<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended MAY 31, 1996
Commission File Number 000-19364
---------
AMERICAN HEALTHCORP, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 62-1117144
- --------------------------------- ----------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
One Burton Hills Boulevard, Nashville, TN 37215
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(615) 665-1122
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
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 twelve 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
------- -------
As of July 12, 1996 there were outstanding 7,980,708 shares of the Registrant's
Common Stock, par value $.001 per share.
<PAGE> 2
PART I.
ITEM 1. FINANCIAL STATEMENTS
AMERICAN HEALTHCORP, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
May 31, August 31,
1996 1995
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 14,270,407 $ 13,721,650
Accounts receivable, net 7,267,350 6,162,026
Other current assets 1,231,455 1,586,051
Deferred tax asset 953,000 934,000
------------ ------------
Total current assets 23,722,212 22,403,727
------------ ------------
Long-term receivables and deposits 1,050,255 120,534
------------ ------------
Property and equipment:
Buildings and improvements 4,707,980 4,586,031
Equipment 8,602,984 7,278,162
Construction in progress 1,218,876 42,624
------------ ------------
14,529,840 11,906,817
Less accumulated depreciation (4,242,538) (2,916,377)
------------ ------------
Net property and equipment 10,287,302 8,990,440
------------ ------------
Long-term deferred tax asset 453,000 453,000
------------ ------------
Other assets, net 956,671 1,277,121
------------ ------------
Excess of cost over net assets
of purchased companies, net 34,600,573 32,286,755
------------ ------------
$ 71,070,013 $ 65,531,577
============ ============
</TABLE>
2
<PAGE> 3
AMERICAN HEALTHCORP, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
May 31, August 31,
1996 1995
------------ ------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 877,543 $ 886,628
Accrued salaries and benefits 1,499,922 2,385,784
Accrued liabilities 2,205,904 1,982,882
Income taxes payable 1,314,294 1,320,609
Current portion of other long-term
liabilities 2,906,760 2,475,101
------------ ------------
Total current liabilities 8,804,423 9,051,004
------------ ------------
Deferred income taxes 456,000 215,000
------------ ------------
Long-term debt 6,764,580 5,237,286
------------ ------------
Other long-term liabilities 2,616,949 2,146,322
------------ ------------
Minority interest 11,972,512 10,582,469
------------ ------------
Stockholders' equity
Common stock
$.001 par value, 15,000,000 shares
authorized, 7,980,708 and
7,979,005 shares outstanding 7,981 7,979
Additional paid-in capital 17,576,166 17,577,713
Retained earnings 22,871,402 20,713,804
------------ ------------
Total stockholders' equity 40,455,549 38,299,496
------------ ------------
$ 71,070,013 $ 65,531,577
============ ============
</TABLE>
3
<PAGE> 4
AMERICAN HEALTHCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
May 31, May 31,
------------------------------- ----------------------------
1996 1995 1996 1995
-------------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Revenues $ 15,959,508 $ 14,386,670 $ 44,268,869 $ 42,018,025
-------------- -------------- ------------ -------------
Expenses
Salaries and benefits 7,551,161 5,949,497 20,989,636 17,941,825
Other operating expenses 4,504,572 4,854,848 11,908,241 13,546,932
Depreciation and amortization 967,855 916,719 2,894,667 2,486,980
Interest 219,943 180,956 603,429 399,260
-------------- -------------- ------------ -------------
Total expenses 13,243,531 11,902,020 36,395,973 34,374,997
-------------- -------------- ------------ -------------
Income before income taxes and
minority interests 2,715,977 2,484,650 7,872,896 7,643,028
Income tax expense 587,000 632,000 1,805,000 1,990,000
-------------- -------------- ------------ -------------
Income before minority interests 2,128,977 1,852,650 6,067,896 5,653,028
AmSurg minority partners' interest 1,301,978 889,865 3,527,929 2,361,535
AmSurg minority stockholders' interest 174,153 87,939 382,369 269,818
-------------- -------------- ------------ -------------
Net income $ 652,846 $ 874,846 $ 2,157,598 $ 3,021,675
============== ============== ============ =============
Net income per share $ 0.08 $ 0.11 $ 0.27 $ 0.37
Weighted average common shares
and equivalents 8,171,903 8,092,714 8,138,964 8,259,608
</TABLE>
4
<PAGE> 5
AMERICAN HEALTHCORP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED MAY 31, 1996
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained
Stock Capital Earnings Total
--------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Balance, August 31, 1995 $ 7,979 $ 17,577,713 $ 20,713,804 $ 38,299,496
Exercise of stock options 13 85,947 - 85,960
Issuance of stock 4 39,994 - 39,998
Stock repurchase (15) (127,488) - (127,503)
Net income - - 2,157,598 2,157,598
--------- ------------ ------------ -------------
Balance, May 31, 1996 $ 7,981 $ 17,576,166 $ 22,871,402 $ 40,455,549
========= ============ ============ =============
</TABLE>
5
<PAGE> 6
AMERICAN HEALTHCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
May 31,
---------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,157,598 $ 3,021,675
Income tax expense 1,805,000 1,990,000
AmSurg center minority partners' interest 3,527,929 2,361,535
AmSurg minority stockholders' interest 382,369 269,818
-------------- --------------
Income before income taxes and minority interests 7,872,896 7,643,028
Noncash expenses, revenues, losses and gains
included in income:
Depreciation and amortization 2,894,667 2,486,980
Decrease (increase) in working capital items (1,345,317) 364,184
Other noncash transactions 256,495 411,836
-------------- --------------
9,678,741 10,906,028
Income taxes (net paid) (1,574,315) (1,963,889)
Additions to other long-term liabilities 497,705 -
Payments on other long-term liabilities (287,699) (169,449)
Increase in other assets (251,814) (851,675)
-------------- --------------
Net cash flows provided by operating activities 8,062,618 7,921,015
-------------- --------------
Cash flows from investing activities:
Business acquisitions (3,797,050) (5,249,637)
Acquisition of property and equipment (1,951,140) (3,301,496)
Decrease (increase) in long-term receivables,
and deposits 80,141 (53,969)
-------------- --------------
Net cash flows used in investing activities (5,668,049) (8,605,102)
-------------- --------------
Cash flows from financing activities:
Distributions to minority partners (3,334,144) (2,281,018)
Additions to long-term debt 2,914,333 3,527,365
Payments on long-term debt (1,750,030) (405,936)
AmSurg minority partners capital contributions 303,830 708,128
Stock repurchase (127,503) (2,034,921)
Sale of AmSurg stock (net of issuance costs) 76,743 570,423
Exercise of stock options 70,959 29,916
-------------- --------------
Net cash flows provided by (used in) financing activities (1,845,812) 113,957
-------------- --------------
Net increase (decrease) in cash and cash equivalents 548,757 (570,130)
Cash and cash equivalents, beginning of period 13,721,650 11,819,784
-------------- --------------
Cash and cash equivalents, end of period $ 14,270,407 $ 11,249,654
============== ==============
</TABLE>
6
<PAGE> 7
AMERICAN HEALTHCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) INTERIM FINANCIAL REPORTING
The accompanying consolidated financial statements of American Healthcorp, Inc.
and its subsidiaries (the "Company") for the three and nine month periods ended
May 31, 1996 and 1995 are unaudited. However, in the opinion of the Company,
all adjustments consisting of normal, recurring accruals necessary for a fair
presentation, have been reflected therein.
Certain financial information which is normally included in financial
statements prepared in accordance with generally accepted accounting
principles, but which is not required for interim reporting purposes, has been
omitted. The accompanying consolidated financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1995.
(2) SUBSEQUENT EVENT
On June 25, 1996, AmSurg executed an amended and restated credit agreement with
a lending institution. Under the terms of the new agreement, all borrowings
(approximately $5.7 million) outstanding under the previous credit agreement
have been converted to a term loan that bears interest at the prime rate or
1.75% above LIBOR or a combination thereof and is to be repaid on a periodic
basis through June 2000. In addition, the credit agreement permits AmSurg to
borrow up to an additional $12 million to finance AmSurg acquisition and
development projects. New borrowings under this agreement will bear interest
at the prime rate or 1.75% above LIBOR or a combination thereof. AmSurg may
borrow under this credit agreement through June 1998. The agreement provides
for a fee of .35% on unused commitments and all additional borrowings are to be
repaid on a periodic basis through June 2001. The agreement contains covenants
relating to the ratio of debt to net worth, operating performance and minimum
net worth and prohibits the payment of dividends. Borrowings under the credit
agreement are generally secured by the development center assets that are
financed under the agreement.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
American Healthcorp, Inc. and its subsidiaries (the "Company") currently
operate two business segments, Diabetes Treatment Centers of America, Inc.
("DTCA") and AmSurg Corp. ("AmSurg"). DTCA, a wholly-owned subsidiary, is the
nation's leading provider of diabetes services to physicians and hospitals and
has developed and is marketing diabetes population healthcare management
programs for managed care payors designed to enhance the quality and lower the
cost of treatment of patients with diabetes. AmSurg, a majority-owned (62% at
May
7
<PAGE> 8
31, 1996) subsidiary, develops, acquires and manages physician practice-based
ambulatory surgery centers and specialty physician networks in partnership with
surgical and other group practices.
This Form 10-Q contains forward-looking statements which are based upon current
expectations and involve a number of risks and uncertainties. In order for the
Company to utilize the new "safe harbor" provisions of the Private Litigation
Reform Act of 1995, you are hereby cautioned that these statements may be
affected by the important factors, among others, set forth below, and,
consequently, actual operations and results may differ materially from those
expressed in these forward-looking statements. The important factors include:
DTCA's ability to effect estimated cost savings under certain managed care
agreements or to effect such savings within the time frames contemplated by
DTCA; unusual and unforeseen patterns of healthcare utilization by individuals
with diabetes in the HMOs with which DTCA has executed an agreement; the
ability of the HMOs to maintain the number of covered lives enrolled in the
plans during the terms of the agreements between the HMOs and DTCA; the ability
of DTCA to enroll members with diabetes who are covered by the plans for which
DTCA is providing services; and DTCA's ability to attract and/or retain and
effectively manage the employees required to implement the agreements.
DTCA
DTCA contributed approximately 49% and 62% of the Company's revenues for the
three months ended May 31, 1996 and 1995, respectively. The principal sources
of revenues for DTCA were its operating contracts with client hospitals for
diabetes treatment centers. Fee structures under the DTCA contracts generally
are a combination of some form of fixed management fee plus incentive fee
arrangements. Incentive arrangements generally provide for fee payments to
DTCA based on changes in the client hospital's market share of diabetes
inpatients and the costs of providing care to these patients. The form of these
contracts includes various structures ranging from arrangements where all costs
of the DTCA program for core center professional personnel, medical director
fees and community relations are the responsibility of DTCA to structures where
all DTCA program costs are the responsibility of the client hospital.
The following table presents the number of DTCA contracts in effect and the
number of hospital sites where DTCA provided services or was in the process of
initiating operations as of May 31, 1996 and 1995. The number of contracts and
hospital sites for both periods includes two ArthritisCare Centers of America,
Inc. ("ACCA") contracts with hospitals to provide comprehensive arthritis
services that are operated by DTCA.
<TABLE>
<CAPTION>
As of May 31,
--------------------------------------------------------------
1996 1995
----------------------------- -----------------------------
Hospital Hospital
Contracts Sites Contracts Sites
------------ ------------- ------------- ------------
<S> <C> <C> <C> <C>
Hospital contracts/sites 58 60 69 71
Hospital network contracts/sites 2 11 1 4
------------ ------------- ------------- ------------
Total contracts/sites 60 71 70 75
============ ============= ============= ============
</TABLE>
8
<PAGE> 9
During the quarters and the nine months ended May 31, 1996 and 1995, the
components of changes to the total number of contracts and the total number of
hospital sites where DTCA provides services or was in the process of initiating
operations are presented below.
<TABLE>
<CAPTION>
Three Months Ended May 31,
--------------------------------------------------------
1996 1995
-------------------------- --------------------------
Hospital Hospital
Contracts Sites Contracts Sites
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total contracts/sites at beginning
of period 62 73 71 73
New contracts/sites signed 0 0 2 2
Contracts/sites discontinued (2) (2) (3) (3)
Conversion of stand alone
hospital contract to hospital
network contract - - - 3
----------- ----------- ----------- -----------
Total contracts/sites 60 71 70 75
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended May 31,
--------------------------------------------------------
1996 1995
-------------------------- --------------------------
Hospital Hospital
Contracts Sites Contracts Sites
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total contracts/sites at beginning
of period 69 74 69 71
New contracts/sites signed 4 9 9 9
Contracts/sites discontinued (12) (12) (8) (8)
Conversion of stand alone
hospital contract to hospital
network contract (1) - - 3
----------- ----------- ----------- -----------
Total contracts/sites 60 71 70 75
=========== =========== =========== ===========
</TABLE>
During the three month period ended May 31, 1996, three contracts were renewed.
During the remainder of fiscal 1996, six additional contracts will reach the
end of their terms unless renewed. The Company periodically renegotiates
existing DTCA contracts and, in that connection, has historically agreed to
reduce its fee structures in center contracts where performance has been
generally better than average to maintain favorable long-term client
relationships and to enhance longer-term opportunities at these centers. The
Company anticipates that it will continue to make such fee reductions or center
contract restructurings which will have a negative impact on the Company's
revenues and profitability. The Company also believes that
9
<PAGE> 10
the general uncertainties associated with the changes taking place in the
healthcare industry and the reactions of the Company's client hospitals have
adversely affected DTCA's revenues and contract retention and may continue to
have an adverse effect in future periods.
The Company is continuing its product development and marketing efforts for
DTCA's comprehensive diabetes population healthcare management products for
managed care payors and new hospital-based products. During the quarters ended
May 31, 1996 and 1995, the Company incurred approximately $820,000 and
$1,210,000, respectively, in expenditures associated with these efforts. These
expenditures have been spent primarily to identify and develop diabetes
population healthcare management products to address varying managed care payor
needs and delivery system requirements, to develop the staff and materials and
implement a managed care payor marketing program for these products and to
develop the Company's information technology capabilities. The Company
anticipates that it will need to continue these development and marketing
efforts during fiscal 1996 at expenditure levels it expects will be slightly
less than fiscal 1995 costs. The Company also expects to incur significant
start-up costs during the remainder of fiscal 1996 and in early fiscal 1997 as
it begins to implement the managed care programs described below.
The Company's growth strategy is primarily to develop new relationships
directly with payors and others who are ultimately responsible for the
healthcare costs of individuals with diabetes and to further develop its
hospital-based diabetes treatment center business. If the Company determines
that it will enhance and/or accelerate the development of its comprehensive
diabetes disease management product for the managed care marketplace, the
Company may develop strategic alliances or joint ventures with other entities
that have interests in diabetes care. Pursuant to the strategy with payors,
DTCA is expected to provide management services designed to improve the quality
of care for individuals with diabetes while lowering the overall cost of care,
and it is anticipated that DTCA may eventually be responsible for all or a
portion of the healthcare costs for these individuals in return for capitated
or other forms of payment. The Company believes that its position as the
leading provider of diabetes treatment services to hospitals and physicians
will be an advantage in comparison with other potential competitors or with the
payors themselves who have no such actual diabetes treatment or comprehensive
diabetes population management experience.
As part of this growth strategy, the Company announced in June that DTCA had
reached agreement with two HMOs, Principal Healthcare, Inc. ("Principal") and
Health Options, Inc. ("Health Options"), an HMO subsidiary of Blue Cross and
Blue Shield of Florida, to provide comprehensive healthcare management services
for their enrollees with diabetes. The Principal agreement covers six of the
largest HMO subsidiaries of Principal totaling approximately 370,000 members,
including an estimated 11,000 members who have diabetes. The Health Options
agreement covers enrollees in their central Florida region in Orlando and seven
surrounding counties encompassing approximately 65,000 members, including an
estimated 1,800 to 2,000 members with diabetes. Both the Principal and the
Health Options contracts have an initial term of five years. DTCA will be at
risk for the costs of operating its comprehensive healthcare management system
and Principal and Health Options will continue to be at risk for all of their
members' healthcare costs. Cost savings produced by the system will be shared
according to formulae set forth in the agreements.
10
<PAGE> 11
DTCA anticipates that revenues and profits from the Principal and Health
Options agreements will be more heavily weighted toward the later years of the
agreements' initial terms and that, during the first year of operations at each
site, revenues will be slightly less than operating costs. Implementation
began on a market-by-market basis on July 1, 1996, with the last market
scheduled for start-up in March 1997. Because of expected ramp-up periods at
each of the agreement sites during the staggered implementation schedule, the
significant start-up costs for the implementation program, and the timing delay
in calculating DTCA's share of earnings, if any, which may be produced by the
system, it is anticipated that DTCA's profitability will be negatively affected
by these agreements through fiscal 1997.
In June 1996, DTCA also reached agreement with U.S. Healthcare ("USHC") to
provide outpatient services to USHC enrollees with diabetes, including patient
assessment and patient stratification based on the scope and intensity of
needed services, as well as educational, behavioral and motivational support
and outcomes tracking and reporting. Services will be provided on a packaged
fee-for-service basis and will be delivered through 21 DTCA centers currently
operating in USHC markets. The program is expected to begin in July 1996 in
five DTCA centers with the other 16 centers to begin implementation over a 60
to 90 day period.
While the Company believes that the Principal, Health Options and the USHC
agreements will provide substantial revenue and profit opportunities for DTCA
over the term of these agreements, it cannot accurately predict the amount or
timing of these revenues and profits. The Company also believes the agreements
with Principal, Health Options and USHC, as well as the agreement announced in
January 1996 with Bristol-Myers Squibb Co. U.S. Pharmaceuticals
("Bristol-Myers"), will provide momentum in its discussions with other
potential customers for its diabetes healthcare management products; however,
no assurances can be given that DTCA will be successful in developing these
additional relationships.
AMSURG
Through investments made since fiscal 1993, the Company owns approximately 62%
of the outstanding common stock of AmSurg, a company that develops, acquires
and manages physician practice-based ambulatory surgery centers and specialty
physician networks through partnership or limited liability company ("LLC")
interests in these centers and networks. AmSurg contributed approximately 51%
and 38% of the Company's revenues for the three month periods ended May 31,
1996 and 1995, respectively.
The following table presents the components of changes in the number of AmSurg
surgery centers in operation for the three and nine month periods ended May 31,
1996 and 1995.
11
<PAGE> 12
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
May 31, May 31,
------------------------- ------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Centers in operation at beginning
of period 18 15 18 10
New center acquisitions placed
in operation - 1 - 3
New development centers placed
in operation - 2 - 5
---------- ---------- ---------- ----------
Total centers 18 18 18 18
========== ========== ========== ==========
</TABLE>
Beginning in fiscal 1995, AmSurg focused its center development efforts
primarily on start-up centers as opposed to center acquisitions. Because of
the additional time required in the development and construction of these
start-up centers, the growth in the number of centers placed in operation
during fiscal 1996 will not be as great as that experienced in prior fiscal
years.
Fifteen of the AmSurg surgery centers in operation as of May 31, 1996 perform
gastrointestinal endoscopy procedures, two centers perform eye surgery
procedures and one center performs ear, nose and throat procedures. As of May
31, 1996, AmSurg also owned a majority interest in fourteen partnerships or
LLCs, including four projects requiring certificate of need approval, each of
which will develop, own and operate a surgery center. As of May 31, 1995,
AmSurg owned a majority interest in five partnerships that were developing
centers. In addition, on February 1, 1996, AmSurg acquired an undivided 70%
interest in the assets of a gastroenterology and primary care physician
practice located in Miami, Florida and associated with a surgery center in
which AmSurg already held an ownership interest. While AmSurg generally owns
51% to 70% of these center/practice entities, the Company's consolidated
statements of operations include 100% of the results of operations of the
entities, reduced by the minority partners' share of the net income of the
entities. Also, because the Company owns approximately 62% of the common stock
of AmSurg, the calculation of consolidated net income of the Company includes a
minority interest provision to reflect the AmSurg minority stockholders' share
of the net income or loss of AmSurg.
The Company intends to expand AmSurg primarily through the development and, to
a lesser extent, acquisition of additional surgery centers in targeted surgical
specialties. In addition, AmSurg's surgery centers, combined with its
relationships with specialty physician surgical practices in their markets,
will provide other opportunities for AmSurg growth from surgical specialty
network acquisition and development that may include the acquisition of
specialty physician practices. By using AmSurg surgery centers as a base to
develop specialty physician networks that are designed to serve large numbers
of covered lives, the Company believes that AmSurg will strengthen its market
position in contracting with managed care organizations. In order to fund
future development or acquisition projects, the Company, from time to time, may
make further investments in AmSurg, and AmSurg may also need to seek additional
funding from sources other than the Company.
12
<PAGE> 13
RESULTS OF OPERATIONS
The Company operates two business segments, DTCA and AmSurg. Included in DTCA
results of operations are the operations of two ArthritisCare centers and
corporate costs attributable to DTCA. Included in AmSurg expenses are charges
for general management, administrative and accounting services provided by the
Company. Charges to AmSurg for such services approximate the Company's cost.
DTCA
The following table presents the operations of DTCA for the three and nine
month periods ended May 31, 1996 and associated percentage changes from the
corresponding periods in fiscal 1995.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
May 31, 1996 May 31, 1996
Actual % Change Actual % Change
---------- -------- ------------- --------
<S> <C> <C> <C> <C>
Revenues $7,873,924 (12.2%) $ 23,588,519 (15.5%)
---------- ----- ------------ -----
Expenses:
Salaries and benefits 4,920,552 9.6% 14,658,952 4.7%
Other operating expenses 1,995,238 (31.5%) 5,270,616 (38.2%)
Depreciation and amortization 309,980 (6.8%) 959,641 (4.3%)
Interest 942 (51.7%) 4,306 (24.2%)
---------- ----- ------------ -----
Total expenses 7,226,712 (6.6%) 20,893,515 (11.3%)
---------- ----- ------------ -----
Income before income taxes 647,212 (47.4%) 2,695,004 (38.5%)
Income taxes 281,000 (44.4%) 1,170,000 (34.8%)
---------- ----- ------------ -----
Net income $ 366,212 (49.6%) $ 1,525,004 (41.0%)
========== ===== ============ =====
</TABLE>
The DTCA revenue decrease for the three and nine month periods ended May 31,
1996 from the comparable periods last year resulted primarily from decreases of
5% and 9%, respectively, in same-contract revenues for contracts in operation
as of September 1, 1994, from fewer contracts in operation during the fiscal
1996 periods and the absence of revenues from the Company's mail order diabetes
supply business which was sold at the end of fiscal 1995. The decrease in
same-contract revenues resulted primarily from the impact of contract fee
renegotiations and restructurings. The Company believes that the negative
impact of contract rate renegotiations and restructurings and the transition of
client hospitals within their evolving healthcare markets will continue to
negatively impact same-contract revenue comparisons and contract renewals
during fiscal 1996 and 1997. Revenues from the new managed care agreements are
not expected to materially impact revenue comparisons during fiscal 1996.
The increase in overall DTCA salaries and benefits for the three and nine month
periods ended May 31, 1996 from the comparable periods last year resulted
primarily from normal salary and benefit increases and higher contract staffing
costs associated with DTCA's new multi-site hospital network contract signed
during the first quarter of fiscal 1996 and the Bristol-Myers agreement signed
during the second quarter of fiscal 1996. It is expected that salary and
benefit
13
<PAGE> 14
costs will continue to grow with the implementation of the new managed care
agreements. Salaries and benefits expense as a percentage of revenues for both
the three month and the nine month periods ended May 31, 1996 was 62% compared
with 50% for the comparable fiscal 1995 periods. These increases were primarily
a result of the decrease in DTCA revenues for the quarter and nine month
periods ended May 31, 1996 from the comparable fiscal 1995 periods.
The decrease in DTCA's other operating expenses for the three month and nine
month periods ended May 31, 1996 from the comparable periods last year resulted
primarily from the sale of the Company's mail order diabetes supply business at
the end of fiscal 1995, lower consulting fees associated with DTCA's new
product efforts, lower medical director costs at DTCA centers and lower legal
costs associated with a civil suit filed by a former employee and the resulting
OIG investigation. Therefore, other operating expenses as a percentage of
revenues for the three and nine month periods ended May 31, 1996 were 25% and
22% respectively, compared with 32% and 31%, respectively, for the comparable
fiscal 1995 periods. The Company anticipates that other operating expenses
will grow with the implementation of the new managed care agreements.
The decrease in income tax expense attributable to DTCA's operations for the
three and nine month periods ended May 31, 1996 from the comparable periods
last year resulted primarily from decreased operating results for the fiscal
1996 periods. DTCA's effective income tax rate for the fiscal 1996 periods
increased to 43% from 41% for the comparable periods last year. The increase in
the effective rate resulted primarily from the impact of the fixed amount of
DTCA's non-deductible amortization of excess costs over net assets of purchased
companies relative to decreased levels of income. The differences between the
federal statutory income tax rate and DTCA's effective income tax rates during
the periods are due primarily to the impact of state income taxes and the
amortization of certain excess costs over net assets of purchased companies
which are not deductible for income tax purposes.
14
<PAGE> 15
AMSURG
The following table presents the operations of AmSurg for the three and nine
month periods ended May 31, 1996 and associated percentage changes from the
corresponding periods in fiscal 1995.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
May 31, 1996 May 31, 1996
------------------------------ ---------------------------
Actual % Change Actual % Change
------------- -------- ------------- --------
<S> <C> <C> <C> <C>
Revenues $ 8,085,584 49.3% $ 20,680,350 46.7%
------------- ---- ------------- ----
Expenses:
Salaries and benefits 2,630,609 80.3% 6,330,684 60.7%
Other operating expenses 2,509,334 29.2% 6,637,625 32.4%
Depreciation and amortization 657,875 12.6% 1,935,026 30.4%
Interest 219,001 22.3% 599,123 52.2%
------------- ---- ------------- ----
Total expenses 6,016,819 44.5% 15,502,458 43.1%
------------- ---- ------------- ----
Income before income taxes
and minority interests 2,068,765 65.1% 5,177,892 58.6%
Income taxes 306,000 140.9% 635,000 225.6%
------------- ---- ------------- ----
Income before minority interests 1,762,765 56.5% 4,542,892 48.0%
AmSurg minority partners' interest 1,301,978 46.3% 3,527,929 49.4%
AmSurg minority stockholders'
interest 174,153 98.0% 382,369 41.7%
------------- ---- ------------- ----
Net income $ 286,634 93.1% $ 632,594 44.5%
============= ==== ============= ====
</TABLE>
The increase in AmSurg revenues for the three and nine month periods ended May
31, 1996 from the comparable periods last year resulted primarily from more
surgery centers in operation through the entire period, from increases of 25%
and 15%, respectively, in same-center revenues at the 10 centers in operation
since September 1, 1994 and the acquisition of a gastroenterology and primary
care physician practice on February 1, 1996. AmSurg expects that growth in the
number of surgery centers in operation will continue, but more of this growth
will come from start-up development centers as opposed to center acquisitions.
Because of the additional time required in the development and construction of
these start-up centers, AmSurg's surgery center revenue growth for fiscal 1996
may be less than it was during fiscal 1995. However, AmSurg believes that the
focus on start-up centers will provide a better longer-term return on
investment than acquired centers and that higher levels of revenue growth will
occur as start-up centers begin operation.
The increases in salaries and benefits expense and in other operating expenses
for the three and nine month periods ended May 31, 1996 from the comparable
periods last year resulted primarily from an increased number of surgery
centers in operation through the entire period, the acquisition of the
gastroenterology and primary care physician practice and from an increase in
AmSurg corporate staff primarily to support anticipated growth.
AmSurg's depreciation and amortization expense increases for the three month
and nine month periods ended May 31, 1996 from the comparable periods last year
are associated primarily with
15
<PAGE> 16
AmSurg's acquisition of majority interests in additional surgery centers, the
acquisition of the gastroenterology and primary care physician practice and
from new start-up surgery centers placed in operation. Increases in interest
expense are primarily attributable to an increase in debt assumed or incurred
by AmSurg in connection with additional acquisitions of interests in surgery
centers and the gastroenterology and primary care physician practice plus the
interest expense associated with newly opened start-up surgery centers financed
partially with bank debt.
AmSurg's effective income tax rates for the three and nine month periods ended
May 31, 1996, after reduction of taxable income for AmSurg minority partners'
interest, were 40% and 38%, respectively, compared with 35% and 22%,
respectively, for the comparable fiscal 1995 periods. The increases in these
effective income tax rates resulted from the utilization of prior period net
operating loss carryforwards during the fiscal 1995 periods. The difference
between the federal statutory income tax rate and AmSurg's effective income tax
rates is due primarily to the utilization of prior-period net operating loss
carryforwards and the impact of state income taxes. The Company estimates that
AmSurg's effective income tax rate without the impact of prior-period net
operating loss carryforwards would have been approximately 40%.
The AmSurg minority partners' interest in earnings for the three and nine month
periods ended May 31, 1996 increased from the corresponding fiscal 1995 periods
primarily as a result of adding new AmSurg surgery centers and from increased
profitability at existing centers. The increases in AmSurg minority
stockholders' interest for the three and nine month periods ended May 31, 1996
compared to the corresponding periods during fiscal 1995 resulted primarily
from improved AmSurg profitability.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities during the nine months ended May 31, 1996 generated $8.1
million in cash flow. Investing activities during this period used $5.7 million
of cash, which consisted primarily of funds used by AmSurg for the acquisition
of the gastroenterology and primary care physician practice, the acquisition of
property and equipment for the development of new AmSurg surgery centers and
for other equipment purchases for AmSurg and DTCA. Financing activities for the
nine month period ended May 31, 1996 utilized net cash of $1.8 million,
primarily as a result of $3.3 million in net distributions to AmSurg surgery
center minority partners and $127,503 utilized to repurchase Company common
stock offset partially by net additions to AmSurg long-term debt of $1.2
million and $380,573 in AmSurg minority partner capital contributions to AmSurg
partnerships and LLCs and cash proceeds from the private sale of AmSurg common
stock to parties other than the Company. Currently the Company has no
outstanding borrowings under its $10 million bank revolving credit agreement,
which expires January 29, 1998, and AmSurg has $5.7 million outstanding under
its amended and restated bank credit agreement which is repayable through June
2000. AmSurg also has available borrowings of $12 million through June 1998
for acquisition and development projects under this bank credit agreement with
repayment of these borrowings being made through June 2001. AmSurg borrowings
under this bank credit agreement bear interest at a rate equal to the prime
rate or 1.75% above LIBOR or a combination thereof at AmSurg's option.
The Company believes that cash flow from DTCA operating activities and the
Company's available cash balances will continue to enable the Company to fund
DTCA's current working
16
<PAGE> 17
capital needs, including the implementation and operation of the new agreements
with Principal, Health Options and USHC, and new product development, marketing
and implementation. The Company anticipates that AmSurg operating activities
will continue to provide positive cash flow and that this cash flow will be
utilized in combination with additional investments by the Company from
available cash balances, borrowings under AmSurg's amended and restated bank
revolving credit agreement and through additional financing sources that AmSurg
is expected to require to fund acquisition and development projects. This
additional financing could take the form of a private or public offering of
debt or equity securities or additional bank financing. No assurances can be
given that the necessary financing will be obtainable on terms satisfactory to
AmSurg.
The Company is disputing certain tax assessments by the Internal Revenue
Service. The Company believes that the ultimate amount of any additional tax,
interest or penalties will not have a material adverse impact on its financial
position, results of operations or liquidity.
17
<PAGE> 18
PART II
ITEM 1. Legal Proceedings.
In November 1994, the Company received an administrative subpoena
for documents from a regional office of the Office of the Inspector
General ("OIG") of the Department of Health and Human Services in
connection with an investigation of DTCA under certain federal
Medicare and Medicaid statutes. On February 10, 1995, the Company
learned that the federal government had declined to take over and
pursue a civil "whistle blower" action brought under seal in June
1994 on behalf of the government by a former employee dismissed by
the Company in February 1994. The Company believes that this
lawsuit triggered the OIG investigation. The civil suit was filed
in June 1994 against the Company, DTCA, and certain named and
unnamed medical directors and client hospitals and was kept under
seal to permit the government to determine whether to take over the
lawsuit. Following its review, the government made the
determination not to take over the litigation, and the complaint
was unsealed on February 10, 1995. On September 14, 1995, the
federal district court in Nashville, Tennessee dismissed the civil
suit for failure to state a claim. The plaintiff filed a motion to
reconsider and in January 1996 the court reversed its earlier
decision and reinstated the lawsuit. In April 1996, the Company's
interlocutory appeal to the Sixth Circuit Court of Appeals was
denied. In May 1996, the plaintiff filed a motion for leave to
file a third amended complaint and the parties are engaged in the
process of filing and arguing preliminary motions with respect to
the plaintiff's motion.
The Company has cooperated fully with the OIG in its investigation
and believes that its operations have been conducted in full
compliance with applicable statutory requirements. Although there
can be no assurance that the existence of, or the results of, the
investigation would not have a material adverse effect on the
Company, the Company believes that the resolution of issues, if
any, which may be raised by the government and the resolution of
the civil litigation would not have a material adverse effect on
the Company's financial position or results of operations, except
to the extent that the Company incurs material legal expenses
associated with its defense of this matter and the civil suit.
ITEM 2. Changes in Securities.
Not Applicable.
ITEM 3. Defaults Upon Senior Securities.
Not Applicable.
18
<PAGE> 19
ITEM 4. Submission of Matters to a Vote of Security Holders.
Not Applicable.
ITEM 5. Other Information.
Not Applicable.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
4.1 Article IV of the Company's Restated Certificate of
Incorporation (incorporated by reference to Exhibit 3.1 to
Registration Statement on Form S-1 (Registration No.
33-41119))
10.1 Amended and Restated Loan Agreement dated June 25, 1996
between AmSurg Corp. and SunTrust Bank, Nashville, N.A.
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
There have been no reports on Form 8-K filed during the quarter for
which this report is filed.
19
<PAGE> 20
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.
AMERICAN HEALTHCORP, INC.
----------------------------------
(Registrant)
Date July 12, 1996 By /s/ Henry D. Herr
------------------------- ----------------------------------
HENRY D. HERR
Executive Vice President
Finance and Administration,
(Principal Financial Officer)
Date July 12, 1996 By /s/ David A. Sidlowe
------------------------- ----------------------------------
DAVID A. SIDLOWE
Vice President and Controller
(Principal Accounting Officer)
20
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Exhibit Sequentially Numbered Page
- -------------- ------- --------------------------
<S> <C> <C>
4.1 Article IV of the Company's
Restated Certificate of
Incorporation [incorporated by
reference to Exhibit 3.1 to
Registration Statement on Form
S-1 (Registration No. 33-41119)]
10.1 Amended and Restated Loan 22
Agreement dated June 25, 1996
between AmSurg Corp. and SunTrust
Bank, Nashville, N.A.
27 Financial Data Schedule
(for SEC use only)
</TABLE>
21
<PAGE> 1
AMENDED AND RESTATED LOAN AGREEMENT
ENTERED INTO by and between AMSURG CORP., a Tennessee corporation
(the "Borrower"), and SUNTRUST BANK, NASHVILLE, N.A., formerly known as Third
National Bank in Nashville (the "Lender"), as of this 25th day of June, 1996.
RECITALS:
1. Borrower and Lender entered into a Loan Agreement dated as of
September 29, 1993, as amended by a First Amendment to Loan Agreement dated as
of December 27, 1993, as further amended by a Second Amendment to Loan
Agreement dated as of September 30, 1994, as further amended by a Third
Amendment to Loan Agreement dated as of February 24, 1995, as further amended
by a Fourth Amendment to Loan Agreement dated as of March 28, 1995, as amended
by a Fifth Amendment to Loan Agreement dated as of June 9, 1995, as amended by
an amendment dated October 12, 1995, and as further amended by a Seventh
Amendment to Loan Agreement dated December 11, 1995 (herein the Loan Agreement,
as amended, shall be referred to as the "Loan Agreement").
2. Borrower desires that the Lender extend it additional credit.
3. Borrower and Lender desire to amend and restate the Loan
Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the parties hereto agree that the Loan Agreement is
amended and restated as follows:
Article I. Definitions.
As used in this Agreement, the following terms shall have the
following meanings, unless the context expressly otherwise requires:
The terms defined in this article have the meanings attributed to them
in this article. Singular terms shall include the plural as well as the
singular, and vice versa. Words of masculine, feminine or neuter gender shall
mean and include the correlative words of other genders.
All references herein to a separate instrument are to such separate
instrument as the same may be amended or supplemented from time to time
pursuant to the applicable provisions thereof.
All accounting terms not otherwise defined herein have the meanings
assigned to them, and all computations herein provided for shall be made, in
accordance with generally accepted accounting principles applied on a
consistent basis. All references herein to
<PAGE> 2
EXHIBIT A
INITIAL NOTICE OF INTEREST RATE ELECTION
Pursuant to Section 2.06(a) of that Amended and Restated Loan
Agreement dated June 25, 1996 and executed between AmSurg Corp. ("Borrower")
and SunTrust Bank, Nashville, N.A. ("Lender"), the Borrower delivers this
Notice to Lender advising that it makes the following election for the interest
rate applicable to that an Advance under the Amended and Restated Revolving
Credit Note, which Advance is in the principal amount of $____________.
<TABLE>
<S> <C>
(a) Effective date of selected interest rate: , 19 .
----------------------- ----
(b) Applicable Interest Rate selected
---
/ / Base Rate
---
---
/ / Libor-Based Rate
---
(c) if the Borrower has elected the Libor-Based Rate as the Applicable Interest Rate, then the
Borrower designates the maturity for such rate as follows:
---
/ / 30 Days
---
---
/ / 60 Days
---
---
/ / 90 Days
---
</TABLE>
All defined terms contained herein shall have the same meaning as set
forth in the Amended and Restated Loan Agreement.
Submitted by Borrower to Lender as of this __________ day of
________________, 19___.
AMSURG CORP.
By:
--------------------------------
Title:
-----------------------------
<PAGE> 3
EXHIBIT B
NOTICE OF INTEREST RATE ELECTION
Pursuant to Section 2.06(c) and/or Section 2.06(d) of that certain
Amended and Restated Loan Agreement dated June 25, 1996, executed between
AmSurg Corp. ("Borrower") and SunTrust Bank, Nashville, N.A. ("Lender"), the
Borrower delivers this Notice to Lender advising that it makes the following
election for the interest rate applicable to that certain Amended and Restated
Term Note issued by Borrower to the order of Lender in the principal amount of
$5,749,245.88 and dated June 25, 1996:
<TABLE>
<S> <C>
(a) Effective date of selected interest rate: , 19 .
----------------------- ----
(b) Applicable Interest Rate selected
---
/ / Base Rate
---
---
/ / Libor-Based Rate
---
(c) if the Borrower has elected the Libor-Based Rate as the Applicable Interest Rate, then the
Borrower designates the maturity for such rate as follows:
---
/ / 30 Days
---
---
/ / 60 Days
---
---
/ / 90 Days
---
</TABLE>
All defined terms contained herein shall have the same meaning as set
forth in the Amended and Restated Loan Agreement.
Submitted by Borrower to Lender as of this __________ day of
________________, 19___.
AMSURG CORP.
By:
--------------------------------
Title:
-----------------------------
<PAGE> 4
EXHIBIT B
NOTICE OF INTEREST RATE ELECTION
Pursuant to Section 2.06(c) and/or Section 2.06(d) of that certain
Amended and Restated Loan Agreement dated June 25, 1996, executed between AmSurg
Corp. ("Borrower") and SunTrust Bank, Nashville, N.A. ("Lender"), the Borrower
delivers this Notice to Lender advising that it makes the following election
for the interest rate applicable to that certain Amended and Restated Revolving
Credit Note issued by Borrower to the order of Lender in the principal amount
of $12,000,000 and dated June 25, 1996:
<TABLE>
<S> <C>
(a) Effective date of selected interest rate: , 19 .
----------------------- ----
(b) Applicable Interest Rate selected
---
/ / Base Rate
---
---
/ / Libor-Based Rate
---
(c) if the Borrower has elected the Libor-Based Rate as the Applicable Interest Rate, then the
Borrower designates the maturity for such rate as follows:
---
/ / 30 Days
---
---
/ / 60 Days
---
---
/ / 90 Days
---
</TABLE>
All defined terms contained herein shall have the same meaning as set
forth in the Amended and Restated Loan Agreement.
Submitted by Borrower to Lender as of this __________ day of
________________, 19___.
AMSURG CORP.
By:
--------------------------------
Title:
-----------------------------
<PAGE> 5
"generally accepted accounting principles" refer to such principles as they
exist at the date of application thereof.
All references herein to designated "Articles", "Sections" and other
subdivisions or to lettered Exhibits are to the designated Articles, Sections
and other subdivisions hereof and the Exhibits annexed hereto unless the
context otherwise clearly indicates. All Article, Section, other subdivision
and Exhibit captions herein are used for reference only and in no way limit or
describe the scope or intent of, or in any way affect, this Agreement.
"Acquisition" means the acquisition of a majority ownership interest
in an existing ambulatory surgery center through the formation of a Partnership
or LLC with a physician or group of physicians.
"Advance" or "Advances" means any and all extensions of credit made
pursuant to this Agreement and shall include, without limitation, any and all
advances under the Revolving Credit Note.
"Agreement" means this Loan Agreement (including all exhibits hereto)
as the same may be modified, amended, or supplemented from time to time.
"Applicable Interest Rate" means either the Base Rate or the
LIBOR-Based Rate as applicable.
"Base Rate" means the rate of interest established from time to time
and announced by Lender as its "base rate," such rate being an interest rate
used as an index for establishing interest rates on loans.
"Borrower" means AmSurg Corp., a Tennessee corporation and any
successors thereto, including without limitation, any trustee or receiver in
bankruptcy, in reorganization, or in similar proceedings.
"Business Day" means any day other than a Saturday, Sunday or day on
which commercial banks are authorized to close under the laws of the State of
Tennessee.
"Capitalization" means Borrower's total consolidated Debt plus
Consolidated Net Worth.
"Closing" means the time and place of the execution and/or delivery of
the Loan Documents.
"Closing Date" means the 25th day of June, 1996 or at such other date
as the parties elect.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
2
<PAGE> 6
"Collateral" means any and all collateral securing the Indebtedness,
as described in Article III hereof.
"Conditions Precedent" means those matters or events that must be
completed or must occur or exist prior to Lender's being obligated to fund any
Advance, including, but not limited to, those matters described in Article V
hereof.
"Consolidated Net Income" means, for any period, the net income on a
consolidated basis of Borrower, its Subsidiaries, the Partnerships, the LLC's,
and any other Persons that prepare financial statements on a consolidated basis
under Borrower for such period, determined in accordance with GAAP.
"Consolidated Statements" means Financial Statements of the Borrower
on a consolidated basis.
"Consolidated Net Worth" means (i) the aggregate amount of all assets
of the Borrower (determined on a consolidated basis) as may properly be
classified as such, less (ii) the aggregate amount of all liabilities of the
Borrower (determined on a consolidated basis) and all Minority Interests as
shown on the consolidated balance sheets.
"Contingent Liabilities" means all contingent liabilities required to
be disclosed on the consolidated Financial Statements of the Borrower, its
Subsidiaries, the Partnerships, the LLC's in accordance with GAAP as in effect
from time to time, including statement #5 of the Financial Accounting Standards
Board and any successor thereto.
"Conversion Date" means the date that interest on the outstanding
principal balance of any Advance is converted from the Base Rate to the
LIBOR-Based Rate.
"Debt" means, with respect to any Person, all obligations of such
Person, contingent or otherwise, which in accordance with GAAP would be
classified on a balance sheet of such Person as liabilities of such Person, but
in any event including (a) liabilities secured by any mortgage, pledge or lien
existing on Property owned by such Person and subject to such mortgage, pledge
or lien, whether or not the liability secured thereby shall have been assumed
by such Person, (b) all indebtedness and other similar monetary obligations of
such Person, (c) all guaranties, obligations in respect of letters of credit,
endorsements (other than endorsements of negotiable instruments for purposes of
collection in the ordinary course of business), obligations to purchase goods
or services for the purpose of supplying funds for the purchase or payment of
Debt of others and other contingent obligations in respect of, or to purchase,
or otherwise acquire, or advance funds for the purchase of, Debt of others, (d)
all obligations of such Person to indemnify another Person to the
3
<PAGE> 7
extent of the amount of indemnity, if any, which would be payable by such
Person at the time of determination of Debt and (e) all obligations of such
Person under capital leases.
"Default" or "Event of Default" means the occurrence of any of the
events specified in Section 8.01 hereof.
"Default Conditions" or "Default Condition" means the occurrence of
any of the events specified in Section 8.04 hereof.
"Development Costs" means the total amount of all costs and expenses
(excluding soft costs and fees payable to Borrower) incurred by a Partnership
or LLC in the development, construction, or renovation of a Project.
"EBITDA" (Earnings Before Interest, Taxes, Depreciation, and
Amortization) for any period means an amount equal to Consolidated Net Income
(or the net deficit, if expenses and charges exceed revenues and proper income
items) for such period, plus amounts that have been deducted for (i)
depreciation, (ii) amortization, (iii) interest expense, (iv) income taxes, (v)
extraordinary and non-recurring items, (vi) the cumulative effects of changes
in accounting principles, and (vii) minority interest, used in determining
Consolidated Net Income for such period, and minus amounts that have been added
for (i) extraordinary and non-recurring items and (ii) the cumulative effects
of changes in accounting principles, in determining Consolidated Net Income for
such period.
"Environmental Law" means any federal, state or local law, statute,
ordinance or regulation applicable or pertaining to health, industrial hygiene,
waste materials, removal of waste materials, oil, gas, or underground storage
tanks, Hazardous Substances, other environmental conditions on, under, or
affecting Borrower's Property or any interest therein.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, including (unless the context otherwise requires)
any rules or regulations promulgated thereunder.
"Eurodollar Business Day" means a Business Day on which the relevant
London international financial markets are open for transaction of business
contemplated by this Agreement.
"Financial Statements" means (i) the consolidated financial statement
or statements of Borrower described or referenced in Section 4.06 hereof and
delivered with this Agreement to Lender, and (ii) subsequent financial
statements required to be provided pursuant to this Agreement.
4
<PAGE> 8
"Fiscal Quarter" means each of the quarters of the Fiscal Year ending
on March 31st, June 30th, September 30th, and December 31st.
"Fiscal Year" or "Annually" means any twelve-month accounting period
ending December 31st.
"Funded Debt" means all Debt resulting from loans made to Borrower by
banks, savings and loan associations, and financial institutions, all purchase
money mortgages, all conditional sales contracts, all title retention
agreements, and all current maturities of Debt not otherwise specified herein.
"GAAP" means generally accepted accounting principles.
"Indebtedness" means any and all amounts and liabilities owing or to
be owing by Borrower to Lender from time to time whether now existing or
hereafter incurred, and whether in connection with this Agreement or otherwise,
including any amendments hereof, or in connection with loans, participation
interests, drafts, notes, banker's acceptances, letters of credit, guarantees,
or overdrafts of checking or savings accounts of Borrower maintained with
Lender.
"Initial Notice of Interest Rate Election" means the notice required
by Section 2.06(a) herein, which notice shall be in the form of Exhibit A
hereto or in another form approved by Lender.
"Interest Expense" means any and all payments, cash or in-kind, made
or accrued on account of interest obligations incurred, arising under or out of
any Debt of the Borrower (on a consolidated basis), including but not limited
to promissory notes issued to evidence such interest payments and including the
component of amounts payable under capital leases attributable to interest, and
excluding any non-cash items other than notes issued to evidence such interest
payments and the component of amounts payable under capital leases attributable
to interest.
"LLC" means any limited liability company validly formed under the law
of any State for the purpose of making an Acquisition or a Physician Practice
Acquisition, or for the purpose of developing a Project and in which the
Borrower retains a majority ownership interest.
"LLC Note" means a promissory note issued by an LLC to the order of
Borrower and evidencing a loan by Borrower to such LLC of monies initially
advanced by Lender to Borrower under the Revolving Credit Note, which loan is
made for the purpose of developing a Project in which the Borrower retains a
majority ownership interest.
"LLC Note Collateral" means any property, collateral, or assets
securing repayment of an LLC Note.
5
<PAGE> 9
"Lender" means SunTrust Bank, Nashville, N.A., its successors and
assigns.
"Letter of Credit" means any letter of credit issued by Lender on
Borrower's account pursuant to and in compliance with Section 2.11 herein.
"LIBOR-Based Rate" means for any Libor Based Rate Interest Period, one
hundred and seventy-five (175) basis points per annum above the average
(rounded upwards, if necessary, to the next higher one/sixteenth of one
percent) of the respective rates per annum by which dollar deposits in
immediately available funds are offered to Lender in the London Interbank
market at approximately 11:00 a.m. (Nashville time) two Eurodollar Business
Days before the first day of such Libor-Based Rate Interest Period for delivery
on the first day of such Libor-Based Rate Interest Period in amounts
approximately equal to the principal amount of the loans on which the
LIBOR-Based Rate is applicable and for the number of days comprised therein.
"LIBOR-Based Rate Period" means with respect to any Advance on which
the Borrower has elected, pursuant to Section 2.06, that the LIBOR-Based Rate
apply, the 30, 60, or 90 day period selected by Borrower commencing on the date
the Advance is made or on any subsequent Conversion Date.
"Lien" means any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute, or contract, and including, but
not limited to, the lien or security interest arising from a mortgage,
encumbrance, pledge, security agreement, conditional sale, or trust receipt or
a lease, consignment, or bailment for security purposes. The term "Lien" shall
include reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases, and other title exceptions and
encumbrances affecting the Property. For the purposes of this Agreement,
Borrower shall be deemed to be the owner of any Property that it has acquired
or holds subject to a conditional sale agreement, financing lease, or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person for security purposes.
"Loan" or "Loans" means any borrowing by Borrower under this
Agreement, the Revolving Credit Note, the Term Note, and/or any extension of
credit by Lender to or for Borrower pursuant to this Agreement or any other
Loan Document, including any renewal, amendment, extension, or modification
thereof.
"Loan Documents" means, collectively, each document, paper or
certificate executed, furnished or delivered in connection with this Agreement
(whether before, at, or after the Closing Date), including, without limitation,
this Agreement, the Revolving Credit
6
<PAGE> 10
Note, the Term Note, and all other documents, certificates, reports, and
instruments that this Agreement requires or that were executed or delivered (or
both) at Lender's request.
"Minority Interest" means that amount depicted from time to time on
Borrower's most current Consolidated Balance Sheet as "Minority Interest" so
long as such is calculated on a consistent basis and in accordance with GAAP.
"Notice of Interest Rate Election" means the notice required by
Section 2.06(c) and Section 2.06(d) herein and which notice shall be in either
the form of Exhibit B hereto or in such other form as approved by Lender.
"Obligations" means all of Borrower's undertakings in the Loan
Documents including, but not limited to, all agreements, representations,
warranties, and covenants. The term "Obligations" includes the Indebtedness.
"Partnership" means any general or limited partnership validly formed
under the law of any state for the purpose of making an Acquisition or a
Physician Practice Acquisition, or for the purpose of developing a Project and
in which the Borrower retains a majority ownership interest.
"Partnership Agreement" means the general partnership agreement or the
limited partnership agreement of any Partnership.
"Partnership Note" means a promissory note issued by a Partnership to
the order of Borrower and evidencing a loan by Borrower to such Partnership of
monies initially advanced by Lender to Borrower under the Revolving Credit
Note, which loan is made in connection with the development of a Project in
which the Borrower retains a majority ownership interest.
"Partnership Note Collateral" means any property, collateral, or
assets securing repayment of a Partnership Note.
"Physician Practice Acquisition" means the acquisition of the assets
of a physician's practice or the practice of more than one physician by a
Partnership or LLC in circumstances where the physicians whose assets are
acquired are partners or are members in an LLC or immediately thereafter will
become partners in the Partnership or a member in the LLC.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
government, or any agency or political subdivision thereof, or any other form
of entity.
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"Plan" means any employee benefit or other plan established or
maintained, or to which contributions have been made, by the Borrower or any
Subsidiary and covered by Title IV of ERISA or to which Section 412 of the Code
applies.
"Principal Office" means the principal office of the Lender located at
201 Fourth Avenue North, Nashville, Tennessee.
"Project" means construction, expansion and/or renovation of an
ambulatory surgery center owned by a Partnership or LLC.
"Property" or "Properties" means any interest in any kind of property
or asset, whether real, personal, or mixed, or tangible or intangible.
"Request for Advance" means a request by Borrower to Lender for
Advances under the Revolving Credit Note all in the form of Exhibit C.
"Revolving Credit Note" means that certain Amended and Restated
Revolving Credit Note issued by Borrower to Lender in the principal amount of
$12,000,000 in the form of Exhibit D hereto, as such may be amended.
"Seller Financing" means either: (i) the extension of credit to
Borrower that enables the Borrower to acquire a majority interest in a
Partnership or LLC, (ii) the extension of credit to Borrower by any seller of a
majority interest in an existing ambulatory surgery center, which sale is made
to Borrower, a Partnership, or an LLC, or (iii) the extension of credit to
Borrower by the seller of the assets in a Physician Practice Acquisition.
"Subsidiary" means any corporation of which more than fifty percent
(50%) of the issued and outstanding voting stock is owned or controlled at the
time as of which any determination is being made directly or indirectly, by
Borrower and/or by one or more of Borrower's Subsidiaries.
"Term Note" means that certain Consolidated, Amended, and Restated
Term Note in the principal amount of $5,749,245.88 issued by Borrower to the
order of Lender dated June 25, 1996 in the form of Exhibit E hereto, as such
may be amended.
"Voting Stock" means securities of any class of a corporation the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or persons performing similar
functions).
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Article II. The Loans.
Section 2.01 The Revolving Credit Note. Subject to the conditions and
the terms of the Loan Documents and in reliance upon the representations,
warranties, and covenants set forth in the Loan Documents, Lender agrees to
extend the Borrower credit on a revolving credit basis, in the principal amount
of up to $12,000,000 pursuant to the Revolving Credit Note.
Section 2.02 Advances Under the Revolving Credit Note. Advances under
the Revolving Credit Note shall be made only after the Borrower has complied
with the provisions of this Agreement. Borrower shall not be entitled to
receive Advances under the Revolving Credit Note subsequent to June 25, 1998.
Subject to the terms and requirements of this Agreement, Borrower may repay and
re-borrow amounts under the Revolving Note up to the maximum principal amount
thereof, provided, however, the amount available to be advanced to Borrower
under the Revolving Credit Note shall be reduced by the face amount of any
outstanding Letter of Credit issued by Lender or Borrower's behalf pursuant to
Section 2.11 herein.
Section 2.03 Borrowing Procedure. The Borrower hereby authorizes the
Lender to deposit all Advances under the Revolving Credit Note into the
operating account maintained by the Borrower with Lender. Any authorized officer
shall have the authority to request Advances. All requests for Advances shall be
in writing (except that telephonic requests by any authorized officer confirmed
immediately in writing thereafter shall be acceptable). In the event of a
telephonic request, the Lender shall be entitled to rely, without further
investigation, on the fact that the person making the telephone call has
identified himself as one of the authorized officers.
The giving of notice by Borrower that it is requesting an Advance
shall constitute a warranty that, as of the date the notice is given and as of
the date of the Advance, the officers of the Borrower do not have knowledge of
any Default Conditions or Event of Default as defined herein; and that as of
such date, the representations and warranties contained in Article IV are and
will be true and correct, except as to changes occurring after the date of this
Agreement caused by transactions not prohibited under this Agreement. Lender
shall have no liability to Borrower arising out of its compliance with this
procedure.
Section 2.04 Minimum Advance Amounts. Advances under the Revolving
Credit Note shall not be made in amounts less than $100,000 without Lender's
prior written consent.
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Section 2.05 Required Payments.
(a) Commencing on the tenth (10th) day of July, 1996, and on
the tenth (10th) day of each consecutive month through and
including June 10, 1998 the Borrower shall pay to Lender an amount
equal to all then accrued interest.
(b) Commencing on the tenth (10th) day of July, 1998, and
on the tenth (10th) day of each consecutive month through and
including May 10, 2002, the Borrower shall pay to Lender an amount
equal to the product of: (i) the principal balance of the Revolving
Credit Note as such exists on June 10, 1998, divided by (ii) 48, plus
all then accrued interest.
(c) On June 10, 2002 the Revolving Credit Note shall mature
and the Borrower shall pay to the Lender an amount equal to all
outstanding principal, plus all accrued interest.
Section 2.06 Applicable Interest Rate.
(a) With regard to the Revolving Credit Note and at the
time that the Borrower requests an Advance, the Borrower shall
deliver to Lender the Initial Notice of Interest Rate Election which
shall be irrevocable, shall be in the form attached as Exhibit A, and
shall set forth the following: (a) whether the selected interest rate
is the Base Rate or the LIBOR-Based Rate, and (b) if the interest rate
selected is the LIBOR-Based Rate, the maturity selected for the
LIBOR-Based Rate Period. In the event that the Borrower shall fail to
deliver this Initial Notice of Interest Rate Election, then it shall be
conclusively presumed that the Borrower has elected the Base Rate.
(b) With regard to the Term Note and upon the Closing Date,
the Borrower shall advise the Lender in writing: (a) whether the
applicable interest on the Term Note is the Base Rate or the
LIBOR-Based Rate, and (b) if the interest rate selected is the
LIBOR-Based Rate, the maturity selected for the LIBOR-Base Rate Period.
(c) At any time that the outstanding principal balance of
the Term Note or an Advance bears interest at the Base Rate, the
Borrower may elect upon three (3) days prior written notice and
delivery to Lender of a Notice of Interest Rate Election to convert the
Applicable Interest Rate to a LIBOR-Based Rate.
(d) Once the Borrower has selected the LIBOR-Based Rate,
such rate shall remain applicable until the expiration of the then
applicable LIBOR-Based Rate Interest Period. Three (3) days prior to
the expiration of any applicable LIBOR-Based Rate Period, the Borrower
shall deliver to Lender a Notice of
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Interest Rate Election. Should the Borrower fail to deliver such
Notice of Interest Rate Election in a timely manner, then it shall be
conclusively presumed that the Borrower has selected the Base Rate as
the Applicable Interest Rate.
(e) At any time, no more than ten (10) different
LIBOR-Based Rate Periods may be applicable to the Term Note and all
Advances.
(f) The calculation of the Applicable Interest Rate shall
be based on a year of 360 days.
(g) The following provisions shall apply at any time that
the LIBOR-Based Rate is applicable:
(i) Increased Cost. If, as a result of any
change in applicable law, regulation, treaty or directive, in
the interpretation or application thereof or compliance by
Lender with any request or directive (whether or not having
the force of law) from any court or governmental authority,
agency or instrumentality:
(A) the basis of taxation of payments to
Lender of the principal of or interest on any loan on
which a LIBOR-Based Rate is applicable (other than
taxes imposed on the overall net income of Lender) is
changed;
(B) any reserve, special deposit or
similar requirements against assets of, deposits with
or for the account of, or credit extended by, Lender
are imposed, modified or deemed applicable; or
(C) any other condition affecting this
Agreement or the LIBOR-Based Rate is imposed on
Lender or the London eurodollar market;
and Lender determines that, by reason thereof, the actual
out-of-pocket cost to Lender of offering, making, or
maintaining the LIBOR-Based Rate is increased, or the amount
of any sum receivable by Lender hereunder in respect of any of
the LIBOR-Based Rate is reduced;
then, Borrower shall pay to Lender upon demand (which demand
shall be accompanied by a statement setting forth the basis
for the calculation thereof but only to the extent not
theretofore provided to Borrower) such additional amount or
amounts as will compensate Lender for such additional cost or
reduction. Determinations by Lender for purpose of this
section of the additional amounts required to compensate
Lender in respect of the foregoing shall be conclusive, absent
demonstrable error.
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(ii) Eurodollar Deposits Unavailable or Interest
Rate Unascertainable. In the event that the Lender shall have
reasonably determined (which determination shall be conclusive
and binding on the parties hereto, absent demonstrable error)
that deposits of the necessary amount for the relevant
LIBOR-Based Rate Period are not available to Lender in the
London Eurodollar market or that, by reason of circumstances
affecting such market, adequate and reasonable means do not
exist for ascertaining the LIBOR-Based Rate applicable to such
period or term, as the case may be, or that the application or
use of the LIBOR-Based Rate would be impracticable as a result
of a contingency occurring after the Closing Date that
materially and adversely affects the London interbank market,
then Lender shall promptly give notice of such determination
to Borrower and (i) any notice of new LIBOR-Based Rate
selection previously given by Borrower and not yet converted
shall be deemed a selection of the Base Rate and (ii) the
existing LIBOR-Based Rate shall be converted to the Base Rate
on the last day of the then current LIBOR-Based Rate Period
with respect thereof.
(iii) Changes in Law Rendering the LIBOR-Based
Rate Unlawful. If at any time due to any new law, treaty or
regulation, or any interpretation thereof by any governmental
or other regulatory authority charged with the administration
thereof, or for any other reason arising subsequent to the
date hereof, it shall become unlawful for Lender to offer,
charge or collect interest based on the LIBOR-Based Rate, the
obligation of Lender to provide the LIBOR-Based Rate shall,
upon the happening of such event, forthwith be suspended for
the duration of such illegality. Upon the happening of such
event, Lender shall notify Borrower thereof in writing, and
Borrower, at its election, shall, on the earlier of (i) the
last day of the then current LIBOR-Based Rate Period or (ii)
if required by such law, regulation or interpretation, on such
date as shall be specified in such notice, either convert the
unlawful LIBOR-Based Rate to the Base Rate or repay the
Revolving Credit Note, without penalty, to Lender in full,
together with all interest accrued thereon.
(iv) Other Changes Rendering Use of LIBOR-Based
Rate a Severe Hardship. In the event that on any date after
the Closing Date Lender shall reasonably determine (which
determination shall be conclusive and binding on the parties
hereto, absent demonstrable error) that the use and/or
application of the LIBOR-Based Rate will cause the Lender
severe hardship as a result of a contingency occurring after
the date of this Agreement; then, and in
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any such event, the Lender shall give telephonic notice
(immediately confirmed in writing) to the Borrower of such
determination, and the obligation of the Lender to offer or
permit the selection of the LIBOR-Based Rate shall be
terminated at the earlier of the end of the then current
LIBOR-Based Rate Period, and upon such date the Borrower, at
its option shall either repay the Revolving Credit Note,
without penalty, together with all interest accrued thereon,
or convert the Revolving Credit Note to the Base Rate.
(v) Adjustments to Rate to Cover Additional
Cost. It is the intention of the parties that the LIBOR-Based
Rate shall accurately reflect the cost to Lender of
maintaining loans at the LIBOR-Based Rate during the
applicable LIBOR-Based Rate Period. Accordingly:
(i) if by reason of any change after the
date hereof in any applicable law or governmental
rule, regulation or order (or any interpretation
thereof and including the introduction of any new law
or governmental rule, regulation or order), including
any change in the LIBOR reserve requirement, the cost
to Lender of maintaining loans at the LIBOR-Based
Rate or funding the same by means of a London
interbank market time deposit, as the case may be,
shall increase, the LIBOR-Based Rate then charged by
Lender shall be adjusted as necessary to reflect such
change in cost to such Lender, effective as of the
date on which such change in any applicable law,
governmental rule, regulation or order becomes
effective.
(ii) if the Lender shall have determined
that the adoption after the Closing Date of any law,
rule, regulation or guideline regarding capital
adequacy, or any change in any of the foregoing or in
the interpretation or administration of any of the
foregoing by any governmental authority or agency,
central bank or comparable agency charged with the
interpretation or administration thereof, or
compliance by the Lender (or any lending office of
the Lender) or the Lender's holding company with any
request or directive regarding capital adequacy
(whether or not having the force of law) of any such
governmental authority or agency, central bank or
comparable agency, has or would have the effect of
reducing the rate of return on the Lender's capital
or on the capital of the Lender's holding company, as
a consequence of the Lender's obligations under this
Agreement or the Advances made by such Lender
pursuant hereto to a level
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below that which the Lender or the Lender's holding
company could have achieved but for such adoption,
change or compliance (taking into consideration the
Lender's guidelines with respect to capital adequacy)
by an amount deemed by the Lender to be material,
then from time to time the Borrower shall pay to the
Lender such additional amount or amounts as will
compensate the Lender or the Lender's holding company
for any such reduction suffered.
(h) Borrower may prepay the principal amount evidenced by
the Term Note or by any Advance at any time that the Applicable
Interest Rate is the Base Rate. Except as provided specifically in
Section 2.05(i), (iii) and (iv), Borrower may not prepay the Term Note
or any such Advance so long as the Applicable Rate is the LIBOR-Based
Rate, except at the maturity of any applicable LIBOR-Based Rate
Period.
Section 2.07 The Term Note. Subject to the conditions and terms of
the Loan Documents and in reliance upon the representations, warranties, and
covenants set forth in the Loan Documents, Lender agrees to extend the Borrower
credit in the principal amount of $5,749,245.88 pursuant to the Term Note. The
terms of repayment of the Term Note shall be as set forth therein.
Section 2.08 Participation. Lender shall have the right to enter into
one or more participation agreements with one or more participating lenders
approved by Lender on such terms and conditions as Lender shall deem advisable;
provided that at all times the Lender shall retain a minimum of fifty percent
(50%) of the Loans.
Section 2.09 Use of Proceeds. Proceeds of the Revolving Credit Note
will be used to: (i) permit the issuance of Letters of Credit, and (ii) enable
the Borrower to make (x) loans to Partnerships or LLC's for the construction and
renovation of Projects and/or (y) Acquisitions and Physician Practice
Acquisitions. Proceeds of the Term Note were used to refinance existing
indebtedness.
Section 2.10 Payments to Principal Office; Debit Authority. Each
payment under the Revolving Credit Note and Term Note (including any permitted
prepayment and payment of interest) shall be made to Lender at its Principal
Office for the account of Lender in U.S. dollars and in immediately available
funds before 11:00 a.m. Nashville Time on the date such payment is due. The
Lender may, but shall not be obligated to, debit the amount of any such payment
which is not made by such time to any ordinary deposit account of the Borrower
with the Lender.
Section 2.11 Letters of Credit. Provided no Default Condition or Event
of Default has occurred and is continuing, the Lender agrees that at Borrower's
request, it shall cause Letters of Credit
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to be issued to such Persons as designated by Borrower on Borrower's account.
In connection with the issuance of each Letter of Credit, the Borrower shall
execute in favor of Lender an application and agreement for issuance of a
letter of credit in form and substance required by Lender, and the Borrower
shall pay to Lender a fee in an amount equal to one and one-half percent (1
1/2%) of the face amount of the Letter of Credit issued by Lender. The issuance
by Lender of a Letter of Credit shall reduce the available amount to be
advanced by Lender under the Revolving Credit Note by an amount equal to the
face amount of the Letter of Credit for so long as such Letter of Credit
remains outstanding. In the event that the Lender is required to pay to any
Person the proceeds (partial or in full) of a Letter of Credit, the Borrower
agrees to pay to Lender immediately on demand by Lender an amount equal to the
proceeds paid by Lender to such Person, plus interest from the date of such
payment until the date of payment by Borrower at an amount equal to the Base
Rate. Letters of Credit issued by Lender shall not be issued for a time period
in excess of twelve (12) months. The Lender shall have no obligation to issue
Letters of Credit on or after June 25, 1998.
Section 2.12 Right of Offset, Etc. The Borrower hereby agrees that,
in addition to (and without limitation of) any right of set-off, banker's lien
or counterclaim the Lender may otherwise have, the Lender shall be entitled, at
its option, to offset balances held by it at any of its offices against any
principal of or interest on the Obligations hereunder which is not paid within
fifteen (15) days after such payment is due to the Lender, and in the event the
Lender does offset against such balances, it shall promptly notify the Borrower,
provided that its failure to give such notice shall not affect the validity
thereof.
Section 2.13 Usury. The parties to this Agreement intend to conform
strictly to applicable usury laws as presently in effect. Accordingly, if the
transactions contemplated hereby would be usurious under applicable law
(including the laws of the United States of America and the State of Tennessee),
then, in that event, notwithstanding anything to the contrary in any Loan
Document or agreement executed in connection with or as security for the
Obligations, Borrower and Lender agree as follows: (i) the aggregate of all
consideration that constitutes interest under applicable law which is contracted
for, charged, or received under any of the Loan Documents or agreements, or
otherwise in connection with the Obligations, shall under no circumstance exceed
the maximum lawful rate of interest permitted by applicable law, and any excess
shall be credited on the Obligations by the holder thereof (or, if the
Obligations shall have been paid in full, refunded to Borrower); and (ii) in the
event that the maturity of the Obligations is accelerated by reason of an
election of the holder resulting from any Event of Default under this Agreement
or otherwise, or in the event of any required or permitted prepayment, then such
consideration that constitutes interest may never include
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more than the maximum amount of interest permitted by applicable law, and
excess interest, if any, for which this Agreement provides, or otherwise, shall
be cancelled automatically as of the date of such acceleration or prepayment
and, if previously paid, shall be credited on the Obligations (or, if the
Obligations shall have been paid in full, refunded to Borrower).
Article III. Collateral.
Section 3.01 Collateral. The Indebtedness and Obligations shall be
secured by the following:
(a) all Partnership Notes, Partnership Note Collateral,
LLC Notes, and LLC Note Collateral;
(b) all deposit accounts, monies, and items of value of
Borrower now or hereafter placed in Lender's possession; and
(c) all other Property of Borrower presently and/or
subsequently pledged or delivered to Lender to secure all or a portion
of the Indebtedness.
Article IV. Representations and Warranties.
To induce Lender to enter this Agreement and extend credit under this
Agreement, Borrower covenants, represents, and warrants to Lender that as of
the date hereof and as of the Closing Date:
Section 4.01 Corporate Existence. Borrower and each Subsidiary are
corporations duly organized, and validly existing, and in good standing under
the laws of the states of their respective incorporation, and the Borrower and
each Subsidiary are duly qualified as a foreign corporation in all jurisdictions
in which the Property owned or the business transacted by each of them makes
such qualification necessary, except where failure to do so would not have a
material, adverse effect on the Borrower or any Subsidiary which acts as a
general partner in a Partnership or member in an LLC.
Each Partnership and LLC that has executed LLC Notes or Partnership
Notes, as applicable, as of the date hereof is duly formed and validly existing
under the laws of the respective State under which it was formed.
Section 4.02 Corporate Power and Authorization. The Borrower is duly
authorized and empowered to execute, deliver, and perform under all Loan
Documents; the Borrower's board of directors has authorized the Borrower to
execute and perform under the Loan Documents; and all other corporate and/or
shareholder action on Borrower's part required for the due execution, delivery,
and performance of the Loan Documents has been duly and effectively taken.
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Section 4.03 Binding Obligations. This Agreement is, and the other
Loan Documents when executed and delivered in accordance with this Agreement
will be, legal, valid and binding upon and against the Borrower and its
Properties enforceable in accordance with their respective terms, subject to no
defense, counterclaim, set-off, or objection of any kind known to or suspected
by Borrower. To the best of Borrower's knowledge and belief, the Lender has
taken no action nor has it failed to take any action that subjects Lender to any
liability to Borrower.
Section 4.04 No Legal Bar or Resultant Lien. The Borrower's execution,
delivery and performance of the Loan Documents do not constitute a default
under, and will not violate any provisions of the charter or bylaws of Borrower,
or any contract or agreement entered into by Borrower and any Person. To
Borrower's knowledge, the Borrower's execution, delivery and performance of the
Loan Documents do not constitute a breach of any law, regulation, order,
injunction, judgment, decree, or writ to which Borrower is subject, or result in
the creation or imposition of any lien upon any Properties of Borrower, other
than those contemplated by the Loan Documents.
Section 4.05 No Consent. The execution, delivery, and performance of
the Loan Documents do not require the consent or approval of any other Person,
except for such consents which have been obtained by Borrower in writing.
Section 4.06 Financial Condition. The Financial Statements for the
period ended December 31, 1995 and the Fiscal Quarter ended March 31, 1996
which have been delivered to Lender, have been prepared on a consolidated basis
in accordance with GAAP, consistently applied, and the Financial Statements
present fairly the consolidated financial condition of Borrower as of the date
or dates and for the period or periods stated therein provided that it is
understood that quarterly Financial Statements are subject to year end
adjustments and do not contain footnotes that would appear on the audited
Financial Statements. No material adverse change in the consolidated financial
condition of Borrower has occurred since the date of the most recent Financial
Statements.
The Financial Statements include all liabilities (direct and
contingent) and all assets of each LLC and Partnership, and such Financial
Statements accurately reflect Borrower's ownership interest therein.
Section 4.07 Investments, Advances, and Guaranties. Except for the
transactions described on Exhibit F, neither Borrower, nor any Subsidiary, nor
any Partnership, nor any LLC has made investments in, advances to, or guaranties
of the obligations of any Person (other than to Borrower or any Subsidiary, a
Partnership, a LLC, or to a partnership or other entity that prepares financial
statements under Borrower on a consolidated basis) in excess of $100,000 in
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the aggregate, or committed or agreed to undertake any of these actions or
obligations, except as referred to or reflected in the Financial Statements or
as permitted hereunder.
Section 4.08 Liabilities and Litigation. Neither Borrower, nor any
Subsidiary, nor any Partnership, nor any LLC has any material liabilities
(individually or in the aggregate) direct or contingent, except as referred to
or reflected in the Financial Statements. There is no litigation, legal or
administrative proceeding, investigation, or other action of any nature pending
or, to the knowledge of Borrower, threatened against or affecting Borrower, or
any Subsidiary, or any Partnership, or any LLC that involves the possibility of
any judgment or liability not fully covered by insurance or that if adversely
decided could reasonably be expected to materially and adversely affect the
business or the Properties of Borrower, or any Subsidiary, or any Partnership,
or any LLC or the ability of Borrower, or any Subsidiary, or any Partnership, or
any LLC to carry on its business as now conducted.
Section 4.09 Taxes; Governmental Charges. Borrower, each Subsidiary,
each Partnership, and each LLC have filed or caused to be filed all tax returns
and reports required to be filed and have paid all taxes, assessments, fees, and
other governmental charges levied upon each of them or upon any of their
respective Properties or income, which are due and payable, including interest
and penalties unless such are contested in good faith and adequate reserves have
been retained therefor. Borrower, each Subsidiary, each Partnership, and each
LLC have made all required withholding deposits.
Section 4.10 Title, Etc. Borrower, each Subsidiary, each Partnership,
and each LLC have good title to their respective Properties, free and clear of
all liens except those referenced or reflected in the Financial Statements or
those securing the Obligations. Borrower, each Subsidiary which acts as a
general partner in a Partnership, each Partnership, and each LLC possess all
trademarks, copyrights, trade names, patents, licenses, and rights therein,
adequate in all material respects for the conduct of their respective business
as now conducted and presently proposed to be conducted, without conflict with
the rights or claimed rights of others.
Section 4.11 No Default. Neither Borrower, nor any Subsidiary, nor
any Partnership, nor any LLC is in default in any material respect that affects
its respective business, Properties, operations, or condition, financial or
otherwise, under any indenture, mortgage, deed of trust, credit agreement, note,
agreement, or other instrument to which Borrower, or any Subsidiary, or any
Partnership, or any LLC is a party or by which it or its respective Properties
are bound. Neither the Borrower, nor any Subsidiary, nor any Partnership, nor
any LLC is in violation in any material respect of its applicable articles of
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incorporation or charter or bylaws or Partnership Agreements or LLC operating
agreements. Neither the Borrower, nor any Subsidiary, nor any Partnership, nor
any LLC has received notice from any Person that it has violated or breached
any applicable articles of incorporation, charter, bylaws, Partnership
Agreements, articles of organization, or operating agreements. No Default
Conditions hereunder have occurred or are continuing as of the date hereof or
at the Closing Date.
Section 4.12 Casualties; Taking of Properties, Etc. Neither the
business nor the Properties of Borrower, nor any Subsidiary which acts as a
general partner in a Partnership, nor any Partnership, nor any LLC have been
materially affected as a result of any fire, explosion, earthquake, flood,
drought, windstorm, accident, strike or other labor disturbance, embargo,
requisition or taking of property, cancellation of contracts, permits,
concessions by any domestic or foreign government or any agency thereof, riot,
activities of armed forces or acts of God or of any public enemy.
Section 4.13 Regulation U. Neither Borrower, nor any Subsidiary which
acts as a general partner in a Partnership, nor any Partnership, nor any LLC is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System. No part of the Indebtedness shall be used at any time to purchase or to
carry margin stock within the meaning of Regulation U or to extend credit to
others for the purpose of purchasing or carrying any margin stock if to do so
would cause the Lender to violate the provisions of Regulation U.
Section 4.14 Compliance with Laws, Etc. Neither Borrower, nor any
Subsidiary which acts as a general partner in a Partnership, nor any
Partnership, nor any LLC is in violation of any law, judgment, decree, order,
ordinance, or governmental rule or regulation to which Borrower, or any such
Subsidiary, or any Partnership, or any LLC or any of their respective Properties
is subject which, if enforced, would have a material adverse effect on the
Borrower, or such Subsidiaries, or any Partnership, or any LLC. Neither
Borrower, nor any Subsidiary, which acts as a general partner in a Partnership,
nor any Partnership, nor any LLC has failed to obtain any license, permit,
franchise, or other governmental authorization necessary to the ownership of any
of their Properties or to the conduct of their respective business. All
improvements on the real estate owned by, leased to or used by Borrower, or any
Subsidiary which acts as a general partner in any Partnership, or any
Partnership, or any LLC conform in all material respects to all applicable state
and local laws, zoning and building ordinances and health and safety ordinances,
and such real estate is zoned for the various purposes for which such real
estate and improvements thereon are presently being used.
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Section 4.15 ERISA. Borrower, each Subsidiary, each Partnership, and
each LLC are in compliance in all material respects with the applicable
provisions of ERISA. Neither Borrower, nor any Subsidiary, nor any Partnership,
nor any LLC has incurred any "accumulated funding deficiency" within the meaning
of ERISA which is material, and Borrower has not incurred any material liability
to PBGC in connection with any Plan.
Section 4.16 Subsidiaries, Etc. The names, addresses of registered
offices, and states of incorporation of Borrower's Subsidiaries are attached
hereto as Exhibit G. Borrower owns a majority interest of all of the Voting
Stock of each Subsidiary and its ownership interest is noted on Exhibit G. The
Borrower uses no trade names.
The names, addresses of registered offices, and states of formation of
the Partnerships and LLC's are attached hereto as Exhibit H.
Section 4.17 No Material Misstatements. No information, exhibit, or
report furnished or to be furnished by Borrower to Lender in connection with
this Agreement, contain as of the date thereof, or will contain as of the
Closing Date, any material misstatement of fact or failed or will fail to state
any material fact, the omission of which would render the statements therein
materially false or misleading.
Section 4.18 Investment Company Act. Neither Borrower, nor any
Subsidiary, nor any Partnership, nor any LLC is an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
Section 4.19 Use of Proceeds; Purpose of the Credit. Borrower has used
or will use proceeds from the Term Note and the Revolving Credit Note
exclusively for the purposes stated in this Agreement.
Section 4.20 Personal Holding Company; Subchapter S. Neither
Borrower, nor any Subsidiary, nor any Partnership, nor any LLC is a "personal
holding company" as defined in Section 542 of the Code, and neither Borrower,
nor any Subsidiary, nor any Partnership, nor any LLC is a "Subchapter S"
corporation within the meaning of the Code.
Section 4.21 Solvency. Borrower, each Subsidiary that is a general
partner in any Partnership, each Partnership, and each LLC are solvent as of the
date hereof and shall remain solvent at all times hereafter. Borrower, and each
Subsidiary that is a general partner in any Partnership, and each Partnership,
and each LLC are generally paying their respective debts as they mature and the
fair value of Borrower's, and such Subsidiary's, and such Partnership's,
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and such LLC's assets substantially exceeds the sum total of their respective
liabilities.
Section 4.22 Capital. Borrower now has capital sufficient to carry on
its business and transactions and all businesses and transactions in which it is
engaged.
Article V. Conditions of Lending.
Section 5.01 Initial Conditions. Lender's obligation to extend credit
hereunder is subject to the Conditions Precedent that Lender shall have received
(or agreed in writing to waive or defer receipt of) all of the following, each
duly executed, dated and delivered as of the Closing Date, in form and substance
satisfactory to Lender and its counsel:
(a) Revolving Credit Note, the Term Note, and Loan
Documents. The Revolving Credit Note, the Term Note, and all other
Loan Documents.
(b) Collateral. Delivery of any collateral required by
Article III herein.
(c) Resolutions of Borrower. Certified copies of
resolutions of the Board of Directors of Borrower authorizing
or ratifying the execution, delivery, and performance, respectively,
of this Agreement and all Loan Documents.
(d) Borrower's Certificate of Existence. A certificate
of existence of Borrower from the State of Tennessee, which
certificate shall contain no facts objectionable to Lender.
(e) Consents, Etc. Certified copies of all documents
evidencing any necessary corporate action, consents, and
governmental approvals (if any) with respect to this Agreement and the
Loan Documents.
(f) Officer's Certificate. A certificate of the secretary
or any assistant secretary of Borrower certifying the names of
the officer or officers of Borrower authorized to sign this Agreement
and the Loan Documents, together with a sample of the true signature
of such officer(s).
(g) Borrower's Charter and By-Laws. A copy of Borrower's
by-laws and charter (including all amendments thereto) certified, in
the case of by-laws, by the secretary or any assistant secretary of
Borrower, and in the case of the charter by the Secretary of State of
Tennessee, as being true and complete copies of the current charter
and by-laws of Borrower.
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(h) Opinions of Counsel for Borrower. The opinions of
counsel for Borrower, addressed to Lender, substantially in the form
of Exhibit I.
(i) Other. Such other documents as Lender may reasonably
request.
Section 5.02 Conditions Prior to Funding. Lender's obligation to fund
any Advance is subject to the additional Conditions Precedent that Lender shall
have received (or agreed in writing to waive or defer receipt of) all of the
following, each duly executed:
Request for Advance. A Request for Advance in the form of
Exhibit C hereto, along with borrowing base certificate signed by the
chief financial officer of Borrower affirming that the total amount
outstanding under all Advances made subsequent to the date hereof,
plus the requested Advance, do not and will not exceed the sum of (i)
85% of Development Costs, plus (ii) 65% of the total cost of all
Acquisitions or a Physician Practice Acquisitions.
Section 5.03 All Borrowings. The Lender's obligations to extend
credit under the Loan Documents are subject to the following additional
Conditions Precedent which shall be met each time an Advance is requested and an
Advance is made:
(a) The representations of the Borrower contained in
Article IV are true and correct in all material respects as of the
date of the requested Advance, with the same effect as though made on
the date additional funds are advanced, except as to changes occurring
after the date of this Agreement caused by transactions not prohibited
under this Agreement; (b) There has been no material adverse change in
the Borrower's financial condition or other condition since the date
of the last borrowing hereunder; (c) No Default Conditions and no
Event of Default have occurred and continue to exist; (d) No material
litigation (including, without limitation, derivative actions),
arbitration proceedings or governmental proceedings not disclosed in
writing by the Borrower to the Lender prior to the date of the
execution and delivery of this Agreement is pending or known to be
threatened against the Borrower, or any Subsidiary, or any
Partnership, or any LLC, and (e) no material development not so
disclosed has occurred in any litigation, arbitration proceedings or
governmental proceedings so disclosed, which could reasonably be
expected to adversely affect the financial position or business of the
Borrower, or any Subsidiary, or any Partnership, or any LLC, or impair
the ability of the Borrower, or any Subsidiary, or any Partnership, or
any LLC, to perform their respective obligations under this Agreement
or any other Loan Documents.
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Article VI. Affirmative Covenants.
Borrower covenants that, during the term of this Agreement (including
any extensions hereof) and until all Indebtedness shall have been finally paid
in full and all Obligations shall have been fully discharged, unless Lender
shall otherwise first consent in writing, Borrower shall:
Section 6.01 Financial Statements and Reports. Promptly furnish to
Lender:
(a) Annual Reports. As soon as available, and in any
event within ninety (90) days after the close of each Fiscal Year, the
audited consolidated Financial Statements of the Borrower setting
forth the audited consolidated balance sheets of Borrower as at the
end of such year, and the audited consolidated statements of income,
statements of cash flows, and consolidated statements of retained
earnings of Borrower for such year, setting forth in each case in
comparative form (beginning when comparative data are available) the
corresponding figures for the preceding Fiscal Year accompanied by the
report of Borrower's certified public accountants, and by an unaudited
consolidating balance sheet and unaudited consolidating statements of
income of Borrower, its Subsidiaries, LLC's, Partnerships, and
partnerships and LLC's that are not borrowing funds from Borrower duly
certified by Borrower's chief financial officer as being correct
reflections of the information used for the audited consolidated
Financial Statements. The audit opinion in respect of the Financial
Statements of Borrower shall be the opinion of a firm of independent
certified public accountants reasonably acceptable to Lender;
(b) Quarterly and Year-to-Date Reports. As soon as
available and in any event within forty-five (45) days after the end
of each of the first three (3) Fiscal Quarters, the unaudited
consolidated balance sheets of Borrower as of the end of such Fiscal
Quarter, and the unaudited consolidated and consolidating statements
of income of Borrower, its Subsidiaries, the LLC's, the Partnerships,
and partnerships and LLC's that are not borrowing funds from Borrower
for such Quarter and for a period from the beginning of the Fiscal
Year to the close of such Fiscal Quarter, all certified by the chief
financial officer or chief accounting officer of Borrower as being
true and correct to the best of his or her knowledge; and
(c) Other Information. Promptly upon its becoming
available, such other material information about Borrower or the
Indebtedness as Lender may reasonably request from time to time.
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All such balance sheets and other Financial Statements referred to in Sections
6.01(a) and (b) hereof shall conform to GAAP on a basis consistent with those
of previous Financial Statements.
Section 6.02 Taxes and Other Liens. Cause to be paid and discharged
promptly all taxes, assessments, and governmental charges or levies imposed upon
it, upon any Subsidiary, upon any LLC, or upon any Partnership or upon any of
its or any Subsidiary's, any LLC's, or any Partnership's income or Property as
well as all claims of any kind (including claims for labor, materials, supplies,
and rent) which, if unpaid, might become a Lien upon any or all of its or any
Subsidiary's, any LLC's, or any Partnership's Property; provided, however, that
neither Borrower, nor any Subsidiary, nor any LLC, nor any Partnership shall be
required to pay any such tax, assessment, charge, levy, or claim if the amount,
applicability, or validity thereof shall currently be contested in good faith by
appropriate proceedings diligently conducted and if Borrower shall establish
reserves therefor adequate under GAAP.
Section 6.03 Maintenance.
(a) Maintain and cause to be maintained its corporate
existence, name, rights, and franchises and the corporate existence,
name, rights and franchises of each Subsidiary that acts as a general
partner in a Partnership, and the existence, name, and rights of each
Partnership and each LLC;
(b) observe and comply (to the extent necessary so that
any failure will not materially and adversely affect the business or
Property of Borrower, or any Subsidiary that is a general partner of
any Partnership, or of any Partnership, or of any LLC) with all
applicable laws, statutes, codes, acts, ordinances, orders, judgments,
decrees, injunctions, rules, regulations, certificates, franchises,
permits, licenses, authorizations, and requirements of all federal,
state, county, municipal, and other governments;
(c) cause its Property and the Property of any Subsidiary
that acts as a general partner in any Partnership, any Partnership,
and any LLC (and any Property leased by or consigned to it, any
Subsidiary that acts as a general partner in any Partnership, any
Partnership, or any LLC or held under title retention or conditional
sales contracts) to be maintained in good and workable condition at
all times and make all repairs, replacements, additions, and
improvements to the Property owned by Borrower, and any Subsidiary
that acts as a general partner in any Partnership, and any
Partnership, and any LLC reasonably necessary and proper to ensure
that the business carried on in connection with such Property may be
conducted properly and efficiently at all times; and
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(d) cause the Borrower, each LLC, and each Subsidiary
that acts as a general partner in a Partnership, and each Partnership
to refrain from doing business in any state in which such business
would require qualifications to do business in such state unless and
until it shall have qualified to do business in such state.
Section 6.04 Further Assurances. Promptly cure any defects in the
creation, issuance, and delivery of the Loan Documents. Borrower at its expense
promptly will execute and deliver to Lender upon request all such other and
further documents, agreements, and instruments in compliance with or
accomplishment of the covenants and agreements of Borrower in the Loan
Documents, or to correct any omissions in the Loan Documents, or to state more
fully the Obligations and agreements set out in any of the Loan Documents, to
file any notices, or to obtain any consents, all as may be reasonably necessary
or appropriate in connection therewith.
Section 6.05 Performance of Obligations.
(a) Pay the Indebtedness according to the terms of the
Loan Documents; and
(b) do and perform, and cause to be done and to be
performed, every act and discharge all of the Obligations provided to
be performed and discharged by Borrower under the Loan Documents, at
the time or times and in the manner specified.
Section 6.06 Insurance. Maintain and continue to maintain, with
financially sound and reputable insurors, insurance satisfactory in type,
coverage and amount to Lender against such liabilities, casualties, risks, and
contingencies and in such types and amounts as is customary in the case of
Persons engaged in the same or similar businesses and similarly situated as that
of Borrower, its Subsidiaries, LLC's, and the Partnerships. Upon request of
Lender, Borrower will furnish or cause to be furnished to Lender from time to
time a summary of the insurance coverage of Borrower in form and substance
satisfactory to Lender and if requested will furnish Lender copies of the
applicable policies. In the case of any fire, accident, or other casualty
causing material loss or damage to any Property of Borrower, any Subsidiary, any
LLC, or any Partnership, and the loss(es) materially impair(s) the operation of
the business of Borrower, any Subsidiary, any LLC, or any Partnership the
proceeds of such policies shall be used, at Borrower's discretion (a) to repair
or replace the damaged Property, or (b) to prepay the Indebtedness.
Section 6.07 Accounts and Records. At Borrower's expense, cause books
of record and account for it and its Subsidiaries, the LLC's, and the
Partnerships to be kept, in which full, true, and correct entries will be made
of all dealings or transactions in accordance with GAAP as applicable, except
only for changes in
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accounting principles or practices with which Borrower's certified public
accountants concur and which changes have been reported to Lender in writing
and with an explanation thereof.
Section 6.08 Right of Inspection. At Borrower's expense, permit any
officer, employee, or agent of Lender to visit and inspect any of the Property
of Borrower or any Subsidiary, to examine Borrower's and any Subsidiary's books
of record and accounts, to take copies and extracts from such books of record
and accounts, and to discuss the affairs, finances, and accounts of Borrower and
any Subsidiary with Borrower's respective officers, accountants, and auditors,
all at such reasonable times and as often as Lender may reasonably desire.
Cause at reasonable times any officer, employee, or agent of Lender to be
permitted to visit and inspect at Borrower's cost any Properties owned by any
Partnership or LLC and to inspect and copy any financial records and books of
records and account of such Partnership or LLC.
Section 6.09 Notice of Certain Events. Promptly notify Lender if
Borrower learns of the occurrence of (i) any event that constitutes a Default
Condition or Event of Default together with a detailed statement by a
responsible officer of Borrower of the steps being taken as a result thereof; or
(ii) the receipt of any notice from, or the taking of any other action by, the
holder of any promissory note, debenture, or other evidence of Debt of Borrower
or of any security (as defined under the Securities Act of 1933, as amended) of
Borrower with respect to a claimed default, together with a detailed statement
by a responsible officer of Borrower specifying the notice given or other action
taken by such holder and the nature of the claimed default and what action
Borrower is taking or proposes to take with respect thereto; or (iii) any legal,
judicial, or regulatory proceedings affecting Borrower in which the amount
involved is material and is not covered by insurance or which, if adversely
determined, would have a material and adverse effect on the business or the
financial condition of Borrower; or (iv) any dispute between Borrower and any
governmental or regulatory authority or any other person, entity, or agency
which, if adversely determined, could reasonably be expected to materially
interfere with the normal business operations of Borrower; or (v) any material
adverse changes, either individually or in the aggregate, in the assets,
liabilities, financial condition, business, operations, affairs, or
circumstances of Borrower from those reflected in the Financial Statements or
from the facts warranted or represented in any Loan Document; or (vi) the
occurrence of a default under a Partnership Note or an LLC Note.
Section 6.10 ERISA Information and Compliance. Comply with ERISA and
all other applicable laws governing any pension or profit sharing plan or
arrangement to which Borrower is a party. Borrower shall provide Lender with
notice of any "reportable event" or "prohibited transaction" or the imposition
of a "withdrawal liability" within the meaning of ERISA.
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Section 6.11 Management. Give notice to Lender of any material change
in the executive officers of Borrower within five (5) days after such change
occurs.
Section 6.12 Reports, Etc. If applicable, furnish to Lender copies of
all filings and reports, of any nature or type, made with or to the Securities
and Exchange Commission (or any successor thereto) within 5 days thereafter, and
including all amendments, modifications, or supplements thereto, as the same are
filed with the Securities and Exchange Commission.
Section 6.13 Calculations. In all calculations made for purposes
required by this Loan Agreement, the Borrower, each Subsidiary, each LLC, each
Partnership, and each partnership and LLC not borrowing funds from the Borrower
shall comply with GAAP, and the Borrower, each Subsidiary, each LLC, each
Partnership, and each partnership and LLC not borrowing funds from the Borrower
shall use the same procedures and methods employed by Borrower, each Subsidiary,
each LLC, each Partnership, and each partnership and LLC not borrowing funds
from the Borrower in preparing the Financial Statements delivered to Lender
prior to the date of this Agreement. All references contained herein to
calculations of or determinations affecting Borrower (on a consolidated basis)
shall refer to the Borrower, each Subsidiary, each LLC, each Partnership, and
each Person that prepares financial statements under Borrower.
Section 6.14 Partnership Notes and LLC Notes, Etc. The Borrower shall
assign to Lender and grant Lender a first perfected security interest in all
Partnership Notes, Partnership Note Collateral, LLC Notes, and LLC Note
Collateral to secure repayment of the Indebtedness and the Obligations pursuant
to such documentation as reasonably required by Lender.
Article VII. Negative Covenants.
Borrower covenants and agrees that, during the term of this Agreement
and any extensions hereof and until the Indebtedness has been paid and
satisfied in full, unless Lender shall otherwise first consent in writing,
neither Borrower, nor any Subsidiary, nor any LLC, nor any Partnership, nor any
other partnership or LLC in which Borrower or a Subsidiary owns an interest
will, either directly or indirectly:
Section 7.01 Debts, Guaranties, and Other Obligations. Incur, create,
assume, or in any manner become or be liable with respect to any Debt; provided
that subject to all other provisions of this Article VII, the foregoing
prohibitions shall not apply to:
(a) Any Indebtedness to Lender;
(b) liabilities, direct or contingent, of Borrower or any
Subsidiary, or any Partnership, or any LLC existing on the
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date of this Agreement that are referenced or reflected in the
Financial Statements; and
(c) Seller Financing and Funded Debt not to exceed
$5,500,000 in the aggregate.
Section 7.02 Liens. Create, incur, assume, or permit to exist any
Lien on any of its Property (now owned or hereafter acquired) except, subject to
all other provisions of this Article, the foregoing restrictions shall not apply
to:
(a) Liens securing the payment of any Indebtedness to
Lender;
(b) Liens for taxes, assessments, or other governmental
charges not yet due or which are being contested in good faith by
appropriate action promptly initiated and diligently conducted, if
Borrower or such Subsidiary shall have made any reserve therefor
required by GAAP;
(c) Liens referred to or reflected in the Financial
Statements identified in Section 4.06 herein; and
(d) Liens on any real or personal property that secures
the Debt permitted by Section 7.01(c) above; and
(e) Liens permitted by Section 7.01(e); and
(f) Landlord liens in states where such liens arise by
operation of law.
Section 7.03 Investments, Loans, and Advances. Make or permit to
remain outstanding any loans or advances to or investments in any Person, except
that, subject to all other provisions of this Article, the foregoing restriction
shall not apply to:
(a) investments in direct obligations of the United
States of America or any agency thereof;
(b) investments in certificates of deposit having
maturities of less than one year, or repurchase agreements issued by
commercial banks in the United States of America having capital and
surplus in excess of $50,000,000, or commercial paper of the highest
quality;
(c) investments in money market funds so long as the
entire investment therein is fully insured or so long as the fund is a
fund operated by a commercial bank of the type specified in (b) above;
(d) Those matters referenced on Exhibit F and loans to
Partnerships or LLC's; and
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(e) other investments not to exceed $500,000.
Section 7.04 Dividends, Distributions, and Redemptions; Issuance of
Stock. Permit Borrower to declare or pay any dividend; nor permit any Subsidiary
to declare or pay any dividend to any Person other than Borrower or another
Subsidiary. Permit Borrower or any Subsidiary to redeem any of its stock or
return capital to shareholders except through existing shareholder agreements
and future shareholder agreements with (i) Persons who are members in an LLC or
who are partners in a Partnership formed subsequent to the Closing Date that
acquire Voting Stock of Borrower, (ii) physicians or physician groups that are
affiliated with the partners in a Partnership or are affiliated with the members
in an LLC formed subsequent to the Closing Date; and (iii) physicians and
physician groups that enter into a business relationship with the Borrower or a
Subsidiary after the Closing Date regarding the development, operation, or
investment in an ambulatory surgery center.
Section 7.05 Nature of Business. (a) Suffer any material change to be
made in the character of its business as carried on at the Closing Date; or (b)
permit the Borrower to own less than 51% of the Voting Stock of any incorporated
Subsidiary; or (c) permit the Borrower or a subsidiary of Borrower to own less
than 51% of the controlling ownership interest of any Partnership or LLC.
Section 7.06 Further Acquisitions, Mergers, Etc. (i) Permit Borrower
to merge or consolidate with any other Person, except under conditions in which
the Borrower is the surviving entity and such merger or consolidation does not
cause the Borrower to be in violation of this Agreement; or (ii) permit any
Subsidiary to merge or consolidate with any Person other than the Borrower or
any other Subsidiary; or (iii) permit the Borrower, any Subsidiary, LLC, or
Partnership to dispose of substantially all of their respective Properties.
Section 7.07 Proceeds of Loan. Permit the proceeds of the Advances to
be used for any purpose other than those permitted under this Agreement.
Section 7.08 Sale or Discount of Receivables. Except to minimize
losses on bona fide debts previously contracted, discount or sell with recourse,
or sell for less than the greater of the face or market value thereof, any of
its notes receivable or Accounts.
Section 7.09 Disposition of Assets. Dispose of any of its assets
having a material value other than in the ordinary course of its present
business upon terms standard in Borrower's industry.
Section 7.10 Partnership Notes or LLC Notes. Forgive, cancel, amend,
alter, or seek to transfer any Partnership Notes or LLC Notes.
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Section 7.11 Financial Covenants.
(a) Net Worth. Permit its Consolidated Net Worth as of
December 31, 1995 to be less than $21,000,000; nor permit its
Consolidated Net Worth as measured at the end of each Fiscal Quarter
thereafter to be less than the sum of: (a) $21,000,000, plus (b) the
amount by which Borrower's additional paid in capital exceeds
$21,000,000, plus (c) 75% of the net, after-tax earnings of the
Borrower as determined on a consolidated basis from the immediately
preceding Fiscal Year.
(b) Funded Debt to EBITDA. As calculated on the last day
of each Fiscal Quarter, permit the ratio of Funded Debt, plus amounts
attributable to capital leases to EBITDA to be greater than 2.25 to
1.0.
(c) EBITDA to Interest Expense. As calculated on the
last day of each Fiscal Quarter, permit the ratio of EBITDA to
Interest Expense to be less than 5.0 to 1.0.
(d) Funded Debt to Capitalization. As calculated on the
last day of each Fiscal Quarter, permit the ratio of Borrower's Funded
Debt (as determined on a consolidated basis but excluding Debt
attributed to a Minority Interest), to Capitalization to be greater
than .5 to 1.0.
(e) For the purpose of calculating EBITDA in parts (b)
and (c) above, EBITDA shall be calculated on an annualized, trailing
six (6) month basis and it shall include the EBITDA of any Acquisition
so long as the calculation thereof is done in a manner reasonably
calculated to comply with GAAP. For the purpose of calculating
Interest Expense in part (c) above, Interest Expense shall be
calculated on a trailing twelve (12) month basis.
Section 7.12 Inconsistent Agreements. Enter into any agreement
containing any provision which would be violated or breached by the performance
by Borrower of its Obligations.
Section 7.13 Restrictions on Physician Practice Acquisitions. (a)
Enter into Physician Practice Acquisitions the aggregate cost of which exceeds
$4,000,000 in any twelve (12) month period without the Lender's prior written
consent; or (b) enter into any single Physician Practice Acquisition the cost of
which exceeds $2,000,000 without the Lender's prior written approval, provided
that the provisions of this subpart (b) do not apply to the following matters:
(i) Melbourne Eye Practice, and (ii) Wichita Eye Practice.
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Article VIII. Events of Default.
Section 8.01 Events of Default. Any of the following events shall be
considered an Event of Default as those terms are used in this Agreement:
(a) Principal and Interest Payments. Borrower fails to
make payment when due of any installment of principal or interest on
the Revolving Credit Note or the Term Note or the Indebtedness within
fifteen (15) days of the date thereof, or Borrower fails to pay when
due any payment due hereunder or under any of the Loan Documents
within fifteen (15) days of the due date thereof; or
(b) Representations and Warranties. Any representation or
warranty made by Borrower in any Loan Document, proves to have
been incorrect in any material respect as of the date thereof; or any
representation, statement (including Financial Statements),
certificate, or data furnished or made by Borrower in any Loan Document
with respect to any Indebtedness, proves to have been untrue in any
material respect, as of the date as of which the facts therein set
forth were stated or certified provided that with regard to Borrower's
representation in Section 4.04 herein, the Lender shall not be entitled
to declare a default hereunder unless the Borrower's representation in
Section 4.04 proves to be untrue with regard to any contract requiring
the payment of money or goods valued at $250,000 or more or the
performance of services valued at $250,000 or more; or
(c) Obligations. Borrower fails to perform its
Obligations as required by and contained in any Loan Document or a
breach occurs of any agreement, representation, or warranty contained
herein or in any Loan Document and such continues for thirty (30) days
after delivery by Lender of written notice to Borrower that it has
failed to perform its Obligations or that a breach has occurred of any
agreement, representation, or warranty contained herein or in any Loan
Document, and following delivery of such written notice from Lender to
Borrower the failure or breach has not been fully cured and/or
corrected; provided and except that the 30 day notice and cure period
shall not be applicable to Events of Default or breaches arising out
of or under the following sections of this Loan Agreement (and in such
cases no notice and cure period beyond any specifically stated therein
shall be applicable):
Section 8.01(a), 8.01(b), 8.01(d), 8.01(e), 8.01(f), 8.01(h),
8.01(i), 8.01(k), 8.01(l), 6.01, 6.04, 6.07, 6.08, 6.09, 6.11,
6.12, 7.01, 7.02, 7.03, 7.05, 7.06, 7.07, 7.08, 7.09, 7.10,
7.11, and 7.12.
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(d) Involuntary Bankruptcy or Receivership Proceedings. A
receiver, custodian, liquidator, or trustee of Borrower, any
Subsidiary, any Partnership, or of any LLC, or of any of their
respective Property, is appointed by the order or decree of any court
or agency or supervisory authority having jurisdiction; or Borrower,
any Subsidiary, any Partnership, or any LLC is adjudicated bankrupt or
insolvent; or any of the Property of Borrower, any Subsidiary, any
Partnership, or LLC is sequestered by court order or a petition is
filed against Borrower, any subsidiary, Partnership, and/or any LLC
under any state or federal bankruptcy, reorganization, debt
arrangement, insolvency, readjustment of debt, dissolution,
liquidation, or receivership law of any jurisdiction, whether now or
hereafter in effect, which proceeding is not dismissed within 60 days
of filing; or
(e) Voluntary Petitions. Borrower, any Subsidiary, any
Partnership, or any LLC takes affirmative steps to prepare to file, or
Borrower, any Subsidiary, any Partnership, or any LLC files a petition
in voluntary bankruptcy or to seek relief under any provision of any
bankruptcy, reorganization, debt arrangement, insolvency, readjustment
of debt, dissolution, or liquidation law of any jurisdiction, whether
now or hereafter in effect, or consents to the filing of any petition
against it under any such law; or
(f) Assignments for Benefit of Creditors, Etc. Borrower,
any Subsidiary, any Partnership, or any LLC makes an assignment for
the benefit of its creditors, or admits in writing its inability to
pay its debts generally as they become due, or consents to the
appointment of a receiver, trustee, or liquidator of Borrower, any
Subsidiary, any Partnership, or any LLC, or of all or any part of its
Properties; or
(g) Discontinuance of Business, Etc. Borrower, any
Subsidiary that acts as a general partner in any Partnership, any
Partnership, or any LLC discontinues its usual business and such has a
material adverse impact on Borrower's financial condition; or
(h) Cross-Default on Other Debt or Security. Subject to
any applicable grace period or waiver prior to any due date, Borrower,
any Subsidiary, any Partnership, any partnerships consolidated with
Borrower on its consolidated Financial Statements, and/or any LLC
fails to make any payment due on any Debt or security (as "security"
is defined for purposes of the federal securities laws) in excess of
an aggregate amount equal to $500,000 or any event shall occur or any
condition shall exist with respect to any Debt or security of
Borrower, any Subsidiary, any Partnership, and/or any LLC or under any
agreement securing or relating to such indebtedness or security the
effect of which is to cause or to permit any
32
<PAGE> 36
holder or holders of Debt in excess of an aggregate amount equal to
$500,000 to cause such Debt or security, or a portion thereof, to
become due prior to its stated maturity or prior to its regularly
scheduled dates of payment; or
(i) Undischarged Judgments. If a judgment for the payment
of money in excess of $500,000 in the aggregate is rendered by any
court or other governmental authority against Borrower, any
Subsidiary, any Partnership, and/or any LLC which is not fully covered
by valid collectible insurance (subject, however to a reasonable
deductible); or
(j) Violation of Laws, Etc. Borrower, any Subsidiary,
any Partnership, or any LLC violates or otherwise fails to comply with
any law, rule, regulation, decree, order, or judgment under the laws
of the United States of America, or of any state or jurisdiction
thereof which violation or failure has a material, adverse effect on
Borrower, any Subsidiary, any Partnership, or any LLC; or Borrower
fails or refuses at any and all times to remain current in its or
their financial reporting requirements pursuant to such laws, rules,
and regulations or pursuant to the rules and regulations of any
exchange upon which any shares of Borrower are traded.
(k) Dissolution of Partnerships, Subsidiaries, or LLC's.
Should any Partnership, Subsidiary, or LLC be dissolved prior to
repayment of all amounts owed by such Partnership, Subsidiary, or LLC
to Borrower.
(l) Change of Ownership. Should the majority of stock of
Borrower cease to be owned by American Healthcorp, Inc. unless
otherwise approved in writing by Borrower; provided that this
provision shall not be violated in the event that the stock of the
Borrower is sold pursuant to an IPO transaction, or if American
Healthcorp, Inc. distributes stock of Borrower to shareholders of
American Healthcorp, Inc.
Section 8.02 Remedies. Upon the happening of any Event of Default set
forth above, with the exception of those events set forth in Section
8.01(d) and 8.01(e): (i) Lender may declare the entire principal amount of all
Indebtedness then outstanding, including interest accrued thereon, to be
immediately due and payable without presentment, demand, protest, notice of
protest, or dishonor or other notice of default of any kind, all of which
Borrower hereby expressly waives, (ii) at Lender's sole discretion and option,
all obligations of Lender under this Agreement shall immediately cease and
terminate unless and until Lender shall reinstate such obligations in writing,
(iii) Lender may exercise all rights against Collateral set forth in the
Security Documents or afforded a creditor under applicable law; or (iv) Lender
may bring an action to protect or enforce its rights under the Loan Documents or
seek to collect the Indebtedness and/or enforce the Obligations by any lawful
means.
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<PAGE> 37
Upon the happening of any event specified in Section 8.01(d) and
Section 8.01(e) above: (i) all Indebtedness, including all principal, accrued
interest, and other charges or monies due in connection therewith shall be
immediately and automatically due and payable in full, without presentment,
demand, protest, or dishonor or other notice of any kind, all of which Borrower
hereby expressly waives, (ii) all obligations of Lender under this Agreement
shall immediately cease and terminate unless and until Lender shall reinstate
such obligations in writing, (iii) Lender may exercise all rights against
Collateral set forth in the Security Documents or afforded a creditor under
applicable law; or (iv) Lender may bring an action to protect or enforce its
rights under the Loan Documents or seek to collect the Indebtedness and/or
enforce the Obligations by any lawful means.
Section 8.03 Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, Lender is authorized, at any time and from
time to time, without notice to Borrower (any such notice being expressly waived
by Borrower), to set-off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by Lender to or for the credit or the account of Borrower against
any and all of the Obligations, irrespective of whether or not Lender shall have
accelerated the Indebtedness or made any demand under this Agreement or the Note
and although such obligations may be unmatured.
Section 8.04 Default Conditions. Any of the following events shall be
considered a Default Condition:
(a) Borrower suffers a material adverse change in its
financial condition; and
(b) Any event occurs which with the passage of time or
giving of notice would become an Event of Default hereunder or an
Event of Default under the Guaranty.
Upon the occurrence of a Default Condition or at any time thereafter
until such Default Condition no longer exists, the Borrower agrees that the
Lender, in its sole discretion, and without notice to Borrower, may immediately
cease making any Advances under the Loan Documents, all without liability
whatsoever to Borrower or any other Person whomsoever, all of which is
expressly waived hereby. Borrower releases Lender from any and all liability
whatsoever, whether direct, indirect, or consequential, and whether seen or
unforeseen, resulting from or arising out of or in connection with Lender's
determination to cease making Advances pursuant to this Section, unless Lender
acts with gross negligence or willful misconduct.
Article IX. General Provisions.
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<PAGE> 38
Section 9.01 Notices. All communications under or in connection with
this Agreement or any of the other Loan Documents shall be in writing and shall
be mailed by first class certified mail, postage prepaid, or otherwise sent by
telex, telegram, telecopy, or other similar form of rapid transmission confirmed
by mailing (in the manner stated above) a written confirmation at substantially
the same time as such rapid transmission, or personally delivered to an officer
of the receiving party. All such communications shall be mailed, sent, or
delivered as follows:
(a) if to Borrower, to its address shown below, or to
such other address as Borrower may have furnished to Lender in
writing:
1 Burton Hills Boulevard
Nashville, Tennessee 37215
Attention: Claire Gulmi
(b) if to Lender, to its address shown below, or to such
other address or to such individual's or department's attention as it
may have furnished Borrower in writing:
Karen Ahern
SunTrust Bank, Nashville, N.A.
201 Fourth Avenue North
Nashville, Tennessee 37219
Any communication so addressed and mailed by certified mail shall be deemed to
be given when so mailed.
Section 9.02 Deviation from Covenants. The procedure to be followed
by Borrower to obtain the consent of Lender to any deviation from the covenants
contained in this Agreement or any other Loan Document shall be as follows:
(a) Borrower shall send a written notice to Lender
setting forth (i) the covenant(s) relevant to the matter, (ii) the
requested deviation from the covenant(s) involved, and (iii) the
reason for the requested deviation from the covenant(s); and
(b) Lender, within a reasonable time, will send a written
notice to Borrower, signed by an authorized officer of Lender,
permitting or refusing the request, but in no event will any deviation
from the covenants of this Agreement or any other Loan Document be
effective without the express prior written consent of Lender.
Lender's failure to provide such written notice shall be deemed a
refusal of such request.
Section 9.03 Invalidity. In the event that any one or more of the
provisions contained in any Loan Document for any reason shall be held invalid,
illegal, or unenforceable in any respect, such
35
<PAGE> 39
invalidity, illegality, or unenforceability shall not affect any other
provision of any Loan Document.
Section 9.04 Survival of Agreements. All representations and
warranties of Borrower in this Agreement and all covenants and agreements in
this Agreement not fully performed before the Closing Date of this Agreement
shall survive the Closing.
Section 9.05 Successors and Assigns. Borrower may not assign its
rights or delegate its duties under this Agreement or any other Loan Document.
All covenants and agreements contained by or on behalf of Borrower in any Loan
Document shall bind the Borrower's successors and assigns and shall inure to the
benefit of Lender and its successors and assigns. In the event that Lender sells
participations in Indebtedness to participating lenders, each of such
participating lenders shall have the rights of set-off against such Indebtedness
and similar rights or Liens to the same extent available to Lender, except as
otherwise provided in this Agreement.
Section 9.06 Renewal, Extension, or Rearrangement. All provisions of
this Agreement relating to Indebtedness shall apply with equal force and effect
to each and all promissory notes executed hereafter which in whole or in part
represent a renewal, extension for any period, increase, or rearrangement of any
part of the Indebtedness originally represented by any part of such other
Indebtedness.
Section 9.07 Waivers. Pursuant to T.C.A. Section 47-50-112, no action
or course of dealing on the part of Lender, its officers, employees,
consultants, or agents, nor any failure or delay by Lender with respect to
exercising any right, power, or privilege of Lender under the Note, this
Agreement, or any other Loan Document shall operate as a waiver thereof, except
as otherwise provided in this Agreement. Lender may from time to time waive any
requirement hereof, including any of the Conditions Precedent; however no waiver
shall be effective unless in writing and signed by the Lender. The execution by
Lender of any waiver shall not obligate Lender to grant any further, similar, or
other waivers.
Section 9.08 Cumulative Rights. Rights and remedies of Lender under
each Loan Document shall be cumulative, and the exercise or partial exercise of
any such right or remedy shall not preclude the exercise of any other right or
remedy.
Section 9.09 Construction. This Agreement, the Note, and the other
Loan Documents constitute a contract made under and shall be construed in
accordance with and governed by the laws of the State of Tennessee.
Section 9.10 Nature of Commitment. With respect to the Loan and the
Advances, Lender's obligation to make the Loan or any Advances shall be deemed
to be pursuant to a contract to make a
36
<PAGE> 40
loan or to extend debt financing or financial accommodations to or for the
benefit of Borrower within the meaning of Sections 365(c)(2) and 365(e)(2)(B)
of the United States Bankruptcy Code, 11 U.S.C. Section 101 et seq.
Section 9.11 Disclosures. Every reference in this Agreement to
disclosures of Borrower to Lender (except the Financial Statements), to the
extent that such references refer or are intended to refer to disclosures at or
prior to the execution of this Agreement, shall be deemed strictly to refer only
to written disclosures delivered to Lender concurrently with the execution of
this Agreement and referred to specifically in the Loan Documents. The parties
intend that such disclosures are to be limited to those presented in an orderly
manner at the time of executing this Agreement and are not to be deemed to
include expressly or impliedly any disclosures that previously may have been
delivered from time to time to Lender, except to the extent that such previous
disclosures are again presented to Lender in writing concurrently with the
execution of this Agreement.
Section 9.12 Governance; Exhibits. The terms of this Agreement shall
govern if determined to be in conflict with the terms or provisions in any other
Loan Document. The exhibits attached to this Agreement are incorporated in this
Agreement and shall be considered a part of this Agreement except that in the
event of any conflict between an exhibit and this Agreement or another Loan
Document, the provisions of this Agreement or the Loan Document, as the case may
be, shall prevail over the exhibit.
Section 9.13 Titles of Articles, Sections, and Subsections. All titles
or headings to articles, sections, subsections, or other divisions of this
Agreement or the exhibits to this Agreement are only for the convenience of the
parties and shall not be construed to have any effect or meaning with respect to
the other content of such articles, sections, subsections, or other divisions,
such other content being controlling with respect to the agreement between the
parties.
Section 9.14 Time of Essence. Time is of the essence with regard to
each and every provision of this Agreement.
Section 9.15 Remedies. All remedies for which this Agreement and all
other Loan Documents provide for Lender shall be in addition to all other
remedies available to Lender under the principles of law and equity, and
pursuant to any other body of law, statutory or otherwise.
Section 9.16 Application of Prepayments. Prepayments shall be applied
at Lender's sole discretion (i) first to accrued interest under any of the
Obligations as determined by Lender and (ii) second to reduce principal of any
of the Obligations, all in such manner as determined by Lender.
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<PAGE> 41
Section 9.17 Computations; Accounting Principles. Where the character
or amount of any asset or liability or item of income or expense is required to
be determined, or any consolidation or other accounting computation is required
to be made for the purposes of this Agreement, such determination or
calculation, to the extent applicable and except as otherwise specified in this
Agreement, shall be made in accordance with GAAP applied on a consolidated basis
consistent with those in effect at the Closing Date.
Section 9.18 Costs, Expenses, and Taxes. Borrower agrees to pay on
demand all out-of-pocket costs and expenses of Lender (including the reasonable
fees and out-of-pocket expenses of counsel for Lender) incurred by Lender in
connection with the preparation, execution, delivery, administration,
interpretation, enforcement, or protection of Lender's rights under the Loan
Documents (including any suit for declaratory judgment or interpretation of the
provisions hereof). In addition, Borrower agrees to pay, and to hold Lender
harmless from all liability for, any stamp or other taxes (including taxes under
Tennessee Code Annotated Section 67-4-409 due upon the recordation of mortgages
and financing statements) which may be payable in connection with the execution
or delivery of this Agreement, the Advances, and the Collateral under this
Agreement, or the issuance of the Note or any other Loan Documents delivered or
to be delivered under or in connection with this Agreement. Borrower, upon
request, promptly will reimburse Lender for all amounts expended, advanced, or
incurred by Lender to satisfy any obligation of Borrower under this Agreement or
any other Loan Documents, or to perfect a Lien in favor of Lender, or to protect
the Properties or business of Borrower or to collect the Obligations, or to
enforce the rights of Lender under this Agreement or any other Loan Document,
which amounts will include all court costs, attorney's fees, fees of auditors
and accountants, and investigation expenses reasonably incurred by Lender in
connection with any such matters, together with interest thereon at the rate
applicable to past due principal and interest as set forth in the Loan Documents
but in no event in excess of the maximum lawful rate of interest permitted by
applicable law on each such amount. All obligations for which this Section
provides shall survive any termination of this Agreement.
Section 9.19 Distribution of Information. The Borrower hereby
authorizes the Lender, as the Lender may elect in its sole discretion, to
discuss with and furnish to any affiliate of the Lender, to any government or
self-regulatory agency with jurisdiction over the Lender, or to any participant
or prospective participant, all financial statements, audit reports and other
information pertaining to the Borrower and/or its Subsidiaries whether such
information was provided by Borrower or prepared or obtained by the Lender or
third parties. Neither the Lender nor any of its employees, officers, directors
or agents make any representation or warranty regarding any audit reports or
other analyses of Borrower which the Lender may elect to distribute, whether
such information was provided by Borrower or prepared or
38
<PAGE> 42
obtained by the Lender or third parties, nor shall the Lender or any of its
employees, officers, directors or agents be liable to any Person receiving a
copy of such reports or analyses for any inaccuracy or omission contained in
such reports or analyses or relating thereto.
Section 9.20 Entire Agreement; No Oral Representations Limiting
Enforcement. This Agreement represents the entire agreement between the parties
hereto except for such other agreements set forth in the Loan Documents, and any
and all oral statements heretofore made regarding the matters set forth herein
are merged herein.
Section 9.21 Amendments. The parties hereto agree that this Agreement
may not be modified or amended except in writing signed by the parties hereto.
Section 9.22 Non-Use Fee. As additional consideration for the
Lender's committing and reserving monies to fund the Revolving Credit Note, the
Borrower shall pay to Lender quarterly in arrears a fee at a rate equal to 35
basis points per annum of the average unused portion of the Revolving Credit
Note during the prior Fiscal Quarter. The fee shall be calculated on a 360-day
basis.
Article X. Jury Waiver.
Section 10.01. Jury Waiver. IF ANY ACTION OR PROCEEDING INVOLVING
THIS LOAN AGREEMENT OR ANY LOAN DOCUMENT IS COMMENCED IN ANY COURT OF COMPETENT
JURISDICTION, BORROWER AND LENDER HEREBY WAIVE THEIR RIGHTS TO DEMAND A JURY
TRIAL.
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<PAGE> 43
ENTERED INTO this date first set forth above.
BORROWER:
AMSURG CORP., a Tennessee corporation
By:
----------------------------------
Title:
-------------------------------
LENDER:
SUNTRUST BANK, NASHVILLE, N.A.
By:
----------------------------------
Title:
-------------------------------
40
<PAGE> 44
INDEX OF EXHIBITS
Exhibit A: Initial Notice of Interest Rate Election (Section
2.05(b)) (form)
Exhibit B: Notice of Interest Rate Election (Section 2.06(c)
and Section 2.06(d)) (form)
Exhibit C: Request for Advance
Exhibit D: Revolving Credit Note (form)
Exhibit E: Term Note
Exhibit F: Exemptions from Section 4.07 (Largo, FL and
Jackson, TN)
Exhibit G: List of Subsidiaries
Exhibit H: List of Partnerships and LLC's
Exhibit I: Opinion Letter of Borrower's Counsel Due at
Closing
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<PAGE> 45
EXHIBIT C
REQUEST FOR ADVANCE
(Section 5.02)
Pursuant to Section 5.02 of that certain Amended and Restated Loan
Agreement dated June 25, 1996 entered into by and between AmSurg Corp. (the
"Borrower") and SunTrust Bank, Nashville, N.A. (the "Lender") (the "Loan
Agreement"), the Borrower hereby requests that Lender advance it monies under
the Amended and Restated Revolving Credit Note, which Advance is requested in a
principal amount equal to $__________________.
The Borrower advises Lender that no event of Default or Default
Condition exists under the Loan Agreement.
The Borrower affirms that the total amount outstanding under all
Advances made subsequent to June 25, 1996, plus the requested Advance, do not
and will not exceed the sum of (i) 85% of Development Costs, plus (ii) 65% of
the total cost of all Acquisitions or a Physician Practice Acquisitions.
The Borrower requests that the Advance be made by Lender on
_________________, 199____.
All terms used herein shall have the same meaning as set forth in the
Amended and Restated Loan Agreement.
Submitted by Borrower this _____ day of ________________, 199___.
AMSURG CORP.
By:
-------------------------------
Title:
----------------------------
Received by Lender this day of , 199 .
----- --------------- ---
SUNTRUST BANK, NASHVILLE, N.A.
By:
--------------------------------
Title:
-----------------------------
<PAGE> 46
EXHIBIT D
AMENDED AND RESTATED REVOLVING CREDIT NOTE
ENTERED INTO by and between AMSURG CORP., a Tennessee corporation (the
"Borrower"), and SUNTRUST BANK, NASHVILLE, N.A., formerly known as Third
National Bank in Nashville, a national bank (the "Lender"), as of this 25th day
of June, 1996.
RECITALS:
1. The Borrower issued a certain Revolving Credit Note payable to
the order of Lender in the original principal amount of $5,000,000 dated as of
September 29, 1995, as amended and restated pursuant to an Amended and Restated
Credit Note dated February 24, 1996 (the "Note").
2. The Borrower desires that the Lender extend it additional
credit and amend certain of the terms of the Note.
3. The Borrower and the Lender desire to amend and restate the
Note in its entirety as follows:
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the parties hereto agree that the Note shall be
amended and restated in its entirety as follows:
FOR VALUE RECEIVED, AMSURG CORP., a Tennessee corporation
(hereinafter referred to as "Borrower"), promises and agrees to pay to
the order of SUNTRUST BANK, NASHVILLE, N.A. (formerly known as Third
National Bank in Nashville) (the "Lender") at its offices in
Nashville, Tennessee, or at such other place as may be designated in
writing by the holder, in lawful money of the United States of
America, the principal sum of Twelve Million and No/100 Dollars
($12,000,000) or so much thereof as may be advanced from time to time
by the Lender, together with interest on the unpaid principal balance
outstanding from time to time hereon computed from the date of each
advance until maturity at the rate of interest set forth in that
certain Amended and Restated Loan Agreement executed between Borrower
and Lender dated June 25, 1996, as such may be amended from time to
time (herein referred to as the "Loan Agreement"). Interest for each
year shall be computed based upon a 360-day year.
So long as no default has occurred and is continuing hereunder
and so long as no Event of Default or Default Condition has occurred
and is continuing under the Loan Agreement, and subject to the terms
of the Loan Agreement, the Borrower may borrow hereunder, repay such
borrowings, and reborrow hereunder as provided in the Loan Agreement.
Lender shall keep records of all borrowings and repayments. Draws
<PAGE> 47
under this Note shall be evidenced by such documentation as required
by Article II of the Loan Agreement.
Advances under this Note shall be made pursuant to the
procedure specified in the Loan Agreement.
This Note shall be repaid as required by Article II of the
Loan Agreement.
This Note is subject to the terms of the Loan Agreement.
Notwithstanding any provision to the contrary, it is the
intent of the Lender, the Borrower, and all parties liable on this
Note, that neither the Lender nor any subsequent holder shall be
entitled to receive, collect, reserve or apply, as interest, any
amount in excess of the maximum lawful rate of interest permitted to
be charged by applicable law or regulations, as amended or enacted
from time to time. In the event the Note calls for an interest payment
that exceeds the maximum lawful rate of interest then applicable, such
interest shall not be received, collected, charged, or reserved until
such time as that interest, together with all other interest then
payable, falls within the then applicable maximum lawful rate of
interest. In the event the Lender, or any subsequent holder, receives
any such interest in excess of the then maximum lawful rate of
interest, such amount which would be excessive interest shall be
deemed a partial prepayment of principal and treated hereunder as
such, or, if the principal indebtedness evidenced hereby is paid in
full, any remaining excess funds shall immediately be paid to the
Borrower. In determining whether or not the interest paid or payable,
under any specific contingency, exceeds the maximum lawful rate of
interest, the Borrower and the Lender shall, to the maximum extent
permitted under applicable law, (a) exclude voluntary prepayments and
the effects thereof, and (b) amortize, prorate, allocate, and spread,
in equal parts, the total amount of interest throughout the entire
term of the indebtedness; provided that if the indebtedness is paid in
full prior to the end of the full contemplated term hereof, and if the
interest received for the actual period of existence hereof exceeds
the maximum lawful rate of interest, the holder of the Note shall
refund to the Borrower the amount of such excess or credit the amount
of such excess against the principal portion of the indebtedness as of
the date it was received, and, in such event, the Lender shall not be
subject to any penalties provided by any laws for contracting for,
charging, reserving, collecting or receiving interest in excess of the
maximum lawful rate of interest.
Principal and unpaid interest bear interest during the
continuance of any default in payment of principal and interest as
herein provided at the maximum lawful rate of
-2-
<PAGE> 48
interest permitted by law. In case of suit, or if this obligation is
placed in an attorney's hands for collection, or to protect the
security for its payment, the undersigned will pay all costs of
collection and litigation, including a reasonable attorney's fee.
In the event that there occurs any breach of any promise made
in this Note and such breach continues for longer than fifteen (15)
days, or upon the occurrence of an Event of Default as defined in the
Loan Agreement, then, during the continuance of any of such events, at
the option of the holder, the entire indebtedness hereby evidenced
shall become due, payable and collectible then or thereafter, without
notice, as the holder may elect regardless of the date of maturity.
The holder may waive any default before or after the same has been
declared and restore this Note to full force and effect without
impairing any rights hereunder, such right of waiver being a
continuing one.
The makers, endorsers, guarantors and all parties to this Note
and all who may become liable for same, jointly and severally waive
presentment for payment, protest, notice of protest, notice of
nonpayment of this Note, demand and all legal diligence in enforcing
collection, and hereby expressly agree that the lawful owner or holder
of this Note may defer or postpone collection of the whole or any part
thereof, either principal and/or interest, or may extend or renew the
whole or any part thereof, either principal and/or interest, or may
accept additional collateral or security for the payment of this Note,
or may release the whole or any part of any collateral security and/or
liens given to secure the payment of this Note, or may release from
liability on account of this Note any one or more of the makers,
endorsers, guarantors and/or other parties thereto, all without notice
to them or any of them; and such deferment, postponement, renewal,
extension, acceptance of additional collateral or security and/or
release shall not in any way affect or change the obligation of any
such maker, endorser, guarantor or other party to this Note, or of any
who may become liable for the payment thereof.
The Borrower shall pay a "late charge" of five percent (5%) of
any payments of principal and/or interest due when paid more than five
days after the due date thereof (provided that in no event shall said
"late charge" result in the payment of interest in excess of the
maximum lawful rate of interest permitted by applicable law), to cover
the extra expenses involved in handling delinquent payments; and
provided that the late charge shall not be applicable to the payment
due on the Maturity Date.
-3-
<PAGE> 49
The term "maximum lawful rate of interest" as used herein
shall mean a rate of interest equal to the higher or greater of the
following: (a) the "applicable formula rate" defined in Tennessee Code
Annotated Section 47-14-102(2), or (b) such other rate of interest as
may be charged under other applicable laws or regulations.
This Note is a secured Note.
This Note has been executed and delivered in, and shall be
governed by and construed according to the laws of the State of
Tennessee except to the extent pre-empted by applicable laws of the
United States of America.
This Note may not be changed or terminated without the prior
written approval of the Lender and the Borrower. No waiver of any term
or provision hereof shall be valid unless in writing signed by the
holder.
Executed this 25th day of June, 1996.
BORROWER:
AMSURG CORP., a Tennessee
corporation
By:
-----------------------------
Title:
--------------------------
ACCEPTED BY:
SUNTRUST BANK, NASHVILLE, N.A.
By:
------------------------------
Title:
---------------------------
-4-
<PAGE> 50
EXHIBIT E
CONSOLIDATED, AMENDED AND RESTATED TERM NOTE
ENTERED INTO by and between AMSURG CORP., a Tennessee corporation (the
"Borrower"), and SUNTRUST BANK, NASHVILLE, N.A., formerly known as Third
National Bank in Nashville ("Lender") as of this 25th day of June, 1996.
RECITALS:
1. Borrower issued the following promissory notes payable to the
order of Lender (herein collectively referred to as the "Notes"):
(a) that certain Term Note issued by Borrower to the
order of Lender in the original principal amount of $625,000 dated
February 15, 1996;
(b) that certain Acquisition Term Note issued by the
Borrower to the order of Lender in the original principal amount of
$1,430,000 dated April 19, 1995;
(c) that certain Acquisition Term Note issued by the
Borrower to the order of Lender in the original principal amount of
$2,000,000 dated January 30, 1996;
(d) that certain Term Note issued by the Borrower to the
order of Lender in the original principal amount of $359,550 dated
November 1, 1994;
(e) that certain Term Note issued by the Borrower to the
order of Lender in the original principal amount of $990,000 dated May
18, 1994;
(f) that certain Term Note issued by the Borrower to the
order of Lender in the original principal amount of $270,000 dated
April 22, 1996;
(g) that certain Term Note issued by the Borrower to the
order of Lender in the original principal amount of $445,000 dated
March 7, 1994; and
(h) that certain Term Note issued by the Borrower to the
order of Lender in the original principal amount of $460,000 dated
February 1, 1994.
2. The Borrower desires to consolidate and amend the Notes into
this Amended and Restated Term Note.
<PAGE> 51
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the parties hereto agree that the Notes shall
be amended and restated in its entirety as follows:
FOR VALUE RECEIVED, AMSURG CORP., a Tennessee corporation
(hereinafter referred to as "Borrower"), promises and agrees to pay to
the order of SUNTRUST BANK, NASHVILLE, N.A. (formerly known as Third
National Bank in Nashville) (the "Lender") at its offices in
Nashville, Tennessee, or at such other place as may be designated in
writing by the holder, in lawful money of the United States of
America, the principal sum of Five Million Seven Hundred Forty-Nine
Thousand Two Hundred Forty-Five Dollars and 88/100 ($5,749,245.88),
together with interest on the unpaid principal balance outstanding
from time to time hereon computed from the date hereof until maturity
at the rate of interest set forth in that certain Amended and Restated
Loan Agreement executed between Borrower and Lender dated June 25,
1996, as such may be amended from time to time (herein referred to as
the "Loan Agreement"). Interest for each year shall be computed based
upon a 360-day year.
This Note shall be repaid as follows: (a) commencing on the
tenth (10th) day of July, 1996 and on the tenth (10th) day of each
consecutive month thereafter through and including May 10, 2000, the
Borrower shall pay to Lender an amount equal to $119,776, plus all
then accrued interest; and (b) on June 10, 2000, this Note shall
mature, and the Borrower shall pay to Lender an amount equal to all
outstanding principal, plus all then accrued interest.
This Note is subject to the terms of the Loan Agreement.
Notwithstanding any provision to the contrary, it is the
intent of the Lender, the Borrower, and all parties liable on this
Note, that neither the Lender nor any subsequent holder shall be
entitled to receive, collect, reserve or apply, as interest, any
amount in excess of the maximum lawful rate of interest permitted to
be charged by applicable law or regulations, as amended or enacted
from time to time. In the event the Note calls for an interest payment
that exceeds the maximum lawful rate of interest then applicable, such
interest shall not be received, collected, charged, or reserved until
such time as that interest, together with all other interest then
payable, falls within the then applicable maximum lawful rate of
interest. In the event the Lender, or any subsequent holder, receives
any such interest in excess of the then maximum lawful rate of
interest, such amount which would be excessive interest shall be
deemed a partial prepayment of principal and treated hereunder as
such, or, if the principal indebtedness evidenced hereby is paid in
full, any remaining
- 2 -
<PAGE> 52
excess funds shall immediately be paid to the Borrower. In determining
whether or not the interest paid or payable, under any specific
contingency, exceeds the maximum lawful rate of interest, the Borrower
and the Lender shall, to the maximum extent permitted under applicable
law, (a) exclude voluntary prepayments and the effects thereof, and
(b) amortize, prorate, allocate, and spread, in equal parts, the total
amount of interest throughout the entire term of the indebtedness;
provided that if the indebtedness is paid in full prior to the end of
the full contemplated term hereof, and if the interest received for
the actual period of existence hereof exceeds the maximum lawful rate
of interest, the holder of the Note shall refund to the Borrower the
amount of such excess or credit the amount of such excess against the
principal portion of the indebtedness as of the date it was received,
and, in such event, the Lender shall not be subject to any penalties
provided by any laws for contracting for, charging, reserving,
collecting or receiving interest in excess of the maximum lawful rate
of interest.
Principal and unpaid interest bear interest during the
continuance of any default in payment of principal and interest as
herein provided at the maximum lawful rate of interest permitted by
law. In case of suit, or if this obligation is placed in an attorney's
hands for collection, or to protect the security for its payment, the
undersigned will pay all costs of collection and litigation, including
a reasonable attorney's fee.
In the event that there occurs any breach of any promise made
in this Note and such breach continues for longer than fifteen (15)
days, or upon the occurrence of an Event of Default as defined in the
Loan Agreement, then, during the continuance of any of such events, at
the option of the holder, the entire indebtedness hereby evidenced
shall become due, payable and collectible then or thereafter, without
notice, as the holder may elect regardless of the date of maturity.
The holder may waive any default before or after the same has been
declared and restore this Note to full force and effect without
impairing any rights hereunder, such right of waiver being a
continuing one.
The makers, endorsers, guarantors and all parties to this Note
and all who may become liable for same, jointly and severally waive
presentment for payment, protest, notice of protest, notice of
nonpayment of this Note, demand and all legal diligence in enforcing
collection, and hereby expressly agree that the lawful owner or holder
of this Note may defer or postpone collection of the whole or any part
thereof, either principal and/or interest, or may extend or renew the
whole or any part thereof, either principal and/or interest, or may
accept additional collateral or security for the
- 3 -
<PAGE> 53
payment of this Note, or may release the whole or any part of any
collateral security and/or liens given to secure the payment of this
Note, or may release from liability on account of this Note any one or
more of the makers, endorsers, guarantors and/or other parties
thereto, all without notice to them or any of them; and such
deferment, postponement, renewal, extension, acceptance of additional
collateral or security and/or release shall not in any way affect or
change the obligation of any such maker, endorser, guarantor or other
party to this Note, or of any who may become liable for the payment
thereof.
The Borrower shall pay a "late charge" of five percent (5%) of
any payments of principal and/or interest due when paid more than five
days after the due date thereof (provided that in no event shall said
"late charge" result in the payment of interest in excess of the
maximum lawful rate of interest permitted by applicable law), to cover
the extra expenses involved in handling delinquent payments; and
provided that the late charge shall not be applicable to the payment
due on the Maturity Date.
The term "maximum lawful rate of interest" as used herein
shall mean a rate of interest equal to the higher or greater of the
following: (a) the "applicable formula rate" defined in Tennessee Code
Annotated Section 47-14-102(2), or (b) such other rate of interest as
may be charged under other applicable laws or regulations.
This Note is a secured Note.
This Note has been executed and delivered in, and shall be
governed by and construed according to the laws of the State of
Tennessee except to the extent pre-empted by applicable laws of the
United States of America.
This Note may not be changed or terminated without the prior
written approval of the Lender and the Borrower. No waiver of any term
or provision hereof shall be valid unless in writing signed by the
holder.
Executed this 25th day of June, 1996.
BORROWER:
AMSURG CORP., a Tennessee
corporation
By:
-----------------------------
Title:
--------------------------
- 4 -
<PAGE> 54
ACCEPTED BY:
SUNTRUST BANK, NASHVILLE, N.A.
By:______________________________
Title:___________________________
- 5 -
<PAGE> 55
Exhibit F
---------
1. Loans to Digestive Disease Clinic, P.C., Jackson, Tennessee. AmSurg
has a management agreement but no current ownership in this ASC but
does have an option to acquire a 51% ownership interest in July, 1997.
2. Loan to The Largo Urology ASC, L.P., Largo, Florida. AmSurg will own
40% of this ASC with a right to buy up to 51% after 3 years of
operation.
3. Loan to The Evansville ASC, LLC, Evansville, Indiana. AmSurg current
ownership is 40%. On the date of opening, AmSurg will purchase an
additional 15% bringing ownership to 55%.
<PAGE> 56
Exhibits G and H
AmSurg Corp.
Subsidiaries
As of May 30, 1996
(Note: All subsidiaries are Tennessee entities)
Registered office for all entities is:
One Burton Hills Blvd. Nashville, TN 37215
<TABLE>
<CAPTION>
Subsidiary Corporation and Affiliated Facility Ownership
Limited Partnership Location Interest
==============================================================================
<S> <C> <C>
AmSurg EC Centennial, Inc. Nashville, 100%
Tennessee
The Endoscopy Center of Centennial, L.P. Nashville, 60
Tennessee
- ------------------------------------------------------------------------------
AmSurg EC Topeka, Inc. Topeka, 100
Kansas
The Endoscopy Center of Topkea, L.P. Topeka, 60
Kansas
- ------------------------------------------------------------------------------
AmSurg EC St. Thomas, Inc. Nashville, 100
Tennessee
The Endoscopy Center of St. Thomas, L.P. Nashville, 60
Tennessee
- ------------------------------------------------------------------------------
AmSurg EC Beaumont, Inc. Beaumont, 100
Texas
The Endoscopy Center of Southeast Texas, Beaumont, 51
L.P. Texas
- ------------------------------------------------------------------------------
AmSurg KEC, Inc. Knoxville, 100
Tennessee
The Endoscopy Center of Knoxville, L.P. Knoxville, 51
Tennessee
- ------------------------------------------------------------------------------
AmSurg EC Santa Fe, Inc. Santa Fe, New 100
Mexico
The Endoscopy Center of Santa Fe, L.P. Santa Fe, New 51
Mexico
- ------------------------------------------------------------------------------
AmSurg EC Washington, Inc. Washington, 100
District of
Columbia
The Endoscopy Center of Washington D.C., Washington, 60
L.P. District of
Columbia
- ------------------------------------------------------------------------------
AmSurg Torrance, Inc. Torrance, 100
California
The Endoscopy Center of the South Bay, L.P. Torrance, 51
California
- ------------------------------------------------------------------------------
</TABLE>
<PAGE> 57
<TABLE>
<CAPTION>
Subsidiary Corporation and Affiliated Facility Ownership
Limited Partnership Location Interest
==============================================================================
<S> <C> <C>
AmSurg Brevard, Inc. Melbourne, 100%
Florida
The Ophthalmology Center of Brevard, L.P. Melbourne, 51
Florida
- ------------------------------------------------------------------------------
AmSurg Encino, Inc. Encino, 100
California
The Valley Endoscopy Center, L.P. Encino, 51
California
- ------------------------------------------------------------------------------
AmSurg Sebastopol, Inc. Sebastopol, 100
California
The Sebastopol ASC, L.P. Sebastopol, 60
California
- ------------------------------------------------------------------------------
AmSurg ENT Brevard, Inc. Melbourne, 100
Florida
The ENT Center of Brevard, L.P. Melbourne, 51
Florida
- ------------------------------------------------------------------------------
AmSurg Abilene, Inc. Abilene, 100
Texas
The Abilene ASC, L.P. Abilene, 60
Texas
- ------------------------------------------------------------------------------
AmSurg West Tennessee, Inc. Jackson, 100
Tennessee
The West Tennessee Center, L.P. Jackson, 40
Tennessee
- ------------------------------------------------------------------------------
AmSurg Dallas, Inc. Dallas, Texas 100
- ------------------------------------------------------------------------------
AmSurg Lakeland, Inc. Lakeland, 100
Florida
The Lakeland Ophthalmology Center, L.P. Lakeland, 51
Florida
- ------------------------------------------------------------------------------
AmSurg SWFLA, Inc. Fort 100
Myers/Cape
Coral,
Florida
AmSurg Southwest Florida, L.P. Fort 60
Myers/Cape
Coral,
Florida
- ------------------------------------------------------------------------------
AmSurg Lorain, Inc. Lorain, Ohio 100
The Lorain ASC, L.P. Lorain, Ohio 51
- ------------------------------------------------------------------------------
</TABLE>
<PAGE> 58
<TABLE>
<CAPTION>
Subsidiary Corporation and Affiliated Facility Ownership
Limited Partnership Location Interest
=============================================================================
<S> <C> <C>
AmSurg Maryville, Inc. Maryville, 100%
Tennessee
- -----------------------------------------------------------------------------
The Maryville ASC Maryville, 51
Tennessee
AmSurg Holdings, Inc. All LLCs 100
The Knoxville Ophthalmology ASC, LLC Knoxville, 60
Tennessee
The West Monroe Endoscopy ASC, LLC West Monroe, 55
Louisiana
Montgomery Eye Surgery Center, LLC Montgomery, 51
Alabama
The Evansville ASC, LLC Evansville, 40
Indiana
The Sidney ASC, LLC Sidney, Ohio 51
The Bloomington ASC, LLC Bloomington, 51
Minnesota
The Union City ASC, LLC Union City, 51
Tennessee
- ------------------------------------------------------------------------------
AmSurg Miami, Inc. Miami, 100
Florida
The Miami ASC, L.P. Miami, 51
Florida
- ------------------------------------------------------------------------------
AmSurg North Platte, Inc. North Platte, 100
Nebraska
The North Platte ASC, L.P. North Platte, 51
Nebraska
- ------------------------------------------------------------------------------
AmSurg Fort Collins, Inc. Fort Collins, 100
Colorado
The Fort Collins ASC, L.P. Fort 51
Collins,
Colorado
- ------------------------------------------------------------------------------
AmSurg Hanford, Inc. Hanford, 100
California
The Hanford ASC, L.P. Hanford, 63
California
- ------------------------------------------------------------------------------
AmSurg Melbourne Inc. Melbourne, 100
Florida
The Melbourne ASC, L.P. Melbourne, 51
Florida
- ------------------------------------------------------------------------------
AmSurg Largo, Inc Largo, 100
Florida
</TABLE>
<PAGE> 59
<TABLE>
<CAPTION>
Subsidiary Corporation and Affiliated Facility Ownership
Limited Partnership Location Interest
==============================================================================
<S> <C> <C>
The Largo Urology ASC, L.P. Largo, 40%
Florida
- ------------------------------------------------------------------------------
AmSurg Port Arthur, Inc. Port Arthur, 100
Texas
The Port Arthur ASC, L.P. Port Arthur, 51
Texas
- ------------------------------------------------------------------------------
AmSurg Chicago, Inc. Chicago, 100
Illinois
The Chicago Endoscopy ASC, L.P. Chicago, 51
Illinois
- ------------------------------------------------------------------------------
AmSurg Dade County, Inc. Miami, 100
Florida
Gastroenterology Group of South Florida Miami, 70
Florida
- ------------------------------------------------------------------------------
Amsurg Hillmont, Inc. Philadelphia, 100
PA
The Hillmont ASC, L.P. Philadelphia, 51
PA
- ------------------------------------------------------------------------------
</TABLE>
<PAGE> 60
BASS, BERRY & SIMS PLC
A PROFESSIONAL LIMITED LIABILITY COMPANY
ATTORNEYS AT LAW
<TABLE>
<S> <C>
2700 FIRST AMERICAN CENTER 1700 RIVERVIEW TOWER
NASHVILLE, TENNESSEE 37238-2700 POST OFFICE BOX 1509
TELEPHONE (615) 742-6200 KNOXVILLE, TENNESSEE 37901-1509
TELECOPIER (616) 742-6293 TELEPHONE (423) 521-6200
TELECOPIER (423) 521-6234
</TABLE>
June 25, 1996
SunTrust Bank, Nashville, N.A.
201 Fourth Avenue North
Nashville, Tennessee 37219
Attention: Karen Ahern, Vice President
Dear Ms. Ahern:
We have acted as counsel to AmSurg Corp, a Tennessee corporation (the
"Borrower"), in connection with its execution of that certain Amended and
Restated Loan Agreement of even date herewith (the "Loan Agreement"), by and
between Borrower and SunTrust Bank, N.A., Nashville ("Lender"), and the
transactions described therein. This Opinion Letter is provided to you at the
request of Borrower pursuant to the requirements of the Loan Agreement. The
terms used, but not defined, herein shall have the meanings ascribed to them in
the Loan Agreement or the Accord (see below).
For purposes of this Opinion Letter, we have examined the following:
(a) The Loan Agreement;
(b) The Amended and Restated Revolving Credit Note of even date
herewith, in the principal amount not exceeding $12,000,000, made and
executed by Borrower payable to the order of Lender (the "Revolving
Credit Note");
(c) The Amended and Restated Term Note of even date herewith, in
the principal amount of $5,749,245.88, made and executed by Borrower
payable to the order of Lender (the "Term Note"); and
(d) The charter and by-laws of Borrower, as amended, and the
corporate proceedings of the Borrower authorizing the transactions
that are the subject of the Loan Agreement, the Revolving Credit Note
and the Term Note.
The Loan Agreement, the Revolving Credit Note and the Term Note are
referred to herein as the "Transaction Documents".
This Opinion Letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the ("Accord") of the ABA Section of
Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and
<PAGE> 61
June 25, 1996
SunTrust Bank, Nashville, N.A.
Page 2
other limitations, all as more particularly described in the Accord, and this
Opinion Letter should be read in conjunction therewith.
Solely as to matters of fact, but not to the legal conclusions that
are the subject of this opinion, we have relied upon representations made by
Borrower in the Transaction Documents.
The Law covered by the opinions expressed herein is limited to the
federal Law of the United States and the Law of the State of Tennessee.
Based on the foregoing, and subject to the assumptions, limitations,
and qualifications set forth herein, we are of the opinion that;
1. Borrower is a corporation, duly organized, validly existing,
and in good standing under the laws of the State of Tennessee. Borrower has
the corporate power and corporate authority under such laws to enter into and
perform its obligations under the Transaction Documents.
2. The Transaction Documents have been duly authorized by all
necessary corporate action on the part of Borrower and have been duly executed
and delivered by the Borrower.
3. The Transaction Documents are enforceable against the Borrower.
Our opinion in paragraph 3 is further subject to the qualification
that certain waivers, procedures, remedies, and other provisions of the
Transaction Documents may be unenforceable under or limited by applicable law;
provided, however, that the inclusion of such waivers, procedures, remedies,
and other provisions does not render the Transaction Documents invalid as a
whole, and subject to the other qualifications and limitations set forth
herein, there exist in the Transaction Documents or pursuant to applicable law,
legally adequate remedies for the practical realization of the principal
benefits reasonably intended to be provided by the Transaction Documents,
subject to the consequences of any delay that may result from limitations
imposed by applicable law.
In making our examinations and in expressing our opinions, we have
assumed that the Transaction Documents have been executed and delivered for
adequate consideration.
The General Qualifications apply to all of the opinions set forth above.
We hereby confirm to you that there are no actions or proceedings
against the Borrower, pending or threatened in writing, before any court,
governmental agency or arbitrator that affect the enforceability of the
Transaction Documents.
<PAGE> 62
June 25, 1996
SunTrust Bank, Nashville, N.A.
Page 3
This Opinion Letter may be relied upon by you only in connection with
the Transaction Documents and may not be used or relied upon by any person for
any purpose whatsoever, except to the extent authorized in the Accord, without
in each instance our prior written consent.
Very truly yours,
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AMERICAN HEALTHCORP FOR THE NINE MONTHS ENDED MAY 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> MAY-31-1996
<EXCHANGE-RATE> 1
<CASH> 14,270,407
<SECURITIES> 0
<RECEIVABLES> 7,267,350
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23,722,212
<PP&E> 14,529,840
<DEPRECIATION> 4,242,538
<TOTAL-ASSETS> 71,070,013
<CURRENT-LIABILITIES> 8,804,423
<BONDS> 0
0
0
<COMMON> 7,981
<OTHER-SE> 40,447,568
<TOTAL-LIABILITY-AND-EQUITY> 71,070,013
<SALES> 0
<TOTAL-REVENUES> 44,268,869
<CGS> 0
<TOTAL-COSTS> 32,897,877
<OTHER-EXPENSES> 2,894,667
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 603,429
<INCOME-PRETAX> 7,872,896
<INCOME-TAX> 1,805,000
<INCOME-CONTINUING> 2,157,598
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,157,598
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
</TABLE>
