<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 1-13177
INTEGRA, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3605119
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1060 First Avenue - Suite 410
King of Prussia, PA 19406
(Address of principal executive offices) (Zip Code)
(610) 992-2600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 November 10, 1998, Integra, Inc. had 10,139,263 shares of common stock,
$0.01 par value, outstanding.
Page 1 of 20
<PAGE> 2
INTEGRA, INC.
FORM 10-Q - QUARTER ENDED SEPTEMBER 30, 1998
INDEX
<TABLE>
<CAPTION>
FORM 10-Q FORM 10-Q FORM 10-Q
PART NO: ITEM NO. DESCRIPTION PAGE NO.
-------- -------- ----------- --------
<S> <C> <C> <C>
I. FINANCIAL INFORMATION
1. Financial Statements
- Consolidated Statements of
Operations for the Three Months
Ended September 30, 1998 and 1997 3
- Consolidated Statements of
Operations for the Nine Months
Ended September 30, 1998 and 1997 4
- Consolidated Balance Sheets
as of September 30, 1998 and
December 31, 1997 5
- Consolidated Statements of
Cash Flows for the Nine Months
Ended September 30, 1998 and 1997 6
- Consolidated Statement of
Changes in Stockholders' Equity
for the Nine Months Ended
September 30, 1998 7
- Notes to Consolidated Financial
Statements 8 - 9
2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 -15
II. OTHER INFORMATION
1. Legal Proceedings 16
4. Submission of Matters to a Vote of Security Holders 17
5. Other Information 18
6. Exhibits and Reports on Form 8-K 18
Signatures 19
Index to Exhibits 20
</TABLE>
Page 2 of 20
<PAGE> 3
INTEGRA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1998 1997
--------- ---------
<S> <C> <C>
Net revenues:
Patient service revenue........................ $ 144 $ 14,372
Premium revenue................................ 3,499 2,734
----------- ----------
Total net revenues.......................... 3,643 17,106
----------- ----------
Cost of revenues:
Patient service costs.......................... 155 11,465
Premium service costs.......................... 1,971 1,316
----------- ----------
Total cost of revenues...................... 2,126 12,781
----------- ----------
Gross profit..................................... 1,517 4,325
Selling and administrative expenses.............. 902 2,668
Provision for doubtful accounts.................. 12 856
Amortization of intangible assets and excess
cost over fair value of net assets acquired..... 123 525
----------- ----------
Income from operations........................... 480 276
Non-operating expenses (income):
Interest expense................................. 10 391
Interest (income)................................ (77) (7)
----------- ----------
Income (loss) before income taxes................ 547 (108)
Provision for income taxes....................... 30 34
----------- ----------
Net income (loss)................................ $ 517 $ (142)
=========== ==========
Basic and diluted net income (loss) per common
share........................................... $ 0.05 $ (0.01)
=========== ==========
Weighted average shares outstanding:
Basic........................................... 10,123,983 9,949,626
=========== ==========
Assuming dilution............................... 10,514,227 9,949,626
=========== ==========
</TABLE>
Page 3 of 20
<PAGE> 4
INTEGRA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share and per share data)
(Unaudited)
[CAPTION]
<TABLE>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1998 1997
----------- -----------
<S> <C> <C>
Net revenues:
Patient service revenue $ 19,201 $ 46,295
Premium revenue 9,754 7,921
----------- -----------
Total net revenues 28,955 54,216
----------- -----------
Cost of revenues:
Patient service costs 15,580 37,320
Premium service costs 5,774 4,023
----------- -----------
Total cost of revenues 21,354 41,343
----------- -----------
Gross profit 7,601 12,873
Selling and administrative expenses 5,294 7,756
Provision for doubtful accounts 1,201 2,715
Amortization of intangible assets and excess
cost over fair value of net assets acquired 825 1,589
----------- -----------
Income from operations 281 813
Non-operating expenses (income):
Interest expense - related parties 1,020
Interest expense - other 529 1,061
Interest (income) (120) (22)
----------- -----------
Loss before income taxes (1,148) (226)
Provision for income taxes 92 72
----------- -----------
Net loss $ (1,240) $ (298)
=========== ===========
Basic and diluted net loss per common share $ (0.12) $ (0.03)
=========== ===========
Weighted average shares outstanding, basic
and diluted 10,094,369 9,890,699
=========== ===========
</TABLE>
Page 4 of 20
<PAGE> 5
INTEGRA, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share data)
<TABLE>
<CAPTION>
SEPTEMBER 30,
ASSETS 1998 DECEMBER 31,
(Unaudited) 1997
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,210 $ 2,154
Accounts receivable, net of allowance
for doubtful accounts of $126 in
1998 and $7,348 in 1997 521 5,939
Other accounts receivable 460 1,455
Other current assets 201 410
------------- ------------
Total current assets 5,392 9,958
Property and equipment, net of accumulated
amortization of $727 in 1998 and $1,253
in 1997 1,196 2,426
Intangible assets and excess cost over fair
value of net assets acquired, net of
accumulated amortization of $1,077 in 1998
and $4,569 in 1997 10,357 31,031
Other assets, net 24 185
------------- ------------
$ 16,969 $ 43,600
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 423 $ 13,891
Accounts payable 230 2,283
Accrued expenses and other current
liabilities 11,289 21,430
------------- ------------
Total current liabilities 11,942 37,604
Long-term debt 809
Other long-term liabilities 18 128
Deferred income tax liability 356 346
------------- ------------
Total liabilities 12,316 38,887
------------- ------------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 20,000,000
shares authorized; issued 10,139,263 in
1998 and 10,029,325 in 1997 101 100
Capital in excess of par value 87,511 86,349
Accumulated deficit (82,947) (81,707)
Deferred compensation (12) (29)
------------- ------------
Total stockholders' equity 4,653 4,713
------------- ------------
$ 16,969 $ 43,600
============= ============
</TABLE>
Page 5 of 20
<PAGE> 6
INTEGRA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,240) $ (298)
Adjustments to reconcile net loss to net cash
used in operations:
Depreciation and amortization 1,253 2,168
Provision for doubtful accounts 1,201 2,715
Issue of warrant for financing guarantee 880
Changes in assets and liabilities, net of
effects of businesses acquired:
Decrease (increase) in accounts receivable 57 (692)
Decrease in other current assets 28 447
Decrease in accounts payable (1,840) (214)
Decrease in accrued expenses and other
current liabilities (2,781) (2,474)
(Increase) decrease in other assets and
other liabilities (21) 130
--------- ---------
Net cash (used in) provided by operating
activities (2,463) 1,782
--------- ---------
Cash flows from investing activities:
Payments for acquisition of businesses, net of
cash acquired of $8 in 1998 (498)
Additional payments for businesses acquired
in prior years (4,775) (2,407)
Net proceeds from disposition of businesses 24,129 100
Purchases of property and equipment (355) (1,203)
--------- ---------
Net cash provided by (used in)
investing activities 18,501 (3,510)
--------- ---------
Cash flows from financing activities:
Proceeds from borrowings 2,700 5,845
Principal payments on long-term obligations (16,682) (3,998)
--------- ---------
Net cash (used in) provided by
financing activities (13,982) 1,847
--------- ---------
Net increase in cash and cash equivalents 2,056 119
Cash and cash equivalents at beginning of period 2,154 2,299
--------- ---------
Cash and cash equivalents at end of period $ 4,210 $ 2,418
========= =========
Supplemental disclosures of cash flow information:
Interest paid $ 813 $ 1,100
========= =========
Income taxes paid $ 142 $ 230
========= =========
</TABLE>
Page 6 of 20
<PAGE> 7
INTEGRA, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON SHARES
---------------------- CAPITAL IN
EXCESS OF ACCUMULATED DEFERRED
NUMBER PAR VALUE PAR VALUE DEFICIT COMPENSATION TOTAL
------ --------- --------- ------- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 10,029 $ 100 $ 86,349 $(81,707) $ (29) $ 4,713
Common stock issued in connection with
acquisitions 110 1 282 283
Issue of warrant for financing guarantee 880 880
Amortization of deferred compensation 17 17
Net loss (1,240) (1,240)
-------- -------- -------- -------- -------- --------
Balance at September 30, 1998 (unaudited) 10,139 $ 101 $ 87,511 $(82,947) $ (12) $ 4,653
======== ======== ======== ======== ======== ========
</TABLE>
Page 7 of 20
<PAGE> 8
INTEGRA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(Dollars in thousands, except share and per share data)
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated financial statements are unaudited. These
statements have been prepared in accordance with the rules and regulations of
the Securities and Exchange Commission and should be read in conjunction with
the Company's consolidated financial statements and notes thereto for the year
ended December 31, 1997 included in its Form 10-K filed with the Securities and
Exchange Commission on April 15, 1998. Certain information and note disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. In the opinion of Company management, the consolidated
financial statements for the unaudited interim periods presented include all
adjustments, consisting only of normal recurring adjustments, necessary to
present a fair statement of the results for such interim periods.
Certain prior period amounts have been reclassified to conform to the
current period presentation.
Operating results for the three and nine month periods ended September
30, 1998 are not necessarily indicative of the results that may be expected for
a full year or any portion thereof.
NOTE 2 - INCOME TAXES
The provision for income taxes is based on the Company's estimated
effective income tax rate for 1998. At December 31, 1997, the Company had net
operating loss carryforwards for federal income tax purposes of approximately
$10,000. The Company will only be able to use the net operating loss
carryforwards against future taxable earnings of the Company. In addition, as
specified in the Internal Revenue Code, the Company's ability to use certain of
the net operating loss carryforwards is limited as they were acquired by the
Company in a purchase of the stock of other companies. The carryforwards expire
in varying amounts through 2012. A valuation reserve has been established
against the potential future benefit of the net operating loss carryforwards and
other deferred tax assets.
Page 8 of 20
<PAGE> 9
INTEGRA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(Dollars in thousands, except share and per share data)
(Unaudited)
NOTE 3 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---- ----
<S> <C> <C>
Clinician fees and medical claims $ 1,749 $ 3,291
Acquisition related costs 270 5,006
Salaries and vacation 745 1,507
Restructuring costs 1,522 3,218
Long-term care reserves 5,800 5,800
Other 1,203 2,608
------- -------
$11,289 $21,430
======= =======
</TABLE>
Page 9 of 20
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The Company provides managed behavioral health services through full
and shared risk arrangements with employers and managed care organizations,
employee assistance programs and other programs, including third party clinical
case management and claims adjudication.
In December 1997, the Company announced its plans to sell and divest
its outpatient behavioral health group practice operations . The Company entered
into an agreement to sell substantially all of the assets of the outpatient
behavioral practice business (the "Sale"), except for practices located in the
Western region of the United States which the Company has sold or shut down. The
Sale was completed effective May 18, 1998 and resulted in the divestiture by the
Company of substantially all the assets and business of the Company's outpatient
behavioral health practices. As of December 31, 1997, the outpatient behavioral
health practice business accounted for approximately eight-four percent (84%) of
the assets of the Company (before the impact of the write down of assets held
for sale and the impact of the restructuring charge); and for the year ended
December 31, 1997, approximately eighty-three percent (83%) of the Company's net
revenues. As a result of the Sale, the Company is significantly smaller in terms
of revenues and assets.
In July 1998, the Company announced it received approval from its
shareholders to change the name of the Company from Apogee, Inc. (AMEX: APG) to
Integra, Inc. (AMEX: IGR). The new name reflects the Company's decision to focus
on the successful Integra behavioral managed care operation, which the Company
believes is well established and respected in the behavioral health market.
Sale and Divestiture of Outpatient Business
On December 26, 1997, the Company entered into an Agreement of Purchase
and Sale (the "Purchase Agreement") with PsychPartners MidAtlantic, Inc.,
PsychPartners, Inc., and PsychPartners, LLC (collectively "PsychPartners" or the
"Purchasers"). Pursuant to the Purchase Agreement, the Company agreed to sell to
the Purchasers substantially all of the assets and business of the Company's
outpatient behavioral healthcare business, which consisted of (i) all of the
capital stock of one of the subsidiaries of the Company operating two outpatient
behavioral health practices and (ii) substantially all of the assets relating to
20 of the Company's outpatient behavioral health practices (the 22 practices are
collectively, the "Practices").
Page 10 of 20
<PAGE> 11
On May 14, 1998, at a Special Meeting of the Shareholders of the Company, the
shareholders approved and adopted the terms of the Purchase Agreement with
PsychPartners. Effective on May 18, 1998, the Company closed the Sale. The
purchase price paid at closing consisted of: (a) $26,400 in cash, (b) a warrant
contingently issuable to purchase 230,000 Common Units of PsychPartners, L.L.C.
at a purchase price of $.05 per Common Unit and (c) the assumption of certain
liabilities. The purchase price is subject to adjustment if the cash, accounts
receivable, deposits and prepaid expenses of the Practices are less than the
liabilities and future contingent payment obligations of the Practices.
TOTAL NET REVENUES
Patient Service Revenue
Patient service revenue is reported when earned at time of service at
the estimated amounts to be realized through payments from patients, third party
payors and others for services rendered. Third party reimbursement is initially
billed at "usual, customary and reasonable" market rates. Aggregate billings are
adjusted when recorded to reflect the estimated amounts realizable from third
party payors based on the Company's historical experience and contractual rates
established with the payors. Patient service revenue represents billings of the
Company's operations other than its behavioral managed care division, which are
principally comprised of the outpatient group practice business and long-term
care behavioral health business.
Patient service revenue for the three and nine month periods ended
September 30, 1998 decreased significantly from the same periods of the prior
year. This decrease is essentially a result of the impact of operations sold to
PsychPartners and of Western region operations which have been sold or closed.
Premium Revenue
Premium revenue pertains to the Company's managed behavioral care
operations which maintain a portfolio of agreements with managed care
organizations and corporations to provide inpatient and outpatient behavioral
health services. Revenues are primarily generated by capitated managed
behavioral health and employee assistance programs. The fees are defined by
contract and are primarily calculated on a fixed per-member per-month fee.
Revenues under these contracts are recorded in the month for which the member is
entitled to services. Generally, these membership contracts are on a one to
three year basis subject to cancellation by either party without cause at any
time with thirty to ninety days written notice.
The Company estimates the cost of providing services under these
agreements, including a reserve for services incurred, but not reported, based
upon authorized services, past claim payment experience for member groups and
other facts. The Company typically does not subcapitate the risk of providing
services under these contracts, but the Company arranges discounted
fee-for-service rates with independent inpatient and outpatient behavioral
health providers, which the Company manages. In certain markets, as part of its
provider network, the Company utilizes certain of the outpatient behavioral
health practices which were sold to PsychPartners. The Company anticipates that
in these markets where practicable, it will continue to utilize these outpatient
behavioral health practices at the existing or comparable rates which it
believes are at fair market. The Company believes that there is a ready supply
of service providers in these markets, and accordingly, the Company is not
dependent on these outpatient behavioral health practices for the delivery of
service to their contracts.
Page 11 of 20
<PAGE> 12
Under capitated contracts, the Company is responsible for ensuring
appropriate access to care and bears the risk for utilization levels and pricing
of the cost of services performed under these contracts. The Company believes
the future revenues under these contracts will exceed the costs of services it
will be required to provide under the terms of the contracts. An underestimation
in the utilization or price of services for these contracts could result in
material losses to the Company. Historically, Integra has managed these
capitated contracts profitably. The Company maintains no re-insurance against
the risk of loss under these contracts.
Premium revenues for the three and nine month periods ended September
30, 1998 increased from the same periods of the prior year as a result of new
contracts for capitated managed behavioral health services and employee
assistance programs.
GROSS PROFIT
Gross profit comprises net revenues less personnel, field management,
facility and other costs and expenses directly associated with the delivery of
services. Gross profit decreased significantly for the three and nine month
periods ended September 30, 1998 from the comparable periods last year. This
decrease is primarily a result of the impact of operations which were sold to
PsychPartners on May 18, 1998 or which were discontinued in conjunction with the
Company's restructuring in the fourth quarter of 1997.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses are primarily comprised of
corporate office, divisional management, sales and administration. Selling and
administrative expenses decreased to $902 for the three months ended September
30, 1998 from $2,668 for the same period in 1997, and to $5,294 for the nine
months ended September 30, 1998 from $7,756 for the same period in 1997. The
decrease is essentially a result of the impact of operations sold to
PsychPartners and of Western region operations which have been sold or closed.
PROVISION OF DOUBTFUL ACCOUNTS
The provision for doubtful accounts decreased for the three and nine
month periods ended September 30, 1998 from the comparable period in 1997. The
decrease results from the Sale and discontinuation of the outpatient operations.
INTEREST EXPENSE - RELATED PARTIES
In order to provide for additional financing if the sale did not occur,
the Company entered into an agreement with certain investment partnerships (the
"Investment Partnerships"), which are significant stockholders of the Company
and are managed by Foster Management Company, an affiliated party, to obtain
their commitment to guarantee an additional $7,000 of financing. This additional
financing amount represented the Company's estimated additional cash needs
during 1998 for contingent payments, seller notes and for restructure related
activities.
Page 12 of 20
<PAGE> 13
Under the terms of the agreement, in return for their guaranty the Investment
Partnerships were to receive the following: (i) a commitment fee of 2% of the
guaranteed amount; (ii) a draw down fee of 2% on Bank borrowings in excess of
$15,000; (iii) an unused commitment fee of 1/2% per annum; and (iv) warrants to
purchase 400,000 shares of common stock of the Company at a price of $0.05 per
share (the "Integra Warrants") or, in the event the Sale was not consummated, a
transaction fee of $3,500 payable on April 30, 1999. With the Sale completed,
the cost to the Company of this guarantee was $1,020 of which $140 was paid in
cash to the Investment Partnerships. The remaining portion represents a non-cash
charge of approximately $880, which is the difference between the exercise price
of the Integra Warrant and the fair market value of the underlying common stock
of the Company on the closing date of the Sale to PsychPartners. These charges,
which are non-recurring in nature, have been recorded in the Company's results
of operations for the quarter ended June 30, 1998.
INTEREST (INCOME) EXPENSE
The Company recorded interest income of $77 for the three months ended
September 30, 1998 due primarily to remaining proceeds from the Sale. Interest
expense decreased to $529 for the nine months ended September 30, 1998 from
$1,061 for the same period in 1997 due primarily to the pay down of bank debt
with proceeds from the Sale.
OTHER MATTERS
During 1996, certain of the Company's Medicare Part B and related
co-insurance billings previously submitted were selected for review by the
Office of the Inspector General of the Department of Health and Human Services
("OIG") and the Department of Justice ("DOJ"). The Company was notified by the
DOJ that the review is a civil matter relating to billings for services to
Medicare patients in long-term care facilities in the State of Florida during
the period from approximately January 1994 through mid-1995. In October 1998,
the Company executed a final settlement agreement with the DOJ and OIG, which
resolved all of the OIG's civil claims against the Company relating to this
matter. Terms of the settlement included a repayment of approximately $3,000.
This amount was fully accrued as of September 30, 1998.
In March 1998, the Company received notification that the Medicare
intermediary in California has completed a post payment medical review of
billings previously submitted and paid between 1990 and 1994. Based on the
results of their review, the intermediary has requested a refund of
approximately $1,200. Payment for services were denied primarily on the basis of
medical necessity and incomplete documentation. The Company has not yet
completed its review of the intermediary 's findings, but anticipates requesting
an administrative hearing. The Company has fully reserved for the above amount.
In April 1998, the Company received notice from the office of the
Attorney General of New York State that the New York Medicaid billings of one of
the operations with which it has an Administrative Services Agreement would be
audited. Due to the preliminary nature of the review, the Company cannot predict
when the audit will be completed, its ultimate outcome or its potential impact
of earnings. The Company believes that the outcome of the audit, including
repayments, if any, should not have a material adverse effect on the Company's
results of operations or financial condition.
Page 13 of 20
<PAGE> 14
Although management believes that the reserves established for the
above matters are sufficient, it is possible that the final resolution of these
matters may exceed the established reserves by an amount which could be material
to the Company's results of operations. The Company does not believe the
ultimate outcome of these matters will have a material adverse effect on the
Company's overall financial condition, liquidity or operations.
Liquidity and Capital Resources
Net cash used in operations was $2,463 for the nine months ended
September 30, 1998, compared to net cash provided by operations of $1,782 for
the same period in the prior year. Cash and cash equivalents increased to $4,210
at September 30, 1998 from $2,154 at December 31,1997 due to the remaining
proceeds of the Sale.
At September 30, 1998, the Company had a working capital deficit of
($6,550). This deficit is primarily attributable to the current classification
of accrued liabilities of $7,322 which pertain to the Company's sale of and exit
from the outpatient behavioral group practice business and reserves established
for its long-term care operations which were discontinued in 1996. Although
these amounts are classified as current due to their nature, the Company does
not expect that all of these amounts will require payment within the next twelve
months.
In October 1998, the Company entered into an agreement with PNC Bank
(the "Bank") to establish a revolving Credit Facility ("Credit Facility") for up
to a maximum of $10,000. Borrowings availability under this Credit Facility are
primarily based on the Company's earnings before interest, income taxes,
depreciation and amortization, subject to various financial and non-financial
covenants; and secured by substantially all of the assets of the Company.
Borrowings under this facility bear a variable rate interest ranging between the
Bank's prime rate plus 0.25% to 1.0% or LIBOR plus 1.75% to 2.50%. The proceeds
of this Credit Facility are available for future acquisitions, working capital
and general corporate purposes. There are currently no outstanding borrowings
under the Credit Facility.
The Company believes that the cash flow generated by the Company's
operations together with its existing cash and Credit Facility will be
sufficient to meet the Company's current cash requirements.
The Company's current ratio, working capital and debt to equity ratio
are set forth below for the dates indicated:
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
------------------ -----------------
<S> <C> <C>
Current Ratio ......... .45:1 .26:1
Working Capital Deficit $ (6,550) $(27,646)
Debt to Equity ........ .09:1 3.1:1
</TABLE>
Inflation
A significant portion of the Company's operating expenses have been
subject to inflationary increases, including clinical and administrative
salaries and rent expense. Based on management's assessment, the Company has
historically been unable to substantially offset inflationary increases through
price increases. The Company believes it has somewhat mitigated the effect by
expanding services and increasing operating efficiencies. There can be no
assurance that the Company will be able to offset future inflationary increases
in expenses, if any, which would result in a dilutive impact on the Company's
future earnings.
Page 14 of 20
<PAGE> 15
YEAR 2000 ISSUES
The year 2000 problem is primarily the result of two potential
malfunctions that could have an impact on the Company's systems and equipment.
The first problem arises due to computers being programmed to use two rather
than four digits to define the applicable year. The second problem arises in
embedded chips where microchips and microcontrollers have been designed using
two rather than four digits to define the applicable year. Certain of the
Company's computers programs, and building infrastructure components (e.g.
alarm systems and HVAC systems) are date sensitive and may recognize a date
using "00" as the year 1900 rather than the year 2000. If uncorrected, the
problems could result in computer system and program failures or could result
in a disruption of business operations or that could affect the Company's
ability to deliver service.
The Company has undertaken a program to inventory, access and correct,
replace or otherwise address its computer hardware, systems software, business
software, and telecommunication equipment. The Company has implemented a
program to contact vendors, analyze information provided, and to remediate,
replace or otherwise address products that may pose a material Year 2000
impact. The Company anticipates completion, in all material respects of the
information technology infrastructure portion of its program by June 1999. The
Company believes that the cost to correct its information technology
infrastructure will not be material and will not require an investment in
capital assets significantly in excess of the Company's historical levels.
The Company presently believes that with modifications to existing
software or the installation of upgraded software the Year 2000 will not pose
material operational problems for its computer systems and information
technology infrastructure. However, if such modifications or upgrades are not
accomplished in a timely manner, Year 2000 related failures may present a
material adverse impact on the operations of the Company.
Due to the potentially far-reaching affects of the Year 2000 problem,
the Company believes it is also important to obtain an understanding of its key
payors and vendors readiness for Year 2000 issues. To this extent, the Company
has initiated communications with its major customers. The Company relies on
timely reimbursement, as well as member eligibility and benefit data often
through the use of electronic data interfaces. Failure of these third party
systems could have a material adverse affect on the Company's results of
operations. The Company also has initiated communications with its critical
suppliers and vendors (i.e. those suppliers and vendors whose products and
services are essential for day to day operations) to assure their continued
operation through the Year 2000. The Company is continuing its efforts to
obtain such assurances from all critical suppliers and vendors. Failure of
these third parties could have material impact on operations and/or the ability
to provide behavioral health services.
CAUTIONARY STATEMENT
Matters discussed above contained forward-looking statements that are
based on the Company's estimates, assumptions and projections. Major factors
which could cause results to differ materially from those expected by management
include the timing and nature of reimbursement changes, the nature of changes in
laws and regulations that govern various aspects of the Company's business, new
criteria adopted to determine medical necessity for behavioral health services,
the outcome of post-payment reviews of the Company's billings to Medicare
patients in long-term care facilities, year 2000 issues, pricing of managed
care and other third party contracts, the utilization and cost of services
under the Company's capitated contracts, the direction and success of
competitors, management retention and unanticipated market changes.
Page 15 of 20
<PAGE> 16
INTEGRA, INC.
FORM 10-Q - QUARTER ENDED SEPTEMBER 30, 1998
PART II
ITEM 1 - LEGAL PROCEEDINGS
From time to time, the Company is a party to certain claims, suits and
complaints which arise in the ordinary course of business. In March 1998, the
Company received notification that the Medicare intermediary in California has
completed a post payment medical review of billings previously submitted and
paid between 1990 and 1994. Based on the results of their review, the
intermediary has requested a refund of approximately $1,200. Services were
denied primarily on the basis of medical necessity and incomplete documentation.
The Company has not yet completed its review of the intermediary's findings, but
anticipates requesting an administrative hearing. The Company fully reserved for
the above amount.
In April 1998, the Company received notice from the office of the
Attorney General of New York State that the New York Medicaid billings of one of
the operations with which it has an Administrative Services Agreement would be
audited. Due to the preliminary nature of the review, the Company can not
predict when the audit will be completed, its ultimate outcome or its potential
impact of earnings, but believes the outcome of the audit, including repayments,
if any, should not have a material adverse effect on the Company's results of
operations or financial condition.
Page 16 of 20
<PAGE> 17
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 15, 1998, the Company held its 1998 Annual Meeting of
Shareholders. At the Annual Meeting, the following matters were submitted to a
vote of shareholders:
1. The following seven individuals, constituting the full Board
of Directors of the Company, were nominated and elected to
serve as the directors of the Company:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
John H. Foster FOR: 5,805,188
WITHHOLD
AUTHORITY: 43,968
Lawrence M. Davies FOR: 5,805,188
WITHHOLD
AUTHORITY: 43,968
Harvey V. Fineberg, M.D. FOR: 5,805,188
WITHHOLD
AUTHORITY: 43,968
Timothy E. Foster FOR: 5,805,188
WITHHOLD
AUTHORITY: 43,968
Irwin Lehrhoff, Ph.D. FOR: 5,805,188
WITHHOLD
AUTHORITY: 43,968
R. Bruce Mosbacher FOR: 5,805,188
WITHHOLD
AUTHORITY: 43,968
Shawkat Raslan FOR: 5,805,188
WITHHOLD
AUTHORITY: 43,968
</TABLE>
2. The holders of 5,813,078 shares of common stock voted in favor
of, the holders of, 31,005 shares of common stock voted
against, and the holders of 5,073 shares of common stock
abstained, with respect to, approval of an amendment to the
Company's Certificate of Incorporation changing the corporate
name of the Company from Apogee, Inc. to Integra, Inc.
3. The holders of 5,839,783 shares of common stock voted in favor
of, the holders of 6,800 shares of common stock voted against,
and the holders of 2,573 shares of common stock abstained,
with respect to, the ratification of the selection of
Pricewaterhousecoopers LLP, independent certified public
accountants, to serve as independent accountants for the
Company.
Page 17 of 20
<PAGE> 18
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a) The exhibits required to be filed as part of this Quarterly
Report on Form 10-Q are contained in the attached Index to
Exhibits.
b) Current Reports on Form 8-K: None
Page18 of 20
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
INTEGRA, INC.
------------------------------
(registrant)
November 10, 1998 /s/Mark D. Gibson
- ------------------------ ------------------------------
(Date) Mark D. Gibson
Chief Financial Officer
Page 19 of 20
<PAGE> 20
INDEX TO EXHIBITS
10(w) Credit Agreement with PNC Bank, National Association dated October 1,
1998.
27 Financial Data Schedule, which is submitted electronically to the
Securities and Exchange Commission for information only and not filed.
Page 20 of 20
<PAGE> 1
$10,000,000 REVOLVING CREDIT FACILITY
CREDIT AGREEMENT
by and among
INTEGRA, INC.,
and
and certain of its SUBSIDIARIES
and
PNC BANK, NATIONAL ASSOCIATION
Dated October 1, 1998
<PAGE> 2
TABLE OF CONTENTS
Page
-i-
<PAGE> 3
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
SCHEDULE 1.1(P)(1) PERMITTED LIENS
SCHEDULE 6.1(a) ORGANIZATION AND QUALIFICATION
SCHEDULE 6.1(c) SUBSIDIARIES
SCHEDULE 6.1(g) LITIGATION
SCHEDULE 6.1(l) CONSENTS AND APPROVALS
SCHEDULE 6.1(q) INSURANCE
SCHEDULE 6.1(s) MATERIAL CONTRACTS
SCHEDULE 6.1(v) PLANS AND BENEFIT ARRANGEMENTS
SCHEDULE 6.1(x) ENVIRONMENTAL MATTERS
SCHEDULE 8.2(a)(ii) EXISTING INDEBTEDNESS
EXHIBITS
EXHIBIT 1.1(P)(1) PERMITTED ACQUISITIONS APPROVAL/
DISCLOSURE CERTIFICATE
EXHIBIT 1.1(P)(2) TERMS FOR PERMITTED ADDITIONAL
SUBORDINATED INDEBTEDNESS
EXHIBIT 1.1(S)(z) SUBORDINATION AGREEMENT (INTERCOMPANY)
EXHIBIT 2.5 REVOLVING CREDIT LOAN REQUEST
EXHIBIT 7.1(l) SOLVENCY CERTIFICATE
EXHIBIT 8.1(m)(iv) COMPLIANCE CERTIFICATE
-ii-
<PAGE> 4
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated October 1, 1998, and is made by
and among INTEGRA, INC., a Delaware corporation ("Integra"), each Restricted
Subsidiary of Integra (identified on Schedule 6.1(c) hereto) (together with
Integra sometimes collectively referred to as the "Borrowers" and individually
as a "Borrower") and PNC BANK, NATIONAL ASSOCIATION (the "Bank").
WITNESSETH:
WHEREAS, the Loan Parties (as hereinafter defined) have
requested the Bank to provide a revolving credit facility in an aggregate
principal amount not to exceed $10,000,000; and
WHEREAS, the revolving credit facility shall be used for (a)
Permitted Acquisitions, (b) working capital and (c) general corporate purposes;
and
WHEREAS, the Bank is willing to provide such credit upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto, in consideration of their
mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby, covenant and agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 Certain Definitions.
In addition to words and terms defined elsewhere in this
Agreement, the following words and terms shall have the following meanings,
respectively, unless the context hereof clearly requires otherwise:
Affiliate as to any Person shall mean any other
Person (i) which directly or indirectly controls, is controlled by, or is under
common control with such Person, (ii) which beneficially owns or holds 50% or
more of any class of the voting stock of any Loan Party, or (iii) 50% or more of
the voting stock (or in the case of a Person which is not a corporation, 50% or
more of the equity interest) of which is beneficially owned or held, directly or
indirectly, by any Loan Party. Control, as used herein, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise, including the power to
elect a majority of the directors or trustees of a corporation or trust, as the
case may be.
<PAGE> 5
Agreement shall mean this Credit Agreement as the
same may be supplemented or amended from time to time including all schedules
and exhibits hereto.
Annual Statements shall have the meaning assigned to
such term in Section 6.1(i).
Applicable Margin shall mean the percentage interest
rate per annum in excess of the Euro-Rate which is, pursuant to this Agreement,
applicable to a Revolving Credit Loan to which the Revolving Credit Euro-Rate
Option applies.
Approvals shall have the meaning given to such term
in Section 6.1(s).
Authorized Officer shall mean those persons
designated by written notice to the Bank from each of the Loan Parties,
authorized to execute notices, reports and other documents required hereunder.
Any Loan Party may amend such list of persons from time to time by giving
written notice of such amendment to the Bank.
Bank shall mean PNC Bank, National Association and
its successors and assigns.
Base Rate shall mean the greater of (i) the interest
rate per annum announced from time to time by the Bank at its Principal Office
as its then prime rate, which rate may not necessarily be the lowest rate then
being charged commercial borrowers by the Bank and (ii) the Federal Funds
Effective Rate plus 1/2% per annum.
Benefit Arrangement shall mean at any time an
"employee benefit plan," within the meaning of Section 3(3) of ERISA, which is
neither a Plan or a Multiemployer Plan and which is maintained, sponsored or
otherwise contributed to, by any member of the ERISA Group.
Borrower Agency Agreement shall mean that certain
agreement among the Borrowers, in form and substance satisfactory to the Bank,
pursuant to which the Borrowers authorize and appoint Integra to act on behalf
of the Borrowers to take any and all actions that may be required to be taken by
any Borrower or the Borrowers hereunder, including, without limitation, making
requests for and borrowing any Revolving Credit Loan.
Borrowers shall mean Integra and each Subsidiary of
Integra identified as a "Borrower" on Schedule 6.1(c) hereto and any Person
subsequently becoming a party to the Loan Documents and assuming the obligations
of a Borrower thereunder.
Borrowing Date shall mean, with respect to any
Revolving Credit Loan, the date for the making thereof or the renewal thereof or
conversion thereof to the same or a different Interest Rate Option, which shall
be a Business Day.
Borrowing Tranche shall mean specified portions of
Revolving Credit Loans outstanding as follows: (i) any Revolving Credit Loans to
which a Revolving Credit
2
<PAGE> 6
Euro-Rate Option applies which become subject to the same Interest Rate Option
under the Revolving Credit Loan Request by the Borrowers and which have the same
Euro-Rate Interest Period shall constitute one Borrowing Tranche, and (ii) all
Revolving Credit Loans to which a Revolving Credit Base Rate Option applies
shall constitute one Borrowing Tranche.
Business Day shall mean a day on which commercial
banks are required to be open for business in Pittsburgh, Pennsylvania or New
York, New York.
Change in Ownership shall mean if, from and after the
Closing Date, any Person or group within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "1934 Act") and the rules and
regulations promulgated thereunder (other than John H. Foster or a Person or
group controlled, directly or indirectly, by John H. Foster) shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act),
directly or indirectly, of securities of Integra (or other securities
convertible into such securities) representing 50% or more of combined voting
power of all securities of Integra entitled to vote in the election of directors
(hereinafter called a "Controlling Person"). For purposes of this definition, a
Person or group shall not be a Controlling Person if such Person or group holds
voting power in good faith and not for the purpose of circumventing this
definition as an agent, bank, broker, nominee, trustee, or holder of irrevocable
proxies given in response to a solicitation pursuant to the 1934 Act, for one or
more beneficial owners who do not individually, or, if they are a group acting
in concert, as a group, have the voting power specified in this definition.
Closing Date shall mean the Business Day on which the
first Revolving Credit Loan shall be made, which shall be September 29, 1998 or
such later date on which all requisite conditions have been satisfied. The
closing shall take place on the Closing Date at the offices of Buchanan
Ingersoll Professional Corporation, Philadelphia, Pennsylvania, or at such other
time and place as the parties agree.
Closing Fee shall have the meaning given to such term
in Section 2.3 hereof.
Collateral shall mean the Pledged Collateral, the UCC
Collateral, the Intellectual Property Collateral; including that of Integra and
the Restricted Subsidiaries and excluding that of the Dormant Subsidiaries.
Consolidated Cash Flow from Operations for any period
of determination shall mean (i) the sum of net income, depreciation,
amortization, interest expense and income tax expense, in each case of Integra
and its Subsidiaries for such period determined and consolidated in accordance
with GAAP.
Consolidated Earnings Available for Fixed Charges
shall mean, for any period of determination, Consolidated Cash Flow from
Operations plus expenses under operating leases, in each case of Integra and its
Subsidiaries for such period determined and consolidated in accordance with
GAAP.
3
<PAGE> 7
Consolidated Fixed Charges shall mean, for any period
of determination, the sum of interest expense, expenses under operating leases,
cash income tax expense, current maturities of long term Indebtedness,
Earn-outs, capitalized expenditures of the type referred to in Section 8.2(p)
and current principal payments under capitalized leases (for the twelve (12)
month period following the date of determination) in each case of Integra and
its Subsidiaries for such period determined and consolidated in accordance with
GAAP.
Consolidated Funded Debt shall mean any Indebtedness
of Integra and its Subsidiaries, owing to Persons other than a Loan Party,
determined and consolidated in accordance with GAAP. Any items which are
included in more than one clause of the definition of Indebtedness shall not be
counted more than one time in computing the amount of Consolidated Funded Debt.
Consolidated Net Income shall mean for any period of
determination the net income of Integra and its Subsidiaries for such period
determined and consolidated in accordance with GAAP.
Consolidated Net Worth shall mean as of any date of
determination total stockholders' equity of Integra and its Subsidiaries as of
such date determined and consolidated in accordance with GAAP.
Delivery Date shall mean the earlier of (A) the date
on which Integra delivers its consolidated financial statements pursuant to
Sections 8.1(m)(ii) and (iii) or (B) one Business Day following the date on
which such financial statements are due to be delivered pursuant to such
Sections.
Dollar, Dollars, U.S. Dollars and the symbol $ shall
mean lawful money of the United States of America.
Dormant Subsidiaries shall mean the Subsidiaries of a
Loan Party which are listed as such on Schedule 6.1(c) and each of which has no
material assets or liabilities and which conduct no business except pursuant to
the Interim Services Agreement between Apogee, Inc. (n/k/a Integra, Inc.), Psych
Partners, Inc. and certain other affiliates of each of them dated December 26,
1997, or the Administrative Services Agreement among Apogee Services, Inc.,
Lloyd Sokolow and Lifestart Clinic, Inc. dated May 1, 1995.
Earn-out shall mean that portion of the total
consideration paid or to be paid to the seller by a Loan Party in connection
with any acquisition of a business, including Permitted Acquisitions, and which
is subject to the proviso in the definition of "Purchase Price."
Environmental Complaint shall mean any written
complaint setting forth a cause of action for personal or property damage or
equitable relief, order, notice of violation, citation, request for information
issued pursuant to any Environmental Laws by an Official Body, subpoena or other
written notice of any type relating to, arising out of, or issued pursuant to
any of the Environmental Laws or any Environmental Conditions, as the case may
be.
4
<PAGE> 8
Environmental Conditions shall mean any conditions of
the environment, including, without limitation, the work place, the ocean,
natural resources (including flora or fauna), soil, surface water, ground water,
any actual or potential drinking water supply sources, substrata or the ambient
air, relating to or arising out of, or caused by the use, handling, storage,
treatment, recycling, generation, transportation, release, spilling, leaking,
pumping, emptying, discharging, injecting, escaping, leaching, disposal,
dumping, threatened release or other management or mismanagement of Regulated
Substances resulting from the use of, or operations on, the real property owned
or leased by the Borrowers.
Environmental Laws shall mean all federal, state,
local and foreign laws and regulations, including permits, orders, judgments,
and consent decrees issued, or entered into, pursuant thereto, relating to
pollution or protection of human health or the environment or employee safety in
the work place.
ERISA shall mean the Employee Retirement Income
Security Act of 1974, as the same may be amended or supplemented from time to
time, and any successor statute of similar import, and the rules and regulations
thereunder, as from time to time in effect.
ERISA Group shall mean, at any time, Integra, its
Subsidiaries and all members of a controlled group of corporations and all
trades or businesses (whether or not incorporated) under common control and all
other entities which, together with Integra, are treated as a single employer
under Section 414 of the Internal Revenue Code.
Euro-Rate shall mean, with respect to the Revolving
Credit Loans comprising any Borrowing Tranche to which the Revolving Credit
Euro-Rate Option applies for any Euro-Rate Interest Period, the interest rate
per annum determined by the Bank by dividing (the resulting quotient rounded
upwards, if necessary, to the nearest 1/100th of 1% per annum) (i) the rate of
interest determined by the Bank in accordance with its usual procedures (which
determination shall be conclusive absent manifest error) to be the average of
the London interbank offered rates for U.S. Dollars quoted by the British
Bankers' Association as set forth on Dow Jones Markets Service (formerly known
as Telerate) display page 3750 (or appropriate successor or, if the British
Bankers' Association or its successor ceases to provide such quotes, a
comparable replacement determined by the Bank) two (2) Business Days prior to
the first day of such Euro-Rate Interest Period for an amount comparable to such
Borrowing Tranche and having a borrowing date and a maturity comparable to such
Euro-Rate Interest Period by (ii) a number equal to 1.00 minus the Euro-Rate
Reserve Percentage. The Euro-Rate may also be expressed by the following
formula:
Average of London interbank offered rates on Dow
Jones Markets Service display page 3750 as quoted by
Euro-Rate = British Bankers' Association or appropriate successor
-----------------------------------------------------
1.00 - Euro-Rate Reserve Percentage
The Euro-Rate shall be adjusted with respect to any
Revolving Credit Euro-Rate Option outstanding on the effective date of any
change in the Euro-Rate Reserve Percentage as of such effective date. The Bank
shall give prompt notice to the Borrower of the
5
<PAGE> 9
Euro-Rate as determined or adjusted in accordance herewith, which determination
shall be conclusive absent manifest error.
Euro-Rate Interest Period shall have the meaning
given to that term in Section 4.2.
Euro-Rate Reserve Percentage shall mean the maximum
percentage (expressed as a decimal rounded upward to the nearest 1/100 of 1%) as
determined by the Bank which is in effect during any relevant period, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the reserve requirements (including supplemental,
marginal and emergency reserve requirements) with respect to eurocurrency
funding (currently referred to as "Eurocurrency Liabilities") of a member bank
in such System.
Event of Default shall mean any Event of Default
described in Section 9.1.
Expiration Date shall mean with respect to the
Revolving Credit Commitment, October 1, 2000, subject to the provisions of
Section 2.6
Federal Funds Effective Rate for any day shall mean
the rate per annum (based on a year of 360 days and actual days elapsed and
rounded upward to the nearest 1/100 of 1%) announced by the Federal Reserve Bank
of New York (or any successor) on such day as being the weighted average of the
rates on overnight federal funds transactions arranged by federal funds brokers
on the previous trading day, as computed and announced by such Federal Reserve
Bank (or any successor) in substantially the same manner as such Federal Reserve
Bank computes and announces the weighted average it refers to as the "Federal
Funds Effective Rate" as of the date of this Agreement; provided, if such
Federal Reserve Bank (or its successor) does not announce such rate on any day,
the "Federal Funds Effective Rate" for such day shall be the Federal Funds
Effective Rate for the last day on which such rate was announced.
GAAP shall mean generally accepted accounting
principles as are in effect from time to time, subject to the provisions of
Section 1.3 hereof, and applied on a consistent basis (except for changes in
application in which the Borrowers' independent certified public accountants
concur) both as to classification of items and amounts.
Guaranty of any Person shall mean any obligation of
such Person guaranteeing or in effect guaranteeing any liability or obligation
of any other Person in any manner, whether directly or indirectly, including,
without limiting the generality of the foregoing, any agreement to indemnify or
hold harmless any other Person, any performance bond or other suretyship
arrangement and any other form of assurance against loss, except endorsement of
negotiable or other instruments for deposit or collection in the ordinary course
of business.
Guaranty Agreement shall mean the Guaranty and
Suretyship Agreement in form and substance satisfactory to the Bank executed and
delivered by each of the Borrowers to the Bank.
6
<PAGE> 10
Guarantors shall mean each Restricted Subsidiary of
Integra and any Person which hereafter becomes a party to the Loan Documents and
assumes the obligations of a Guarantor thereunder including pursuant to Section
11.17.
Historical Statements shall have the meaning assigned
to that term in Section 6.1(i).
Indebtedness shall mean as to any Person at any time,
any and all indebtedness, obligations or liabilities (whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, or joint or several) of such Person for or in respect of: (i)
borrowed money (excluding trade debt), (ii) amounts raised under or liabilities
in respect of any note purchase or acceptance credit facility, (iii)
reimbursement obligations under any letter of credit, currency swap agreement,
interest rate swap, cap, collar or floor agreement or other interest rate
management device, (iv) any other transaction (including without limitation
forward sale or purchase agreements, capitalized leases and conditional sales
agreements) having the commercial effect of a borrowing of money entered into by
such Person to finance its operations or capital requirements (but not including
trade payables, operating leases and accrued expenses incurred in the ordinary
course of business which are not represented by a promissory note), or (v) any
Guaranty of Indebtedness for borrowed money.
Integra shall have the meaning assigned to such term
in the preamble.
Intellectual Property Collateral shall mean all of
the property described in the Patent, Trademark and Copyright Security
Agreement.
Intercompany Indebtedness shall mean all Indebtedness
of Integra or any of its Subsidiaries to Integra or any other Subsidiary.
Interest Payment Date shall mean each date specified
for the payment of interest in Section 5.2.
Interest Rate Option shall mean the Revolving Credit
Euro-Rate Option or Revolving Credit Base Rate Option.
Interim Statements shall have the meaning assigned to
such term in Section 6.1(i).
Internal Revenue Code shall mean the Internal Revenue
Code of 1986, as the same may be amended or supplemented from time to time, and
any successor statute of similar import, and the rules and regulations
thereunder, as from time to time in effect.
Joining Subsidiary shall have the meaning assigned to
such term in Section 11.17.
7
<PAGE> 11
Law shall mean any law (including common law),
constitution, statute, treaty, regulation, rule, ordinance, opinion, release,
ruling, order, injunction, writ, decree or award of any Official Body.
Letter of Credit shall have the meaning assigned to
that term in Section 2.9.
Letter of Credit Fee shall have the meaning assigned
to that term in Section 2.9(b).
Letter of Credit Outstandings shall mean at any time
the sum of (i) the aggregate undrawn face amount of any Letters of Credit and
(ii) the aggregate amount of all unpaid and outstanding Reimbursement
Obligations.
Lien shall mean any mortgage, deed of trust, pledge,
lien, security interest, charge or other encumbrance or security arrangement of
any nature whatsoever, whether voluntarily or involuntarily given, including but
not limited to any conditional sale or title retention arrangement, and any
assignment, deposit arrangement or lease intended as, or having the effect of,
security and any filed financing statement or other notice of any of the
foregoing (whether or not a lien or other encumbrance is created or exists at
the time of the filing).
Loan Documents shall mean this Agreement, the
Revolving Credit Note, the Guaranty Agreement, the Pledge Agreements, the
Security Agreement, the Subordination Agreement (Intercompany), the Borrower
Agency Agreement, the Patent, Trademark and Copyright Security Agreement, and
any other instruments, certificates or documents delivered or contemplated to be
delivered hereunder or thereunder or in connection herewith or therewith, as the
same may be supplemented or amended from time to time in accordance herewith or
therewith, and Loan Document shall mean any of the Loan Documents.
Loan Parties shall mean collectively the Borrowers,
the Guarantors, and each Person which hereafter becomes a party to the Loan
Documents as a Borrower and a Guarantor, and Loan Party shall mean any of the
Loan Parties.
Material Adverse Change shall mean any set of
circumstances or events which (a) has or could reasonably be expected to have
any material adverse effect whatsoever upon the validity or enforceability of
this Agreement or any other Loan Document, (b) is or could reasonably be
expected to be material and adverse to the business, properties, assets,
financial condition, results of operations or prospects of (i) Integra or (ii)
the Loan Parties taken as a whole, (c) impairs materially or could reasonably be
expected to impair materially the ability of any one or more Loan Parties to
duly and punctually pay or perform (x) any obligations hereunder or (y) any
other Indebtedness owing by a Loan Party in excess of $250,000, or (d) impairs
materially or could reasonably be expected to impair materially the ability of
the Bank, to the extent permitted, to enforce its legal remedies pursuant to
this Agreement or any other Loan Document.
8
<PAGE> 12
Minimum Net Worth Requirement shall mean for any
period of determination, the sum of (i) $3,881,700, plus (ii) seventy five
percent (75%) of Consolidated Net Income of Integra and its Subsidiaries for
each fiscal quarter in which net income was earned (as opposed to a net loss)
plus the proceeds received by Integra in connection with the sale of shares of
its capital stock after deducting any expenses associated with such sale, during
the period from July 1, 1998 through (and including) the date of determination.
Month, with respect to a Euro-Rate Interest Period
under the Revolving Credit Euro-Rate Option, shall mean the interval between the
days in consecutive calendar months numerically corresponding to the first day
of such Interest Period. If any Euro-Rate Interest Period begins on a day of a
calendar month for which there is no numerically corresponding day in the month
in which such Euro-Rate Interest Period is to end, the final month of such
Interest Period shall be deemed to end on the last Business Day of such final
month.
Multiemployer Plan shall mean any employee benefit
plan which is a "multiemployer plan" within the meaning of Section 4001(a)(3) of
ERISA and to which Integra, its Subsidiaries or any member of the ERISA Group is
then making or accruing an obligation to make contributions or, within the
preceding five Plan years, has made or had an obligation to make such
contributions.
Multiple Employer Plan shall mean a Plan which has
two or more contributing sponsors (including any Borrower or any member of the
ERISA Group) at least two of whom are not under common control, as such a plan
is described in Sections 4063 and 4064 of ERISA.
Official Body shall mean any national, federal,
state, local or other government or political subdivision thereof, or any
agency, authority, bureau, central bank, commission, department or
instrumentality of any government or political subdivision thereof, or any
court, tribunal, grand jury or arbitrator, in each case whether foreign or
domestic.
Patent, Trademark and Copyright Security Agreement
shall mean the Patent, Trademark and Copyright Security Agreement in form and
substance satisfactory to the Bank, executed and delivered by each of the Loan
Parties to the Bank.
PBGC shall mean the Pension Benefit Guaranty
Corporation established pursuant to Subtitle A of Title IV of ERISA or any
successor.
Permitted Acquisition shall mean the acquisition by a
Loan Party of assets of any Person, or the capital stock or other ownership
interest of any Person, whether by merger or otherwise, and whether accounted
for as a purchase, a pooling or otherwise, under GAAP, provided that all of the
following conditions are met:
(A) the line of business being acquired is
to be conducted by such Loan Party as a Permitted Line of Business;
9
<PAGE> 13
(B) there shall not exist an Event of
Default or Potential Default after giving effect to such acquisition;
(C) if the acquisition is a purchase of
stock and the Person whose stock or other ownership interests are being acquired
becomes a Subsidiary, Integra shall cause such Person to join this Agreement as
a Borrower and a Guarantor and cause the stock or other ownership interests of
such Person and any stock or other ownership interests held by such Person to be
pledged to the Bank pursuant to Section 11.17 and the purchaser thereof shall
pledge to the Bank 100% of the stock or other ownership interest of the new
Subsidiary;
(D) if the Purchase Price in such
acquisition equals or exceeds Five Hundred Thousand Dollars ($500,000), or all
the aggregate Purchase Price in such acquisitions occurring in any one (1)
calendar year equals or exceeds One Million Five Hundred Thousand Dollars
($1,500,000), Integra shall, together with the materials required under clause
(H) hereof, deliver to the Bank on or before the date required below a
certificate of the Chief Executive Officer, President or Chief Financial Officer
of Integra in the form of Exhibit 1.1(P)(1) hereto (x) stating the amount of the
Purchase Price and (y) demonstrating to the satisfaction of the Bank, in the
Bank's sole discretion, that after giving effect to such acquisition and any
Revolving Credit Loans requested in connection therewith the Loan Parties shall
be in compliance on the date of the most recently delivered financial statements
with clauses (A) through (C) above and the financial covenants contained in
Section 8.2 of this Agreement and any other covenants which the Bank requests
that Integra confirm. The Bank shall be deemed to approve of such acquisition
either by notifying Integra on behalf of all Loan Parties in writing of such
approval or by failing to respond (either negatively or positively) within five
(5) Business Days after Integra delivers notice of such request and the
certification described in this clause (D) to the Bank. The Loan Parties may not
consummate the purchase or become obligated to do so unless and until the Bank
has been deemed to have approved of such acquisition pursuant to this clause
(D).
(E) The directors of the corporation whose
assets or stock is being acquired and the management of any other Person which
is a party to the transaction shall approve of and consent to such acquisition
(the terms "directors" and "management" in this clause (E) refer to the
individuals who served as directors or managers of such corporation or Person,
as the case may be, during the periods immediately prior to the acquisition in
the case of a publicly held company or Person and refer to the stockholders or
owners of a privately-held corporation or Person) and no outstanding tender
offer or merger offer for such corporation or Person, its assets, its shares or
other direct or indirect ownership interests in it shall be currently
outstanding;
(F) No claim, suit or other action exists
or, to the knowledge of the Borrowers, has been threatened by any Person seeking
to enjoin or prohibit the transaction;
(G) Integra shall deliver to the Bank true
and correct copies of the documentation relating to such acquisition within ten
(10) Business Days following the date thereof;
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(H) Integra shall deliver the following
documents to the Bank when Integra delivers to the Bank its certification
described in clause (D) above: (1) copies of consolidated balance sheets and
income statements of the Person whose ownership interests or assets are being
acquired and such Person's Subsidiaries for their fiscal year immediately prior
to the acquisition or any other financial statements received by Loan Parties in
connection with the acquisition; (2) copies of any financial projections
prepared by the seller, the Loan Parties or any other Persons with respect to
the Person whose ownership interests or assets are being acquired and such
Person's Subsidiaries, (3) any revised budget and accompanying forecasts and
projections which Integra may have prepared projecting its operations on a
consolidated basis or separately for each of its and its Subsidiaries' lines of
business since Integra last delivered such a budget; and (4) copies of the
agreements governing any Indebtedness issued as a result of or in connection
with such acquisition if such Indebtedness is not Permitted Additional
Subordinated Indebtedness (provided nothing in this clause (4) shall be
construed to permit additional Indebtedness in connection with acquisitions
which is not Permitted Additional Subordinated Indebtedness); and
(I) On the date of the closing of an
acquisition in connection with which the deliveries under clause (D) are not
required to be made, then nevertheless, Integra shall deliver to the Bank a
certificate satisfactory in form and substance to the Bank demonstrating that
after giving effect to such acquisition and any Revolving Credit Loans requested
in connection therewith, the Loan Parties shall be in compliance on the date of
the most recently delivered financial statements with the financial covenants
contained in Section 8.2 of this Agreement.
Permitted Additional Subordinated Indebtedness shall
mean Indebtedness (other than Intercompany Indebtedness) which meets each of the
following conditions: (A) the documentation governing such Indebtedness shall
provide that the rights of the holders thereof shall be subordinate to the
rights of the Bank with respect to the Indebtedness under the Loan Documents in
accordance with the subordination provisions contained in Exhibit 1.1(P)(2), (B)
the agreements governing such Indebtedness shall not contain any provisions
which are more restrictive than the provisions of this Agreement, (C) such
Indebtedness shall be unsecured, and (D) the Loan Parties shall deliver to the
Bank copies of drafts of the agreements described in clauses (A) and (B) at
least five (5) Business Days before they incur such Indebtedness if the amount
of such Indebtedness shall be equal to or exceed $1,500,000.
Permitted Intercompany Indebtedness shall mean
Intercompany Indebtedness, provided that such Indebtedness is subordinated
pursuant to the Subordination Agreement (Intercompany), and excluding in all
events Indebtedness owing to or by a Dormant Subsidiary.
Permitted Investments shall mean investments by the
Loan Parties in any of the following:
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(i) direct obligations of the United States of
America ("U.S.A.") or any agency or instrumentality thereof or obligations
backed by the full faith and credit of the U.S.A. maturing in twelve (12) months
or less from the date of acquisition;
(ii) commercial paper maturing in one hundred and
eighty (180) days or less rated not lower than A-1 by Standard & Poor's
Corporation or P-1 by Moody's Investors Service Inc. on the date of acquisition;
(iii) demand deposits, time deposits or certificates
of deposit maturing within six (6) months in commercial banks whose obligations
are rated A-1, A or the equivalent or better by Standard & Poor's Corporation on
the date of acquisition;
(iv) Permitted Acquisitions;
(v) investments in money-market funds rated AAm or
AAm-G or higher by Standard & Poor's (or equivalent rating) whose net asset
value remains a constant $1.00 per share; and
(vi) banker's acceptances issued by, and overnight
purchase agreements with, banks described in clause (iii).
Permitted Liens shall mean:
(i) Liens for taxes, assessments, or similar charges,
incurred in the ordinary course of business and which are not yet due and
payable;
(ii) Pledges or deposits made in the ordinary course
of business to secure payment of workers' compensation, or to participate in any
fund in connection with workers' compensation, unemployment insurance, old-age
pensions or other social security programs;
(iii) Liens of mechanics, materialmen, warehousemen,
carriers, or other like Liens, securing obligations incurred in the ordinary
course of business that are not yet due and payable and Liens of landlords
securing obligations to pay lease payments that are not yet due and payable or
in default;
(iv) Good faith pledges or deposits made in the
ordinary course of business to secure performance of bids, tenders, or advance
payments, contracts (other than for the repayment of borrowed money) or leases,
not in excess of the aggregate amount due thereunder, or to secure statutory
obligations, or surety, appeal, indemnity, performance or other similar bonds
required in the ordinary course of business (except that appeal bonds shall be
permitted even outside of the normal course of business);
(v) Encumbrances consisting of zoning restrictions,
easements, reservations or other restrictions on the use of real property, none
of which materially impairs the
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use of such property as currently used or the present value thereof, and none of
which is violated in any material respect by existing or proposed structures or
land use;
(vi) Liens in favor of the Bank;
(vii) Liens securing obligations under leases
permitted in Section 8.2(a)(iii) provided that such Liens are limited to the
property under lease;
(viii) Any Lien existing on the date of this
Agreement described on Schedule 1.1(P)(1) hereto, provided that the principal
amount secured thereby is not hereafter increased and no additional assets
become subject to such Lien;
(ix) The following, (A) if the validity or amount
thereof is being contested in good faith by appropriate and lawful proceedings
diligently conducted so long as levy and execution thereon have been stayed and
continue to be stayed or (B) if a final judgment is entered and such judgment is
discharged within thirty (30) days of entry, and in either case they do not
affect the Collateral (or, in the event they do affect the Collateral, the Loan
Parties have provided security to the Bank which is adequate in the Bank's sole
discretion) or, in the aggregate, materially impair the ability of the Loan
Parties to perform their obligations hereunder or under the other Loan
Documents:
(1) Claims or Liens for taxes, assessments
or charges due and payable and subject to interest or penalty,
provided that the applicable Loan Party maintains such
reserves or other appropriate provisions as shall be required
by GAAP and pays all such taxes, assessments or charges
forthwith upon the commencement of proceedings to foreclose
any such Lien;
(2) Claims, Liens or encumbrances upon, and
defects of title to, real or personal property other than the
Collateral (or, in the event they do affect the Collateral,
the Loan Parties have provided security to the Bank which is
adequate in the Bank's sole discretion), including any
attachment of personal or real property or other legal process
prior to adjudication of a dispute on the merits; or
(3) Claims or Liens of mechanics,
materialmen, warehousemen, carriers, or other statutory
nonconsensual Liens;
(x). Purchase Money Security Interests not exceeding
in the aggregate $500,000; and
(xi) Liens up to $150,000 outstanding at any time
from Permitted Acquisitions plus other Liens permitted in
writing by the Bank.
Permitted Line of Business shall mean solely the
operation of behavioral managed care and employee assistance programs as
generally described in Integra's report on Form 10-K and related businesses in
which the Loan Parties are engaged on the Closing Date.
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Person shall mean any individual, corporation,
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture, government or political subdivision or agency
thereof, or any other entity.
Plan shall mean at any time an employee pension
benefit plan (including a Multiple Employer Plan but not a Multiemployer Plan)
which is covered by Title IV of ERISA or is subject to the minimum funding
standards under Section 412 of the Internal Revenue Code and either (i) is
maintained by any member of the ERISA Group for employees of any member of the
ERISA Group or (ii) has at any time within the preceding five years been
maintained by any entity which was at such time a member of the ERISA Group for
employees of any entity which was at such time a member of the ERISA Group.
Pledge Agreements shall mean the Pledge Agreements in
form and substance satisfactory to the Bank, executed and delivered by Integra
with respect to the pledge of the capital stock of its Subsidiaries and executed
and delivered by each Loan Party (other than Integra) which owns stock in any
other Loan Party, and any other form of agreement pledging any interests in a
Loan Party executed and delivered by the holders of such interests, in each
instance to the Bank, and Pledge Agreement shall mean separately any Pledge
Agreement.
Pledged Collateral shall have the meaning assigned to
that term in the Pledge Agreements.
Potential Default shall mean any event or condition
which with notice, passage of time or a determination by the Bank, or any
combination of the foregoing, would constitute an Event of Default.
Principal Office shall mean the main banking office
of the Bank, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707.
Prior Security Interest shall mean a valid and
enforceable perfected first priority security interest under the Uniform
Commercial Code in the UCC Collateral and the Pledged Collateral, subject to
Permitted Liens.
Prohibited Transaction shall mean any prohibited
transaction as defined in Section 4975 of the Internal Revenue Code or Section
406 of ERISA for which neither an individual nor a class exemption has been
issued by the United States Department of Labor.
Purchase Money Security Interest shall mean a Lien
upon tangible personal property securing loans to any Person or deferred
payments by such Person for the purchase of such tangible personal property and
which extend only to the property so purchased.
Purchase Price shall mean with respect to any
Permitted Acquisition, the aggregate of (i) the cash paid by any of the Loan
Parties, directly or indirectly, to the seller in connection therewith, (ii) the
Indebtedness incurred or assumed by any of the Loan Parties (including, without
limitation, Indebtedness of a Person becoming a Loan Party in connection with a
Permitted Acquisition, which Indebtedness continues to exist following the
consummation
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<PAGE> 18
of such Permitted Acquisition), whether in favor of the seller or otherwise and
whether fixed or contingent, in connection therewith, (iii) any Guaranty given
or incurred by any Loan Party in connection therewith, (iv) the fair market
value of any equity issued by any of the Loan Parties, in connection therewith,
and (v) any other consideration given or obligation incurred by any of the Loan
Parties in connection therewith, provided, however, that the amount of any
deferred earn-out payments to any seller not required by GAAP to be disclosed as
a liability on the balance sheet of any Loan Party as of the date of
consummation of such Permitted Acquisition shall be excluded from the
determination under clauses (i) through (v) of this definition.
Regulated Substances shall mean any substance,
including without limitation any solid, liquid, gaseous, thermal or thoriated
material, refuse, garbage, wastes, chemicals, petroleum products or by-products,
dust, scrap, PCB's, heavy metals, any substances defined as "hazardous
substances," "pollutants," "pollution," "contaminant," "hazardous or toxic
substances," "toxic wastes," "regulated substances," "industrial waste,"
"residual waste," "solid wastes," "municipal wastes," "infectious waste,"
"chemotherapeutic waste," "medical waste" or any related materials or substances
as now or hereafter defined pursuant to any Environmental Laws, ordinances,
rules or directives of any Official Body, the generation, manufacture,
processing, distribution, treatment, storage, disposal, transport, recycling,
reclamation, use, reuse or other management or mismanagement of which is
regulated by the Environmental Laws.
Regulation U shall mean Regulation U, T, G or X as
promulgated by the Board of Governors of the Federal Reserve System, as amended
from time to time.
Reimbursement Obligation shall mean the obligation of
the Borrowers to reimburse the Bank for any draw under a Letter of Credit.
Restricted Subsidiary shall mean any Subsidiary of
Integra which is not a Dormant Subsidiary, each of which is listed as such on
Schedule 6.1(c), and Restricted Subsidiaries shall mean all such Persons
collectively.
Reportable Event means a reportable event described
in Section 4043 of ERISA and regulations thereunder with respect to a Plan or
Multiemployer Plan.
Revolving Credit Base Rate Option shall mean the
option of the Borrowers to have Revolving Credit Loans bear interest at the rate
and under the terms and conditions set forth in Section 4.1(a)(i).
Revolving Credit Base Rate Portion shall mean the
portion of the Revolving Credit Loans bearing interest at any time under the
Revolving Credit Base Rate Option.
Revolving Credit Commitment shall mean Ten Million
Dollars ($10,000,000).
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Revolving Credit Euro-Rate Option shall mean the
option of the Borrowers to have Revolving Credit Loans bear interest at the rate
and under the terms and conditions set forth in Section 4.1(a)(ii).
Revolving Credit Euro-Rate Portion shall mean the
portion of the Revolving Credit Loans bearing interest at any time under the
Revolving Credit Euro-Rate Option.
Revolving Credit Loan Request shall mean a request
for Revolving Credit Loans made in accordance with Section 2.5 hereof.
Revolving Credit Loans shall mean collectively and
Revolving Credit Loan shall mean separately all Revolving Credit Loans or any
Revolving Credit Loan made by the Bank to the Borrowers or any Borrower pursuant
to Section 2.1 hereof.
Revolving Credit Note shall mean the Revolving Credit
Note of the Borrowers in a form and substance acceptable to the Bank evidencing
the Revolving Credit Loans together with all amendments, extensions, renewals,
replacements, refinancings or refundings thereof in whole or in part.
Security Agreement shall mean the Security Agreement
in form and substance satisfactory to the Bank executed and delivered by each
Loan Party to the Bank.
Solvent shall mean, with respect to any Person on a
particular date, that on such date (i) the fair value of the property of such
Person is greater than the total amount of liabilities, including, without
limitation, contingent liabilities required to be recognized in accordance with
GAAP, of such Person, (ii) the present fair salable value of the assets of such
Person is not less than the amount that will be required to pay the probable
liability of such Person on its debts as they become absolute and matured, (iii)
such Person is able to realize upon its assets and pay its debts and other
liabilities, contingent obligations required to be recognized in accordance with
GAAP and other commitments as they mature in the normal course of business, (iv)
such Person does not intend to, and does not believe that it will, incur debts
or liabilities beyond such Person's ability to pay as such debts and liabilities
mature, and (v) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital after giving due
consideration to the prevailing practice in the industry in which such Person is
engaged. In computing the amount of contingent liabilities at any time, it is
intended that such liabilities will be computed in accordance with GAAP. No
Subsidiary shall fail to be "Solvent" solely because of "push down" accounting
transactions among the Loan Parties as a consolidated group or because of
transfers among Loan Parties.
Subordinated Indebtedness Documents shall mean
collectively the documents evidencing the Permitted Additional Subordinated
Indebtedness and the documents evidencing the Permitted Intercompany
Indebtedness.
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Subordination Agreement (Intercompany) shall mean the
Subordination Agreement in the form of Exhibit 1.1(S) hereto pursuant to which
the Loan Parties subordinate their rights to collect loans made to other Loan
Parties to the rights of the Bank to collect Indebtedness of the Loan Parties to
the Bank under the Loan Documents.
Subsidiary of any Person at any time shall mean (i)
any corporation or trust of which more than 50% (by number of shares or number
of votes) of the outstanding capital stock or shares of beneficial interest
normally entitled to vote for the election of one or more directors or trustees
(regardless of any contingency which does or may suspend or dilute the voting
rights) is at such time owned directly or indirectly by such Person or one or
more of such Person's Subsidiaries, or any limited partnership of which such
Person is a general partner or any partnership of which more than 50% of the
partnership interests is at the time directly or indirectly owned by such Person
or one or more of such Person's Subsidiaries or (ii) any other entity of which
such Person owns more than 50% of the ownership interests, directly or
indirectly, or (iii) any corporation, trust, partnership or other entity which
is controlled or capable of being controlled by such Person or one or more of
such Person's Subsidiaries.
Subsidiary Shares shall have the meaning assigned to
that term in Section 6.1(c)
UCC Collateral shall mean the property of the Loan
Parties in which security interests are to be granted under the Security
Agreement.
Uniform Commercial Code shall have the meaning
assigned to that term in Section 6.1(p).
1.2 Construction.
Unless the context of this Agreement otherwise clearly
requires, references to the plural include the singular, the singular the plural
and the part the whole, "or" has the inclusive meaning represented by the phrase
"and/or," and "including" has the meaning represented by the phrase "including
without limitation." References in this Agreement to "determination" of or by
the Bank shall be deemed to include good faith estimates by the Bank (in the
case of quantitative determinations) and good faith beliefs by the Bank (in the
case of qualitative determinations). Whenever the Bank is granted the right
herein to act in its sole discretion or to grant or withhold consent such right
shall be exercised in good faith. The words "hereof," "herein," "hereunder" and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. The section and other headings
contained in this Agreement and the Table of Contents preceding this Agreement
are for reference purposes only and shall not control or affect the construction
of this Agreement or the interpretation thereof in any respect. Section,
subsection, schedule and exhibit references are to this Agreement unless
otherwise specified. References to any agreement (including this Agreement and
any other Loan Document together with the schedules and exhibits hereto or
thereto), document or instrument means such agreement, document or instrument as
amended, modified, replaced, substituted for, superseded or restated. References
to "shall" and "will" are intended to have the same meaning.
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1.3 Accounting Principles.
Except as otherwise provided in this Agreement, all
computations and determinations as to accounting or financial matters and all
financial statements to be delivered pursuant to this Agreement shall be made
and prepared in accordance with GAAP (including principles of consolidation
where appropriate), and all accounting or financial terms shall have the
meanings ascribed to such terms by GAAP.
If one or more changes in GAAP after the date of this
Agreement are required to be applied to then existing transactions, and either a
violation of one or more provisions hereof shall have occurred which would not
have occurred if no change in accounting principles had taken place or a
violation of one or more of the provisions hereof shall not occur which would
have occurred if no change in accounting principles had taken place, then:
a) any such violation shall not be considered to
constitute an Event of Default for a period of 30 days;
b) the parties will negotiate in good faith to
attempt to draft an amendment of this Agreement which shall approximate to the
extent possible the economic effect of the original provisions hereof after
taking into account such change or changes in GAAP; and
c) if the parties are unable to agree upon such an
amendment within 30 days, then as used in this Agreement "GAAP" shall mean
generally accepted accounting principles as in effect prior to such change.
ARTICLE II
REVOLVING CREDIT FACILITY
2.1 Revolving Credit Borrowing.
Subject to the terms and conditions hereof and relying upon
the representations and warranties herein set forth, the Bank agrees to make
revolving credit loans (the "Revolving Credit Loans") to any of the Borrowers at
any time or from time to time on or after the date hereof to, but not including,
the Expiration Date, in an aggregate principal amount not to exceed at any one
time the Bank's Revolving Credit Commitment minus the aggregate undrawn face
amount of outstanding Letters of Credit issued pursuant to Section 2.9.
Notwithstanding anything to the contrary herein, availability under the
Revolving Credit Commitment shall be limited to Four Million Dollars
($4,000,000) until November 14, 1998 and thereafter in accordance with this
Agreement. Within such limits of time and amount and subject to the other
provisions of this Agreement, the Borrowers may borrow, repay and reborrow
pursuant to this Section 2.1.
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2.2 Nature of Bank's Obligations with Respect to Revolving
Credit Loans.
The aggregate of the Bank's Revolving Credit Loans outstanding
hereunder to the Borrowers at any time shall never exceed the Revolving Credit
Commitment minus the aggregate undrawn face amount of outstanding Letters of
Credit. The failure of the Bank to perform its obligations hereunder shall not
affect the obligations of the Borrowers to any other party nor shall any other
party be liable for the failure of the Bank to perform its obligations
hereunder. The Bank shall have no obligation to make Revolving Credit Loans
hereunder on or after the Expiration Date.
2.3 Closing Fee and Commitment Fee.
(a) Integra agrees to pay to the Bank, as
consideration for the Bank's Revolving Credit Commitment, a nonrefundable fee
(the "Closing Fee") equal to Fifteen Thousand Dollars ($15,000), payable on the
Closing Date.
(b) Accruing from the date hereof until the
Expiration Date, the Borrowers agree to pay to the Bank, as consideration for
the Revolving Credit Commitment, a nonrefundable commitment fee (the "Commitment
Fee") equal to the amount set forth below and calculated in respect of the ratio
of the Borrowers' Consolidated Funded Debt to Consolidated Cash Flow from
Operations (computed on the basis of a year of 365 or 366 days, as the case may
be, and actual days elapsed) on the average daily difference between the amount
of (i) the Revolving Credit Commitment as the same may be constituted from time
to time and the (ii) the sum of all Revolving Credit Loans outstanding plus the
Letters of Credit Outstanding.
Ratio Commitment Fee
Percentage
----------
(i) greater than or equal to 2.0-to-1.0 .45%
(ii) less than 2.0-to-1.0 .35%
All Commitment Fees shall be payable in arrears on the first
Business Day of each January, April, July and October after the date hereof and
on the Expiration Date or upon acceleration of the Revolving Credit Note.
2.4 Voluntary Reduction of Commitment.
The Borrowers shall have the right at any time and from time
to time upon five (5) Business Days' prior written notice to the Bank to
permanently reduce, in a minimum amount of $1,000,000 of principal, or terminate
the Revolving Credit Commitment without penalty or premium, except as
hereinafter set forth, provided that any such reduction or termination shall be
accompanied by prepayment of the Revolving Credit Note, together with the full
amount of interest accrued on the principal sum to be prepaid (and all amounts
referred to in Section 5.4 hereof), to the extent that the aggregate amount
thereof then outstanding exceeds the Revolving Credit Commitment as so reduced
or terminated.
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2.5 Revolving Credit Loan Requests.
Except as otherwise provided herein, the Borrowers, through
Integra as their agent pursuant to the Borrower Agency Agreement, may from time
to time prior to the Expiration Date request the Bank to make Revolving Credit
Loans, or renew or convert the Interest Rate Option applicable to existing
Revolving Credit Loans, by the delivery to the Bank, not later than 10:00 a.m.
Pittsburgh time (i) three (3) Business Days prior to the proposed Borrowing Date
with respect to the making of Revolving Credit Loans to which the Revolving
Credit Euro-Rate Option applies or the conversion to or the renewal of the
Revolving Credit Euro-Rate Option for any Revolving Credit Loans; and (ii) one
(1) Business Day prior to either the proposed Borrowing Date with respect to the
making of a Revolving Credit Loan to which the Revolving Credit Base Rate Option
applies or the last day of the preceding Euro-Rate Interest Period with respect
to the conversion to the Revolving Credit Base Rate Option for any Revolving
Credit Loan, of a duly completed request therefor substantially in the form of
Exhibit 2.5 or a request by telephone immediately confirmed in writing by letter
or facsimile in such form (each, a "Revolving Credit Loan Request"), it being
understood that the Bank may rely in good faith on (and is under no duty to
establish) the authority of any person making such a telephonic request and
purporting to be an Authorized Officer. Each Revolving Credit Loan Request shall
be irrevocable and shall (i) specify the proposed Borrowing Date; (ii) specify
the aggregate amount of the proposed Revolving Credit Loans comprising the
Borrowing Tranche, which shall be in integral multiples of $50,000 and not less
than $300,000 for Revolving Credit Loans to which the Revolving Credit Euro-Rate
Option applies and not less than the lesser of $50,000 or the maximum amount
available for Revolving Credit Loans to which the Revolving Credit Base Rate
Option applies; (iii) specify whether the Revolving Credit Euro-Rate Option or
Revolving Credit Base Rate Option shall apply to the proposed Revolving Credit
Loans comprising the Borrowing Tranche; (iv) in the case of Revolving Credit
Loans to which the Revolving Credit Euro-Rate Option applies, specify an
appropriate Euro-Rate Interest Period for the proposed Revolving Credit Loans
comprising the Borrowing Tranche; (v) specify the Borrower to which each
Borrowing Tranche is to apply and the amount of such Borrowing Tranche allocable
to such Borrower; (vi) certify that the use by the Borrower of the Revolving
Credit Loan proceeds is a use permitted by Section 2.8; and (vii) certify that
no Event of Default or Potential Default (including without limitation Section
8.2(k)-(m) hereof) has occurred and is continuing after giving effect to the
proposed Revolving Credit Loan. Together with each Revolving Credit Loan
Request, Integra, on behalf of the Borrowers, shall also deliver to the Bank
written certification by Integra's Chief Financial Officer that no Event of
Default, Potential Default or Material Adverse Change exists or would be caused
by such Revolving Credit Loan.
2.6 Extension by Bank of the Expiration Date.
After delivery by the Borrower of the annual financial
statements to be provided under Section 8.1(m)(iii) [Annual Financial
Statements] for the fiscal year ending December 31, 1998 the Borrowers may
request after August 29, 1999 but before October 29, 1999 a one-year extension
of the Expiration Date by written notice to the Bank, and the Bank agrees to
respond to the Borrowers' request for an extension within thirty (30) calendar
days; provided, however, that the failure of the Bank to respond within such
time period shall not in any manner constitute an
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agreement by the Bank to extend the Expiration Date. If the Bank elects to
extend, the Expiration Date shall be extended for a period of one year.
2.7 Revolving Credit Note.
The obligation of each Borrower to repay the aggregate unpaid
principal amount of the Revolving Credit Loans made to it by the Bank, together
with interest and fees thereon, shall be evidenced by a Revolving Credit Note
dated the Closing Date payable to the order of the Bank. The Revolving Credit
Note shall be in a face amount equal to the Revolving Credit Commitment.
Notwithstanding that Integra may request Revolving Credit Loans on behalf of a
Borrower or Borrowers in accordance with Section 2.5, the Borrowers shall
internally account on an individual Borrower basis for the use of the proceeds
of the Revolving Credit Loans by each Borrower.
2.8 Use of Proceeds.
The proceeds of the Revolving Credit Loans shall be used by
the Borrowers only for (i) Permitted Acquisitions, (ii) working capital and
(iii) general corporate purposes.
2.9 Letter of Credit Subfacility.
(a) At the request of Integra as agent for the
Borrowers, the Bank will issue, on the terms and conditions hereinafter set
forth, standby letters of credit on behalf of any Borrower (collectively,
"Letters of Credit"); provided, however, that each Letter of Credit shall have a
maximum maturity of twelve (12) months from the date of issuance and shall in no
event expire later than one Business Day prior to the Expiration Date; provided,
further, however, that in no event shall (i) the aggregate undrawn face amount
of the Letters of Credit issued to all of the Borrowers pursuant to this Section
2.9 exceed, at any one time, $1,000,000; or (ii) the aggregate outstanding
principal balance of the Revolving Credit Loans made to the Borrowers pursuant
to Section 2.1 plus the Letters of Credit Outstandings exceed at any one time,
the Revolving Credit Commitment.
(b) The Borrower shall pay (i) to the Bank a fee (the
"Letter of Credit Fee") equal to the Applicable Margin which is in effect, and
(ii) to the Bank a fronting fee equal to 1/8% per annum (computed on the basis
of a year of 360 days and actual days elapsed), and the fees described in the
preceding clauses (i) and (ii) shall be computed on the daily average Letters of
Credit Outstanding and shall be payable quarterly in arrears commencing with the
first Business Day of each January, April, July and October following issuance
of each Letter of Credit and on the Expiration Date. The Borrower shall also pay
to the Bank the Bank's then in effect customary fees and administrative expenses
payable with respect to the Letters of Credit as the Bank may generally charge
or incur from time to time in connection with the issuance, maintenance,
modification (if any), assignment or transfer (if any), negotiation, and
administration of Letters of Credit.
(c) Any and all amounts which the Bank is required to
advance pursuant to the Letters of Credit shall become, at the time the amounts
are advanced, Revolving
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Credit Loans from the Bank and shall bear interest initially at the Base Rate
and thereafter at the rate set forth in, and in accordance with the provisions
contained in, Section 4.1.
(d) The Borrowers, jointly and severally, agree to be
bound by the terms of the Bank's application and/or agreement for Letters of
Credit (including the Bank's standard form application and reimbursement
agreements and documentation) and the Bank's written regulations and customary
practices relating to Letters of Credit, though such interpretation may be
different from the Borrowers' own, and it is understood and agreed that, except
in the case of gross negligence or willful misconduct, the Bank shall not be
liable for any error, negligence and/or mistakes, whether of omission or
commission, in following the Borrowers' instructions or those contained in the
Letters of Credit or any modifications, amendments or supplements thereto.
ARTICLE III
[RESERVED]
ARTICLE IV
INTEREST RATES
4.1 Interest Rate Options.
Each Borrower shall pay interest in respect of the outstanding
unpaid principal amount of the Revolving Credit Loans as selected by Integra, as
agent for such Borrower, from the Revolving Credit Base Rate Option or Revolving
Credit Euro-Rate Option set forth below applicable to the Revolving Credit
Loans, it being understood that, subject to the provisions of this Agreement,
Integra, as such agent, may select different Interest Rate Options and different
Euro-Rate Interest Periods to apply simultaneously to the Revolving Credit Loans
comprising different Borrowing Tranches and may convert to or renew one or more
Interest Rate Options with respect to all or any portion of the Revolving Credit
Loans comprising any Borrowing Tranche provided that there shall not be at any
one time outstanding more than seven (7) Borrowing Tranches in the aggregate
comprising the Revolving Credit Euro-Rate Portion. The Bank's determination of a
rate of interest and any change therein shall in the absence of manifest error
be conclusive and binding upon all parties hereto. If at any time the designated
rate applicable to any Revolving Credit Loan made by the Bank exceeds the Bank's
highest lawful rate, the rate of interest on the Bank's Revolving Credit Loan
shall be limited to the Bank's highest lawful rate.
(a) Interest Rate Options. Integra, as agent for the
Borrowers, shall have the right to select from the following Interest Rate
Options applicable to the Revolving Credit Loans.
(i) Revolving Credit Base Rate Option. A
fluctuating rate per annum (computed on the basis of a year of 365 or 366 days,
as the case may be, and actual days elapsed) for each period specified below
equal to the Base Rate plus the applicable percentage set
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forth below, based upon the ratio of (a) Consolidated Funded Debt to (b)
Consolidated Cash Flow from Operations. Such ratio shall be computed as of the
end of each fiscal quarter, with the calculation of Consolidated Cash Flow from
Operations made as provided in the definition of such term in Section 1.1.
Adjustments to interest attributable to a change in such ratio shall be
effective (a) on the Delivery Date for the Borrower's consolidated financial
statements for such quarter if the applicable interest rate is to be increased
and (b) on the later of the Delivery Date for such financial statements or the
date on which such financial statements are actually delivered to the Bank if
the applicable interest rate is to be decreased.
Ratio of Consolidated
Funded Debt to Consolidated
Cash Flow from Operations Applicable Interest Rate
------------------------- ------------------------
Greater than or equal to 2.5 to 1.0 Base Rate plus 1.00%
Greater than or equal to 2.0 to 1.0 but less
than 2.5 to 1.0 Base Rate plus 0.75%
Greater than or equal to 1.0 to 1.0 but less
than 2.0 to 1.0 Base Rate plus 0.50%
Less than 1.0 to 1.0 Base Rate plus 0.25%
(ii) Revolving Credit Euro-Rate Option: A
rate per annum (computed on the basis of a year of 360 days and actual days
elapsed) for each period specified below equal to the Euro-Rate plus the
applicable percentage (the "Applicable Margin") set forth below, based upon the
ratio of (a) Consolidated Funded Debt to (b) Consolidated Cash Flow from
Operations. Such ratio shall be computed as of the end of each fiscal quarter,
with the calculation of Consolidated Cash Flow from Operations made as provided
in the definition of such term in Section 1.1. Adjustments to interest
attributable to a change in such ratio shall be effective (a) on the Delivery
Date for the Borrower's consolidated financial statements for such quarter if
the applicable interest rate is to be increased and (b) on the later of the
Delivery Date for such financial statements or the date on which such financial
statements are actually delivered to the Bank if the applicable interest rate is
to be decreased.
Ratio of Consolidated
Funded Debt to Consolidated
Cash Flow from Operations Applicable Margin
------------------------- -----------------
Greater than or equal to 2.5 to 1.0 2.50%
Greater than or equal to 2.0 to 1.0 but less
than 2.5 to 1.0 2.25%
Greater than or equal to 1.0 to 1.0 but less
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than 2.0 to 1.0 2.0%
Less than 1.0 to 1.0 1.75%
(b) Rate Quotations. Integra, as agent for the
Borrowers, may call the Bank on or before the date on which a Revolving Credit
Loan Request is to be delivered to receive an indication of the rates then in
effect, but it is acknowledged that such projection shall not be binding on the
Bank nor affect the rate of interest which thereafter is actually in effect when
the election is made.
4.2 Interest Periods.
At any time when Integra, as agent for the Borrowers, shall
select, convert to or renew a Revolving Credit Euro-Rate Option, Integra shall
notify the Bank thereof at least three (3) Business Days prior to the effective
date of such Revolving Credit Euro-Rate Option by delivering a Revolving Credit
Loan Request. The notice shall specify an interest period during which such
Interest Rate Option shall apply, such periods to be one, two, three or six
months ("Euro-Rate Interest Period"), provided, that:
(a) any Euro-Rate Interest Period which would
otherwise end on a date which is not a Business Day shall be extended to the
next succeeding Business Day unless such Business Day falls in the next calendar
month, in which case such Euro-Rate Interest Period shall end on the next
preceding Business Day;
(b) any Euro-Rate Interest Period which begins on the
last day of a calendar month for which there is no numerically corresponding day
in the subsequent calendar month during which such Euro-Rate Interest Period is
to end shall end on the last Business Day of such subsequent month;
(c) Revolving Credit Euro-Rate Portion for each
Euro-Rate Interest Period shall be in integral multiples of $50,000 and not less
than $300,000;
(d) Integra shall not select, convert to or renew a
Euro-Rate Interest Period for any portion of the Revolving Credit Loans that
would end after the Expiration Date; and
(e) in the case of the renewal of a Revolving Credit
Euro-Rate Option at the end of a Euro-Rate Interest Period, the first day of the
new Euro-Rate Interest Period shall be the last day of the preceding Euro-Rate
Interest Period, without duplication in payment of interest for such day.
4.3 Interest After Default.
To the extent permitted by Law, upon the occurrence and during
the continuation of an Event of Default, any principal, interest, fee or other
amount payable hereunder shall bear interest for each day thereafter until paid
in full (before and after judgment) at a rate per annum
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which shall be equal to two hundred (200) basis points (2% per annum) above the
rate of interest otherwise applicable with respect to such amount or two hundred
(200) basis points (2% per annum) above the interest rate calculated pursuant to
Section 4.1(a)(i) (in respect of the Base Rate) if no rate of interest is
otherwise applicable. Each Borrower acknowledges that such increased interest
rate reflects, among other things, the fact that such Revolving Credit Loans or
other amounts have become a substantially greater risk given their default
status and that the Bank is entitled to additional compensation for such risk.
4.4 Euro-Rate Unascertainable.
(a) If on any date on which a Euro-Rate would
otherwise be determined, the Bank shall have determined (which determination
shall be conclusive absent manifest error) that:
(i) adequate and reasonable means do not
exist for ascertaining such Euro-Rate, or
(ii) a contingency has occurred which
materially and adversely affects the secondary market for negotiable
certificates of deposit maintained by dealers of recognized standing relating to
the London interbank market relating to the Euro-Rate, or
(b) if at any time the Bank shall have determined
(which determination shall be conclusive absent manifest error) that:
(i) the making, maintenance or funding of
any Revolving Credit Loan to which a Revolving Credit Euro-Rate Option applies
has been made impracticable or unlawful by compliance by the Bank in good faith
with any Law or any interpretation or application thereof by any Official Body
or with any request or directive of any such Official Body (whether or not
having the force of Law), or
(ii) such Revolving Credit Euro-Rate Option
will not adequately and fairly reflect the cost to such Bank of the
establishment or maintenance of any such Revolving Credit Loan, or
(iii) after making all reasonable efforts
that deposits of the relevant amount in Dollars for the relevant Euro-Rate
Interest Period for a Revolving Credit Loan to which a Revolving Credit
Euro-Rate Option applies, respectively, are not available to the Bank at the
effective cost of funding a proposed Revolving Credit Loan to which the
Revolving Credit Euro-Rate Option applies in the London interbank market, then,
in the case of any event specified in subsection (a) above, the Bank shall
promptly so notify Integra, as agent for the Borrowers, and in the case of an
event specified in subsection (b) above, the Bank shall promptly endorse a
certificate to such notice as to the specific circumstances of such notice and
the Bank shall promptly send copies of such notice and certificate to Integra,
as agent for the Borrowers. Upon such date as shall be specified in such notice
(which shall not be earlier than the date such notice is given) the obligation
of the Bank to allow Integra, as agent for the Borrowers, to select, convert to
or renew a Revolving Credit Euro-Rate Option shall be suspended until the Bank
shall
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have later notified Integra, in such capacity, of the Bank's determination
(which determination shall be conclusive absent manifest error) that the
circumstances giving rise to such previous determination no longer exist. If at
any time the Bank makes a determination under subsection (a) or (b) of this
Section 4.4 and Integra has previously notified the Bank of its selection of,
conversion to or renewal of a Revolving Credit Euro-Rate Option and such
Interest Rate Option has not yet gone into effect, such notification shall be
deemed to provide for selection of, conversion to or renewal of the Revolving
Credit Base Rate Option otherwise available with respect to such Revolving
Credit Loans (except that the interest thereon shall be the Base Rate plus
.25%). If the Bank notifies Integra of a determination under subsection (b) of
this Section 4.4, the Borrowers shall, subject to the Borrowers' indemnification
obligations under Section 5.4(b), as to any Revolving Credit Loan of the Bank to
which a Revolving Credit Euro-Rate Option applies, on the date specified in such
notice either convert such Revolving Credit Loan to the Revolving Credit Base
Rate Option otherwise available with respect to such Revolving Credit Loan
(except that the interest thereon shall be the Base Rate plus .25%) or prepay
such Revolving Credit Loan in accordance with Section 5.3 hereof. Absent due
notice from Integra of conversion or prepayment, such Revolving Credit Loan
shall automatically be converted to the Revolving Credit Base Rate Option
otherwise available with respect to such Revolving Credit Loan upon such
specified date.
4.5 Selection of Interest Rate Options.
If Integra, as agent for the Borrowers, fails to select a
Euro-Rate Interest Period in accordance with the provisions of Section 4.2 in
the case of renewal of the Revolving Credit Euro-Rate Portion, Integra shall be
deemed to have converted such Revolving Credit Loan or portion thereof to the
Revolving Credit Euro-Rate Option with a three month Euro-Rate Interest Period,
commencing upon the last day of the prior Euro-Rate Interest Period.
ARTICLE V
PAYMENTS
5.1 Payments.
All payments and prepayments to be made in respect of
principal, interest, Closing Fee, Letter of Credit Fees or other fees or amounts
due from the Borrowers hereunder shall be payable prior to 2:00 P.M. (Pittsburgh
time) on the date when due without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived by the Borrowers, and without
setoff, counterclaim or other deduction of any nature, and an action therefor
shall immediately accrue. Such payments shall be made to the Bank at its
Principal Office with respect to the Revolving Credit Loans in U.S. Dollars and
in immediately available funds. The Bank's statement of account, ledger or other
relevant record shall, in the absence of manifest error, be conclusive as the
statement of the amount of principal of and interest on the Revolving Credit
Loans and other amounts owing under this Agreement and shall be deemed an
"account stated."
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5.2 Interest Payment Dates.
Interest on Revolving Credit Loans to which the Revolving
Credit Base Rate Option applies shall be due and payable in arrears on the first
Business Day of each April, July, October and January, after the date hereof,
and on the Expiration Date or upon acceleration of the Revolving Credit Note.
Interest on Revolving Credit Loans to which the Revolving Credit Euro-Rate
Option applies shall be due and payable on the last day of each Euro-Rate
Interest Period. The Borrowers authorize the Bank to debit with two Business
Days' prior notice (but without prior notice if there exists a Potential Default
or Event of Default) any or all amounts due hereunder, when due, from accounts
regularly maintained with the Bank.
5.3 Prepayments.
(a) Voluntary Prepayments. Each Borrower shall have
the right at its option from time to time to prepay the Revolving Credit Loans
in whole or part without premium or penalty (except as provided in Section 5.4
hereof):
(i) at any time with respect to any
Revolving Credit Loan to which the Revolving Credit Base Rate Option applies,
(ii) on the last day of the applicable
Euro-Rate Interest Period with respect to Revolving Credit Loans to which a
Revolving Credit Euro-Rate Option applies, or
(iii) on the date specified in a notice by
the Bank pursuant to Section 4.4(b) hereof with respect to any Revolving Credit
Loan to which a Revolving Credit Euro-Rate Option applies.
Whenever a Borrower desires to prepay any part of the
Revolving Credit Loans, it shall cause Integra, as its agent, to provide a
prepayment notice to the Bank at least one (1) Business Day prior to the date of
prepayment of Revolving Credit Loans setting forth the following information:
(x) the date, which shall be a Business Day,
on which the proposed prepayment is to be made; and
(y) the total principal amount of such
prepayment, which shall not be less than $50,000.
All prepayment notices shall be irrevocable unless otherwise
agreed to by the Bank. The principal amount of the Revolving Credit Loans for
which a prepayment notice is given, together with interest on such principal
amount except with respect to Revolving Credit Loans to which the Revolving
Credit Base Rate Option applies, shall be due and payable on the date specified
in such prepayment notice as the date on which the proposed prepayment is to be
made. Unless otherwise specified by Integra on behalf of such Borrower with
respect to prepayments of the Revolving Credit Euro-Rate Portion of the
Revolving Credit Loans permitted
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under (ii) or (iii) above, all prepayments shall be applied first to the
Revolving Credit Base Rate Portion of such Revolving Credit Loans, as the case
may be, and then to the Revolving Credit Euro-Rate Portion of such Revolving
Credit Loans, subject to Section 5.4 hereof.
(b) Mandatory Payments. Within thirty (30) Business
Days of any sale of assets, the Revolving Credit Commitment shall automatically
be reduced by an amount equal to the net after-tax proceeds of such sale (as
estimated in good faith by Integra), and the Borrowers shall make payments of
principal to the extent the principal amount of the Revolving Credit Loans and
Letter of Credit Outstandings together exceed the Revolving Credit Commitment as
so reduced, together with accrued interest on such principal amount except that
with respect to sales of assets made at any time after the Closing Date and
generating net proceeds not exceeding $2,000,000 in the aggregate, the Borrowers
may re-invest net proceeds in business assets used in the normal course of the
Borrowers' business provided that such assets are or become within thirty (30)
days after the underlying asset sale Collateral as to which the Bank has a Prior
Security Interest.
5.4 Additional Compensation in Certain Circumstances.
(a) Increased Costs or Reduced Return Resulting From
Taxes, Reserves, Capital Adequacy Requirements, Expenses, Etc. If any Law,
guideline or interpretation or any change in any Law, guideline or
interpretation or application thereof by any Official Body charged with the
interpretation or administration thereof or compliance with any request or
directive (whether or not having the force of Law) of any central bank or other
Official Body:
(i) subjects the Bank to any tax or changes
the basis of taxation with respect to this Agreement, the Revolving Credit Note,
the Revolving Credit Loans or payments by any Borrower of principal, interest,
or other amounts due from any Borrower hereunder or under the Revolving Credit
Note (except for taxes on the net income of the Bank),
(ii) imposes, modifies or deems applicable
any reserve, special deposit or similar requirement against credits or
commitments to extend credit extended by, or assets (funded or contingent) of,
deposits with or for the account of, or other acquisitions of funds by, the
Bank, or
(iii) imposes, modifies or deems applicable
any capital adequacy or similar requirement (A) against assets (funded or
contingent) of, or letters of credit, other credits or commitments to extend
credit extended by, the Bank, or (B) otherwise applicable to the obligations of
the Bank under this Agreement, and the result of any of the foregoing is to
increase the cost to, reduce the income receivable by, or impose any expense
(including loss of margin) upon the Bank or its parent with respect to this
Agreement, the Revolving Credit Note or the making, maintenance or funding of
any part of the Revolving Credit Loans (or, in the case of any capital adequacy
or similar requirement, to have the effect of reducing the rate of return on the
capital of the Bank or its parent, taking into consideration the Bank's
customary policies with respect to capital adequacy) by an amount which the Bank
in its sole discretion deems to be material, the Bank shall from time to time
notify the Borrowers of the amount determined in
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<PAGE> 32
good faith (using any averaging and attribution methods employed in good faith)
by the Bank (which determination shall be conclusive absent manifest error) to
be necessary to compensate the Bank for such increase in cost, reduction of
income or additional expense. Such notice shall set forth in reasonable detail
the basis for such determination. Such amount shall be due and payable by the
Borrowers, jointly and severally, to the Bank ten (10) Business Days after such
notice is given. For purposes of this Section 5.4(a), in calculating the amount
necessary to compensate the Bank for any such increase in cost, reduction of
income or additional expense, the Bank shall calculate the amount payable to it
in a manner consistent with the manner in which it shall calculate similar
compensation payable to it by other borrowers in the industry of the Borrowers
having provisions in their credit agreements comparable to this Section 5.4(a).
(b) Indemnity.
In addition to the compensation required by subsection (a) of
this Section 5.4, the Borrowers, jointly and severally, shall indemnify the Bank
against all liabilities, losses or expenses (including loss of margin, any loss
or expense incurred in liquidating or employing deposits from third parties and
any loss or expense incurred in connection with funds acquired by the Bank to
fund or maintain Revolving Credit Loans subject to the Revolving Credit
Euro-Rate Option) which the Bank sustains or incurs as a consequence of any:
(i) payment, prepayment, conversion or
renewal of any Revolving Credit Loan to which the Revolving Credit Euro-Rate
Option applies on a day other than the last day of the corresponding Euro-Rate
Interest Period (whether or not such payment or prepayment is mandatory,
voluntary or automatic and whether or not such payment or prepayment is then
due),
(ii) attempt by the Borrowers to revoke
(expressly, by later inconsistent notices or otherwise) in whole or part any
notice relating to Revolving Credit Loan Requests under Section 2.5, a Euro-Rate
Interest Period designated under Section 4.2 or prepayments under Section 5.3,
or
(iii) default by any Borrower in the
performance or observance of any covenant or condition contained in this
Agreement or any other Loan Document, including without limitation any failure
of any Borrower to pay when due (by acceleration or otherwise) any principal,
interest, or any other amount due hereunder.
If the Bank sustains or incurs any such loss or expense it
shall from time to time notify the Borrowers of the amount determined in good
faith by the Bank (which determination shall be conclusive absent manifest error
and may include such assumptions, allocations of costs and expenses and
averaging or attribution methods as the Bank shall deem reasonable) to be
necessary to indemnify the Bank for such loss or expense. Such notice shall set
forth in reasonable detail the basis for such determination. Such amount shall
be due and payable by the Borrowers, jointly and severally, to the Bank ten (10)
Business Days after such notice is given.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties.
Each Loan Party represents and warrants to the Bank as
follows:
(a) Organization and Qualification. Each of the Loan
Parties is a corporation, partnership, limited liability company or business
trust, duly organized, validly existing and, except as set forth on Schedule
6.1(a), in good standing under the laws of its respective jurisdiction of
organization; each Loan Party has the corporate or partnership power (as the
case may be) to own or lease its respective properties and to engage in the
business it presently conducts or proposes to conduct; and each Loan Party is
duly qualified and in good standing in each jurisdiction where the property
owned or leased by it or the nature of the business transacted by it or both
makes such licensing or qualification necessary, except where the failure to be
so licensed or qualified would not cause or constitute a Material Adverse
Change.
(b) Capitalization and Ownership. All of the issued
and outstanding shares of authorized capital stock of Integra have been validly
issued and are fully paid and nonassessable.
(c) Subsidiaries; Dormant Subsidiaries.
(i) Schedule 6.1(c) attached hereto states
the name of each Subsidiary of Integra, its jurisdiction of organization, and
with respect to each Restricted Subsidiary, its authorized capital stock and the
issued and outstanding shares of each Restricted Subsidiary (referred to herein
collectively as the "Subsidiary Shares") and the owners thereof if it is a
partnership. Integra has good and marketable title to all of the Subsidiary
Shares it purports to own, free and clear in each case of any Lien, except for
Liens in favor of the Bank, and each other Loan Party has good and marketable
title to all of the Subsidiary Shares it purports to own, free and clear of any
Lien, except for Liens in favor of the Bank. All Subsidiary Shares have been
validly issued. All Subsidiary Shares are fully paid and nonassessable. Except
as set forth on Schedule 6.1(c), there are no options, warrants or other rights
outstanding to purchase any such Subsidiary Shares.
(ii) Each Subsidiary of Integra which is not
a Dormant Subsidiary is a Restricted Subsidiary and is a Loan Party hereunder
and is listed on the signature lines and Schedule 6.1(c), as a Guarantor and a
Borrower. The aggregate total assets of the Dormant Subsidiaries collectively is
less than $150,000 and the aggregate total liabilities of the Dormant
Subsidiaries collectively is less than $150,000.
(d) Power and Authority. Each Loan Party has full
corporate or partnership power to enter into, execute, deliver and carry out
this Agreement and the other Loan Documents to which it is a party, to incur the
Indebtedness contemplated by the Loan Documents
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and to perform its obligations under the Loan Documents to which it is a party
and all such actions have been duly authorized by all necessary proceedings on
its part.
(e) Validity and Binding Effect. This Agreement has
been duly and validly executed and delivered by each Loan Party, and each other
Loan Document, when duly executed and delivered by each respective Loan Party
thereto, will have been duly and validly executed and delivered by such Loan
Parties. This Agreement and each other Loan Document delivered by the Loan
Parties pursuant to the provisions hereof will constitute legal, valid and
binding obligations of the Loan Parties thereto, enforceable against each
respective Loan Party in accordance with their respective terms, except to the
extent that enforceability of any of the foregoing Loan Documents may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforceability of creditors' rights generally or limiting the
right of specific performance or by general equitable principles.
(f) No Conflict. Neither the execution and delivery
of this Agreement or the other Loan Documents by the Loan Parties nor the
consummation of the transactions herein or therein contemplated or compliance
with the terms and provisions hereof or thereof by them will conflict with,
constitute a default under or result in any breach of (i) the terms and
conditions of the certificate of incorporation, bylaws or other organizational
documents of any Loan Party, or (ii) any Law or any material agreement or
instrument or order, writ, judgment, injunction or decree to which any Loan
Party is a party or by which it is bound or to which it is subject, or result in
the creation or enforcement of any Lien, charge or encumbrance whatsoever upon
any property (now or hereafter acquired) of any Loan Party (other than Liens
granted under the Loan Documents).
(g) Litigation. Except as set forth on Schedule
6.1(g), there are no actions, suits, proceedings or investigations pending or,
to the knowledge of any Loan Party, threatened against any Loan Party at law or
equity before any Official Body which individually or in the aggregate would
constitute a Material Adverse Change including, without limitation, any actions,
suits or proceedings by any Official Body to recover any Medicare or Medicaid
payments from any Loan Party or to otherwise exclude any Loan Party from
participation in any Medicare, Medicaid or similar program. No Loan Party is in
violation of any order, writ, injunction or any decree of any Official Body
which would constitute a Material Adverse Change.
(h) Title to Properties. Each of the Loan Parties has
good and marketable title to or valid leasehold interest in all properties,
assets and other rights which it purports to own or lease or which are reflected
as owned or leased on its books and records, free and clear of all Liens and
encumbrances except Permitted Liens. All leases of property are in full force
and effect without the necessity for any consent which has not previously been
obtained upon consummation of the transactions contemplated hereby. As of the
Closing Date, no Loan Party owns any fee interest in real property.
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(i) Financial Statements.
(A) Historical Statements. Integra has delivered to
the Bank copies of its audited consolidated year-end financial statements for
and as of the end of the fiscal year ended December 31, 1997 (the "Annual
Statements") and its unaudited consolidated financial statements for and as of
the fiscal quarter ended June 30, 1998 (the "Interim Statements" and, together
with the Annual Statements, the "Historical Statements"). The Historical
Statements were compiled from the books and records maintained by Integra's
management, fairly present the consolidated financial condition of Integra and
its Subsidiaries as of their dates and the results of operations for the fiscal
periods then ended and have been prepared in accordance with GAAP consistently
applied.
(B) Financial Projections. Integra has delivered to
the Bank financial projections of Integra and its Subsidiaries through December
31, 2001 derived from various assumptions of Integra's management (the
"Financial Projections"). The Financial Projections represent a reasonable range
of possible results in light of the history of the business, present and
reasonably foreseeable conditions and the intentions of Integra's management.
The Financial Projections reasonably reflect the liabilities of Integra and its
Subsidiaries upon consummation of the transactions contemplated hereby as of the
Closing Date.
(C) Accuracy of Financial Statements. Neither Integra
nor any Subsidiary has any material liabilities, contingent or otherwise, or
material forward or long-term commitments that are not disclosed in the
Historical Statements or in the notes thereto and are required to be disclosed,
and except as disclosed therein there are no unrealized or anticipated losses
from any commitments of Integra or any Subsidiary which are required to be
disclosed. Since June 30, 1998 no Material Adverse Change has occurred.
(j) Full Disclosure. Neither this Agreement nor any
other Loan Document, nor any certificate, statement, agreement or other
documents furnished to the Bank in connection herewith or therewith or filed
with the Securities and Exchange Commission (on which the Bank is hereby
entitled to rely), contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
and therein, in light of the circumstances under which they were made, not
misleading.
(k) Taxes. All material federal, state, local and
other tax returns required to have been filed with respect to each Loan Party
have been filed and payment or adequate provision has been made for the payment
of all taxes, fees, assessments and other governmental charges which have or may
become due pursuant to said returns or to assessments received except to the
extent that such taxes, fees, assessments and other charges are being contested
in good faith by appropriate proceedings diligently conducted and for which such
reserves or other appropriate provisions, if any, as shall be required by GAAP
shall have been made. There are no agreements or waivers extending the statutory
period of limitations applicable to any federal income tax return of any Loan
Party.
(l) Consents and Approvals. No consent, approval,
exemption, order or authorization of, or a registration or filing with any
Official Body or any other Person is
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required by any Law or any agreement in connection with the execution, delivery
and carrying out of this Agreement and the other Loan Documents by any Loan
Party, except as listed on Schedule 6.1(l) attached hereto, all of which shall
have been obtained or made on or prior to the Closing Date except as otherwise
indicated on Schedule 6.1(l); provided, however, that it is acknowledged that
consent of health care regulatory authorities issuing any licenses or regulating
any health care facilities may be required if the Bank exercises the rights and
remedies in respect of the Pledged Collateral and such exercise of remedies
results in or constitutes an assignment of any health care license issued by a
health care regulatory authority or constitutes a change of control with respect
to the ownership of a health care facility.
(m) No Event of Default; Compliance with Instruments. No event
has occurred and is continuing and no condition exists or will exist after
giving effect to the borrowings to be made on the Closing Date under the Loan
Documents which constitutes an Event of Default or Potential Default. No Loan
Party is in violation of (i) any term of its certificate of incorporation,
bylaws, or other organizational documents or (ii) any agreement or instrument to
which it is a party or by which it or any of its properties may be subject or
bound which would cause or constitute a Material Adverse Change.
(n) Patents, Trademarks, Copyrights, Etc. Each Loan Party owns
or possesses all the material patents, trademarks, service marks, trade names,
copyrights and other intellectual property rights necessary to own and operate
its properties and to carry on its business as presently conducted and planned
to be conducted by such Loan Party without known conflict with the rights of
others and is not a licensee of any such item used in its business except for
Compass software, other software and other similar licenses generally available.
(o) Solvency. The Loan Parties, taken as a whole, are Solvent
and after giving effect to the transactions contemplated by the Loan Documents,
including all Indebtedness incurred thereby, and the payment of all fees
relating thereto, will be Solvent, determined as of the Closing Date and as of
each Borrowing Date.
(p) Security Interests; Mortgage Liens; Status of the
Collateral.
(i) The Liens and security interests granted to the Bank
pursuant to the Patent, Trademark and Copyright Security Agreement, the Pledge
Agreements and the Security Agreement in the Collateral constitute and no Loan
Party will take away any action or fail to take any commercially reasonable
action which would cause them not to continue to constitute Prior Security
Interests under the Uniform Commercial Code as in effect in each applicable
jurisdiction (the "Uniform Commercial Code") or other applicable Law entitled to
all the rights, benefits and priorities provided by the Uniform Commercial Code
or such Law. Upon the filing of financing statements relating to said security
interests in each office and in each jurisdiction where required in order to
perfect the security interests described above, taking possession of any stock
certificates or other certificates evidencing the Pledged Collateral and
recordation of the Patent, Trademark and Copyright Security Agreement in the
United States Patent and Trademark Office and United States Copyright Office as
applicable, all
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such action as is necessary or advisable to establish such rights of the Bank
will have been taken, and there will be upon execution and delivery of the
Patent, Trademark and Copyright Security Agreement, the Pledge Agreements and
the Security Agreement, such filings and such taking of possession, no necessity
for any further action in order to preserve, protect and continue such rights,
except the filing of continuation statements with respect to such financing
statements within six months prior to each five-year anniversary of the filing
of such financing statements. All filing fees and other expenses in connection
with each such action have been or will be paid by the Borrowers.
(ii) When granted, the Liens granted to the Bank
pursuant to documents delivered pursuant to Section 8.1(m)(vi)(H) shall
constitute a valid first priority Lien under applicable law. All such action as
will be necessary or advisable to establish such Lien of the Bank and its
priority as described in the preceding sentence will be taken at or prior to the
time required for such purpose, and there will be as of the date of execution
and delivery of the documents delivered pursuant to Section 8.1(m)(vi)(H) no
necessity for any further action in order to protect, preserve and continue such
Lien and such priority.
(iii) All the shares of capital stock included in the
Pledged Collateral to be pledged pursuant to the Pledge Agreements are or will
be upon issuance validly issued and nonassessable and owned beneficially and of
record by the pledgor free and clear of any Lien or restriction on transfer,
except as otherwise provided by the Pledge Agreements and except as the right of
the Bank to dispose of the Shares may be limited by the Securities Act of 1933,
as amended, and the regulations promulgated by the Securities and Exchange
Commission thereunder and by applicable state securities laws. There are no
shareholder, partnership or other agreements or understandings with respect to
the Shares of capital stock included in the Pledged Collateral.
(q) Insurance. Schedule 6.1(q) hereto lists all insurance
policies and other bonds to which each Loan Party is a party on the date hereof,
all of which are valid and in full force and effect. No notice has been given or
claim made and no grounds exist to cancel or avoid any of such policies or bonds
or to reduce the coverage provided thereby. Such policies and bonds provide
adequate coverage from reputable and financially sound insurers in amounts
sufficient to insure the assets and risks of each Loan Party in accordance with
prudent business practice in the industry of each Loan Party.
(r) Compliance with Laws. All Loan Parties are in compliance
in all material respects with all applicable Laws (other than Environmental Laws
which are specifically addressed in subsection (x)) in all jurisdictions in
which such Loan Party is presently doing business except where the failure to do
so would not constitute a Material Adverse Change.
(s) Material Contracts, Licenses, Permits and Approvals.
(A) As of the date hereof, Schedule 6.1(s) hereto lists
the following contracts relating to the business operations of the Loan Parties:
(i) all employee benefit plans, employment agreements with the executives and
labor contracts to which a
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Restricted Subsidiary is a party and other Earn-outs, (ii) the ten (10) largest
employee assistance program contracts and other administrative service
contracts, all existing managed care contracts and all Earn-out agreements;
(iii) all leases of real property to which any Loan Party is a party and under
which the payments made by such Loan Party exceeded or are expected to exceed
$200,000 in the current fiscal year, (iv) any contract or series of contracts
with the same Person for the furnishing or purchase of machinery, equipment or
goods, where the payments made by any Loan Party exceeded or are expected to
exceed $250,000 in the aggregate in the current fiscal year; (v) all provider
agreements where Integra shares capitated risk with a healthcare provider; (vi)
all licenses, permits, approvals, certificates of need, qualifications,
authorizations and accreditations (the lack or loss of which would cause or
constitute a Material Adverse Change ) of each Loan Party; (vii) all other
material contracts filed as exhibits to any report filed by Integra with the
Securities and Exchange Commission during the past twelve months. All such
material contracts are valid, binding and enforceable upon the Loan Party which
is a party to such contract, as the case may be, and, to the best knowledge of
each Loan Party, each of the other parties thereto in accordance with their
respective terms, and there is no material default thereunder, to the knowledge
of the Loan Parties, with respect to parties other than the Loan Parties.
(B) Except as set forth on Schedule 6.1(s), each Loan
Party has all material accreditations, authorizations, approvals, certificates
of need, consents, licenses, permits and qualifications (collectively,
"Approvals") required (i) for them to construct, acquire, own, manage, lease
and/or operate their facilities and provide services, or (ii) for them to
receive payment and reimbursement from any patient or third party payor, to the
extent in the case of (i) and (ii) such Approvals are now required. There are no
actions, suits, proceedings or investigations pending or, to the knowledge of
any Loan Party, threatened against any Loan Party at law or in equity before any
Official Body to modify, rescind or revoke any of the Approvals. There are no
actions, suits, proceedings or investigations pending, or to the knowledge of
any Loan Party, threatened against any Loan Party by any Official Body to impose
any sanctions, including any fines, penalties or other sanctions upon any
Borrower except those which would not be expected to cause or constitute a
Material Adverse Change. The Loan Parties have all other material Approvals
required for the lawful operation of their businesses. All material Approvals of
the Loan Parties are in full force and effect and have not been amended or
otherwise modified, rescinded, revoked or assigned except for modifications
which would not be expected to cause or constitute a Material Adverse Change,
and no notice has been received of any violation of applicable Laws or any
refusal to renew any Approval which could reasonably be expected to cause or
constitute a Material Adverse Change. The continuation, validity and
effectiveness of all such Approvals will in no way be adversely affected by the
transactions contemplated by this Agreement. No Loan Party knows of any reason
why any of them will not be able to maintain, after the Closing Date, all
material Approvals necessary or appropriate to construct, own, lease, manage and
operate all of their facilities and to otherwise conduct their businesses as now
conducted and presently proposed to be conducted. There are no deficiencies to
the conditions for participation by any Loan Party in any Medicare, Medicaid or
other reimbursement programs which would preclude or reduce such participation,
nor, other than routine, scheduled audits, is there any pending or, to the
knowledge of the Borrowers, threatened
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investigation, proceeding or other action by Medicare or Medicaid to exclude any
Loan Party from participation in such programs except as described in Schedule
6.1(g).
(t) Investment Companies. No Loan Party is an "investment
company" registered or required to be registered under the Investment Company
Act of 1940 or under the "control" of an "investment company" as such terms are
defined in the Investment Company Act of 1940 and shall not become such an
"investment company" or under such "control."
(u) Margin Stock. Neither Integra nor any of its Subsidiaries
is engaged or intends to engage principally, or as one of its important
activities, in the business of extending credit for the purpose, immediately,
incidentally or ultimately, of purchasing or carrying margin stock (within the
meaning of Regulation U). No part of the proceeds of any Revolving Credit Loan
has been or will be used, immediately, incidentally or ultimately, to purchase
or carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock or to refund Indebtedness originally
incurred for such purpose, or for any purpose which entails a violation of or
which is inconsistent with the provisions of the regulations of the Board of
Governors of the Federal Reserve System.
(v) Plans and Benefit Arrangements. Except as set forth on
Schedule 6.1(v) hereto:
(i) Integra, its Subsidiaries and each member of the
ERISA Group are in compliance in all material respects with any applicable
provisions of ERISA with respect to all Benefit Arrangements, Plans and
Multiemployer Plans and each Benefit Arrangement and Plan has been administered
in all material respects in accordance with its terms and ERISA. There has been
no Prohibited Transaction with respect to any Benefit Arrangement or any Plan
or, to the best knowledge of Integra and its Subsidiaries, with respect to any
Multiemployer Plan or Multiple Employer Plan, which could result in any material
liability of Integra, its Subsidiaries or any other member of the ERISA Group.
Integra, its Subsidiaries and all members of the ERISA Group have made when due
any and all payments required to be made under any agreement relating to a
Multiemployer Plan or a Multiple Employer Plan or any Law pertaining thereto.
With respect to each Plan and Multiemployer Plan, Integra, its Subsidiaries and
each member of the ERISA Group (i) have fulfilled in all material respects their
obligations under the minimum funding standards of ERISA, (ii) have not incurred
any liability to the PBGC other than for the payment of required premiums and
(iii) have not had asserted against them any penalty for failure to fulfill the
minimum funding requirements of ERISA.
(ii) To the best knowledge of each Loan Party, each
Multiemployer Plan and Multiple Employer Plan is able to pay benefits thereunder
when due.
(iii) Neither Integra, its Subsidiaries nor any other
member of the ERISA Group has instituted or intends to institute proceedings to
terminate any Plan, which termination resulted or will directly or indirectly
result in any material liability to any Loan Party.
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(iv) No event requiring notice to the PBGC under Section
302(f)(4)(A) of ERISA has occurred or is reasonably expected to occur with
respect to any Plan, and no amendment with respect to which security is required
under Section 307 of ERISA has been made or is reasonably expected to be made to
any Plan.
(v) The aggregate actuarial present value of all benefit
liabilities (whether or not vested) under each Plan, determined on a plan
termination basis, as disclosed in, and as of the date of, the most recent
actuarial report for such Plan, does not exceed the aggregate fair market value
of the assets of such Plan by a material amount.
(vi) Neither Integra, its Subsidiaries nor any other
member of the ERISA Group has incurred or reasonably expects to incur any
material withdrawal liability under ERISA to any Multiemployer Plan or Multiple
Employer Plan. Neither Integra, its Subsidiaries nor any other member of the
ERISA Group has been notified by any Multiemployer Plan or Multiple Employer
Plan that such Multiemployer Plan or Multiple Employer Plan has been terminated
within the meaning of Title IV of ERISA and, to the best knowledge of Integra
and its Subsidiaries, no Multiemployer Plan or Multiple Employer Plan is
reasonably expected to be reorganized or terminated, within the meaning of Title
IV of ERISA.
(vii) To the extent that any Benefit Arrangement is
insured, Integra, its Subsidiaries and all members of the ERISA Group have paid
when due all premiums required to be paid for all periods through and including
the Closing Date. To the extent that any Benefit Arrangement is funded other
than with insurance, Integra, its Subsidiaries and all members of the ERISA
Group have made when due all contributions required to be paid for all periods
through and including the Closing Date.
(w) Employment Matters. Each Loan Party is in compliance with
its labor contracts and all applicable federal, state and local labor and
employment Laws including, but not limited to, those related to equal employment
opportunity and affirmative action, labor relations, minimum wage, overtime,
child labor, medical insurance continuation, worker adjustment and relocation
notices, immigration controls and worker and unemployment compensation, except
for any failure to comply which would not be expected to cause or constitute a
Material Adverse Change. There are no outstanding grievances, arbitration awards
or appeals therefrom arising out of any Loan Party's labor contracts or current
or threatened strikes, picketing, handbilling or other work stoppages or
slowdowns at facilities of any Loan Party.
(x) Environmental Matters. Except as disclosed on Schedule
6.1(x) hereto:
(i) Neither Integra nor any of its Subsidiaries has
received any Environmental Complaint from any Official Body or private person
alleging that Integra, any of its Subsidiaries or any prior or subsequent owner
of any real property of any Borrower is a potentially responsible party under
the Comprehensive Environmental Response, Cleanup and Liability Act, ("CERCLA")
42 U.S.C. Section 9601, et seq., or is potentially liable under the Solid Waste
Disposal Act, as amended, ("SWDA") 42 U.S.C. Section 6901, et seq., or any
comparable state
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or foreign law, statute or regulation of either CERCLA or SWDA and Integra has
no reason to believe that such an Environmental Complaint might be received.
There are no pending or, to any Loan Party's actual knowledge, threatened
Environmental Complaints relating to Integra, any of its Subsidiaries or, to any
Loan Party's knowledge, any prior or subsequent owner of any real property of
any Borrower pertaining to, or arising out of, any Environmental Conditions
which, individually or in the aggregate, if adversely determined could
reasonably be expected to constitute a Material Adverse Change.
(ii) To each Loan Party's actual knowledge, except for
conditions, violations or failures which individually and in the aggregate are
not reasonably likely to result in a Material Adverse Change, (A) there are no
circumstances at, on or, to the actual knowledge of each Loan Party, under any
real property of any Borrower that constitute a breach of or non-compliance with
any of the Environmental Laws, and (B) there are, to the actual knowledge of
each Loan Party, no past or present Environmental Conditions at, on or under any
real property of any Borrower or, to each Loan Party's actual knowledge, at, on
or under adjacent property, that prevent compliance with the Environmental Laws
at any real property of any Borrower.
(iii) To each Loan Party's actual knowledge, neither the
Real Property nor any structures, improvements, equipment, fixtures, activities
or facilities thereon or thereunder contain or use Regulated Substances except
in compliance in all material respects with Environmental Laws (other than any
noncompliance which individually and in the aggregate is not reasonably likely
to result in a Material Adverse Change). There are no processes, facilities,
operations, equipment or any other activities at, on or, to the actual knowledge
of each Loan Party, under the any real property of any Borrower, or, to each
Loan Party's actual knowledge, at, on or under adjacent property, that currently
result in the release or threatened release of Regulated Substances onto any
real property of any Borrower, except to the extent that such releases or
threatened releases are not a material breach of or otherwise not a material
violation of the Environmental Laws, or are not likely to result in a Material
Adverse Change.
(iv) To each Loan Party's actual knowledge, there are no
above ground storage tanks, underground storage tanks, or underground piping
associated with such tanks, used for the management of Regulated Substances at,
on or under any real property of any Borrower that (a) do not have, to the
extent required by applicable Environmental Laws, a full operational secondary
containment system in place, and (b) are not otherwise in compliance in all
material respects with all Environmental Laws (other than any noncompliance
which individually or in the aggregate is not reasonably likely to result in a
Material Adverse Change). To the actual knowledge of each Loan Party, there are
no abandoned underground storage tanks or underground piping associated with
such tanks, previously used for the management of Regulated Substances at, on or
under any real property of any Borrower that have not been either abandoned in
place, or removed, in accordance with the Environmental Laws (other than any
noncompliance which individually or in the aggregate is not reasonably likely to
result in a Material Adverse Change).
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(v) Each Loan Party has all material permits, licenses,
authorizations, plans and approvals necessary under the Environmental Laws for
the conduct of the business of each Loan Party as presently conducted (except
where the failure to hold any such permit, license, authorization or approval is
not reasonably likely to result in a Material Adverse Change). Each Loan Party
has submitted all material notices, reports and other filings required by the
Environmental Laws to be submitted to an Official Body which pertain to past and
current operations on any real property of any Borrower (except where the
failure to make any such submission is not reasonably likely to result in a
Material Adverse Change).
(vi) To each Loan Party's actual knowledge, except for
violations which individually and in the aggregate are not likely to result in a
Material Adverse Change, (i) all present and, to the actual knowledge of each
Loan Party, past on-site generation, storage, processing, treatment, recycling,
reclamation or disposal of Regulated Substances at, on, or, to the actual
knowledge of each Loan Party, under any real property of any Borrower and, (ii)
to the actual knowledge of each Loan Party, all off-site transportation,
storage, processing, treatment, recycling, reclamation or disposal of Regulated
Substances by any Loan Party, and to the actual knowledge of each Loan Party, by
any other party, relating to the activities on any real property of any Borrower
has been done in accordance with the Environmental Laws.
(y) Senior Debt Status. The obligations of the Loan Parties
under this Agreement, the Revolving Credit Note and the Guaranties, do rank and
will rank at least pari passu in priority of payment with all other indebtedness
of the Loan Parties except indebtedness of the Loan Parties to the extent
secured by Permitted Liens. There is no Lien upon or with respect to any of the
properties or income of any Loan Party which secures indebtedness or other
obligations of any Person except for Permitted Liens.
(z) Existing Seller Debt. All Indebtedness owing by any Loan
Party to a seller of a practice is fully described in the seller notes delivered
to the Bank prior to the date hereof and is listed on Schedule 8.2a)(ii).
(aa) Year 2000. The Loan Parties have reviewed the areas
within their business and operations which could be adversely affected by, and
have developed a program to address on a timely basis, the risk that certain
computer applications used by the Loan Parties (or any of their material
suppliers, customers or vendors) may be unable to recognize and perform
date-sensitive functions involving dates prior to and after December 31, 1999
(the "Year 2000 Problem"). The Year 2000 Problem will not result in any Material
Adverse Change.
6.2 Updates to Schedules.
Should any of the information or disclosures provided on any of the
Schedules attached hereto become outdated or incorrect in any material respect,
the Loan Parties shall promptly provide the Bank in writing with such revisions
or updates to such Schedule as may be necessary or appropriate to update or
correct same; provided, however that no Schedule shall be deemed to have been
amended, modified or superseded by any such correction or update, nor shall any
breach of warranty or representation resulting from the inaccuracy or
incompleteness of any such Schedule be deemed to have been cured thereby, unless
and until the Bank, in its sole
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and absolute discretion, shall have accepted in writing such revisions or
updates to such Schedule.
ARTICLE VII
CONDITIONS OF LENDING
The obligation of the Bank to make Revolving Credit Loans or to
issue any Letters of Credit hereunder is subject to the performance by each Loan
Party of its obligations to be performed hereunder at or prior to the making of
any such Revolving Credit Loans or the issuing of such Letters of Credit and to
the satisfaction of the following further conditions:
7.1 First Revolving Credit Loans.
On the Closing Date:
(a) The representations and warranties of each Loan Party
contained in Article VI hereof shall be true and accurate on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such date (except representations and warranties
which relate solely to an earlier date or time, which representations and
warranties shall be true and correct on and as of the specific dates or times
referred to therein), and each Loan Party shall have performed and complied with
all covenants and conditions hereof; no Event of Default or Potential Default
under this Agreement shall have occurred and be continuing or shall exist; and
there shall be delivered to the Bank a certificate of Integra, dated the Closing
Date and signed by the Chief Executive Officer, President or Chief Financial
Officer of Integra, to each such effect.
(b) There shall be delivered to the Bank a certificate dated
the Closing Date and signed by the Secretary or an Assistant Secretary of each
Loan Party, certifying as appropriate as to:
(i) all action taken by such Loan Party in connection
with this Agreement and the other Loan Documents;
(ii) the names of the officer or officers authorized to
sign this Agreement and the other Loan Documents and the true signatures of such
officer or officers and specifying the Authorized Officers permitted to act on
behalf of each Borrower for purposes of this Agreement and the true signatures
of such officers, on which the Bank may conclusively rely; and
(iii) copies of its organizational documents, and, if it
is a partnership, the organizational documents of its general partner, including
the certificate of incorporation, bylaws, certificate of limited partnership and
partnership agreement, as applicable and as in effect on the Closing Date,
together with certificates from the appropriate state officials as to the
continued existence and good standing of each of the Borrowers in each state
where organized or qualified to do business.
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(c) This Agreement, the Borrower Agency Agreement, the
Guaranty Agreement, Revolving Credit Note, Pledge Agreements, the Security
Agreement, the Patent, Trademark and Copyright Security Agreement, and the
Subordination Agreement (Intercompany) shall have been duly executed and
delivered to the Bank, together with all appropriate financing statements and
appropriate stock powers and certificates evidencing the Pledged Collateral.
(d) There shall be delivered to the Bank a written opinion of
Haythe & Curley, counsel for the Loan Parties (who may rely on the opinions of
such other counsel as may be acceptable to the Bank), all dated the Closing Date
and acceptable to the Bank in form and substance.
(e) All legal details and proceedings in connection with the
transactions contemplated by this Agreement and the other Loan Documents shall
be in form and substance satisfactory to the Bank, and the Bank shall have
received all such other counterpart originals or certified or other copies of
such documents and proceedings in connection with such transactions, in form and
substance satisfactory to the Bank, as the Bank may reasonably request.
(f) The Borrowers shall pay or cause to be paid to the Bank to
the extent not previously paid the Closing Fee and all other fees accrued
through the Closing Date and the costs and expenses for which the Bank is
entitled hereunder to be reimbursed.
(g) All material consents required to effectuate the
transactions contemplated hereby as set forth on Schedule 6.1(l) shall have been
obtained.
(h) Since July 30, 1998 no Material Adverse Change shall have
occurred which has not been described in Section 6.1(i)(C); prior to the Closing
Date, there shall be no material change in the management of Integra except as
disclosed in writing to the Bank; and there shall be delivered to the Bank a
certificate dated the Closing Date and signed by the (x)(i)Chairman and Chief
Executive Officer or (ii) the President and Chief Operating Officer and (y) and
Chief Financial Officer of Integra to each such effect.
(i) The making of the Revolving Credit Loans shall not
contravene any Law applicable to any Loan Party or the Bank.
(j) No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of this Agreement or the consummation of the
transactions contemplated hereby or which, in the Bank's sole discretion, would
make it inadvisable to consummate the transactions contemplated by this
Agreement or any of the other Loan Documents.
(k) The Loan Parties shall deliver evidence acceptable to the
Bank that adequate insurance in compliance with Section 8.1(c) is in full force
and effect and that all premiums then due thereon have been paid.
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(l) The Chief Financial Officer of Integra shall have
delivered a certificate in the form of Exhibit 7.1(l) and satisfactory to the
Bank as to the capital adequacy and Solvency of the Borrowers after giving
effect to the transactions contemplated hereby.
(m) Integra shall have delivered a landlord waiver in form and
substance satisfactory to the Bank relating to Integra's address in King of
Prussia and such other locations as are selected by the Bank.
7.2 Each Additional Revolving Credit Loan.
At the time of making any Revolving Credit Loans or issuing any
Letters of Credit other than the Revolving Credit Loan made or Letters of Credit
issued on the Closing Date hereunder and after giving effect thereto: the
representations and warranties of the Loan Parties contained in Article VI
hereof shall be true on and as of the date of such additional Revolving Credit
Loan or Letter of Credit with the same effect as though such representations and
warranties had been made on and as of such date (except representations and
warranties which expressly relate solely to an earlier date or time, which
representations and warranties shall be true and correct on and as of the
specific dates or times referred to therein) and the Loan Parties shall have
performed and complied with all covenants and conditions hereof; no Event of
Default or Potential Default shall have occurred and be continuing or shall
exist; the making of the Revolving Credit Loans or issuance of the Letters of
Credit shall not contravene any Law applicable to any Loan Party or the Bank;
and Integra, for itself or as agent for another Borrower or Borrowers, shall
have delivered to the Bank a duly executed and completed Revolving Credit Loan
Request or request for Letters of Credit.
ARTICLE VIII
COVENANTS
8.1 Affirmative Covenants.
Each Loan Party covenants and agrees that until payment in full of
the Revolving Credit Loans and interest thereon, expiration or termination of
all Letters of Credit, satisfaction of all of the Loan Parties' other
obligations hereunder and termination of the Revolving Credit Commitment, each
Loan Party shall comply at all times with the following affirmative covenants:
(a) Preservation of Existence, etc. Except as specifically
permitted by Section 8.2(d), each Loan Party shall maintain its corporate
existence and its qualification and good standing in each jurisdiction in which
its ownership or lease of property or the nature of its business makes such
license or qualification necessary, except where the failure to be so licensed
or qualified would not cause or constitute a Material Adverse Change.
(b) Payment of Liabilities, Including Taxes, etc. Each Loan
Party shall duly pay and discharge all material liabilities to which it is
subject or which are asserted against it, promptly as and when the same shall
become due and payable, including all taxes,
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assessments and governmental charges upon it or any of its properties, assets,
income or profits, prior to the date on which penalties attach thereto, except
to the extent that such liabilities, including taxes, assessments or charges,
are being contested in good faith and by appropriate and lawful proceedings
diligently conducted and for which such reserve or other appropriate provisions,
if any, as shall be required by GAAP shall have been made, but only to the
extent that failure to discharge any such liabilities would not result in any
Material Adverse Change or adversely affect the Collateral, provided that such
Loan Party will pay all such liabilities forthwith upon the commencement of
proceedings to foreclose any Lien which may have attached as security therefor.
(c) Maintenance of Insurance. Each Loan Party shall insure its
properties and assets against loss or damage by fire and such other insurable
hazards as such assets are commonly insured (including fire, extended coverage,
property damage, worker's compensation, public liability and business
interruption insurance) and against other risks in such amounts as similar
properties and assets are insured by prudent companies in similar circumstances
carrying on similar businesses, and with reputable and financially sound
insurers, including self-insurance to the extent customary. At the request of
the Bank, each Loan Party shall deliver on the Closing Date and annually
thereafter a certificate signed by such Loan Party's independent insurance
broker certifying as to all insurance then in force with respect to such Loan
Party.
(d) Maintenance of Properties and Leases. Each Loan Party
shall maintain in good repair, working order and condition (ordinary wear and
tear excepted) in accordance with the general practice of other businesses of
similar character and size, all of those material properties useful or necessary
to its business, and from time to time, each Loan Party will make or cause to be
made all appropriate repairs, renewals or replacements thereof.
(e) Maintenance of Patents, Trademarks, etc. Each Loan Party
shall maintain in full force and effect all patents, trademarks, trade names,
copyrights, licenses, franchises, permits and other authorizations reasonably
necessary for the ownership and operation of its properties and business except
where failure to do so would not cause or constitute a Material Adverse Change.
(f) Visitation Rights. Each Loan Party shall permit any of the
officers or authorized employees or representatives of the Bank to visit and
inspect any of its properties and to examine and make excerpts from its books
and records or discuss its business affairs, finances and accounts with its
officers, all in such detail and at such times during normal business hours and
as often as any of the Bank may reasonably request, provided that the Bank shall
provide Integra, on behalf of the Borrowers, with reasonable notice prior to any
visit or inspection.
(g) Keeping of Records and Books of Account. The Loan Parties
shall maintain and keep proper books of record and account which enable the Loan
Parties to issue financial statements in accordance with GAAP and as otherwise
required by applicable Laws of
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<PAGE> 47
any Official Body having jurisdiction over the Loan Parties, and accurately and
fairly reflect the transactions and dispositions of the assets of the Loan
Parties.
(h) Plans and Benefit Arrangements.
(i) Integra shall, and shall cause each member of the
ERISA Group to, comply with ERISA, the Internal Revenue Code and other Laws
applicable to Plans and Benefit Arrangements except where such failure to comply
would not be expected to cause or constitute a Material Adverse Change. Without
limiting the generality of the foregoing, Integra shall cause all of its Plans
and all Plans maintained by any member of the ERISA Group to be funded in
accordance with the minimum funding requirements of ERISA and shall make, and
cause each member of the ERISA Group to make, in a timely manner, all
contributions due to Plans, Benefit Arrangements and Multiemployer Plans.
(ii) Promptly upon becoming aware of the occurrence
thereof, Integra shall furnish to the Bank notice (including the nature of the
event and, when known, any action taken or threatened by the Internal Revenue
Service or the PBGC with respect thereto) of:
(A) any Reportable Event with respect to any
Borrower or any member of the ERISA Group (regardless of whether the obligation
to report said Reportable Event to the PBGC has been waived),
(B) any Prohibited Transaction which could subject
any Borrower or any member of the ERISA Group to a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the
Internal Revenue Code in connection with any Plan, Benefit Arrangement or any
trust created thereunder,
(C) any assertion of material withdrawal liability
with respect to any Multiemployer Plan,
(D) any partial or complete withdrawal from a
Multiemployer Plan by any Borrower or any member of the ERISA Group under Title
IV of ERISA (or assertion thereof), where such withdrawal is likely to result in
material withdrawal liability,
(E) any cessation of operations (by any Borrower
or any member of the ERISA Group) at a facility in the circumstances described
in Section 4062(e) of ERISA,
(F) withdrawal by any Borrower or any member of
the ERISA Group from a Multiple Employer Plan where such withdrawal is likely to
result in a material liability,
(G) a failure by any Borrower or any member of the
ERISA Group to make a payment to a Plan required to avoid imposition of a lien
under Section 302(f) of ERISA,
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<PAGE> 48
(H) the adoption of an amendment to a Plan
requiring the provision of security to such Plan pursuant to Section 307 of
ERISA, or
(I) any change in the actuarial assumptions or
funding methods used for any Plan, where the effect of such change is to
materially increase or materially reduce the unfunded benefit liability or
obligation to make periodic contributions.
(iii) Promptly after receipt thereof, Integra shall
furnish to the Bank copies of (a) all notices received by any Borrower or any
member of the ERISA Group of the PBGC's intent to terminate any Plan
administered or maintained by any Borrower or any member of the ERISA Group, or
to have a trustee appointed to administer any such Plan, and (b) at the request
of the Bank the three most recent annual reports (IRS Form 5500 series) and all
accompanying schedules, the most recent actuarial reports, the most recent
financial information concerning the financial status of each Plan administered
or maintained by any Borrower or any member of the ERISA Group, and schedules
showing the amounts contributed within the last year to each such Plan by or on
behalf of each Borrower or any member of the ERISA Group in which any of their
personnel participate or from which such personnel may derive a benefit.
(iv) Promptly upon the filing thereof, Integra shall
furnish to the Bank copies of any Form 5310, or any successor or equivalent form
to Form 5310, filed with the PBGC in connection with the termination of any Plan
of any Borrower or member of the ERISA Group.
(i) Compliance With Laws. Each Loan Party shall comply with
all applicable Laws, including all Environmental Laws, in all material respects,
except where failure so to comply would not be expected to cause or constitute a
Material Adverse Change.
(j) Use of Proceeds. The Borrowers will use the proceeds of
the Revolving Credit Loans only for lawful purposes in accordance with Section
2.8 as applicable and such uses shall not contravene any applicable Law or any
other provision hereof.
(k) Further Assurances. Each Loan Party shall, from time to
time, at its expense, faithfully preserve and protect the Bank's Lien on and
Prior Security Interest in the Collateral as a continuing first priority
perfected Lien, and shall do such other acts and things as the Bank in its sole
discretion reasonably may deem necessary or advisable from time to time in order
to preserve, perfect and protect the Liens granted under the Loan Documents and
to exercise and enforce its rights and remedies thereunder with respect to the
Collateral.
(l) Subordination of Intercompany Indebtedness; Permitted
Additional Subordinated Indebtedness.
(A) Intercompany Indebtedness. Each Loan Party shall
enter into and be bound by the Subordination Agreement (Intercompany) and shall
cause all Intercompany Indebtedness to be subordinated to the obligations of the
Loan Parties to the Bank pursuant to the terms of such Subordination Agreement
(Intercompany).
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<PAGE> 49
(B) Permitted Additional Subordinated Indebtedness. The
Loan Parties shall cause to be subordinated pursuant to the provisions of
Exhibit 1.1(P)(2) hereof all Indebtedness and Guaranties of Indebtedness of the
Loan Parties except for Indebtedness expressly permitted under Section 8.2(a).
Without limiting the foregoing, the Loan Parties shall cause to be subordinated
pursuant to such provisions all Indebtedness and Guaranties of Indebtedness (i)
incurred by any Loan Party in connection with a Permitted Acquisition, or (ii)
incurred by a corporation (or its Subsidiaries) whose shares are acquired by a
Loan Party in a Permitted Acquisition ) unless such Indebtedness is permitted by
Sections 8.2(a).
(m) Certificate of Borrowers; Other Reports and Information.
Integra shall furnish or cause to be furnished to the Bank:
(i) Monthly Financial Statements. As soon as available
and in any event within thirty (30) days after the end of each of the first two
months of each fiscal quarter, consolidated financial statements of Integra and
its Subsidiaries, consisting of a balance sheet as of the end of such month and
related statements of income for the month then ended, all in reasonable detail
and all (subject to normal year-end audit adjustments) prepared in accordance
with GAAP, consistently applied, and setting forth in comparative form the
respective financial statements (except for the balance sheets) for the
corresponding date and period in the previous fiscal year.
(ii) Quarterly Financial Statements. As soon as
available and in any event within forty-five (45) days after the end of each of
the first three fiscal quarters in each fiscal year, consolidated financial
statements of Integra and its Subsidiaries, consisting of a balance sheet as of
the end of such fiscal quarter, related statements of income for the fiscal
quarter then ended and the fiscal year through such date and related statements
of cash flows, for the fiscal year through such date, all in reasonable detail
and certified (subject to normal year-end audit adjustments) by the Chief
Executive Officer, President or Chief Financial Officer of Integra as having
been prepared in accordance with GAAP, consistently applied, and setting forth
in comparative form the respective financial statements (except for the balance
sheets) for the corresponding date and period in the previous fiscal year.
Integra may comply with this Section 8.1(m)(ii) by delivering to the Bank
certified copies of its Form 10-Q filed with the Securities and Exchange
Commission provided that the financial statements contained therein comply with
the foregoing requirements and are delivered when required by this subsection
(ii).
(iii) Annual Financial Statements. As soon as available
and in any event within ninety (90) days after the end of each fiscal year,
consolidated financial statements of Integra and its Subsidiaries consisting of
a balance sheet as of the end of such fiscal year, and related statements of
income, stockholders' equity and cash flows for the fiscal year then ended, all
in reasonable detail and setting forth in comparative form the financial
statements as of the end of and for the preceding fiscal year, and certified by
PriceWaterhouseCoopers or other independent certified public accountants of
nationally recognized standing reasonably satisfactory to the Bank. The
certificate or report of accountants shall be free of qualifications (other than
any consistency qualification that may result from a change in the method used
to prepare the financial statements as to which such accountants concur) and
shall not indicate the
46
<PAGE> 50
occurrence or existence of any event, condition or contingency which would
materially impair the prospect of payment or performance of any covenant,
agreement or duty of the Loan Parties under any of the Loan Documents. Integra
may comply with this Section 8.1(m)(iii) by delivering to the Bank copies of its
Form 10-K filed with the Securities and Exchange Commission, provided that the
financial statements and report of accountants contained therein comply with the
foregoing requirements and are delivered when required by this subsection (iii).
(iv) Certificate of the Borrower. No later than ten (10)
Business Days following the due date of the financial statements of Integra and
its Subsidiaries furnished to the Bank pursuant to Sections 8.1(m)(ii) and (iii)
hereof, a certificate of Integra signed by the Chief Executive Officer,
President or Chief Financial Officer of Integra, in the form of Exhibit
8.1(m)(iv) hereto, to the effect that, except as described pursuant to Section
8.3(a) below, (i) the representations and warranties of the Loan Parties
contained in Article VI hereof are true on and as of the date of such
certificate with the same effect as though such representations and warranties
had been made on and as of such date (except representations and warranties
which expressly relate solely to an earlier date or time) and the Loan Parties
have performed and complied with all covenants and conditions hereof, and (ii)
no Event of Default or Potential Default exists and is continuing on the date of
such certificate. The certificate also shall contain calculations in sufficient
detail to demonstrate compliance as of the date of the financial statements with
all financial covenants contained in Section 8.2.
(v) Management Letters. As soon as available and in any
event within thirty (30) days of receipt, any reports including management
letters submitted to any Loan Party by independent accountants in connection
with any annual, interim or special audit.
(vi) Other Reports and Information. Promptly upon their
becoming available to Integra or as otherwise specified below:
(A) the annual consolidated budget and any
accompanying forecasts or projections of Integra and its Subsidiaries submitted
to Integra's Board of Directors (or proposed to be submitted) which shall
project the operations of Integra and its Subsidiaries on a consolidated basis
and separately for each of their lines of business. Integra shall deliver such
budget, forecasts and projections to the Bank not later than forty-five (45)
days following the commencement of the fiscal year to which such budget,
forecasts and projections may be applicable. In the event that as a result of a
Permitted Acquisition, Integra updates any budget, forecasts or projections to
give effect to such Permitted Acquisition, Integra shall promptly deliver to the
Bank such updated budget, forecasts or projections as they become available,
(B) any reports, notices or proxy statements
generally distributed by Integra to its stockholders on a date no later than the
date supplied to the stockholders,
(C) regular or periodic reports, including Forms
10-K, 10-Q and 8-K, registration statements and prospectuses (except for
registration statements on
47
<PAGE> 51
Form S-8), filed by Integra with the Securities and Exchange Commission within
five (5) days of such filing,
(D) a copy of any order in any proceeding to which
Integra or any of its Subsidiaries is a party issued by any Official Body, which
order is other than in the ordinary course of business, or is likely to cause,
constitute or relate to a Material Adverse Change,
(E) a copy of any notice regarding the occurrence
of an event of default or event which with the passage of time or giving of
notice or both would cause an event of default in respect of any lease or any
agreement in respect of Indebtedness to which Integra or any of its Subsidiaries
is a party or by which Integra or any of its Subsidiaries is bound, pursuant to
which lease or documents evidencing such Indebtedness Integra or any of its
Subsidiaries makes payments equal to or in excess of $250,000 in any fiscal
year, such notice to be delivered to the Bank upon receipt thereof by Integra or
any of its Subsidiaries,
(F) within ninety (90) days following the end of
each fiscal year, an updated list of all contracts of Integra and its
Subsidiaries as of the end of such fiscal year, in form and substance
satisfactory to the Bank, pursuant to which contracts any Loan Party will
receive or is reasonably likely to receive income of $1,000,000 or more in the
following fiscal year or will incur or is reasonably likely to incur expenses or
make payments in excess of $1,000,000 or more in the following fiscal year,
(G) such other reports and information as the Bank
may from time to time reasonably request. Integra shall also notify the Bank
promptly after it obtains knowledge of the enactment or adoption of any Law
which may result in a Material Adverse Change,
(H) on the Closing Date and on each anniversary
thereof, a report listing the location(s) of each Loan Party, the nature of such
Loan Party's interest in real estate (fee, leasehold, subleasehold or otherwise)
and also, as and when required by the Bank, landlord waivers, leasehold
mortgages, mortgages or other security devices in respect of some or all of such
location(s).
(n) Maintenance of Accounts. Integra shall maintain its
principal bank accounts at the main Philadelphia office of the Bank.
8.2 Negative Covenants.
Each Loan Party covenants and agrees that until payment in full of
the Revolving Credit Loans and interest thereon, expiration or termination of
all Letters of Credit and satisfaction of all of the Loan Parties' other
obligations hereunder and termination of the Revolving Credit Commitment, each
Loan Party, or Integra, as the case may be, shall comply at all times with the
following negative covenants:
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<PAGE> 52
(a) Indebtedness. Each Loan Party shall not at any time
create, incur, assume or suffer to exist any Indebtedness, except:
(i) Indebtedness under the Loan Documents;
(ii) Indebtedness existing on the date hereof as set
forth on Schedule 8.2(a)(ii), including any extensions or renewals thereof
provided there is no increase in the amount thereof or other significant change
in the terms thereof adverse to any Loan Party;
(iii) Up to $500,000 in the aggregate for all of the
Borrowers on a consolidated basis at any time outstanding, of Indebtedness
pursuant to capitalized leases and entered into in the ordinary course of
business consistent with past practice;
(iv) Permitted Intercompany Indebtedness;
(v) Up to $5,000,000 in the aggregate, for all of the
Borrowers on a consolidated basis, of Permitted Additional Subordinated
Indebtedness, at any time outstanding;
(vi) Indebtedness secured by Purchase Money Security
Interests described in the definition of Permitted Liens; and
(vii) Indebtedness (other than seller notes) not to
exceed in the aggregate $2,500,000 assumed in connection with Permitted
Acquisitions
(b) Liens. Each Loan Party shall not at any time create,
incur, assume or suffer to exist any Lien on any of its property or assets,
tangible or intangible, now owned or hereafter acquired, or agree or become
liable to do so, except Permitted Liens. None of the Loan Parties shall enter
into any agreement or covenant with any Person other than the Bank which in any
manner limits the right of any of the Loan Parties to incur any Lien on any of
their assets.
(c) Guaranties. Each Loan Party shall not at any time,
directly or indirectly, become or be liable in respect of any Guaranty, or
assume, guarantee, become surety for, endorse or otherwise agree, become or
remain directly or contingently liable upon or with respect to any obligation or
liability of any other Person which obligation or liability would be required to
be reported or noted in the financial statements of such Loan Party in
accordance with GAAP, except pursuant to (i) Guaranties listed on Schedule
8.2(a)(ii); (ii) the Guaranty Agreement; (iii) Guaranties of obligations of
other Loan Parties; (iv) indemnities delivered in the normal course of business
to sellers of practices; or (v) indemnities contained in provider or payor
agreements, leases and other agreements in the ordinary course of business.
(d) Liquidations, Mergers, Consolidations, Acquisitions. Each
Loan Party shall not dissolve, liquidate or wind-up its affairs, or, except in
connection with a Permitted Acquisition, become a party to any merger or
consolidation, provided that any wholly owned Subsidiary of Integra may
consolidate or merge into Integra or any other Loan Party. Each Loan
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<PAGE> 53
Party shall not acquire by purchase, lease or otherwise all or substantially all
of the assets or capital stock of any Person, provided that any Loan Party may
make a Permitted Acquisition.
(e) Dispositions of Assets or Subsidiaries. Each Loan Party
shall not sell, convey, assign, lease, abandon or otherwise transfer or dispose
of, voluntarily or involuntarily, any of its properties or assets, tangible or
intangible (including but not limited to sale, assignment, discount or other
disposition of accounts, contract rights, chattel paper, equipment or general
intangibles with or without recourse or of capital stock, shares of beneficial
interest or partnership interests of a Restricted Subsidiary), except (A)
transactions involving (i) any sale, abandonment, transfer or lease of assets in
the ordinary course of business which are no longer necessary or required in the
conduct of such Loan Party's business; (ii) any sale, transfer, abandonment or
lease of assets by any Loan Party which is a wholly owned Restricted Subsidiary
of Integra to Integra or any other Loan Party which is a wholly owned Subsidiary
of Integra; (iii) any sale, abandonment, transfer or lease of assets in the
ordinary course of business which are replaced by substitute assets; (B) any
number of asset disposition transactions (of the general types described in item
(A) of this subsection (e)) which in the aggregate and measured from the Closing
Date through the Expiration Date involve the disposition of assets having an
aggregate value not in excess of 5% of Integra's Consolidated Net Worth as
described from time to time in the financial statements delivered pursuant to
Section 8.1(m); and (C) the disposition or dissolution of one or more Dormant
Subsidiaries.
(f) Joinder of Subsidiaries. Integra shall not and shall not
permit any other Loan Party to own, create or acquire any Subsidiary unless such
Subsidiary joins this Agreement as a Borrower and a Guarantor pursuant to
Section 11.17 hereof unless such Subsidiary is and remains a Dormant Subsidiary
as demonstrated to the satisfaction of the Bank.
(g) Continuation of or Change in Business. Each Loan Party
shall not engage in any business other than a Permitted Line of Business.
(h) Plans and Benefit Arrangements. Each Loan Party shall not:
(i) fail to satisfy the minimum funding requirements of
ERISA and the Internal Revenue Code with respect to any Plan;
(ii) request a minimum funding waiver from the Internal
Revenue Service with respect to any Plan;
(iii) engage in a Prohibited Transaction with any Plan,
Benefit Arrangement or Multiemployer Plan which, alone or in conjunction with
any other circumstances or set of circumstances resulting in liability under
ERISA which would cause or constitute a Material Adverse Change;
(iv) permit the aggregate actuarial present value of all
benefit liabilities (whether or not vested) under each Plan, determined on a
plan termination basis, as disclosed in the most recent actuarial report
completed with respect to such Plan, to exceed, as of any actuarial valuation
date, the fair market value of the assets of such Plan;
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<PAGE> 54
(v) fail to make when due any contribution to any
Multiemployer Plan that any Borrower or any member of the ERISA Group may be
required to make under any agreement relating to such Multiemployer Plan, or any
Law pertaining thereto;
(vi) withdraw (completely or partially) from any
Multiemployer Plan or withdraw (or be deemed under Section 4062(e) of ERISA to
withdraw) from any Multiple Employer Plan, where any such withdrawal is likely
to result in a material liability of any Borrower or any member of the ERISA
Group;
(vii) terminate, or institute proceedings to terminate,
any Plan, where such termination is likely to result in a material liability to
any Borrower or any member of the ERISA Group;
(viii) make any amendment to any Plan with respect to
which security is required under Section 307 of ERISA; or
(ix) fail to give any and all notices and make all
disclosures and governmental filings required under ERISA or the Internal
Revenue Code unless such failure would not cause or constitute a Material
Adverse Change.
(i) Loans and Investments. The Loan Parties shall not, and
shall not permit any of their Subsidiaries to, at any time make or suffer to
remain outstanding any loan or advance to, or purchase, acquire or own any
stock, bonds, notes or securities of, or any partnership interest (whether
general or limited) in or any other investment or interest in, or make any
capital contribution to, any other Person (including any Dormant Subsidiary), or
agree, become or remain liable to do any of the foregoing, except:
(i) trade credit extended on usual and customary terms
in the ordinary course of business;
(ii) up to $500,000 in the aggregate for the Loan
Parties on a consolidated basis at any one time outstanding of advances to
employees to meet expenses incurred by such employees in the ordinary course of
their employment, loans to facilitate purchase by employees of computers in
accordance with Integra's policies, compensation advances against employee's
service fee income and short-term or relocation loans to new employees to induce
them to enter into the employ of Integra or any of its Subsidiaries, consistent
with past practices;
(iii) Permitted Investments; and
(iv) Permitted Intercompany Indebtedness and investments
in the Loan Parties.
(j) Dividends and Related Distributions. The Loan Parties
shall not make or pay, or agree to become or remain liable to make or pay, any
dividend or other distribution of any nature (whether in cash, property,
securities or otherwise) on account of or in
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<PAGE> 55
respect of its shares of capital stock or on account of the purchase,
redemption, retirement or acquisition of its shares of capital stock (or
warrants, options or rights therefor), except dividends payable by any
Subsidiary of Integra to Integra or to any other Loan Party and except for stock
repurchases provided under stock purchase or employment agreements incident to
the termination of an employee's employment.
(k) Minimum Net Worth. The Loan Parties shall not permit
Consolidated Net Worth, calculated as of the end of each fiscal quarter, to be
less than the Minimum Net Worth Requirement.
(l) Funded Debt to Cash Flow From Operations. The Loan Parties
shall not permit the ratio of Consolidated Funded Debt to Consolidated Cash Flow
from Operations, calculated as of the end of each fiscal quarter, to exceed
3.0-to-1.0. For purposes of calculating the foregoing ratio, Consolidated Cash
Flow from Operations shall be determined as follows: (i) for the fiscal quarter
ended September 30, 1998, Consolidated Cash Flow from Operations shall be the
product of (A) Consolidated Cash Flow from Operations for the fiscal quarter
then ended, multiplied by (B) four (4); (ii)(A) Consolidated Cash Flow from
Operations for the two fiscal quarters ended December 31, 1998 multiplied by (B)
two; (iii) for the fiscal quarter ended March 31, 1999, Consolidated Cash Flow
from Operations shall be the product of the following (A) and (B): (A)
Consolidated Cash Flow from Operations for the three fiscal quarters then ended,
divided by three (3), and (B) four (4); and (iv) for the fiscal quarter ended
June 30, 1999 and each fiscal quarter ended thereafter, Consolidated Cash Flow
from Operations shall be the Consolidated Cash Flow from Operations for the four
fiscal quarters then ended.
(m) Minimum Fixed Charge Coverage Ratio. The Loan Parties
shall not permit the ratio of Consolidated Earnings Available for Fixed Charges
to Consolidated Fixed Charges, calculated as of the end of each fiscal quarter
for the four fiscal quarters then ended, to not to be less than 1.4-to-1.0 for
each quarter during the period ending on December 31, 1999 and 1.5-to-1.0 for
each quarter thereafter. For purposes of calculating the foregoing ratio,
Consolidated Earnings Available for Fixed Charges and Consolidated Fixed
Charges, respectively, shall be determined as follows: (i) for the fiscal
quarter ended September 30, 1998, Consolidated Earnings Available for Fixed
Charges and Consolidated Fixed Charges, respectively shall be the product of (A)
such amounts each calculated for the fiscal quarter then ended, multiplied by
(B) four (4); (ii)(A) for the two fiscal quarters ended December 31, 1998 (A)
such amounts multiplied by (B) two; (iii) for the fiscal quarter ended March 31,
1999, Consolidated Earnings Available for Fixed Charges and Consolidated Fixed
Charges, respectively, shall be the product of the following (A) and (B): (A)
such amounts for the three fiscal quarters then ended, divided by three (3), and
(B) four (4); and (iv) for the fiscal quarter ended June 30, 1999 and each
fiscal quarter ended thereafter, Consolidated Earnings Available for Fixed
Charges and Consolidated Fixed Charges, respectively, shall be such amounts for
the four fiscal quarters then ended.
(n) Changes in Subordinated Indebtedness Documents. The Loan
Parties shall not amend or modify any provisions of the Subordinated
Indebtedness Documents
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without providing at least five (5) Business Days' prior written notice to the
Bank, and obtaining the prior written consent of the Bank. The Loan Parties
shall not directly or indirectly make any payment or other distribution,
directly or indirectly to the obligees of Permitted Additional Subordinated
Indebtedness, or existing seller debt, except for regularly scheduled mandatory
payments of principal and interest under the Subordinated Indebtedness Documents
except for other payments required by any acceleration permitted by the
subordination provision applicable to such Indebtedness and permitted by the
Loan Documents.
(o) Affiliate Transactions. Integra shall not, and shall not
permit any of its Subsidiaries to, enter into or carry out any transaction
(including, without limitation, purchasing property or services or selling
property or services) with any Affiliate (other than the Loan Parties) unless
such transaction is not otherwise prohibited by this Agreement, is entered into
in the ordinary course of business upon fair and reasonable arm's-length terms
and conditions which are fully disclosed to the Bank and is in accordance with
all applicable Law.
(p) Capital Expenditures. Each of the Loan Parties shall not,
and shall not permit any of its Subsidiaries to, make any payments exceeding the
amount set forth below in the aggregate in any fiscal year on account of the
purchase or lease of any assets (but excluding for purposes of this calculation,
the Purchase Price paid in Permitted Acquisitions), which if purchased would
constitute fixed assets or which if leased would constitute a capitalized lease,
and all such capital expenditures and leases shall be made under usual and
customary terms and in the ordinary course of business.
<TABLE>
<CAPTION>
Period Maximum Amount
- ------ --------------
<S> <C>
Closing Date through
December 31, 1998 $ 350,000
Calendar Year 1999 $ 750,000
Calendar Year 2000 $1,000,000
Calendar Year 2001
(if applicable) $1,250,000
</TABLE>
8.3 Reporting Requirements.
The Borrowers jointly and severally covenant and agree that until
payment in full of the Revolving Credit Loans and interest thereon, expiration
of all Letters of Credit and termination of the Revolving Credit Commitment and
satisfaction of all of the Borrowers' other obligations hereunder, the Borrowers
shall furnish or cause to be furnished to the Bank:
(a) Notice of Default. Promptly after any officer of any Loan
Party has learned of the occurrence of an Event of Default or Potential Default,
a certificate signed by the Chief Executive Officer, President or Chief
Financial Officer of Integra setting forth the details of such Event of Default
or Potential Default and the action which such Loan Party proposes to take with
respect thereto.
(b) Notice of Litigation. Promptly after the commencement
thereof, notice of all actions, suits, proceedings or investigations before or
by any Official Body or any
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other Person against any Loan Party involving a claim or series of claims in
excess of $500,000 or which if adversely determined would constitute a Material
Adverse Change.
(c) Acquisition Information. Promptly after their preparation,
all "board packages" assembled for presentation to any Loan Party's board of
directors (or committees thereof) in connection with any Permitted Acquisition.
ARTICLE IX
DEFAULT
9.1 Events of Default.
An Event of Default shall mean the occurrence or existence of any
one or more of the following events or conditions (whatever the reason therefor
and whether voluntary, involuntary or effected by operation of Law):
(a) Any Loan Party shall fail to pay any principal of any
Revolving Credit Loan (including scheduled installments, mandatory prepayments
or the payment due at maturity), fees or any other amount owing hereunder or
under the other Loan Documents after such principal, fees or other amount
becomes due in accordance with the terms hereof or thereof or shall fail to pay
any interest on any Revolving Credit Loan within three (3) days of the due date
for payment of interest;
(b) Any representation or warranty made at any time by any
Loan Party herein or in any other Loan Document, or in any certificate, other
instrument or statement furnished pursuant to the provisions hereof or thereof,
shall prove to have been false or misleading in any material respect as of the
time it was made or furnished;
(c) Any Loan Party shall breach or default in the observance
or performance of any covenant contained in Section 8.1(f) or Section 8.2;
(d) Any Loan Party shall default in the observance or
performance of any other covenant, condition or provision hereof or of any other
Loan Document and such default shall continue unremedied for a period of twenty
(20) Business Days after any officer of such Loan Party becomes aware of the
occurrence thereof (such grace period to be applicable only in the event such
default can be remedied by corrective action of Integra or such Loan Party as
determined by the Bank in its sole discretion);
(e) A default or event of default shall occur and remain
unremedied for a period of fifteen (15) calendar days under the terms of (i)
Subordinated Indebtedness Documents evidencing Permitted Additional Subordinated
Indebtedness in excess of $500,000 (or any agreement to subordinate the right of
payment in respect of Permitted Additional Subordinated Indebtedness in excess
of $500,000 to the Indebtedness arising out of or under the Loan Documents, at
any time and for any reason, ceases to be in full force and effect or is
declared to be null and void or unenforceable in part); (ii) any lease by a Loan
Party under which
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such Loan Party may be obligated in excess of $500,000 as lessee or sublessee,
or such Loan Party fails to make a payment thereunder when due or a default
thereunder shall occur which permits the lessor or sublessor to terminate the
lease, retake possession of the leased property or assert a claim for damages;
or (iii) any other agreement involving borrowed money or the extension of credit
or any other Indebtedness under which any Loan Party may be obligated in excess
of $500,000 as borrower or guarantor, and with respect to such other agreement
described in this clause (iii) either (A) such breach, default or event of
default consists of the failure to pay (beyond any period of grace permitted
with respect thereto, whether waived or not) any indebtedness when due (whether
at stated maturity, by acceleration or otherwise) or (B) such breach or default
permits or causes the acceleration of any indebtedness (whether or not such
right shall have been waived) or the termination of any commitment to lend;
(f) Any final judgments or orders for the payment of money in
excess of $500,000 in the aggregate shall be entered against any Loan Party by a
court having jurisdiction in the premises which judgment is not discharged,
vacated, bonded or stayed pending appeal within a period of thirty (30) days
from the date of entry;
(g) Any of the Loan Documents shall cease to be legal, valid
and binding agreements enforceable against the Loan Party executing the same or
such party's successors and assigns (as permitted under the Loan Documents) in
accordance with the respective terms thereof or shall in any way be terminated
(except in accordance with its terms) or become or be declared ineffective or
inoperative or shall cease to give or provide the respective Liens, security
interests, rights, titles, interests, remedies, powers or privileges intended to
be created thereby;
(h) With respect to any Loan Party, there shall occur any
material uninsured (except to the extent of self-insurance for which adequate
reserves have been made) damage to or loss, theft or destruction of any of its
property or assets in excess of $500,000 or any other of any Loan Party's assets
are attached, seized, levied upon or subjected to a writ or distress warrant; or
such come within the possession of any receiver, trustee, custodian or assignee
for the benefit of creditors and the same is not cured within thirty (30) days
thereafter;
(i) A notice of lien or assessment in excess of $500,000 is
filed of record with respect to all or any part of any Loan Party's assets by
the United States, or any department, agency or instrumentality thereof, or by
any state, county, municipal or other governmental agency, including, without
limitation, the PBGC, or if any taxes or debts owing at any time or times
hereafter to any one of these become payable and the same are not paid within
thirty (30) days after the same become payable unless the same are being
contested in good faith and either a stay of execution is in effect or the Bank
is provided with adequate security satisfactory to the Bank in its sole
discretion;
(j) Any Loan Party is enjoined, restrained or in any way
prevented by court order from conducting all or any material part of its
business and such injunction, restraint or other preventive order is not
dismissed within thirty (30) days after the entry thereof and such condition
would cause or constitute a Material Adverse Change;
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(k) A Change in Ownership occurs;
(l) A proceeding shall have been instituted in a court having
jurisdiction in the premises seeking a decree or order for relief in respect of
any Loan Party in an involuntary case under any applicable bankruptcy,
insolvency, reorganization or other similar law now or hereafter in effect, or
for the appointment or the taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator, conservator (or similar official) of
any Loan Party or for any substantial part of any Loan Party's property, or for
the winding-up or liquidation of its affairs, and such proceeding shall remain
undismissed or unstayed and in effect for a period of ninety (90) consecutive
days or such court shall enter a decree or order granting any of the relief
sought in such proceeding; or
(m) Any Loan Party shall commence a voluntary case under any
applicable bankruptcy, insolvency, reorganization or other similar law now or
hereafter in effect, shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the appointment or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator, conservator (or other similar official) of itself or for any
substantial part of its property or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any action in furtherance of any of the foregoing.
9.2 Consequences of Event of Default.
(a) If an Event of Default specified under subsections (a)
through (k) of Section 9.1 hereof shall occur and be continuing, the Bank shall
be under no further obligation to make Revolving Credit Loans or issue any
Letters of Credit hereunder and the Bank may (i) by written notice to Integra,
on behalf of the Loan Parties, declare the unpaid principal amount of the
Revolving Credit Note then outstanding and all interest accrued thereon, any
unpaid fees and all other Indebtedness of the Loan Parties to the Bank hereunder
and thereunder to be forthwith due and payable, and the same shall thereupon
become and be immediately due and payable to the Bank without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived; and (ii) require each Borrower to, and each Borrower shall
thereupon, deposit in a non-interest bearing account with the Bank, as cash
collateral for its obligations under the Loan Documents, an amount equal to the
maximum amount currently or at any time thereafter available to be drawn on all
outstanding Letters of Credit issued on its account, and each Borrower hereby
pledges to the Bank, and grants to the Bank a security interest in, all such
cash as security for such obligations. Upon the curing of all existing Events of
Default to the satisfaction of the Bank, the Bank shall return such cash
collateral to the applicable Borrower; and
(b) If an Event of Default specified under subsections (l) or
(m) of Section 9.1 hereof shall occur, the Bank shall be under no further
obligations to make Revolving Credit Loans or issue any Letters of Credit
hereunder and the unpaid principal amount of the Revolving Credit Note then
outstanding and all interest accrued thereon, any unpaid fees and all other
Indebtedness of the Loan Parties to the Bank hereunder and thereunder shall be
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immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived; and
(c) If an Event of Default shall occur and be continuing, any
branch, subsidiary or affiliate of the Bank or participant anywhere in the world
shall have the right, in addition to all other rights and remedies available to
it, without notice to the Loan Parties, to set-off against and apply to the then
unpaid balance of all the Revolving Credit Loans and all other obligations of
such Loan Party hereunder or under any other Loan Document any debt owing to,
and any other funds held in any manner for the account of, such Loan Party by
the Bank or participant or by such branch, subsidiary or affiliate, including,
without limitation, all funds in all deposit accounts (whether time or demand,
general or special, provisionally credited or finally credited, or otherwise)
now or hereafter maintained by such Loan Party for its own account (but not
including funds held in custodian or trust accounts) with the Bank or
participant or such branch, subsidiary or affiliate. The Bank agrees promptly to
notify Integra on behalf of the Loan Parties after any such set-off and
application made by the Bank; provided, however, that the failure to give such
notice shall not affect the validity of such set-off and application. Such right
shall exist whether or not the Bank shall have made any demand under this
Agreement or any other Loan Document, whether or not such debt owing to or funds
held for the account of such Loan Party is or are matured or unmatured and
regardless of the existence or adequacy of any collateral, Guaranty or any other
security, right or remedy available to the Bank; and
(d) If an Event of Default shall occur and be continuing, and
provided that the Bank shall have accelerated the maturity of Revolving Credit
Loans of the Borrower or such Loans otherwise shall have been accelerated or
come due pursuant to any of the foregoing provisions of this Section 9.2, the
Bank, may proceed to protect and enforce its rights by suit in equity, action at
law and/or other appropriate proceeding, whether for the specific performance of
any covenant or agreement contained in this Agreement or the Revolving Credit
Note, including as permitted by applicable Law the obtaining of the ex parte
appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of the Bank; and
(e) Following the occurrence and during the continuance of an
Event of Default, each Loan Party, at the cost and expense of the Loan Parties
(including the cost and expense of obtaining any of the following referenced
consents, approvals, etc.) will promptly execute and deliver or cause the
execution and delivery of all applications, certificates, instruments,
registration statements, and all other documents and papers the Bank may request
in connection with the obtaining of any consent, approval, registration,
qualification, permit, license, accreditation, or authorization of any Official
Body or other Person necessary or appropriate for the effective exercise of any
rights hereunder or under the other Loan Documents. Without limiting the
generality of the foregoing, each Loan Party agrees that in the event the Bank
shall exercise its rights, hereunder or pursuant to the other Loan Documents, to
sell, transfer, or otherwise dispose of, or vote, consent, operate, or take any
other action in connection with any of the Collateral, each Loan Party shall
execute and deliver (or cause to be executed and delivered) all applications,
certificates, assignments, and other documents that the Bank requests to
facilitate such actions and shall otherwise promptly, fully, and diligently
cooperate with the
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Bank and any other necessary persons in making any application for the prior
consent or approval of any Official Body or any other Person to the exercise by
the Bank of any of such rights relating to all or any of the Collateral.
Furthermore, because the Loan Parties agree that the remedies of the Bank at law
for failure of the Loan Parties to comply with the provisions of this Section
9.2(e) would be inadequate and that any such failure would not be adequately
compensable in damages, the Loan Parties agree that the covenants of this
Section 9.2(e) may be specifically enforced; and
(f) From and after the date on which the Bank has taken any
action pursuant to this Section 9.2 and until all obligations of the Loan
Parties have been paid in full, any and all proceeds received by the Bank from
any sale or other disposition of the Collateral, or any part thereof, or the
exercise of any other remedy by the Bank, shall be applied as follows:
(i) first, to reimburse the Bank for out-of-pocket
costs, expenses and disbursements, including without limitation reasonable
attorneys' fees and legal expenses, incurred by the Bank in connection with
realizing on the Collateral or collection of any obligations of the Loan Parties
under any of the Loan Documents, including advances made by the Bank for the
reasonable maintenance, preservation, protection or enforcement of, or
realization upon, the Collateral, including without limitation, advances for
taxes, insurance, repairs and the like and reasonable expenses incurred to sell
or otherwise realize on, or prepare for sale or other realization on, any of the
Collateral;
(ii) second, to the repayment of all Indebtedness then
due and unpaid of the Loan Parties to the Bank incurred under this Agreement or
any of the Loan Documents, provided that such proceeds shall be applied first to
interest, fees, expenses and other Indebtedness other than principal, in such
manner as the Bank may reasonably determine, and then to principal;
(iii) the balance, if any, as required by Law; and
(g) In addition to all of the rights and remedies contained in
this Agreement or in any of the other Loan Documents, the Bank shall have all of
the rights and remedies of a secured party under the Uniform Commercial Code or
other applicable Law, all of which rights and remedies shall be cumulative and
nonexclusive, to the extent permitted by Law. The Bank may exercise all
post-default rights granted to the Bank under the Loan Documents or applicable
Law.
9.3 Notice of Sale.
Any notice required to be given by the Bank of a sale, lease, or
other disposition of the Collateral or any other intended action by the Bank, if
given to Integra ten (10) Business Days prior to such proposed action, shall
constitute commercially reasonable and fair notice thereof to the Loan Parties.
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ARTICLE X
[RESERVED]
ARTICLE XI
MISCELLANEOUS
11.1 Modifications, Amendments or Waivers.
The Bank and the Loan Parties (or Integra on behalf of the Loan
Parties) may from time to time enter into written agreements amending or
changing any provision of this Agreement or any other Loan Document or the
rights of the Bank or the Loan Parties hereunder or thereunder, or may grant
written waivers or consents to a departure from the due performance of the
obligations of the Loan Parties hereunder or thereunder.
11.2 No Implied Waivers; Cumulative Remedies; Writing Required.
No course of dealing and no delay or failure of the Bank in
exercising any right, power, remedy or privilege under this Agreement or any
other Loan Document shall affect any other or future exercise thereof or operate
as a waiver thereof; nor shall any single or partial exercise thereof or any
abandonment or discontinuance of steps to enforce such a right, power, remedy or
privilege preclude any further exercise thereof or of any other right, power,
remedy or privilege. The rights and remedies of the Bank under this Agreement
and any other Loan Documents are cumulative and not exclusive of any rights or
remedies which they would otherwise have. Any waiver, permit, consent or
approval of any kind or character on the part of the Bank of any breach or
default under this Agreement or any such waiver of any provision or condition of
this Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing.
11.3 Reimbursement and Indemnification of Bank by the Borrowers;
Taxes.
The Borrowers jointly and severally agree unconditionally upon
demand to pay or reimburse to the Bank and to save the Bank harmless against (i)
liability for the payment of all reasonable out-of-pocket costs, expenses and
disbursements including but not limited to development, negotiation,
preparation, printing, fees and expenses of counsel, accountants, appraisers,
and environmental consultants for the Bank (a) in connection with the
negotiation, preparation, printing, administration, interpretation and
performance of this Agreement, the other Loan Documents and other instruments
and documents to be delivered hereunder, (b) relating to any amendments, waivers
or consents pursuant to the provisions hereof or thereof, (c) in connection with
the enforcement of this Agreement or any other Loan Document, or collection of
amounts due hereunder or thereunder or the proof and allowability of any claim
arising under this Agreement or any other Loan Document, whether in bankruptcy
or receivership proceedings or otherwise, and (d) in any workout, restructuring
or in connection with the protection, preservation, exercise or enforcement of
any of the terms hereof or of any rights hereunder or under any other Loan
Document or in connection with any foreclosure, collection or bankruptcy
proceedings, or (ii) all liabilities, obligations, losses, damages, penalties,
actions, judgments,
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suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against the Bank in any way relating
to or arising out of this Agreement or any other Loan Documents or any action
taken or omitted by the Bank hereunder or thereunder, provided that the
Borrowers shall not be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements (A) if the same results from the Bank's gross negligence or
willful misconduct, or (B) if the Borrowers were not given notice of the subject
claim and the opportunity to participate in the defense thereof, at their
expense, or (C) if the same results from a compromise or settlement agreement
entered into without the consent of the Borrowers. The Borrowers jointly and
severally agree unconditionally to pay all stamp, document, transfer, recording
or filing taxes or fees and similar impositions now or hereafter determined by
the Bank to be payable in connection with this Agreement or any other Loan
Document, and the Borrowers jointly and severally agree unconditionally to save
the Bank harmless from and against any and all present or future claims,
liabilities or losses with respect to or resulting from any omission to pay or
delay in paying any such taxes, fees or impositions.
11.4 Holidays.
Whenever any payment or action to be made or taken hereunder shall
be stated to be due on a day which is not a Business Day, such payment or action
shall be made or taken on the next following Business Day (except as provided in
Section 4.2(a)), and such extension of time shall be included in computing
interest or fees, if any, in connection with such payment or action.
11.5 Funding by Branch, Subsidiary or Affiliate.
(a) Notional Funding. The Bank shall have the right from time
to time, without notice to the Loan Parties, to deem any branch, subsidiary or
affiliate (which for the purposes of this Section 11.5 shall mean any
corporation or association which is directly or indirectly controlled by or is
under direct or indirect common control with any corporation or association
which directly or indirectly controls the Bank) of the Bank to have made,
maintained or funded any Revolving Credit Loan to which the Revolving Credit
Euro-Rate Option applies at any time, provided that immediately following (on
the assumption that a payment were then due from the Borrowers to such other
office) and as a result of such change the Borrowers would not be under any
greater financial obligation pursuant to Section 5.4 than they would have been
in the absence of such change. Notional funding offices may be selected by the
Bank without regard to the Bank's actual methods of making, maintaining or
funding the Loans or any sources of funding actually used by or available to the
Bank.
(b) Actual Funding. The Bank shall have the right from time to
time to make or maintain any Loan by arranging for a branch, subsidiary or
affiliate of the Bank to make or maintain such Loan subject to the last sentence
of this Section 11.5(b). If the Bank causes a branch, subsidiary or affiliate to
make or maintain any part of the Loans hereunder, all terms and conditions of
this Agreement shall, except where the context clearly requires otherwise, be
applicable to such part of the Revolving Credit Loans to the same extent as if
such
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Revolving Credit Loans were made or maintained by the Bank but in no event shall
the Bank's use of such a branch, subsidiary or affiliate to make or maintain any
part of the Revolving Credit Loans hereunder cause the Bank or such branch,
subsidiary or affiliate to incur any cost or expenses payable by any Borrower
hereunder or require any Borrower to pay any other compensation to the Bank
(including, without limitation, any expenses incurred or payable pursuant to
Section 5.4 hereof) which would otherwise not be incurred.
11.6 Notices.
All notices, requests, demands, directions and other communications
(collectively "notices") given to or made upon any party hereto under the
provisions of this Agreement shall be by telephone, in person or in writing
(including facsimile communication) unless otherwise expressly permitted
hereunder and shall be delivered or sent by facsimile to the respective parties
at the addresses and numbers set forth under their respective names on the
signature pages hereof, provided, that, all notices to the Loan Parties shall be
sent in care of Integra, unless written direction is given by a Borrower to the
Bank to send notices to a different party and address. All notices shall, except
as otherwise expressly herein provided, be effective (a) in the case of
facsimile, when received, (b) in the case of hand-delivered notice, when hand
delivered, (c) in the case of telephone, when telephoned, provided, however,
that in order to be effective, telephonic notices must be confirmed in writing
no later than the next day by letter or facsimile, and (d) if given by any other
means (including by air courier), when delivered; provided, that notices to the
Bank shall not be effective until received by the Bank.
11.7 Severability.
The provisions of this Agreement are intended to be severable. If
any provision of this Agreement shall be held invalid or unenforceable in whole
or in part in any jurisdiction such provision shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without in any
manner affecting the validity or enforceability thereof in any other
jurisdiction or the remaining provisions hereof in any jurisdiction.
11.8 Governing Law.
This Agreement shall be deemed to be a contract under the laws of
the Commonwealth of Pennsylvania and for all purposes shall be governed by and
construed and enforced in accordance with the laws of the Commonwealth of
Pennsylvania without regard to its conflict of laws principles.
11.9 Prior Understanding.
This Agreement supersedes all prior understandings and agreements,
whether written or oral, between the parties hereto relating to the transactions
provided for herein, including any prior confidentiality agreements and
commitments.
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11.10 Duration; Survival.
All representations and warranties of the Borrowers contained herein
or made in connection herewith shall survive the making of Revolving Credit
Loans and shall not be waived by the execution and delivery of this Agreement,
any investigation by the Bank, the making of Revolving Credit Loans, or payment
in full of the Revolving Credit Loans. All covenants and agreements of the
Borrowers contained in Sections 8.1, 8.2 and 8.3 shall continue in full force
and effect from and after the date hereof so long as the Borrowers may borrow
hereunder and until termination of the Revolving Credit Commitment. All
covenants and agreements of the Borrowers contained herein relating to the
payment of principal, interest, premiums, additional compensation or expenses
and indemnification, including those set forth in the Revolving Credit Note,
Article V and Section 11.3, and relating to confidentiality shall survive
payment in full of the Revolving Credit Loans, termination or expiration of all
Letters of Credit and termination of the Revolving Credit Commitment.
11.11 Successors and Assigns.
This Agreement shall be binding upon and shall inure to the benefit
of the Bank, the Loan Parties and their respective successors and assigns,
except that the Loan Parties may not assign or transfer any of their rights and
obligations hereunder or any interest herein. The Bank may, at its own cost,
make assignments of or sell participations in all or any part of its Revolving
Credit Commitment and the Loans made by it to one or more banks or other
financial institutions, subject to the consent of Integra on behalf of the Loan
Parties with respect to any assignee or participant other than an affiliate of
the Bank, such consent not to be unreasonably withheld. In the case of an
assignment, upon receipt by the Bank of an Assignment and Assumption Agreement,
in form and substance satisfactory to the Bank, the assignee shall have, to the
extent of such assignment (unless otherwise provided therein), the same rights,
benefits and obligations as it would have if it had been a signatory Bank
hereunder, the Revolving Credit Commitment in Section 2.1 shall be adjusted
accordingly, and upon surrender of any Revolving Credit Note subject to such
assignment, the Borrowers shall execute and deliver a new Revolving Credit Note
to the assignee in an amount equal to the amount of the Revolving Credit
Commitment assumed by it and a Revolving Credit Note to the assigning Bank in an
amount equal to the Revolving Credit Commitment retained by it hereunder. In the
case of a participation, the participant shall only have the rights specified in
Section 9.2(c) (the participant's rights against such Bank in respect of such
participation to be those set forth in the agreement executed by such Bank in
favor of the participant relating thereto and not to include any voting rights
except with respect to changes of the type referenced in Section 11.1 hereof),
all of the Bank's obligations under this Agreement or any other Loan Document
shall remain unchanged and all amounts payable by the Borrowers hereunder or
thereunder shall be determined as if the Bank had not sold such participation.
The Bank may furnish any publicly available information concerning the Borrowers
and any other information concerning the Borrowers in the possession of the Bank
from time to time to assignees and participants (including prospective assignees
or participants) provided such assignees and participants agree to be bound by
the provisions of Section 11.12.
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11.12 Confidentiality.
The Bank agrees to keep confidential all information obtained from
the Borrowers which is nonpublic and confidential or proprietary in nature
(including any information the Borrowers specifically designate as
confidential), except as provided below, and to use such information only in
connection with its capacity under this Agreement and for the purposes
contemplated hereby. The Bank shall be permitted to disclose such information
(i) to outside legal counsel, accountants and other professional advisors who
need to know such information in connection with the administration and
enforcement of this Agreement, subject to agreement of such persons to maintain
the confidentiality thereof, (ii) to assignees and participants as contemplated
by Section 11.11 (subject to the agreement of such persons to maintain the
confidentiality thereof), (iii) to the extent requested by any bank regulatory
authority or, with notice to the Borrowers, as otherwise required by applicable
Law or by any subpoena or similar legal process, or in connection with any
investigation or proceeding arising out of the transactions contemplated by this
Agreement, (iv) if it becomes publicly available other than as a result of a
breach of this Agreement or becomes available from a source not subject to
confidentiality restrictions, or (v) if Integra shall have consented to such
disclosure.
11.13 Counterparts.
This Agreement may be executed by different parties hereto on any
number of separate counterparts, each of which, when so executed and delivered,
shall be an original, and all such counterparts shall together constitute one
and the same instrument.
11.14 Bank's Consent.
Whenever the Bank's consent is required to be obtained under this
Agreement or any of the other Loan Documents as a condition to any action,
inaction, condition or event, the Bank shall be authorized to give or withhold
such consent in its sole and absolute discretion (unless otherwise specifically
provided herein) and to condition its consent upon the giving of additional
collateral, the payment of money or any other matter.
11.15 Exceptions.
The representations, warranties and covenants contained herein shall
be independent of each other and no exception to any representation, warranty or
covenant shall be deemed to be an exception to any other representation,
warranty or covenant contained herein unless expressly provided, nor shall any
such exceptions be deemed to permit any action or omission that would be in
contravention of applicable Law.
11.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL.
EACH BORROWER HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY, PENNSYLVANIA AND
THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA, AND
WAIVES
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PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO SUCH
BORROWER AT THE ADDRESSES PROVIDED FOR IN SECTION 11.6 AND SERVICE SO MADE SHALL
BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. EACH BORROWER WAIVES ANY
OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS
PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE. EACH BORROWER AND THE BANK HEREBY WAIVE TRIAL BY JURY IN
ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR
RELATED TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE COLLATERAL TO THE FULL
EXTENT PERMITTED BY LAW.
11.17 Joinder of Loan Parties.
(i) All Subsidiaries of Integra acquired or created on or
after the Closing Date shall join this Agreement as a Guarantor and as a
Borrower (a "Joining Subsidiary") on the date of their acquisition or creation
by completing all of the following by such date: (1) executing and delivering to
the Bank (A) a Revolving Credit Note satisfactory in form and substance to the
Bank payable to the Bank, (B) a joinder to this Agreement satisfactory in form
and substance to the Bank, (C) a Guaranty Agreement satisfactory in form and
substance to the Bank, (D) mortgages or leasehold mortgages satisfactory in form
and substance to, and as required by, the Bank, (E) a Security Agreement
satisfactory in form and substance to the Bank, (F) a joinder to the Borrower
Agency Agreement satisfactory in form and substance to the Bank, (G) a Patent,
Trademark and Copyright Security Agreement satisfactory in form and substance to
the Bank, (H) a joinder to the Subordination Agreement (Intercompany)
satisfactory in form and substance to the Bank, and (I) if it owns stock or
other ownership interests in any Subsidiary, a Pledge Agreement satisfactory in
form and substance to the Bank or other appropriate form acceptable to the Bank
if such Subsidiary is not a partnership or corporation, as applicable, and
delivering, as applicable, the original certificates evidencing such stock or
other ownership interest if it is certificated with appropriate stock powers or
other assignments signed in blank and UCC-1 financing statements necessary to
perfect the security interests of the Bank therein; (2) delivering to the Bank
an opinion of counsel reasonably satisfactory to the Bank regarding such Joining
Subsidiary and such joinder; and (3) delivering to the Bank certified copies of
its organizational documents and other documents as requested by the Bank. The
Loan Party which owns the stock or other ownership interest of the Joining
Subsidiary shall execute and deliver to the Bank a Pledge Agreement.
(ii) All joinders by a new Loan Party shall be effective and
binding upon the Bank and each of the other Loan Parties without any requirement
that the Bank or such other Loan Parties execute such joinder.
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[Signature Page to Credit Agreement]
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Agreement as of the day and year first above
written.
BORROWERS AND GUARANTORS:
ATTEST: INTEGRA, INC.
By:____________________ By: ____________________________
[Seal] Title: _________________________
INTEGRA OF PENNSYLVANIA, INC.
By: ____________________________
Title: _________________________
NORTH, CLAWSON & BOLT, LTD.
By: ____________________________
Title: _________________________
THE CLIFTON GROUP, INC.
By: ____________________________
Title: _________________________
INTEGRA IPA, INC.
By: ____________________________
Title: _________________________
TWIN PONDS MANAGEMENT, INC.
By: ____________________________
Title: _________________________
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[Signature Page to Credit Agreement]
TWIN PONDS III, INC.
By: ____________________________
Title: _________________________
ELLIPTIC RESOURCES, INC.
By: ____________________________
Title: _________________________
ORBITAL INVESTMENTS, INC.
By: ____________________________
Title: _________________________
PERIGEE PROPERTIES, INC.
By: ____________________________
Title: _________________________
Address for Notices:
c/o Integra, Inc.
1060 First Avenue
Suite 410
King of Prussia, PA `9406
Attention: Mark D. Gibson
Telecopier: (610) 992-9830
Telephone: (610) 992-2600
66
<PAGE> 70
[Signature Page to Credit Agreement]
BANK:
PNC BANK, NATIONAL ASSOCIATION
By: ____________________________
Title: _________________________
Address for Notices:
One PNC Plaza
249 Fifth Avenue
Pittsburgh, PA 15222
Telecopier No. (412) 768-5149
Attention: Healthcare Banking Group
Telephone No. (412) 762-2190
67
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1998 AND THE CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,210
<SECURITIES> 0
<RECEIVABLES> 647
<ALLOWANCES> 126
<INVENTORY> 0
<CURRENT-ASSETS> 5,392
<PP&E> 1,923
<DEPRECIATION> 727
<TOTAL-ASSETS> 16,969
<CURRENT-LIABILITIES> 11,942
<BONDS> 0
0
0
<COMMON> 101
<OTHER-SE> 4,552
<TOTAL-LIABILITY-AND-EQUITY> 16,969
<SALES> 0
<TOTAL-REVENUES> 3,643
<CGS> 0
<TOTAL-COSTS> 2,126
<OTHER-EXPENSES> 902
<LOSS-PROVISION> 12
<INTEREST-EXPENSE> 10
<INCOME-PRETAX> 547
<INCOME-TAX> 30
<INCOME-CONTINUING> 517
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 517
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
