<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____________ TO _____________.
COMMISSION FILE NUMBER: 0-19786
PHYCOR, INC.
------------
(Exact Name of Registrant as Specified in Its Charter)
TENNESSEE 62-1344801
------------------------------ ------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
30 BURTON HILLS BLVD., SUITE 400
NASHVILLE, TENNESSEE 37215
--------------------------------------- -----------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (615) 665-9066
--------------
NOT APPLICABLE
--------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
As of August 12, 1998, 78,245,363 shares of the Registrant's Common
Stock were outstanding.
<PAGE> 2
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
PHYCOR, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1998 (unaudited) and December 31, 1997
(All dollar amounts are expressed in thousands)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ASSETS 1998 1997
- ------- ----- -----
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 63,336 38,160
Accounts receivable, net 436,759 391,668
Inventories 20,692 18,578
Prepaid expenses and other current assets 72,931 48,158
---------- ---------
Total current assets 593,718 496,564
Property and equipment, net 271,571 235,685
Intangible assets, net 997,057 807,726
Other assets 30,000 22,801
---------- ---------
Total assets $1,892,346 1,562,776
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current installments of long-term debt $ 5,526 1,144
Current installments of obligations under capital leases 3,214 3,564
Accounts payable 43,471 34,622
Due to physician groups 57,217 50,676
Purchase price payable 87,085 114,971
Salaries and benefits payable 41,979 37,141
Other accrued expenses and liabilities 120,060 51,145
---------- ---------
Total current liabilities 358,552 293,263
Long-term debt, excluding current installments 354,539 210,893
Obligations under capital leases, excluding current installments 4,153 5,093
Purchase price payable 27,646 23,545
Deferred tax credits and other liabilities 47,420 57,918
Convertible subordinated notes payable to physician groups 52,799 61,576
Convertible subordinated debentures 200,000 200,000
---------- ---------
Total liabilities 1,045,109 852,288
---------- ---------
Shareholders' equity:
Preferred stock, no par value; 10,000,000 shares authorized: -- --
Common stock, no par value; 250,000,000 shares authorized; issued
and outstanding, 71,878,000 in 1998 and 63,273,000 shares in 1997 774,222 645,288
Retained earnings 73,015 65,200
---------- ---------
Total shareholders' equity 847,237 710,488
---------- ---------
Total liabilities and shareholders' equity $1,892,346 1,562,776
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 3
PHYCOR, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three months and six months ended June 30, 1998 and 1997
(All amounts are expressed in thousands, except for earnings per share)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenue $ 371,450 267,354 694,145 518,006
Operating expenses:
Cost of provider services 26,024 -- 26,024 --
Clinic salaries, wages and benefits 126,980 100,722 247,691 195,586
Clinic supplies 56,543 42,374 109,649 81,638
Purchased medical services 9,337 7,661 18,573 14,689
Other clinic expenses 53,657 41,284 102,559 80,307
General corporate expenses 7,685 6,672 15,141 13,159
Rents and lease expense 31,650 23,717 61,713 45,960
Depreciation and amortization 22,835 14,938 41,010 28,660
Provision for clinic restructuring
and merger expenses -- -- 36,196 --
--------- -------- -------- --------
Net operating expenses 334,711 237,368 658,556 459,999
--------- -------- -------- --------
Earnings from operations 36,739 29,986 35,589 58,007
Interest income (747) (660) (1,492) (1,713)
Interest expense 9,281 5,266 16,803 11,425
--------- -------- -------- --------
Earnings before income taxes and
minority interest 28,205 25,380 20,278 48,295
Income tax expense 8,993 8,689 5,738 16,393
Minority interest in earnings of
consolidated partnerships 3,899 2,985 6,725 5,889
--------- -------- -------- --------
Net earnings $ 15,313 13,706 7,815 26,013
========= ======== ======== ========
Earnings per share:
Basic $ .22 .22 .12 .43
Diluted .22 .20 .11 .39
========= ======== ======== ========
Weighted average number of shares and dilutive
share equivalents outstanding:
Basic 68,779 63,570 67,516 61,095
Diluted 70,857 68,191 70,024 65,932
========= ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
PHYCOR, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three months and six months ended June 30, 1998 and 1997
(All dollar amounts are expressed in thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 15,313 13,706 7,815 26,013
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 22,835 14,938 41,010 28,660
Minority interests 3,899 2,985 6,725 5,889
Provision for clinic restructuring and merger expenses -- -- 36,196 --
Increase (decrease) in cash, net of effects
of acquisitions, due to changes in:
Accounts receivable (991) 1,522 (22,122) (13,894)
Inventories (260) (876) 22 (758)
Prepaid expenses and other current assets (5,731) (6,108) (8,811) (2,783)
Accounts payable (2,107) 2,818 (2,732) (2,667)
Due to physician groups (2,278) (2,409) 5,038 5,277
Other accrued expenses and liabilities 7,163 (1,221) 11,271 (2,496)
--------- ------- -------- --------
Net cash provided by operating activities 37,843 25,355 74,412 43,241
--------- ------- -------- --------
Cash flows from investing activities:
Payments for acquisitions, net (105,455) (31,414) (139,994) (182,373)
Purchase of property and equipment (17,815) (14,349) (37,970) (32,271)
Payments to acquire other assets (821) (373) (11,133) (2,171)
--------- ------- -------- --------
Net cash used by investing activities (124,091) (46,136) (189,097) (216,815)
--------- ------- -------- --------
Cash flows from financing activities:
Net proceeds from issuance of stock and warrants 9,497 11,231 16,460 223,796
Proceeds from long-term borrowings 103,000 27,000 139,000 182,000
Repayment of long-term borrowings (2,136) (8,127) (9,056) (218,225)
Repayment of obligations under capital leases (1,131) (203) (1,898) (2,175)
Distributions of minority interests (3,190) (2,999) (4,369) (3,675)
Loan costs incurred (276) -- (276) --
--------- ------- -------- --------
Net cash provided by financing activities 105,764 26,902 139,861 181,721
--------- ------- -------- --------
Net increase in cash and cash equivalents 19,516 6,121 25,176 8,147
Cash and cash equivalents - beginning of period 43,820 32,556 38,160 30,530
--------- ------- -------- --------
Cash and cash equivalents - end of period $ 63,336 38,677 63,336 38,677
========= ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
PHYCOR, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
Three months and six months ended June 30, 1998 and 1997
(All dollar amounts are expressed in thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------- -----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
SUPPLEMENTAL SCHEDULE OF INVESTING ACTIVITIES:
Effects of acquisitions:
Assets acquired, net of cash $ 207,365 22,168 292,946 279,736
Liabilities paid (assumed), net of deferred purchase
price payments (16,212) 9,246 (41,730) (80,513)
Issuance of convertible subordinated notes payable -- -- (1,317) (8,672)
Issuance of common stock and warrants (84,517) -- (105,974) (8,178)
Cash received from disposition of clinic assets (1,181) -- (3,931) --
--------- ------ -------- --------
Payments for acquisitions $ 105,455 31,414 139,994 182,373
========= ====== ======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Capital lease obligations incurred to acquire
equipment $ 258 146 438 310
========= ====== ======== ========
Conversion of subordinated notes payable
to common stock $ -- 3,888 2,000 11,558
========= ====== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
PHYCOR, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
Three months and six months ended June 30, 1998 and 1997
(1) BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial reporting and in accordance with Rule 10-01 of Regulation S-X.
In the opinion of management, the unaudited interim financial statements
contained in this report reflect all adjustments, consisting of only
normal recurring accruals which are necessary for a fair presentation of
the financial position and the results of operations for the interim
periods presented. The results of operations for any interim period are
not necessarily indicative of results for the full year.
These financial statements, footnote disclosures and other information
should be read in conjunction with the financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K, as amended
by Form 10-K/A, for the year ended December 31, 1997.
(2) ACQUISITIONS
(A) MULTI-SPECIALTY MEDICAL CLINICS
Through June 30, 1998 and during 1997, the Company, through
wholly-owned subsidiaries, acquired certain operating assets of the
following clinics:
<TABLE>
<CAPTION>
CLINIC EFFECTIVE DATE LOCATION
------ -------------- --------
<S> <C> <C>
1998:
Grove Hill Medical Center March 1, 1998 New Britain, Connecticut
Watson Clinic (A) May 1, 1998 Lakeland, Florida
Desert Valley Medical Group and Hospital May 1, 1998 Victorville, California
1997:
Vancouver Clinic January 1, 1997 Vancouver, Washington
First Physicians Medical Group February 1, 1997 Palm Springs, California
St. Petersburg-Suncoast Medical Group February 28, 1997 St. Petersburg, Florida
Greater Chesapeake Medical Group May 1, 1997 Annapolis, Maryland
Welborn Clinic June 1, 1997 Evansville, Indiana
White-Wilson Medical Center July 1, 1997 Ft. Walton Beach, Florida
Maui Medical Group September 1, 1997 Maui, Hawaii
Murfreesboro Medical Clinic October 1, 1997 Murfreesboro, Tennessee
West Florida Medical Center Clinic October 1, 1997 Pensacola, Florida
Northern California Medical Association December 1, 1997 Santa Rosa, California
Lakeview Medical Center (B) December 1, 1997 Suffolk, Virginia
</TABLE>
(A) Watson Clinic entered into an interim management agreement effective
May 1, 1998.
(B) Lakeview Medical Center was operated under a management agreement
during December 1997. Effective January 1, 1998, the Company
completed the purchase of certain clinic operating assets and entered
into a long-term service agreement with the affiliated physician
group.
(Continued)
6
<PAGE> 7
PHYCOR, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
The acquisitions were accounted for as purchases, and the
accompanying consolidated financial statements include the results
of their operations from the dates of their respective
acquisitions. Simultaneous with each acquisition, the Company
entered into a long-term service agreement with the related clinic
physician group. The service agreements are 40 years in length. In
conjunction with certain acquisitions, the Company is obligated to
make deferred payments to physician groups.
(B) NORTH AMERICAN MEDICAL MANAGEMENT, INC. (NORTH AMERICAN)
Effective January 1, 1995, the Company completed its merger with
North American, an operator and manager of independent practice
associations (IPAs). The Company made additional payments for the
North American acquisition pursuant to an earn-out formula during
1996 and 1997 totaling $35.0 million. A final payment of $35.0
million was made in April 1998, of which $13.0 million was paid in
shares of the Company's Common Stock.
(C) PHYCOR MANAGEMENT CORPORATION (PMC)
In June 1995, the Company purchased a minority interest of
approximately 9% in PMC and has managed PMC pursuant to a 10-year
administrative services agreement. PMC develops and manages IPAs
and provides other services to physician organizations. PhyCor
acquired the remaining interests of PMC on March 31, 1998 for an
aggregate purchase price of approximately $21.0 million paid in
shares of the Company's Common Stock.
(D) PRIMECARE INTERNATIONAL, INC. (PRIMECARE)
In May 1998, the Company acquired PrimeCare, a physician practice
management company serving southern California's Inland Empire
area, in a purchase business combination. PrimeCare's delivery
network is comprised of an integrated campus, including the Desert
Valley Medical Group, Desert Valley Hospital and Apple Valley
Surgery Center, as well as the Inland Empire area IPA network.
(3) NET REVENUE
Net revenue of the Company is comprised of net clinic service agreement
revenue, IPA management revenue, and net hospital revenues. Clinic
service agreement revenue is equal to the net revenue of the clinics,
less amounts retained by physician groups. Net clinic revenue is recorded
by the physician groups and net hospital revenue is recorded at
established rates reduced by provisions for doubtful accounts and
contractual adjustments. Contractual adjustments arise as a result of the
terms of certain reimbursement and managed care contracts. Such
adjustments represent the difference between charges at established rates
and estimated recoverable amounts and are recognized in the period the
services are rendered. Any differences between estimated contractual
adjustments and actual final settlements under reimbursement contracts
are recognized as contractual adjustments in the year final settlements
are determined. With the exception of PrimeCare, the physician groups,
rather than the Company, enter into managed care contracts. Through
calculation of its service fees, the Company shares indirectly in any
capitation risk assumed by its affiliated physician groups.
IPA management revenue is equal to the difference between the amount of
capitation and risk pool payments due to the IPAs managed by the Company
less amounts retained by the IPA. The Company has not historically been a
party to capitated contracts entered into by the IPAs, but it is exposed
to losses to the extent of its share of deficits, if any, of the
capitated revenue of the IPAs. With the acquisition of PrimeCare, the
Company became a party to certain managed care contracts. Accordingly,
the cost of provider services for the PrimeCare contracts is not included
as a deduction to net revenue of the Company but is reported as an
operating expense.
(Continued)
7
<PAGE> 8
PHYCOR, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
The following represent amounts included in the determination of net
revenue (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------- -----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross physician group and hospital
revenue $883,479 686,126 1,724,998 1,329,283
Less:
Provisions for doubtful accounts
and contractual adjustments 351,810 260,369 691,099 503,202
-------- ------- --------- ---------
Net physician group and hospital
revenue 531,669 425,757 1,033,899 826,081
IPA revenue 176,114 98,637 297,097 185,627
-------- ------- --------- ---------
Net physician group, hospital and IPA
revenue 707,783 524,394 1,330,996 1,011,708
Less amounts retained by physician groups
and IPAs:
Physician groups 185,824 157,809 361,857 305,584
Clinic technical employee compensation 23,567 17,437 46,795 34,732
IPAs 126,942 81,794 228,199 153,386
-------- ------- --------- ---------
Net revenue $371,450 267,354 694,145 518,006
======== ======= ========= =========
</TABLE>
(4) ASSETS TO BE DISPOSED OF AND RESTRUCTURED
In the fourth quarter of 1997, the Company recorded a pre-tax charge to
earnings of $83.4 million related to the revaluation of assets of seven
of the Company's multi-specialty clinics. Included in the seven clinics
were three clinic operations the Company determined to dispose of because
of a variety of negative operating and market-specific issues. The
Company completed the disposal of one clinic in the first quarter of
1998, a second clinic in April 1998 and the third clinic in July 1998.
Amounts received upon the dispositions approximated net book value of
those assets. Clinic net assets to be disposed of include current assets,
property and equipment, intangibles and other assets totaling $1,397,000
and $3,237,000 at June 30, 1998 and December 31, 1997, respectively. Net
losses from the clinics to be disposed of totaled $19,000 and $171,000 in
the second quarter and first six months of 1998, respectively, and
$666,000 in 1997.
In addition, restructuring charges totaling $22.0 million were recorded
in the first quarter of 1998 with respect to the seven clinics that are
being sold or restructured and included facility and lease termination
costs, severance costs and other exit costs in the amount of $15,316,000,
$4,611,000 and $2,073,000, respectively. The Company is closing,
consolidating or subleasing various leased facilities associated with the
related physician groups and expects to complete such closings or
subleases in 1998. During the second quarter of 1998 and the first six
months of 1998, the Company paid approximately $1.0 million and $2.3
million, respectively, in costs associated with the above activities.
(Continued)
8
<PAGE> 9
PHYCOR, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
(5) MERGER EXPENSES
The Company recorded a pre-tax charge to earnings of approximately $14.2
million in the first quarter of 1998 relating to the termination of its
merger agreement with MedPartners, Inc. This charge represents the
Company's share of investment banking, legal, travel, accounting and
other expenses incurred during the merger negotiation process.
(6) NEW ACCOUNTING PRONOUNCEMENT
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No.130 "Reporting Comprehensive Income".
Comprehensive income generally includes all changes in equity during a
period except those resulting from investments by shareholders and
distributions to shareholders. Net income was the same as comprehensive
income for the second quarter and first six months of 1998 and 1997.
(7) CHANGE IN ACCOUNTING POLICY
Effective April 1, 1998, the Company changed its policy with respect to
amortization of intangible assets. All existing and future intangible
assets will be amortized over a period not to exceed 25 years from the
inception of the respective intangible assets. Had the Company adopted
this policy at the beginning of 1997, amortization expense would have
increased and diluted earnings per share would have decreased by
approximately $2.8 million and $0.02, respectively, in the second quarter
of 1997 and $5.6 million and $0.05, respectively, in the first six months
of 1997. On the same basis, for the first quarter of 1998, amortization
expense would have increased by approximately $3.3 million, resulting in
a decrease in diluted earnings per share of $0.03.
(8) SUBSEQUENT EVENTS
In July 1998, the Company completed three previously announced
acquisitions. The Company acquired Seattle-based CareWise, Inc., a
nationally recognized leader in the health care decision-support industry
and Atlanta-based First Physician Care, Inc., a provider of practice
management services. Both of these transactions were accounted for as
poolings-of-interests and treated as tax free exchanges, and the Company
issued approximately 6.1 million shares of Common Stock in conjunction
with these transactions. The Company also completed its acquisition of
The Morgan Health Group, Inc., an Atlanta-based IPA.
On July 23, 1998, the Company announced it expects to record a pre-tax
asset impairment charge of approximately $65 million in the third quarter
of 1998. This expected charge relates primarily to continuing negative
operating trends for those clinic operations which were included in the
fourth quarter 1997 asset impairment charge and corresponding initiatives
to dispose of these assets.
9
<PAGE> 10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
PhyCor, Inc. ("PhyCor" or the "Company") is a physician practice
management company that acquires and operates multi-specialty medical clinics,
develops and manages independent practice associations ("IPAs") and provides
health care decision-support services, including demand management and disease
management services to managed care organizations, health care providers,
employers and other group associations. Including the pending transaction
discussed below, the Company currently operates 60 clinics with approximately
4,045 physicians in 29 states and manages IPAs with approximately 26,000
physicians in 36 markets. The Company's affiliated physicians provide medical
services under capitated contracts to approximately 1,517,000 patients,
including approximately 253,000 Medicare/Medicaid eligible patients. The Company
provides health care decision-support services to more than approximately 1.8
million individuals within the United States and an additional 500,000 under
foreign country license agreements.
The Company's strategy is to position its affiliated multi-specialty
medical clinics and IPAs to be the physician component of organized health care
systems. PhyCor believes physician organizations create the value in these
networks because physician decisions determine the cost and quality of health
care.
A substantial majority of the Company's revenue in the first six months
of 1998 and 1997 was earned under service agreements with multi-specialty
medical clinics. Revenue earned under substantially all of the service
agreements is equal to the net revenue of the clinics, less amounts retained by
physician groups. The service agreements contain financial incentives for the
Company to assist the physician groups in increasing clinic revenues and
controlling expenses.
To increase clinic revenue, the Company works with the affiliated
physician groups to recruit additional physicians, merge other physicians
practicing in the area into the affiliated physician groups, negotiate contracts
with managed care organizations and provide additional ancillary services. To
reduce or control expenses, among other things, PhyCor utilizes national
purchasing contracts for key items, reviews staffing levels to make sure they
are appropriate and assists the physicians in developing more cost-effective
clinical practice patterns.
The Company has increased its focus on the development of IPAs to
enable the Company to provide services to a broader range of physician
organizations, to enhance the operating performance of existing clinics and to
further develop physician relationships. The Company develops IPAs that include
affiliated clinic physicians to enhance the clinics' attractiveness as providers
to managed care organizations.
On May 11, 1998, the Company announced that it had entered into an
interim management agreement and letter of intent to acquire certain assets and
enter into a long-term service agreement with Watson Clinic, a 167-physician
multi-specialty group based in Lakeland, Florida.
On May 18, 1998, the Company acquired PrimeCare International, Inc.
("PrimeCare"), a physician practice management company serving southern
California's Inland Empire area. PrimeCare's delivery network is comprised of an
integrated campus, including the 60-physician Desert Valley Medical Group, the
83-bed Desert Valley Hospital and Apple Valley Surgical Center, as well as the
Inland Empire area IPA Network, a network of 10 IPAs consisting of 210 primary
care physicians and approximately 2,000 affiliated specialty physicians.
10
<PAGE> 11
In addition to the acquisition of PrimeCare, the Company affiliated
with one other multi-specialty clinic and numerous smaller medical practices and
completed its purchase of certain operating assets of Lakeview Medical Center
located in Suffolk, Virginia, which was operated under a management agreement
during December 1997, adding a total of $248.6 million in assets during the
first six months of 1998. The principal assets acquired were accounts
receivable, property and equipment, prepaid expenses, and service agreement
rights, an intangible asset. The consideration for the acquisitions consisted of
approximately 49% cash, 21% liabilities assumed, 29% Common Stock and 1%
convertible notes. The cash portion of the purchase price was funded by a
combination of operating cash flow and borrowings under the Company's bank
credit facility. Property and equipment acquired consists mostly of clinic
operating equipment.
Since June 30, 1998, the Company has completed its acquisition of The
Morgan Health Group, Inc., an Atlanta-based IPA whose network of approximately
400 primary care physicians and 1,800 specialists provide care to approximately
57,000 managed care members under capitated contracts. The Company also
completed its previously announced acquisitions of Atlanta-based First Physician
Care, Inc. ("FPC"), a provider of practice management services, and
Seattle-based CareWise, Inc. ("CareWise"), a nationally recognized leader in the
consumer decision-support industry. The FPC and CareWise transactions were
accounted for as poolings-of-interests. The Company issued approximately 6.1
million shares of Common Stock in conjunction with the FPC and CareWise
transactions.
The Company has historically amortized the goodwill and other
intangible assets related to its service agreements over the periods during
which the agreements are effective, ranging from 25 to 40 years. Effective April
1, 1998, the Company adopted a maximum of 25 years as the useful life for
amortization of its intangible assets, including those acquired in prior years.
Had this policy been in place for 1997, amortization expense would have
increased by approximately $2.8 million in the second quarter of 1997,
approximately $5.6 million in the first six months of 1997, and approximately
$11.2 million for the full year. Applying the Company's historical tax rate,
diluted earnings per share would have been reduced by $0.02 in the second
quarter of 1997, $0.05 for the first six months of 1997, and $0.10 for the full
year of 1997 . On the same basis, for the first quarter of 1998, amortization
expense would have increased by approximately $3.3 million, resulting in a
decrease in diluted earnings per share of $0.03.
RESULTS OF OPERATIONS
The following table shows the percentage of net revenue represented by
various expense and other income items reflected in the Company's Consolidated
Statements of Operations.
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenue................................. 100.0% 100.0% 100.0% 100.0%
Operating expenses
Cost of provider services................ 7.0 -- 3.7 --
Clinic salaries, wages and benefits...... 34.2 37.7 35.7 37.8
Clinic supplies.......................... 15.2 15.8 15.8 15.8
Purchased medical services............... 2.5 2.9 2.7 2.8
Other clinic expenses.................... 14.4 15.4 14.8 15.5
General corporate expenses............... 2.1 2.5 2.2 2.5
Rents and lease expense................. 8.5 8.9 8.9 8.9
Depreciation and amortization............ 6.2 5.6 5.9 5.5
Provision for clinic restructuring
and merger expenses.............. -- -- 5.2 --
------ ------ ------- -------
Operating expenses.......................... 90.1 88.8 94.9 (A) 88.8
------ ------ ------- -------
</TABLE>
11
<PAGE> 12
<TABLE>
<S> <C> <C> <C> <C>
Earnings from operations.............. 9.9 11.2 5.1 (A) 11.2
Interest income............................. (0.2) (0.3) (0.2) (0.3)
Interest expense............................ 2.5 2.0 2.4 2.2
------ ------ ------- -------
Earnings before income taxes
and minority interest................ 7.6 9.5 2.9 (A) 9.3
Income tax expense.......................... 2.4 3.3 .8 (A) 3.2
Minority interest........................ 1.1 1.1 1.0 1.1
------ ------ ------ -------
Net earnings.......................... 4.1% 5.1% 1.1% (A) 5.0%
====== ====== ====== ======
</TABLE>
(A) Excluding the effect of the provision for clinic restructuring and merger
expenses in 1998, operating expenses, earnings from operations, earnings before
income taxes and minority interest, income tax expense and net earnings, as a
percent of net revenue, would have been 89.7%, 10.3%, 8.1%, 3.0% and 4.1%,
respectively, for the six months ended June 30, 1998.
1998 Compared to 1997
Net revenue increased $104.1 million, or 38.9%, from $267.4 million for
the second quarter of 1997 to $371.5 million for the second quarter of 1998, and
from $518.0 million to $694.1 million for the first six months of 1997 compared
to 1998, an increase of 34.0%. The increase in clinic net revenue from the
second quarter of 1997 compared to 1998 was $67.2 million, including $55.2
million in service fees resulting from newly acquired clinics in 1998 or the
timing of entering into new service agreements in 1997 and was comprised of (i)
a $62.2 million increase in service fees for reimbursement of clinic expenses
incurred by the Company and (ii) a $5.0 million increase in the Company's share
of clinic operating income and net physician group revenue. The increase in
clinic net revenue from the first six months of 1997 compared to 1998 was $134.8
million, including $106.5 million in service fees resulting from newly acquired
clinics in 1998 or the timing of entering into new service agreements in 1997
and was comprised of (i) a $121.2 million increase in service fees for
reimbursement of clinic expenses incurred by the Company and (ii) a $13.6
million increase in the Company's share of clinic operating income and net
physician group revenue. The increases in clinic net revenue have been reduced
as a result of assets disposed in 1998 by $4.8 million and $5.2 million in the
second quarter and the first six months of 1998, compared to the same periods in
1997, respectively. Net revenue from the 39 service agreements and 27 IPA
markets (excluding clinics being restructured or sold) in effect for both
quarters, increased by $26.8 million, or 12.8%, for the quarter and $50.5
million, or 12.0%, for the six months ended June 30, 1998, compared with the
same period in 1997. Same market growth resulted from the addition of new
physicians, the expansion of ancillary services and increases in patient volume
and fees.
During the second quarter and first six months of 1998, most categories
of operating expenses varied as a percentage of net revenue when compared to the
same periods in 1997. The addition of cost of provider services is a result of
the acquisition of PrimeCare in the second quarter of 1998. PrimeCare manages a
network of 10 IPAs in the Inland Empire area of southern California, and is a
party to certain managed care contracts, resulting in the company presenting
such revenues on a "gross-up basis," where the cost of provider services
(payments to physicians and other providers under subcapitation and other
reimbursement contracts) is not included as a deduction to net revenue of the
Company but is reported as an operating expense. This revenue reporting has an
impact on the Company's operating expenses as a percentage of net revenue.
Excluding the impact of PrimeCare's revenue reporting, most categories of
operating expenses as a percentage of net revenue during the second quarter and
first six months of 1998 were comparable to the percentages in the same periods
in 1997. Excluding the impact of PrimeCare's revenue reporting, clinic salaries,
wages and benefits decreased as a percentage of net revenue resulting from the
acquisition of clinic operations with lower levels of these expenses compared to
the existing base of clinics and continued focus on efficiently staffing the
existing clinic operations. The increase in depreciation and amortization
expense as a percentage of net revenue resulted from the change in the
amortization policy with respect to intangible assets. The addition of
pharmacies at certain existing clinics and new clinics which operate pharmacies
also resulted in increased clinic supplies expense, excluding the impact of
PrimeCare's revenue reporting. While general corporate expenses decreased as a
percentage of net revenue, the dollar amount of general corporate expenses
increased as a result of the
12
<PAGE> 13
addition of corporate personnel to accommodate growth and to respond to
increasing physician group needs for support in managed care negotiations,
information systems implementation and clinical outcomes management programs.
The provision for clinic restructuring of $22.0 million in the first
quarter of 1998 relates to seven of the Company's clinics that are being
restructured or sold and includes facility and lease termination costs,
severance and other exit costs. In the fourth quarter of 1997, the Company
recorded a pre-tax charge of $83.4 million related to asset revaluation at these
same clinics. The charges address operating issues which developed in four of
the Company's multi-specialty clinics which represent the Company's earliest
developments of such clinics through the formation of new groups. Three other
clinics included in the 1997 charge represent clinics disposed of during 1998
because of a variety of negative operating and market issues. Losses on the
three clinics divested approximated the amounts accrued. For additional
discussion, see "Liquidity and Capital Resources."
The Company also recorded a pre-tax charge to earnings of approximately
$14.2 million in the first quarter of 1998 relating to the termination of its
merger agreement with MedPartners, Inc. This charge represents PhyCor's share of
investment banking, legal, travel, accounting and other expenses incurred during
the merger negotiation process.
The Company expects an effective tax rate of approximately 37.0% in
1998 before the tax benefit of the provision for clinic restructuring and merger
expenses discussed above as compared to a rate of 38.5% in 1997.
PhyCor has assessed its practice management systems, managed care
information systems, business information systems and other clinic systems for
compliance with the Year 2000 issue. The Company is in its normal process of
standardizing the various systems utilized by its clinics and IPAs. This
standardization includes implementation of Year 2000 compliant systems. The
Company has performed an assessment of its various clinics and IPAs to identify
which systems specifically require replacement or upgrade because of the Year
2000 issue in order to ensure timely upgrade or installation. The Company
believes it has a replacement strategy in place such that the Year 2000 issue
will not have a significant effect on its operations. Total capital costs to
implement new systems and to address the Year 2000 issue are expected to be less
than $20.0 million.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had $235.2 million in working capital,
compared to $203.3 million as of December 31, 1997. Also, the Company generated
$37.8 million of cash flow from operations for the second quarter of 1998
compared to $25.4 million for the second quarter of 1997 and $74.4 million for
the first six months of 1998 compared to $43.2 for the same period in 1997. At
June 30, 1998, net accounts receivable of $436.8 million amounted to 70 days of
net clinic revenue compared to $391.7 million and 72 days at the end of 1997.
In the first six months of 1998, $2.0 million of convertible
subordinated notes issued in connection with physician group asset acquisitions
were converted into Common Stock. These conversions, option exercises, other
issuances of Common Stock and net earnings for the first six months of 1998
resulted in an increase of $136.7 million in shareholders' equity compared to
December 31, 1997.
Capital expenditures during the first six months of 1998 totaled $38.0
million. The Company is responsible for capital expenditures at its affiliated
clinics under the terms of its service agreements. The Company expects to make
approximately $31.0 million in capital expenditures during the remainder of
1998.
13
<PAGE> 14
In June 1995, the Company purchased a minority interest of
approximately 9% in PhyCor Management Corporation ("PMC") and has managed PMC
pursuant to a 10-year administrative services agreement. PMC develops and
manages IPAs and provides other services to physician organizations. PhyCor
acquired the remaining interests of PMC on March 31, 1998 for approximately
956,300 shares of the Company's Common Stock.
Effective January 1, 1995, the Company completed its acquisition of
North American Medical Management, Inc. ("North American"). The Company paid
$20.0 million at closing and has made additional payments pursuant to an
earn-out formula during 1996 and 1997 totaling $35.0 million. A final payment of
$35.0 million was made pursuant to the earnout formula in April 1998. Of the
final payment, $13.0 million was made in shares of the Company's Common Stock.
In addition, deferred acquisition payments are payable to physician
groups in the event such physician groups attain predetermined financial targets
during established periods of time following acquisition. If each group
satisfied its applicable financial targets for the periods covered, the Company
would be required to pay an aggregate of approximately $82.9 million of
additional consideration over the next five years, of which a maximum of $16.7
million would be payable during the remainder of 1998.
In the fourth quarter of 1997, the Company recorded a pre-tax charge to
earnings of $83.4 million related to the revaluation of assets of seven of the
Company's multi-specialty clinics. In the first quarter of 1998, the Company
also recorded an additional charge of approximately $22.0 million relating to
these clinics that are being restructured or sold. The pre-tax charge was
partially in response to issues which arose in four of the Company's
multi-specialty clinics which represent the Company's earliest developments of
such clinics through the formation of new groups. The clinics were considered to
have an impairment of certain current assets, property and equipment, other
assets and, primarily, intangible assets as a result of certain groups of
physicians within a larger clinic terminating their relationship with the
medical group affiliated with the Company and therefore affecting future cash
flows. On July 23, 1998, the Company announced it expects to record a pre-tax
asset impairment charge of approximately $65 million in the third quarter of
1998, primarily related to the same group formation multi-specialty clinics.
This expected charge relates to continuing negative operating trends and
corresponding initiatives to dispose of these assets. At June 30, 1998, the
Company had a total of nine group formation multi-specialty clinics, which
includes the four clinics associated with the charges discussed above. The total
assets and intangible assets of the remaining five group formation clinics not
included in the asset impairment charges totaled $80.4 million and $50.4 million
at June 30, 1998, respectively. The Company has limited its growth through new
group formations, and believes recent group formations have been more
successful.
Three other clinics included in the fourth quarter of 1997 charge
represent clinics disposed of because of a variety of negative operating and
market issues including those related to market position and clinic
demographics, physician relations, operating results and ongoing viability of
the existing medical group. Although these factors have been present
individually from time to time in various affiliated clinics and could occur in
future clinic operations, the combined effect of the existence of these factors
at the clinics disposed of resulted in clinic operations that made it difficult
for the Company to effectively manage the clinics. One of these clinics was sold
in the first quarter of 1998, the second clinic in April 1998 and the third
clinic in July 1998. These assets were sold below carrying value for the reasons
noted above, and given such facts, a sale at a discount to original carrying
value was considered more cost-effective than a liquidation which might have
subjected the Company to additional costs. The Company recorded no gain or loss
on the final disposition of these assets.
The Company does not believe that the clinics included in the
14
<PAGE> 15
charges are indicative of a trend in the Company's operations or the industry in
which the Company operates. There can be no assurance, however, that in the
future a similar combination of negative characteristics will not develop at a
clinic affiliated with the Company and result in the termination of the service
agreement or that in the future additional clinics will not terminate their
relationships with the Company in a manner that may materially adversely affect
the Company.
PhyCor has been the subject of an audit by the Internal Revenue Service
("IRS") covering the years 1988 through 1993. The IRS has proposed adjustments
relating to the timing of recognition for tax purposes of certain revenue and
deductions relating to uncollectible accounts and a recharacterization of the
Company's relationship with affiliated physician groups. PhyCor disagrees with
the positions asserted by the IRS including any recharacterization and is
vigorously contesting these proposed adjustments. The Company believes that any
adjustments resulting from resolution of this disagreement would not affect
reported net earnings of PhyCor but would defer tax benefits and change the
levels of current and deferred tax assets and liabilities. For the years under
audit, and potentially, for subsequent years, any such adjustments could result
in material cash payments by the Company. PhyCor does not believe the resolution
of this matter will have a material adverse effect on its financial condition,
although there can be no assurance as to the outcome of this matter.
In April 1998, the Company completed modifications to its bank credit
facility which included the revision of certain terms and conditions. The
Company's bank credit facility provides for a five-year, $500.0 million
revolving line of credit for use by the Company prior to April 2003 for
acquisitions, working capital, capital expenditures and general corporate
purposes. The total drawn cost under the facility is either .275% to .75% above
the applicable eurodollar rate or the agent's base rate plus .10% to .225% per
annum. The total drawn cost of outstanding borrowings at June 30, 1998 was
6.36%. On October 17, 1997, the Company entered into an interest rate swap
agreement to fix the interest rate on $100 million of debt at 5.85% relative to
the three month floating LIBOR. The interest rate swap agreement matures in
October 2002 with a lender's option to terminate beginning October 1999.
The Company's bank credit facility contains covenants which, among
other things, require the Company to maintain certain financial ratios and
impose certain limitations or prohibitions on the Company with respect to (i)
the incurring of certain indebtedness, (ii) the creation of security interests
on the assets of the Company, (iii) the payment of cash dividends on, and the
redemption or repurchase of, securities of the Company, (iv) investments and (v)
acquisitions. The Company is required to obtain bank consent for an acquisition
with an aggregate purchase price of $75.0 million or more. The Company was in
compliance with such covenants at June 30, 1998.
At June 30, 1998, the Company had cash and cash equivalents of
approximately $63.3 million, and as of August 12, 1998, $154.7 million available
under its bank credit facility. The Company believes that the combination of
funds available under the Company's bank credit facility, together with cash
reserves and cash flow from operations, should be sufficient to meet the
Company's current planned capital expenditures and working capital needs over
the next year.
In addition, in order to provide the funds necessary for the continued
pursuit of the Company's long-term acquisition and expansion strategy, the
Company expects to continue to incur, from time to time, additional short-term
and long-term indebtness and to issue equity and debt securities, the
availability and terms of which will depend upon market and other conditions.
There can be no assurance that such additional financing will be available on
terms acceptable to the Company.
Forward-looking statements of PhyCor included herein or incorporated by
reference including, but not limited to, those regarding future business
prospects, the acquisition of additional clinics, the development of additional
IPAs, the adequacy of PhyCor's capital resources, the adequacy of recent and
proposed asset impairment and restructuring charges, the future profitability of
capitated fee arrangements and other statements regarding trends relating to
various revenue and expense
15
<PAGE> 16
items, could be affected by a number of risks, uncertainties, and other factors
described in the Company's Annual Report on Form 10-K, as amended on Form
10-K/A, for the year ended December 31, 1997.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
No disclosure required.
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The annual meeting of shareholders of the Company was held on Tuesday, June 2,
1998. At this meeting, the following matters were voted upon by the Company's
shareholders:
(A) AMENDMENT AND RESTATEMENT OF THE COMPANY'S AMENDED 1988 INCENTIVE STOCK
PLAN
The Company's shareholders rejected the amendment and restatement of the
Company's Amended 1988 Incentive Stock Plan to (i) increase from 17,000,000 to
18,300,000 the number of shares of Common Stock authorized thereunder, (ii)
limit the number of Awards that can be made to any employee during the calendar
year, (iii) modify the restriction on the transfer of Plan awards, other than
incentive options, to allow transfers approved by the Compensation Committee of
the Board of Directors, (iv) appoint the Compensation Committee as administrator
of the Plan, and (v) make other administrative modifications with respect to the
grant of options.
<TABLE>
<CAPTION>
Votes Cast in Favor Votes Cast Against Abstentions
------------------- ------------------ -----------
<S> <C> <C>
15,647,107 26,823,726 145,898
</TABLE>
(B) ADOPTION OF THE COMPANY'S 1998 INCENTIVE STOCK PLAN
The shareholders of the Company rejected the adoption of the Company's 1998
Incentive Stock Plan.
<TABLE>
<CAPTION>
Votes Cast in Favor Votes Cast Against Abstentions
------------------- ------------------ -----------
<S> <C> <C>
15,765,207 26,702,786 148,938
</TABLE>
(C) ELECTION OF CLASS I DIRECTORS
Winfield Dunn, C. Sage Givens, Joseph A. Hill and Richard D. Wright were elected
to serve as Class I directors of the Company. The vote was as follows:
<TABLE>
<CAPTION>
Names Votes Cast in Favor Votes Cast Against or Withheld
----- ------------------- ------------------------------
<S> <C> <C>
Winfield Dunn 54,182,989 503,335
C. Sage Givens 54,195,750 490,574
Joseph A. Hill 54,090,736 595,588
Richard D. Wright 54,095,463 590,861
</TABLE>
(D) SELECTION OF AUDITORS
The shareholders of the Company ratified the appointment of KPMG Peat Marwick
LLP as the Company's independent auditors for the fiscal year ended December 31,
1998, by the following vote:
16
<PAGE> 17
<TABLE>
<CAPTION>
Votes Cast in Favor Votes Cast Against Abstentions
------------------- ------------------ -----------
<C> <C> <C>
54,539,130 105,880 41,314
</TABLE>
ITEM 5. OTHER INFORMATION.
The deadline for delivering to the Company notice of shareholder proposals,
other than proposals to be included in the proxy statement, for the 1999 Annual
Meeting of Shareholders will be March 16, 1999, pursuant to Rule 14a-4. The
persons named as proxies in the proxy statement may exercise discretionary
authority to vote on any proposals received after such date.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------
<S> <C> <C>
3.1 -- Restated Charter of Registrant(1)
3.2 -- Amendment to Restated Charter of the Registrant (2)
3.3 -- Amendment to Restated Charter of the Registrant (3)
3.4 -- Amended Bylaws of the Registrant (1)
4.1 -- Specimen of Common Stock Certificate (4)
4.2 -- Shareholder Rights Agreement, dated February 18, 1994, between the
Registrant and First Union National Bank of North Carolina (5)
10.1 -- $500,000,000 Second Amended and Restated Credit Agreement, dated
as of April 2, 1998, among the Registrant, the Banks named therein
and Citibank, N.A .
10.2 -- Registrant's Nonqualified Stock Option Plan (6)
27.1 -- Financial Data Schedule (for SEC use only)
27.2 -- Financial Data Schedule (for SEC use only)
</TABLE>
- -------------
(1) Incorporated by reference to exhibits filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994, Commission No.
0-19786.
(2) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-3, Registration No. 33-93018.
(3) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-3, Registration No. 33-98528.
(4) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-1, Registration No. 33-44123.
(5) Incorporated by reference to exhibits filed with the Registrant's Current
Report on Form 8-K dated February 18, 1994, Commission No. 0-19786.
(6) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-8, Registration No. 333-58709.
(B) REPORTS ON FORM 8-K.
The Company filed a Current Report on Form 8-K on April 29, 1998
announcing the change in its policy with respect to amortization of intangible
assets pursuant to Item 5 of Form 8-K; and a Current Report on Form 8-K on June
3, 1998 announcing the acquisition of PrimeCare International, Inc. pursuant to
Item 2 of Form 8-K.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PHYCOR, INC.
By: /s/ John K. Crawford
------------------------------
John K. Crawford
Chief Financial Officer
Date: August 14, 1998
18
<PAGE> 19
Exhibit Index
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------
<S> <C> <C>
3.1 -- Restated Charter of Registrant(1)
3.2 -- Amendment to Restated Charter of the Registrant (2)
3.3 -- Amendment to Restated Charter of the Registrant (3)
3.4 -- Amended Bylaws of the Registrant (1)
4.1 -- Specimen of Common Stock Certificate (4)
4.2 -- Shareholder Rights Agreement, dated February 18, 1994, between the
Registrant and First Union National Bank of North Carolina (5)
10.1 -- $500,000,000 Second Amended and Restated Credit Agreement, dated
as of April 2, 1998, among the Registrant, the Banks named therein
and Citibank, N.A .
10.2 -- Registrant's Nonqualified Stock Option Plan (6)
27.1 -- Financial Data Schedule (for SEC use only)
27.2 -- Financial Data Schedule (for SEC use only)
</TABLE>
- -------------
(1) Incorporated by reference to exhibits filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994, Commission No.
0-19786.
(2) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-3, Registration No. 33-93018.
(3) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-3, Registration No. 33-98528.
(4) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-1, Registration No. 33-44123.
(5) Incorporated by reference to exhibits filed with the Registrant's Current
Report on Form 8-K dated February 18, 1994, Commission No. 0-19786.
(6) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-8, Registration No. 333-58709.
<PAGE> 1
Exhibit 10.1
EXECUTION COPY
U.S. $500,000,000
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
DATED AS OF APRIL 2, 1998
AMONG
PHYCOR, INC.,
AS BORROWER,
THE BANKS NAMED HEREIN,
AS BANKS,
AND
CITIBANK, N.A.,
AS AGENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS.................................................1
SECTION 1.01. Certain Defined Terms...............................................1
SECTION 1.02. Computation of Time Periods........................................27
SECTION 1.03. Accounting Terms...................................................27
ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES..............................................27
SECTION 2.01. The Committed Rate Advances........................................27
SECTION 2.02. The Competitive Bid Advances.......................................30
SECTION 2.03. Fees...............................................................34
SECTION 2.04. Optional Reduction of the Commitments..............................35
SECTION 2.05. Repayment..........................................................35
SECTION 2.06. Interest...........................................................35
SECTION 2.07. Interest Rate Determination and Protection.........................37
SECTION 2.08. Voluntary and Automatic Conversion of Committed Rate Advances......37
SECTION 2.09. Prepayments........................................................38
SECTION 2.10. Increased Costs....................................................39
SECTION 2.11. Illegality.........................................................40
SECTION 2.12. Payments and Computations..........................................40
SECTION 2.13. Taxes..............................................................42
SECTION 2.14. Sharing of Payments, Etc...........................................43
SECTION 2.15. Evidence of Debt/Register..........................................44
SECTION 2.16. Use of Proceeds....................................................44
SECTION 2.17. Outstanding Advances, Existing Collateral..........................44
ARTICLE III AMOUNT AND TERMS OF LETTERS OF CREDIT AND PARTICIPATIONS THEREIN..............45
SECTION 3.01. Letters of Credit..................................................45
SECTION 3.02. Issuing the Letters of Credit......................................46
SECTION 3.03. Reimbursement Obligations..........................................46
SECTION 3.04. Participations Purchased by the Banks..............................47
SECTION 3.05. Letter of Credit Fees..............................................48
SECTION 3.06. Indemnification: Nature of the Issuing Bank's Duties...............49
SECTION 3.07. Increased Costs....................................................50
SECTION 3.08. Uniform Customs and Practice.......................................51
ARTICLE IV CONDITIONS OF LENDING..........................................................51
SECTION 4.01. Conditions Precedent to Any Borrowing and Letter of Credit.........51
SECTION 4.02. Conditions Precedent to Initial Advances...........................52
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE V REPRESENTATIONS AND WARRANTIES..................................................54
SECTION 5.01. Representations and Warranties of the Borrower.....................54
ARTICLE VI COVENANTS OF THE BORROWER......................................................58
SECTION 6.01. Affirmative Covenants..............................................58
SECTION 6.02. Negative Covenants.................................................61
SECTION 6.03. Financial Covenants................................................72
SECTION 6.04. Reporting Requirements.............................................74
ARTICLE VII EVENTS OF DEFAULT.............................................................76
SECTION 7.01. Events of Default..................................................76
ARTICLE VIII THE AGENT....................................................................80
SECTION 8.01. Authorization and Action...........................................80
SECTION 8.02. Agent's Reliance, Etc..............................................80
SECTION 8.03. Citibank and Affiliates............................................81
SECTION 8.04. Bank Credit Decision...............................................81
SECTION 8.05. Indemnification....................................................81
SECTION 8.06. Successor Agent/Issuing Bank.......................................82
SECTION 8.07. Documentation Agent................................................83
ARTICLE IX MISCELLANEOUS..................................................................83
SECTION 9.01. Amendments, Etc....................................................83
SECTION 9.02. Notices, Etc.......................................................84
SECTION 9.03. No Waiver: Remedies................................................84
SECTION 9.04. Costs, Expenses and Taxes..........................................84
SECTION 9.05. Right of Set-off...................................................85
SECTION 9.06. Indemnification....................................................86
SECTION 9.07. Binding Effect.....................................................87
SECTION 9.08. Assignments and Participations.....................................87
SECTION 9.09. Headings...........................................................90
SECTION 9.10. Confidentiality....................................................90
SECTION 9.11. Severability of Provisions.........................................91
SECTION 9.12. Independence of Provisions.........................................91
SECTION 9.13. Consent to Jurisdiction............................................91
SECTION 9.14. GOVERNING LAW......................................................92
SECTION 9.15. WAIVER OF JURY TRIAL...............................................92
SECTION 9.16. Execution in Counterparts..........................................92
</TABLE>
ii
<PAGE> 4
SCHEDULES
Schedule I - Real Property
Schedule II - Subsidiaries
Schedule III - Service Agreements
Schedule IV - Existing Debt
Schedule V - Existing Liens
Schedule VI - Litigation
Schedule VII - Existing Letters of Credit
iii
<PAGE> 5
EXHIBITS
Exhibit A-1 - Form of Committed Rate Note
Exhibit A-2 - Form of Competitive Bid Note
Exhibit B-1 - Form of Notice of Borrowing
Exhibit B-2 - Form of Competitive Bid Request
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Subordination Agreement
Exhibit E - Forms of Opinion of Counsel
Exhibit F - Form of Acquisition Approval Letter
Exhibit G - Form of Consent
iv
<PAGE> 6
Second Amended and Restated Revolving Credit Agreement, dated as of
April 2, 1998 (this "Agreement"), among PHYCOR, INC., a Tennessee corporation
(the "Borrower"), the banks (the "Banks") listed on the signature pages hereof
and from time to time parties hereto, and CITIBANK, N.A. ("Citibank"), as an
Issuing Bank hereunder, SunTrust Bank, Nashville, N.A., as the Swing Line Bank
hereunder, Citibank, as administrative agent (the "Agent") for the Banks and the
Issuing Banks and NationsBank, N.A., as documentation agent (the "Documentation
Agent").
PRELIMINARY STATEMENT
The Borrower has requested that the Amended and Restated Revolving
Credit Agreement, dated as of July 1, 1997, as amended by the First Amendment
dated as of February 13, 1998, among the Borrower, the banks named therein,
NationsBank, N.A., as documentation agent, and Citibank, as an issuing bank
thereunder and as agent (the "Existing Credit Agreement"), be amended and
restated to provide for the making of advances to it and to provide for the
issuance of letters of credit for its account under a revolving credit facility
in the principal amount of up to $500,000,000 to refinance certain existing debt
of the Borrower and to provide financing to the Borrower for general corporate
purposes, on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"$100,000,000 Synthetic Lease Facility" means the agreements
and instruments, as amended, supplemented, restated or otherwise
modified from time to time, providing financing for the acquisition and
construction of property for physician clinics, medical offices and
corporate offices, pursuant to which Borrower and/or one of more of its
Subsidiaries shall lease such properties under one or more synthetic
lease and under which the maximum amount of obligations issued to note
holders and certificate holders shall not exceed $100,000,000.
"Accounts" means all present and future rights of the Borrower
or any Subsidiary of the Borrower to payment for goods (including
medications) sold or leased or for services rendered pursuant to any
Service Agreement (except
<PAGE> 7
those evidenced by instruments or chattel paper), whether now existing
or hereafter arising and wherever arising and whether or not earned by
performance (including, without limitation, accounts receivable
purchased by the Borrower or any of its Subsidiaries from any
physician group which has entered into a Service Agreement with the
Borrower or such Subsidiary).
"Administrative Details Reply Form" means, with respect to
each Bank, an administrative questionnaire in the form prepared by the
Agent, submitted by such Bank to the Agent (with a copy to the
Borrower) and duly completed by such Bank.
"Advance" means a Committed Rate Advance, Competitive Bid
Advance or a Swing Line Advance. In the case of Committed Rate
Advances, "Advance" also refers to a Base Rate Advance or Eurodollar
Rate Advance (each of which shall be a "Type" of Committed Rate
Advance). In the case of Competitive Bid Advances, "Advance" also
refers to a Fixed Rate Advance or a LIBOR Advance (each of which shall
be a "Type" of Competitive Bid Advance).
"Affiliate" means, with respect to any Person, any other
entity that, directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such
Person.
"Agent" has the meaning specified in the recital of parties
to this Agreement.
"Applicable Eurodollar Rate Margin" means, for the Initial
Effective Period (as defined below), 0.4375% per annum and thereafter
0.5250% per annum; provided, however, that if the Borrower shall have
satisfied the Consolidated Debt/EBITDA Ratio test indicated in the
table below, the Applicable Eurodollar Rate Margin for any Advance, as
applicable, made on or after the fifth Business Day after the delivery
of quarterly certified Consolidated financial statements and a schedule
evidencing financial covenant compliance delivered to the Banks
pursuant to Section 6.04(a) (each a "Quarterly Delivery"), and while
the Borrower is in compliance with Section 6.04(a), shall be the
percentage rate per annum set forth opposite the appropriate test for
the fiscal quarter reported on for such Quarterly Delivery for such
Advance in the table below.
2
<PAGE> 8
<TABLE>
<CAPTION>
Applicable Eurodollar
Consolidated Rate Margin for
Debt/EBITDA Ratio Advances
-------------------------------------- ---------------------
<S> <C>
Greater than 3.25 to 1.00 0.5250%
Less than or equal to 3.25 to 1.00 but 0.4375%
greater than 2.50 to 1.00
Less than or equal to 2.50 to 1.00 but 0.3250%
greater than 2.00 to 1.00
Less than or equal to 2.00 to 1.00 but 0.2875%
greater than 1.50 to 1.00
Less than or equal to 1.50 to 1.00 0.2500%
</TABLE>
The Applicable Eurodollar Rate Margin shall be determined by
the Agent each quarter on the basis of quarterly certified Consolidated
financial statements and a schedule evidencing financial covenant
compliance delivered to the Banks pursuant to Section 6.04(b). The
"Initial Effective Period" shall be the period commencing on the
Closing Date and ending the fifth Business Day after the Quarterly
Delivery for the fiscal quarter ended March 31, 1998. Notwithstanding
the foregoing, the Applicable Eurodollar Rate Margin shall be deemed to
be 0.5250% per annum in respect of Advances made on any day as of which
the deliveries required to calculate the Applicable Eurodollar Rate
Margin shall not have been made.
"Applicable Facility Fee Rate" means for the Initial Effective
Period 0.1875% per annum and thereafter for each Effective Period (as
defined below) 0.2250% per annum; provided, however, that if the
Borrower shall have satisfied the Consolidated Debt/EBITDA Ratio test
indicated in the table below, the Applicable Facility Fee Rate for the
Effective Period as to which such test is satisfied shall be the
percentage rate per annum set forth opposite the appropriate test for
the Commitment in the table below.
3
<PAGE> 9
<TABLE>
<CAPTION>
Applicable Facility Fee
Consolidated Rate for
Debt/EBITDA Ratio Advances
-------------------------------------- -----------------------
<S> <C>
Greater than 3.25 to 1.00 0.2250%
Less than or equal to 3.25 to 1.00 but 0.1875%
greater than 2.50 to 1.00
Less than or equal to 2.50 to 1.00 but 0.1750%
greater than 2.00 to 1.00
Less than or equal to 2.00 to 1.00 but 0.1500%
greater than 1.50 to 1.00
Less than or equal to 1.50 to 1.00 0.1250%
</TABLE>
The Applicable Facility Fee Rate shall be determined by the Agent each
quarter on the basis of quarterly certified Consolidated financial
statements and a schedule evidencing financial covenant compliance
delivered to the Banks pursuant to Section 6.04(b). The "Effective
Period" with respect to the Applicable Facility Fee Rate shall be the
period commencing on the fifth Business Day after the Borrower shall
have delivered to the Agent the quarterly certified Consolidated
financial statements and financial covenant compliance schedule for
such quarter and ending on the date that is five Business Days after
delivery to the Agent of quarterly certified Consolidated financial
statements and financial covenant compliance certificate for the
subsequent quarter. Notwithstanding the foregoing, the Applicable
Facility Fee Rate shall be deemed to be 0.2250% per annum for each day
during an Effective Period as of which the deliveries required to
calculate the Applicable Facility Fee Rate shall not have been made.
"Applicable Lending Office" means, with respect to each Bank,
such Bank's Domestic Lending Office in the case of a Base Rate Advance
or a Fixed Rate Advance and such Bank's Eurodollar Lending Office in
the case of a Eurodollar Rate Advance or a LIBOR Advance.
"Asset Purchase Agreement" means any agreement between the
Borrower or any of its Subsidiaries and any Person relating to the
purchase by the Borrower or any of its Subsidiaries of the assets of
any Facility or Related Business.
"Assignment and Acceptance" means an assignment and acceptance
entered into by an assigning Bank and an Eligible Assignee, and
accepted by the Agent, in accordance with Section 9.08 and in
substantially the form of Exhibit C.
4
<PAGE> 10
"Banks" means the banks listed on the signature pages hereof
and, after the date hereof, includes each Eligible Assignee that has
entered into an Assignment and Acceptance which has been accepted by
the Agent.
"Base Rate" means, for any period, a fluctuating interest rate
per annum as shall be in effect from time to time which rate per annum
shall at all times be equal to the highest of:
(a) the rate of interest announced publicly by
Citibank in New York, New York, from time to time, as
Citibank's base rate; or
(b) 1/2 of one percent per annum above the latest
three-week moving average of secondary market morning offering
rates in the United States for three-month certificates of
deposit of major United States money market banks, such
three-week moving average being determined weekly on each
Monday (or, if any such day is not a Business Day, on the next
succeeding Business Day) for the three-week period ending on
the previous Friday by Citibank on the basis of such rates
reported by certificate of deposit dealers to and published by
the Federal Reserve Bank of New York or, if such publication
shall be suspended or terminated, on the basis of quotations
for such rates received by Citibank from three New York
certificate of deposit dealers of recognized standing selected
by Citibank in either case adjusted to the nearest 1/16 of one
percent or, if there is no nearest 1/16 of one percent, to the
next higher 1/16 of one percent; or
(c) the Federal Funds Rate plus 1/2 of one percent.
"Base Rate Advance" means a Committed Rate Advance which bears
interest as provided in Section 2.06(a)(i).
"Bid Due Date" has the meaning set forth in Section 2.02(c).
"Borrowing" means a Borrowing that is a Committed Rate
Borrowing, a Competitive Bid Borrowing or a Swing Line Borrowing.
"Business Day" means a day of the year on which banks are not
required or authorized to close in New York City and, if the applicable
Business Day relates to any Eurodollar Rate Advances or LIBOR Advances,
on which dealings in dollar deposits are carried on in the London
interbank market.
"Capital Expenditures" means, with respect to any Person for
any period, the aggregate of all expenditures paid or accrued by such
Person during such period that, in accordance with generally accepted
accounting principles, should be included in or reflected by the
property, plant or
5
<PAGE> 11
equipment or similar fixed asset account reflected in the balance
sheet of such Person.
"Capital Investments" means (without duplication), with
respect to any Person for any period, the aggregate of all investments
by such Person in (i) Capital Expenditures, (ii) joint ventures,
general or limited partnerships, limited liability companies or any
other type of Person that is not a Subsidiary, including loans and
advances to such Person (including loans and advances to any physician
group or other third party related to a Facility or Related Business,
or any third party with whom such Person has entered into a Service
Agreement), (iii) capital investments in, and loans and advances to, a
Subsidiary which becomes a Subsidiary as a result of such investment,
(iv) the purchase of the homes of employees of such Person in
connection with the relocation of such employees, and (v) Existing
Clinic Acquisitions.
"Capital Lease" of any Person means any lease of any property
(whether real, personal or mixed) by such Person as lessee, which lease
should, in accordance with generally accepted accounting principles, be
required to be accounted for as a capital lease on the balance sheet of
such Person. The leases included in the $100,000,000 Synthetic Lease
Facility shall be deemed not to be Capital Leases.
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. ss. 9601
et seq.), and any regulations promulgated thereunder.
"Change of Control" means the occurrence, after the date of
this Agreement, of (i) any Person or two or more Persons acting in
concert acquiring beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended), directly or indirectly, of
securities of the Borrower (or other securities convertible into such
securities) representing 50% or more of the combined voting power of
all securities of the Borrower entitled to vote in the election of
directors; or (ii) during any period of up to 24 consecutive months,
commencing before or after the date of this Agreement, individuals who
at the beginning of such 24-month period were directors of the Borrower
ceasing for any reason to constitute a majority of the Board of
Directors of the Borrower unless the Persons replacing such individuals
were nominated by the Board of Directors of the Borrower; or (iii) any
Person or two or more Persons acting in concert acquiring by contract
or otherwise, or entering into a contract or arrangement which upon
consummation will result in its or their acquisition of, or control
over, securities of the Borrower (or other securities convertible into
such securities) representing 50% or more of the combined voting power
of all securities of the Borrower entitled to vote in the election of
directors.
6
<PAGE> 12
"Closing Date" means the Business Day on which all of the
conditions set forth in Section 4.02 shall have been fulfilled.
"Committed Rate Advance" means an Advance pursuant to
Section 2.01.
"Committed Rate Borrowing" means a Borrowing pursuant to
Section 2.01.
"Committed Rate Note" means a promissory note of the Borrower
payable to the order of a Bank, in substantially the form of Exhibit
A-1, evidencing the aggregate indebtedness of the Borrower to such Bank
resulting from the Committed Rate Advances made by such Bank, and
"Committed Rate Notes" means such promissory notes collectively.
"Commitment" means, as to any Bank, the amount of commitment
to make Committed Rate Advances or participate in Letters of Credit set
forth opposite such Bank's name on the signature pages hereof or, if
such Bank has entered into one or more Assignments and Acceptances, the
amount thereof set forth for such Bank in the Register maintained by
the Agent pursuant to Section 9.08(c), as such amount may be reduced
from time to time pursuant to Section 2.04.
"Commitment Percentage" means, as to any Bank, the percentage
equal to such Bank's Commitment divided by the aggregate Commitments of
all Banks.
"Common Stock" means Securities having ordinary voting power
for the election of directors that are not entitled to any preference
as to dividends or other distributions or on liquidation.
"Competitive Bid" has the meaning set forth in Section
2.02(c).
"Competitive Bid Advance" means an Advance made pursuant to
Section 2.02.
"Competitive Bid Borrowing" means a Borrowing pursuant to
Section 2.02.
"Competitive Bid Reduction" has the meaning set forth in
Section 2.01(a).
"Competitive Bid Note" means a promissory note of the Borrower
payable to the order of a Designated Bidder, in substantially the form
of Exhibit A-2, evidencing the indebtedness of the Borrower to such
Designated Bidder resulting from Competitive Bid Advances made by such
Designated
7
<PAGE> 13
Bidder, and "Competitive Bid Notes" means such promissory notes
collectively.
"Competitive Bid Request" has the meaning set forth in
Section 2.02(b).
"Consolidated" and any derivative thereof each means, with
reference to the accounts or financial reports of any Person, the
consolidated accounts or financial reports of such Person and each
Subsidiary of such Person determined in accordance with generally
accepted accounting principles, including principles of consolidation,
consistent with those applied in the preparation of the Borrower's
December 31, 1996 Consolidated financial statements delivered to the
Banks prior to the date hereof.
"Contingent Obligation" of any Person means, without
duplication, (i) any direct or indirect liability, contingent or
otherwise, of such Person with respect to any obligation of the type
specified in clause (ii) or (iii) below or other obligation of another
Person, including, without limitation, any obligation directly or
indirectly guaranteed, endorsed (other than for collection or deposit
in the ordinary course of business), co-made, discounted or sold with
recourse by such Person, or in respect of which such Person is
otherwise directly or indirectly liable (including, without limitation,
liable through any agreement to purchase, repurchase or otherwise
acquire such obligation or provide or purchase any security therefor,
or to provide funds for the payment or discharge of such obligation, or
to maintaining any financial condition of the obligor of such
obligation, or to make payment for any products, materials or supplies
or for any transportation, services or lease (regardless of the
non-delivery or non-furnishing thereof), in any such case if the
purpose or intent of such agreement is to provide assurance that such
obligation will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such obligation
will be protected against loss in respect thereof), (ii) obligations of
such Person with respect to undrawn letters of credit or unpaid
bankers' acceptances, bankers' assurances or guarantees or similar
items, and (iii) obligations of such Person with respect to any
interest rate protection, hedge, cap, collar or similar agreement or
any foreign exchange or forward sale agreement, or any similar
agreement.
"Convert", "Conversion" and "Converted" each refers to a
conversion of Advances of one Type into Advances of another Type
pursuant to Section 2.07 or 2.08.
"Current Liabilities" of any Person means, as of any date of
determination, (i) all Debt (excluding any Debt under Operating Leases)
which by its terms is payable on demand or matures within one year from
the
8
<PAGE> 14
date of creation (excluding any Debt renewable or extendible, at the
exclusive option of the debtor, to a date more than one year from such
date or arising under a revolving credit or similar agreement that
unconditionally obligates the lender or lenders to extend credit in
respect thereof during a period of more than one year from such date),
and (ii) all other items (including taxes accrued as estimated) which
in accordance with generally accepted accounting principles should be
included as current liabilities of such Person, in each case, including
all amounts required to be paid or prepaid with respect to any Debt of
such Person within one year from the date of determination.
"Debt" of any Person means, without duplication, (i) all
indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (but excluding, in the case of
the acquisition of any Facility (or the assets thereof), any Existing
Clinic Acquisition or the acquisition of a Related Business, any
contingent obligation to make payments (other than deferred purchase
price payments) after the closing of such acquisition), (ii) all
obligations of such Person in connection with any agreement to
purchase, redeem, exchange, convert or otherwise acquire for value any
Securities of such Person or any warrants, rights or options to acquire
such Securities, now or hereafter outstanding, (iii) all obligations of
such Person evidenced by bonds, notes, debentures, convertible
debentures or other similar instruments, (iv) all indebtedness created
or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even though
the rights and remedies of the seller or lender under such agreement in
the event of default, acceleration, or termination are limited to
repossession or sale of such property), (v) all obligations of such
Person under Capital Leases, (vi) the amount of all Contingent
Obligations (other than guarantees of medical group real property
leases at Facilities to the extent the amount thereof incurred in any
twelve-month period does not exceed $5,000,000 in the aggregate), (vii)
all Debt referred to in clause (i), (ii), (iii), (iv), (v) or (vi)
above secured by (or for which the holder of such Debt has an existing
right, contingent or otherwise, to be secured by) any lien, security
interest or other charge or encumbrance upon or in property (including,
without limitation, accounts and contract rights) owned by such Person,
even though such Person has not assumed or become liable for the
payment of such Debt, (viii) all mandatorily redeemable preferred
stock, valued at the applicable redemption price, plus accrued and
unpaid dividends payable in respect of such mandatorily redeemable
preferred stock, (ix) if an ERISA Event shall have occurred with
respect to any Plan, the Insufficiency (if any) of such Plan (or, in
the case of a Plan with respect to which an ERISA Event described in
clauses (iii) through (vi) of the definition of ERISA Event shall have
occurred, the liability related thereto), and (x) net obligations under
any interest rate, currency or other protection, hedge, cap, collar,
swap or similar agreement. The obligations of Borrower
9
<PAGE> 15
and its Subsidiaries under the $100,000,000 Synthetic Lease Facility
shall be deemed not to be Debt.
"Debt/EBITDA Ratio" of any Person means, at any date of
determination, the ratio that (a) the sum of (i) such Person's total
Debt outstanding at such date of determination (including, without
limitation, all Subordinated Debt other than, in the case of the
Borrower and its Subsidiaries, the Excluded Convertible Acquisition
Debt), and (ii) the aggregate amount of such Person's Synthetic Lease
Attributable Indebtedness at such date, less (iii) the amount, if any,
by which such Person's unrestricted cash and cash equivalents exceeds
$15,000,000 at such date of determination, bears to (b) the sum of (i)
such Person's EBITDA and (ii) such Person's Lease Expense under the
$100,000,000 Synthetic Lease Facility for the period for which EBITDA
is determined.
"Deferred Acquisition Consideration" means, in the case of the
acquisition of any Facility (or the assets thereof) or any Related
Business, all deferred cash and non-cash consideration to be paid by
the Borrower or any of its Subsidiaries after the closing of such
acquisition; provided that Deferred Acquisition Consideration shall not
include any contingent payments that may be made by the Borrower or any
of its Subsidiaries after such closing.
"Designated Bidder" means each Bank (or its nominee so long as
the beneficial interest in the Competitive Bid Advances held by such
nominee is retained by such Bank) unless such Bank has elected, by
notice in writing to the Agent, the other Banks and the Borrower, not
to be a potential bidder in respect of Competitive Bid Advances. Any
such election may be terminated, at any time, by notice in writing to
the Agent, the other Banks and the Borrower.
"Documentation Agent" means NationsBank, N.A.
"Domestic Lending Office" means, with respect to any Bank, the
office of such Bank specified as its "Domestic Lending Office" in its
Administrative Details Reply Form or on the signature page of the
Assignment and Acceptance pursuant to which it became a Bank, or such
other office or Affiliate of such Bank as such Bank may from time to
time specify to the Borrower and the Agent.
"EBITDA" means, with respect to any Person for any fiscal
period, the sum (without duplication) of (i) Net Income (whether
positive or negative), plus (ii) Interest Expense, plus (iii) income
tax expense, plus (iv) depreciation expense, plus (v) amortization
expense, plus (vi) extraordinary losses (determined in accordance with
generally accepted accounting principles), minus (vii) extraordinary
gains (determined in accordance with generally
10
<PAGE> 16
accepted accounting principles), plus (viii) in the case of the fiscal
quarter ending December 31, 1997, the aggregate amount of any
reduction in Net Income attributable to any charge for the revaluation
of assets made in accordance with generally accepted accounting
principles in connection with the restructuring of operations,
provided that such charge shall not exceed $83,000,000 (prior to any
adjustment for income taxes), plus (ix) in the case of the fiscal
quarter ending March 31, 1998, the aggregate amount of expense
incurred in respect of (a) the termination of the Borrower's announced
merger agreement with MedPartners, Inc. and (b) the Borrower's
restructuring and consolidation of certain clinic operations, provided
that such expense shall not exceed $37,000,000 (prior to any
adjustment for income taxes).
"EBITDAL" means, with respect to any Person for any fiscal
period, the sum (without duplication) of EBITDA plus Lease Expense.
"Eligible Assignee" means (i) a commercial bank organized
under the laws of the United States, or any state thereof, having a
combined capital and surplus of at least $100,000,000; (ii) a savings
and loan association or savings bank organized under the laws of the
United States or any state thereof; and having a combined capital and
surplus of at least $100,000,000; (iii) a commercial bank organized
under the laws of any other country which is a member of the OECD, or a
political subdivision of any such country, and having a combined
capital and surplus of at least $100,000,000, provided that such bank
is acting through a branch, agency or Affiliate located in the United
States or managed and controlled by a branch, agency or affiliate
located in the United States; (iv) any Affiliate of any Bank if such
Affiliate has Total Assets in excess of $100,000,000; (v) any insurance
company organized under the laws of the United States or any state
thereof, and having Total Assets in excess of $100,000,000 and any
other commercial financial entity having Total Assets in excess of
$100,000,000; and (vi) any other Person mutually agreed to in writing
by the Borrower and the Agent.
"Environmental Activity" means any past, present or future
storage, holding, existence, release, threatened release, emission,
discharge, generation, processing, abatement, disposition, handling or
transportation of any Hazardous Substance (i) from, under, into or on
any Facility, or (ii) relating to any Facility, or the ownership, use,
operation or occupancy thereof, or any threat of such activity.
"Environmental Laws" means any and all laws, statutes,
ordinances, rules, regulations, judgments, orders, decrees, permits,
licenses, or other governmental restrictions or requirements relating
to the environment, any Hazardous Substance or any Environmental
Activity in effect in any and all jurisdictions in which the Borrower
or any of its Subsidiaries is or from time
11
<PAGE> 17
to time may be doing business, or where any of the Facilities are from
time to time located, including, without limitation, CERCLA and RCRA.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA Affiliate" means any Person who for purposes of Title
IV of ERISA is a member of the Borrower's controlled group, or under
common control with the Borrower, within the meaning of Section 414 of
the Internal Revenue Code of 1986, as amended from time to time, and
the regulations promulgated pursuant thereto and the rulings issued
thereunder.
"ERISA Event" means (i) the occurrence of a reportable event,
within the meaning of Section 4043 of ERISA, unless the 30-day notice
requirement with respect thereto has been waived by the PBGC; (ii) the
provision by the administrator of any Plan of a notice of intent to
terminate such Plan, pursuant to Section 4041(a)(2) of ERISA (including
any such notice with respect to a plan amendment referred to in Section
4041(e) of ERISA); (iii) the cessation of operations at a facility in
the circumstances described in Section 4062(e) of ERISA; (iv) the
withdrawal by the Borrower or an ERISA Affiliate from a Multiple
Employer Plan during a plan year for which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA; (v) the failure by
the Borrower or any ERISA Affiliate to make a material payment to a
Plan required under Section 302(f)(1) of ERISA; (vi) the adoption of an
amendment to a Plan requiring the provision of initial or additional
security to such Plan, pursuant to Section 307 of ERISA; or (vii) the
institution by the PBGC of proceedings to terminate a Plan, pursuant to
Section 4042 of ERISA, or the occurrence of any event or condition
which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, a Plan.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
"Eurodollar Lending Office" means, with respect to any Bank,
the office of such Bank specified as its "Eurodollar Lending Office" in
its Administrative Details Reply Form or on the signature page of the
Assignment and Acceptance pursuant to which it became a Bank (or, if no
such office is specified, its Domestic Lending Office), or such other
office of such Bank as such Bank may from time to time specify to the
Borrower and the Agent.
"Eurodollar Rate" means, for any Interest Period for each
Eurodollar Rate Advance or LIBOR Advance comprising part of the same
Borrowing, an
12
<PAGE> 18
interest rate per annum obtained by dividing (i) the rate of interest
determined by the Agent to be equal to the average (rounded upward to
the nearest whole multiple of 1/16 of one percent per annum, if such
average is not such a multiple) of the rate per annum at which
deposits in United States dollars are offered by the principal office
of Citibank in London to prime banks in the London interbank market at
11:00 A.M. (London time) two Business Days before the first day of
such Interest Period in an amount substantially equal to the Advance
comprising part of such Borrowing and for a period equal to such
Interest Period by (ii) a percentage equal to 100% minus the
Eurodollar Rate Reserve Percentage for such Interest Period. The
Eurodollar Rate for any Interest Period for each Eurodollar Rate
Advance or LIBOR Advance comprising part of the same Borrowing shall
be determined by the Agent on the basis of applicable rates furnished
to and received by the Agent from Citibank two Business Days before
the first day of such Interest Period, subject, however, to the
provisions of Section 2.07.
"Eurodollar Rate Advance" means a Committed Rate Advance which
bears interest as provided in Section 2.06(a)(ii).
"Eurodollar Rate Reserve Percentage" of any Bank for any
Interest Period for any Eurodollar Rate Advance or LIBOR Advance means
the reserve percentage applicable during such Interest Period (or if
more than one such percentage shall be so applicable, the daily average
of such percentages for those days in such Interest Period during which
any such percentage shall be so applicable) under regulations issued
from time to time by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental
or other marginal reserve requirement) for such Bank with respect to
liabilities or assets consisting of or including Eurocurrency
Liabilities having a term equal to such Interest Period.
"Event of Default" has the meaning specified in Section 7.01.
"Excluded Convertible Acquisition Debt" means the subordinated
convertible notes issued by the Borrower or any of its Subsidiaries as
consideration for the acquisition of Facilities that, at any date of
determination, are convertible into shares of the Borrower's common
stock having a Market Value, as of such date, equal to 140% of the
conversion price of such notes.
"Existing Clinic Acquisition" means the acquisition of an
additional Facility or single-specialty clinic, or the assets thereof,
by the Borrower or a Subsidiary of the Borrower which already owns and
operates one or more
13
<PAGE> 19
Facilities, or the addition of physicians to such Facilities, which
acquisition or addition will supplement the operations of the existing
Facilities.
"Facility" means any multi-specialty medical clinic (including
any satellite locations and all real, personal and mixed property
relating to any such clinic) and related businesses certain of the
assets of which are now owned or leased and operated or hereafter owned
or leased and operated by the Borrower or any existing or future
Subsidiary of the Borrower or, in the case of an acquisition, that such
a Subsidiary intends to acquire.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is
a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Fixed Charge Coverage Ratio" of any Person means, at any date
of determination for any period, the ratio that such Person's EBITDAL
for such period, bears to such Person's Interest Expense for such
period plus Lease Expense for such period.
"Fixed Rate" has the meaning set forth in Section 2.02(c).
"Fixed Rate Advance" means a Competitive Bid Advance which
bears interest as provided in Section 2.06(b).
"Funded Debt" of any Person means Debt (including, without
limitation, all Subordinated Debt other than, in the case of the
Borrower and its Subsidiaries, the Excluded Convertible Acquisition
Debt) which matures more than one year from the date of determination
or matures within one year from such date but is renewable or
extendible, at the option of such Person, to a date more than one year
from such date or arises under a revolving credit or similar agreement
which obligates the lender or lenders to extend credit during a period
of more than one year from such date, including, without limitation,
all amounts of Funded Debt required to be paid or prepaid within one
year from the date of determination.
"Guarantors" means the Subsidiaries listed on Schedule II
hereto and each other Subsidiary that from time to time may enter into
a Guaranty pursuant hereto; provided that Immaterial Subsidiaries shall
not be required to be Guarantors; and provided further that Arnett
Health Systems, Inc. and its Subsidiaries as of the date hereof (the
"Arnett Subsidiaries") shall not be
14
<PAGE> 20
Guarantors so long as less than 3.0% of the EBITDA of the Borrower and
its Subsidiaries (calculated on a rolling four quarter basis) is
attributable to their interests in the Arnett Subsidiaries.
"Guaranty" means the Guaranty dated as of July 1, 1997 made by
each of the Loan Parties (other than the Borrower) in favor of the
Agent, as amended, supplemented, restated or otherwise modified from
time to time.
"Hazardous Substance" means (i) any hazardous substance and
toxic substance as such terms are presently deemed or used in ss.
101(14) of CERCLA (42 U.S.C. ss. 9601(14)), in 33 U.S.C. ss. 1251 et
seq. (Clean Water Act), or 15 U.S.C. ss. 2601 et seq. (Toxic Substances
Control Act), (ii) any additional substances or materials which are now
or hereafter hazardous or toxic substances under any applicable laws,
and (iii) as of any date of determination, any additional substances or
materials which are hereafter incorporated in or added to the
definition or use of "hazardous substance" or "toxic substance" for
purposes of CERCLA or any other applicable law.
"Immaterial Subsidiary" means a Subsidiary of the Borrower
that, on a Consolidated basis with its Subsidiaries, as of the end of
each fiscal quarter, does not account for 1% or more of the
Consolidated Total Assets of the Borrower or 1% or more of the
Consolidated total revenues of the Borrower, as determined in
accordance with generally accepted accounting principles; provided that
if as of the end of any fiscal quarter the Immaterial Subsidiaries
shall account, in the aggregate, for 5% or more of the Consolidated
Total Assets of the Borrower or 5% or more of the Consolidated total
revenues of the Borrower as so determined, the Borrower shall promptly,
by written notice to the Agent, designate one or more of such
Subsidiaries not to be Immaterial Subsidiaries so that the Immaterial
Subsidiaries do not account for 5% or more of such Consolidated Total
Assets or such Consolidated total revenues, and the subsidiaries so
designated shall thereupon cease to be Immaterial Subsidiaries.
"Indemnitee" or "Indemnitees" has the meaning set forth in
Section 9.06.
"Insufficiency" means, with respect to any Plan, the amount,
if any, of its unfunded benefit liabilities, as defined in Section
4001(a)(18) of ERISA.
"Intercompany Creditor" means PhyCor of Nashville, Inc., a
Tennessee corporation and wholly owned Subsidiary of the Borrower.
"Intercompany Debt" means any and all indebtedness from time
to time owed (i) to the Borrower by any of its Subsidiaries, (ii) to
the Intercompany Creditor by any other Subsidiary of the Borrower, or
(iii) to any Subsidiary of the Borrower by the Borrower, including any
investments
15
<PAGE> 21
by the Borrower in any of its Subsidiaries to the extent such
investments are made in the form of loans or advances by the Borrower
to such Subsidiary. All Intercompany Debt shall be payable on demand.
"Intercompany Subordination Agreement" means the Intercompany
Subordination Agreement dated as of July 1, 1997 among the Borrower and
each of its Subsidiaries, other than, subject to Section 6.01(j),
Immaterial Subsidiaries, as the same may be amended, supplemented or
otherwise modified from time to time.
"Interest Expense" of any Person means the aggregate amount of
interest paid, accrued or scheduled to be paid or accrued in respect of
any Debt (including the interest portion of rentals under Capital
Leases, but excluding, in the case of the Borrower and its
Subsidiaries, any interest paid, accrued or scheduled to be paid or
accrued in respect of the Excluded Convertible Acquisition Debt to the
extent, and only to the extent, that such interest is offset by a
corresponding increase in fees payable to the Borrower or its
Subsidiary pursuant to the Service Agreement relating to such
acquisition) and all but the principal component of payments in respect
of conditional sales, equipment trust or other title retention
agreements paid, accrued or scheduled to be paid or accrued by such
Person, in each case determined in accordance with generally accepted
accounting principles.
"Interest Period" means, for each Eurodollar Rate Advance or
LIBOR Advance, as the case may be, comprising part of the same
Borrowing, the period commencing on the date of such Advance or, in the
case of a Eurodollar Rate Advance, the date of the Conversion of any
Advance into such Type of Advance and ending on the last day of the
period selected by the Borrower pursuant to the provisions below and,
thereafter, in the case of a Eurodollar Rate Advance, each subsequent
period commencing on the last day of the immediately preceding Interest
Period and ending on the last day of the period selected by the
Borrower pursuant to the provisions below. The duration of each such
Interest Period shall be one, two, three or six months in the case of a
Eurodollar Rate Advance or a LIBOR Advance; provided, however, that:
(i) the Borrower may not select any Interest Period
which ends after the Revolver Termination Date;
(ii) Interest Periods commencing on the same date for
Advances comprising part of the same Committed Rate Borrowing
shall be of the same duration;
(iii) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the
last day of such Interest Period shall be extended to occur on
the next succeeding
16
<PAGE> 22
Business Day; provided, in the case of any Interest Period for
a Eurodollar Rate Advance or LIBOR Advance, that if such
extension would cause the last day of such Interest Period to
occur in the next following calendar month, the last day of
such Interest Period shall occur on the next preceding
Business Day; and
(iv) the Borrower may not have more than eight
Eurodollar Rate Borrowings outstanding on any given date.
"Investment Grade" means a rating of Debt of at least BBB by
Standard & Poor's Ratings Group or Baa2 by Moody's Investors
Service, Inc.
"Issue" means, with respect to any Letter of Credit, either to
issue, or to extend the expiry of, or to renew, or to increase the
amount of, such Letter of Credit, and the term "Issued" or "Issuance"
shall have corresponding meanings.
"Issuing Bank" means (i) Citibank or any Affiliate of Citibank
that may from time to time Issue Letters of Credit for the account of
the Borrower and (ii) any other Bank that agrees in writing to act as
an Issuing Bank hereunder with the written consent of the Borrower, the
Majority Banks and the Agent.
"Lease" means any lease, rental contract, occupancy agreement,
license or other arrangement pursuant to which any Person occupies or
has the right to occupy all or any part of the Real Property.
"Lease Expense" of any Person means all payments made by such
Person under Operating Leases. For the purpose of calculating the Fixed
Charge Coverage Ratio of the Borrower and its Subsidiaries, Lease
Expense shall refer to all payments made by (i) PhyCor Vero Beach
pursuant to that certain Lease entered into by and between PhyCor Vero
Beach and Healthcare Realty Trust, (ii) the Borrower and/or any of its
Subsidiaries under the leases included in the $100,000,000 Synthetic
Lease Facility and (iii) the Borrower or any of its Subsidiaries in
connection with any other Lease entered into in the future by such
Person which is not cancelable upon termination of the related Service
Agreement or for which the payments thereunder are not fully
reimbursable to the Borrower or such Subsidiary pursuant to the related
Service Agreement.
"Letter of Credit" means any standby letter of credit in form
satisfactory to the Issuing Bank therefor, which is at any time Issued
by such Issuing Bank pursuant to Article III, in each case as amended,
supplemented or otherwise modified from time to time.
17
<PAGE> 23
"Letter of Credit Liability" means, as of any date of
determination, all then existing liabilities of the Borrower to the
Issuing Banks in respect of the Letters of Credit Issued for its
account, whether such liability is contingent or fixed, and shall, in
each case, consist of the sum of (i) the aggregate maximum amount then
available to be drawn under such Letters of Credit (the determination
of such maximum amount to assume compliance with all conditions for
drawing) and (ii) the aggregate amount which has then been paid by, and
not been reimbursed to, the Issuing Banks under such Letters of Credit.
"LIBOR Advance" means a Competitive Bid Advance which bears
interest as provided in Section 2.06(b).
"LIBOR Margin" has the meaning set forth in Section 2.02(c).
"Lien" means any assignment, chattel mortgage, pledge or other
security interest or any mortgage, deed of trust or other lien, or
other charge or encumbrance, upon property or rights (including
after-acquired property or rights), or any preferential arrangement
with respect to property or rights (including after--acquired property
or rights) which has the practical effect of constituting a security
interest or lien.
"Loan Documents" means this Agreement, the Notes, the
Guaranty, the Subordination Agreements, the Intercompany Subordination
Agreement and all other documents delivered by the Loan Parties in
connection with this Agreement, in each case as amended, supplemented,
restated or otherwise modified from time to time.
"Loan Party" means, individually, the Borrower and each
Guarantor; and "Loan Parties" means the Borrower and the Guarantors,
collectively.
"Majority Banks" means, at any time, Banks holding more than
50% of the then aggregate unpaid principal amount of the Committed Rate
Advances owing to the Banks, or, if no such principal amount is then
outstanding, having more than 50% of the Commitments.
"Market Value" means, with respect to any publicly traded
Security at any date of determination, the amount equal to the average
closing price for such Security during the 15 trading days immediately
preceding the date of determination. The closing price of a publicly
traded security on each day shall be the closing price on such day as
reported on any stock exchange, the National Market System of the
National Association of Securities Dealers' Automated Quotation System,
or an established securities quotation service, as the case may be.
18
<PAGE> 24
"Merger Agreement" means any agreement between the Borrower or
any of its Subsidiaries and any Person relating to the purchase by and
merger into the Borrower or any of its Subsidiaries of any Facility (or
the assets thereof) or any Related Business.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA
Affiliate is making or accruing an obligation to make contributions, or
has within any of the preceding five plan years made or accrued an
obligation to make contributions, such plan being maintained pursuant
to one or more collective bargaining agreements.
"Multiple Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, which (i) is maintained for
employees of the Borrower or an ERISA Affiliate and at least one Person
other than the Borrower and its ERISA Affiliates or (ii) was so
maintained and in respect of which the Borrower or any ERISA Affiliate
could have liability under Section 4064 or 4069 of ERISA in the event
such plan has been or were to be terminated.
"NAMM" means North American Medical Management, Inc.,
a Tennessee corporation.
"Net Cash Proceeds" means, as to any sale, lease or other
disposition of any Facility (or the assets thereof) or any Related
Business, or of the assets of the Borrower and its Subsidiaries, by the
Borrower or any Subsidiary of the Borrower to any Person other than the
Borrower or any Subsidiary of the Borrower, or the sale or issuance of
any Securities, any securities convertible into or exchangeable for
Securities, or any warrants, rights or options to acquire Securities of
the Borrower or any of its Subsidiaries to any Person other than the
Borrower or any Subsidiary of the Borrower (other than such sale or
issuance pursuant to the Borrower's employee stock purchase plans or
employee and director stock option plans and other than the issuance of
Securities as consideration for the acquisition of any Facility (or the
assets thereof), any Existing Clinic Acquisition or the acquisition of
any Related Business to the extent such acquisition satisfies the
applicable requirements of Section 6.02(f)(i) or (ii)), or the issuance
of any Subordinated Debt, whether convertible into or exchangeable for
Securities (other than in the case of the Borrower and its
Subsidiaries, the subordinated convertible notes issued by the Borrower
or any of its Subsidiaries as consideration for the acquisition of
Facilities (or the assets thereof), Existing Clinic Acquisitions or the
acquisition of Related Businesses), an amount equal to (i) the cash and
other consideration paid by such Person (but not including (i) any Debt
of the Borrower or its Subsidiaries assumed by such Person in
connection with such sale, lease or other disposition or (ii) any Debt
of the Borrower or its
19
<PAGE> 25
Subsidiaries owed to such Person which is offset against the Total
Consideration of such Facility or Related Business), minus (ii) the
sum of (A) in the case of a Facility, the unpaid principal balance on
the date of such sale or other disposition of any Debt secured by a
Lien on such Facility that may be accelerated as a result of such sale
or secured by Liens not prohibited by the terms of this Agreement and
affecting only such Facility, in each case which is required to be
repaid, and is actually repaid, by the Borrower or any of its existing
or future Subsidiaries on the date of such sale or other disposition,
(B) any tax paid or payable by the Borrower or any of its existing or
future Subsidiaries in connection with or as a consequence of such
sale or other disposition (excluding any such tax for which the
Borrower or any of its existing or future Subsidiaries seller is
reimbursed by such Person to the extent not otherwise included in the
determination of Net Cash Proceeds), (C) the amount of any reserve
(other than in respect of inventory) required to be retained in
connection with such sale or other disposition under generally
accepted accounting principles (excluding any reserve in respect of
any amounts not payable within 180 days), provided that the unused
amount of such reserve at the termination of such reserve in
accordance with generally accepted accounting principles shall be
deemed Net Cash Proceeds in the amount of such unused amount, and (D)
reasonable out-of-pocket costs of such sale or other disposition
incurred by the Borrower or any of its existing or future Subsidiaries
to third parties directly in connection therewith, including, without
limitation, sales commissions, escrow fees, legal fees, title
insurance premiums and similar expenses.
"Net Income" of any Person, for any period, means the net
income of such Person for such period, determined in accordance with
generally accepted accounting principles, excluding:
(i) the proceeds of any life insurance policy;
(ii) any earnings (or losses), prior to the date of
acquisition, of any other Person acquired in any manner;
(iii) in the case of a successor to such Person by
consolidation or merger or a transferee of its assets, any
earnings (or losses) of the successor or transferee
corporation prior to the consolidation, merger or transfer of
assets; and
(iv) any deferred credit (or debit) (or amortization
of a deferred credit) arising from the acquisition of any
Person.
"Net Worth" of any Person, as of any date of determination,
means the excess of such Person's Total Assets over Total Liabilities.
20
<PAGE> 26
"Note" means a Committed Rate Note or a Competitive Bid Note,
and "Notes" means such promissory notes collectively.
"Notice of Borrowing" means a written notice, in substantially
the form of Exhibit B-1 hereto, delivered in accordance with, and
within the periods specified in, Section 2.01(c).
"Notice of Swing Line Borrowing" has the meaning specified in
Section 2.01(d).
"OECD" means the Organization for Economic Cooperation and
Development or any successor.
"Operating Lease" means any lease of real, personal or mixed
property which is not a Capital Lease. The leases included in the
$100,000,000 Synthetic Lease Facility shall be deemed to be Operating
Leases.
"Other Taxes" has the meaning set forth in Section 2.13(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor.
"Permitted Lien" means:
(i) Any Liens (other than Liens securing Debt, taxes,
assessments or governmental charges or levies, obligations
under ERISA or the Environmental Laws, or other obligations)
affecting any of the Real Property which do not materially
adversely affect the use of such Real Property;
(ii) Liens for taxes, assessments or governmental
charges or levies to the extent not past due or to the extent
contested, in good faith, by appropriate proceedings and for
which adequate reserves have been established;
(iii) Liens imposed by law, such as materialman's,
mechanic's, carrier's, workman's, and repairman's Liens and
other similar Liens arising in the ordinary course of business
which relate to obligations which are not overdue for a period
of more than 30 days or which are being contested in good
faith, by appropriate proceedings and for which adequate
reserves have been established;
(iv) pledges or deposits in the ordinary course of
business to secure nondelinquent obligations under workman's
compensation or unemployment laws or similar legislation or to
secure the performance
21
<PAGE> 27
of leases or contracts entered into in the ordinary course of
business or of public or nondelinquent statutory obligations,
bids, or appeal bonds;
(v) Liens upon or in any property acquired or held by
the Borrower or any of its Subsidiaries (other than the
Intercompany Creditor) to secure the purchase price or
construction costs (and, to the extent financed, sales and
excise taxes, delivery and installation costs and other
related expenses) of such property or to secure indebtedness
incurred solely for the purpose of financing or refinancing
the acquisition or construction of any such property to be
subject to such Liens, or Liens existing on any such property
at the time of acquisition, or extensions, renewals or
replacements of any of the foregoing for the same or a lesser
amount, provided that such Lien is established within thirty
days of the acquisition of said property or expenditure of
said construction costs, and provided further that no such
Lien shall extend to or cover any property other than the
property being acquired and no such extension, renewal or
replacement shall extend to or cover any property not
theretofore subject to the Lien being extended, renewed or
replaced, and provided further that the incurrence of any Debt
secured by the Liens permitted by this clause (v) shall not
exceed the amount then allowed under any of the covenants set
forth in Section 6.02;
(vi) zoning restrictions, easements, licenses,
landlord's liens or restrictions on the use of real property
owned or leased by the Borrower or any of its Subsidiaries,
which do not materially impair the use of such property in the
operation of the business of the Borrower or any of its
Subsidiaries or the value of such property for the purpose of
such business;
(vii) Liens on the property or assets of any
Subsidiary in favor of the Borrower or a Subsidiary, provided
that the holder and grantor of such Lien have each entered
into the Intercompany Subordination Agreement;
(viii) Liens listed on Schedule V; and
(ix) Liens not described in subclauses (i) through
(viii) above that relate to liabilities which are not in
excess of $25,000,000 in the aggregate.
"Person" means a individual partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency or instrumentality
thereof.
22
<PAGE> 28
"Plan" means a Single Employer Plan or a Multiple Employer
Plan.
"Process Agent" has the meaning set forth in Section 9.13(a).
"RCRA" means the Resource Conservation and Recovery Act of
1976, as amended (42 U.S.C. ss. 6901 et seq.), and any regulations
promulgated thereunder.
"Real Property" means the real property of the Borrower and
its Subsidiaries located in the United States described in Schedule I
hereto, consisting of real property or any interest in real property,
including a leasehold interest or an option to purchase, and all
buildings, structures and improvements now or hereafter located on all
or any portion of said real property, provided, that, notwithstanding
the foregoing, only leasehold interests of the Borrower and its
Subsidiaries which relate to the main clinic of any Facility or for
which the Borrower or any of its Subsidiaries incurs Lease Expense
equal to or in excess of $100,000 per year shall be described in
Schedule I.
"Register" has the meaning specified in Section 9.08(c).
"Related Business" means (i) a business that principally
operates (A) one or more independent practice associations (each an
"IPA") providing general organizational structure and management to
physician networks and related management companies providing
information and operating systems, actuarial and financial analysis,
medical management and provider contract services to the IPAs or (B)
one or more management service organizations (each a "MSO") providing
IPAs with practice management services, including billing, staffing and
financial management services, or (ii) a business (other than a
single-specialty clinic, or the assets thereof) related to the
operation of a Facility, IPA or MSO, the acquisition or operation of
which would not result in a material change in the nature of the
Borrower's business as of the date hereof. A Related Business shall
also include all real, personal and mixed property relating thereto.
"Restricted Payment" of any Person, means any dividend payment
or other distribution of assets, properties, cash, rights, obligations
or securities on account of any shares of any class of Securities of
such Person, or any purchase, redemption or other acquisition for value
of any shares of any class of Securities of such Person, or any
warrants, rights or options to acquire any such Securities, or the
entry by such Person or any of its Subsidiaries into hedge agreements
in respect of any class of Securities of such Person now or hereafter
outstanding; provided, however, that (i) any dividend payment or other
distribution payable in common stock of such Person and (ii) any
purchase, redemption or other acquisition of shares of such Person's
Securities or warrants, rights or options to acquire any such
Securities with
23
<PAGE> 29
the proceeds received from the substantially concurrent issue of new
shares of such Person's Securities shall not be considered a Restricted
Payment.
"Revolver Termination Date" means April 2, 2003, or the
earlier date of termination in whole of the Commitments pursuant to
Section 2.04 or 7.01.
"Securities" means shares of capital stock of a corporation
(or similar property right in the case of partnerships, limited
liability companies and trusts).
"Senior Debt" means all Debt outstanding pursuant to this
Agreement and any other Debt of the Borrower and its Subsidiaries not
expressly subordinated on terms satisfactory to the Majority Banks to
the Debt outstanding under this Agreement.
"Service Agreement" means any of (i) the Service Agreements
listed on Schedule III and (ii) any similar agreement entered into by
the Borrower or any existing or future Subsidiary of the Borrower or
related professional association or corporation after the Closing Date,
in each case as any of such agreements may from time to time be
amended, restated, supplemented or otherwise modified.
"Single-Employer Plan" means a single-employer plan, as
defined in Section 4001(a)(15) of ERISA, which (i) is maintained for
employees of the Borrower or an ERISA Affiliate and no Person other
than the Borrower and its ERISA Affiliates or (ii) was so maintained
and in respect of which the Borrower or an ERISA Affiliate could have
liability under Section 4069 of ERISA in the event such plan has been
or were to be terminated.
"Solvent" means, with respect to any Person, that as of any
date of determination, (i) the then fair saleable value of the assets
of such Person is (a) greater than the then total amount of liabilities
(including contingent, subordinated, matured and unliquidated
liabilities) of such Person and (b) greater than the amount that will
be required to pay such Person's probable liability on such Person's
then existing debts as they become absolute and matured, (ii) such
Person's capital is not unreasonably small in relation to its business
or any contemplated or undertaken transaction, and (iii) such Person
does not intend to incur, or believe or reasonably should believe that
it will incur, debts beyond its ability to pay such debts as they
become due.
"Stock Purchase Agreement" means any agreement between the
Borrower or any of its Subsidiaries and any Person that operates a
Facility or a Related Business relating to the purchase by the Borrower
or any of its Subsidiaries of all of the Securities of such Person.
24
<PAGE> 30
"Subordinated Debt" means any Debt of the Borrower that is
subordinated to the Debt of the Borrower under this Agreement and the
Notes on, and that otherwise contains, terms and conditions
satisfactory to the Majority Banks.
"Subordination Agreement" means a duly executed subordination
agreement in substantially the form of Exhibit D, as amended,
supplemented or otherwise modified from time to time.
"Subsidiary" means, with respect to any Person, any
corporation, partnership, limited liability company, trust or other
Person of which more than 50% of the outstanding Securities having
ordinary voting power to elect a majority of the board of directors of
such corporation (or similar governing body or Person with respect to
partnerships, limited liability companies and trusts) (irrespective of
whether or not at the time Securities of any other class or classes of
such Person shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned by such
Person, or one or more other Subsidiaries of such Person, or by one or
more other Subsidiaries of such Person.
"Swing Line Advance" means an advance made by (a) the Swing
Line Bank pursuant to Section 2.01(b) or (b) any Bank pursuant to
Section 2.01(d).
"Swing Line Bank" means Suntrust Bank, Nashville, N.A.
"Swing Line Borrowing" means a Borrowing consisting of a Swing
Line Advance made by the Swing Line Bank.
"Swing Line Facility" has the meaning specified in
Section 2.01(b).
"Synthetic Lease Attributable Indebtedness" means, with
respect to the obligations of any Person in respect of the $100,000,000
Synthetic Lease Facility as of any date, the aggregate amount of the
obligations issued to note holders and certificate holders thereunder
that are outstanding as of such date.
"Tangible Net Assets" of any Person, as at any date of
determination, means (without duplication) such Person's cash, net
Accounts, inventory, equipment, fixtures, real property and the
refundable portion of any prepaid expense which, in accordance with
generally accepted accounting principles, are treated as tangible
assets of such Person, in each case (to the extent applicable), less
the sum of (i) Current Liabilities, (ii) cash held in a sinking or
other analogous fund established for the purpose of redemption,
retirement or prepayment of Securities or Debt, and (iii) any write-up
in the book value of such asset resulting from a revaluation (but not a
valuation of an asset in connection with an acquisition subject to
purchase accounting
25
<PAGE> 31
treatment under generally accepted accounting principles; provided that
such valuation is accomplished in accordance with such principles).
"Taxes" has the meaning set forth in Section 2.13(a).
"Total Assets" of any Person, as of the date of determination,
means all property, whether real, personal, tangible, intangible or
otherwise, which, in accordance with generally accepted accounting
principles, should be included in determining total assets as shown on
the assets portion of a balance sheet of such Person.
"Total Capitalization" of any Person, as of the date of
determination, means the sum of such Person's Funded Debt plus Net
Worth.
"Total Consideration" means, with respect to the acquisition
of any Facility (or the assets thereof) or Related Business, whether or
not such acquisition is accomplished by Securities purchase or asset
purchase or by merger, the sum of (i) all cash and non-cash
consideration (including, without limitation, assumed liabilities and
equity consideration) paid by the Borrower or any of its Subsidiaries
at the closing of such transaction, and (ii) all Deferred Acquisition
Consideration; provided that Total Consideration shall not include any
contingent payments that may be made by the Borrower or any of its
Subsidiaries after such closing.
"Total Liabilities" of any Person, as of the date of
determination, means all obligations, including, without limitation,
all Debt of such Person, which, in accordance with generally accepted
accounting principles, should be included in determining total
liabilities as shown on the liabilities portion of a balance sheet of
such Person, including all Subordinated Debt other than, in the case of
the Borrower and its Subsidiaries, the Excluded Convertible Acquisition
Debt.
"UCP" has the meaning set forth in Section 3.08.
"Unused Commitment" means, with respect to any Bank at any
time, (a) such Bank's Commitment at such time (as such Commitment may
be reduced pursuant to Section 2.04 or on account of an Assignment and
Acceptance entered into by such Bank) minus (b) the aggregate principal
amount of all Committed Rate Advances made by such Bank outstanding at
such time.
"Welfare Plan" means a welfare plan, as defined in Section
3(l) of ERISA, which section covers plans, funds and programs providing
(among other things) medical, surgical, or hospital care or benefits,
or benefits in the event of sickness, accident, disability, death or
unemployment, together with
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plans which provide workmen's compensation, unemployment compensation
or disability insurance benefits.
"Withdrawal Liability" has the meaning given such term under
Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Computation of Time Periods. In this Agreement, in the
computation of a period of time from a specified date to a later specified date,
unless otherwise stated, the word "from" or "commencing" means "from and
including" and the word "to" or "until" means "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with United States generally
accepted accounting principles consistent with those applied in the preparation
of the Borrower's December 31, 1996 Consolidated financial statements delivered
to the Banks prior to the date hereof.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Committed Rate Advances.
(a) Each Bank severally agrees, on the terms and conditions hereinafter
set forth, to make Committed Rate Advances to the Borrower from time to time on
any Business Day during the period from the Closing Date until the Revolver
Termination Date, in an amount for each such Advance not to exceed such Bank's
Unused Commitment on such Business Day less such Bank's Commitment Percentage on
such Business Day of the sum of the Swing Line Advances then outstanding and the
then existing Letter of Credit Liability; provided, however, that such Bank
shall not be obligated to make such Committed Rate Advance if, after giving
effect to such Committed Rate Advance and the other Committed Rate Advances to
be made by the other Banks as part of the same Borrowing, the then outstanding
aggregate principal amount of all Committed Rate Advances and Swing Line
Advances plus the then existing Letter of Credit Liability shall exceed the
aggregate Commitments of the Banks less the then outstanding aggregate principal
amount of all Competitive Bid Advances; provided further that, for the purposes
of this Section 2.01(a), such Bank's Unused Commitment shall be deemed to be
reduced on such Business Day by an amount equal to the product of (i) the then
outstanding principal amount of all Competitive Bid Advances and (ii) such
Bank's Commitment Percentage (the "Competitive Bid Reduction"). Each Committed
Rate Borrowing shall be in an aggregate amount of $3,000,000 or an integral
multiple of $1,000,000 in excess thereof, and shall consist of Advances made on
the same day by the Banks ratably according to their respective Commitments.
Within the limits of each Bank's Unused Commitment (as deemed
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reduced by the Competitive Bid Reduction) in effect from time to time, the
Borrower may borrow under this Section 2.01(a), prepay pursuant to Section 2.09
and reborrow under this Section 2.01(a).
(b) The Borrower may request the Swing Line Bank to make, and the Swing
Line Bank shall make, on the terms and conditions hereinafter set forth, Swing
Line Advances to the Borrower from time to time on any Business Day during the
period from the date hereof until the Revolver Termination Date in an aggregate
amount not to exceed at any time outstanding $10,000,000 (the "Swing Line
Facility"). No Swing Line Advance shall be used for the purpose of funding the
payment of principal of any other Swing Line Advance. Each Swing Line Borrowing
shall be in an amount as may be agreed by the Borrower and the Swing Line Bank
and shall bear interest as may be agreed between the Borrower and the Swing Line
Bank, provided that in no event shall any Swing Line Advance bear interest at a
rate lower than the interest rate applicable to the Committed Rate Advances.
Within the limits of the Swing Line Facility, the Borrower may borrow under this
Section 2.01(b), repay pursuant to Section 2.05(c), prepay pursuant to Section
2.09(a) and reborrow under this Section 2.01(b).
(c) Each Committed Rate Borrowing shall be made on notice, given not
later than 11:00 A.M. (New York City time) (i) on the third Business Day prior
to the date of the proposed Borrowing, in the case of Eurodollar Rate Advances,
and (ii) on the date of the proposed Borrowing, in the case of Base Rate
Advances, by the Borrower to the Agent, which shall give each Bank prompt notice
thereof by telecopier, telex or cable. Each such notice of a Borrowing (a
"Notice of Borrowing") shall be by telecopler, telex or cable, confirmed
immediately in writing, in substantially the form of Exhibit B-1 hereto,
specifying therein (i) the requested date of such Borrowing, (ii) the requested
Type of Advances comprising such Borrowing, (iii) the requested aggregate amount
of such Borrowing, and (iv) in the case of a Borrowing comprised of Eurodollar
Rate Advances, the requested initial Interest Period for each such Advance. Each
Bank shall, before 12:00 noon (New York City time) on the date of such
Borrowing, make available for the account of its Applicable Lending Office to
the Agent at its address referred to in Section 9.02, in same day funds, such
Bank's ratable portion of such Borrowing. After the Agent's receipt of such
funds and upon fulfillment of the applicable conditions set forth in Article IV,
the Agent will make such funds available to the Borrower at the Agent's
aforesaid address. Anything in this subsection (b) above to the contrary
notwithstanding, (A) the Borrower may not select Eurodollar Rate Advances for
any Committed Rate Borrowing if the obligation of the Banks to make Eurodollar
Rate Advances shall then be suspended pursuant to Section 2.11 and (B) no more
than ten Committed Rate Borrowings may be outstanding at any one time.
(d) Each Swing Line Borrowing shall be made on notice, given not later
than 11:00 A.M. (New York City time) on the date of the proposed Swing Line
Borrowing, by the Borrower to the Swing Line Bank and the Agent. Each such
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notice of a Swing Line Borrowing (a "Notice of Swing Line Borrowing") shall be
by telephone, confirmed immediately in writing, or telex or telecopier,
specifying therein the requested (i) date of such Borrowing and (ii) amount of
such Borrowing. Each Swing Line Borrowing shall be due and payable on the
earlier of the date of demand by the Swing Line Bank in respect of such Swing
Line Borrowing and the Revolver Termination Date. Each such Notice of Swing Line
Borrowing shall be irrevocable and binding on the Borrower. Upon fulfillment of
the applicable conditions set forth in Article IV, the Swing Line Bank will make
the amount thereof available in accordance with the instructions of the
Borrower, in same day funds. Upon written demand by the Swing Line Bank, with a
copy of such demand to the Agent, each other Bank shall purchase from the Swing
Line Bank and the Swing Line Bank shall sell and assign to each such other Bank,
such other Bank's Commitment Percentage of such outstanding Swing Line Advance
as of the date of such demand, by making available for the account of its
Applicable Lending Office to the Agent for the account of the Swing Line Bank in
same day funds, an amount equal to the portion of the outstanding principal
amount of such Swing Line Advance to be purchased by such Bank. The Borrower
hereby agrees to each such sale and assignment. Each Bank agrees to purchase its
Commitment Percentage of an outstanding Swing Line Advance on (i) the Business
Day on which demand therefor is made by the Swing Line Bank, provided that
notice of such demand is given not later than 11:00 A.M. (New York City time) on
such Business Day or (ii) the first Business Day next succeeding such demand if
notice of such demand is given after such time. Upon any such assignment by the
Swing Line Bank to any other Bank of a portion of a Swing Line Advance, the
Swing Line Bank represents and warrants to such other Bank that the Swing Line
Bank is the legal and beneficial owner of such interest being assigned by it and
such assignment is free and clear of any claim or adverse interest of any kind,
but makes no other representation or warranty and assumes no responsibility with
respect to the Swing Line Advance, the Loan Documents or any Loan Party. If and
to the extent that any Bank shall not have so made the amount of such Swing Line
Advance available to the Agent, such Bank agrees to pay to the Agent forthwith
on demand such amount together with interest thereon, for each day from the date
of demand by the Swing Line Bank until the date such amount is paid to the
Agent, at the Federal Funds Rate. If such Bank shall pay to the Agent such
amount for the account of the Swing Line Bank on any Business Day, such amount
so paid in respect of principal shall constitute a Swing Line Advance made by
such Bank on such Business Day for purposes of this Agreement, and the
outstanding principal amount of the Swing Line Advance made by the Swing Line
Bank shall be reduced by such amount on such Business Day.
(e) Each Notice of Borrowing and Notice of Swing Line Borrowing shall
be irrevocable and binding on the Borrower. In the case of any Committed Rate
Borrowing which the related Notice of Borrowing specifies is to be comprised of
Eurodollar Rate Advances, the Borrower shall indemnify each Bank against any
loss (including loss of anticipated profits), cost or expense incurred by such
Bank as
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a result of any failure to fulfill on or before the date specified in such
Notice of Borrowing for such Borrowing the applicable conditions set forth in
Article IV, including, without limitation, any loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such Bank to fund the Advance to be made by such Bank as part of such Borrowing
when such Advance, as a result of such failure, is not made on such date.
(f) Unless the Agent shall have received notice from a Bank prior to
the date of any Committed Rate Borrowing that such Bank will not make available
to the Agent such Bank's ratable portion of such Borrowing, the Agent may assume
that such Bank has made such portion available to the Agent on the date of such
Borrowing in accordance with subsection (b) above and the Agent may, in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so made
such ratable portion available to the Agent, such Bank and the Borrower
severally agree to repay to the Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date such amount is
made available to the Borrower until the date such amount is repaid to the
Agent, at (i) in the case of the Borrower, the interest rate applicable at the
time to Advances comprising such Borrowing and (ii) in the case of such Bank,
the Federal Funds Rate. If such Bank shall repay to the Agent such corresponding
amount, such amount so repaid shall constitute such Bank's Advance as part of
such Borrowing for purposes of this Agreement. To the extent that any Bank makes
a payment of principal or interest to the Agent pursuant to this subsection (d),
the Borrower shall not be obligated to make such payment.
(g) The failure of any Bank to make the Advance to be made by it as
part of any Committed Rate Borrowing shall not relieve any other Bank of its
obligation, if any, hereunder to make its Advance on the date of such Borrowing,
but no Bank shall be responsible for the failure of any other Bank to make the
Advance to be made by such other Bank on the date of any Committed Rate
Borrowing.
SECTION 2.02. The Competitive Bid Advances.
(a) Each Designated Bidder severally agrees, on the terms and
conditions hereinafter set forth, that the Borrower may avail itself of
Competitive Bid Advances from time to time on any Business Day during the period
from the Closing Date until 30 days prior to the Revolver Termination Date, in
the manner set forth in this Section 2.02; provided that the aggregate principal
amount of Competitive Bid Advances made on any Business Day may not exceed the
lesser of (i) the aggregate Unused Commitments of the Banks on such Business Day
less the sum of the aggregate principal amount of Swing Line Advances then
outstanding and the then existing Letter of Credit Liability and the then
outstanding principal amount of any other Competitive Bid Advances and (ii)
$250,000,000.
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(b) The Borrower may request a Competitive Bid Borrowing by delivering
to the Agent, by telecopler, telex or cable, confirmed immediately in writing, a
request, in substantially the form of Exhibit B-2 (a "Competitive Bid Request"),
specifying therein (i) whether Fixed Rate Advances or LIBOR Advances are being
requested, (ii) the date (which shall be a Business Day) and aggregate amount of
the proposed Competitive Bid Borrowing, (iii) the maturity date for repayment of
the Competitive Bid Advances to be made as part of such Borrowing (which
maturity date shall be a date occurring (A) not less than seven days after the
date of such Borrowing in the case of a request for Fixed Rate Advances or 30
days after the date of such Borrowing in the case of a request for LIBOR
Advances, and (B) not later than 180 days after the date of such Borrowing, and
in any event, not later than the Revolver Termination Date), (iv) the interest
payment date or dates relating thereto, in the case of a request for Fixed Rate
Advances, and the applicable Interest Period, in the case of a request for LIBOR
Advances, and (v) any other terms to be applicable to such Borrowing, not later
than 11:00 A.M. (New York City time) at least (A) one Business Day, in the case
of a request for Fixed Rate Advances, or (B) four Business Days, in the case of
a request for LIBOR Advances, prior to the date of the proposed Competitive Bid
Borrowing. The Agent shall in turn promptly notify each Designated Bidder of
each request for such Competitive Bid Borrowing received by it by sending such
Designated Bidder a copy of the related Competitive Bid Request.
(c) Each Designated Bidder may, if, in its sole discretion, it elects
to do so, irrevocably offer to make one or more Competitive Bid Advances to the
Borrower as part of such proposed Competitive Bid Borrowing at a rate or rates
of interest specified by such Designated Bidder in its sole discretion. Any such
offer (a "Competitive Bid") may be made by notifying the Agent (i) before 10:00
A.M. (New York City time) on the date of such proposed Competitive Bid
Borrowing, in the case of a request for Fixed Rate Advances, and (ii) before
10:00 A.M. (New York City time) on the third Business Day before the date of
such proposed Competitive Bid Borrowing, in the case of a request for LIBOR
Advances (the "Bid Due Date"), specifying the following:
(A) the amount of each Competitive Bid Borrowing which such
Designated Bidder would be willing to make as part of such proposed
Competitive Bid Borrowing (which amount may, subject to the proviso to
the first sentence of subsection (a) above, exceed a Bank's Commitment
but may not exceed the principal amount of the Competitive Bid Advances
of the Type and maturity requested by the Borrower);
(B) in the case of a request for a LIBOR Advance, the margin
above or below the applicable Eurodollar Rate (the "LIBOR Margin")
offered for such Competitive Bid Advance, expressed as a percentage
(rounded upwards, if necessary, to the nearest 1/16 of one percent) to
be added to or subtracted from the applicable Eurodollar Rate;
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(C) in the case of a request for a Fixed Rate Advance, the
rate of interest per annum (rounded upwards, if necessary, to the
nearest 1/16 of one percent) (the "Fixed Rate") offered for such
Competitive Bid Advance; and
(D) the identity of the Designated Bidder submitting the
Competitive Bid;
provided that if the Agent in its capacity as a Designated Bidder shall, in its
sole discretion, elect to make any such Competitive Bid, it shall notify the
Borrower of such Competitive Bid before 9:30 A.M. (New York City time) on the
Bid Due Date. If any Designated Bidder shall elect not to make such a
Competitive Bid, such Designated Bidder shall so notify the Agent, before 10:00
A.M. (New York City time) on the Bid Due Date, and such Designated Bidder shall
not be obligated to, and shall not, make any Advance as part of such Competitive
Bid Borrowing; provided that the failure by any Designated Bidder to give such
notice shall not cause such Designated Bidder to be obligated to make any
Advance as part of such proposed Competitive Bid Borrowing. Unless otherwise
agreed by the Borrower and the Agent, no Competitive Bid shall contain
qualifying, conditional or similar language or propose terms other than or in
addition to those set forth in the Competitive Bid Request and, in particular,
no Competitive Bid may be conditioned upon acceptance by the Borrower of all (or
some specified minimum) of the principal amount of the Competitive Bid Advances
offered.
(d) The Agent shall as promptly as practicable after the Competitive
Bid is submitted (but in any event not later than 10:15 A.M. (New York City
time) on the Bid Due Date), notify the Borrower of the terms (A) of any
Competitive Bid submitted that is in accordance with subsection (c) above and
(B) of any Competitive Bid that amends, modifies or is otherwise inconsistent
with a previous Competitive Bid with respect to the same Competitive Bid
Request. Any such subsequent Competitive Bid may be submitted solely to correct
a manifest error in such former Competitive Bid. The Agent's notice to the
Borrower shall specify (1) the aggregate principal amount of the Competitive Bid
Borrowing for which Competitive Bids have been received and (2) the respective
principal amounts and the Fixed Rates and LIBOR Margins, as the case may be, so
offered by each Designated Bidder (identifying the Designated Bidder that made
each Competitive Bid).
(e) The Borrower shall, in turn, before 11:00 A.M. (New York City time)
(i) on the day of the proposed Competitive Bid Borrowing, in the case of
requests for Fixed Rate Advances, or (ii) on the third Business Day prior to the
date of the proposed Competitive Bid Advances, in the case of a request for
LIBOR Advances, (or, in any such case, such other time and date as the Borrower
and the Agent, with the consent of the Majority Banks, may agree), either:
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(i) cancel such Competitive Bid Borrowing by giving the Agent
notice to that effect, or
(ii) accept one or more of the Competitive Bids, in its sole
discretion, by giving notice to the Agent of the amount of each
Competitive Bid Advance to be made by each Designated Bidder as part of
such Competitive Bid Borrowing, and reject any remaining Competitive
Bids by giving the Agent notice to that effect; provided that (A) the
Borrower may only accept Competitive Bids in the order of the lowest to
the highest Fixed Rates or LIBOR Margins, as the case may be, offered,
(B) the Borrower may not accept Competitive Bids in excess of the
amount requested pursuant to subsection (b) above, or the amount
offered pursuant to subsection (c) above, for any maturity date or
Interest Period, and (C) if two or more Designated Bidders make
Competitive Bids at the same Fixed Rates or LIBOR Margins, as the case
may be, for the same maturity date or Interest Period, the Borrower may
only accept such Competitive Bids in proportion (as nearly as possible)
to the amounts which such Designated Bidders offered at such rate for
such maturity or Interest Period (in amounts of not less than
$1,000,000 or an integral multiple of $100,000 in excess thereof).
(f) If the Borrower notifies the Agent that such Competitive Bid
Borrowing is canceled pursuant to subsection (d)(i) above, the Agent shall give
prompt notice thereof to the Designated Bidders, and such Competitive Bid
Borrowing shall not be made.
(g) If the Borrower accepts one or more of the Competitive Bids made by
any Designated Bidder or Designated Bidders pursuant to subsection (d)(ii)
above, the Agent shall in turn promptly notify (A) each Designated Bidder that
has made a Competitive Bid as described in subsection (c) above, of the date and
aggregate amount of such Competitive Bid Borrowing and whether or not any
Competitive Bid or Bids made by such Designated Bidder pursuant to subsection
(c) above have been accepted by the Borrower, (B) each Designated Bidder that is
to make an Advance as part of such Competitive Bid Borrowing, of the amount of
each Advance to be made by such Bank as part of such Borrowing, and (C) each
Designated Bidder that is to make an Advance as part of such Competitive Bid
Borrowing, as to whether such Competitive Bid Borrowing conforms of the
requirements of Section 2.02. Each Designated Bidder that is to make an Advance
as part of such Competitive Bid Borrowing shall, before 11:30 A.M. (New York
City time) on the date of such Competitive Bid Borrowing specified in the notice
received from the Agent pursuant to clause (A) of the preceding sentence
(provided such Designated Bidder shall have received a Competitive Bid Note and
a favorable notice from the Agent pursuant to clause (C) of the preceding
sentence), make available to the Agent at its address referred to in Section
9.02, in same day funds, such Designated Bidder's portion of such Competitive
Bid Borrowing. Upon fulfillment of the applicable conditions set forth in
Article IV and after receipt by the Agent of such funds, the Agent will make
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such funds available to the Borrower at the Agent's aforesaid address. Promptly
after each Competitive Bid Borrowing, the Agent shall notify each Bank of the
amount of the Competitive Bid Borrowing, the consequent Competitive Bid
Reduction and the dates upon which such Competitive Bid Reduction commenced and
will terminate.
(h) Each Competitive Bid Borrowing shall be in an aggregate amount not
less than $10,000,000 or an integral multiple of $1,000,000 in excess thereof
and, following the making of such Competitive Bid Borrowing, the Borrower shall
be in compliance with the limitations set forth in the proviso to the first
sentence of subsection (a) above.
(i) Each acceptance by Borrower pursuant to subsection (g) above shall
be irrevocable and binding on the Borrower. In the case of any acceptance of a
Competitive Bid for LIBOR Advances, the Borrower shall indemnify each Designated
Bidder against any loss (including loss of anticipated profits), cost or expense
incurred by such Designated Bidder as a result of any failure to fulfill on or
before the date specified pursuant to subsection (g) above for such Competitive
Bid Borrowing the applicable conditions set forth in Article IV, including,
without limitation, any loss, cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such
Designated Bidder to fund the LIBOR Advance to be made by such Bank as part of
such Borrowing when such Advance, as a result of such failure, is not made on
such date.
(j) The failure of any Designated Bidder to make the Advance to be made
by it as part of any Competitive Bid Borrowing shall not relieve any other
Designated Bidder of its obligation, if any, hereunder to make its Advance on
the date of such Borrowing, but no Designated Bidder shall be responsible for
the failure of any other Designated Bidder to make the Advance to be made by
such other Designated Bidder on the date of any Competitive Bid Borrowing.
(k) Within the limits and on the conditions set forth in this Section
2.02, the Borrower may from time to time borrow under this Section 2.02, repay
pursuant to Section 2.05 and reborrow under this Section 2.02; provided that not
more than ten Competitive Bid Borrowings may be outstanding at any time (for
which purpose Competitive Bid Advances made on the same date, but having
different maturities or representing Borrowings under different Commitments,
shall be deemed to be separate Competitive Bid Borrowings).
SECTION 2.03. Fees.
(a) Facility Fees. The Borrower agrees to pay to the Agent, for the
account of each of the Banks, a facility fee on the average daily Commitment of
such Bank from the Closing Date until the Revolver Termination Date at the
Applicable Facility Fee Rate from time to time in effect, payable quarterly in
arrears on the
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last day of each March, June, September and December, commencing June 30, 1998,
and on the Revolver Termination Date.
(b) Agency, Auction and Arrangement Fees. The Borrower agrees to pay to
the Agent, for its own account, the agency fees and the auction fees and to an
Affiliate of the Agent, the arrangement fee, in such amounts and on such dates
as are specified in the letter agreement dated as of March 4, 1998, between the
Borrower and the Agent.
SECTION 2.04. Optional Reduction of the Commitments. The Borrower shall
have the right, upon at least three Business Days' notice to the Agent,
permanently to terminate in whole or reduce ratably in part the Unused
Commitments; provided that (a) each partial reduction shall be in the aggregate
amount of $3,000,000 or an integral $1,000,000 multiple in excess thereof, (b)
each reduction shall be made ratably among the Banks in accordance with their
Unused Commitments and (c) no reduction may reduce the aggregate Commitments of
the Banks below the aggregate amount of the then outstanding Letter of Credit
Liability and the then outstanding principal amount of the Competitive Bid
Advances.
SECTION 2.05. Repayment.
(a) The Borrower shall repay on the Revolver Termination Date the
aggregate principal amount of the Committed Rate Advances of each Bank
outstanding on the Revolver Termination Date, together with accrued interest
thereon.
(b) The Borrower shall repay the aggregate principal amount of the
Competitive Bid Advances of each Designated Bidder, together with accrued
interest thereon, in such amounts and on such dates as specified pursuant to
Section 2.02(b).
(c) The Borrower shall repay to the Agent for the account of the Swing
Line Bank the outstanding principal amount of each Swing Line Advance made by
the Swing Line Bank on the earlier of the date demanded by the Swing Line Bank
in respect of such Swing Line Advance and the Revolver Termination Date.
SECTION 2.06. Interest.
(a) The Borrower shall pay interest on the unpaid principal amount of
each Committed Rate Advance made by each Bank from the date of such Advance
until such principal amount shall be paid in full, at the following rates per
annum:
(i) Base Rate Advances. During such periods as such Advance is
a Base Rate Advance, a rate per annum equal at all times to the Base
Rate in effect from time to time, payable monthly in arrears on the
last day of each
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calendar month during such periods and on the date such Base Rate
Advance shall be Converted or paid in full. Notwithstanding the
foregoing, during the continuance of an Event of Default, the
principal amount of each Base Rate Advance shall bear interest, to the
fullest extent permitted by law, from the date on which such amount is
due until such amount is paid in full, payable on demand, at a
fluctuating rate per annum equal at all times to 2% per annum above
the Base Rate in effect from time to time.
(ii) Eurodollar Rate Advances. During such periods as such
Advance is a Eurodollar Rate Advance, a rate per annum equal at all
times during the Interest Period for such Advance to the sum of (A) the
Eurodollar Rate for such Interest Period plus (B) the Applicable
Eurodollar Rate Margin in effect on the first day of such Interest
Period, payable on the last day of such Interest Period and, if such
Interest Period has a duration of six months, on the day that occurs
during such Interest Period three months from the first day of such
Interest Period and on the date such Eurodollar Rate Advance shall be
Converted or paid in full; provided, however, that in the event that
the Applicable Eurodollar Rate Margin for any fiscal quarter of the
Borrower has not yet been determined in accordance with the provisions
of the definition of Applicable Eurodollar Rate Margin in Section 1.01
as of the time when interest on a Eurodollar Rate Advance becomes due,
the Borrower shall pay such interest on the date when due based on the
then existing Applicable Eurodollar Rate Margin and any necessary
subsequent adjustments in the amount of interest payable hereunder (due
to any subsequent change in the Applicable Eurodollar Rate Margin)
shall be made on the first date on which any interest on any Committed
Rate Advance is payable after the date of determination of the
Applicable Eurodollar Rate Margin. Notwithstanding the foregoing,
during the continuance of an Event of Default, the principal amount of
each Eurodollar Rate Advance shall bear interest, to the fullest extent
permitted by law, from the date on which such amount is due until such
amount is paid in full, payable on demand, at a rate per annum equal at
all times to 2% per annum above the Eurodollar Rate plus the Applicable
Eurodollar Rate Margin until the end of the Interest Period applicable
to such Eurodollar Rate Advance, at which time the rate per annum shall
become 2% per annum above the Base Rate, in each case as in effect from
time to time.
(b) The Borrower shall pay interest on the unpaid principal amount of
each Competitive Bid Advance from the date of such Advance until such principal
amount shall be paid in full, at the rate of interest for such Advance specified
by the Designated Bidder making such Advance in its Competitive Bid with respect
thereto delivered pursuant to Section 2.02(c), payable on the interest payment
date or dates specified by the Borrower for such Advance in the related
Competitive Bid Request delivered pursuant to Section 2.02(b) and on the
maturity date of such Competitive Bid Advance. Notwithstanding the foregoing,
during the continuance
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of an Event of Default, the principal amount of each Competitive Bid Advance
shall bear interest, to the fullest extent permitted by law, from the date on
which such amount is due until such amount is paid in full, payable on demand,
at a rate equal to 2% per annum above the interest rate specified by the
Designated Bidder that made such Advance in its Competitive Bid with respect
thereto delivered pursuant to Section 2.02(c).
SECTION 2.07. Interest Rate Determination and Protection.
(a) The Agent shall give prompt notice to the Borrower and the Banks
of the applicable interest rate under Section 2.06(a)(i) or (ii).
(b) If, with respect to any Eurodollar Rate Advance, the Majority Banks
notify the Agent that the Eurodollar Rate for any Interest Period for such
Advance will not adequately reflect the cost to such Majority Banks of making,
funding or maintaining their respective Eurodollar Rate Advance for such
Interest Period, the Agent shall forthwith so notify the Borrower and the Banks,
whereupon:
(i) each Eurodollar Rate Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a
Base Rate Advance, and
(ii) the obligation of the Banks to make, or to Convert
Advances into, Eurodollar Rate Advances shall be suspended until the
Agent shall notify the Borrower and the Banks that the circumstances
causing such suspension no longer exist.
(c) If the Borrower shall fail to select the duration of any Interest
Period for any Eurodollar Rate Advance in accordance with the provisions
contained in the definition of "Interest Period" in Section 1.01, the Agent will
forthwith so notify the Borrower and the Banks and such Advance will
automatically, on the last day of the then existing Interest Period therefor,
Convert into Base Rate Advances.
SECTION 2.08. Voluntary and Automatic Conversion of Committed Rate
Advances.
(a) The Borrower may on any Business Day, upon notice given to the
Agent not later than 11:00 A.M. (New York City time) on the second Business Day
prior to the date of the proposed Conversion and subject to the provisions of
Sections 2.07 and 2.11, Convert all Committed Rate Advances of one Type
comprising the same Borrowing into Committed Rate Advances of another Type;
provided, however, that any Conversion of any Eurodollar Rate Advances into Base
Rate Advances shall be made on, and only on, the last day of an Interest Period
for such Eurodollar Rate Advances. Each such notice of Conversion shall, within
the restrictions specified above, specify (i) the date of such Conversion,
(ii) the Advances
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to be Converted, and (iii) if such Conversion is into Eurodollar Rate Advances,
the duration of the Interest Period for each such Advance.
(b) On the date on which the unpaid aggregate principal amount of
Eurodollar Rate Advances comprising any Committed Rate Borrowing shall be
reduced, by payment or prepayment or otherwise, to less than $3,000,000, the
Eurodollar Rate Advances comprising such Borrowing shall automatically Convert
into Base Rate Advances, and on and after such date the Borrower may not convert
such Base Rate Advances to Eurodollar Rate Advances until such time as the
aggregate principal amount of Base Rate Advances equals or exceeds $3,000,000.
(c) Upon the occurrence and during the continuance of any Event of
Default, (i) each Eurodollar Rate Advance will automatically, on the last day of
the then existing Interest Period therefor, Convert into a Base Rate Advance and
(ii) the obligation of the Banks to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended.
SECTION 2.09. Prepayments.
(a) Voluntary Prepayments. The Borrower may, upon at least (i) in the
case of Eurodollar Rate Advances, two Business Days' and (ii) in the case of
Base Rate Advances, the same Business Day's notice to the Agent stating the
proposed date and aggregate principal amount of the prepayment, and if such
notice is given, the Borrower shall, prepay the outstanding principal amounts of
the Advances comprising part of the same Committed Rate Borrowing in whole or
ratably in part, together with accrued interest to the date of such prepayment
on the principal amount prepaid and, in the case of Eurodollar Rate Advances,
any amounts payable under Section 9.04(b); provided, however, that each partial
prepayment shall be in an aggregate principal amount not less than $3,000,000 or
any integral multiple of $1,000,000 in excess thereof. The Borrower may not
prepay any Competitive Bid Advances.
(b) Asset Sales Mandatory Prepayments. Subject to Section 2.09(d), upon
the sale, lease or other disposition by the Borrower or any Subsidiary of the
Borrower of assets of the Borrower and its Subsidiaries constituting more than
5% of the Consolidated Total Assets of the Borrower and its Subsidiaries at the
time of sale, lease or other disposition, then (x) the Net Cash Proceeds of such
sale, lease or other disposition shall be delivered as soon as practicable to
the Agent and (y) any deferred cash proceeds of such sale, lease, or other
disposition shall be delivered to the Agent as soon as practicable after their
receipt (at which time the same shall become Net Cash Proceeds). Any such Net
Cash Proceeds shall be applied in accordance with Section 2.09(c).
(c) Application of Prepayments. Mandatory prepayments pursuant to
Section 2.09(b) shall be: first, applied to the payment of any amount required
to be paid under Article III hereof as a reimbursement obligation of the
Borrower; second,
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applied to the ratable payment of outstanding Swing Line Advances, together with
accrued interest to the date of such payment on the principal amount repaid and
any amounts payable pursuant to Section 9.04(b) in respect thereof; third,
applied to the ratable payment of outstanding Committed Rate Advances, together
with accrued interest to the date of such payment on the principal amount repaid
and any amounts payable pursuant to Section 9.04(b) in respect thereof; and
fourth, delivered to the Agent to be held as pledged collateral to be applied to
the ratable payment when due of outstanding Competitive Bid Advances and any
Letter of Credit Liability (other than the Letter of Credit Liabilities referred
to in the first clause of this Section 2.09(c)), together with accrued interest
to the date of such payment on the principal amount repaid, to the aggregate
amount of such principal and interest.
(d) Effect of Investment Grade Rating. Notwithstanding Section 2.09(b),
no prepayment shall be required by any of such sections if at the time of the
sale, lease or other disposition, issuance or sale referred to therein any of
the then outstanding Debt of the Borrower shall then be rated Investment Grade.
SECTION 2.10. Increased Costs.
(a) If, due to either (i) the introduction of or any change (other than
any change by way of imposition or increase of reserve requirements, in the case
of Eurodollar Rate Advances or LIBOR Advances, included in the Eurodollar Rate
Reserve Percentage) in or in the interpretation of any law or regulation or (ii)
the compliance with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law), there shall be
any increase in the cost to any Bank of agreeing to make or making, funding or
maintaining Eurodollar Rate Advances or LIBOR Advances, then the Borrower shall
from time to time, upon demand by such Bank (with a copy of such demand to the
Agent), pay to the Agent for the account of such Bank additional amounts
sufficient to compensate such Bank for such increased cost. A certificate as to
the amount of such increased cost, submitted to the Borrower and the Agent by
such Bank, shall be conclusive and binding for all purposes, absent manifest
error.
(b) If any Bank determines that compliance with any law or regulation
or any guideline or request from any central bank or other governmental
authority (whether or not having the force of law) affects or would affect the
amount of capital (or the rate of return on capital) required or expected to be
maintained by such Bank or any corporation controlling such Bank and that the
amount of such capital is increased (or such rate of return is reduced) by or
based upon the existence of such Bank's commitment, or offer or agreement, to
lend hereunder and other commitments, or offers or agreements, of this type,
then, upon notice by such Bank (with a copy of such notice to the Agent), the
Borrower shall immediately pay to the Agent for the account of such Bank, from
time to time as specified by such Bank, additional amounts sufficient to
compensate such Bank or such corporation in the
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light of such circumstances, to the extent that such Bank reasonably determines
such increase in capital (or reduction in rate of return) to be allocable to the
existence of such Bank's commitment, or offer or agreement, to lend hereunder.
Such notice as to such amounts submitted and delivered to the Borrower and the
Agent by such Bank shall set forth in summary fashion the basis of such
allocation and shall be conclusive and binding for all purposes, absent manifest
error.
SECTION 2.11. Illegality. Notwithstanding any other provision of this
Agreement, if any Bank shall notify the Agent that the introduction of or any
change in or in the interpretation of any law or regulation makes it unlawful or
any central bank or other governmental authority asserts that it is unlawful,
for any Bank or its Eurodollar Lending Office to perform its obligations or
agreements hereunder to make Eurodollar Rate Advances or LIBOR Advances or to
fund or maintain Eurodollar Rate Advances or LIBOR Advances hereunder: (a) in
the case of Eurodollar Rate Advances, (i) the obligation of the Banks to make,
or to Convert Advances into, Eurodollar Rate Advances shall be suspended until
the Agent shall notify the Borrower and the Banks that the circumstances causing
such suspension no longer exist and (ii) the Borrower shall forthwith prepay in
full all Eurodollar Rate Advances of all Banks then outstanding, together with
interest accrued thereon and any costs payable pursuant to Section 9.04(b),
unless the Borrower, within five Business Days of notice from the Agent,
Converts all Eurodollar Rate Advances of all Banks then outstanding into Base
Rate Advances in accordance with Section 2.08, and (b) in the case of LIBOR
Advances, such Bank shall no longer be obligated to fund any LIBOR Advance it
has agreed to fund thereafter.
SECTION 2.12. Payments and Computations.
(a) The Borrower shall make each payment hereunder and under the Notes
not later than 11:00 A.M. (New York City time) on the day when due free and
clear of any taxes, offset or other charge in United States dollars to the Agent
at its address referred to in Section 9.02 in same day funds. The Agent will
promptly thereafter cause to be distributed like funds relating to the payment
of principal or interest or facility fees (i) ratably (other than amounts
payable pursuant to Section 2.10, 2.13 or 9.04) to the Banks for the account of
their respective Applicable Lending Offices, in the case of Committed Rate
Advances, and to the applicable Designated Bidder (for the account of its
Applicable Lending Office), in the case of Competitive Bid Advances, and like
funds relating to the payment of any other amount payable to any Bank to such
Bank for the account of its Applicable Lending Office, in each case to be
applied in accordance with the terms of this Agreement. Upon its acceptance of
an Assignment and Acceptance and recording of the information contained therein
in the Register pursuant to Section 9.08(d), from and after the effective date
specified in such Assignment and Acceptance, the Agent shall make all payments
hereunder in respect of the interest assigned thereby to the Bank assignee
thereunder, and the parties to such Assignment and Acceptance
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shall make all appropriate adjustments in such payments for periods prior to
such effective date directly between themselves.
(b) The Borrower hereby authorizes each Bank, if and to the extent
payment owed to such Bank is not made when due hereunder or under the Note held
by such Bank, to charge from time to time against any or all of the Borrower's
accounts with such Bank any amount so due.
(c) All computations of interest (other than interest on Base Rate
Advances) and of fees shall be made on the basis of a year of 360 days, and all
computations of interest on Base Rate Advances shall be made on the basis of a
year of 365 or 366 days (as the case may be), in each case for the actual number
of days (including the first day but excluding the last day) occurring in the
period for which such interest or fees are payable. Each determination by the
Agent of an interest rate or fee hereunder shall be conclusive and binding for
all purposes, absent manifest error.
(d) Whenever any payment hereunder or under the Notes shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or facility fee, as the case
may be; provided, however, if such extension would cause payment of interest on
or principal of Eurodollar Rate Advances or LIBOR Advances to be made in the
next following calendar month, such payment shall be made on the next preceding
Business Day.
(e) Unless the Agent shall have received notice from the Borrower prior
to the date on which any payment is due to the Banks hereunder in respect of
Committed Rate Advances that the Borrower will not make such payment in full,
the Agent may assume that the Borrower has made such payment in full to the
Agent on such date and the Agent may, in reliance upon such assumption, cause to
be distributed to each Bank on such due date an amount equal to the amount then
due such Bank. If and to the extent the Borrower shall not have so made such
payment in full to the Agent, each Bank shall repay to the Agent forthwith on
demand such amount distributed to such Bank together with interest thereon, for
each day from the date such amount is distributed to such Bank until the date
such Bank repays such amount to the Agent, at the Federal Funds Rate.
(f) Notwithstanding any provision in this Agreement or any other Loan
Document to the contrary, all payments received by the Agent under the other
Loan Documents, the application of which are not provided for in such Loan
Documents, may be then or at any time thereafter be applied in whole or in part
by the Agent for the ratable benefit of the Banks (except in the case of
Competitive Bid Advances), against all or part of the Advances or other
obligations of the Borrower
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hereunder or under the other Loan Documents, in such order and manner as the
Agent shall elect.
SECTION 2.13. Taxes.
(a) Any and all payments by the Borrower hereunder or under the Notes
shall be made, in accordance with Section 2.12, free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding, in
the case of each Bank and the Agent, taxes imposed on its income, and franchise
taxes imposed on it, by the jurisdiction under the laws of which such Bank or
the Agent (as the case may be) is organized or any political subdivision thereof
and, in the case of each Bank, taxes imposed on its income, and franchise taxes
imposed on it, by the jurisdiction of such Bank's Applicable Lending Office or
any political subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from
or in respect of any sum payable hereunder or under any Note to any Bank or the
Agent, (i) the sum payable shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 2.13) such Bank or the Agent (as the case may
be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law.
(b) In addition, the Borrower agrees to pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or under the Notes or from
the execution, delivery or registration of, or otherwise with respect to, this
Agreement or the Notes (hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each Bank and the Agent for the full
amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section
2.13) paid by such Bank or the Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. This indemnification shall be made within 30 days from the date such
Bank or the Agent (as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the Borrower
will furnish to the Agent, at its address referred to in Section 9.02, the
original or a certified copy of a receipt evidencing payment thereof.
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(e) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.13 shall survive the payment in full of principal and interest
hereunder and under the Notes.
(f) Prior to the date of the first Borrowing under this Agreement in
the case of each Bank party hereto on the date hereof, on the date of the
effectiveness of the Assignment and Acceptance pursuant to which it became a
Bank in the case of each other Bank, and within 30 days following the first day
of each calendar year or if otherwise requested from time to time by the
Borrower or the Agent, each Bank organized under the laws of a jurisdiction
outside the United States shall provide the Agent and the Borrower with two
counterparts of each of the forms prescribed by the Internal Revenue Service
(Form 1001 or 4224, or successor form(s), as the case may be, or another
appropriate form) of the United States certifying as to such Bank's status for
purposes of determining exemption from United States withholding taxes with
respect to all payments to be made to such Bank under any Loan Document. Unless
the Borrower and the Agent have received such forms or other documents
satisfactory to them indicating that payments under any Loan Document are not
subject to United States withholding tax, the Borrower or the Agent (if not
withheld by the Borrower) shall withhold taxes from such payments at the
applicable statutory rate, without any obligation to "gross-up" or make such
Bank or the Agent whole under Section 2.13(a); provided, however, that the
Borrower shall have the obligation to make such Bank or the Agent whole and to
"gross-up" under Section 2.13(a), if the failure to so deliver such forms or
make such statements (other than the forms and statements required to be
delivered on or made prior to the date of the initial Borrowing, on the date of
the Assignment and Acceptance pursuant to which an Eligible Assignee became a
Bank) is the result of the occurrence of an event (including, without
limitation, any change in treaty, law or regulation) which (alone or in
conjunction with other events) renders such forms inapplicable, that would
prevent such Bank or the Agent from making the statements contemplated by such
forms or which removes or reduces an exemption (whether partial or complete)
from withholding tax previously available to such Bank or the Agent. Each Bank
(and the Agent, if applicable) will promptly notify the Borrower of the
occurrence (when known to it) of an event contemplated by the foregoing proviso.
SECTION 2.14. Sharing of Payments, Etc. If any Bank shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of any Committed Rate Advances made by it
(other than pursuant to Section 2.10, 2.13 or 9.04) in excess of its ratable
share of payments on account of such Committed Rate Advances obtained by all the
Banks, such Bank shall forthwith purchase from the other Banks such
participations in such Committed Rate Advances made by them as shall be
necessary to cause such purchasing Bank to share the excess payment ratably with
each of them; provided, however, that if all or any portion of such excess
payment is thereafter recovered
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from such purchasing Bank, such purchase from each Bank shall be rescinded and
such Bank shall repay to the purchasing Bank the purchase price to the extent of
such recovery together with an amount equal to such Bank's ratable share
(according to the proportion of (i) the amount of such Bank's required repayment
to (ii) the total amount so recovered from the purchasing Bank) of any interest
or other amount paid or payable by the purchasing Bank in respect of the total
amount so recovered. The Borrower agrees that any Bank so purchasing a
participation from another Bank pursuant to this Section 2.14 may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of set-off) with respect to such participation as fully as if such
Bank were the direct creditor of the Borrower in the amount of such
participation.
SECTION 2.15. Evidence of Debt/Register.
(a) The Debt of the Borrower resulting from the Committed Rate Advances
(including, without limitation, the Swing Line Advances) and Competitive Bid
Advances shall be evidenced by the Committed Rate Notes and the Competitive Bid
Notes, respectively, delivered to the Banks pursuant to Article IV, and the
remaining principal amount thereof shall be recorded by the Banks, and, prior to
any transfer, endorsed on the grids thereto in accordance with the terms of the
Notes. The Agent shall also maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower under this
Agreement and the amounts of principal and interest payable and paid to each
Bank from time to time under this Agreement.
(b) The Register maintained by the Agent pursuant to Section 9.08(c)
shall include a control account, and a subsidiary account for each Bank, in
which accounts (taken together) shall be recorded: (i) the date and amount of
each Borrowing, the Commitment to which such Borrowing relates, the Type of
Advance comprising such Borrowing and the Interest Period applicable thereto (if
any) from time to time, (ii) the terms of each Assignment and Acceptance
delivered to and accepted by it, (iii) the amount of any principal or interest
due and payable or to become due and payable from the Borrower to each Bank, and
(iv) the amount of any sum received by the Agent from the Borrower hereunder and
each Bank's share thereof.
SECTION 2.16. Use of Proceeds. The proceeds of the Advances shall be
used by the Borrower for Capital Investments (to the extent permitted under this
Agreement), including, without limitation, acquisitions of Facilities and
Related Businesses (to the extent permitted under this Agreement), and other
general corporate purposes.
SECTION 2.17. Outstanding Advances, Existing Collateral.
(a) Conversion to Advances; Termination of Commitment under Existing
Credit Agreement. On the Closing Date: (i) all outstanding Base Rate Advances
(as
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defined in the Existing Credit Agreement) shall automatically become Base
Rate Advances under the Commitments as if borrowed on the Closing Date and shall
thereafter bear interest as provided herein and payable at such times and
otherwise on such terms as are provided herein for Base Rate Advances under the
Commitments, (ii) there shall be no outstanding Eurodollar Rate Advances or
Competitive Bid Advances (as such terms are defined in the Existing Credit
Agreement) and (iii) the Commitments (as such term is defined in the Existing
Credit Agreement) shall be permanently terminated in full.
(b) Adjustment Assignments and Payments Among Banks. Notwithstanding
the requirements set forth in Section 9.08 or any other provision to the
contrary contained herein, on the Closing Date, through the Agent, the Banks
shall enter into such assignments and make such payments (including any accrued
interest or fees) in immediately available funds among themselves as shall be
necessary for each Bank to have funded its ratable share, in accordance with its
Commitment hereunder, of all existing Base Rate Advances as if such Advances
were borrowed on the Closing Date hereunder and to participate, in accordance
with its Commitment hereunder, in all Letters of Credit outstanding on the
Closing Date.
ARTICLE III
AMOUNT AND TERMS OF LETTERS OF
CREDIT AND PARTICIPATIONS THEREIN
SECTION 3.01. Letters of Credit. Each Issuing Bank agrees, on the terms
and conditions hereinafter set forth, to Issue for the account of the Borrower,
one or more Letters of Credit (denominated in United States dollars) from time
to time during the period from the Closing Date until the date which occurs 30
days before the Revolver Termination Date in an aggregate undrawn amount not to
exceed at any time $25,000,000, each such Letter of Credit upon its Issuance to
expire on or before the earlier of (x) the date which occurs one year from the
date of its Issuance or (y) the Revolver Termination Date; provided, however,
that any standby Letter of Credit may by its terms be automatically extendable
for up to periods of one year; provided further that any letter of credit issued
under the Existing Credit Agreement which continues to be undrawn in whole or in
part on the Closing Date shall be deemed to be a Letter of Credit Issued
hereunder from and after the Closing Date and shall be set forth on Schedule
VII; provided further that each Letter of Credit shall be Issued on a sight
basis only; provided further no Issuing Bank shall be obligated or permitted to
Issue or renew any Letter of Credit if:
(i) after giving effect to the Issuance or renewal of such
Letter of Credit, the then outstanding aggregate amount of the Letter
of Credit Liability and all Advances (including any Advances required
to be made but
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not funded) shall exceed the aggregate amount of the Commitments of
the Banks; or
(ii) the Agent or the Majority Banks shall have notified such
Issuing Bank and the Borrower, that no further Letters of Credit are to
be Issued or renewed by such Issuing Bank due to failure to meet any of
the applicable conditions set forth in Article IV, and such notice has
not expired or been withdrawn by the Majority Banks.
Within the limits of the obligations of each Issuing Bank set forth above, the
Borrower may request an Issuing Bank to Issue one or more Letters of Credit,
reimburse such Issuing Bank for payments made thereunder pursuant to Section
3.03(a), and request any Issuing Bank to Issue one or more additional Letters of
Credit under this Section 3.01.
SECTION 3.02. Issuing the Letters of Credit. Each Letter of Credit
shall be Issued on at least five Business Days' notice from the Borrower to the
Issuing Bank specifying the date, amount, expiry, and beneficiary thereof,
accompanied by such application and agreement for letter of credit and other
documents as the Issuing Bank may specify to the Borrower, each in form and
substance satisfactory to the Issuing Bank. On the date specified by the
Borrower in such notice and upon fulfillment of the applicable conditions set
forth in Section 3.01 and Article IV, the Issuing Bank shall Issue such Letter
of Credit in the form specified in such notice and such application and
agreement for letter of credit and shall promptly notify the Agent thereof. In
the event and to the extent that any provision of an application and agreement
for a Letter of Credit shall conflict with this Agreement, the provisions of
this Agreement shall govern.
SECTION 3.03. Reimbursement Obligations.
(a) Notwithstanding any provisions to the contrary in any application
and agreement for letter of credit applicable to any Letter of Credit, the
Borrower shall:
(i) pay to the Issuing Bank an amount equal to, and in
reimbursement for, each amount which such Issuing Bank pays under any
Letter of Credit on or before the earlier of (A) the time specified
therefor in the application and agreement for letter of credit
applicable to such Letter of Credit or (B) the date which occurs one
Business Day after payment of such amount by such Issuing Bank under
such Letter of Credit; and
(ii) pay to the Issuing Bank interest on any amount remaining
unpaid under clause (i) above from the date on which such Issuing Bank
pays such amount under any Letter of Credit until such amount is
reimbursed in full to such Issuing Bank pursuant to clause (i) above,
payable on demand, at a fluctuating rate per annum equal to the sum of
the Base Rate in effect from time to time, provided that any such
amount which is not reimbursed to such
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Issuing Bank within one Business Day after notice thereof by the
Issuing Bank shall thereafter bear interest, until such amount is
reimbursed in full to such Issuing Bank pursuant to clause (i) above,
payable on demand, at the Base Rate in effect from time to time plus
2-1/2% per annum.
(b) All amounts to be reimbursed to the Issuing Bank in accordance with
subsection (a) above may, subject to the limitations set forth in Section 2.01
(exclusive of the minimum borrowing limitations), be paid from the proceeds of
Committed Rate Advances. The Borrower hereby authorizes the Banks to make
pursuant to Section 2.01 Committed Rate Advances which are in the amounts of the
reimbursement obligations of the Borrower set forth in subsection (a) above, and
further authorizes the Agent (i) to give the Banks, pursuant to Section 2.01(c),
a Notice of Borrowing with respect to the Borrowing comprised of such Advances
(which shall be Base Rate Advances) and (ii) to distribute the proceeds of such
Advances to the Issuing Bank to pay such amounts. The Borrower agrees that all
such Advances so made shall be deemed to have been requested by it, and directs
that all proceeds thereof shall be used to pay such reimbursement obligations
under subsection (a) above.
SECTION 3.04. Participations Purchased by the Banks.
(a) On the date of Issuance of each Letter of Credit, the Issuing Bank
shall be deemed irrevocably and unconditionally to have sold and transferred to
each Bank without recourse or warranty, and each Bank shall be deemed to have
irrevocably and unconditionally purchased and received from such Issuing Bank,
an undivided interest and participation, to the extent of such Bank's Commitment
Percentage, in effect from time to time, in such Letter of Credit and all Letter
of Credit Liability relating to such Letter of Credit and all Loan Documents
securing, guaranteeing, supporting, or otherwise benefitting the payment of such
Letter of Credit Liability. As to each Letter of Credit Issued or to be Issued
by the Issuing Bank, the Agent will promptly (after it receives notification
from the Issuing Bank pursuant to Section 3.02) notify each Bank of such Letter
of Credit and its date of Issue, amount, expiry, and reference number.
(b) In the event that any reimbursement obligation under Section
3.03(a) is not paid when due to the Issuing Bank with respect to any Letter of
Credit, the Issuing Bank shall promptly notify the Agent to that effect, and the
Agent shall promptly notify the Banks of the amount of such reimbursement
obligation and each Bank shall immediately pay to the Issuing Bank, in lawful
money of the United States and in same day funds, an amount equal to such Bank's
Commitment Percentage then in effect of the amount of such unpaid reimbursement
obligation with interest at the Federal Funds Rate for each day after such
notification until such amount is paid to the Agent.
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(c) Promptly after the Issuing Bank receives a payment on account of a
reimbursement obligation with respect to any Letter of Credit, the Issuing Bank
shall promptly pay to the Agent, and the Agent shall promptly pay to each Bank
which funded its participation therein, in lawful money of the United States and
in the kind of funds so received, an amount equal to such Bank's ratable share
thereof.
(d) Upon the request of any Bank, the Agent shall furnish to such Bank
copies of any Letter of Credit and any application and agreement for letter of
credit and other documents related thereto as may be reasonably requested by
such Bank.
(e) The obligation of each Bank to make payments under Section 3.04(b)
above shall be unconditional and irrevocable and shall be made under all
circumstances, including, without limitation, any of the circumstances referred
to in Section 3.06(b).
(f) If any payment received on account of any reimbursement obligation
with respect to a Letter of Credit and distributed to a Bank as a participant
under Section 3.04(c) is thereafter recovered from the Issuing Bank in
connection with any bankruptcy or insolvency proceeding relating to the
Borrower, each Bank which received such distribution shall upon demand by the
Agent, repay to the Issuing Bank such Bank's ratable share of the amount so
recovered together with an amount equal to such Bank's ratable share (according
to the proportion of (i) the amount of such Bank's required repayment to (ii)
the total amount so recovered) of any interest or other amount paid or payable
by such Issuing Bank in respect of the total amount so recovered.
SECTION 3.05. Letter of Credit Fees.
(a) The Borrower hereby agrees to pay nonrefundable letter of credit
fees with respect to each Letter of Credit on the maximum amount available to be
drawn under such Letter of Credit from time to time after giving effect to
scheduled reductions thereof (the determination of such maximum amount to assume
compliance with all conditions for drawing) from the date of Issuance of such
Letter of Credit until the expiry date of such Letter of Credit, (i) to each
Bank (in accordance with its Commitment Percentage) at a rate equal to (A) the
Applicable Eurodollar Rate Margin in effect on the date of Issuance thereof less
(B) 1/8 of one percent per annum and (ii) to the Issuing Bank at a rate equal to
1/8 of one percent per annum, for the number of months or any fraction thereof
that such Letter of Credit is outstanding, payable in arrears and on the last
day of each March, June, September and December prior to the expiry date of such
Letter of Credit for the number of months or fraction thereof and on the expiry
date of such Letter of Credit.
(b) The Borrower shall pay to the Issuing Bank, for its own account and
on demand, sums equal to standard fees (other than its letter of credit fee),
charges and expenses that such Issuing Bank may impose, pay or incur in
connection with
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the Issuance, amendment, administration, transfer or cancellation of any or all
Letters of Credit or in connection with any payment by such Issuing Bank
thereunder.
SECTION 3.06. Indemnification: Nature of the Issuing Bank's Duties.
(a) The Borrower agrees to indemnify and save harmless the Agent, each
Issuing Bank and each Bank from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
attorneys' fees) which the Agent, such Issuing Bank or such Bank may incur or be
subject to as a consequence, direct or indirect, of (i) the Issuance of any
Letter of Credit or (ii) any action or proceeding relating to a court order,
injunction, or other process or decree restraining or seeking to restrain such
Issuing Bank from paying any amount under any Letter of Credit.
(b) The obligations of the Borrower hereunder with respect to Letters
of Credit shall be unconditional and irrevocable, and shall be paid strictly in
accordance with the terms hereof under all circumstances, including, without
limitation, any of the following circumstances:
(i) any lack of validity or enforceability of any Letter of
Credit or Loan Document or any agreement or instrument relating
thereto;
(ii) the existence of any claim, setoff, defense or other
right which the Borrower may have at any time against the beneficiary,
or any transferee, of any Letter of Credit, or any Issuing Bank, any
Bank, or any other Person;
(iii) any draft, certificate, or other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) any lack of validity, effectiveness, or sufficiency of
any instrument transferring or assigning or purporting to transfer or
assign any Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part;
(v) any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under any Letter of Credit
or of the proceeds thereof;
(vi) the release or non-perfection of any collateral;
(vii) any failure of the beneficiary of a Letter of Credit to
strictly comply with the conditions required in order to draw upon any
Letter of Credit;
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(viii) any misapplication by the beneficiary of any Letter of
Credit of the proceeds of any drawing under such Letter of Credit; or
(ix) any other circumstances or happening whatsoever, whether
or not similar to the foregoing;
provided that, notwithstanding the foregoing, neither an Issuing Bank nor the
Agent shall be relieved of any liability it may otherwise have as a result of
its gross negligence or willful misconduct.
SECTION 3.07. Increased Costs.
(a) Change in Law. If any change in any law or regulation or in the
interpretation thereof by any court or administrative governmental authority
charged with the administration thereof shall either (i) impose, modify or deem
applicable any reserve, special deposit or similar requirement against letters
of credit issued by an Issuing Bank or (ii) impose on such Issuing Bank or any
Bank any other condition regarding letters of credit or, in the case of such
Bank, its participation hereunder in Letters of Credit, and the result of any
event referred to in the preceding clause (i) or (ii) shall be to increase the
cost to such Issuing Bank of Issuing or maintaining or, in the case of such
Bank, having a participation in Letters of Credit, then, upon demand by such
Issuing Bank or such Bank (with a copy to the Agent), the Borrower shall
immediately pay to such Issuing Bank or such Bank from time to time as specified
by such or such Bank (with a copy to the Agent) additional amounts which shall
be to compensate such Issuing Bank or such Bank for such increased cost. Each
certificate as to such increased cost, and amount thereof, incurred by any
Issuing Bank or any Bank as a result of any event mentioned in clause (i) or
(ii) above, submitted by such Issuing Bank or such Bank to the Borrower and the
Agent, shall set out in reasonable detail the calculation of such amounts and
shall be conclusive and binding for all purposes, absent manifest error.
(b) Capital. If any Issuing Bank or any Bank determines that compliance
with any law or regulation or with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law)
has or would have the effect of reducing the rate of return on the capital of
any Issuing Bank or such Bank or any corporation controlling such Issuing Bank
or such Bank as a consequence of, or with reference to, such Issuing Bank's
commitment to issue, issuance of, or, with respect to such Bank's commitment, to
participate in, any Letter of Credit hereunder below the rate that such Issuing
Bank, such Bank or such other corporation could have achieved but for compliance
(taking into account the policies of such Issuing Bank, such Bank or corporation
with capital), then the Borrower, shall from time to time, upon demand by such
Issuing Bank or such Bank (with a copy of such demand to the Agent), immediately
pay to such Issuing Bank or such Bank additional amounts sufficient to
compensate such Issuing Bank or other
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corporation for such reduction. A certificate as to such amounts, to the
Borrower and the Agent by such Issuing Bank or such Bank, shall be conclusive
and binding for all purposes, absent manifest error. Each Issuing Bank and each
Bank agree promptly to notify the Borrower and the Agent of any circumstances
that would Borrower to pay additional amounts pursuant to this subsection (b),
provided that the failure to give such notice shall not affect the Borrower's
obligation to pay such additional amounts hereunder.
(c) Survival of Obligations. Without prejudice to the survival of any
other obligation of the Borrower hereunder, the agreements and obligations of
the Borrower contained in this Section 3.07 shall survive the payment in full of
the Advances (after the Revolver Termination Date).
SECTION 3.08. Uniform Customs and Practice. The Uniform Customs and
Practice for Documentary Credits as most recently published by the International
Chamber of Commerce ("UCP") shall in all respects be deemed a part of this
Article III as if incorporated herein and shall apply to the Letters of Credit.
ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.01. Conditions Precedent to Any Borrowing and Letter of
Credit. The obligation of each Bank to make an Advance on the occasion of any
Borrowing, the obligation of each Issuing Bank to Issue any Letter of Credit and
the right of the Borrower to request a Swing Line Borrowing, shall be subject to
the conditions precedent that on the date of such Borrowing or Issuance (a) the
following statements shall be true and the Agent shall have received a
certificate signed by a duly authorized officer of the Borrower, dated the date
of such Borrowing or Issuance, stating that such statements are true (and each
of the giving of the applicable Notice of Borrowing or the Notice of Swing Line
Borrowing and the acceptance by the Borrower of the proceeds of such Borrowing
or the issuance of such Letter of Credit shall constitute a representation and
warranty by the Borrower and each Loan Party (as to each Loan Document to which
it is a party) that on the date of such Borrowing or such Issuance such
statements are true):
(i) the representations and warranties contained in Section
5.01 of this Agreement, in Section 6 of the Guaranty, and in Section 11
of the Intercompany Subordination Agreement, are true and correct in
all material respects on and as of the date of such Borrowing or
Issuance, before and after giving effect to such Borrowing or Issuance
and to the application of the proceeds therefrom, as though made on and
as of such date; and
(ii) no event has occurred and is continuing, or would result
from such Borrowing or such Issuance or from the application of the
proceeds
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therefrom, which constitutes an Event of Default or would constitute an
Event of Default but for the requirement that notice be given or time
elapse or both;
(b) the Competitive Bid Note, duly executed by the Borrower, to the
order of the appropriate Designated Bidder, shall have been received by the
Agent and (c) the Agent shall have received such other approvals, opinions or
documents as the Agent may reasonably request.
SECTION 4.02. Conditions Precedent to Initial Advances. The obligations
of each Bank to make its initial Advance and each Issuing Bank to Issue its
initial Letter of Credit on or after the Closing Date are subject to the
following conditions precedent:
(i) The Agent shall have received evidence satisfactory to it
that all fees and expenses payable by the Borrower under the Existing
Loan Agreement shall have been paid in full.
(ii) The Agent shall have received the following documents,
each dated the Closing Date and in form and substance satisfactory to
the Agent:
(a) If requested by a Bank, a Committed Rate Note,
each duly executed by the Borrower, to the order of such Bank.
(b) A Consent with respect to the amendment and
restatement of the Existing Credit Agreement, duly executed by
each Guarantor and by each Loan Party party to the
Intercompany Subordination Agreement in substantially the form
of Exhibit G.
(c) Certified copies of the (i) resolutions of the
Board of Directors or other governing body of each Loan Party
approving each Loan Document to which it is a party, and of
all documents evidencing other necessary corporate, limited
liability company or partnership action and governmental
approvals, if any, with respect to each such Loan Document,
(ii) all documents evidencing other corporate, limited
liability company or partnership action or governmental
approvals, if any, necessary or, in the reasonable opinion of
the Agent, advisable in connection with the execution,
delivery and performance of each Loan Document; (iii) the
certificate or articles of incorporation, by-laws or other
constituent instruments of the Borrower and of each of its
Subsidiaries other than Immaterial Subsidiaries, as amended
through the Closing Date or, with respect to any of the
Borrower's Subsidiaries other than Immaterial Subsidiaries, a
certification that such Subsidiary's certificate or articles
of incorporation, bylaws or other constituent instruments
delivered to Citibank in connection with the Existing Credit
Agreement are true and correct copies of the certificate
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or articles of incorporation, bylaws or other constituent
instruments of such Subsidiary and that such certificate or
articles of incorporation, bylaws or other constituent
instruments have not been amended or otherwise modified since
the date such copies were delivered to Citibank and (iv) good
standing certificates with respect to the Borrower and each of
its Subsidiaries other than Immaterial Subsidiaries from the
Secretary of State (or similar official) of the state in which
the Borrower or such Subsidiary is incorporated or organized.
(d) A certificate of the Secretary or an Assistant
Secretary of each Loan Party certifying the names and true
signatures of the officers of such Loan Party authorized to
sign each Loan Document to which it is a party and the other
documents to be delivered hereunder.
(e) A certificate of the Borrower, signed on behalf
of the Borrower by its President or a Vice President,
certifying as to the absence of any event occurring and
continuing, or resulting from this Agreement, that constitutes
an Event of Default or would constitute an Event of Default
but for the requirement that notice be given or time elapse or
both.
(f) Favorable opinions of N. Carolyn Forehand,
general counsel of the Borrower, and Waller Lansden Dortch &
Davis, special counsel for the Borrower and the other Loan
Parties, substantially in the forms of Exhibit E.
(g) A favorable opinion of Shearman & Sterling,
counsel for the Agent, satisfactory to the Agent.
(h) Such other agreements, certificates, consents and
other documents that the Agent or any Bank may reasonably
request.
(iii) The Borrower shall have paid all fees payable hereunder
on or before the Closing Date.
(iv) Other than as set forth on Schedule VI, no judgment,
order, decree, injunction or other restraint affecting any Loan Party
shall have been rendered or imposed by any court, governmental agency
or arbitrator, and there shall be no pending or threatened action or
proceeding affecting any Loan Party before any court, governmental
agency or arbitrator, which could reasonably be expected to have a
material adverse effect on the business, prospects or condition
(financial or otherwise) or operations of the Borrower and its
Subsidiaries, taken as a whole, or which purports to affect the
legality, validity or enforceability of this Agreement or any other
Loan Document.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of incorporation, is
duly qualified as a foreign corporation and is in good standing in each
jurisdiction as to which the location of its assets or the nature of its
business makes qualification necessary, and has all power, corporate or
otherwise, to conduct its business and to own, or hold under lease, its assets,
and to execute and deliver, and to perform all of its obligations under, each of
the Loan Documents to which it is or will be a party. Each of the Borrower's
Subsidiaries other than Immaterial Subsidiaries is a corporation, limited
liability company or partnership duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of organization, is duly
qualified as a foreign corporation, limited liability company or partnership and
is in good standing in each jurisdiction as to which the location of its assets
or the nature of its business makes qualification necessary, and has all power
(corporate, limited liability company, partnership or otherwise) to conduct its
business and to own, or hold under lease, its assets, and to execute and
deliver, and to perform all of its obligations under, each of the Loan Documents
to which it is or will be a party.
(b) The execution, delivery and performance by each Loan Party of each
Loan Document to which it is or will be a party are within such Loan Party's
corporate, limited liability company or partnership powers, have been duly
authorized by all necessary corporate, limited liability company or partnership
action, and do not contravene (i) such Loan Party's certificate or articles of
incorporation, by-laws or other constituent instruments, or (ii) any law, rule,
regulation (including, without limitation, Regulation T, U or X of the Board of
Governors of the Federal Reserve System), order, writ, judgment, injunction,
decree, determination or award binding on or affecting such Loan Party or any of
its properties, or (iii) any contractual restriction binding on or affecting
such Loan Party or any of its properties, and do not result in or require the
creation of any Lien upon or with respect to any of its properties; and no Loan
Party is in default in any material respect under any such law, rule,
regulation, order, writ, judgment, injunction, decree, determination, award or
restriction.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by any Loan Party of any Loan
Document to which it is or will be a party except for those which have been duly
obtained or made and are in full force and effect.
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(d) This Agreement is, and each other Loan Document to which each Loan
Party will be a party when executed and delivered hereunder will be, the legal,
valid and binding obligation of such Loan Party enforceable against such Loan
Party in accordance with its terms.
(e) The Consolidated balance sheets of the Borrower and its
Subsidiaries as at December 31, 1996 and September 30, 1997 and the related
Consolidated statements of operations, stockholders' equity and cash flow of the
Borrower and its Subsidiaries for the fiscal year and nine months, respectively,
then ended have been furnished to the Agent. Such financial statements, and all
financial statements hereafter delivered pursuant to Sections 6.04(b) and (c),
fairly present, or will fairly present, the financial condition of the Borrower
and its Subsidiaries as at the dates thereof and the results of the operations
of the Borrower and its Subsidiaries for the periods then ended or ending, all
in accordance with generally accepted accounting principles consistently
applied. Since December 31, 1996, there has been no material adverse change, in
the business, prospects or condition (financial or otherwise) or in the results
of operations of the Borrower and its Subsidiaries taken as a whole.
(f) Each Loan Party has good title to all of its material property,
free and clear of all Liens, except for Permitted Liens. Each Lease or other
agreement relating to the Real Property described in Schedule I operated by each
Loan Party is a valid and subsisting Lease or other agreement and is in full
force and effect in accordance with the terms thereof, and the Borrower or its
Subsidiary is in possession of all such leaseholds and no material default by
the Borrower or any of its Subsidiaries exists under any such Lease or other
agreement and, to the best of the Borrower's knowledge, no lessor has any
accrued right to terminate any such Lease or other agreement on account of a
default by the Borrower or its Subsidiaries.
(g) Each Service Agreement is a valid and subsisting agreement and is
in full force and effect in accordance with the terms thereof, and no material
default by the Borrower or any of its Subsidiaries exists under any Service
Agreement and, to the best of the Borrower's knowledge, no party to any of the
Service Agreements has any accrued right to terminate any Service Agreement on
account of a default by the Borrower or any of its Subsidiaries.
(h) Other than as set forth on Schedule VI, no judgment, order, decree,
injunction or other restraint affecting any Loan Party has been rendered or
imposed by any court, governmental agency or arbitrator, and there is no pending
or, to the best knowledge of the Borrower, threatened action or proceeding
affecting any Loan Party before any court, governmental agency or arbitrator,
which could reasonably be expected to have a material adverse effect on the
business, prospects or condition (financial or otherwise) or operations of the
Borrower and its Subsidiaries, taken as
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a whole, or which purports to affect the legality, validity or enforceability of
this Agreement or any other Loan Document.
(i) Set forth on Schedule II is a complete and accurate list of all of
the Subsidiaries of the Borrower, other than Immaterial Subsidiaries, as of the
date hereof, showing as of such date (as to each such Subsidiary) the nature of
its organization, the jurisdiction of its organization, the number of shares or
the amount of interests of each class of Securities outstanding on the date
hereof, the direct owner of the outstanding shares or the amount of interests of
each such class owned, and the jurisdictions in which such Subsidiary is
qualified to do business as a foreign entity. There are no outstanding options,
warrants, rights of conversion or purchase, and similar rights to acquire
Securities of any of such Subsidiaries, except as set forth on Schedule II, and
all of the outstanding Securities of all of such Subsidiaries have been validly
issued, are fully paid and nonassessable and are owned by the Borrower or, in
the case of limited liability companies, the Intercompany Creditor, free and
clear of (i) all Liens and (ii) any restrictions (other than laws, rules or
regulations) on the ability to vote or alienate such Securities.
(j) All information, exhibits and reports furnished in writing by or on
behalf of the Borrower or any of its Subsidiaries other than Immaterial
Subsidiaries and made available to the Agent or any Bank relating to the
condition (financial or otherwise), operations, business or properties of the
Borrower or such Subsidiary, are true, correct and complete and not misleading
in all material respects.
(k) With respect to all business plans and other forecasts and
projections furnished by or on behalf of the Borrower or any of its Subsidiaries
other than Immaterial Subsidiaries and made available to the Agent or any Bank
relating to the financial condition, operations, business, properties or
prospects of the Borrower or such Subsidiary, to the best of the Borrower's
knowledge: (i) all facts stated as such therein are true and complete in all
material respects, (ii) all facts upon which the forecasts or projections
therein contained are based are true and complete in all material respects, and
(iii) all estimates and assumptions were made in good faith and believed to be
reasonable at the time made.
(l) Schedule IV sets forth, as of the date hereof, all Debt of the
Borrower and its Subsidiaries other than Debt representing miscellaneous
liabilities not in excess of $5,000,000 in the aggregate.
(m) Neither the business nor the properties of the Borrower or any of
its Subsidiaries are affected by any strike, lockout, fire, explosion,
earthquake, embargo, act of God or of the public enemy or other casualty which
could reasonably be expected to have a material adverse effect on the business,
prospects, condition (financial or otherwise) or results of operations of the
Borrower and its Subsidiaries taken as a whole.
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(n) No ERISA Event has occurred with respect to any Plan or is
reasonably expected to occur with respect to any Plan.
(o) Schedule B (Actuarial Information) to the most recently completed
annual report (Form 5500 Series) for each Plan of the Borrower or its
Subsidiaries, copies of which have been or will be filed with the Internal
Revenue Service, is complete and accurate in all material respects and fairly
presents the funding status of such Plan, and since the date of such Schedule B
there has been no material adverse change in such funding status.
(p) Neither the Borrower nor any ERISA Affiliate has incurred or is
reasonably expected to incur any material Withdrawal Liability to any
Multiemployer Plan.
(q) Neither the Borrower nor any ERISA Affiliate has been notified by
the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or has been terminated, within the meaning of Title IV of ERISA
and no Multiemployer Plan is reasonably expected to be in reorganization or to
be terminated, within the meaning of Title IV of ERISA.
(r) The Borrower and its Subsidiaries on a Consolidated basis are, and
each Loan Party individually is, and after receipt and application of the
Advances in accordance with the terms of this Agreement and execution of each
Loan Document to which it is or is to be a party will be, Solvent.
(s) Neither the Borrower nor any Subsidiary of the Borrower is, or is
required to be, registered under the Investment Company Act of 1940, as amended.
(t) Each of the Borrower and its Subsidiaries is in compliance in all
material respects with the provisions of all Environmental Laws. Neither the
Borrower nor any of its Subsidiaries nor, to the knowledge of the Borrower, any
other Person, has engaged in any Environmental Activity, nor, to the knowledge
of the Borrower, has any Environmental Activity otherwise occurred, in material
violation of any provision of any applicable Environmental Laws.
(u) Neither the Borrower nor any of its Subsidiaries has any liability,
absolute or contingent, in connection with any Environmental Activity the
satisfaction of which could reasonably be expected to have a material adverse
effect on the business, prospects, condition (financial or otherwise) or results
of operations of the Borrower and its Subsidiaries taken as a whole.
(v) The Borrower is not engaged in the business of extending credit for
the purpose of purchasing or carrying margin stock (within the meaning of
Regulation U issued by the Board of Governors of the Federal Reserve System). No
proceeds of any Advance will be used to purchase or carry any margin stock
(within the meaning of Regulation U issued by the Board of Governors of the
Federal Reserve
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System) or to extend credit to others for the purpose of purchasing or carrying
any margin stock (within the meaning of Regulation U issued by the Board of
Governors of the Federal Reserve System) in violation of applicable law,
including, without limitation, Regulation U issued by the Board of Governors of
the Federal Reserve System.
(w) The Intercompany Creditor (i) is not liable in respect of any Debt
other than Intercompany Debt, (ii) has no other liabilities or obligations other
than contingent obligations that are not material in amount in respect of
operating leases entered into prior to May 1, 1993, and (iii) has not engaged in
any operations, and has not received any notice of a claim or threatened claim
in respect of any operations or the sale thereof, since May 1, 1993.
(x) All reprogramming required to permit the proper functioning, in and
following the year 2000, of the Borrower's computer systems and the related
equipment and the testing of all such systems and equipment, as so reprogrammed,
will be materially completed in a timely fashion and will not result in a
material adverse effect on the business, prospects, condition (financial or
otherwise) or results of operations of the Borrower and its Subsidiaries taken
as whole.
ARTICLE VI
COVENANTS OF THE BORROWER
SECTION 6.01. Affirmative Covenants. So long as any Note shall remain
unpaid, any Letter of Credit shall remain outstanding, any amount shall remain
due hereunder, or any Bank shall have any Commitment hereunder, the Borrower
will, unless the Majority Banks shall otherwise consent in writing:
(a) Payment of Taxes, Etc. Pay and discharge, and cause each Subsidiary
to pay and discharge, before the same shall become delinquent, (i) all taxes,
assessments and governmental charges or levies imposed upon it or upon its
property, and (ii) all lawful claims which, if unpaid, might by law become a
Lien upon its property; provided, however, that neither the Borrower nor any
Subsidiary shall be required to pay or discharge any such tax, assessment,
charge or claim which is being contested in good faith and by proper proceedings
and as to which appropriate reserves are being maintained.
(b) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable insurance
companies or associations (i) in such amounts and covering such risks as is
usually carried by companies engaged in similar businesses and owning similar
properties in the same general areas in which the Borrower or such Subsidiary
operates, and (ii) reasonably satisfactory to the Agent, and naming the Agent as
an additional insured or as loss payee as the respective interests appear.
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(c) Preservation of Corporate Existence, Etc. Except as is otherwise
expressly permitted hereby, preserve and maintain, and cause each Subsidiary to
preserve and maintain, its corporate existence, rights (charter and statutory)
and franchises.
(d) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects, with the requirements of all
applicable laws, rules, regulations and orders, including, without limitation,
all Environmental Laws relating to the Real Property and the ownership, use,
operation and occupancy thereof.
(e) Visitation Rights. At any reasonable time and from time to time
after notice, permit the Agent or any of the Banks or any agents or
representatives thereof, to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of, the Borrower
and/or any of the Subsidiaries of the Borrower, and to discuss the affairs,
finances and accounts of the Borrower and any such Subsidiary with any of their
officers or directors and with their independent certified public accountants.
(f) Keeping of Books. Keep, and cause each Subsidiary of the Borrower
to keep, proper books of record and account, in which full and correct entries
shall be made of all financial transactions and the assets and business of the
Borrower and each such Subsidiary in accordance with generally accepted
accounting principles consistently applied.
(g) Maintenance of Properties, Etc. Maintain and preserve, and cause
each Subsidiary of the Borrower to maintain and preserve, all of its properties
which are used or useful in the conduct of its business in good working order
and condition, ordinary wear and tear excepted.
(h) Compliance with Terms of All Leaseholds. Make all payments and
otherwise perform, and cause each of its Subsidiaries to make all payments and
otherwise perform, all of its material obligations in respect of all material
Leases, and use its best efforts, and cause each of its Subsidiaries to use its
best efforts, to keep, and to take all action to keep, such Leases in full force
and effect and not allow any such Leases to lapse or be terminated or any rights
to renew such Leases to be forfeited or canceled; provided, however, that any
such Lease may lapse or be terminated or such renewal rights may be forfeited or
canceled if in the reasonable business judgment of the Borrower or its
Subsidiary, as the case may be, it is in its best economic interests to allow or
cause such lapse, termination, forfeiture or cancellation.
(i) Solvency. Continue, and cause each of its Subsidiaries to continue,
to be Solvent.
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(j) Further Assurances.
(A) If and to the extent requested by the Agent from time to
time, execute and deliver such documents and take such other action,
and cause each of its Subsidiaries to execute and deliver such
documents and take such other action, as may be necessary or reasonably
requested by the Agent, in order to assure and confirm that all
obligations under this Agreement (including reimbursement obligations
in respect of outstanding Letters of Credit), the Notes or any of the
other Loan Documents are at all times guaranteed on terms satisfactory
to the Agent by Guaranties of each of its present and future
Subsidiaries other than Immaterial Subsidiaries.
(B) Promptly upon the acquisition by the Borrower or one of
its Subsidiaries of the Securities of any Subsidiary that is not an
Immaterial Subsidiary or, in the event any Subsidiary of the Borrower
ceases to be an Immaterial Subsidiary, within 30 days after such
Subsidiary ceases to be an Immaterial Subsidiary, the Borrower will
cause such Subsidiary to enter into a Guaranty.
(C) Promptly upon the acquisition of the Securities of any
Subsidiary of the Borrower or one of its Subsidiaries that is not an
Immaterial Subsidiary or, in the event any Subsidiary of the Borrower
ceases to be an Immaterial Subsidiary or is owed by the Borrower more
than $100,000 in Intercompany Debt, within 30 days after such
Subsidiary ceases to be an Immaterial Subsidiary or first is owed such
amount of Intercompany Debt, the Borrower will cause such Subsidiary to
enter into the Intercompany Subordination Agreement.
(D) Use its best efforts, from and after the Closing Date, to
obtain supplements to the Subordination Agreements outstanding on the
Closing Date confirming the continued subordination of the Debt
referred to therein, in form and substance reasonably satisfactory to
the Agent.
(k) Employment of Technology; Disposal of Hazardous Materials, Etc. (i)
Employ, and cause each of its Subsidiaries to employ, in connection with its
use, if any, of the Real Property, appropriate technology and compliance
procedures to maintain compliance with any applicable Environmental Laws, (ii)
obtain and maintain and cause each of its Subsidiaries to obtain and maintain,
any and all material permits required by applicable Environmental Laws in
connection with its or its Subsidiaries' operations and (iii) dispose of, and
cause each of its Subsidiaries to dispose of, any and all Hazardous Substances
only at facilities and with carriers reasonably believed to possess valid
permits under RCRA, if applicable, and any applicable state and local
Environmental Laws. The Borrower shall use its best efforts, and cause each of
its Subsidiaries to use its best efforts, to obtain all certificates required by
law to be obtained by the Borrower and its Subsidiaries
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from all contractors employed by the Borrower or any of its Subsidiaries in
connection with the transport or disposal of any Hazardous Substances.
(l) Environmental Matters. If the Borrower or any of its
Subsidiaries shall:
(i) receive written notice that any material violation of any
Environmental Laws may have been committed or is about to be committed
by the Borrower or any of its Subsidiaries;
(ii) receive written notice that any administrative or
judicial complaint or order has been filed or is about to be filed
against the Borrower or any of its Subsidiaries alleging any material
violation of any Environmental Laws or requiring the Borrower or any of
its Subsidiaries to take any action in connection with the release or
threatened release of Hazardous Substances or solid waste into the
environment; or
(iii) receive written notice from a federal, state, foreign or
local governmental agency or private party alleging that the Borrower
or any of its Subsidiaries is liable or responsible for costs
associated with the response to cleanup, stabilization or
neutralization of any Environmental Activity;
then it shall provide the Agent with a copy of such notice within five Business
Days of the Borrower's or such Subsidiary's receipt thereof. Within ten days of
the date the Borrower or such Subsidiary shall have learned of the enactment or
promulgation of any Environmental Laws which may have a material adverse effect
on the business, property, condition (financial or otherwise) or results of
operations of the Borrower and its Subsidiaries, taken as a whole, the Borrower
shall provide the Agent with notice thereof The Borrower shall monitor
compliance with Environmental Laws by any and all owners or operators of the
Real Property.
(m) Violation of Law, Etc. Prior to the Borrower or any Subsidiary of
the Borrower commencing any acquisition of any margin stock (within the meaning
of Regulation U issued by the Board of Governors of the Federal Reserve System),
including, without limitation, commencing a merger or tender offer for shares of
another Person, the Borrower will deliver to the Agent an opinion of the general
counsel of the Borrower satisfactory to the Agent that such activity (taking
into account Section 6.02(a) and the use or proposed use of the proceeds of any
Advances in connection with such activity) does not violate any law, rule or
regulation (including without limitation Regulation U issued by the Board of
Governors of the Federal Reserve System).
SECTION 6.02. Negative Covenants. So long as any Note shall remain
unpaid, any Letter of Credit shall remain outstanding, any amount shall remain
due hereunder, or any Bank shall have any Commitment hereunder, the Borrower
will not, without the written consent of the Majority Banks:
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(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any
of its Subsidiaries to create, incur, assume or suffer to exist, any Lien upon
or with respect to any of its properties of any character (including, without
limitation, Accounts), whether now owned or hereafter acquired, or assign any
right to receive income, or sign or file, or permit any of its Subsidiaries to
sign or file, under the Uniform Commercial Code a financing statement that names
the Borrower or any of its Subsidiaries as debtor or the equivalent or sign, or
permit any of its Subsidiaries to sign, any security agreement authorizing any
secured party thereunder to file any such financing statement or other document,
or assign, or permit any of its Subsidiaries to assign, any Accounts, excluding,
however, from the operation of the foregoing restrictions the Liens created by
or pursuant to the Loan Documents and Permitted Liens and leases of and other
agreements relating to interests in property financed under the $100,000,000
Synthetic Lease Facility arising under the $100,000,000 Synthetic Lease
Facility.
(b) Restrictive Covenants. Enter into, or permit any of its
Subsidiaries to enter into, any agreement or instrument (other than the Loan
Documents and the $100,000,000 Synthetic Lease Facility) (i) which restricts the
ability of the Borrower or any of its Subsidiaries to create or suffer to exist
any Lien upon or with respect to its Securities, whether now or hereafter
issued, or upon or with respect to any of its properties, whether now owned or
leased or hereafter acquired or leased, except in connection with transactions
contemplated by clause (v) of the definition "Permitted Lien" in which case any
such agreement shall be limited to the property acquired in connection with such
transactions and any Lien granted is limited as provided in said clause (v) and
except for investments of no more than $10,000,000 in any individual case (or
series of individual cases), but in no event more than $20,000,000 in the
aggregate at any time, by the Borrower and its Subsidiaries in any Person which
is not a Subsidiary, in which the Borrower or its Subsidiaries hold less than
50% of the equity interest and as to which the Borrower or its Subsidiaries are
prohibited by law to grant a Lien on any such equity interest, or (ii) which
restricts the ability of any Subsidiary of the Borrower to (A) pay dividends or
make other distributions on its Securities or to the Borrower or any other
Subsidiary of the Borrower, (B) make any loan or advance to the Borrower or any
of its Subsidiaries, or (C) create, incur, assume or suffer to exist, or pay or
prepay, any Intercompany Debt, provided that any such agreement or instrument
mandated by any federal law, rule or regulation or order governing the business
of the Borrower and its Subsidiaries shall not be a violation of this Section
6.02(b)(ii).
(c) Debt. Create, incur, assume or suffer to exist, or permit any of
its Subsidiaries to create, incur, assume or suffer to exist, any Debt other
than:
(i) Debt hereunder;
(ii) Debt under the Loan Documents;
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(iii) Debt secured by Liens permitted by clause (v) of the
definition of "Permitted Lien";
(iv) the Debt listed on Schedule IV, provided that such Debt
may be renewed, extended or otherwise modified on terms no less
favorable to the Borrower or its Subsidiaries or the Banks than the
existing terms of such Debt;
(v) Debt not otherwise permitted by this Section 6.02(c)
incurred by the Borrower and/or its Subsidiaries (other than the
Intercompany Creditor) in connection with the acquisition of any
Facility (or the assets thereof), any Existing Clinic Acquisition or
the acquisition of any Related Business, so long as such acquisition
satisfies all the conditions precedent set forth in Section 6.02(f)(i)
or (ii), as the case may be;
(vi) convertible Subordinated Debt incurred by the Borrower or
any Subsidiary of the Borrower (other than the Intercompany Creditor)
in connection with the acquisition of a Facility (or the assets
thereof), any Existing Clinic Acquisition or the acquisition of any
Related Business, provided that the holder of any such Debt shall have
executed and delivered a Subordination Agreement to the Agent;
(vii) Subordinated Debt, whether convertible or not, in an
aggregate principal amount not in excess of $350,000,000; provided that
the Agent and the Majority Banks shall have approved in writing prior
to the issuance thereof the terms and conditions relating to the
issuance of such Subordinated Debt, including the terms of any
indenture executed in connection therewith;
(viii) any Intercompany Debt or Debt permitted under the terms
of Section 6.02(i) or 6.02(o);
(ix) Contingent Obligations permitted under Section 6.02(d);
(x) Debt under any interest rate, currency or other
protection, hedge, cap, collar, swap or similar agreement entered into
by the Borrower with any of the Banks or their respective Affiliates
from time to time;
(xi) unsecured Senior Debt in an aggregate principal amount
not in excess of $50,000,000 incurred by the Borrower or any of its
Subsidiaries (other than the Intercompany Creditor) to fund any
Existing Clinic Acquisition or the acquisition of any Facility (or the
assets thereof) or any Related Business; provided, however, that such
unsecured Senior Debt contains terms and conditions, including, without
limitation, interest rates, covenants and defaults, no greater or more
restrictive, as the case may be, than those contained herein; provided
further that there can be no principal
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repayments of such unsecured Senior Debt until one year after the
Revolver Termination Date; and
(xii) obligations under the $100,000,000 Synthetic Lease
Facility.
(d) Contingent Obligations. Create, incur, assume or suffer to exist,
or permit any of its Subsidiaries to create, incur, assume or suffer to exist,
any Contingent Obligations except (i) by reason of endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business, (ii) Contingent Obligations created pursuant to the Loan
Documents, (iii) guaranties by the Borrower of Capital Leases, Operating Leases
(and any other obligations under the $100,000,000 Synthetic Lease Facility) or
Service Agreements of any Subsidiary of the Borrower (including consents by the
Borrower to the assignment of such guaranties), provided that such Capital
Leases or Operating Leases are otherwise permitted hereunder, (iv) Contingent
Obligations of the type specified in clauses (ii) and (iii) of the definition of
"Contingent Obligation" created in the ordinary course of business, (v)
miscellaneous Contingent Obligations not to exceed at any time outstanding
$25,000,000, (vi) guaranties by the Subsidiaries of the Borrower of the
Borrower's obligations under a Capital Lease or an Operating Lease provided that
such Capital Lease or Operating Lease is otherwise permitted hereunder and only
to the extent of the portion of such Capital Lease or Operating Lease that
directly benefits such Subsidiary, (vii) Contingent Obligations not otherwise
permitted by this Section 6.02(d) incurred by the Borrower and/or its
Subsidiaries (other than the Intercompany Creditor) in connection with the
acquisition of any Facility (or the assets thereof), any Existing Clinic
Acquisition or the acquisition of any Related Business, so long as such
acquisition satisfies all the conditions precedent set forth in Section
6.02(f)(i) or (ii), as the case may be, (viii) Contingent Obligations permitted
pursuant to Section 6.02(c) and Contingent Obligations listed on Schedule IV and
(ix) Contingent Obligations to make recruitment subsidy advances pursuant to any
Service Agreement.
(e) Restricted Payments. Make, or permit any of its Subsidiaries to
make, any Restricted Payment if at the time such Restricted Payment is made none
of the then outstanding Debt of the Borrower shall be rated Investment Grade,
except that:
(i) the Borrower may pay dividends on its Common Stock, or
purchase or otherwise acquire for value any shares of its Common Stock,
or enter into any hedge agreement in respect of its Common Stock (each
a "Common Stock Payment"), provided that (A) no Event of Default or
event that would constitute an Event of Default but for the requirement
that notice be given or time elapse or both shall have occurred and be
continuing or would result from such Common Stock Payment, (B) the
aggregate amount of dividends paid on its Common Stock during the
period from January 1, 1998 through the date of such Common Stock
Payment shall not exceed an amount
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equal to ten percent of the Consolidated Net Income of the Borrower
and its Subsidiaries for the period from January 1, 1998 through the
last day of the fiscal quarter most recently ended prior to the date
of such Common Stock Payment (treated for such purposes as a single
accounting period), (C) the sum of (1) the notional value of any hedge
agreement entered into in respect of its Common stock plus (2) the
aggregate amount of Common Stock Payments made to purchase or
otherwise acquire for value shares of Common Stock shall not exceed
$35,000,000 in the aggregate for all such hedge agreements, purchases
or other acquisitions, and (D) the Borrower shall have provided the
Agent with a certificate of the treasurer or chief financial officer
of the Borrower setting forth computations in reasonable detail
demonstrating satisfaction of the foregoing conditions; and
(ii) the Borrower and its Subsidiaries may make Restricted
Payments to terminated employees in an amount not to exceed $100,000 in
any year.
(f) Capital Investments. Make, or permit any of its Subsidiaries to
make, any Capital Investments, provided that:
(i) the Borrower and the Subsidiaries of the Borrower (other
than the Intercompany Creditor) can make Capital Investments consisting
of an acquisition of a Facility (or the assets thereof) or Related
Businesses or Existing Clinic Acquisitions (whether through the
acquisition of assets or Securities) that satisfy all of the following:
(A) the Total Consideration for each such acquisition
shall be less than $75,000,000;
(B) the aggregate Total Consideration for all such
acquisitions in any twelve-month period shall not exceed
$500,000,000;
(C) the aggregate number of such acquisitions (other
than Existing Clinic Acquisitions) in any twelve-month period
shall not exceed fifteen;
(D) except in the case of Existing Clinic
Acquisitions, the Agent and the Banks shall have received at
least one day before the scheduled closing for such
acquisition the following financial and other information:
(1) the Total Consideration to be paid for
such acquisition;
(2) summary financial information relating
to the Facility or Related Business to be acquired,
including operating
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forecasts and information as to the numbers of
physicians and physician assistants involved and any
other information reasonably requested by the Agent;
and
(3) a schedule, duly certified by the chief
financial officer of the Borrower, demonstrating
compliance on a pro forma basis with the financial
covenants contained in Section 6.03 after such
acquisition; provided, however, that in preparing
such pro forma schedule, the Borrower shall include
all Debt to be incurred in connection with such
acquisition and the EBITDA of the Facility or Related
Business to be acquired (which shall be based on
audited, if available, historical numbers, adjusted
as contemplated by Section 6.03);
(E) the Agent and the Banks shall have received at
least one day before the scheduled closing of such acquisition
all other information, financial or otherwise, regarding such
acquisition as the Agent or the Banks may reasonably request;
(F) except in the case of Existing Clinic
Acquisitions, the Agent shall have received, on or before the
date of such acquisition, each of the following documents;
(1) a Guaranty (dated on or before the date
of such acquisition), duly executed by the Subsidiary
of the Borrower formed to acquire or resulting from
the acquisition of such Facility (or the assets
thereof) or Related Business, unless immediately
after giving effect to such acquisition such
Subsidiary will be an Immaterial Subsidiary;
(2) an amendment (dated on or before the
date of such acquisition) to the Intercompany
Subordination Agreement, which amendment shall make
the Subsidiary of the Borrower formed to acquire or
resulting from the acquisition of such Facility (or
the assets thereof) or Related Business a
"Subordinated Creditor" under such Intercompany
Subordination Agreement, unless immediately after
giving effect to the acquisition such Subsidiary will
be an Immaterial Subsidiary;
(3) certified copies of resolutions of the
Board of Directors or other governing body of such
Subsidiary authorizing the execution and delivery of
such Loan Documents, together with certificates of
incumbency with respect to the individuals executing
such Loan Documents;
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(4) a supplement to Schedule I hereto to the
extent such supplement is necessary to make the
representation and warranty contained in Section
5.01(f) correct on and as of the date of such
acquisition; and
(5) such other documents (including a
favorable legal opinion of the general counsel of the
Borrower) as the Agent may reasonably request;
(ii) the Borrower and the Subsidiaries of the Borrower (other
than the Intercompany Creditor) can make Capital Investments consisting
of an acquisition of a Facility (or the assets thereof) or Related
Businesses for which the Total Consideration (whether through the
acquisition of assets or Securities) equals or exceeds $75,000,000 only
with the prior approval in writing of the terms and conditions of such
acquisition by the Majority Banks in substantially the form of Exhibit
F (it being understood that the Banks shall use reasonable efforts to
notify the Borrower within ten Business Days after receipt of all of
the information regarding a proposed acquisition described in clause
(A) below of their decision to approve or disapprove the proposed
acquisition), and
(A) the Banks and the Agent shall have received
complete information, financial and otherwise, regarding the
proposed acquisition as may be necessary or desirable, in the
reasonable judgment of the Banks, to enable the Banks to
evaluate the proposed acquisition for the purpose of approving
such acquisition under this Section 6.02(f)(ii), including,
without limitation, information regarding the Total
Consideration to be paid, a schedule, duly certified by the
chief financial officer of the Borrower, demonstrating
compliance on a pro forma basis with the financial covenants
contained in Section 6.03 after such acquisition, and any
other information as the Banks may reasonably request;
provided, however, that in preparing such pro forma schedule,
the Borrower shall include all Debt to be incurred in
connection with such acquisition and the EBITDA of the
Facility or Related Business to be acquired (which shall be
based on audited, if available, historical numbers, adjusted
as contemplated by Section 6.03); and
(B) the Agent shall have received on or before the
day of such acquisition, in form and substance satisfactory to
the Agent, each of the documents described in subsection
6.02(f)(i)(F);
(iii) the Borrower and its Subsidiaries may make Capital
Expenditures that are not acquisitions of, or other investments in,
Facilities, Related Businesses or other Persons (or all or
substantially all of the assets
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thereof) in the ordinary course of business, provided that no Event of
Default or event that would constitute an Event of Default but for the
requirement that notice be given or time elapse or both shall have
occurred and be continuing or would result therefrom;
(iv) the Borrower and its Subsidiaries may make capital
investments in, and loans and advances to, Subsidiary joint ventures,
general or limited partnerships, limited liability companies or other
types of Persons that are not wholly-owned by the Borrower and its
Subsidiaries in an aggregate amount of not more than $25,000,000 during
any fiscal year, and in no event in an aggregate amount exceeding
$50,000,000 at any time outstanding;
(v) the Borrower and its Subsidiaries may make capital
investments in, and loans and advances to, joint ventures, general or
limited partnerships, limited liability companies or other types of
Persons that are not Subsidiaries in an aggregate amount not exceeding
$15,000,000 at any time outstanding;
(vi) without limiting amounts that may be invested in, or
loaned or advanced to other Persons pursuant to Section 6.02(f)(v), the
Borrower's Subsidiary PhyCor of Hawaii, Inc. ("PhyCor-Hawaii") may make
secured loans to Straub Clinic & Hospital, Inc. ("Straub") to the
extent required by, and in compliance with, Sections 5.8.1, 5.8.2 and
5.8.3 of its Service Agreement with Straub (the "Straub Service
Agreement"); provided that:
(A) at the time of each such loan and after giving
effect thereto, no Event of Default or event which would
constitute an Event of Default but for the requirement that
notice be given or time elapse or both shall occur and be
continuing;
(B) loans pursuant to Section 5.8.1 of the Straub
Service Agreement ("Straub Capital Loans") shall be secured by
a first priority security interest in all of the assets
directly or indirectly acquired by Straub from the proceeds of
any such loans, free and clear of any other Liens; and the
aggregate principal amount of all Straub Capital Loans may not
exceed $50,000,000 at any time outstanding;
(C) loans pursuant to Section 5.8.2 of the Straub
Service Agreement ("Straub Working Capital Loans";
collectively, with the Straub Capital Loans, the "Straub
Loans") shall be made pursuant to a single credit facility
providing loan availability for no more than one year from the
commencement of the term thereof (which may be renewed on an
annual basis, but not provide availability later than the
stated Revolver Termination Date) and shall be secured by a
first priority security interest in all of the accounts
receivable, inventory,
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supplies and other current assets of Straub (the "Straub
Loan Base"), free and clear of any other Liens; and the
aggregate principal amount of all Straub Working Capital
Loans may not exceed at any time outstanding the lesser of
(1) $40,000,000 or (2) the aggregate book value (less any
reserves applicable thereto) of (x) the Straub Loan Base as
of such time and (y) any current assets acquired by the
Borrower in the merger with Straub Clinic & Hospital,
Incorporated and held by the Borrower at such time, all as
determined in accordance with generally accepted accounting
principles; and
(D) each Straub Loan shall be evidenced by a
promissory note (1) that shall have a final maturity not later
than the stated Revolver Termination Date and provide for the
repayment of principal prior to final maturity at the annual
rate of one-sixth of the principal outstanding at the time
loan availability under the applicable credit facility for
Straub ceases and (2) that shall be subject to the repurchase
right of Straub provided in the Straub Service Agreement; and
(vii) the Borrower and its Subsidiaries may make Capital
Investments in the properties subject to and financed under the
$100,000,000 Synthetic Lease Facility as provided in the $100,000,000
Synthetic Lease Facility.
(g) Mergers, Etc. Merge or consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to, or acquire all or substantially all of the
assets (other than the acquisition of assets of any Facility or Related Business
or an Existing Clinic Acquisition, whether or not such acquisition is
accomplished by merger or by Securities or asset purchase, so long as such
acquisition satisfies all the conditions precedent set forth in Section
6.02(f)(i) or (ii) and, if any merger involves the Borrower, the Borrower is the
surviving corporation) of, any Person, or permit any of its Subsidiaries to do
so, except that:
(i) any Subsidiary may consolidate with or merge into the
Borrower (only if the Borrower shall be the continuing or surviving
corporation) or (except for the Intercompany Creditor) with or into one
or more other Subsidiaries that are Guarantors, provided that (A)
immediately before and after giving effect to such consolidation or
merger, the parties thereto and the survivor thereof all are Solvent,
(B) all Guaranties shall continue in full force and effect, and (C) the
Agent shall have been furnished with a favorable opinion of counsel
reasonably satisfactory to the Agent covering such matters as the Agent
may reasonably request; and
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(ii) the Borrower may consolidate or merge with any other
Person, provided that (A) immediately before and after giving effect to
such consolidation or merger, the parties thereto and the survivor
thereof all are Solvent, (B) the Borrower shall be the continuing or
surviving corporation, (C) no Change of Control shall occur and (D) all
Guaranties shall continue in full force and effect;
provided, however, that immediately before and after any consolidation or merger
under this Section 6.02(g), no Event of Default, or event which, with the giving
of notice or lapse of time or both, would become an Event of Default, shall have
occurred and be continuing.
(h) Limitation on Sales of Assets. Except for the sale of inventory in
the ordinary course of business, the sale of worn-out or obsolete assets and
intercompany transfers permitted under Section 6.02(g), sell, lease, transfer or
otherwise dispose of its assets, or permit any Subsidiary to sell, lease,
transfer or otherwise dispose of its assets (including any interest in a
Subsidiary), unless (i) the book value of such assets sold constitutes less than
5% of the value of the Borrowers Consolidated Tangible Net Assets at the time of
sale or other disposition, provided that the aggregate book value of all such
assets sold in any twelve-month period shall not exceed 15% of the value of the
Borrower's average Consolidated Tangible Net Assets for the twelve-month period
ending with the quarter immediately preceding the date of determination, as
evidenced by a certificate duly executed by the chief financial officer of the
selling entity on the date of such sale or disposition and provided further that
such assets do not constitute Securities of the Intercompany Creditor or
Intercompany Debt, or (ii) such sale is required in connection with the
termination of a Service Agreement or a change in control under the Amended
Securities Purchase Agreement, dated as of January 1, 1995, with respect to
NAMM, and, in each case, the Net Cash Proceeds of such sale are delivered
directly to the Agent to be applied in accordance with Section 2.09(e).
(i) Transactions with Affiliates. Lend or advance money to, contract
with or engage in any other transactions with, or permit any Subsidiary of the
Borrower to lend or advance money to, contract with or engage in any other
transactions with, Subsidiaries or Affiliates of the Borrower, except for (i)
any such transaction between or among Loan Parties and (ii) any such transaction
occurring in the ordinary course of their business with third parties and in
each case on terms and for consideration which is no less favorable to the
Borrower and its Subsidiaries than the terms and consideration which the
Borrower or such Subsidiaries would be obligated to pay in an arms' length
transaction, subject, however, to the limitation that the Borrower and its
Subsidiaries shall not loan more than $100,000 times the number of Facilities
operated by the Borrower and its Subsidiaries to employees at any one time
outstanding; provided, however, that nothing in this Section 6.02(i) shall
prohibit the Borrower and its Subsidiaries from engaging in transactions with
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joint ventures in which the Borrower or any of its Subsidiaries is a joint
venture partner to the extent permitted by Section 6.02(f)(iv) or (v).
(j) Prepayments of Debt. Prepay, redeem, defease (whether actually or
in substance) or purchase in any manner (or deposit or set aside funds or
securities for the purpose of the foregoing), or make any payment (other than
for scheduled payments of principal and interest due on the date of payment
thereof, if such payment is permitted to be made pursuant to the terms of the
documents evidencing or governing the applicable Debt) in respect of, or
establish any sinking fund, reserve or like set-aside of funds or other property
for the redemption, retirement or repayment of, any Debt, or transfer any
property in payment of or as security for the payment of, or violate the
subordination terms of, any Debt, or amend, modify or change in any manner less
favorable to Borrower or any of its Subsidiaries or the Banks the terms of any
Debt or any instrument, indenture or other document evidencing, governing or
affecting the terms of any Debt, or cause or permit any of its Subsidiaries to
do any of the foregoing; provided, however, that nothing in this Section 6.02(j)
shall prohibit (i) any payments of the Debt under this Agreement in accordance
with the terms hereof, (ii) the conversion of convertible Subordinated Debt of
the Borrower into Securities of the Borrower, (iii) the prepayment in any fiscal
year of the Borrower of up to $30,000,000 in principal amount of Senior Debt of
the Borrower or any of its Subsidiaries if the effective yield payable in
respect of such Senior Debt is greater than the interest payable hereunder in
respect of Base Rate Advances or Eurodollar Rate Advances, whichever is lower,
(iv) the prepayment of the existing operating capital notes payable to the
various physicians listed on Schedule IV in the aggregate principal amount
specified therein, (v) setoff of any convertible Subordinated Debt against the
purchase price to be paid by the holder of such Debt in connection with the
repurchase by such holder of any Facility pursuant to the Asset Purchase
Agreement relating to such Facility, or (vi) payment of any Deferred Acquisition
Consideration in connection with any acquisition of Facilities (or the assets
thereof), any Existing Clinic Acquisition or any acquisition of a Related
Business to the extent such acquisition satisfies the requirements of Section
6.02(f)(i) or (ii), as the case may be.
(k) Accounting Changes. Change its fiscal year, or make, or permit any
of its Subsidiaries to make, any other significant change in Consolidated
accounting treatment and reporting practices except as required or permitted by
generally accepted accounting principles or the rules and regulations of the
Securities and Exchange Commission.
(l) Change in Nature of Business. Make, or permit any of its
Subsidiaries to make, any material change in the nature of its business as
conducted as of the date hereof.
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(m) Securities. Except as is provided in Section 6.02(g), permit any of
its Subsidiaries to issue or sell any of its Securities or any rights, warrants
or options to acquire any of its Securities, or permit any of its Subsidiaries
to sell or otherwise dispose of any Securities of any of its Subsidiaries, or
permit any of its Subsidiaries to amend its charter, bylaws or other constituent
instruments so as to affect the conversion rights, payments, privileges or other
terms in respect of such Securities or in any respect that affects any of the
foregoing interests of its respective securityholders.
(n) Welfare Plan Liabilities. Create or suffer to exist, or permit any
of its Subsidiaries to create or suffer to exist, any liability with respect to
Welfare Plans if, immediately after giving effect to such liability, the
aggregate annualized cost (including, without limitation, the cost of insurance
premiums) with respect to Welfare Plans and other benefit plans and insurance of
the type described in the definition of "Welfare Plans" contained in Section
1.01 for which the Borrower and its Subsidiaries are or may become liable in any
fiscal year of the Borrower could have a material adverse effect on the
business, property, prospects, condition (financial or otherwise) or results of
operations of the Borrower and its Subsidiaries, taken as a whole.
(o) Intercompany Creditor. Permit the Intercompany Creditor to engage
in any business or operations except the receipt and advancing of Intercompany
Debt and the holding of Intercompany Debt or Securities of other Subsidiaries of
the Borrower.
SECTION 6.03. Financial Covenants. So long as any Note shall remain
unpaid, any Letter of Credit shall remain outstanding, any amount shall remain
due hereunder, or any Banks shall have any Commitment hereunder, the Borrower
will not, without the written consent of the Majority Banks:
(a) Consolidated Net Worth. Permit at any date of determination the
Consolidated Net Worth of the Borrower and its Subsidiaries to be less than
$683,000,000, plus (i) 80% of the net proceeds received from the issuance, sale
or disposition of the Borrower's Securities (common, preferred or special),
securities converted into or exchanged for Securities, and any rights, options,
warrants and similar instruments from December 31, 1997 to such date of
determination and (ii) 50% of positive Consolidated Net Income (if any) earned
from December 31, 1997 through such date of determination (without regard for
net losses).
(b) Fixed Charge Coverage Ratio. Permit, for the four consecutive
fiscal quarters ending March 31, 1998 and for each four consecutive fiscal
quarters ending thereafter, the Consolidated Fixed Charge Coverage Ratio of the
Borrower and its Subsidiaries, calculated at the end of each fiscal quarter of
the Borrower, to be less than for each such period, 4.75 to 1.00.
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(c) Consolidated Debt/EBITDA Ratio. Permit, for each period of four
consecutive fiscal quarters ending March 31, 1998, and for each period of four
consecutive fiscal quarters ending thereafter, the Consolidated Debt/EBITDA
Ratio of the Borrower and its Subsidiaries to be greater than (x) for each such
period ending on or prior to December 31, 1998, 4.25 to 1.00 and (y) for each
period thereafter, 3.75 to 1.00.
For the purposes of subsection (b) above, a determination of EBITDAL, Lease
Expense or any other component of the ratio referred to in such subsections (the
"Ratio Components") is required to be made as to any period prior to the date of
such determination (a "Determination Period"), such determination shall be made
so as to give effect to the following:
(i) if any Person, Facility or Related Business (an "Acquired
Business") shall have been acquired in compliance with this Agreement
since the beginning of such Determination Period and must be
Consolidated with the Borrower and its Subsidiaries in accordance with
GAAP, the Ratio Components of such Acquired Business from the beginning
of the Determination Period to the date of acquisition shall be
included on a pro forma basis with the same effect as if such Acquired
Business had been a Consolidated Subsidiary of the Borrower for such
portion of the Determination Period, subject to the following:
(A) for any date of determination occurring on or
before the completion of one full fiscal quarter after the
date of acquisition of such Acquired Business, pro forma
adjustments may be made to reflect (1) specifically identified
changes in physician compensation, complements of physicians,
malpractice insurance costs and other group purchase
arrangements, all of which shall be consistent with the terms
and conditions of any Service Agreement entered into in
connection with such acquisition and (2) other planned cost
savings which will be realized by such Acquired Business as a
consequence of such acquisition to the extent demonstrated by
the Borrower to the satisfaction of the Majority Banks; and
(B) For any date of determination occurring after the
completion of one full fiscal quarter after the date of such
acquisition, the actual Ratio Components for the period
through the end of the then most recently ended fiscal quarter
shall be annualized for the Determination Period; and
(ii) if any Person, Facility or Related Business (a "Disposed
Business") which shall have been Consolidated with the Borrower and its
Subsidiaries shall have been discontinued, lost, sold or otherwise
disposed of
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as of the date of determination, the Ratio Components of such Disposed
Business shall be excluded for the Determination Period.
SECTION 6.04. Reporting Requirements. So long as any Note shall remain
unpaid, any Letter of Credit shall remain outstanding, or amount shall remain
due hereunder or any Bank shall have any Commitment hereunder, the Borrower will
furnish to the Agent, for distribution to the Banks, in sufficient copies for
each Bank, the following:
(a) as soon as available and in any event within 45 days after the end
of each fiscal quarter, Consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such fiscal quarter and Consolidated statements of
operations and cash flow of the Borrower and its Subsidiaries for the period
commencing at the end of the previous fiscal year and ending with the end of
such fiscal quarter, certified by the chief financial officer of the Borrower,
together with (in the case of each of the first three quarters of each year) (i)
a certificate of said officer stating that no Event of Default has occurred and
is continuing or, if an Event of Default has occurred and is continuing, a
statement as to the nature thereof and the action that the Borrower has taken or
proposes to take with respect thereto, (ii) a schedule in form satisfactory to
the Agent of the computations used by the Borrower in determining compliance
with the covenants contained in Section 6.03 and in sufficient detail for
determining the Applicable Facility Fee Rates and the Applicable Eurodollar Rate
Margins in accordance with the definitions of such terms set forth in Section
1.01, and (iii) a certificate of said officer or of the general counsel of the
Borrower regarding additions to and deletions from Schedule I reflecting changes
occurring during such fiscal quarter;
(b) as soon as available and in any event within 95 days after the end
of each fiscal year, a copy of the annual audit report for such year for the
Borrower, including therein an audited Consolidated balance sheet of the
Borrower and its Subsidiaries as of the end of such fiscal year and audited
Consolidated statements of operations, stockholders' equity and cash flow of the
Borrower and its Subsidiaries for such fiscal year (i) certified by a nationally
recognized public accounting firm, together with a certificate of such
accounting firm stating that in the course of the regular audit of the business
of the Borrower, which audit was conducted in accordance with generally accepted
auditing standards, such accounting firm has obtained no knowledge that an Event
of Default has occurred and is continuing, or, if in the opinion of such
accounting firm, an Event of Default has occurred and is continuing, a statement
as to the nature thereof, and (ii) accompanied by a copy of the management
letter from such accounting firm accompanying such financial statements;
(c) as soon as possible and in any event within two days after the
occurrence of an Event of Default of which the Borrower or any Subsidiary has
knowledge, a statement of the chief financial officer of the Borrower setting
forth
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details of such Event of Default and the action which the Borrower has taken and
proposes to take with respect thereto;
(d) promptly after any change in accounting policies or reporting
practices that could reasonably be expected to have a material adverse effect on
the condition (financial or otherwise), operations, business, assets or
prospects of the Borrower or of any of its Subsidiaries or on the rights of the
Banks under any of the Loan Documents, notice and a description in reasonable
detail of such change;
(e) promptly and in any event within ten days after the Borrower or any
ERISA Affiliate knows or has reason to know that any ERISA Event has occurred, a
statement of the chief financial officer of the Borrower describing such ERISA
Event and the action, if any, that the Borrower or such ERISA Affiliate has
taken or proposes to take with respect thereto;
(f) promptly and in any event within two Business Days after receipt
thereof by the Borrower or any ERISA Affiliate (i) copies of each notice from
the PBGC stating its intention to terminate any Plan or to have a trustee
appointed to administer any Plan and (ii) copies of each material notice
received from the United States Department of Labor in connection with any ERISA
requirements;
(g) promptly and in any event within five Business Days after receipt
thereof by the Borrower or any ERISA Affiliate from the sponsor of a
Multiemployer Plan, a copy of each notice received by the Borrower or any ERISA
Affiliate concerning (i) the imposition of Withdrawal Liability by a
Multiemployer Plan, (ii) the determination that a Multiemployer Plan is, or is
expected to be, in reorganization within the meaning of Title IV of ERISA, (iii)
the termination of a Multiemployer Plan within the meaning of Title IV of ERISA
or (iv) the amount of liability incurred, or expected to be incurred, by the
Borrower or any ERISA Affiliate in connection with any event described in clause
(i), (ii) or (iii) above;
(h) promptly and in any event within ten days after the commencement
thereof, notice of all actions, suits and proceedings before any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, affecting the Borrower or any of its Subsidiaries, of the
type described in Section 5.01(h);
(i) promptly and in any event within ten days after the sending or
filing in final form thereof, copies of all proxy statements and financial
statements that the Borrower or any of its Subsidiaries sends to its
securityholders generally, and copies of all registration statements (other than
those relating to employee stock plans), without exhibits, all periodic reports
on Forms 10-K and 10-Q and reports on Form 8-K that the Borrower or any of its
Subsidiaries files with the Securities and Exchange Commission or any
governmental authority that may substituted therefor, or any national securities
exchange or with the National Association of Securities Dealers;
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(j) promptly after the occurrence thereof, notice of (A) any event of
which Borrower or any Subsidiary is aware which makes any of the representations
obtained in Section 5.01 inaccurate in any respect or (B) the receipt by the
Borrower or any Subsidiary of any notice, order, directive or other
communication from a governmental authority alleging violations of or
noncompliance with any Environmental Law; and
(k) such other information respecting the condition or operations,
financial or otherwise, of the Borrower or any of its Subsidiaries as any Bank
through the Agent may from time to time reasonably request.
Notwithstanding the foregoing, upon the occurrence and during the continuance of
an Event of or a Default, the Borrower will, and will cause its Subsidiaries to,
provide to the Agent for each Bank additional information and any and all of the
above information more frequently to the extent reasonably requested by the
Agent or any Bank.
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01. Events of Default. If any of the following events
(each an "Event of Default") shall occur and be continuing:
(a) the Borrower shall fail to pay any principal of any Advance or Note
or any reimbursement obligation under any Letter of Credit, in each case when
the same becomes due and payable; or the Borrower shall fail to pay any interest
on any Advance, Note or reimbursement obligation under any Letter of Credit, or
any fees or other amounts payable under any Loan Document, in each case within
five days after the same becomes due and payable; or
(b) any representation or warranty made or deemed by any Loan Party (or
any of its officers) in any Loan Document or certificate or other writing
delivered pursuant thereto shall prove to have been incorrect in any material
respect when made or deemed made; or
(c) (i) any Loan Party shall fail to perform or observe any term,
covenant or agreement contained in Section 6.01, Section 6.02 or Section 6.03;
or (ii) any Loan Party shall fail to perform or observe any other term, covenant
or agreement contained in this Agreement or in any other Loan Document on its
part to be performed or observed if such failure shall remain unremedied for ten
days after written notice thereof shall have been given to such Loan Party by
the Agent or any Bank; or
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(d) any Loan Party or any of its Subsidiaries shall fail to pay any
principal of or premium or interest on any Debt which is outstanding in a
principal amount of at least $10,000,000 in the aggregate (but excluding Debt
evidenced by the Notes or under Letters of Credit) of such Loan Party or such
Subsidiary (as the case may be), when the same becomes due and payable (whether
by scheduled maturity, required prepayment, acceleration, demand or otherwise),
and such failure shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Debt; or any other
event shall occur or condition shall exist under any agreement or instrument
relating to any such Debt and shall continue after the applicable grace period,
if any, specified in such agreement or instrument, if the effect of such event
or condition is to accelerate, or to permit the acceleration of, the maturity of
such Debt; or any such Debt shall be declared to be due and payable, or required
to be prepaid (other than by a regularly scheduled required prepayment,
redeemed, purchased or defeased, or any offer to prepay, redeem, purchase or
defease such Debt shall be required to be made, in each case prior to the stated
maturity thereof; or
(e) any Loan Party or any of its Subsidiaries shall generally not pay
its debts as such debts become due, or shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against any Loan Party or
any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part of its
property and, in the case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain undismissed or unstayed
for a period of 30 days, or any of the actions sought in such proceeding
(including, without limitation, the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official for, it
or for any substantial part of its property) shall occur; or any Loan Party or
any of its Subsidiaries shall take any corporate action to authorize any of the
actions set forth above in this subsection (e); or
(f) any proceeding shall be instituted against any Loan Party or any of
its Subsidiaries seeking to adjudicate it a bankrupt or insolvent or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief or protection of debtors or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part of its
property, and either such proceeding shall remain undismissed or unstayed for a
period of 30 days or any of the actions sought in such proceeding (including,
without limitation, the entry of an order for relief
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against it or the appointment of a receiver, trustee, custodian or other similar
official for it or for any substantial part of its property) shall occur; or
(g) any judgment or order for the payment of money in excess of
$10,000,000 which is not covered by insurance shall be rendered against any Loan
Party or any of its Subsidiaries and either (i) enforcement proceedings shall
have been commenced by any creditor upon such judgment or order or (ii) there
shall be any period of ten consecutive days during which a stay of enforcement
of such judgment or order, by reason of a pending appeal or otherwise, shall not
be in effect; or
(h) any non-monetary judgment or order shall be rendered against the
Borrower or any of its Subsidiaries that is materially adverse to the business,
property, prospects, condition (financial or otherwise) or results of operations
of the Borrower and its Subsidiaries, taken as a whole, and either (i)
enforcement proceedings shall have been commenced by any Person upon such
judgment or order or (ii) there shall be any period of ten consecutive days
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or
(i) any Loan Document after delivery thereof pursuant to Article IV
hereof or otherwise shall, for any reason cease to be valid and binding on the
respective Loan Party or Loan Parties thereto; or a Loan Party shall so state in
writing or shall contest the validity or enforceability of any material term or
provision of any Loan Document; or
(j) any one or more Service Agreements shall be terminated during any
period of four consecutive fiscal quarters that represent, in the aggregate, 5%
of the Consolidated EBITDA of the Borrower and its Subsidiaries for such period,
measured as of the end of any fiscal quarter ending after the date of any such
termination, provided that it shall not be an Event of Default hereunder if the
Service Agreement for the Facility owned by PhyCor of Ruston, Inc. is terminated
without cause; or
(k) any ERISA Event with respect to a Plan shall have occurred and, 30
days after notice thereof shall have been given to the Borrower by the Agent,
(i) such ERISA Event shall still exist and (ii) the sum (determined as of the
date of occurrence of such ERISA Event) of the Insufficiency of such Plan and
the Insufficiency of any and all other Plans with respect to which an ERISA
Event shall have occurred and then exist (or in the case of a Plan with respect
to which an ERISA Event described in clauses (iii) through (vi) of the
definition of ERISA Event shall have occurred and then exist, the liability
related thereto) is equal to or greater than $5,000,000 for any fiscal year; or
(l) the Borrower or any ERISA Affiliate shall have been notified by the
sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to
such
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Multiemployer Plan in an amount that, when aggregated with all other amounts
required to be paid to Multiemployer Plans by the Borrower and its ERISA
Affiliates as Withdrawal Liability (determined as of the date of such
notification), exceeds $5,000,000 for any fiscal year; or
(m) the Borrower or any ERISA Affiliate shall have been notified by the
sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of Tide IV of ERISA,
if as a result of such reorganization or termination the aggregate annual
contributions of the Borrower and its ERISA Affiliates to all Multiemployer
Plans that are then in reorganization or being terminated have been or will be
increased over the amounts contributed to such Multiemployer Plans for the
respective plan year of each such Multiemployer Plan immediately preceding the
plan year in which the reorganization or termination occurs by an amount
exceeding $5,000,000; or
(n) there shall occur any Change of Control; or
(o) any three of Messrs. Joseph C. Hutts, Thompson S. Dent, Derril W.
Reeves or Richard D. Wright shall, within any six-month period, cease to be
employed full time as officers of the Borrower other than by reason of the death
or incapacity of any such person; or
(p) since December 31, 1996 there has been, in the reasonable judgment
of the Agent or the Majority Banks, any material adverse change in the
Consolidated condition, financial or otherwise, operations, properties or
prospects of the Borrower and its Subsidiaries taken as a whole;
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Majority Banks, by notice to the Borrower, declare the
obligation of each Bank to make Advances (other than Swing Line Advances by a
Bank pursuant to Section 2.01(d)) and the obligations of the Issuing Bank to
Issue Letters of Credit to be terminated, whereupon the same shall forthwith
terminate, (ii) shall at the request, or may with the consent, of the Majority
Banks, by notice to the Borrower, declare the Notes, all interest thereon and
all other amounts payable under this Agreement to be forthwith due and payable,
whereupon the Notes, all such interest and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Borrower,
(iii) shall at the request, or may with the consent, of the Majority Banks
demand that the Borrower, and if such demand is made the Borrower shall, pay to
the Agent for the benefit of the Issuing Banks, an amount in immediately
available funds equal to the then outstanding Letter of Credit Liability which
shall be held by the Agent (or the Issuing Banks) as cash collateral in a cash
collateral account under the exclusive control and dominion of the Agent (or
Issuing Banks) and applied to the reduction of such Letter of Credit Liability
as drawings are made on outstanding Letters of Credit and (iv) shall at
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the request, or may with the consent, of the Majority Banks exercise any other
remedies provided hereunder or by law; provided, however, that in the event of
an actual or deemed entry of an order for relief with respect to the Borrower or
any of its Subsidiaries under the Federal Bankruptcy Code, (A) the obligation of
each Bank to make Advances (other than Swing Line Advances by a Bank pursuant to
Section 2.01(d)) and of the Issuing Banks to Issue Letters of Credit shall
automatically be terminated and (B) the Notes, all such interest and all such
amounts (including the amounts referred to in clause (iii) above) shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Borrower.
ARTICLE VIII
THE AGENT
SECTION 8.01. Authorization and Action. Each Bank, each Issuing Bank
and the Swing Line Bank (if applicable) hereby appoints and authorizes the Agent
to take such action as agent on its behalf and to exercise such powers under
this Agreement as are delegated to the Agent by the terms hereof, together with
such powers as are reasonably incidental thereto. As to any matters not
expressly provided for by this Agreement (including, without limitation,
enforcement or collection of the Notes), the Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Majority Banks, and such instructions
shall be binding upon all Banks and all holders of Notes; provided, however,
that the Agent shall not be required to take any action which exposes the Agent
to personal liability or which is contrary to any Loan Document or applicable
law. The Agent agrees to give to each Bank prompt notice of each notice given to
it by the Borrower pursuant to the terms of this Agreement.
SECTION 8.02. Agent's Reliance, Etc. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them under or in connection with this Agreement,
except for its or their own gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, the Agent: (i) may treat the
payee of any Note as the holder thereof, and treat the Bank that purchased or
funded a participation with respect to a Letter of Credit as the holder or owner
of the Debt resulting therefrom, until the Agent receives written notice of the
assignment or transfer thereof signed by such payee and including the agreement
of the assignee or transferee to be bound hereby as it would have been if it had
been an original Bank party hereto, in form satisfactory to the Agent; (ii) may
consult with legal counsel (including counsel for the Borrower), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to
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be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation to any Bank
and shall not be responsible to any Bank for any statements, warranties or
representations (whether written or oral) made in or in connection with any Loan
Document; (iv) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of any
Loan Document on the part of the Borrower or any Subsidiary of the Borrower or
to inspect the property (including the books and records) of the Borrower or any
such Subsidiary; (v) shall not be responsible to any Bank for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of any
Loan Document or any other instrument or document furnished pursuant thereto;
and (vi) shall incur no liability under or in respect of any Loan Document by
acting upon any notice, consent, certificate or other instrument or writing
(which may be by telecopier, telegram, cable facsimile or telex) believed by it
to be genuine and signed or sent by the proper party or parties.
SECTION 8.03. Citibank and Affiliates. With respect to its Commitment,
the Advances made by it, the Notes issued to it and the participations in
Letters of Credit purchased by it, Citibank shall have the same rights and
powers under this Agreement as any other Bank and may exercise the same as
though it were not the Agent; and the term "Bank" or "Banks" shall, unless
otherwise expressly indicated, include Citibank in its individual capacity.
Citibank and its Affiliates may accept deposits from, lend money to, act as
trustee under indentures of, and generally engage in any kind of business with,
the Borrower, any of its Subsidiaries and any Person who may do business with or
own securities of the Borrower or any such Subsidiary, all as if Citibank were
not the Agent and without any duty to account therefor to the Banks.
SECTION 8.04. Bank Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent, the Issuing Bank or any other
Bank and based on the financial statements referred to in Section 5.01(e) and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Bank also acknowledges that it will, independently and without
reliance upon the Agent, any Issuing Bank or any other Bank 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 action under this
Agreement and the other Loan Documents.
SECTION 8.05. Indemnification. The Banks agree to indemnify the Agent
and each Issuing Bank (in each case, to the extent not reimbursed by the
Borrower), ratably according to the respective principal amounts of the
Committed Rate Advances then held by each of them (or if no Committed Rate
Advances are at the time outstanding ratably according to the respective amounts
of their Commitments), from and against any and all liabilities, obligations,
losses,
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damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against the Agent or any Issuing Bank, as the case may be, in any way
relating to or arising out of this Agreement or any other Loan Document or any
Letter of Credit or any action taken or omitted by the Agent or such Issuing
Bank, as the case may be, under this Agreement or any other Loan Document or any
Letter of Credit, provided that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Agent's or any Issuing
Bank's, as the case may be, gross negligence or willful misconduct. Without
limitation of the foregoing, each Bank agrees to reimburse the Agent and each
Issuing Bank promptly upon demand for its ratable share of any out-of-pocket
expenses (including counsel fees) incurred by the Agent or such Issuing Bank, as
the case may be, in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement or any Letter of Credit, to the
extent that the Agent or such Issuing Bank, as the case may be, is not
reimbursed for such expenses by the Borrower.
SECTION 8.06. Successor Agent/Issuing Bank. The Agent may resign at any
time by giving written notice thereof to the Banks and the Borrower and the
Agent and/or any Issuing Bank may be removed at any time with or without cause
by the Majority Banks. Upon any such resignation or removal, in the case of the
Agent, or removal, in the case of any Issuing Bank, the Majority Banks shall
have the right, subject to the approval of the Borrower (which shall not be
unreasonably withheld), to appoint a successor Agent or a successor Issuing
Bank, as the case may be. If no successor Agent or successor Issuing Bank, as
the case may be, shall have been so appointed by the Majority Banks, and shall
have accepted such appointment, within 30 days after the retiring Agent's giving
of notice of resignation or the Majority Banks' removal of the retiring Agent or
the retiring Issuing Bank, then the retiring Agent or the retiring Issuing Bank,
as the case may be, may, on behalf of the Banks, appoint a successor Agent or a
successor Issuing Bank, as the case may be, which shall be a commercial bank
organized under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $100,000,000. Upon the
acceptance of any appointment as Agent or as an Issuing Bank hereunder by a
successor Agent or a successor Issuing Bank, respectively, such successor Agent
or Issuing Bank shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent or the retiring
Issuing Bank, as the case may be, and the retiring Agent or the retiring Issuing
Bank, as the case may be, shall be discharged from its duties and obligations
under this Agreement and the other Loan Documents. After any retiring Agent's
resignation or removal hereunder as Agent, or any retiring Issuing Bank's
removal hereunder as an Issuing Bank, the provisions of this Article VIII shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent or an Issuing Bank, as the case may be,
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under this Agreement and the other Loan Documents. Notwithstanding the
foregoing, no Issuing Bank may be removed unless prior to or contemporaneously
with such removal it shall have received an amount, in immediately available
funds, equal to all outstanding Letter of Credit Liability then outstanding and
then owing to such Issuing Bank and shall have been indemnified by the Borrower,
the Banks and such successor Issuing Bank, to the Issuing Bank's satisfaction,
against all such Letter of Credit Liability. The fees referred to in Section
3.05(b) shall continue to inure to such Issuing Bank's benefit, with respect to
each Letter of Credit Issued by it, until such time as all Letter of Credit
Liability in respect of such Letter of Credit has been discharged in full.
SECTION 8.07. Documentation Agent. The Documentation Agent, as such,
shall have no duties or obligations whatsoever with respect to this Agreement,
the Notes or any of the other Loan Documents.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. No amendment or waiver of any provision
of this Agreement or the Notes or the Loan Documents, nor consent to any
departure by the Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Majority Banks (or consented to in
writing in the case of the Loan Documents), and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided, however, that no amendment, waiver or consent shall,
unless in writing and signed by all the Banks, do any of following: (a) waive
any of the conditions specified in Article IV, (b) increase the Commitments of
the Banks or subject the Banks to any additional monetary obligations, (c)
reduce the principal of, or interest on, the Committed Rate Advances or the
Committed Rate Notes or any fees or other amounts payable hereunder, (d)
postpone the date fixed for the scheduled payment of principal of, or interest
on, the Committed Rate Advances or the Committed Rate Notes or any fees or other
amounts payable hereunder or waive any such payment when due, (e) change the
percentage of the Commitments or of the aggregate unpaid principal amount of the
Committed Rate Advances or the Committed Rate Notes, or the number or percentage
of Banks, which shall be required for the Banks or any of them to take any
action hereunder or (f) amend this Section 9.01; provided further that no
amendment, waiver or consent shall, in writing and signed by the Agent in
addition to the Banks required above to take such action, affect the rights or
duties of the Agent under this Agreement or any Note; and provided further that
no amendment, waiver or consent shall, unless in writing and signed by the Swing
Line Bank or the Issuing Bank, as the case may be, in addition to the Banks
required above to take such action, affect the rights or duties of the Swing
Line Bank or the Issuing Bank under this Agreement; and provided also that no
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amendment, waiver or consent, unless in writing and signed by the Designated
Bidder holding such Note, affect the rights of the holder of a Competitive Bid
Note under such Note.
SECTION 9.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic,
telex or cable communication) and mailed (by certified mail, return receipt
requested), telecopied, telegraphed, telexed, cabled or delivered, if to the
Borrower, at its address at 30 Burton Hills Blvd., Suite 400, Nashville, TN
37215, Attention: Mr. John K. Crawford, telecopier no. (615) 665-7840; if to any
Bank, at its Domestic Lending Office as specified in its Administrative Details
Reply Form; if to the Agent, at its address at 1 Court Square, 7th Floor, Zone
1, Long Island City, New York, New York 11120, Attention: Mr. Dennis Agnew,
telecopier no. (718) 248-4844; and if to any Issuing Bank, as specified in its
Administrative Details Reply Form; with a copy, in the cases of notices to the
Agent or the Issuing Bank, to Ms. Margaret A. Brown, 399 Park Avenue, 8th Floor,
Zone 11, New York 10043; or, as to each Person, at such other address or
telecopier number as shall be designated by such party in a written notice to
the other parties. All such notices and communications shall, when mailed (by
certified mail, return receipt requested), telecopied, telegraphed, telexed,
cabled, or faxed be effective when deposited in the mails, telecopied, delivered
to the telegraph company, confirmed by telex answerback, delivered to the cable
company or confirmed received in the case of a telecopy or facsimile,
respectively, except that notices and communications to the Agent pursuant to
Article II or VIII or to any Issuing Bank pursuant to Article III or VIII shall
not be effective until received by the Agent or such Issuing Bank, as the case
may be.
SECTION 9.03. No Waiver: Remedies. No failure on the part of any Bank,
any Issuing Bank or the Agent to exercise, and no delay in exercising, any right
under any Loan Document shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 9.04. Costs, Expenses and Taxes.
(a) The Borrower agrees to pay the Agent and each Issuing Bank on
demand all reasonable costs and expenses of the Agent and such Issuing Bank in
connection with the preparation, negotiation, approval, execution, delivery,
filing, recording, administration, modification and amendment of the Loan
Documents and the other documents to be delivered under the Loan Documents,
including, without limitation, the reasonable fees and out-of-pocket expenses of
special and local counsel for the Agent and such Issuing Bank with respect
thereto and with respect to advising the Agent and such Issuing Bank as to its
rights and responsibilities under the Loan Documents and the other documents to
be delivered hereunder and
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thereunder. The Borrower further agrees to pay on demand (i) all costs and
expenses, if any, of the Agent, each Issuing Bank or any Bank in connection with
the enforcement (whether through negotiations or legal proceedings, in
bankruptcy, reorganization or other insolvency proceedings or otherwise) of the
Loan Documents and the other documents to be delivered under the Loan Documents,
including, without limitation, reasonable counsel fees and expenses in
connection with the enforcement of rights under this Section 9.04(a), and (ii)
all costs and expenses in connection with appraisals, valuations, audits and
search reports, all insurance and title costs, and all filing and recording fees
required hereby or associated with any enforcement of rights or remedies
specified in clause (i).
(b) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance or LIBOR Advance is made other than on the last day of an Interest
Period relating to such Advance, as a result of a payment (including, without
limitation, any payment pursuant to Section 2.09) or Conversion pursuant to
Section 2.08 or 2.11 or acceleration of the maturity of the Notes pursuant to
Section 7.01 or for any other reason, the Borrower shall, upon demand by any
Bank (with a copy of such demand to the Agent), pay to the Agent for the account
of such Bank any amounts required to compensate such Bank for any additional
losses (including loss of anticipated profits), costs or expenses which it may
reasonably incur as a result of such payment or Conversion, including, without
limitation, any loss, cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Bank to fund or
maintain such Advance.
SECTION 9.05. Right of Set-off. Upon (i) the occurrence and during the
continuance of any Event of Default and (ii) the making of the request or the
granting of the consent specified by Section 7.01 to authorize the Agent to
declare the Notes due and payable pursuant to the provisions of Section 7.01 or
to demand payment of (or cash collateralization of) all then outstanding Letter
of Credit Liability, each Bank is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Bank to or for the credit
or the account of the Borrower against any and all of the obligations of the
Borrower now or hereafter existing under any Loan Document to such Bank
(including, to the fullest extent permitted by law, obligations indirectly owed
to such Bank by virtue of its purchase of a participation of the Letter of
Credit Liability pursuant to Section 3.04), whether or not such Bank shall have
made any demand under this Agreement or such Note and although such obligations
may be unmatured. Each Bank agrees promptly to notify the Borrower after any
such set-off and application made by such Bank, provided that the failure to
give such notice shall not affect the validity of such setoff and application.
The rights of each Bank under this Section 9.05 are in addition to other rights
and remedies (including, without limitation, other rights of set-off) which such
Bank may have.
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SECTION 9.06. Indemnification. The Borrower agrees to defend, protect,
indemnify and hold harmless the Agent, each Bank and each Issuing Bank and their
respective Affiliates and the directors, officers, employees, attorneys and
agents of the Agent, each Bank, each Issuing Bank and such Affiliates (each of
the foregoing being an "Indemnitee" and all of the foregoing being collectively
the "Indemnitees") from and against any and all claims, actions, damages,
liabilities, costs and expenses (including, without limitation, all fees and
disbursements of counsel and environmental consultants which may be incurred in
the investigation or defense of any matter) imposed upon, incurred by or
asserted against any Indemnitee by any third party, whether direct, indirect or
consequential and whether based on any federal, state or foreign laws or other
statutes or regulations (including, without limitation, securities laws,
commercial laws and Environmental Laws and regulations), under common law or on
equitable cause, or on contract, tort or otherwise, including, without
limitation, those arising:
(a) by reason of, relating to or in connection with the execution,
delivery, performance or enforcement of any Loan Document, any commitments
relating thereto, or any transaction contemplated by any Loan Document; or
(b) in connection with any investigation, litigation, proceeding or
other action relating to any Loan Document (whether or not any Indemnitee is a
party thereto); or
(c) by reason of, relating to or in connection with any credit extended
or used under the Loan Documents or any act done or omitted by any Person, or
any event occurring, in connection therewith, or the exercise of any rights or
remedies thereunder, including, without limitation, any Environmental Activity
or Environmental Law; or
(d) arising out of, related to or in connection with any acquisition or
proposed, acquisition (including, without limitation, by tender offer, merger or
other method) by the Borrower or any of its Subsidiaries or Affiliates of any
Facility (or the assets thereof) or any Related Businesses or any Existing
Clinic Acquisition, whether or not an Indemnitee is a party thereto;
provided, however, that, notwithstanding the foregoing, the Borrower shall not
be liable to any Indemnitee for any portion of such claims, damages, liabilities
and expenses resulting from such Indemnitee's or such Indemnitee's Affiliate's,
director's, officer's, employee's, attorney's or agent's gross negligence or
willful misconduct. In the event this indemnity is unenforceable as a matter of
law as to a particular matter or consequence referred to herein, it shall be
enforceable to the full extent permitted by law.
This indemnification applies, without limitation, to any act, omission,
event or circumstance existing or occurring on or prior to the date of payment
in full of the Advances, including any Environmental Activity or Environmental
Law, regardless
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of whether the act, omission, event or circumstance constituted a violation of
any Environmental Law at the time of its existence or occurrence. The
indemnification provisions set forth above shall be in addition to any liability
the Borrower may otherwise have. Without prejudice to the survival of any other
obligation of the Borrower hereunder, the indemnities and obligations of the
Borrower contained in this Section 9.06 shall survive the payment in full of the
Advances.
SECTION 9.07. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower, the Agent and each Issuing
Bank and when the Agent shall have been notified by each Bank that such Bank has
executed it and thereafter shall be binding upon and inure to the benefit of the
Borrower, the Agent, each Issuing Bank and each Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Banks.
SECTION 9.08. Assignments and Participations.
(a) Each Bank may assign, with the prior consent of the Borrower and
the Agent (which, in either case, shall not be unreasonably withheld), to one or
more banks, financial institutions or other entities all or a portion of its
rights and obligations as a Bank under this Agreement and the other Loan
Documents (including, without limitation, all or a portion of its Commitment,
the Advances owing to it and the Notes held by it in respect of the Committed
Rate Advances and its participation in reimbursement obligations of the Borrower
in respect of Letters of Credit); provided, however, that (i) each such
assignment shall be of the same percentage of all of the assigning Bank's rights
and obligations under the Loan Documents, (ii) the amount of the Commitments, if
any, of the assigning Bank being assigned pursuant to each such assignment
(determined as of the date of the Assignment and Acceptance with respect to such
assignment) shall in no event be less than $10,000,000, and shall be an integral
multiple of $1,000,000 in excess thereof, or the remaining amount of such Bank's
Commitments, (iii) each such assignment shall be to an Eligible Assignee, and
(iv) the parties to each such assignment shall execute and deliver to the Agent,
for its acceptance and recording in the Register, an Assignment and Acceptance,
together with any Notes subject to such assignment and a processing and
recordation fee of $3,000; provided further that each Bank may, without the
consent of the Borrower or the Agent, assign, as collateral or otherwise, any of
its rights under this Agreement and the other Loan Documents (including, without
limitation, the right to payment of principal and interest under the Notes) to
any Federal Reserve Bank, and such assignment of rights to the Federal Reserve
Bank shall not be subject to the conditions and restrictions set forth in items
(i) through (iv) of the immediately foregoing proviso; and provided further that
each Bank may, without the consent of (but with prior written notice to) the
Borrower or the Agent, assign, in whole or in part, any of its rights and
obligations under this Agreement and the other Loan Documents to any of its
Affiliates, and such assignment to Affiliates shall not be subject to the
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conditions and restrictions set forth in items (i) through (iv) of the proviso
above. Upon such execution, delivery, acceptance and recording, from and after
the effective date specified in each Assignment and Acceptance, (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations under the Loan Documents have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations of a Bank hereunder
and thereunder and (y) the Bank assignor thereunder shall, to the extent that
rights and obligations under the Loan Documents have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Loan Documents (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Bank's rights and obligations under the Loan Documents, such Bank shall cease to
be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the Bank
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with any Loan Document or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of any Loan Document or any other instrument or document furnished
pursuant hereto or thereto; (ii) such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of any Loan Party or the performance or observance by any Loan Party of any of
its obligations under any Loan Document or any other instrument or document
furnished pursuant hereto or thereto; (iii) such assignee confirms that it has
received a copy of each of the Loan Documents, together with copies of the
financial statements referred to in Section 5.01(e) and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Agent, any Issuing Bank, such
assigning Bank or any other Bank 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 action under this Agreement or any other Loan Document;
(v) such assignee confirms that it is an Eligible Assignee; (vi) such assignee
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement and the other Loan Documents as are
delegated to the Agent by the terms hereof and thereof, together with such
powers as are reasonably incidental thereto; and (vii) such assignee agrees that
it will perform in accordance with their terms all of the obligations which by
the terms of the Loan Documents are required to be performed by it as a Bank.
(c) The Agent shall maintain at its address referred to in Section 9.02
a copy of each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Banks and the
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Commitment and principal amount of the Advances owing to, each Bank from time to
time (the "Register"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrower, the Agent and
the Banks may treat each Person whose name is recorded in the Register as a Bank
hereunder for all purposes of this Agreement. The Register shall be available
for inspection by the Borrower or any Bank at any reasonable time and from time
to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and an assignee representing that it is an Eligible Assignee,
together with any Notes subject to such assignment, the Agent shall, if such
Assignment and Acceptance has been completed and is in substantially the form of
Exhibit C, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register, and (iii) give prompt notice
thereof to the Borrower. Within five Business Days after its receipt of such
notice, the Borrower, at its own expense, shall execute and deliver to the Agent
in exchange for the surrendered Committed Rate Notes, new Committed Rate Notes
to the order of such Eligible Assignee in an aggregate principal amount equal to
the principal amount of Committed Rate Advances owed to it pursuant to such
Assignment and Acceptance and, if the assigning Bank has retained any principal
amount of Committed Rate Advances hereunder, new Committed Rate Notes to the
order of the assigning Bank in an aggregate principal amount equal to such
principal amount. Such new Committed Rate Notes shall be in an aggregate
principal amount equal to the aggregate principal amount of such surrendered
Committed Rate Notes, shall be dated the effective date of such Assignment and
Acceptance, shall consist of Committed Rate Notes payable to the order of such
Eligible Assignee and, if the assigning Bank has retained ownership of any
Committed Rate Advances hereunder, the assigning Bank in the appropriate
principal amounts, and shall otherwise be in substantially the forms required by
this Agreement.
(e) Each Bank may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under the Loan
Documents (including, without limitation, all or a portion of its Commitments,
the Notes held by it and reimbursement obligations of the Borrower in respect of
Letters of Credit); provided, however, that (i) such Bank's obligations under
the Loan Documents (including, without limitation, its Commitments to the
Borrower hereunder) shall remain unchanged, (ii) such Bank shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Bank shall remain the holder of any such Notes for all purposes of
the Loan Documents, and (iv) the Borrower, the Agent, each Issuing Bank and the
other Banks shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under the Loan Documents;
provided further that, to the extent of any such participation (unless otherwise
stated therein and subject to the preceding proviso), the assignee or purchaser
of such participation shall, to the fullest extent permitted by law, have the
same rights and benefits hereunder as it
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would have if it were a Bank hereunder; and provided further that each such
participation shall be granted pursuant to an agreement providing that the
purchaser thereof shall not have the right to consent or object to any action by
the selling Bank (who shall retain such right) other than an action which would
(i) reduce principal of or interest on any Advance or fees in which such
purchaser has an interest or (ii) postpone any date fixed for payment of
principal of or interest on any such Advance or such fees.
(f) The Borrower agrees that any Bank purchasing a participation from
another Bank pursuant to Section 2.14 or 9.08(e) may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of
set-off) with respect to such participation as fully as if such Bank were the
direct creditor of the Borrower in the amount of such participation.
(g) Notwithstanding any other provision of this Section 9.08, each
Designated Bidder may assign to one or more Eligible Assignees any Competitive
Bid Note.
SECTION 9.09. Headings. Article and Section headings in this Agreement
are included for convenience of reference only and shall not constitute a part
of this Agreement for any other purpose.
SECTION 9.10. Confidentiality. Neither the Agent nor any Bank shall
disclose to any third party any Confidential Information disclosed to the Agent
or such Bank pursuant to the Loan Documents, except that (i) the Agent or any
Bank may disclose Confidential Information to a third party to the extent
compelled by law, subpoena, civil investigative demand, interrogatory or similar
legal process or by any rule, regulation or request of any regulatory authority
having jurisdiction over the Agent or such Bank, as the case may be, (ii) the
Agent or any Bank may disclose Confidential Information to a potential
transferee who is an Eligible Assignee, provided that such potential transferee
agrees to be bound by the same confidentiality obligations as the Banks under
this Section and (iii) the Agent or any Bank may disclose Confidential
Information to its affiliates or its legal counsel or other agents; provided
that prior to any such disclosure the Agent or such Bank, as the case may be,
informs such affiliates, counsel or agent of the confidential nature of such
Confidential Information. For purposes hereof, "Confidential Information" is
written information disclosed by the Borrower or any of its Subsidiaries to the
Agent or any Bank pursuant hereto that is not information which (x) has become
generally available to the public, other than as a result of disclosure by the
Agent or such Bank, (y) was available on a non-confidential basis prior to its
disclosure to the Agent or such Bank by the Borrower or any of its Subsidiaries,
or (z) becomes available to the Agent or such Bank on a non-confidential basis
from a source other than the Borrower or any of its Subsidiaries. The Agent and
the Banks acknowledge that the Confidential Information may from
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time to time include material non-public information relating to the Borrower or
its Subsidiaries.
SECTION 9.11. Severability of Provisions. Each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
or unenforceable in any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective only to the extent of such prohibition or
unenforceability without invalidating the remainder of such provision or the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
SECTION 9.12. Independence of Provisions. All agreements and covenants
hereunder and under the Loan Documents shall be given independent effect such
that if a particular action or condition is prohibited by the terms of any such
agreement or covenant, the fact that such action or condition would be permitted
within the limitations of another agreement or covenant shall not be construed
as allowing such action to be taken or condition to exist.
SECTION 9.13. Consent to Jurisdiction.
(a) The Borrower hereby irrevocably submits to the jurisdiction of any
New York State or Federal court sitting in New York City in any action or
proceeding arising out of or relating to this Agreement or any Loan Document,
and the Borrower hereby irrevocably agrees that all claims in respect of such
action or proceeding may be heard and determined in such New York State or
Federal court. The Borrower hereby irrevocably waives, to the fullest extent it
may effectively do so, the defense of an inconvenient forum to the maintenance
of such action or proceeding. The Borrower hereby irrevocably appoints CT
Corporation System (the "Process Agent"), with an office on the date hereof at
1633 Broadway, New York, New York 10019, United States, as its agent to receive
on behalf of the Borrower and its property service of copies of the summons and
complaint and any other process which may be served in any such action or
proceeding. Such service may be made by mailing or delivering a copy of such
process to the Borrower in care of the Process Agent at the Process Agent's
above address, and the Borrower hereby irrevocably authorizes and directs the
Process Agent to accept such service on his behalf. As an alternative method of
service, the Borrower also irrevocably consents to the service of any and all
process in any such action or proceeding by the mailing of copies of such
process to the Borrower at its address specified in Section 9.02. The Borrower
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.
(b) Nothing in this section shall affect the right of any Bank, any
Issuing Bank or the Agent to serve legal process in any other manner permitted
by law or affect the right of any Bank, any Issuing Bank or the Agent to bring
any action or
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proceeding against the Borrower or its property in the courts of any other
jurisdictions.
SECTION 9.14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.15. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT,
THE ISSUING BANK AND THE BANKS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY
OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY.
SECTION 9.16. Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE BORROWER
PHYCOR, INC.
By /s/ John K. Crawford
------------------------------------
Name: John K. Crawford
Title: Vice President
THE AGENT
CITIBANK, N.A.
as Agent
By /s/ Margaret Au Brown
------------------------------------
Name: Margaret Au Brown
Title: Managing Director
THE ISSUING BANK
CITIBANK, N.A.
as Issuing Bank
By /s/ Margaret Au Brown
------------------------------------
Name: Margaret Au Brown
Title: Managing Director
<PAGE> 98
THE SWING LINE BANK
SUNTRUST BANK, NASHVILLE, N.A.
as Swing Line Bank
By /s/ Karen Cole Ahern
------------------------------------
Name: Karen Cole Ahern
Title: GVP
<PAGE> 99
THE DOCUMENTATION AGENT
NATIONSBANK, N.A.,
as Documentation Agent
By /s/ Kevin Wagley
------------------------------------
Name: Kevin Wagley
Title: Vice President
<PAGE> 100
Commitments: THE BANKS
- ------------ ---------
Commitment: $50,000,000.00 CITIBANK, N.A.
By: /s/ Margaret Au Brown
-------------------------------
Name: Margaret Au Brown
Title: Attorney-in-Fact
<PAGE> 101
Commitment: $25,000,000.00 AMSOUTH BANK
By: /s/ Cathy M. Wind
--------------------------------
Name: Cathy M. Wind
Title: Vice President
<PAGE> 102
Commitment: $30,000,000.00 BANK OF AMERICA, NT & SA
By: /s/ J. Gregory Seibly
--------------------------------
Name: J. Gregory Seibly
Title: Vice President
<PAGE> 103
Commitment: $40,000,000.00 BANKERS TRUST COMPANY
By: /s/ David J. Bell
--------------------------------
Name: David J. Bell
Title: Vice President
<PAGE> 104
Commitment: $25,000,000.00 THE BANK OF NOVA SCOTIA
By: /s/ W.J. Brown
--------------------------------
Name: W.J. Brown
Title: Vice President
<PAGE> 105
Commitment: $20,000,000.00 CORESTATES BANK, N.A.
By: /s/ Elizabeth D. Morris
--------------------------------
Name: Elizabeth D. Morris
Title: Vice President
<PAGE> 106
Commitment: $25,000,000.00 CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Farboud Tavangar
--------------------------------
Name: Farboud Tavangar
Title: First Vice President
<PAGE> 107
Commitment: $25,000,000.00 FIRST AMERICAN NATIONAL BANK
By: /s/ Allison Jones
--------------------------------
Name: Allison Jones
Title: Senior Vice President
<PAGE> 108
Commitment: $25,000,000.00 THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Erik Back
--------------------------------
Name: Erik Back
Title: Corporate Banking Officer
<PAGE> 109
Commitment: $20,000,000.00 FIRST UNION NATIONAL BANK
By: /s/ Ann M. Dodd
--------------------------------
Name: Ann M. Dodd
Title: Senior Vice President
<PAGE> 110
Commitment: $20,000,000.00 FLEET NATIONAL BANK
By: /s/ Carol Paige
--------------------------------
Name: Carol Paige
Title: Senior Vice President
<PAGE> 111
Commitment: $25,000,000.00 MELLON BANK, N.A.
By: /s/ Scott Hennessee
--------------------------------
Name: Scott Hennessee
Title: Vice President
<PAGE> 112
Commitment: $45,000,000.00 NATIONSBANK, N.A.
By: /s/ Kevin Wagley
--------------------------------
Name: Kevin Wagley
Title: Vice President
<PAGE> 113
Commitment: $20,000,000.00 COOPERATIEVE CENTRALE RAIFFEISEN
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH
By: /s/ Terrell Boyle
--------------------------------
Name: Terrell Boyle
Title: Vice President
By: /s/ Robert B. Benoit
--------------------------------
Name: Robert B. Benoit
Title: Senior Vice President
<PAGE> 114
Commitment: $20,000,000.00 THE SUMITOMO BANK, LIMITED
By: /s/ Gary Franke
--------------------------------
Name: Gary Franke
Title: Vice President and Manager
<PAGE> 115
Commitment: $40,000,000.00 SUNTRUST BANK, NASHVILLE, N.A.
By: /s/ Mark D. Mattson
--------------------------------
Name: Mark D. Mattson
Title: Vice President
<PAGE> 116
Commitment: $15,000,000.00 TORONTO DOMINION (TEXAS), INC.
By: /s/ Debbie A. Greene
--------------------------------
Name: Debbie A. Greene
Title: Vice President
<PAGE> 117
Commitment: $30,000,000.00 WACHOVIA BANK
By: /s/ Stephen A. Racine
--------------------------------
Name: Stephen A. Racine
Title: Banking Officer
<PAGE> 118
Total Commitments: $500,000,000
- ------------------ ------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 63,336
<SECURITIES> 0
<RECEIVABLES> 436,759
<ALLOWANCES> 0
<INVENTORY> 20,692
<CURRENT-ASSETS> 593,718
<PP&E> 388,590
<DEPRECIATION> 117,019
<TOTAL-ASSETS> 1,892,346
<CURRENT-LIABILITIES> 358,552
<BONDS> 554,539
0
0
<COMMON> 774,222
<OTHER-SE> 73,015
<TOTAL-LIABILITY-AND-EQUITY> 1,892,346
<SALES> 0
<TOTAL-REVENUES> 699,007
<CGS> 0
<TOTAL-COSTS> 663,418
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,311
<INCOME-PRETAX> 20,278
<INCOME-TAX> 5,738
<INCOME-CONTINUING> 7,815
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,815
<EPS-PRIMARY> .12
<EPS-DILUTED> .11
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 38,677
<SECURITIES> 0
<RECEIVABLES> 349,543
<ALLOWANCES> 0
<INVENTORY> 16,447
<CURRENT-ASSETS> 453,825
<PP&E> 273,249
<DEPRECIATION> 73,589
<TOTAL-ASSETS> 1,423,600
<CURRENT-LIABILITIES> 213,210
<BONDS> 298,250
0
0
<COMMON> 636,232
<OTHER-SE> 88,004
<TOTAL-LIABILITY-AND-EQUITY> 1,423,600
<SALES> 0
<TOTAL-REVENUES> 518,006
<CGS> 0
<TOTAL-COSTS> 459,999
<OTHER-EXPENSES> 4,176
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,425
<INCOME-PRETAX> 42,406
<INCOME-TAX> 16,393
<INCOME-CONTINUING> 26,013
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,013
<EPS-PRIMARY> .43
<EPS-DILUTED> .39
<FN>
Earnings per share for the six months ended June 30, 1997 has been restated to
conform with the provisions of FAS No. 128, Earnings per share, adopted by the
Company in 1997.
</FN>
</TABLE>
