Exhibit 10.1

 

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT (this "Agreement") is entered into as of September 1,
2017, by and between CORVEL CORPORATION, a Delaware corporation ("Borrower"),
and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank").

RECITALS

Borrower has requested that Bank extend or continue credit to Borrower as
described below, and Bank has agreed to provide such credit to Borrower on the
terms and conditions contained herein.

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Bank and Borrower hereby agree as follows:

ARTICLE I

CREDIT TERMS

SECTION 1.1.LINE OF CREDIT.

(a)Line of Credit.  Subject to the terms and conditions of this Agreement, Bank
hereby agrees to make advances to Borrower from time to time up to and including
September 1, 2018, not to exceed at any time the aggregate principal amount of
Ten Million Dollars ($10,000,000.00) ("Line of Credit"), the proceeds of which
shall be used to finance Borrower's working capital requirements.  Borrower's
obligation to repay advances under the Line of Credit shall be evidenced by a
promissory note dated as of September 1, 2017, as modified from time to time
("Line of Credit Note"), all terms of which are incorporated herein by this
reference.

(b)Borrowing and Repayment.  Borrower may from time to time during the term of
the Line of Credit borrow, partially or wholly repay its outstanding borrowings,
and reborrow, subject to all of the limitations, terms and conditions contained
herein or in the Line of Credit Note; provided however, that the total
outstanding borrowings under the Line of Credit shall not at any time exceed the
maximum principal amount available thereunder, as set forth herein.

SECTION 1.2.STANDBY LETTER OF CREDIT.

(a)Standby Letter of Credit.  Subject to the terms and conditions of this
Agreement, Bank hereby agrees to issue or cause an affiliate to issue a standby
letter of credit for the account of Borrower and for the benefit of TRAVELERS
INSURANCE for financing in the event of non-payment (the “Standby Letter of
Credit”) in the principal amount of Four Million Five Hundred Forty-Five
Thousand Dollars ($4,545,000.00).  The form and substance of the Standby Letter
of Credit shall be subject to approval by Bank, in its sole discretion.  The
Standby Letter of Credit shall have an expiration date of May 26, 2019, or such
other date agreed to by Bank in its sole discretion, and shall be subject to the
additional terms of the Letter of Credit agreement, application and any related
documents required by Bank in connection with the issuance thereof (the “Letter
of Credit Agreement”).

(b)Repayment of Drafts.  Each drawing paid under the Standby Letter of Credit
shall be repaid by Borrower in accordance with the provisions of the Letter of
Credit Agreement.

SECTION 1.3.INTEREST/FEES.

(a)Interest.  The outstanding principal balance of each credit subject hereto
shall bear interest, and the amount of each drawing paid under the Standby
Letter of Credit shall bear interest from the date such drawing is paid to the
date such amount is fully repaid by Borrower, at the rate of interest set forth
in each promissory note or other instrument or document executed in connection
therewith.

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(b)Computation and Payment.  Interest shall be computed on the basis set forth
in each promissory note or other instrument or document required
hereby.  Interest shall be payable at the times and place set forth in each
promissory note or other instrument or document required hereby.

(c)Unused Commitment Fee.  Borrower shall pay to Bank a fee equal to eighty-five
thousandths percent (0.085%) per annum (computed on the basis of a 360-day year,
actual days elapsed) on the daily unused amount of the Line of Credit, which fee
shall be calculated on a quarterly basis by Bank and shall be due and payable by
Borrower in arrears within ten (10) days after each billing is sent by Bank.

(d)Letter of Credit Fees.  Borrower shall pay to Bank (i) fees upon the issuance
of each Letter of Credit equal to eight hundred fifty thousandths percent
(0.850%) per annum (computed on the basis of a 360-day year, actual days
elapsed) of the face amount thereof, and (ii) fees upon the payment or
negotiation of each drawing under any Letter of Credit and fees upon the
occurrence of any other activity with respect to any Letter of Credit (including
without limitation, the transfer, amendment or cancellation of any Letter of
Credit) determined in accordance with Bank's standard fees and charges then in
effect for such activity.

SECTION 1.4.COLLECTION OF PAYMENTS.  Borrower authorizes Bank to collect all
principal, interest and fees due under each credit subject hereto by debiting
Borrower’s deposit account number 4159624063 with Bank, or any other deposit
account maintained by Borrower with Bank, for the full amount thereof.  Should
there be insufficient funds in any such deposit account to pay all such sums
when due, the full amount of such deficiency shall be immediately due and
payable by Borrower.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

Borrower makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until the full and final payment, and
satisfaction and discharge, of all obligations of Borrower to Bank subject to
this Agreement.

SECTION 2.1.LEGAL STATUS.  Borrower is: (a)  a corporation, duly organized and
existing and in good standing under the laws of Delaware, and is qualified or
licensed to do business (and is in good standing as a foreign corporation, if
applicable) in all jurisdictions in which such qualification or licensing is
required or in which the failure to so qualify or to be so licensed could have a
material adverse effect on Borrower; and (b) not the target of any trade or
economic sanctions promulgated by the United Nations or the governments of the
United States, the United Kingdom, the European Union, or any other jurisdiction
in which the Borrower is located or operates (collectively, “Sanctions”).

SECTION 2.2.AUTHORIZATION AND VALIDITY.  This Agreement and each promissory
note, contract, instrument and other document required hereby or at any time
hereafter delivered to Bank in connection herewith (collectively, the "Loan
Documents") have been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower or the party which executes the same,
enforceable in accordance with their respective terms.

SECTION 2.3.NO VIOLATION.  The execution, delivery and performance by Borrower
of each of the Loan Documents do not violate any provision of any law or
regulation, or contravene any provision of the organizational and governing
documents of Borrower, or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound.

SECTION 2.4.LITIGATION.  There are no pending, or to the best of Borrower's
knowledge threatened, actions, claims, investigations, suits or proceedings by
or before any governmental authority, arbitrator, court or administrative agency
which could have a material adverse effect on the financial condition or
operation of Borrower other than those disclosed by Borrower to Bank in writing
prior to the date hereof.

 

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SECTION 2.5.CORRECTNESS OF FINANCIAL STATEMENT.  The annual financial statement
of Borrower dated December 31, 2016, and all interim financial statements
delivered to Bank since said date, true copies of which have been delivered by
Borrower to Bank prior to the date hereof, (a) are complete and correct and
present fairly the financial condition of Borrower, (b) disclose all liabilities
of Borrower that are required to be reflected or reserved against under
generally accepted accounting principles, whether liquidated or unliquidated,
fixed or contingent, and (c) have been prepared in accordance with generally
accepted accounting principles consistently applied.  Since the dates of such
financial statements there has been no material adverse change in the financial
condition of Borrower, nor has Borrower mortgaged, pledged, granted a security
interest in or otherwise encumbered any of its assets or properties except in
favor of Bank or as otherwise permitted by Bank in writing.

SECTION 2.6.INCOME TAX RETURNS.  Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect to any year.

SECTION 2.7.NO SUBORDINATION.  There is no agreement, indenture, contract or
instrument to which Borrower is a party or by which Borrower may be bound that
requires the subordination in right of payment of any of Borrower's obligations
subject to this Agreement to any other obligation of Borrower.

SECTION 2.8.PERMITS, FRANCHISES.  Borrower possesses, and will hereafter
possess, all permits, consents, approvals, franchises and licenses required and
rights to all trademarks, trade names, patents, and fictitious names, if any,
necessary to enable it to conduct the business in which it is now engaged in
compliance with applicable law.

SECTION 2.9.ERISA.  Borrower is in compliance in all material respects with all
applicable provisions of the Employee Retirement Income Security Act of 1974, as
amended or recodified from time to time ("ERISA"); Borrower has not violated any
provision of any defined employee pension benefit plan (as defined in ERISA)
maintained or contributed to by Borrower (each, a "Plan"); no Reportable Event
as defined in ERISA has occurred and is continuing with respect to any Plan
initiated by Borrower; Borrower has met its minimum funding requirements under
ERISA with respect to each Plan; and each Plan will be able to fulfill its
benefit obligations as they come due in accordance with the Plan documents and
under generally accepted accounting principles.

SECTION 2.10.OTHER OBLIGATIONS.  Borrower is not in default on any obligation
for borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation.

SECTION 2.11.ENVIRONMENTAL MATTERS.  Except as disclosed by Borrower to Bank in
writing prior to the date hereof, Borrower is in compliance in all material
respects with all applicable federal or state environmental, hazardous waste,
health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may be
amended, modified or supplemented from time to time.  None of the operations of
Borrower is the subject of any federal or state investigation evaluating whether
any remedial action involving a material expenditure is needed to respond to a
release of any toxic or hazardous waste or substance into the
environment.  Borrower has no material contingent liability in connection with
any release of any toxic or hazardous waste or substance into the environment.

ARTICLE III

CONDITIONS

SECTION 3.1.CONDITIONS OF INITIAL EXTENSION OF CREDIT.  The obligation of Bank
to extend any credit contemplated by this Agreement is subject to the
fulfillment to Bank's satisfaction of all of the following conditions:

 

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(a)Approval of Bank Counsel.  All legal matters incidental to the extension of
credit by Bank shall be satisfactory to Bank's counsel.

(b)Documentation.  Bank shall have received, in form and substance satisfactory
to Bank, each of the following, duly executed:

 

(i)

This Agreement and each promissory note or other instrument or document required
hereby.

(ii)Corporate Resolutions and Certificate of Incumbency: Borrower.

 

(iii)

Such other documents as Bank may require under any other Section of this
Agreement.

 

(c)Financial Condition.  There shall have been no material adverse change, as
determined by Bank, in the financial condition or business of Borrower or any
Third Party Obligor hereunder, if any, nor any material decline, as determined
by Bank, in the market value of any collateral required hereunder or a
substantial or material portion of the assets of Borrower or any such Third
Party Obligor, if any.

(d)Insurance.  Borrower shall have delivered to Bank evidence of insurance
coverage, in form, substance, amounts, covering risks and issued by companies
satisfactory to Bank, and where required by Bank, with lender loss payable
endorsements in favor of Bank, including without limitation, policies of fire
and extended coverage insurance covering all real property collateral required
hereby, with replacement cost and mortgagee loss payable endorsements, and such
policies of insurance against specific hazards affecting any such real property,
including terrorism, as may be required by governmental regulation or Bank.

SECTION 3.2.CONDITIONS OF EACH EXTENSION OF CREDIT.  The obligation of Bank to
make each extension of credit requested by Borrower hereunder shall be subject
to the fulfillment to Bank's satisfaction of each of the following conditions:

(a)Compliance.  The representations and warranties contained herein and in each
of the other Loan Documents shall be true on and as of the date of the signing
of this Agreement and on the date of each extension of credit by Bank pursuant
hereto, with the same effect as though such representations and warranties had
been made on and as of each such date, and on each such date, no Event of
Default as defined herein, and no condition, event or act which with the giving
of notice or the passage of time or both would constitute such an Event of
Default, shall have occurred and be continuing or shall exist.

(b)Documentation.  Bank shall have received all additional documents which may
be required in connection with such extension of credit.

(c)Letter of Credit Documentation.  Prior to the issuance of any Letter of
Credit, Bank shall have received a Letter of Credit Agreement and any other
letter of credit documentation required by Bank, in each case completed and duly
executed by Borrower.

 

ARTICLE IV

AFFIRMATIVE COVENANTS

Borrower covenants that so long as Bank remains committed to extend credit to
Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower shall, unless Bank otherwise consents in writing:

SECTION 4.1.PUNCTUAL PAYMENTS.  Punctually pay all principal, interest, fees or
other liabilities due under any of the Loan Documents at the times and place and
in the manner specified therein, and immediately upon demand by Bank, the amount
by which the outstanding principal balance of any credit subject hereto at any
time exceeds any limitation on borrowings applicable thereto.

 

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SECTION 4.2.ACCOUNTING RECORDS.  Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time, to inspect, audit
and examine such books and records, to make copies of the same, and to inspect
the properties of Borrower.

SECTION 4.3.FINANCIAL STATEMENTS.  Provide to Bank all of the following, in form
and detail satisfactory to Bank:

(a)not later than 120 days after and as of the end of each fiscal year, a copy
of the 10K report filed with the Securities Exchange Commission, prepared by a
certified public accountant acceptable to Bank, to include balance sheet, income
statement and statement of cash flows; and

(b)not later than 45 days after and as of the end of each quarter, a copy of the
10Q report filed with the Securities Exchange Commission, prepared by a
certified public accountant acceptable to Bank, to include balance sheet, income
statement and statement of cash flows; and

(c)from time to time such other information as Bank may reasonably request,
including without limitation, copies of rent rolls and other information with
respect to any real property collateral required hereby.

SECTION 4.4.COMPLIANCE.  Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business so long
as the failure to comply could not have a material adverse effect on the
Borrower in any respect.  

SECTION 4.5.INSURANCE.  Maintain and keep in force, for each business in which
Borrower is engaged, insurance of the types and in amounts customarily carried
in similar lines of business, including but not limited to fire, extended
coverage, commercial general liability, flood, and, if required, hurricane,
windstorm, seismic property damage and workers' compensation, with all such
insurance carried in amounts satisfactory to Bank, and deliver to Bank from time
to time at Bank's request schedules setting forth all insurance then in effect,
together with a lender’s loss payee endorsement for all such insurance naming
Bank as a lender loss payee.  Such insurance may be obtained from an insurer or
through an insurance agent of Borrower’s choice, provided that any insurer
chosen by Borrower is acceptable to Bank on such reasonable grounds as may be
permitted under applicable law.

SECTION 4.6.FACILITIES.  Keep all properties useful or necessary to Borrower's
business in good repair and condition, and from time to time make necessary
repairs, renewals and replacements thereto so that such properties shall be
fully and efficiently preserved and maintained.

SECTION 4.7.TAXES AND OTHER LIABILITIES.  Pay and discharge when due any and all
indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except (a) such as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Bank's satisfaction, for eventual payment thereof in the
event Borrower is obligated to make such payment.

SECTION 4.8.LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower with a claim in excess of
$5,000,000.00 or in which an adverse judgment could reasonable be expected to
have a material adverse effect upon Borrower.

SECTION 4.9.FINANCIAL CONDITION.  Maintain Borrower's financial condition as
follows using generally accepted accounting principles consistently applied and
used consistently with prior practices (except to the extent modified by the
definitions herein):

 

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(a)Current Ratio not less than 1.25 to 1.0 at each fiscal quarter end, with
“Current Ratio” defined as total current assets divided by total current
liabilities.

(b)Total Liabilities divided by Tangible Net Worth not greater than 1.25 to 1.0
at each fiscal quarter end, with “Total Liabilities” defined as the aggregate of
current liabilities and non-current liabilities less subordinated debt, and with
“Tangible Net Worth” defined as the aggregate of total stockholders equity plus
subordinated debt less any intangible assets.

(c)Net income after taxes not less than $1.00 on an annual basis, determined as
of each fiscal year end, and pre-tax profit not less than $1.00 on a rolling
4-quarter basis, determined as of each fiscal quarter end.

SECTION 4.10.NOTICE TO BANK.  Promptly (but in no event more than five (5) days
after the occurrence of each such event or matter) give written notice to Bank
in reasonable detail of:  (a) the occurrence of any Event of Default, or any
condition, event or act which with the giving of notice or the passage of time
or both would constitute an Event of Default; (b) any change in the name or the
organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower's property.

ARTICLE V

NEGATIVE COVENANTS

Borrower further covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's prior written
consent:

SECTION 5.1.USE OF FUNDS.  Use any of the proceeds of any credit extended
hereunder except for the purposes stated in Article I hereof, or directly or
indirectly use any such proceeds for the purpose of (a) providing financing to,
or otherwise funding, any targets of Sanctions; or (b) providing financing for,
or otherwise funding, any transaction which would be prohibited by Sanctions or
would otherwise cause Bank or any of Bank’s affiliates to be in breach of any
Sanctions. 

SECTION 5.2.  MERGER, CONSOLIDATION, TRANSFER OF ASSETS.  Merge into or

consolidate with any other entity unless Borrower is the surviving entity and
remains incompliance with all terms and conditions of the Loan Documents; engage
in any material business not reasonably related to Borrower's business as the
date of this Agreement; nor sell, lease, transfer or otherwise dispose of all or
a substantial or material portion of Borrower's assets except in the ordinary
course of its business, provided that Borrower may self, lease, transfer or
dispose of up to 15% of its assets in any fiscal year, provided that Borrower
receive fair consideration therefor; nor acquire all or substantially all of the
assets of any other person of entity, provided that, any Acquisition by Borrower
shall be permitted which is either (i) consented to by Bank in writing prior
thereto or (ii) where:

(a)the business, division or operating units acquired are for use, or the person
acquired is engaged, in businesses reasonably related to the businesses
conducted by Borrower at the time of such Acquisition;

(b)immediately before and after giving effect to such Acquisition, no Event of
Default shall exist;

(c)the aggregate consideration to be paid by Borrower (including consideration
consisting of equity in Borrower and/or any debt assumed or issued in connection
therewith, the amount thereof to be calculated in accordance with generally
accepted accounting principles) in connection with (i) such Acquisition (or any
series of related Acquisitions) is less than $40,000,000 and (ii) all
Acquisitions after the date of this Agreement is less than $100,000,000;

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(d)in the case of the Acquisition of any person, the board of directors or
similar governing body of such person has approved such Acquisition and such
person shall not have announced that it will oppose such Acquisition or shall
not have commenced any action which alleges that such Acquisition will violate
any applicable law; and

(e)If the Acquisition is structured as a merger, Borrower is the surviving
entity.

For purposes of this provision the following terms have the meanings assigned to
them:

"Acquisition" means any transaction or series of related transactions for the

purpose of or resulting, directly or indirectly, in (i) the acquisition of all
or substantially all of the assets of a person, or of all or substantially all
of any business or division of a person (other than a person that is already a
Subsidiary), (ii) the acquisition of the Capital Securities (including the
acquisition of any rights, warrants or options to acquire the Capital
Securities) of any person (other than a person that is already a Subsidiary), or
any other combination with another person (other than a person that is already a
Subsidiary).

''Capital Securities" means, with respect to any person, all shares, interest,
participations or other equivalents (however designated, whether voting or
non-voting) of such person's capital, whether now outstanding or issued or
acquired after the date of this Agreement, including common shares, preferred
shares, membership interest a limited liability company, limited or general
partnership interest in a partnership, interests in trust, interests in joint
ventures, Interests in other unincorporated organizations or any other
equivalent of such ownership interest.

"Subsidiary" means, with respect to any person, a corporation, partnership
limited liability company or other entity of which such person owns, directly or
indirectly, such number of outstanding Capital Securities as have more than 50%
of the ordinary voting power for the election of directors or other managers of
such corporation, partnership, limited liability company or other entity. Unless
the context otherwise requires, each reference to Subsidiaries herein shall be a
reference to Subsidiaries of Borrower.

SECTION 5.3. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a Lien
(as hereinafter defined) upon, all or any portion of Borrower's assets now owned
or hereafter acquired, except any of the following (each of the following, a
"Permitted Lien"):

(a)inchoate Liens for taxes, assessments or governmental charges or levies not
yet due or Liens for taxes, assessments or governmental charges or levies being
contested in good faith and by appropriate proceedings for which reasonable
reserves have been established by Borrower;

(b)Liens in respect of property or assets of Borrower imposed by law which were
incurred in the ordinary course of business, such as carriers', warehousemen's,
and mechanics' Liens, statutory landlord's Liens, and other similar Liens
arising In the ordinary course of business;

(c)Liens created in favor of the Bank;

(d)Liens existing on the date hereof to the extent listed, and the property
subject thereto described, on Schedule 5.3 and any subsequent extensions or
renewals thereof which does not include an increase in the principal amount
secured thereby or in the property subject thereto;

(e)Liens arising from judgments, decrees or attachments (or securing of appeal
bonds with respect thereto) in circumstances not constituting an Event of
Default under Section 6.1 (f), so long as no cash or property (other than
proceeds of insurance payable by reason of such judgments, decrees or
attachments) is deposited or delivered to secure any such judgment(s) and
award(s) and appeal bond(s) in respect thereof, the fair market value of which
exceeds $5,000,000 in aggregate;

(f)Liens incurred or deposits made in the ordinary course of business (i) in
connection with workers' compensation, unemployment insurance and other types of
social security, to the extent required by law, or (ii) to secure the
performance of tenders, surety bonds, bids, leases, government contracts,
performance and return-of-

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money bonds and other similar obligations incurred in the ordinary course of
business not involving in excess of $5,000,000 in aggregate amount, and any
subsequent extensions or renewals thereof which does not include an increase in
the principal amount secured thereby or in the property subject thereto;

(g)licenses, leases or subleases granted to other persons not interfering in any
material respect with the business of Borrower;

(h)easements, rights-of-way, restrictions, minor defects or Irregularities in
title and other similar charges or encumbrances not interfering in any material
respect with the ordinary conduct of the business of Borrower;

(i)banker's Liens, rights of setoff and similar Liens in respect of operational
and payment risks (but not, in any event, indebtedness for borrowed money) under
deposit accounts established and maintained by Borrower in the ordinary course
of business;

(j)Liens arising from precautionary UCC financing statements regarding operating
leases permitted by this Agreement;

(k)any interest or title of a lessor under any true lease;

(I)Liens upon assets of Borrower subject to capital leases in an amount not
exceeding $10,000,000 at any time outstanding and any subsequent extensions or
renewals thereof which does not include an increase in the principal amount
secured thereby or in the property subject thereto, provided that (i) such Liens
only serve to secure the payment of debt arising under such capital leases and
(ii) the Liens encumbering the assets giving rise to such capital leases do not
encumber any other assets of Borrower;

(m)purchase money Liens placed upon assets of Borrower used in the ordinary
course of business of Borrower at the time of the acquisition thereof by the
Borrower to secure the payment of debt Incurred to pay all or a portion of the
purchase price thereof or to secure debt incurred solely for the purpose of
financing the acquisition of any such assets or extensions, renewals or
replacements of any of the foregoing for the same or a lesser amount, provided
that (i) such Liens only serve to secure the payment of debt arising in
connection with such acquisition of such assets and (ii) the Liens encumbering
such assets do not encumber any other assets of Borrower;

(n)Liens on the assets of acquired in connection with an Acquisition permitted
under Section 5.2 and any subsequent extensions or renewals thereof which does
not include an increase in the principal amount secured thereby or in the
property subject thereto, provided that such Liens existed at the time of such
Acquisition, and provided further that such Lien does not encumber additional
property after such acquisition is consummated or increase the principal amount
secured thereby after such acquisition is consummated;

(o)Liens consisting of customary restrictions on transfers of assets contained
in agreements related to the sale thereof pending consummation of the sale
thereof, provided that such Liens apply only to the assets to be sold and the
sale of such assets is otherwise permitted under the terms of this Agreement
;and

(p)Liens granted by Borrower on Non-Trading Assets, with "Non-Trading Assets•
defined as property or assets of Borrower other than cash, cash equivalents,
deposit accounts, accounts, accounts receivable and other rights to payment,
provided, that subsection 5.3(i) above shall not be limited by this subsection
5.3(p).

For purposes of this Agreement, the term "Lien" has the following meaning:

"Any security interest, mortgage, pledge, lien, charge, encumbrance, title
retention agreement or analogous instrument or device (including the interest of
each lessor under any capital lease), in, of or on any assets or properties of
Borrower, now owned or hereafter acquired, whether arising by agreement or
operation of law."

 

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ARTICLE VI

EVENTS OF DEFAULT

SECTION 6.1.The occurrence of any of the following shall constitute an "Event of
Default" under this Agreement:

(a)Borrower shall fail to pay within five (5) days after the due date any
principal, interest, fees or other amounts payable under any of the Loan
Documents.

(b)Any financial statement or certificate furnished to Bank in connection with,
or any representation or warranty made by Borrower or any other party under this
Agreement or any other Loan Document shall prove to be incorrect, false or
misleading in any material respect when furnished or made.

(c)Any default in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document
(other than those specifically described as an “Event of Default” in this
section 6.1), and with respect to any such default that by its nature can be
cured, such default shall continue for a period of thirty (30) days from its
occurrence.

(d)Any default in the payment or performance of any obligation, or any defined
event of default, under the terms of any contract, instrument or document (other
than any of the Loan Documents) pursuant to which Borrower, any guarantor
hereunder or any general partner or joint venturer in Borrower if a partnership
or joint venture (with each such guarantor, general partner and/or joint
venturer referred to herein as a "Third Party Obligor") has incurred any debt or
other liability to any person or entity, including Bank, and where, in the case
of a creditor or creditors other than Bank, the aggregate amount of such
obligations in default exceeds $5,000,000.00 and in the case of Bank, the
aggregate amount of such obligations in default exceeds $50,000.00

(e)Borrower or any Third Party Obligor shall become insolvent, or shall suffer
or consent to or apply for the appointment of a receiver, trustee, custodian or
liquidator of itself or any of its property, or shall generally fail to pay its
debts as they become due, or shall make a general assignment for the benefit of
creditors; Borrower or any Third Party Obligor shall file a voluntary petition
in bankruptcy, or seeking reorganization, in order to effect a plan or other
arrangement with creditors or any other relief under the Bankruptcy Reform Act,
Title 11 of the United States Code, as amended or recodified from time to time
("Bankruptcy Code"), or under any state or federal law granting relief to
debtors, whether now or hereafter in effect; or Borrower or any Third Party
Obligor shall file an answer admitting the jurisdiction of the court and the
material allegations of any involuntary petition; or Borrower or any Third Party
Obligor shall be adjudicated a bankrupt, or an order for relief shall be entered
against Borrower or any Third Party Obligor by any court of competent
jurisdiction under the Bankruptcy Code or any other applicable state or federal
law relating to bankruptcy, reorganization or other relief for debtors.

(f)The filing of a notice of judgment lien against Borrower or any Third Party
Obligor; or the recording of any abstract or transcript of judgment against
Borrower or any Third Party Obligor in any county or recording district in which
Borrower or such Third Party Obligor has an interest in real property; or the
service of a notice of levy and/or of a writ of attachment or execution, or
other like process, against the assets of Borrower or any Third Party Obligor;
or the entry of a judgment against Borrower or any Third Party Obligor; or any
involuntary petition or proceeding pursuant to the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors is filed or commenced against Borrower or any Third Party
Obligor, provided that, the aggregate amounts subject to such action(s) pending
at any time and not fully covered by third party insurance exceeds $5,000,000.00
and any action(s) which if so stayed or dismissed would result in an Event of
Default not occurring under this Section 6.1 (f), is not stayed or dismissed
within 30 days after it is commenced without expenditure of funds other than for
legal expenses and from proceeds of insurance payable by reason of such
judgment, levy or attachment.

 

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(g)There shall exist or occur any event or condition that Bank in good faith
believes impairs, or is substantially likely to impair, the prospect of payment
or performance by Borrower, any Third Party Obligor, or the general partner of
either if such entity is a partnership, of its obligations under any of the Loan
Documents.

(h)The death or incapacity of Borrower or any Third Party Obligor if an
individual.  The withdrawal, resignation or expulsion of any one or more of the
general partners in Borrower or any Third Party Obligor if a partnership.  The
dissolution or liquidation of Borrower or any Third Party Obligor if a
corporation, partnership, joint venture or other type of entity; or Borrower or
any such Third Party Obligor, or any of its directors, stockholders or members,
shall take action seeking to effect the dissolution or liquidation of Borrower
or such Third Party Obligor.

(i)The withdrawal, resignation or expulsion of any one or more of the general
partners in Borrower or any change in control of Borrower or any entity or
combination of entities that directly or indirectly control Borrower, with
“control” defined as ownership of an aggregate of twenty-five percent (25%) or
more of the common stock, members' equity or other ownership interest (other
than a limited partnership interest).

SECTION 6.2.REMEDIES.  Upon the occurrence of any Event of Default:  (a) all
principal, unpaid interest outstanding and other indebtedness of Borrower under
each of the Loan Documents, any term thereof to the contrary notwithstanding,
shall at Bank's option and without notice (except as expressly provided in any
mortgage or deed of trust pursuant to which Borrower has provided Bank a lien on
any real property collateral) become immediately due and payable without
presentment, demand, protest or any notices of any kind, including without
limitation, notice of nonperformance, notice of protest, notice of dishonor,
notice of intention to accelerate or notice of acceleration, all of which are
hereby expressly waived by Borrower; (b) the obligation, if any, of Bank to
extend any further credit under any of the Loan Documents shall immediately
cease and terminate; and (c) Bank shall have all rights, powers and remedies
available under each of the Loan Documents, or accorded by law, including
without limitation the right to resort to any or all security for any credit
subject hereto and to exercise any or all of the rights of a beneficiary or
secured party pursuant to applicable law.  All rights, powers and remedies of
Bank may be exercised at any time by Bank and from time to time after the
occurrence of an Event of Default, are cumulative and not exclusive, and shall
be in addition to any other rights, powers or remedies provided by law or
equity.

ARTICLE VII

MISCELLANEOUS

SECTION 7.1. NO WAIVER.  No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy.  Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.

SECTION 7.2.NOTICES.  All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:

BORROWER:CORVEL CORPORATION

111 Southwest 5th Avenue, Suite 200

Portland, Oregon 97204

 

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BANK:WELLS FARGO BANK, NATIONAL ASSOCIATION

MAC P6101-250

1300 Southwest 5th Avenue, 25th Floor

Portland, Oregon 97201-5667

 

or to such other address as any party may designate by written notice to all
other parties.  Each such notice, request and demand shall be deemed given or
made as follows:  (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.

SECTION 7.3.COSTS, EXPENSES AND ATTORNEYS' FEES.  Borrower shall pay to Bank
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including, to the extent permitted by applicable law,
reasonable attorneys' fees (to include outside counsel fees and all allocated
costs of Bank's in-house counsel to the extent permissible), expended or
incurred by Bank in connection with (a) the negotiation and preparation of this
Agreement and the other Loan Documents, Bank's continued administration hereof
and thereof, and the preparation of any amendments and waivers hereto and
thereto, (b) the enforcement of Bank's rights and/or the collection of any
amounts which become due to Bank under any of the Loan Documents, whether or not
suit is brought, and (c) the prosecution or defense of any action in any way
related to any of the Loan Documents, including without limitation, any action
for declaratory relief, whether incurred at the trial or appellate level, in an
arbitration proceeding or otherwise, and including any of the foregoing incurred
in connection with any bankruptcy proceeding (including without limitation, any
adversary proceeding, contested matter or motion brought by Bank or any other
person) relating to Borrower or any other person or entity. Notwithstanding
anything in this Agreement to the contrary, reasonable attorneys' fees shall not
exceed the amount permitted by law.  

SECTION 7.4.SUCCESSORS, ASSIGNMENT.  This Agreement shall be binding upon and
inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interests or rights hereunder without
Bank's prior written consent.  Bank reserves the right to sell, assign,
transfer, negotiate or grant participations in all or any part of, or any
interest in, Bank's rights and benefits under each of the Loan Documents.  In
connection therewith, Bank may disclose all documents and information which Bank
now has or may hereafter acquire relating to any credit subject hereto, Borrower
or its business, any guarantor hereunder or the business of such guarantor, if
any, or any collateral required hereunder.

SECTION 7.5.ENTIRE AGREEMENT; AMENDMENT.  To the full extent permitted by law,
this Agreement and the other Loan Documents constitute the entire agreement
between Borrower and Bank with respect to each credit subject hereto and
supersede all prior negotiations, communications, discussions and correspondence
concerning the subject matter hereof.  This Agreement may be amended or modified
only in writing signed by each party hereto.

SECTION 7.6.NO THIRD PARTY BENEFICIARIES.  This Agreement is made and entered
into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.

SECTION 7.7.TIME.  Time is of the essence of each and every provision of this
Agreement and each other of the Loan Documents.

SECTION 7.8.SEVERABILITY OF PROVISIONS.  If any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.

 

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SECTION 7.9.COUNTERPARTS.  This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same
Agreement.

SECTION 7.10.GOVERNING LAW.  This Agreement shall be governed by and construed
in accordance with the laws of Oregon (such State, Commonwealth or District is
referred to herein as the “State”), but giving effect to federal laws applicable
to national banks, without reference to the conflicts of law or choice of law
principles thereof.

SECTION 7.11.BUSINESS PURPOSE.  Borrower represents and warrants that each
credit subject hereto is made for (a) a business, commercial, investment,
agricultural or other similar purpose, (b) the purpose of acquiring or carrying
on a business, professional or commercial activity, or (c) the purpose of
acquiring any real or personal property as an investment and not primarily for a
personal, family or household use.

SECTION 7.12.RIGHT OF SETOFF; DEPOSIT ACCOUNTS. Upon and after the occurrence of
an Event of Default, (a) Borrower hereby authorizes Bank, at any time and from
time to time, without notice, which is hereby expressly waived by Borrower, and
whether or not Bank shall have declared any credit subject hereto to be due and
payable in accordance with the terms hereof, to set off against, and to
appropriate and apply to the payment of, Borrower's obligations and liabilities
under the Loan Documents (whether matured or unmatured, fixed or contingent,
liquidated or unliquidated), any and all amounts owing by Bank to Borrower
(whether payable in U.S. dollars or any other currency, whether matured or
unmatured, and in the case of deposits, whether general or special (except trust
and escrow accounts), time or demand and however evidenced), and (b) pending any
such action, to the extent necessary, to hold such amounts as collateral to
secure such obligations and liabilities and to return as unpaid for insufficient
funds any and all checks and other items drawn against any deposits so held as
Bank, in its sole discretion, may elect.  Bank may exercise this remedy
regardless of the adequacy of any collateral for the obligations of Borrower to
Bank and whether or not the Bank is otherwise fully secured.  Borrower hereby
grants to Bank a security interest in all deposits and accounts maintained with
Bank to secure the payment of all obligations and liabilities of Borrower to
Bank under the Loan Documents.

SECTION 7.13.ARBITRATION.

(a)Arbitration.  The parties hereto agree, upon demand by any party, to submit
to binding arbitration all claims, disputes and controversies between or among
them (and their respective employees, officers, directors, attorneys, and other
agents), whether in tort, contract or otherwise in any way arising out of or
relating to (i) any credit subject hereto, or any of the Loan Documents, and
their negotiation, execution, collateralization, administration, repayment,
modification, extension, substitution, formation, inducement, enforcement,
default or termination; or (ii) requests for additional credit.  In the event of
a court ordered arbitration, the party requesting arbitration shall be
responsible for timely filing the demand for arbitration and paying the
appropriate filing fee within 30 days of the abatement order or the time
specified by the court. Failure to timely file the demand for arbitration as
ordered by the court will result in that party’s right to demand arbitration
being automatically terminated.

(b)Governing Rules.  Any arbitration proceeding will (i) proceed in a location
in the State selected by the American Arbitration Association (“AAA”); (ii) be
governed by the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the documents
between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA’s commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA’s optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to herein, as applicable, as the
“Rules”).  If there is any inconsistency between the terms hereof and the Rules,
the terms and procedures set forth herein shall control.  Any party who fails or
refuses to submit to arbitration following a demand by any other party shall
bear all costs and expenses incurred by such other party in compelling

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arbitration of any dispute.  Nothing contained herein shall be deemed to be a
waiver by any party that is a bank of the protections afforded to it under 12
U.S.C. §91 or any similar applicable state law.

(c)No Waiver of Provisional Remedies, Self-Help and Foreclosure.  The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding.  This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.

 

(d)Arbitrator Qualifications and Powers.  Any arbitration proceeding in which
the amount in controversy is $5,000,000.00 or less will be decided by a single
arbitrator selected according to the Rules, and who shall not render an award of
greater than $5,000,000.00.  Any dispute in which the amount in controversy
exceeds $5,000,000.00 shall be decided by majority vote of a panel of three
arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations.  The arbitrator will be a neutral
attorney licensed in the State or a neutral retired judge of the state or
federal judiciary of the State, in either case with a minimum of ten years
experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated.  The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation in
determining any claim.  In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the arbitrator's discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to state
a claim or motions for summary adjudication.  The arbitrator shall resolve all
disputes in accordance with the substantive law of the State and may grant any
remedy or relief that a court of such state could order or grant within the
scope hereof and such ancillary relief as is necessary to make effective any
award.  The arbitrator shall also have the power to award recovery of all costs
and fees, to impose sanctions and to take such other action as the arbitrator
deems necessary to the same extent a judge could pursuant to the Federal Rules
of Civil Procedure, the corresponding rules of civil practice and procedure
applicable in the State or other applicable law.  Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction.  The
institution and maintenance of an action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial relief.

(e)Discovery.  In any arbitration proceeding, discovery will be permitted in
accordance with the Rules.  All discovery shall be expressly limited to matters
directly relevant to the dispute being arbitrated and must be completed no later
than 20 days before the hearing date.  Any requests for an extension of the
discovery periods, or any discovery disputes, will be subject to final
determination by the arbitrator upon a showing that the request for discovery is
essential for the party's presentation and that no alternative means for
obtaining information is available.

(f)Class Proceedings and Consolidations.  No party hereto shall be entitled to
join or consolidate disputes by or against others in any arbitration, except
parties who have executed any Loan Document, or to include in any arbitration
any dispute as a representative or member of a class, or to act in any
arbitration in the interest of the general public or in a private attorney
general capacity.

(g)Payment Of Arbitration Costs And Fees.  The arbitrator shall award all costs
and expenses of the arbitration proceeding.

 

(h)Miscellaneous.  To the maximum extent practicable, the AAA, the arbitrators
and the parties shall take all action required to conclude any arbitration
proceeding within 180 days of the filing of the dispute with the AAA.  No
arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation.  If more than one agreement for arbitration by or between the
parties potentially applies to a dispute, the arbitration provision most
directly related to the Loan Documents or the subject matter of the dispute
shall

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control.  This arbitration provision shall survive termination, amendment or
expiration of any of the Loan Documents or any relationship between the parties.

(i)Small Claims Court.  Notwithstanding anything herein to the contrary, each
party retains the right to pursue in Small Claims Court any dispute within that
court’s jurisdiction.  Further, this arbitration provision shall apply only to
disputes in which either party seeks to recover an amount of money (excluding
attorneys’ fees and costs) that exceeds the jurisdictional limit of the Small
Claims Court.

UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY BANK
CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY
OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN
WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY BANK TO BE ENFORCEABLE.

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby,
have caused this Agreement to be executed as of the day and year first written
above.

 

  WELLS FARGO BANK,

CORVEL CORPORATION  NATIONAL ASSOCIATION

 

By:

 

/s/ Richard Schweppe

 

 

 

By:

 

/s/ DAWN MOORE

 

Name:

 

 

Richard Schweppe

 

 

 

 

 

DAWN MOORE,

SENIOR VICE PRESIDENT

 

Title:

 

 

Chief Financial Officer