<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly Period Ended September 30, 1997
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _________ to _________
Commission File Number 33-80731
----------------
PHYSICIAN SUPPORT SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3624081
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
ROUTE 230 AND EBY-CHIQUES ROAD
MT. JOY, PENNSYLVANIA 17552
(Address of principal executive offices) (Zip Code)
(717) 653-5340
--------------
Registrant's telephone number, including area code
--------------
Indicated by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
Indicate the number of shares outstanding of each of issuer's classes of common
stock, as of the latest practicable date.
Common Stock, par value $.001 per share 9,732,033 Shares
--------------------------------------- ----------------
Class Outstanding at
October 27, 1997
<PAGE>
Physician Support Systems, Inc. And Subsidiaries
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
--------
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets--
September 30, 1997 and December 31, 1996 2
Condensed Consolidated Statements of Operation--
Three and Nine Months Ended September 30,
1997 and 1996 3
Condensed Consolidated Statements of Cash Flows--
Nine Months Ended September 30, 1997 and 1996 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits 12
Signatures 13
Exhibit Index 14
</TABLE>
1
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
Physician Support Systems, Inc. And Subsidiaries
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
------------- ------------
1997 1996
---- ----
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents............. $ 643,441 $ 3,826,018
Accounts receivable................... 25,698,479 17,458,338
Accounts receivable--unbilled......... 15,859,389 11,149,811
Prepaid expenses and
other current assets................. 2,905,511 1,991,689
--------------- -------------
Total current assets................ 45,106,820 34,425,856
Property and equipment--net............. 10,036,702 9,092,630
Intangible assets--net.................. 58,060,653 44,556,022
Due from related parties................ 1,390,369 1,054,038
Other assets............................ 2,831,720 2,776,902
--------------- -------------
Total............................... $ 117,426,264 $ 91,905,448
=============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................... $ 1,776,668 $ 2,135,924
Accrued expenses...................... 14,289,418 16,805,042
Current portion of other long-term
liabilities.......................... 1,152,914 969,623
Current portion of due to related
parties.............................. 140,112 463,736
Deferred income taxes................. 31,347 31,347
--------------- -------------
Total current liabilities........... 17,390,459 20,405,672
--------------- -------------
Long-term debt.......................... 43,057,978 20,017,027
--------------- -------------
Other long-term liabilities............. 2,983,806 3,676,052
--------------- -------------
Due to related parties.................. 676,573 771,695
--------------- -------------
Deferred income taxes................... 1,322,263 1,322,263
--------------- -------------
Commitments and contingencies...........
Stockholders' equity:
Preferred stock, par value $.01 per
share: authorized 10,000,000 shares:
none outstanding....................
Common stock, par value $.001 per
share: authorized 100,000,000
shares: outstanding 9,720,033 and
9,156,101 shares at September 30, 1997
and December 31, 1996 respectively.... 9,720 9,156
Additional paid-in capital.............. 58,740,799 55,194,229
Retained earnings (accumulated deficit). (6,755,334) (9,490,646)
--------------- -------------
Total stockholders' equity.......... 51,995,185 45,712,739
--------------- -------------
Total............................... $ 117,426,264 $ 91,905,448
=============== =============
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
Physician Support Systems, Inc. And Subsidiaries
Condensed Consolidated Statements Of Operations
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
1997 1996 1997 1996
---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues................................ $ 28,995,780 $ 19,774,785 $ 81,741,604 $ 54,044,689
------------- ------------- -------------- -------------
Operating expenses:
Salaries and wages................... 14,370,104 9,929,898 41,261,948 27,969,515
General and administrative........... 9,508,064 6,589,681 28,492,060 19,823,503
Depreciation and amortization........ 1,539,143 1,337,647 4,567,871 3,893,513
Interest income...................... (34,923) (166,617) (92,927) (610,173)
Interest expense..................... 791,353 221,711 2,045,614 758,054
Other (income) expense............... --- 20,444 --- 122,609
Merger costs......................... --- 1,200,000 --- 2,350,000
Restructuring charges................ --- --- 750,000 2,500,000
------------- ------------- -------------- -------------
Income (loss) before income taxes
(benefit)............................ 2,822,039 642,021 4,717,038 (2,762,332)
Income taxes (benefit).................. 1,185,257 2,902,258 1,981,726 2,246,258
------------- ------------- -------------- -------------
Net income (loss)....................... 1,636,782 (2,260,237) 2,735,312 (5,008,590)
Pro forma income taxes (benefit)........ --- (1,425,343) --- (1,578,681)
------------- ------------- -------------- -------------
Pro forma net income (loss)............. 1,636,782 (834,894) 2,735,312 (3,429,909)
Preferred stock dividends............... --- --- --- 36,320
------------- ------------- -------------- -------------
Pro forma net income (loss) applicable
to common stock..................... $ 1,636,782 $ (834,894) $ 2,735,312 $ (3,466,229)
============= ============== ============== =============
Pro forma earnings (loss) per share..... $ 0.17 $ (0.09) $ 0.28 $ (0.43)
============= ============== ============== =============
Weighted average shares outstanding..... 9,849,024 8,824,625 9,640,843 8,006,589
============= ============== ============== =============
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
Physician Support Systems, Inc. And Subsidiaries
Condensed Consolidated Statements Of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------
1997 1996
--------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)...................... $ 2,735,312 $ (5,011,829)
Adjustments to reconcile net income to
net cash provided by (used
in) operating activities:
Depreciation and amortization....... 4,567,871 3,896,724
Deferred income taxes............... --- 2,150,683
Loss on disposal of property and
equipment.......................... --- 122,609
Other long-term liabilities......... 42,168 (341,866)
Changes in operating assets and
liabilities:
Accounts receivable................ (7,490,624) (653,254)
Accounts receivable--unbilled...... (2,721,625) (583,985)
Prepaid expenses and other current
assets and other assets........... (924,329) (1,869,361)
Accounts payable................... (1,169,639) (1,092,543)
Accrued expenses................... (2,426,561) 4,027,900
--------------- ---------------
Net cash provided by (used in)
operating activities................ (7,387,427) 645,078
--------------- ---------------
Cash flows from investing activities:
Acquisitions, net of cash acquired..... (14,139,183) (21,557,373)
Deferred purchase price................ (463,333) (1,166,667)
Capital expenditures................... (2,188,488) (1,592,302)
--------------- ---------------
Net cash used in investing activities (16,791,004) (24,316,342)
--------------- ---------------
Cash flows from financing activities:
Net proceeds from sale of common stock. --- 43,556,217
Proceeds from long-term borrowings..... 23,040,952 168,635
Proceeds from short-term borrowings.... --- 3,371,875
Repayment of short-term borrowings..... --- (600,000)
Principal payments on long-term debt... (586,274) (14,267,809)
Principal payments on capital lease
obligations........................... (703,750) (370,693)
Due to/from related parties............ (755,074) (393,439)
Common stock dividends................. --- (1,196,112)
Redemption of preferred stock.......... --- (2,932,032)
Redeemable preferred stock
distributions......................... --- (36,319)
--------------- ---------------
Net cash provided by financing
activities.......................... 20,995,854 27,300,323
--------------- ---------------
Net increase (decrease) in cash and
cash equivalents....................... (3,182,577) 3,629,059
Cash and cash equivalents, beginning of
period................................. 3,826,018 1,691,758
--------------- ---------------
Cash and cash equivalents, end of period $ 643,441 $ 5,320,817
=============== ===============
Supplemental investing activity:
Fair value of assets acquired.......... $ 20,155,912 $ 31,589,439
Stock issued in acquisitions........... (3,547,132) ---
Cash acquired.......................... --- (490,231)
Liabilities assumed.................... (2,274,597) (7,279,835)
Deferred purchase price................ (195,000) (2,262,000)
--------------- ---------------
Net cash paid for acquisitions....... $ 14,139,183 $ 21,557,373
=============== ===============
Supplemental disclosure of cash flow
information:
Cash paid for interest................. $ 1,688,777 $ 1,574,066
=============== ===============
Capital lease obligations incurred in
acquisition of equipment.............. $ 718,955 $ 1,073,235
=============== ===============
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
Physician Support Systems, Inc. And Subsidiaries
Notes To Condensed Consolidated Financial Statements
Three and Nine Months Ended September 30, 1997 and 1996
1. Basis of Presentation
The unaudited condensed consolidated financial statements included herein
have been prepared by the Company in accordance with the rules and regulations
of the Securities and Exchange Commission and consequently do not include all of
the disclosures normally required by generally accepted accounting principles.
These unaudited condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and related notes
thereto included in the Company's Annual Report on Form 10-K.
The unaudited financial information contained herein reflects all
adjustments (consisting of only normal recurring accruals) which, in the opinion
of management, are necessary for a fair presentation of the results of
operations for the three and nine month periods ended September 30, 1997 and
1996.
2. Sale of Common Stock
On February 12, 1996, the Company authorized the issuance of up to
10,000,000 shares of preferred stock, increased the number of authorized shares
of common stock from 5,000 to 100,000,000, changed the par value of its common
stock from $.01 to $.001 per share and effected a 1,400-for-one stock split. In
addition, on February 12, 1996, the Company sold 4,025,000 shares of common
stock for $12 per share in its initial public offering of common stock. The net
proceeds of such offering of approximately $43,556,000 were used to repay all
outstanding short and long-term debt except for The Spring Anesthesia Group,
Inc. ("Spring") acquisition subordinated note, redeem all outstanding shares of
preferred stock and acquire three businesses.
3. Business Combinations
During 1996, the Company acquired either 100 percent of the outstanding
common stock or substantially all of the assets and liabilities of seven
businesses in transactions accounted for under the purchase method of
accounting, and merged with three businesses in transactions accounted for as
poolings of interests.
On February 5, 1997, the Company acquired 100 percent of the outstanding
common stock of Physerv Solutions, Inc. ("Physerv") for approximately
$10,109,000 in cash plus 563,934 shares of common stock. The Company has begun
to merge the operations of Spring into Physerv, and will complete this
assilimation as soon as is practicable (see Note 5).
The unaudited consolidated results of operations of the Company on a pro
forma basis as if the Company had consummated on January 1, 1996 the
acquisitions of the businesses accounted for under the purchase method of
accounting since January 1, 1996 are as follows:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------
1997 1996
-------------- -------------
<S> <C> <C>
Revenues $ 82,509,909 $ 75,561,362
============== =============
Net income $ 3,253,414 $ 736,948
============== =============
Earnings per share $ 0.33 $ 0.08
============== =============
Weighted average shares 9,720,033 9,720,033
============== =============
</TABLE>
5
<PAGE>
4. Long-Term Debt
<TABLE>
<CAPTION>
Long-term debt consists of the September 30, December 31,
following: 1997 1996
---- ----
<S> <C> <C>
Amended Agreement Adjusted LIBOR Rate
borrowings (7.5% at September 30, 1997).... $ 36,000,000 $ ---
Amended Agreement Prime Rate borrowings
(8.5% at September 30, 1997)............... 1,557,978 ---
Loan Agreement Acquisition Line
borrowings, Overnight Market Rate
(6.2% at December 31, 1997)................ --- 12,017,027
Loan Agreement Working Capital Line
borrowings, Intermediate Market Rate
(6.8% at December 31, 1997)................ --- 2,500,000
Spring acquisition subordinated note,
7.6%, payable on August 12, 2003 5,500,000 5,500,000
------------- -------------
$ 43,057,978 $ 20,017,027
============= =============
</TABLE>
On September 8, 1997, the Company amended its Loan Agreement (the "Loan
Agreement") with its bank and entered into an Amended and Restated Loan
Agreement (the "Amended Agreement") with three banks which allows for a
$65,000,000 Revolving Credit Facility. Under the Amended Agreement, the Company
may borrow, repay, and reborrow amounts through September 8, 2000, at which time
all borrowings become due. Borrowings may, at the Company's option, bear
interest at the Prime Rate or the Adjusted LIBOR Rate (London Interbank Offered
Rate plus up to 1.75%). Borrowings are secured by a pledge of the common stock
of the Company's subsidiaries.
5. Restructuring Charge
As previously reported, results at the Company's Spring subsidiary located
in Stockton, California, in the three months ended June 30, 1996 were adversely
affected by operating inefficiencies in the processing of physician charges
which resulted in lower revenues during that period. In addition, the Company
incurred increased salary and general and administrative expenses in an attempt
to increase production. To address these operating inefficiencies, among other
actions, the Company decided to replace certain computer hardware and software
at Spring with other operating software. The Company recorded a restructuring
charge in the three months ended June 30, 1996 of approximately $1,600,000
related to the write-off of certain computer hardware and software, and costs
associated with the introduction of a new management team, some limited
severance activity and other transition items. During the three months ended
December 31, 1996, the Spring operating inefficiencies led to client
dissatisfaction. The Company incurred increased salary and general and
administrative costs in an attempt to increase client satisfaction. However,
these efforts were unsuccessful, and led to the loss of clients and loss of
related revenues. As a result, in accordance with Statement of Financial
Accounting Standards No. 121, the Company determined that certain identifiable
intangible assets (primarily customer contracts), and goodwill, were not
recoverable from future cash flows of Spring, and accordingly, an impairment
loss of approximately $6,578,000 was recorded in the year ended December 31,
1996. In addition, in conjunction with the Company's acquisition on February 5,
1997 of Physerv, which like Spring, serves only anesthesiologists, the Company
decided to fold the remaining Spring business into Physerv, in order to develop
a profitable, national approach to the anesthesia market. This entails exiting
the processing of physician charges in remote Spring locations and performing
such processing activities at more efficient central anesthesia processing
locations. As a result of this assimilation, the Company recorded a charge of
$750,000 in the three months ended March 31, 1997 primarily for severance and
lease terminations related to exiting processing activities at Spring.
6
<PAGE>
6. Pro Forma Income Taxes
The Company has acquired certain entities in merger transactions accounted
for as poolings of interests, which prior to the mergers had elected "S"
corporation status for income tax purposes. As a result of the mergers, these
acquired entities terminated their "S" corporation elections. Pro forma income
taxes represent the income tax provision (benefit) that would have been
recognized for periods prior to the mergers had the acquired entities been taxed
as "C" corporations.
7. Related Party Transactions
Legal services provided by related parties were approximately $1,055,000
and $497,000 in the three months ended September 30, 1997 and 1996, respectively
and $2,872,000 and $2,161,000 in the nine months ended September 30, 1997 and
1996, respectively.
Rent paid to related parties was approximately $113,000 and $18,000 for the
three months ended September 30, 1997 and 1996, respectively and $302,000 and
$27,000 for the nine months ended September 30, 1997 and 1996, respectively.
8. Subsequent Event
On October 14, 1997, the Company announced that it had entered into a
definitive agreement with National Data Corporation ("NDC"), pursuant to which
NDC will acquire the Company. NDC is a leading provider of information services
and systems for the health care and payment systems markets.
Under the terms of the definitive agreement, each share of the Company's
common stock will be exchanged for .435 shares of NDC common stock, subject to
adjustment based on the average trading price of a share of NDC common stock
prior to closing in the event such price is greater than $47.126 per share or
less than $36.782 per share. The acquisition will be accounted for as a
pooling-of-interests and is expected to close by the end of January 1998,
subject to customary conditions, including approval of the Company's
stockholders and expiration of the waiting period under the Hart-Scott-Rodino
Anti-Trust Improvements Act.
7
<PAGE>
Item 2. Management's Discussion And Analysis Of Financial Condition And Results
Of Operations.
OVERVIEW
The Company is a leading provider of business management services to hospitals
and physicians. The Company's services include preparation and follow-up on
bills for medical services provided, assisting providers in qualifying patients
for state medicaid eligibility, collecting past due accounts, and providing
other business management services on an outsource basis. The Company is
generally compensated with a management fee based upon net receipts of its
clients.
On February 12, 1996, the Company sold 4,025,000 shares of common stock for
$12 per share in its initial public offering of common stock. The net proceeds
of such offering of approximately $43,556,000 were used to repay all outstanding
short and long-term debt except for the Spring acquisition subordinated note,
redeem all outstanding shares of preferred stock and acquire three businesses.
See "ACQUISITIONS."
This Management's Discussion and Analysis of Financial Condition and Results
of Operations should be read in conjunction with the Company's latest Annual
Report on Form 10-K.
ACQUISITIONS
During 1996, the Company acquired either 100 percent of the outstanding common
stock or substantially all the assets and liabilities of seven businesses in
transactions accounted for under the purchase method of accounting, and merged
with three businesses in transactions accounted for as poolings of interests.
On February 5, 1997, the Company acquired 100 percent of the outstanding
common stock of Physerv for approximately $10,109,000 in cash plus 563,934
shares of common stock. The Company has begun to merge the operations of Spring
into Physerv, and will complete this assimilation as soon as is practicable.
RESULTS OF OPERATIONS
The following table sets forth, for the periods presented, the percentages of
net revenue represented by certain items reflected in the Company's statement of
operations.
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Salaries and wages 49.6% 50.2% 50.5% 51.8%
General and administrative 32.8% 33.3% 34.9% 36.7%
Depreciation and
amortization 5.3% 6.8% 5.6% 7.2%
Interest expense (income),
net 2.6% 0.3% 2.4% 0.3%
Other expense (income), net 0.0% 0.1% 0.0% 0.2%
Merger costs 0.0% 6.1% 0.0% 4.3%
Restructuring charge 0.0% 0.0% 0.9% 4.6%
------------------ ----------------- ---------------- ---------------------
Income (loss) before
income taxes (benefit) 9.7% 3.2% 5.7% (5.1)%
Income taxes (benefit) 4.1% 14.7% 2.4% 4.2%
------------------ ----------------- ---------------- ---------------------
Net income (loss) 5.6% (11.5)% 3.3% (9.3)%
Pro forma income taxes
(benefit) 0.0% (7.2)% 0.0% (3.0)%
------------------ ----------------- ---------------- ---------------------
Pro forma net income (loss) 5.6% (4.3)% 3.3% (6.3)%
================== ================= ================ =====================
</TABLE>
Revenues
Revenues increased 46.6% from $19,774,785 for the three months ended September
30, 1996 to $28,995,780 for the three months ended September 30, 1997 and 51.2%
from $54,044,689 for the nine months ended September 30, 1996 to $81,741,604 for
the nine months ended September 30, 1997. Such increases resulted primarily from
businesses acquired during 1996 and 1997 plus increased revenues from the
addition of new clients, offset, in part, by decreased revenues from lost
clients. In addition, the Company's revenues during the three months ended March
8
<PAGE>
31, 1997 were adversely affected by operating inefficiencies in the processing
of physician charges at Spring, the Company's subsidiary located in Stockton,
California. See "Restructuring Charge."
Salaries and Wages
Salaries and wages increased 44.7% from $9,929,898 for the three months ended
September 30, 1996 to $14,370,104 for the three months ended September 30, 1997
and 47.5% from $27,969,515 for the nine months ended September 30, 1996 to
$41,261,948 for the nine months ended September 30, 1997. Such increases
resulted primarily from businesses acquired during 1996 and 1997 and increases
in the number of clients served by the Company. As a percentage of revenues,
salaries and wages were lower in the three and nine months ended September 30,
1997 compared to the three and nine months ended September 30, 1996 primarily
due to efficiencies gained at businesses previously acquired.
General and Administrative Expenses
General and administrative expenses increased 44.3% from $6,589,681 for the
three months ended September 30, 1996 to $9,508,064 for the three months ended
September 30, 1997 and 43.7% from $19,823,503 for the nine months ended
September 30, 1996 to $28,492,060 for the nine months ended September 30, 1997.
Such increases resulted primarily from businesses acquired during 1996 and 1997
and increases in the number of clients served by the Company. As a percentage
of revenues, general and administrative expenses were lower in the three and
nine months ended September 30, 1997 compared to the three and nine months ended
September 30, 1996 primarily due to efficiencies gained at businesses previously
acquired, offset by increased administrative costs associated with being a
publicly traded company.
Depreciation and Amortization
Depreciation and amortization increased 15.1% from $1,337,647 for the three
months ended September 30, 1996 to $1,539,143 for the three months ended
September 30, 1997 and 17.3% from $3,893,513 for the nine months ended September
30, 1996 to $4,567,871 for the nine months ended September 30, 1997. Such
increases resulted primarily from businesses acquired during 1996 and 1997,
offset, in part, by reductions in depreciation and amortization expense due to
the write off of Spring fixed and intangible assets. See "Restructuring
Charge."
Interest Income
Interest income decreased from $166,617 for the three months ended September
30, 1996 to $34,923 for the three months ended September 30, 1997 and from
$610,173 for the nine months ended September 30, 1996 to $92,927 for the nine
months ended September 30, 1997 primarily as a result of lower levels of excess
cash invested in 1997 compared to 1996.
Interest Expense
Interest expense increased from $221,711 for the three months ended September
30, 1996 to $791,353 for the three months ended September 30, 1997 and from
$758,054 for the nine months ended September 30, 1996 to $2,045,614 for the nine
months ended September 30, 1997. Such increases resulted primarily from
increased levels of borrowings in 1997 resulting from the acquisition of
businesses during 1996 and 1997.
Restructuring Charge
As previously reported, results at the Company's Spring subsidiary located in
Stockton, California in the three months ended June 30, 1996 were adversely
affected by operating inefficiencies in the processing of physician charges
which resulted in lower revenues during that period. In addition, the Company
incurred increased salary and general and administrative expenses in an attempt
to increase production. To address these operating inefficiencies, among other
actions, the Company decided to replace certain computer hardware and software
at Spring with other operating software. The Company recorded a restructuring
charge in the three months ended June 30, 1996 of approximately $1,600,000
related to the write-off of certain computer hardware and software, and costs
associated with the introduction of a new management team, some limited
severance activity and other transition items. During the three months ended
December 31, 1996, the Spring operating inefficiencies led to client
dissatisfaction. The Company incurred increased salary and general and
administrative costs in an attempt to increase client satisfaction. However,
these efforts were unsuccessful, and led to the loss of clients and loss of
related revenues. As a result, in accordance with Statement of Financial
Accounting Standards No. 121, the Company determined that certain identifiable
intangible assets (primarily customer contracts) and goodwill were not
recoverable from future cash flows of Spring, and accordingly, an impairment
loss of approximately $6,578,000 was recorded in the year ended December 31,
1996.
9
<PAGE>
In addition, in conjunction with the Company's acquisition on February 5, 1997
of Physerv, which like Spring, serves only anesthesiologists, the Company
decided to fold the remaining Spring business into Physerv, in order to develop
a profitable, national approach to the anesthesia market. This entails exiting
the processing of physician charges in remote Spring locations and performing
such processing activities at more efficient central anesthesia processing
locations. As a result of this assimilation, the Company recorded a charge of
$750,000 in the three months ended March 31, 1997 primarily for severance and
lease terminations related to exiting processing activities at Spring.
Income Taxes (Benefit) and Pro Forma Income Taxes
The Company's historical effective rates for income taxes (benefit) changed
from (16.2%) for the three months ended September 30, 1996 to 42.0% for the
three months ended September 30, 1997 and from (19.3%) for the nine months ended
September 30, 1996 to 42.0% for the nine months ended September 30, 1997. Such
changes were primarily attributable to mergers with two companies subsequent to
June 30, 1996, but prior to December 31, 1996, that were accounted for as
poolings of interests. Both companies had been taxed as "S" Corporations, and
their historical financial statements, which are now included in the Company's
consolidated financial statements, did not include provisions for income taxes.
Pro forma income taxes are presented for the three and nine months ended
September 30, 1996 to show what income taxes would have been had these two
companies been taxed as "C" Corporations at that time. In addition, changes in
the effective income tax rate also resulted from differing levels in each year
of projected annual pretax income and the effect on such projected levels of
items not deductible for Federal and State income tax purposes.
Pro Forma Net Income and Pro Forma Earnings Per Share
Pro forma net income and pro forma earnings per share result from the
accumulation of the items described above and the increase in the weighted
average number of shares outstanding in the three and nine months ended
September 30, 1997 compared to the three and nine months ended September 30,
1996 resulting from shares issued in the Company's initial public offering of
common stock and additional shares of common stock issued as consideration in
acquisitions accounted for as purchases in 1996 and 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital and cash and cash equivalents were $27,716,000
and $643,000, respectively, at September 30, 1997 compared to $14,020,000 and
$3,826,000, respectively, at December 31, 1996.
The Company's total long-term debt, including current portion and amounts due
to related parties was $43,875,000 at September 30, 1997 compared to $21,252,000
at December 31, 1996. Such increase at September 30, 1997 was primarily
attributable to increased borrowings resulting from the acquisition of PhyServ
on February 5, 1997, plus borrowings during the nine months ended September 30,
1997 to pay transaction fees associated with the PhyServ acquisition and other
acquisitions that were consummated in the second half of 1996 and borrowings to
fund changes in working capital items, primarily increases in billed and
unbilled accounts receivable associated with increases in revenues and increases
in days of billed accounts receivable outstanding.
On September 8, 1997, the Company amended its Loan Agreement (the "Loan
Agreement") with its bank and entered into an Amended and Restated Loan
Agreement (the "Amended Agreement") with three banks which allows for a
$65,000,000 Revolving Credit Facility. Under the Amended Agreement, the Company
may borrow, repay, and reborrow amounts through September 8, 2000, at which time
all borrowings become due. Borrowings may, at the Company's option, bear
interest at the Prime Rate or the Adjusted LIBOR Rate (London Interbank Offered
Rate plus up to 1.75%). Borrowings are secured by a pledge of the common stock
of the Company's subsidiaries.
The Company believes anticipated cash flow from operations, cash and cash
equivalents on hand and borrowing capacity from the Agreement are adequate for
its anticipated operating needs.
10
<PAGE>
Recent Developments
On October 14, 1997, the Company announced that it had entered into a
definitive agreement with National Data Corporation ("NDC"), pursuant to which
NDC will acquire the Company. NDC is a leading provider of information services
and systems for the health care and payment systems markets.
Under the terms of the definitive agreement, each share of the Company's
common stock will be exchanged for .435 shares of NDC common stock, subject to
adjustment based on the average trading price of a share of NDC common stock
prior to closing in the event such price is greater than $47.126 per share or
less than $36.782 per share. The acquisition will be accounted for as a
pooling-of-interests and is expected to close by the end of January 1998,
subject to customary conditions, including approval of the Company's
stockholders and expiration of the waiting period under the Hart-Scott-Rodino
Anti-Trust Improvements Act.
11
<PAGE>
Part II. Other Information
Item 6. Exhibits
(a) Exhibits
Exhibit
Number Description
------ -----------
10.1 Amended and Restated Loan Agreement dated as of
September 8, 1997 among Physician Support Systems,
Inc., its subsidiaries named therein, the lenders
named therein, and CoreStates Bank, N.A., as
agent.
10.2 Collateral Pledge of Stock Agreement dated as of
September 8, 1997 among Physician Support Systems,
Inc., its subsidiaries named therein and
CoreStates Bank, N.A., as agent.
27 Financial Data Schedule
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, on November 6, 1997.
PHYSICIAN SUPPORT SYSTEMS, INC.
By: /s/ DAVID S. GELLER
-----------------------
DAVID S. GELLER
SENIOR VICE PRESIDENT
CHIEF FINANCIAL OFFICER
(Duly Authorized Officer and
Principal Financial Officer)
13
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
10.1 Amended and Restated Loan Agreement dated as of
September 8, 1997 among Physician Support Systems, Inc.,
its subsidiaries named therein, the lenders named
therein, and CoreStates Bank, N.A., as agent.
10.2 Collateral Pledge of Stock Agreement dated as of
September 8, 1997 among Physician Support Systems, Inc.,
its subsidiaries named therein and CoreStates Bank,
N.A., as agent.
27 Financial Data Schedule
14
<PAGE>
Exhibit 10.1
AMENDED AND RESTATED
LOAN AGREEMENT
Among
PHYSICIAN SUPPORT SYSTEMS, INC.
and its Subsidiaries,
as Borrower,
THE LENDERS IDENTIFIED HEREIN,
and
CORESTATES BANK, N.A., as Agent
For the Several Lenders
Dated as of September 8, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
Section Page
- ------- ----
SECTION 1. DEFINITIONS
1.1 General Provisions.......................... 1
------------------
1.2 Defined Terms............................... 2
-------------
SECTION 2. AMOUNT AND TERMS OF LOANS
2.2 Revolving Credit Note....................... 16
---------------------
2.3 Interest Rate Elections..................... 17
-----------------------
2.4 Letters of Credit........................... 19
-----------------
2.5 Swing Line Commitment....................... 22
---------------------
2.6 Fees........................................ 24
----
2.7 Loan Account................................ 25
------------
2.8 Computation of Interest..................... 25
-----------------------
2.9 Maximum Legal Rate.......................... 25
------------------
2.10 Place of Payments........................... 26
-----------------
2.11 Application of Payments..................... 26
-----------------------
2.12 Late Charges................................ 26
------------
2.13 Voluntary Prepayments....................... 26
---------------------
SECTION 3. REPRESENTATIONS AND WARRANTIES
3.1 Organization and Qualification.............. 27
------------------------------
3.2 Power and Authority......................... 27
-------------------
3.3 Enforceability.............................. 27
--------------
3.4 Conflict with Other Instruments............. 28
-------------------------------
3.5 Litigation.................................. 28
----------
3.6 Title to Assets............................. 28
---------------
3.7 Licenses; Intellectual Property............. 28
-------------------------------
3.8 Default..................................... 29
-------
3.9 Taxes....................................... 29
-----
3.10 Financial Condition......................... 29
-------------------
3.11 ERISA....................................... 29
-----
3.12 Regulation U................................ 30
------------
3.13 No Notices; No Violations................... 31
-------------------------
3.14 Labor....................................... 31
-----
3.15 Environmental Matters....................... 31
---------------------
SECTION 4. CONDITIONS OF BORROWING
4.1 Initial Advance............................. 31
---------------
4.2 Subsequent Advances......................... 33
-------------------
SECTION 5. AFFIRMATIVE COVENANTS
5.1 Financial Statements; Reports............... 34
-----------------------------
5.2 Liabilities................................. 35
-----------
5.3 ERISA....................................... 35
-----
5.4 Notices..................................... 36
-------
5.5 Use of Proceeds............................. 36
---------------
5.6 Corporate Existence; Properties............. 36
-------------------------------
5.7 Insurance................................... 36
---------
5.8 Books and Records........................... 37
-----------------
5.9 Location of Business........................ 37
--------------------
5.10 Funded Debt to Total Capital................ 37
----------------------------
5.11 Fixed Charge Coverage Ratio................. 37
---------------------------
5.12 Funded Debt to Annualized EBITDA............ 37
--------------------------------
5.13 Deposit Accounts............................ 38
----------------
5.14 Compliance Certificates..................... 38
-----------------------
5.15 Interest Rate Hedging Program............... 38
-----------------------------
5.16 Acquisition Financial Information........... 38
---------------------------------
SECTION 6. NEGATIVE COVENANTS
6.1 Debt........................................ 39
----
6.2 Liens....................................... 39
-----
(i)
<PAGE>
6.3 Investments................................. 39
-----------
6.4 Mergers, Consolidations..................... 41
-----------------------
6.5 Disposition of Assets....................... 41
---------------------
6.6 Continuance of Business..................... 41
-----------------------
6.7 Use of Proceeds............................. 41
---------------
6.8 Negative Pledges............................ 41
----------------
6.9 Acquisitions................................ 42
------------
SECTION 7. EVENTS OF DEFAULT, REMEDIES
7.1 Events of Default........................... 42
-----------------
7.2 Acceleration................................ 45
------------
7.3 Right of Setoff............................. 45
---------------
7.4 Remedies Cumulative......................... 45
-------------------
SECTION 8. MISCELLANEOUS
8.1 No Waiver; Cumulative Remedies.............. 46
------------------------------
8.2 Notices..................................... 46
-------
8.3 Reimbursement of Agent...................... 47
----------------------
8.4 Payment of Expenses and Taxes............... 47
-----------------------------
8.5 Survival of Representations and Warranties.. 47
------------------------------------------
8.6 Participations and Assignments.............. 47
------------------------------
8.7 Successors.................................. 48
----------
8.8 Governing Law and Construction.............. 48
------------------------------
8.9 Severability................................ 48
------------
8.10 Indemnity................................... 49
---------
8.11 Waiver of Trial by Jury; Jurisdiction....... 49
-------------------------------------
8.12 Actions Against Lenders; Release............ 50
--------------------------------
8.13 Counterparts................................ 50
------------
8.14 Entire Agreement............................ 50
----------------
8.15 Margin Stock................................ 50
------------
SECTION 9. RIDERS AND JOINDERS
9.1 Riders...................................... 51
------
9.2 Joinders.................................... 51
--------
SECTION 10. THE AGENT
10.1 Appointment and Authorization............... 51
-----------------------------
10.2 Agent's Rights as Lender.................... 51
------------------------
10.3 Actions; Lenders' Instructions.............. 52
------------------------------
10.4 Preference Repayments....................... 53
---------------------
10.5 Consultation with Experts................... 53
-------------------------
10.6 Liability of Agent.......................... 53
------------------
10.7 Credit Decision............................. 54
---------------
10.8 Successor Agent............................. 54
---------------
10.9 Setoff or Counterclaim...................... 54
----------------------
10.10 Amendments.................................. 55
----------
10.11 Payments Received........................... 55
-----------------
10.12 Advances.................................... 55
--------
10.13 Indemnification............................. 55
---------------
10.14 Liquidation................................. 56
-----------
10.15 Forwarding Information...................... 56
----------------------
10.16 Termination................................. 57
-----------
10.17 Notices..................................... 58
-------
10.18 No Joint Venture............................ 58
----------------
10.19 Corporate Records........................... 58
-----------------
Table of Schedules . . . . . . . . . . . . . . . . . . . .
Table of Exhibits. . . . . . . . . . . . . . . . . . . . .
(ii)
<PAGE>
AMENDED AND RESTATED LOAN AGREEMENT
-----------------------------------
THIS AMENDED AND RESTATED LOAN AGREEMENT made and entered into
September 8, 1997, between PHYSICIAN SUPPORT SYSTEMS, INC., and the other
Borrowers (as defined herein), the Lenders (as defined herein), and CORESTATES
BANK, N.A., as a Lender and as Agent for the Lenders.
RECITALS
WHEREAS, the Borrowers and CoreStates Bank, N.A. have entered into
that certain loan agreement dated as of December 13, 1996 which provided a
$30,000,000 revolving credit facility and a $5,000,000 line of credit facility
to the Borrowers; and
WHEREAS, the Borrowers have requested that the Lenders terminate such
line of credit facility and provide an amended and restated $65,000,000
revolving credit facility; and
WHEREAS, the Lenders have agreed to make the requested amended and
restated credit facility available to the Borrowers on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
SECTION 1. DEFINITIONS.
1.1 General Provisions. Unless expressly provided otherwise in this
------------------
Agreement or in the Loan Documents, or unless the context requires otherwise:
(a) all accounting terms used in this Agreement and in the Loan
Documents shall have the meanings given to them in accordance with
Generally Accepted Accounting Principles;
(b) all terms used herein and in the Loan Documents that are
defined in the Pennsylvania Uniform Commercial Code, as amended from time
to time, shall have the meanings set forth therein;
(c) unless otherwise specified, all capitalized terms defined in
this Agreement shall have the defined meanings when used in
the Loan Documents and in any other documents made or delivered pursuant
<PAGE>
to this Agreement;
(d) the singular shall mean the plural, the plural shall mean the
singular, and the use of any gender shall include all genders;
(e) all references to any particular party defined herein shall
be deemed to refer to each and every Person defined herein as such party
individually, and to all of them, collectively, jointly and severally, as
though each were named wherever the applicable defined term is used;
(f) all references to "Sections," "Subsections," "Paragraphs" and
"Subparagraphs" shall refer to provisions of this Agreement;
(g) all references to time herein shall mean Eastern Standard
Time or Eastern Daylight Time, as then in effect; and
(h) all references to sections, subsections, paragraphs or other
provisions of statutes or regulations shall be deemed to include successor,
amended, renumbered and replacement provisions.
1.2 Defined Terms. As used herein, the following terms shall have
-------------
the meanings indicated, unless the context otherwise requires:
"Accumulated Funding Deficiency" shall mean any accumulated
funding deficiency as defined in ERISA (S)302(a).
"Adjusted Base Rate" shall mean, for any day, a rate per annum
equal to the sum of (i) the Base Rate for such day, plus (ii) the relevant
Applicable Margin.
"Adjusted LIBOR Rate" shall mean, for and with respect to any
applicable LIBOR Period, a rate per annum equal to the sum of (i) LIBOR,
plus (ii) the relevant Applicable Margin.
----
"Advance" and "Advances" shall mean, individually and
collectively as appropriate, any and all Revolving Credit Advances and
Swing Line Advances.
"Affiliate" shall mean, as to any Person:
(a) if such Person is an individual, any
2
<PAGE>
(i) Relative of such Person or of a general partner of such Person,
(ii) partnership in which such Person is a general partner, (iii)
general partner of such Person, or (iv) corporation of which such
Person is a director, officer, or person in control;
(b) if such Person is a corporation, any (i) director of
such Person, (ii) officer of such Person, (iii) person in control of
such Person, (iv) partnership in which such Person is a general
partner, (v) general partner of or joint venturer with such Person, or
(vi) Relative of a general partner, director, officer, or person in
control of such Person; or
(c) if such Person is a partnership, any (i) general partner
in such Person, (ii) Relative of a general partner in such Person,
(iii) partnership in which such Person is a general partner, (iv)
general partner of such Person, or (v) person in control of such
Person.
As used in this definition, "control" shall mean possession, directly or
indirectly, of power to direct or cause the direction of management or
policies (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise), provided that, in any
--------
event, any Person which owns or holds directly or indirectly twenty-five
percent (25%) or more of the voting securities or twenty-five percent (25%)
or more of the partnership or other equity interests of any other Person
(other than as a limited partner of such other Person) will be deemed to
control such corporation or other Person.
"Agent" shall mean CoreStates Bank, N.A., as agent for the
Lenders, and any successor agent hereunder.
"Agreement" shall mean this amended and restated loan agreement
and any future amendments, restatements, modifications or supplements
hereof or hereto.
"Annualized EBITDA" shall mean at any date the product of (a)
EBITDA of PSS and its Subsidiaries on a consolidated basis for the
preceding two (2) fiscal quarters minus Capital Expenditures of PSS and its
-----
Subsidiaries on a consolidated basis during such two (2) fiscal quarters,
multiplied by (b) two (2); provided that if PSS or any of its Subsidiaries
has acquired any business or company (whether by merger, consolidation,
acquisition of stock, or acquisition of assets) during such two (2) fiscal
quarters, EBITDA and Capital Expenditures of such
3
<PAGE>
business or company shall be included in the calculation contemplated by
this definition for such two (2) fiscal quarters so long as PSS has
delivered to Agent Pro Forma Historical Financial Statements for such two
(2) fiscal quarters which reflect such acquisition.
"Applicable Margin" shall mean the appropriate margin that shall
be added to the LIBOR Rate and the Base Rate to determine the Adjusted
LIBOR Rate and the Adjusted Base Rate as set forth below:
<TABLE>
<CAPTION>
Ratio of Funded
Debt to Annualized EBITDA Base Rate Margin LIBOR Margin
- --------------------------- ----------------- -------------
<S> <C> <C>
less than 2.0 .00% 1.0%
greater than or equal to 2.0;
less than 2.5 .00% 1.25%
greater than or equal to 2.5;
less than 3.0 .00% 1.50%
greater than or equal to 3.0 .25% 1.75%
</TABLE>
"Available Commitment" shall mean, at any time, with respect to
any Lender, the excess of (a) the sum of (i) such Lender's Commitment, plus
(ii) such Lender's Commitment Percentage of any Letter of Credit Reserve,
over (b) such Lender's Commitment Percentage of the sum of (i) the
aggregate outstanding balance of all Advances plus (ii) the aggregate
stated amount of all outstanding Letters of Credit.
"Bankruptcy Code" shall mean the United States Bankruptcy Code,
Title 11 of the United States Code, as amended, or any successor law
thereto, and any rules promulgated in connection therewith.
"Base Rate" shall mean, for any day, a rate per annum equal to
the higher of (a) the Prime Rate for such day, and (b) the sum of 0.5% and
the Federal Funds Rate for such day.
"Base Rate Loans" shall mean, collectively, any and all Advances
made by the Lenders to the Borrowers bearing interest at the Adjusted Base
Rate.
"Borrowers" shall mean, collectively, PSS and all Subsidiaries
which have executed the signature pages of this Agreement or which have
joined in this Agreement.
"Borrowing Notice" shall mean a written request by any Borrower
to the Agent for a Revolving Credit Advance or Swing Line Advance pursuant
hereto containing any and all information required
4
<PAGE>
hereby and made pursuant to such forms as the Agent may require from time
to time.
"Business Day" shall mean a day other than (x) a Saturday, Sunday
or legal holiday under the laws of the Commonwealth of Pennsylvania or (y)
a day on which commercial banks in Philadelphia, Pennsylvania are required
or permitted by law or executive order to be closed.
"Capital Expenditures" shall mean, collectively, any purchase,
acquisition, or lease, the cost of which or payment with respect to which
is required to be capitalized pursuant to and in accordance with Generally
Accepted Accounting Principles.
"Capital Lease Obligations" shall mean, collectively, the
obligations of any Person to pay rent or other amounts under any lease of
or other arrangement conveying the right to use real or personal property,
or a combination thereof, which obligations are required to be classified
and accounted for as capital leases on a balance sheet of such Person
pursuant to and in accordance with Generally Accepted Accounting
Principles, and the amount of such obligations shall be the capitalized
amount thereof determined in accordance with Generally Accepted Accounting
Principles.
"Closing Date" shall mean September 8, 1997.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
or any successor law thereto, and any regulations promulgated thereunder.
"Collections" means all monies or other assets received by the
Agent or any of the Lenders, by setoff or otherwise, for credit against
principal, interest or other amounts due with respect to the Advances.
"Commitment" shall mean, with respect to any Lender, such
Lender's commitment to make Swing Line Advances and Revolving Credit
Advances hereunder as set forth on Rider A attached hereto, as such
Commitment may be reduced, increased, or terminated pursuant to Section 2
hereof.
"Commitment Percentage" shall mean, with respect to any Lender,
such Lender's percentage interest in each Advance to be made
5
<PAGE>
hereunder and each Letter of Credit to be issued hereunder as set forth on
Rider A attached hereto, as such percentages may be reduced or increased as
provided in Subsection 8.6 hereof.
"Contamination" shall mean the presence of any Hazardous
Substance which may require Remedial Actions under applicable law.
"Controlled Group Member" shall mean:
(a) any corporation included with PSS in a controlled group
of corporations within the meaning of Code (S)414(b);
(b) any trade or business (whether or not incorporated)
which is under common control with PSS within the meaning of Code
(S)414(c); and
(c) any member of an affiliated service group of which PSS
is a member within the meaning of Code (S)414(m).
"Default" shall mean any event specified in Subsection 7.1,
whether or not any requirement for notice or lapse of time has been
satisfied.
"Default Rate" shall mean a floating annual rate equal to the
Prime Rate (as in effect from time to time) plus two percent (2%).
"EBITDA" shall mean, for any period, the sum of (i) net income
for such period, (ii) interest expense, taxes, and depreciation and
amortization expense for such period, (iii) charges related to
extinguishment of debt for such period, (iv) merger costs for such period,
(v) charges associated with acquisitions accounted for as poolings of
interest for such period, and (vi) with the approval of the Required
Lenders, restructuring charges for such period, in each case to the extent
taken into account in determining net income during such period.
"Employee Pension Plan" shall mean any pension plan which (i) is
maintained by PSS or any Controlled Group Member, and (ii) is qualified
under Code (S)401.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and any regulations issued thereunder by the
6
<PAGE>
United States Department of Labor or the PBGC.
"Event of Default" shall mean any event specified in Subsection
7.1, provided that any requirement for notice or lapse of time has been
--------
satisfied.
"Federal Funds Rate" shall mean for any day the rate per annum
(rounded upward, if necessary, to the nearest one one-hundredth of one
percent) equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve Bank
of New York on the Business Day next succeeding such day; provided that (a)
if such day is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business Day
as so published on the next succeeding Business Day and (b) if no such rate
is so published on such next succeeding Business Day, the Federal Funds
Rate for such day shall be the average rate quoted to the Agent on such day
on such transactions as determined by the Agent.
"Fixed Charges" shall mean, with respect to PSS and its
Subsidiaries on a consolidated basis, for any applicable period and without
duplication, the product of (x) the sum of (i) the total amount of interest
due and payable in respect of all outstanding indebtedness, (ii) amounts
due and payable in respect of Capital Lease Obligations to the extent that
such amounts are in the nature of interest, (iii) all scheduled payments of
principal on all outstanding indebtedness, (iv) amounts paid in respect of
Capital Lease Obligations to the extent that such amounts are in the nature
of principal, (v) dividends paid, and (vi) funds disbursed for the
repurchase of capital stock, as measured over the preceding two (2) fiscal
quarters of PSS, multiplied by (y) two (2); provided that if PSS or any of
its Subsidiaries has acquired any business or company (whether by merger,
consolidation, acquisition of stock, or the acquisition of assets) during
such two (2) fiscal quarters, items in clause (x) for such business or
company shall be included in the calculation contemplated by this
definition for such two (2) fiscal quarters so long as PSS has delivered to
Agent Pro Forma Historical Financial Statements of PSS and its Subsidiaries
for such two (2) fiscal quarters which reflect such acquisition and the pro
forma effect of the debt incurred in connection with such acquisition.
"Funded Debt" shall mean, with respect to PSS and its
Subsidiaries on a consolidated basis, at any applicable date and without
7
<PAGE>
duplication, the excess of (a) sum of (i) the principal amount of all
indebtedness for borrowed money and indebtedness incurred in connection
with the acquisition of assets or capital stock, (ii) all Capital Lease
Obligations, and (iii) all guaranteed obligations, letter of credit
obligations and deferred purchase price obligations, over (b) the principal
----
amount of all Subordinated Indebtedness.
"Generally Accepted Accounting Principles" shall mean, at any
particular time, generally accepted accounting principles as in effect at
such time, provided, however, that, if employment of more than one
-----------------
principle shall be permissible at such time in respect of a particular
accounting matter, "Generally Accepted Accounting Principles" shall refer
to the principles which are then employed by PSS with the agreement of its
independent certified public accountants.
"Hazardous Substances" shall mean any chemical, solid, liquid,
gas, or other substance having the characteristics identified in, listed
under, or designated pursuant to:
(a) the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. (S)9601(14), as a
"hazardous substance;"
(b) the Clean Water Act, 33 U.S.C. (S)1321(b)(2)(A), as a
"hazardous substance;"
(c) the Clean Water Act, 33 U.S.C. (S)(S)1317(a) and
1362(13), as a "toxic pollutant;"
(d) Table 1 of Committee Print Numbered 95-30 of the
Committee on Public Works and Transportation of the United States
House of Representatives, as a "toxic pollutant;"
(e) the Clean Air Act, 42 U.S.C. (S)7412(a)(1), as a
"hazardous air pollutant;"
(f) the Toxic Substances Control Act, 15 U.S.C. (S)2606(f),
as an "imminently hazardous chemical substance or mixture;"
(g) the Resource, Conservation and Recovery Act, 42 U.S.C.
(S)(S)6903(5) and 6921, as a "hazardous waste;" or
8
<PAGE>
(h) any other laws, regulations or governmental
publications, as presenting an imminent and substantial danger to the
public health or welfare or to the environment, or as otherwise
requiring special handling, collection, storage, treatment, disposal,
or transportation.
The term "Hazardous Substances" shall also include: (w) petroleum, crude
oil, gasoline, natural gas, liquified natural gas, synthetic fuel, and all
other petroleum, oil, or gasoline based products; (x) radioactive
substances, mixtures, wastes, compounds, materials, elements, products or
matters; (y) asbestos, asbestos-containing materials, polychlorinated
biphenyls, and (z) any other substance, mixture, waste, compound, material,
element, product or matter that presents an imminent and substantial danger
to the public health or welfare or to the environment upon its Release.
"Issuing Bank" shall mean CoreStates Bank, N.A.
"Letters of Credit" shall have the meaning given to such term in
Subsection 2.4.
"Letter of Credit Reserve" shall mean the amounts (if any) on
deposit in the cash collateral accounts described in Subsections 2.4(b),
(c) and (f).
"Lenders" shall mean, collectively, the financial institutions
listed on Rider A attached hereto, as such Rider may be amended from time
to time.
"LIBOR" shall mean, for each LIBOR Loan and LIBOR Period
applicable thereto, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100th of 1%) determined by the Agent according to the
following formula:
where R = LIBOR
X = London Interbank Offered Rate for such LIBOR Loan for
the applicable LIBOR Period
Y = the average of the daily rates (expressed as a
9
<PAGE>
decimal fraction) of maximum reserve requirements which
are, at any time, applicable during such LIBOR Period
(including, without limitation, basic, special,
supplemental, marginal and emergency reserves) under
any regulations of the Board of Governors of the
Federal Reserve System or other banking authority,
domestic or foreign, as now and from time to time
hereafter in effect, prescribed for eurocurrency
funding (currently referred to as Eurocurrency
Liabilities in Regulation D of such Board) to which the
Agent (including any branch, Affiliate, or other
fronting office making or holding a LIBOR Loan) is
subject, as now and from time to time hereafter in
effect.
"LIBOR Business Day" shall mean any Business Day on which
commercial banks are open for international business (including dealing in
Dollar ($) deposits) in London, England and Philadelphia, Pennsylvania.
"LIBOR Loan" shall mean any Revolving Credit Advance or portion
thereof which bears interest at the Adjusted LIBOR Rate pursuant hereto.
"LIBOR Period" shall mean, with respect to any Advance or portion
thereof bearing interest at the Adjusted LIBOR Rate pursuant hereto, the
period commencing on the date on which the Advance or portion thereof
begins to bear interest at the Adjusted LIBOR Rate in accordance herewith
and ending one month, two months, three months, or six months thereafter,
as appropriate, as selected by any Borrower pursuant to Section 2.3,
subject to the following:
(i) if the last day of the LIBOR Period selected by such
Borrower pursuant to Section 2.3 does not fall on a Business Day:
(A) the LIBOR Period shall be automatically extended
until the next succeeding Business Day unless such Business Day
falls in another calendar month, in which case such LIBOR Period
shall end on the next preceding Business Day;
10
<PAGE>
(B) interest shall, to the extent applicable, continue
to accrue at the Adjusted LIBOR Rate; and
(C) the next LIBOR Period elected, or deemed to have
been elected, by such Borrower with respect to the LIBOR Loan to
which the LIBOR Period relates, if any, shall commence on the day
following the Business Day described in clause (i)(A) above; and
(ii) any LIBOR Period that begins on the last Business Day
of the calendar month (or on a date for which there is no numerically
corresponding day in the calendar month in which such LIBOR Period
ends) shall end on the last Business Day of a calendar month and the
next LIBOR Period with respect to the LIBOR Loan to which the LIBOR
Period relates, if any, shall commence on such Business Day.
"Loan Account" shall mean, collectively, the account or accounts
of the Borrowers on the books of Agent in which are recorded the Advances
and the payments of principal and interest made by the Borrowers to Agent
thereon.
"Loan Documents" shall mean, collectively, this Agreement, the
Notes, the Pledge Agreement, and all other agreements executed and
delivered to the Lenders or the Agent by the Borrowers in connection
therewith and any modifications, amendments, restatements, substitutions
and replacements of or for any of the foregoing.
"London Interbank Offered Rate" shall mean, for and with respect
to any LIBOR Loan and any LIBOR Period applicable thereto, the rate
(rounded upwards, if necessary, to the nearest 1/100th of 1%) equal to the
composite London Interbank Offered Rate for dollar ($) deposits
approximately equal in principal amount to the amount of such LIBOR Loan
and for a maturity comparable to such LIBOR Period appearing on the
Telerate Screen Page 3750 at approximately 9:00 A.M., Eastern Standard
time, on the date that is two (2) LIBOR Business Days prior to the
commencement of such LIBOR Period; provided, however, that if such rate
-------- -------
shall for any reason not be available on the Telerate Screen Page 3750 at
such time, the London Interbank Offered Rate shall be the arithmetic
average of the rates at which dollar ($) deposits approximately equal in
principal amount to the amount of such LIBOR Loan and for a maturity
comparable to such LIBOR Period are offered to Agent in immediately
available funds in the London interbank market at approximately
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11:00 A.M., London time, two (2) LIBOR Business Days prior to the
commencement of such LIBOR Period. As used herein, the term "Telerate
Screen Page 3750" shall mean the display designated as the page for LIBOR
on the Dow Jones Telerate Service (or such other page as may replace the
LIBOR page on that service for the purpose of displaying London interbank
offered rates of major banks).
"Mandatory Loan" shall have the meaning given to that term in
Subsection 2.5.
"Minimum Loan Amount" shall mean One Million Dollars
($1,000,000).
"Multiemployer Plan" shall mean a multiemployer pension plan as
defined in ERISA (S)3(37) to which PSS or any Controlled Group Member is or
has been required to contribute subsequent to September 25, 1980.
"Notes" shall mean, collectively, the Revolving Credit Notes.
"Obligations" shall mean all liabilities, duties and obligations
of the Borrowers to the Lenders with respect to any covenants,
representations or warranties herein or in the Loan Documents, with respect
to the principal of and interest on the Advances, and all other present and
future fixed and/or contingent obligations of the Borrowers to the Lenders
under the Loan Documents, including, without limitation, obligations with
respect to interest accruing (or which would accrue but for (S)502 of the
Bankruptcy Code) after the date of any filing by any Borrower of any
petition in bankruptcy or the commencement of any bankruptcy, insolvency or
similar proceedings with respect to any Borrower.
"Out-of-Pocket Costs" means all reasonable out-of-pocket costs
and expenses (including, without limitation, reasonable attorneys' fees and
expenses) paid or incurred by or on behalf of the Agent or the Lenders in
connection with the preparation, execution and administration or the
enforcement of any rights under this Agreement or any of the other Loan
Documents.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pro Forma Historical Financial Statements" shall mean pro forma
historical financial statements of PSS and its subsidiaries
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(after giving effect to the acquisition of any acquired entity) for the
preceding two (2) fiscal quarters, prepared by PSS in accordance with
Generally Accepted Accounting Principles and reflecting such adjustments as
PSS has historically made in preparing pro forma historical financial
statements and any other adjustments approved by the Required Lenders in
the reasonable exercise of their discretion.
"PSS" shall mean Physician Support Systems, Inc., a Delaware
corporation.
"Person" shall mean an individual, a corporation, a partnership,
a limited liability company, a joint venture, a trust or unincorporated
organization, a joint stock company or other similar organization, a
government or any political subdivision thereof, or any other legal entity.
"Pledge Agreement" shall mean the collateral pledge of stock
agreement dated the Closing Date between PSS and the Agent.
"Premises" shall mean the real properties, improvements thereon
and fixtures attached thereto owned or leased by any Borrower.
"Prime Rate" shall mean the floating annual rate of interest that
is designated from time to time by Agent as its "Prime Rate" and is used by
Agent as a reference base with respect to different interest rates charged
to borrowers generally. Such rate of interest shall change simultaneously
and automatically upon Agent's designation of any change in such reference
rate, and Agent's determination and designation from time to time of the
reference rate shall not in any way preclude Agent from making loans to
other borrowers at rates which are higher or lower than or different from
the referenced rate.
"Relative" shall mean, with respect to any individual, any
spouse, child, parent, grandchild, grandparent, brother or sister of such
individual, whether natural or by adoption.
"Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, or dumping.
"Remedial Actions" shall mean:
(a) clean-up or removal of Hazardous Substances;
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(b) such actions as may be necessary to monitor, assess, or
evaluate the Release or threatened Release of Hazardous Substances;
(c) proper disposal or removal of Hazardous Substances;
(d) the taking of such other actions as may be necessary to
prevent, minimize, or mitigate the damages caused by a Release or
threatened Release of Hazardous Substances to the public health or
welfare or to the environment; and
(e) the providing of emergency assistance after a Release.
Remedial Actions include, but are not limited to, such actions at the
location of a Release as: storage; confinement; perimeter protection using
dikes, trenches, or ditches; clay cover; neutralization; clean-up of
Hazardous Substances or contaminated materials; recycling or reuse;
diversion; destruction; segregation of reactive wastes; dredging or
excavations; repair or replacement of leaking containers; collection of
leachate and runoff; onsite treatment or incineration; providing
alternative water supplies; and any monitoring reasonably required to
assure that such actions protect the public health and welfare and the
environment.
"Reorganization" shall mean reorganization as defined in ERISA
(S)4241(a).
"Reportable Event" shall mean with respect to any Employee
Pension Plan, an event described in ERISA (S)4043(b).
"Required Lenders" shall mean Lenders that own, in the aggregate,
at least 66/2//\\3\\% of the Commitments.
"Revolving Credit Advance" or "Revolving Credit Advances" shall
mean, individually and collectively as appropriate, any or all Advances
made under the Revolving Credit Facility.
"Revolving Credit Commitment" shall mean, as at any applicable
time, the Borrowers' maximum credit availability at such time under the
Revolving Credit Facility, as determined under
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Subsection 2.1(a).
"Revolving Credit Facility" shall mean the revolving credit
facility in the maximum amount of $65,000,000 described in Subsection 2.1.
"Revolving Credit Notes" shall mean the promissory notes of the
Borrowers described in Subsection 2.2 and any future amendments,
restatements, modifications, or supplements thereof or thereto.
"SEC" shall mean the Securities and Exchange Commission.
"Subordinated Indebtedness" shall mean (i) the indebtedness owed
by PSS to the L. David Covell Living Trust and Spring Investment Limited
Liability Company in a principal amount not to exceed $5,500,000 in the
aggregate (the "Spring Debt"), (ii) any indebtedness of PSS or any
Subsidiary in an aggregate principal amount not exceeding $10,000,000 that
is subordinated on substantially the same basis as the Spring Debt, and
(iii) any other indebtedness of PSS or any Subsidiary, if any, for money
borrowed, whether now existing or hereafter incurred, which is approved by
the Agent as Subordinated Indebtedness before it is incurred by PSS or such
Subsidiary.
"Subsidiary" shall mean any corporation more than fifty percent
(50%) of the outstanding shares of capital stock of which (except for
directors' qualifying shares, if required by law) are at the time owned,
directly or indirectly, by PSS and/or one or more Subsidiaries.
"Swing Line Advance" or "Swing Line Advances" shall mean,
individually and collectively as appropriate, any or all Advances made
under the Swing Line Facility.
"Swing Line Commitment" shall mean, as at any applicable time,
the Borrowers' maximum credit availability at such time under the Swing
Line Facility, as determined under Subsection 2.5.
"Swing Line Facility" shall mean the swing line facility in the
maximum amount of $3,000,000 described in Subsection 2.5.
"Swing Line Lender" means CoreStates Bank, N.A., in its capacity
as Swing Line lender hereunder.
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"Termination Date" shall mean the third anniversary of the
Closing Date, unless extended in writing by the Lenders and the Agent.
"Total Capital" shall mean, as of any date, the sum of (i)
shareholders' equity on such date of PSS and its Subsidiaries on a
consolidated basis, and (ii) Funded Debt on such date of PSS and its
Subsidiaries on a consolidated basis.
"Withdrawal Liability" shall mean any withdrawal liability as
defined in ERISA (S)4201.
SECTION 2. AMOUNT AND TERMS OF LOANS.
2.1 Revolving Credit.
----------------
(a) Subject to, and in accordance with, the terms and conditions
of this Agreement, each Lender severally (but not jointly) agrees to extend
credit to the Borrowers by making Revolving Credit Advances to them, from
time to time during the period commencing on the Closing Date and ending on
the Business Day preceding the Termination Date. No Lender shall be
required to make any Revolving Credit Advance in excess of such Lender's
Available Commitment. The sum of (i) the aggregate principal balance of
all outstanding Advances and (ii) the aggregate stated amount of all
outstanding Letters of Credit (minus any Letter of Credit Reserve), shall
not at any time exceed $65,000,000, as such limit may be reduced from time
to time pursuant to Subsection 2.1(c).
(b) During the period referred to in Subsection 2.1(a), the
Borrowers may borrow under Subsection 2.1(a), repay and reborrow. Subject
to the provisions of Section 2.3(b), the Borrowers shall notify the Agent
in writing of each proposed borrowing under Subsection 2.1(a) not later
than 10:00 A.M. at least one Business Day prior to such proposed borrowing.
Each such borrowing and repayment shall be either (i) in the Minimum Loan
Amount and integral multiples of Two Hundred Fifty Thousand Dollars
($250,000) in excess thereof or (ii) equal to the remaining credit
availability under the Revolving Credit Commitment. The Borrowers
authorize and direct the Lenders to disburse the proceeds of each such
borrowing by direct deposit to demand deposit account number 0015355336 of
PSS with the Agent.
(c) PSS may upon three Business Days prior written notice to the
Agent permanently reduce (in whole or in part) or terminate the
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Revolving Credit Commitment and the Commitments, provided that on the
effective date of such reduction or termination the Borrowers pay to the
Agent for the account of the Lenders the amount by which (x) the sum of (i)
the aggregate outstanding Revolving Credit Advances plus (ii) the aggregate
stated amount of all outstanding Letters of Credit (minus any Letter of
Credit Reserve) exceeds (y) the Revolving Credit Commitment, and the amount
by which the aggregate Advances exceed the Commitments, in each case as so
reduced or terminated, together with any amounts due under Subsection 2.13.
2.2 Revolving Credit Note. On the date hereof, the Borrowers shall
---------------------
execute and deliver to each Lender a promissory note, which shall evidence the
Borrowers' obligations to repay the principal of, interest on, and other amounts
due in connection with the Revolving Credit Facility owed to such Lender and
which shall:
(a) be dated the Closing Date and be payable to the Lender's
order in a principal amount equal to such Lender's Commitment;
(b) bear interest on the unpaid principal amount of any
outstanding Revolving Credit Advances from the dates of such advances at an
annual rate selected by PSS pursuant to Section 2.3;
(c) be payable, with respect to LIBOR Loans, as to interest at
the expiration of the LIBOR Period applicable thereto; provided, however,
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for LIBOR Loans having a LIBOR Period in excess of three (3) months,
interest shall be payable at the expiration of each three (3) month period
during the LIBOR Period and at the expiration of the LIBOR Period;
(d) be payable as to interest with respect to Base Rate Loans
monthly, commencing October 1, 1997, and continuing on the first day of
each month thereafter until payment in full of the unpaid principal amount
thereof and all accrued but unpaid interest thereon;
(e) bear interest after the occurrence and during the
continuation of any Event of Default at the Default Rate; and
(f) be payable in full as to the entire unpaid principal
balance, all accrued interest and other sums due thereunder on the sooner
of (i) the Termination Date; (ii) upon written demand after the occurrence
of an Event of Default; or (iii) immediately and automatically upon any
Event of Default described in Paragraphs (e) or
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(f) of Subsection 7.1.
2.3 Interest Rate Elections.
-----------------------
(a) Any Borrower, subject to any prior continuing interest rate
elections made pursuant to Section 2.3(b), at any time and from time to
time, may notify the Agent that it is electing to have interest accrue at
the Base Rate on all or a specific portion of the aggregate unpaid amount
of any Revolving Credit Advance. All Revolving Credit Advances for which
an interest rate option is not specifically designated by a Borrower,
pursuant to the terms hereof, or not requested in conformity with the terms
hereof, shall be bear interest at the Base Rate.
(b) Subject to the notice provisions set forth in this Section
2.3(b), at any time and from time to time, any Borrower may notify (which
notice shall be irrevocable) the Agent that it is electing to have interest
accrue for a LIBOR Period specified in writing by such Borrower at the
Adjusted LIBOR Rate on all or a specific portion of the aggregate unpaid
amount of any Revolving Credit Advance (including any Revolving Credit
Advance to be made by the Lenders to the Borrowers on the date of election)
equal to the amount specified by such Borrower. A Borrower shall notify the
Agent not later than 11:00 A.M. three (3) LIBOR Business Days before the
date on which the Borrowers desire any Revolving Credit Advance to bear
interest at the Adjusted LIBOR Rate. Notwithstanding anything contained
herein to the contrary, any LIBOR Loan shall be in minimum denominations
equal to the lesser of (i) the Minimum Loan Amount and integral multiples
of Two Hundred Fifty Thousand Dollars ($250,000) if in excess thereof or
(ii) the remaining credit availability under the Revolving Credit
Commitment. A Borrower may not elect to have a Revolving Credit Advance
bear interest at the Adjusted LIBOR Rate if as a result thereof more than
eight (8) LIBOR Loans would be outstanding.
(c) Following an interest rate election made by any Borrower
with respect to any Revolving Credit Advance pursuant to Sections 2.3(a) or
2.3(b), but subject to all other conditions of this Agreement, such
Borrower may, in accordance with the provisions of Sections 2.3(a) and
2.3(b), from time to time, elect to convert or continue the type of
interest rate borne by such Revolving Credit Advance. In the event that a
Borrower fails to provide the Agent with any notice of conversion or
continuance, as described above, such Revolving Credit Advance shall
immediately and automatically become a
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Base Rate Loan and shall commence bearing interest at the Base Rate.
Notwithstanding anything contained herein to the contrary, no Borrower
shall convert any LIBOR Loan to a Base Rate Loan until the expiration of
the LIBOR Period then in effect with respect thereto.
(d) Each LIBOR Period shall end prior to the Termination Date,
and the Borrowers may not elect any LIBOR Period hereunder that ends after
the Termination Date.
(e) In the event that the Agent shall determine (which
determination shall be conclusive and binding upon the Borrowers) that, by
reason of circumstances affecting the interbank eurodollar market or
otherwise, adequate and reasonable means do not exist for ascertaining
LIBOR, the Borrowers' right to elect to have interest accrue on any
Revolving Credit Advance at the Adjusted LIBOR Rate shall be suspended
until such time that the Agent determines that adequate and reasonable
means exist for ascertaining LIBOR.
(f) Notwithstanding anything contained herein to the contrary, if
any applicable law, treaty, regulation or directive, or any change in or in
the application or interpretation of such law, treaty, regulation or
directive, or any other event shall make it unlawful for any Lender to make
or maintain LIBOR Loans:
(i) The obligation of the Lenders to make or maintain LIBOR
Loans shall be cancelled automatically and immediately; and
(ii) Such LIBOR Loans shall convert automatically and
immediately to Base Rate Loans and bear interest at the Adjusted Base
Rate.
(g) The Borrowers shall not prepay, in whole or in part, any
LIBOR Loans prior to the expiration of the appropriate LIBOR Period
applicable thereto. The Borrowers shall indemnify the Lenders and hold the
Lenders harmless from and against any and all direct and indirect costs and
losses (including losses resulting from redeployment of prepaid or
reborrowed funds at rates lower than the cost of such funds to the
Lenders), but not lost profits, that the Lenders may sustain or incur as a
result of (i) any prepayment of a LIBOR Loan, (ii) the conversion of a
LIBOR Loan to a Base Rate Loan prior to the expiration of the LIBOR Period
applicable thereto, (iii) a Revolving Credit Advance being converted from a
LIBOR Loan to a Base Rate Loan by reason of the circumstances described in
Section 2.3(e) or (f), or (iv) a LIBOR Loan
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not being made after notice thereof is provided to the Agent pursuant
hereto. Such agreement to indemnify shall include, without limitation, any
interest payable by the Lenders to lenders of funds obtained by the Lenders
in order to make or maintain LIBOR Loans pursuant hereto.
(h) Following the occurrence and during the continuance of an
Event of Default, the Borrowers may not elect to have any Revolving Credit
Advance made or maintained as, or converted into, a LIBOR Loan after the
expiration of any LIBOR Period then in effect for that Revolving Credit
Advance.
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2.4 Letters of Credit.
-----------------
(a) The Borrowers, the Agent and the Lenders agree that standby
letters of credit (herein collectively the "Letters of Credit" and individually
a "Letter of Credit") may be issued from time to time by the Issuing Bank for
the account of any Borrower for the purposes and under the terms set forth in
this Section 2.4. In no event shall the aggregate stated amount of all Letters
of Credit issued and unexpired at any time exceed the lesser of (i) the
aggregate amount of the unused Available Commitments of all of the Lenders and
(ii) Two Million Dollars ($2,000,000.00). In addition to the provisions set
forth in this Section 2.4, all terms, conditions and provisions of this
Agreement applicable to the making of any Advance shall likewise be applicable
to the issuance of any and all Letters of Credit, including, without
limitation, the means by which the Borrower requests the making of a Revolving
Credit Advance and all limitations upon, and conditions precedent to, the making
of any Advance; provided, however, that the Borrower shall give the Issuing Bank
-------- -------
written request for the issuance of a Letter of Credit at least three (3)
Business Days prior to the date such Letter of Credit is to be issued. With
respect to any Letter of Credit, the Agent, pursuant to the terms of such Letter
of Credit, from time to time, shall be entitled to, without notice or demand of
the Borrowers at any time and without the need for further approval of the
Borrowers, cause Advances to be made under the Revolving Credit Facility (as
Base Rate Loans) directly to the beneficiary of such Letter of Credit to pay and
honor all or any part of the liabilities under such Letter of Credit. Without
in any way limiting the force and effect of any provision of this Agreement, the
Borrowers acknowledge and agree that their obligations under each Letter of
Credit to repay such Advances shall be evidenced by the Revolving Credit Notes
and secured by the Pledge Agreement. Notwithstanding any repayment and/or
prepayment by Borrowers to Lenders of all amounts due under the Revolving Credit
Facility, so long as any Letter of Credit, or any extension, amendment or
renewal thereof, is outstanding, available and unexpired, whether or not draws
have been made thereunder, it shall be deemed that sums are due and owing to
Lenders pursuant to this Agreement and the Borrowers shall remain bound by all
covenants, conditions, restrictions, and obligations set forth in this Agreement
and the other Loan Documents until such time as all amounts due under the
Revolving Credit Facility have been repaid to Lenders in full and no Letters of
Credit are outstanding or in effect. If an Advance has been made to honor a
drawing under a Letter of Credit, the stated amount of such Letter of Credit
shall be reduced by the amount of such Advance.
<PAGE>
(b) So long as there shall exist an Event of Default under this
Agreement, the Agent may, at its option, cause an Advance to be made under the
Revolving Credit Facility in an amount equal to the stated amount of each
outstanding Letter of Credit. The proceeds of any Advance made pursuant to this
paragraph shall be deposited by the Agent in a deposit account maintained with
the Agent which shall constitute cash collateral for any obligations to honor
draws under outstanding Letters of Credit. In the event that any outstanding
Letters of Credit are thereafter returned to the Issuing Bank without any drafts
or demands for payment having been made thereon, then from any sums then on
deposit in the foregoing account an amount shall be applied to the outstanding
principal balance of the Revolving Credit Facility which is equal to the face
amount of each such returned Letter of Credit.
(c) The terms of each Letter of Credit must be acceptable to each of
the Issuing Bank and the Borrower which is the account party. However, in no
event shall a Letter of Credit be issued which has an expiry date occurring more
than twelve (12) months after the date of issuance of such Letter of Credit. A
Letter of Credit may be issued having an expiry date occurring after the
Termination Date; provided, however, that the Borrower shall provide to Agent
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cash collateral in an amount equal to one hundred three percent (103%) of the
stated amount of each Letter of Credit having an expiry date occurring after the
Termination Date, such cash collateral to be posted on or before the date which
is ninety (90) days prior to the then current Termination Date. Letters of
Credit shall be issued for the Borrowers' general corporate purposes.
(d) All Advances by the Agent under paragraphs (a) or (b) of this
Subsection 2.4 shall be deemed to be Base Rate Loans and shall be deemed to be a
Revolving Credit Advance subject to all of the terms, conditions and provisions
of this Agreement which are applicable to Base Rate Loans; provided, however,
that nothing contained in this Agreement shall relieve the Agent from the
obligation to honor proper draws or demands for payment under the terms of any
outstanding and unexpired Letter of Credit.
(e) The liability of the Lenders to the Issuing Bank on account of
each Letter of Credit issued pursuant to this Section 2.4 shall be pro rata
according to the respective Commitment Percentages of the Lenders. The Lenders
do each hereby agree to indemnify the Issuing Bank and hold the Issuing Bank
harmless, under the terms of Subsection 10.6 of this Agreement, from and against
any and all demands, draws, claims and liabilities of any nature arising out of
and/or relating to any and all Letters of Credit. In the event that the Issuing
Bank shall be required to honor any draft, draw or
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demand for payment under the terms of any Letter of Credit, then the funding of
such draft, draw or demand for payment by the Lenders to the Issuing Bank shall
be made pursuant to Section 10.12 of this Agreement. The Issuing Bank shall
provide notice to the Lenders of the Issuing Bank's intention to honor any draw
or demand for payment under any Letter of Credit and the amount of each Lender's
pro rata share of such draw or demand and each Lender shall make the amount of
its pro rata share of such draw or demand available to the Issuing Bank at the
office of the Issuing Bank prior to 1:00 P.M. Philadelphia prevailing time, on
the Business Day following the date of issuance of such notice of intent by the
Issuing Bank or such later date as is specified by the Issuing Bank.
(f) PSS may upon three Business Days prior written notice to the Agent
permanently reduce (in whole or in part) or terminate the ability of the
Borrowers to request the issuance of Letters of Credit under this Subsection
2.4, provided that the Borrowers establish a cash collateral account with the
Agent in an amount equal to the excess of (i) the aggregate stated amount of all
Letters of Credit outstanding on the effective date of such reduction or
termination over (ii) the maximum aggregate stated amount of Letters of Credit
that the Borrowers may request to be issued hereunder as a result of the
reduction in such availability by PSS. (For example, if PSS reduces the amount
of Letters of Credit that can be issued to $1,000,000 and the aggregate stated
amount of outstanding Letters of Credit is $1,500,000, then the Borrowers must
establish a $500,000 cash collateral account with the Agent.)
2.5 Swing Line Commitment.
---------------------
(a) Subject to satisfaction of all conditions precedent to the
establishment of the Revolving Credit Facility, the Swing Line Lender hereby
agrees to make Swing Line Advances to or for the benefit of the Borrowers under
the terms and subject to the conditions set forth in this Section 2.5.
(b) Swing Line Advances (i) may be made at any time and from time to
time on and after the date of this Agreement and prior to the Termination Date,
provided that any request for a Swing Line Advance must be made by 2:00 p.m. on
the date such Swing Line Advance is required, (ii) may be made only as cash
advances which shall accrue interest at the Base Rate and shall not be entitled
to be converted into LIBOR Loans, (iii) shall not be made if the aggregate
principal amount of Swing Line Advances then outstanding, after giving effect to
any requested Swing Line Advance, would exceed $3,000,000, or if the principal
amount of any requested Swing Line Advance would exceed the aggregate amount of
all Lenders' Available
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Commitments. To the extent the Borrowers have credit availability under the
Swing Line Facility and no Event of Default has occurred and is continuing, the
Swing Line Lender shall make Swing Line Advances in connection with the cash
management system maintained by the Borrowers with Agent to the extent necessary
to avoid any negative account balance.
(c) The Swing Line Lender shall, so long as and to the extent that
amounts are available to be borrowed under the Swing Line Facility (whether or
not any conditions precedent thereto can be or are met), require each other
Lender, and each other Lender hereby agrees, subject to this Subsection 2.5(c),
on such date (which shall be a Business Day) as designated by the Swing Line
Lender in writing to the Borrowers and the other Lenders, to make a Base Rate
Loan in an amount equal to such Lender's Commitment Percentage of the amount of
each Swing Line Advance (rounded up to the nearest thousand dollars) specified
in such notice (each a "Mandatory Loan"). If Base Rate Loans are made by Lenders
other than the Swing Line Lender under the immediately preceding sentence, each
such Lender shall make the amount of its Mandatory Loan available to the Agent,
in same day funds, at the Agent's Philadelphia, Pennsylvania office, not later
than 12:00 noon (Philadelphia time) on the Business Day next succeeding the date
such notice is given. The conversion of Swing Line Advances to Base Rate Loans
will not require the Borrowers to comply with the conditions precedent set forth
in Subsection 4.1 hereof or the notice requirements of Subsection 2.3 hereof or
require any other action on the part of Borrowers. The proceeds of such Base
Rate Loans shall be immediately delivered to Swing Line Lender (and not to
Borrowers) and applied to repay the outstanding Swing Line Advances. On the day
such Base Rate Loans are made, the Swing Line Lender's Commitment Percentage of
Swing Line Advances shall be deemed to be paid with the proceeds of a Base Rate
Loan made by the Swing Line Lender and such portion of the Swing Line Advances
deemed to be so paid shall no longer be outstanding as Swing Line Advances, and
shall be due under the Revolving Credit Note issued to the Swing Line Lender. If
any portion of any such amount paid to the Swing Line Lender should be recovered
by or on behalf of any Borrower from the Swing Line Lender in bankruptcy, by
assignment for the benefit of creditors or otherwise, the loss of the amount so
recovered shall be ratably shared among all Lenders in the manner contemplated
by Section 10.4 hereof. Each Lender's obligation to make any Mandatory Loan
referred to in this Subsection 2.5(c) shall be absolute and unconditional and
shall not be affected by any circumstance, including, without limitation, (i)
any setoff, counterclaim, recoupment, defense or other right which such Lender
may have against the Swing Line Lender, any Borrower or any other Person for any
reason whatsoever; (ii) the occurrence or continuance of a Default or any Event
of Default; (iii) any breach of this Agreement or any of the other Loan
Documents by any other
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Lender; or (iv) any other circumstances, happening or event whatsoever, whether
or not similar to any of the foregoing.
(d) In the event that any Mandatory Loan cannot for any reason be made
on the date otherwise required above (including, without limitation, as a result
of the commencement of a proceeding under the Bankruptcy Code with respect to
any Borrower), then each Lender hereby agrees that it shall forthwith purchase
(as of the date the Mandatory Loan would otherwise have been made, adjusted for
any principal payments received by the Swing Line Lender relating to the Swing
Line Advance from any Borrower on or after such date and prior to such purchase)
from the Swing Line Lender, such participations in the outstanding Swing Line
Advances as shall be necessary to cause such Lenders to share in such Swing
Line Advances ratably based upon their respective Commitment Percentages;
provided, however, that (x) all interest payable on the Swing Line Advances
- -------- -------
shall be for the account of the Swing Line Lender until the date as of which the
respective participation required to be purchased is paid and, to the extent
attributable to the purchased participation, shall be payable to the participant
from and after such date and (y) at the time any purchase of participations
pursuant to this sentence is actually made, the purchasing Lender shall be
required to pay the Swing Line Lender interest on the principal amount of the
participation purchased for each day from and including the day upon which the
Mandatory Loan would otherwise have occurred to but excluding the date of
payment for such participation, at a rate per annum equal to (I) the Federal
---------
Funds Rate for the first three (3) days and (II) at the Base Rate for each day
thereafter.
(e) A copy of each notice given by the Swing Line Lender to Lenders
pursuant to this Subsection 2.5 shall be promptly delivered by the Swing Line
Lender to the Agent and PSS. Upon the making of a Base Rate Loan by a Lender
pursuant to Subsection 2.5(c), the amount so funded shall become due under such
Lender's Revolving Credit Note.
2.6 Fees.
----
(a) In connection with the Revolving Credit Facility, the Borrowers
shall pay to the Agent for the account of the Lenders, ratably in proportion to
their Commitments, the following fees, all of which shall be non-refundable:
(i) An annual facility fee payable quarterly at the end of each
calendar quarter, commencing October 1, 1997, in an amount equal to the
product of (i) the daily average amount during such
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<PAGE>
calendar quarter of the Revolving Credit Commitment, and (ii) .0625%; and
(ii) A closing fee payable on the Closing Date equal to the
product of (x) 0.5% and (y) the Revolving Credit Commitment.
The fees payable under paragraph (i) of this Subsection 2.6(a) shall be adjusted
on a pro rata basis if the Revolving Credit Commitment is reduced or terminated
during any calendar quarter.
(b) The Borrowers shall pay to the Agent for the account of the
Lenders, ratably in proportion to their Commitments, an annual fee with respect
to each Letter of Credit issued and outstanding under this Agreement in an
amount equal to the product of (x) the Applicable Margin applicable to LIBOR
Loans at the date of issuance of such Letter of Credit, and (y) the stated
amount of such Letter of Credit. Such fee shall be payable in equal quarterly
installments at the end of each calendar quarter commencing October 1, 1997. In
addition, the Borrowers shall pay to the Issuing Bank on the date a Letter of
Credit is issued an annual fee equal to 0.125% per annum of the stated amount of
each Letter of Credit issued hereunder by the Issuing Bank.
(c) The Borrowers shall pay to the Agent the fees described in the
letter agreement dated the Closing Date between PSS and the Agent.
2.7 Loan Account. The Agent shall record in one or more Loan
------------
Accounts, all Advances to and all payments made by the Borrowers, and all other
appropriate debits and credits. Each month the Agent shall render to PSS a
statement setting forth the debit balance of the Loan Account as of the close of
the preceding month, together with a statement of the amount of interest and
other charges due the Lenders as of that time. Each statement shall be
considered correct and accepted by the Borrowers and conclusively binding upon
the Borrowers unless the Borrowers notify the Agent to the contrary in writing
within thirty (30) days from the receipt of the statement.
2.8 Computation of Interest. Interest shall be calculated on the
-----------------------
basis of a 365/366-day year for actual days elapsed for Base Rate Loans and on
the basis of a 360-day year for LIBOR Loans. Any change in the interest rate on
the Notes resulting from a change in the Base Rate shall become effective as of
the opening of business on the day on which such change in the Base Rate shall
occur.
26
<PAGE>
2.9 Maximum Legal Rate. The Borrowers shall not be obligated to pay
------------------
and Lenders shall not collect interest on any Obligation at a rate in excess of
the maximum permitted by law or the maximum that will not subject Lenders to any
civil or criminal penalties. If, because of the acceleration of maturity, the
payment of interest in advance or any other reason, the Borrowers are required,
under the provisions of any Loan Document or otherwise, to pay interest at a
rate in excess of such maximum rate, the rate of interest under such provisions
shall immediately and automatically be reduced to such maximum rate, and any
payment made in excess of such maximum rate, together with interest thereon at
the rate provided herein from the date of such payment, shall be immediately and
automatically applied to the reduction of the unpaid principal balance of the
Obligation as of the date on which such excess payment was made. If the amount
to be so applied to reduction of the unpaid principal balance exceeds the unpaid
principal balance, the amount of such excess shall be refunded by Lenders to the
Borrowers.
2.10 Place of Payments. All payments (including prepayments) by the
-----------------
Borrowers hereunder shall be made at 51 South Duke Street, Lancaster,
Pennsylvania 17602 or such other place or places as the Agent may direct, prior
to 2:00 P.M. on the date of payment, in lawful money of the United States of
America, and in immediately available funds, and, when due or upon instruction
from PSS, may be made by debit to PSS's account number 0015355336 with the
Agent.
2.11 Application of Payments. All payments shall be applied first to
-----------------------
the payment in full of any costs incurred in the collection of any Obligation,
including, without limitation, reasonable attorneys' fees, then to the payment
in full of any late charges, then to the payment in full of accrued and unpaid
interest and then to the reduction of the unpaid principal balance on any
Advance.
2.12 Late Charges. If the Borrowers shall fail to pay any installment
------------
of interest or principal due under the Advances or any other sum due to the
Lenders under any of the Loan Documents within fifteen (15) days after the date
it is due, the Borrowers shall pay to the order of the Agent (for the ratable
benefit of the Lenders), immediately, without notice or demand, a late charge
equal to two percent (2.0%) of the amount overdue to defray part of the
additional expense incurred by the Lenders in connection with the delinquency
and collection of the overdue amount. The provision for such late charge shall
not be construed to permit the Borrowers to make any payment after its due date,
obligate the Lenders to accept any overdue installment, or affect the Lenders'
rights and remedies upon the occurrence of
27
<PAGE>
a Default or an Event of Default.
2.13 Voluntary Prepayments.
---------------------
(a) Subject to Subsection 2.3 and paragraph (b) below, the
Borrowers at any time and from time to time may voluntarily prepay any
Advance, in whole or in part, upon notification to the Agent of such
prepayment not later than one Business Day prior to the date of prepayment,
in integral multiples of Two Hundred Fifty Thousand Dollars ($250,000) or,
if less than Two Hundred Fifty Thousand Dollars ($250,000) in Advances
remains outstanding, such lesser amount.
(b) If the Borrowers prepay, in whole or in part, any LIBOR Loan
prior to the expiration of the appropriate LIBOR Period applicable thereto,
then the Borrowers shall indemnify the Lenders and hold the Lenders
harmless from and against any and all direct and indirect costs and losses
(including losses from redeployment of prepaid or unborrowed funds at rates
lower than the cost of such funds to Lenders), but not lost profits, that
any Lender may sustain or incur as a result of such prepayment of a LIBOR
Loan. Such agreement to indemnify shall include, without limitation, any
interest payable by the Lenders to lenders of funds obtained by the Lenders
in order to make or maintain LIBOR Loans pursuant hereto.
SECTION 3. REPRESENTATIONS AND WARRANTIES.
To induce Agent and the Lenders to enter into this Agreement and to
make the Advances and issue the Letters of Credit, each Borrower represents and
warrants to Agent and the Lenders that:
3.1 Organization and Qualification. Each Borrower is a corporation
------------------------------
or limited liability company duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization and is duly
qualified as a foreign corporation or limited liability company and in good
standing under the laws of each jurisdiction in which the conduct of its
business or the ownership of its assets requires such qualification and in which
the failure to so qualify would have a material adverse effect on the business
or financial condition of PSS or such Borrower.
3.2 Power and Authority. Each Borrower has the power to execute,
-------------------
deliver and perform under each of the Loan Documents to which it is a party and
to borrow under this Agreement and has taken all necessary corporate action to
authorize the borrowings hereunder on the terms and conditions of
28
<PAGE>
this Agreement and the execution and delivery of, and performance under, the
Loan Documents to which it is a party. No consent of any other party (including
stockholders of the Borrowers) and no consent, license, approval or
authorization of, or registration or declaration with, any governmental
authority, bureau or agency is required in connection with the execution,
delivery, or performance by the Borrowers of the Loan Documents, except such
consents as have already been obtained.
3.3 Enforceability. The Loan Documents, when executed and delivered
--------------
to Agent pursuant to the provisions of this Agreement, will constitute valid
obligations of each Borrower which is a party thereto, legally binding upon it
and enforceable in accordance with their respective terms, except as
enforceability of the foregoing may be limited by bankruptcy, insolvency or
other laws of general application relating to or affecting the enforcement of
creditors' rights and general equitable principles.
3.4 Conflict with Other Instruments. The execution and delivery by
-------------------------------
the Borrowers of, and performance by the Borrowers under, the Loan Documents
will not violate or contravene any provision of any existing law or regulation
or decree of any court, governmental authority, bureau or agency having
jurisdiction in the premises or of the Articles of Incorporation or of the By-
Laws of any Borrower or of any material mortgage, indenture, security agreement,
contract, undertaking or other agreement to which any Borrower is a party or
which purports to be binding upon it or any of its properties or assets, and
will not result in the creation or imposition of any lien, charge, encumbrance
on, or security interest in, any of its properties or assets pursuant to the
provisions of any such mortgage, indenture, security agreement, contract,
undertaking or other agreement.
3.5 Litigation. No actions, suits or proceedings before any court or
----------
governmental department or agency (whether or not purportedly on behalf of any
Borrower) are pending or, to the knowledge of the Borrowers, threatened (a) with
respect to any of the transactions contemplated by this Agreement or (b) against
or affecting any Borrower or any of its properties that could reasonably be
expected to have a material adverse effect upon the financial condition,
business or operations of the Borrowers as a whole or the Borrowers' ability to
perform any of their obligations under the Loan Documents.
3.6 Title to Assets. Except as disclosed in writing to the Agent or
---------------
in PSS's most recent audited financial statements, no assets of any Borrower or
any Subsidiary are subject to any mortgages, pledges, charges, liens, security
interests or other encumbrances that would be required to be
29
<PAGE>
disclosed in audited financial statements of PSS in accordance with Generally
Accepted Accounting Principles.
3.7 Licenses; Intellectual Property. Each Borrower owns or has a
-------------------------------
valid right to use the licenses, trade secrets, trademarks, trademark rights,
trade names or trade name rights or franchises, copyrights, inventions, and
intellectual property rights being used to conduct its business as now operated;
and the conduct of the business of each Borrower as now operated does not
conflict with valid licenses, trade secrets, trademarks, trademark rights, trade
names or trade name rights or franchises, copyrights, inventions, and
intellectual property rights of others. No claim is pending or, to the
Borrowers' knowledge, threatened to the effect that any such intellectual
property owned or licensed by the Borrowers or which any Borrower otherwise has
the right to use, is invalid or unenforceable by the Borrower, as the case may
be. Except as disclosed to the Agent, no Borrower has any obligation to
compensate any Person for the use of any such rights, and no Person has been
granted any license or other rights to use in any manner any of the rights of
any Borrower, whether requiring the payment of royalties or not.
3.8 Default. No Default or Event of Default hereunder has occurred
-------
and is continuing.
3.9 Taxes. Each Borrower has filed or caused to be filed all tax
-----
returns (including, without limitation, those relating to federal and state
income taxes) required to be filed and has paid all taxes shown to be due and
payable on said returns or on any assessments made against it (other than those
being contested in good faith by appropriate proceedings for which adequate
reserves have been provided on its books). No tax liens have been filed against
any assets of any Borrower, and no claims are being asserted with respect to
such taxes which could have a material adverse effect upon the financial
condition, business or operations of the Borrowers taken as a whole.
3.10 Financial Condition. All consolidated and consolidating balance
-------------------
sheets, profit and loss statements, and other financial statements of PSS, dated
as of March 31, 1997, all of which have heretofore been delivered to the
Lenders, and all financial statements and data of PSS which will hereafter be
furnished to the Lenders, do or will (when furnished) present fairly in all
material respects the consolidated financial position of PSS and the results of
its operations as of the dates and for the periods for which the same are
furnished. All such financial statements have been prepared in accordance with
Generally Accepted Accounting Principles applied on a consistent basis. Neither
PSS nor any Subsidiary possesses any "loss
30
<PAGE>
contingency" (as that term is defined in Financial Accounting Standards Board,
Statement of Financial Accounting Standards No. 5 - "FASB 5") which is not
accrued, reflected, or reserved against in its balance sheet or disclosed in the
footnotes to such balance sheet. There has been no material adverse change in
the business, properties, operations or condition (financial or otherwise) of
PSS or any Subsidiary since the date of the financial statements which were most
recently furnished by the Borrowers to the Lenders.
3.11 ERISA.
-----
(a) Except as specifically disclosed to the Lenders in writing
prior to the date of this Agreement:
(i) there is no Accumulated Funding Deficiency with
respect to any Employee Pension Plan;
(ii) no Reportable Event has occurred with respect to any
Employee Pension Plan;
(iii) no violations of the Code have occurred that could
potentially cause the loss of the tax qualified status of any Employee
Pension Plan other than violations that are curable without material
expense to the Borrower;
(iv) neither PSS nor any Controlled Group Member has
incurred Withdrawal Liability with respect to any Multiemployer Plan;
and
(v) no Multiemployer Plan is in Reorganization.
(b) No liability (whether or not such liability is being
litigated) has been asserted against PSS or any Controlled Group Member in
connection with any Employee Pension Plan or any Multiemployer Plan by the
PBGC, by the trustee of a trust established pursuant to ERISA (S)4049, by a
trustee appointed pursuant to ERISA (S)4042(b) or (c), or by a sponsor or
an agent of a sponsor of a Multiemployer Plan, and no lien has been
attached and no person has threatened to attach a lien on any of PSS's or
its Controlled Group Members' property as a result of failure to comply
with ERISA or as a result of the termination of any Employee Pension Plan.
(c) Each Employee Pension Plan, as most recently amended,
including amendments to any trust agreement, group annuity or insurance
31
<PAGE>
contract, or other governing instrument, is the subject of a favorable
determination letter by the Internal Revenue Service with respect to its
qualifications under Code (S)401(a) and such Employee Pension Plan's
related trusts are exempt from taxation under Code (S)501(a). PSS has
furnished Lenders with a copy of the most recent actuarial report for each
Employee Pension Plan which is a defined benefit pension plan and each such
report is accurate in all material respects. Neither PSS nor any
Controlled Group Member has an unfulfilled obligation to contribute to any
Multiemployer Plan other than for periodic contributions on account of
current services of current employees that are not past due.
3.12 Regulation U. Neither PSS nor any Subsidiary is engaged 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), and (except for a tender offer for the stock of a
company whose stock is publicly traded) no part of the proceeds of the Loans
will be used to purchase or carry any margin stock or to reduce or retire any
indebtedness incurred for such purpose or to extend credit to others for such
purpose.
3.13 No Notices; No Violations. Neither PSS nor any Subsidiary has
-------------------------
received any notice from any federal, state or local authority or any insurance
or inspection body to the effect that any of its properties, facilities,
equipment or business procedures or practices fail to comply with any applicable
law, ordinance, regulation, building or zoning law, judicial or administrative
determination, or any other requirements of any such authority or body, and PSS
and all Subsidiaries, and all such properties, facilities, equipment, procedures
and practices, are, to the Borrowers' knowledge, in compliance in all material
respects with all such laws, ordinances, determinations, regulations and
requirements.
3.14 Labor. Neither PSS nor any Subsidiary is involved in any strike,
-----
lock-out, boycott or any other material labor trouble, nor is it involved in
labor negotiations.
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<PAGE>
3.15 Environmental Matters.
---------------------
(a) To the best of Borrowers' knowledge, the Premises have never
been and are not being used to make, store, handle, treat, dispose of,
generate, or transport Hazardous Substances in violation of any applicable
law. To the best of Borrowers' knowledge, there has never been a Release
of Hazardous Substances on or from the Premises or any other property owned
or used by any Borrower in violation of any applicable law or that caused
or might cause Contamination, and no Contamination exists on any such
property.
(b) Neither PSS nor any of the Subsidiaries has ever received any
notification, citation, or complaint of any kind from any governmental
authority alleging any violation of any law or regulation by PSS or such
Subsidiary relating or pertaining to the making, storing, handling,
treating, disposing, generating, transporting, or Release of any Hazardous
Substances, and neither PSS nor any Subsidiary nor, to the best of
Borrowers' knowledge, any property owned or used by PSS or any Subsidiary
is under any investigation with respect to any such matters.
(c) To the best of the Borrowers' knowledge, there are no
underground storage tanks on the Premises or any other property owned or
used by PSS or any Subsidiary.
SECTION 4. CONDITIONS OF BORROWING.
4.1 Initial Advance. As a condition precedent to the Lenders'
---------------
obligation to make the initial Advance, the following conditions shall all be
satisfied at the Closing Date:
(a) Loan Documents. Each Borrower shall have delivered or caused
--------------
to be delivered to the Agent duly executed copies of each of the Loan
Documents.
33
<PAGE>
(b) Borrower's Authorizations.
-------------------------
(x) PSS shall have delivered to Agent
(i) a copy, certified by the Secretary of PSS, of the
resolutions of the Board of Directors of PSS authorizing and approving
the execution and delivery of and performance under this Agreement and
the other Loan Documents, the borrowings provided for hereunder;
(ii) PSS's articles of incorporation certified by the
corporate Secretary of PSS;
(iii) a good standing or subsistence certificate with
respect to PSS certified by the Secretary of State of the state of
PSS's incorporation as of a date within thirty (30) days of the
Closing Date; and
(iv) a copy of PSS's By-Laws, as currently in effect,
certified by PSS's Secretary or Assistant Secretary; and
(y) The President and Secretary of PSS shall have duly
executed and delivered to the Agent certificates of incumbency, in form and
substance satisfactory to the Agent.
(z) PSS shall have delivered to the Agent (i) a copy,
certified by the Secretary or an Assistant Secretary of each Borrower
(other than PSS) of the resolutions of the respective Boards of Directors
of such Borrower authorizing and approving the execution and delivery of
and performance under this Agreement and the other Loan Documents to which
it is a party, and the borrowings provided for hereunder, and (ii) a good
standing or corporate subsistence certificate with respect to such Borrower
issued by the Secretary of State of its state of incorporation as of a date
within twenty (20) days of the Closing Date.
(c) Legal Opinions. Counsel for PSS shall have delivered to the
--------------
Agent an opinion acceptable to Agent, dated the Closing Date and addressed
to the Agent and the Lenders.
(d) Representations. The representations and warranties
---------------
contained in Section 3 hereof shall be true and correct as of the
34
<PAGE>
Closing Date and no Default or Event of Default shall be in existence or
shall occur as a result of any Advance made on the Closing Date.
(e) Legal Matters. All legal matters incident to the
-------------
transactions contemplated by this Agreement shall be satisfactory to
Stevens & Lee, counsel for the Agent.
(f) Due Diligence. The Agent and the Lenders shall have
-------------
completed their due diligence review of the Borrowers, and the results of such
review shall be acceptable to the Agent and the Lenders.
(g) No Material Adverse Change. No material adverse change in
--------------------------
the business, properties, operations or financial condition of PSS and its
Subsidiaries, taken as a whole, shall have occurred since March 31, 1997.
(h) Recent Financial Statements. The Agent and the Lenders
---------------------------
shall have completed a satisfactory review of the consolidated results of
operations of PSS for the five months ended May 31, 1997.
4.2 Subsequent Advances. As a condition precedent to the Lenders'
-------------------
obligation to make any Advance after the Closing Date, the following conditions
shall all be satisfied on the date of such Advance:
(a) Representations. The representations and warranties
---------------
contained in Subsections 3.1, 3.2, 3.3, 3.4, 3.6, 3.8, and 3.10 (except for
the last sentence of Subsection 3.10 to the extent such matter has
theretofore been disclosed to the Agent) shall be true and correct on the
date such Advance is made.
(b) No Default. No Default or Event of Default shall exist on
----------
the date of such Advance or shall occur as the result of making such
Advance.
SECTION 5. AFFIRMATIVE COVENANTS.
The Borrowers covenant and agree that from and after the effective
date of this Agreement and so long as any of the indebtedness hereunder remains
outstanding and unpaid, in whole or in part, or the credit commitments hereunder
remain available, the Borrowers will observe the following covenants, unless the
Agent shall otherwise consent in writing:
5.1 Financial Statements; Reports. The Borrowers will furnish
-----------------------------
35
<PAGE>
to Lender:
(a) Annual Reports: as soon as PSS files its annual report on
--------------
Form 10-K with the SEC or ninety (90) days after its fiscal year end,
whichever is later, the annual audit report of PSS containing a
consolidated balance sheet of PSS and Subsidiaries, as at the end of such
fiscal year, and related consolidated statements of income, stockholders'
equity, and cash flows of PSS and its Subsidiaries, for such fiscal year,
setting forth in each case in comparative form the corresponding figures
for the preceding fiscal year, all in reasonable detail, prepared in
accordance with Generally Accepted Accounting Principles applied on a
consistent basis and certified without exception or qualification by
independent public accountants selected by PSS and satisfactory to the
Agent, together with a consolidating balance sheet as at such year end and
a consolidating income statement for such fiscal year of PSS and its
Subsidiaries;
(b) Quarterly Statements. As soon as PSS files its quarterly
--------------------
reports on Form 10-Q with the SEC or forty-five (45) days after the end of
each fiscal quarter, whichever is later, a consolidated balance sheet of
PSS and its Subsidiaries, as of the end of such quarterly period, the
related consolidated statements of income for such quarterly period and for
the period from the end of the preceding fiscal year to the end of such
quarterly period, and the related consolidated statements of cash flows for
the period from the end of the preceding year to the end of such quarterly
period, setting forth in each case in comparative form the corresponding
figures for the corresponding period of the preceding fiscal year, all in
reasonable detail and prepared in accordance with Generally Accepted
Accounting Principles applied on a consistent basis (subject to normal
year-end adjustments) and certified as to accuracy by the chief financial
officer of PSS, together with a consolidating balance sheet as at such
quarter end and consolidating statements of income for such quarterly
period and for the period from the preceding year end to the end of such
quarterly period of PSS and its Subsidiaries;
(c) Reports to Investors: promptly after the sending or making
--------------------
available or filing the same, copies of all reports and financial
statements required to be or actually delivered or sent by PSS to its
shareholders generally;
(d) Securities Filings: promptly upon sending, making available
------------------
or filing the same, such reports and financial statements as
36
<PAGE>
PSS shall send or make available to the shareholders of PSS or file with
the SEC and any press releases made by PSS; and
(e) Other Information: from time to time, such additional
-----------------
financial and other information as Agent may reasonably request.
5.2 Liabilities. The Borrowers will pay and discharge, at or before
-----------
their maturity, all their respective obligations and liabilities (including,
without limitation, tax liabilities and all employee wages as provided in the
Fair Labor Standards Act, 29 U.S.C. (S)(S)206-207 and any successor statute)
which are material to the properties, results of operations, or financial
condition of PSS and its Subsidiaries, taken as a whole, except those which may
be contested in good faith, and maintain adequate reserves for any of the same
in accordance with Generally Accepted Accounting Principles.
5.3 ERISA.
-----
(a) PSS will furnish to Lenders (i) within thirty (30) days after
it has reason to know that it or any Controlled Group Member has incurred
Withdrawal Liability, or that any Multiemployer Plan is in Reorganization
or that any Reportable Event has occurred with respect to any Employee
Pension Plan or that the PBGC has instituted or will institute proceedings
under Title IV of ERISA to terminate any Employee Pension Plan or to
appoint a trustee to administer any Employee Pension Plan, a statement
setting forth the details as to such Withdrawal Liability, Reorganization,
Reportable Event, termination or appointment proceedings and the action
which it (or the Multiemployer Plan sponsor or Employee Pension Plan
sponsor other than PSS) proposes to take with respect thereto, together
with a copy of any notice of Withdrawal Liability or Reorganization given
to PSS or any Controlled Group Member and a copy of the notice of such
Reportable Event given to PBGC if a copy of such notice is available to PSS
or any of its Controlled Group Members; and (ii) promptly after receipt
thereof, a copy of any notice PSS or any of its Controlled Group Members or
the sponsor of any Employee Pension Plan receives from PBGC or the Internal
Revenue Service which sets forth or proposes any action or determination
with respect to such Employee Pension Plan.
(b) PSS will notify Lenders of (i) any excise taxes which have
been assessed or which PSS or any of its Controlled Group Members have
reason to believe may be assessed against PSS or any of its Controlled
Group Members by the Internal Revenue Service with respect to
37
<PAGE>
any Employee Pension Plan or Multiemployer Plan or (ii) any revocation of
qualification under Code (S)401 which has occurred or which PSS or any of
its Controlled Group Members have reason to believe may occur with respect
to any Employee Pension Plan or Multiemployer Plan.
5.4 Notices. The Borrowers will promptly give notice in writing to
-------
the Lenders of the occurrence of any of the following:
(a) any Event of Default or Default under this Agreement; or
(b) any adverse change in the properties, operations, business or
condition (financial or otherwise) of the Borrowers since the date of the
most recent financial statements furnished by the Borrowers to the Lenders
or the likely occurrence thereof that is material to the properties,
operations, business or financial condition of PSS and its Subsidiaries
taken as a whole.
5.5 Use of Proceeds. The Borrowers shall use the proceeds of the
---------------
Revolving Credit Facility solely for the purpose of (i) repaying existing bank
financing and Swing Line Advances, (ii) financing working capital, (iii) general
corporate purposes, (iv) repayment of drawings honored under Letters of Credit,
and (v) financing acquisitions permitted under Subsection 6.9.
5.6 Corporate Existence; Properties. Except in connection with
-------------------------------
transactions permitted under Subsection 6.4, and except where any failure to
comply with this Section 5.6 would not have a material adverse effect on the
operations, properties, or financial condition of PSS and its Subsidiaries,
taken as a whole, PSS and each Subsidiary will maintain:
(a) its corporate existence and its qualification to do business
and good standing in each jurisdiction in which qualification is necessary
for the proper conduct of its businesses; and
(b) all material licenses, permits and other authorizations
necessary for the ownership and operation of its properties and businesses.
5.7 Insurance. PSS and each Subsidiary shall carry at all times, in
---------
coverage, form and amount consistent with prudent business practices, hazard
insurance (with fire, extended and vandalism and malicious mischief coverage and
coverage against such other hazards as are customarily
38
<PAGE>
insured against by companies in the same or similar business), commercial
general liability insurance, worker's compensation insurance, and
comprehensive automobile liability insurance, and pay all premiums on the
policies for such insurance when and as they become due and do all other things
necessary to maintain such policies in full force and effect, except where any
failure to do so would not have a material adverse effect on the financial
condition, properties or results of operations of PSS and its Subsidiaries,
taken as a whole. The Borrowers shall from time to time, upon request by the
Agent, promptly furnish or cause to be furnished to the Agent evidence, in form
and substance satisfactory to the Agent, of the maintenance of all insurance
required to be maintained by this Section.
5.8 Books and Records. PSS will maintain, and will cause each
-----------------
Subsidiary to maintain, accurate and complete records and books of account with
respect to all its operations in accordance with Generally Accepted Accounting
Principles, and will permit, and will cause each Subsidiary to permit, officers
or representatives of the Agent and the Lenders to examine and make excerpts
from such books and records and to visit and inspect its properties, both real
and personal, at all reasonable times and upon reasonable prior notice.
5.9 Location of Business. The Borrowers will notify Agent in advance
--------------------
of any change in the location of the principal executive offices of PSS.
5.10 Funded Debt to Total Capital. PSS will maintain on a
----------------------------
consolidated basis at each fiscal quarter end beginning June 30, 1997, a ratio
of Funded Debt to Total Capital of not greater than 0.5 to 1.0.
5.11 Fixed Charge Coverage Ratio. PSS will maintain on a consolidated
---------------------------
basis at each fiscal quarter end beginning June 30, 1997, a ratio of Annualized
EBITDA to Fixed Charges of not less than 3.0 to 1.0.
5.12 Funded Debt to Annualized EBITDA. PSS will maintain on a
--------------------------------
consolidated basis at each fiscal quarter end beginning June 30, 1997, a ratio
of Funded Debt to Annualized EBITDA of not greater than the following:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Maximum Ratio
- -------------------------- -------------
<S> <C>
June 30, 1997 3.75 to 1.0
September 30, 1997 3.50 to 1.0
December 31, 1997 3.25 to 1.0
Each Fiscal Quarter End 3.00 to 1.0
</TABLE>
39
<PAGE>
After December 31, 1997
5.13 Deposit Accounts. PSS shall maintain an account with the Agent.
----------------
5.14 Compliance Certificates. Together with the financial statements
-----------------------
to be provided under Subsections 5.1(a) and (b) hereof, the Borrowers will
deliver to the Agent and the Lenders a certificate of the chief financial
officer of PSS (i) stating that no Default or Event of Default has occurred and
is then continuing (or if a Default or Event of Default is then continuing,
describing it and the actions being taken by the Borrowers to remedy such
Default or Event of Default), and (ii) setting forth the calculation of
compliance with the financial covenants contained in Subsections 5.10 through
5.12 as of the date of such financial statements.
5.15 Interest Rate Hedging Program. Within 90 days after the Closing
-----------------------------
Date, PSS will establish and thereafter maintain a program to reduce the risk of
movements in interest rates on the Borrowers' results of operations. In the
event PSS enters into an agreement with any Lender as a part of such interest
rate hedging program, the obligations of PSS to any Lender under such agreement
shall be secured by the Pledge Agreement on a pari passu basis with all other
---- -----
obligations secured by the Pledge Agreement, which lien shall be permitted for
purposes hereof.
5.16 Acquisition Financial Information. In connection with any
---------------------------------
proposed acquisition of any business or company by any Borrower (whether by
merger, consolidation, acquisition of stock, or acquisition of assets), PSS will
provide to the Lenders no later than five (5) Business Days prior to any
acquisition requiring approval of the Required Lenders under Subsection 6.9, and
no later than one (1) Business Day prior to any other acquisition (excluding
transfers within the PSS consolidated group), the following information:
(a) A narrative description of the proposed acquisition which
describes the business to be acquired, the legal structure of the
acquisition, the acquisition price to be paid, and other material features
of the acquisition;
(b) Copies of the financial statements, if available, or federal
income tax returns if not, for the two most recent fiscal years of such
business; and
(c) Pro forma historical financial statements of PSS giving
40
<PAGE>
effect to the proposed acquisition on an historical basis for the two most
recent fiscal quarters and on a projected basis for the period ending on
the proposed date for completing the acquisition and demonstrating
compliance with the covenants contained in Subsections 5.10 through 5.12.
SECTION 6. NEGATIVE COVENANTS.
The Borrowers covenant and agree that from and after the effective
date of this Agreement and so long as any of the indebtedness hereunder remains
outstanding and unpaid, in whole or in part, or the credit commitments hereunder
remain available, the Borrowers will observe the following covenants unless the
Agent shall otherwise consent in writing:
6.1 Debt. Except for the indebtedness incurred under this Agreement,
----
the Borrowers will not, nor will they permit any Subsidiary to, create, incur,
assume or suffer or permit to exist any indebtedness for borrowed money or any
indebtedness constituting the deferred portion of the purchase price of any
business permitted to be acquired by PSS or any Subsidiary, except:
(a) any such indebtedness not in excess of $2,000,000 in the
aggregate principal amount at any one time outstanding; and
(b) Subordinated Indebtedness.
6.2 Liens. Except as otherwise contemplated by Section 5.15 or the
-----
Pledge Agreement, PSS will not, nor will it permit any Subsidiary to, create,
assume, or suffer to exist, any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind upon any of its assets, whether now owned or
hereafter acquired, securing (a) indebtedness for borrowed money, (b)
indebtedness incurred in connection with the acquisition of businesses permitted
to be acquired by PSS or any Subsidiary, (c) guaranteed obligations, (d) letter
of credit obligations, or (e) deferred purchase price obligations, except,
purchase money liens on and security interests in assets acquired by any
Borrower or any Subsidiary, provided that such liens and security interests
attach only to the property so acquired and do not encumber any other property
of the Borrowers or any Subsidiary.
6.3 Investments. The Borrowers will not make or suffer to exist any
-----------
investment, except investments in the following:
(a) companies engaged in businesses similar to the lines
41
<PAGE>
of business in which the Borrowers are currently engaged;
(b) marketable direct obligations of the United States of America
or any agency thereof, marketable obligations directly and fully
guaranteed by the United States of America and certificates of deposit
issued by any Lender or by any other bank with a shareholders' equity of at
least $50,000,000 organized under the laws of the United States of America
or any state thereof, provided that such obligations and certificates of
deposit have a maturity of one year or less from the date of purchase;
(c) any of the following:
(i) repurchase agreements on obligations specified in
clause (b) above maturing within 90 days, provided that the long-term
unsecured obligations of the party agreeing to repurchase such
obligations are at the time rated by each Rating Agency in one of its
two highest rating categories and the short-term debt obligations of
the party agreeing to repurchase are rated at least Prime-1 by Moody's
Investor Service, Inc. and at least A1+ by Standard & Poor's
Corporation;
(ii) federal funds, certificates of deposit, time deposits,
money market accounts and bankers' acceptances (which shall each have
an original maturity of not more than 90 days and, in the case of
bankers' acceptances, shall in no event have an original maturity of
more than 365 days) of any United States depository institution or
trust company incorporated under the laws of the United States or any
state, provided that the long-term unsecured debt obligations of such
depository institution or trust company at the date of acquisition
thereof have been rated by each Rating Agency in one of its two
highest long-term ratings; and the short-term obligations of such
depository institution or trust company are rated at least Prime-1 by
Moody's Investor Service, Inc. and at least A1+ by Standard & Poor's
Corporation; and
(iii) commercial paper (having an original maturity of not
more than 365 days) of any corporation incorporated under the laws of
the United States or any state thereof which on the date of
acquisition has been rated by each Rating Agency in its highest short-
term rating; provided that such commercial paper shall have a
remaining maturity of not more than 90 days; and
42
<PAGE>
(d) assets used in the ordinary course of Borrowers' businesses.
6.4 Mergers, Consolidations. PSS will not, nor will it permit any
-----------------------
Subsidiary to, enter into any transaction of merger or consolidation, except
that:
(a) any Subsidiary may be merged into or consolidated with the
Borrower if the Borrower shall be the surviving corporation;
(b) any Subsidiary may be merged into or consolidated with any
other Subsidiary or any other Person; and
(c) Borrower may be merged with another Person if the Borrower
will be the surviving corporation;
provided that immediately after giving effect thereto, the Borrower shall be in
compliance with all the terms of this Agreement and no Default or Event of
Default hereunder shall have occurred and be continuing.
6.5 Disposition of Assets. No Borrower will liquidate or dissolve
---------------------
itself (or suffer any liquidation or dissolution), or convey, sell, lease,
pledge, or otherwise transfer or dispose of all or any substantial part of its
properties, assets or business except that the Borrowers and any Subsidiaries
may sell used equipment no longer used or useful in connection with their
respective businesses.
6.6 Continuance of Business. No Borrower will, nor will it permit
-----------------------
any Subsidiary to, engage in any line of business other than those in which the
Borrowers or any such Subsidiary is currently engaged on the date of this
Agreement and lines of business similar thereto.
6.7 Use of Proceeds. Except in connection with a tender offer for
---------------
the stock of corporation whose shares are publicly traded, no Borrower will, nor
will it permit any Subsidiary to, directly or indirectly, apply any part of the
proceeds of the Loans to the purchasing or carrying of any "margin stock" within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System, or any regulations, interpretations or rulings thereunder.
6.8 Negative Pledges. PSS will not, nor will it permit any
----------------
Subsidiary to, enter into any agreement or understanding prohibiting PSS or
43
<PAGE>
any Subsidiary from granting liens or encumbrances on their respective assets in
favor of Agent or any Lender.
6.9 Acquisitions. No Borrower will, nor will it permit any
------------
Subsidiary to, acquire any business or company (whether by merger,
consolidation, acquisition of stock, or acquisition of assets) if (i) the total
consideration paid for such business or company exceeds $7,500,000, or (ii) the
total consideration paid for all such businesses or companies in any calendar
year will exceed $15,000,000. For purposes of this Subsection 6.9, "total
consideration" means, without duplication, the sum of all (i) cash paid, (ii)
liabilities assumed, (iii) notes or other similar obligations issued to sellers,
and (iv) the fair market value of all capital stock issued in connection with
such acquisition by any Borrower or any Subsidiary.
SECTION 7. EVENTS OF DEFAULT, REMEDIES.
7.1 Events of Default. The following shall constitute Events of
-----------------
Default:
(a) Non-Payment. (i) Failure by the Borrowers to pay the
-----------
principal of or accrued interest on the Notes within three Business Days
after such payment is due, or (ii) the failure of the Borrowers to pay any
other amount payable to any Lender under this Agreement within fifteen (15)
days after such amount becomes due.
(b) Falsity of Representations and Warranties. Any
-----------------------------------------
representation or warranty made by the Borrowers in this Agreement or in
any other Loan Document or in any certificate, financial or other statement
furnished at any time under or in connection with this Agreement or any
other Loan Document shall prove to be false or misleading in any material
respect when made.
(c) Failure to Perform Certain Covenants. Failure by the
------------------------------------
Borrowers to observe or perform any other covenants, conditions or
provisions contained in this Agreement or in any other Loan Document,
provided that, except with respect to a violation of the covenants
contained in Subsections 5.10 through 5.12, 6.4, and 6.5, such failure
shall continue for a period of thirty (30) days.
(d) Default Under Other Obligations. The Borrower or any
-------------------------------
Subsidiary:
(i) defaults in any payment of principal of or
44
<PAGE>
interest on any obligations with respect to indebtedness for borrowed
money (other than under the Notes or any such obligation payable to
any Lender) or any obligation for the deferred purchase price of
property beyond any period of grace provided with respect thereto; or
(ii) defaults in the performance of any other agreement,
term or condition contained in any such obligation or in any agreement
relating thereto;
if the holder or holders of such obligation (or a trustee on behalf of such
holder or holders) declares, such obligation to become due prior to its
stated maturity and if the aggregate amount of all of such obligations so
accelerated exceed $1,000,000.
(e) Voluntary Bankruptcy, Etc. The commencement by PSS or any
-------------------------
Subsidiary of a voluntary case under the Bankruptcy Code, as now
constituted or hereafter amended, or any other applicable federal or state
bankruptcy, insolvency, reorganization, rehabilitation or other similar
law, or the consent by it to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of PSS or any Subsidiary or for any substantial part of
its property, or the making by it of any general assignment for the benefit
of creditors, or the failure of PSS or any Subsidiary generally to pay its
debts as such debts become due, or the taking of corporate action by PSS or
any Subsidiary in furtherance of any of the foregoing, except where any
such action would not have a material adverse effect on the properties,
results of operations, or financial condition of PSS and its Subsidiaries
taken as a whole.
(f) Involuntary Bankruptcy, Etc. The entry of a decree or order
---------------------------
for relief by a court having jurisdiction in the premises in respect of any
Borrower or any Subsidiary in an involuntary case under the Bankruptcy
Code, as now or hereafter constituted, or any other applicable federal or
state bankruptcy, insolvency or other similar law, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or
similar official) of any Borrower or any Subsidiary or for any substantial
part of its property, or ordering the winding-up or liquidation of its
affairs and the continuance of any such decree or order unstayed and in
effect for a period of sixty (60) days, except where any such action would
not have a material adverse effect on the properties, results of
operations, or financial condition of PSS and its Subsidiaries taken as a
whole.
45
<PAGE>
(g) ERISA.
-----
(i) (A)(1) Any Employee Pension Plan is terminated within
the meaning of Title IV of ERISA (other than a standard termination
that satisfies the requirements of Section 4041(b) of ERISA), or (2) a
trustee is appointed by the appropriate United States District Court
to administer any Employee Pension Plan, or (3) the PBGC institutes
proceedings to terminate any Employee Pension Plan, or (4) any
Reportable Event occurs which the Lender determines in good faith
indicates a substantial likelihood that an event described in (1),
(2), or (3) above will occur, or (5) PSS or any of its Controlled
Group Members incur any Withdrawal Liability with respect to any
Multiemployer Plan or (6) any Multiemployer Plan enter Reorganization,
and (B) with respect to events described in (1)-(4) above, only, the
benefit commitments (within the meaning of ERISA (S)4001(a)(16)),
exceed the market value of the assets in the fund under the Employee
Pension Plan by, five percent (5%) or more of the consolidated net
worth of PSS;
(ii) there occurs any Accumulated Funding Deficiency with
respect to any Employee Pension Plan and PSS or any of its Controlled
Group Members fails to correct such Accumulated Funding Deficiency
prior to the end of the taxable period within the meaning of Code
(S)4971(c)(3); or
(iii) any Employee Pension Plan loses its tax-qualified
status and as a result thereof, PSS or any Controlled Group Member
incurs liability in the aggregate exceeding five percent (5%) of the
consolidated net worth of PSS.
(h) Default Under Other Documents. An "Event of Default" or
-----------------------------
similar event shall have occurred and be continuing under any Loan
Document.
(i) Judgments. One or more judgments not covered by insurance
---------
maintained by Borrowers (or if covered by insurance, with respect to which
the insurer has denied coverage or reserved its rights) are entered against
any Borrower in an aggregate amount of One Million Dollars ($1,000,000) or
more and that would have a material adverse effect on the properties,
results of operations, or financial condition of PSS and its Subsidiaries
taken as a whole, and the Borrowers shall
46
<PAGE>
not obtain the satisfaction, release, stay or dismissal thereof within
thirty (30) days thereof.
7.2 Acceleration.
------------
(a) Upon the occurrence of an Event of Default specified in
Paragraphs 7.1(a) through 7.1(d), and 7.1(g) through 7.1(i), the Agent may,
with the approval of the Required Lenders, by written notice to the
Borrowers, terminate immediately and irrevocably the Revolving Credit
Facility, the Revolving Credit Commitment, the Swing Line Facility, the
Swing Line Commitment, and any other obligation of the Lenders to make any
Advances to or issue Letters of Credit for the account of the Borrowers,
and declare the Notes, and all other instruments evidencing the Obligations
to be due and payable, whereupon the principal amount of the Notes and all
outstanding Obligations, together with accrued interest thereon and all
other amounts payable thereunder, shall become immediately due and payable
without presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived, anything contained herein or in the
documents evidencing the same to the contrary notwithstanding.
(b) Upon the occurrence of an Event of Default specified in
Paragraphs 7.1(e) or 7.1(f), the Revolving Credit Facility, the Revolving
Credit Commitment, the Swing Line Facility, the Swing Line Commitment, and
any other obligation of the Lenders to make any Advances to or issue
Letters of Credit for the account of the Borrowers, shall automatically and
immediately terminate and the unpaid principal balances of, all accrued,
unpaid interest on, and all other sums payable with regard to, the Notes
and all instruments evidencing the Obligations shall automatically and
immediately become due and payable, in all cases without any action on the
part of the Agent or any Lender.
7.3 Right of Setoff. Upon the occurrence of an Event of Default, the
---------------
Lenders shall have the right, in addition to all other rights and remedies
available to them, to set off against the unpaid balance of the Obligations, any
debt owing to any Borrower by any Lender and any funds in any deposit account
maintained by any Borrower with any Lender except deposit accounts used solely
as payroll accounts or for the payment of health benefit expenses.
7.4 Remedies Cumulative. The Agent and the Lenders may exercise any
-------------------
of their rights and remedies set forth in this Loan Agreement and the other Loan
Documents. The remedies of the Agent and the Lenders shall be
47
<PAGE>
cumulative and concurrent, and may be pursued singly, successively, or together,
at their sole discretion, and may be exercised as often as the occasion
therefore shall occur; and the failure to exercise any such right or remedy
shall in no event be construed as a waiver or release thereof.
SECTION 8. MISCELLANEOUS.
8.1 No Waiver; Cumulative Remedies. No failure or delay on the part
------------------------------
of the Agent or any Lender in exercising any right, power or privilege hereunder
or under the other Loan Documents shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege hereunder or
thereunder preclude or require any other or further exercise thereof or the
exercise of any other right, power or privilege. Neither the Agent nor any
Lender shall be deemed, by any act of omission or commission, to have waived any
of its rights or remedies hereunder unless such waiver is in writing and signed
by the Agent, and then only to the extent specifically set forth in writing. A
waiver with respect to one event shall not be construed as continuing or as a
bar to or a waiver of any right or remedy with respect to a subsequent event.
The rights and remedies herein provided are cumulative and not exclusive of any
rights or remedies provided by law.
8.2 Notices. All notices, requests and demands to or upon the
-------
respective parties hereto shall be deemed to have been given or made when (a)
deposited in the United States mail, postage prepaid, certified mail, return
receipt requested, (b) when sent by telecopy transmission, or (c) when sent by
courier system providing for receipt of delivery, addressed as follows or to
such other address as may be hereafter designated in writing by the respective
parties hereto:
48
<PAGE>
The Borrowers: (a) If mailed:
Physician Support Systems, Inc.
P.O. Box 127
Landisville, PA 17538
Attention: David S. Geller,
Senior Vice President and Chief
Financial Officer
(b) If sent by courier:
Physician Support Systems, Inc.
Route 230 and Eby Chicques Road
Mount Joy, PA 17552
Attention: David S. Geller,
Senior Vice President and Chief
Financial Officer
(c) If sent by telecopy:
Telecopy No.: (717) 653-8261
Agent: CoreStates Bank, N.A.
51 South Duke Street
Lancaster, PA 17602
Attention: Gary R. Johnson
Telecopy No.: (717) 295-8544
8.3 Reimbursement of Agent. The Borrowers hereby agree to reimburse
----------------------
the Agent for its reasonable out-of-pocket expenses, including reasonable
counsel fees, incurred by the Agent in connection with the development,
preparation, execution and enforcement of this Agreement and all the Loan
Documents, including all counsel fees in connection with any bankruptcy or
insolvency proceeding involving any Borrower, this Agreement or any of the other
Loan Documents. Such expenses and counsel fees shall be paid simultaneously
with the execution of this Agreement and all such expenses hereafter incurred
shall be paid within fifteen (15) days after notice thereof is given to
Borrowers by the Agent.
8.4 Payment of Expenses and Taxes. In addition to payment of the
-----------------------------
expenses and counsel fees provided for in Subsection 8.3, the Borrowers agree to
pay, and to save the Agent and the Lenders harmless from any delay in paying,
stamp and other similar taxes, if any, including, without limitation, all
levies, impositions, duties, charges or withholdings, together with any
penalties, fines or interest thereon or other additions thereto, which may be
payable or determined to be payable in connection with the execution and
delivery of this Agreement and the Loan Documents or any modification of any
thereof or any waiver or consent under or in respect of any thereof.
8.5 Survival of Representations and Warranties. All
------------------------------------------
49
<PAGE>
representations, warranties, covenants and agreements made in this Agreement and
all other Loan Documents shall survive the execution and delivery of the Loan
Documents and the making of the Loans hereunder. The provisions of Subsections
8.3, 8.4, 8.10, 8.11 and 8.12 hereof shall survive payment of the Obligations.
8.6 Participations and Assignments.
------------------------------
(a) Subject to the provisions of Section 10.16(b) hereof, with
the prior written consent of PSS (which consent shall not be unreasonably
withheld or delayed), each Lender shall have the right to assign up to
fifty percent (50%) of its Commitment and its interest in the Advances and
the Loan Documents. Each Lender may sell to other lenders participations in
its Commitment and in the Advances, the Loan Documents and any and all
collateral on such terms and at such times as the Lender may determine from
time to time; provided that such participants shall be granted the right to
vote or consent to modifications to the Loan Documents only on matters
involving (i) changes in interest rates, (ii) changes in the Termination
Date, or (iii) the amount of such Lender's Commitment or the amount of the
Revolving Credit Commitment. The Borrowers hereby grant to each such
assignee and participant the right to set off deposit accounts maintained
by any Borrower or any of the Subsidiaries with such assignee or
participant or any other obligations such assignee or participant may owe
to such Borrower or any of its Subsidiaries, to the extent of all
Obligations. The Lenders may disclose all financial, business and other
information about the Borrower or any of its Subsidiaries which the Lenders
may possess at any time to all prospective and actual assignees and
participants, provided that such prospective or actual assignees and
participants agree to preserve the confidentiality of any nonpublic
information.
(b) No Borrower may assign or transfer its rights hereunder
without the prior written consent of the Required Lenders.
(c) No Lender may assign any of its interest in the Advances or
its Commitment unless it pays to the Agent a transfer fee of $3,500 in
connection with each such assignment. The Borrowers will not be responsible
or obligated to pay any costs, fees or expenses in connection with any
assignment or participation.
8.7 Successors. This Agreement shall be binding upon and inure to
----------
the benefit of the Borrowers, the Agent, and the Lenders and their
50
<PAGE>
respective successors and permitted assigns.
8.8 Governing Law and Construction. This Agreement, all Loan
------------------------------
Documents, and the rights and obligations of the parties hereunder and
thereunder, shall be governed by and construed and interpreted in accordance
with, the domestic internal laws of the Commonwealth of Pennsylvania without
regard to its rules or principles pertaining to conflict of laws. The Section
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
8.9 Severability. Any provision contained in this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.10 Indemnity. The Borrowers hereby agree, whether or not any of
---------
the transactions contemplated in the Loan Documents shall be consummated, to
pay, assume liability for, and indemnify, protect, defend, save and keep
harmless the Agent and the Lenders from and against, any and all liabilities,
obligations, losses, damages, settlements, claims, actions, suits, penalties,
costs and expenses (including, but not limited to, reasonable legal and
investigative fees and expenses but excluding any and all lost profits) of
whatsoever kind and nature, including, but not limited to claims based upon
negligence, strict or absolute liability, liability in tort, latent and other
defects (whether or not discoverable), and any claim for patent, trademark or
copyright infringement which may from time to time be imposed on, incurred by or
asserted against the Agent or any Lender (whether or not any such claim is also
indemnified or insured against by any other person) in any way relating to or
resulting from this Agreement or any other Loan Document, or any of the
transactions contemplated herein or therein. The provisions of this subsection
shall survive the payoff, release, foreclosure or other disposition, as
applicable, of this Agreement, the Obligations or any collateral.
51
<PAGE>
8.11 Waiver of Trial by Jury; Jurisdiction.
-------------------------------------
(a) Each party to this Agreement agrees that any suit, action, or
proceeding, whether claim or counterclaim, brought or instituted by either
party hereto or any successor or assign of any party on or with respect to
this Agreement or any other Loan Document or which in any way relates,
directly or indirectly, to the Advances or Letters of Credit or any event,
transaction, or occurrence arising out of or in any way connection with the
Advances or Letters of Credit, or the dealings of the parties with respect
thereto, shall be tried only by a court and not by a jury. EACH PARTY
HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT,
ACTION, OR PROCEEDING. THE BORROWERS ACKNOWLEDGE AND AGREE THAT THIS
SUBSECTION 8.11 IS A SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT BETWEEN
THE PARTIES AND THAT THE LENDERS WOULD NOT EXTEND THE CREDIT FACILITIES
PROVIDED HEREIN TO THE BORROWERS IF THIS WAIVER OF JURY TRIAL SECTION WERE
NOT A PART OF THIS AGREEMENT.
(b) For the purpose of any suit, action or proceeding arising out
of or relating to this Agreement, the Notes, or the Advances or Letters of
Credit, the Borrowers hereby irrevocably consent and submit to the
jurisdiction and venue of any of the Courts of the Commonwealth of
Pennsylvania including, without limitation, the Court of Common Pleas of
Lancaster County and the Federal District Court for the Eastern District of
Pennsylvania. The Borrowers irrevocably waive any objection which they may
now or hereinafter have to the laying of the venue of any suit, action or
proceeding brought in such court and any claim that such suit, action or
proceeding brought in such a court has been brought in an inconvenient
forum. The provisions of this Paragraph 8.11(b) shall not limit or
otherwise affect the right of the Agent or any Lender to institute and
conduct action in any other appropriate manner, jurisdiction or court.
8.12 Actions Against Lenders; Release.
--------------------------------
(a) Any action brought by the Borrowers or any Subsidiary against
the Agent or any Lender which is based, directly or indirectly, on this
Agreement or any other Loan Document or any matter in or related to this
Agreement or any other Loan Document, including but not limited to the
making of the Advances or the administration or collection thereof, shall
be brought only in the courts located in the Commonwealth of Pennsylvania.
52
<PAGE>
(b) Upon full payment and satisfaction of the Advances and the
interest thereon, as provided in Section 2 hereof, the expiration or
termination of all Letters of Credit, and the termination of all credit
availability hereunder, the parties shall thereupon automatically each be
fully, finally, and forever released and discharged from any further claim,
liability or obligation in connection with the Advances and Letters of
Credit, except as expressly set forth herein, and except to the extent any
payment received by the Agent or any Lender is determined to be a
preference or similar voidable transfer.
8.13 Counterparts. This Agreement may be executed in any number of
------------
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument, but all of such counterparts taken together shall be
deemed to constitute one and the same instrument.
8.14 Entire Agreement. This Agreement and the Loan Documents
----------------
represent the entire agreement between the Agent, the Lenders and the Borrowers
with respect to the financing transactions to which they relate, and cannot be
changed or amended except by an agreement in writing signed by the Borrowers and
the Agent.
8.15 Margin Stock. The Lenders are not relying on any margin stock
------------
(within the meaning of Regulation U) as collateral in connection with the
extension or maintenance of any credit under this Agreement.
SECTION 9. RIDERS AND JOINDERS.
9.1 Riders. Each of the Riders attached to this Agreement and
------
executed or initialed by Agent and by PSS are incorporated by reference into
this Agreement and are made a part hereof. The terms and conditions contained
in any Rider to this Agreement may be modified, amended, supplemented or
restated by a subsequently dated Rider executed or initialed by the Agent and
PSS, and any such subsequently dated Rider shall be incorporated by reference
into this Agreement and made a part hereof whether or not such Rider is
physically attached hereto. Each amendment, modification, and supplement to or
restatement of a Rider shall be effective as of the date of such Rider unless
otherwise expressly provided therein.
9.2 Joinders. If the parties hereto desire to have a new entity
--------
become a party to this Agreement as either a Borrower or a Lender, such party
shall execute and deliver to the Agent a joinder in the form of Rider B attached
hereto. Upon acceptance of such joinder by the Agent and PSS, such
53
<PAGE>
party shall become a Borrower or Lender hereunder as the case may be. Each
Subsidiary shall join in this Agreement and become a Borrower hereunder within
ten (10) days after such Subsidiary becomes a Subsidiary.
SECTION 10. THE AGENT.
10.1 Appointment and Authorization. Each Lender appoints and
-----------------------------
authorizes the Agent to take such action as agent on the Lender's behalf and to
exercise such powers under this Agreement and the Loan Documents as are
delegated to the Agent by the terms hereof or thereof, together with all such
powers as are reasonably incidental thereto. The Agent shall have no duties or
responsibilities except those expressly provided herein. The Borrowers shall be
entitled to rely on any representation made by Agent that any action taken by
Agent has been approved (if necessary) by the Required Lenders, and the
Borrowers shall have no duty to inquire as to whether such action by Agent was
approved by the Required Lenders.
10.2 Agent's Rights as Lender. Agent shall have the same rights and
------------------------
powers under this Agreement as any other Lender and may exercise or refrain from
exercising the same as though it were not the Agent, and Agent and its
affiliates may accept deposits from, lend money to, and generally engage in any
kind of business with any Borrower or any Affiliate as if it were not the Agent
hereunder.
10.3 Actions; Lenders' Instructions.
------------------------------
(a) The Agent, upon receipt of written instructions from the
Required Lenders, shall take any action specified in such instructions
which is within the Agent's rights, powers or discretion under the Loan
Documents and applicable law. Any Lender that fails to respond to the
Agent in writing within ten (10) days after written notice from Agent
requesting approval of any action that Agent proposes to take with respect
to the Loans shall be deemed to have approved such action by Agent.
(b) Each Lender which notifies the Agent to take specific
actions shall concurrently deliver copies of such notification to the other
Lenders. The Agent shall deliver copies to the Lenders of each written
notice which it delivers to any Borrower. Failure by any Lender to deliver
copies of any notices pursuant to this Section 10.3(b) shall not invalidate
any action with regard to the Borrowers.
(c) Any action taken or failure to act pursuant to such
54
<PAGE>
instructions from the Required Lenders or the Agent's rights, powers or
discretion shall be binding on the Lenders.
(d) No Lender shall have any right of action against the Agent
as a result of the Agent's action or failure to take action under the Loan
Documents in accordance with the instructions of the Required Lenders.
(e) Notwithstanding anything else contained herein to the
contrary, without the prior written consent of all of the Lenders (which
consent no Lender shall unreasonably withhold, condition or delay), the
Agent, on behalf of the Lenders, shall not:
(i) agree to any change in the rate or rates of interest,
maturity or amortization schedules applicable to the Advances except
as the Borrowers are permitted to make under the terms hereof;
(ii) release any Borrower from its obligations under the
Loan Documents (including the release of any collateral pledged to
secure the Obligations pursuant to the Pledge Agreement); or
(iii) extend the Termination Date.
(f) Notwithstanding anything else contained herein to the
contrary, a Lender's Commitment may not be increased or decreased without
the written consent of such Lender.
(g) Anything herein or otherwise to the contrary
notwithstanding,the Agent shall not grant any waiver or consent required
under the Loan Documents or requested by the Borrowers without the approval
of the Required Lenders.
10.4 Preference Repayments. If claim is ever made upon the Agent or
---------------------
any Lender for repayment or recovery of any amount or amounts received by the
Agent or any Lender in payment or on account of the Advances and the Agent or
any Lender repays all or part of such amount by reason of (a) any judgment,
decree or order of any court or administrative body having jurisdiction over the
Agent or any Lender or any of its property, or (b) any settlement or compromise
of any such claim effected by the Agent or any Lender with any such claimant
(including the Borrowers), then and in such event Lenders agree that any such
judgment, decree, order, settlement or compromise shall be binding
55
<PAGE>
upon Lenders, notwithstanding any revocation hereof or the cancellation of the
Loan Documents or other instrument evidencing the Advances, and Lenders agree to
immediately pay to the Agent or the Lender repaying such amount an amount equal
to the product of (i) such Lender's Commitment Percentage and (ii) the amount of
such funds repaid by the Agent or such Lender.
10.5 Consultation with Experts. The Agent may consult with legal
-------------------------
counsel, independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants or experts.
10.6 Liability of Agent. Neither the Agent nor any of its directors,
------------------
officers, agents, or employees shall be liable for any action taken or not taken
by it in connection herewith (i) with the consent or at the request of the
Required Lenders or (ii) in the absence of its own gross negligence or willful
misconduct. Neither the Agent nor any of its directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into
or verify (i) any statement, warranty or representation made in connection with
this Agreement, any Loan Document, or any borrowing hereunder; (ii) the
performance or observance of any of the covenants or agreements of the
Borrowers; or (iii) the validity, effectiveness or genuineness of this
Agreement, the Loan Documents, or any other instrument or writing furnished in
connection herewith. The Agent shall not incur any liability by acting in
reliance upon any notice, consent, certificate, statement, or other writing
(which may be a telecopy or similar writing) reasonably believed by it to be
genuine or to be signed by the proper party or parties.
10.7 Credit Decision. By executing this Agreement, each Lender
---------------
acknowledges that it has, independently and without reliance upon the Agent or
any other Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking any action under the Loan
Documents.
10.8 Successor Agent. With the written consent of PSS to any
---------------
successor Agent (which consent shall not be unreasonably withheld or delayed),
the Agent may resign at any time by giving written notice thereof to the
Lenders. Upon any such resignation, the Required Lenders shall have the right
to appoint a successor Agent, which successor Agent must be approved by PSS
56
<PAGE>
(which approval shall not be unreasonably withheld or delayed). If no successor
Agent shall have been so appointed by the Required Lenders and shall have
accepted such appointment within thirty (30) Business Days after the retiring
Agent gives notice of resignation, the retiring Agent may, on behalf of the
Lenders, appoint a successor agent, which shall be a commercial bank organized
or licensed under the laws of the United States of America or of any State
thereof and having a combined capital and surplus of at least Fifty Million
Dollars ($50,000,000). Upon the acceptance in writing for the benefit of the
Lenders of its appointment as Agent hereunder by a successor Agent, the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Section
10 shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent.
10.9 Setoff or Counterclaim. The Agent and the Lenders each hereby
----------------------
agree that if any of them shall, by exercising any right of setoff or
counterclaim or otherwise, receive payment of a proportion of the aggregate
amount of principal and interest due with respect to the Advances which is
greater than the proportion received by the others in respect of the aggregate
amount of principal and interest due to the others with respect to the Advances,
the Lender that has received such proportionately greater payment shall make
such payments to the other Lenders as may be required so that all such payments
of principal and interest with respect to the interest of each in the Advances
shall be shared by the Lenders pro rata (in proportion to each Lender's
Commitment). The foregoing shall not impair the right of any of Lenders to
exercise any right of setoff or counterclaim it may have and to apply the amount
subject to such exercise to the payment of indebtedness of any Borrower other
than its indebtedness under the Advances; provided, however, that amounts
subject to such exercise shall be applied first to the payment of indebtedness
of such Borrower which is participated in or shared by all the Lenders prior to
the application of any such amounts to any indebtedness of the Borrower which is
owed to only some of the Lenders.
10.10 Amendments. Any provision of this Section 10 may be amended by
----------
a writing signed by all of the Lenders and Agent. Except for the provisions of
Sections 10.1, 10.8, 10.11, and 10.16, the Borrowers shall not be a beneficiary
of any provision contained in this Section 10, and the Borrowers shall have no
rights under any provisions of this Section 10.
57
<PAGE>
10.11 Payments Received. Agent shall hold all payments received by
-----------------
it from the Borrowers with respect to the Advances in trust for the account of
the Lenders. Agent shall deliver to each Lender its percentage share of any
payment received by Agent on account of the Advances by wire transfer of funds
to the account designated by such Lender on the Business Day following the date
on which payment is received by the Agent. Payments shall not be deemed
"received" by Agent until Agent has collected funds with respect to such
payment.
10.12 Advances. Each Lender shall on the date that any Advance is to
--------
be made to the Borrowers remit to the Agent such Lender's Commitment Percentage
of such Advance by wire transfer in immediately available funds. The commitment
of each Lender to the Agent hereunder is absolute and binding, and is not
subject to reduction or termination. The Agent and each Lender shall make
appropriate adjustments of their respective records concerning the proportionate
share of each with respect to amounts advanced under the Advances and amounts
received from the Borrowers for credit against principal, interest and other
charges due under the Loan Documents as of the date of each transfer between the
Agent and such Lender.
10.13 Indemnification. Each Lender hereby agrees to indemnify the
---------------
Agent, according to its proportionate share, from and against all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs
(including, without limitation, the Out-of-Pocket Costs), expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against the Agent in any way relating to, or arising out of the
Advances or any action taken or omitted by the Agent under the Loan Agreement or
other Loan Documents; provided, however, that the Lenders shall not be liable
for any portion of any such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from (a) the Agent's gross negligence or willful misconduct, or (b) any breach
of the provisions of this Agreement by Agent. The Agent agrees to act in a
commercially reasonable fashion in defending or attempting to settle any such
suit, action or claim brought against it, and any payment of any amounts for
which it shall seek indemnification hereunder; and the Agent shall give the
Lenders notice of all such suits, actions and claims of which it is aware, and
shall endeavor to give the Lenders prior notice of any such payment. Without
limitation of the foregoing, each Lender agrees to reimburse the Agent promptly
upon demand for the Lender's proportionate share of any Out-of-Pocket Costs to
the extent that the Agent is not reimbursed for such Out-of-Pocket Costs by the
Borrowers.
58
<PAGE>
10.14 Liquidation.
-----------
(a) If the Agent shall determine that an Event of Default has
occurred, the Agent may, after notice to, and approval of the Required
Lenders, elect to exercise its rights and remedies under this Agreement and
the other Loan Documents. Thereafter, all Collections and all other monies
received or held by the Agent in connection with the Advances shall be
applied to the following categories, in the following order (and in
accordance with the proportionate shares thereof in categories (ii) and
(iii)): (i) all Out-of-Pocket Costs and all costs and expenses incurred by
the Agent and the Lenders in connection with the enforcement of their
rights under this Agreement or any of the other Loan Documents; (ii) all
accrued and unpaid interest under the Advances; and (iii) the entire unpaid
principal balance of the Advances. The failure of the Agent or the Lenders
to apply Collections as aforesaid shall not be deemed or construed to
confer any right upon the Borrowers or to any guarantor, surety or endorser
of the Advances.
(b) The Agent agrees to use its best efforts to give the Lenders
notice of all material actions to be taken with respect to all Collections
after the occurrence of an Event of Default under this Agreement; provided,
--------
however, that no failure to give the Lenders any such notice shall result
-------
in any liability of the Agent in the absence of gross negligence or willful
misconduct on the part of the Agent.
10.15 Forwarding Information. Agent shall promptly forward to each
----------------------
Lender a copy of any financial information received by the Agent with respect to
the Borrowers that has not been contemporaneously provided to the Lenders by the
Borrowers. The Agent shall furnish to the Lenders on a weekly basis a statement
of all advances made and payments received by the Agent with respect to the
Revolving Credit Facility.
59
<PAGE>
10.16 Termination.
-----------
(a) The obligations of the Lenders to the Agent hereunder are
absolute, and the Lenders' proportionate share of the Advances may be
reduced or terminated only with the express prior written approval of the
Agent and PSS and effected either by (i) the substitution of another
financial institution which is authorized to make similar extensions of
credit in the ordinary course of business (provided that the Agent and PSS
shall not unreasonably withhold such approval); or (ii) the voluntary
purchase by the Agent of the Lenders' proportionate share (or the amount of
the reduction thereof proposed by the Lenders). The Agent shall have no
obligation to purchase the Lenders' proportionate share or any part
thereof, or to find any substitute financial institution.
(b) Except as provided in Subsection 8.6, neither the Agent nor
any of the Lenders shall sell, pledge, assign, grant participations in,
subparticipate or otherwise transfer (except to wholly-owned banking
subsidiaries of any holding company which owns either the Agent or any of
the Lenders, by operation of law in the case of a merger or acquisition
involving the Agent or any of the Lenders, or where so ordered pursuant to
applicable banking regulations) its respective rights under or in
connection with this Agreement, the Loan Documents and the Advances without
procuring the prior written consent of the Required Lenders. Nothing
contained herein shall confer upon either the Agent or the Lenders any
interest in, or subject either to any liability for, the assets or
liabilities of the other, except as expressly provided for herein.
60
<PAGE>
(c) In the event of (i) the insolvency of any of the Lenders or
the appointment of any public authority to be in charge of any of the
Lenders or their respective assets, or (ii) the failure on the part of any
of the Lenders to observe or perform any of the terms, covenants or
conditions required to be observed or performed by them under this
Agreement and the subsequent failure to cure such failure within thirty
(30) days after notice from the Agent to effect such cure, the Agent and
any other Lender shall have the right, but not the obligation, to purchase
the defaulting Lender's Commitment and Commitment Percentage of Advances
and Letters of Credit for a purchase price equal to the defaulting Lender's
Commitment Percentage of the outstanding principal balance of the Advances
funded by such defaulting Lender at the purchase date plus accrued but
unpaid interest at the applicable rates specified in the Loan Documents
through the date of such purchase. Such transfer shall be accomplished by
a written assignment in form acceptable to the parties.
(d) In the event of (i) the insolvency of the Agent or the
appointment of any public authority to be in charge of the Agent or its
assets or (ii) the failure of the Agent to observe or perform any of the
terms, covenants, or conditions required to be observed or performed by
Agent under this Agreement and the subsequent failure to cure such failure
within ten (10) days after notice from any of the Lenders of such failure,
then the Lenders (excluding any Lender acting as Agent) may by agreement
replace the Agent and appoint a successor Agent in accordance with the
procedures described in Paragraph 10.8 hereof.
10.17 Notices. All notices given under this Section 10 shall be
-------
deemed given (i) when sent by United States mail, postage paid, (ii) when sent
by commercial express courier that provides evidence of delivery, charges paid,
or (iii) when sent by telecopy to the Lenders and the Agent at the addresses set
forth in Rider A attached hereto.
10.18 No Joint Venture. The provisions of this Section 10 shall not
----------------
be deemed a joint venture or partnership among the Agent and the Lenders or an
extension of credit by the Agent or the Lenders to the other.
10.19 Corporate Records. Each of the Lenders and the Agent agree to
-----------------
have the minutes of the appropriate committee of such institution reflect the
existence of this Agreement and to maintain a copy of this Agreement in the
institution's files relating to the Lender's Commitment.
61
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
PHYSICIAN SUPPORT SYSTEMS, INC.
By /s/ David S. Geller
---------------------------------------
David S. Geller, Senior Vice President
SPRING ANESTHESIA GROUP, INC.
By /s/ David S. Geller
---------------------------------------
David S. Geller, Senior Vice President
INDEPENDENT ANESTHESIA IPA OF CALIFORNIA, INC.
By /s/ David S. Geller
---------------------------------------
David S. Geller, Senior Vice President
INDEPENDENT ANESTHESIA IPA OF ARIZONA, INC.
By /s/ David S. Geller
---------------------------------------
David S. Geller, Senior Vice President
NORTH COAST HEALTH CARE MANAGEMENT, INC.
By /s/ David S. Geller
---------------------------------------
David S. Geller, Senior Vice President
NORTH COAST ACCOUNT SYSTEMS, INC.
By /s/ David S. Geller
---------------------------------------
David S. Geller, Vice President
MEDICAL MANAGEMENT SUPPORT, INC.
By /s/ David S. Geller
---------------------------------------
David S. Geller, Senior Vice President
DATA PROCESSING SYSTEMS, INC.
By /s/ David S. Geller
---------------------------------------
David S. Geller, Vice President
PSS PBS NORTHWEST, INC.
By /s/ David S. Geller
---------------------------------------
David S. Geller, Senior Vice President
PSS ALM, INC.
By /s/ David S. Geller
---------------------------------------
David S. Geller, Secretary
SYNERGISTIC SYSTEMS, INC.
By /s/ David S. Geller
---------------------------------------
David S. Geller, Senior Vice President
62
<PAGE>
EE&C FINANCIAL SERVICES, INC.
By /s/ David S. Geller
---------------------------------------
David S. Geller, Senior Vice President
PSS EE&C HEALTH SERVICES, INC.
By /s/ David S. Geller
---------------------------------------
David S. Geller, Senior Vice President
MED-DATA INTERFACE SYSTEMS, LLC
By /s/ David S. Geller
---------------------------------------
David S. Geller, Senior Vice President
MEDICAL INTERCEPT SYSTEMS, LLC
By /s/ David S. Geller
---------------------------------------
David S. Geller, Senior Vice President
PHYSERV SOLUTIONS, INC.
By /s/ David S. Geller
---------------------------------------
David S. Geller, Senior Vice President
PSS C-CARE, INC.
By /s/ David S. Geller
---------------------------------------
David S. Geller, Vice President
PSS PAMBI, INC.
By /s/ David S. Geller
---------------------------------------
David S. Geller, Vice President
PSI ACQUISITION CORPORATION
By /s/ David S. Geller
---------------------------------------
David S. Geller, Vice President
REVENUE PRODUCTION MANAGEMENT, INC.
By /s/ David S. Geller
---------------------------------------
David S. Geller, Senior Vice President
C-CARE, INC.
By /s/ David S. Geller
---------------------------------------
David S. Geller, Treasurer
H.O.P.E. ENTERPRISES GROUP, INC.
By /s/ David S. Geller
---------------------------------------
David S. Geller, Treasurer
PROFESSIONAL MEDICAL RECOVERY SERVICE, INC.
By /s/ David S. Geller
---------------------------------------
David S. Geller, Treasurer
CORESTATES BANK, N.A., as Agent
63
<PAGE>
By /s/ Gary R. Johnson
---------------------------------------
Gary R. Johnson, Vice President
CORESTATES BANK, N.A., as Lender
By /s/ Gary R. Johnson
---------------------------------------
Gary R. Johnson, Vice President
TORONTO DOMINION (NEW YORK), INC.
By /s/ David G. Parker
---------------------------------------
David G. Parker
Vice President
NATIONSBANK, N.A.
By /s/ Monica Brandes
---------------------------------------
Monica Brandes
Vice President
Exhibits
- --------
A - Form of Borrowing Notice
Riders
- ------
A - Lenders and Commitments
B - Form of Joinder
64
<PAGE>
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public, the
undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be a Senior Vice President of PHYSICIAN SUPPORT SYSTEMS, INC., a
Delaware corporation, and that he as such officer, being authorized to do so,
executed the foregoing instrument for the purposes therein contained by signing
the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
-----------------------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public, the
undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be a Senior Vice President of SPRING ANESTHESIA GROUP, INC., a
California corporation, and that he as such officer, being authorized to do so,
executed the foregoing instrument for the purposes therein contained by signing
the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
-----------------------------------------
Notary Public
65
<PAGE>
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public,
the undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be a Vice President of PSS C-CARE, INC., a Delaware corporation, and
that he as such officer, being authorized to do so, executed the foregoing
instrument for the purposes therein contained by signing the name of the
corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
----------------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public,
the undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be the Treasurer of C-CARE, INC., a New Jersey corporation, and that
he as such officer, being authorized to do so, executed the foregoing instrument
for the purposes therein contained by signing the name of the corporation by
himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
----------------------------------
Notary Public
66
<PAGE>
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public,
the undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be the Treasurer of H.O.P.E. ENTERPRISES GROUP, INC., a New Jersey
corporation, and that he as such officer, being authorized to do so, executed
the foregoing instrument for the purposes therein contained by signing the name
of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
----------------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public,
the undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be the Treasurer of PROFESSIONAL MEDICAL RECOVERY SERVICE, INC., a
New Jersey corporation, and that he as such officer, being authorized to do so,
executed the foregoing instrument for the purposes therein contained by signing
the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
----------------------------------
Notary Public
67
<PAGE>
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public, the
undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be a Senior Vice President of REVENUE PRODUCTION MANAGEMENT, INC., an
Illinois corporation, and that he as such officer, being authorized to do so,
executed the foregoing instrument for the purposes therein contained by signing
the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
----------------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public, the
undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be a Vice President of PSS PAMBI, INC., a Delaware corporation, and
that he as such officer, being authorized to do so, executed the foregoing
instrument for the purposes therein contained by signing the name of the
corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
----------------------------------
Notary Public
68
<PAGE>
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public, the
undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be a Vice President of PSI ACQUISITION CORP., a Michigan corporation,
and that he as such officer, being authorized to do so, executed the foregoing
instrument for the purposes therein contained by signing the name of the
corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
----------------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public, the
undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be a Senior Vice President of INDEPENDENT ANESTHESIA IPA OF
CALIFORNIA, INC., a California corporation, and that he as such officer, being
authorized to do so, executed the foregoing instrument for the purposes therein
contained by signing the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
-----------------------------------------
Notary Public
69
<PAGE>
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public, the
undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be a Senior Vice President of INDEPENDENT ANESTHESIA IPA OF ARIZONA,
INC., an Arizona corporation, and that he as such officer, being authorized to
do so, executed the foregoing instrument for the purposes therein contained by
signing the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
-----------------------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public, the
undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be a Senior Vice President of NORTH COAST HEALTH CARE MANAGEMENT,
INC., an Ohio corporation, and that he as such officer, being authorized to do
so, executed the foregoing instrument for the purposes therein contained by
signing the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
-----------------------------------------
Notary Public
70
<PAGE>
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public, the
undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be a Vice President of NORTH COAST ACCOUNT SYSTEMS, INC., a Delaware
corporation, and that he as such officer, being authorized to do so, executed
the foregoing instrument for the purposes therein contained by signing the name
of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
-----------------------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public, the
undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be a Senior Vice President of MEDICAL MANAGEMENT SUPPORT, INC., a
Delaware corporation, and that he as such officer, being authorized to do so,
executed the foregoing instrument for the purposes therein contained by signing
the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
------------------------------------------
Notary Public
71
<PAGE>
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public, the
undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be a Vice President of DATA PROCESSING SYSTEMS, INC., a Delaware
corporation, and that he as such officer, being authorized to do so, executed
the foregoing instrument for the purposes therein contained by signing the name
of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
-----------------------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public, the
undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be a Senior Vice President of PSS PBS NORTHWEST, INC., a Delaware
corporation, and that he as such officer, being authorized to do so, executed
the foregoing instrument for the purposes therein contained by signing the name
of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
-----------------------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public, the
undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be the Secretary of PSS ALM, INC., a Delaware corporation, and that
he as such officer, being authorized to do so, executed the foregoing instrument
for the purposes therein contained by signing the name of the corporation by
himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
-----------------------------------------
Notary Public
72
<PAGE>
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public, the
undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be a Senior Vice President of SYNERGISTIC SYSTEMS, INC., a California
corporation, and that he as such officer, being authorized to do so, executed
the foregoing instrument for the purposes therein contained by signing the name
of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
-----------------------------------------
Notary Public
73
<PAGE>
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public, the
undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be a Senior Vice President of EE&C FINANCIAL SERVICES, INC., a New
York corporation, and that he as such officer, being authorized to do so,
executed the foregoing instrument for the purposes therein contained by signing
the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
-----------------------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public, the
undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be a Senior Vice President of PSS EE&C HEALTH SERVICES, INC., a
Delaware corporation, and that he as such officer, being authorized to do so,
executed the foregoing instrument for the purposes therein contained by signing
the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
-----------------------------------------
Notary Public
74
<PAGE>
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public, the
undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be a Senior Vice President of MED-DATA INTERFACE SYSTEMS, LLC, a
Texas limited liability company, and that he as such officer, being authorized
to do so, executed the foregoing instrument for the purposes therein contained
by signing the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
-----------------------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public, the
undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be a Senior Vice President of MEDICAL INTERCEPT SYSTEMS, LLC, a Texas
limited liability company, and that he as such officer, being authorized to do
so, executed the foregoing instrument for the purposes therein contained by
signing the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
-----------------------------------------
Notary Public
75
<PAGE>
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public, the
undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be a Senior Vice President of PHYSERV SOLUTIONS, INC. a Michigan
corporation, and that he as such officer, being authorized to do so, executed
the foregoing instrument for the purposes therein contained by signing the name
of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
-----------------------------------------
Notary Public
76
<PAGE>
EXHIBIT "A"
-----------
FORM OF NOTICE OF BORROWING
CoreStates Bank, N.A.
51 South Duke Street
Lancaster, Pennsylvania 17602
Attention:
-----------------------
Ladies and Gentlemen:
The undersigned, Physician Support Systems, Inc., ("PSS"), refers to the
Amended and Restated Loan Agreement dated as of September 8, 1997 (as it may be
amended, modified, extended or restated from time to time, the "Credit
Agreement"), among PSS and its Subsidiaries, the Lenders party thereto, and
CoreStates Bank, N.A., as Agent. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms in the
Credit Agreement. The Borrower hereby gives you notice that it requests a
Revolving Credit Advance in accordance with the provisions of Section 2.1 under
the Credit Agreement, and in that connection sets forth below the terms on which
such Advance is requested to be made:
REQUEST FOR REVOLVING CREDIT ADVANCE
(A) Date of Borrowing
(which is a Business Day)
----------------------
(B) Principal Amount of
Borrowing/1/
----------------------
(C) Interest rate basis/2/
----------------------
(D) Interest Period and the last
day thereof if a LIBOR Loan/3/
---------------------------------
Upon acceptance of any or all of the Loans made by the Lenders in response
to this request, the Borrower shall be deemed to have represented and warranted
that the conditions to lending specified in Section 4.2 of the Credit Agreement
have been satisfied.
Very truly yours,
PHYSICIAN SUPPORT SYSTEMS, INC.
By
---------------------------------------
Title:
-----------------------------------
- --------------------
/1/ A minimum of $1,000,000 and $500,000 increments in excess thereof (or the
remaining amount available under the Revolving Credit Facility, if less).
/2/ LIBOR Loan or Money Market Loan.
/3/ Subject to the provisions and definitions of the Credit Agreement, but
generally one, two, three, or six months' duration.
77
<PAGE>
Dated: August 28, 1997
RIDER A
LENDERS' COMMITMENTS
<TABLE>
<CAPTION>
Percentage
Interest in
Lender and Address Loans Lender's Commitment
------------------ ----------- -------------------
<S> <C> <C>
CoreStates Bank, N.A. 53.846% $35,000,000
51 South Duke Street
Lancaster, Pennsylvania 17602
Attention: Gary R. Johnson
Telecopy No. 717-295-8544
NationsBank, N.A. 15.385% $10,000,000
Commercial Banking
10 Light Street - 20th floor
MD4-302-20-06
Baltimore, MD 21202-1499
Attention: Monica R. Brandes
Telecopy No.: 410-539-7508
Toronto Dominion(New York),Inc. 30.769% $20,000,000
909 Fannin, Suite 1700
Houston, Texas 77010
Attention: Manager, Credit
Administration
Telecopy No.: 713-951-9921
</TABLE>
CORESTATES BANK, N.A.
By /s/ Gary R. Johnson
----------------------------------------
Gary R. Johnson, Vice President
TORONTO DOMINION (NEW YORK), INC.
By /s/ David G. Parker
----------------------------------------
David G. Parker
Vice President
NATIONSBANK, N.A.
By /s/ Monica Brandes
----------------------------------------
Monica Brandes
Vice President
78
<PAGE>
RIDER "B"
JOINDER
-------
The undersigned, intending to be legally bound, hereby joins in and
becomes a party to the Amended and Restated Loan Agreement dated September 8,
1997 to which this Joinder is attached as a [Lender] [Borrower], and agrees to
be bound by the terms and conditions thereof.
IN WITNESS WHEREOF, the undersigned has caused this Joinder to be
executed and delivered as of this _______ day of _____________________, 199__.
------------------------------------------
By
----------------------------------------
Attest:
-----------------------------------
79
<PAGE>
Exhibit 10.2
COLLATERAL PLEDGE OF STOCK AGREEMENT
------------------------------------
COLLATERAL PLEDGE OF STOCK AGREEMENT, made the 8th day of September,
1997, by and between PHYSICIAN SUPPORT SYSTEMS, INC. and certain of its direct
and indirect subsidiaries (collectively, the "Pledgor") and CORESTATES BANK,
N.A., as agent for the several Lenders (the "Pledgee").
BACKGROUND
----------
A. Pursuant to an Amended and Restated Loan Agreement dated the date
hereof (the "Loan Agreement") among the Pledgor , the Pledgee, and the several
Lenders named therein (collectively, the "Lenders"), the Lenders have provided a
$65,000,000 revolving credit facility to the Pledgor (the "Credit Facility").
B. The Credit Facility is evidenced by several promissory notes dated
the date hereof (the "Notes") of the Pledgor payable to the order of each Lender
in the aggregate principal amount of $65,000,000.
C. The Pledgor has agreed to secure its obligations and liabilities
under the Notes and Loan Agreement by pledging to Pledgee all of the shares of
stock of the direct and indirect subsidiaries of Physician Support Systems, Inc.
(each, an "Issuer") owned, directly or indirectly, by Physician Support Systems,
Inc. or any Subsidiary.
AGREEMENT
---------
NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
1. Definitions.
-----------
(a) "Event of Default" shall mean an Event of Default as defined in
the Loan Agreement.
(b) "Obligations" shall mean all of the liabilities and obligations
(i) of the Pledgor to Pledgee and the Lenders under the Loan Agreement, and (ii)
of Physician Support Systems, Inc. or any of its direct or indirect subsidiaries
to any Lender under any agreement entered into with such Lender in connection
with hedging interest rate risk (as more fully described in section 5.15 of the
Loan Agreement), whether now or hereafter created or existing.
(c) "Pledged Stock" shall mean the shares of capital stock or
membership interests of the Issuers described on Exhibit "A" attached hereto and
made a part hereof, together with all certificates, options, rights, or other
distributions issued as an addition to, in substitution or in exchange for, or
on account of any such shares or interests, and all proceeds of the
1
<PAGE>
foregoing, now or hereafter owned or acquired by the Pledgor or any Subsidiary.
(d) Capitalized terms used herein without definition shall have the
meanings given to such terms in the Loan Agreement.
2. Pledge and Grant of Security Interest.
-------------------------------------
(a) As security for the prompt satisfaction of the Obligations, the
Pledgor hereby pledges to the Pledgee and grants to the Pledgee a lien on and
security interest in the Pledged Stock.
(b) If the Pledgor shall become entitled to receive or shall
receive, in connection with any of the Pledged Stock, any:
(i) Stock certificate, including, but without limitation, any
certificate issued in connection with a stock dividend, an increase or
reduction of capital, a reclassification, a merger, a consolidation, a sale
of assets, a combination of shares, a stock split, a spin-off or split-off;
(ii) Option, warrant or right, whether as an addition to or in
substitution or in exchange for any of the Pledged Stock, or otherwise;
(iii) Dividend or distribution payable in property, including
securities issued by other than the issuer of any of the Pledged Stock; or
(iv) Dividends or distributions of any sort;
then: the Pledgor shall accept the same as the Pledgee's agent, in trust for
the Pledgee, and shall deliver them forthwith to the Pledgee in the exact form
received with, as applicable, the Pledgor's endorsement when necessary, or
appropriate stock powers duly executed in blank, to be held by the Pledgee,
subject to the terms hereof, as part of the Pledged Stock.
(c) Pledgor herewith delivers the Pledged Stock to Pledgee
represented by certificates duly endorsed in blank, or accompanied by
appropriate stock powers duly endorsed in blank with signatures guaranteed and
Pledgee acknowledges receipt thereof.
(d) At any time after the occurrence and during the continuation of
an Event of Default, Pledgee, at its option, may have any or all of the Pledged
Stock registered in its name or that of its nominee, and the Pledgor hereby
covenants that, upon the Pledgee's request, the Pledgor will cause the Issuers
to
2
<PAGE>
effect such registration. Prior to the occurrence of an Event of Default, the
Pledgor shall nevertheless retain all voting rights with respect to the Pledged
Stock. Immediately and without further notice, upon the occurrence and during
the continuation of an Event of Default, whether or not the Pledged Stock shall
have been registered in the name of the Pledgee or its nominee, the Pledgee or
its nominee shall have, with respect to the Pledged Stock, the right to exercise
all voting rights as to all of the shares of the Pledged Stock and all other
corporate rights and all conversion, exchange, subscription or other rights,
privileges or options pertaining thereto as if it were the absolute owner
thereof, including, without limitation, the right to exchange any or all of the
Pledged Stock upon the merger, consolidation, reorganization, recapitalization
or other readjustment of any Issuer, or upon the exercise by any Issuer of any
right, privilege, or option pertaining to any of the Pledged Stock and, in
connection therewith, to deliver any of the Pledged Stock to any committee,
depository, transfer agent, registrar or other designated agency upon such terms
and conditions as it may determine, all without liability except to account for
property actually received by it; but the Pledgee shall have no duty to exercise
any of the aforesaid rights, privileges or options and shall not be responsible
for any failure to do so or delay in so doing.
(e) Unless an Event of Default shall have occurred and be
continuing, the Pledgor shall be entitled to receive for the Pledgor's own use
cash dividends on the Pledged Stock paid out of retained earnings. Upon the
occurrence and during the continuation of an Event of Default, the Pledgee may
require any such cash dividends to be applied toward the satisfaction of the
Obligations.
(f) Upon the occurrence of an Event of Default, and at any time
thereafter during the continuation thereof, the Pledgee shall have and may
exercise with reference to the Pledged Stock any or all of the rights and
remedies of a secured party (i) under the Pennsylvania Uniform Commercial Code,
(ii) under any other applicable law, or (iii) under this agreement, including
without limitation and without demand of performance or other demand,
advertisement, or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon the Pledgor or any other person
(all of which are, to the extent permitted by law, hereby expressly waived), the
right to forthwith realize upon the Pledged Stock or any part thereof and the
right to sell or otherwise dispose of and deliver the Pledged Stock or any part
thereof or interest therein, in one or more parcels at public or private sale or
sales, at any exchange, broker's board or at any of the Pledgee's offices or
elsewhere, at such prices and on such terms (including, but without limitation,
a requirement that any purchaser of all or any part of the Pledged Stock
purchase the shares constituting the Pledged Stock for investment and without
any intention to
3
<PAGE>
make a distribution thereof) as it may deem best, for cash or on credit, or for
future delivery without assumption of any credit risk, with the right to the
Pledgee or any purchaser to purchase upon any such sale the whole or any part of
the Pledged Stock free of any right or equity of redemption in the Pledgor,
which right or equity is hereby expressly waived and released.
(g) The proceeds of any such disposition or other action by the
Pledgee shall be applied as follows:
(i) First, to the costs and expenses incurred in connection
therewith or incidental thereto or to the care or safekeeping of any of the
Pledged Stock or in any way relating to the rights of the Pledgee
hereunder, including reasonable attorneys' fees and legal expenses;
(ii) Second, to the satisfaction of the Obligations;
(iii) Third, to the payment of any other amounts required by
applicable law (including, without limitation, Section 9-504(a) of the
Pennsylvania Uniform Commercial Code); and
(iv) Fourth, to the Pledgor to the extent of any surplus
proceeds.
(h) The Pledgee need not give more than ten (10) days' notice of
the time and place of any public sale or of the time after which a private sale
may take place, which notice the Pledgor hereby deems reasonable, or such longer
period of time as expressly required under any laws or regulations to which PSS
shall then be subject (including, for this purpose, the rules of any stock
exchange or trading market on which shares of PSS's common stock are traded).
(i) If an Event of Default shall have occurred and be continuing,
the Pledgee shall not be required to marshal any present or future security for,
or guarantees of, the Notes or to resort to any such security or guarantee in
any particular order and the Pledgor waives, to the fullest extent that the
Pledgor lawfully can, any right the Pledgor might have to require the Pledgee to
pursue any particular remedy before proceeding against the Pledgor.
3. Representations and Warranties. The Pledgor represents and
------------------------------
warrants that:
(a) The Pledgor has, and has duly exercised, all requisite power
and authority to enter into this Agreement, to pledge the Pledged Stock for the
purposes described in Paragraph 2(a), and to carry out the transactions
contemplated by this Agreement;
4
<PAGE>
(b) The Pledgor is the legal and beneficial owner of all of the
Pledged Stock;
(c) The shares or membership interests evidenced by the Pledged
Stock constitute all of the outstanding shares of capital stock of the Issuers
or membership interests in the Issuers, as the case may be;
(d) All of the shares of the Pledged Stock have been duly and
validly issued, are fully paid and nonassessable, and are owned by the Pledgor
free of any pledge, mortgage, hypothecation, lien, charge, encumbrance,
restriction, option or other right to purchase, or security interest in such
shares or the proceeds thereof, except for that granted hereunder;
(e) The execution and delivery of this Agreement, and the
performance of its terms, will not result in any violation of any provision of
the certificate of incorporation or by-laws, or violate or constitute a default
under the terms of any agreement, indenture or other instrument, license,
judgment, decree, order, law, statute, ordinance or other governmental rule or
regulation, applicable to any Issuer or the Pledgor or any of its or the
Pledgor's property;
(f) There are no outstanding options, warrants, or other rights to
purchase any shares of capital stock of any Issuer or any capital stock
equivalents; and
(g) Upon delivery of the Pledged Stock to the Pledgee or its agent,
this Agreement shall create a valid first lien upon and perfected security
interest in the Pledged Stock and the proceeds thereof, subject to no prior
security interest, lien, charge or encumbrance, or agreement purporting to grant
to any third party a security interest in the property or assets of the Pledgor
which would include the Pledged Stock.
4. Covenants.
---------
(a) The Pledgor hereby covenants that, until all of the
Obligations have been satisfied in full, the Pledgor will not:
(i) Sell, convey, or otherwise dispose of any of the Pledged
Stock or any interest therein or create, incur, or permit to exist any
pledge, mortgage, lien, charge, encumbrance or any security interest
whatsoever in or with respect to any of the Pledged Stock or the proceeds
thereof, other than that created hereby or pursuant to Section 5.15 of the
Loan Agreement; or
(ii) Consent to or approve the issuance of any additional
shares of any class of capital stock of any
5
<PAGE>
Issuer; or any securities convertible voluntarily by the holder thereof
or automatically upon the occurrence or nonoccurrence of any event or
condition into, or exchangeable for, any such shares; or any warrants,
options, rights, or other commitments entitling any person to purchase or
otherwise acquire any such shares.
(b) The Pledgor warrants and will, at the Pledgor's own expense,
defend the Pledgee's right, title, special property and security interest in and
to the Pledged Stock against the claims of any person, firm, corporation or
other entity.
(c) The Pledgee hereby agrees to cooperate with all reasonable
requests of PSS in connection with PSS's obligations under the Securities
Exchange Act of 1934 and with respect to the NASDAQ National Market (or any
exchange on which PSS's common stock may be listed) as such obligations relate
to PSS's ownership or disposition of the Subsidiaries.
5. Registration of Pledged Stock. [Intentionally Omitted.]
-----------------------------
6. Certain Sales. The Pledgor recognizes (i) that the Pledgee may
-------------
not be able to effect a public sale of any or all Pledged Stock (by reason of
prohibitions contained in the Securities Act of 1933 and applicable state
securities laws or otherwise), but may have to resort to private sales to a
restricted group of purchasers that can only lawfully acquire such securities
for their own account for investment and not with a view to distribution or
resale, (ii) that such sale may not reflect the best price obtainable in a
public market for securities, (iii) that such private sales shall not be deemed
to have been made in a commercially unreasonable manner, and (iv) that the
Pledgee has no obligation to delay sale of any Pledged Stock to permit the
issuer thereof to register it for public sale under the Securities Act.
7. Additional Rights. Notwithstanding the foregoing, the Pledgor
-----------------
acknowledges and agrees that the Pledgee may, in addition to any other right
provided hereunder or under applicable law,
(a) sell the Pledged Stock at one or more private sales to a
restricted group of purchasers agreeing to hold the Pledged Stock for their own
account for investment and not with a view to distribution or resale, or
(b) sell the Pledged Stock in one or more transactions on any
recognized market on which securities are regularly traded, without any duty to
make any effort to obtain any "control premium" or other premium over the
offering price on any public market as of the time of such sale, and Pledgee
shall
6
<PAGE>
have no liability to the Pledgor or anyone else for any effect such
disposition may have on the price of the Issuer's securities on any public or
private market.
8. Public Sales. The Pledgor further agrees that if the Pledgee
------------
either sells the Pledged Stock in the usual manner on any recognized market
therefor, or sells the Pledged Stock at the price current in such market at the
time of the sale, or if the Pledgee has otherwise sold the Pledged Stock in
conformity with practices among dealers in securities, whether in one or more
public or private sales, the Pledgee shall be conclusively presumed to have sold
the Pledged Stock in a commercially reasonable manner, and shall have no
liability to the Pledgor on account of such sale or sales.
9. Notices. The Pledgor will promptly deliver to the Pledgee all
-------
written notices, and will promptly give the Pledgee written notice of any other
notices, received by it with respect to Pledged Stock, and the Pledgee will
promptly give like notice to the Pledgor of any such notices received by it or
its nominee.
10. Additional Documentation. The Pledgor shall at any time, and
------------------------
from time to time, upon the written request of the Pledgee, execute and deliver
such further documents and do such further acts and things as the Pledgee may
reasonably request to effect the purposes of this Agreement, including, without
limitation, delivering to the Pledgee upon the occurrence of an Event of Default
irrevocable proxies with respect to the Pledged Stock in form satisfactory to
the Pledgee. Until receipt thereof, this Agreement shall constitute the
Pledgor's proxy to the Pledgee or its nominee to vote all shares of Pledged
Stock then registered in the Pledgor's name upon the occurrence and during the
continuation of an Event of Default.
11. Termination. Upon the satisfaction in full of all Obligations
-----------
and the satisfaction of all additional costs and expenses of the Pledgee as
provided herein, this Agreement shall terminate and the Pledgee shall deliver to
the Pledgor, at the Pledgor's expense, such of the Pledged Stock as shall not
have been sold or otherwise applied pursuant to this Agreement.
12. No Liability. Beyond the exercise of reasonable care to assure
------------
the safe custody of the Pledged Stock while held hereunder, the Pledgee shall
have no duty or liability to preserve rights pertaining thereto and shall be
relieved of all responsibility for the Pledged Stock upon surrendering it or
tendering surrender of it to the Pledgor.
13. No Waiver. No course of dealing between the Pledgor and the
---------
Pledgee, nor any failure to exercise, nor any delay in exercising, any right,
power or privilege of the Pledgee hereunder or under the Notes shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, power
or
7
<PAGE>
privilege hereunder or thereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
14. Rights and Remedies Cumulative. The rights and remedies provided
------------------------------
herein and in the Notes and in all other agreements, instruments, and documents
delivered pursuant to or in connection with the Notes are cumulative and are in
addition to and not exclusive of any rights or remedies provided by law,
including, but without limitation, the rights and remedies of a secured party
under the Pennsylvania Uniform Commercial Code.
15. Severability; Invalidity. The provisions of this Agreement are
------------------------
severable, and if any clause or provision shall be held invalid or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision or part thereof in
such jurisdiction and shall not in any manner affect such clause or provision in
any other jurisdiction or any other clause or provision in this Agreement in any
jurisdiction.
16. Immunity; Submission to Jurisdiction. The Pledgor hereby
------------------------------------
irrevocably and unconditionally waives any right to claim immunity in respect of
itself or any of the Pledged Stock, including immunity from jurisdiction,
immunity from attachment prior to judgment, immunity from attachment in aid of
execution of judgment, and immunity from execution of judgment, all in respect
of any legal suit, action or proceeding arising out of or relating to this
Agreement. In addition, the Pledgor agrees that any such suit, action or
proceeding may be instituted in the courts of the Commonwealth of Pennsylvania
or the United States District Court for the Eastern District of Pennsylvania,
and irrevocably submits to the jurisdiction of any such court for any such
purpose.
17. Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and shall be binding upon the successors and assigns of the parties
hereto.
18. Choice of Law. This Agreement shall be construed in accordance
-------------
with the domestic, internal law of the Commonwealth of Pennsylvania without
regard to principles of conflicts of law and is intended to take effect as an
instrument under seal.
19. Construction. Whenever the context hereof requires, the singular
------------
shall mean the plural, the plural shall mean the singular, the masculine gender
shall mean the neuter gender or the feminine gender or the neuter gender shall
mean the masculine gender or the feminine gender.
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals the day and year first above written.
8
<PAGE>
PHYSICIAN SUPPORT SYSTEMS, INC.
By /s/ David S. Geller (SEAL)
--------------------------
David S. Geller,
Senior Vice President
SPRING ANESTHESIA GROUP, INC.
By /s/ David S. Geller
--------------------------------
David S. Geller,
Senior Vice President
NORTH COAST HEALTH CARE MANAGEMENT, INC.
By /s/ David S. Geller
--------------------------------
David S. Geller,
Senior Vice President
PSS C-CARE, INC.
By /s/ David S. Geller
---------------------------------
David S. Geller,
Vice President
PSI ACQUISITION CORPORATION
By /s/ David S. Geller
---------------------------------
David S. Geller,
Vice President
"Pledgor"
CORESTATES BANK, N.A., as Agent for the several
Lenders
By /s/ Gary R. Johnson
--------------------------------
Vice President
"Pledgee"
9
<PAGE>
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public, the
undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be a Senior Vice President of PHYSICIAN SUPPORT SYSTEMS, INC., a
Delaware corporation, and that he as such officer, being authorized to do so,
executed the foregoing instrument for the purposes therein contained by signing
the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
----------------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public,
the undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be the Senior Vice President of SPRING ANESTHESIA GROUP, INC., a
California corporation, and that he as such officer, being authorized to do so,
executed the foregoing instrument for the purposes therein contained by signing
the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
----------------------------------
Notary Public
10
<PAGE>
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public,
the undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be a Senior Vice President of NORTH COAST HEALTH CARE MANAGEMENT,
INC., an Ohio corporation, and that he as such officer, being authorized to do
so, executed the foregoing instrument for the purposes therein contained by
signing the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
----------------------------------
Notary Public
11
<PAGE>
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public,
the undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be a Vice President of PSS C-CARE, INC., a Delaware corporation, and
that he as such officer, being authorized to do so, executed the foregoing
instrument for the purposes therein contained by signing the name of the
corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
--------------------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA :
:ss.
COUNTY OF LANCASTER :
On this 8th day of September, 1997, before me, a notary public, the
undersigned officer, personally appeared DAVID S. GELLER, who acknowledged
himself to be a Vice President of PSI ACQUISITION CORP, a Michigan corporation,
and that he as such an officer, being authorized to do so, executed the
foregoing instrument for the purposes therein contained by signing the name of
the corporation by himself as such officer.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Doris J. Martin
--------------------------------------
Notary Public
12
<PAGE>
EXHIBIT "A"
-----------
Pledged Stock and Membership Interests
--------------------------------------
<TABLE>
<CAPTION>
Certificate No. of Registered
Issuer No. Shares Owner
------ ------ ------ --------
<S> <C> <C> <C>
Synergistic Systems, Inc. 124 1 PSS
EE&C Financial Services,
Inc. 13 1,000 PSS
Revenue Production
Management, Inc. 0004 1,000 PSS
PSS PBS Northwest, Inc. 1 1,000 PSS
North Coast Health Care
Management, Inc. 6 100 PSS
Physerv Solutions, Inc. 0014 1,000 PSI Acquisition Corp.
Spring Anesthesia Group, Inc. 15 53 PSS
Medical Intercept Systems, LLC 29 100% PSS
PSS ALM, Inc. 1 1,000 PSS
Medical Management Support, Inc. 1 1,000 PSS
Data Processing Systems, Inc. 1 1,000 PSS
Independent Anesthesia IPA
of California, Inc. 1 1,000 Spring Anesthesia Group, Inc.
Independent Anesthesia IPA
of Arizona, Inc. 1 1,000 Spring Anesthesia Group, Inc.
North Coast Account Systems, Inc. 1 1,000 North Coast Health Care
Management, Inc.
PSS EE&C Health Services, Inc. 1 1,000 PSS
MED-Data Interface Systems, LLC 38 100% PSS
PSS C-Care, Inc. 1 1,000 PSS
PSS PAMBI, Inc. 1 1,000 PSS
PSI Acquisition Corporation 1 1,000 PSS
</TABLE>
A-1
<PAGE>
<TABLE>
<S> <C> <C> <C>
C-Care, Inc. 24 1,000 PSS C-Care, Inc.
H.O.P.E. Enterprises
Group, Inc. 9 1,000 PSS C-Care, Inc.
Professional Medical
Recovery Service, Inc. 9 1,000 PSS C-Care, Inc.
</TABLE>
A-2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 643,441
<SECURITIES> 0
<RECEIVABLES> 43,514,181
<ALLOWANCES> (1,956,313)
<INVENTORY> 0
<CURRENT-ASSETS> 45,106,820
<PP&E> 10,036,702
<DEPRECIATION> 0
<TOTAL-ASSETS> 117,426,264
<CURRENT-LIABILITIES> 17,390,459
<BONDS> 0
0
0
<COMMON> 9,720
<OTHER-SE> 51,985,465
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 81,741,604
<CGS> 0
<TOTAL-COSTS> 77,024,566
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,045,614
<INCOME-PRETAX> 4,717,038
<INCOME-TAX> 1,981,726
<INCOME-CONTINUING> 2,735,312
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,735,312
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0
</TABLE>
