Exhibit 10.38
DISTRIBUTION AND SERVICES AGREEMENT
This Distribution and Services Agreement is entered into as of this
28th day of August, 1998 (the "Effective Date"), by and between Centocor, Inc.,
and its Affiliates, with principal offices located at 000 Xxxxx Xxxxxx Xxxxxxx,
Xxxxxxx, Xxxxxxxxxxxx 00000 ("Centocor"), and Nova Factor, Inc., with principal
offices located at 0000 Xxxxxxx Xxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxxxx 00000 ("Nova Factor").
RECITALS
WHEREAS, Centocor has developed an anti-TNF chimeric monoclonal
antibody product known as Remicade(TM) (the "Product") for use as an agent in
the treatment of (a) inflammatory bowel diseases, including Crohn's Disease
(collectively referred to as "Inflammatory Bowel Disease"); (b) rheumatoid
arthritis, and (c) new indication(s) to be defined.
WHEREAS, as of the Effective Date, the Product has received commercial
marketing approval in the United States of America for certain indications of
Crohn's Disease from the United States of America Food and Drug Administration;
WHEREAS, Centocor is in the process of establishing a distribution
network for the sale of the Product in the United States of America;
WHEREAS, as a part of the distribution network, Centocor intends to
appoint a preferred retail distributor to provide retail assignment of benefits
services to users of the Product;
WHEREAS, Nova Factor, as both a retail and wholesale pharmacy, has the
facilities and expertise to distribute the Product to out-patient customers, to
provide reimbursement assistance and other customer services to its customers
and to provide data reporting and other services to Centocor;
WHEREAS, Centocor is willing to appoint Nova Factor as a preferred
retail distributor of the Product on the terms and conditions set forth in this
Agreement, and Nova Factor is willing to accept such appointment.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, the parties hereby agree as follows:
1. DEFINITIONS
For purposes of this Agreement the following terms shall have the
following meanings:
1.1 "Adverse Event" shall have the meaning set forth in 21 CFR
600.80.
1.2 "Affiliates" shall mean, with respect to a given party, any
corporation, firm, partnership or other entity which directly
or indirectly controls or is controlled by or is under common
control with such party. For purposes of this Section 1.2,
"control" shall mean direct or indirect ownership of fifty
percent (50%) or greater of the equity having the power to
vote on or direct the affairs of the entity.
1.3 "Assignment of Benefits" ("AOB") shall mean the assignment by
the Outpatient Customer of Insurance Benefits for the Product
to Nova Factor as payment for the Product.
1.4 "AOB Services" shall have the meaning ascribed to such term in
Section 4.6 of this Agreement.
1.5 "Average Wholesale Price" ("AWP") for purposes of this
Agreement shall mean the estimated wholesale price submitted
by Centocor for the Product based on convention employed by
First Data Bank, Blue Book, Red Book, and Medispan. In the
event Centocor decides not to submit an estimated wholesale
price to commercial publishers of pricing information, the
parties shall meet to discuss a revised definition of AWP for
purposes of this Agreement.
1.6 "Bad Debt" shall mean Insurance Benefits assigned to and
accepted by Nova Factor as payment for Product, including
unpaid Outpatient Customer co-pay amounts, which are
uncollectible determined on an accrual basis as provided by
Generally Accepted Accounting Principles ("GAAP").
1.7 "Contractual Allowance" shall mean any discount off Centocor
AWP, or rebate provided by Nova Factor to a third party health
insurer, government program or other third party benefits
payor determined on an accrual basis as provided by GAAP.
1.8 "Database" shall have the meaning set forth in Section 7.1.
1.9 "Documedics" shall mean Documedics, 000 Xxxxx Xxxxxx, Xxxxx
0000, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000.
1.10 "Facility" shall mean Nova Factor's facility located at 0000
Xxxxxxx Xxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxx Xxxxxxxxx 00000.
1.11 "FDA" shall mean the United States of America Food and Drug
Administration.
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1.12 "Infusion Provider" shall mean a Patient's treating physician
or the hospital outpatient clinic or infusion center, etc. at
which a Patient is administered Product.
1.13 "Insurance Benefit" shall mean the amounts paid by a Patient's
third party health insurer, government program or other third
party payor for Product.
1.14 "LHSI" shall mean Xxxxxxxxxx Healthcare Services, Inc., 000
Xxxx Xxxxx, Xxxxxx, Xxxxxxxx and its Affiliates, where Product
shall be warehoused on Centocor's behalf.
1.15 "Outpatient Customers" shall mean (a) out-patient infusion
Patients or the Patient's Infusion Provider in the Territory
who are referred to Nova Factor by their treating physicians
or (b) the Patient's Infusion Provider (hospital, out-patient
clinic, infusion center, etc.) in the Territory; and the
Patient, physician or Infusion Provider has elected to assign
the Product Insurance Benefit to a third party as payment for
the Product.
1.16 "Patient" shall mean an individual who is to be administered
the Product.
1.17 "Product" shall have the meaning ascribed to such term in the
first recital of this Agreement.
1.18 "Purchase Price" shall have the meaning ascribed to such term
in Section 8.1 of this Agreement.
1.19 "Retail" shall mean the provision of Product by a Centocor
distributor for the Product on a named Patient basis to an
Outpatient Customer, and the Insurance Benefit for such
Product is assigned to the Centocor distributor as payment for
the Product.
1.20 "SOP" shall mean the written standard operating procedures
prepared by Centocor and agreed to by Nova Factor, as modified
from time to time by the mutual agreement of the parties,
which will be used by Nova Factor to provide certain services
under this Agreement. In the event of a conflict between the
SOPs and this Agreement, the terms of this Agreement shall
govern. The SOPs will be completed within sixty (60) days of
the Effective Date, then appended to this Agreement as
Schedule "A", and incorporated herein by reference.
1.21 "Territory" shall mean the United States of America.
1.22 "Triage Services" shall have the meaning ascribed to such term
in Section 5.2 of this Agreement.
1.23 "US" shall mean the United States of America.
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2. APPOINTMENT AS PREFERRED DISTRIBUTOR
2.1 Subject to the terms and conditions in this Agreement,
Centocor hereby appoints Nova Factor and Nova Factor hereby
accepts appointment as a preferred Retail distributor of
Product to Outpatient Customers in the Territory on a Retail
AOB basis. Centocor expressly reserves the right to sell
Product to wholesalers, wholesale specialty distributors,
hospitals, pharmacy benefit managers and other third parties,
to sell Product directly and to appoint other distributors,
retail or otherwise, inside and outside of the Territory.
Centocor shall provide Nova Factor with written notice at
least ninety (90) days prior to the effective date of any
agreement between Centocor and a Retail AOB distributor under
which Centocor grants the Retail AOB distributor the right to
provide Product to Outpatient Customers in the Territory on a
Retail AOB basis, which notice shall specify the name of the
other Retail AOB distributor but shall not specify any other
business terms of the Agreement with the other Retail AOB
distributor. If Centocor contracts directly with a Home Care
Delivery Company for Home Care Services, Centocor will notify
Nova Factor of the existence of that contract, but not the
terms and conditions of that contract. Nova Factor will not
promote wholesale distribution and will not sell Product
directly to Infusion Providers unless specifically approved in
writing in advance by Centocor; except Nova Factor may (i)
provide wholesale distribution of Product on a named-Patient
basis for Medicaid Patients in those states listed on Schedule
"B" attached hereto and incorporated herein by reference; and
(ii) provide wholesale distribution on a named-patient basis
to those hospitals or other entities listed on Schedule "C"
attached hereto and incorporated by reference. Schedule "C"
may be amended by Nova Factor with the prior written consent
of Centocor.
2.2 Nova Factor agrees to use commercially reasonable efforts to
market, sell and distribute the Product to managed care
payors, and to work with Centocor's marketing team, including
without limitation, outside contract sales representatives, if
any, during the terms of this Agreement to distribute the
Product in the Territory in an effective and diligent manner.
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3. ORDERS, DELIVERY
3.1 The parties hereto agree that, commencing upon the date hereof
and continuing during the term of this Agreement, Centocor
will sell the Product to Nova Factor for resale by Nova Factor
in the Territory and Nova Factor shall purchase Product from
Centocor at the Purchase Price, subject to the right of
Centocor to allocate supplies of Product under Section 3.5
specified herein. Nova Factor shall order Product from
Centocor in such quantities as are necessary to meet the
demand for Product from Nova Factor's Outpatient Customers
provided that Nova Factor will keep a minimum stock of Product
equal to an average of two (2) weeks total sales to Outpatient
Patient Customers, which average shall be based on the
previous two (2) months sales of Product by Nova Factor. All
purchases of Product by Nova Factor shall be in accordance
with SOPs, and in accordance with the terms and conditions set
forth in this Agreement.
3.2 Centocor shall cause LHSI to ship Product to Nova Factor FOB
Point of Origin. Product shall be transported from the LHSI
warehouse facility to the Facility by means of transportation
selected by Centocor. Centocor will prepay all freight costs
incurred to ship Product from LHSI to Nova Factor's Facility.
Title to Product shall transfer to Nova Factor upon delivery
of Product to the carrier. Nova Factor will pay any costs due
to special shipping requests made by Nova Factor. Centocor may
ship Product in installments as it deems advisable or
necessary, in accordance with SOPs. Risk of loss of Product
will remain with Centocor during transit from LHSI to the
Facility and will transfer to Nova Factor upon delivery of
Product to the Facility.
3.3 Product supplied to Nova Factor hereunder shall be in final
labeled and packaged vials. Nova Factor shall unload each
shipment of Product immediately upon receipt at the Facility.
Nova Factor shall carefully examine Products upon delivery and
shall immediately notify Centocor's Customer Service
Department and the carrier by phone or fax of any claim of
non-delivery of a portion of a shipment or any defect or
damage in any Product which is reasonably discoverable upon
visual inspection of the Product without unloading individual
shipping units. Along with notice of any defect or damage,
Nova Factor shall furnish to Centocor a detailed written
description of the nature of the defect or damage. In the
event of any such claim, Nova Factor shall hold the Product
pending receipt of Centocor's instruction concerning
disposition and permit Centocor to inspect the Product upon
request. Centocor agrees to provide such instruction promptly.
Upon receipt of notice of any defect or nondelivery, Centocor,
at its option, shall replace or repair any defective Product,
in accordance with the Centocor Wholesaler Returned Goods
Policy
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attached hereto as Schedule "D" and incorporated herein by
reference, as amended from time to time. The Product will be
deemed to have been received in good condition unless Nova
Factor notifies Centocor to the contrary within five (5)
business days of opening the shipment container but in no
event later than twenty-one (21) calendar days following
receipt by Nova Factor. Nova Factor shall, at Centocor's
expense, follow Centocor's instructions to return to
Centocor, LHSI or a third party disposal company designated
by Centocor, any Products delivered to Nova Factor which are
not in compliance with Centocor's FDA approved quality
assurance specifications. Nova Factor shall cooperate with
Centocor in investigating the cause of any suspected defect
in Product.
3.4 Nova Factor shall not alter Product packaging without
Centocor's written consent (except to remove Product from the
shipping containers) and shall not alter Product labeling
except to add a prescription label to Product, as permitted by
applicable law. Nova Factor shall at all times comply with the
SOPs and information and recommendations otherwise
communicated by Centocor in writing with respect to storage,
handling and shipment of Products (including storage of
Product at 2-8 degrees Celsius, if requested by Centocor),
provided that if such information and recommendations are
materially different than those otherwise set forth in the
SOPs and result in a material increase in the costs incurred
by Nova Factor in performing its obligations under this
Agreement, the parties shall negotiate in good faith an
adjustment to the Purchase Price set forth in Section 8.1.
Nova Factor shall pay for all costs associated with storage,
handling and shipment of Product from the Facility.
3.5 Notwithstanding anything herein to the contrary, in the event
of a shortage of Product, Centocor shall allocate available
supplies of Product in such manner that Nova Factor is treated
as well as Centocor's other direct customers in the Territory
as determined by Centocor. If Centocor is not able to supply
Product to Nova Factor in the quantities ordered by Nova
Factor for more than four (4) weeks on any occasion during the
term of this Agreement because of a Product shortage caused by
factors other than the market demand exceeding Centocor's full
capacity to produce Product (including, but not limited to,
factors such as an FDA recall due to negligence or intentional
wrongdoing of Centocor, major plant shutdown, or similar
event), Nova Factor shall have the right to terminate this
Agreement upon thirty (30) days written notice.
3.6 Notwithstanding Section 3.5 above, should the FDA quarantine
the Product, Centocor shall have thirty (30) days from the
date of receipt of notice of quarantine from the FDA to cure
the quarantine. In the event Centocor has not cured the
quarantine within thirty (30) days after receipt of notice of
quarantine from the FDA, Nova Factor may terminate this
Agreement upon expiration of an additional thirty (30) day
notice period.
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4. CUSTOMER ORDERS AND IN-OFFICE DELIVERY
4.1 Centocor will provide such marketing, sales and
patient/physician education materials to be distributed by
Nova Factor as shall be deemed necessary by Centocor to
promote the Product. Relevant Patient and Infusion Provider
marketing and sales literature distributed by Centocor's sales
force will describe the AOB program offered through Nova
Factor (as described in this Agreement), and will contain a
Nova Factor toll-free number as the point of contact for
enrollment in such program. Centocor and Nova Factor shall
mutually agree on the description of Nova Factor to be used in
Centocor's sales, marketing, and patient/physician educational
materials. Nova Factor shall maintain such telephone and fax
lines dedicated to calls from customers for Product as it
determines to be needed to service these customers.
4.2 In accordance with a Physician's prescription, Nova Factor
shall ship Product and the appropriate infusion-related
medical supplies listed in Schedule "E" attached hereto and
incorporated herein by reference, to Outpatient Customers at
any office or other location at which the Patient will receive
infusion, such as a hospital, clinic, or infusion center, all
as designated by the Outpatient Customer, via Federal Express
standard overnight delivery service or another mutually agreed
to overnight carrier in accordance with SOPs and at no cost to
Centocor. Schedule "E" may be modified or changed by mutual
written agreement of Centocor and Nova Factor. Nova Factor
shall have sole responsibility for purchasing and shipping the
infusion-related medical supplies for the Product at no cost
to Centocor. Nova Factor shall use its best efforts to ship
Product so that Product having the earliest expiration date is
shipped first from available inventory. Nova Factor shall
track each shipment of Product to each Outpatient Customer and
confirm receipt in accordance with SOPs.
4.3 Nova Factor will, upon the request of the Outpatient Customer,
work with personnel to coordinate plans for outpatient Product
administration for Patients. Nova Factor will provide written
and telephone assistance regarding home administration of the
Product to Patients.
4.4 Nova Factor will provide the following services to each
Outpatient Customer requesting Product from Nova Factor: Nova
Factor will reasonably investigate whether the Patient
qualifies for AOB Services in accordance with Section 4.7 of
this Agreement. If the Patient qualifies for AOB Services,
Nova Factor will provide such AOB Services in accordance with
Sections 4.5 through 4.9 of this Agreement. If the Patient
does not qualify for AOB Services because the Patient's health
insurer/governmental program/third party payor does not
utilize Nova Factor as a pharmacy, Nova Factor will transfer
the Patient's prescription
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to the pharmacy designated by the Patient's health
insurer/governmental program/third party payor with Triage
Services in accordance with Sections 5.1 and 5.2 of this
Agreement. If, after reasonable efforts (as defined in
Section 4.7), Nova Factor cannot obtain Insurance Benefits
for Product requested by an Outpatient Customer, Nova Factor
will refer the Outpatient Customer to Documedics in
accordance with Section 4.7 of this Agreement.
4.5 In Retail transactions, Nova Factor will obtain an AOB from
the Outpatient Customer and will xxxx the Outpatient
Customer/insurance company/ governmental program/other third
party payor in Nova Factor's name. Nova Factor shall use
reasonable efforts to obtain reimbursement clearance, if
necessary, for anticipated subsequent orders from an
Outpatient Customer prior to actual receipt of the subsequent
order.
4.6 Nova Factor will use its Retail AOB service model ("AOB
Services") to distribute the Product to Outpatient Customers.
Nova Factor will offer a toll-free phone number where health
care professionals in clinics, physician's offices, infusion
centers, or home care can:
- identify whether Patients have Insurance Benefits for
the Product;
- coordinate timely delivery of Product and supplies;
- arrange to have Product billed directly to the
Outpatient Customer's insurance company/ governmental
program/other third-party payor.
Nova Factor Retail AOB Services will include the following:
A. Reimbursement services.
1. Accepting Patient referrals by toll free
phone call or fax.
2. Verification of Patient's Insurance Benefit.
3. Use reasonable efforts to obtain prior
authorization for therapy and other
supporting documentation.
4. Initiating requests for formulary status or
medical review on a Patient specific basis.
5. Explaining the Outpatient Customer's
Insurance Benefits and their responsibility
to the appropriate party.
6. Accepting the Outpatient Customer's AOB,
which includes consent for therapy, release
of medical records, and acknowledgement of
financial responsibility.
7. Filing insurance claims on the Outpatient
Customer's behalf.
8. Use reasonable efforts to collect from the
Outpatient Customer's insurance
company/governmental program/third party
payor.
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9. Use reasonable efforts to appeal denied
claims.
10. Use reasonable efforts to collect Outpatient
Customer's copayments and deductibles.
11. Coordination of Insurance Benefits with
Outpatient Customer's secondary insurance.
B. Pharmacy services.
1. Obtaining the prescription for the Product.
2. Filling the prescription and labeling the
medications in compliance with state
pharmacy laws.
3. Providing current information about Product
administration procedures.
4. Coordinating planned delivery times with the
administration site so that the Product is
available in time for the Outpatient
Customer's infusion appointment.
5. Shipping the Product to the administration
site, and following up via the Federal
Express tracking system to confirm receipt.
6. Providing information about procedures for
Product administration to healthcare
professionals.
7. Providing information about the Product for
the Outpatient Customer.
8. Computerized next shipment scheduling
capability for follow-up doses.
9. Follow-up calls to the prescriber to arrange
the next doses of Product.
C. Managed care sales support.
1. Contracting with various payor groups,
Health Maintenance Organizations, Preferred
Provider Organizations, PBM organizations,
PPM organizations or indemnity insurance
carriers to obtain in-network
provider status.
2. Identifying patients with closed networks or
for whom Nova Factor is out-of-network and
follow-up of these contracting
opportunities.
3. Collaboration with the Centocor managed care
sales force through sharing of information
to achieve formulary status for the Product
and to gain network provider status to Nova
Factor.
4.7 Nova Factor will use reasonable effort to attempt to obtain
Insurance Benefits for all FDA approved indications for the
Product. For all referrals for non-FDA approved indications
for the Product, Nova Factor will refer the Patient to
Documedics for reimbursement clearance. Patients
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referred to Documedics for non- FDA approved indications for
reimbursement assistance will be referred back to Nova
Factor for Retail AOB Services once reimbursement clearance
is obtained.
4.8 Nova Factor shall incur all billing and collection costs
associated with its sale of Product.
4.9 Nova Factor shall pay for all costs associated with
distribution and delivery of Product to its Outpatient
Customers.
5. TRIAGE AND PATIENT-RELATED SERVICES
5.1 Nova Factor will accept referrals for the retail AOB Services
program, and will perform insurance verification. If Nova
Factor is in-network for the Patient's health plan, Nova
Factor will serve the Patient directly through Retail AOB
Services. If Nova Factor is not in-network due to either a
closed network, lack of network affiliation, or requirements
for an in-state provider, Nova Factor will refer the
Outpatient Customer to the in-network provider designated by
the Patient's health insurer/governmental program/other third
party payor.
5.2 Reimbursement services will include accepting the referral and
collecting patient demographic information, following up with
the patient for additional information (prescription, drug
card, secondary insurance), contacting the insurance carrier
to verify benefits, obtaining prior authorization when
permitted, and notifying the patient of his or her insurance
benefits and financial responsibility. The triage process
includes contacting the in-network provider, transferring the
prescription by phone or fax as required by State Pharmacy
laws, and following up with the Infusion Provider to let
prescriber know who will be providing services ("Triage
Services"). Nova Factor will use Triage Services only for FDA
approved indications for the Product.
6. OTHER SERVICES
6.1 Nova Factor shall provide a licensed pharmacist, who is
properly trained to answer Product-related questions or
requests for emergency supplies of Product, to answer
telephone questions relating to the Product posed by doctors
and/or Outpatient Customers (i) from 9:00 A.M. to 6:00 P.M.
E.S.T., Monday through Friday, except legal holidays, for
routine calls and (ii) twenty-four hours (24) per day for
emergency calls. Nova Factor will not handle requests for
clinical information outside of the scope of Nova Factor's
usual pharmacist counseling which will be limited to
information covered in the Product package insert. Nova Factor
shall pay for all costs associated with the services provided
pursuant to this Section 6.1.
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7. DATA AND REPORTS
7.1 Nova Factor shall maintain in a separate, Centocor-specific
database (the "Database") the information specified in
Schedule "F" attached hereto and incorporated herein by
reference, for each customer and each order. In addition,
Nova Factor shall maintain in the Database, by Outpatient
Customer, any information Centocor reasonably requests Nova
Factor to track to the extent that collection of such other
information will not result in a material increase in the
costs incurred by Nova Factor in performing its obligations
under this Agreement.
7.2 As permitted by law, Nova Factor shall generate and furnish to
Centocor electronic or written reports at a mutually agreed
upon frequency from the Database as specified in Schedule "G"
attached hereto and incorporated herein by reference and such
other reports as Centocor may from time to time reasonably
request to the extent that generation of such other reports
will not result in a material increase in the costs incurred
by Nova Factor in performing its obligations under this
Agreement. The reports shall identify Outpatient Customers
only by number and not by name. Physician-level data will be
provided, as specified, on a named basis. Reports shall
include, without limitation, the following information:
physician name, physician practice name, practice address,
Patient number and Patient diagnosis.
8. PRICE, PAYMENT
8.1 Nova Factor shall purchase Product from Centocor at a price
per vial of Centocor AWP minus Twenty-Six and Two Tenths
Percent (26.2%) of Centocor AWP ("Purchase Price"). Any
changes in Purchase Price will be effective upon written
notice to Nova Factor. Nova Factor shall have the sole
responsibility and authority for determining the price at
which it will sell Product to its Outpatient Customers.
8.2 Nova Factor shall prepare and provide to Centocor forty-five
(45) days after the end of each calendar quarter, a calendar
quarterly report in the format set forth in Schedule "H"
attached hereto and incorporated herein by reference, which
report will show the ratio of Bad Debt to Nova Factor sales of
Product for the calendar quarter and the ratio of Contractual
Allowances to Nova Factor sales of Product for the calendar
quarter. If the ratio of Bad Debt plus Contractual Allowances
to Nova Factor sales of Product for any calendar quarter after
June 30, 1999 exceeds Thirteen and Forty-Two One Hundredths
Percent (13.42%), plus or minus one (1%) percent, Centocor
agrees to renegotiate the Purchase Price. For purposes of this
Section 8.2, "Nova Factor Sales" shall be defined as the Total
Number of Product Units sold to Outpatient Customers in the
Territory on a Retail AOB basis multiplied by the AWP
effective at the time
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of transaction.
8.3 All amounts due under Section 8.1 above are payable by
electronic funds transfer to Centocor in US Dollars. Centocor
shall invoice upon shipment to Nova Factor for all amounts due
hereunder. Payment by Nova Factor shall be invoiced less two
percent (2%) off invoice amount if paid within thirty (30)
days from the date of the invoice and net invoice if paid on
or after thirty-one (31) days.
8.4 Centocor shall pay Nova Factor for Triage Services provided
under Section 5 of this Agreement an amount equal to
Thirty-Nine United States of America Dollars (US $39.00) per
patient, including both reimbursement and Triage Services.
Nova Factor shall invoice Centocor monthly for this amount and
all billed amounts are due within thirty days of the date of
receipt of invoice by Centocor.
8.5 Except as otherwise expressly set forth herein, Nova Factor
shall be responsible for all costs and expenses associated
with fulfilling its obligations under this Agreement,
including reimbursement and AOB Services.
8.6 All Product prices (including Purchase Price) are exclusive of
federal, state and local excise, sales, use and other taxes
levied or imposed on the sale, shipment, delivery, ownership,
possession or resale of Product or any other activities
contemplated under this Agreement. Except for taxes on
Centocor's income, Nova Factor shall be liable for and pay all
taxes imposed in connection with the activities contemplated
hereunder.
8.7 The parties recognize that Nova Factor will incur significant
costs for start-up of its distribution program for the
Product. Centocor has asked that Nova Factor proceed with
preparing to distribute the Product prior to finalizing this
Agreement and Nova Factor has incurred or will incur these
expenses only upon the condition that Centocor agrees to
reimburse Nova Factor for these expenses. Centocor agrees that
it will pay for the reasonable start-up costs of Nova Factor
equal to a total payment of Sixty- Five Thousand Dollars
($65,000.00). For purposes of this paragraph, start-up costs
include those reasonable costs incurred by Nova Factor for (i)
activities performed by Nova Factor pursuant to this Agreement
to facilitate Nova Factor's first sale of Product; and (ii)
activities reasonably required of Nova Factor to begin
providing those services required of Nova Factor under this
Agreement. These start-up costs will be paid by Centocor
thirty (30) days after this Agreement is signed by both
parties. No portion of these costs will be refunded to
Centocor regardless of when or why this Agreement may be
terminated.
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9. REPLACEMENT AND RETURNS
9.1 In the event Nova Factor, or a Nova Factor Outpatient
Customer, returns or requests to return a Product, Centocor
will accept return of such Product and replace, or give a
credit to Nova Factor for, the Product in accordance with the
Centocor Wholesaler Return Goods Policy, attached hereto as
Schedule "D", and incorporated herein by reference, as amended
by Centocor from time to time. Centocor will accept such
returns of Product under such policy from, and provide
replacement Product or credit to, only Nova Factor. Nova
Factor shall be solely responsible for returns of Product
from, and replacements and/or credits for Product to, Nova
Factor Outpatient Customers.
10. ADVERSE EVENT REPORTING AND CUSTOMER COMPLAINTS
10.1 Nova Factor will not be responsible for FDA reporting of
Adverse Events. Nova Factor will comply with those policies
and instructions concerning adverse events which are set out
on Schedule "I" attached hereto and incorporated herein by
reference. Nova Factor will immediately report to Centocor any
Product problems such as defective or mislabeled Product.
11. SUSPENSION OF DISTRIBUTION AND RECALLS
11.1 If requested by Centocor as the result of a problem with
Product quality or directive from the FDA, Nova Factor shall
suspend distribution of Product. If the suspension continues
for more than four (4) weeks, Centocor will repurchase the
Product held in inventory by Nova Factor at the Purchase Price
paid by Nova Factor including all contractual discounts, Nova
Factor will ship the repurchased Product to Centocor at
Centocor's expense and Nova Factor shall have the right to
terminate this Agreement upon thirty (30) days written notice.
11.2 Centocor shall promptly notify Nova Factor of any recalls of
Product initiated by Centocor or required by the FDA. Upon
receipt of notice of a recall of Product from Centocor, Nova
Factor shall notify as appropriate the affected customers.
Centocor shall provide Nova Factor with the form of letter to
be used in connection with notice of any recall which shall
contain the appropriate instructions as to whether the
customer should return or dispose of the affected Product.
Centocor shall be responsible for the mailing, shipping and
reasonable administrative expenses incurred by Nova Factor in
connection with the recall as well as the cost of replacement
Product for Nova Factor's customers, provided that the reason
for the recall does not arise from (i) the negligence or
intentional misconduct of Nova Factor or any of its agents or
employees or (ii) failure of Nova Factor to comply with the
terms of this Agreement. Nova Factor
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shall cooperate in any recalls by providing Product tracking
information reasonably requested by Centocor.
11.3 Nova Factor shall maintain for two (2) years after termination
or expiration of this Agreement such information as shall be
reasonably required by Centocor to effect a Product recall
after termination or expiration of this Agreement, and shall
make such information available to Centocor, at Centocor's
request, in the event of such a recall.
11.4 Nova Factor shall cooperate with Centocor in investigating any
Product failure which resulted in the need for a recall.
12. REPRESENTATIONS, WARRANTIES AND COVENANTS OF NOVA FACTOR
12.1 Nova Factor is a corporation duly organized, validly existing
and in good standing under the laws of the State of Tennessee.
12.2 In performing its obligations under this Agreement, Nova
Factor shall comply with all applicable laws and regulations,
including federal and state pharmacy laws, laws relating to
the disposal of pharmaceutical products and hazardous wastes,
to the extent disposal of Product is Nova Factor's
responsibility under this Agreement, and all applicable
professional and industry standards and good business
practices.
12.3 Nova Factor represents and warrants that it is currently
eligible to participate as a provider in the Medicaid program
in each state in the Territory except those states listed on
Schedule "J", attached hereto and incorporated herein by
reference, and covenants that it will maintain such
eligibility during the term of this Agreement. Nova Factor may
amend Schedule "J" in its sole discretion to add additional
states and shall provide Centocor with prompt notice of any
such amendment, provided that Nova Factor shall not add any
state to Schedule "J" unless that state has changed its laws
to require an in-state pharmacy presence for eligibility in
its Medicaid program. Nova Factor shall remove a state from
Schedule "J" (and shall provide notice to Centocor of such
removal) when the state no longer requires an in-state
pharmacy presence for the eligibility in the state's Medicaid
program.
12.4 Nova Factor covenants that it shall not take any action which
would materially adversely affect its standing or that of
Centocor in the pharmaceutical industry or with respect to
Product customer base or which would undermine the image of
Product.
14
12.5 Nova Factor represents and warrants that it now has and shall
maintain in full force during the term of this Agreement all
federal and state pharmacy, wholesaler, retailer and other
licenses or approvals required by Nova Factor to fulfill its
obligations under this Agreement, except as otherwise set
forth in Section 12.3, and except that Nova Factor shall not
be required to maintain its licenses in any state which amends
its laws and regulations to require an in-state pharmacy
presence as a requirement for licensing if the new requirement
would materially increase the costs incurred by Nova Factor in
performing its obligations under this Agreement. Nova Factor
covenants that it shall provide Centocor with notice of any
communications with pharmacy licensing boards which relate to
potential problems with facilities, operations or procedures
used by Nova Factor in its distribution of Product, including
notices of inquiries, investigations or inspections and
resulting findings.
12.6 Nova Factor covenants that it shall not make any performance
claims or engage in any promotional activities with respect to
Product except for the distribution of Product literature
prepared by Centocor and any other activities expressly
approved by Centocor.
12.7 Nova Factor shall not use the trademarks or tradenames of
Centocor except to the extent contained in Product literature
provided by Centocor and on Product labels or as otherwise
approved by Centocor.
12.8 Nova Factor represents and warrants that it has the authority
to enter into this Agreement and that its execution of this
Agreement and its performance of its obligations hereunder
will not conflict with and is not prohibited by any other
agreement to which Nova Factor is a party.
12.9 No consent, approval, order of authorization of, or
registration, qualification, designation, declaration or
filing with, any federal, state or local government authority
is required in connection with the consummation by Nova Factor
of the transactions contemplated by this Agreement.
12.10 Nova Factor covenants to Centocor that it will: (i) comply
fully with all laws applicable to Nova Factor and its
activities under this Agreement; (ii) notify Centocor in
writing of any material civil, criminal or administrative
action brought against Nova Factor, its directors, officers,
employees or agents which is likely adversely to affect Nova
Factor's ability to perform its obligations under this
Agreement, and promptly to provide Centocor with reasonably
detailed information regarding Nova Factor's handling and
disposition of any such action; and (iii) not initiate any
voluntary communications with regulatory agencies relating to
the Product without Centocor's prior knowledge.
15
13. REPRESENTATIONS AND WARRANTIES OF CENTOCOR
13.1 Centocor is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of
Pennsylvania.
13.2 Centocor shall not use the trademark or tradenames of Nova
Factor except to the extent necessary for activities
contemplated under this Agreement.
13.3 Centocor shall be responsible for testing Product and ensuring
that Product complies, when shipped to Nova Factor, with all
applicable laws, regulations, directives and requirements of
the FDA, including without limitation, standards of identity,
strength, quality and purity, packaging and labeling
requirements, product warning requirements, product design and
safety requirements and advertising requirements.
13.4 Centocor represents that it has the authority to enter into
this Agreement and that its execution of this Agreement and
its performance of its obligations hereunder will not conflict
with and is not prohibited by any other Agreement to which
Centocor is a party.
13.5 No consent, approval, order of authorization of, or
registration, qualification designation, declaration or filing
with, any federal, state or local government authority is
required in connection with the consummation by Centocor of
the transactions contemplated by this Agreement, other than
the commercial marketing approval for the Product discussed in
the second recital of this Agreement.
13.6 Centocor covenants to Nova Factor that it will: (i) comply
fully with all laws applicable to Centocor and its activities
under this Agreement; (ii) notify Nova Factor in writing of
any material civil, criminal or administrative action brought
against Centocor, its directors, officers, employees or agents
which is likely adversely to affect Centocor's ability to
perform its obligations under this Agreement, and promptly to
provide Nova Factor with reasonably detailed information
regarding Centocor's handling and disposition of any such
action; and (iii) notify Nova Factor after Centocor's
voluntary communications with regulatory agencies which may
materially affect Centocor's ability to perform its
obligations under this Agreement.
14. DISCLAIMER AND LIMITATION OF REMEDIES
14.1 EXCEPT AS STATED IN SECTIONS 13.3, 13.4, 13.5 and 13.6 OF THIS
AGREEMENT, CENTOCOR MAKES NO WARRANTY, EXPRESS OR IMPLIED,
REGARDING THE PRODUCT SOLD TO NOVA FACTOR.
16
14.2 Except for Section 17.1, Nova Factor's sole and exclusive
remedy for delivery of defective or nonconforming Product will
be to receive credit or like quantity of replacement goods,
upon the return of defective or nonconforming Product. Under
no circumstances will Centocor be liable for any incidental or
consequential damages based on Product purchased by Nova
Factor.
15. TERM AND TERMINATION
15.1 The Agreement will be for a three (3) year term and will
automatically renew from year to year thereafter unless either
party should terminate the Agreement upon notice as set forth
below.
15.2 Either party may terminate this Agreement for any reason, at
any time upon ninety (90) days prior written notice.
15.3 Upon receipt or delivery of a termination notice or ninety
(90) days prior to the expiration of this Agreement at the end
of the term, as applicable, the parties shall begin to
transition distribution of Product for Nova Factor's customers
to a party to be designated by Centocor. Transition of
distribution under this section shall mean the following:
(i) At Centocor's request, Nova Factor shall provide
written notice to all of Nova Factor's customers of
the change in distributors; and
(ii) Nova Factor shall transfer a copy of the Database and
customer information including prescription files to
Centocor, provided, that if the applicable patient
confidentiality laws prohibit transfer of the
customer's name to Centocor, Nova Factor shall
transfer the Database and customer information using
customer numbers instead of names; and
(iii) Nova Factor's obligation to order additional Product
shall cease and Centocor shall repurchase any Product
held in inventory by Nova Factor within sixty (60)
days after the date of termination at the price paid
for the Product by Nova Factor. All such inventory
shall be returned to Centocor at Centocor's cost.
15.4 Sections 9, 10, 11, 14, 15, 16, 17, 18 and 22.9 shall survive
termination or expiration of this Agreement.
17
16. REGULATORY, INSPECTIONS, AUDITS
16.1 Nova Factor shall provide to Centocor all documents and
information requested by the FDA or by Centocor in support of
its regulatory filings. Copies of all documents to be provided
to the FDA shall be provided to Centocor in advance, if
practicable, or otherwise within two (2) business days of
delivery to the FDA. Nova Factor shall notify Centocor
immediately upon receipt of notice of any inspection by the
FDA directed specifically toward Product, and Centocor shall
have the right to have an employee present at any such
inspection, if allowed by law. In addition, Nova Factor shall
notify Centocor of any FDA correspondence or inspections that
concern Nova Factor generally and which are not related to a
non-Centocor product. Nova Factor shall notify Centocor
immediately of any notices, requests for information or other
communications related to Product from the U.S. Department of
Health and Human Services or any other government agency or
any state healthcare program or other state agency and to the
extent permitted under the applicable law, shall give Centocor
copies of such communication.
16.2 Nova Factor shall provide to Centocor, at Centocor's request,
any information reasonably required in connection with
Centocor investigations relating to recalled or returned
Product or any requests or investigations by or filings with
governmental bodies, including the FDA or in support of
Centocor's applications to the FDA. Nova Factor shall respond
within two (2) business days to any reasonable requests for
information by Centocor.
16.3 Nova Factor shall from time to time submit to inquiries,
audits and inspections by Centocor during normal business
hours or at any other time during which the services being
audited are ongoing, including but not limited to, audits of
regulatory and quality assurance standard operating procedures
and FDA correspondence referenced in Section 16.1 above.
Centocor shall give Nova Factor at least two (2) business days
prior notice of any audit or inspection and shall bear the
costs of such audit or inspection.
16.4 Nova Factor shall permit Centocor's auditors, or its
designated representatives to have reasonable access, upon
five (5) business days prior written notice to Nova Factor and
during normal business hours, to Nova Factor's financial books
and records as may be reasonably necessary to verify all
documentation and/or address any financial issues regarding
the Product and services provided under this Agreement.
17. INDEMNIFICATION
18
17.1 Centocor shall at all times during the term of this Agreement
and thereafter, defend, indemnify and hold Nova Factor and its
officers, directors, agents and employees harmless from and
against any and all claims, suits, damages, liabilities, costs
and expenses, including but not limited to court costs and
reasonable attorney's fees, incurred in connection with any
third-party claim arising out of the use of any Product,
except to the extent caused by or based upon (i) the
negligence or intentional misconduct of Nova Factor or any of
its officers, directors, agents and employees or (ii) the
breach by Nova Factor of any of the terms of this Agreement.
17.2 Nova Factor shall at all times during the term of this
Agreement and thereafter, defend, indemnify and hold Centocor
and its officers, directors, agents and employees harmless
from and against any and all claims, suits damages,
liabilities, costs and expenses, including but not limited to
court costs and reasonable attorney's fees, incurred in
connection with any third-party claim arising out of the (i)
negligence or intentional misconduct of Nova Factor or any of
its officers, directors, agents and employees or (ii) breach
by Nova Factor of any of the terms of this Agreement.
17.3 A party seeking indemnification under this Section shall give
prompt notice of the claim to the other party and, provided
that the indemnifying party is not contesting the indemnity
obligation, shall permit the indemnifying party to control any
litigation relating to such claim and disposition of any such
claim, provided that the indemnifying party shall act
reasonably and in good faith with respect to all matters
relating to the settlement or disposition of any claim as the
settlement or disposition relates to the parties being
indemnified under this Section and the indemnifying party
shall not settle or otherwise resolve any claim without prior
notice to the indemnified party. The indemnified party shall
cooperate with the indemnifying party in its defense of any
claim for which indemnification is sought hereunder.
17.4 In no event shall Nova Factor be liable for loss of profit or
any other incidental or consequential damages to Centocor.
17.5 In no event shall Centocor be liable for loss of profit or any
other incidental or consequential damages to Nova Factor.
18. CONFIDENTIALITY
18.1 Nova Factor agrees to treat any confidential or proprietary
information obtained from Centocor and any confidential or
proprietary information generated by Nova Factor in performing
its obligations under this Agreement, including, but not
limited to, information regarding Centocor's
19
pricing policies and reimbursement for the Product,
information regarding the cost of providing services to
Centocor, the Database, the information in the Database, and
anything derived therefrom, (collectively, the "Centocor
Information") as the confidential and exclusive property of
Centocor, and agrees not to disclose any of the Centocor
Information to any third party without first obtaining the
written consent of Centocor. Notwithstanding this provision,
Nova Factor may disclose Centocor Information to Nova
Factor's accountants, bankers, auditors, and attorneys on an
as needed basis and may also disclose such information in
response to requirements of law or governmental regulations
or in response to subpoena or other lawful process. Nova
Factor may provide Patient usage data to managed care
organizations, but may not provide pricing, discount or
other information relating to Product acquisition cost. Nova
Factor agrees that it will use any Centocor Information only
for purposes of performing its obligations hereunder and for
no other purpose without the prior written consent of
Centocor. Nova Factor further agrees to take all practicable
steps to ensure that the Centocor Information will not be
used by its directors, officers, or employees, except on
like terms of confidentiality as aforesaid, and will be kept
confidential by them.
The above provisions of confidentiality shall not apply to
that part of the Centocor Information which Nova Factor is
able to demonstrate by documentary evidence:
(a) was in Nova Factor's possession prior to receipt from
Centocor; or
(b) was generally available to the public at the time of
receipt from Centocor; or
(c) became generally available to the public through no
fault of Nova Factor, its directors, officers, or
employees; or
(d) was lawfully received by Nova Factor from some third
party not disclosing the information on behalf of
Centocor and having a right of further disclosure; or
(e) is required by law to be disclosed, provided that
Nova Factor notifies Centocor prior to any such
disclosure so as to permit Centocor to oppose same by
appropriate legal action.
Nova Factor agrees that, at Centocor's request, it shall
return to Centocor all parts of the Centocor Information
existing in documentary form, not including pharmacy records,
and will, at Centocor's request, return or destroy any copies
thereof made by Nova Factor, its directors, officers or
employees except that Nova Factor shall retain a copy of the
Database, subject to the ongoing obligation of
confidentiality. Nova Factor shall not
20
dispose of the information in the Database without first
offering in writing, given at least sixty (60) days prior to
such disposal, to deliver the information to Centocor.
18.2 Centocor agrees to treat confidential or proprietary
information obtained from Nova Factor, (not including the
Database, or information about insurers' reimbursement
policies with respect to Product) and anything derived
therefrom, (collectively, the "Nova Factor Information") as
the confidential and exclusive property of Nova Factor, and
Centocor agrees not to disclose any of the Nova Factor
Information to any third party without first obtaining the
written consent of Nova Factor, provided that Centocor may
disclose Nova Factor Information to any third party
providing reimbursement related services to Centocor as long
as the third party is obligated to Centocor to keep such
information confidential. Notwithstanding this provision,
Centocor may disclose Nova Factor Information to Centocor's
accountants, bankers, auditors, and attorneys on an as
needed basis and may also disclose such information in
response to requirements of law or governmental regulations
or in response to subpoena or other lawful process. Such
confidential information shall include, but shall not be
limited to, FDA files, training materials, methods of doing
business, financial information and operating procedures.
Centocor agrees that it will use any Nova Factor Information
only for purposes of activities contemplated hereunder and
for no other purpose without the prior written consent of
Nova Factor. Centocor further agrees to take all practicable
steps to ensure that the Nova Factor Information will not be
used by its directors, officers, or employees, except on
like terms of confidentiality as aforesaid, and will be kept
confidential by them.
The above provisions of confidentiality shall not apply to
that part of the Nova Factor Information which Centocor is
able to demonstrate by documentary evidence:
(a) was in Centocor's possession prior to receipt from
Nova Factor; or
(b) was generally available to the public at the time of
receipt from Nova Factor; or
(c) became generally available to the public through no
fault of Centocor, its directors, officers and
employees, or
(d) was lawfully received by Centocor from some third
party not disclosing the information on behalf of
Nova Factor and having a right of further disclosure;
or
(e) is required by law to be disclosed, provided that
Centocor notifies
21
Nova Factor prior to any such disclosure so as to
permit Nova Factor to oppose same by appropriate
legal action.
Centocor agree that, at Nova Factor's request, it shall return
to Nova Factor all parts of the Nova Factor Information
existing in documentary form and will, at Nova Factor's
request, return or destroy any copies thereof made by
Centocor, its directors,
18.3 Nothing contained herein shall be deemed to grant to either
party any rights or licenses under any patent applications or
patents or to any know-how, technology, inventions or other
intellectual property rights of the other party.
18.4 The obligations of the parties under this Section 18 shall
continue during the term of this Agreement and for a period
ending five (5) years after termination or expiration of this
Agreement.
19. INSURANCE
19.1 Nova Factor agrees (i) to obtain and maintain at its cost and
expense, while this Agreement is in effect, commercial general
liability insurance, including products liability insurance
with coverage limits of not less than $1,000,000.00 per
occurrence; and $3,000,000.00 in the aggregate, and (ii) not
to cancel the insurance or reduce the coverage without giving
at least thirty (30) days prior written notice to Centocor.
Nova Factor shall cause Centocor to be a notice party on each
insurance policy such that Centocor shall receive notice of
any cancellation or change in policy. At the request of
Centocor, Nova Factor shall provide Centocor with a copy of a
certificate of insurance to verify that insurance with the
required coverage is in effect. In the event of cancellation
or termination of the coverage described herein, Nova Factor
shall immediately obtain substitute or replacement coverage.
19.2 Centocor agrees to maintain, at its cost and expense while
this Agreement is in effect, general public liability,
products liability and property damage insurance with coverage
limits of not less than $1,000,000.00 per occurrence; and
$3,000,000.00 per annum aggregate. Centocor shall cause Nova
Factor to be a notice party on each insurance policy such that
Nova Factor shall receive notice of any cancellation or change
in policy. At the request of Nova Factor, Centocor will
provide Nova Factor with a copy of a certificate of insurance
to verify that insurance with the required coverage is in
effect, and shall provide that notice of cancellation of
termination thereof shall be provided in advance to Nova
Factor. In the event of cancellation or termination of the
coverage described herein, Centocor shall immediately obtain
substitute or replacement coverage.
22
20. TRAINING
Nova Factor will prepare a training manual and orientation program for
Nova Factor personnel to familiarize the personnel with the Product and
the market. Any training manual or orientation program regarding the
Product must be approved by Centocor in writing prior to
implementation. Nova Factor shall allow Centocor to audit Nova Factor's
personnel training sessions.
21. NONCOMPETITION
21.1 During the term of this Agreement, Nova Factor shall not
promote, sell or distribute in the Territory another company's
treatment for inflammatory bowel disease, rheumatoid
arthritis, or immediately following such approval, for any
other indication for which the FDA has approved the marketing
and sale of the Product in the Territory, unless agreed to in
writing by Centocor ninety (90) days prior to such promotion,
sale or distribution. After termination of this Agreement for
any reason, Nova Factor shall not promote, sell or distribute
in the Territory another company's treatment for inflammatory
bowel disease, rheumatoid arthritis, or immediately following
such approval, for any other indication for which the FDA has
approved the marketing and sale of the Product in the
Territory for a period of ninety (90) days following the date
of termination.
21.2 In the event Centocor enters into a signed written agreement
which grants a Retail AOB distributor other than Nova Factor
the right to provide Product to Outpatient Customers in the
Territory on a Retail AOB basis, the restrictions of Section
21.1 shall not apply. Nova Factor shall provide Centocor with
written notice at least thirty (30) days prior to the
effective date of any agreement between Nova Factor and
another company promoting, selling or distributing in the
Territory treatment for inflammatory bowel diseases,
rheumatoid arthritis or any other indication for which the FDA
has approved the marketing and sale of the Product in the
Territory.
21.3 In the event the FDA quarantines the Product or requires
recall of the Product from the market in the Territory, the
restrictions of Section 21.1 shall not apply.
22. MISCELLANEOUS
22.1 This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and
assigns, provided that neither party shall have the right to
assign this Agreement or its rights and obligations hereunder
without the prior written consent of the other party, which
such consent shall not be unreasonably withheld, except that
Centocor may assign this Agreement or its rights and
obligations
23
hereunder to its Affiliates or successors in business who
assume and agree to be bound by the terms hereof provided
the entity has demonstrated financial ability to carry out
Centocor's obligations hereunder.
22.2 This Agreement constitutes the entire and only agreement
between the parties relating to the subject matter hereof, and
all prior negotiations, representations, agreements and
understandings are superseded hereby. No agreements amending,
altering or supplementing the terms hereof may be made except
by means of a written document signed by the duly authorized
representatives of both parties.
22.3 Any notice required by this Agreement shall be given by
prepaid, first class, certified mail, return receipt
requested, or by air courier, hand delivery, or facsimile, to
the parties at the following addresses:
If to Centocor:
Centocor, Inc.
000 Xxxxx Xxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
Attn: Corporate Secretary
Fax: (000) 000-0000
If to Nova Factor:
Nova Factor, Inc.
0000 Xxxxxxx Xxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000
Attn: President
Fax: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxx, Xx.
Xxxxxxxxx Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx & Xxxxxx, PLLC
Xxxxxxxx Plaza
00 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000-0000
Fax: (000) 000-0000
Any notice sent under this Section shall be deemed delivered
within five (5) days if sent by mail and within twenty-four
(24) hours if sent by fax, courier or hand delivery.
24
22.4 Neither party shall be liable for any failure or delay caused
by fires, flood, earthquakes, peril of the sea, accidents,
explosions, sabotage, strikes, or other labor disturbances
(regardless of the reasonableness of the demands of labor),
civil commotions, riots, invasions, wars, acts, restraints,
requisitions, regulations, or directions of governmental
authorities, shortages of labor, fuel, power, or raw material,
inability to obtain equipment or supplies, inability to obtain
or delays in transportation, acts of God, or any other cause
beyond its reasonable control ("Force Majeure").
22.5 Headings included herein are for convenience only, and shall
not be used to construe this Agreement.
22.6 For purposes of this Agreement, Nova Factor and its employees
and agents shall not be deemed agents, servants, partners,
joint venturers or employees of Centocor. Thus, they do not
have the authority to take action on Centocor's behalf or to
bind Centocor without Centocor's prior written consent. Nova
Factor, its employees and agents are acting in the capacity of
independent contractors of Centocor. Centocor is not
responsible for withholding, and shall not withhold, FICA or
taxes of any kind from any payments it owes to Nova Factor.
Nova Factor is responsible to provide any and all
compensation, benefits and/or insurance to its employees and
agents. Nova Factor employees and agents are not eligible to
participate in, nor are they eligible for coverage under, any
of Centocor's benefit plans, programs, employment policies,
procedures or workers' compensation insurance.
22.7 If any provision of this Agreement shall be found by a court
to be void, invalid or unenforceable, the same shall either be
reformed to comply with applicable law or stricken if not so
conformable, so as not to affect the validity or
enforceability of this Agreement, except if the principal
intent of the Agreement is frustrated by such reformation or
deletion, in which case this Agreement shall terminate.
22.8 Failure of either party to enforce a right under this
Agreement shall not act as a waiver of that right or the
ability to later assert that right relative to the particular
situation involved or to terminate this Agreement as a result
of any subsequent default or breach.
22.9 Neither Nova Factor nor Centocor shall make any news release
or other public statement, whether to the press,
stockholders or otherwise, disclosing the terms of this
Agreement or of any amendments hereto, or to performance
hereunder or the existence of the arrangement between the
parties without the prior written approval of the other
party, which approval shall not be unreasonably withheld, or
unless required by law.
25
22.10 This Agreement shall be construed and enforced in accordance
with the laws of the Commonwealth of Pennsylvania, excluding
choice of law rules.
22.11 This Agreement may be executed in counterparts, including
counterparts transmitted by facsimile, each of which shall
constitute an original and all of which shall be considered
one and the same Agreement. Counterparts or facsimile copies
executed by Centocor and Nova Factor shall have the same
effect as if the signatures to each counterpart or facsimile
copy were on the same document and copies of such documents
shall be deemed valid as originals. Centocor and Nova Factor
agree to exchange copies of the Agreement with original
signatures as soon as practicable after the execution of the
facsimile copies.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
CENTOCOR, INC. NOVA FACTOR, INC.
By: /s/ Centocor, Inc. By: /s/ Nova Factor, Inc.
------------------- -----------------------
Title: Title:
---------------- -----------------------
Dated: 8/28/98 Dated: 8/28/98
------------------- -----------------------
26
Exhibit 10.38
--------------------------------------------------------------------------------
LOAN AND SECURITY AGREEMENT
DATED AS OF JUNE 5, 1997
AMONG
NOVA HOLDINGS, INC.
AND ITS SUBSIDIARIES
AND
NATIONSBANK OF TENNESSEE, N.A., AND
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
AND
NATIONSBANK OF TENNESSEE, N.A., AS AGENT
--------------------------------------------------------------------------------
NOVA HOLDINGS, INC.
AND ITS SUBSIDIARIES
LOAN AND SECURITY AGREEMENT
DATED AS OF JUNE 5, 1997
TABLE OF CONTENTS
Paragraph Number Page
---------------- ----
I. DEFINITIONS...................................................................................................1
II. THE LOANS...................................................................................................19
2.1 The Revolving Loan Commitments.................................................................19
2.2 Borrowing Notices, Interest Rates and Payments of Interest.....................................20
2.3 Letters of Credit..............................................................................23
2.4 Nonuse Fee.....................................................................................29
2.5 Reduction of Commitment........................................................................30
2.6 Alternate Rate of Interest.....................................................................30
2.7 Change in Circumstances........................................................................30
2.8 Change in Legality.............................................................................32
2.9 Optional Prepayment - Premiums in Certain Events...............................................33
2.10 Payment to the Agent...........................................................................33
III. CONDITIONS PRECEDENT.......................................................................................34
3.1 Documents Required for the Closing.............................................................34
3.2 Requirements for all Subsequent Advances.......................................................36
3.3 Legal Matters..................................................................................37
IV. COLLATERAL SECURITY.........................................................................................37
4.1 Composition of the Collateral..................................................................37
4.2 Rights in Property Held by the Banks...........................................................37
4.3 Rights in Property of the Borrower and Guarantors..............................................37
4.4 Priority of Liens..............................................................................38
4.5 Financing Statements...........................................................................38
4.6 Collection of Receivables......................................................................38
V. REPRESENTATIONS AND WARRANTIES...............................................................................39
5.1 Due Organization and Qualification.............................................................39
5.2 No Conflicting Agreement.......................................................................39
5.3 Capacity.......................................................................................40
5.4 Binding Obligations............................................................................40
5.5 Pledged Stock..................................................................................40
5.6 Litigation.....................................................................................40
5.7 Title..........................................................................................40
5.8 Financial Statements...........................................................................40
5.9 No Additional Indebtedness.....................................................................41
5.10 Taxes..........................................................................................41
5.11 Licenses; Compliance with Laws.................................................................41
5.12 Environmental Compliance.......................................................................41
5.13 Full Disclosure................................................................................42
5.14 Consents.......................................................................................42
5.15 Existing Borrowings............................................................................42
5.16 Material Contracts.............................................................................42
5.17 No Commissions.................................................................................42
5.18 ERISA..........................................................................................42
5.19 Survival.......................................................................................42
VI. AFFIRMATIVE COVENANTS.......................................................................................43
6.1 Use of Proceeds................................................................................43
6.2 Financial Statements and Reports...............................................................43
6.3 Good Condition.................................................................................45
6.4 Insurance......................................................................................45
6.5 Taxes; Copies of Returns.......................................................................45
6.6 Records and Inspection.........................................................................45
6.7 Maintenance of Existence and Business; Licenses................................................46
6.8 Reimbursement Eligibility......................................................................46
6.9 Ordinary Course; Pledge of Notes...............................................................46
6.10 Payment of Indebtedness........................................................................46
6.11 Notice of Litigation or Loss of Licenses.......................................................46
6.12 Notice to Banks of Default.....................................................................47
6.13 Notice of Name Change or Location..............................................................47
6.14 Environmental Compliance.......................................................................47
6.15 Notice of Environmental Action.................................................................48
6.16 ERISA Compliance...............................................................................48
6.17 Financial Ratios...............................................................................48
VII. NEGATIVE COVENANTS.........................................................................................49
7.1 Merger or Reorganization.......................................................................49
7.2 Sale of Assets.................................................................................49
7.3 Encumbrances...................................................................................49
7.4 Debts and Other Obligations....................................................................49
7.5 Untrue Certificate.............................................................................50
7.6 Margin Stock...................................................................................50
7.7 Sale-Leaseback.................................................................................50
7.8 Guarantee Obligation...........................................................................50
7.9 Dividends and Distributions....................................................................50
7.10 Redemptions and Capital Stock..................................................................50
7.11 Prepayments....................................................................................50
7.12 Subsidiary.....................................................................................50
7.13 Loans and Advances.............................................................................51
7.14 Investments....................................................................................51
7.15 Acquisitions...................................................................................51
7.16 Capital Expenditures...........................................................................52
7.17 Accounts Payable...............................................................................52
7.18 Inventory Locations............................................................................53
7.19 Affiliate Transactions.........................................................................53
VIII. DEFAULT...................................................................................................53
8.1 Events of Default..............................................................................53
8.2 Acceleration...................................................................................55
8.3 Remedies.......................................................................................55
IX. THE AGENT..................................................................................................56
9.1 Authorization..................................................................................56
9.2 Standard of Care...............................................................................57
9.3 No Waiver of Rights............................................................................57
9.4 Payments.......................................................................................57
9.5 Indemnification................................................................................58
9.6 Exculpation....................................................................................58
9.7 Credit Investigation...........................................................................58
9.8 Resignation....................................................................................59
9.9 Proration of Payments..........................................................................59
9.10 No Liability For Errors........................................................................60
9.11 Offset.........................................................................................60
X. MISCELLANEOUS................................................................................................60
10.1 Construction...................................................................................60
10.2 Further Assurance..............................................................................60
10.3 Enforcement and Waiver by the Banks............................................................60
10.4 Expenses of the Banks..........................................................................61
10.5 Notices........................................................................................61
10.6 Waiver and Release.............................................................................62
10.7 Indemnification................................................................................62
10.8 Participations and Assignments.................................................................63
10.9 Applicable Laws................................................................................66
10.10 Binding Effect, Assignment and Entire Agreement................................................66
10.11 Severability...................................................................................66
10.12 Counterparts...................................................................................66
10.13 Venue..........................................................................................66
10.14 Waiver of Jury Trial...........................................................................66
SCHEDULE OF EXHIBITS
--------------------
EXHIBIT
-------
A Form of Notes
B Borrowing/Conversion Notice
C Existing Indebtedness and Liens
D Subordinated Indebtedness
E Form of Stock Pledge Agreement
F Form of Guaranty and Suretyship Agreements
G Form of Opinion Letter
H Corporate Matters
(States of Incorporation and Qualification; Stock Ownership)
I Addresses and Inventory Locations
J Litigation and Claims
K Compliance with Laws
L Material Leases, Contracts and Commitments
M Borrowing Base Calculation Certificate
N Compliance Certificate
O Form of Assignment and Acceptance
LOAN AND SECURITY AGREEMENT
---------------------------
THIS LOAN AND SECURITY AGREEMENT is made as of the 5th day of
June, 1997, by and among Nova Holdings, Inc., a Delaware corporation (the
"Borrower"); the Subsidiaries and Guarantors, jointly and severally, as such
term is defined herein; each of the undersigned lenders as the Banks herein; and
NationsBank of Tennessee, N.A. (the "Agent"), individually and as Agent for such
Banks.
W I T N E S S E T H:
--------------------
WHEREAS, Borrower has requested the Banks to lend up to the
sum of Forty Million Dollars ($40,000,000.00), on a revolving loan basis to
refinance certain existing indebtedness owed by a Subsidiary of the Borrower, to
enable certain acquisitions, and for other general corporate purposes, and the
Banks are willing to do so upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and obligations herein contained, and each intending to be
legally bound hereby, the parties agree as follows:
SECTION I. DEFINITIONS
----------------------
As used herein:
"Accounts", "Chattel Paper", "Documents", "Equipment",
"Fixtures", "General Intangibles", "Goods", "Instruments" and "Inventory" shall
have the same respective meanings as are given to those terms in the UCC.
"Acquisition" means any transaction, or any series of related
transactions, by which any Person, in the transaction or as of the most recent
transactions in a series of transactions, directly or indirectly acquires any
going concern or all or a substantial part of the assets of any corporation,
partnership or other entity or any division of any such entity, or any such
entity or any division of such an entity becomes a Subsidiary of such Person.
"Acquisition Advance" means an advance under the Revolving
Loan for a Permitted Acquisition.
"Acquisition Cash Flow" means for any Person who is the
subject of an Acquisition by the Borrower, such Person's net income as
calculated in accordance with generally accepted accounting principles
consistently applied for the four (4) quarters immediately prior to the
anticipated Acquisition date plus Interest Expense, Rental Expense,
depreciation, amortization, federal and state taxes, and such other adjustments
thereto as the Agent may consent to in its sole discretion after consultation
with the Borrower.
"Affiliates" means as to any Person (A) any Person which,
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with
such Person, or (B) any Person who is a director or executive officer (i) of
such Person, (ii) of any Subsidiary of such Person or (iii) of any Person
described in clause (A) above. For purposes of this definition, "control" of
a Person shall mean the power, direct or indirect, (i) to vote or direct the
voting of more than five percent (5%) of the outstanding shares of voting
stock of such Person, or (ii) to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise. In
no event shall any of the Banks be deemed to be Affiliates of the Borrower.
"Agent" means NationsBank of Tennessee, N.A. in its capacity
as agent for the Banks pursuant to Section IX hereof, and not in its individual
capacity as a Bank, and any successor Agent appointed pursuant to Section IX.
"Agreement" means this Loan and Security Agreement, as it may
be amended, restated, renewed or extended from time to time.
"Applicable Lending Office" means, for each Bank and for each
type of Loan, the "Lending Office" of such Bank (or of an affiliate of such
Bank) designated for such type of Loan in Paragraph 10.5 hereof or such other
office of such Bank (or of an affiliate of such Bank) as such Bank may from time
to time specify to the Agent and the Borrower as the office for its Loans of
such type.
"Applicable LIBO Rate Margin" means two and one-half percent
(2.50%) per annum; provided however, that during any fiscal quarter of the
Borrower where the Borrower shall have satisfied the Funded Debt to Cash Flow
ratio test indicated in the table below, then the Applicable LIBO Rate Margin
for the Effective Period (as defined below) shall be the percentage rate per
annum set forth opposite the appropriate test in the table below:
Funded Debt to Cash Flow Applicable LIBO Rate Margin
------------------------ ---------------------------
Greater than 3.0 to 1.0 2.50% per annum
Equal to or Less than 3.0:1.0 and 2.00% per annum
Greater than 2.25:1.0
Equal to or Less than 2.25:1.0 and 1.50% per annum
Greater than 1.5:1.0
Equal to or Less than 1.5 to 1.0 0.75% per annum
The Funded Debt to Cash Flow ratio shall be computed generally as set forth in
Paragraph 6.17(C) with Cash Flow being computed on a rolling four (4) quarter
basis after giving Pro-Forma Effect to any Permitted Acquisition or Indebtedness
associated therewith, and the Applicable LIBO Rate Margin shall be confirmed by
the Agent on the basis of quarter-annual financial statements of the Borrower
delivered to the Banks pursuant to Paragraph 6.2(B) and year end financial
statements delivered pursuant to Paragraph 6.2(C). The "Effective Period" shall
be the period commencing on the first Business Day of the first month following
delivery to the Agent of the financial statements of the Borrower pursuant to
Paragraphs 6.2(B) and 6.2(C), which financial statements indicate that the
applicable test set forth above has been
2
satisfied for the preceding fiscal quarter, and ending on the date that is
three months after such commencement date. At the end of any Effective
Period, the Applicable LIBO Rate Margin shall automatically become two and
one-half percent (2.50%) per annum unless at or prior to such time the next
Effective Period shall have commenced.
"Applicable Prime Rate Margin" means one percent (1.0%) per
annum; provided however, that during any fiscal quarter of the Borrower where
the Borrower shall have satisfied the Funded Debt to Cash Flow ratio test
indicated in the table below, the Applicable Prime Rate Margin for the Effective
Period (as defined below) shall be the percentage rate per annum set forth
opposite the appropriate test in the table below:
Funded Debt to Cash Flow Applicable Prime Rate Margin
------------------------ ----------------------------
Greater than 3.0 to 1.0 1.0% per annum
Equal to or Less than 3.0:1.0 and 0.50% per annum
Greater than 2.25:1.0
Equal to or Less than 2.25:1.0 and 0.00% per annum
Greater than 1.5:1.0
Equal to or Less than 1.5 to 1.0 0.00% per annum
The Funded Debt to Cash Flow ratio shall be computed generally as set forth in
Paragraph 6.17(C) with Cash Flow being computed on a rolling four (4) quarter
basis after giving Pro-Forma Effect to any Permitted Acquisition or Indebtedness
associated therewith, and the Applicable Prime Rate Margin shall be confirmed by
the Agent on the basis of the quarter-annual financial statements of the
Borrower delivered to the Banks pursuant to Paragraph 6.2(B) and year end
financial statements delivered pursuant to Paragraph 6.2(C). The "Effective
Period" shall be the period commencing on the first Business Day of the first
month following delivery to the Agent of the financial statements of the
Borrower pursuant to Paragraphs 6.2(B) and 6.2(C), which financial statements
indicate that the applicable test set forth above has been satisfied for the
preceding fiscal quarter, and ending on the date that is three months after such
commencement date. At the end of any Effective Period, the Applicable Prime Rate
Margin shall automatically become one percent (1.0%) per annum unless at or
prior to such time the next Effective Period shall have commenced.
"Assignment and Acceptance" means an Assignment and
Acceptance, substantially in the form of Exhibit O.
"Bank" means each lending institution and/or Bank listed on
the signature pages of this Agreement and their respective successors and
assigns, and "Banks" means all of such lender(s) and Banks collectively.
"Borrowing Base" means that amount which is equal to three and
one-half times (3.5x) Cash Flow as calculated for the Borrower and its
Subsidiaries over the most recent Borrowing Base Reference Period.
3
"Borrowing Base Adjustment Date" means that date following
each Borrowing Base Reference Period which occurs on the earlier of: (A) the
date on which the Banks actually receive the Borrowing Base calculations from
the Borrower as required by Subparagraph 6.2(D) hereof, or (B) thirty (30) days
after the last day of the previous Borrowing Base Reference Period.
"Borrowing Base Reference Period" means, for any period of
determination, the period of twelve (12) consecutive monthly periods of the
Borrower and/or its Subsidiaries (i.e., rolling 12 months) ending on the last
day of the immediately preceding monthly period. The Borrowing Base Reference
Period when first measured after the date of this Agreement shall be measured
from July 1, 1996 through June 30, 1997 and shall incorporate the preceding 12
months of Acquisition Cash Flow of Horizon.
"Business Day" means any day on which the state banks and
national banking associations in Nashville, Tennessee and New York, New York are
open for the conduct of ordinary business; provided however, that when used in
connection with determining the LIBO Rate or notices in connection therewith,
the term "Business Day" shall also exclude any day on which banks are not open
for dealings in U.S. Dollar deposits in the London Interbank Market.
"Capital Expenditures" means all amounts paid by the Borrower
and its Subsidiaries in connection with the purchase of property, plant,
machinery, equipment or other similar expenditures (including capital leases of
any of the foregoing) which would be required to be capitalized and shown on the
balance sheet of Borrower and its Subsidiaries in accordance with generally
accepted accounting principles consistently applied.
"Cash Flow" means, as to the Borrower and its Subsidiaries,
for any period of determination, the Consolidated Net Income of the Borrower and
its Subsidiaries for such period plus (A) Interest Expense for such period
deducted in the determination of Consolidated Net Income, (B) Rental Expense for
such period deducted in the determination of Consolidated Net Income, (C)
depreciation, (D) amortization, and (E) Federal and state taxes for such period
deducted in the determination of Consolidated Net Income, all as determined for
any period in accordance with generally accepted accounting principles
consistently applied. Notwithstanding the foregoing or any other provision
hereof, Cash Flow attributable to Non-Corporate Unperfected Subsidiaries shall
not be included in computing Cash Flow if Non-Corporate Unperfected Subsidiaries
would account for more than fifteen percent (15%) of total Cash Flow.
"CHAMPUS" means Civilian Health and Medical Program of the
Uniformed Services.
"Change of Control" means the occurrence, after the date of
this Agreement, of (i) any Person or two or more Persons acting in concert
acquiring beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended), directly or indirectly, of securities of Borrower (or other securities
convertible into such securities) representing 51% or more of the combined
voting power of all securities of Borrower entitled to vote in the election of
directors; or (ii) commencing after the date of this Agreement, individuals who
at the beginning of this
4
Agreement were directors of Borrower ceasing for any reason to constitute a
majority of the Board of Directors of Borrower unless the Persons replacing
such individuals were nominated by the Board of Directors of Borrower; or
(iii) any Person or two or more Persons acting in concert acquiring by
contract or otherwise, or entering into a contract or arrangement which upon
consummation will result in its or their acquisition of, or control over,
securities of Borrower (or other securities convertible into such securities)
representing 51% or more of the combined voting power of all securities of
Borrower entitled to vote in the election of directors; provided, an IPO
shall not be considered a Change of Control even if it results in 51% or more
of the voting securities being acquired by other Persons.
"Closing" means the valid execution and delivery of the Notes,
this Agreement, and Collateral Documents to the Agent, or as the Banks otherwise
direct.
"Collateral" has the meaning set forth in Paragraph 4.1.
"Collateral Documents" means the documents specified in
Paragraphs 3.1 (D) through (F).
"Commitment Percentage" means, as to any Bank at any time, the
percentage of the Total Commitments then constituted by such Bank's Commitment.
"Commitments" means the Revolving Loan Commitments in the
aggregate principal amount of $40,000,000.00 described in Paragraph 2.1 hereof
and "Commitment" means, for each Bank, the obligation of such Bank to make Loans
and extend credit in an aggregate amount at any one time outstanding up to but
not exceeding the amount(s) set out beside the name of such Bank in Paragraph
2.1 or, in the case of any Person who hereafter becomes a Bank, the amount as
reflected on the signature page of the Assignment and Acceptance executed by
such Person; and provided further, that the Commitment of each Bank shall be
decreased (or increased, as the case may be) to reflect any assignments by such
Bank in accordance with Paragraph 10.8 hereof. The original aggregate principal
amount of the Total Commitments is $40,000,000.00.
"Consolidated Accounts" means, at any time, all Accounts that
in accordance with generally accepted accounting principles consistently applied
should be classified as accounts receivable on a consolidated balance sheet of
the Borrower and its Subsidiaries.
"Consolidated Allowance for Doubtful Accounts" means, for any
period of determination, that amount shown on the consolidated balance sheet of
the Borrower and its Subsidiaries as an allowance for doubtful accounts.
"Consolidated Assets" means, at any time, all assets that in
accordance with generally accepted accounting principles should be classified as
assets on a consolidated balance sheet of the Borrower and its Subsidiaries.
5
"Consolidated Capital" means, as to both the Borrower and its
Subsidiaries at any time of determination, the sum of Shareholders' Equity plus
Funded Debt.
"Consolidated Current Assets" and "Consolidated Current
Liabilities" mean, at any time, all assets or liabilities, respectively, that,
in accordance with generally accepted accounting principles consistently
applied, should be classified as current assets or current liabilities,
respectively, on a consolidated balance sheet of the Borrower and its
Subsidiaries.
"Consolidated Fixed Assets" means, at any time, all tangible,
fixed assets (other than Consolidated Current Assets) that should, in accordance
with generally accepted accounting principles consistently applied, be
classified as property, plant and equipment on a consolidated balance sheet of
the Borrower and its Subsidiaries.
"Consolidated Liabilities" means all Indebtedness that, in
accordance with generally accepted accounting principles consistently applied,
should be classified as liabilities on a consolidated balance sheet of the
Borrower and its Subsidiaries.
"Consolidated Net Income" means, for any particular fiscal
period, the after tax net income (or deficit) of the Borrower and its
Subsidiaries on a consolidated basis, determined in accordance with generally
accepted accounting principles consistently applied excluding, however any gains
from the write-up of assets or any extraordinary or nonrecurring gains.
"Consolidated Revenues" means, for any period of
determination, the gross revenues less contractual adjustments (i.e., net
revenues) of the Borrower and its Subsidiaries as shown on their consolidated
income statement as computed in accordance with generally accepted accounting
principles consistently applied.
"Contingent Obligation" means, with respect to any Person, any
direct or indirect liability of such Person with respect to any Funded Debt,
lease, dividend, guaranty, letter of credit (other than a standby letter of
credit with no reasonable likelihood of draw, in the reasonable opinion of the
Agent) or other obligation (the "primary obligation") of another Person (the
"primary obligor"), whether or not contingent, (a) to purchase, repurchase or
otherwise acquire such primary obligations or any property constituting direct
or indirect security therefor, (b) to advance or provide funds (i) for the
payment or discharge of any such primary obligation or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency or any balance sheet item, level of income or financial
condition of the primary obligor, (c) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor in respect thereof to make
payment of such primary obligation, or (d) otherwise to assure or hold harmless
the owner of any such primary obligation against loss or failure or inability to
perform in respect thereof. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith.
6
"Debt Service" means for any given period, the sum of the
amounts due from both the Borrower and its Subsidiaries for (A) Interest
Expense, exclusive of original issue discount on the Subordinated Indebtedness
owed to Welsh, Carson, Xxxxxxxx & Xxxxx VII, L.P. and WCAS Healthcare Partners,
L.P. and their partners and affiliates, (B) Letter of Credit Fees, (C) Rental
Expense, and (D) one-seventh (1/7th) of the amount of Funded Debt.
"Debt Service Coverage Ratio" means, as to the Borrower and
its Subsidiaries, for any period of determination, that ratio consisting of Cash
Flow divided by Debt Service.
"Eligible Assignee" means (A) a commercial bank organized
under the laws of the United States, or any State thereof, and having a combined
capital and surplus of at least $1,000,000,000.00; (B) a commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (the "OECD"), or a
political subdivision of any such country, and having a combined capital and
surplus of at least $1,000,000,000.00, provided that such bank is acting through
a branch or agency located in the United States; (C) any Bank and any Affiliate
of a Bank; and (D) any Federal Reserve Bank.
"Environmental Laws" means the Comprehensive Environmental
Response, Compensation, and Liability Act (CERCLA) and the Superfund Amendments
and Reauthorization Act (XXXX); the Resource Conservation and Recovery Act
(RCRA); the Emergency Planning and Community Right to Know Act; the Clean Water
Act (Federal Water Pollution Control Act); the Safe Drinking Water Act; the
Clean Air Act; the Surface Mining Control and Reclamation Act; the Coastal Zone
Management Act; the Noise Control Act; the Occupational Safety and Health Act;
the Toxic Substances Control Act (TSCA); the Federal Insecticide, Fungicide and
Rodenticide Act (FIFRA); any so-called "Superfund" or "Superlien" law; or any
other federal, state or local statute, law, ordinance, code, rule, regulation,
order, decree or other requirements of any governmental body regulating,
relating to or imposing liability or standards of conduct concerning any
Hazardous Materials or toxic or dangerous chemical, waste, substance or
material.
"Eurodollar Liabilities" has the meaning assigned to that term
in Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Loan" means any Loan which bears interest based on
the LIBO Rate.
"Eurodollar Rate Reserve Percentage" means the reserve
percentage applicable during any Eurodollar Loan Interest Period (or if more
than one such percentage shall be so applicable, the daily average of such
percentages for those days in such Interest Period during which any such
percentage shall be so applicable) under regulations issued from time to time by
the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement) for Banks with
respect to liabilities or assets consisting of or including Eurodollar
Liabilities having a term equal to such Interest Period.
7
"Event of Default" has the meaning set forth in Paragraph 8.1.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day; provided that (a) if the day for which such rate is to
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day and (b) if such rate is not so
published for any Business Day, the Federal Funds Rate for such Business Day
shall be the average rate charged to the Agent on such Business Day on such
transactions as determined by the Agent.
"Fee Letter" means that letter agreement between the Agent and
the Borrower dated May 28, 1997.
"Financial Statements" means the consolidated balance sheets
of the Borrower as of June 30, 1996 and March 31, 1997, the statements of income
and shareholders equity of the Borrower for the years or months ended on such
dates, and the balance sheet of Horizon as of December 31, 1996 and March 31,
1997, together with the statements of income and shareholders equity of Horizon
for the years or months ended on such dates.
"Financing Statements" means any one or more filings made
pursuant to the UCC to perfect the security interests in the Collateral granted
to Agent for the benefit of the Banks pursuant to Section IV hereof.
"Floating Rate Loan" means any Loan which bears interest based
on the Prime Rate.
"Funded Debt" means at any date, with respect to the Borrower
and its Subsidiaries, all of the following obligations (without duplication) of
Borrower and its Subsidiaries as of such date: (a) all obligations for borrowed
money, (b) all obligations evidenced by bonds, debentures, notes or other
similar instruments, (c) all obligations to pay the deferred purchase price of
property, except trade accounts payable arising in the ordinary course of
business, including those payable to Genzyme, Inc., (d) all obligations as
lessee under capitalized leases, (e) all obligations to purchase securities or
other property which arise out of or in connection with the sale of the same or
substantially similar securities or property, such as bankers acceptances or
similar instruments, (f) all non-contingent obligations to reimburse any bank or
other person in respect of amounts paid under a letter of credit or similar
instrument, (g) all obligations under any Interest Rate Contract or other
interest rate or hedging arrangement, (h) all debt of others secured by a lien
on any asset of Borrower and its Subsidiaries, whether or not such debt is
assumed, and (h) all debt of others guaranteed by Borrower and/or its
Subsidiaries, and (i) any Contingent Obligation; provided, there shall be
excluded from the Funded Debt calculation all Subordinated Indebtedness owed to
Welsh, Carson, Xxxxxxxx &
8
Xxxxx VII, L.P. and WCAS Healthcare Partners, L.P., their partners,
affiliates, and the heirs, successors and assigns thereof.
"Guarantee Obligation" means with respect to any Person, any
contract, agreement or understanding of such Person pursuant to which such
Person guarantees, or in effect guarantees, any Indebtedness of any other person
(the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, agreements (a) to purchase such Indebtedness or
any asset constituting security therefor, (b) to advance or supply funds for the
purchase or payment of such Indebtedness or to maintain net worth or working
capital or other balance sheet conditions, or otherwise to advance or make
available funds for the purchase or payment of such Indebtedness, (c) to
purchase an asset or service primarily for the purpose of assuring the holder of
such Indebtedness of the ability of the primary obligor to make payment of the
Indebtedness, or (d) otherwise to assure the holder of the Indebtedness of the
primary obligor against loss with respect thereto; provided, however, that such
term shall not include the endorsement by Borrower or a Subsidiary of negotiable
instruments or documents for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by the
Banks in good faith.
"Guarantor" individually means any Person who guarantees
payment of the Obligations from time to time, including without limitation any
one of the following corporations, each of which is also a Subsidiary for the
purposes of this Agreement, and "Guarantors" means all of such corporations from
time to time jointly and severally:
(A) Nova Factor, Inc., a Tennessee corporation;
(B) Southern Health Systems, Inc., a Tennessee corporation;
(C) Horizon Health Systems, Inc., a Tennessee corporation.
"Hazardous Materials" means any hazardous, toxic or dangerous
chemical, substance, waste or material defined as such in any of the
Environmental Laws, and petroleum, petroleum products, oil, asbestos and PCB's.
"Horizon" means Horizon Health Systems, Inc., a Tennessee
corporation.
"Horizon Acquisition" means the purchase of all the
outstanding stock of Horizon by Borrower pursuant to that certain Stock Purchase
Agreement by and among Borrower, Xxxxxx Xxxxx, X.X. Xxxxxxxx and Horizon Health
Systems, Inc., dated June 5, 1997 for a purchase price not to exceed
$32,000,000, subject to closing adjustments as therein set forth.
9
"Indebtedness" means, as to the Borrower or any Subsidiary,
all items of indebtedness, obligation or liability, whether matured or
unmatured, liquidated or unliquidated, direct or contingent, joint or several,
including without limitation:
(A) All indebtedness guaranteed, directly or
indirectly, in any manner, or endorsed (other than for collection or deposit in
the ordinary course of business) or discounted with recourse;
(B) All indebtedness in effect guaranteed, directly
or indirectly, through agreements, contingent or otherwise: (1) to purchase such
indebtedness; or (2) to purchase, sell or lease (as lessee or lessor) property,
products, materials or supplies or to purchase or sell services, primarily for
the purpose of enabling the debtor to make payment of such indebtedness or to
assure the owner of the indebtedness against loss; or (3) to supply funds to or
in any other manner invest in the debtor;
(C) All indebtedness secured by (or for which the
holder of such indebtedness has a right, contingent or otherwise, to be secured
by) any mortgage, deed of trust, pledge, lien, security interest or other charge
or encumbrance upon property owned or acquired subject thereto, whether or not
the liabilities secured thereby have been assumed; and
(D) All indebtedness incurred as the lessee of
facilities, goods or services under leases that, in accordance with generally
accepted accounting principles consistently applied, should not be reflected on
the Borrower's or any Subsidiary's balance sheet.
"Interest Expense" means, with respect to any Person for any
period of determination, the gross interest expenses of such Person and its
Subsidiaries net of any interest income determined in accordance with generally
accepted accounting principles consistently applied as shown on their income
statement.
"Interest Payment Date" shall mean, as to any Loan, the last
day of the Interest Period applicable to such Loan and, in addition, in the case
of a Eurodollar Loan with an Interest Period of six (6) months' duration, each
day which is three (3) months, or a whole multiple thereof, after the first day
of such Interest Period and the last day of such Interest Period.
"Interest Period" shall mean: (a) as to any Eurodollar Loan,
the period commencing on the date of such Eurodollar Loan and ending on the
numerically corresponding day (or, if there is no numerically corresponding day,
on the last day) in the calendar month that is 1, 2, 3 or 6 months thereafter,
as the Borrower may elect, and (b) as to any Floating Rate Loan, the period
commencing on the date of such Loan and ending on the earliest of (i) the first
(1st) day of the next succeeding calendar month, and (ii) the Loan Termination
Date, as applicable; provided, however, that (x) if any Interest Period would
end on a day that shall not be a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless, with respect to Eurodollar
Loans only, such next succeeding Business Day would fall in the next calendar
month, in which case such Interest Period shall end on the next preceding
10
Business Day and (y) no Interest Period with respect to any Loan shall end later
than the Loan Termination Date. Interest shall accrue from and including the
first day of an Interest Period to but excluding the last day of such Interest
Period.
"Interest Rate and Foreign Exchange Contracts" means interest
rate and foreign exchange swap agreements, interest rate cap agreements,
interest rate collar agreements, interest rate and foreign exchange insurance
and other agreements or arrangements designed to provide protection against
fluctuations in interest rates and currency exchange rates.
"IPO" means a public offering by Borrower pursuant to a filed
registration statement of any series of common stock of Borrower under the
Securities Act of 1933, as amended.
"Issuing Bank" means NationsBank of Tennessee, N.A. or any
successor thereto, as the issuer of Letters of Credit under Paragraph 2.3,
together with its successors and assigns in each capacity; provided that no
successor or assign may have a letter of credit risk rating less than that
accorded to letters of credit issued by NationsBank or its affiliates.
"Laws" means all ordinances, statutes, rules, regulations,
orders, injunctions, writs or decrees of any government or political subdivision
or agency thereof, or any court or similar entity established by any thereof.
"Letter of Credit" shall have the meaning assigned to such
term in Paragraph 2.3.
"Letter of Credit Documents" means, with respect to any Letter
of Credit, collectively, any application for any Letter of Credit and any other
agreements, instruments, guarantees or other documents (whether general in
application or applicable only to such Letter of Credit) governing or providing
for (a) the rights and obligations of the parties concerned or at risk with
respect to such Letter of Credit or (b) any collateral security for any of such
obligations.
"Letter of Credit Interest" means, for each Bank, such Bank's
participation interest (or, in the case of the Issuing Bank, the Issuing Bank's
retained interest) in the Issuing Bank's liability under Letters of Credit and
such Bank's rights and interests in Reimbursement Obligations and fees, interest
and other amounts payable in connection with Letters of Credit and Reimbursement
Obligations.
"Letter of Credit Liability" means, without duplication, at
any time and in respect of any Letter of Credit, the sum of (a) the undrawn face
amount of such Letter of Credit plus (b) the aggregate unpaid principal amount
of all Reimbursement Obligations of the Borrower at such time due and payable in
respect of all drawings made under such Letter of Credit. For purposes of this
Agreement, a Bank (other than the Issuing Bank) shall be deemed to hold a Letter
of
11
Credit Liability in an amount equal to its participation interest in the
related Letter of Credit under Paragraph 2.3, and the Issuing Bank shall be
deemed to hold a Letter of Credit Liability in an amount equal to its retained
interest in the related Letter of Credit after giving effect to the acquisition
by the Banks (other than the Issuing Bank) of their participation interests
under Paragraph 2.3.
"LIBO Rate" means, with respect to any Eurodollar Loan for any
Interest Period, the interest rate per annum (rounded upwards, if necessary, to
the next higher 1/100 of 1%) at which dollar deposits approximately equal in
principal amount to such Eurodollar Loan and with a maturity comparable to such
Interest Period are offered to first-class banks in immediately available funds
in the London Interbank Market for Eurodollars at approximately 12:00 noon,
Nashville time, on the date two (2) Business Days prior to the commencement of
such Interest Period, as determined by the Agent pursuant to the TELERATE
Reporting System.
"Loan" means any funds which any Bank has advanced or will
advance to the Borrower pursuant to this Agreement, and "Loans" means all such
advances by all Banks.
"Loan Documents" means this Agreement, the Notes, the Fee
Letter, the Letter of Credit Documents, and the Collateral Documents, or any
other document executed or delivered by or on behalf of the Borrower or any
Subsidiary evidencing or securing the Obligations.
"Loan Termination Date" means October 31, 1999.
"Majority Banks" means, at any time there are no more than two
(2) Banks hereunder, those Banks having one hundred (100%) percent or more of
the aggregate unpaid principal amount of the outstanding Loans, and, at any time
there are more than two (2) Banks hereunder, those Banks having sixty-six and
two-thirds percent (66-2/3%) or more of the aggregate outstanding principal
amount of the outstanding Loans.
"Material Adverse Change" means a material adverse change in
the business or conditions (financial or otherwise) or in the results of
operations of the Borrower and its Subsidiaries (unless otherwise indicated),
taken as a whole as reasonably determined in good faith by the Majority Banks.
"Material Adverse Effect" means, when referring to the taking
of an action or the omission to take an action, that such action, if taken, or
omission, would have a material adverse effect on the business, condition
(financial or otherwise) or results of operations of the Borrower and its
Subsidiaries (unless otherwise indicated), or might materially impair the value
of the Collateral, each taken as a whole as reasonably determined in good faith
by the Majority Banks.
"Material Supplier Agreements" means those distribution
agreements from time to time in effect between any Subsidiary of the Borrower
and Biogen, Inc., Genzyme Corporation or Genentech, Inc. to purchase and
distribute certain specified biotech drugs manufactured by the respective
biotech drug companies.
12
"NationsBank" means NationsBank of Tennessee, N.A. and its
successors.
"Non-Corporate Subsidiary" means a Subsidiary that is other
than a corporation.
"Non-Corporate Unperfected Subsidiary" means a Non-Corporate
Subsidiary, Borrower's interest in which is not subject to a perfected security
interest to secure the Obligations.
"Note" means a promissory note substantially in the form of
Exhibit A attached hereto, duly executed and delivered to any Bank by Borrower
and payable to the order of a Bank in the amount of one or more of its
Commitments, including any amendment, modification, renewal, extension, or
replacement thereof, and "Notes" means the Notes payable to each of the Banks
collectively.
"Note Purchase Agreement" means that Note Purchase Agreement
among Nova Holdings, Inc., Welsh, Carson, Xxxxxxxx & Xxxxx VII, L.P. and WCAS
Healthcare Partners, L.P. and certain partners thereof dated June 2, 1997.
"Obligations" means, respectively, all of the obligations of
the Borrower:
(A) To pay the principal of and interest on the
Notes in accordance with the terms thereof and to satisfy all of the Borrower's
other liabilities to the Banks under the Agreement, whether now existing or
hereafter incurred, matured or unmatured, direct or contingent, joint or
several, including any extensions, modifications, and renewals thereof and
substitutions therefor;
(B) To pay all Letter of Credit Liabilities,
including any Reimbursement Obligations and any other amounts owed by Borrower
under any Letter of Credit Documents;
(C) To repay to the Banks all amounts advanced by the
Banks hereunder on behalf of the Borrower, including, but without limitation,
amounts owed under Interest Rate and Foreign Exchange Contracts to one or more
of the Banks, advances for overdrafts, principal or interest payments to prior
secured parties, mortgagees, or lienors, or for taxes, levies, insurance, rent,
repairs to or maintenance or storage of any of the Collateral; and
(D) To reimburse the Agent and the Banks, on demand,
for all of the Agent's and each Banks' reasonable out-of-pocket expenses and
costs, including the reasonable fees and expenses of its counsel, in connection
with the enforcement of this Agreement and the documents required hereunder,
including, without limitation, any proceeding brought or threatened to enforce
payment of any of the obligations referred to in the foregoing paragraphs (A),
(B) and (C), or any suits or claims against any Bank whatsoever as a result of
such Bank's execution of this Agreement and making of its Loan, except as
limited by Paragraph 10.7 hereof; and in addition, to reimburse the Agent for
its expenses and attorneys' fees in connection with the preparation,
administration, amendment, modification or waiver of this Agreement and the
other Loan Documents.
13
"Permitted Acquisition" means any business, enterprise or
operation of any Person which is the subject of an acquisition permitted under
Paragraph 7.15.
"Permitted Acquisition Indebtedness" means purchase money
indebtedness incurred by the Borrower or any Subsidiary in connection with the
purchase of a Permitted Acquisition which Acquisition and purchase money
indebtedness is approved by the Banks pursuant to Paragraph 7.15.
"Permitted Acquisition Price" means the aggregate purchase
price of any Permitted Acquisition, including without limitation the value of
any stock, notes, assumed debt, amounts allocated to non-compete agreements and
the minimum amounts reasonably expected to be paid under any earn-out
agreements.
"Permitted Investments" means all expenditures made and all
liabilities incurred (contingent or otherwise) by any Borrower or any Subsidiary
for:
(A) obligations issued or guaranteed as to principal and
interest by the United States of America and having a maturity of not more than
twelve (12) months from the date of purchase;
(B) certificates of deposit, issued by banks organized under
the laws of the United States of America or any State thereof and foreign
subsidiaries of such banks, having a rating of not less than A or its equivalent
by Standard & Poor's Corporation, or its successor;
(C) commercial paper or finance company paper which is rated
not less than prime-one or A-1 or their equivalents by Xxxxx'x Investor
Services, Inc. or Standard & Poor's Corporation or their successors;
(D) repurchase agreements related to an investment of the type
described in Clause (A) above, provided that the counter-party thereto is a
government securities dealer designated by the Federal Reserve Bank of New York
as a "Reporting Dealer" and whose financial statements indicate that it has a
capital of at least $50,000,000.00 and that the investment which is the subject
of such repurchase agreement shall be at all times during the term of the
repurchase agreement in the possession of the Borrower (or the Agent) or the
interest of such Borrower therein shall be appropriately recorded in accordance
with the United States Federal Regulations regarding Book Entry Treasury
Securities;
(E) bankers acceptances issued by banks that qualify for the
NationsBank of Tennessee, N.A. Federal Funds List, not to exceed $500,000.00 per
issuer and a maximum maturity of 180 days;
(F) Eurodollar time deposits with banks having a minimum
rating by Xxxxx Bankwatch of A for domestic banks and I for foreign banks,
provided the maximum deposit with any bank does not exceed $500,000.00, the
concentration in any individual country does not exceed $250,000.00 or 25% of
the total amount of all Permitted Investments, whichever is
14
greater, and the aggregate amount of Eurodollar time deposits does not exceed
$500,000.00 or 75% of the amount of all Permitted Investments, whichever is
greater;
(G) money market funds which invest in money market
instruments consistent with the guidelines herein set forth for other Permitted
Investments provided the same do not exceed 25% of the total amount of all
Permitted Investments nor exceed $500,000.00 in any one money market fund;
(H) state and municipal general obligation bonds rated A or
better by S & P or Moody's for long term issues and Moody's MIG-1 for short term
issues, provided no security shall have a maturity in excess of one year, no
more than $500,000.00 shall be invested with any single issuer, and the
concentration in any one type of issue (states, local governments, school
districts, municipal power authorities, hospitals, housing authorities, etc.)
shall be limited to 25% of the total amount of all Permitted Investments or
$250,000.00, whichever is greater; and
(I) other investments approved by the Banks in writing in
advance.
"Permitted Liens" means:
(A) Liens in favor of the Agent for the benefit
of the Banks;
(B) Security interests in assets (not stock) granted
to secure equipment notes and capitalized leases provided such security
interests secure not more than the amount of the purchase price financed
thereby, and provided further that the purchase is either permitted by Paragraph
7.16 or approved by the Banks pursuant to Paragraph 7.15 in connection with a
Permitted Acquisition;
(C) Liens for taxes, assessments, or similar charges,
incurred in the ordinary course of business that are not yet delinquent;
(D) Pledges or deposits made in the ordinary course
of business to secure payment of workmen's compensation, or to participate in
any fund in connection with workmen's compensation, unemployment insurance,
old-age pensions or other social security programs;
(E) Liens of mechanics, materialmen, warehousemen,
carriers, or other like liens, securing obligations incurred in the ordinary
course of business that are not yet delinquent;
(F) Good faith pledges or deposits made in the
ordinary course of business to secure performance of bids, tenders, contracts
(other than for the repayment of borrowed money) or leases, not in excess of ten
percent (10%) 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;
15
(G) Encumbrances consisting of zoning restrictions,
easements or other restrictions on the use of real property, none of which
materially impairs the use of such property by the Borrower or any Subsidiary in
the operations of its business, and none of which is violated in any material
respect by existing or proposed structures or land use;
(H) Existing liens set forth or described on Exhibit
C, attached hereto and made a part hereof, and renewals thereof;
(I) Landlord's liens on Fixtures retained in any
lease;
(J) The following, if the validity or amount
thereof is being contested in good faith by appropriate and lawful proceedings,
so long as levy and execution thereon have been stayed and continue to be
stayed; if Borrower or any Subsidiary has posted such security as may be
required by Laws or as is reasonably satisfactory to Banks; and if the following
do not, in the aggregate, materially detract from the value of the properties of
the Borrower or any Subsidiary taken as a whole, or materially impair the use
thereof in the operation of their respective businesses:
(1) Claims or liens for taxes,
assessments or charges due and payable and subject to interest or penalty;
(2) Claims, liens and encumbrances upon,
and defects of title to, real or personal property, including any attachment of
personal or real property or other legal process prior to adjudication of a
dispute on the merits;
(3) Claims or liens of mechanics,
materialmen, warehousemen, carriers, or other like liens; and
(4) Adverse judgments on appeal.
"Person" means any individual, corporation, partnership,
association, joint-stock company, estate, trust, unincorporated organization,
limited liability company, joint venture, court or government or political
subdivision or agency thereof.
"Pledged Stock" means the stock and other interests pledged
pursuant to the Stock Pledge Agreements described in Paragraph 3.1.
"Pledgor" means the Borrower and each other owner of the
Pledged Stock as set forth in the Stock Pledge Agreements.
"Prime Rate" means that rate announced by NationsBank of
Tennessee, N.A. from time to time as the NationsBank Prime Rate. No
representation is made herein that the NationsBank Prime Rate is the lowest rate
at which any Bank will lend to its customers.
16
"Pro-Forma Effect" means, in making any calculation to
determine if Borrower and its Subsidiaries are in compliance with Subparagraphs
6.17(B) and (C) or to determine if the conditions precedent to an Acquisition
Advance under Subparagraph 7.15(A) have been met, that the calculation will be
made assuming that (a) any Permitted Acquisition made during the twelve-month
period ending on the date of determination (the "Reference Period") was made on
the first day of the Reference Period, and (b) any Indebtedness associated with
(a) incurred during the Reference Period or to be incurred as of the date of
determination was made or incurred on the closing date of the Permitted
Acquisition. Acquisition Cash Flow for the Reference Period associated with the
assets acquired or to be acquired in any Permitted Acquisition will be included
in the calculation of Cash Flow for Borrower and its Subsidiaries. Any
Indebtedness incurred or to be incurred by Borrower or any Subsidiary in
connection with the consummation of any Permitted Acquisition will be assumed to
have been incurred on the closing date of the Permitted Acquisition. All
Interest Expense actually incurred during the Reference Period whether or not
attributable to Indebtedness assumed, refinanced or paid off in the Acquisition,
will be included in the calculation for which a Pro-Forma Effect is being given.
"Quarterly Dates" means the first day of each January, April,
July, or October, the first of which shall be the first such day after July 1,
1997.
"Quarterly Period" means (a) the Period from the Closing Date
to the next succeeding Quarterly Date and (b) thereafter, any period from the
first day after a Quarterly Date to the next succeeding Quarterly Date.
"Records" means correspondence, memoranda, tapes, books,
discs, paper, magnetic storage and other documents or information of any type,
whether expressed in ordinary or machine language.
"Reimbursement Obligations" means, at any time, the obligation
of the Borrower then outstanding, or which may thereafter arise in respect of
any or all Letters of Credit then outstanding, to reimburse amounts paid by the
Issuing Bank and the other Banks with respect to their Letter of Credit
Interests in respect of any drawings under a Letter of Credit.
"Rental Expense" means, with respect to the Borrower and its
Subsidiaries for any period, the gross real estate rental expenses of the
Borrower and its Subsidiaries for such period determined in accordance with
generally accepted accounting principles consistently applied, excluding all
personal property rental expense.
"Revolving Loan" means Loans made pursuant to
Paragraph 2.1(A).
"Shareholders' Equity" means, at any time, the accounts
required to be set forth in a balance sheet of the Borrower and its
Subsidiaries, prepared in accordance with generally accepted accounting
principles consistently applied, including but not limited to: (A) the par or
stated value of all outstanding capital stock, including preferred stock that is
not redeemable prior to the then stated Loan Termination Date and any accrued
dividends thereon; (B) capital surplus, including additional paid-in capital;
and (C) retained earnings.
17
"Subordinated Indebtedness" means all Indebtedness incurred
pursuant to the Note Purchase Agreement and any Indebtedness incurred at any
time by the Borrower or any Subsidiary, the repayment of which is subordinated
to the Obligations in form and manner satisfactory to the Banks. All existing
Subordinated Indebtedness is so specified in Exhibit D attached hereto.
"Subsidiary" means any corporation, partnership, joint
venture, or limited liability company of which fifty percent (50%) or more of
the outstanding voting securities or other ownership interests shall, at the
time of determination, be owned directly, or indirectly through one or more
intermediaries, by the Borrower, and "Subsidiaries" means all such entities
together with each of the Guarantors including Horizon, if different.
"Subsidiary Advances" means any advances of any kind made
(regardless of the form, whether equity or debt, cash or property) by the
Borrower or a Subsidiary to a Subsidiary, whether such advances are to fund the
purchase price of any Person that will upon the completion of the acquisition
become a Subsidiary, to fund working capital advances, or otherwise.
"Total Commitments" means from time to time the aggregate
Commitments of all of the Banks hereunder, which initially is $40,000,000,
subject to reduction as provided in Paragraph 2.5 hereof.
"UCC" means the Uniform Commercial Code as in effect on the
date hereof in the State of Tennessee, as it may be amended from time to time;
provided that if by reason of mandatory provisions of law, the perfection or the
effect of perfection or non-perfection of a security interest in any Collateral
is governed by the Uniform Commercial Code as in effect in a jurisdiction other
than Tennessee, "UCC" means the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection.
"Unmatured Default" means an event which but for the lapse of
time or the giving of notice, or both, would constitute an Event of Default.
"Unutilized Revolving Commitment" means, with respect to any
Bank at any time, such Bank's maximum Commitment at such time without regard to
any Borrowing Base limitations less the sum of (i) the aggregate principal
amount of all Revolving Loans made by such Bank that are outstanding at such
time, and (ii) such Bank's Commitment Percentage of all Letter of Credit
Liabilities at such time.
"Working Capital" means those advances used for general
corporate purposes in the ordinary course of business, but excluding the costs
of the Acquisition of any Person, permitted or otherwise.
The definitions in this Section I shall apply equally to both
the singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the
18
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase
"without limitation". All references herein to Articles, Sections, Exhibits
and Schedules shall be deemed references to Articles and Sections of, and
Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with
generally accepted accounting principles, as in effect from time to time;
provided however, in determining compliance with any covenant set forth in
Section VI, such term shall be construed in accordance with generally
accepted accounting principles as in effect on the date of this Agreement
consistently applied.
SECTION II. THE LOANS
---------------------
2.1 The Revolving Loan Commitments. (A) Subject to the
terms and conditions of and relying on the representations, warranties and
covenants contained in this Agreement, through the day prior to the Loan
Termination Date, each Bank agrees to fund severally but not jointly to the
Borrower the amount set out below their names, which for all of the Banks
shall be initially an aggregate maximum principal amount of up to Forty
Million Dollars ($40,000,000.00), provided the principal balance of the
Revolving Loans outstanding shall not exceed the Borrowing Base. The maximum
Commitment of each of the Banks and its respective percentage of the Total
Commitments (the "Commitment Percentage" of each Bank) are as follows:
---------------------------------------------------------------------------------------
Bank Acquisition Loan Commitment
Commitment Amount Percentage
---------------------------------------------------------------------------------------
NationsBank of Tennessee, N.A. $25,000,000 62.50%
---------------------------------------------------------------------------------------
First Tennessee Bank National Association $15,000,000 37.50%
---------------------------------------------------------------------------------------
TOTAL COMMITMENTS $40,000,000 100%
---------------------------------------------------------------------------------------
The Revolving Loans shall be evidenced by the (i) Twenty Five Million Dollar
($25,000,000.00) Note of Borrower to NationsBank of Tennessee, N.A., and (ii)
the Fifteen Million Dollar ($15,000,000.00) Note of Borrower to First Tennessee
Bank National Association, which Notes are substantially in the form set forth
in Exhibit A attached hereto, with each Note payable in accordance with its
terms. The Borrower may obtain Loans, repay without penalty or premium except as
set forth in Paragraph 2.9 below and reborrow hereunder, from the date of this
Agreement up to the day prior to the Loan Termination Date, the then available
Revolving Loan Commitments or any lesser sum which is in the minimum amount of
Two Hundred Fifty Thousand Dollars ($250,000.00) and in an integral multiple of
Fifty Thousand Dollars ($50,000.00) if in excess thereof; provided, however,
Borrower may not borrow more than two
19
(2) times in any calendar week. Each advance of the Revolving Loans hereunder
shall be made by each Bank ratably in accordance with its respective
Commitment Percentage of such advance.
(B) The obligations of each Bank to make advances to
Borrower pursuant to its respective Loan Commitment shall not exceed at any time
such Bank's Commitment Percentage multiplied by the applicable Borrowing Base as
in effect during the term of this Agreement. The Borrowing Base shall be
adjusted on July 31, 1997 and on each Borrowing Base Adjustment Date thereafter,
with the initial Borrowing Base amount in effect from the date hereof through
July 31, 1997 being $32,400,000.00. If at any time the aggregate outstanding
principal balances of the Loans exceeds the Borrowing Base, then Borrower shall
immediately pay to Agent for the account of the Bank any such excess principal
to reduce such outstanding principal balances to the applicable Borrowing Base
amount, subject to any penalty set forth in Paragraph 2.9.
(C) Revolving Loan advances may be used by the
Borrower to refinance the existing Indebtedness of Nova Factor, Inc. on the date
hereof and for Permitted Acquisitions, Working Capital, Reimbursement
Obligations and other general corporate purposes; provided however, no more than
an aggregate of Twenty Million Dollars ($20,000,000.00) may be outstanding at
any one time for Working Capital and Letter of Credit Liabilities; and provided
further, that the Banks shall have no obligation to fund if the conditions
precedent in Paragraph 3.2 below have not been satisfied.
(D) The failure of any Bank to make any advances
hereunder pursuant to its Revolving Loan Commitment shall not relieve any other
Bank of its obligation, if any, hereunder to make its advances pursuant to its
Revolving Loan Commitment. However, no Bank shall be responsible for any other
Bank's failure or refusal to make any advances pursuant to such other Bank's
Revolving Loan Commitment.
(E) All outstanding principal and interest on each
such Revolving Loan shall be due and payable in full in a balloon installment on
the Loan Termination Date. In addition, all outstanding principal in excess of
the then available Borrowing Base shall be due on demand.
2.2 Borrowing Notices, Interest Rates and Payments of
Interest.
(A) Loans made hereunder may be either Eurodollar
Loans, Floating Rate Loans, or a combination thereof; provided, Eurodollar Loans
shall be in the minimum amount of $1,000,000.00 and shall be in an integral
multiple of $100,000.00.
(B) The Borrower shall give the Agent irrevocable
notice in the form attached hereto as Exhibit B (a "Borrowing Notice") not later
than 10:00 a.m. Nashville time at least three (3) Business Days prior to the
date of any requested disbursement of Eurodollar Loans and one (1) Business Day
prior to any requested disbursement of Floating Rate Loans. Each Borrowing
Notice shall be filled in and signed and may be made by telecopier, telex or
cable in addition to the means set forth for giving notice in Paragraph 10.5.
Each Borrowing
20
Notice shall specify the requested date of such requested disbursement; the
aggregate amount of such disbursement; the type of Loan, i.e., Eurodollar or
Floating Rate; and if a Eurodollar Loan, the designated Interest Period. The
Agent shall promptly advise the other Banks of any Borrowing Notice given
pursuant to this Subparagraph and each Bank's portion of the requested Loan.
Not later than noon (12:00 a.m.) Nashville time on each disbursement date,
and subject to the terms and conditions hereof, Agent will credit the
proceeds of the Loans received by Agent from the Banks to the Borrower's
deposit account with Agent. Each such Borrowing Notice shall obligate the
Borrower to accept the Loan disbursement requested thereby.
(C) The Borrower shall have the right at any time, on
prior irrevocable written, faxed or telex notice to the Agent not later than
10:00 a.m., Nashville time, three (3) Business Days prior to the date of any
requested conversion, to convert any Floating Rate or Eurodollar Loan into a
Loan of another type, or to continue any Eurodollar Loan for another Interest
Period (specifying in each case the Interest Period to be applicable thereto),
subject in each case to the following:
(1) Each conversion or continuation
shall be made prorata among the Banks in accordance with the respective
principal amounts of the Loan converted or continued;
(2) No Eurodollar Loan shall be
converted at any time other than at the end of the Interest Period applicable
thereto;
(3) Each conversion shall be effected by
applying the proceeds of the new Eurodollar and/or Floating Rate Loan, as the
case may be, to the Loan (or portion thereof) being converted;
(4) The number of Eurodollar Loans
outstanding at one time may not exceed six (6); and
(5) No Interest Period may be selected
for any Eurodollar Loan that would end later than a repayment date occurring on
or after the first day of such Interest Period if the aggregate outstanding
amount of Eurodollar Loans with Interest Periods ending prior to such repayment
date plus the aggregate outstanding amount of all Floating Rate Loans is not
equal to or greater than the principal amount(s) of the Loan(s) to be paid on
such repayment date.
(D) Each notice pursuant to this Paragraph shall be
irrevocable and shall refer to this Agreement and specify (1) the identity and
principal amount of the particular Loan that the Borrower requests be converted
or continued, (2) if such notice requests conversion, the date of such
conversion (which shall be a Business Day), and (3) if a Loan is to be converted
to a Eurodollar Loan or a Eurodollar Loan is to be continued, the Interest
Period with respect thereto. In the event that the Borrower shall not give
notice to continue any Eurodollar Loan for a subsequent period, such Eurodollar
Loan (unless repaid) shall automatically be converted into a Floating Rate Loan.
If the Borrower shall fail to specify in any Borrowing Notice the
21
type of borrowing or, in the case of a Eurodollar Loan, the applicable
Interest Period, the Borrower will be deemed to have requested a Floating
Rate Loan. If Agent reasonably believes that any failure by Borrower to
specify the type of borrowing or the applicable Interest Period shall have
resulted from failure of communications equipment or clerical error, then
prior to funding any such borrowing the Agent shall use reasonable efforts to
obtain confirmation from Borrower of the contents of such Borrowing Notice;
however, in the absence of prompt confirmation by Borrower which specifies
the type of borrowing and/or the applicable Interest Period, the Borrower
will be deemed to have requested a Floating Rate Loan. Notwithstanding
anything to the contrary contained above, if an Event of Default shall have
occurred and be continuing, no Eurodollar Loan may be continued and no
Floating Rate Loan may be converted into a Eurodollar Loan.
(E) Interest shall be charged and paid on each Loan
from the date of the initial advance thereunder until such Loan is paid or
converted as follows:
(1) For a Floating Rate Loan, at an
annual rate equal to the Prime Rate plus the Applicable Prime Rate Margin, said
rate to change contemporaneously with any change in the Prime Rate.
(2) For a Eurodollar Loan, at a rate
equal to the LIBO Rate plus the Applicable LIBO Rate Margin.
(3) The Borrower shall pay to any Bank,
if and so long as such Bank shall be required under regulations of the Board of
Governors of the Federal Reserve System to maintain reserves with respect to
liabilities or assets consisting of or including Eurodollar Liabilities,
additional interest on the unpaid principal amount of each Eurodollar Loan, from
the date of such advance until said principal amount is paid in full, at an
interest rate per annum equal at all times to the remainder obtained by
subtracting (i) the LIBO Rate for the Interest Period from (ii) the rate
obtained by dividing the LIBO Rate by a percentage equal to 100% minus the
Eurodollar Rate Reserve Percentage for such Interest Period, payable on each
date on which interest is payable. Such additional interest shall be determined
by such Bank who shall notify Borrower thereof.
(4) Interest for both Floating Rate
Loans and Eurodollar Loans shall be computed on the basis of a 360-day year
counting the actual number of days elapsed, and shall be due and payable without
notice on each Interest Payment Date. On each change in interest rate pursuant
to this Agreement, the rate of interest charged as a result of such change shall
not exceed the maximum rate of interest allowed by applicable Laws at the time
of such change.
(F) Notwithstanding the foregoing, upon the
occurrence of an Event of Default interest may be charged at the Default Rate as
defined and set forth in the Notes if the Majority Banks so elect, regardless of
whether the Majority Banks have elected to exercise any other remedies under
Section VIII hereof, including without limitation acceleration of the maturity
of the outstanding principal of the Notes. All such interest shall be paid at
the time of
22
and as a condition precedent to the curing of any such default to
the extent any right to cure is given.
(G) All agreements herein made are expressly limited
so that in no event whatsoever shall the interest and loan charges agreed to be
paid to the Banks for the use of the money advanced or to be advanced pursuant
to this Agreement exceed the maximum amounts collectible under applicable laws
in effect from time to time. There is no intent to evade applicable Laws
pertaining to usury and applicable loan charges, and if for any reason
whatsoever the interest or loan charges paid or contracted to be paid in respect
of the Loans shall exceed the maximum amounts collectible under applicable laws
in effect from time to time, then, ipso facto, the obligation to pay such
interest and/or loan charges shall be reduced to the maximum amounts collectible
under applicable laws in effect from time to time, and any amounts collected by
the Banks that exceed such maximum amounts shall be applied to the reduction of
the principal balance of the Loans and/or refunded to Borrower so that at no
time shall the interest or loan charges paid or payable in respect of the Loans
exceed the maximum amounts permitted from time to time by applicable law. This
provision shall control every other provision herein and in any and all other
agreements and instruments now existing or hereafter arising between Borrower
and the Banks with respect to the Loans.
2.3 Letters of Credit. Subject to the terms and
conditions of this Agreement, the Commitments may be utilized, upon the
request of the Borrower, in addition to the Loans provided for by Paragraph
2.1, for the issuance by the Issuing Bank of letters of credit ("Letters of
Credit") for the account of the Borrower; provided that in no event shall (i)
the aggregate amount of all Letter of Credit Liabilities, together with the
aggregate principal amount of the Loans exceed the aggregate amount of the
Commitments as in effect from time to time, (ii) the outstanding aggregate
amount of all Letter of Credit Liabilities and Loan advances for Working
Capital exceed $20,000,000.00 and (iii) the expiration date of any Letter of
Credit extend beyond the earlier of the Loan Termination Date and the date
twelve months following the issuance of such Letter of Credit. The following
additional provisions shall apply to Letters of Credit:
(A) The Borrower shall give the Agent at least three
Business Days' irrevocable prior notice (effective upon receipt) specifying the
Business Day (which shall be no later than 30 days preceding the Loan
Termination Date) each Letter of Credit is to be issued and describing in
reasonable detail the proposed terms of such Letter of Credit (including its
beneficiary) and the nature of the transactions or obligations proposed to be
supported (including whether such Letter of Credit is to be a commercial letter
of credit or a standby letter of credit). The Borrower shall be the account
party for each Letter of Credit, including Letters of Credit issuable to a
beneficiary having a claim or potential claim against a Subsidiary of the
Borrower.
(B) On each day during the period commencing with the
issuance by the Issuing Bank of any Letter of Credit and until such Letter of
Credit shall have expired or been terminated or, if drawn upon, until the
resulting Reimbursement Obligations have been reimbursed in full by the Borrower
(whether by a borrowing under this agreement or otherwise), the Commitment of
each Bank shall be deemed to be utilized for all purposes of this Agreement
23
in an amount equal to such Bank's Commitment Percentage of the then Letter of
Credit Liabilities associated with such Letter of Credit. Each Bank (other
than the Issuing Bank) agrees that, upon the issuance of any Letter of Credit
it shall automatically acquire a participation in the Issuing Bank's
liability under such Letter of Credit in an amount equal to such Bank's
Commitment Percentage of such liability, and each Bank (other than the
Issuing Bank) thereby shall absolutely, unconditionally and irrevocably
assume, as primary obligor and not as surety, and shall be unconditionally
obligated to the Issuing Bank to pay and discharge when due, its Commitment
Percentage of the Issuing Bank's liability under such Letter of Credit.
(C) Upon receipt from the beneficiary of any
Letter of Credit or any demand for payment under such Letter of Credit, the
Issuing Bank shall promptly notify the Borrower (through the Agent) of the
amount to be paid by the Issuing Bank as a result of such demand and the date on
which payment is to be made by the Issuing Bank to such beneficiary in respect
of such demand. The Borrower hereby unconditionally agrees to pay and reimburse
the Agent for the account of the Issuing Bank and the other Banks with respect
to their Letter of Credit Interest for the amount of each demand for payment
under such Letter of Credit at or prior to the date on which payment is to be
made by the Issuing Bank to the beneficiary under such Letter of Credit, without
presentment, demand, protest or other formalities of any kind. Any amounts not
so paid or borrowed as set forth in (D) below shall bear interest at the rate(s)
specified in the Letter of Credit Documents or, if higher, at the rate(s)
specified on the Notes (including the Default Rate, if applicable).
(D) Forthwith upon its receipt of a notice
referred to in clause (C) of this Paragraph 2.3, the Borrower shall advise the
Agent whether or not the Borrower intends to borrow under Paragraph 2.1 to
finance its obligation to reimburse the Issuing Bank for the amount of the
related demand for payment and, if it does, submit a notice of such borrowing as
provided in Paragraph 2.2. In the event that the Borrower fails to so advise the
Agent, and if the Borrower fails to reimburse the Issuing Bank for a demand for
payment under a Letter of Credit by the date of such payment, the Agent shall
give each Bank prompt notice of the amount of the demand for payment, specifying
such Bank's Commitment Percentage of the amount of the related demand for
payment, and the Borrower shall be deemed in default hereunder for breaching
Subparagraph 2.3(C) above.
(E) Each Bank (other than the Issuing Bank)
shall pay to the Agent for the account of the Issuing Bank in Dollars and in
immediately available funds, the amount of such Bank's Commitment Percentage of
any payment under a Letter of Credit upon notice by the Agent to such Bank
requesting such payment and specifying such amount as provided in clause (D) of
this Paragraph 2.3. Each such Bank's obligation to make such payments to the
Agent for the account of the Issuing Bank under this clause (E), and the Issuing
Bank's right to receive the same, shall be absolute and unconditional and shall
not be affected by any circumstance whatsoever, including (i) the failure of any
other Bank to make its payment under this clause (E), the financial condition of
the Borrower (or any other account party), the existence of any Default or (ii)
the termination of the Commitments. Each such payment to the Issuing Bank shall
be made without any offset, abatement, withholding or reduction whatsoever.
24
(F) Upon the making of each payment by a Bank
to the Issuing Bank pursuant to clause (E) above in respect of any Letter of
Credit, such Bank shall, automatically and without any further action on the
part of the Agent, the Issuing Bank or such Bank, acquire (i) a participation in
any amount equal to such payment in the Reimbursement Obligation owing to the
Issuing Bank by the Borrower under this Agreement and under the Letter of Credit
Documents relating to such Letter of Credit and (ii) a participation in a
percentage equal to such Bank's Commitment Percentage in any interest or other
amounts payable by the Borrower under such Letter of Credit Documents and the
other Loan Documents in respect of such Reimbursement Obligation (other than the
commissions, charges, costs and expenses payable to the Issuing Bank pursuant to
clause (G) of this Paragraph 2.3). Upon receipt by the Issuing Bank from or for
the account of the Borrower of any payment in respect of any Reimbursement
Obligation or any such interest or other amount (including by way of set-off or
application of proceeds of any collateral security) the Issuing Bank shall
promptly pay to the Agent for the account of each Bank who shall have previously
assumed a participation in such payment under clause (ii) above, such Bank's
Commitment Percentage of such payment, each such payment by the Issuing Bank to
be made in the same money and funds in which received by the Issuing Bank. In
the event any payment received by the Issuing Bank and so paid to the Banks is
rescinded or must otherwise be returned by the Issuing Bank, each Bank shall,
upon the request of the Issuing Bank (through the Agent), repay to the Issuing
Bank (through the Agent) the amount of such payment paid to such Bank, with
interest at the rate specified in clause (J) of this Paragraph 2.3.
(G) Borrower shall pay to the Agent for the
account of each Bank a letter of credit fee in respect of each Letter of Credit
on the undrawn face amount of such Letter of Credit at its date of issuance and
on each Quarterly Date occurring thereafter until such Letter of Credit is drawn
in full, expires or is terminated (such fee to be non-refundable, to be paid in
advance on its issuance for the period of time until the next Quarterly Date and
thereafter on each Quarterly Date and on the Loan Termination Date) in an amount
equal to 2.5% per annum or, for any Quarterly Period prior to the first day of
which (and in any event no later than 45 days after the end of the fiscal
quarter most recently ended) the Borrower has delivered to the Agent a
compliance certificate of the Borrower calculating the Funded Debt to Cash Flow
ratio as set forth in Paragraph 6.17(C) below for the last day of such fiscal
quarter (other than such portion of such period during which a Default shall be
continuing), the percentage per annum set forth below opposite the Funded Debt
to Cash Flow ratio for the Borrower reflected on such certificate:
25
Funded Debt to Cash Flow Percentage Rate
------------------------ ---------------
Greater than 3.0 to 1.0 2.5% per annum
Equal to or Less than 3.0:1.0 and Greater than 2.25:1.0 2.0% per annum
Equal to or Less than 2.25:1.0 and Greater than 1.5:1.0 1.5% per annum
Equal to or Less than 1.5 to 1.0 0.75% per annum
All calculations of Letter of Credit fees shall be based on a 360 day year
counting the actual number of elapsed days. Notwithstanding the foregoing,
following the occurrence of an Event of Default and for so long as any such
Default remains uncured, the Letter of Credit fee otherwise applicable as
hereinabove set forth shall be increased by two percent (2%) per annum.
(H) Upon the request of any Bank from time to
time, the Issuing Bank shall deliver any information reasonably requested by
such Bank with respect to each Letter of Credit then outstanding.
(I) The issuance by the Issuing Bank of each
Letter of Credit shall be subject, in addition to the conditions precedent set
forth in Paragraph 3.2, to the conditions precedent that (i) such Letter of
Credit shall be in such form, contain such terms and support such transactions
as shall be satisfactory to the Issuing Bank consistent with its then current
practices and procedures with respect to letters of credit of the same type and
(ii) the Borrower shall have executed and delivered such applications,
agreements and other instruments relating to such Letter of Credit as the
Issuing Bank shall have reasonably requested consistent with its then current
practices and procedures with respect to letters of credit of the same type;
provided that in the event of any conflict between any such application,
agreement or other instrument and the provisions of this Agreement, the
provisions of this Agreement shall control.
(J) To the extent that any Bank fails to
pay any amount required to be paid pursuant to clause (E) or (F) of this
Paragraph 2.3 when due, such Bank shall pay interest to the Issuing Bank
(through the Agent) on such amount from and including such due date to but
excluding the date such payment is made (i) during the period from and including
such due date to but excluding the date three Business Days thereafter, at a
rate per annum equal to the Federal Funds Rate (as in effect from time to time)
and (ii) thereafter, at a rate per annum equal to the Prime Rate plus 1.0%.
(K) The issuance by the Issuing Bank of any
modification or supplement to any Letter of Credit shall be subject to the same
conditions applicable under this Paragraph 2.3 to the issuance of new Letters of
Credit, and no such modification or supplement shall be issued unless either (x)
the respective Letter of Credit as affected by such action would have complied
with such conditions had it originally been issued in such modified or
supplemented form or (y) each Bank shall have consented to such modification or
supplement.
26
(L) The obligations of the Borrower under this
Paragraph 2.3 shall be unconditional and absolute and shall not be affected,
modified or impaired, upon the happening at any time or from time to time of any
event, including any of the following, whether or not with notice to or the
consent of the Borrower:
(1) the compromise, settlement, release,
modification, amendment (whether material or otherwise) or termination of any or
all of the obligations, conditions covenants or agreements of any Person in
respect of any of the Loan Documents;
(2) the occurrence, or the failure by
the Agent, any Bank or any other Person to give notice to the Borrower of the
occurrence, of any Event of Default or any default under any of the other Loan
Documents;
(3) the waiver of the payment,
performance or observance of any of the obligations, conditions, covenants or
agreements of any Person contained in any of the Loan Documents;
(4) the extension of the time for
performance of any other obligations, covenants or agreements of any Person
under or arising out of any of the Loan Documents;
(5) the taking or the omission of any of
the actions referred to in any of the Loan Documents;
(6) any failure, omission or delay on
the part of the Agent, any Bank, the Borrower or the beneficiary of any Letter
of Credit to enforce, assert or exercise any right, remedy, power or privilege
conferred by this Agreement or any of the Loan Documents, or any other act or
acts on the part of the Agent, any Bank, the Borrower or the beneficiary of any
Letter of Credit;
(7) the voluntary or involuntary
liquidation, dissolution, sale or other disposition of all or substantially all
the assets of, the marshalling of assets and liabilities, receivership,
insolvency, bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition with creditors or readjustment of, or other similar
proceedings which affect, the Borrower or any other party to any of the Loan
Documents;
(8) any lack of validity or
enforceability of this Agreement, any Letter of Credit or any other Loan
Document, or any allegation of invalidity or unenforceability or any contest of
such validity or enforceability;
(9) the existence of any claim, set-off,
defense or other right which the Borrower may have at any time against the
Agent, any Bank or any beneficiary or any transferee of any Letter of Credit (or
any persons or entities for whom the Bank or any such beneficiary or transferee
may be acting), or any other Person, whether in connection with this
27
Agreement or any of the other Loan Documents or any of the transactions
contemplated by any Loan Document or any unrelated transaction;
(10) any statement in any certificate or
any other document presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any such statement being
untrue or inaccurate in any respect whatsoever;
(11) payment by the Issuing Bank under
any Letter of Credit against presentation of a demand or certificate which does
not comply with the terms of such Letter of Credit;
(12) the release or discharge by
operation of law of the Borrower from the performance or observance of any
obligation, covenant or agreement contained in any of the Loan Documents; or
(13) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing.
(M) Without affecting the Borrower's liability
under Paragraph 10.7, the Borrower agrees to indemnify each of the Issuing Bank,
the Agent and the Banks and their respective affiliates, directors, officers,
employees, attorneys and agents from, and hold each of them harmless against,
any and all losses, liabilities, damages or expenses incurred by any of them in
connection with or by reason of any actual or threatened investigation,
litigation or other proceeding (including, in respect of the Issuing Bank and
the Agent, any such investigations, litigation or other proceeding between the
Issuing Bank or the Agent and any Bank) relating to (a) the execution and
delivery of any Letter of Credit; (b) the use of the proceeds of any drawing
under any Letter of Credit; or (c) the transfer or substitution of, or payment
or failure to pay under, any Letter of Credit, including the reasonable fees and
disbursements of counsel incurred in connection with any such investigation,
litigation or other proceeding, but excluding damages, losses, liabilities or
expenses to the extent, but only to the extent, incurred by reason of (x) the
willful misconduct or gross negligence of the Issuing Bank, including without
limitation in determining whether a document presented under any Letter of
Credit complies with the terms of such Letter of Credit or (y) in the case of
the Issuing Bank, such Bank's failure to pay under any Letter of Credit after
presentation to it of documents strictly complying with the terms and condition
of such Letter of Credit. It shall not be a condition to any such
indemnification that the Issuing Bank, the Agent or any Bank shall be a party to
any such investigations, litigation or other proceeding. Nothing in this
Paragraph 2.3 is intended to limit the Borrower's payment obligations under this
Agreement.
(N) The Borrower assumes all risks of the acts
or omissions of any beneficiary of any Letter of Credit with respect to the use
of the Letter of Credit. None of the Agent, any Bank nor any of their respective
affiliates, officers, directors, employees, attorneys or agents shall be liable
or responsible for: (a) the use which may be made of the Letter of Credit or for
any acts or omissions of any beneficiary of any Letter of Credit in connection
with such Letter of Credit; (b) the validity, sufficiency or genuineness of
documents presented to the
28
Issuing Bank, or of any endorsement on such documents, even if such documents
should in fact prove to be in any or all respects invalid, insufficient,
fraudulent or forged; (c) payment by the Issuing Bank against presentation of
documents which do not comply with the terms of any Letter of Credit,
including failure of any documents to bear any reference or adequate
reference to such Letter of Credit; or (d) any other circumstances whatsoever
in making or failure to make payment under any Letter of Credit; provided
that the Borrower shall have a claim against the Issuing Bank to the extent,
but only to the extent, of any direct, as opposed to consequential, damages
suffered by the Borrower which the Borrower proves were caused by (i) the
Issuing Bank's willful misconduct or gross negligence in determining whether
a document presented under any Letter of Credit complies with the terms of
such Letter of Credit or (ii) the Issuing Bank's willful failure to pay under
the Letter of Credit after presentation to it of documents strictly complying
with the terms and conditions of such Letter of Credit. In furtherance and
not in limitation of the foregoing, the Issuing Bank may accept documents
that appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary.
2.4 Nonuse Fee. The Borrower shall pay to the Agent
for the account of each Bank a nonuse fee on the average daily Unutilized
Revolving Commitment of such Bank for the period from and including the
Closing to but not including the earlier of the date such Commitment is
terminated and the Loan Termination Date, at the rate of (a) for the first
Quarterly Period, 0.30% per annum and (b) thereafter, 0.30% per annum or, for
any Quarterly Period prior to the first day of which (and in any event no
later than 45 days after the end of the fiscal quarter most recently ended)
the Borrower has delivered to the Agent a compliance certificate of the
Borrower calculating the Funded Debt to Cash Flow ratio as set forth in
Paragraph 6.17(C) below for the last day of such fiscal quarter (other than
such portion of such period during which an Event of Default shall be
continuing), the percentage per annum set forth below opposite the Funded
Debt to Cash Flow ratio for the Borrower reflected on such certificate:
Funded Debt to Cash Flow Percentage Rate
------------------------ ---------------
Greater than 3.0 to 1.0 30% per annum
Equal to or Less than 3.0:1.0 and Greater than 2.25:1.0 25% per annum
Equal to or Less than 2.25:1.0 and Greater than 1.5:1.0 25% per annum
Equal to or Less than 1.5 to 1.0 20% per annum
Nonuse fees shall be calculated on a 360-day year counting the actual number of
elapsed days.
Accrued nonuse fees shall be payable in arrears on each Quarterly Date and on
the earlier of each of the date the relevant Commitments are terminated and the
Loan Termination Date.
29
2.5 Reduction of Commitment. The Borrower shall have
the right to reduce the amount of the aggregate Commitments, at any time and
from time to time, in any integral multiple of One Million Dollars
($1,000,000.00), which reduction shall, unless otherwise agreed in writing,
reduce each Bank's Commitment pro rata in accordance with its Commitment
Percentage. Contemporaneously with each such reduction, the Borrower shall
repay to the Agent for the account of each Bank in accordance with its
respective Commitment Percentage the amounts, if any, by which the then
outstanding principal balance of each Note exceeds each Commitment as so
reduced. After each such reduction: (i) the Borrower shall immediately pay
the Agent any Nonuse Fee provided for in Paragraph 2.4 with respect to the
amount by which the Commitments are so reduced, but only with respect to the
time any such Commitment existed and only to the extent not previously paid;
(ii) the Nonuse Fee provided for in Paragraph 2.4 shall be calculated with
respect to the aggregate Commitments as so reduced; and (iii) the Commitments
may not be increased without the written consent of the Banks.
2.6 Alternate Rate of Interest
(A) In the event, and on each occasion, that on
the date of commencement of any Interest Period for a Eurodollar Loan, any Bank
shall have determined:
(1) That dollar deposits in the amount
of the requested principal amount of such Eurodollar Loan are not generally
available in the London Interbank Market;
(2) That the rate at which such dollar
deposits are being offered will not adequately and fairly reflect the cost to
Bank of making or maintaining such Eurodollar Loan during such Interest Period;
or
(3) That reasonable means do not exist
for ascertaining the LIBO Rate, such Bank shall, as soon as practicable
thereafter, give written or telephonic notice of such determination to the Agent
and Borrower. In the event of any such determination, any request by the
Borrower for a Eurodollar Loan pursuant to Paragraph 2.2 shall, until the
circumstances giving rise to such notice no longer exist, be deemed to be a
request for a Floating Rate Loan. Each determination by a Bank hereunder shall
be conclusive absent manifest error.
2.7 Change in Circumstances
(A) Notwithstanding any other provision
herein, if after the date of this Agreement any change in applicable Laws or
regulation or in the interpretation or administration thereof by any
governmental authority charged with the interpretation or administration thereof
(whether or not having the force of law) shall change the basis of taxation of
payments to a Bank under any Eurodollar Loan made by a Bank or any other fees or
amounts payable hereunder (other than taxes imposed on the overall net income of
such Bank by the country in which such Bank is located, or by the jurisdiction
in which such Bank has its principal office, or by any political subdivision or
taxing authority therein), or shall impose, modify or deem applicable any
30
reserve requirement, special deposit, insurance charge (including FDIC insurance
on Eurodollar deposits) or similar requirement against assets of, deposits with
or for the account of, or credit extended by, such Bank or shall impose on such
Bank or the London Interbank Market any other condition affecting this Agreement
or Eurodollar Loans made by such Bank, and the result of any of the foregoing
shall be to increase the cost to such Bank of making or maintaining any
Eurodollar Loan or to reduce the amount of any sum received or receivable by
such Bank hereunder (whether of principal, interest or otherwise) in respect
thereof by an amount reasonably deemed by such Bank in good faith to be
material, then the Borrower will pay to such Bank such additional amount or
amounts as will compensate such Bank for such additional costs of reduction.
(B) If either:
(1) The introduction of, or any change
in, or in the interpretation of, any United States or foreign law, rule or
regulation; or
(2) Compliance with any directive,
guidelines or request from any central bank or other United States or foreign
governmental authority (whether or not having the force of law) promulgated or
made after the date hereof (but excluding, however, any law, rule, regulation,
interpretation, directive, guideline or request contemplated by or resulting
from the report dated July, 1988, entitled "International Convergence of Capital
Measurement and Capital Standards" issued by the Basle Committee on Banking
Regulations and Supervisory Practices), affects or would affect the amount of
capital required or expected to be maintained by a Bank (or any lending office
of such Bank) or any corporation directly or indirectly owning or controlling
such Bank (or any lending office of such Bank) based upon the existence of this
Agreement, and such Bank shall have determined that such introduction, change or
compliance has or would have the effect of reducing the rate of return on Bank's
capital or on the capital of such owning or controlling corporation as a
consequence of its obligations hereunder (including its Commitment) to a level
below that which such Bank or such owning or controlling corporation could have
achieved but for such introduction, change or compliance (after taking into
account that Bank's policies or the policies of such owning or controlling
corporation, as the case may be, regarding capital adequacy) by an amount
reasonably deemed by such Bank in good faith to be material, then, from time to
time, the Borrower shall pay to such Bank such additional amount or amounts as
will compensate such Bank for such reduction attributable to making, funding and
maintaining its Commitment, Loans and Letters of Credit hereunder.
(C) A certificate of any Bank setting forth such
amount or amounts as shall be necessary to compensate such Bank (or its
participating banks or other entities pursuant to Paragraph 10.8) as specified
in paragraph (A) or (B) above, as the case may be, shall be delivered to the
Agent and the Borrower; provided however, that the Borrower shall be responsible
for compliance herewith and the payment of increased costs only to the extent:
(1) Any change in Laws giving rise to
increased costs occurs after the date of this Agreement;
31
(2) Such change in Laws or the
application thereof applies generally to the banking industry and is not the
result of one or more of the Banks in this Agreement having inadequate or
substandard capital as determined by its regulators; and
(3) The affected Bank gives notice of
the change giving rise to increased costs within one hundred eighty (180)
Business Days after such Bank has, or with reasonable diligence should have had,
knowledge of the change, or else such Bank can only collect costs from and after
the date of the notice.
Subject to the foregoing, the Borrower shall pay to the Agent for the account of
the affected Bank the amount shown as due on any such certificate within thirty
(30) days after its receipt of such certificate.
(D) The protection of this Paragraph 2.7 shall
be available to each Bank regardless of any possible contention of invalidity or
inapplicability of the law, regulation or condition that shall have been
imposed; provided, if a court of competent jurisdiction (or a final
administrative proceeding which is not judicially challenged) finally determines
that such law or regulation is invalid or unapplicable, then the protection of
this Paragraph shall not be available.
2.8 Change in Legality
(A) Notwithstanding anything to the contrary
herein contained, if any change in any law or regulation or in interpretation
thereof by any governmental authority charged with the administration or
interpretation thereof shall make it unlawful for any Bank to make or maintain
any Eurodollar Loan or to give effect to its obligations as contemplated hereby,
then, by written notice to the Agent and the Borrower, such Bank may:
(1) Declare that Eurodollar Loans
will not thereafter be made by such Bank hereunder, whereupon the Borrower shall
be prohibited from requesting Eurodollar Loans from such Bank hereunder unless
such declaration is subsequently withdrawn; and
(2) Require that all outstanding
Eurodollar Loans made by it be converted to Floating Rate Loans, in which event
(a) all such Eurodollar Loans shall be automatically converted to Floating Rate
Loans as of the effective date of such notice as provided in paragraph (B) below
and (b) all payments and prepayments of principal that would otherwise have been
applied to repay the converted Eurodollar Loans shall instead be applied to
repay the Floating Rate Loans resulting from the conversion of such Eurodollar
Loans.
(B) For purposes of this Paragraph 2.8, a
notice to the Borrower and Agent by any Bank pursuant to (A) above shall be
effective, if lawful, on the last day of the then current Interest Period; in
all other cases, such notice shall be effective on the date of receipt by the
Borrower.
32
2.9 Optional Prepayment - Premiums in Certain Events
(A) The Borrower may, upon three (3) Business
Days' prior written notice to the Agent, and upon payment of all premiums set
forth in subparagraph (D) hereinbelow, prepay any outstanding Eurodollar Loans
prior to any Interest Payment Date for such Eurodollar Loans, in whole or in
part.
(B) The Borrower may at any time prepay any
outstanding Floating Rate Loans in whole or in part without premium or penalty.
(C) Each notice of prepayment of any Eurodollar
Loan shall specify the date and amount of such prepayment and shall be
irrevocable. The Agent shall promptly notify the Banks of its receipt of a
notice of prepayment. Each partial prepayment of any Eurodollar Loans shall be
in an aggregate principal amount which is the lesser of (1) the then outstanding
principal balance of the one or more Eurodollar Loans to be prepaid, or (2) One
Hundred Thousand Dollars ($100,000.00) or an integral multiple thereof. Interest
on the amount prepaid accrued to the prepayment date shall be paid on such date.
(D) Upon prepayment of any Eurodollar Loan on a
date other than the relevant Interest Payment Date for such borrowing, Borrower
shall pay to Agent for the account of each Bank, in addition to all other
payments then due and owing the Banks, premiums which shall be equal to an
amount, if any, reasonably determined by each Bank to be the difference between
the rate of interest then applicable to the relevant Eurodollar Loan and the
yield each Bank receives upon reinvestment of so much of the relevant Eurodollar
Loans as is prepaid for the remainder of the term of the relevant Eurodollar
Loan or Loans. Anything in this section 2.9(D) to the contrary notwithstanding,
the premiums payable upon any such prepayment shall not exceed the amount, if
any, reasonably determined by each Bank to be the difference between the rate of
interest then applicable to the relevant Eurodollar Loan and the yield that each
Bank could receive upon reinvestment in the "Floor Reinvestment" of so much of
the relevant Eurodollar Loan as is prepaid for the remainder of the term of the
relevant Eurodollar Loan. For purposes hereof, "Floor Reinvestment" shall mean
an investment for the time period from the date of such prepayment to the end of
the relevant Interest Period applicable to such Eurodollar Loan at an interest
rate per annum equal to the Federal Fund Rate "offered" as published in the Wall
Street Journal on the date of such prepayment. All determinations, estimates,
assumptions, allocations and the like required for the determination of such
premiums shall be made by each Bank in good faith and shall be presumed correct
absent demonstrable error.
2.10 Payment to the Agent
(A) The Agent shall send the Borrower statements
of all amounts due hereunder (or the Banks may in the case of Section 2.7
above), which statements shall be considered correct and conclusively binding on
the Borrower unless the Borrower notifies the Agent to the contrary within one
hundred eighty (180) days of its receipt of any statement to which it objects.
All sums payable to the Banks hereunder shall be paid directly to the Agent
33
for the account of each Bank in immediately available funds prior to 12:00
noon, Nashville time, on the date when such sums are due and payable. Any
amounts received by the Agent after 12:00 noon Nashville time on any Business
Day shall be deemed to have been received on the next Business Day.
(B) Each payment made to the Agent on the
Notes or for other sums or fees due hereunder for the account of the Banks shall
in like funds be properly remitted by the Agent to each Bank, no later than 2:00
p.m. Nashville time on the date on which Agent receives such payment.
SECTION III. CONDITIONS PRECEDENT
---------------------------------
The obligation of the Banks to fund and/or continue funding
the Loans hereunder is subject to the following conditions precedent:
3.1 Documents Required for the Closing. The Borrower
shall have delivered to the Agent prior to the initial disbursement of the Loans
the following:
(A) Evidence satisfactory to the Agent and the
Banks that the Horizon Acquisition has been closed pursuant to the terms of the
Stock Purchase Agreement and that the Borrower is the lawful owner and holder of
all of the shares of Horizon;
(B) This Agreement, duly executed by the
Borrower, the Guarantors, the Agent and the Banks;
(C) The Notes;
(D) Stock Pledge Agreements (collectively, the
"Stock Pledge Agreements") in the form attached hereto as Exhibit E, including
Schedule I thereto, duly executed by the Borrower and Southern Health Systems,
Inc., respectively, together with certificates representing the shares pledged
thereby, duly endorsed in blank, and stock powers duly endorsed in blank;
(E) Duly executed Guaranty and Suretyship
Agreements (collectively the "Guaranty and Suretyship Agreements") of the
Guarantors, in the form attached hereto as Exhibit F;
(F) The Financing Statements required by Section
IV;
(G) A copy of resolutions of Borrower's board of
directors, certified by the corporate secretary or assistant secretary of
Borrower as of the date of Closing, authorizing the execution, delivery and
performance of this Agreement, the Notes, the Collateral Documents, and each
other document to be delivered pursuant hereto;
34
(H) A copy of resolutions of each Guarantor's
board of directors, certified as of the date of Closing by the secretary of each
of such corporations, authorizing the execution, delivery and performance of any
documents to be delivered by such corporation pursuant to this Agreement,
including without limitation any of the Collateral Documents.
(I) A copy, certified as of the most recent
date practicable, by the applicable Secretaries of State of Borrower's and each
Guarantor's Charter, together with a certificate dated the date of the Closing
of each corporate secretary to the effect that such certificates of
incorporation have not been amended since the date of the aforesaid Secretary of
State certifications;
(J) A copy of Borrower's by-laws certified by
Borrower's secretary as of the date of the Closing;
(K) A copy of the by-laws of each Guarantor
certified by each Guarantor's secretary as of the date of Closing;
(L) A certificate dated the date of the Closing
of Borrower's corporate secretary as to the incumbency and signatures of the
officers of Borrower executing this Agreement, the Notes, the Collateral
Documents, and each other document to be delivered pursuant hereto;
(M) A certificate dated the date of the Closing
of each Guarantor's corporate secretary as to the incumbency and signatures of
the officers of each of such corporation executing any document to be delivered
pursuant hereto, including without limitation any of the Collateral Documents.
(N) Certificates, as of the most recent dates
practicable, of the Delaware Secretary of State and the Secretary of State of
each state in which a Borrower is qualified as a foreign corporation as to the
good standing of such Borrower;
(O) Certificates, as of the most recent date
practicable, of the Secretaries of State in each state where each Guarantor is
organized as to the good standing of each such Subsidiary;
(P) A written opinion of Messrs. Armstrong,
Allen, Prewitt, Gentry, Xxxxxxxx & Xxxxxx, PLLC, the Borrower's counsel, dated
the date of the Closing and addressed individually to each Bank, in the form
attached hereto as Exhibit G and otherwise satisfactory to the Banks.
(Q) A certificate, dated the date of the
Closing, signed by the president, vice president, chief financial officer, or
corporate controller of the Borrower and to the effect that:
35
(1) The representations and warranties
set forth within Section V are true as of the date of the Closing;
(2) No Event of Default or Unmatured
Default has occurred as of such date;
(3) All of the Collateral Documents are
and shall remain in full force and effect.
(R) Copies of all Material Supplier Agreements,
said agreements to be in form and substance satisfactory to Banks and containing
such inventory buy-back arrangements as may be acceptable to the Banks.
(S) Copies of all documents evidencing the
terms and conditions of any debt specified as Subordinated Indebtedness on
Exhibit D in form and substance satisfactory to Banks;
(T) A fully executed Intercreditor Agreement
between the Banks, the Agent and the holders of the existing Subordinated
Indebtedness in such form as may be required by the Banks.
(U) A fully executed Subordination Agreement
between Genzyme Corporation and the Agent on behalf of the Banks subordinating
the lien of Genzyme Corporation against the accounts of Nova Factor, Inc. to
those liens on such accounts granted hereunder by Nova Factor, Inc. in favor of
the Agent for the benefit of the Banks to secure the Obligations.
(V) A Federal Reserve Form (or Forms) U-1,
duly completed and executed by the Borrower and each Pledgor.
3.2 Requirements for all Subsequent Advances. At the
Closing, and as an express condition precedent after Closing to each
disbursement of any Loan (whether for an Acquisition Advance or otherwise) or
the issuance of any Letter of Credit, each of the following shall be true and
correct:
(A) As of the date thereof, no Event of Default
has occurred and is continuing, and no Unmatured Default is in existence;
(B) The extension of credit will be used only as
permitted in Paragraph 2.1;
(C) No Material Adverse Change has occurred
since the date of the Financial Statements or the date of the Closing, as
applicable; and
36
(D) All of the Collateral Documents remain in full
force and effect, and with respect to any Acquisition Advance the Borrower has
satisfied all of the conditions of Paragraph 7.15 including without limitation
providing or causing to be provided such additional Collateral Documents as
required by Paragraph 7.15.
If any of the foregoing statements is not true and correct, then the Banks shall
have no obligation to make the requested advance. In addition, on each requested
disbursement of a Revolving Loan, the Borrower shall deliver to the Agent a true
and accurate certificate together with (or included within) any Borrowing
Notice, dated the date on which a Revolving Loan disbursement is to be made,
signed by the president, vice president, chief financial officer, or corporate
controller of the Borrower and certifying to the foregoing.
3.3 Legal Matters. At the time of the Closing and
thereafter, all legal matters incidental to the Loans shall be satisfactory
to Agent and its counsel.
SECTION IV. COLLATERAL SECURITY
-------------------------------
4.1 Composition of the Collateral. The property in
which a security interest is granted pursuant to the provisions of Paragraphs
4.2 and 4.3 is herein collectively called the "Collateral." The Collateral,
together with all of the Borrower's and any Guarantor's other property of any
kind, both real and personal, held by, assigned to, mortgaged to or conveyed
in favor of the Banks, shall stand as one general, continuing collateral
security for all Obligations and the security interest may be retained by the
Agent and/or Banks until all Obligations have been satisfied in full.
4.2 Rights in Property Held by the Banks. As security
for the prompt satisfaction of all Obligations and all Guaranties of the
Obligations, the Borrower and each Guarantor hereby assign, transfer and set
over to the Banks all of their right, title and interest in and to, and grant
each of the Banks and the Agent on behalf of the Banks a lien on and a
security interest in, all amounts that may be owing from time to time by the
Banks to the Borrower or such Guarantor in any capacity, including, but
without limitation, any balance or share belonging to the Borrower or such
Guarantor of any deposit or other account with the Banks, which lien and
security interest shall be independent of any right of set-off which the
Banks and/or Agent may have.
4.3 Rights in Property of the Borrower and Guarantors.
As further security for the prompt satisfaction of all Obligations and all
Guaranties of the Obligations, the Borrower and each Guarantor hereby
collaterally assign to the Agent for the benefit of the Banks all of their
respective right, title and interest in and to, and grant the Banks a lien
upon and security interest in, all of the following, wherever located,
whether now owned or hereafter acquired, together with all substitutions,
replacements, improvements, accessions or appurtenances thereto, and proceeds
(including without limitation insurance proceeds) thereof:
(A) Accounts;
37
(B) Chattel Paper;
(C) Documents;
(D) Equipment;
(E) Fixtures;
(F) General Intangibles;
(G) Instruments;
(H) Inventory;
(I) The Pledged Stock; and
(J) All Records pertaining thereto or to any
other Collateral.
4.4 Priority of Liens. The foregoing liens shall be
first and prior liens except for any Permitted Liens on assets which have
priority or would have priority by the operation of Laws.
4.5 Financing Statements
(A) The Borrower and each Guarantor will:
(1) Join with the Agent in executing
such additional Financing Statements (including amendments thereto and
continuation statements thereof) in form satisfactory to the Banks as the Banks
may specify;
(2) Pay or reimburse the Agent and/or
the Banks for all costs and taxes of filing or recording the same in such public
offices as the Agent may designate, and reimburse the Agent for performing
subsequent verification searches following Closing in Tennessee, Alabama and
Oklahoma; and
(3) Take such other steps as the Agent
may direct, including the noting of the Banks' lien on the Collateral and on any
certificates of title therefor all to perfect the Banks' security interest in
the Collateral.
(B) A carbon, photographic, or other
reproduction of this Agreement shall be sufficient as a financing statement and
may be filed in any appropriate office in lieu thereof.
(C) To the extent lawful, the Borrower and each
Guarantor hereby appoint the Agent as their attorney-in-fact (without requiring
the Agent to act as such) to execute any Financing Statement in the name of the
Borrower or such Guarantor, and to perform all other acts that the Agent deems
appropriate to perfect and continue the Banks' security interest in, and to
protect and preserve, the Collateral.
4.6 Collection of Receivables. Following the
occurrence of any Event of Default and for so long as such Event of Default
remains uncured, upon demand of the Majority Banks, Borrower and each
Guarantor shall deposit or cause to be deposited, all checks, drafts, cash,
and other remittances received in payment of services rendered or inventory
sold or in
38
payment or on account of its accounts, immediately upon receipt thereof with
Agent in a special "lockboxed" bank account maintained with Agent, over which
the Agent alone shall have power of withdrawal. The funds in said special
bank account shall be held by the Agent on behalf of the Banks as security
for all loans made hereunder and all other Obligations of Borrower or any
Guarantor to the Banks secured hereby. Said proceeds shall be deposited in
precisely the form received, except for the endorsement of Borrower and each
Guarantor where necessary to permit collection, which endorsement Borrower
and each Guarantor agree to make and which Agent also hereby is irrevocably
authorized to make on their behalf. Pending such deposit, Borrower and each
Guarantor agree that they will not commingle any such checks, drafts, cash,
and other remittances with any of their funds or property, but will hold them
separate and apart therefrom and upon an express trust for the Banks until
deposit thereof is made in the said special bank account. At least twice
weekly, Agent will apply the whole or any part, as the Majority Banks deem
appropriate, of the collected funds on deposit in the said special bank
account against the principal and/or interest of any loans made hereunder
and/or on Borrower's other Obligations secured hereby, the order and method
of such application to be in the discretion of the Majority Banks. Any
portion of said funds on deposit in the special bank account that the
Majority Banks elect not to apply will be paid over by Agent to Borrower.
SECTION V. REPRESENTATIONS AND WARRANTIES
-----------------------------------------
To induce the Banks to enter into this Agreement, the Borrower
and each Guarantor jointly and severally represent and warrant to each Bank as
follows:
5.1 Due Organization and Qualification. Borrower is a
corporation duly organized, validly existing and in good standing under the
Laws of the State of Delaware and is qualified to transact business in
Tennessee; each Subsidiary is duly organized, validly existing and in good
standing under the Laws of its state of formation or incorporation, all as
set forth in Exhibit H, and Borrower has no other Subsidiaries except as
therein listed; the Borrower and each Subsidiary have the lawful power to own
their properties and to engage in the business they conduct, and each is duly
qualified and in good standing as a foreign corporation in the jurisdictions
wherein the nature of the business transacted by it or property owned by it
is both material and makes such qualification necessary; the states in which
the Borrower and each Subsidiary are qualified to do business are set forth
in Exhibit H; the percentage of the Borrower's ownership of the outstanding
stock or ownership interests of each Subsidiary is as listed in Exhibit H;
and the addresses of all places of business of the Borrower and each
Subsidiary are as set forth in Exhibit I, together with a separate listing of
each office or place of business where the value of the Inventory held equals
or exceeds $50,000.00 in amount;
5.2 No Conflicting Agreement. Neither the Borrower nor
any Subsidiary is in default with respect to any existing Indebtedness where
the Indebtedness exceeds $50,000.00 in amount, and the making and performance
of this Agreement, the Notes and the Collateral Documents will not
(immediately, or with the passage of time or the giving of notice, or both):
39
(1) Violate the charter or bylaw
provisions of the Borrower or any Guarantor, or violate any Laws, or result in a
default under any material contract, agreement, or instrument to which the
Borrower or any Subsidiary is a party or by which the Borrower or any Guarantor
or its property is bound; or
(2) Result in the creation or imposition
of any security interest in, or lien or encumbrance upon, any of the assets of
the Borrower or any Guarantor, except in favor of the Agent for the benefit of
the Banks;
5.3 Capacity. The Borrower and each Guarantor have the
power and authority to enter into and perform this Agreement, the Notes and
the Collateral Documents, as applicable, and to incur the Obligations herein
and therein provided for, and have taken all corporate action necessary to
authorize the execution, delivery, and performance of this Agreement, the
Notes and the Collateral Documents;
5.4 Binding Obligations. This Agreement and the
Collateral Documents are, and the Notes when delivered will be, valid,
binding, and enforceable in accordance with their respective terms subject to
the general principles of equity (regardless of whether such question is
considered in a proceeding in equity or at law) and to applicable bankruptcy,
insolvency, moratorium, fraudulent or preferential conveyance and other
similar laws affecting generally the enforcement of creditors' rights;
5.5 Pledged Stock. The Borrower owns the Pledged
Stock; the Pledged Stock constitutes one hundred percent (100%) of the issued
and outstanding capital stock of the respective issuers thereof; and the
Pledged Stock has been duly issued, is fully paid and non-assessable, and is
free of all claims, security interests, liens, charges and encumbrances;
5.6 Litigation. Except as disclosed in Exhibit J
hereto, there is no pending or threatened order, notice, claim, litigation,
proceeding or investigation against or affecting the Borrower or any
Subsidiary, whether or not covered by insurance, that would involve the
payment of One Hundred Thousand Dollars ($100,000.00) or more if adversely
determined;
5.7 Title. The Borrower and its Subsidiaries have good
and marketable title to all of their respective material assets, including
without limitation the Collateral, subject to no security interest,
encumbrance or lien, or the claims of any other Person except for Permitted
Liens;
5.8 Financial Statements. The Financial Statements,
including any schedules and notes pertaining thereto, have been prepared in
accordance with generally accepted accounting principles consistently
applied, and fully and fairly present the financial condition of the Borrower
and its Subsidiaries (including without limitation Horizon) at the dates
thereof and the results of operations for the periods covered thereby, and
there has been no Material Adverse Change in the financial condition or
business of the Borrower and its Subsidiaries (including without limitation
Horizon) as last audited to the date hereof;
40
5.9 No Additional Indebtedness. As of the date hereof,
the Borrower and its Subsidiaries (including without limitation Horizon) had
no Indebtedness of any nature, including, but without limitation, liabilities
for taxes and any interest or penalties relating thereto, except for trade
payables and other Indebtedness incurred in the ordinary course of business
or to the extent reflected (in a footnote or otherwise) and reserved against
in the March 31, 1997 Financial Statements or as disclosed in or permitted by
this Agreement; the Borrower does not know, and has no knowledge of any basis
for the assertion against it or any Subsidiary (including without limitation
Horizon) as of the date hereof, of any material Indebtedness of any nature
not fully reflected and reserved against in the March 31, 1997 Financial
Statements;
5.10 Taxes. Except as otherwise permitted herein, the
Borrower and its Subsidiaries (including without limitation Horizon) have
filed all federal, state and local tax returns and other reports they are
required by Laws to file prior to the date hereof and which are material to
the conduct of their respective businesses, have paid or caused to be paid
all taxes, assessments and other governmental charges that are due and
payable prior to the delinquency hereof, and have made adequate provision for
the payment of such taxes, assessments or other charges accruing but not yet
payable; the Borrower has no knowledge of any deficiency or additional
assessment in connection with any taxes, assessments or charges not provided
for on its books;
5.11 Licenses; Compliance with Laws. All material
certificates of authority, licenses, permits, accreditations and approvals
required by all laws and/or governmental authorities necessary in order for
Borrower and each of its Subsidiaries to conduct their respective businesses
have been obtained and are in full force and effect. Except as otherwise
disclosed in Exhibit K hereto, or except to the extent that the failure to
comply would not materially interfere with the conduct of the business of the
Borrower or any Subsidiary or have a Material Adverse Effect, the Borrower
and its Subsidiaries have complied with all applicable Laws with respect to:
(1) any licenses, restrictions, specifications, or other requirement
pertaining to services that the Borrower or any Subsidiary performs; (2) the
conduct of their respective businesses; (3) the use, maintenance, and
operation of the real and personal properties owned or leased by them in the
conduct of their respective businesses; and (4) health, safety, worker's
compensation, and equal employment opportunity;
5.12 Environmental Compliance. The Borrower and its
Subsidiaries and their respective assets and operations are in compliance in
all material respects with all Environmental Laws. All warehouses, facilities
and properties of the Borrower and its Subsidiaries are and will be on the
date of Closing in a clean and healthful condition, free of friable asbestos
and of all contamination by Hazardous Materials and, to the best of
Borrower's actual knowledge, there is no illegal contamination of the air,
soil, groundwater or surface waters associated with or adjacent to such
plants, facilities and properties; to the best of Borrower's actual
knowledge, all storage tanks (whether above or below ground) located in or on
such plants, facilities and properties are in sound condition, free or
corrosion or leaks that could allow or threaten the release of any Hazardous
Material; to the best of Borrower's actual knowledge, no Hazardous Materials
have been used, stored, treated or disposed of in violation of applicable
Laws and regulations. Neither the Borrower nor any Subsidiary is a defendant
in any administrative or
41
judicial action alleging liability under the Comprehensive Environmental
Response, Compensation and Liability Act, as amended ("CERCLA"), nor has the
Borrower or any Subsidiary received a notice that it is a potentially
responsible party under CERCLA or similar state Laws. The foregoing
representations and exceptions thereto shall in no way diminish or abrogate
the covenants made in Paragraph 6.14;
5.13 Full Disclosure. No representation or warranty by
the Borrower or any Subsidiary contained herein or in any certificate or
other document furnished by the Borrower or any Subsidiary pursuant to this
Agreement contains any untrue statement of material fact or omits to state a
material fact necessary to make such representation or warranty not
misleading in light of the circumstances under which it was made;
5.14 Consents. Each consent, approval or authorization
of, or filing, registration or qualification with, any Person required to be
obtained or effected by the Borrower or any Subsidiary in connection with the
execution and delivery of the Loan Documents or the undertaking or
performance of any obligation thereunder has been duly obtained or effected;
5.15 Existing Borrowings. All existing Indebtedness:
(1) for money borrowed; or (2) under any security agreement or mortgage from
the Borrower or any Subsidiary is described in Exhibit C, unless the same are
less than $10,000.00 in amount;
5.16 Material Contracts. Except as described on Exhibit L
hereto, the Borrower and its Subsidiaries have no material lease, contract or
commitment of any kind (such as employment agreements; collective bargaining
agreements; distribution arrangements; patent license agreements; contracts
for future purchase or delivery of goods or rendering of services; bonus or
stock option plans; all parties (including the Borrower and Subsidiaries) to
all such material leases, contracts and other commitments to which the
Borrower or any Subsidiary is a party have to the best of Borrower's actual
knowledge complied with the provisions of such leases, contracts and other
commitments; no party is in default under any provision thereof; and no event
has occurred which, but for the giving of notice or the passage of time, or
both, would constitute a default;
5.17 No Commissions. Neither the Borrower nor any
Subsidiary has made any agreement or has taken any action which may cause
anyone to become entitled to a commission or finder's fee as a result of the
making of the Loans;
5.18 ERISA. Borrower and its Subsidiaries have no
Defined Benefit Pension Plans, as defined in the Employee Retirement Income
Security Act of 1974, as amended ("ERISA");
5.19 Survival. All of the representations and
warranties set forth in Section V shall survive until all Obligations are
satisfied in full.
42
SECTION VI. AFFIRMATIVE COVENANTS
The Borrower does hereby covenant and agree with each Bank
that, so long as any of the Obligations remain unsatisfied, it will comply, and
it will cause its Subsidiaries to comply, with the following covenants:
6.1 Use of Proceeds. The Borrower will use the proceeds of
each of the respective Loans and Letters of Credit only for the purposes
permitted in Paragraph 2.1, and will furnish the Agent such evidence as it
may reasonably require with respect to such use.
6.2 Financial Statements and Reports. The Borrower will
furnish each of the Banks:
(A) Within thirty (30) days after the close of each
calendar month in each fiscal year of Borrower and its Subsidiaries: (a)
consolidated and consolidating income statements of the Borrower and its
Subsidiaries for such monthly period; and (b) consolidated balance sheets of the
Borrower and its Subsidiaries as of the end of such monthly period--all in
reasonable detail, subject to year-end audit adjustments and certificated by the
Borrower's president or principal financial officer to have been prepared in
accordance with generally accepted accounting principles consistently applied by
the Borrower and its Subsidiaries, except for any inconsistencies explained in
such certificate;
(B) Within thirty (30) days after the close of each
quarter-annual accounting period in each fiscal year of the Borrower and its
Subsidiaries: (a) a consolidated statement of cash flows of the Borrower and its
Subsidiaries for such quarter-annual period; (b) consolidated and consolidating
income statements of the Borrower and its Subsidiaries for such quarter-annual
period; (c) consolidated and consolidating balance sheets of the Borrower and
its Subsidiaries as of the end of such quarter-annual period -- all in
reasonable detail, subject to year-end audit adjustments and certified by the
Borrower's president or principal financial officer to have been prepared in
accordance with generally accepted accounting principles consistently applied by
the Borrower and its Subsidiaries, except for any inconsistencies explained in
such certificate; and (d) a product line income statement showing for each
significant drug and product line the cumulative 12 month income attributable
for each such product line;
(C) Within ninety (90) days after the close of each
fiscal year of Borrower and its Subsidiaries: (a) consolidated and consolidating
statements of cash flows of the Borrower and its Subsidiaries for such fiscal
year; (b) consolidated and consolidating income statements of the Borrower and
its Subsidiaries for such fiscal year; and (c) consolidated and consolidating
balance sheets of the Borrower and its Subsidiaries as of the end of such fiscal
year--all in reasonable detail, including all supporting schedules, notes and
comments; the consolidated statements and balance sheets shall be audited by
Ernst & Young or another independent certified public accountant selected by the
Borrower and acceptable to the Banks, and certified by such accountants to have
been prepared in accordance with generally accepted accounting principles
consistently applied by the Borrower and its Subsidiaries, except for any
43
inconsistencies explained in such certificate. In addition, the Borrower will
obtain from such independent certified public accountants and deliver to the
Bank, within ninety (90) days after the close of such fiscal year, their written
statement that in making the examination necessary to their certification they
have obtained no knowledge of any Event of Default by the Borrower, or
disclosing all Events of Default of which they have obtained knowledge;
provided, however, that in making their examination such accountants shall not
be required to go beyond the bounds of generally accepted auditing procedures
for the purpose of certifying financial statements. Each Bank shall have the
right, from time to time, to discuss the Borrower's affairs directly with the
Borrower's independent certified public accountants after notice to the Borrower
and opportunity of the Borrower to be present at any such discussions;
(D) Contemporaneously with each monthly and fiscal
year-end financial report required by the foregoing paragraphs (A) and (C), a
Borrowing Base Calculation Certificate in the form of Exhibit M hereto as
well as an aging of all Accounts due and owing to the Borrower and its
Subsidiaries at the end of such period and an aging of all accounts payable
due from the Borrower and its Subsidiaries, each in form and substance
satisfactory to the Agent, together with an aging in the year-end report of
amounts due for advances made pursuant to Paragraph 7.13;
(E) Contemporaneously with each quarter-annual and
fiscal year-end financial report required by the foregoing paragraphs (B) and
(C), a Compliance Certificate in the form of Exhibit N hereto signed by the
president or chief financial officer of the Borrower stating that: (i) such
officer has individually reviewed the provisions of this Agreement; (ii) a
review of the activities of the Borrower and its Subsidiaries during such
year or quarterly period, as the case may be, has been made by such officer
or under such officer's supervision, with a view to determining whether the
Borrower has fulfilled all its obligations under this Agreement; and (iii) to
the best of such officers' knowledge, the Borrower has observed and performed
each undertaking contained in this Agreement and is not in default in the
observance or performance of any of the provisions hereof or, if the Borrower
shall be so in default, specifying all such defaults and events of which such
officer may have knowledge. Such certificate shall further set forth the
calculations of the financial ratios and covenants set forth in Paragraph
6.17 including without limitation any antecedent calculations and the source
of any information that was used in such calculations;
(F) On or before September 1 of each year, a proforma
budget (including projected Capital Expenditures) for the ensuing fiscal
year, in form reasonably satisfactory to the Agent;
(G) Immediately upon receipt of the same by Borrower or
any Subsidiary, copies of all management letters and any other reports which
are submitted to the Borrower or any of its Subsidiaries by its independent
accountants in connection with any annual or interim audit of the Records of
the Borrower or its Subsidiaries by such accountants; and
44
(H) Promptly after the sending or making available or
filing of the same, copies of all registration statements, proxy statements,
financial statements and report that the Borrower files with the Securities
and Exchange Commission or any successor Person.
6.3 Good Condition. The Borrower and its Subsidiaries will
maintain their assets and their respective Inventory, Equipment and other
properties in good condition and repair (normal wear and tear excepted), and
will pay and discharge or cause to be paid and discharged when due, the cost
of repairs to or maintenance of the same, and will pay or cause to be paid
all rental or mortgage payments due on such Equipment or real property. The
Borrower hereby agrees that, in the event it or any Subsidiary fails to pay
or cause to be paid any such payment, the Agent may do so on behalf of the
Banks after notice to the Borrower and be reimbursed by the Borrower therefor.
6.4 Insurance. The Borrower and its Subsidiaries will
maintain, or cause to be maintained, public liability insurance (including
product liability) and fire and extended coverage insurance on all assets
owned by them, as well as malpractice and professional liability insurance,
all in such form and amounts as are consistent with industry practices and
with such insurers as may be satisfactory to the Agent. Such policies shall
name the Agent on behalf of the Banks as loss payee under a standard
mortgagee loss payee clause and as an additional insured, as their interests
may appear, and shall contain a provision whereby they cannot be canceled
except after thirty (30) days' written notice to the Agent. The Borrower will
furnish to the Agent such evidence of insurance as the Agent may require. The
Borrower hereby agrees that, in the event it or any Subsidiary fails to pay
or cause to be paid the premium on any such insurance, the Agent or any Bank
may do so and be reimbursed by the Borrower therefor. The Agent is hereby
appointed the Borrower's attorney-in-fact (without requiring the Agent to act
as such) to endorse any check which may be payable to the Borrower to collect
such returned or unearned premiums or the proceeds of such insurance, and any
amounts so collected shall be returned to the Borrower unless there is an
Event of Default, in which case such amounts may be applied by the Agent
toward satisfaction of any of the Obligations.
6.5 Taxes; Copies of Returns. The Borrower and its
Subsidiaries will pay or cause to be paid prior to delinquency, all taxes,
assessments and charges or levies imposed upon them or on any of their
property or which any of them is required to withhold or pay over, except
where contested in good faith by appropriate proceedings with adequate
security therefor having been set aside in a manner satisfactory to Banks.
The Borrower and each Subsidiary shall pay or cause to be paid all such
taxes, assessments, charges or levies forthwith whenever foreclosure on any
lien that attaches (or security therefor) appears imminent. Within ten (10)
days of any Bank's request therefor, the Borrower will furnish the Banks with
copies of federal income tax returns filed by the Borrower.
6.6 Records and Inspection. The Borrower and its
Subsidiaries will, when requested so to do and upon two (2) Business Days
notice, make available at their offices during regular business hours any of
their Records (excluding confidential patient records) for inspection by duly
authorized representatives of the Banks, and will furnish the Banks any
45
information regarding their business affairs and financial condition within a
reasonable time after written request therefor.
6.7 Maintenance of Existence and Business; Licenses. The
Borrower and its Subsidiaries will take all necessary steps to renew, keep in
full force and effect, and preserve their corporate existence, good standing,
and franchises, and will comply in all respects with all present and future
Laws applicable to them in the operation of their specialized pharmacy
services and drug distribution business except to the extent that a failure
to do so would not have or cause to occur a Material Adverse Effect. The
Borrower and its Subsidiaries will preserve, renew and keep in full force and
effect all material licenses, contracts, governmental permits,
authorizations, consents and approvals, rights, privileges and franchises
necessary or desirable in the normal course of their providing specialized
pharmacy services and distribution.
6.8 Reimbursement Eligibility. The Borrower and its
Subsidiaries will each maintain at all times eligibility for reimbursement
from Medicaid, Medicare, CHAMPUS, and any successors thereto as necessary for
the operation of their respective business.
6.9 Ordinary Course; Pledge of Notes. The Borrower and its
Subsidiaries will keep accurate and complete Records of their Accounts and
Equipment, consistent with sound business practices. The Borrower and its
Subsidiaries will collect their Accounts only in the ordinary course of
business. If any Accounts in excess of $100,000 should be evidenced by
promissory notes, then the holder shall immediately deliver the same to
Agent, appropriately endorsed to Agent's order. The Borrower and each
Subsidiary hereby waives presentment, demand, notice of dishonor, protest,
notice of protest, and all other notices with respect thereto.
6.10 Payment of Indebtedness. The Borrower and its
Subsidiaries will pay when due (or within applicable grace periods) all
Indebtedness for borrowed money (whether direct or indirect, including
Guarantee Obligations) due any Person, except when the amount thereof is
being contested in good faith by appropriate proceedings and with adequate
security therefor being set aside in a manner reasonably satisfactory to the
Banks. If default is made by the Borrower or any Subsidiary in the payment of
any principal (or installment thereof) of, or interest on, any such
Indebtedness, the Banks shall have the right, in their discretion, to pay
such interest or principal for the account of the Borrower or such Subsidiary
and be reimbursed by the Borrower therefor.
6.11 Notice of Litigation or Loss of Licenses. The Borrower
and its Subsidiaries will give immediate notice to the Agent and provide
copies to the Agent of: (1) any litigation or proceeding in which any of them
is a party if an adverse decision therein would require them to pay over more
than Five Hundred Thousand Dollars ($500,000.00) or deliver assets the value
of which exceeds such sum (if such claim is not considered to be covered by
insurance) or pay over more than One Million Dollars ($1,000,000.00) (if such
claim is considered to be covered by insurance); (2) the institution of any
other suit or proceeding involving any of them, or the overt threat thereof,
that might materially and adversely affect their operations, financial
condition, property, business, or the Collateral; (3) all notices of loss of
participation under any material reimbursement program or loss of applicable
pharmaceutical
46
or health care licenses; and (4) all other material deficiency notices,
compliance orders or adverse reports issued by any governmental authority or
licensing commission having jurisdiction over licensing, accreditation or
operation of the Borrower or any Subsidiary or by any governmental authority
or private insurance company pursuant to a provider agreement, which, if not
promptly complied with or cured, could result in the suspension or forfeiture
of any license, certification, or accreditation necessary for the Borrower or
any Subsidiary to carry on its business as then conducted or the termination
of any material insurance or reimbursement program available to the Borrower
or any Subsidiary.
6.12 Notice to Banks of Default. The Borrower and its
Subsidiaries will notify each Bank immediately if any of them becomes aware
of the occurrence of any Event of Default or of any fact, condition or event
that only with the giving of notice or passage of time or both, could become
an Event of Default, or of the failure of the Borrower or any Subsidiary to
observe any of their respective undertakings hereunder.
6.13 Notice of Name Change or Location. The Borrower and
its Subsidiaries will notify each Bank thirty (30) days in advance of any
change in (i) the name of the Borrower or any Subsidiary, (ii) the location
of any Collateral, (iii) the location of any of their places of business or
(iv) of the establishment of any new, or the discontinuance of any existing,
place of business.
6.14 Environmental Compliance.
(A) Borrower and its Subsidiary will (1) employ, and
cause each of its Subsidiaries to employ, in connection with its use, if any,
of all real property, appropriate technology and compliance procedures and
will maintain compliance with any applicable Environmental Laws, (2) obtain
and maintain, and cause each of its Subsidiaries to obtain and maintain, any
and all material permits required by applicable Environmental Laws in
connection with its or its Subsidiaries' operations and (3) dispose of, and
cause each of its Subsidiaries to dispose of, any and all Hazardous Materials
only at facilities and with carriers reasonably believed to possess valid
permits under RCRA, if applicable, and any applicable state and local
Environmental Laws. The Borrower shall use its best efforts, and cause each
of its Subsidiaries to use its best efforts, to obtain all certificates
required by law to be obtained by the Borrower and its Subsidiaries from all
contractors employed by the Borrower or any of its Subsidiaries in connection
with the transport or disposal of any Hazardous Materials.
(B) In the event that the Banks have reason to believe
that any Borrower or Subsidiary has failed to comply with any material
Environmental Laws, or there exists a threat of material harm to the
environment or Persons, the Banks or their agents shall have the right, but
no obligation, at any time during business hours and upon reasonable written
notice, to enter upon any property operated by a Borrower or Subsidiary and
conduct or cause to be conducted an Environmental Phase I audit (or an update
of any audit completed in connection with the execution of this Agreement) at
Borrower's sole expense and if such Phase I audit (or update) recommends
further testing, then the Banks or their agents may require, but shall not be
obligated to require, upon reasonable written notice, such further testing at
Borrower's sole
47
expense. The Banks or their agents shall use their best
efforts to invoke and maintain all applicable privileges over all audit
information generated pursuant to this provision.
6.15 Notice of Environmental Action. If the Borrower or any
of its Subsidiaries shall:
(A) receive written notice that any material violation
of any Environmental Laws may have been committed or is about to be committed
by the Borrower or any of its Subsidiaries;
(B) receive written notice that any administrative or
judicial complaint or order has been filed or is about to be filed against
the Borrower or any of its Subsidiaries alleging any material violation of
any Environmental Laws or requiring the Borrower or any of its Subsidiaries
to take any action in connection with the release or threatened release of
Hazardous Substances or solid waste into the environment; or
(C) receive written notice from a federal, state,
foreign or local governmental agency or private party alleging that the
Borrower or any of its Subsidiaries is liable or responsible for costs
associated with the response to cleanup, stabilization or neutralization of
any environmental activity;
then it shall provide the Agent and each Bank with a copy of such notice
within ten (10) Business Days of the Borrower's or such Subsidiary's receipt
thereof. Subject to the right of the Borrower or any Subsidiary to contest in
good faith any such actions or proceedings, the Borrower and/or any
Subsidiary shall as promptly as possible resolve, cure and/or have dismissed
with prejudice any such actions or proceedings, to the reasonable
satisfaction of the Banks.
6.16 ERISA Compliance. The Borrower and its Subsidiaries
will: (1) fund all their Defined Benefit Pension Plans in accordance with no
less than the minimum funding standards of Section 302 of ERISA and Section
412 of the Internal Revenue Code; (2) furnish the Agent upon request with
copies of all reports or other statements filed with the United States
Department of Labor or the Internal Revenue Service with respect to all such
Plans; and (3) promptly advise the Agent of the occurrence of any Reportable
Event or Prohibited Transaction with respect to any such Plan.
6.17 Financial Ratios. Unless the Banks otherwise agree in
writing, the Borrower and its Subsidiaries will maintain the following
financial ratios and covenants:
(A) Funded Debt to Consolidated Capital. A ratio of
Funded Debt to Consolidated Capital of not more than 0.50 to 1.00 at all
times.
(B) Debt Service Coverage. Giving Pro-Forma Effect to
any Permitted Acquisition made or to be made or Indebtedness incurred or to
be incurred as of the date of
48
determination, at the end of each fiscal quarter a Debt Service Coverage
Ratio computed for the four (4) quarters just ended of not less than 1.20 to
1.00.
(C) Funded Debt to Cash Flow. Giving Pro-Forma Effect
to any Permitted Acquisition made or to be made or Indebtedness incurred or
to be incurred as of the date of determination, at the end of each fiscal
quarter, a ratio of Funded Debt to Cash Flow for the four (4) quarters just
ended of not greater than 3.50 to 1.0.
(D) Maximum Account Days Outstanding. At all times,
the number of days obtained by multiplying 365 days by the quotient obtained
by dividing Consolidated Accounts derived from patients (less the
Consolidated Allowance for Doubtful Accounts) by Consolidated Revenues for
the prior 12 month period shall be no more than 90 days.
SECTION VII. NEGATIVE COVENANTS
Without first obtaining the prior written consent of the
Majority Banks:
7.1 Merger or Reorganization. No Borrower or Subsidiary
will enter into any merger, consolidation, reorganization or
recapitalization; provided, any Subsidiary may merge into the Borrower or any
other Subsidiary provided the Banks are given not less than thirty (30) days
prior written notice thereof and provided the surviving entity is a Borrower
or a Subsidiary which is a party to this Agreement.
7.2 Sale of Assets. No Borrower or Subsidiary will sell,
transfer, lease or otherwise dispose of all or any material part of its
assets; provided, however, Borrower and its Subsidiaries may in the ordinary
course of business sell its Inventory and may sell other assets to the extent
that the sales of such other assets do not exceed a combined fair market
value of up to One Hundred Thousand Dollars ($100,000.00) per fiscal year, or
may replace damaged or worn Equipment with Equipment of similar value and use.
7.3 Encumbrances. No Borrower or Subsidiary will: (1)
mortgage, pledge, grant or permit to exist a security interest in or lien
upon any of its assets of any kind, now owned or hereafter acquired, except
for Permitted Liens, or (2) covenant or agree with any other Person (other
than the Banks) not to mortgage, pledge, or grant a security interest in or a
lien upon their assets.
7.4 Debts and Other Obligations. No Borrower or Subsidiary
will incur, create, assume, or permit to exist any Indebtedness except: (1)
the Loans; (2) the Indebtedness described in Exhibit C; (3) trade
Indebtedness incurred in the ordinary course of business, including that
payable to Genzyme, Inc.; (4) contingent Indebtedness permitted by Paragraph
7.8; (5) Indebtedness, including Permitted Acquisition Indebtedness, secured
by Permitted Liens; (6) Indebtedness for borrowed money owed by any Guarantor
(exclusive of the Non-Corporate Subsidiaries) to the Borrower, or by the
Borrower to any Subsidiary of the Borrower, provided that if any such
Indebtedness is evidenced by a document or instrument, the same is pledged to
the Agent for the benefit of the Banks pursuant to an appropriate pledge
agreement; (7)
49
Indebtedness owed by the Non-Corporate Subsidiaries to the Borrower or any
Guarantor arising in the ordinary course of business from selling Inventory
and supplying management services to the Non-Corporate Subsidiaries, provided
the aggregate amount of such Indebtedness does not exceed One Million Dollars
($1,000,000.00) at any time outstanding; (8) operating leases incurred in the
ordinary course of business; and (9) Permitted Acquisition Indebtedness.
7.5 Untrue Certificate. No Borrower or Subsidiary will
furnish the Agent or any Bank any certificate or other document that will
contain any untrue statement of material fact or that will omit to state a
material fact necessary to make it not misleading in light of the
circumstances under which it was furnished.
7.6 Margin Stock. No Borrower or Subsidiary will directly
or indirectly apply any part of the proceeds of the Loans to the purchasing
or carrying of any "margin stock" within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System, or any regulations,
interpretations or rulings thereunder.
7.7 Sale-Leaseback. No Borrower or Subsidiary will enter
into any sale-leaseback transaction.
7.8 Guarantee Obligation. No Borrower or Subsidiary will
create, incur, suffer to exist a Guarantee Obligation or otherwise become
liable for any obligation of any other Person or any Subsidiary, except: (1)
the endorsement of commercial paper for deposit or collection in the ordinary
course of business, and (2) leases by the Borrower or a Subsidiary incurred
in the ordinary course of business.
7.9 Dividends and Distributions. The Borrower will not
declare or pay any cash dividends, or make any other cash payment or other
distribution of an asset on account of its capital stock (although dividends
may accrue on the preferred stock). The Borrower will not permit any
Subsidiary to become subject to any restriction on the ability of such
Subsidiary to pay dividends or make distributions.
7.10 Redemptions and Capital Stock. Except for the
redemption of up to 100,000 shares of common stock from Xxxx Xxxxxxxx, the
Borrower will not redeem, purchase or retire any of its capital stock and no
Subsidiary will issue, redeem, purchase or retire any of its capital stock or
other ownership interests or grant or issue any warrant, right or option
pertaining thereto or other security convertible into any of the foregoing.
7.11 Prepayments. No Borrower or Subsidiary will prepay any
Subordinated Indebtedness, or Indebtedness for borrowed money other than the
Obligations, or enter into or modify any agreement as a result of which the
terms of payment of any of the foregoing Indebtedness are modified to
accelerate or increase payments.
7.12 Subsidiary. No Borrower or Subsidiary will form any
Subsidiary, make any investment in or make any loan in the nature of any
investment to any Person, except for: (1) any Permitted Investments, (2) the
formation of a Subsidiary in connection with making a
50
Permitted Acquisition which qualifies as such under Paragraph 7.15 below, (3)
advances by the Borrower to any Guarantor(s), (4) the formation of additional
Non-Corporate Subsidiaries provided the amounts of the investments and loans
made or reasonably anticipated to be made by the Borrower or any Guarantor to
such Non-Corporate Subsidiary do not exceed in the aggregate Two Hundred
Fifty Thousand Dollars ($250,000.00), and (5) advances by any Subsidiaries of
the Borrower to the Borrower.
7.13 Loans and Advances. No Borrower or Subsidiary will
make any loan or advance to any officer, shareholder, director or employee of
a Borrower or any Subsidiary, except for temporary advances in the ordinary
course of business not to exceed Five Hundred Thousand Dollars ($500,000.00)
in the aggregate.
7.14 Investments. No Borrower or Subsidiary will purchase
or otherwise invest in or hold securities, non-operating real estate outside
the normal course of business, or other non-operating assets, except: (1)
Permitted Investments; (2) the present investment in any such assets,
including existing Subsidiaries; and (3) operating assets that hereafter
become non-operating assets.
7.15 Acquisitions. No Borrower or Subsidiary will make an
Acquisition of any Person without the prior written consent of the Banks;
provided however, the Borrower may acquire either all of the stock or assets
of a Person or any Guarantor may acquire the assets of or merge with such
Person (provided the Guarantor is the surviving entity) (hereinafter
collectively a "Permitted Acquisition") if either all Banks consent in
writing in advance thereto or, without the necessity of obtaining the Banks'
prior written approval if:
(A) not less than ten (10) Business Days prior to
entering into a binding agreement to make any Permitted Acquisition, Borrower
shall submit to each of the Banks the following information: (1) a copy of
the signed letter of intent and a current draft of the acquisition agreement
with any prepared exhibits; (2) a written description of the Person to be
acquired, including location and type of operations, key management, and real
estate assets (including legal descriptions of any owned real estate), if
any; (3) audited or reviewed historical financial statements of the Permitted
Acquisition for the prior two years and the most recent interim statement;
(4) consolidated financial statements and projections for both the Borrower
and its Subsidiaries as well as the Person being acquired giving Pro Forma
Effect to the Indebtedness associated with the Acquisition Advance and the
Acquisition Cash Flow associated with the Person to be acquired, and
indicating: (i) compliance on a joint, consolidated basis with the financial
covenant set forth in Paragraphs 6.17(B) and (C) for the twelve (12) months
prior to the anticipated closing of the Acquisition, (ii) compliance on a
joint, consolidated basis with the financial covenants set forth in
Paragraphs 6.17(A), (B), and (C) as of the closing of the Acquisition, and
(iii) projected compliance for the ensuing twelve (12) months after the
closing of the Acquisition with each financial covenant in Paragraph 6.17;
and (5) a copy of the acquisition analysis done by Borrower preparatory to
making the Permitted Acquisition;
51
(B) the Permitted Acquisition Price does not exceed
Five Million Dollars ($5,000,000.00) and does not exceed the product of six
(6) times the Acquisition Cash Flow of such Person;
(C) the business of the Permitted Acquisition is in
the provision of specialized pharmacy services and is located in the United
States;
(D) environmental Phase I audits of any real
properties owned by the Permitted Acquisition company conducted within six
(6) months prior to the closing of the Acquisition (or material substantially
similar thereto in the opinion of the Banks) indicate environmental risks
and/or exposures for which the estimated costs to fully remedy and clean-up
are less than One Hundred Thousand Dollars ($100,000.00), and copies of such
are provided to the Banks with a reliance letter;
(E) no Event of Default or Unmatured Default has
occurred hereunder and not been cured, or would otherwise occur as a result
of or in connection with the Permitted Acquisition, whether immediately or on
a projected basis;
(F) whether or not the Banks have been requested to
disburse funds, the Borrower must pledge or cause to be pledged to the Agent
for the benefit of the Banks a first priority lien on the outstanding stock
or ownership interests, if any, acquired in the Permitted Acquisition and
first priority liens (subject only to Permitted Liens) on all real estate
owned or leased by such Person and on all Inventory, Accounts, Chattel Paper,
Documents, Equipment, Fixtures, Instruments, and General Intangibles acquired
in the Permitted Acquisition in form and substance satisfactory to the Banks;
(G) if a new Subsidiary is formed for the purpose of
making the Permitted Acquisition or the Permitted Acquisition is a stock
purchase Acquisition, the new Subsidiary and/or the entity acquired must
become a party to this Agreement and execute a Guaranty and Suretyship with
respect to the Obligations in form and substance satisfactory to the Banks.
7.16 Capital Expenditures. Other than in connection with
funding Permitted Acquisitions, neither the Borrower nor any Subsidiary will
make or incur Capital Expenditures without the prior approval of Majority
Banks if such Capital Expenditures exceed, in the aggregate, one hundred
fifty percent (150%) of the Capital Expenditure amount set forth in the
applicable budget for such year submitted by Borrower to the Banks pursuant
to Subparagraph 6.2(F) above.
7.17 Accounts Payable. The Borrower and its Subsidiaries
will not permit their consolidated accounts payable portion of their
Consolidated Current Liabilities to exceed the sum of the maximum
contractually permissible payables under their Material Supplier Agreements
and other pharmaceutical supply agreements, if any.
52
7.18 Inventory Locations. No Borrower or Guarantor will
store Inventory having a value on a cost basis in excess of $100,000 in any
state other than the States of Tennessee, Alabama and Oklahoma unless such
Borrower or Subsidiary shall have first notified the Agent thereof in writing
of the location in said state and executed such Financing Statement(s) as
shall be necessary to perfect the security interests granted herein in the
Inventory located at such location or locations.
7.19 Affiliate Transactions. Except as described on Exhibit
L hereto, Borrower will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction
(including without limitation the purchase, sale, lease or exchange of any
property or the rendering of any service) with any Affiliate (other than any
Subsidiary which is wholly owned by Borrower) on terms that are less
favorable to the Borrower or its Subsidiaries than those that would be
obtainable at the time from any Person who is not an Affiliate.
Notwithstanding the foregoing, Borrower will not, and will not permit any of
its Subsidiaries to: (1) pay or incur any obligation to pay any management
fee, consulting fee, service fee or similar fee or charge to any Affiliate
other than a Guarantor or the Borrower or (2) enter into any transaction with
an Affiliate other than a Guarantor or the Borrower where the amount to be
paid, whether immediately or over time, exceeds Two Hundred Thousand Dollars
($200,000.00) in the aggregate other than the Subordinated Indebtedness owed
to Welsh, Carson, Xxxxxxxx & Xxxxx VII, L.P. and WCAS Healthcare Partners,
L.P. and their partners and affiliates or pharmacy dispensing contracts
entered into in the ordinary course of business.
SECTION VIII. DEFAULT
8.1 Events of Default. The occurrence of any one or more
of the following events shall constitute an "Event of Default" hereunder:
(A) The Borrower shall fail to pay within five (5) days
of the date when due any installment of principal or interest payable
hereunder or under a Letter of Credit Document or shall fail to pay within
ten (10) days of written notice any fee payable hereunder or under the Fee
Letter.
(B) The Borrower and its Subsidiaries shall fail to
achieve any of the financial covenants contained in Paragraph 6.17.
(C) The Borrower, any Subsidiary, or Pledgor shall fail
to observe or perform any obligation or covenant to be observed or performed
by any of them, jointly or severally, under any of the Loan Documents;
provided, however, if such failure is not related to the payment of money
under Subparagraph 8.1(A), the breach of a financial covenant contained in
Paragraph 6.17, or the breach of any negative covenant in Section VII,
Borrower shall have fifteen (15) days to cure such failure before the
Majority Banks and/or Agent exercise the rights and remedies hereunder, with
such fifteen (15) day period commencing after notice of such failure from the
Agent or Banks.
53
(D) The filing of any tax lien whatsoever with respect
to any of the Collateral except for a tax lien that is being contested in
good faith and for which the Borrower has provided additional security
satisfactory in all respects to the Banks.
(E) The Borrower and its Subsidiaries taken as a whole
shall suffer a Material Adverse Effect from any breach of or event of default
arising under any agreement binding the Borrower or any Subsidiary.
(F) Any financial statement, representation, warranty
or certificate made or furnished by any Borrower or Subsidiary to the Agent
or any Bank in connection with this Agreement or the Loans, or as inducement
to the Banks to enter into this Agreement, or in any separate statement or
document to be delivered hereunder to the Agent or any Bank, shall be
materially false, incorrect, or incomplete when made.
(G) Any Borrower or Subsidiary shall admit its
inability to pay its debts as they mature, or shall make an assignment for
the benefit of its or any of its creditors.
(H) Proceedings in bankruptcy, or for reorganization of
any Borrower or Subsidiary, or for the readjustment of any of their
respective debts, under the United States Bankruptcy Code, as amended, or any
part thereof, or under any other Laws, whether state or federal, for the
relief of debtors, now or hereafter existing, shall be commenced by the
Borrower or any Subsidiary, or shall be commenced against the Borrower or any
Subsidiary.
(I) A receiver or trustee shall be appointed for the
Borrower or any Subsidiary or for any substantial part of their respective
assets, or any proceedings shall be instituted for the dissolution or the
full or partial liquidation of the Borrower any Subsidiary, or the Borrower
any Subsidiary shall discontinue business or materially change the nature of
its business.
(J) The Borrower or any Subsidiary shall suffer final
judgments for payment of money aggregating in excess of One Hundred Thousand
Dollars ($100,000.00) and shall not discharge the same within a period of
thirty (30) days unless, pending further proceedings, execution has been
effectively stayed.
(K) A judgment creditor of any Borrower or Subsidiary
shall obtain possession of any Collateral or other assets by any lawful
means, including, but without limitation, levy, distraint, replevin or
self-help.
(L) Any obligee of Subordinated Indebtedness shall fail
to comply with the subordination provisions of the instruments evidencing
such Subordinated Indebtedness.
(M) The termination of one (1) or more of the Material
Supplier Agreements at any time from and after the date of this Agreement.
(N) The occurrence of a Change of Control.
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8.2 Acceleration. Upon the occurrence of any of such Events
of Default, the Majority Banks may, at their option, immediately terminate
the obligation to make any further advances or issue Letters of Credit under
the respective Commitments and/or declare the principal and interest accrued
on the Notes and all other Obligations to be immediately due and payable,
whereupon the same shall become forthwith due and payable, without
presentment, demand, protest, or any notice of any kind except as set forth
above; provided, that in the case of the Events of Default specified in
clause (G), (H) or (I) above with respect to Borrower, without any notice to
Borrower or any act by Agent or the Banks, the Commitments shall thereupon
terminate and the Notes and all other Obligations shall become immediately
due and payable without presentment, demand, protest or other notice of any
kind, all of which are waived by the Borrower. In addition, and regardless of
whether the Notes have been accelerated, the Majority Banks may upon the
occurrence of any Event of Default elect to charge interest at the Default
Rate set forth in the Notes.
8.3 Remedies. After any acceleration, as provided for in
Paragraph 8.2, the Agent and/or Banks shall have, in addition to the rights
and remedies given it by the Loan Documents, all those allowed by all
applicable Laws, including, but without limitation, the UCC as enacted in any
jurisdiction in which any Collateral may be located. Without limiting the
generality of the foregoing, the Agent may immediately, without demand of
performance and without other notice (except as specifically required by the
Loan Documents) or demand whatsoever to the Borrower, all of which are hereby
expressly waived, and without advertisement, sell at public or private sale,
in any manner and at any location authorized by Laws, or otherwise realize
upon, the whole or, from time to time, any part of the Collateral, or any
interest which the Borrower may have therein. After deducting from the
proceeds of sale or other disposition of the Collateral all expenses
(including all reasonable expenses for legal services), the Agent shall apply
such proceeds toward the satisfaction of the Obligations. Any remainder of
the proceeds after satisfaction in full of the Obligations shall be
distributed as required by applicable Laws. Notice of any sale or other
disposition shall be given to the Borrower at least ten (10) days before the
time of any intended public sale or of the time after which any intended
private sale or other disposition of the Collateral is to be made, which the
Borrower hereby agrees shall be reasonable notice of such sale or other
disposition. The Borrower agrees to assemble, or to cause to be assembled, at
its own expense, the Collateral at such place or places as the Banks shall
designate. At any such sale or other disposition, the Banks may, to the
extent permissible under applicable Laws, purchase the whole or any part of
the Collateral, free from any right of redemption on the part of the
Borrower, which right is hereby expressly waived and released.
Without limiting the generality of any of the rights
and remedies conferred upon the Agent and/or Banks under this Paragraph 8.3,
the Agent and/or Banks may, to the full extent permitted by applicable Laws:
(A) Engage independent appraisers and field examiners
to conduct appraisals and field examinations of the real properties,
leasehold interest, fixtures, machinery, equipment, inventory and accounts
receivable owned by Borrower and/or any of its Subsidiaries, with all of the
reasonable costs of such appraisals and field examinations to be paid by
Borrower
55
or, if paid by the Banks, reimbursed to the Banks by Borrower upon
demand of the Banks. All such field examinations and appraisals shall be
conducted in accordance with Agent's guidelines for such appraisals and field
examinations at the time, and Borrower and each Subsidiary hereby agree that
such guidelines are reasonable;
(B) The Issuing Bank and Agent may treat each then
outstanding Letter of Credit as if a draft in the full amount available to be
drawn thereunder had been properly drawn thereunder and paid by the Issuing
Bank and the Borrower had failed to reimburse the Agent, for the account of
the Issuing Bank, for the amount so paid;
(C) Upon demand of the Agent (except no demand shall
be required if there shall have occurred an Event of Default under clause
(G), (H) or (I) of Paragraph 8.1), the Borrower shall deposit in cash with
the Agent an amount equal to the amount of all Letter of Credit Liabilities
then outstanding as collateral security for the repayment thereof;
(D) Enter upon the premises of the Borrower, exclude
therefrom the Borrower, any Subsidiary or any Affiliate thereof, and take
immediate possession of the Collateral, either personally or by means of a
receiver appointed by a court of competent jurisdiction, using all necessary
and lawful self-help to do so;
(E) At the Banks' option, use, operate, manage and
control the Collateral in any lawful manner, including lockboxing accounts
receivable pursuant to Paragraph 4.6 above;
(F) Collect and receive all receivables, rents,
income, revenue, earnings, issues and profits therefrom; and
(G) Maintain, repair, renovate, alter or remove the
Collateral as the Banks may determine in their discretion.
SECTION IX. THE AGENT
This Section IX is between and among the Agent and the Banks
only. Neither the Borrower nor any other creditor of the Borrower shall have any
rights under this section, whether as a third party beneficiary or otherwise,
and this section may be amended by the Agent and the Banks acting alone.
9.1 Authorization. Each Bank authorizes the Agent to act on
behalf of such Bank or holder to the extent provided herein or in any
document or instrument delivered hereunder or in connection herewith and
signed by such Bank, and to take such other action as may be reasonably
incidental thereto. The Agent shall be considered as acting solely in an
administrative and ministerial capacity, not as trustee or other fiduciary of
the Banks. The Agent shall not be construed as having any agency or fiduciary
relationship with the Borrower. The Agent shall not have any duties or
obligations to the Banks other than those expressly
56
provided for herein. The Agent shall not be required to exercise any
discretion or take any action, but shall be fully protected in so acting or
in refraining from acting, upon the instructions of the Majority Banks
(except as otherwise provided in Paragraph 10.3, for matters which require
the consent of all Banks), and such instructions shall be binding upon all
Banks and holders of the Notes, and the Agent shall not be liable to any
party hereto for any consequence of any such action or refraining from
action. Notwithstanding any instructions of the Majority Banks, the Agent
shall not be required to take any action that exposes the Agent to personal
liability or that is contrary to any loan document or applicable law.
9.2 Standard of Care. Neither the Agent nor any of its
officers, directors, agents, employees or representatives shall be liable for
any action taken or omitted to be taken by it or any of them under or in
connection with this Agreement, except for its or their own gross negligence
or willful misconduct. Without limitation of the generality of the foregoing,
the Agent: (a) may treat the payee of any Notes as the holder thereof and as
a Bank hereunder until the Agent receives written notice of the assignment or
transfer thereof signed by such payee and in form satisfactory to the Agent
(which notice shall be binding on all parties hereto); (b) may consult with
legal counsel, independent public accountants and other experts and advisors
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants, experts or other advisors; (c) makes no warranty or
representation to any Bank and shall not be responsible to any Bank for any
statements, warranties or representations made in or in connection with this
Agreement or for any failure or delay in performance by the Borrower or any
Bank under this Agreement; (d) shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement; (e) shall not be responsible to any Bank for
the due execution, legality, validity, enforceability, perfection,
collectability, genuineness, sufficiency or value of this Agreement, the
Notes, or any other instrument or document furnished pursuant thereto or for
the accuracy or completeness of any credit or other information provided to
the Banks; (f) shall incur no liability under or in respect of this Agreement
by acting upon any notice, consent, certificate or other instrument or
writing (which may be by telecopier, telegram, cable or telex) believed by it
to be genuine and signed or sent by the proper party or parties; and (g)
shall incur no liability for relying upon any matters of fact that might
reasonably be expected to be within the knowledge of the Borrower, upon a
certificate or other writing signed by Borrower, or upon telephone
communications with Borrower which are reasonably believed to be true and
valid.
9.3 No Waiver of Rights. With respect to the Notes, the
Agent in its capacity as a Bank shall have the same rights and powers
hereunder as any other Bank and may exercise the same as though it were not
the Agent, and the Agent may accept deposits from, and generally engage in
any kind of business with, the Borrower.
9.4 Payments. The Agent shall use its best efforts to
deliver to each Bank on the same day as received by Agent in immediately
available funds such Bank's pro rata share of all payments received by the
Agent for the benefit of the Banks, but in the event Agent is unable to
deliver such payments to any Bank on the same day of receipt, Agent agrees to
pay such Bank interest on the payment for each day the Agent is unable to
deliver the payments after
57
the date of its receipt based on the overnight Federal Funds Rate of
interest. Any payment due for any reason under this Agreement that is
required to be made on a date on which the Agent is not open for business
shall be extended until the next day on which the Agent is open for the
transaction of business. The Agent shall make available to any Bank for
inspection upon reasonable request the Agent's records with respect to all
sums received or disbursed by the Agent in connection with the Loans and the
Loan Documents. The Agent shall provide to any Bank upon request information
as to the amount of the then outstanding Loans, Letter of Credit Liabilities
and Reimbursement Obligations.
9.5 Indemnification. The Agent shall not be required to do
any act hereunder or under any other document or instrument delivered
hereunder or in connection herewith or take any action toward the execution
or enforcement of the agency hereby created, or to prosecute or defend any
suit in respect of this Agreement or the Notes or to advance funds hereunder
upon the failure by any Bank to fund its pro rata share of the Commitment
hereunder, unless ratably indemnified to its satisfaction (to the extent not
reimbursed by Borrower) by the holders of the Notes against loss, cost,
liability and expense (including reasonable fees and out-of-pocket expenses
of counsel), claim, demand, action, loss or liability (except such as result
from Agent's gross negligence or willful misconduct) that Agent may suffer or
incur in connection with this Agreement or any action taken or omitted by
Agent hereunder. If any indemnity furnished to the Agent for or against any
loss, cost, liability, and expense or for any purpose shall, in the opinion
of the Agent, be insufficient or become impaired, the Agent may call for
additional indemnity and not commence or cease to do the acts indemnified
against until such additional indemnity is furnished. Each Bank agrees to
reimburse the Agent promptly upon demand for such Bank's pro rata share of
any expenses referred to in Paragraph 10.4 incurred by the Agent to the
extent that the Agent is not reimbursed for such expenses by the Borrower.
9.6 Exculpation. Neither Agent nor any of its directors,
officers, employees or agents shall be liable for any action taken or not
taken by it in connection herewith (a) with the consent or at the request of
the Banks or Majority Banks, as appropriate, or (b) in the absence of its own
gross negligence or willful misconduct. Neither Agent nor any of its
directors, officers, employees or agents shall (i) be responsible for any
recitals, representations or warranties contained in, or for the execution,
validity, genuineness, effectiveness or enforceability of this Agreement, any
Note or any other instrument or document delivered hereunder or in connection
herewith, or (ii) be under any duty to inquire into or pass upon any of the
foregoing matters, or to make any inquiry concerning the performance by
Borrower or any other obligor of its obligations.
9.7 Credit Investigation. Each Bank acknowledges that it
has made such inquiries and taken such care on its own behalf as would have
been the case had the Commitment been granted and the Loan made directly by
such Bank to the Borrower. Each Bank agrees and acknowledges that the Agent
makes no representations or warranties about the creditworthiness of the
Borrower or any other party to this Agreement or with respect to the
legality, validity, sufficiency or enforceability of this Agreement, the
Notes or the value of any security therefor and that each Bank has not
entered into this Agreement in reliance upon any action, statement,
representation, or warranty of any other Bank or Agent. Each Bank agrees
58
that it will, independently and without reliance upon the Agent or any other
Bank and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not
taking action under this Agreement. Neither the Agent nor any other Bank
shall have any obligation whatsoever to make any such credit analysis or
decisions for a Bank or to provide any credit or other information with
respect to the Borrower now or in the future in the possession of the Agent
or such other Bank, except that the Agent shall promptly forward to the Banks
a copy of any notice received by the Agent from the Borrower of the
occurrence of an Event of Default hereunder and copies of all material
documents delivered to it by the Borrower pursuant to the terms hereof.
9.8 Resignation. The Agent may resign at any time as the
Agent under this Agreement by giving written notice thereof to the Banks and
the Borrower, which resignation shall be effective upon a successor Agent's
acceptance of its appointment. Upon any such resignation, the Majority Banks
shall have the right to appoint a successor Agent hereunder, subject to the
Borrower's consent not to be unreasonably withheld. If no such successor
Agent shall have been so appointed by the Majority Banks, or Borrower shall
have reasonably rejected such appointment, within thirty (30) days after the
retiring Agent's giving of notice of resignation, then the retiring Agent
may, on behalf of the Banks, appoint a successor Agent, which shall be a
commercial bank organized under the laws of the United States of America or
of any State thereof having assets of at least One Billion and No/100 Dollars
($1,000,000,000.00) and which shall be reasonably acceptable to the Borrower.
Upon the acceptance of any appointment as Agent hereunder by a successor
Agent, such successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations hereunder.
After any retiring Agent's resignation as an Agent hereunder, the provisions
of this Section IX shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was an Agent under the Loan Documents.
9.9 Proration of Payments. Except as may be provided in
other sections of this Agreement, all funds received by Banks, or any of
them, shall be allocated pro rata among all Banks in proportion to their
respective share of outstanding Loan balances and Reimbursement Obligations,
if any; provided, following the occurrence of an Event of Default hereunder
and the acceleration of the Obligations, all funds received by the Banks
thereafter shall, unless the Banks otherwise agree, be allocated in
proportion to their respective outstanding Loan balances and the Letter of
Credit Liabilities. If any Bank or other holder of any Notes shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
offset or otherwise) on account of principal of or interest on the Note then
held by it in excess of its pro rata share of payments and other recoveries
obtained by all Banks or other holders on account of principal of and
interest on the Notes then held by them, such Bank or other holder shall
purchase from the other Banks or holders such participation in the Notes held
by them as shall be necessary to cause such purchasing Bank or other holder
to share the excess payment or other recovery ratably with each of them;
provided, however, if all or any portion of the excess payment or other
recovery is thereafter recovered from such purchasing holder, the purchase
shall be rescinded and the purchase price restored to the extent of such
recovery, but without interest. Notwithstanding the foregoing, no Bank shall
have any obligation to account
59
for or share any amount, property or profit of any kind received by it for
its own account arising out of a banking or other relationship with the
Borrower apart from the obligations under the Loan Documents.
9.10 No Liability For Errors. The Agent shall not be liable
for any error in computing the amounts payable to any Bank in respect of any
amounts due to the Banks hereunder or in making payment of such amounts. In
the event of an error in computing any amount payable to any Bank or in the
making of a payment, the Agent, the Borrower and such Bank shall, forthwith
upon discovery of such error, make such adjustment as shall be required to
correct such error, including the payment of interest on any amounts that
were incorrectly paid or not paid from the date paid or of the date due to
the date returned or paid, all as the case may be, at the average daily rate
for the overnight sale of Federal Funds by the Agent in effect for such
period.
9.11 Offset. In addition to and not in limitation of all
rights of offset that any Bank or other holder of any Note may have under
applicable Laws, each Bank or other holder of a Note shall, upon the
occurrence of any Event of Default described in this Agreement or in the Note
in question, have the right to appropriate and apply to the payment of such
Notes any and all balances, credits, deposits, accounts or moneys of the
Borrower then or thereafter with such Bank or other holder; provided,
however, all funds received as a result of such offsets shall be applied pro
rata among the Banks in proportion to the Letter of Credit Liabilities and
the respective outstanding Loan amounts. Each Bank agrees to notify the
Borrower and other Banks immediately after the exercise by it of this right
of offset.
SECTION X. MISCELLANEOUS
10.1 Construction. The provisions of this Agreement shall
be in addition to those of any guaranty, pledge or security agreement, note
or other evidence of liability held by the Banks, all of which shall be
construed as complementary to each other; provided, in the event of any
inconsistency, the provisions of this Agreement shall control. Nothing herein
contained shall prevent the Banks from enforcing any or all other notes,
guaranties, pledge or security agreements in accordance with their respective
terms.
10.2 Further Assurance. From time to time, the Borrower and
its Guarantors will execute and deliver to the Banks such additional
documents and will provide such additional information as the Banks may
reasonably require to carry out the terms of this Agreement and be informed
of the Borrower's operations, business and condition.
10.3 Enforcement and Waiver by the Banks. The Majority
Banks shall have the sole and exclusive right to administer, amend, or modify
the Loan Documents, and are hereby empowered to act for the Banks with regard
to the aggregate Commitments and the documentation thereof as if said
Majority Banks were the sole lenders or extenders of credit under the Loan
Documents; provided, however, that it shall take an affirmative vote of all
Banks to: (i) increase any of the several Commitments; (ii) decrease any of
the interest rates or fees
60
on the Loans; (iii) extend the Loan Termination Date; (iv) reduce or postpone
the principal payments due on any Loans; (v) postpone any payments of
interest or interest payment dates; (vi) release Collateral having a value
greater than fifteen percent (15%) of the total book value of the Collateral,
either in a single transaction or in a series of related transactions
consummated over a six (6) month period; amend the definition of Majority
Banks; and (vii) amend this Paragraph 10.3. The Banks shall have the right at
all times to enforce the provisions of the Loan Documents in strict
accordance with the terms thereof, notwithstanding any conduct or custom on
the part of the Banks and/or Agent in refraining from so doing at any time or
times. The failure of the Banks at any time or times to enforce their rights
under such provisions, strictly in accordance with the same, shall not be
construed as having created a custom in any way or manner contrary to
specific provisions of the Loan Documents or as having in any way or manner
modified or waived the same. All rights and remedies of the Banks are
cumulative and concurrent and the exercise of one right or remedy shall not
be deemed a waiver or release of any other right or remedy.
10.4 Expenses of the Banks. The Borrower will, on demand,
reimburse the Agent and the Banks for all out-of-pocket expenses, including
the reasonable fees and expenses of legal counsel for the Agent and the
Banks, incurred by the Agent and the Banks in connection with the
preparation, administration, amendment, modification, or enforcement of the
Loan Documents and the collection or attempted collection of the Notes.
10.5 Notices. Any notices or consents required or permitted
by this Agreement shall be in writing and shall be deemed delivered when
delivered in person, when sent by overnight courier service or by facsimile
to the address and/or telecopy number as follows, or three (3) days after
mailing by certified mail, return receipt requested, unless such address or
number is changed by written notice hereunder:
(A) If to the Borrower:
Nova Holdings, Inc.
0000 Xxxxxxx Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxx, CFO
Telecopy: 0-000-000-0000
With a copy to:
Armstrong, Allen, Prewitt, Gentry,
Xxxxxxxx & Xxxxxx, PLLC
Xxxxxxxx Plaza
00 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxx, Xx.
61
(B) If to the Agent:
NationsBank of Tennessee, N.A., Agent
Xxx XxxxxxxXxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Healthcare Group;
Xxxx Xxxxx, Vice President
Telecopy: 749-4951 (615)
(C) If to the Banks:
NationsBank of Tennessee, N.A.
Xxx XxxxxxxXxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Healthcare Group;
Xxxx Xxxxx, Vice President
Telecopy: 749-4951 (615)
First Tennessee Bank National Association
000 Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxx 00000
Attention: Metropolitan Department;
Xxxxxxx Xxxxxxxx, Vice President
Telecopy: 523-4235 (901)
10.6 Waiver and Release. To the maximum extent permitted by
applicable Laws, the Borrower and each Subsidiary:
(A) Waive: (1) protest of all commercial paper at any
time held by the Banks on which the Borrower or any Subsidiary is in any way
liable; and (2) notice and opportunity to be heard, after acceleration in the
manner provided in Paragraph 8.2, before exercise by the Banks of the
remedies of self-help, set-off, or of other summary procedures permitted by
any applicable Laws or by any agreement with the Borrower or any Subsidiary,
and, except where required hereby or by any applicable Laws, notice of any
other action taken by the Banks; and
(B) Release the Agent, the Banks, and their officers,
directors, attorneys, employees, and agents from all claims for loss or
damage caused by any act or omission on the part of any of them except for
gross negligence, recklessness or willful misconduct.
10.7 Indemnification. Borrower and each Subsidiary hereby
indemnify and hold the Agent, the Banks, and their officers, directors,
attorneys, employees and agents free and harmless from and against any and
all actions, causes of action, suits, losses, liabilities and
62
damages, and expenses in connection therewith, including without limitation
reasonable counsel fees and other disbursements, incurred by the Agent, the
Banks or any of them as a result of, or arising out of, or relating to the
execution, delivery, performance or enforcement of the Loan Documents or any
instrument contemplated therein by Borrower or any Subsidiary except for the
Agent's or any Bank's gross negligence or willful misconduct. If and to the
extent that the foregoing undertaking may be unenforceable for any reason,
Borrower and each Subsidiary hereby agree to make the maximum contribution to
the payment and satisfaction of such liabilities and costs permitted under
applicable Laws.
10.8 Participations and Assignments. Participations and
Assignments
(A) This Agreement and the other Loan Documents shall
be binding upon and inure to the benefit of Borrower, Banks, and Agent and
their respective successors and assigns; provided, however, that Borrower may
not assign, transfer or delegate any of its rights, duties or obligations
under this Agreement or the other Loan Documents without the prior written
consent of Agent and Banks. Banks may assign, sell and transfer their
interests, rights and obligations under this Agreement and the other Loan
Documents only in accordance with this Paragraph 10.8.
(B) With the prior written consent of the Agent and
the Borrower, not to be unreasonably withheld, any Bank may assign to one or
more Eligible Assignees all, or a proportionate part of all, of its
interests, rights and obligations under this Agreement and the other Loan
Documents; provided, however, that (i) each such assignment shall be of a
constant, and not a varying, percentage of all of the assigning Bank's
interests, rights and obligations under this Agreement, (ii) the amount of
each such assignment (determined as of the date the Assignment and Acceptance
with respect to such assignment) shall not be less than the lesser of (A) the
entire amount of such Bank's Loans or (B) the principal amount of $3,000,000
or an integral multiple of $1,000,000 in excess thereof, and (iii) the
parties to each such assignment shall execute and/or deliver to Agent, for
its acceptance and recording in the Register, an Assignment and Acceptance,
together with the Notes subject to such assignment, and a processing and
recordation fee of $3,500 payable to Agent. Upon such execution, delivery,
acceptance and recording, from and after the "Effective Date" specified in
the Assignment and Acceptance, which "Effective Date," unless Agent otherwise
agrees, shall be not earlier than five Business Days after the date of
acceptance and recording by Agent (provided, however, that, as between the
assigning Bank and the assignee thereunder only, the effective date shall be
the effective date of execution and delivery as between such Persons as
specified in the Assignment and Acceptance), (A) the assignee thereunder
shall be a Bank under this Agreement and, to the extent provided in such
Assignment and Acceptance, have the interests, rights and obligations of a
Bank hereunder and (B) the assigning Bank thereunder shall, to the extent
provided in such Assignment and Acceptance, be released from its contractual
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of the assigning Bank's
interests, rights and obligations under this Agreement, such assigning Bank
shall cease to be a Bank under this Agreement). Each Bank shall, in a
reasonably prompt fashion after it has engaged in any material discussions
with an Eligible Assignee that may lead to an assignment referred to in this
Paragraph 10.8, notify Agent and
63
Borrower of the identity of such Eligible
Assignee so that they will have sufficient time to determine if they are
willing to consent.
(C) By executing and delivering an Assignment and
Acceptance, the assigning Bank thereunder and the Eligible Assignee
thereunder shall be deemed to confirm to and agree with each other and the
other parties hereto as follows: (i) such assignee is an Eligible Assignee;
(ii) other than as provided in the Assignment and Acceptance, such assigning
Bank makes no representation or warranty and assumes no responsibility with
respect to any representations, warranties or other statements made in or in
connection with this Agreement or any other Loan Document or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or any other Loan Document or any Collateral; (iii) such assigning
Bank makes no representation or warranty and assumes no responsibility with
respect to the financial condition of Borrower or any Subsidiary or the
performance or observance by Borrower or any Subsidiary of any of its
obligations under this Agreement or any other Loan Document; (iv) such
assignee confirms that it has received a copy of this Agreement, together
with copies of the most recent Financial Statements and such other
agreements, documents, instruments, certificates and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (v) such assignee will independently and
without reliance upon Agent, such assigning Bank or any other Bank and based
on such agreements, documents, instruments, certificates and information as
it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement and the other
Loan Documents; (vi) such assignee appoints and authorizes Agent to take such
action as agent on its behalf and to exercise such powers under this
Agreement and the other Loan Documents as are delegated to the Agent by the
terms hereof, together with such powers as are reasonably incidental thereto;
(vii) such assignee agrees that it will perform in accordance with their
terms all the obligations which by the terms of this Agreement and the other
Loan Documents are required to be performed by it as a Bank; and (viii) such
assignee makes loans in the ordinary course of its business.
(D) Upon its receipt of an Assignment and Acceptance
executed by an assigning Bank and an Eligible Assignee and the required
processing and recordation fee, Agent shall, if such Assignment and
Acceptance is duly completed and is in the required form, (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in
the Register and (iii) give prompt notice thereof to Banks and Borrower.
Within five Business Days after its receipt of any such notice from Agent,
Borrower, at its own expense, shall execute and deliver to Agent, in exchange
for the surrendered Note or Notes, a new Note or Notes payable to the order
of such assignee in the appropriate principal amount(s) evidencing such
assignee's assigned Loans and Commitments, and, if the assignor Bank has
retained a portion of its Loans and Commitments, a new Note or Notes payable
to the order of such assignor in the appropriate principal amount(s)
evidencing such assignor's Loans and Commitments retained by it. Such new
Note(s) shall be dated the date of the surrendered Note(s) which they replace
and shall otherwise be in substantially the form of the surrendered Notes, as
appropriate.
(E) Each Bank may, without the consent of Borrower,
any Subsidiary or Agent, sell participations to one or more banks in all or a
portion of its interests, rights and
64
obligations under this Agreement (including all or a portion of its Loans or
Commitments) held by it; provided, however, that (i) such Bank shall remain a
Bank for all purposes of this Agreement and the transferee of such
participation shall not constitute a Bank under this Agreement, (ii) such
Bank's obligations under this Agreement shall remain unchanged, (iii) such
Bank shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iv) the participating banks or other
entities shall be entitled to the benefit of the provisions contained in
Paragraphs 2.9 and 2.10 to the same extent as if they were Banks, except that
no such participant shall be entitled to receive any greater benefit pursuant
to Paragraph 2.9 than its assignor Bank would have been entitled to receive
with respect to the rights participated, and (v) Borrower, Subsidiaries,
Agent and the other Banks shall continue to deal solely and directly with
such Bank in connection with such Bank's interests, rights and obligations
under this Agreement, and such Bank-shall retain the sole right to enforce
the obligations of Borrower and its Subsidiaries relating to the Loans and to
approve any amendment, modification or waiver of any provision of this
Agreement, provided that such participation agreement may provide that such
Bank will not agree to any amendment, modification or waiver of this
Agreement or the other Loan Documents, without the consent of such
participant, that would (A) reduce the principal or the rate of interest
payable by Borrower on any Loan or reduce any fees payable by Borrower, (B)
postpone any date fixed for the payment of principal of or interest on the
Loans or any fees payable by Borrower, (C) increase any Commitment of any
Bank or subject any Bank to any obligation to make Loans, or (D) amend
Paragraph 10.3 or any other provision of this Agreement requiring the consent
or other action of all Banks.
(F) Any Bank may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Paragraph 10.8, disclose to the assignee or participant or proposed assignee
or participant any information relating to Borrower or any Subsidiary, the
Collateral or the Loan Documents furnished to such Bank by or on behalf of
the Borrower or any Subsidiary; provided, however, that, prior to any such
disclosure, each such assignee or participant or proposed assignee or
participant shall execute an agreement whereby such assignee or participant
shall agree (subject to customary exceptions) to preserve the confidentiality
of any non-public information received from such Bank.
(G) If (i) any Bank has demanded compensation under
Paragraph 2.9 in an aggregate amount exceeding $5,000 during any calendar
year, (ii) it becomes unlawful, impossible or impractical for any Bank to
make or continue to maintain Eurodollar Loans pursuant to Paragraph 2.10 and
such circumstance is not applicable to NationsBank, or (iii) any Bank is or
becomes insolvent or a receiver, conservator or similar authority is
appointed for any Bank, then Agent and/or Borrower shall have the right, but
not the obligation, upon notice to such Bank and Borrower or Agent, as
applicable, to designate, with the consent of such assignee, an assignee for
any such Bank, which assignee shall be an Eligible Assignee mutually
satisfactory to Agent and Borrower, to purchase such Bank's Loans and
Commitments and assume such Bank's obligations; provided, however, that
Borrower shall have the right to designate any assignee for NationsBank.
Within ten Business Days after any such notice to such Bank and Borrower or
Agent, as applicable, such Bank shall be obligated to sell its Loans and
Commitments, and such assignee shall be obligated to purchase such Loans and
assume such Bank's obligations, pursuant to an Assignment and Acceptance. The
purchase price therefor
65
shall be an amount equal to the sum of (A) the outstanding principal amount
of the Loans payable to such Bank, plus (B) all accrued and unpaid interest
on such Loans, plus (C) Letter of Credit Interest, plus (D) all accrued and
unpaid fees and other amounts due to such Bank pursuant to this Agreement.
(H) Notwithstanding anything to the contrary contained
in this Paragraph 10.6, any Bank may at any time or from time to time assign
as collateral all or any portion of its rights under this Agreement with
respect to its Loans, Commitments and Notes to a Federal Reserve Bank. No
such assignment shall release the assigning Bank from its obligations under
this Agreement.
10.9 Applicable Laws. The Laws of the State of Tennessee,
other than its conflicts of laws rules, shall govern the construction and
interpretation of this Agreement and the validity and enforceability of this
Agreement, and of its provisions and the transactions pursuant to this
Agreement, except for those transactions for which the parties have chosen
other laws to govern or for which other mandatory choice of law rules apply.
10.10 Binding Effect. Assignment and Entire Agreement. This
Agreement shall inure to the benefit of, and shall be binding upon, the
respective successors and permitted assigns of the parties hereto. The
Borrower has no right to assign any of its rights or obligations hereunder
without the prior written consent of the Banks. This Agreement and the
documents executed and delivered pursuant hereto constitute the entire
agreement between the parties, and supersede all prior agreements and
understandings among the parties hereto. This Agreement may be amended only
by a writing signed on behalf of each party.
10.11 Severability. If any provision of this Agreement
shall be held invalid under any applicable Laws, such invalidity shall not
affect any other provision of this Agreement that can be given effect without
the invalid provision, and, to this end, the provisions hereof are severable.
10.12 Counterparts. This Agreement may be executed by the
parties independently in any number of counterparts, all of which together
shall constitute but one and the same instrument which is valid and effective
as if all parties had executed the same counterpart.
10.13 Venue. It is agreed that venue for any action arising
in connection with this Agreement or the Obligations secured hereby shall lie
exclusively with courts sitting in Davidson County in the state of Tennessee,
unless the Banks and Agent otherwise agree in writing.
10.14 Waiver of Jury Trial. EACH PARTY HERETO, INCLUDING
THE BORROWER, EACH SUBSIDIARY, THE BANKS, AND THE AGENT, HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE (TO THE EXTENT PERMITTED BY APPLICABLE
LAWS) ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE ARISING
UNDER, RELATING TO, OR CONNECTED WITH THIS AGREEMENT, THE COLLATERAL OR ANY
OTHER AGREEMENT, INSTRUMENT OR DOCUMENT CONTEMPLATED HEREBY OR DELIVERED IN
CONNECTION HEREWITH AND AGREE THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A
66
JUDGE SITTING WITHOUT A JURY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
BANKS' AND THE AGENT ENTERING INTO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the day and year first above written.
AGENT BORROWER
----- --------
NATIONSBANK OF TENNESSEE, N.A., NOVA HOLDINGS, INC.
as Agent
BY: [Illegible] BY: [Illegible]
-------------------------------- --------------------------
TITLE: VP TITLE: CEO
----------------------------- -----------------------
BANKS GUARANTORS AND SUBSIDIARIES
----- ---------------------------
NATIONSBANK OF TENNESSEE, N.A. SOUTHERN HEALTH SYSTEMS, INC.
BY: [Illegible] BY: [Illegible]
-------------------------------- --------------------------
TITLE: VP TITLE: CEO
----------------------------- -----------------------
FIRST TENNESSEE BANK NATIONAL NOVA FACTOR, INC.
ASSOCIATION
BY: [Illegible] BY: [Illegible]
-------------------------------- --------------------------
TITLE: VP TITLE: CEO
----------------------------- -----------------------
HORIZON HEALTH SYSTEMS, INC.
BY: [Illegible]
--------------------------
TITLE: Chairman of the Board
-----------------------
67
EXHIBIT A
Form of Notes
REVOLVING NOTE
$25,000,000.00 Nashville, Tennessee
June 5, 1997
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
NationsBank of Tennessee, N.A. (the "Bank") the sum of Twenty Five Million
Dollars ($25,000,000.00) with interest thereon as set forth in Section 2.2 of
the Loan and Security Agreement dated of even date herewith (as the same may
be amended, modified or restated from time to time, the "Loan Agreement"),
or, if a lesser amount is outstanding, the Bank's pro rata share of the
aggregate unpaid principal amount of all advances made pursuant to Paragraph
2.1 of the Loan Agreement, at such times as are specified therein and in
accordance with the provisions thereof. Interest shall likewise be payable
hereunder at the rates and on the times specified in the Loan Agreement.
Both principal and interest due on this Revolving Note are payable
in Nashville, Tennessee, at par in lawful money of the United States of
America, in the Main Office of the Agent or at such other place as the Agent
may designate in writing from time to time.
This Revolving Note is one of the Notes referred to in and is
entitled to the benefits of the Loan Agreement and the Collateral referenced
therein. All terms which are capitalized and used herein (which are not
otherwise specifically defined herein) and which are defined in the Loan
Agreement shall be used in this Note as defined in the Loan Agreement.
Time is of the essence of this Note. It is hereby expressly agreed
that in the event that any default be made in the payment of any part of
interest or principal for a period of five (5) days from the date when due,
or upon failure of the undersigned to keep and perform all the covenants,
promises, agreements, conditions and provisions of this Revolving Note, the
Loan Agreement, any Loan Document, or in any other instrument or document now
or hereafter evidencing, securing or otherwise relating to the indebtedness
evidenced hereby, subject to any applicable grace, notice or cure periods
contained therein; then, in any such case, the entire unpaid principal sum
evidenced by this Note, together with all accrued interest, shall, at the
option of any holder, without notice, become due and payable forthwith,
regardless of the stipulated Loan Termination Date. Upon the occurrence of
any default as set forth herein, at the option of holder and without notice
to obligor, all accrued and unpaid interest and fees, if any, shall be added
to the outstanding principal balance hereof, and the entire outstanding
principal balance, as so adjusted, shall bear interest thereafter until paid
at an annual rate (the "Default Rate") equal to the lesser of (i) the rate
that is two percentage points (2%) in excess of the rate(s) set forth in the
Loan Agreement, or (ii) the maximum rate permitted to be charged by
applicable law from time to time in effect (the "Maximum Rate"), regardless
of whether or not there has been an acceleration of the payment of principal
as set forth herein. All such interest shall be paid at the time of and as a
condition precedent to the curing of any such default. Failure of the holder
to exercise this right of accelerating the maturity of the debt, or
PAGE 1 OF A 3 PAGE NOTE
indulgence granted from time to time, shall in no event be considered as a
waiver of said right of acceleration or stop the holder from exercising said
right.
To the extent permitted by applicable law, obligor shall pay to the holder
hereof a late charge equal to four percent (4%) of any interest payment
which is past due for a period of ten (10) or more days, in order to cover
the additional expenses incident to the handling and processing of delinquent
payments.
All persons or corporations now or at any time liable, whether primarily
or secondarily, for the payment of the indebtedness hereby evidenced, for
themselves, their heirs, legal representatives and assigns, waive demand,
presentment for payment, notice of dishonor, protest, notice of protest, and
diligence in collection and all other notices or demands whatsoever with
respect to this Note or the enforcement hereof, and consent that the time of
said payments or any part thereof may be extended by the holder hereof and
assent to any substitution, exchange, or release of collateral permitted by
the holder hereof, all without in any wise modifying, altering, releasing,
affecting or limiting their respective liability. This Note may not be
changed orally, but only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification or discharge is
sought.
The term obligor, as used in this Note, shall mean all parties, and each
of them, directly or indirectly obligated for the indebtedness that this Note
evidences, whether as principal, maker, endorser, surety, guarantor or
otherwise.
In addition to and not in limitation of the foregoing and the provisions
of the Loan Agreement, it is expressly understood and agreed by all parties
hereto, including obligors, that if it is necessary to enforce payment of
this Note through an attorney or by suit, undersigned or any obligors shall
pay reasonable attorney's fees, court costs and all costs of collection.
THIS REVOLVING NOTE HAS BEEN DELIVERED AT NASHVILLE, TENNESSEE, AND SHALL
BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF TENNESSEE, WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES. WHENEVER POSSIBLE EACH PROVISION OF THIS REVOLVING NOTE SHALL BE
INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW,
BUT IF ANY PROVISION OF THIS REVOLVING NOTE SHALL BE PROHIBITED BY OR INVALID
UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF
SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH
PROVISION OR THE REMAINING PROVISIONS OF THIS REVOLVING NOTE. WHENEVER IN THIS
REVOLVING NOTE REFERENCE IS MADE TO THE AGENT, THE BANK OR THE UNDERSIGNED
BORROWER, SUCH REFERENCE SHALL BE DEEMED TO INCLUDE, AS APPLICABLE, A
REFERENCE TO THEIR RESPECTIVE SUCCESSORS AND ASSIGNS. THE PROVISIONS OF THIS
REVOLVING
PAGE 2 OF A 3 PAGE NOTE
NOTE SHALL BE BINDING UPON AND SHALL INURE TO THE BENEFIT OF SUCH SUCCESSORS
AND ASSIGNS.
This obligation is made and intended as a Tennessee contract and is to be
so construed.
IN WITNESS WHEREOF, this Note has been duly executed by the undersigned the
day and year first above written.
NOVA HOLDINGS, INC.,
a Delaware corporation
BY:
---------------------------------
ITS:
---------------------------------
PAGE 3 OF A 3 PAGE NOTE
REVOLVING NOTE
$15,000,000.00 Nashville, Tennessee
June 5, 1997
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
First Tennessee Bank National Association (the "Bank") the sum of Fifteen
Million Dollars ($15,000,000.00) with interest thereon as set forth in
Section 2.2 of the Loan and Security Agreement dated of even date herewith
(as the same may be amended, modified or restated from time to time, the
"Loan Agreement"), or, if a lesser amount is outstanding, the Bank's pro rata
share of the aggregate unpaid principal amount of all advances made pursuant
to Paragraph 2.1 of the Loan Agreement, at such times as are specified
therein and in accordance with the provisions thereof. Interest shall
likewise be payable hereunder at the rates and on the times specified in the
Loan Agreement.
Both principal and interest due on this Revolving Note are payable
in Nashville, Tennessee, at par in lawful money of the United States of
America, in the Main Office of the Agent or at such other place as the Agent
may designate in writing from time to time.
This Revolving Note is one of the Notes referred to in and is
entitled to the benefits of the Loan Agreement and the Collateral referenced
therein. All terms which are capitalized and used herein (which are not
otherwise specifically defined herein) and which are defined in the Loan
Agreement shall be used in this Note as defined in the Loan Agreement.
Time is of the essence of this Note. It is hereby expressly agreed
that in the event that any default be made in the payment of any part of
interest or principal for a period of five (5) days from the date when due,
or upon failure of the undersigned to keep and perform all the covenants,
promises, agreements, conditions and provisions of this Revolving Note, the
Loan Agreement, any Loan Document, or in any other instrument or document now
or hereafter evidencing, securing or otherwise relating to the indebtedness
evidenced hereby, subject to any applicable grace, notice or cure periods
contained therein; then, in any such case, the entire unpaid principal sum
evidenced by this Note, together with all accrued interest, shall, at the
option of any holder, without notice, become due and payable forthwith,
regardless of the stipulated Loan Termination Date. Upon the occurrence of
any default as set forth herein, at the option of holder and without notice
to obligor, all accrued and unpaid interest and fees, if any, shall be added
to the outstanding principal balance hereof, and the entire outstanding
principal balance, as so adjusted, shall bear interest thereafter until paid
at an annual rate (the "Default Rate") equal to the lesser of (i) the rate
that is two percentage points (2%) in excess of the rate(s) set forth in the
Loan Agreement, or (ii) the maximum rate permitted to be charged by
applicable law from time to time in effect (the "Maximum Rate"), regardless
of whether or not there has been an acceleration of the payment of principal
as set forth herein. All such interest shall be paid at the time of and as a
condition precedent to the curing of any such default. Failure of the holder
to exercise this right of accelerating the maturity of the debt, or
PAGE 1 OF A 3 PAGE NOTE
indulgence granted from time to time, shall in no event be considered as a
waiver of said right of acceleration or stop the holder from exercising said
right.
To the extent permitted by applicable law, obligor shall pay to the
holder hereof a late charge equal to four percent (4%) of any interest
payment which is past due for a period of ten (10) or more days, or order to
cover the additional expenses incident to the handling and processing of
delinquent payments.
All persons or corporations now or at any time liable, whether
primarily or secondarily, for the payment of the indebtedness hereby
evidenced, for themselves, their heirs, legal representatives and assigns,
waive demand, presentment for payment, notice of dishonor, protest, notice of
protest, and diligence in collection and all other notices or demands
whatsoever with respect to this Note or the enforcement hereof, and consent
that the time of said payments or any part thereof may be extended by the
holder hereof and assent to any substitution, exchange, or release of
collateral permitted by the holder hereof, all without in any wise modifying,
altering, releasing, affecting or limiting their respective liability. This
Note May not be changed orally, but only by an agreement in writing signed by
the party against whom enforcement of any waiver, change, modification or
discharge is sought.
The term obligor, as used in this Note, shall mean all parties, and
each of them, directly or indirectly obligated for the indebtedness that
this Note evidences, whether as principal, maker, endorser, surety, guarantor
or otherwise.
In addition to and not in limitation of the foregoing and the
provisions of the Loan Agreement, it is expressly understood and agreed by
all parties hereto, including obligors, that if it is necessary to enforce
payment of this Note through an attorney or by suit, undersigned or any
obligors shall pay reasonable attorney's fees, court costs and all costs of
collection.
THIS REVOLVING NOTE HAS BEEN DELIVERED AT NASHVILLE, TENNESSEE, AND
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF TENNESSEE, WITHOUT REGARD TO CONFLICTS OF
LAW PRINCIPLES, WHENEVER POSSIBLE EACH PROVISION OF THIS REVOLVING NOTE
SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER
APPLICABLE LAW, BUT IF ANY PROVISION OF THIS REVOLVING NOTE SHALL BE
PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE
INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT
INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF
THIS REVOLVING NOTE. wHENEVER IN THIS REVOLVING NOTE REFERENCE IS MADE TO THE
AGENT, THE BANK OR THE UNDERSIGNED BORROWER, SUCH REFERENCE SHALL BE DEEMED
TO INCLUDE, AS APPLICABLE, A REFERENCE TO THEIR RESPECTIVE SUCCESSORS AND
ASSIGNS. THE PROVISIONS OF THIS REVOLVING
PAGE 2 OF A 3 PAGE NOTE
NOTE SHALL BE BINDING UPON AND
SHALL INURE TO THE BENEFIT OF SUCH SUCCESSORS AND ASSIGNS.
This obligation is made and intended as a Tennessee contract and is
to be so construed.
IN WITNESS WHEREOF, this Note has been duly executed by the
undersigned the day and year first above written.
NOVA HOLDINGS, INC.,
a Delaware corporation
BY:
-------------------------------------
ITS:
------------------------------------
PAGE 3 OF A 3 PAGE NOTE
EXHIBIT B
BORROWING/CONVERSION NOTICE
AGENT: NationsBank of Tennessee, N.A. Date: ___________199_
BORROWER: Nova Holdings, Inc.
This notice is delivered under the Loan and Security Agreement (as
renewed, extended and amended, the "Loan Agreement") dated as of June 5,
1997, between Borrower its Subsidiaries, the Agent, and the Banks named therein.
Terms defined in the Loan Agreement have the same meanings when used --
unless otherwise defined -- in this request.
Borrower requests a Revolving Loan under the Loan Agreement as
follows:
Borrowing Date(1) _______________, 199_
Amount of Borrowing $_____________________
Type of Borrowing(2) _____________________
For Eurodollar Loans, the Interest Period(3) ______________ months
Proceeds of the requested Revolving Loan shall be deposited to
Borrower's account as provided by the Loan Agreement unless one of the
following options is indicated:
____ The proceeds of the requested Revolving Loan shall be applied
to the payment of an existing Floating Rate Loan, this new Revolving Loan
being a conversion of a Floating Rate Loan to a Eurodollar Loan
____ The proceeds of the requested Revolving Loan shall be applied
to the payment of the following Eurodollar Loan, this new Revolving Loan
being a conversion of a Eurodollar Loan to a different Eurodollar Loan:
Date:___________________________
Amount:_________________________
Interest Period:________________
Borrower certifies that on the date hereof and on the date of the
above Borrowing Date -- after giving effect to the requested Revolving Loan
-- (a) all of the representations and warranties in the Loan Documents will
be true and correct in all material respects -- unless they speak to a
specific date or the facts on which they are based have been changed by
transactions contemplated or permitted by the Loan Agreement, (b) no Event of
Default or Unmatured Default exists, and no Material Adverse Change has
occurred, and (c) all conditions to Borrower's right to receive the requested
Revolving Loan under the Loan Agreement have been satisfied, including those
in Paragraph 3.2.
NOVA HOLDINGS, INC., as Borrower
By:__________________________________________
(Name)_______________________________________
(Title)______________________________________
----------------------
(1)Next Business Day for Floating Rate Loans; 3 Business Days for Eurodollar
Loans.
(2)Eurodollar or Floating Rate Loan.
(3)1,2,3 or 6 months.
