EXHIBIT 10.57
LOAN AND SECURITY AGREEMENT NO. 2
among
MHOA TEXAS I, L.L.C.
Borrower
PHYSICIAN HEALTH CORPORATION
Guarantor
and
DVI FINANCIAL SERVICES INC.
Lender
Dated as of June 16, 1997
TABLE OF CONTENTS
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Page
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Section 1
DEFINITIONS .......................................................... 1
Section 1.1. Specific Definitions ................................... 1
Section 1.2. Generally Accepted Accounting Principles and Uniform
Commercial Code ..................................................... 6
Section 1.3. Construction ........................................... 6
Section 2
LOAN ................................................................. 6
Section 2.1. The Loan ............................................... 6
Section 2.2. Term and Repayment of Loan ............................. 6
Section 2.3. Prepayment ............................................. 7
Section 2.4. Late Payments .......................................... 7
Section 2.5. Conditions to the Closing .............................. 7
Section 3
SECURITY INTEREST .................................................... 9
Section 3.1. Grant of Security Interest ............................. 9
Section 4
SPECIFIC REPRESENTATIONS ............................................. 10
Section 4.1. Name of Borrower ....................................... 10
Section 4.2. Mergers and Consolidations ............................. 10
Section 4.3. Purchase of Assets ..................................... 11
Section 4.4. Change of Name or Identity ............................. 11
Section 4.5. Corporate Structure .................................... 11
Section 5
PROVISIONS CONCERNING COLLATERAL ..................................... 11
Section 5.1. Title .................................................. 11
Section 5.2. No Warranties .......................................... 11
Section 5.3. Further Assurances ..................................... 11
Section 5.4. Intentionally Deleted .................................. 12
Section 5.5. Lender's Duty of Care .................................. 12
Section 5.6. Borrower's Contracts ................................... 12
Section 5.7. Reinstatement of Liens ................................. 12
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Section 5.8. Lender Expenses ........................................ 12
Section 5.9. Inspection of Collateral and Records ................... 13
Section 5.10. Waivers ............................................... 13
Section 6
REPRESENTATIONS AND WARRANTIES ....................................... 13
Section 6.1. Corporate Status ....................................... 13
Section 6.2. Authorization .......................................... 14
Section 6.3. No Breach .............................................. 14
Section 6.4. Taxes .................................................. 14
Section 6.5. Deferred Compensation Plans ............................ 14
Section 6.6. Litigation and Proceedings ............................. 14
Section 6.7. Business ............................................... 14
Section 6.8. Laws and Agreements .................................... 14
Section 6.9. Financial Condition .................................... 15
Section 6.10. Environmental Laws .................................... 15
Section 6.11. Insurance ............................................. 15
Section 6.12. Ownership of Property ................................. 15
Section 6.13. Health Care Laws ...................................... 16
Section 6.14. Cumulative Representations ............................ 16
Section 6.15. Full Disclosure ....................................... 16
Section 7
COVENANTS ............................................................ 16
Section 7.1. Encumbrance of Collateral .............................. 16
Section 7.2. Business ............................................... 16
Section 7.3. Condition and Repair ................................... 16
Section 7.4. Taxes .................................................. 17
Section 7.5. Insurance .............................................. 17
Section 7.6. Accounting System ...................................... 17
Section 7.7. Financial Statements ................................... 17
Section 7.8. Further Information .................................... 17
Section 7.9. ERISA Covenants ........................................ 18
Section 7.10. Environmental Covenants ............................... 18
Section 7.11. Restrictions on Merger, Consolidation, Sale of Assets,
Issuance of Stock, etc .............................................. 18
Section 7.12. Health Care Covenants ................................. 19
Section 7.13. Distributions ......................................... 19
Section 7.14. Capital Expenditures .................................. 19
Section 7.15. Other Debt. ........................................... 19
Section 7.16. Debt Service Coverage. ................................ 19
Section 7.17. Termination of Covenants. ............................. 20
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Section 8
EVENTS OF DEFAULT .................................................... 20
Section 9
REMEDIES ............................................................. 22
Section 9.1. Specific Remedies ...................................... 22
Section 9.2. Power of Attorney ...................................... 23
Section 9.3. Expenses Secured ...................................... 24
Section 9.4. Equitable Relief ...................................... 24
Section 9.5. Remedies Are Cumulative ................................ 24
Section 10
INDEMNITY ............................................................ 24
Section 10.1. General Indemnity ..................................... 24
Section 10.2. Specific Environmental Indemnity ...................... 25
Section 11
MISCELLANEOUS ........................................................ 25
Section 11.1. Delay and Waiver ...................................... 25
Section 11.2. Complete Agreement .................................... 25
Section 11.3. Severability; Headings ................................ 25
Section 11.4. Binding Effect ........................................ 25
Section 11.5. Notices ............................................... 26
Section 11.6. Governing Law ......................................... 26
Section 11.7. Jurisdiction .......................................... 27
Section 11.8. Waiver of Trial by Jury ............................... 27
SCHEDULES
1.1. Permitted Liens
3.1. Personal Property
5.6. Material Contracts
6.6. Litigation and Proceedings
6.11. Insurance
6.13 Health Care Permits
7.13. Permitted Distributions
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LOAN AND SECURITY AGREEMENT NO. 2
THIS LOAN AND SECURITY AGREEMENT NO. 2 (this "Agreement") is entered
into as of June 16, 1997, by and between DVI Financial Services Inc., a Delaware
corporation ("Lender"), MHOA Texas I, L.L.C., a Texas limited liability company
("Borrower"), and Physician Health Corporation ("Guarantor").
In consideration of the mutual covenants and agreements set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and affirmed, the parties agree as
follows:
Section 1
DEFINITIONS
Section 1.1. Specific Definitions. The following definitions apply:
"Account Debtors" mean all customers and other persons who are
obligated or indebted in any manner, whether directly or indirectly, primarily
or secondarily, contingently or otherwise, with respect to Accounts.
"Accounts" mean all accounts, contract rights, instruments, documents,
chattel paper and obligations in any form owing to or owned by Borrower arising
out of the sale or lease of goods or the rendition of services by Borrower,
Seller or the Metroplex Providers whether or not earned by performance; all
credit insurance, guaranties, letters of credit, advises of credit and other
security for any of the above; all merchandise returned to or reclaimed by
Borrower, Seller or the Metroplex Providers and Borrower's Books relating to any
of the foregoing.
"Advance" means an advance of loan proceeds constituting all or a part
of the Loan.
"Affiliate" means with respect to any Person any other Person which
directly or indirectly Controls, is Controlled by or is under common Control
with that Person.
"Asset Purchase Agreement" means that certain Asset Purchase and
Contribution Agreement dated June 16, 1997 among Seller, certain physicians and
their professional associations, Borrower and Guarantor.
"Assignment of Acquisition Instruments" means that certain Assignment
of Acquisition Instruments dated as of the date hereof collaterally assigning
Borrower's rights under the Asset Purchase Agreement and the other documents
delivered to Borrower by Seller pursuant to the Asset Purchase Agreement as
security for the Loan, and consented to by Seller.
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"Assignment of Management Services Agreement" means that certain
Assignment of Management Services Agreement dated as of the date hereof
collaterally assigning Borrower's rights under the Management Services
Agreement, including Borrower's security interest in the Accounts as security
for the Loan, and consented to by Seller and the Metroplex Providers.
"Assumption Agreement" means the Assumption Agreement dated as of the
date hereof by and between Lender and Seller pursuant to which Seller agrees to
assume operations of the assets purchased by Borrower and the Obligations, and
consented to by Borrower.
"Borrower's Books" means all of Borrower's books and records including
but not limited to: minute books, ledgers; records indicating, summarizing or
evidencing Borrower's assets, liabilities and the Accounts; all information
relating to Borrower's business operations or financial condition; and all
computer programs, disk or tape files, printouts, runs and other computer-
prepared information and the equipment containing such information; provided,
however, that confidential patient records are not included therein, except to
the extent otherwise permitted by law.
"Closing Date" means the date of the first Advance of the Loan.
"Collateral" has the meaning specified in Section 3.1 hereof.
"Control" means (i) the ownership of a majority of the voting power of
all classes of voting stock of a corporation, or (ii) the ownership of a
majority of the beneficial interest in income and capital of a person other than
a corporation.
"Distribution" means, with respect to any shares of capital stock or
any warrant or right to acquire shares of capital stock or any other equity
security, (i) the retirement, redemption, purchase or other acquisition,
directly or indirectly, for value by the issuer of any such security, except to
the extent that the consideration therefor consists of shares of stock, (ii) the
declaration or (without duplication) payment of any dividend in cash, directly
or indirectly, on or with respect to any such security, (iii) any investment in
the holder of five percent (5%) or more of any such security if a purpose of
such investment is to avoid characterization of the transaction as a
Distribution, and (iv) any other cash payment constituting a distribution under
applicable laws with respect to such security.
"DVIBC" means DVI Business Credit Corporation, a Delaware corporation.
"Environmental Laws" means all federal, state, local and foreign laws
relating to pollution or protection of the environment, including laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or wastes
into the environment (including, ambient air, surface water, ground water or
land), or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal transport or handling of pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or wastes, and any and
all regulations, codes, plans, orders, decrees, judgments, injunctions, notices,
or demand letters issued, entered, promulgated, or approved thereunder.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all references to sections thereof include such sections and any
predecessor provisions thereto, including any rules or regulations issued in
connection therewith.
"ERISA Affiliate" means each trade or business (whether or not
incorporated) that together with Borrower would be deemed a "contributing
sponsor" to a single employee plan within the meaning of Section 4001 of ERISA.
"Event of Default" has the meaning specified in Section 8 hereof.
"Governmental Authority" means any governmental or political
subdivision or any agency, authority, bureau, central bank, commission,
department or instrumentality thereof, or any court, tribunal, grand jury or
arbitrator, in any case whether foreign or domestic.
"Guaranty" means the Unconditional Continuing Guaranty executed by
Guarantor unconditionally guaranteeing Borrower's Obligations under this
Agreement.
"Health Care Laws" mean all federal, state and local laws relating to
health care providers and health care services, including, Section 1877(a) of
the Social Security Act as amended by the Omnibus Budget Reconciliation Act of
1993, 42 USC (S) 1395nn.
"Indebtedness" of a Person means (i) all items (except items of
capital stock, capital or paid-in surplus or of retained earnings) which, in
accordance with generally accepted accounting principles, would be included in
determining total liabilities as shown on the liability side of the balance
sheet of such Person as at the date as of which Indebtedness is to be
determined, including any lease which, in accordance with generally accepted
accounting principles would constitute indebtedness; (ii) all indebtedness
secured by any mortgage, pledge, security, lien or conditional sale or other
title retention agreement to which any property or asset owned or held by such
Person is subject, whether or not the indebtedness secured thereby have been
assumed; and (iii) all indebtedness of others which such Person has directly or
indirectly guaranteed, endorsed (otherwise than for the collection or deposit in
the ordinary course of business), discounted or sold with recourse or agreed
(contingently or otherwise) to purchase or repurchase or otherwise acquire, or
in respect of which such Person has agreed to supply or advance funds (whether
by way of loan, stock or equity purchase, capital contribution or otherwise) or
otherwise to become directly or indirectly liable.
"Lender Expenses" means (i) all costs or expenses (including taxes and
insurance premiums) required to be paid by Borrower under this Agreement or
under any of the other Loan Documents that are paid or advanced by Lender; (ii)
filing, recording, publication and reasonable search fees paid or incurred by
Lender in connection with Lender's transactions with Borrower; (iii) costs and
expenses incurred by Lender to correct any Event of Default or enforce any
provision of the Loan Documents or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, and preparing for sale or
advertising to sell the Collateral, whether or not a sale is consummated, after
the occurrence of an Event of Default; (iv) costs and expenses of suit incurred
by Lender in enforcing or defending the Loan Documents or any portion thereof;
(v) all costs or expenses paid by Lender to third parties to convert any data
submitted to Lender by Borrower to an
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acceptable form; and (vi) Lender's reasonable attorneys' fees and expenses
incurred (before or after execution of this Agreement) in advising Lender with
respect to, or in structuring, drafting, reviewing, negotiating, amending,
terminating, enforcing, defending or otherwise concerning, the Loan Documents or
any portion thereof, irrespective of whether suit is brought.
"Lien" means any security interest, mortgage, pledge, assignment, lien
or other encumbrance of any kind, including any interest of a vendor under a
conditional sale contract or consignment and any interest of a lessor under a
capital lease.
"Loan" means the loan made by Lender to Borrower pursuant to this
Agreement.
"Loan Documents" mean (i) this Agreement; (ii) the Note; (iii) the
Security Documents; (iv) the Lock Box Agreement; (v) the Subordination
Agreement; and (vi) any other certificates, documents or instruments delivered
by Borrower to Lender pursuant to the terms of this Agreement.
"Lock Box Accounts" means the deposit accounts with NationsBank, or
any subsequent lockbox bank, established and maintained pursuant to either Lock
Box Agreement.
"Lock Box Agreement" means those two (2) certain Lock Box Agreements
dated on or about the date hereof among Borrower, NationsBank and DVIBC or its
assignee, and any amendments, renewals or replacements thereof.
"Management Services Agreement" means the Management Services
Agreement dated as of June 1, 1997 among Seller, Borrower and the Metroplex
Providers.
"Metroplex Providers" has the meaning set forth in the Management
Services Agreement.
"Note" means the Secured Promissory Note executed by Borrower pursuant
to the terms of this Agreement.
"Obligations" mean (i) the due and punctual payment of all amounts due
or become due under the Note; (ii) the performance of all obligations of
Borrower under this Agreement, the Note and the Other Loan Documents; (iii) all
extensions, renewals, modifications, amendments and refinancings of any of the
foregoing; (iv) all Lender Expenses; and (v) all loans, advances, indebtedness
and other obligations owed by Borrower to DVIBC or Lender under the Other Loan
Documents.
"Other Loan Documents" means those five certain Loan and Security
Agreements among Borrower, Guarantor and Lender and that certain Loan and
Security Agreement among Borrower, Guarantor and DVIBC, dated on or about the
date hereof.
"Permitted Liens" means (i) Liens for property taxes and assessments
or governmental charges or levies and Liens securing claims or demands of
mechanics and
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materialmen, provided that payment thereof is not yet due or is being contested
as permitted in this Agreement; (ii) Liens of or resulting from any judgment or
award, the time for the appeal or petition for rehearing of which has not
expired, or in respect of which Borrower is in good faith prosecuting an appeal
or proceeding for a review and in respect of which a stay of execution pending
such appeal or proceeding for review has been secured; (iii) Liens and priority
claims incidental to the conduct of business or the ownership of properties and
assets (including warehouse's and attorney's Liens and statutory landlord's
Liens); deposits, pledges or Liens to secure the performance of bids, tenders,
or trade contracts, or to secure statutory obligations; and surety or appeal
bonds or other Liens of like general nature incurred in the ordinary course of
business and not in connection with the borrowing of money; provided that in
each case the obligation secured is not overdue or, if overdue, is being
contested in good faith by appropriate actions or proceedings; and further
provided that any such warehouse's or statutory landlord's Liens are subordinate
or have been subordinated to the Liens of Lender in a manner satisfactory to
Lender; (iv) Liens granted to DVI or its Affiliates; and (v) Liens existing on
the date of this Agreement that are disclosed on Schedule 1.1 hereto.
"Person" means an individual, corporation, partnership, limited
liability company, trust, unincorporated association, joint venture, joint-stock
company, government (including political subdivisions), Governmental Authority
or any other entity.
"Pledge Agreement" means that certain Pledge Agreement (Member
Interests) dated on or about the date hereof among Guarantor, Seller, the other
members who become a party to the Agreement and Lender.
"Proceeds" mean all proceeds and products of Collateral and all
additions and accessions to, replacements of, insurance or condemnation proceeds
of, and documents covering Collateral; all property received wholly or partly in
trade or exchange for Collateral; all claims against third parties arising out
of damage, destruction, or decrease in value of the Collateral; all leases of
Collateral; and all rents, revenues, issues, profits and proceeds arising from
the sale, lease, license, encumbrance, collection or any other temporary or
permanent disposition of the Collateral or any interest therein.
"Security Documents" means the Guaranty, the Pledge Agreement, the
Assignment of Acquisition Agreement, the Assignment of Management Services
Agreement and any agreement or instrument entered into between Borrower and
Lender or executed by Borrower or Guarantor and delivered to Lender in
connection with this Agreement to secure repayment of the Loan.
"Seller" means Metroplex Hematology/Oncology Associates, L.L.P., a
Texas limited liability partnership.
"Stated Rate" means Twelve and 25/100 percent (12.25%) per annum
computed on the basis of a 360-day year and actual days elapsed.
"Subordination Agreement" means the Subordination Agreement dated on
or about the date hereof between Lender, Borrower, Guarantor and Seller.
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"Unmatured Default" means any event or condition that, with notice,
passage of time, or a determination by Lender or any combination of the
foregoing would constitute an Event of Default.
"Securities Purchase Agreement" means the Security Purchase Agreement
dated on or about the date hereof, among Guarantor, Weston Presidio Capital II,
L.P. and the other Investors set forth in Exhibit I thereto.
Section 1.2. Generally Accepted Accounting Principles and Uniform
Commercial Code. All financial terms used in this Agreement other than those
defined in Section 1, have the meanings accorded to them under generally
accepted accounting principles. All other terms used in this Agreement, other
than those defined in this Section 1, have the meanings accorded to them in the
Uniform Commercial Code as is enacted in any applicable jurisdiction.
Section 1.3. Construction.
(a) Unless the context of this Agreement clearly requires otherwise,
the plural includes the singular, the singular includes the plural, the part
includes the whole, "including" is not limiting, and "or" has the inclusive
meaning of the phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder," and other similar terms in this Agreement refer to this Agreement
as a whole and not exclusively to any particular provision of this Agreement.
(b) Neither this Agreement nor any uncertainty or ambiguity herein
may be construed or resolved against any party hereto, whether under any rule of
construction or otherwise. On the contrary, this Agreement has been reviewed by
each of the parties and their respective counsel and is entitled to be construed
and interpreted according to the ordinary meaning of the words used so as to
accomplish the purposes and intentions of all parties hereto fairly.
Section 2
LOAN
Section 2.1. The Loan. Subject to the terms and conditions and
relying on the representations and warranties set forth herein, Lender shall
advance to Borrower, and Borrower shall borrow from Lender, a senior secured
term loan in the amount of One Million Two Hundred Fifty Thousand and No/100
Dollars ($1,250,000) which is evidenced by the Note. The proceeds of the Loan
must be used by Borrower for part of the purchase price paid by Borrower to
acquire the assets of Seller pursuant to the Asset Purchase Agreement and to
fund the closing costs incurred in connection with the transactions contemplated
in this Agreement.
Section 2.2. Term and Repayment of Loan. The "Term" of the Loan is
seventy-two (72) months and is payable in (i) a single payment on the first day
of August of interest accrued on the unpaid principal balance at the Stated Rate
from the date of the initial Advance to July 31, (ii) two (2) payments of
interest only on the first day of the following two calendar months of interest
accrued on the unpaid principal balance at the Stated Rate for the preceding
calendar
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month, (iii) sixty-nine (69) consecutive monthly installments of Twenty-Five
Thousand Sixty-Three and 79/100 Dollars ($25,063.79) on the first day of each
calendar month thereafter, with all unpaid principal and interest due and
payable in full on the final installment date. All payments of principal and
interest must be paid in full without setoff, deduction or counterclaim. Lender
will debit the Lock Box Accounts maintained pursuant to the Lock Box Agreement
for payment of each monthly installment of amounts due and payable pursuant to
this Agreement. Borrower shall satisfy any Obligations not paid by such
deductions by direct payment to Lender at 000 Xxxx Xxxx, Xxxxxxxxxx, XX 00000.
Section 2.3. Prepayment. The Loan is not subject to prepayment or
redemption in whole or in part prior to the expiration of the Term.
Section 2.4. Late Payments. If Borrower fails to make any payment of
interest or principal, including the payment due upon maturity, when the same is
due and payable and such payment can not be made by debit from the Lock Box
Accounts and such failure continues for five (5) business days after nonpayment,
a late charge by way of damages to the extent provided in this Section 2.4 is
immediately due and payable. Borrower recognizes that default by Borrower in
making the payments herein agreed to be paid when due will result in the Lender
incurring additional expenses, in loss to the Lender of the use of the money due
and in frustration to the Lender in meeting its other commitments. Lender is
entitled to damages for the detriment caused thereby, but it is extremely
difficult and impractical to ascertain the extent of such damages. Borrower
shall pay on demand a sum equal to five cents ($.05) for each one dollar ($1.00)
of each payment which is not received within five (5) business days after the
date it is due and payable is a reasonable estimate of the damages to the
Lender. If any part of the principal or interest is not paid when due, it
thereafter bears interest at the rate of eighteen percent (18%) per annum from
and as of the date of delinquency until paid, provided, however, that any amount
due pursuant to the preceding sentence must be deducted from the amount due
pursuant to this sentence. If the specified interest rate at any time exceeds
the maximum rate allowed by law, then the applicable interest rate is reduced to
the maximum rate allowed by law.
Section 2.5. Conditions to the Closing. The obligation of Lender to
make an Advance on the Closing Date is subject to Lender's determination that
Borrower has satisfied the following conditions on the Closing Date:
(a) The representations and warranties set forth in this Agreement
and in the Other Loan Documents are true and correct on and as of the date
hereof and are true and correct in all material respects as of the Closing Date
and Borrower has performed all obligations required to have been performed by it
hereunder prior to Closing Date.
(b) Borrower has executed and delivered to Lender (or caused to be
executed and delivered to Lender by the appropriate Persons) the following:
(i) this Agreement;
(ii) the Note;
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(iii) UCC-1 Financing Statements;
(iv) the Guaranty;
(v) the Subordination Agreement;
(vi) the Pledge Agreement;
(vii) the Lock Box Agreement;
(viii) the Assignment of Management Services Agreement;
(ix) the Assignment of Acquisition Instruments;
(x) the Assumption Agreement;
(xi) evidence satisfactory to Lender that the transactions
contemplated by the Asset Purchase Agreement and the Venture Capital Agreement
have been consummated in accordance with the terms of such agreements;
(xii) evidence satisfactory to Lender that Borrower is a
limited liability company and Guarantor is a corporation duly formed, validly
existing and in good standing in the state in which it was formed and in each
state in which it is authorized to do business;
(xiii) certificates of insurance that evidence the insurance
coverage and policy provisions required by this Agreement and in the Loan
Documents;
(xiv) pay-off letters, UCC Termination Statement and Lien
Releases as required to grant Lender a first priority security interest, other
than Permitted Liens, in Collateral pledged as security for repayment of the
Loan;
(xv) signature and incumbency certificate of Borrower and
Guarantor;
(xvi) certified copies of resolutions of the members of
Borrower and the Board of Directors of Guarantor authorizing the execution and
delivery of the Loan Documents to be executed by Borrower and Guarantor;
(xvii) copies of the Articles of Organization of Borrower
and Articles of Incorporation of Guarantor certified by the applicable Secretary
of State;
(xviii) copies of the Regulations of Borrower and Bylaws of
Guarantor certified by an officer thereof;
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(xix) certified copies of the Asset Purchase Agreement and
all documents executed and delivered in connection with the transactions
contemplated thereby satisfactory in form and substance to Lender;
(xx) certified copies of the Venture Capital Agreement and
all other documents executed and delivered in connection with the transactions
contemplated thereby satisfactory in form and substance to Lender;
(xxi) certified copy of the Management Services Agreement
satisfactory in form and substance to Lender;
(xxii) the consent of Western Presidio Capital II, L.P. and
the other Investors set forth in Exhibit I to the Venture Capital Agreement to
the terms of this transaction;
(xxiii) the written opinion of counsel to Borrower and
Guarantor issued on the Closing Date and satisfactory to Lender in scope and
substance; and
(xxiv) a certificate from an officer of Borrower indicating
that the representations and warranties contained herein are true and correct as
of the Closing Date.
(c) Borrower has paid closing fees to Lender including Lender's
reasonable legal fees incurred by Lender for the negotiation and preparation of
the Loan Documents.
(d) Neither an Event of Default nor an Unmatured Default has
occurred and is continuing.
(e) None of Borrower, Seller nor Guarantor has suffered a material
adverse change in its business, operations or financial condition from that
reflected in the Financial Statements of Borrower and Guarantor or Seller
delivered to Lender or otherwise.
(f) Lender has received such additional supporting documents,
certificates and assurances as Lender reasonably requests which are satisfactory
to Lender in form and substance.
Section 3
SECURITY INTEREST
Section 3.1. Grant of Security Interest. In order to secure prompt
payment and performance of the Obligations, Borrower hereby grants to Lender a
continuing first-priority pledge and security interest in the following property
of Borrower (the "Collateral"), whether now owned or existing or hereafter
acquired or arising and regardless of where located, subject only to Permitted
Liens. This security interest in the Collateral attaches to all Collateral
without further action on the part of Lender or Borrower. Borrower shall keep
the Collateral at 000 Xxxx Xxxxxx Xxxx Xxxx, Xxxxxxxxx, Xxxxx 00000.
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The Collateral consists of the following, together with such third-
party consents, lien waivers and estoppel certificates as Lender reasonably
requires:
(a) all of Borrower's equipment and machinery listed on Schedule 3.1
and all machine tools, motors, tools, parts, attachments, accessories,
accessions, replacements, upgrades, substitutions, additions and improvements
related thereto, wherever located, and the Proceeds of any of the foregoing,
including cash and non-cash Proceeds;
(b) all of Borrower's right, title and interest in and to the
Accounts, whether presently existing or hereafter arising, and all contract
rights, instruments, notes, securities, drafts, documents, chattel paper and all
other forms of obligations owing to Borrower or Seller arising out of the sale
or lease of goods or the rendition of services, whether or not earned by
performance, and any and all credit insurance, guarantees and other security
therefor, as well as all merchandise returned to or reclaimed by Borrower or
Seller and all of Borrower's Books relating to any of the foregoing, and the
Proceeds of any of the foregoing, including the pledge to it of the Borrower's
interest in the Accounts, cash and non-cash Proceeds. Notwithstanding the
foregoing or any other provision hereof, Lender's Lien on and security interest
in the Collateral described in this clause (b) will be released if the Other
Loan Agreement with DVIBC has been terminated and the conditions contained in
Section 7.17 have been satisfied;
(c) all of Borrower's presently existing and hereafter acquired
general intangibles (including, Borrower's rights and interest under the
Management Services Agreement, and any and all choices in action, goodwill,
patents, trade names, trademarks, blueprints, drawings, purchase orders,
computer programs, computer discs, computer tapes, literature, reports,
catalogues, deposit accounts and tax refunds) other than goods and accounts, as
well as all of Borrower's Books relating to any of the foregoing, and the
Proceeds of any of the foregoing, including cash and non-cash Proceeds; and
(d) all of Borrower's presently existing and hereafter acquired
inventory including, without limitation, goods held for sale or lease or to be
furnished under a contract of service, wherever located, and any documents of
title representing any of the above, and the Proceeds of any of the foregoing,
including cash and non-cash Proceeds.
Section 4
SPECIFIC REPRESENTATIONS
Section 4.1. Name of Borrower. The exact name of Borrower is MHOA
Texas I, L.L.C. Borrower was formed under the laws of the State of Texas. The
following are all previous legal names of Borrower: None. Borrower uses the
following trade names: None. The following are all other trade names used by
Borrower in the past: None.
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Section 4.2. Mergers and Consolidations. Other than the merger with
MHOA Texas I, Inc., a Texas corporation, no entity has merged into Borrower or
been consolidated with Borrower.
Section 4.3. Purchase of Assets. Other than pursuant to the Asset
Purchase Agreement, no entity has sold substantially all of its assets to
Borrower or sold assets to Borrower outside the ordinary course of such seller's
business at any time in the past.
Section 4.4. Change of Name or Identity. Borrower shall not change
its name, business structure, or identity or use any new trade name without
prior notification of Lender.
Section 4.5. Corporate Structure. Guarantor, Seller and the
Metroplex Providers hold one hundred percent (100%) of the member interests in
Borrower. Such member interests are the sole authorized and outstanding security
interests in Borrower.
Section 5
PROVISIONS CONCERNING COLLATERAL
Section 5.1. Title. Borrower has good and marketable title to the
Collateral, and the Liens granted to Lender pursuant to this Agreement are fully
perfected first-priority Liens, in and to the Collateral with priority over the
rights of every person in the Collateral, free, clear and unencumbered by any
Liens in favor of any person other than Lender except for Permitted Liens.
Section 5.2. No Warranties. This Agreement is solely a financing
agreement. Borrower acknowledges that with respect to the appropriate
Collateral: the Collateral has or will have been selected and acquired solely
by Borrower for Borrower's purposes; Lender is not the manufacturer, dealer,
vendor or supplier of the Collateral; the Collateral is of a size, design,
capacity, description and manufacturer selected by Borrower; Borrower is
satisfied that the Collateral is suitable and fit for its purposes; and LENDER
HAS NOT MADE AND DOES NOT MAKE ANY WARRANTY OR REPRESENTATION WHATSOEVER, EITHER
EXPRESS OR IMPLIED, AS TO THE FITNESS, CONDITION, MERCHANTABILITY, DESIGN OR
OPERATION OF THE COLLATERAL, ITS FITNESS FOR ANY PARTICULAR PURPOSE, THE VALUE
OF THE COLLATERAL, THE QUALITY OR CAPACITY OF THE MATERIALS IN THE COLLATERAL OR
WORKMANSHIP IN THE COLLATERAL, NOR ANY OTHER REPRESENTATION OR WARRANTY
WHATSOEVER.
Section 5.3. Further Assurances. Borrower shall execute and deliver
to Lender, concurrent with Borrower's execution of this Agreement and at any
time or times hereafter at the request of Lender, all financing statements,
continuation financing statements, security agreements, chattel mortgages,
assignments, endorsements of certificates of title, applications for titles,
affidavits, reports, notices, schedules of accounts, letters of authority and
all other documents Lender may reasonably request, in form satisfactory to
Lender, to perfect and maintain perfected Lender's Liens
11
in the Collateral and in order to consummate fully all of the transactions
contemplated under the Loan Documents. Borrower hereby irrevocably makes,
constitutes, and appoints Lender (and any of Lender's officers, employees or
agents designated by Lender) as Borrower's true and lawful attorney with power
to sign the name of Borrower on any of the above-described documents or on any
other similar documents that need to be executed, recorded, or filed in order to
perfect or continue perfected Lender's Liens in the Collateral. The appointment
of Lender as Borrower's attorney is irrevocable as long as any Obligations are
outstanding. Any person dealing with Lender is entitled to rely conclusively on
any written or oral statement of Lender that this power of attorney is in
effect.
Section 5.4. Intentionally Deleted.
Section 5.5. Lender's Duty of Care. Lender has no duty of care with
respect to the Collateral except that Lender shall exercise reasonable care with
respect to the Collateral in Lender's custody. Lender will be deemed to have
exercised reasonable care if such property is accorded treatment substantially
equal to that which Lender accords its own property or if Lender takes such
action with respect to the Collateral as the Borrower requests or agrees to in
writing, provided that no failure to comply with any such request nor any
omission to do any such act requested by the Borrower may be deemed a failure to
exercise reasonable care. Lender's failure to take steps to preserve rights
against any parties or property may not be deemed to be failure to exercise
reasonable care with respect to the Collateral in Lender's custody. All risk,
loss, damage or destruction of the Collateral is borne by Borrower except to the
extent Lender breaches the standard of care set forth in this Section 5.5.
Section 5.6. Borrower's Contracts. Schedule 5.6 attached hereto is a
true and complete list of all material contracts and agreements to which
Borrower is a party or will become a party pursuant to the assumption of
Seller's rights and obligations under the terms of the Asset Purchase Agreement.
Borrower remains liable to perform its Obligations under any contracts and
agreements included in the Collateral to the same extent as though this
Agreement had not been entered into and Lender does not have any obligation or
liability under such contracts and agreements by reason of this Agreement or
otherwise.
Section 5.7. Reinstatement of Liens. If, at any time after payment
in full by Borrower of all Obligations and termination of Lender's Liens, any
payments on Obligations previously made by Borrower or any other Person must be
disgorged by Lender for any reason whatsoever (including, the insolvency,
bankruptcy, or reorganization of Borrower or such other Person), this Agreement
and then Lender's Liens granted hereunder are reinstated as to all disgorged
payments as though such payments had not been made, and Borrower shall sign and
deliver to Lender all documents and things necessary to perfect all terminated
Liens.
Section 5.8. Lender Expenses. If Borrower fails to pay any moneys
(whether taxes, assessments, insurance premiums or otherwise) due to third
persons or entities, fails to make any deposits or furnish any required proof of
payment or deposit or fails to discharge any Lien not permitted hereby, all as
required under the terms of this Agreement, then Lender may, to the extent that
it determines that such failure by Borrower could have a material adverse effect
on Lender's
12
interest in the Collateral, in its discretion and without prior notice to
Borrower, make payment of the same or any part thereof; provided, however,
Lender shall make a reasonable attempt to make a prior notification of Borrower
if a delay in making such payment would not have a material advise impact on
Lender's interest in the Collateral. Any amounts paid or deposited by Lender
constitute Lender Expenses, become part of the Obligations, bear interest at the
rate of eighteen percent (18%) per annum, and are secured by the Collateral. Any
payments made by Lender do not constitute (a) an agreement by Lender to make
similar payments in the future or (b) a waiver by Lender of any Event of Default
under this Agreement. Lender need not inquire as to, or contest the validity of,
any such expense, tax, security interest, encumbrance or Lien, and the receipt
of the usual official notice for the payment of moneys to a governmental entity
is conclusive evidence that the same was validly due and owing.
Borrower shall immediately and without demand reimburse Lender for all
sums expended by Lender that constitute Lender Expenses, and Borrower hereby
authorizes and approves all advances and payments by Lender for items
constituting Lender Expenses.
Section 5.9. Inspection of Collateral and Records. During usual
business hours, Lender may inspect and examine the Collateral and check and test
the same as to quality, quantity, value and condition and Borrower shall
reimburse Lender for its reasonable costs and expenses in so doing. Lender also
has the right at any time or times hereafter, during usual business hours to
inspect and verify Borrower's Books in order to verify the amount or condition
of, or any other matter relating to, the Collateral and Borrower's financial
condition and to copy and make extracts therefrom. Borrower waives the right to
assert a confidential relationship, if any, it may have with any accounting firm
or service bureau in connection with any information requested by Lender
pursuant to this Agreement. Lender may directly contact any such accounting
firm or service bureau in order to obtain such information.
Section 5.10. Waivers. Except as specifically provided for herein,
Borrower waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, documents, instruments, chattel paper, and
guaranties at any time held by Lender on which Borrower may in any way be
liable.
Section 6
REPRESENTATIONS AND WARRANTIES
As of the date hereof Guarantor and Borrower each hereby warrants and
represents to Lender the following:
Section 6.1. Corporate Status. Borrower is a limited liability
company validly existing and in good standing under the laws of the State of
Texas; Guarantor is a corporation validly existing and in good standing under
the laws of the State of Delaware; and each of such entities is qualified and
licensed to do business and is in good standing in any state in which the
conduct of its
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business or its ownership of property requires that it be so qualified or
licensed, and has the power and authority (corporate and otherwise) to execute
and carry out the terms of the Loan Documents to which it is a party, to own its
assets and to carry on its business as currently conducted.
Section 6.2. Authorization. The execution, delivery, and performance
by Borrower and Guarantor of this Agreement and each Loan Document have been
duly authorized by all necessary company action. Borrower and Guarantor have
duly executed and delivered this Agreement and each Loan Document to which they
are a party, and each such Loan Document constitutes a valid and binding
obligation of Borrower and Guarantor.
Section 6.3. No Breach. The execution, delivery and performance by
Borrower and Guarantor of this Agreement and each Loan Document to which they
are a party (a) will not contravene any law or any governmental rule or order
binding on Collateral; (b) will not violate any provision of the articles of
organization or regulations of Borrower or the articles of incorporation or
bylaws of Guarantor; (c) will not violate any agreement or instrument by which
Borrower or Guarantor or their assets, is bound; (d) do not require any notice
to consent by any Governmental Authority; and (e) will not result in the
creation of a Lien on any assets of Borrower except the Lien to Lender granted
herein.
Section 6.4. Taxes. All assessments and taxes, whether real, personal
or otherwise, due or payable by or imposed, levied or assessed against Borrower,
or its property have been paid in full before delinquency or before the
expiration of any extension period; and Borrower has made due and timely payment
or deposit of all federal, state, and local taxes, assessments, or contributions
required of it by law, except only for items that Borrower is currently
contesting diligently and in good faith and that have been fully disclosed in
writing to Lender.
Section 6.5. Deferred Compensation Plans. Borrower and each ERISA
Affiliate have made all required contributions to all deferred compensation
plans to which such person is required to contribute, and neither Borrower nor
any ERISA Affiliate has any liability for any unfunded benefits of any single-
employer or multi-employer plans. Neither Borrower nor any ERISA Affiliate is
or at any time has been a sponsor of, provided, or maintained for any employees
any defined benefit plan.
Section 6.6. Litigation and Proceedings. Except as set forth on
Schedule 6.6 attached hereto, there are no outstanding judgments against
Borrower or its assets and there are no actions or proceedings pending by or
against Borrower before any court or administrative agency. Borrower has no
knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or prosecutions
involving Borrower, except for ongoing collection matters in which Borrower is
the plaintiff and except as set forth in Schedule 6.6 hereto.
Section 6.7. Business. Borrower has all franchises, authorizations,
patents, trademarks, copyrights and other rights necessary to conduct its
business. They are all in full force and effect and are not in known conflict
with the rights of others. Borrower is not a party to or
14
subject to any agreement or restriction that is so unusual or burdensome that it
might have a material adverse effect on Borrower's business, properties or
prospects.
Section 6.8. Laws and Agreements. Borrower is in compliance with all
material contracts and agreements applicable to it, including obligations to
contribute to any employee benefit plan or pension plan regulated by ERISA.
Borrower is in material compliance with all laws applicable to it.
Section 6.9. Financial Condition. All financial statements and
information relating to Borrower, Guarantor, Seller or their assets that have
been or may hereafter be delivered by Borrower to Lender are accurate and
complete in all material respects and have been prepared in accordance with
generally accepted accounting principles consistently applied. Borrower and
Guarantor have no material obligations or liabilities of any kind not disclosed
in that financial information, and there has been no material adverse change in
the financial condition of Borrower, Guarantor or Seller since the date of the
most recent financial statements submitted to Lender.
Section 6.10. Environmental Laws.
(a) Borrower has obtained all permits, licenses and other
authorizations that are required under Environmental Laws and Borrower is in
compliance in all material respects with all terms and conditions of the
required permits, licenses and authorizations, and are also in compliance in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in the Environmental Laws.
(b) Borrower is not aware of, and has not received notice of, any
past, present or future events, conditions, circumstances, activities,
practices, incidents, actions or plans that may interfere with or prevent
compliance or continued compliance in any material respect with Environmental
Laws, or may give rise to any material common law or legal liability, or
otherwise form the basis of any material claim, action, demand, suit,
proceeding, hearing, study or investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling or the emission, discharge, release or threatened release
into the environment, of any pollutant, contaminant, chemical, or industrial,
toxic or hazardous substance or waste.
(c) There is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice or demand letter, notice of violation,
investigation, or proceeding pending or to the best knowledge of Borrower and
Guarantor threatened against Borrower, relating in any way to Environmental
Laws.
Section 6.11. Insurance. Schedule 6.11 sets forth a complete and
accurate list of all policies of fire, liability, product liability, workers'
compensation, health, business interruption and other forms of insurance
currently in effect with respect to Borrower's business, true copies of which
have heretofore been delivered to Lender. All such policies are valid,
outstanding and enforceable policies and, to the best knowledge of Borrower,
each will remain in full force and effect at least through the respective dates
set forth on Schedule 6.11.
15
Section 6.12. Ownership of Property. Borrower has good and marketable
title to all of its properties and assets, free and clear of all liens, security
interests and encumbrances, except Permitted Liens. Borrower has the exclusive
right to use all such assets.
Section 6.13. Health Care Laws.
(a) Borrower has obtained all permits, licenses and other
authorizations that are required under Health Care Laws applicable to Borrower
and is in compliance in all material respects with all terms and conditions of
the required permits, licenses and authorizations, and are also in compliance in
all material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in such Health Care Laws.
(b) Borrower is not aware of, and has not received notice of, any
past, present or future events, conditions, circumstances, activities,
practices, incidents, actions or plans that may interfere with or prevent
compliance or continued compliance in any material respect with Health Care
Laws.
(c) There is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice or demand letter, notice of violation,
investigation or proceeding pending or to the best knowledge of Borrower and
Guarantor threatened against Borrower, relating in any way to Health Care Laws.
Section 6.14. Cumulative Representations. The warranties,
representations and agreements set forth herein are cumulative and in addition
to any and all other warranties, representations and agreements that Borrower
gives, or cause to be given, to Lender, either now or hereafter.
Section 6.15. Full Disclosure. No representation, warranty or
statement by Borrower or Guarantor contained in this Agreement, any Schedule or
any document, instrument or certificate furnished by or on behalf of any of them
pursuant to this Agreement contains any untrue, incorrect, incomplete or
misleading statement of material fact, or knowingly omits to state a material
fact necessary to make the statements contained therein not misleading.
Section 7
COVENANTS
Section 7.1. Encumbrance of Collateral. Borrower shall not create,
incur, assume or permit to exist any Lien on any Collateral now owned or
hereafter acquired by Borrower except for Liens to Lender and Permitted Liens.
16
Section 7.2. Business. Borrower shall engage primarily in business of
physician practice management and related services.
Section 7.3. Condition and Repair. Borrower shall maintain in good
repair and working order all material properties used in its business and from
time to time shall make all appropriate repairs and replacements thereof.
Section 7.4. Taxes. Borrower shall pay all taxes, assessments and
other governmental charges imposed upon it or any of its assets or in respect of
any of its franchises, business, income or profits before any penalty or
interest accrues thereon, and all claims (including, without limitation, claims
for labor, services, materials and supplies) for sums that have become due and
payable and that by law have or might become a Lien or charge upon any of its
assets, provided that (unless any material item or property would be lost,
forfeited or materially impaired as a result thereof) no such charge or claim
need be paid if it is being contested in good faith by appropriate proceedings
promptly initiated and diligently conducted, if Lender is notified in advance of
such contest, and if Borrower establishes any reserve or other appropriate
provision required by generally accepted accounting principles. Borrower shall
make timely payment or deposit of all FICA payments and withholding taxes
required of it by applicable laws and will, upon request, furnish Lender with
proof satisfactory to Lender indicating that Borrower has made such payments or
deposits.
Section 7.5. Insurance. Borrower shall maintain, with financially
sound and reputable insurers, insurance with respect to its properties and
business against loss or damage of the kinds and in the amounts customarily
insured against by corporations of established reputation engaged in the same or
similar businesses. Each such policy must name Lender as an additional insured
and, where applicable, as loss payee under a lender loss payable endorsement
satisfactory to Lender and must provide for thirty (30) days' written notice to
Lender before such policy is altered or canceled.
Section 7.6. Accounting System. Borrower and Guarantor at all times
hereafter shall maintain a standard and modern system of accounting in
accordance with generally accepted accounting principles consistently applied,
with ledger and account cards or computer tapes, disks, printouts, and records
that contain information pertaining to the Collateral that may from time to time
be requested by Lender. Borrower and Guarantor shall not modify or change their
method of accounting or enter into any agreement hereafter with any third-party
accounting firm or service bureau for the preparation or storage of their
accounting records without the accounting firm's or service bureau's agreeing to
provide to Lender information regarding the Collateral and Borrower's and
Guarantor's financial condition.
Section 7.7. Financial Statements. Borrower shall submit monthly
financial statements, showing a comparison of actual expenditures to budgeted
amounts, with respect to Borrower and Guarantor, to Lender as soon as available,
and in any event within thirty (30) days of the end of each month. Additionally,
Borrower shall submit audited financial statements with respect to Borrower and
Guarantor to Lender as soon as available, and in any event within one hundred
twenty (120) days of the end of each fiscal year. With all financial statements,
Borrower
17
shall deliver a certificate of its chief financial officer attesting that to the
best of such officer's knowledge no Event of Default or Unmatured Default under
this Agreement has occurred and is continuing.
Section 7.8. Further Information. Borrower and Guarantor shall
promptly supply Lender with such other information concerning its affairs as
Lender may reasonably request from time to time hereafter and shall promptly
notify Lender of any material adverse change in Borrower's or Guarantor's
financial condition and any condition or event that constitutes an Event of
Default or Unmatured Default under this Agreement. In addition, Borrower and
Guarantor authorize Lender to contact credit reporting agencies concerning their
credit standing.
Section 7.9. ERISA Covenants. Borrower shall, and shall cause each
ERISA Affiliate to, comply with all applicable provisions of ERISA and all other
laws applicable to any deferred compensation plans with which Borrower or any
ERISA Affiliate is associated, the failure with which to comply would have a
material adverse effect on Borrower's business or financial condition and shall
promptly notify Lender of the occurrence of any event that could result in any
material liability of Borrower to any person to any person whatsoever with
respect to any such plan.
Section 7.10. Environmental Covenants.
(a) Borrower shall comply in all material respects with, and will
obtain all permits required by, all Environmental Laws.
(b) Borrower shall promptly furnish to Lender a copy of any
communication from the U.S. Environmental Protection Agency or any other
Governmental Authority concerning any possible violation of, or the filing of a
lien pursuant to, any Environmental Laws or any occurrence of which Borrower or
a Subsidiary would be required to notify any Governmental Authority with
jurisdiction over Environmental Laws.
Section 7.11. Restrictions on Merger, Consolidation, Sale of Assets,
Issuance of Stock, etc. Unless authorized by Lender, Borrower may not:
(a) merge or consolidate with any Person;
(b) sell, lease or otherwise dispose of its assets having an
aggregate value of greater than $100,000 in any twelve month period in any
transaction or series of related transactions other than (i) sales in the
ordinary course of business, (ii) if being replaced by items of comparable or
greater value, provided, Borrower receives the consent of Lender, which will not
be unreasonably withheld, to any such transfer having a value greater than
$100,000, and (iii) a transfer of assets to Seller pursuant to the terms of the
Assumption Agreement;
(c) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction;
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(d) acquire interests in any other entity in excess of One Hundred
Thousand Dollars ($100,000) in the aggregate in any calendar year in any
business (whether by purchase of assets, purchase of stock, merger or
otherwise);
(e) become subject to any agreement or instrument which by its terms
would restrict Borrower's right or ability to perform any of its obligations to
Lender pursuant to the terms of the Loan Documents;
(f) authorize or issue any additional member interests or equity
interest; or
(g) own, hold, lease or operate with any real property nor any other
property not necessary or useful to the operation of Borrower's business as it
is presently proposed to be conducted.
Section 7.12. Health Care Covenants.
(a) Borrower shall comply in all material respects with, and will
obtain all permits required by, all Health Care Laws applicable to it.
(b) Borrower shall promptly furnish to Lender a copy of any
communication from any governmental authority concerning any possible violation
of any Health Care Laws or any occurrence of which Borrower would be required to
notify any Governmental Authority with jurisdiction over Health Care Laws.
Section 7.13. Distributions. Except as set forth on Schedule 7.13
hereto, Borrower may not make any Distributions nor pay any management fee,
consulting fee or any similar fee without the prior written consent of Lender,
which may be withheld in its sole discretion.
Section 7.14. Capital Expenditures. Borrower may not spend nor incur
obligations, including the total amount of any capital leases, to acquire fixed
or capital assets exceeding One Million Dollars ( $1,000,000) in any fiscal
year.
Section 7.15. Other Debt. (a) Borrower may not incur any direct or
contingent liabilities, including capital leases, in an aggregate amount
exceeding $100,000 in any twelve month period without Lender's prior written
consent, which may not be unreasonably withheld, provided however that Borrower
shall provide Lender written notice of its intention to incur any such liability
and if such financing can be provided by a third party source such as Lender,
offer Lender a right of first offer to provide such financing. In order to
comply with the right of first offer contained in this Section, Borrower shall
provide Lender with the terms of the proposed financing, including interest
rate, term, amount and collateral for the financing. If Lender declines to
provide the financing on such terms, or does not respond to Borrower's notice
within ten Business Days of receipt thereof, then Borrower can seek alternative
financing on such terms, provided Borrower continues to comply with the first
sentence of this Section. Lender's decision not to provide any such financing
does not waive its right of first offer with respect to any subsequent
financing.
19
(b) Nothing contained in this Section 7.15 prohibits Borrower from:
(i) acquiring goods, supplies or merchandise on normal trade credit;
(ii) endorsing negotiable instruments, received in the usual course
of business; or
(iii) obtaining surety bonds in the usual course of business.
Section 7.16 Debt Service Coverage. Borrower shall maintain as of
the last day of each calendar month, beginning September 30, 1997, a debt
service coverage ratio of no less than 1.5:1 for the previous twelve calendar
month period; provided, that such ratio is calculated on an annualized basis
during the first twelve months following the Closing Date.
"Debt service coverage" means (i) the sum of net income plus
depreciation plus amortization plus interest expense, divided by (ii) the sum of
capitalized lease payments plus loan payments plus interest expense.
Section 7.17 Termination of Covenants. If Guarantor (i) successfully
completes a public offering of its common stock and other securities registered
under the Securities Exchange Act of 1933, as amended, which results in
Guarantor receiving net proceeds of Thirty-Five Million Dollars ($35,000,000) or
more, or (ii) at the end of any fiscal quarter Guarantor or its successor, by
merger or otherwise, attains a net worth of Fifty Million Dollars or more, then
the covenants contained in Sections 7.13, 7.14 and 7.15 will no longer apply to
the Loan and thereafter will be considered deleted from the Agreement.
Section 8
EVENTS OF DEFAULT
An Event of Default is deemed to exist if any of the following events
have occurred and is continuing:
(a) Borrower fails to make any payment of principal or interest or any
other payment on the Note or any other Obligation when due and payable, by
acceleration or otherwise, and such failure continues for five (5) business days
after the payment is due;
(b) Borrower fails to observe or perform any material covenant,
condition or agreement to be observed or performed pursuant to the terms hereof
or any Loan Document to which it is a party and such failure is not cured as
soon as reasonably practicable and in any event within thirty (30) days after
written notice thereof by Lender;
20
(c) Borrower fails to keep its assets insured as required herein, or
material uninsured damage to or loss, theft or destruction of the Collateral
occurs and such assets are not repaired or replaced with five (5) days;
(d) A court enters a decree or order for relief in respect of
Borrower in an involuntary case under any applicable bankruptcy, insolvency, or
other similar law then in effect, or appoints a receiver, liquidator, assignee,
custodian, trustee, or sequestrator (or other similar official) of Borrower or
for any substantial part of its property, or orders the windup or liquidation of
Borrower's affairs; or a petition initiating an involuntary case under any such
bankruptcy, insolvency, or similar law is filed against Borrower and is pending
for sixty (60) days without dismissal;
(e) Borrower commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law then in effect, makes any general
assignment for the benefit of creditors, fails generally to pay its debts as
such debts become due, or takes corporate action in furtherance of any of the
foregoing;
(f) Final judgment for the payment of money on any claim in excess
of $100,000 is rendered against Borrower and remains undischarged for thirty
(30) days during which execution is not effectively stayed;
(g) Guarantor revokes or attempts to revoke its guaranty of any of
the Obligations, or becomes the subject of an insolvency proceeding of the type
described in clauses (d) or (e) above with respect to Borrower or fails to
observe or perform any covenant, condition or agreement to be performed under
any Loan Document to which it is a party;
(h) Any Collateral or any part thereof is sold, agreed to be sold,
conveyed or allocated by operation of law or otherwise, other than as permitted
pursuant to Section 7.11(b);
(i) Borrower defaults under the terms of any Indebtedness or lease
involving total payment obligations of Borrower in excess of $100,000 and such
default is not cured within the time period permitted pursuant to the terms and
conditions of such Indebtedness or lease, or an event occurs that gives any
creditor or lessor the right to accelerate the maturity of any such indebtedness
or lease payments;
(j) Demand is made for payment of any Indebtedness in excess of
$100,000 that was not originally payable upon demand when incurred but the terms
of which were later changed to provide for payment upon demand;
(k) Borrower is enjoined, restrained or in any way prevented by
court order from continuing to conduct all or any material part of its business
affairs and such court order is not revoked or overturned within five (5) days;
(l) A judgment or other claim in excess of $100,000 becomes a Lien
upon any or all of Borrower's assets, other than a Permitted Lien;
21
(m) A notice of Lien, levy or assessment in excess of $100,000 is
filed of record with respect to any or all of Borrower's assets by any
Governmental Authority or any tax or debt owing at any time hereafter to any one
or more of such entities becomes a Lien upon any or all of Borrower's assets and
the same is not paid on the payment date thereof, except to the extent such tax
or debt is being contested by Borrower as permitted in Section 6.4;
(n) There is a material impairment of the value of the Collateral
which is not insured or priority of Lender's Liens on the Collateral;
(o) Any of Borrower's assets in excess of $100,000 or any Collateral
are seized, subjected to a distress warrant, levied upon or come into the
possession of any judicial officer;
(p) Any representation or warranty made in writing to Lender by any
officer of Borrower in connection with the transaction contemplated in this
Agreement is materially incorrect when made;
(q) Guarantor is in default under the Guaranty or this Loan
Agreement or an Event of Default occurs under the Other Loan Documents; or
(r) If the aggregate dollar value of all judgments, defaults,
demands, claims and notices of Liens under clauses (f), (i), (j), (l), (m) and
(o) hereof exceeds $250,000.
Section 9
REMEDIES
Section 9.1. Specific Remedies. Upon the occurrence of any Event of
Default:
(a) Lender may declare all Obligations to be due and payable
immediately, whereupon they immediately become due and payable without
presentment, demand, protest, or notice of any kind, all of which are hereby
expressly waived by Borrower.
(b) Lender may set off against the Obligations all Collateral,
balances, credits, deposits, accounts, or moneys of Borrower then or thereafter
held with Lender, including amounts represented by certificates of deposit.
(c) Lender may enter any premises of Borrower, with or without
judicial process, and take possession of the Collateral; provided however, that
Lender may only exercise such remedy if it may do so without a breach of the
peace. Lender may remove the Collateral and may remove or copy all records
pertaining thereto, or Lender may remain on such premises and use the premises
for the purpose of collecting, preparing and disposing of the Collateral,
without any liability for rent or occupancy charges. Borrower shall, upon
request of Lender, assemble the Collateral and any records pertaining thereto
and make them available at a place designated by Lender that is reasonably
convenient to both parties.
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(d) Lender may dispose of the Collateral in its then-existing
condition or, at its election, may take such measures as it deems necessary or
advisable to improve, process, finish, operation, demonstrate and prepare for
sale the Collateral, and may store, ship, reclaim, recover, protect, advertise
for sale or lease, and insure the Collateral. Lender may use and operate
equipment of Borrower in order to process or finish inventory included in the
Collateral. If any Collateral consists of documents, Lender may proceed either
as to the documents or as to the goods represented thereby.
(e) Lender may pay, purchase, contest, or compromise any
encumbrance, charge or Lien that, in the opinion of Lender, appears to be prior
or superior to its Lien and pay all reasonable expenses incurred in connection
therewith.
(f) Lender may (i) endorse Borrower's name on all checks, notes,
drafts, money orders or other forms of payment of or security for Accounts or
other Collateral; (ii) sign Borrower's name on drafts drawn on Account Debtors
or issuers of letters of credit; and (iii) notify the postal authorities in
Borrower's name to change the address for delivery of Borrower's mail to an
address designated by Lender, receive and open all mail addressed to Borrower,
copy all mail, return all mail relating to Collateral, and hold all other mail
available for pickup by Borrower.
(g) Lender may sell the Collateral at public or private sale and is
not required to repossess Collateral before selling it. Any requirement of
reasonable notice of any disposition of the Collateral is satisfied if such
notice is sent to Borrower, ten (10) days prior to such disposition by any of
the methods provided in Section 11.5 hereof. Borrower will be credited with the
net proceeds of such sale only when they are actually received by Lender, and
Borrower continues to be liable for any deficiency remaining after the
Collateral is sold or collected.
(h) If the sale is to be a public sale, Lender shall also give
notice of the time and place by publishing a notice one time at least five (5)
days before the date of the sale in a newspaper of general circulation in the
county in which the sale is to be held.
(i) To the maximum extent permitted by applicable law, Lender may be
the purchaser of any or all of the Collateral at any public sale and is
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Collateral sold at any public sale,
to use and apply all or any part of the Obligations as a credit on account of
the purchase price of any Collateral payable by Lender at such sale.
Section 9.2. Power of Attorney. Borrower hereby appoints Lender (and
any of Lender's officers, employees, or agents designated by Lender) as
Borrower's attorney, with power after the occurrence of an Event of Default:
(a) to endorse Borrower's name on any checks, notes, acceptances, money orders,
drafts or other forms of payment or security that may come into Lender's
possession; (b) to sign Borrower's name on drafts against Account Debtors, on
schedules and assignments of Accounts, on verifications of Accounts, and on
notices to Account Debtors; (c) to notify the post office authorities to change
the address for delivery of Borrower's mail to an address designated by Lender,
to receive and open all mail addressed to Borrower and to retain all mail
23
relating to the Collateral and forward all other mail to Borrower; (d) to send
requests for verification of Accounts; (e) to execute UCC Financing Statements;
and (f) to do all things necessary to carry out this Agreement. The appointment
of Lender as Borrower's attorney and each and every one of Lender's rights and
powers, being coupled with an interest, are irrevocable as long as any
Obligations are outstanding. Lender shall not exercise the power granted in
clauses 9.2(a) through 9.2(c) prior to the occurrence of an Event of Default and
shall not exercise the power granted in clause 9.2(d) prior to notification of
Borrower of its intent to do so, but such limitations do not limit the
effectiveness of such power of attorney at any time. Any person dealing with
Lender is entitled to rely conclusively on any written or oral statement of
Lender that this power of attorney is in effect. Lender may also use Borrower's
stationery in connection with exercising its rights and remedies and performing
the Obligations of Borrower.
Section 9.3. Expenses Secured. All expenses, including reasonable
attorney fees, incurred by Lender in the exercise of its rights and remedies
provided in this Agreement, in the Other Loan Documents or by law shall be
payable by Borrower to Lender, are part of the Obligations, and are secured by
the Collateral.
Section 9.4. Equitable Relief. Borrower recognizes that in the event
Borrower fails to perform, observe, or discharge any of its Obligations or
liabilities under this Agreement, in certain cases no remedy of law will provide
adequate relief to Lender, and Lender is entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages.
Section 9.5. Remedies Are Cumulative. No remedy set forth herein is
exclusive of any other available remedy or remedies, but each is cumulative and
in addition to every other right or remedy given under this Agreement or under
any other agreement between Lender and Borrower or Guarantor or now or hereafter
existing at law or in equity or by statute. Lender may pursue its rights and
remedies concurrently or in any sequence, and no exercise of one right or remedy
may be deemed to be an election. No delay by Lender constitutes a waiver,
election, or acquiescence by it. Borrower on its behalf waives any rights to
require Lender to proceed against Guarantor or any other party; or proceed
against or exhaust any security held from Guarantor or any other party. Lender
may at any time and from time to time, without notice to, or consent of,
Borrower, and without affecting or impairing the obligation of Borrower
hereunder do any of the following: (i) renew or extend any obligations of
Guarantor, or of any other party at any time directly or contingently liable for
payment of any of the obligations of Guarantor; (ii) accept partial payments of
the obligations of Guarantor; (iii) settle, release (by operation of law or
otherwise), compound, compromise, collect or liquidate any of the obligations of
Guarantor and the security therefor in any manner; or (iv) consent to the
transfer or sale of any security or bid and purchase at any sale of any security
of Guarantor. The validity of this Agreement and the Obligations of Borrower
are not terminated, affected or impaired by reason of the waiving, delaying,
exercising or non-exercising, of any of Lender's rights against Guarantor or as
a result of the substitution, release, repossession, sale, disposition or
destruction of any Collateral securing any obligations of Guarantor. Borrower
is not released or discharged, either in whole or in part, by Lender's failure
or delay to perfect or continue the perfection of any security interest in any
Collateral which secures the obligations of Guarantor or to protect the property
covered by such security interest.
24
Section 10
INDEMNITY
Section 10.1. General Indemnity. BORROWER SHALL UNCONDITIONALLY
PROTECT, INDEMNIFY, DEFEND AND HOLD HARMLESS LENDER AND ITS DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS FROM AND AGAINST ANY LOSS, COST, LIABILITY (INCLUDING
NEGLIGENCE, TORT AND STRICT LIABILITY), EXPENSE, DAMAGE, SUITS, DEMANDS OR
CLAIMS (INCLUDING FEES AND DISBURSEMENTS OF COUNSEL) ON ACCOUNT OF ANY SUIT OR
PROCEEDING BEFORE ANY GOVERNMENTAL AUTHORITY WHICH ARISES FROM THE TRANSACTIONS
CONTEMPLATED IN THIS AGREEMENT OR OTHERWISE ARISING IN CONNECTION WITH OR
RELATING TO THE LOAN AND ANY SECURITY THEREFOR, UNLESS SUCH SUIT, CLAIM OR
DAMAGES ARE CAUSED BY THE GROSS NEGLIGENCE OR INTENTIONAL MALFEASANCE OF LENDER
OR ITS DIRECTORS, OFFICER, AGENTS OR EMPLOYEES. Upon receiving knowledge of any
suit, claim or demand asserted by a third-party that Lender believes is covered
by this indemnity, Lender shall give Borrower timely notice of the matter and an
opportunity to defend it, at Borrower's sole cost and expense, with legal
counsel acceptable to Lender. Lender may, at its option, also require Borrower
to so defend the matter. This obligation on the part of Borrower survives the
termination of this Agreement and the repayment of the Note.
Section 10.2. Specific Environmental Indemnity. Borrower shall
unconditionally protect, indemnify, defend and hold harmless Lender, its
directors, officers, employees and agents against any loss, cost, liability
(including negligence, tort and strict liability), expense, damage, suits,
demands or claim (including fees and disbursements of counsel) arising under any
Environmental Laws having jurisdiction over the property or assets of Borrower
or any portion thereof or its use.
Section 11
MISCELLANEOUS
Section 11.1. Delay and Waiver. No delay or omission to exercise any
right impairs any such right or be a waiver thereof, but any such right may be
exercised from time to time and as often as may be deemed expedient. A waiver
on one occasion is limited to that particular occasion.
Section 11.2. Complete Agreement. This Agreement and the Schedules
are the complete agreement of the parties hereto and supersede all previous
understandings relating to the subject matter hereof. This Agreement may be
amended only by an instrument in writing that explicitly states that it amends
this Agreement and is signed by the party against whom enforcement of the
amendment is sought. This Agreement may be executed in counterparts, each of
which will be an original and all of which will constitute a single agreement.
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Section 11.3. Severability; Headings. If any part of this Agreement
or the application thereof to any person or circumstance is held invalid, the
remainder of this Agreement is unaffected thereby. The section headings herein
are included for convenience only and may not be deemed to be a part of this
Agreement.
Section 11.4. Binding Effect. This Agreement is binding upon and
inures to the benefit of the respective legal representatives, successors and
assigns of the parties hereto; provided however, Borrower may not assign any of
its rights or delegate any of its Obligations hereunder. Lender (and any
subsequent assignee) may transfer and assign this Agreement and deliver the
Collateral to the assignee, who thereupon has all of the rights of Lender; and
Lender (or such subsequent assignee who in turn assigns as aforesaid) is then
relieved and discharged of any responsibility or liability with respect to this
Agreement and said Collateral.
Section 11.5. Notices. Any notices under or pursuant to this
Agreement are deemed duly sent when delivered in hand or when mailed by
registered or certified mail, return receipt requested, or when delivered by
courier or when transmitted by telex, facsimile, or similar electronic medium to
the following addresses:
To Borrower: MHOA Texas I, L.L.C.
000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To Guarantor: Physician Health Corporation
000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To Lender: DVI Financial Services Inc.
000 Xxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. X'Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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Copies to: Xxxxxxx X. Xxxx, Esq.
Xxxxxx, White & Xxxxxx
000 Xxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any party may change such address by sending notice of the change to
the other parties; such change of address is effective only upon actual receipt
of the notice by the other parties.
Section 11.6. Governing Law. ALL ACTS AND TRANSACTIONS HEREUNDER AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO ARE GOVERNED, CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF CALIFORNIA.
Section 11.7. Jurisdiction. The state and federal courts in Orange
County, California or any other court in which Lender initiates proceedings have
jurisdiction over all matters arising out of this Agreement and that service of
process in any such proceeding are effective if mailed to Borrower at its
address described in the Notices section of this Agreement. Borrower waives any
right it may have to assert the defense of forum non conveniens or to object to
such venue and hereby consents to any court-ordered relief.
Section 11.8. Waiver of Trial by Jury. LENDER, GUARANTOR AND BORROWER
HEREBY WAIVE THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS
AGREEMENT OR ANY OF THE SECURITY DOCUMENTS OR THE CONDUCT OF THE RELATIONSHIP
BETWEEN LENDER, GUARANTOR AND BORROWER.
27
IN WITNESS WHEREOF, Borrower, Guarantor and Lender have executed this
Agreement by their duly authorized officers as of the date first above written.
BORROWER: LENDER:
MHOA TEXAS I, L.L.C. DVI FINANCIAL SERVICES INC.
By: /s/ Xxxxx X. Xxxxxx
-------------------------------
Xxxxx X. Xxxxxx By: /s/ Xxxxxxx Fear
President --------------------------------
Xxxxxxx Fear
Vice President
GUARANTOR:
PHYSICIAN HEALTH CORPORATION
By: /s/ Xxxxx X. Xxxxxx
-------------------------------
Xxxxx X. Xxxxxx
President
Schedule 1.1
Permitted Liens
1. Those liens listed on Schedule 3.16 of that certain Asset Purchase and
Contribution Agreement dated as of June 16, 1997, executed by and between
Borrower, Seller and certain other parties (the "Purchase Agreement"), and all
other Permitted Encumbrances, as defined therein.
2. Lien and security interest created in favor of DVIBC on the Collateral
described in Section 3.1(b) pursuant to a Loan and Security Agreement dated as
of the date of this Agreement, which Lien and security interest are intended by
all parties to be prior to the Liens and security interests of this Agreement.
Schedule 3.1
LOAN NO. 2
----------
1. Varian Ximatron 5 Simulator
2. Picker Priam 2000 XP nuclear camera
3. Picker Voxel VQ system & other medical equipment
And all equipment and assets listed as Personal Property in Schedule 3.12 of the
Purchase Agreement.
Schedule 5.6
Material Contracts
1. The Management Agreement.
2. The Benefit Agreements, Employee/Contract Labor Agreements, Real Property
Leases (for business space only) and Services Contracts listed on Schedule 3.20
of the Purchase Agreement and assumed by Borrower thereunder.
Schedule 6.6
Litigation and Proceedings
None
Schedule 6.11
Insurance
Those insurance policies described in the certificates attached hereto.
[CERTIFICATE APPEARS HERE]
[CERTIFICATE APPEARS HERE]
Schedule 7.13
Permitted Distributions
Borrower is permitted to make Distributions to Guarantor provided after
such payment Borrower continues to satisfy the debt service coverage ratio set
forth in Section 7.16.
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