INTO THIS GUARANTY SOLELY TO AMEND,
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RESTATE AND CONSOLIDATE IN THEIR ENTIRETY THE TERMS OF, AND THE OBLIGATIONS
OWING UNDER AND IN CONNECTION WITH, THE EXISTING GUARANTIES. THE PARTIES DO NOT
INTEND THIS GUARANTY NOR THE TRANSACTIONS CONTEMPLATED HEREBY TO BE, AND THIS
GUARANTY AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL NOT BE DEEMED OR
CONSTRUED TO BE, A NOVATION OF ANY OF THE OBLIGATIONS OWING BY ANY SUCH
GUARANTOR UNDER OR IN CONNECTION WITH ANY OF THE EXISTING GUARANTIES. FURTHER,
THE PARTIES DO NOT INTEND THIS GUARANTY NOR THE TRANSACTIONS CONTEMPLATED HEREBY
TO AFFECT THE PERFECTION OR PRIORITY OF ANY LIEN HELD BY THE AGENT, THE LENDERS
OR THE SWINGLINE LENDER IN ANY OF THE COLLATERAL IN ANY WAY WHATSOEVER.
[Signatures on Following Page]
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IN WITNESS WHEREOF, each Guarantor has duly executed and delivered this
Amended, Restated and Consolidated Guaranty as of the date and year first
written above.
GUARANTORS:
[GUARANTOR 1]
[GUARANTOR 2]
By:_________________________________
Name:____________________________
Title:___________________________
Address for Notices:
c/o Physicians' Specialty Corp.
1150 Lake Hearn Drive, Suite 640
Atlanta, Georgia 30342
Attention: Chief Financial Officer
Telecopy No: (404) 256-1078
Agreed to and Accepted:
NATIONSBANK, N.A., as Agent
By:__________________________________
Name:_____________________________
Title:____________________________
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EXHIBIT E
FORM OF NOTICE OF BORROWING
___________,______
NationsBank, N.A., as Agent
101 North Tryon Street
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Angela M. Berry, Agency Services, Corporate Credit Services
Ladies and Gentlemen:
Reference is made to that certain Amended and Restated Credit Agreement
dated as of July 31, 1998 (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 among Physicians'
Specialty Corp. (the "Borrower"), each of the financial institutions initially a
signatory thereto and their assignees pursuant to Section 12.6 thereof (the
"Lenders") and NationsBank, N.A., as Agent (the "Agent").
1. Pursuant to Section 2.1 of the Credit Agreement, the Borrower
hereby requests that the Lenders make Revolving Loans to the
Borrower in an aggregate amount equal to $___________________.
2. The Borrower requests that the proceeds of such Revolving
Loans be made available to the Borrower on ____________,
_____.
3. The Borrower hereby requests that such Revolving Loans all 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
six months
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4. The Agent is instructed to make such proceeds available to the
Borrower as follows:____________________________.
5. The Borrower represents and warrants to the Agent and the
Lenders that the proceeds of the Loan requested hereby are to
be used in accordance with Section 7.8 of the Credit
Agreement.
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 the requested borrowing of Revolving Loans 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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<PAGE> 126
EXHIBIT F
FORM OF NOTICE OF CONTINUATION
______________, _____
NationsBank, N.A., as Agent
101 North Tryon Street
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Angela M. Berry, Agency Services, Corporate Credit Services
Ladies and Gentlemen:
Reference is made to that certain Amended and Restated Credit Agreement
dated as of July 31, 1998 (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"), each of the financial institutions initially a signatory
thereto and their assignees pursuant to Section 12.6 thereof (the "Lenders") and
NationsBank, N.A., as Agent (the "Agent").
Pursuant to Section 2.6 of the Credit Agreement, the Borrower hereby
gives notice, irrevocably, that the Borrower hereby requests a Continuation of a
borrowing of LIBOR Loans under the Credit Agreement, and in that connection sets
forth below the information relating to such 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 Revolving Loans subject to
the requested Continuation is $________________________ and
the portion of such principal amount subject to such
Continuation is $__________________________.
3. The current Interest Period for each of the Revolving Loans
subject to such Continuation ends on ________________, _____.
4. The duration of the Interest Period for each of the Revolving
Loans or portion thereof subject to such Continuation is:
[CHECK ONE BOX ONLY] one month
two months
three months
six months
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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 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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EXHIBIT G
FORM OF NOTICE OF CONVERSION
____________, _____
NationsBank, N.A., as Agent
101 North Tryon Street
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Angela M. Berry, Agency Services, Corporate Credit Services
Ladies and Gentlemen:
Reference is made to that certain Amended and Restated Credit Agreement
dated as of July 31, 1998 (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"), each of the financial institutions initially a signatory
thereto and their assignees pursuant to Section 12.6 thereof (the "Lenders") and
NationsBank, N.A., as Agent (the "Agent").
Pursuant to Section 2.7 of the Credit Agreement, the Borrower hereby
gives you notice, irrevocably, that the Borrower hereby requests a Conversion of
a borrowing of Revolving Loans of one Type into Revolving Loans of another Type
under the Credit Agreement, and in that connection sets forth below the
information relating to such Conversion as required by Section 2.7 of the Credit
Agreement:
1. The requested date of such Conversion is ____________, _____.
2. The Revolving Loans to be Converted pursuant hereto are
currently:
[CHECK ONE BOX ONLY] Base Rate Loans
LIBOR Loans
3. The aggregate principal amount of Revolving Loans 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 each such Revolving Loan to be so Converted is
to be converted into a Revolving 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
six 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 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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EXHIBIT H
FORM OF NOTICE OF SWINGLINE BORROWING
___________, _____
NationsBank, N.A., as Agent
101 North Tryon Street
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Angela M. Berry, Agency Services, Corporate Credit Services
Ladies and Gentlemen:
Reference is made to that certain Amended and Restated Credit Agreement
dated as of July 31, 1998 (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 among Physicians'
Specialty Corp. (the "Borrower"), each of the financial institutions initially a
signatory thereto and their assignees pursuant to Section 12.6 thereof (the
"Lenders") and NationsBank, N.A., as Agent (the "Agent").
1. Pursuant to Section 2.10 of the Credit Agreement, the Borrower
hereby requests that the Swingline Lender make a Swingline
Loan to the Borrower in an amount equal to
$___________________.
2. The Borrower requests that the Swingline Loan be made
available to the Borrower on _____________, _____.
3. The Swingline Lender is instructed to make such proceeds
available to the Borrower as
follows:____________________________.
4. The Borrower represents and warrants to the Agent, the Lenders
and the Swingline Lender that the proceeds of the Swingline
Loan requested hereby are to be used in accordance with
Section 7.8 of the Credit Agreement.
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.
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If notice of this Swingline Loan has been given previously by
telephone, then this notice should be considered a written confirmation of such
telephone notice as required by Section 2.10(b) of the Credit Agreement.
PHYSICIANS' SPECIALTY CORP.
By:______________________________
Name:_________________________
Title:________________________
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<PAGE> 132
EXHIBIT I
FORM OF SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT dated as of __________ by and among
__________________ (the "Junior Creditor") and NATIONSBANK, N.A., as Agent (the
"Agent").
WHEREAS, pursuant to that certain Amended and Restated Credit Agreement
dated as of July 31, 1998 (as it may be amended, modified, restated or
supplemented from time to time, the "Credit Agreement") by and among Physicians'
Specialty Corp. (the "Borrower"), each of the financial institutions initially a
signatory thereto and their assignees pursuant to Section 12.6 thereof (the
"Lenders") and the Agent the Lenders have agreed to make available to the
Borrower a $45,000,000 credit facility;
WHEREAS, [PSC Management Corp.] (the "Debtor") has guarantied the
Borrower's obligations to the Agent, the Lenders and NationsBank, N.A., as
Swingline Lender (the "Swingline Lender") on the terms and conditions contained
in that certain Guaranty dated as of July 31, 1998 (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, and certain other
Subsidiaries of the Borrower in favor of the Agent, the Lenders and the
Swingline Lenders;
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"); and
WHEREAS, it is a condition precedent to the Lenders' continued
extension of credit to the Borrower under the Credit Agreement that the Debtor
and 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:
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 Creditor shall have not received a notice from the Agent
that an Event of Default under and as defined in the Credit Agreement has
occurred and is continuing, the Debtor may pay, and the Creditor may receive,
regularly scheduled payments of interest and principal on the Subordinated
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Note, as such Subordinated Note may be amended with the consent of the Agent. 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. 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 Agent 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 Agent) 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.
Section 3. Bankruptcy of Debtor. In the event of any Bankruptcy
Proceeding, the Junior Creditor will, at the request of the Agent, 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 Agent and assign, transfer and pay over to the Agent,
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 take such action requested by the
Agent, the Agent 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 Agent 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 Agent's own name or in the name of the Junior
Creditor as the Agent may deem necessary or advisable for the enforcement of
this Agreement. The Junior Creditor will execute and deliver to the Agent such
other and further powers of attorney or other instruments as the Agent may
request in order to accomplish the foregoing. The Junior Creditor further grants
to the Agent 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 4. Warranties and Representations of the Junior Creditor. The
Junior Creditor represents and warrants to the Agent, the Lenders and the
Swingline Lender that: (a) no part of the Subordinated Debt is evidenced by any
instrument other than the Subordinated Note; (b) 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 5. 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
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provision of the Subordinated Note without the prior written consent of the
Agent or (c) 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 6. 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 Agent in the form received (together with any endorsement
necessary to effect a transfer of all rights therein to the Agent) for
application to the Senior Debt. The Junior Creditor irrevocably authorizes the
Agent 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 Agent and shall not be commingled with other
funds or property of the Junior Creditor.
Section 7. Waivers. To the fullest extent permitted by law, the Junior
Creditor each hereby waives the right to require the Agent, any Lender or the
Swingline Lender to marshal any assets, or to enforce any security interest or
lien the Agent 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 Agent's entitlement to receive any payment on
account of the Subordinated Debt. The Agent, the Lenders and the Swingline
Lender each 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 8. Validity of Subordinated Debt. This Agreement defines the
relative rights of the Junior Creditor, the Agent, the Lenders and the Swingline
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 9. Specific Performance. In addition to any other remedies
available to the Agent, any Lender or the Swingline 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 Agent may, on its behalf
or on behalf of the Lenders and the Swingline Lender, 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
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defense or dilatory plea this Agreement and the Agent is irrevocably authorized
to intervene and to interpose such defense or plea in the Debtor's name.
Section 10. Indulgences Not Waivers. Neither the failure nor any delay
on the part of the Agent, any Lender or the Swingline 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 11. Duration. This Agreement shall become effective when
executed by the Debtor and the Junior Creditor and accepted by the Agent, 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 12. LITIGATION. IN THE EVENT OF ANY LITIGATION WITH RESPECT TO
ANY MATTER CONCERNED WITH THIS AGREEMENT OR THE SENIOR DEBT, THE JUNIOR
CREDITOR, THE AGENT, ANY LENDER AND THE SWINGLINE 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 ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO ANY OR ALL OF THE SENIOR DEBT OR THIS AGREEMENT.
Section 13. 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 Agent. The Junior Creditor agrees that it shall
cause to be added to the Subordinated Note, and each other document evidencing
the Subordinated Debt, 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 _____________,
199_, as amended from time to time, by and between [Junior Creditor]
and NationsBank, N.A., as Agent."
Section 14. Notices. All notices and other communications provided for
hereunder shall be in writing and shall be mailed, telecopied or delivered, as
follows:
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(a) If to the Agent:
NationsBank, N.A.
600 Peachtree Street, 19th Floor
Atlanta, Georgia 30308
Attention: Walter Scott
Telecopy Number: (404) 607-6338
Telephone Number: (404) 607-5862
(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.
Section 15. Successors and Assigns. This Agreement shall inure to the
benefit of the Agent, each Lender and the Swingline Lender and their respective
successors and assigns, and shall be binding upon the Junior Creditor and its
successors and assigns.
Section 16. Acknowledgment. The Junior Creditor acknowledges that the
Agent, the Lenders and the Swingline Lender, in continuing to make Loans and
other financial accommodations under the Credit Agreement, has relied upon the
terms of this Agreement.
Section 17. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.
Section 18. 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 19. 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.
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"Payment in full" or "paid in full" shall mean, with respect to the
Agent, the Lenders and the Swingline 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 Agent, the Lenders or the Swingline 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 Agent, the Lenders or the Swingline 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 Agent, the Lenders and the Swingline Lender under the
Guaranty, in all cases together with all interest, fees, charges, expenses and
attorney's fees for which the Borrower or the Debtor is now or hereafter becomes
liable to pay to the Agent, the Lenders or the Swingline 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 AGENT:
NATIONSBANK, N.A. ,as Agent
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 J
FORM OF SWING LINE NOTE
$2,500,000 July 31, 1998
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. (the "Swingline Lender") in
care of NationsBank, N.A., as Agent (the "Agent") at its office located at 101
North Tryon Street, Charlotte, North Carolina 28255, or at such other location
as the Agent shall notify the Borrower in writing, in lawful money of the United
States of America and in immediately available funds, the principal amount of
TWO MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($2,500,000), or such
lesser principal amount, as may then constitute the unpaid aggregate principal
amount of the Swingline Loans made by the Swingline 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 Swingline Loan made by the Swingline Lender
to the Borrower under the Credit Agreement, each payment of principal in respect
thereof and the accrual of interest under this Swingline Note, shall be recorded
by the Swingline Lender on its books; provided, however, that the failure of the
Swingline 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 Swingline
Note. Any such recordations made by the Swingline Lender on its books shall be
prima facie evidence of the amounts recorded therein.
This Swingline Note is the "Swingline Note" referred to in that certain
Amended and Restated Credit Agreement dated as of July 31, 1998 (as amended,
restated, supplemented or otherwise modified from time to time, the "Credit
Agreement"), by and among the Borrower, each of the financial institutions
initially a signatory thereto and their assignees pursuant to Section 12.6
thereof (the "Lenders") and the Agent, 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 Swingline Loans by the Swingline 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 Swingline Loans by the
Borrower subject to certain terms and conditions and (c) provides for the
acceleration of the Swingline Loans upon the occurrence of certain specified
events.
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This Swingline 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).
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 SWINGLINE 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
Swingline 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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EXHIBIT K
FORM OF REVOLVING NOTE
$______________ ________ ___, ____
FOR VALUE RECEIVED, the undersigned, PHYSICIANS' SPECIALTY CORP., a
corporation organized under the laws of the State of Delaware (the "Borrower"),
promises to pay to the order of ___________________ (the "Lender") in care of
NationsBank, N.A., as Agent (the "Agent") at its office located at 101 North
Tryon Street, Charlotte, North Carolina 28255, or at such other location as the
Agent shall notify the Borrower in writing, in lawful money of the United States
of America and in immediately available funds, the principal amount of
__________________________ AND NO/100 DOLLARS ($___________), 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 one of the "Revolving Notes" referred to in that certain
Amended and Restated Credit Agreement dated as of July 31, 1998 (as amended,
restated, supplemented or otherwise modified from time to time, the "Credit
Agreement"), by and among the Borrower, each of the financial institutions
initially a signatory thereto and their assignees pursuant to Section 12.6
thereof (the "Lenders") and the Agent, 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.
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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).
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.
[THE FOLLOWING TEXT IS TO BE INCLUDED IN ONLY THE NOTE EXECUTED IN
FAVOR OF NATIONSBANK--This Note amends, restates, consolidates and replaces that
certain Revolving Note dated April 30, 1997 in the original principal amount of
$5,000,000 executed and delivered by the Borrower, payable to the order of the
Lender and that certain Term Note dated April 30, 1997 in the original principal
amount of $20,000,000 executed and delivered by the Borrower, payable to the
order of the Lender. THIS NOTE IS NOT INTENDED TO BE, AND SHALL NOT BE CONSTRUED
TO BE, A NOVATION OF ANY OF THE OBLIGATIONS OWING UNDER OR IN CONNECTION WITH
SUCH OTHER NOTES.]
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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EXHIBIT L
FORM OF AMENDED, RESTATED AND CONSOLIDATED PLEDGE AGREEMENT
THIS AMENDED, RESTATED AND CONSOLIDATED PLEDGE AGREEMENT is dated as of
July 31, 1998 (this "Pledge Agreement"), and executed and delivered by each of
the undersigned "Pledgors" and the other Persons from time to time a party
hereto (all of such undersigned and each such other Person, a "Pledgor" and
collectively, the "Pledgors"), in favor of NATIONSBANK, N.A., successor to
NationsBank, N.A. (South), as Agent (the "Pledgee").
WHEREAS, pursuant to that certain Amended and Restated Credit Agreement
dated as of July 31, 1998 (as the same may be amended, supplemented, restated or
otherwise modified from time to time, the "Credit Agreement") among Physicians'
Specialty Corp. (the "Borrower"), each of the financial institutions initially
party thereto and their assignees pursuant to Section 12.6 thereof (the
"Lenders") and the Pledgee, the Lenders and the Swingline Lenders have agreed to
extend certain financial accommodations to the Borrower subject to the terms
thereof;
WHEREAS, the Borrower owns, directly or indirectly, all of the
outstanding capital stock and other equity interests of the other Pledgors;
WHEREAS, the Pledgors 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
Lenders and the Swingline Lender through their collective efforts;
WHEREAS, each Pledgor (other than the Borrower) acknowledges that it
will receive direct and indirect benefits from the Lenders and the Swingline
Lender making such financial accommodations available to the Borrower under the
Credit Agreement and, accordingly, each such 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 Pledgors and certain other
Subsidiaries of the Borrower in favor of the Pledgee;
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the Lenders' continued extension of such financial accommodations
under the Credit Agreement that the Pledgors 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. Each Pledgor hereby pledges, hypothecates, assigns,
transfers, sets over and delivers unto the Pledgee for its benefit and the
benefit of the Lenders and the
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Swingline Lender, and grants to the Pledgee for its benefit and the benefit of
the Lenders and the Swingline Lender a security interest in, all of such
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 I attached hereto or in Schedule I to
the Accession Agreement by which such Pledgor became a party to this Agreement;
(b) any additional Securities of any of such Issuers as may from time to time be
issued to such Pledgor or otherwise acquired by such Pledgor; (c) any additional
Securities of any Issuer as may hereafter at any time be delivered to the
Pledgee by or on behalf of such 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 for the benefit of
the Lenders and the Swingline Lender, to secure the prompt performance and
payment in full of the following (collectively, the "Secured Obligations"): (a)
all Obligations (as defined in the Credit Agreement); (b) all obligations and
indebtedness of each Pledgor owing to the Pledgee, any Lender or the Swingline
Lender of every kind, nature and description, under or with respect to the
Credit Agreement, the Guaranty, this Pledge Agreement or any of the other Loan
Documents, whether direct or indirect, absolute or contingent, due or not due,
contractual or tortious, liquidated or unliquidated, and whether or not
evidenced by a note; (c) all renewals, modifications, extensions and supplements
to any of the foregoing; and (d) 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. Each Pledgor hereby
represents and warrants to the Pledgee, the Lenders and the Swingline Lender as
follows:
(a) Validly Issued, etc. All of the Securities of each Issuer
pledged by such Pledgor hereunder have been validly issued and are fully paid
and nonassessable.
(b) Title and Liens. Such Pledgor is, and will at all times
continue to be, the legal and beneficial owner of the Pledged Collateral in
which it has rights and none of such Pledged Collateral is subject to any Lien
other than Permitted Liens. No financing statement under the Uniform Commercial
Code of any jurisdiction which names such Pledgor as debtor or covers any of
such 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 such Pledgor has not
signed any such 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.
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(c) Name; Chief Executive Office; Taxpayer ID Number. The correct
corporate name of such Pledgor is set forth on the signature page to this Pledge
Agreement or the applicable Accession Agreement. The chief executive office and
principal place of business of such Pledgor and the location of such Pledgor's
books and records relating to its Pledged Collateral are located at the address
set forth on the signature page hereto or as set forth in the applicable
Accession Agreement. The Internal Revenue Service taxpayer identification number
of such Pledgor is set forth on Schedule I attached hereto or in the applicable
Accession Agreement.
(d) Authority, etc. Such Pledgor (i) has the power and authority
to pledge the Pledged 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 such Pledgor
hereunder constitute [____%] of the issued and outstanding equity interests of
each Issuer.
SECTION 4. COVENANTS. Each Pledgor hereby unconditionally covenants and
agrees as follows:
(a) No Liens; No Sale of Pledged Collateral. Such 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 Pledgee at
least sixty-day's prior written notice, such Pledgor will not (i) change such
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, no
Pledgor shall permit any Issuer of Securities pledged by such Pledgor hereunder
to issue any additional shares of capital stock or other equity securities or
interests to any Person other than such Pledgor. Further, no Pledgor shall
permit any such 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.
(b) Each 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 such
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Pledgor or otherwise acquired by such 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, on
behalf of itself, the Lenders and the Swingline Lender, 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. Each 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 such 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) each 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 such 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) each 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 such
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 each Pledgor, or cause to be
executed and delivered to such Pledgor, as appropriate, at the sole cost and
expense of such Pledgor, all such proxies, powers of attorney, dividend orders
and other instruments as such Pledgor may reasonably request for the purpose of
enabling such Pledgor to exercise the voting and/or consensual rights and powers
which such Pledgor is entitled to exercise pursuant to clause (i) above and/or
to receive the dividends which such 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 such Pledgor to exercise the voting and/or consensual
rights and powers which such Pledgor is entitled to exercise pursuant to
subsection (a)(i) above and/or to receive the dividends which such 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 such Pledgor shall otherwise be entitled to exercise pursuant
to subsection (a)(i) above and/or to receive and retain the dividends which such
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 such Pledgor shall receive any
dividends or other property which it is not entitled to receive under this
Section, such Pledgor shall hold the same in trust for the Pledgee, without
commingling the same with other funds or property of or held by such Pledgor,
and shall promptly deliver the same to the Pledgee upon receipt by such 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) Any Pledgor shall fail to observe or perform any covenant or
agreement contained in Sections 4(a), 5, or 7(b) hereof;
(b) Any 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 such Pledgor by the Pledgee; and
(c) an Event of Default under and as defined in the Credit
Agreement 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
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purchaser at any sale of Pledged Collateral shall take and hold the property
sold absolutely free from any claim or right on the part of any Pledgor, and
each Pledgor hereby waives (to the fullest extent permitted by Applicable Law)
all rights of redemption, stay and/or appraisal which such Pledgor now has or
may at any time in the future have under any Applicable Law now existing or
hereafter enacted. Each Pledgor agrees that, to the extent notice of sale shall
be required by Applicable Law, at least ten days' prior written notice to such
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 any 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 any 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 such 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 such 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 no Pledgor shall 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. Each Pledgor hereby waives any right to require any marshaling of
assets and any similar right.
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(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.
(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 as provided for under the applicable provisions of the Credit
Agreement. Each 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. Each Pledgor hereby
constitutes and appoints the Pledgee as the attorney-in-fact of such 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 such
Pledgor to do any of the following: (a) to perform any obligation of such
Pledgor hereunder in such 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 such
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 such 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 such 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 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 any Pledgor or to any claim or action against the Pledgee.
The power of attorney granted herein is irrevocable and coupled with an
interest.
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SECTION 12. REIMBURSEMENT OF PLEDGEE. Each 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, 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 such 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. Each 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. Each
Pledgor agrees to take, and authorizes the Pledgee to take on such 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 each 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. Each 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 such Pledgor and to sign such Pledgor's name thereto. Each Pledgor authorizes
the Pledgee to file any such financing statement, document or instrument without
the signature of such 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 accompanied by proper instruments of assignment duly executed by each Pledgor
and by such other instruments or documents as the Pledgee may reasonably
request.
SECTION 14. SECURITIES ACT. In view of the position of each Pledgor in
relation to the Pledged Collateral, or because of other current or future
circumstances, a question may arise under the Securities Act or any similar
Applicable Law hereafter enacted analogous in purpose or
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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. Each 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. Each
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. Each 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. Each 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.
SECTION 15. INDEMNIFICATION. Each Pledgor agrees to indemnify and hold
the Pledgee, each Lender, the Swingline Lender, any corporation controlling,
controlled by, or under common control with, the Pledgee, a Lender or the
Swingline Lender and any officer, attorney, director, shareholder, agent or
employee of the Pledgee, a Lender or the Swingline Lender 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 (each an "Indemnified Claim"), 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, no Pledgor
shall be obligated to indemnify or hold harmless an Indemnified Person for an
Indemnified Claim to the extent that such Indemnified Claim resulted from the
gross negligence or willful misconduct of such Indemnified Person. Each
Pledgor's obligations under this section shall survive the termination of this
Pledge Agreement and the payment in full of the Secured Obligations.
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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. Each 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 such 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,
any Lender or the Swingline Lender to exercise, nor the delay on its part in
exercising any right, power or remedy hereunder, nor any course of dealing
between the Pledgee, any Lender or any Swingline Lender, on the one hand and
such Pledgor on the other hand 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 or Guaranty, as applicable (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 each 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.
SECTION 21. 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 no Pledgor shall 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 22. 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 any Pledgor may reasonably request, and at the sole cost and
expense of such Pledgor, (a) to return the Pledged Collateral to such 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.
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SECTION 23. 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 24. 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 25. 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 26. EXPENSES. Each Pledgor will pay, within 10 days of demand,
all reasonable fees and expenses actually incurred by the Pledgee in connection
with (a) the collection or enforcement of the Obligations including the
reasonable fees and disbursements of counsel to the Pledgee actually incurred by
the Pledgee and (b) the exercise by the Pledgee 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 27. DEFINITIONS. Terms not otherwise defined herein are used
herein with the respective meanings given to them in the Credit Agreement.
SECTION 28. JOINT AND SEVERAL OBLIGATIONS. THE OBLIGATIONS OF THE
PLEDGORS HEREUNDER SHALL BE JOINT AND SEVERAL, AND ACCORDINGLY, EACH PLEDGOR
CONFIRMS THAT IT IS LIABLE FOR ALL OF THE OBLIGATIONS AND LIABILITIES OF THE
OTHER PLEDGORS HEREUNDER.
SECTION 29. AMENDMENT, RESTATEMENT AND CONSOLIDATION. PRIOR TO THE DATE
HEREOF, CERTAIN OF THE PLEDGORS EXECUTED AND DELIVERED PLEDGE AGREEMENTS IN
FAVOR OF NATIONSBANK IN CONNECTION WITH THE EXISTING CREDIT AGREEMENT (THE
"EXISTING PLEDGE AGREEMENTS"). SUCH PLEDGORS AND THE PLEDGEE ARE ENTERING INTO
THIS PLEDGE AGREEMENT SOLELY TO AMEND, RESTATE AND CONSOLIDATE IN THEIR ENTIRETY
THE TERMS OF, AND THE OBLIGATIONS OWING UNDER AND IN CONNECTION WITH, THE
EXISTING PLEDGE AGREEMENTS. THE PARTIES DO NOT INTEND THIS PLEDGE AGREEMENT NOR
THE TRANSACTIONS CONTEMPLATED HEREBY TO BE, AND THIS PLEDGE AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY SHALL NOT BE DEEMED OR CONSTRUED TO BE, A
NOVATION OF ANY OF THE OBLIGATIONS OWING BY ANY SUCH PLEDGOR UNDER OR IN
CONNECTION WITH ANY OF THE EXISTING PLEDGE AGREEMENTS. FURTHER, THE PARTIES DO
NOT INTEND THIS PLEDGE AGREEMENT NOR THE TRANSACTIONS CONTEMPLATED HEREBY TO
AFFECT THE PERFECTION OR
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PRIORITY OF ANY LIEN (INCLUDING ANY LIEN PREVIOUSLY HELD BY NATIONSBANK BUT NOW
HELD BY THE PLEDGEE) HELD BY THE PLEDGEE IN ANY OF THE PLEDGED COLLATERAL IN ANY
WAY WHATSOEVER.
[Signatures on Following Page]
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IN WITNESS WHEREOF, each Pledgor has executed and delivered this
Amended, Restated and Consolidated Pledge Agreement under seal as of this the
date first written above.
PLEDGORS:
PHYSICIANS' SPECIALITY CORP.
PSC ACQUISITION CORP.
By:______________________________
Name:_________________________
Title:________________________
Agreed to and Accepted:
NATIONSBANK, N.A., as Agent
By:_________________________________
Name:____________________________
Title:___________________________
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SCHEDULE 1 TO PLEDGE AGREEMENT
PLEDGED SHARES
[PLEDGOR 1]
<TABLE>
<CAPTION>
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Issuer No. of Securities Type of Securities Certificate Nos.
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Issuer No. of Securities Type of Securities Certificate Nos.
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EXHIBIT M
FORM OF AMENDED, RESTATED AND CONSOLIDATED SECURITY AGREEMENT
THIS AMENDED, RESTATED AND CONSOLIDATED SECURITY AGREEMENT is dated as
of July 31, 1998 (this "Security Agreement"), and executed and delivered by each
of the undersigned "Debtors" and the other Persons from time to time party
hereto pursuant to the execution and delivery of an Accession Agreement in the
form of Exhibit A to the Credit Agreement (as defined below) (all of such
undersigned, together with such other Persons each an "Debtor" and collectively,
the "Debtors"), in favor of NATIONSBANK, N.A., successor to NationsBank, N.A.
(South), as Agent (the "Secured Party").
WHEREAS, Physicians' Specialty Corp. (the "Borrower"), the financial
institutions initially party thereto and their assignees under Section 12.6
thereof (the "Lenders") and the Secured Party have entered into that certain
Amended and Restated Credit Agreement dated as of the date hereof (as the same
may be amended, supplemented, restated or otherwise modified from time to time,
the "Credit Agreement") pursuant to which the Lenders and the Swingline Lender
have agreed to extend certain financial accommodations to the Borrower subject
to the terms thereof;
WHEREAS, the Borrower owns directly or indirectly, all of the
outstanding capital stock and other equity interests of the other Debtors;
WHEREAS, the Borrower, the other Debtors 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 Lenders and the Swingline Lender through their collective efforts;
WHEREAS, each Debtor other than the Borrower acknowledges that it will
receive direct and indirect benefits from the Lenders and the Swingline Lender
making such financial accommodations available to the Borrower under the Credit
Agreement and, accordingly, each such Debtor guarantied the Borrower's
obligations to the Lenders and the Swingline Lender 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 each such Debtor in favor
of the Secured Party, the Lenders and the Swingline Lender;
WHEREAS, it is a condition precedent to the extension of such financial
accommodations by the Lenders and the Swingline Lender under the Credit
Agreement that the Debtors execute and deliver this Security Agreement;
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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 each Debtor, each Debtor hereby agrees 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, each Debtor hereby
collaterally assigns and pledges to the Secured Party for its benefit and the
benefit of the Lenders and the Swingline Lender, and grants to the Secured Party
for its benefit and the benefit of the Lenders and the Swingline Lender a
security interest and lien in and upon, the Collateral.
SECTION 2. REPRESENTATIONS AND WARRANTIES. Each Debtor represents and
warrants to the Secured Party, the Lenders and the Swingline Lender as follows:
(a) Name; Taxpayer ID Number. The exact legal name of each Debtor
is set forth on the signature page hereto or to the Accession Agreement by which
such Debtor became a party to this Agreement , and such Debtor does not conduct
and, during the five-year period immediately preceding the date of this Security
Agreement (or since the date of its formation if sooner), has not conducted,
business under any trade name or other fictitious name other than those set
forth on Schedule 2(a) attached hereto or Schedule I to the Accession Agreement
by which such Debtor became a party to this Agreement. The Internal Revenue
Service taxpayer identification number of such Debtor is set forth on such
Schedule.
(b) Liens. None of the Collateral or other properties of such
Debtor is, as of the date hereof, subject to any Lien, except Permitted Liens.
(c) Chief Executive Office. The chief executive office and
principal place of business of such Debtor and the books and records relating to
the Receivables and the other Collateral are located at such Debtor's address
set forth on Schedule 2(c) hereto or on Schedule I to the Accession Agreement by
which such Debtor became a party to this Agreement, and have been located there
for the five-year period immediately preceding the date hereof (or since the
date of its formation if sooner or as otherwise described on such Schedule
2(c)). During such period, such Debtor has not changed its name, identity or
corporate structure in any way.
(d) Places of Business. The states in which any place of business
of such Debtor are set forth on Schedule 2(c) attached hereto or on Schedule I
to the Accession Agreement by which such Debtor became a party to this
Agreement.
(e)______Security Interest. It is the intent of each 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.
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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 each Debtor and all other Persons,
in accordance with the terms of this Security Agreement, as security for the
Obligations.
(b) Each Debtor shall, at its sole cost and expense, take all
action that may be necessary or desirable, or that the Secured Party 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 Secured Party 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) Delivering to the Secured Party, endorsed or
accompanied by such instruments of assignment as the Secured Party 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;
(iii) At the request of the Secured Party, 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 Secured Party,
indicating that such document, chattel paper, or Collateral is subject
to the Security Interest; and
(iv) Executing and delivering financing statements,
pledges, designations, hypothecations, notices and assignments, in each
case in form and substance satisfactory to the Secured Party, relating
to the creation, validity, perfection, priority or continuation of the
Security Interest under the Uniform Commercial Code or other Applicable
Law.
(c) The Secured Party is hereby authorized to execute and file in
all necessary and appropriate jurisdictions (as determined by the Secured Party)
one or more financing or continuation statements (or any other document or
instrument referred to in Section 3(b)(iv) above) in the name of each Debtor and
to sign each Debtor's name thereto. Each Debtor authorizes the Secured Party to
file any such financing statement, document or instrument without the signature
of such 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.
(d) Each 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.
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SECTION 4. COVENANTS REGARDING COLLATERAL GENERALLY.
(a) Verification. The Secured Party shall have the right at any
time and from time to time, in its name in the name of a 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
in favor of a Debtor, such Debtor will immediately thereafter deliver such
instrument to the Secured Party, appropriately endorsed to the Secured Party.
(c) Defense of Title. Each Debtor shall at all times be the sole
owner, sole lessee or licensee, as applicable, of each and every item of its
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. Each Debtor shall maintain all
physical property that constitutes its Collateral in good and workable
condition, with reasonable allowance for wear and tear, and shall exercise
proper custody over all such property.
(e) Insurance. Each Debtor shall maintain, or cause to be
maintained, such insurance, if any, as may be required under Section 7.5 of the
Credit Agreement.
(f) Location of Office. Each 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 on Schedule 2(c) of
this Security Agreement or on Schedule I of the Accession Agreement by which
such Debtor became a party to this Agreement and such Debtor will not change the
location of such office and place of business or such books and records without
giving the Secured Party at least 30 days' prior written notice thereof.
(g) Change of Name, Structure, Etc. Without giving the Secured
Party at least 30 days' prior written notice, no Debtor will (i) change its
name, identity or structure or (ii) conduct business under any trade name or
other fictitious name other than those set forth on Schedule 2(a) hereto or on
Schedule I of the Accession Agreement by which such Debtor became a party to
this Agreement.
(h) Records Relating to Collateral. Each Debtor will at all times
keep complete and accurate records of all other Collateral.
(i) Inspection. The Secured Party (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 a 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 such Debtor's affairs and finances, insofar as the same are
reasonably related to the rights of the Secured Party hereunder with any Person,
to verify the amount, quantity, value and condition of,
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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. Each Debtor shall furnish to the Secured
Party such other information with respect to the Collateral as the Secured Party
may reasonably request from time to time.
(k) Payments Directly to Secured Party. The Secured Party may at
any time and from time to time after the occurrence and during continuation of a
Default or Event of Default notify, or request any 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 Secured Party or any agent or
designee of the Secured Party directly, at such address as may be specified by
the Secured Party. If, notwithstanding the giving of any notice, any account
debtor or other such obligor shall make payment to a Debtor, such Debtor shall
hold all such payments it receives in trust for the Secured Party, without
commingling the same with other funds or property of or held by such Debtor, and
shall promptly deliver the same to the Secured Party or any such agent or
designee immediately upon receipt by such 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, no Debtor shall 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 be deemed a
consent by the Secured Party, any Lender or the Swingline Lender to any other
sale or other disposition of any part or all of the Collateral.
(m) Proceeds of Collateral. Each Debtor shall account fully and
faithfully for, and upon the Secured Party's request during the continuance of
an Event of Default, promptly pay or turn over to the Secured Party, proceeds in
whatever form received in disposition in any manner of any of the Collateral. To
the extent practicable, each Debtor shall at all times keep its Collateral and
proceeds thereof separate and distinct from other property of such Debtor and
shall keep accurate and complete records of such Collateral and proceeds
thereof.
SECTION 5. THE SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Each Debtor
hereby irrevocably appoints the Secured Party as such Debtor's attorney-in-fact,
with full authority in the place and stead of such Debtor and in the name of
such Debtor or otherwise, from time to time upon the occurrence and during the
continuance of a Default or Event of Default in the Secured Party's discretion
to take any action and to execute any instrument or document which the Secured
Party may deem necessary or advisable to accomplish the purposes of this
Security Agreement and to exercise any rights and remedies the Secured Party 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
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amount and at such time or times as the Secured Party 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 Secured Party may deem necessary or
desirable for the collection of any of the Collateral or otherwise to enforce
the rights of the Secured Party with respect to any of the Collateral. The
power-of-attorney granted hereby shall be irrevocable and coupled with an
interest.
SECTION 6. THE SECURED PARTY MAY PERFORM. If a Debtor fails to perform
any agreement contained herein, the Secured Party may, with notice to such
Debtor, itself perform, or cause performance of, such agreement, and the
reasonable expenses of the Secured Party incurred in connection therewith shall
be payable by each Debtor under Section 12 hereof; provided, however, the
Secured Party's failure to give such notice shall not in any way affect the
validity of any action taken by the Secured Party under this Section.
SECTION 7. THE SECURED PARTY'S DUTIES. The powers conferred on the
Secured Party hereunder are solely to protect its interest in the Collateral and
shall not impose any duty upon the Secured Party 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 Secured Party shall
have no duty as to any Collateral. The Secured Party 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
Secured Party accords its own property; it being understood that the Secured
Party 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 connection
therewith shall be for the sole account of the Debtors and shall be added to the
Obligations.
SECTION 8. REMEDIES. The Secured Party 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 Secured Party may:
(i) without notice, demand or other process, and without
payment of any rent or any other charge enter any of a Debtor's
premises and, without breach of the peace, until the Secured Party
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 such
Debtor's equipment; and
(ii) in the exercise of the rights of the Secured Party
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 any Debtor therein, and each Debtor hereby grants a
license to the Secured Party for this purpose.
(b) Rights as a Secured Creditor. The Secured Party may exercise
all of the rights and remedies of a secured party under the Uniform Commercial
Code and under any other Applicable
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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 Secured Party, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms as the Secured
Party may deem commercially reasonable. Each Debtor agrees that, to the extent
notice of sale shall be required by law, at least ten days' notice to such
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 Secured Party shall not be obligated to
make any sale of Collateral regardless of notice of sale having been given. The
Secured Party 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
Secured Party may bid all or any portion of the Obligations at any such sale.
(c) Waiver of Marshaling. Each Debtor hereby waives any right to
require any marshaling of assets and any similar right.
(d) Appointment of Receiver. The Secured Party 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 any Debtor and to
exercise such power as the court shall confer upon such receiver.
(e) Receivables. The Secured Party shall have the exclusive right
to assert, either directly or on behalf of any Debtor, any and all rights and
claims such Debtor may have under any Receivables as the Secured Party 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 provided in the applicable provisions of the Credit Agreement.
Each 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, a Debtor may receive
any insurance proceeds payable by reason of any damage or destruction of any of
the Collateral. If the Secured Party shall receive any such insurance proceeds
which it is not otherwise entitled to retain, the Secured Party shall promptly
turn over such proceeds to the applicable Debtor or to whomsoever may be legally
entitled thereto.
SECTION 10. RIGHTS CUMULATIVE. The rights and remedies of the Secured
Party, each Lender and the Swingline Lender under this Security Agreement, the
Credit Agreement and each
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other document or instrument evidencing or securing the Obligations shall be
cumulative and not exclusive of any rights or remedies which any of them would
otherwise have, including, but not limited to, those rights afforded by the
Uniform Commercial Code and other Applicable Laws. In exercising its respective
rights and remedies the Secured Party, each Lender and the Swingline Lender may
be selective and no failure or delay 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. Each Debtor will pay, within 10 days of demand,
all reasonable fees and expenses actually incurred by the Secured Party in
connection with (a) the collection or enforcement of the Obligations including
the reasonable fees and disbursements of counsel to the Secured Party actually
incurred by the Secured Party and (b) the exercise by the Secured Party 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 any Debtor herefrom
shall in any event be effective unless the same shall be made in accordance with
the applicable provisions of the Credit Agreement.
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 in the case of the Borrower or the Guaranty in the case of any other
Debtor.
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 each Debtor, its successors and assigns and (iii) inure the
benefit of the Secured Party, the Lenders and the Swingline Lender, and their
respective successors and assigns. A 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, each Lender and the Swingline 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 16. INDEMNIFICATION. Each Debtor agrees to indemnify and hold
the Secured Party, each Lender, the Swingline Lender, any corporation
controlling, controlled by, or under
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common control with, the Secured Party, a Lender or the Swingline Lender and any
officer, attorney, director, shareholder, agent or employee of the Secured
Party, a Lender or the Swingline Lender 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 (each an "Indemnified Claim"), brought against or incurred by
an Indemnified Person, in any manner arising out of or, directly or indirectly,
related to or connected with this Agreement, including without limitation, the
exercise by the Secured Party of any of its rights and remedies under this
Agreement or any other action taken by the Secured Party pursuant to the terms
of this Agreement; provided, however, no Debtor shall be obligated to indemnify
or hold harmless an Indemnified Person for any Indemnified Claim to the extent
that such Indemnified Claim resulted from the gross negligence or willful
misconduct of such Indemnified Person. Each Debtor's obligations under this
section shall survive the termination of this Agreement and the payment in full
of the Obligations.
SECTION 17. 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 18. DEFINITIONS. (a) For the purposes of this Security
Agreement:
"Collateral" means, with respect to a Debtor, all of such 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 of such Debtor;
(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 such Debtor;
(c) any and all balances, credits, deposits, accounts, items and
monies of such Debtor now or hereafter with the Secured Party, any or any
affiliate of the Secured Party or deposited with the Secured Party or any
financial institution selected by the Secured Party pursuant to any lock box,
deposit, escrow or other collection agreement or otherwise, and all property of
such Debtor of every kind and description now or hereafter in the possession or
control of the Secured Party 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 such 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.
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"Debtor" has the meaning set forth in the first paragraph hereof.
"Financing Statements" means any and all financing statements executed
and delivered by or on behalf of a Debtor in connection with the perfection of
the Security Interest, together with any amendments thereto and any
continuations thereof.
"Obligations" means (a) all Obligations (as defined in the Credit
Agreement); (b) all obligations and indebtedness of each Debtor owing to the
Secured Party, any Lender or the Swingline Lender of every kind, nature and
description, under or with respect to the Credit Agreement, the Guaranty, this
Agreement or any of the other Loan Documents, 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; (c) all renewals,
modifications, extensions and supplements to any of the foregoing; and (d) any
reasonable costs or expenses actually incurred by the Secured Party or Secured
Party's counsel in connection with the realization of the security for which
this Agreement provides, including, without limitation, any reasonable costs or
expenses of any proceedings to which this Agreement may give rise.
"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.
(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.
SECTION 19. AMENDMENT, RESTATEMENT AND CONSOLIDATION. PRIOR TO THE DATE
HEREOF, CERTAIN OF THE DEBTORS EXECUTED AND DELIVERED SECURITY AGREEMENTS IN
FAVOR OF NATIONSBANK IN CONNECTION WITH THE EXISTING CREDIT AGREEMENT (THE
"EXISTING SECURITY AGREEMENTS"). SUCH DEBTORS AND THE SECURED PARTY ARE ENTERING
INTO THIS SECURITY AGREEMENT SOLELY TO AMEND, RESTATE AND CONSOLIDATE IN THEIR
ENTIRETY THE TERMS OF, AND THE OBLIGATIONS OWING UNDER AND IN CONNECTION WITH,
THE EXISTING SECURITY AGREEMENTS. THE PARTIES DO NOT INTEND THIS SECURITY
AGREEMENT NOR THE TRANSACTIONS CONTEMPLATED HEREBY TO BE, AND THIS SECURITY
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL NOT BE DEEMED OR
CONSTRUED TO BE, A NOVATION OF ANY OF THE OBLIGATIONS OWING BY ANY SUCH DEBTOR
UNDER OR IN CONNECTION WITH ANY OF THE EXISTING SECURITY AGREEMENTS. FURTHER,
THE PARTIES DO NOT INTEND
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THIS SECURITY AGREEMENT NOR THE TRANSACTIONS CONTEMPLATED HEREBY TO AFFECT THE
PERFECTION OR PRIORITY OF ANY LIEN (INCLUDING ANY LIEN PREVIOUSLY HELD BY
NATIONSBANK BUT NOW HELD BY THE SECURED PARTY) HELD BY THE SECURED PARTY IN ANY
OF THE PLEDGED COLLATERAL IN ANY WAY WHATSOEVER.
[Signature on Following Page]
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IN WITNESS WHEREOF, each Debtor has caused this Amended, Restated and
Consolidated Security Agreement to be duly executed and delivered under seal by
its duly authorized officers as of the day first above written.
DEBTORS:
PHYSICIANS' SPECIALTY CORP.
[OTHER DEBTORS]
By:______________________________
Name:_________________________
Title:________________________
ATTEST:
By:______________________________
Name:_________________________
Title:________________________
Agreed to and Accepted:
NATIONSBANK, N.A., as Agent
By:_____________________________________
Name:________________________________
Title:_______________________________
M-12
<PAGE> 169
SCHEDULE 2(a)
Trade Names and Tax ID Numbers
(To be Completed by Debtors
[DEBTOR 1]
Tradenames:
Taxpayer Indentification Number:___________________
[DEBTOR 2]
Tradenames:
Taxpayer Indentification Number:___________________
M-13
<PAGE> 170
SCHEDULE 2(c)
Places of Business
(To be Completed by Debtors)
[DEBTOR 1]
Chief Executive Office and Principal Place of Business:________________
Other Places of Business:______________________________________________
[DEBTOR 2]
Chief Executive Office and Principal Place of Business:________________
Other Places of Business:______________________________________________
M-14
<PAGE> 171
EXHIBIT O
FORM OF COMPLIANCE CERTIFICATE
For the quarter ending _________, _____
NationsBank, N.A., as Agent
600 Peachtree Street, 19th Floor
Atlanta, Georgia 30308
Attention: Walter Scott
Ladies and Gentlemen:
Reference is made to that certain Amended and Restated Credit Agreement
dated as of July 31, 1998 (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"), each of the financial institutions initially a signatory
thereto and their assignees pursuant to Section 12.6 thereof (the "Lenders") and
NationsBank, N.A., as Agent (the "Agent").
Pursuant to Section 8.3 of the Credit Agreement, the undersigned hereby
certifies to the Agent, the Lenders and the Swingline 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 Agent, the Lenders and
the Swingline Lender that the financial information of the Borrower attached
hereto as Schedule 1 is true and correct as of the date hereof.
O-1
<PAGE> 172
IN WITNESS WHEREOF, the undersigned has executed this certificate as of
the date first above written.
_________________________________
Name:_________________________
Title:________________________
O-2
<PAGE> 173
EXHIBIT P-1
FORM OF ACQUISITION CERTIFICATE
[For "Approved Acquisitions"]
This ACQUISITION CERTIFICATE ("Certificate") is delivered pursuant to
Section 9.6 of that certain Amended and Restated Credit Agreement dated as of
July 31, 1998 (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"), each of the financial institutions initially a signatory thereto
and their assignees pursuant to Section 12.6 thereof (the "Lenders") and
NationsBank, N.A., as Agent (the "Agent").
I. This Certificate is submitted with respect to an Acquisition for which
the Lenders' approval is required under the Credit Agreement because the cash
portion of the Acquisition Consideration equals or exceeds $10,000,000.
II. Borrower certifies and submits the following:
A. Not Hostile. The Acquisition is not opposed by the management
and the holders of the majority of the Target's voting shares or partnership
units.
B. New Subsidiary. The Acquisition ___ does ____ does not involve
the acquisition of, or the creation of, a corporate entity or other entity that
will be a New Subsidiary.
C. No Default. After giving effect to the Acquisition, no Default
or Event of Default will occur or be continuing.
D. Description of Acquisition. The following is a brief
description of the Acquisition including a description of (A) the purchase price
of such Acquisition (expressed as a multiple of the management fee to be paid as
a result of such Acquisition [both gross and net of accounts receivable]), (B)
the method and structure of payment thereof and (C) the other parties to such
Acquisition:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
P-1-1
<PAGE> 174
E. Description of Target. The following is a brief description of
the Target of such Acquisition, including (A) the Target's historical revenues
and (B) the management fee anticipated to be payable as a result of such
Acquisition:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
F. Acquisition Documents. Attached hereto as Exhibit A is a copy
of the signed letter of intent relating to the Acquisition.
G Historical Financial Statements. Attached hereto as Exhibit B
are the 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").
H. Pro Forma Compliance Certificate. Attached hereto as Exhibit C
is a certificate of the chief financial officer of the Borrower setting forth in
reasonable detail the pro forma computations necessary to determine whether the
Borrower would have been in compliance with the covenants contained in Sections
9.1(a) through (c). of the Credit Agreement determined on a combined basis with
the Target as of the end of the fiscal quarter most recently ended.
I. Pro Forma Financial Statements. Attached hereto as Exhibit D
are the pro forma financial statements in form reasonably satisfactory to the
Agent 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.
[Signatures on Following Page]
P-1-2
<PAGE> 175
IN WITNESS WHEREOF, the undersigned has executed this certificate as of
the date first above written.
PHYSICIANS' SPECIALTY CORP.
By:______________________________
Name:_________________________
Title:________________________
P-1-3
<PAGE> 176
EXHIBIT P-2
FORM OF ACQUISITION CERTIFICATE
[For Acquisitions Not Requiring Approval]
This ACQUISITION CERTIFICATE ("Certificate") is delivered pursuant to
Section 9.6 of that certain Amended and Restated Credit Agreement dated as of
July 31, 1998 (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"), each of the financial institutions initially a signatory thereto
and their assignees pursuant to Section 12.6 thereof (the "Lenders") and
NationsBank, N.A., as Agent (the "Agent").
I. This Certificate is submitted with respect to an Acquisition for which
the Lenders' approval is not required under the Credit Agreement because the
cash portion of the Acquisition Consideration is less $10,000,000.
II. Borrower certifies and submits the following:
A. Not Hostile. The Acquisition is not opposed by the management
and the holders of the majority of the Target's voting shares or partnership
units.
B. New Subsidiary. The Acquisition ___ does ____ does not involve
the acquisition of, or the creation of, a corporate entity or other entity that
will be a New Subsidiary.
C. No Default. After giving effect to the Acquisition, no Default
or Event of Default will occur or be continuing. If the Acquisition
Consideration payable by the Borrower and its Subsidiaries in connection with
such Acquisition exceeds $2,000,000, then attached hereto as Exhibit A is a
certificate of the chief financial officer of the Borrower setting forth in
reasonable detail the pro forma computations necessary to determine whether the
Borrower would have been in compliance with the covenants contained in Section
9.1(a) through (c) of the Credit Agreement determined on a combined basis with
the Target as of the end of the fiscal quarter most recently ended.
D. Description of Acquisition and Target. The following is a
brief description of the Acquisition including a description of (A) the purchase
price of such Acquisition (expressed as a multiple of the management fee to be
paid as a result of such Acquisition [both gross and net of accounts
receivable), (B) the method and structure of payment thereof, (C) the other
parties to such Acquisition, (D) the Target's historical revenues and (E) the
management fee anticipated to be payable as a result of such Acquisition:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
P-2-1
<PAGE> 177
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
IN WITNESS WHEREOF, the undersigned has executed this certificate as of
the date first above written.
PHYSICIANS' SPECIALTY CORP.
By:______________________________
Name:_________________________
Title:________________________
P-2-2
<PAGE> 1
EXHIBIT 10.54
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by an * and [], have been
separately filed with the Commission.
NETWORK AGREEMENT
BETWEEN
UNITED HEALTHCARE OF ALABAMA, INC.
AND
ALABAMA ENT CENTER, INC.
THIS AGREEMENT, effective October 1, 1998 ("Effective Date"), is
between United HealthCare of Alabama, Inc. ("Plan") and Alabama ENT Center,
Inc.("Company") for the purpose of setting forth the terms and conditions under
which Company shall provide certain services to Plan, as defined herein. For
services rendered on or after its Effective Date, this Agreement supersedes and
replaces any existing agreements between the parties relating to the same
subject matter.
SECTION 1
DEFINITIONS
BENEFIT CONTRACT: A benefit plan sponsored or issued by a Payor, which includes
health care coverage and contains the terms and conditions of a Member's
coverage. The Members to which this Agreement applies are described below.
CONTRACT YEAR: Beginning on the Effective Date, each 1-year period that this
Agreement is in effect.
GATEKEEPER BENEFIT CONTRACT: A Benefit Contract which requires the Member to
receive Health Services from or upon referral by a selected primary care
physician.
HEALTH SERVICES: The health care services and supplies covered under the
Member's Benefit Contract and which are listed in Exhibit 1 to this Agreement.
MEMBER: An individual who either (1) is employed and/or resides within the
Service Area and is properly covered under a non-Medicare/non-Medicaid Open
Access Benefit Contract ("Open Access Member"); (2) has selected or been
assigned to a primary care physician panel designated by Plan, and is properly
covered under a non-Medicare/non-Medicaid Gatekeeper Benefit Contract
("Gatekeeper Member"); or (3) is employed and/or resides within the Service
Area, has selected or been assigned to a primary care physician panel designated
by Plan, and is properly covered under a Benefit Contract sponsored or issued by
Plan pursuant to its risk contract with the Health Care Financing Administration
("Medicare Member"). Members do not include those individuals covered under a
Plan Medicare supplement benefit program.
OPEN ACCESS BENEFIT CONTRACT: A Benefit Contract which contains a component
where the Member may receive Health Services directly from a Participating
Provider of his or her choice without a referral by a selected primary care
physician.
<PAGE> 2
PARTICIPATING PROVIDER: A health care professional or facility, including
Providers and Company, that has or is governed by a written participation
agreement which is in effect with Plan, directly or through another entity, to
provide Health Services to selected groups of Members.
PAYOR: The entity or person authorized by Plan to access one or more of Plan's
networks of Participating Providers and that has the financial responsibility
for payment of Health Services covered by a Benefit Contract. Payors shall
include Plan, United HealthCare of Alabama, Inc. - FQ and self-insured
employers.
PROVIDER: An Otolaryngologist duly licensed and qualified under the laws of the
jurisdiction in which health care services are rendered, who has a 3-party
agreement in effect with Plan and Company, the form of which is attached as
Exhibit 3 (the "Participation Agreement"). Providers are subject to
credentialing and ongoing recredentialing by Plan. Providers do not include
those individuals under contract with Company who do not sign the Participation
Agreement.
SERVICE AREA: That portion of the geographic area served by Plan which is
defined in Exhibit 2.
SECTION 2
OBLIGATIONS OF COMPANY
2.1 PROVISION OF SERVICES. Company shall arrange for Providers to render to all
Members the Health Services which the Providers are licensed or certified to
render. Company shall, and shall cause Providers to, cooperate with all medical
management, utilization management, credentialing, quality assessment, peer
review, or other similar programs established by Plan.
2.2 PLAN REVERSAL OF DENIED CARE. If any Provider denies care to a Member, Plan
shall have the right to reverse the denial and require another agreeable
Provider to render such Health Services if Plan determines, in accordance with
its policies, that the Health Services are covered under the Member's Benefit
Contract. Plan shall consult with the Company Medical Director regarding the
Provider's denial of care. This provision is not intended to deny any Provider
the right to exercise his or her independent medical judgment.
2.3 DELEGATION OF RESPONSIBILITIES. Plan agrees that certain Plan
responsibilities under this Agreement may be delegated to Company with the
intention that Company, upon the prior approval of Plan, will receive assistance
in the implementation of those responsibilities by another entity ("Network
Manager"). As of the Effective Date, the parties agree that Alabama ENT Center,
Inc. shall be the Network Manager. The agreement between Company and the Network
Manager shall be substantially in the same form as the sample agreement attached
as Exhibit 4 ("Company/Network Manager Agreement"). Company may change Network
Managers only upon the prior written consent of Plan, which shall not be
unreasonably withheld. The responsibilities which may be delegated to Company
are assisting in the development of medical guidelines for review and
consideration by Plan, and certain utilization management and quality assessment
functions ("UM/QA Programs") and, if such delegation occurs, it shall be are
subject to the following requirements.
-2-
<PAGE> 3
1. Company's and/or the Network Manager's UM/QA Program standards
must meet Plan standards, state standards and current NCQA
standards.
2. Company and Network Manager must maintain all records,
operational processes and policies necessary for Plan to
monitor the effectiveness of the Company's and/or the Network
Manager's UM/QA Programs. During regular business hours and
upon reasonable notice and demand, Company shall assure that
Plan has access to and the right to audit all such records,
operational processes and policies, and the right to copy all
records free of charge. In accordance with applicable statutes
and regulations, regulatory agencies and accrediting agencies,
including the NCQA, shall have access to information and
records, or copies of such, within the possession of Company
or the Network Manager, which are pertinent to and involve
transactions related to this section. Plan and Company shall
maintain, and Company shall cause the Network Manager to
maintain, the privacy and confidentiality of all information
regarding Providers and Members in accordance with applicable
statutes and regulations.
3. Plan shall provide Company written notice of any deficiencies
in Company's and/or the Network Manager's UM/QA Programs, or
if UM/QA Programs meet Plan standards, state standards and
NCQA standards. Company shall, or shall require the Network
Manager to, correct, within 60 days of receipt of written
notice, any such deficiencies and provide Plan written notice
of such correction within the same time period.
4. Upon 60 days written notice to Company, Plan shall have the
right to assume some or all of the responsibilities delegated
to Company, or to require Company to select a new Network
Manager if, in Plan's judgment, the Network Manager failed to
comply with any material term of this Agreement or the
Company/Network Manager Agreement. The parties agree to work
together in good faith in the selection of a new Network
Manager, if necessary.
2.4 EXECUTION OF PARTICIPATION AGREEMENTS. Company shall be responsible for the
execution by Providers of all Participation Agreements. Plan shall have the
right to determine acceptance of all Otolaryngologists, and shall notify Company
upon acceptance or rejection by Plan of any Otolaryngologist.
To the extent any Providers are currently under contract with Plan through
another agreement, and to the extent the other agreement directly conflicts with
the Participation Agreement, the Participation Agreement shall supersede and
replace the other agreement, but only for the provision of Otolaryngology
services to Members.
If this Agreement terminates, Company's participation under the Participation
Agreement shall also terminate, and, payment to Providers for Health Services
rendered to Capitated Members shall then be paid by Payor pursuant to Appendix B
of the Participation Agreement.
-3-
<PAGE> 4
2.5 SERVICE AREA AND AVAILABILITY OF HEALTH SERVICES.
1. Company shall assure that Providers' offices are distributed
throughout Plan's Service Area, in a manner acceptable to Plan
and in locations which are reasonably accessible to all
Members. Company shall identify to Plan all office locations
and all types of health care professionals providing health
care services under the direction of Providers at each
location. Company shall provide 30 days prior written
notification to Plan of any changes in Provider office
locations or types of health care professionals.
2. Plan may require Company to establish new office locations and
increase the number of Providers upon 60 days prior written
notice if (1) Plan decides the then-current locations and
Providers are not adequate for the then-current Service Area;
or (2) the then-current Service Area is expanded. However,
Company shall establish such new office locations and increase
the number of Providers within the above time frame as long
as, within the first 30 days after receiving such notice from
Plan, Company determines it is economically feasible to do so.
3. If Company determines it is not economically feasible for
Company to establish such new locations and Providers due to
2.5.2(1), Company shall immediately notify Plan, at which time
the Exclusivity provision set forth in this Agreement, with
respect to the then-current Service Area, shall be cancelled,
and Plan shall be free to contract directly with the
Otolaryngologist in the then-current Service Area.
4. If Company determines it is not economically feasible for
Company to establish such new locations and Providers due to
2.5.2(2), Company shall immediately notify Plan, at which time
the Exclusivity provision set forth in this Agreement, with
respect to the expanded Service Area, shall be cancelled, and
Plan shall be free to contract directly with the
Otolaryngologist in the expanded Service Area.
2.6 EXCLUSIVITY. During the term of this Agreement, Plan shall not enter into an
agreement, for the provision of Health Services to Members, with any other
health care providers or networks of providers that specialize in Otolaryngology
and that are located in the Service Area, as modified from time to time by Plan.
This provision shall be in force beginning on the Effective Date and shall
continue to be in force until one of the following occurs: (1) one party gives
notice to the other party of its intent to terminate this Agreement; or (2) in
Plan's judgment and in accordance with Section 2.5, Company can not, for
whatever reason, provide or arrange for adequate access for Members.
2.7 PAYMENT TO PROVIDERS. Company shall be solely responsible for compensating
Providers for all Health Services rendered to Members, and Company and Providers
shall hold harmless and indemnify Plan and Payor against any claims for
compensation by a Provider for Health Services. The method and amount of
compensation to Provider shall be set forth in the Participation Agreement.
-4-
<PAGE> 5
The information below marked by * and [] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
2.8 REPRESENTATIONS AND WARRANTIES. Company represents and warrants that (1) it
has been and will continue to be properly formed pursuant to the laws of the
jurisdiction in which the services in this Agreement are rendered; (2) the
person signing this Agreement on behalf of Company is duly authorized to do so;
and (3) all documents reviewed by Plan prior to execution of this Agreement,
including the Company/Network Manager Agreement and any agreements Company may
have in effect with Providers, shall remain substantially similar to those
reviewed by Plan, and if Company intends to make any substantial changes which
would materially affect this Agreement, Company shall submit to Plan any
proposed changes for Plan's prior review and/or approval. Company agrees that
any such changes implemented without Plan's prior review and/or approval shall
not take effect with respect to this Agreement at Plan's sole discretion.
Company also agrees that if any terms in any Company documents conflict or
appear to conflict with this Agreement, including any Exhibits, as applicable,
the terms in this Agreement shall prevail.
SECTION 3
OBLIGATIONS OF PLAN OR PAYOR
3.1 PAYMENT TO COMPANY. On or before the 15th day of each month, Plan, on behalf
of Payor, shall pay Company for its services and for the provision of Health
Services rendered to Members by Providers, a per Member per month payment, as
set forth below ("Capitation Payment"). The Capitation Payment shall be
calculated based on the total number of Members for which payment of Health
Services is provided under this Agreement. The obligation for payment to Company
under this Agreement is solely that of Payor. Upon reasonable request by
Company, Plan shall provide Company with certain demographic information
relating to Members.
[*]
3.2 ADJUSTMENTS TO CAPITATION PAYMENTS. Any adjustments to the Capitation
Payment shall be reflected in the subsequent month's calculations. Such
adjustments shall be made as deemed necessary by Plan, based solely on the
difference between the actual number of Members and the estimated numbers of
Members.
3.3 LIMITATION OF LOSS. Within 120 days after the end of each Contract Year,
Plan shall determine what the cost of Health Services rendered to each Member by
Providers would have been if paid for on a fee schedule basis for that Contract
Year, using information from claims submitted, including a reasonable estimate
for incurred but not reported claims. The fee schedules will be determined by
Plan and, as of the Effective Date, shall be the then-current fee schedules for
Plan's HMO commercial ("Non-Medicare") and Medicare Benefit Contracts in the
Service Area, net of any Copayments and Deductibles and any withhold that would
have applied to such fee schedule payments.
1. Non-Medicare. Payor will reimburse Company [*] of all such
costs which would have exceeded [*] for any one
Non-Medicare Member. In addition, based on
-5-
<PAGE> 6
The information below marked by * and [ ] has been omitted pursuant to a
request for confidential treatment. The omitted portion has been separately
filed with the Commission.
information maintained by Plan and information provided by
Company, Plan will calculate the amounts paid to Company for
Non-Medicare Members, pursuant to section 3.1 and compare that
amount to [*] of the commercial fee schedule for that Contract
Year. If the amounts paid to Company are less than [*] of the
commercial fee schedule, net of any Copayments and Deductibles
and any withhold that would have applied to such fee schedule
payments, Company will be paid the difference. Payments to
Company pursuant to this section will be made within 30 days
after the amounts to be paid are determined by Plan.
2. Medicare. Payor will reimburse Company [*] of all such costs
which would have exceeded [*] for any one Medicare Member. In
addition, based on information maintained by Plan and
information provided by Company, Plan will calculate the
amounts paid to Company for Medicare Members, pursuant to
section 3.1 and compare that amount to [*] of the United
HealthCare Medicare fee schedule for that Contract Year. If
the amounts paid to Company are less than [*] of the United
HealthCare Medicare fee schedule, net of any Copayments and
Deductibles and any withhold that would have applied to such
fee schedule payments, Company will be paid the difference.
Payments to Company pursuant to this section will be made
within 30 days after the amounts to be paid are determined by
Plan.
3.4 RISK CORRIDOR FOR NON-PARTICIPATING PROVIDER SERVICES. Within 120 days after
the end of each Contract Year, Plan shall determine the total amounts paid to
non-Participating Providers who are Otolaryngologists in the Service Area, for
Health Services rendered to Open Access Members ("Out-of-Network Costs") during
the preceding Contract Year. Plan shall compare the total Capitation Payments
paid to Company for Open Access Members, as defined above, to the total
Out-of-Network Costs. Company shall reimburse Plan any amounts which exceed [*]
of the total Capitation Payments for Open Access Members, up to a maximum of
[*] of the total Capitation Payments for Open Access Members. Such amounts are
payable 30 days after Company receives notice from Plan of the amount due.
3.5 RECOVERIES FROM COORDINATION OF BENEFITS OR SUBROGATION. Plan or Payor will
retain 100% of any amounts recovered by Plan or Payor due to coordination of
benefits or subrogation. Except where otherwise required by Plan's COB rules,
Company or Provider shall retain 100% of any amounts collected by Provider due
to Copayments and Deductibles.
3.6 CLAIMS CONTACT PERSON. Upon request by Company, Plan shall provide Company
with the names of Plan contact persons who are assigned to Company to handle
specific types of questions regarding payment to Providers of claims for health
care services.
3.7 MEMBER PROTECTION PROVISION. The following shall apply when the Member is
covered under Benefit Contract sponsored or issued by a health maintenance
organization, including Plan and United HealthCare of Alabama, Inc. - FQ, and in
all other instances where required by applicable statutes and regulations:
-6-
<PAGE> 7
Company hereby agrees that in no event, including, but not limited to,
non-payment, insolvency of Payor, or breach of this Agreement, shall Company
bill, charge, collect a deposit from, seek compensation, remuneration or
reimbursement from, or have any recourse against any Member or persons other
than Payor acting on behalf of the Member for Health Services provided pursuant
to this Agreement. This provision shall not prohibit collection of Copayments or
Deductibles on Payor's behalf, made in accordance with the terms of the Member's
Benefit Contract.
Company further agrees that (a) this provision shall survive the termination of
this Agreement regardless of the cause giving rise to termination and shall be
construed to be for the benefit of the Members; and (b) this provision
supersedes any oral or written contrary agreement, now existing or thereafter
entered into, between Company and a Member or person acting on a Member's
behalf.
Company may not change, amend or waive any provision of this contract without
the prior written consent of Plan. Any attempts to change, amend, or waive this
contract are void.
SECTION 4
LIABILITY OF PARTIES
4.1 RESPONSIBILITY FOR DAMAGES. Each party shall be responsible for any and all
damages, claims, liabilities or judgments which may arise as a result of its own
negligence or intentional wrongdoing.
4.2 COMPANY'S INSURANCE. Company shall procure and maintain errors and omissions
liability insurance which covers the services Company is providing under this
Agreement, with minimum limits in the amounts of $1,000,000 per occurrence and
$3,000,000 aggregate. Company shall also procure and maintain comprehensive
general and/or umbrella liability insurance in the amount of $1,000,000 per
occurrence and aggregate. Company's errors and omissions liability insurance
shall be either occurrence or claims made with an extended period reporting
option under such terms and conditions as may be reasonably required by Plan and
available for Company to purchase. Prior to or within 30 days following
execution of this Agreement by Company and at each policy renewal thereafter,
Company shall submit to Plan in writing evidence of insurance coverage. Company
shall notify Plan in writing within 10 days of any changes in carriers,
termination of, renewal of, or other material changes in Company's liability
insurance, including reduction of limits, erosion of aggregate, changes in
retention or non-payment of premium.
4.3 PLAN'S INSURANCE. Plan, at its sole cost and expense, shall procure and
maintain comprehensive general liability, professional liability in the amounts
of $1,000,000 per occurrence and $3,000,000 aggregate, and other necessary
insurances to insure Plan and its employees, acting within the scope of their
duties, against claims for damages arising by reason of personal injury or
wrongful death occasioned directly or indirectly by Plan or by its employees in
connection with the performance of Plan's responsibilities under this Agreement.
-7-
<PAGE> 8
SECTION 5
LAWS, REGULATIONS AND LICENSURE
Company and Plan shall maintain all federal, state and local licenses,
certifications and permits, without material restriction, which each party is
obligated to provide under this Agreement, and shall comply with all applicable
statutes and regulations. By virtue of the execution of Provider Agreements by
Company and Providers, Company shall assure that Providers comply with all
statutory and regulatory requirements which are applicable to Providers
including, but not limited to, the requirements which are set forth in the
following sections of the Provider Agreement: 3.1, 3.2, 3.3, and 6.
SECTION 6
BOOKS AND RECORDS
6.1 MAINTENANCE OF AND PLAN ACCESS TO INFORMATION. Company shall maintain, in
accordance with standard and accepted practices, such financial, accounting and
claims records as shall be necessary, appropriate or convenient for Plan to
monitor Company's services under this Agreement. During regular business hours
and upon reasonable notice and demand, Plan shall have access to and the right
to audit all information and records within the possession of Company or
Providers which are related to the services provided under this Agreement,
including relating to Health Services rendered by Providers. Unless a longer
time period is required by applicable statutes or regulations, Plan shall have
such access during the term of this Agreement and for 5 years following its
termination. Records or copies of records requested by Plan shall be provided
within 14 days from the date such request is made, except in the case of an
audit by Plan where records or copies of records shall be provided at the time
of the audit. The photocopying of information reasonably requested by Plan
pursuant to this section shall be at no charge to Plan.
6.2 RIGHT TO PROVIDER INFORMATION. Upon reasonable notice by Plan, Company shall
provide Plan with all reasonably requested information regarding each Provider
to the extent Company possesses such information or can obtain it without undue
effort or expense. Plan reserves the right upon reasonable advance notice to
review any files related to the credentialing of any current or future Providers
during the term of this Agreement. The photocopying of information reasonably
requested by Plan pursuant to this section shall be at no charge to Plan.
6.3 REGULATORY AGENCY ACCESS TO INFORMATION. The federal, state and local
government and any of their authorized representatives shall have access to, and
Plan, Company and Providers are authorized to release, in accordance with all
applicable statutes and regulations, all information and records or copies of
such, within their possession, which are pertinent to and involve transactions
related to this Agreement, and access which is necessary to comply with statutes
and regulations applicable to Plan, Company or Providers.
6.4 PRIVACY OF INFORMATION. Company, Plan, Payor and Provider shall maintain the
privacy and confidentiality of all information regarding Members and Providers
in accordance with any applicable statutes and regulations.
-8-
<PAGE> 9
SECTION 7
RESOLUTION OF DISPUTES
In the event a dispute between Company and Plan or Payor arises out of or is
related to this Agreement, the parties to the dispute shall meet and negotiate
in good faith to attempt to resolve the dispute. In the event the dispute is not
resolved within 30 days of the date one party sent written notice of the dispute
to the other party, and if any party wishes to pursue the dispute, it shall be
submitted to voluntary mediation. If good faith negotiations and voluntary
mediation have failed to resolve the dispute within 60 days of the date written
notice was first provided, and if any party wishes to pursue the dispute, it
shall be submitted to binding arbitration in accordance with the rules of the
American Arbitration Association. In no event may arbitration be initiated more
than one year following the sending of written notice of the dispute. Any
arbitration proceeding under this Agreement shall be conducted in Birmingham,
Alabama. The arbitrators shall have no authority to award any punitive or
exemplary damages, or to vary or ignore the terms of this Agreement, and shall
be bound by controlling law. If the dispute pertains to a matter which is
generally administered by certain Plan or Company procedures, such as a
credentialing or quality assurance plan, the procedures set forth in that plan
must be fully exhausted by Company before any right to arbitration under this
section may be invoked.
SECTION 8
TERM AND TERMINATION
8.1 TERM. This Agreement shall begin on the Effective Date and shall remain in
effect for an initial term of 2 years, and shall automatically renew for
additional 1-year terms thereafter, unless this Agreement is terminated as
provided below.
8.2 TERMINATION. This Agreement may be terminated as follows:
1. by either party upon 120 days prior written notice to the
other party, which notice may be given no sooner than 120 days
prior to the end of the initial term.
2. by either party, upon 30 days prior written notice to the
other party, in the event of a material breach of this
Agreement by the other party; provided, however, that the
termination shall not take effect if the breaching party is
able to cure the breach within 20 days after the date notice
of termination to the breaching party is sent.
3. by Company, upon 120 days prior written notice to Plan, due to
an amendment made by Plan pursuant to Section 9.2, or if Plan
terminates a Provider's participation with Plan pursuant to
the Participation Agreement, and that Provider is a greater
than 25.0% owner of Company.
A Provider's participation with Plan and Company may be terminated pursuant to
the terms in the Participation Agreement. Company and Plan agree to consult with
each other in the termination of any Provider.
-9-
<PAGE> 10
8.3 INFORMATION TO MEMBERS. Company acknowledges the right of Plan to inform
Members of Company's and any Physician's termination. Company agrees to notify
and cooperate with Plan regarding any termination information Company, its
agents and employees, including Network Manager, wish to communicate directly to
Members. Company also agrees that, during the term of this Agreement, any
criticisms Company, its agents and employees, including Network Manager, may
have any regarding Plan, shall be communicated directly to Plan, and not to
Members. Violation of this prohibition may result in termination of this
Agreement by Plan for material breach.
SECTION 9
MISCELLANEOUS
9.1 AMENDMENT. This Agreement may be amended only in writing, and the amendment
must be executed by all parties.
9.2 REGULATORY AMENDMENT. Plan may also amend this Agreement to comply with
applicable statutes and regulations, and shall give notice to Company of such
amendment and its effective date. The amendment will not require agreement by
Company; however, Company may elect to terminate this Agreement at any time due
to such amendment pursuant to section 8.2.3. Any changes to this Agreement which
are required as a result of a filing with any regulatory agency shall be made
pursuant to this section.
9.3 ASSIGNMENT. Plan may assign all or any of its rights and responsibilities
under this Agreement to any entity controlling, controlled by, or under common
control with Plan. Company acknowledges that persons and entities under contract
with Plan may perform certain administrative services under this Agreement.
Company may assign any of its rights and responsibilities under this Agreement
to any person or entity with the prior written consent of Plan, which consent
shall not be unreasonably withheld.
9.4 RELATIONSHIP BETWEEN PLAN AND COMPANY AND PLAN AND PROVIDERS. The
relationships between Plan and Company and between Plan and Providers are solely
that of independent contractors, and nothing in this Agreement or otherwise
shall be construed or deemed to create any other relationship, including one of
employment, agency or joint venture.
9.5 CONFIDENTIALITY. Plan and Company shall treat the terms of this Agreement as
confidential and shall not disclose the terms of this Agreement to any third
party other than Company advisors; except that Plan may disclose certain terms
to Payors, and Company may disclose certain terms, other than specific dollar
amounts and percentages, to Providers. Plan may file the form of this Agreement,
other than specific financial terms, with any federal or state regulatory entity
as may be required by applicable law.
9.6 CERTAIN PHRASES. Whenever the phrase "Company shall cause Providers to" or
other similar phrases are used in this Agreement, such phrases shall mean that
Company shall have a written agreement with Provider under which Provider shall
agree to such obligation or action, and shall take diligent steps to enforce
such Agreement.
-10-
<PAGE> 11
9.7 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties in regard to its subject matter.
9.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state of Alabama.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION THAT MAY BE ENFORCED BY
THE PARTIES.
<TABLE>
<CAPTION>
<S> <C>
UNITED HEALTHCARE ALABAMA ENT CENTER, INC.
OF ALABAMA, INC. The Pavilion at Lake Hearn
3700 Colonnade Parkway 1150 Lake Hearn Drive, Suite 640
Birmingham, AL 35243 Atlanta, GA 30342
</TABLE>
By: /s/ Joseph M. Farley, Jr. By: /s/ Richard D. Ballard
------------------------- ----------------------
Title: Director Title: Director/President
---------------------- -------------------
Date: 9/3/98 Date: 9/1/98
----------------------- --------------------
Phone: (205) 977-6300 Phone: (404) 256-7535
---------------------- -------------------
-11-
<PAGE> 12
The information below marked by * and [] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission.
EXHIBIT 1
1. Health Services which are included in the Capitation Payment are
described below. Such Health Services and the corresponding CPT Codes
are described on a general basis. The parties agree that the CPT Codes
are subject to changes annually.
<TABLE>
<CAPTION>
Service CPT Code
------- --------
<S> <C>
[*]
</TABLE>
2. Health Services which are excluded from the Capitation Payment, but
which are reimbursed according to Plan's fee schedule, are generally
described as follows:
<TABLE>
<CAPTION>
Service CPT Code
------- --------
<S> <C>
[*]
</TABLE>
-12-
<PAGE> 13
The information below marked by * and [ ] has been omitted pursuant to a
request for confidential treatment. The omitted portion has been separately
filed with the Commission.
<TABLE>
<S> <C>
[*]
</TABLE>
-13-
<PAGE> 14
The information below marked by * and [ ] has been omitted pursuant to a
request for confidential treatment. The omitted portion has been separately
filed with the Commission.
<TABLE>
<S> <C>
[*]
</TABLE>
-14-
<PAGE> 15
EXHIBIT 2
Plan's Service Area
GATEKEEPER AND OPEN ACCESS PRODUCTS
<TABLE>
<CAPTION>
Counties Panels
- -------- ------
<S> <C>
Blount All except Cooper Green Hospital
Jefferson (for Jefferson County Group only)
Shelby
St. Clair
Walker
MEDICARE PRODUCT
Counties Panels
- -------- ------
Jefferson Brookwood Medical Center
Medical Center East
Lloyd Noland Hospital
St. Vincent's Hospital
HealthSouth Medical Center
Baptist Medical Center Princeton
Baptist Medical Center Montclair
Bessemer Carraway Medical Center
(not UAB or Carraway Methodist)
Shelby Shelby Medical Center
</TABLE>
-15-
<PAGE> 16
EXHIBIT 3
Participation Agreement
-16-
<PAGE> 17
EXHIBIT 4
Sample Company/Network Manager Agreement
Not Applicable
-17-
<PAGE> 18
The information below marked by * and [ ] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission
AMENDMENT
TO THE
NETWORK AGREEMENT
BETWEEN
UNITED HEALTHCARE OF ALABAMA, INC.
AND
ALABAMA ENT CENTER, INC.
THIS AMENDMENT shall be effective as of the date of signature by and
between UNITED HEALTHCARE OF ALABAMA, INC. ("Plan") and ALABAMA ENT CENTER,
INC., ("Company").
WHEREAS, Company and Plan are parties to that certain Agreement ("the
Agreement") effective {date} under which Company provides certain services to
individuals enrolled in United HealthCare; and
WHEREAS, Plan and Company desire to modify the Agreement as set forth
herein;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereby agree as follows:
SECTION 3 Obligations of Plan or Payor
Section 3.3 Limitation of Loss. The second (2nd) sentence shall be
amended to read as follows:
"The fee schedules will be determined by Plan and, as of the Effective
Date, shall be the fee schedules in place at the time of execution for
Plan's HMO commercial ("Non-Medicare") and Medicare Benefit Contracts
in the Service Area, net of any Copayments and Deductibles that would
have applied to such fee schedule payments."
Section 3.3 (1). Non-Medicare. The third (3rd) sentence of the
paragraph shall be amended to read as follows:
"If the amounts paid to Company are less than [*] of the commercial fee
schedule, net of any Copayments and Deductibles that would have applied
to such fee schedule payments, Company will be paid the difference."
Section 3.3 (2) Medicare. The third (3rd) sentence of the paragraph
shall be amended to read as follows:
"If the amounts paid to Company are less than [*] of the United
HealthCare fee schedule, net of any Copayments and Deductibles that
would have applied to such fee schedule payments, Company will be paid
the difference."
All other terms and conditions of the original Agreement and any
preceding addenda or amendments shall remain in full effect except for those
terms and conditions expressly overridden by this agreement.
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the 1st day of October, 1998.
UNITED HEALTHCARE ALABAMA ENT CENTER, INC.
OF ALABAMA, INC.
BY: /s/ Joseph M. Farley, Jr. BY: /s/ Richard D. Ballard
------------------------- ----------------------------
TITLE: Director TITLE: Director/President
---------------------- ----------------------
ADDRESS: 3700 Colonnade Parkway ADDRESS: The Pavilion at Lake Hearn
Birmingham, AL 35243 1150 Lake Hearn Drive, Suite 640
Atlanta, GA 30342
TELEPHONE: (205) 977-6300 TELEPHONE: (404) 256-7535
-2-
<PAGE> 20
The information below marked by * and [ ] has been omitted pursuant to a request
for confidential treatment. The omitted portion has been separately filed with
the Commission
UNITED HEALTHCARE
United HealthCare
Post Office Box 830637
Birmingham, AL 95283-0637
August 17, 1998
Mr. Mark Misiunas, M.P.H.
Physicians Specialty Corp.
The Pavilion at Lake Hearn
1160 Lake Hearn Drive, Suite 640
Atlanta, GA 30342
Dear Mark:
Please allow this letter to serve as further clarification of the contract
between United HealthCare of Alabama and Alabama ENT Center Inc.
With regard to out-of-network liability, the interpretation in Section 3.4 of
the agreement will not apply until the latter of [*] from the original
agreement effective date, or a reasonable number of physicians join the network
at [*].
Furthermore, if [*], Alabama ENT Center, Inc. will have the option to terminate
the Network Agreement with 90 days prior written notice to United HealthCare of
Alabama. [*]
If this is in keeping with your understanding, please indicate so in the space
provided below. We appreciate being a customer of yours.
Sincerely:
/s/ Joseph M. Farley, Jr.
- ----------------------------------
Joseph M. Farley, Jr.
Director, Physician Services
/s/ Richard D. Ballard 9-18-98
- ----------------------------------
Accepted and agreed Date
<PAGE> 1
EXHIBIT 10.55
AMENDED AND RESTATED
CLINIC SERVICES AGREEMENT
by and among
Cleveland Ear, Nose and Throat Center, Inc.
PSC Management Corp.
and
Physicians' Specialty Corp.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1. Definitions...................................................1
1.1 Clinic.........................................................1
1.2 Clinic Expenses................................................1
1.3 GAAP...........................................................3
1.4 Net Clinic Revenues............................................3
1.5 Physician Shareholders.........................................3
1.6 Practice Employees.............................................3
1.7 Pre-Distribution Margin........................................4
Section 2. Advisory Board................................................4
2.1 Formation and Operation of the Advisory Board..................4
2.2 Functions of the Advisory Board................................4
Section 3. Obligations of Manager........................................6
3.1 Provision of Management Services...............................6
3.2 Medical Offices................................................6
3.3 Furniture, Fixtures and Equipment..............................6
3.4 Financial Planning and Goals...................................6
3.5 Business Office Services.......................................7
3.6 Deposit of Net Clinic Revenues.................................9
3.7 Revenue Reports................................................9
3.8 Support Services...............................................9
3.9 Administrator..................................................9
3.10 Personnel......................................................9
3.11 Clinic Professional Services..................................10
3.12 Patient and Financial Records.................................10
3.13 Physician Recruitment.........................................11
3.14 Expansion of Clinic...........................................11
3.15 Performance of Business Office Services.......................11
3.16 Force Majeure.................................................11
3.17 Non-Clinic Expenses...........................................11
3.18 Budgets.......................................................12
Section 4. Obligations of Practice......................................13
4.1 Non-Clinic Expenses...........................................13
4.2 Professional Standards........................................13
4.3 Provider and Payor Relationships..............................15
4.4 Physician Powers of Attorney..................................15
4.5 Restrictive Covenants.........................................15
4.6 Professional Dues and Education Expenses......................17
4.7 Cooperation...................................................17
4.8 Corporation and Employment Agreements.........................17
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 5. Practice Compensation........................................18
5.1 Compensation to Manager.......................................18
5.2 Payment of Clinic Expenses....................................18
5.3 Draws.........................................................18
5.4 Determination and Payment of Practice Compensation............19
5.5 Assignment of Fees for Medical Services.......................19
Section 6. Term and Termination.........................................21
6.1 Term..........................................................21
6.2 Termination...................................................21
6.3 Duties and Remedies Upon Expiration or Termination............22
6.4 Repurchase of Assets..........................................23
6.5 Closing of Repurchase of Assets...............................25
Section 7. Representations and Warranties of Practice...................25
7.1 Organization and Good Standing................................26
7.2 No Violations.................................................26
7.3 Financial Information.........................................26
7.4 Professional Liability........................................26
Section 8. Insurance and Indemnity......................................26
8.1 Insurance to be Maintained by Practice........................26
8.2 Indemnification by Manager....................................27
8.3 Indemnification by Practice...................................27
8.4 Key Man Insurance.............................................27
Section 9. Assignment...................................................28
Section 10. Compliance with Regulations..................................28
10.1 Practice of Medicine..........................................28
10.2 Subcontracts..................................................28
Section 11. Independent Relationship.....................................29
11.1 Independent Contractor Status.................................29
11.2 Referral Arrangements.........................................30
Section 12. Confidential Information.....................................30
Section 13. Guaranty by Parent...........................................30
Section 14. Miscellaneous................................................31
14.1 Notices.......................................................31
14.2 Additional Acts...............................................32
14.3 Governing Law.................................................32
14.4 Captions......................................................32
14.5 Severability..................................................32
14.6 Changes in Reimbursement......................................33
14.7 Modifications.................................................33
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
14.8 No Rule of Construction.......................................33
14.9 Counterparts..................................................33
14.10 Binding Effect................................................33
14.11 Enforcement Rights............................................34
14.12 Costs of Enforcement..........................................34
Section 15. Physicians' Guaranty.........................................34
Section 16. Consent and Release..........................................35
Appendix A ..............................................................1
Exhibit A ..............................................................2
</TABLE>
iii
<PAGE> 5
AMENDED AND RESTATED
CLINIC SERVICES AGREEMENT
THIS AMENDED AND RESTATED CLINIC SERVICES AGREEMENT, made and executed
as of the 1st day of October, 1998 (the "Effective Date"), by and among
CLEVELAND EAR, NOSE, AND THROAT CENTER, INC., an Ohio corporation ("Practice");
PSC MANAGEMENT CORP., a Delaware corporation ("Manager"); and PHYSICIANS'
SPECIALTY CORP., a Delaware corporation ("Parent").
WITNESSETH:
WHEREAS, Practice, MedPartners Acquisition Corporation, a Delaware
corporation ("MAC"), and MedPartners/Mullikan, Inc., a Delaware corporation, now
known as MedPartners, Inc. ("MPI"), entered into that certain Clinic Services
Agreement dated July 30, 1996 (the "Prior Agreement");
WHEREAS, Manager and Parent have agreed to purchase all of MAC's and
MPI's right, title and interest in and to the Prior Agreement pursuant to that
certain Asset Purchase Agreement dated October 8, 1998, by and among Manager,
Parent, MAC, MPI and MedOhio, L.P. ("the Asset Purchase Agreement"), and as a
condition to consummation of such acquisition Manager, Parent and Practice
desire to amend and restate the Prior Agreement to change the parties thereto
and to amend and restate the Prior Agreement in its entirety in accordance with
the terms and conditions contained herein.
NOW THEREFORE, in consideration of the premises and the mutual promises
and covenants herein contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged by the parties to
this Agreement, Practice, Manager and Parent hereby agree as follows:
SECTION 1. DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
meanings ascribed to them below:
1.1 CLINIC. The term "Clinic" shall mean the professional medical
services rendered by Practice, utilizing the management services of Manager,
regardless of the location where such services are rendered.
1.2 CLINIC EXPENSES. The term "Clinic Expenses" shall mean the
operating and non-operating expenses incurred by Manager in the operation of the
Clinic and the Medical Offices, including, but not limited to: (a) salaries,
benefits and other direct costs (including, without
<PAGE> 6
limitation, professional liability insurance) of all employees of the Clinic
(but not including Practice Employees (except as otherwise set forth in this
Section 1.2(a)) or Physician-Shareholders) and the salaries, benefits, and other
direct costs (including, without limitation, professional liability insurance)
of Audiologists and leased Practice Employees, if any; (b) obligations under
leases or subleases for the Medical Offices, any central billing office or
off-site storage of the Clinic and equipment used by the Clinic; (c) personal
property, personal property "use" and intangible taxes assessed against assets
used by the Clinic; (d) charitable contributions budgeted and approved by
Manager and Practice; (e) depreciation and amortization (other than amortization
described in (k) below); (f) interest expenses (other than interest expenses
described in (1) below); and costs and expenses incurred in recruiting
physicians and other Clinic personnel; (g) utility expenses relating to the
Medical Offices, and all other costs relating to the Medical Offices, including
without limitation, costs of repairs, maintenance, telephone, electric, gas and
water utility expenses, general liability insurance, security, workers'
compensation for Manager employees, normal janitorial services, refuse disposal,
and medical and office supplies, including pharmaceuticals; (h) if billing and
collecting is conducted at the Medical Offices, the actual costs and expenses
for billing and collecting; if billing and collecting is conducted at Manager's
central billing office, a reasonable charge for billing and collecting as
determined by the Advisory Board; and (i) other expenses incurred by Manager in
carrying out its obligations under this Agreement, except as otherwise provided
herein.
The term "Clinic Expenses" shall not include: (j) any corporate overhead charges
from Parent (other than the reasonable charge for billing and collecting set
forth in (h) above), except as may be otherwise agreed upon; (k) any
amortization expense resulting from the amortization of service agreement costs
in connection with the execution of this Agreement, including without
limitation, development costs and goodwill purchased under the Asset Purchase
Agreement; (l) interest expense on indebtedness incurred by Manager or Parent to
finance the purchase price paid or withheld pursuant to, or the refinancing of
any liabilities assumed under, the Asset Purchase Agreement; (m) any federal,
state or local income taxes of Practice or Manager, or the costs of preparing
federal, state or local tax returns; (n) any salaries or benefits payable with
respect to Practice Employees (other than Audiologists or leased employees) or
Physician Shareholders or compensation paid or payable to physician independent
contractors; (o) physician licensure fees, board certification fees, hospital
staff privilege dues, and costs of membership in professional associations for
Practice Employees and Physician Shareholders; (p) costs of continuing
professional education for Practice Employees and Physician Shareholders; (q)
costs associated with legal, accounting and professional services incurred by or
on behalf of Practice; (r) liability judgments assessed against Practice,
Practice Employees or Physician Shareholders in excess of policy limits; (s)
direct personal expenses of Physician Shareholders or Practice Employees of a
kind which Practice has historically charged to its Physician Shareholders and
Practice Employees (including, but not limited to, cellular phone expenses, car
allowances, costs of employees providing personal services to particular
Physician Shareholders or Practice Employees, and like expenses personal in
nature); (t) any costs or expenses related to the acquisition or use of
Practice's name, or any successor or predecessor
2
<PAGE> 7
name, including, without limitation, any logo, trademark, or service mark
related thereto; or (u) any expenses which are expressly designated herein as
expenses or responsibilities of Practice.
Items (j) through (l) above are Manager Expenses (defined below), as well as
that part of item (m) that is attributable to Manager. Items (n) through (u)
above are Practice Expenses (defined below), as well as that part of item (m)
that is attributable to Practice.
1.3 GAAP. The term "GAAP" shall mean generally accepted accounting
principles set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants, in
statements and pronouncements of the Financial Accounting Standards Board, in
such other statements by such other entity, or other practices and procedures as
may be approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of determination. For purposes of
this Agreement, GAAP shall be applied in a manner consistent with the historic
practices used by Manager.
1.4 NET CLINIC REVENUES. The term "Net Clinic Revenues" shall mean
all revenues, computed on an accrual basis as defined by GAAP, (after taking
into account adjustments for uncollectable accounts, discounts, Medicare,
Medicaid, workers' compensation, professional courtesy discounts and other
write-offs) generated by or on behalf of the Clinic, Practice or their
respective employees or leased employees as a result of professional medical
services personally furnished to patients, and other fees or income generated by
such persons in their capacity as Physician Shareholders, Practice Employees,
physician independent contractors, employees and leased employees of Practice or
the Clinic, whether rendered in an inpatient or outpatient setting and whether
rendered to health maintenance organizations, preferred provider organizations,
Medicare, Medicaid or other patients, including, but not limited to, payments
received under any capitation arrangement (including, without limitation,
monthly capitation payments, bonus payments, etc.). The term "Net Clinic
Revenues" shall also include any ancillary services revenues for services
provided at the Medical Offices. The term "Net Clinic Revenues" shall not
include medical director fees, expert witness fees, or amounts received as
honoraria or from royalties from inventions, and shall exclude any consulting
fees or related compensation paid by Manager or Parent to any Physician
Shareholder or Practice Employee.
1.5 PHYSICIAN SHAREHOLDERS. The term "Physician Shareholders"
shall mean those individuals who are duly licensed to practice medicine in the
State of Ohio and who are shareholders of Practice.
1.6 PRACTICE EMPLOYEES. The term "Practice Employees" shall mean:
(a) those individuals who are duly licensed to practice medicine in the State of
Ohio and who are employees of Practice, or those individuals who are otherwise
under contract with Practice as employees or leased employees of the Practice to
provide physician and/or medical services to
3
<PAGE> 8
patients of the Clinic and whose services (as determined on a full-time
equivalency basis) are separately billed, specifically including nurse
practitioners, certified registered nurse anesthetists, physician assistants,
Fellows, surgical assistants, certified nurse midwives, individuals with a
Masters in Social Work degree, physical therapists, and psychologists with a
Masters or a Doctorate degree; and (b) those individuals (other than those
described in Section 1.6(a)) who, by reason of their job description or actual
function, provide services that, under federal law, regulation or policy as of
the Effective Date, must be billed through and by a licensed physician and who
are therefor required to be employees or leased employees of Practice.
1.7 PRE-DISTRIBUTION MARGIN. The term "Pre-Distribution Margin"
shall mean the amount equal to Net Clinic Revenues less all Clinic Expenses.
SECTION 2. ADVISORY BOARD.
2.1 FORMATION AND OPERATION OF THE ADVISORY BOARD. Manager and
Practice shall establish an Advisory Board responsible for advising Manager in
connection with the development of management and administrative policies for
the overall operation of the medical practice of Practice. The Advisory Board
shall consist of four (4) members. Manager shall designate, in its sole
discretion and from time to time, two (2) members of the Advisory Board.
Practice shall designate, in its sole discretion and from time to time, two (2)
members of the Advisory Board. Except as may otherwise be provided, the act of a
majority of the members of the Advisory Board shall be the act of the Advisory
Board.
2.2 FUNCTIONS OF THE ADVISORY BOARD. The Advisory Board shall
review, evaluate and make recommendations to Practice and Manager with respect
to the following matters:
(a) Annual Budgets. All annual capital and operating
budgets prepared by Manager, as set forth in Section 3.4, shall be subject to
review and approval by the Advisory Board, which may recommend changes therein.
(b) Physician Employment and Recruitment. The Advisory
Board shall advise Manager and Practice with respect to the types of physicians
required for the efficient operation of the medical practice of Practice and the
content of all physician employment and recruitment contracts to be utilized by
Practice. Before any binding offer of employment is extended by Practice,
Practice shall provide Manager at least fifteen (15) days prior notice.
(c) Strategic Planning. The Advisory Board shall make
recommendations to Manager regarding the development of long-term strategic
planning objectives for Practice.
(d) Capital Expenditures. The Advisory Board shall make
recommendations to Manager regarding the priority of major capital expenditures
for the medical practice of Practice.
(e) Capital Improvements and Expansion. Any renovation
and expansion plans and capital equipment expenditures with respect to the
operations of the medical practice of
4
<PAGE> 9
Practice shall be subject to the Advisory Board's approval and shall be based,
in the reasonable judgment of Manager, upon economic feasibility, physician
support, productivity and then-current market conditions.
(f) Provider and Payor Relationships. The Advisory Board
shall review and advise Manager and Practice with respect to the establishment
or maintenance of relationships with institutional healthcare providers and
payors.
(g) Ancillary Services. The Advisory Board shall review
and make recommendations to Manager and Practice regarding the provision of
ancillary services based upon the pricing, access to and quality of such
services.
(h) Patient Fees; Collection Policies. At least annually,
the Advisory Board shall review and advise Practice with respect to the fee
schedule for all physicians and ancillary services rendered by the Clinic.
Billing and collecting shall be conducted at the Medical Offices until such time
as the Advisory Board determines that billing and collecting should be conducted
elsewhere.
(i) Advertising. The Advisory Board shall advise Practice
with respect to advertising and other marketing of services including design of
signage, logo and letterhead. All such advertising and marketing shall be in
accordance with applicable laws.
(j) Exceptions to Inclusion in Net Practice Revenues. The
Advisory Board will review and make recommendations to Manager and Practice with
respect to the proposed exclusion of any revenue from Net Clinic Revenues.
(k) Grievance Referrals. The Advisory Board shall
consider, review and make recommendations to Manager and Practice with respect
to any matters arising in connection with the operations of Practice that are
not specifically addressed in this Agreement and as to which Manager or Practice
requests consideration by the Advisory Board.
(l) Quality Assurance and Utilization Review. The
Advisory Board shall advise Manager and Practice regarding all quality assurance
and utilization review programs undertaken by Practice either independently or
in connection with any managed care contracts maintained by Practice, and
Manager shall assist the Practice in preparing, reviewing, revising and
performing the quality assurance and utilization review functions of the
Practice in consultation with the Advisory Board.
Notwithstanding any contrary provision of this Agreement, it is acknowledged and
agreed that other than as provided in Section 2.2(a), recommendations of the
Advisory Board are intended for the advice and guidance of Manager and Practice
and that the Advisory Board does not have the power to bind Manager or Practice.
Where discretion with respect to any matter is vested in Practice under the
terms of this Agreement, Practice shall have ultimate responsibility for the
exercise of such discretion, notwithstanding any recommendation of the Advisory
Board. Where discretion with respect to any matter is vested in Manager under
the terms of this Agreement, Manager shall have ultimate responsibility for the
exercise of such discretion, notwithstanding
5
<PAGE> 10
any recommendation of the Advisory Board. Manager and Practice shall, however,
take such recommendations of the Advisory Board into account in good faith in
the exercise of such discretion.
SECTION 3. OBLIGATIONS OF MANAGER.
3.1 PROVISION OF MANAGEMENT SERVICES. Manager shall provide to the
Clinic the management services, personnel, equipment and supplies provided for
in this Section 3 (collectively "Management Services"). Manager shall provide
the Management Services at the medical offices set forth in Exhibit A attached
hereto and incorporated herein by this reference, or at such other place or
places as may be agreed upon by the parties. The medical offices at which the
Management Services are to be provided are hereinafter referred to as the
"Medical Offices."
3.2 MEDICAL OFFICES. Manager shall pay out of Net Clinic Revenues
all Clinic Expenses incurred from the Effective Date of this Agreement forward
with respect to the Medical Offices. Manager shall consult with Practice with
respect to the condition, use and needs of the Medical Offices, as expanded,
improved or relocated from time to time.
3.3 FURNITURE, FIXTURES AND EQUIPMENT. Manager agrees to provide
to the Clinic those supplies and items of furniture, fixtures and equipment as
are determined by Manager, after consultation with Practice, to be necessary
and/or appropriate for Practice's operations at the Medical Offices during the
term of this Agreement (all such items of furniture, fixtures and equipment are
collectively referred to hereinafter as the "FFE") subject, however, to the
following conditions:
(a) Practice shall have the use of the FFE only during
the term of this Agreement and title to the FFE shall be and remain in Manager
at all times during such term.
(b) Manager shall be responsible for, and pay for out of
Net Clinic Revenues, all repairs and maintenance of the FFE, except for repairs
and maintenance replacement necessitated by the gross negligence or willful
misconduct of Practice, its employees and agents.
3.4 FINANCIAL PLANNING AND GOALS. Manager will prepare, in
consultation with Practice, annual capital budgets for the Clinic, reflecting in
reasonable detail anticipated revenues and sources and uses of capital for
growth in the Clinic. The Advisory Board shall be responsible for determining
the amount of capital to be invested in the Clinic annually, including, without
limitation, amounts for capital used to acquire or affiliate with other
physician practices that become part of the Clinic, and other capital used for
capital expenditures and working capital. Interest expense shall be charged for
funds utilized for capital, whether the source of capital is from outside
sources or from Parent. Interest charges on funds from Parent will be computed
at a floating rate that is equal to the current blended borrowing rate in effect
for actual
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and available outside borrowings of Parent. Nothing contained herein shall
prevent Manager from transferring excess cash to Parent for other uses provided
funds are made available when required hereunder.
3.5 BUSINESS OFFICE SERVICES. Practice hereby appoints Manager as
its sole and exclusive manager and administrator of all business functions and
services related to Practice's services at the Clinic during the term of this
Agreement. Without limiting the generality of the foregoing, in providing the
Management Services, Manager shall perform the following functions:
(a) Manager shall evaluate, negotiate and administer all
managed care contracts on behalf of Practice and shall consult with Practice on
all professional or clinical matters relating thereto. All managed care
contracts will be subject to review and approval by the Advisory Board as set
forth in Section 2.2(f).
(b) Manager shall provide ongoing assessment of business
activity including product line analysis, outcomes monitoring and patient
satisfaction.
(c) Manager shall be responsible for ordering and
purchasing all medical and office supplies reasonably required in the day-to-day
operation of the Clinic at the Medical Offices.
(d) Except as provided in Section 3.5(e) below, Manager
shall bill and collect from patients, third party payors and fiscal
intermediaries all professional fees for medical services and for ancillary
services performed at the Medical Offices by Practice and Practice's employees
and agents, including, but not limited to, Physician Shareholders and Practice
Employees. Practice hereby appoints Manager for the term of this Agreement as
its true and lawful attorney-in-fact for the following purposes:
(i) To bill patients , third party payors and
fiscal intermediaries in Practice's name and on Practice's behalf, under its
provider number(s), in the name and on behalf of all Physician Shareholders and
Practice Employees;
(ii) To collect accounts receivable and claims
for reimbursement generated by such billings in Practice's name and on
Practice's behalf, and in the name and on behalf of all Physician Shareholders
and Practice Employees;
(iii) To receive, on behalf of Practice and all
Physician Shareholders and Practice Employees, payments from patients, Blue
Shield, insurance companies, Medicare, Medicaid and all other payors with
respect to services rendered by Practice, Physician Shareholders and Practice
Employees, and Practice hereby covenants to forward such payments to Manager for
deposit;
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(iv) To take possession of and endorse in the
name of Practice, or in the name of any Physician Shareholder or Practice
Employee, any notes, checks, money orders, insurance payments and any other
instruments received as payment of such accounts receivable and claims for
reimbursement; and
(v) To collect in Practice's name and on its
behalf, and in the name and on behalf of all Physician Shareholders and Practice
Employees, all Net Clinic Revenues.
(e) All amounts received in payment of Medicare,
Medicaid, and CHAMPUS accounts receivable shall be deposited into an account in
the name of and controlled by Practice (the "Physician Deposit Account") with a
bank whose deposits are insured by the Federal Deposit Insurance Corporation.
The Physician Deposit Account shall at all times be maintained and funds
withdrawn in accordance with the provisions in the Billing Agreement for
Governmental Receivables of even date herewith between Manager, Practice and
Physician Shareholders in the form attached hereto as Exhibit 3.5(e) and made a
part hereof (the "Billing Agreement"). The Physician Deposit Account shall be
maintained by Manager solely for the purpose of collecting amounts in payment of
Medicare, Medicaid, and CHAMPUS accounts receivable unless otherwise expressly
agreed by Manager.
3.6 DEPOSIT OF NET CLINIC REVENUES. Except as provided in Section
3.5(e) and Exhibit 3.5(e), during the term of this Agreement, all revenues
collected, which revenues were generated by or on behalf of the Clinic, Practice
or their respective employees, shall be transferred to or deposited directly
into a bank account at its "Credit Facility Lender" (as defined in Section
5.5(c)), of which Manager shall be the owner and from which Manager shall have
the sole right to make withdrawals ("Account"). Manager shall maintain its
accounting records in such a way as to clearly segregate Net Clinic Revenues
from other funds of Manager. Practice hereby appoints Manager as its true and
lawful attorney-in-fact to deposit in the Account all Net Clinic Revenues
collected. Practice and Manager hereby agree to execute from time to time such
documents and instructions as shall be required by the Credit Facility Lender
and mutually agreed upon to effectuate the foregoing provisions and to extend or
amend such documents and instructions. Any funds in the Physician Deposit
Account which are not made available to Manager due to any revocation of its
authority under the Billing Agreement shall, at Manager's election, be deemed
delivered for purposes of this section.
3.7 REVENUE REPORTS. Manager shall maintain revenue reports, as
determined by the books and records of Manager, with respect to the Clinic.
Revenue reports shall reflect the total gross revenues and Net Clinic Revenues
generated by or on behalf of the Clinic. Manager shall provide Practice with
monthly revenue reports and shall provide a year-end revenue report for the
Clinic within ninety (90) days after the end of each calendar year. Practice
shall have the right, upon reasonable notice to Manager, to inspect the books
and records of Manager as they relate to the determination of Net Clinic
Revenues, Clinic Expenses, Pre-Distribution Margin, or Practice Compensation.
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3.8 SUPPORT SERVICES. Manager shall provide all reasonable and
necessary computer, bookkeeping, billing and collection services, accounts
receivable and accounts payable management services, laundry, linen, janitorial
and cleaning services and management services to improve efficiency and workflow
systems and procedures, as determined by Manager after consultation with
Practice.
3.9 ADMINISTRATOR. Manager shall provide an Administrator to
manage and administer all of the day-to-day business functions and services of
the Clinic. The Administrator will be selected by Manager with the prior consent
of Practice, which consent shall not be unreasonably withheld. Manager shall
determine the salary and fringe benefits of the Administrator, but shall consult
with Practice with respect thereto. Manager shall offer [JANET REITZ] such
position as Administrator.
3.10 PERSONNEL. Manager shall provide such non-physician personnel
as determined by the Advisory Board to be reasonably necessary for the effective
operation of the Clinic at the Medical Offices, subject, however, to the
following:
(a) Manager shall provide to Practice all nurses, medical
records personnel and other medical support personnel as requested by Practice
and as shall be reasonably necessary for the operation of Practice's medical
practice at the Medical Offices. As to the nursing and non-physician medical
support personnel provided under this Section 3.10(a), Manager shall determine
the salaries and benefits of all such personnel, but shall consult with Practice
with respect thereto. All nursing, audiologists and other non-physician medical
support personnel required by law or regulatory authority to be billed through
and by a licensed physician shall be either employees or leased employees of the
Practice. Manager shall also recommend the assignment of all such personnel to
perform services at the Medical Offices; provided, however, that Practice shall
have the right to approve, based solely on professional competence, the
assignment of all non-physician medical support personnel to provide services at
the Medical Offices and Manager shall, at Practice's request, reassign and
replace such personnel from time to time who are not, in Practice's judgment,
adequately performing the required professional services.
(b) Manager shall provide to Practice all business office
personnel (i.e., clerical, secretarial, bookkeeping and collection personnel)
reasonably necessary for the maintenance of patient records, collection of
accounts receivable and upkeep of the financial books of account to the extent
that same are required for, and directly related to, the operation of the
Clinic. As to the personnel provided under this Section, Manager shall determine
the salaries and fringe benefits of all such personnel, but shall consult with
Practice with respect thereto.
(c) In exercising its judgment with regard to personnel
as provided in Sections 3.8 and 3.9 and this Section 3.10, Practice agrees not
to discriminate against such personnel on the basis of race, religion, age, sex,
disability or national origin.
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(d) Notwithstanding any provision herein to the contrary,
the Advisory Board shall determine the number of Audiologists to be employed by
Practice and the salaries and benefits payable with respect thereto.
3.11 CLINIC PROFESSIONAL SERVICES. Manager shall not be responsible
for any services requested by or rendered to any individual, employee or agent
of Practice not directly related to the operations of the Clinic, nor shall
Manager be responsible for rendering any legal or tax advice or services or
personal financial services to Practice or any employee or agent of Practice.
3.12 PATIENT AND FINANCIAL RECORDS. Manager shall maintain all
files and records relating to the operation of the Clinic, including, but not
limited to, customary financial records and patient files. The management of all
files and records shall comply with all applicable federal, state and local
statutes and regulations, and all files and records shall be located so that
they are readily accessible for patient care, consistent with ordinary records
management practices. Practice shall supervise the preparation of, and direct
the contents of, patient medical records, all of which shall be and remain
confidential and the property of Practice. Manager shall have reasonable access
to such records and, subject to applicable laws, regulations and accreditation
policies, Manager shall be permitted to retain true and complete copies of such
records. Practice shall have reasonable access to such financial records and,
subject to applicable laws, regulations and accreditation policies, Practice
shall be permitted to retain true and complete copies of such records. Each of
Manager and Practice hereby agrees to preserve the confidentiality of such
patient financial and medical records and to use the information in such records
only for the limited purposes necessary to perform the services to be performed
hereunder and, within the limits of its responsibilities hereunder, to ensure
that provision is made for appropriate care for patients of the Clinic.
3.13 PHYSICIAN RECRUITMENT. At the request of Practice, Manager
shall perform administrative services relating to the recruitment of physicians
for Practice. Practice shall determine the need for additional physicians in
consultation with Manager. It shall be the responsibility of Practice to
interview and select physicians for Practice. All such physicians recruited by
Manager as may be accepted by Practice shall be shareholders or employees of
Practice (if such physicians are hired as employees) and not of Manager. Any
expenses incurred in the recruitment of physicians shall be treated as Clinic
Expenses.
3.14 EXPANSION OF CLINIC. Manager shall use reasonable efforts to,
and will assist Practice in attempting to, add additional office-based
procedures, establish satellite office(s), as determined by Practice and Manager
to be beneficial to the Clinic. Upon request of Practice, Manager will consult
and advise Practice regarding development of relationships and affiliations with
physicians and other specialists, hospitals, networks, health maintenance
organizations, preferred provider organizations, and similar organizations to
assist in the continued growth and development of the Clinic. Practice will not
enter into any agreements with respect to any such matters without the prior
consent of Manager.
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3.15 PERFORMANCE OF BUSINESS OFFICE SERVICES. Manager is hereby
expressly authorized to perform its business office services hereunder in
whatever reasonable manner it deems appropriate to meet the day-to-day
requirements of the non-medical business functions of Practice's medical
practice at the Medical Offices. Manager may perform some or all of the business
office functions of Practice at locations other than at the Medical Offices.
3.16 FORCE MAJEURE. Manager shall not be liable to Practice for
failure to perform any of the services required herein in the event of strikes,
lockouts, calamities, acts of God, unavailability of supplies or other events
over which Manager has no control for so long as such event continues and for a
reasonable period of time thereafter.
3.17 NON-CLINIC EXPENSES. Manager shall be solely responsible for
the payment of all costs and expenses incurred in connection with Manager's
operations that are not Clinic Expenses or Practice Expenses, but are expenses
of Manager ("Manager Expenses"), including, but not limited to, any corporate
overhead charges from Parent (other than the reasonable charge for billing and
collecting set forth in 1.2(h) above), except as may be otherwise agreed upon.
Manager shall pay all Manager Expenses as they fall due; provided, however,
Manager may contest in good faith any claimed Manager Expenses as to which there
is any dispute regarding the nature, existence or validity of such claimed
Manager Expenses.
3.18 BUDGETS.
(a) As part of the Manager's responsibilities under this
Agreement, the Manager shall prepare annual capital and operating budgets for
the Practice for each budget period in accordance with the provisions of this
Section 3.18. As used herein, a budget period means a calendar year of Practice
unless otherwise provided.
With respect to each budget period following the initial
budget period, the Manager shall prepare and deliver a preliminary draft of each
such budget to the Advisory Board at least 30 days prior to the commencement of
the budget period to which such budget relates. The Advisory Board shall provide
any comments or suggested changes to such preliminary drafts to the Manager
within 15 days after receipt thereof. The Manager shall then submit a revised
budget to the Advisory Board for approval by the Advisory Board no later than 15
days after the end of the 15-day period referred to in the immediately preceding
sentence. The Advisory Board shall then approve or disapprove of, but not modify
or amend the revised budget within 15 days of receiving it. The foregoing time
periods during which drafts of the budget are to be delivered and approved shall
be subject to adjustment from time to time as determined appropriate by the
Advisory Board and Manager.
If prior to the commencement of any budget period, the
Advisory Board has not yet approved the budget or provided comments or suggested
changes to the proposed budget, then the Manager and the Advisory Board will
work diligently in good faith to obtain such approvals, and until such approvals
are obtained, with respect to the budget, (i) as to any disputed
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line items, the immediately preceding budget period's budget shall be
controlling until such time, if any as agreement is reached on the amounts to be
allocated to such disputed line items, specifically as follows: (A)
non-recurring or extraordinary items shall not be continued from the budget for
the immediately preceding budget period, (B) if the previous budget was for a
budget period of less than 12 months, it shall be annualized, (C) all items
subject to an automatic increase, such as rent and taxes, shall be budgeted at
the increased rate, (D) for items such as employee salaries and benefits, the
total salary and benefits number shall be adjusted to take into account changes
in the number and classifications of employees employed or contracted, (E) as to
any line items which are not in dispute, the revised budgets submitted by the
Manager shall control, and (F) those items reasonably deemed medically necessary
by Practice shall be acquired. With respect to the initial budget for the
calendar year 1999, Manager shall deliver a draft of such budget to the Advisory
Board within sixty (60) days of the date of this Agreement. If the Advisory
Board has not approved the budget for 1999 within fifteen (15) days thereafter,
actual 1998 costs of the Practice shall be deemed to be the "immediately
preceding budget period's budget" for purposes of this paragraph.
(b) The parties agree that the Manager shall have the
authority and discretion in its reasonable business judgment to reallocate cost
and expense line items within the budget, so long as the pre-tax income targets
within such budgets are not adversely impacted and Manager's staffing
obligations under Sections 3.8, 3.9 and 3.10 are not materially adversely
affected.
(c) Manager agrees that expenses of the Practice which
are shared by any other practices which are managed by Manager in Cleveland,
Ohio shall be allocated as "Clinic Expenses" to Practice and such other
practices based on actual expenses incurred where such expenses are directly
identifiable by Manager, or on a pro rata basis in accordance with the
respective "Net Clinic Revenues" of Practice and such other practices, or such
other fair and reasonable basis as Manager may determine.
SECTION 4. OBLIGATIONS OF PRACTICE.
4.1 NON-CLINIC EXPENSES. Practice shall be solely responsible for
the payment of all costs and expenses incurred in connection with Practice's
operations that are not Clinic Expenses or Manager Expenses ("Practice
Expenses"), including, but not limited to, insurance premiums for policies of
malpractice insurance, deductibles under such policies of malpractice insurance,
any and all costs and expenses incurred with respect to claims under such
policies of malpractice insurance, salaries and benefits, workers' compensation,
retirement plan contributions, health, disability and life insurance premiums,
payroll taxes, cellular phone and automobile expenses incurred by or in
connection with the employment of all Physician Shareholders and Practice
Employees. Practice shall pay all Practice Expenses as they fall due; provided,
however, Practice may contest in good faith any claimed Practice Expenses as to
which there is any dispute regarding the nature, existence or validity of such
claimed Practice Expenses.
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4.2 PROFESSIONAL STANDARDS.
(a) It is expressly acknowledged by the parties to the
Agreement that all medical services provided at the Medical Offices shall be
performed solely by physicians duly licensed to practice medicine in the State
of Ohio. The professional services provided by Practice and its Physician
Shareholders and Practice Employees shall at all times be provided in accordance
with applicable ethical standards, laws and regulations applying to the medical
profession. Practice will cooperate with Manager in taking steps to resolve any
utilization review or quality assurance issues which may arise in connection
with the Clinic. If any disciplinary actions or professional liability actions
are initiated against any Physician Shareholder or Practice Employee, Practice
shall immediately inform Manager of such action and the underlying facts and
circumstances. Practice shall establish and maintain procedures to assure the
consistency and quality of all professional medical services provided at or
through the Clinic. Practice agrees to implement and maintain a program to
monitor the quality of medical care provided by Practice, and Manager shall
render administrative assistance to Practice on an as-requested basis to assist
Practice in implementing and maintaining such program.
(b) Practice shall at all times during the term of this
Agreement use its best efforts to assure that each physician employed by the
Practice shall:
(i) maintain an unrestricted license to practice medicine
and surgery in all its branches in the State of Ohio and maintain good
standing with the Medical Board of the State of Ohio;
(ii) maintain a federal Drug Enforcement Administration
certificate without restrictions, to prescribe controlled substances as
are customarily prescribed by physicians practicing in Physician's
practice specialties;
(iii) maintain hospital medical staff memberships and
clinical privileges at those facilities at which such Physician treats
or sees patients;
(iv) perform all professional services through Practice
and in accordance with all laws and with prevailing standards of care
and medical ethics in accordance with any Employment Agreement between
Practice and Physician and with practice protocols and policies as
adopted from time to time by Practice;
(v) maintain Physician's skills through continuing
education and training, including participation in those programs
designated by Practice from time to time;
(vi) maintain eligibility for insurance under the
professional liability policy or policies at a commercially reasonable
cost as determined by Practice carried by or on behalf of Practice for
Physician's practice specialties, to the extent Physician is to be
covered by such policy or policies pursuant to the Physician Employment
Agreement;
(vii) maintain Physician's board-certified or board
eligible status in Physician's practice specialties;
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(viii) qualify and maintain Physician's qualification as a
participating provider in the Medicare and State of Ohio Medicaid
programs;
(ix) abide by the Principles of Medical Ethics of the
American Medical Association, and the ethical principles or statements
as adopted and amended from time to time by the American Board of
Otolaryngology;
(x) comply with all laws applicable to the conduct of
Physician's activities, as well as with the articles of incorporation,
bylaws and other corporate governance documents of Practice and other
rules or regulations adopted from time to time by Practice;
(xi) promptly disclose to Practice (i) the commencement or
pendency of any legal action, administrative proceeding or
investigation, medical staff or professional disciplinary actions
against Physician or (ii) the existence of any circumstances that could
reasonably be expected to form the basis of or lead to any such action,
proceeding or investigation;
(xii) abide by any guidelines adopted by Practice or any
person or entity providing management services to Practice designed to
encourage the appropriate, efficient and cost-effective delivery of
medical services, subject always to the clinical judgment of Physician,
and cooperate with and participate in all Practice programs regarding
quality assurance, utilization review, risk management and peer review;
(xiii) maintain appropriate and accurate medical records in
accordance with accepted medical standards and Practice policies with
respect to all patients evaluated and treated; and
(xiv) satisfy such other reasonable requirements as are
established from time to time by Practice.
4.3 PROVIDER AND PAYOR RELATIONSHIPS. Manager, upon request of
Practice, shall consult with Practice on matters relating to the establishment
or maintenance of relationships with institutional healthcare providers and
third-party payors, including, but not limited to, managed care programs, health
maintenance organizations and preferred provider organizations. Practice shall
not be required by Manager to sign up or contract with any particular provider
or payor.
4.4 PHYSICIAN POWERS OF ATTORNEY. Practice shall require all
Physician Shareholders and physician Practice Employees to execute and deliver
to Manager powers of attorney, satisfactory in form and substance to Manager,
appointing Manager as attorney-in-fact for each such Physician Shareholder and
physician Practice Employee for the purposes set forth in Sections 3.5 and 3.6.
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4.5 RESTRICTIVE COVENANTS.
(a) Practice acknowledges and agrees that the services to
be provided by Manager hereunder are feasible only if Practice operates a
vigorous medical practice to which its Physician Shareholders and Practice
Employees devote their full time and attention. Accordingly, Practice agrees
that, during the term of this Agreement, it shall not, without the prior written
consent of Manager, establish, operate or provide physician services at any
medical office, clinic or other health care facility providing services
substantially similar to those offered by the Clinic. Practice shall cause its
Physician Shareholders and physician Practice Employees to enter into written
agreements, satisfactory in form and substance to Manager, pursuant to which
Physician Shareholders and physician Practice Employees shall agree not to
establish, operate or provide physician services, without the prior written
consent of Manager, at any medical office, clinic or other health care facility
providing services substantially similar to those provided by the Clinic during
the term of this Agreement. If such person shall cease to be a Physician
Shareholder or physician Practice Employee during the term of this Agreement,
for a period of eighteen (18) months following the termination of the
professional relationship between such person and Practice such person shall
agree not to establish, operate, or provide physician services, without the
prior written consent of Manager, at any medical office, clinic or other health
care facility providing services substantially similar to those provided by the
Clinic within Cleveland, Ohio or any location within a ten (10) mile radius of
the Medical Offices. Manager shall be expressly named as a third-party
beneficiary to such agreements between Practice and each Physician Shareholder
and physician Practice Employee. Notwithstanding the foregoing, the Advisory
Board may waive the restrictive covenant set forth in this Section 4.5(a) as it
applies to any individual physician who ceases to be a Physician Shareholder or
physician Practice Employee.
(b) During the term of this Agreement and for a period of
eighteen (18) months following the termination or expiration of this Agreement,
Practice shall not, without the prior written consent of Manager, employ, hire
or contract for services with any employee or former employee of Manager, nor
shall Practice solicit any such person to leave the employ of Manager. For
purposes of this Section 4.5(b), a "former employee" shall be any person who was
employed by Manager within six (6) months prior to the termination or expiration
of this Agreement. Practice shall cause its Physician Shareholders and physician
Practice Employees to enter into written agreements, satisfactory in form and
substance to Manager, pursuant to which such persons shall agree to be bound by
the same restrictions as set forth in this Section 4.5(b) with respect to
Practice, and Manager shall be expressly named as a third-party beneficiary to
such agreements between Practice and each Physician Shareholder and physician
Practice Employee. This Section 4.5(b) shall not apply to the individuals set
forth on Schedule 4.5(b).
(c) If this Agreement is terminated by Manager pursuant
to Sections 6.2(a) hereof, Practice shall not, for a period of eighteen (18)
months following the effective date of such termination, engage or contract with
any person, firm or entity (or group of affiliated entities) for the provision
of comprehensive management services to the Clinic of the kind contemplated by
this Agreement.
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(d) Manager and Practice acknowledge and agree that
Manager's remedy at law for any breach or attempted breach of the foregoing
provisions will be inadequate and that Manager shall be entitled to specific
performance, injunction or other equitable relief in the event of any such
breach or attempted breach, in addition to any other remedies which might be
available at law or in equity. If the duration, scope or geographic area
contemplated by the foregoing provisions is determined to be unenforceable by a
court of competent jurisdiction, the parties agree that such duration, scope or
geographic area shall be deemed to be reduced to the greatest scope, duration or
geographic area which would be enforceable.
(e) If the equitable relief contemplated by the foregoing
paragraph is not available for any reason, or if any court of competent
jurisdiction shall refuse to enforce the foregoing paragraph for reasons of
public policy or otherwise, the parties agree that Manager shall be entitled to
receive liquidated damages from the breaching party in an amount equal to two
times the then-current Practice Compensation (as hereinafter defined), or, in
the event of a breach by a Physician Shareholder or physician Practice Employee,
two times the breaching person's aliquot share of the then-current Practice
Compensation. The parties acknowledge and agree that such liquidated damages are
appropriate because actual damages to Manager would be speculative and difficult
to determine at the time of any such breach.
4.6 PROFESSIONAL DUES AND EDUCATION EXPENSES. Practice and its
Physician Shareholders and Practice Employees shall be solely responsible for
all costs and expenses associated with membership in professional associations
and continuing professional education. Practice shall ensure that each of its
Physician Shareholders and Practice Employees participates in such continuing
medical education activities as are necessary for such physicians to remain
current in their respective specialties, including, but not limited to, the
minimum continuing medical education requirements imposed by applicable laws and
policies of applicable specialty boards.
4.7 COOPERATION. Practice shall, and shall cause its Physician
Shareholders and Practice Employees to, exercise diligence in assisting Manager
in keeping costs and expenses of the Clinic to a minimum without sacrificing
professional standards or high quality patient care. Practice shall exercise due
care to ensure that, when being used by Physician Shareholders and Practice
Employees, medical equipment of the Clinic is being used in a safe and efficient
manner, and shall timely report any unsafe or unsatisfactory medical equipment
of which Practice, or any of its Physician Shareholders or Practice Employees,
is aware. Practice acknowledges and agrees that on execution of this Agreement,
Manager will implement its own policies and procedures, including, but not
limited to, policies and procedures regarding cash management and revenue
controls. These policies and procedures will be implemented as soon as
reasonably practicable after execution of this Agreement and may be revised or
amended by Manager from time to time thereafter during the term of this
Agreement. Practice agrees to
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cooperate with any such implementation, revision, or amendment of Manager's
policies and procedures. Practice also agrees to cooperate with, and participate
in, any patient satisfaction surveys and/or outcomes management surveys or
programs instituted or implemented by Manager.
4.8 CORPORATION AND EMPLOYMENT AGREEMENTS. Practice represents
that it has delivered to Manager a true and correct copy of the Close
Corporation Agreement and Physician Employment Agreements between Practice and
its Physician Shareholders and will cause all new shareholders of Practice to
execute such agreements prior to becoming a shareholder (or employee) in
Practice. Practice shall not amend the Close Corporation Agreement so as to
cause the Close Corporation Agreement to contravene or conflict with this
Agreement and shall not amend the Physician Employment Agreements between
Practice and its physician employees. Practice shall not waive any material
rights thereunder without the prior consent of Manager. The shareholders of the
Practice are and shall be individual physicians.
SECTION 5. PRACTICE COMPENSATION.
5.1 COMPENSATION TO MANAGER. As compensation for services rendered
in connection with the Clinic ("Manager Compensation"), Manager shall receive
compensation determined as set forth on Appendix A, attached hereto and made a
part hereof, which amends, restates and replaces Appendix A in the Prior
Agreement. Practice hereby releases MAC, MPI, Manager and Parent, and their
respective successors and assigns, from any obligation to pay compensation under
Part 2 of Appendix A of the Prior Agreement. Manager shall be entitled, on a
monthly basis, to pay itself from Net Clinic Revenues the amount specified in
Section 5.1 and Appendix A as Manager Compensation for providing its services
under this Agreement. Practice acknowledges and agrees that the amount to be
retained by Manager as Manager Compensation in accordance with this Agreement is
reasonable and fair, given the undertakings of Manager as set forth in this
Agreement and the other benefits and value that accrue to Practice as a result
of Manager's services under this Agreement.
5.2 PAYMENT OF CLINIC EXPENSES. Manager shall pay all Clinic
Expenses, as they fall due, out of Net Clinic Revenues; provided, however, that
Manager may, in the name of and on behalf of Practice, contest in good faith any
claimed Clinic Expenses as to which there is any dispute regarding the nature,
existence or validity of such claimed Clinic Expenses.
5.3 DRAWS.
(a) Following the end of each month, Manager shall make
an estimate of the collection percentage ("Estimated Collection Percentage") for
such month's gross production. The Estimated Collection Percentage may vary
depending on historical collection percentages, changes in fee schedules,
changes in third party reimbursement, bad debt write-offs and similar
adjustments. The Estimated Collection Percentage will then be applied to such
month's gross production, resulting in estimated Net Clinic Revenues for such
month. Clinic Expenses will
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then be subtracted from estimated Net Clinic Revenues, resulting in estimated
Pre-Distribution Margin for such month. Draws attributable to such month are
determined by applying the formula discussed under Section 5.1 and Appendix A to
the estimated Pre-Distribution Margin. Manager shall pay Practice such amount by
the 15th day of the following month.
(b) Practice and Manager mutually recognize and
acknowledge that it is the intent of the parties that all management fees paid
to Manager under this Agreement be reasonable and approximate Manager's actual
costs and expenses plus a reasonable profit. Payment of the management fee is
not intended to be, and shall not be, interpreted or applied as permitting the
Manager to share in Practice's fees for professional services rendered, but is
acknowledged as the parties' negotiated agreement as to the reasonable, fair
market value of the management services being furnished by the Manager pursuant
to this Agreement, considering the nature and volume of such services.
5.4 DETERMINATION AND PAYMENT OF PRACTICE COMPENSATION.
(a) Within one hundred eighty (180) days after the end of
each calendar year, Manager will adjust the Estimated Collection Percentage
based on actual net cash collections attributable to the gross production for
such year, and shall determine actual Net Clinic Revenues and actual
Pre-Distribution Margin. Within forty-five (45) days after the end of such one
hundred eighty (180) day period, Manager shall cause a payment to be made to
Practice in the following amount, as determined from the financial statements
prepared by Manager pursuant to Section 3.7: Practice shall be paid an amount
equal to the aggregate Practice Compensation payable with respect to such
calendar year, less the aggregate sum of all draws by Practice pursuant to
Section 5.3 during such period. All Pre-Distribution Margin in excess of
Practice Compensation shall be the sole property of Manager.
(b) In the event that, after making the calculation
contemplated by Section 5.4(a), it is determined that draws by Practice under
Section 5.3 for the applicable calendar year exceed the amount which Practice is
ultimately entitled to receive with respect to such year (an "overdraft"),
Practice shall pay the amount of such overdraft to Manager within thirty (30)
days after receipt by Practice of written notice from Manager specifying the
amount of such overdraft or, at the option of Practice, Practice shall have the
amounts payable to it pursuant to Section 5.1 with respect to the next
succeeding four months reduced pro rata by the amount of such overdraft. In the
event Practice disagrees with Manager's computation of Net Clinic Revenues,
Pre-Distribution Margin or Practice Compensation, it shall have the right to
review, upon reasonable notice to Manager, the books and records, and other
documents used in determining such amounts.
5.5 ASSIGNMENT OF FEES FOR MEDICAL SERVICES.
(a) The parties acknowledge and agree that the
compensation and benefits payable to Practice pursuant to Section 5.1 are
intended to be in lieu of charges which Practice or
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its Physician Shareholders or Practice Employees would otherwise earn for the
provision of medical services to patients of their medical practice and which
Practice or the Physician Shareholders or Practice Employees would otherwise
bill and retain for their own account. Accordingly, Practice hereby irrevocably
assigns and sets over to Manager all of its rights to receive payment for such
services and retain such payment for its own account, and shall obtain a like
assignment from all Physician Shareholders and Practice Employees; provided,
that in the case of revenue and accounts receivable generated as a result of
billing for services under Medicare or Medicaid such assignment shall only be an
assignment of proceeds of accounts receivable consistent with the provisions of
applicable law. Except as otherwise provided in Section 3.5(e) and the Billing
Agreement, Practice shall endorse (and shall cause each Physician Shareholder or
Practice Employee to endorse) any payments received on account of such services
to the order of Manager and shall take such other actions as may be necessary to
confirm to Manager the rights set forth in this Section 5.5(a).
(b) Without limiting the generality of the foregoing, it
is the intent of the parties that the assignment to Manager of the rights
described in Section 5.5(a) above shall be inclusive of the rights of Practice
and the Physician Shareholders and Practice Employees to receive payment with
respect to any services rendered prior to the effective date of any expiration
or termination of this Agreement. Practice agrees and shall cause each Physician
Shareholder and Practice Employee to agree, that Manager shall retain the right
to collect and retain for its own account any accounts receivable relating to
any such services rendered prior to the effective date of any such expiration or
termination ("Pre-Termination Accounts Receivable"), and that the proceeds
thereof will be transferred to Manager's account to be applied in accordance
with Section 3.5 and 3.6 and the other provisions of this Agreement and the
Billing Agreement.
(c) Practice acknowledges that it is the intent of
Manager and Parent to grant a security interest in the Pre-Termination Accounts
Receivable to the lender(s) under its working capital credit facility (whether
one or more, "Credit Facility Lender"), as in effect from time to time. Practice
agrees that such security interest of the Credit Facility Lender is intended to
be a first priority security interest and is superior to any right, title or
interest which may be asserted by Practice or any Physician Shareholder or
Practice Employee with respect to Pre-Termination Accounts Receivable or the
proceeds thereof. Practice further agrees, and shall cause each Physician
Shareholder and Practice Employee to agree, that, upon the occurrence of an
event which, under the terms of such working capital credit facility, would
allow the Credit Facility Lender to exercise its right to collect
Pre-Termination Accounts Receivable and apply the proceeds thereof toward
amounts due under such working capital credit facility, the Credit Facility
Lender will succeed to all rights and powers of Manager under the powers of
attorney provided for in Sections 3.6 and 4.4 above as if such Credit Facility
Lender had been named as the attorney-in-fact therein.
(d) If, contrary to the mutual intent of Manager and
Practice, the assignment of rights described in this Section 5.5 shall be
deemed, for any reason, to be ineffective as an outright assignment, then
Practice and each Physician Shareholder and Practice Employee shall, effective
as of the date of this Agreement, be deemed to have granted (and Practice does
hereby
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grant, and shall cause each Physician Shareholder and Practice Employee to
grant) to Manager a first priority lien on and security interest in and to any
and all interests of Practice and such Physician Shareholders and Practice
Employees in any accounts receivable generated by the medical practice of
Practice and its Physician Shareholders and Practice Employees or otherwise
generated through the operations of the Clinic, and all proceeds with respect
thereto, to secure the payment to Manager of all Net Clinic Revenues in excess
of Practice Compensation, and this Agreement shall be deemed to be a security
agreement to the extent necessary to give effect to the foregoing. Practice
shall execute and deliver, and cause each Physician Shareholder and Practice
Employee to execute and deliver, all such financing statements as Manager may
request in order to perfect such security interest. Practice shall not grant
(and shall not suffer any Physician Shareholder or Practice Employee to grant)
any other lien on or security interest in or to such accounts receivable or any
proceeds thereof.
SECTION 6. TERM AND TERMINATION.
6.1 TERM. The term of this Agreement shall continue from the
Effective Date and end on July 30, 2036. Thereafter, this Agreement may be
extended for separate and successive five-year periods (each such five-year
period referred to hereinafter as an "extended term"), under such terms and
conditions as stated herein with respect to any such extended term; provided,
however, that: (a) Practice and Manager mutually agree to extend the term hereof
and mutually agree upon the documents to be in effect during any such extended
term hereto, not less than sixty (60) days prior to expiration of the initial
term or extended term then in effect; and (b) Practice is not in material
default hereunder on the date of commencement of the extended term.
6.2 TERMINATION.
(a) Manager may terminate this Agreement, and have no
further liability or obligation hereunder, upon the occurrence of one or more of
the following events:
(i) Practice ceases to materially perform its
material duties and responsibilities hereunder or materially breaches any
material term or condition of this Agreement, and such cessation or breach
continues uncured for a period of sixty (60) days (or such longer period as is
reasonably necessary to cure if such cessation or breach is of such a nature
that it cannot be cured within such sixty (60) day period and if Practice
commences the cure within such sixty (60) day period and diligently prosecutes
such cure to completion) after Practice's receipt of written notice specifying
such breach; provided, however, that if Practice or any Physician Shareholder or
Practice Employee breaches Section 4.5 hereof, Manager may terminate this
Agreement immediately upon written notice to Practice.
(ii) Practice voluntarily files a petition in
bankruptcy or makes an assignment for the benefit of creditors or otherwise
seeks relief from creditors under any federal
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or state bankruptcy, insolvency, reorganization or moratorium statute, or
Practice is the subject of an involuntary petition in bankruptcy which is not
set aside within sixty (60) days of its filing.
(iii) Practice materially breaches or defaults
under any other written agreement with Manager, subject to any applicable notice
and cure periods provided in any such agreement.
(iv) The representations and warranties made by
Practice in this Agreement cease to be true and correct.
(v) If the license of any Physician Shareholder
or physician Practice Employee to practice medicine in the State of Ohio is
suspended or revoked, or he is subjected to any final disciplinary action by the
Ohio State Board of Medicine or any similar body on any grounds, other than
minor, immaterial or insubstantial grounds, or he dies or becomes mentally or
physically disabled and, by reason of such disability, is in the reasonable
judgment of Manager unable to conduct his medical practice on substantially the
same basis as it was conducted prior to such disability, or if any Physician
Shareholder retires or sells his interest in Practice and ceases to practice
medicine on substantially a full-time basis as a Practice Employee; provided,
however, that in any such event Practice shall have one hundred eighty (180)
days from the date on which Manager gives Practice written notice of its intent
to terminate this Agreement pursuant to this Section 6.2(a)(v) to replace the
affected physician with another physician satisfactory to Manager, in its
reasonable discretion; provided further, however, that Manager and Practice may
agree to bring in a locum tenens to provide physician services during such one
hundred eighty (180) day period.
(b) Practice may terminate this Agreement, and have no
further liability hereunder, upon the occurrence of one or more of the following
events:
(i) Manager ceases to materially perform its
material duties and responsibilities hereunder or materially breaches any term
or condition of this Agreement, and such cessation or breach continues uncured
for a period of sixty (60) days (or such longer period as is reasonably
necessary to cure if such cessation or breach is of such a nature that it cannot
be cured within such sixty (60) day period and if Practice commences the cure
within such sixty (60) day period and diligently prosecutes such cure to
completion) after Manager's receipt of written notice specifying such breach.
(ii) Manager voluntarily files a petition in
bankruptcy or makes an assignment for the benefit of creditors or otherwise
seeks relief from creditors under federal or state bankruptcy, insolvency,
reorganization or moratorium statute, or Manager is the subject of an
involuntary petition in bankruptcy which is not set aside within sixty (60) days
of its filing.
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(iii) Manager fails to remit to Practice the
balance of the Pre-Distribution Margin minus Manager Compensation when due and
payable hereunder and such failure continues uncured for a period of ten (10)
days after Manager's receipt of written notice from Practice specifying such
failure.
6.3 DUTIES AND REMEDIES UPON EXPIRATION OR TERMINATION. Upon the
expiration or earlier termination of this Agreement, neither party shall have
any further obligation hereunder with the exception of: (a) obligations accruing
prior to the date of such expiration or earlier termination; and (b)
obligations, promises and covenants contained herein which are expressly
provided to extend beyond the term hereof, including, without limitation, any
indemnities, restrictive covenants, and access to books and records. Upon the
expiration or earlier termination of this Agreement, Manager Compensation shall
be prorated between the parties to reflect any partial calendar year. Manager
shall disburse funds for such payment on the closing date of the repurchase of
assets provided for in Section 6.5. If this Agreement is terminated pursuant to
Sections 6.2(a)(i), 6.2(a)(iii), 6.2(b)(i) or 6.2(b)(iii) hereof, the
non-breaching party may pursue such other legal or equitable relief as may be
available in addition to such proration. From and after any termination, each
party shall provide the other with reasonable access to books and records then
owned by it to permit such requesting party to satisfy reporting and contractual
obligations which may be required of it.
6.4 REPURCHASE OF ASSETS.
(a) Upon the expiration, or earlier termination by either
Practice or Manager (other than termination pursuant to Section 6.2(b)), of this
Agreement, Practice shall:
(i) Purchase from Manager the accounts
receivable of the Clinic at the closing under Section 6.5 at an amount equal to
the net realizable value of the accounts receivable as determined in accordance
with GAAP;
(ii) Purchase from Manager the FFE, all then
unused supplies and inventory, and other tangible and intangible personal
property, located at the Medical Offices or purchased for specific use for the
Clinic (except pharmaceutical supplies), for cash in an amount equal to the book
value thereof as reflected by Manager's books and records of account.
Notwithstanding any provision in this Agreement to the contrary, nothing in this
Agreement is intended, nor should it be construed, to give Practice any right to
acquire any proprietary software of Manager (including software licensed by
Manager from others) used by Manager in its provision of the Management
Services;
(iii) Purchase from Manager any real estate owned
by Manager and associated with the Clinic, and acquired through the Asset
Purchase Agreement or with the Approval of the Advisory Board, at the greater of
(i) the appraised fair market value thereof, or (ii) the then book value thereof
as reflected by Manager's books and records of account. In the event of any
repurchase of such real property, the appraised fair market value shall be
determined
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by each of Manager and Practice selecting a duly qualified appraiser, who will
then select a third appraiser. This third appraiser shall perform the appraisal,
which appraisal shall be binding on Manager and Practice. If either party fails
to select an appraiser within fifteen (15) days of the selection of an appraiser
by the other party, the appraiser selected by the other party shall make the
selection of the third-party appraiser;
(iv) Purchase from Manager all improvements,
additions and leasehold improvements, which were acquired through the Asset
Purchase Agreement or with the approval of the Advisory Board, and which relate
primarily to the operation of the Clinic, at book value as reflected by
Manager's books and records of account;
(v) Purchase from Manager the service agreement
costs and any other intangible assets of Manager primarily relating to the
operation of the Clinic (other than those intangible assets accounted for in
Section 6.4(a)(ii)), including goodwill, at book value as if purchase accounting
were used to record the transaction, which transaction includes, without
limitation this Agreement and the Asset Purchase Agreement, and as adjusted
through the last day of the month most recently ended prior to the date of such
expiration or earlier termination, in accordance with GAAP to reflect the
amortization or depreciation of restrictive covenants and intangibles, including
goodwill; and
(vi) Assume all debt and all payables, leases and
other contracts entered into or assumed in connection with and primarily related
to the operation of the Clinic, on such terms and conditions of such obligations
and instruments, such assumption to be accomplished by execution and delivery of
an assumption agreement, in form reasonably satisfactory to Manager and
Practice.
In the event that Practice is unable for any reason to fulfill its obligations
and requirements set forth in this Section 6.4(a) or Section 6.5 below, then the
undersigned Physician Shareholders shall fulfill such obligations and duties as
if such Physician Shareholders were the primary obligors hereunder.
(b) Upon termination of this Agreement by Practice
pursuant to Section 6.2(b) Practice shall:
(i) Purchase from Manager the accounts
receivable of the Clinic at the closing under Section 6.5 at an amount equal to
the net realizable value of the accounts receivable as determined in accordance
with GAAP;
(ii) Purchase from Manager the FFE, all then
unused supplies and inventory, and other tangible and intangible personal
property, located at the Medical Offices or purchased for specific use for the
Clinic (except pharmaceutical supplies), for cash in an amount equal to the book
value thereof as reflected by Manager's books and records of account.
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Notwithstanding any provision in this Agreement to the contrary, nothing in this
Agreement is intended, nor should it be construed, to give Practice any right to
acquire any proprietary software of Manager (including software licensed by
Manager from others) used by Manager in its provision of the Management
Services;
(iii) Purchase from Manager any real estate owned
by Manager and associated with the Clinic, and acquired through the Asset
Purchase Agreement or with the Approval of the Advisory Board, at the greater of
(i) the appraised fair market value thereof, or (ii) the then book value thereof
as reflected by Manager's books and records of account. In the event of any
repurchase of such real property, the appraised fair market value shall be
determined by each of Manager and Practice selecting a duly qualified appraiser,
who will then select a third appraiser. This third appraiser shall perform the
appraisal, which appraisal shall be binding on Manager and Practice. If either
party fails to select an appraiser within fifteen (15) days of the selection of
an appraiser by the other party, the appraiser selected by the other party shall
make the selection of the third-party appraiser;
(iv) Purchase from Manager all improvements,
additions and leasehold improvements, which were acquired through the Asset
Purchase Agreement or with the approval of the Advisory Board, and which relate
primarily to the operation of the Clinic, at book value as reflected by
Manager's books and records of account;
(v) Assume all debt and all payables, leases and
other contracts entered into or assumed in connection with and primarily related
to the operation of the Clinic, on such terms and conditions of such obligations
and instruments, such assumption to be accomplished by execution and delivery of
an assumption agreement, in form reasonably satisfactory to Manager and
Practice.
In the event that Practice is unable for any reason to fulfill its obligations
and requirements set forth in this Section 6.4(b) or Section 6.5 below, then the
undersigned Physician Shareholders shall fulfill such obligations and duties as
if such Physician Shareholders were the primary obligors hereunder.
6.5 CLOSING OF REPURCHASE OF ASSETS. Practice shall pay cash for
the repurchased assets, as contemplated by Section 6.4. The amount of the
purchase price shall be reduced by the amount of debt and liabilities (other
than contingent liabilities, such as leases) of Manager assumed by Practice and
shall also be reduced by any payment Manager has failed to make under this
Agreement. Practice, Physician Shareholders and physician Practice Employees
shall execute such documents as may be required to assume the liabilities set
forth in Section 6.4(a)(vi) or 6.4(b)(v) and to remove Manager and Parent from
any liability or guaranty with respect to such repurchased assets and with
respect to any property leased or subleased by Manager. The closing date for the
repurchase shall be determined by the parties hereto, but in no event shall
occur later than ninety (90) days from the date of termination or the notice of
termination, as applicable.
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SECTION 7. REPRESENTATIONS AND WARRANTIES OF PRACTICE.
Practice hereby represents and warrants to Manager as follows:
7.1 ORGANIZATION AND GOOD STANDING. Practice is a professional
corporation, duly organized, validly existing and in good standing under the
laws of the State of Ohio. Practice has all necessary power to own all of its
properties and assets and to carry on its business as now being conducted.
7.2 NO VIOLATIONS. Practice has the corporate authority to
execute, deliver and perform this Agreement and all agreements executed and
delivered by it pursuant to this Agreement, and has taken all action required by
law, its Articles or Certificate of Incorporation, its Bylaws or otherwise to
authorize the execution, delivery and performance of this Agreement and such
related documents. The execution and delivery of this Agreement does not and,
subject to the consummation of the transactions contemplated hereby, will not,
violate any provisions of the Articles or Certificate of Incorporation or Bylaws
of Practice or any provisions of or result in the acceleration of, any
obligation under any mortgage, lien, lease, agreement, instrument, order,
arbitration award, judgment or decree, to which Practice is a party, or by which
it is bound. This Agreement has been duly executed and delivered by Practice and
constitutes the legal, valid and binding obligation of Practice, enforceable in
accordance with its terms.
7.3 FINANCIAL INFORMATION. Practice has hereto furnished Manager
with complete copies of certain financial information about Practice which
information is true and correct and presents fairly the financial results
experienced by Practice for the periods set forth in such information.
7.4 PROFESSIONAL LIABILITY. No Physician Shareholder or physician
Practice Employee has ever (a) had his license to practice medicine in any state
or his Drug Enforcement Agency number suspended, relinquished, terminated,
restricted or revoked; (b) been reprimanded, sanctioned or disciplined by any
licensing board, or any federal, state or local society or agency, governmental
body or specialty board; (c) had entered against him final judgment in, or
settle without judgment, a malpractice or similar action for an aggregate award
or amount to the plaintiff in excess of Fifty Thousand and No/100 Dollars
($50,000.00); or (d) had his medical staff privileges at any hospital or medical
facility suspended, terminated, restricted or revoked.
SECTION 8. INSURANCE AND INDEMNITY.
8.1 INSURANCE TO BE MAINTAINED BY PRACTICE. Practice shall
provide, or shall arrange for the provision of, and maintain throughout the
entire term of this Agreement, professional liability insurance coverage on
Practice and each of Practice's employees and agents, including,
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but not limited to, all Physician Shareholders and Practice Employees, in the
minimum amount of One Million and No/100 Dollars ($1,000,000.00) per occurrence
and Three Million and No/l00 Dollars ($3,000,000.00) annual aggregate. Practice
shall provide to Manager written documentation evidencing such insurance
coverage. Practice shall, at its sole cost and expense, pay the premium costs of
all such professional liability insurance coverage during the term of this
Agreement. Practice shall provide, or shall arrange for the provision of, and
shall maintain throughout the entire term of this Agreement, workers'
compensation insurance coverage on Practice and each of its employees and
agents, including, but not limited to, all Physician Shareholders and Practice
Employees, in the amounts required by law. Practice shall provide to Manager
written documentation evidencing such insurance coverage. Practice shall, at its
sole cost and expense, pay the premium costs of all such workers' compensation
insurance coverage.
8.2 INDEMNIFICATION BY MANAGER. MANAGER SHALL INDEMNIFY, HOLD
HARMLESS AND DEFEND PRACTICE FROM AND AGAINST ANY AND ALL LIABILITY, LOSS,
DAMAGES, CLAIMS, CAUSES OF ACTIONS AND EXPENSES ASSOCIATED THEREWITH (INCLUDING
REASONABLE ATTORNEY'S FEES), CAUSED OR ASSERTED TO HAVE BEEN CAUSED, DIRECTLY OR
INDIRECTLY, BY OR AS A RESULT OF THE GROSS NEGLIGENCE OR INTENTIONAL ACTS OR
OMISSIONS OF MANAGER, ITS EMPLOYEES OR AGENTS DURING THE TERM HEREOF. THE
PROVISIONS OF THIS SECTION 8.2 SHALL SURVIVE THE EXPIRATION OR EARLIER
TERMINATION OF THIS AGREEMENT.
8.3 INDEMNIFICATION BY PRACTICE. PRACTICE SHALL INDEMNIFY, HOLD
HARMLESS AND DEFEND MANAGER AND PARENT FROM AND AGAINST ANY AND ALL LIABILITY,
LOSS, DAMAGES, CLAIMS, CAUSES OF ACTION AND EXPENSES ASSOCIATED THEREWITH
(INCLUDING REASONABLE ATTORNEYS' FEES) CAUSED OR ASSERTED TO HAVE BEEN CAUSED,
DIRECTLY OR INDIRECTLY, BY OR AS A RESULT OF THE PERFORMANCE OF MEDICAL SERVICES
BY PRACTICE AND ITS EMPLOYEES OR AGENTS DURING THE TERM HEREOF, OR THE GROSS
NEGLIGENCE OR INTENTIONAL ACTS OR OMISSIONS OF PRACTICE, ITS EMPLOYEES OR AGENTS
DURING THE TERM. THE PROVISIONS OF THIS SECTION 8.3 SHALL SURVIVE THE EXPIRATION
OR EARLIER TERMINATION OF THIS AGREEMENT.
8.4 KEY MAN INSURANCE. Practice agrees, and shall cause its
Physician Shareholders and Practice Employees to agree, that Manager may obtain,
at its sole expense and for its sole benefit, "key man" life and/or disability
insurance policies on any or all Physician Shareholders and Practice Employees.
Neither Practice nor any Physician Shareholder or Practice Employee shall have
any right, title or interest in or to the proceeds of any such insurance
policies. Practice shall cause its Physician Shareholders and Practice Employees
to cooperate with Manager, as reasonably requested by Manager from time to time,
in obtaining any such insurance policies, including, but not limited to, causing
such Physician Shareholders and Practice Employees to
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submit to such physical examinations and providing such information relating to
insurability as Manager may reasonably request from time to time. The costs and
expenses of obtaining such "key man" insurance shall be a Manager Expense.
SECTION 9. ASSIGNMENT.
The parties hereby agree that this Agreement shall not be assigned or
transferred by Manager or Practice without the prior written consent of the
other; provided, however, that this Agreement may be assigned by Manager, in its
sole discretion, without the consent of Practice, to any parent, subsidiary or
affiliate of Manager or to any person or entity that acquires all or
substantially all of the assets of Manager or Parent. Notwithstanding the
foregoing, the Practice agrees and consents to the Manager granting to the
Credit Facility Lender a security interest in all of the Manager's right, title
and interest in and under this Agreement as security for the Manager's
obligations under a guaranty of all of the Parent's indebtedness and other
obligations owing to the Credit Facility Lender.
SECTION 10. COMPLIANCE WITH REGULATIONS.
10.1 PRACTICE OF MEDICINE. The parties hereto acknowledge that
Manager is not authorized or qualified to engage in any activity which may be
construed or deemed to constitute the practice of medicine. To the extent any
act or service herein required of Manager should be construed or deemed to
constitute the practice of medicine, the performance of said act or service by
Manager shall be deemed waived and forever unenforceable. The Practice shall
have unfettered control in the exercise of its professional medical judgment
with respect to medical matters.
10.2 SUBCONTRACTS. Pursuant to Title 42 of the United States Code
and applicable rules and regulations thereunder, until the expiration of four
(4) years after termination of this Agreement, Manager shall make available,
upon appropriate written request by the Secretary of the United States
Department of Health and Human Services or the Comptroller General of the United
States General Accounting Office, or any of their duly authorized
representatives, a copy of this Agreement and such books, documents and records
as are necessary to certify the nature and extent of the costs of the services
provided by Manager under this Agreement. Manager further agrees that if it
carries out any of its duties under this Agreement through a subcontract with a
value or cost of Ten Thousand and No/100 Dollars ($10,000.00) or more over a
twelve (12) month period with a related organization, such subcontract shall
contain a clause to the effect that until the expiration of four (4) years after
the furnishing of such services pursuant to such subcontract, the related
organization shall make available, upon appropriate written request by the
Secretary of the United States Department of Health and Human Services or the
Comptroller General of the United States General Accounting Office, or any of
their duly authorized representatives, a copy of such subcontract and such
books, documents and records of such
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organization as are necessary to verify the nature and extent of such costs.
Disclosure pursuant to this Section shall not be construed as a waiver of any
other legal right to which Manager may be entitled under law or regulation.
SECTION 11. INDEPENDENT RELATIONSHIP.
11.1 INDEPENDENT CONTRACTOR STATUS.
(a) It is acknowledged and agreed that Practice and
Manager are at all times acting and performing hereunder as independent
contractors. Manager shall neither have nor exercise any control or direction
over the methods by which Practice, Physician Shareholders and Practice
Employees practice medicine. The sole function of Manager hereunder is to
provide all Management Services in a competent, efficient and satisfactory
manner. Manager shall not, by entering into and performing its obligations under
this Agreement, become liable for any of the existing obligations, liabilities
or debts of Practice unless otherwise specifically provided for under the terms
of this Agreement. In its management role, Manager will have only an obligation
to exercise reasonable care in the performance of the Management Services.
Manager shall have no liability whatsoever for damages suffered on account of
the willful misconduct or negligence of any employee, agent or independent
contractor of Practice. Each party shall be solely responsible for compliance
with all state and federal laws pertaining to employment taxes, income
withholding, unemployment compensation contributions and other employment
related statutes regarding their respective employees, agents and servants.
(b) If any court or regulatory authority shall determine
that the independent contractor relationship established hereby violates any
statutes, rules or regulations (or in the event that Manager, in good faith,
determines that there is a material risk that such a determination would be made
by any court or regulatory authority), then, at the request of Manager given by
written notice to Practice, the parties will negotiate in good faith to enter
into an employment arrangement between Manager and the then-current Physician
Shareholders and Practice Employees which substantially preserves for the
parties the relative economic benefits of this Agreement. If the parties cannot
reach agreement on such an arrangement after a period of 30 days of good faith
negotiations which shall commence after the aforesaid determination or opinion
is delivered, then either Practice or Manager may elect by notice to the other
to require that the parties enter into binding mediation in accordance with this
Section 11.1(b) to determine such arrangement. Pursuant to any such notice of
mediation Manager and Practice shall each choose an expert possessing knowledge
regarding health care management arrangements in the State of Ohio, and the two
experts so chosen shall select a third expert (the "Mediator") who shall be a
lawyer or accountant with a nationally recognized firm possessing knowledge and
experience regarding health care management arrangements in the State of Ohio.
Following selection the Mediator shall meet with Manager and Practice and, if
the parties are still unable to agree after two (2) such meetings, the Mediator
shall propose in a writing labeled "Binding
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Arrangement" an arrangement which best complies with statutes, rules and
regulations and which substantially preserves for the parties the relative
economic benefits of this Agreement, and such proposed binding arrangement shall
be final and binding on the parties. Each party shall bear the costs associated
with the retention of its chosen expert, and the costs associated with the
Mediator shall be paid by Manager in a percentage amount equal to a fraction,
the numerator of which is Manager's annual Manager Compensation for the most
recent fiscal year ended, and the denominator of which is Net Practice Revenues
for such fiscal year. The balance of the Mediator's cost shall be a Practice
Expense.
11.2 REFERRAL ARRANGEMENTS. The parties hereby acknowledge and
agree that no benefits to Practice hereunder require or are in any way
contingent upon the admission, recommendation, referral or any other arrangement
for the provision of any item or service offered by Manager or any of its
affiliates, to any patients of Practice, Practice's employees, leased employees
or agents.
SECTION 12. CONFIDENTIAL INFORMATION.
Except as required to perform its obligations under this Agreement,
Manager shall not, without the express written consent of Practice, distribute,
market, publish, or divulge to any person or entity, or use or modify for use,
directly or indirectly, any "Practice Confidential Information" during the term
of this Agreement and for a period of three (3) years after the final date of
the term of this Agreement; provided, however, that Manager may disclose
Practice Confidential Information, (i) to other medical practices which are
potential acquisition or merger partners for Manager or the Clinic, (ii) as
required by law, governmental order or regulation, or by subpoena or other legal
process (provided Practice will be provided advance notice of such disclosure in
order to afford it the opportunity to seek an appropriate protective order),
(iii) in any litigation involving Practice, Manager or a Physician Shareholder,
and (iv) to Manager's lenders, financial advisors, accountants, investment
bankers, investors, and attorneys. For purposes of this Agreement "Practice
Confidential Information" shall mean valuable, non-public competitively
sensitive data and information relating to Practice that is not generally known
by or readily available to competitors of Practice, including payor and managed
care contract fees and rates under exclusive arrangements of Practice with third
party payors, and Practice revenue and expense reports and related financial
information.
SECTION 13. GUARANTY BY PARENT.
To induce Practice to execute and deliver this Agreement, Parent hereby
absolutely and unconditionally guarantees the full, prompt and faithful
performance by Manager of all covenants and obligations to be performed by
Manager under this Agreement, including, but not limited to, the payment of all
sums stipulated to be paid by Manager pursuant to this Agreement. If Manager
fails to fully perform all such covenants and obligations in accordance with
their terms or pay all or any part of such sums when due, Parent will perform
all such covenants and obligations in accordance with their terms or immediately
pay to Practice (or such other payee as
29
<PAGE> 34
may be provided in any such agreement) the amount due and unpaid by Manager, it
being understood that each such covenant or obligation and each obligation to
pay any such amount constitutes the direct and primary obligation of Parent.
Parent hereby waives presentment, demand of payment, protest, dishonor, notice
of protest or dishonor, and notice of acceptance of the guaranty set forth in
this Section 13 and all rights to require Practice to proceed against Manager,
or to pursue any other remedy it may have against Manager in the event of a
breach by Manager of any obligation or covenant contained in this Agreement. If
Manager is not liable to perform any such obligation or covenant because the act
creating such obligation or covenant is ultra vires or unauthorized, and for
such reason such obligation or covenant cannot be enforced against Manager, such
fact shall not affect Parent's liability under this Section 13. In the event of
termination, liquidation or dissolution of Manager, this unconditional guaranty
shall continue in full force and effect.
SECTION 14. MISCELLANEOUS.
14.1 NOTICES. Any notice required or permitted by this Agreement or
any agreement or document executed and delivered in connection with this
Agreement shall be deemed to have been served properly if hand delivered or sent
by overnight courier, charges prepaid and properly addressed, to the respective
party to whom such notice relates at the following addresses:
If to Practice:
Cleveland Ear, Nose and Throat Center, Inc.
6000 Rockside Woods Boulevard, Suite 240
Cleveland, Ohio 44131-2350
Attention: President
with a copy to:
Robert J. Crump, Esq.
Walter & Haverfield
1300 Terminal Tower
Cleveland, Ohio 44113-2253
If to Manager or Parent:
PHYSICIANS' SPECIALTY CORP.
1150 Lake Hearn Drive, Suite 640
Atlanta, Georgia 30342
Attention: Chief Executive Officer
with a copy of each notice directed to Manager or Parent to:
30
<PAGE> 35
Richard H. Brody, Esq.
Troutman Sanders LLP
5200 NationsBank Plaza
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
or such other address as shall be furnished in writing by any party to the other
party. All such notices shall be considered received when hand delivered or one
business day after delivery to the overnight courier.
14.2 ADDITIONAL ACTS. Each party hereby agrees to perform any
further acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
14.3 GOVERNING LAW. This Agreement shall be interpreted, construed
and enforced in accordance with the laws of the State of Ohio, applied without
giving effect to any conflicts-of-law principles.
14.4 CAPTIONS. The captions or headings in this Agreement are made
for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
14.5 SEVERABILITY. The provisions of this Agreement shall not be
severable, and if any material provision shall be determined to be invalid, void
or unenforceable in whole or in part for any reason by a court of competent
jurisdiction, Manager shall have the right to terminate this Agreement upon five
(5) business days prior written notice.
14.6 CHANGES IN REIMBURSEMENT. If Medicare, Medicaid, Blue Shield
or any other third party payor, or any other Federal, state or local laws,
rules, regulations or interpretations, at any time during the term of this
Agreement, prohibit, restrict or in any way materially and adversely change the
method or amount of reimbursement or payment for services rendered by Practice
pursuant to this Agreement or of the method of compensation for either party
provided for in this Agreement, then the Practice and Manager shall each have
the option to request the other that the parties consider negotiating in good
faith to amend this Agreement to provide for payment of compensation in a manner
consistent with any such prohibition, restriction or limitation and which takes
into account any materially adverse change in reimbursement or payment from such
third party payors for such physician services. If the parties cannot reach
agreement on such amendment prior to the effective date of such rule, regulation
or interpretation, this Agreement shall continue in full force and effect in
accordance with its terms.
14.7 MODIFICATIONS. This instrument contains the entire agreement
of the parties and supersedes any and all prior or contemporaneous negotiations,
understandings or agreements between the parties, written or oral, with respect
to the transactions contemplated hereby and
31
<PAGE> 36
amends, restates and replaces the Prior Agreement in its entirety. This
Agreement may not be changed or terminated orally, but may only be changed by an
agreement in writing signed by a duly authorized officer of Manager if Manager
is the party against whom enforcement of any such waiver, change, modification,
extension, discharge or termination is sought, or by Practice if Practice is the
party against whom enforcement of any such waiver, change, modification,
extension, discharge or termination is sought. The parties expressly acknowledge
that this Section 14.7 may not be waived, modified or changed by any other
persons except the President of Manager and Practice.
14.8 NO RULE OF CONSTRUCTION. The parties acknowledge that this
Agreement was initially prepared by Manager solely as a convenience and that all
parties and their counsel have read and fully negotiated all the language used
in this Agreement. The parties acknowledge and agree that because all parties
and their counsel participated in negotiating and drafting this Agreement, no
rule of construction shall apply to this Agreement which construes any language,
whether ambiguous, unclear or otherwise, in favor of, or against any party by
reason of that party's role in drafting this Agreement.
14.9 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument.
14.10 BINDING EFFECT. This Agreement shall be binding on an shall
inure to the benefit of the parties hereto, and their successors and permitted
assigns.
14.11 ENFORCEMENT RIGHTS. Practice acknowledges that both Practice
and Manager will be directly or indirectly affected by the enforcement of
Practice's contractual and other legal rights against Physician Shareholders and
Practice Employees with respect to the restrictive covenants and liquidated
damages provisions contained in the Physician Employment Agreements. Therefore,
Practice appoints Manager its nonexclusive true and lawful attorney-in-fact to
enforce any and all rights of Practice, to the extent not contrary to applicable
law, with respect to the provisions pertaining to restrictive covenants and
liquidated damages in the Physician Employment Agreements. Practice agrees to
execute any instrument reasonably requested by Manager to evidence such
appointment or to reappoint Manager as such attorney-in-fact upon any
termination of the appointment made hereby. Such appointment is coupled with an
interest and irrevocable during the term of this Agreement.
14.12 COSTS OF ENFORCEMENT. If either party files suit in any court
against the other party to enforce the terms of this Agreement against the other
party or to obtain performance by it hereunder, the prevailing party will be
entitled to recover all reasonable costs, including reasonable attorneys' fees,
from the other party as part of any judgment in such suit. The term "prevailing
party" shall mean the party in whose favor final judgment after appeal (if any)
is rendered with respect to the claims asserted in the Complaint. "Reasonable
attorneys' fees" are those attorneys' fees actually incurred in obtaining a
judgment in favor of the prevailing party.
32
<PAGE> 37
SECTION 15. PHYSICIANS' GUARANTY.
To induce Manager and Parent to execute and deliver this Agreement,
each of the undersigned Physician Shareholders during the term of his or her
employment with Practice and for a period of five (5) years thereafter, hereby
absolutely and unconditionally guarantees the full, prompt and faithful
performance by Practice of all covenants and obligations to be performed by
Practice under Sections 3.6, 4.4, 4.5, 5.5, 6.4, 6.5, 8.1, 8.3, and 14.7 of this
Agreement. If Practice fails to fully perform all such covenants and obligations
in accordance with their terms or pay all or any part of such sums when due, the
Physician Shareholders will perform all such covenants and obligations in
accordance with their terms or immediately pay to Manager the amount due and
unpaid, it being understood that each such covenant or obligation and each
obligation to pay any such amount constitutes the direct and primary obligation
of the Physician Shareholders. The Physician Shareholders hereby waive
presentment, demand of payment, protest, dishonor, notice of protest or
dishonor, and notice of acceptance of the guaranty set forth in this Section 15
and all rights to require Manager to proceed against Practice, or to pursue any
other remedy it may have against Practice in the event of a breach by Practice
of any obligation or covenant contained in the aforesaid sections of this
Agreement. If Practice is not liable to perform any such obligation or covenant
because the act creating such obligation or covenant is ultra vires or
unauthorized, and for such reason such obligation or covenant cannot be enforced
against Practice, such fact shall not affect the Physician Shareholders'
liability under this Section 15. In the event of termination, liquidation or
dissolution of Practice, this unconditional guaranty shall continue in full
force and effect.
33
<PAGE> 38
SECTION 16. CONSENT AND RELEASE.
To induce Manager to acquire all of MAC's and MPI's right, title and
interest in, to, and under the Agreement and other assets of MAC, MPI and
MedOhio, L.P. pursuant to the Asset Purchase Agreement, and to enter into this
Agreement, the Practice and the undersigned Physician Shareholders hereby
consent to the assignment to Manager of all right, title and interest of MAC and
MPI in, to, and under the Agreement. The undersigned Physician Shareholders and
Practice confirm and agree that no breach or default, or event which with notice
or lapse of time or both notice and lapse of time would constitute a breach or
default, exists under the Agreement or Prior Agreement as of the Effective Date.
The undersigned Physician Shareholders and Practice hereby release and forever
discharge MAC, MPI and MedOhio L.P. from and against any and all claims, sums,
losses, damages and expenses of any kind based on or arising out of any act,
event or occurrence from the beginning of time to the date of this Agreement,
whether arising out of the Asset Acquisition Agreement dated July 30, 1996, the
Prior Agreement, the Agreement, or otherwise, excluding, however, any and all
claims for payment of unpaid amounts of "Practice Compensation" accrued under
the Prior Agreement for the period prior to the Effective Date, and the
undersigned Physician Shareholders and Practice covenant and agree never to sue
or to assert any claim, demand, counterclaim, right of offset or cause of action
against Manager or Parent based on or arising out of any act or omission of MAC,
MPI or MedOhio, L.P. or any breach or alleged breach by MAC or MPI of the Prior
Agreement, including any failure of MAC, MPI or MedOhio, L.P. to pay accrued and
unpaid "Practice Compensation" for any period prior to the Effective Date.
34
<PAGE> 39
IN WITNESS WHEREOF, Practice, Manager and Parent have duly executed
this Agreement on the day and year first above written.
PHYSICIANS' SPECIALTY CORP. CLEVELAND EAR, NOSE AND THROAT CENTER, INC.
BY: /s/ BY: /s/ Michael Papsidero
------------------------ -------------------------------
ITS: Vice President ITS: President
----------------------- -------------------------------
PSC MANAGEMENT CORP.
BY: /s/
-----------------------
ITS: Treasury & Vice President
-----------------------
By execution below, both MAC and MPI confirm and agree that they have
assigned all their right, title and interest in, to and under the Agreement to
Manager, that they have no further rights or interests under the Prior
Agreement, and that they hereby release and forever discharge Practice and the
Physician Shareholders from and against any and all claims, sums, losses,
damages and expenses of any kind based on or arising out of any act, event or
occurrence from the beginning of time to the date of this Agreement, whether
arising out of the Asset Acquisition Agreement dated July 30, 1996, the Prior
Agreement, the Agreement, or otherwise. Notwithstanding the foregoing, MAC and
MPI agree to pay all amounts of accrued and unpaid "Practice Compensation" to
Practice for all periods prior to the Effective Date in accordance with the
terms of the Prior Agreement.
MEDPARTNERS ACQUISITION CORPORATION MEDPARTNERS, INC., AS SUCCESSOR TO
MEDPARTNERS/MULLIKIN, INC.
BY: /s/ John M. Dobrowski, M.D. BY: /s/ John M. Dobrowski, M.D.
------------------------------- -------------------------------
ITS: Vice President & Treasurer ITS: Executive Vice President & CEO
------------------------------ ------------------------------
35
<PAGE> 40
By execution below, the undersigned Physician Shareholders agree to be
bound by the terms of the Agreement, including, but not limited to, the terms of
Sections 15 and 16.
/s/ MICHAEL PAPSIDERO, M.D. /s/ JOHN M. DOBROWSKI, M.D.
- ------------------------------- -------------------------------
MICHAEL PAPSIDERO, M.D. JOHN M. DOBROWSKI, M.D.
/s/ BERT M. BROWN, M.D. /s/ MATTHEW C. MCDONNELL, M.D.
- ------------------------------- -------------------------------
BERT M. BROWN, M.D. MATTHEW C. MCDONNELL, M.D.
/s/ TORIBIO C. FLORES, M.D. /s/ HOWARD L. LEVINE, M.D.
- ------------------------------- -------------------------------
TORIBIO C. FLORES, M.D. HOWARD L. LEVINE, M.D.
/s/ SANFORD M. TIMEN, M.D. /s/ RICHARD B. SMITH, M.D.
- ------------------------------- -------------------------------
SANFORD M. TIMEN, M.D. RICHARD B. SMITH, M.D.
36
<PAGE> 41
APPENDIX A
TO
CLINIC SERVICES AGREEMENT
A. Manager Compensation. As compensation for services rendered in
connection with the Clinic ("Manager Compensation"), Manager shall
receive twelve percent (12%) of the Pre-Distribution Margin per
calendar year. Eighty-eight percent of the Pre-Distribution Margin
shall be paid to Practice each calendar year.
<PAGE> 42
SCHEDULE 4.5(B)
Alan J. Sogg, M.D.
Valentin F. Mersol, M.D.
<PAGE> 43
EXHIBIT 3.5(e)
BILLING AGREEMENT
for
GOVERNMENTAL RECEIVABLES
THIS BILLING AGREEMENT ("Agreement") is entered into this _____ day of
___________, 1998, by and between PSC MANAGEMENT CORP., a Delaware corporation
("Manager"), and CLEVELAND EAR, NOSE AND THROAT CENTER, INC., an Ohio
corporation, and the Physician Shareholders who are signatories hereto
(collectively referred to as "Practice").
WITNESSETH:
WHEREAS, the parties entered into an Amended and Restated Clinic Services
Agreement dated ________ __, 1998 (the "Service Agreement"), under which Manager
provides certain management services to Practice, including billing and
collection services for Medicare, Medicaid and CHAMPUS receivables; and,
WHEREAS, the parties wish to set forth in detail the mechanisms under
which Manager provides and is compensated for such billing services.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties agree as follows:
1. Appointment and Authority Manager shall, on behalf of Practice, bill
and collect from Medicare, Medicaid and CHAMPUS the professional fees for
medical services rendered by Practice to Medicare, Medicaid and CHAMPUS
patients. Practice hereby appoints Manager for the term hereof to be Practice's
true and lawful attorney-in-fact for the following purposes:
a. to bill Medicare, Medicaid and CHAMPUS in the name and on behalf of
Practice;
b. to collect all accounts receivable resulting from such billings in
the name and on behalf of Practice;
c. to take possession of and endorse in the name and on behalf of
Practice (and/or in the name of an individual physician who has
properly reassigned benefits to Practice) any notes, checks, money
orders, electronic payments, and other forms of payment of such
accounts receivable;
<PAGE> 44
d. to deposit all such amounts collected, including electronic
payments, into an account owned by Practice (the "Physician Deposit
Account") with a bank whose deposits are insured by the Federal
Deposit Insurance Corporation, which account shall at all times be
maintained in accordance with the provisions of Section 2 below;
and,
e. to withdraw funds from the Physician Deposit Account in accordance
with the provisions of Section 2 below on behalf and in the name of
Practice for the payment of Practice Expenses, and remittance of
funds to Practice as provided in the Service Agreement.
2. Physician Deposit Account.
a. Manager shall have access to the Physician Deposit Account solely
for the purpose of paying Practice Expenses incurred by or on
behalf of Practice, including the payment of Manager's fee, in
accordance with the terms of the Service Agreement. Practice agrees
to execute and deliver to the bank any and all documents necessary
to evidence or effect the special power of attorney granted to
Manager in accordance with Section 1 above.
b. Medicare and Medicaid payments shall be deposited directly to the
Physician Deposit Account. Practice and Manager hereby agree that
if any Medicare and Medicaid payments are received by Manager on
behalf of Practice, such amounts shall be forwarded to the
Physician Deposit Account for deposit. Funds from the Physician
Deposit Account will only be drawn in the name of Practice.
Practice hereby agrees that this payment arrangement will continue
in effect only so long as Practice has sole control of the
Physician Deposit Account, and the bank is subject only to
Practice's instructions regarding the Physician Deposit Account.
c. In the event that Practice revokes Manager's right to withdraw
funds form the Physician Deposit Account, or if Practice withdraws
funds from the Physician Deposit Account or takes any other actions
with respect to the Physician Deposit Account (unless such actions
are required by applicable law) without first obtaining the
approval of the Advisory Board in accordance with the Service
Agreement (it being understood that all proceeds are intended to be
paid over to Manager to pay Practice Expenses and repay any
advances made by Manager in accordance with the Service Agreement),
and if any such actions remain uncured after notice and ten (10)
days opportunity to cure, such actions shall constitute grounds for
immediate termination of this Agreement and the Service Agreement
as a "Practice Event of Default" thereunder, and Practice hereby
acknowledges that Practice has granted to Manager a security
interest in Practice's cash
2
<PAGE> 45
proceeds from all collections covered by this Agreement in
accordance with Section 5.5 of the Service Agreement. Practice
further agrees in the event Practice revokes Manager's right to
withdraw funds from the account that Practice shall be deemed to
have received any and all amounts retained in the Physician Deposit
Account when determining the amount to be remitted by Manager to
Practice under the Service Agreement.
3. Compensation. As reimbursement for services provided under the
Service Agreement and this Agreement, Manager shall receive the fees set forth
in Section 5.1 and Appendix A of the Service Agreement. The parties have agreed
to such fees at arms' length and have determined that such fees represent fair
market value for the services provided hereunder and under the Service
Agreement.
4. Construction of Terms. The terms of the Service Agreement shall, to
the fullest extent reasonably possible, be construed so as to be consistent
with the terms of this Agreement, and all capitalized terms herein shall,
except as otherwise expressly provided herein, have the same definitions as set
forth in the Service Agreement. In the event of any ambiguity or inconsistency
between the terms and conditions of this Agreement and the Service Agreement,
the terms and conditions of this Agreement shall govern.
5. Changes in Reimbursement Laws and Regulations. In the event of
changes in laws and regulations that would cause any portion of this Agreement
to be illegal or unenforceable, the parties shall promptly amend this Agreement
as necessary to comply with such laws and regulations.
6. Binding on Successors. This Agreement shall be binding upon the
parties hereto, and their successors, assigns, heirs and beneficiaries. Without
limitation of the foregoing, Manager shall have the same rights to assign this
Agreement as provided in Section 14.10 of the Service Agreement with respect to
assignment of the Service Agreement.
7. Governing Law. The validity, interpretation, and performance of this
Agreement shall be governed by the laws designated to govern the terms of the
Service Agreement.
8. Severability. The provisions of this Agreement shall be deemed
severable and if any portion shall be held invalid, illegal or unenforceable
for any reason, the remainder of this Agreement shall be effective and binding
upon the parties.
9. Amendments. This Agreement shall not be modified or amended except by
a written document executed by both parties to this Agreement, and any such
written modifications or amendments shall be attached hereto.
10. Notices. Any communications required or desired to be given
hereunder shall be deemed to have been served properly if hand delivered, or
sent by overnight courier, charges prepaid and properly addressed, to the
respective party to whom such notice relates at the following addresses:
3
<PAGE> 46
If to Manager or Parent:
PHYSICIANS' SPECIALTY CORP.
1150 Lake Hearn Drive, Suite 640
Atlanta, Georgia 30342
Attention: Chief Executive Officer
With a copy of each notice directed to Manager or Parent to:
Richard H. Brody, Esq.
Troutman Sanders LLP
5200 NationsBank Plaza
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
If to Practice or any Physician Shareholder:
Cleveland Ear, Nose and Throat Center, Inc.
6000 Rockside Woods Boulevard, Suite 240
Cleveland, Ohio 44131-2350
Attention: President
With a copy of each notice directed to Practice to:
Robert J. Crump, Esq.
Walter & Haverfield
50 Public Square, Suite 1300
Cleveland, Ohio 44131-2253
or such other address as shall be furnished in writing by any party to the
other party. All such notices shall be considered received when hand delivered
or one business day after delivery to the overnight courier.
11. Additional Acts. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.
4
<PAGE> 47
12. Captions, etc. The captions or headings in this Agreement are made
for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement. All Addenda and Exhibits to this Agreement are hereby incorporated
into this Agreement by this reference.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument.
5
<PAGE> 48
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PRACTICE:
CLEVELAND EAR, NOSE, AND THROAT
CENTER, INC.
By:
----------------------------------
Title:
-------------------------------
MANAGER:
PSC MANAGEMENT CORP.
By:
----------------------------------
Title:
-------------------------------
PHYSICIAN SHAREHOLDERS:
-------------------------------
Michael Papsidero, M.D.
-------------------------------
John Dobrowski, M.D.
-------------------------------
Bert Brown, M.D.
-------------------------------
Matthew McDonnell, M.D.
-------------------------------
Toribio Flores, M.D.
-------------------------------
Howard L. Levine, M.D.
-------------------------------
Sanford Timen, M.D.
6
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
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