Item 1.01. Entry Into a Material Definitive Agreement.
On May 29, 2009, CorVel Corporation (the "Company") entered into a Credit
Agreement (the "Credit Agreement") and an unsecured Revolving Line of Credit
Note (the "Note") with Wells Fargo Bank, National Association ("Wells Fargo"),
pursuant to which the Company established a $10.0 million revolving credit
facility (the "Credit Facility") for general working capital requirements.
Borrowings under the Credit Facility may be made from time to time until
maturity on May 28, 2010, as the Company deems necessary or appropriate. The
Credit Facility bears interest at a fixed rate per annum equal to LIBOR plus
1.50%, and is subject to acceleration upon the occurrence of certain events of
default. After the maturity date or upon acceleration of the Note, the Note
shall bear interest until paid in full at an increased rate per annum equal to
2% above the then-existing interest rate.
In addition to containing affirmative covenants, the Credit Agreement also
includes negative covenants that, without Wells Fargo's approval, limit the
Company's ability to: (a) use the Credit Facility for purposes other than
general working capital; (b) mortgage, pledge, grant or permit to exist a lien
upon, all or any portion of the Company's assets, except for certain permitted
liens; (c) merge into or consolidate with any other entity unless the Company is
the surviving entity and remains in compliance with the Credit Agreement;
(d) engage in any material business not reasonably related to the Company's
present business; (e) sell, lease, transfer or otherwise dispose of all or a
substantial or material portion of the Company's assets except in the ordinary
course of its business, or except for up to 15% of its assets in any fiscal year
for fair consideration; and (f) acquire all or substantially all of the assets
of any other person or entity, except where (i) 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 the Company at the
time of the acquisition, (ii) immediately before and after giving effect to the
acquisition, no event of default exists, (iii) the aggregate consideration to be
paid by the Company in connection with the acquisition (or any series of related
acquisitions) is less than $40,000,000 and all acquisitions after May 29, 2009
is less than $100,000,000, (iv) the board of directors or similar governing body
of the acquired 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 (v) if the acquisition is structured as a merger, the Company is the
surviving entity.
The Credit Agreement also includes default provisions based upon (a) a
failure to pay principal, interest or other amounts within 5 days after the date
due under the Credit Agreement; (b) any financial statement or certificate, or
any representation or warranty, made by the Company under the Credit Agreement
being incorrect, false or misleading in any material respect; (c) an uncured
failure to perform or comply with other obligations to Wells Fargo; (d) a
default under certain third-party agreements; (e) the filing of certain notices
of judgment lien, the recording of certain abstracts of judgment, the service of
certain notices of levy and/or writs of attachment or execution, or the entry of
certain judgments; (f) insolvency, the appointment of a receiver, trustee,
custodian or liquidator, the general failure to pay debts as they become due,
making a general assignment for the benefit of creditors, a voluntary petition
for bankruptcy, or an involuntary petition for bankruptcy not dismissed within
30 days; (g) the dissolution or liquidation of the Company; and (h) any change
in ownership of an aggregate of 25% or more of the common stock of the Company
in a single or in affiliated transactions.
The foregoing is a summary of the material terms of the Credit Agreement and
the Note. Such summary does not purport to be complete and is qualified in its
entirety by reference to the full text of the Credit Agreement and the Note,
copies of which are attached hereto as Exhibits 10.16 and 10.17 and are
incorporated herein by reference.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information disclosed in Item 1.01 of this Current Report on Form 8-K is
incorporated by reference into this Item 2.03.
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