Exhibit 10.2

 

LOAN AGREEMENT

 

Wachovia Bank, National Association

123 South Broad Street

Philadelphia, Pennsylvania 19109

(Hereinafter referred to as the “Bank”)

 

Covalent Group, Inc.

Glenhardie Corporate Center

1275 Drummers Lane, Suite 100

Wayne, Pennsylvania 19087

(Individually and collectively “Borrower”)

 

This Loan Agreement (“Agreement”) is entered into June 17, 2003, by and between
Bank and Borrower.

 

This Agreement amends and restates in its entirety that certain Loan Agreement
dated August 1, 2002 and applies to the loan or loans (individually and
collectively, the “Loan”) evidenced by one or more promissory notes dated June
17, 2003 or other notes subject hereto, as modified from time to time (whether
one or more, the “Note”) and all Loan Documents. The terms “Loan Documents” and
“Obligations,” as used in this Agreement, are defined in the Note.

 

Relying upon the covenants, agreements, representations and warranties contained
in this Agreement, Bank is willing to extend credit to Borrower upon the terms
and subject to the conditions set forth herein, and Bank and Borrower agree as
follows:

 

AVAILABILITY. With respect to the line of credit Promissory Note in the amount
of $2,500,00.00, dated June 17, 2003, notwithstanding anything to the contrary
contained herein, the aggregate outstanding principal balance of Advances (as
defined in the Note) (the “Total Outstandings”) at any one time shall not exceed
the lesser of $2,500,000.00 or the Borrowing Base (as hereinafter defined). In
the event that the Total Outstandings at any time exceeds the Borrowing Base,
Borrower shall pay to Bank the amount of such excess immediately upon receipt by
Borrower of written notice that the Borrowing Base has been exceeded.

 

REPRESENTATIONS. Borrower represents that from the date of this Agreement and
until final payment in full of the Obligations: Accurate Information. All
information now and hereafter furnished to Bank is and will be true, correct and
complete. Any such information relating to Borrower’s financial condition will
accurately reflect Borrower’s financial condition as of the date(s) thereof,
(including all contingent liabilities of every type), and Borrower further
represents that its financial condition has not changed materially or adversely
since the date(s) of such documents. Authorization; Non-Contravention. The
execution, delivery and performance by Borrower and any guarantor, as
applicable, of this Agreement and other Loan Documents to which it is a party
are within its power, have been duly authorized as may be required and, if
necessary, by making appropriate filings with any governmental agency or unit
and are the legal, binding, valid and enforceable obligations of Borrower and
any guarantors; and do not (i) contravene, or constitute (with or without the
giving of notice or lapse of time or both) a violation of any provision of
applicable law, a violation of the organizational documents of Borrower or any
guarantor, or a default under any agreement, judgment, injunction, order, decree
or other instrument binding upon or affecting Borrower or any guarantor, (ii)
result in the creation or imposition of any lien (other than the lien(s) created
by the Loan Documents) on any of Borrower’s or any guarantor’s assets, or (iii)
give cause for the acceleration of any obligations of Borrower or any guarantor
to any other creditor. Asset Ownership. Borrower has good and marketable title
to all of the properties and assets reflected on the balance sheets and
financial statements supplied Bank by Borrower, and all such properties and
assets are free and clear of mortgages, security deeds, pledges, liens, charges,
and all other encumbrances, except as otherwise disclosed to Bank by Borrower in
writing and approved by Bank (“Permitted Liens”). To Borrower’s knowledge, no
default has occurred under any Permitted Liens and no claims or interests
adverse to Borrower’s present rights in its properties and assets have arisen.
Discharge of Liens and

 

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Taxes. Borrower has duty filed, paid and/or discharged all taxes or other claims
that may become a lien on any of its property or assets, except to the extent
that such items are being appropriately contested in good faith and an adequate
reserve for the payment thereof is being maintained. Sufficiency of Capital.
Borrower is not, and after consummation of this Agreement and after giving
effect to all indebtedness incurred and liens created by Borrower in connection
with the Note and any other Loan Documents, will not be, insolvent within the
meaning of 11 U.S.C. § 101(32). Compliance with laws. Borrower is in compliance
in all respects with all federal, state and local laws, rules and regulations
applicable to its properties, operations, business, and finances, including,
without limitation, any federal or state laws relating to liquor (including 18
U.S.C. § 3617, et seq.) or narcotics (including 21 U.S.C. § 801, et seq.) and/or
any commercial crimes; all applicable federal, state and local laws and
regulations intended to protect the environment; and the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), if applicable. Organization
and Authority. Each corporation, partnership or limited liability company
Borrower and/or guarantor, as applicable, is duly created, validly existing and
in good standing under the laws of the state of its organization, and has all
powers, governmental licenses, authorizations, consents and approvals required
to operate its business as now conducted. Each corporation, partnership or
limited liability company Borrower and/or guarantor, as applicable, is duly
qualified, licensed and in good standing in each jurisdiction where
qualification or licensing is required by the nature of its business or the
character and location of its property, business or customers, and in which the
failure to so qualify or be licensed, as the case may be, in the aggregate,
could have a material adverse effect on the business, financial position,
results of operations, properties or prospects of Borrower or any such
guarantor. No Litigation. There are no pending or threatened suits, claims or
demands against Borrower or any guarantor that have not been disclosed to Bank
by Borrower in writing, and approved by Bank.

 

AFFIRMATIVE COVENANTS. Borrower agrees that from the date hereof and until final
payment in full of the Obligations, unless Bank shall otherwise consent in
writing, Borrower will: Access to Books and Records. Allow Bank, or its agents,
during normal business hours, access to the books, records and such other
documents of Borrower as Bank shall reasonably require, and allow Bank, at
Borrower’s expense, to inspect, audit and examine the same and to make extracts
therefrom and to make copies thereof. Accounts Receivable Aging. Deliver to
Bank, from time to time hereafter but not less than monthly within 15 days of
the end of each such period, a detailed receivables report including totals,
customer names and addresses, a reconciliation statement, and the original date
of each invoice. Business Continuity. Conduct its business in substantially the
same manner and locations as such business is now and has previously been
conducted. Compliance with Other Agreements. Comply with all terms and
conditions contained in this Agreement, and any other Loan Documents, and swap
agreements, if applicable, as defined in the 11 U.S.C. § 101. Estoppel
Certificate. Furnish, within 15 days after request by Bank, a written statement
duly acknowledged of the amount due under the Loan and whether offsets or
defenses exist against the Obligations. Insurance. Maintain adequate insurance
coverage with respect to its properties and business against loss or damage of
the kinds and in the amounts customarily insured against by companies of
established reputation engaged in the same or similar businesses including,
without limitation, commercial general liability insurance, workers compensation
insurance, and business interruption insurance, all acquired in such amounts and
from such companies as Bank may reasonably require. Maintain Properties.
Maintain, preserve and keep its property in good repair, working order and
condition, making all needed replacements, additions and improvements thereto,
to the extent allowed by this Agreement. Non-Default Certificate From Borrower.
Deliver to Bank, with the Financial Statements required below, a certificate
signed by Borrower, in the form attached hereto as exhibit A, if Borrower is an
individual, or by a principal financial officer of Borrower warranting that no
“Default” as specified in the Loan Documents nor any event which, upon the
giving of notice or lapse of time or both, would constitute such a Default, has
occurred and demonstrating Borrower’s compliance with the financial covenants
contained herein. Notice of Default and Other Notices. (a) Notice of Default.
Furnish to Bank immediately upon becoming aware of the existence of any
condition or event which constitutes a Default (as defined in the Loan
Documents) or any event which, upon the giving of notice or lapse of time or
both, may become a Default, written notice specifying the nature and period of
existence thereof and the action which Borrower is taking or proposes to take
with respect thereto. (b) Other Notices. Promptly notify Bank in writing of (i)
any material adverse change in its financial condition or its business; (ii) any
default under any material agreement, contract or other instrument to which it
is a party or by which any of its properties are bound, or any acceleration of
the maturity of any indebtedness owing by Borrower; (iii) any material adverse
claim against or affecting Borrower or any part of its properties; (iv) the
commencement of, and any material

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determination in, any litigation with any third party or any proceeding before
any governmental agency or unit affecting Borrower; and (v) at least 30 days
prior thereto, any change in Borrower’s name or address as shown above, and/or
any change in Borrower’s structure. Other Financial Information. Deliver
promptly such other information regarding the operation, business affairs, and
financial condition of Borrower which Bank may reasonably request. Payment of
Debts. Pay and discharge when due, and before subject to penalty or further
charge, and otherwise satisfy before maturity or delinquency, all obligations,
debts, taxes, and liabilities of whatever nature or amount, except those which
Borrower in good faith disputes. Reports and Proxies. Deliver to Bank, promptly,
a copy of all financial statements, reports, notices, and proxy statements, sent
by Borrower to stockholders, and all regular or periodic reports required to be
filed by Borrower with any governmental agency or authority.

 

NEGATIVE COVENANTS. Borrower agrees that from the date of this Agreement and
until final payment in full of the Obligations, unless Bank shall otherwise
consent in writing, Borrower will not: Change in Fiscal Year. Change its fiscal
year. Change of Control. Make or suffer a change of ownership that effectively
changes control of Borrower from current ownership. Encumbrances. Create,
assume, or permit to exist any mortgage, security deed, deed of trust, pledge,
lien, charge or other encumbrance on any of its assets, whether now owned or
hereafter acquired, other than: (i) security interest required by the Loan
Documents; (ii) liens for taxes contested in good faith; (iii) liens accruing by
law for employee benefits; or (iv) Permitted Liens. Guarantees. Guarantee or
otherwise become responsible for obligations of any other person or persons,
other than endorsement of checks and drafts for collection in the ordinary
course of business. Investments. Purchase any stock, securities, or evidence of
indebtedness of any other person or entity except investments in direct
obligations of the United States Government, certificates of deposit of United
States commercial banks having a tier 1 capital ratio of not less than 6% and
then in an amount not exceeding 10% of the issuing bank’s unimpaired capital and
surplus, and investment accounts managed by Bank or Wachovia Securities, Inc.
Default on Other Contracts or Obligations. Default on any material contract with
or obligation when due to a third party or default in the performance of any
obligation to a third party incurred for money borrowed. Government
Intervention. Permit the assertion or making of any seizure, vesting or
intervention by or under authority of any government entity, as a result of
which the management of Borrower or any guarantor is displaced of its authority
in the conduct of its respective business or its such business is curtailed or
materially impaired. Judgment Entered. Permit the entry of any monetary judgment
or the assessment against, the filing of any tax lien against, or the issuance
of any writ of garnishment or attachment against any property of or debts due.
Retire or Repurchase Capital Stock. Retire or otherwise acquire any of its
capital stock. Notwithstanding the foregoing, Borrower may repurchase its shares
during any fiscal year for an amount not to exceed $500,000.00 in the aggregate
for all shares repurchased so long as no event of default has occurred or would
be caused by the repurchase.

 

ANNUAL FINANCIAL STATEMENTS. Borrower shall deliver to Bank, within 120 days
after the close of each fiscal year, audited financial statements reflecting its
operations during such fiscal year, including, without limitation, a balance
sheet, profit and loss statement and statement of cash flows, with supporting
schedules and in reasonable detail, prepared in conformity with generally
accepted accounting principles, applied on a basis consistent with that of the
preceding year. If audited statements are required, all such statements shall be
examined by an independent certified public accountant acceptable to Bank. The
opinion of such independent certified public accountant shall not be acceptable
to Bank if qualified due to any limitations in scope imposed by Borrower or any
other person or entity. Any other qualification of the opinion by the accountant
shall render the acceptability of the financial statements subject to Bank’s
approval.

 

PERIODIC FINANCIAL STATEMENTS. Borrower shall deliver to Bank, within 45 days
after the end of each fiscal quarter, unaudited management-prepared quarterly
financial statements including, without limitation, a balance sheet, profit and
loss statement and statement of cash flows, with supporting schedules; all in
reasonable detail and prepared in conformity with generally accepted accounting
principles, applied on a basis consistent with that of the preceding year. Such
statements shall be certified as to their correctness by a principal financial
officer of Borrower and in each case, if audited statements are required,
subject to audit and year-end adjustments.

 

FINANCIAL COVENANTS. Borrower agrees to the following provisions from the date
hereof until final

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payment in full of the Obligations, unless Bank shall otherwise consent in
writing, using the financial information for Borrower, its subsidiaries,
affiliates and its holding or parent company, as applicable: Tangible Net Worth.
Borrower shall, at all times, maintain a Tangible Net Worth of not less than
$10,750,000.00. “Tangible Net Worth” shall mean total assets minus Total
Liabilities. For purposes of this computation, the aggregate amount of any
intangible assets of Borrower including, without limitation, goodwill,
franchises, licenses, patents, trademarks, trade names, copyrights, service
marks, and brand names, shall be subtracted from total assets. “Total
Liabilities” shall mean all liabilities of Borrower, including capitalized
leases and all reserves for deferred taxes, debt fully subordinated to Bank on
terms and conditions acceptable to Bank, and other deferred sums appearing on
the liabilities side of a balance sheet and all obligations as lessee under
off-balance sheet synthetic leases of Borrower, all in accordance with generally
accepted accounting principles applied on a consistent basis. Total Liabilities
to Tangible Net Worth Ratio. Borrower shall, at all times, maintain a ratio of
Total Liabilities to Tangible Net Worth of not more than 1.25 to 1.00. “Total
Liabilities” shall mean all liabilities of Borrower, including capitalized
leases and all reserves for deferred taxes, debt fully subordinated to Bank on
terms and conditions acceptable to Bank, and other deferred sums appearing on
the liabilities side of a balance sheet and all obligations as lessee under
off-balance sheet synthetic leases of Borrower, all in accordance with generally
accepted accounting principles applied on a consistent basis. “Tangible Net
Worth” shall mean total assets minus Total Liabilities. For purposes of this
computation, the aggregate amount of any intangible assets of Borrower
including, without limitation, goodwill, franchises, licenses, patents,
trademarks, trade names, copyrights, service marks, and brand names, shall be
subtracted from total assets. Deposit Relationship. Borrower shall maintain its
primary depository account with Bank. Limitation on Debt. Borrower shall not,
directly or indirectly, create, incur, assume or become liable for any
additional indebtedness, whether contingent or direct, excluding obligations to
Bank and debt related to Permitted Liens.

 

BORROWING BASE. “Borrowing Base” means 75.00% of the net amount of Eligible
Accounts, less the amount of any Reserves required by Bank. “Eligible Account”
means an account receivable not more than 90 days from the date of the original
invoice that arises in the ordinary course of Borrower’s business and meets the
following eligibility requirements: (a) the sale of goods or services reflected
in such account is final and such goods and services have been delivered or
provided and accepted by the account debtor and payment for such is owing; (b)
the invoices comprising an account are not subject to any claims, returns or
disputes of any kind; (c) the account debtor is not insolvent; (d) the account
debtor has its principal place of business in the United States; (e) the account
debtor is not an Affiliate of Borrower and is not a supplier to Borrower and the
account is not otherwise exposed to risk of set-off; (f) not more than 30% of
the original invoices owing Borrower by the account debtor are more than 90 days
from the date of the original invoice; and (g) the account is not subject to any
lien prior to the lien of Bank. “Reserves” means such amounts as may be required
by Bank, at any time and from time to time without prior notice to Borrower,
which Bank deems to be adequate to reserve against outstanding letters of
credit, outstanding banker’s acceptances, Borrower’s obligations to Bank or its
affiliates or any guaranties or other contingent debts of Borrower.

 

Required Reports. Borrower shall certify to Bank, at any time Advances exceed
$1,500,000.00 in the aggregate, by the 15th day of each month or as frequently
as requested by Bank, the amount of Eligible Accounts as of the last day of the
prior month, on forms required by Bank, together with all detail and supporting
documents requested by Bank. Bank may at any time and from time to time, during
Borrower’s normal business hours, enter upon any business premises of Borrower
and audit Borrower’s accounts. Bank’s determination of the amount of Eligible
Accounts shall at all times be indisputable and deemed correct. Borrower, at all
times, shall cooperate with Bank by providing Bank information and access to
Borrower’s premises and business records and shall be courteous to Bank’s
agents.

 

CONDITIONS PRECEDENT. The obligations of Bank to make the loan and any advances
pursuant to this Agreement are subject to the following conditions precedent:
Additional Documents. Receipt by Bank of such additional supporting documents as
Bank or its counsel may reasonably request.

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IN WITNESS WHEREOF, Borrower and Bank, on the day and year first written above,
have caused this Agreement to be executed under seal.

 

COVALENT GROUP, INC.     By:   /s/    JORGE A. LEON           (SEAL)  

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Jorge A. Leon,

Chief Financial Officer/EVP

   

 

 

WACHOVIA BANK, NATIONAL ASSOCIATION     By:   /s/    LINDA M. DOUGLAS          
(SEAL)  

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Linda M. Douglas,

Vice President

   

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EXHIBIT A

 

NON-DEFAULT CERTIFICATE

 

In accordance with the terms of the Loan Documents dated June 17, 2003 by and
between Wachovia Bank, National Association and Covalent Group, Inc.
(“Borrower”), I hereby certify that:

 

1.   I am a principal financial officer of Borrower;

 

2.   The enclosed financial statements are prepared in accordance with generally
accepted accounting principles;

 

3.   No Default (as defined in the Loan Documents) or any event which, upon the
giving of notice or lapse of time or both, would constitute such a Default, has
occurred.

 

       

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Name:

Title:

 

Jorge A. Leon

Chief Financial Officer/EVP