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LETTER LOAN AGREEMENT
July 1, 2000
The undersigned, U.S. PHYSICAL THERAPY, INC., a Nevada corporation
("BORROWER"), has requested that SOUTHWEST BANK OF TEXAS, N.A. ("BANK") provide
to Borrower a TWO MILLION FIVE HUNDRED THOUSAND DOLLAR ($2,500,000.00)
convertible line of credit facility and FIVE HUNDRED THOUSAND DOLLAR
($500,000.00) revolving credit facility and Bank is willing to provide such
credit facility to Borrower upon the terms and subject to the conditions set
forth in this letter loan agreement (this "AGREEMENT"). In consideration for
the above premises and the mutual promises and covenants herein contained,
Borrower and Bank hereby agree as follows:
1. Credit Facilities.
(a) Convertible Line of Credit. On the terms and subject
to the conditions hereinafter set forth, Bank agrees to make loans to Borrower
(each a "CONVERTIBLE LINE OF CREDIT LOAN") on any business day prior to
December 31, 2000 (the "CONVERSION DATE") in such amounts as Borrower may
request, up to but not exceeding an aggregate principal sum of $2,500,000 (the
" LOAN"). Within such limits and during the period from the date of this
Agreement to the Conversion Date (the "CONVERTIBLE LINE OF CREDIT PERIOD"),
Borrower may borrow under the Convertible Line of Credit Loan. The Bank shall
have no obligation to make additional Convertible Line of Credit Loans to
Borrower following the Line of Credit Conversion Date. The principal amount of
Convertible Line of Credit Loans outstanding on the Conversion Date shall be
due and payable as provided below with a final maturity date of June 30, 2003
(the "LINE OF CREDIT MATURITY DATE").
(b) Unsecured Revolving Line of Credit. On the terms and
subject to the conditions hereinafter set forth, Bank agrees to make loans to
Borrower (each a "REVOLVING LOAN") on any business day prior to July 1, 2001
(the "REVOLVER TERMINATION Date") in such amounts as Borrower may request, up
to but not exceeding an aggregate principal sum at any time outstanding of
$500,000.00 (the "REVOLVING LINE OF CREDIT COMMITMENT"). Within such limits and
during the period from the date of this Agreement to the Revolver Termination
Date (the "REVOLVING CREDIT PERIOD") Borrower may borrow, repay and reborrow
hereunder (the "REVOLVING LINE OF CREDIT"). The Convertible Line of Credit Loan
and the Revolving Line of Credit are herein called the "CREDIT FACILITY"; and
each Convertible Line of Credit Loan and each Revolving Loan are herein called
the "LOANS".
2. Promissory Notes; Interest Rate; Manner of Borrowing; Etc.
(a) The Notes:
(i) Convertible Line of Credit Note. The Convertible Line
of Credit Loans shall be evidenced by a promissory note
(herein called, together with any renewals and extensions
thereof, the "CONVERTIBLE LINE OF CREDIT NOTE") in
substantially the form attached hereto as Exhibit A(i),
duly executed by Borrower, dated of even date herewith,
not to exceed the principal amount of TWO MILLION FIVE
HUNDRED THOUSAND DOLLARS ($2,500,000.00) and made payable
to the order of Bank.
(ii) Revolving Line of Credit Note. The Revolving Loans
shall be evidenced by a promissory note in substantially
the form attached hereto as Exhibit A(ii), duly executed
by Borrower(herein called, together with any renewals and
extensions thereof the
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"REVOLVING LINE OF CREDIT NOTE"), dated of even date
herewith, in the principal amount of FIVE HUNDRED
THOUSAND DOLLARS ($500,000.00) and made payable to the
order of Bank. The Convertible Line of Credit Note and
the Revolving Line of Credit Note are herein
collectively, the "NOTES."
(iii) Renewal Notes. All renewals, extensions,
modifications, increases, and rearrangements of the Notes,
if any, shall be deemed to be made pursuant to this
Agreement and accordingly, shall be subject to the terms
and provisions hereof, and the Borrower shall be deemed to
have ratified, as of such renewal, extension,
modification, increase, or rearrangement date, all of the
representations, warranties, covenants and agreements set
forth herein.
(b) Principal and Interest Note Payments.
(i) Convertible Line of Credit Note. The principal of and
interest to accrue on the Convertible Line of Credit Loan
shall be due and payable as follows: Principal shall be
due and payable in ten (10) equal quarterly payments of
$250,000 each on the last day of each March, June,
September and December, until the Line of Credit Maturity
Date commencing March 31, 2001; and interest shall be due
and payable quarterly as it accrues commencing September
30, 2000, and continuing on the last day of each March,
June, September and December thereafter until the Line of
Credit Maturity Date.
(ii) Revolving Line of Credit Note. The principal of and
interest to accrue on the Revolving Loans shall be due and
payable as follows: Interest to accrue on the Revolving
Loans shall be due and payable quarterly as it accrues,
with the first installment to be due and payable on or
before the last day of September 2000, with a like
installment of all accrued but unpaid interest to be due
and payable on or before the same day of each December,
March, June and September succeeding thereafter until the
Revolver Termination Date on which date both all
outstanding principal and accrued but unpaid interest
thereon shall be due and payable in full.
(iii) Payment Dates. Should the principal of, or any
installment of interest on, the Notes become due and
payable on any day other than a business day, the maturity
thereof shall be extended to the next succeeding business
day, and interest shall be payable with respect to such
extension.
(c) Payment Location. All payments on the Notes shall be made to
Bank at its principal office in Houston, Texas by company check or, if required
by Bank, by automatic debit provided sufficient funds exist in Borrower's
operating account at Bank, in immediately available funds, and payments shall
be applied first to expenses, if any, due hereunder and outstanding, then to
accrued interest and then to principal.
(d) Interest Rate. The Loan shall bear interest on the outstanding
and unpaid principal balance thereof, from the date such Loans are made until
they become due for each date at the rates set forth in the Notes.
(e) Manner of Borrowing under the Credit Facilities. During the
Convertible Line of Credit Period and the Revolving Credit Period respectively,
Borrower shall give Bank prior written notice on or before 10:00 a.m. (Houston,
Texas time) one business day before a Loan under each such Credit Facility is
requested (a "NOTICE OF BORROWING") hereunder in form and substance acceptable
to Bank and shall specify the Credit Facility, aggregate amount and requested
date of such Loan. Not later than 2:00 p.m.,
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Houston, Texas time, on the business day specified, subject to the terms and
conditions of this Agreement, Bank shall make available to Borrower the
requested Loan in immediately available funds in Borrower's operating account
maintained at Bank, or as otherwise directed in the Notice of Borrowing.
(f) Commitment Fee. Borrower shall pay Bank a fee on the average
daily amount of the difference between $500,000.00 and the aggregate amount of
all outstanding Revolving Loans at a per annum rate equal to three-eighths of
one percent (3/8%). Such fee shall accrue from the date all conditions in
Section 3(a) hereof are satisfied to the Revolver Termination Date and shall be
due and payable quarterly in arrears on the same day as interest payments are
due under the Revolving Line of Credit Note through the Revolver Termination
Date, with the final payment to be made on the Revolver Termination Date.
3. Conditions Precedent.
(a) Conditions of Initial Loans. The obligation of Bank to
make the initial Loans to Borrower is subject to the conditions precedent that:
(i) Bank shall have received duly executed this Agreement, the Notes, the
Guaranties executed by U.S. P-T Delaware, Inc., Rehab Partners #1, Inc., Rehab
Partners #2, Inc., Rehab Partners #3, Inc., Rehab Partners #4, Inc., Rehab
Partners #5, Inc. and Rehab Partners #6, Inc. (herein collectively
"Guarantors") and any other documents and instruments contemplated hereby or
executed in connection herewith, and any modifications thereof (hereinafter
collectively referred to as the "LOAN DOCUMENTS"); (ii) Bank shall have
received the other documents listed on Exhibit B attached hereto in form and
substance acceptable to Bank and its legal counsel; and (iii) Borrower shall
have paid to Bank (A) all reasonable fees to be received by Bank pursuant to
this Agreement or any other Loan Document, (B) as reimbursement to the Bank an
amount equal to the reasonable fees and out-of-pocket expenses of Bank's
counsel incurred in connection with the preparation, execution and delivery of
the Loan Documents and the consummation of the transactions contemplated
thereby and (C) a fee equal to one-quarter of one percent (0.25%) of the
$3,000,000.00 commitment hereunder.
(b) Conditions of All Loans. The obligation of Bank to make any Loan
under this Agreement (including the initial Loans) shall be subject to the
conditions precedent that, as of the date of such Loan and after giving effect
thereto: (i) there exists no Default or Event of Default; (ii) there exists no
change that would cause a material adverse change in, or effect upon, (A) the
validity, performance or enforceability of any Loan Documents, (B) the
financial condition or business operations of Borrower or any Guarantor, or (C)
the ability of Borrower or any Guarantor to fulfill its obligations under the
Loan Documents (a "MATERIAL ADVERSE EFFECT"); (iii) Bank shall have received
from Borrower a Notice of Borrowing dated as of the date of such Loan and all
of the statements contained in such Notice of Borrowing shall be true and
correct; (iv) the representations and warranties contained in each of the Loan
Documents shall be true in all respects as though made on the date of such
Loan; and (v) the making of the Loans shall be permitted by the laws and
regulations of each jurisdiction to which Bank or Borrower may be subject
(including, without limitation, Regulation T, U or X of the Board of Governors
of the Federal Reserve System), and shall not subject Bank to any penalty or,
in the reasonable judgment of the Bank, other burdensome condition under or
pursuant to any applicable law or governmental regulation.
4. Representations and Warranties. In order to induce Bank to
make the Loans hereunder, Borrower represents and warrants to Bank that:
(a) The Borrower is a corporation, duly organized and in good
standing, under the laws of the State of Nevada and each of Borrower's
Subsidiaries is incorporated in the states identified under Exhibit C hereto
and Borrower and each of its Subsidiaries has the power to own its property and
to carry on its business in each jurisdiction in which it operates;
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(b) The Borrower has full power and authority to enter into this
Agreement, to make the borrowing hereunder, to execute and deliver the Loan
Documents and to incur the obligations provided for in the Loan Documents, all
of which has been duly authorized by all necessary corporate action;
(c) The Borrower has no subsidiaries other than those companies
described on Exhibit C hereto (herein collectively the "Subsidiaries" and each
individually a "Subsidiary"); for purposes of compliance with Section 3(b)(iv),
Borrower shall only be required to update Exhibit C once every quarter of the
fiscal year.
(d) The Loan Documents are the legal and binding obligations of
Borrower, enforceable in accordance with their respective terms, except as
limited by bankruptcy, insolvency or other laws of general application relating
to the enforcement of creditors' rights;
(e) Neither the execution and delivery of this Agreement and the
other Loan Documents, nor consummation of any of the transactions herein or
therein contemplated, nor compliance with the terms and provisions hereof or
thereof, will contravene or conflict with (i) any provision of law, statute or
regulation to which Borrower is subject, or (ii) any judgment, license, order
or permit applicable to Borrower or any indenture, mortgage, deed of trust or
other instrument to which Borrower may be subject; no consent, approval,
authorization or order of any court, governmental authority or third party is
required in connection with the execution and delivery by Borrower of this
Agreement or any of the other Loan Documents or to consummate the transactions
contemplated herein or therein;
(f) All financial statements delivered by Borrower to Bank prior to
the date hereof are true and correct, fairly present the financial condition of
Borrower and its Subsidiaries and have been prepared in accordance with
generally accepted accounting principles, consistently applied, and no material
adverse changes have occurred in the financial condition or business of
Borrower or its Subsidiaries since the date of the most recent financial
statements which Borrower has delivered to Bank;
(g) No litigation, investigation, or governmental proceeding is
pending, or, to the knowledge of any of Borrower's officers, threatened against
or affecting Borrower or its Subsidiaries, which may result in any material
adverse change in Borrower's and its Subsidiaries' business, properties or
operations on a consolidated basis;
(h) There is no fact known to Borrower that Borrower has not
disclosed to Bank in writing which may result in any material adverse change in
Borrower's or its Subsidiaries' business, properties or operations;
(i) Borrower and its Subsidiaries own all of the assets reflected on
its most recent balance sheet free and clear of all liens, security interests
or other encumbrances, except as listed on Exhibit E;
(j) The principal office, chief executive office and principal place
of business of Borrower is in Houston, ▇▇▇▇▇▇ County, Texas;
(k) Borrower and each of its Subsidiaries has filed all tax returns
to be filed, or received an extension for the filing of such tax return, and
paid all taxes shown thereon to be due, including interest and penalties, or
provided adequate reserves for the payment thereof;
(l) Borrower is not in material violation of any law, ordinance,
governmental rule or regulation to which it is subject, and is not in default
under any material agreement, contract or understanding to which it is a party;
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(m) Borrower and each of its Subsidiaries and any properties or
assets owned by Borrower and each of its Subsidiaries are not in violation of,
in any material respect, any environmental laws, nor is there existing, pending
or threatened any investigation or inquiry by any governmental authority
pursuant to any environmental laws, nor is there existing or pending any
remedial obligations under any environmental laws;
(n) The proceeds of the Notes shall be used by the Borrower for
general corporate needs. No part of the proceeds received under this Agreement
or the Notes will be used, directly or indirectly, for the purpose of
purchasing or carrying, or the payment in full or in part, of indebtedness
which was incurred for the purpose of purchasing or carrying, any margin stock,
as such term is defined in Regulation U of the Board of Governors of the
Federal Revenue System, 12 C.F.R., Part 221 ("REGULATION U"). No part of
proceeds received under this Agreement or the Notes will be used for any
purpose which violates Regulation X of the Board of Governors of the Federal
Reserve System, 12 C.F.R., Part 224 ("REGULATION X"). All Loans evidenced by
the Notes are and shall be "business loans," as such term is used in the
Depository Institutions Deregulation and Monetary Control Act of 1980, as
amended, and such loans are for business or commercial purposes and not
primarily for personal, family, or household use, as such terms are used in the
Federal Truth-in-Lending Act and in chapter One of the Texas Credit Code; and
(o) All factual information heretofore or contemporaneously
furnished by or on behalf of the Borrower to Bank for purposes or in connection
with this Agreement and the Notes or any transaction contemplated herein is,
and all other such information hereafter furnished by or on behalf of the
Borrower to Bank will be, true and accurate on the date as of which such
information is dated or certified and not incomplete by omitting to state any
material fact necessary to make such information not misleading at such time.
5. Affirmative Covenants. Until payment in full of the Notes
and all other obligations and liabilities of Borrower hereunder, and until the
expiration and termination of Bank's obligation hereunder, Borrower agrees and
covenants that (unless Bank shall otherwise consent in writing):
(a) Borrower shall conduct its business in an orderly and efficient
manner consistent with good business practices and in accordance with all valid
regulations, laws and orders of any governmental authority and will act in
accordance with customary industry standards in maintaining and operating its
assets, properties and investments;
(b) Borrower shall maintain materially complete and accurate books
and records of its transactions prepared on a consistent basis, and upon
reasonable notice will coordinate with and give Bank access to all books,
records and documents of Borrower and each of its Subsidiaries and permit Bank
to make and take away copies thereof during Borrower's regular business hours
so as to not unreasonably interfere with Borrower's and its Subsidiaries'
normal business operations;
(c) Borrower shall furnish to Bank as soon as available and in any
event within forty-five (45) days after the end of each of the first three (3)
quarterly fiscal periods of each fiscal year of Borrower, copies of the balance
sheet of Borrower and its Subsidiaries on a consolidated basis (such
Subsidiaries included in Borrower's consolidated financial statements are
herein called "CONSOLIDATED SUBSIDIARIES") as of the end of such fiscal period,
and statements of income and changes in cash flow of Borrower and its
Subsidiaries on a consolidated basis for the portion of the fiscal year ending
with such period, all in reasonable detail, and certified by the chief
financial officer of Borrower in the form of Exhibit D attached hereto as being
true and correct and as having been prepared in accordance with generally
accepted accounting principles, consistently applied, subject to year-end
adjustments and shall provide to Bank copies of its 10-Q as filed with the
Securities Exchange Commission;
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(d) Borrower shall furnish to Bank as soon as available and in any
event within one hundred twenty (120) days after the close of each fiscal year
of Borrower, copies of the audited balance sheet of Borrower and its
Subsidiaries on a consolidated basis as of the close of such fiscal year, and
statements of income and retained earnings and changes in cash flow of Borrower
and its Subsidiaries on a consolidated basis for such fiscal year, in each case
setting forth in comparative form the figures for the preceding fiscal year,
all in reasonable detail and accompanied by an unqualified opinion (or if
qualified, of a non-material nature (e.g., FASB changes of accounting
principles) or nothing indicative of an ongoing concern or material
misrepresentation nature) of independent public accountants of recognized
national standing selected by Borrower and satisfactory to Bank, to the effect
that (i) such financial statements have been prepared in accordance with
generally accepted accounting principles, (ii) the examination of such accounts
in connection with such financial statements has been made in accordance with
generally accepted auditing standards, and, accordingly, includes such tests of
the accounting records and such other auditing procedures as were considered
necessary in the circumstances, and (iii) certified by Borrower's Chief
Financial Officer that Borrower's Chief Financial Officer has not become aware
of any condition or event which would constitute a default or an Event of
Default under any of the terms or provisions of this Agreement and, if any such
condition or event then exists, specifying in the nature and period of
existence thereof;
(e) Borrower shall furnish to Bank, immediately upon becoming aware
of the existence of any condition or event constituting an Event of Default or
event which, with the lapse of time and/or giving of notice would constitute an
Event of Default, written notice specifying the nature and period of existence
thereof and any action which Borrower is taking or proposes to take with
respect thereto;
(f) Borrower shall promptly notify Bank of (i) any material adverse
change in Borrower's financial condition or business; (ii) any default under
any material agreement, contract or other instrument to which Borrower is a
party or by which any of its Subsidiaries or its properties are bound, or any
acceleration of any maturity of any indebtedness owing by Borrower or any of
its Subsidiaries; (iii) any material adverse claim against or affecting
Borrower or any of its Subsidiaries; and (iv) any litigation, or any claim or
controversy which might become the subject of litigation, against Borrower or
any of its Subsidiaries or affecting any of Borrower's or any of its
Subsidiaries' property, if such litigation or potential litigation might, in
the event of an unfavorable outcome, have a material adverse effect on
Borrower's or any of its Subsidiaries' financial condition or business or might
cause an Event of Default;
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(g) Borrower shall promptly furnish to Bank, at Bank's request, such
additional financial or other information concerning assets, liabilities,
operations and transactions of Borrower and its Subsidiaries as Bank may from
time to time reasonably request;
(h) Borrower shall, and shall cause each of its Subsidiaries to,
promptly pay all lawful claims, whether for labor, materials or otherwise,
which might or could, if unpaid, become a lien or charge on any property or
assets of Borrower and its Subsidiaries, unless and to the extent only that the
same are being contested in good faith by appropriate proceedings and reserves
have been established therefor;
(i) Borrower shall, and shall cause each of its Subsidiaries to,
preserve and maintain all licenses, privileges, franchises, certificates and
the like necessary for the operation of its business;
(j) Borrower shall, and shall cause each of its Subsidiaries to,
execute such additional instruments as may be reasonably requested by Bank in
order to carry out the intent of this Agreement and to perfect or give further
assurances of any of the rights granted or provided for hereunder or under any
of the Loan Documents;
(k) Borrower shall indemnify, defend and hold harmless Bank and its
directors, officers, agents, attorneys, and employees (individually, an
"INDEMNITEE" and collectively, the "INDEMNITEES") from and against any and all
loss, liability, obligation, damage, penalty, judgment, claim, deficiency and
expense (including interest, penalties, attorneys' fees and amounts paid in
settlement) to which the Indemnitees may become subject arising out of this
Agreement and the other Loan Documents other than those which arise by reason
of the gross negligence or willful misconduct of Bank, BUT SPECIFICALLY
INCLUDING ANY LOSS, LIABILITY, OBLIGATION, DAMAGE, PENALTY, JUDGMENT, CLAIM,
DEFICIENCY OR EXPENSE ARISING OUT OF THE SOLE OR CONCURRENT NEGLIGENCE OF BANK.
Borrower shall also indemnify, protect and hold each Indemnitee harmless from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, proceedings, costs, expenses (including
without limitation all reasonable attorneys' fees and legal expenses whether or
not suit is brought), and disbursements of any kind or nature whatsoever which
may at any time be imposed on, incurred by, or asserted against such
Indemnitee, with respect to or as a direct or indirect result of the violation
by Borrower of any environmental law. The provisions of and undertakings and
indemnifications set forth in this Section shall survive (i) the satisfaction
and payment of the Loans and termination of this Agreement and (ii) the release
of any security interests held by Bank or the extinguishment of such security
interests by foreclosure or action in lieu thereof;
(l) Borrower shall use the proceeds of the Line of Credit Loan to
repurchase up to 565,000 shares of Borrower's outstanding common stock provided
the weighted average price per share repurchased shall not exceed $12.00;
(m) Borrower shall use the proceeds of the Revolving Loan for
general working capital purposes.
6. Negative Covenants. Until payment in full of the Notes and all
other obligations and liabilities of Borrower hereunder, and until the
expiration and termination of Bank's obligation hereunder, Borrower agrees and
covenants that it shall not and shall not permit any of its Subsidiaries to
(unless Bank shall otherwise consent in writing):
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(a) create, incur or assume any indebtedness or borrow money, except
for (i) the Loans hereunder, (ii) intercompany indebtedness between Borrower
and any Consolidated Subsidiaries, (iii) trade debt incurred in the ordinary
course of Borrower's and its Subsidiaries' business, including under office
space leases, (iv) debt reflected on Borrower's most recent balance sheet, and
(v) additional debt not to exceed $500,000.00.
(b) endorse, guarantee, or otherwise become liable for the
obligations of any person, firm or corporation except for endorsements of
negotiable instruments by Borrower and its Subsidiaries' in the ordinary course
of business and except as provided in 6(a)(v) above.
(c) mortgage, assign, encumber, hypothecate or grant a security
interest in any of Borrower's or any of its Subsidiaries' assets, except to
Bank (provided, however, that the foregoing shall not apply to inchoate
landlord liens and liens for taxes which are not delinquent or which are being
contested in good faith and liens resulting from deposits to secure the
payments of workmen's compensation or social security or to secure the
performance of bids or contracts in the ordinary course of business);
(d) liquidate, dissolve or reorganize Borrower or any Consolidated
Subsidiary; or merge or consolidate Borrower or any Consolidated Subsidiary
with, or permit Borrower or any Consolidated Subsidiary to acquire all or
substantially all of the assets of, any other company, firm or association
except with respect to wholly-owned Subsidiaries of Borrower; or make any other
change in Borrower's or any Consolidated Subsidiary's capitalization or its
business if any such transaction would have a Material Adverse effect on
Borrower's capitalization or business;
(e) pay any dividends on any of its outstanding stock (other than
dividends by Borrower's Subsidiaries to Borrower); own, purchase or acquire,
directly or indirectly, any promissory notes, stock or securities of any
person, firm or corporation, other than Borrower's or Borrower's Subsidiaries,
commercial paper of an isuer rated at least "A - 1" by Standard and Poor's
Ratings Group, a Division of ▇▇▇▇▇▇-▇▇▇▇, Inc., "P - 1" by ▇▇▇▇▇'▇ Investor
Service, Inc. or "F - 1" by Fitch IBCA and securities guaranteed as to the
principal and interest by the United States government; or make any loans or
advances to any other person other than Borrower's employees and its
Consolidated Subsidiaries;
(f) sell any of its assets used or useful in its business, except in
the ordinary course of business; or sell any of its assets to any other person,
firm or corporation with the agreement that such assets shall be leased back to
Borrower.
7. Financial Covenants.
(a) For purposes of this Section 7, the following terms shall have
the respective meanings assigned to them below:
"CAPEX" means, for any person on a consolidated basis as
of any period, the aggregate amount of expenditures related to
equipment, leasehold improvements and other tangible assets.
"Current Assets" means, as of any date, the total assets
of Borrower on a consolidated basis that would be reflected on a
balance sheet of Borrower as "current assets" in accordance with
GAAP.
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"Current Liabilities" means, as of any date, the total
liabilities of Borrower on a consolidated basis that would be
reflected on a balance sheet of Borrower as "current liabilities" in
accordance with GAAP.
"EBITDA" means, as of any date, with respect to Borrower
on a consolidated basis , without duplication, (i) Net Income plus
(ii) depreciation, depletion, amortization and other non-cash items
(including non-cash minority interests expenses) reducing Net Income
plus (iii) interest expenses plus (iv) income tax expenses, all
determined in accordance with GAAP.
"GAAP" means generally accepted accounting principles,
applied on a consistent basis, that are applicable in the
circumstances as of the date in question.
"Intangible Assets" means assets that are (i) deferred
assets, other than prepaid insurance, prepaid taxes and deferred
taxes, (ii) patents, copyrights, trademarks, tradenames, franchises,
goodwill, experimental expenses and other similar assets which would
be classified as intangible assets on a balance sheet, and (iii)
unamortized debt discount and expense.
"Net Income" means, for any period, the net earnings (or
loss) after taxes of Borrower on a consolidated basis for such
period determined in accordance with GAAP.
"Subordinated Debt" means those certain 8% convertible
subordinated notes issued by Borrower June 2, 1993, April 7, 1994
and May 2, 1994 in the aggregate amount of $8,050,000.00 due June
30, 2003 and June 30, 2004.
"Tangible Net Worth" means the total shareholders' equity
of Borrower, plus outstanding Subordinated Debt less the aggregate
book value of Intangible Assets.
"Total Liabilities" means, as of any date, the liabilities
of Borrower on a consolidated basis that would be reflected on a
balance sheet of Borrower as "liabilities" in accordance with GAAP
excluding the outstanding Subordinated Debt.
(b) Until payment in full of the Notes and all other obligations and
liabilities of Borrower hereunder, Borrower covenants that it shall not (unless
Bank shall otherwise consent in writing):
(i) permit the ratio of its Current Assets to its
Current Liabilities to be less than 2.0 to 1.0;
(ii) permit its ratio of Total Liabilities to Tangible
Net Worth to be greater than 1.25 to 1.00;
(iii) permit, at all times after December 31, 1999, its
Tangible Net Worth to be less than $10,000,000.00 plus 50%
of Net Income, on a cumulative basis (provided that no
negative adjustment will be made in the event that Net
Income is a deficit figure for such period);
(iv) permit, for any period, the ratio of Borrower's (x)
EBITDA to (y) CAPEX plus dividends plus cash interest
expenses plus scheduled debt repayments plus cash tax
expenses all on a consolidated basis to be less than 1.25
to 1.00, in each case for the one-year period ending on
the last day of such period; or
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(v) permit Net Income to be negative for two or more
consecutive fiscal quarters.
8. Default. An Event of Default shall exist if any one or
more of the following events (individually, an "EVENT OF DEFAULT" and
collectively, "EVENTS OF DEFAULT") shall occur:
(a) Borrower shall fail to pay when due any principal of, or
interest on, the Notes or any other fee or payment due hereunder or under any
of the Loan Documents;
(b) any representation or warranty made in any of the Loan Documents
shall prove to be untrue or inaccurate in any material respect as of the date
on which such representation or warranty is made;
(c) default shall occur in the performance of any of the covenants
or agreements of Borrower contained herein or in any of the other Loan
Documents other than as specifically set forth under this Section 8 and such
default shall remain uncured for a period of 10 days following notice of same;
(d) Borrower or any of its Subsidiaries shall (i) apply for or
consent to the appointment of a receiver, custodian, trustee, intervener or
liquidator of such party or of all or a substantial part of such party's
assets, (ii) voluntarily become the subject of a bankruptcy, reorganization or
insolvency proceeding or be insolvent or admit in writing that such party is
unable to pay its debts as they become due or generally not pay such party's
debts as they become due, (iii) make a general assignment for the benefit of
creditors (iv) file a petition or answer seeking reorganization or an
arrangement with creditors or to take advantage of any bankruptcy or insolvency
laws, (v) file an answer admitting the material allegations of, or consent to,
or default in answering, a petition filed against such party in any bankruptcy,
reorganization or insolvency proceeding, (vi) become the subject of an order
for relief under any bankruptcy, reorganization or insolvency proceeding, or
(vii) fail to pay any money judgment against such party before the expiration
of thirty days after such judgment becomes final and no longer subject to
appeal;
(e) an order, judgment or decree shall be entered by any court of
competent jurisdiction or other competent authority approving a petition
appointing a receiver, custodian, trustee, intervener or liquidator of Borrower
and of its Subsidiaries or of all or substantially all of such person's assets,
and such order, judgment or decree shall continue unstayed and in effect for a
period of 30 days; or a complaint or petition shall be filed against Borrower
or any of its Subsidiaries seeking or instituting a bankruptcy, insolvency,
reorganization, rehabilitation or receivership proceeding of such persons and
such petition or complaint shall not have been dismissed within sixty (60)
days;
(f) Borrower shall default in the payment of the Subordinated Debt
or any other indebtedness in excess of $75,000.00 of Borrower or in the
performance of any of its obligations under such indebtedness and such default
shall continue for more than any applicable period of grace for which adequate
reserves have been set aside if disputed; or
(g) Any final judgment(s) for the payment of money in excess of
$75,000.00 shall be rendered against Borrower or any of its Subsidiaries and
such judgment(s) shall not be satisfied or discharged at least ten (10) days
prior to the date on which any of such person's assets could be lawfully sold
to satisfy such judgment(s).
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9. Remedies Upon Event of Default. If an Event of Default shall have
occurred and be continuing, then Bank at its option may (i) declare the
principal of, and all interest then accrued on, the Notes and any other
liabilities of Borrower to Bank to be forthwith due and payable, whereupon the
same shall forthwith become due and payable without notice, presentment,
demand, protest, notice of intention to accelerate, notice of acceleration, or
other notice of any kind, all of which Borrower hereby expressly waives,
anything contained herein or in the Note to the contrary notwithstanding, (ii)
reduce any claim to judgment, and/or (iii) without notice of default or demand,
pursue and enforce any of Bank's rights and remedies under the Loan Documents
or otherwise provided under or pursuant to any applicable law or agreement.
10. Miscellaneous.
(a) Waiver. No failure to exercise, and no delay in exercising, on
the part of Bank, any right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right. The rights of Bank
hereunder and under the other Loan Documents shall be in addition to all other
rights provided by law. No notice or demand given in any case shall constitute
a waiver of the right to take other action in the same, similar or other
instances without such notice or demand.
(b) Notices. Any notices or other communications required or
permitted to be given by any of the Loan Documents must be given in writing and
must be personally delivered or mailed by prepaid certified or registered mail
to the party to whom such notice or communication is directed at the address of
such party as follows: (i) Borrower: U.S. Physical Therapy, Inc., ▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Chief
Financial Officer, and (ii) Bank: Southwest Bank of Texas, ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President. Any such
notice or other communication shall be deemed to have been given (whether
actually received or not) on the day it is personally delivered as aforesaid
or, if mailed, on the third day after it is mailed as aforesaid. Any party may
change its address for purposes of this Agreement by giving notice of such
change to all other parties pursuant to this paragraph 9(b).
(c) Governing Law. This Agreement and the other Loan Documents are
being executed and delivered, and are intended to be performed, in the State of
Texas, and the substantive laws of Texas shall govern the validity,
construction, enforcement and interpretation of this Agreement and all other
Loan Documents, except to the extent: (i) otherwise specified therein; (ii) the
federal laws governing national banks expressly supersede and have contrary
application; or (iii) federal laws governing maximum interest rates shall
provide for rates of interest higher than those permitted under the laws of the
State of Texas.
(d) Arbitration. All disputes, claims and controversies between the
undersigned, whether individual, joint, or class in nature, arising from this
Agreement, the Loan Documents or otherwise, including without limitation
contract and tort disputes, shall be arbitrated pursuant to the Rules of the
American Arbitration Association, upon request of any of the undersigned. No
act to take or dispose of any collateral securing the Loan shall constitute a
waiver of this arbitration provision or be prohibited by this arbitration
provision. This includes, without limitation, obtaining injunctive relief or a
temporary restraining order; invoking a power of sale under any deed of trust
or mortgage; obtaining a writ of attachment or imposition of a receiver; or
exercising any rights relating to personal property, including taking or
disposing of such property with or without judicial process pursuant to Article
9 of the Uniform Commercial Code. Any disputes, claims, or controversies
concerning the lawfulness or reasonableness of any act, or exercise of any
right concerning any collateral securing the Loan, including any claim to
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rescind, reform, or otherwise modify any agreement relating to the collateral
securing the Loan, shall also be arbitrated, provided however that no
arbitrator shall have the right or the power to enjoin or restrain any act of
any party. Judgment upon any award rendered by any arbitrator may be entered in
any court having jurisdiction; provided, however, that nothing contained herein
shall be deemed to be a waiver by any party that is a bank of the protections
afforded to it under 12 USC ss. 91, Texas Banking Code art. 342-8.002 or any
other protection provided banks by the laws of Texas or the United States. The
statutes of limitations, estoppel, waiver, laches, and similar doctrines which
would otherwise be applicable in any action brought by a party shall be
applicable in any arbitration proceeding, and the commencement of an
arbitration proceeding shall be deemed the commencement of an action for these
purposes. The Federal Arbitration Act shall apply to the construction,
interpretation, and enforcement of this arbitration provision. If the Federal
Arbitration Act is inapplicable to any such claim or controversy for any
reason, such arbitration shall be conducted pursuant to the Texas General
Arbitration Act and in accordance with this arbitration provision and
Commercial Arbitration Rules of the American Arbitration Association.
(e) Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid or unenforceable by a court of competent jurisdiction,
then such provision shall be severed from this Agreement and the remaining
provisions shall remain in full force and effect and shall not be affected by
the illegal, invalid or unenforceable provision or by its severance from this
Agreement.
(f) Interest.
(i) It is the intention of the parties hereto to comply
with applicable usury laws; accordingly, notwithstanding
any provision to the contrary in this Agreement, the Notes
or in any of the other Loan Documents securing the payment
hereof or otherwise relating hereto, in no event shall
this Agreement, the Notes or such other Loan Documents
require or permit the payment, taking, reserving,
receiving, collection, or charging of any sums
constituting interest under applicable laws which exceed
the maximum amount permitted by such laws. If any such
excess interest is called for, contracted for, charged,
taken, reserved, or received in connection with the Loans
evidenced by the Notes or in any of the Loan Documents
securing the payment thereof or otherwise relating
thereto, or in any communication by Bank or any other
Person to Borrower or any other Person, or in the event
all or part of the principal or interest thereof shall be
prepaid or accelerated, so that under any of such
circumstances or under any other circumstance whatsoever
the amount of interest contracted for, charged, taken,
reserved, or received on the amount of principal actually
outstanding from time to time under the Notes or any other
Loan Document shall exceed the maximum amount of interest
permitted by applicable usury laws, then in any such event
it is agreed as follows: (A) the provisions of this
paragraph shall govern and control, (B) neither Borrower
nor any other Person now or hereafter liable for the
payment of the Notes or any obligation shall be obligated
to pay the amount of such interest to the extent such
interest is in excess of the maximum amount of interest
permitted by applicable usury laws, (C) any such excess
which is or has been received notwithstanding this
paragraph shall be credited against the then unpaid
principal balance of the Notes or other obligations, as
applicable, or, if the Notes or other obligations, as
applicable, have been or would be paid in full, refunded
to Borrower, and (D) the provisions of this Agreement, the
Notes and the other Loan Documents securing the payment
thereof and otherwise relating thereto, and any
communication to Borrower, shall immediately be deemed
reformed and such excess interest reduced, without the
necessity of executing any other document, to the maximum
lawful rate allowed under applicable laws as now or
hereafter construed by courts having jurisdiction hereof
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or thereof. Without limiting the foregoing, all
calculations of the rate of the interest contracted for,
charged, collected, taken, reserved, or received in
connection with the Notes, this Agreement or any other
Loan Document which are made for the purpose of
determining whether such rate exceeds the maximum lawful
rate shall be made to the extent permitted by applicable
laws by amortizing, prorating, allocating and spreading
during the period of the full term of the Loans or other
obligations, as applicable, including all prior and
subsequent renewals and extensions, all interest at any
time contracted for, charged, taken, collected, reserved,
or received. The terms of this paragraph shall be deemed
to be incorporated in every document and communication
relating to the Notes, the Loans or any other Loan
Document.
(ii) Texas Finance Code, Chapter 346 (formerly Tex. Rev.
Civ. Stat., Title 79, Chapter 15), which regulates
certain revolving loan accounts and revolving triparty
accounts, shall not apply to any revolving loan accounts
created under the Notes, this Agreement or the other Loan
Documents or maintained in connection therewith.
(iii) To the extent that the interest rate laws of the
State of Texas are applicable to the Loans or any other
obligations, the applicable interest rate ceiling is the
weekly ceiling (formerly the indicated rate ceiling)
determined in accordance with Tex. Rev. Civ. Stat., Title
79, Article 5069-1D.003, also codified at Texas Finance
Code, Section 303.301 (formerly Article 5069-1.01(a)(1)),
and, to the extent that this Agreement, the Notes or any
other Loan Document is deemed an open end account as such
term is defined in Tex. Rev. Civ. Stat., Title 79,
Article 5069-1B.002(14), also codified at Texas Finance
Code Section 3.01.001(3) (formerly Article 5069-1.01(f)),
the Bank retains the right to modify the interest rate in
accordance with applicable law.
(g) Entirety and Amendments. The Loan Documents embody the entire
agreement between the parties and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof and thereof, and
this Agreement and the other Loan Documents may be amended only by an
instrument in writing executed by the party, or an authorized officer of the
party, against whom such amendment is sought to be enforced.
(h) Parties Bound. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, assigns and
legal representatives; provided, however, that Borrower may not, without the
prior written consent of Bank, assign any rights, powers, duties or obligations
hereunder.
(i) Expenses. Borrower will promptly pay all reasonable costs, fees
and expenses paid or incurred by Bank incident to this Agreement and the other
Loan Documents or incident to the collection of the Loan hereunder (including
the fees and expenses of counsel to Bank).
(j) Headings. Paragraph headings are for convenience of reference
only and shall in no way affect the interpretation of this Agreement.
THIS WRITTEN LOAN AGREEMENT, THE NOTES, AND THE DOCUMENTS AND
INSTRUMENTS EXECUTED IN CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENT IS OF THE PARTIES.
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THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
-----------------------------------------------------------
IN WITNESS WHEREOF the parties hereto have executed this Agreement on the date
first written above.
U.S. PHYSICAL THERAPY, INC., a
Nevada corporation
By: /s/ J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Chief Financial Officer, Vice President
- BORROWER -
SOUTHWEST BANK OF TEXAS, N.A.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Vice President
- BANK -
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Convertible Line of Credit Note
-------------------------------
$2,500,000.00 HOUSTON, TEXAS JULY 1, 2000
FOR VALUE RECEIVED, the undersigned, U.S. PHYSICAL THERAPY, INC., A
NEVADA CORPORATION (herein called "MAKER"), promises to pay to the order of
SOUTHWEST BANK OF TEXAS, N.A. (herein called "PAYEE," which term herein in
every instance shall refer to any owner or holder of this note) the sum of TWO
MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000.00), together with interest
on the principal hereof from time to time outstanding from the date of
advancement until maturity, at the per annum rate hereinafter stated (computed
on the basis of a year of 365 days and paid for the actual number of days
elapsed), said principal and interest being payable in lawful money of the
United States of America at the banking quarters of Southwest Bank of Texas,
N.A., 4400 Post Oak Park, Houston, ▇▇▇▇▇▇ County, Texas, or at such other place
as Payee may designate hereafter in writing.
This note is issued pursuant to a letter loan agreement of even date
herewith, by and between Maker and Payee (the "LOAN AGREEMENT"), and reference
is made hereby to the Loan Agreement for certain rights as to the prepayment,
the acceleration of the maturity hereof and collateral securing the payment
hereof; and this note is entitled to all the benefits of the Loan Agreement.
Subject to the terms and conditions of the Loan Agreement, until December 31,
2000, the undersigned may borrow under one or more loans hereunder in an
aggregate principal amount not to exceed $2,500,000.00. Principal outstanding
under this note on December 31, 2000, shall be due and payable as provided in
the Loan Agreement.
The principal balance hereof advanced and from time to time
remaining unpaid shall bear interest during each day of the term of the loan
evidenced hereby at a variable per annum rate equal to the lesser of (A) a per
annum rate that is equal to (herein called the "BASIC RATE") one-half of one
percent (1/2%) plus the prime rate of interest (herein called the "PRIME
RATE"), being the variable per annum rate of interest most recently announced
by Southwest Bank of Texas, N.A. (herein sometimes called the "BANK") as its
"prime rate," with the understanding that the Bank's "prime rate" may be one of
several base rates and serves as a basis upon which effective rates of interest
are from time to time calculated for loans making reference thereto and may not
be the lowest of the Bank's base rates, which Basic Rate shall change when and
as the Prime Rate shall change, effective on the day of such change or (B) the
Maximum Rate (hereinafter defined). Notwithstanding the foregoing, if at any
time the Basic Rate shall exceed the Maximum Rate and thereafter the Basic Rate
shall become less than the Maximum Rate, the rate of interest payable hereunder
shall be the Maximum Rate until the Payee shall have received the amount of
interest it would have received otherwise if the interest payable hereunder had
not been limited by the Maximum Rate during the period of time the Basic Rate
exceeded the Maximum Rate.
All past due principal and interest of this note, whether due as the
result of acceleration of maturity or otherwise, shall bear interest at the
lesser of (1) a rate that is five percentage points above the Prime Rate as it
varies or (2) the maximum lawful rate of interest permitted by the applicable
usury laws, now or hereafter enacted, which interest rate (herein called the
"MAXIMUM RATE") shall change when and as said laws shall change to the extent
permitted by said laws, effective on the day such change in said laws becomes
effective, from the date the payment thereof shall have become due until the
same have been fully discharged by payment.
The principal and interest of this note are due and payable at the
offices of said Payee in Houston, ▇▇▇▇▇▇ County, Texas, in accordance with, and
as set forth in, the Loan Agreement.
Maker and any and all sureties, guarantors and endorsers of this
note and all other parties now or hereafter liable hereon, severally waive
grace, demand, presentment for payment, protest, notice of any kind (including,
but not limited to, notice of dishonor, notice of protest, notice of intention
to accelerate and notice of acceleration) and diligence in collecting and
bringing suit against any party hereto, and agree (i) to all extensions and
partial payments, with or without notice, before or after maturity, (ii) to any
substitution, exchange or release of any security now or hereafter given for
this note, (iii) to the release of any party primarily or secondarily liable
hereon, and (iv) that it will not be necessary for Payee, in order to enforce
payment of this note, to first institute or exhaust Payee's remedies against
Maker or any other party liable therefor or against any security for this note.
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In the event of default hereunder or under any of the instruments
securing payment hereof and this note is placed in the hands of an attorney for
collection (whether or not suit is filed), or if this note is collected by suit
or legal proceedings or through the probate court or bankruptcy proceedings,
Maker agrees to pay all reasonable attorneys' fees and all expenses of
collection and costs of court.
It is the intention of the parties hereto to comply with applicable
usury laws; accordingly, Section 10(f) of the Loan Agreement is incorporated
herein by reference and shall have the same force and effect as if set forth
herein.
This note shall be governed by and construed under the laws of the
State of Texas and applicable United States federal law. This note is subject
to the arbitration provisions under Article 10(d) of the Loan Agreement.
Any check, draft, money order or other instrument given in payment
of all or any portion hereof may be accepted by Payee and handled in collection
in the customary manner, but the same shall not constitute payment hereunder or
diminish any rights of Payee except to the extent that actual cash proceeds of
such instrument are unconditionally received by Payee.
MAKER:
U. S. PHYSICAL THERAPY, INC., a Nevada
corporation
By: /s/ J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------
J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Chief Financial Officer
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