Exhibit 10.36
$7,000,000.00
LOAN AND SECURITY AGREEMENT
by and among
RAINTREE HEALTHCARE CORPORATION
BRITWILL HEALTHCARE COMPANY
BRITWILL FUNDING CORPORATION
CEDAR CARE, INC.
SHERWOOD HEALTHCARE CORP.
BRITWILL INVESTMENTS-I, INC.
BRITWILL INVESTMENTS-II, INC.
BRITWILL INDIANA PARTNERSHIP
▇▇▇▇▇▇▇▇▇▇ HOUSE, INC.
▇▇▇▇▇▇▇▇▇▇▇ NURSING CENTER, INC.
AMBERWOOD COURT, INC.
THE ARBORS HEALTH CARE CORPORATION
LOS ▇▇▇▇▇, INC.
PUEBLO NORTE, INC.
RIO VERDE NURSING CENTER, INC.
SIGNATURE HEALTH CARE CORPORATION
SIGNATURE MANAGEMENT GROUP, INC.
(collectively, the "Borrower")
and
HCFP FUNDING, INC.
(the "Lender")
May 11, 1999
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (the "Agreement" or the "New LOC II Agreement")
is made as of this 11th day of May 1999, by and among RAINTREE HEALTHCARE
CORPORATION, a Delaware corporation (f/k/a Unison Healthcare Corporation),
BRITWILL HEALTHCARE COMPANY, a Delaware corporation, BRITWILL FUNDING
CORPORATION, a Delaware corporation, CEDAR CARE, INC., an Indiana corporation,
SHERWOOD HEALTHCARE CORP., an Indiana corporation, BRITWILL INVESTMENTS-I, INC.,
a Delaware corporation, BRITWILL INVESTMENTS-II, INC., a Delaware corporation
BRITWILL INDIANA PARTNERSHIP, an Arizona general partnership, ▇▇▇▇▇▇▇▇▇▇ HOUSE,
INC., a Colorado corporation (f/k/a ▇▇▇▇▇▇ Circle, Inc.), ▇▇▇▇▇▇▇▇▇▇▇ NURSING
CENTER, INC., a Colorado corporation, AMBERWOOD COURT, INC., a Colorado
corporation (f/k/a Valley Hi, Inc.), THE ARBORS HEALTH CARE CORPORATION, an
Arizona corporation, LOS ▇▇▇▇▇, INC., a Colorado corporation, PUEBLO NORTE,
INC., a Colorado corporation (f/k/a Signature Health Care of California
Corporation), RIO VERDE NURSING CENTER, INC., a Colorado corporation, SIGNATURE
HEALTH CARE CORPORATION, a Delaware corporation, and SIGNATURE MANAGEMENT GROUP,
INC., a Colorado corporation (collectively, "Borrower(s)"); and HCFP FUNDING,
INC., a Delaware corporation ("Lender").
RECITALS
A. Borrower desires to establish certain financing arrangements with and
borrow funds from Lender, and Lender is willing to establish such arrangements
for and make loans and extensions of credit to Borrower, on the terms and
conditions set forth below.
B. Borrower includes some of the Debtors in the jointly administered Chapter
11 bankruptcies pending in the United States Bankruptcy Court for the District
of Arizona (the "Bankruptcy Court") (Case Nos. B-98-06583-PHX-GBN through
B-98-06612-PHX-GBN, and Case Nos. B-98-0173-PHX-GBN through B-98-0175-PHX-GBN)
(the "Bankruptcy Cases").
C. By on Order dated January 29, 1999 entered in the Bankruptcy Cases, the
Bankruptcy Court has confirmed a plan of reorganization with respect to Borrower
(and the other Debtors) (as confirmed, the "Reorganization Plan"). The
Reorganization Plan contemplates that the Debtors, as reorganized, will obtain a
secured working line of credit of approximately $12,000,000.00 (defined in the
Reorganization Plan as the "New Line of Credit"). The New Line of Credit will be
comprised of the credit facility of up to the maximum principal amount of
$7,000,000.00 available to Borrower under this New LOC II Agreement, and the
credit facility of up to the maximum principal amount of $7,000,000.00 available
to New LOC I Borrower (as defined below) under the New LOC I Agreement (as
defined below). As provided below, the credit facilities available under this
New LOC II Agreement and under the New LOC I Agreement are limited in principal
amount to the aggregate of $12,000,000.00.
2
D. Borrower and New LOC I Borrower consist of some of the Debtors as
reorganized pursuant to the Reorganization Plan confirmed in the Bankruptcy
Cases.
E. The parties desire to define the terms and conditions of their relationship
in this Agreement.
NOW, THEREFORE, in consideration of the promises and covenants contained in this
Agreement, and for other consideration, the receipt and sufficiency of which are
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
SECTION 1.1. ACCOUNT. "Account" means any right to payment for goods sold or
leased or services rendered, whether or not evidenced by an instrument or
chattel paper, and whether or not earned by performance.
SECTION 1.2. ACCOUNT DEBTOR. "Account Debtor" means any Person obligated on
any Account of Borrower, including without limitation, any Insurer and any
Medicaid/Medicare Account Debtor.
SECTION 1.3. AFFILIATE. "Affiliate" means, with respect to a specified Person,
any Person directly or indirectly controlling, controlled by, or under common
control with the specified Person, including without limitation their
stockholders and any Affiliates thereof. A Person shall be deemed to control a
corporation if the Person possesses, directly or indirectly, the power to direct
or cause the direction of the management and business of the corporation whether
through the ownership of voting securities, by contract, or otherwise.
SECTION 1.4. AGREEMENT. "Agreement" means this Loan and Security Agreement, as
it may be amended or supplemented from time to time. This Agreement is also
referred to herein from time to time as the "New LOC II Agreement".
SECTION 1.5. BASE RATE. "Base Rate" means a rate of interest equal to
eighty-five one-hundredths of one percent (0.85%) above the "Prime Rate of
Interest".
SECTION 1.6. BORROWED MONEY. "Borrowed Money" means any obligation to repay
money, any indebtedness evidenced by notes, bonds, debentures or similar
obligations, any obligation under a conditional sale or other title retention
agreement and the net aggregate rentals under any lease which under GAAP would
be capitalized on the books of the Borrower or which is the substantial
equivalent of the financing of the property so leased.
2
SECTION 1.7. BORROWER(S). "Borrower" and "Borrowers" have the meanings set
forth in the Preamble, PROVIDED, HOWEVER, THAT individual references to the
singular and the plural will not limit or affect the joint and several
incurrence of Obligations, granting of liens and security interests in
Collateral, and repayment and enforcement provisions provided herein.
SECTION 1.8. BORROWING BASE. "Borrowing Base" has the meaning set forth in
Section 2.1 (d).
SECTION 1.9. BUSINESS DAY. "Business Day" means any day on which financial
institutions are open for business in the State of Maryland, excluding Saturdays
and Sundays.
SECTION 1.10. CLOSING; CLOSING DATE. "Closing" and "Closing Date" have the
meanings set forth in Section 5.3.
SECTION 1.11. COLLATERAL. "Collateral" has the meaning set forth in Section
3.1.
SECTION 1.12. COMMITMENT FEE. "Commitment Fee" has the meaning set forth in
Section 2.4(a).
SECTION 1.13. CONCENTRATION ACCOUNT. "Concentration Account" has the meaning
set forth in Section 2.3.
SECTION 1.14. CONTROLLED GROUP. "Controlled Group" means a "controlled group"
within the meaning of Section 4001(b) of ERISA.
SECTION 1.15. COST REPORT SETTLEMENT ACCOUNT. "Cost Report Settlement Account"
means an "Account" owed to Borrower by a Medicaid/Medicare Account Debtor
pursuant to any cost report, either interim, filed or audited, as the context
may require.
SECTION 1.16. DEFAULT RATE. "Default Rate" means a rate per annum equal to two
percent (2%) above the Base Rate.
SECTION 1.17. ERISA. "ERISA" has the meaning set forth in Section 4.12.
SECTION 1.18. EVENT OF DEFAULT. "Event of Default" and "Events of Default" have
the meanings set forth in Section 8.1.
SECTION 1.19. GAAP. "GAAP" means generally accepted accounting principles
applied in a matter consistent with the financial statements referred to in
Section 4.7.
SECTION 1.20. GOVERNMENTAL AUTHORITY. "Governmental Authority" means and
includes any federal, state, District of Columbia, county, municipal, or other
government and any department, commission, board, bureau, agency or
instrumentality thereof, whether domestic or foreign.
3
SECTION 1.21. HAZARDOUS MATERIAL. "Hazardous Material" means any substances
defined or designated as hazardous or toxic waste, hazardous or toxic material,
hazardous or toxic substance, or similar term, by any environmental statute,
rule or regulation or any Governmental Authority.
SECTION 1.22. HIGHEST LAWFUL RATE. "Highest Lawful Rate" means the maximum
lawful rate of interest referred to in Section 2.8 that may accrue pursuant to
this Agreement.
SECTION 1.23. INSURER. A Person that insures a Patient against certain of the
costs incurred in the receipt by such Patient of Medical Services, or that has
an agreement with Borrower to compensate Borrower for providing services to a
Patient.
SECTION 1.23A. ISSUING BANK. "Issuing Bank" shall refer to Fleet Bank, N.A., or
such other bank mutually acceptable to Lender and Borrower from which Lender
obtains the issuance of any of the Letters of Credit in accordance with Section
2.1(e).
SECTION 1.24. LENDER. "Lender" has the meaning set forth in the Preamble.
SECTION 1.24A. LETTERS OF CREDIT. "Letters of Credit" has the meaning set forth
in Section 2.1(e).
SECTION 1.25. LOAN. "Loan" has the meaning set forth in Section 2.1(a).
SECTION 1.26. LOAN DOCUMENTS. "Loan Documents" means and includes this
Agreement, the Note, and each and every other document now or hereafter
delivered in connection therewith, as any of them may be amended, modified, or
supplemented from time to time.
SECTION 1.27. LOAN MANAGEMENT FEE. "Loan Management Fee" has the meaning set
forth in Section 2.4(c).
SECTION 1.28. LOCKBOX. "Lockbox" has the meaning set forth in Section 2.3(a).
SECTION 1.29. LOCKBOX BANK. "Lockbox Bank" has the meaning set forth in Section
2.3(a).
SECTION 1.30. MAXIMUM LOAN AMOUNT. "Maximum Loan Amount" has the meaning set
forth in Section 2.1(a).
SECTION 1.31. MEDICAID/MEDICARE ACCOUNT DEBTOR. "Medicaid/ Medicare Account
Debtor" means any Account Debtor which is (i) the United States of America
acting under the Medicaid/Medicare program established pursuant to the Social
Security Act, (ii) any state or the District of Columbia acting pursuant to a
health plan adopted pursuant to Title XIX of the Social Security Act or (iii)
any agent, carrier, administrator or intermediary for any of the foregoing.
SECTION 1.32. MEDICAL SERVICES. Medical and health care services provided to a
Patient, including, but not limited to, medical and health care services
provided to a Patient and performed by Borrower which are covered by a policy of
4
insurance issued by an Insurer, and includes physician services, nurse and
therapist services, dental services, hospital services, skilled nursing facility
services, comprehensive outpatient rehabilitation services, home health care
services, residential and out-patient behavioral healthcare services, and
medicine or health care equipment provided by Borrower to a Patient for a
necessary or specifically requested valid and proper medical or health purpose.
SECTION 1.32A. NEW LOC II AGREEMENT. "New LOC II Agreement" means this Loan and
Security Agreement, as it may be amended or supplemented from time to time. The
term "New LOC II Agreement" is completely synonymous and interchangeable with
"Agreement" as defined above.
SECTION 1.32B. NEW LOC I AGREEMENT. "New LOC I Agreement" means that certain
Loan and Security Agreement between Lender and New LOC I Borrower dated as of
February 8, 1999, as it may be amended or supplemented from time to time. Under
the New LOC I Agreement, Lender makes available to New LOC I Borrower a credit
facility of up to the maximum principal amount of $7,000,000.00 under the terms
and conditions stated in the New LOC I Agreement.
SECTION 1.32C. NEW LOC I BORROWER. "New LOC I Borrower" means collectively the
following Affiliates of Borrower: RAINTREE HEALTHCARE CORPORATION, a Delaware
corporation (f/k/a Unison Healthcare Corporation), SUNQUEST SPC, INC., an
Arizona corporation, SAFFORD CARE, INC., a Colorado corporation, ▇▇▇▇▇▇▇ ▇▇▇▇▇,
INC., a Colorado corporation, CORNERSTONE CARE CENTER, INC., a Colorado
corporation, and ARKANSAS, INC., a Colorado corporation.
SECTION 1.33. NOTE. "Note" has the meaning set forth in Section 2.1(c).
SECTION 1.34. OBLIGATIONS. "Obligations" has the meaning set forth in Section
3.1.
SECTION 1.35. PATIENT. "Patient" means any Person receiving Medical Services
from Borrower and all Persons legally liable to pay Borrower for such Medical
Services other than Insurers.
SECTION 1.36. PERMITTED LIENS. "Permitted Liens" means: (a) liens for taxes not
delinquent, or which are being contested in good faith and by appropriate
proceedings which suspend the collection thereof and in respect of which
adequate reserves have been made (provided that such proceedings do not, in
Lender's sole discretion, involve any substantial danger of the sale, loss or
forfeiture of such property or assets or any interest therein); (b) deposits or
pledges to secure obligations under workmen's compensation, social security or
similar laws, or under unemployment insurance; (c) deposits or pledges to secure
bids, tenders, contracts (other than contracts for the payment of money),
leases, statutory obligations, surety and appeal bonds and other obligations of
like nature arising in the ordinary course of business; (d) mechanic's,
workmen's, materialmen's or other like liens arising in the ordinary course of
business with respect to obligations which are not due, or which are being
contested in good faith by appropriate proceedings which suspend the collection
thereof and in respect of which adequate reserves have been made (provided that
such proceedings do not, in Lender's sole discretion, involve any substantial
danger of the sale, loss or forfeiture of such property or assets or any
interest therein); (e) liens and encumbrances in favor of Lender; (f) liens
granted in connection with the lease or purchase of property or assets financed
5
by borrowings permitted by Section 7.1 (provided, however, that no such
borrowings permitted by Section 7.1 may be secured by liens on any of the
Collateral); and (g) liens set forth on SCHEDULE 1.36.
SECTION 1.37. PERSON. "Person" means an individual, partnership, corporation,
trust, joint venture, joint stock company, limited liability company,
association, unincorporated organization, Governmental Authority, or any other
entity.
SECTION 1.38. PLAN. "Plan" has the meaning set forth in Section 4.12.
SECTION 1.39. PREMISES. "Premises" has the meaning set forth in Section 4.14.
SECTION 1.40. PRIME RATE OF INTEREST. "Prime Rate of Interest" means that rate
of interest quoted by Fleet National Bank of Connecticut, N.A., or any successor
thereto, as the same may from time to time fluctuate.
SECTION 1.41. PROHIBITED TRANSACTION. "Prohibited Transaction" means a
"prohibited transaction" within the meaning of Section 406 of ERISA or Section
4975(c)(1) of the Internal Revenue Code.
SECTION 1.42. QUALIFIED ACCOUNT. "Qualified Account" means an Account of
Borrower generated in the ordinary course of Borrower's business from the sale
of goods or rendition of medical services which Lender, in its reasonable credit
judgment, deems to be a Qualified Account. Without limiting the generality of
the foregoing, no Account shall be a Qualified Account if: (a) it is payable
directly to Borrower by a Medicaid/Medicare Account Debtor or commercial medical
Insurer acceptable to Lender in its reasonable discretion, and remains unpaid
more than one hundred twenty (120) days past the claim or service date
(provided, however, that to be Qualified such Medicaid/Medicare Account must be
billed within thirty (30) days after the applicable Medical Services have been
rendered); (b) it or any portion thereof is payable by an individual
beneficiary, recipient or subscriber individually and remains unpaid more than
thirty (30) days after the applicable Medical Services have been rendered (it
being agreed by Borrower that, outstanding Revolving Credit Loans with respect
to such pre-billed Accounts shall at no time exceed $1,300,000.00); (c) the
Account is subject to any defense, set-off, counterclaim, deduction, discount,
credit, chargeback, freight claim, allowance, or adjustment of any kind; (d) any
part of any goods the sale of which has given rise to the Account has been
returned, rejected, lost, or damaged; (e) if it arises from the sale of goods by
Borrower, such sale was not an absolute sale or on consignment or on approval or
on a sale-or-return basis or subject to any other repurchase or return
agreement, or such goods have not been shipped to the Account Debtor or its
designee; (f) if it arises from the performance of services, such services have
not been actually been performed or were undertaken in violation of any law; (g)
the Account is subject to a lien other than a Permitted Lien; (h) the Borrower
knows or should have known of the bankruptcy, receivership, reorganization, or
6
insolvency of the Account Debtor; (i) the Account is evidenced by chattel paper
or an instrument of any kind in which Lender does not have a first priority,
perfected security interest, or has been reduced to judgment; (j) it is an
Account of an Account Debtor having its principal place of business or executive
office outside the United States; (k) the Account Debtor is an Affiliate or
Subsidiary of Borrower; (l) more than ten percent (10%) of the aggregate balance
of all Accounts owing from the Account Debtor obligated on the Account (other
than Medicaid or Medicare Account Debtors) are outstanding more than one hundred
twenty (120) days past their invoice date; (m) more than fifteen percent (15%)
of the aggregate balance of all Accounts owing from any individual Medicaid
Account Debtor obligated on the Account are outstanding more than one hundred
fifty (150) days past their invoice date; (n) more than twenty percent (20%) of
the aggregate balance of all Accounts owing from any individual Account Debtor
(other than a Medicaid/Medicare Account Debtor) obligated on the Account are
outstanding more than one hundred fifty (150) days past their invoice date; (o)
fifty percent (50%) or more of the Accounts from the Account Debtor are not
deemed Qualified Accounts hereunder; (p) the total unpaid Accounts of the
Account Debtor, except for a Medicaid/Medicare Account Debtor, exceed twenty
percent (20%) of the net amount of all Qualified Accounts; (q) the Account has
been generated through the operation of one of the nursing home facilities
listed on SCHEDULE 4.15 as to which Lender has not yet received an estoppel
certificate that is substantially in the form of EXHIBIT D attached hereto or is
otherwise acceptable to Lender in form and substance (r) any covenant,
representation or warranty contained in the Loan Documents with respect to such
Account has been breached; or (s) the Account fails to meet such other
specifications and requirements which may from time to time be established by
Lender.
SECTION 1.43. REPORTABLE EVENT. "Reportable Event" means a "reportable event"
as defined in Section 4043(b) of ERISA.
SECTION 1.44. REVOLVING CREDIT LOAN. "Revolving Credit Loan" has the meaning
set forth in Section 2.1(b).
SECTION 1.45. TERM. "Term" has the meaning set forth in Section 2.8.
SECTION 1.46. USAGE FEE. "Usage Fee" has the meaning set forth in Section
2.4(b).
ARTICLE II
LOAN
SECTION 2.1. TERMS.
(a) The maximum aggregate principal amount of credit extended by Lender to
Borrower hereunder (the "Loan") that may be outstanding at any time is Seven
Million and No/100 ($7,000,000.00) (the "Maximum Loan Amount"). Notwithstanding
the foregoing, or anything else in this Agreement to the contrary, however, the
total of the aggregate outstanding principal amount of the Loan made under this
Agreement and the aggregate outstanding principal amount of the Loan under the
New LOC I Agreement shall not exceed Twelve Million and No/100 ($12,000,000.00).
(b) The Loan shall be in the nature of a revolving line of credit, and
shall include sums advanced and other credit extended by Lender to or for the
benefit of the Borrower from time to time under this Article 2 (each a
"Revolving Credit Loan"), limited at all times to the least of: (i) the Maximum
Loan Amount; (ii) the availability in the Borrowing Base; or (iii) the
7
difference between $12,000,000.00 and the outstanding Loan owing pursuant to the
New LOC I Agreement (as defined therein). Depending on the requests of Borrower
pursuant to the terms and conditions of Sections 2.1(e) and 2.2 below, the
outstanding principal balance of the Loan may fluctuate from time to time, to be
reduced by repayments made by Borrower (which may be made without penalty or
premium), and to be increased by future Revolving Credit Loans, advances and
other extensions of credit to or for the benefit of Borrower, and shall be due
and payable in full upon the expiration of the Term. For purposes of this
Agreement, any determination as to whether there is ability within the Borrowing
Base for advances or extensions of credit shall be made by Lender in its
reasonable discretion and is final and binding upon Borrower.
(c) At Closing, Borrower shall execute and deliver to Lender a promissory
note evidencing Borrower's unconditional obligation to repay Lender for
Revolving Credit Loans, advances, and other extensions of credit made under the
Loan (including without limitation Borrower's obligations with respect to
Letters of Credit), in the form of EXHIBIT A to this Agreement (the "Note"),
dated the date hereof, payable to the order of Lender in accordance with the
terms thereof. The Note (and the principal balance of the Loan outstanding from
time to time thereunder, but not including the portion of the Loan owing for
undrawn Letters of Credit) shall bear interest from the date thereof until
repaid, with interest payable monthly in arrears on the first Business Day of
each month, at a rate per annum (on the basis of the actual number of days
elapsed over a year of 360 days) equal to the Base Rate, provided that after an
occurrence or during the continuance of an Event of Default such rate shall be
equal to the Default Rate. Each Revolving Credit Loan, advance and other
extension of credit shall be deemed evidenced by the Note, which is deemed
incorporated by reference herein and made a part hereof.
(d) As used herein, the term "Borrowing Base" shall mean that amount
equal, at any applicable time, to eighty-five percent (85%) of Qualified
Accounts due and owing from any Medicaid/Medicare Account Debtor, Insurer or
other Account Debtor. Notwithstanding any other provision of this Agreement,
advances under the Loan shall not be made in an amount that would cause the
total amount outstanding under the Loan (after taking into account a proposed
advance) to exceed the amount of the Borrowing Base.
(e) Borrower may request from time to time that Lender obtain from Issuing
Bank irrevocable standby letters of credit (collectively, the "Letters of
Credit") issued on behalf of Borrower for the benefit of third parties
identified by Borrower, PROVIDED THAT: (i) the aggregate amount that
beneficiaries of outstanding Letters of Credit may draw at any time may not
exceed the amount equal to $2,500,000.00 less the aggregate face amount of all
Letters of Credit outstanding pursuant to the New LOC I Agreement; and (ii) when
a Letter of Credit is issued, the maximum amount that can be drawn on that
Letter of Credit by the beneficiary thereof shall be deemed an advance under
this Agreement for purposes of determining Borrower's borrowing capacity under
the Loan. Such advances shall be deemed Revolving Credit Loans and therefore
part of the Loan owing by Borrower hereunder, but shall be deemed to be repaid
as the amounts that can be drawn under Letters of Credit are reduced from time
8
to time in accordance with the terms and conditions thereof. In the event of any
draw under a Letter of Credit: (i) Borrower shall immediately thereafter pay to
Lender an amount equal to all amounts that Lender has paid to, or owes, Issuing
Bank in relation to that Letter of Credit; and (ii) the portion of the Loan
comprised of Borrower's obligations with respect to the Letter of Credit drawn
upon shall thereafter bear interest at the applicable rate for the remainder of
the Loan (not including obligations related to other Letters of Credit). Payment
and performance of all obligations and liabilities of Borrower to Lender arising
in connection with the Letters of Credit, including but not limited to all
obligations and liabilities of Borrower to Lender under the fee and
reimbursement agreement (in a form acceptable to Lender in its sole discretion)
that shall be entered into by Borrower and Lender with respect to each Letter of
Credit, shall be secured by the liens and security interests in the Collateral
granted to Lender under this Agreement. Notwithstanding any of the foregoing,
Lender's failure, for any reason, to obtain a Letter of Credit on behalf of
Borrower following a request by Borrower shall not constitute a default by
Lender under this Agreement.
SECTION 2.2. LOAN ADMINISTRATION. Borrowings under the Loan shall be as follows:
(a) A request for a Revolving Credit Loan shall be made, or shall be
deemed to be made, in the following manner: (i) Borrower may give Lender notice
of its intention to borrow, in which notice Borrower shall specify the amount of
the proposed borrowing and the proposed borrowing date, not later than 2:00 p.m.
Eastern time one (1) Business Day prior to the proposed borrowing date;
PROVIDED, HOWEVER, that no such request may be made at a time when there exists
an Event of Default; and (ii) the becoming due (after the expiration of the
applicable grace period, if any) of any amount required to be paid under this
Agreement, whether as interest or for any other Obligation, shall be deemed
irrevocably to be a request for a Revolving Credit Loan on the due date in the
amount required to pay such interest or other Obligation.
(b) Borrower hereby irrevocably authorizes Lender to disburse the proceeds
of each Revolving Credit Loan requested, or deemed to be requested, as follows:
(i) the proceeds of each Revolving Credit Loan requested under subsection
2.2(a)(i) shall be disbursed by Lender by wire transfer to such bank account as
may be agreed upon by Borrower and Lender from time to time or elsewhere if
pursuant to written direction from Borrower; and (ii) the proceeds of each
Revolving Credit Loan requested under subsection 2.2(a)(ii) shall be disbursed
by Lender by way of direct payment of the relevant interest or other Obligation.
(c) All Revolving Credit Loans, advances and other extensions of credit to
or for the benefit of Borrower shall constitute the Obligation of Borrower, and
shall be secured by Lender's lien upon all of the Collateral of the Borrower.
(d) Lender shall enter all Revolving Credit Loans as debits to a loan
account in the name of Borrower and shall also record in said loan account all
payments made by Borrower on any Obligations and all proceeds of Collateral
which are indefeasibly paid to Lender, and may record therein, in accordance
with customary accounting practice, other debits and credits, including interest
and all charges and expenses properly chargeable to Borrower. All collections
into the Concentration Account pursuant to Section 2.3 shall be applied first to
fees, costs and expenses due and owing under the Loan Documents, then to
interest due and owing under the Loan Documents, and then to principal
outstanding with respect to Revolving Credit Loans.
9
(e) Lender will account to Borrower monthly with a statement of Revolving
Credit Loans, charges and payments made pursuant to this Agreement, and such
account rendered by Lender shall, absent manifest error, be deemed final,
binding and conclusive upon Borrower unless Lender is notified by Borrower in
writing to the contrary within thirty (30) days of the date each accounting is
mailed to Borrower. Such notice shall be deemed an objection to those items
specifically objected to therein.
SECTION 2.3. COLLECTIONS, DISBURSEMENTS, BORROWING AVAILABILITY, AND LOCKBOX
ACCOUNT. Borrower shall maintain one or more lockbox accounts (collectively, the
"Lockbox") with Bank One Arizona, N.A. (the "Lockbox Bank"), subject to the
provisions of this Agreement, and shall execute with the Lockbox Bank a Lockbox
Agreement in the form acceptable to Lender, and such other agreements related
thereto as Lender may require. Borrower shall ensure that all collections of
Accounts are paid directly from Account Debtors into the Lockbox, and that all
funds paid into the Lockbox are immediately transferred into a depository
account maintained by Lender at Bank One Arizona, N.A. or U.S. Bank N.A., as
determined by Lender in its sole discretion and communicated to Borrower (the
"Concentration Account"). Lender shall apply, on a daily basis, all funds
transferred into the Concentration Account pursuant to this Section 2.3 to
reduce the outstanding indebtedness under the Loan, with future Revolving Credit
Loans, advances and other extensions of credit to be made by Lender under the
conditions set forth in this Article II. To the extent that any collections of
Accounts or proceeds of other Collateral are not sent directly to the Lockbox
but are received by Borrower, such collections shall be held in trust for the
benefit of Lender and immediately remitted, in the form received, to the Lockbox
Bank for transfer to the Concentration Account immediately upon receipt by
Borrower. Borrower acknowledges and agrees that its compliance with the terms of
this Section 2.3 is essential, and that upon its failure to comply with any such
terms Lender shall be entitled to assess a non-compliance fee which shall
operate to increase the Base Rate by two percent (2%) per annum during any
period of non-compliance. Lender shall be entitled to assess such fee whether or
not an Event of Default is declared or otherwise occurs. All funds transferred
from the Concentration Account for application to Borrower's indebtedness to
Lender shall be applied to reduce the Loan balance, but for purposes of
calculating interest, shall be subject to a five (5) Business Day clearance
period. If as the result of collections of Accounts pursuant to the terms and
conditions of this Section 2.3 a credit balance exists with respect to the
Concentration Account, such credit balance shall not accrue interest in favor of
Borrower, but shall be available to Borrower at any time or times for so long as
no Event of Default exists.
SECTION 2.4. FEES.
(a) Upon execution of this Agreement, Borrower shall unconditionally pay
to Lender a commitment fee equal to Ten Thousand and No/100 Dollars ($10,000.00)
(the "Commitment Fee").
(b) For so long as the Loan is available to Borrower, Borrower
unconditionally shall pay to Lender a monthly usage fee (the "Usage Fee") equal
to one twelfth (1/12th) of one and one-quarter percent (1.25%) of the average
amount by which the Maximum Loan Amount exceeds the average amount of the
10
outstanding principal balance of the Revolving Credit Loans during the preceding
month. The Usage Fee shall be payable monthly in arrears on the first day of
each successive calendar month.
(c) For so long as the Loan is available to Borrower, Borrower
unconditionally shall pay to Lender a quarterly loan management fee (the "Loan
Management Fee") equal to Three Thousand Seven Hundred Fifty and No/100 Dollars
($3,750.00) per quarter within the Term. The Loan Management Fee shall be
payable quarterly in advance on the first day of each February, May, August and
November while this Agreement remains in effect.
(d) Borrower shall pay to Lender all reasonable audit and appraisal fees
in connection with audits and appraisals of Borrower's books and records on not
more than a quarterly basis while no Event of Default exists and is continuing,
which shall be due and payable on the first Business Day of the month following
the date of issuance by Lender of a request for payment thereof to Borrower;
provided, however, that (i) absent an Event of Default the payment by Borrower
of the quarterly Loan Management Fee shall satisfy its payment obligations under
this Section 2.4(d) for the applicable quarter, and (ii) following the
occurrence or during the continuation of an Event of Default the hourly rates of
the professionals selected by Lender to perform the audits and appraisals shall
be reasonable in relation to the scope of the services performed.
(e) Borrower shall pay to Lender, on demand, any and all fees, costs or
expenses which Lender or any participant pays to a bank or other similar
institution (including, without limitation, any fees paid by Lender to any
participant) arising out of or in connection with (i) the forwarding to Borrower
or any other Person on behalf of Borrower, by Lender, of proceeds of Revolving
Credit Loans made by Lender to Borrower pursuant to this Agreement, and (ii) the
depositing for collection, by Lender or any participant, of any check or item of
payment received or delivered to Lender or any participant on account of
Obligations.
(f) Borrower shall pay to Lender, on demand, any and all fees, costs or
expenses which Lender pays to Issuing Bank arising out of or in connection with
any Letter of Credit issued on behalf of Borrower. In addition, on the date that
any Letter of Credit is issued or renewed by Issuing Bank, Borrower shall pay to
Lender a fee equal to four percent (4%) of the face amount of the Letter of
Credit issued or renewed.
SECTION 2.5. PAYMENTS. Principal payable on account of Revolving Credit Loans
shall be payable by Borrower to Lender immediately upon the earliest of (i) the
receipt by Borrower of any proceeds of any of the Collateral, to the extent of
such proceeds, (ii) any draw under a Letter of Credit, to the extent provided in
Section 2.1(e) hereof, (iii) the occurrence of an Event of Default in
consequence of which the Loan and the maturity of the payment of the Obligations
are accelerated, or (iv) the termination of this Agreement pursuant to Section
2.8 hereof; PROVIDED, HOWEVER, that if any advance made by Lender in excess of
the Borrowing Base shall exist at any time, Borrower shall, immediately upon
demand, repay such overadvance. Interest accrued on the Revolving Credit Loans
shall be due on the earliest of (i) the first Business Day of each month (for
the immediately preceding month), computed on the last calendar day of the
11
preceding month, (ii) the occurrence of an Event of Default in consequence of
which the Loan and the maturity of the payment of the Obligations are
accelerated, or (iii) the termination of this Agreement pursuant to Section 2.8
hereof. Except to the extent otherwise set forth in this Agreement, all payments
of principal and of interest on the Loan, all other charges and any other
obligations of Borrower hereunder, shall be made to Lender to the Concentration
Account, in immediately available funds.
SECTION 2.6. USE OF PROCEEDS. The proceeds of Lender's advances under the Loan
shall be used solely for working capital and for other costs of Borrower arising
in the ordinary course of Borrower's business.
SECTION 2.7. INTEREST RATE LIMITATION. The parties intend to conform strictly
to the applicable usury laws in effect from time to time during the term of the
Loan. Accordingly, if any transaction contemplated hereby would be usurious
under such laws, then notwithstanding any other provision hereof: (a) the
aggregate of all interest that is contracted for, charged, or received under
this Agreement or under any other Loan Document shall not exceed the maximum
amount of interest allowed by applicable law, and any excess shall be promptly
credited to Borrower by Lender (or, to the extent that such consideration shall
have been paid, such excess shall be promptly refunded to Borrower by Lender);
(b) neither Borrower nor any other Person now or hereafter liable hereunder
shall be obligated to pay the amount of such interest to the extent that it is
in excess of the maximum interest permitted by applicable law (the "Highest
Lawful Rate"); and (c) the effective rate of interest shall be reduced to the
Highest Lawful Rate. All sums paid, or agreed to be paid, to Lender for the use,
forbearance, and detention of the debt of Borrower to Lender shall, to the
extent permitted by applicable law, be allocated throughout the full term of the
Note until payment is made in full so that the actual rate of interest does not
exceed the Highest Lawful Rate in effect at any particular time during the full
term thereof. If at any time the rate of interest under the Note exceeds the
Highest Lawful Rate, the rate of interest to accrue pursuant to this Agreement
shall be limited, notwithstanding anything to the contrary herein, to the
Highest Lawful Rate, but any subsequent reductions in the Base Rate shall not
reduce the interest to accrue pursuant to this Agreement below the Highest
Lawful Rate until the total amount of interest accrued equals the amount of
interest that would have accrued if a varying rate per annum equal to the
interest rate under the Note had at all times been in effect. If the total
amount of interest paid or accrued pursuant to this Agreement under the
foregoing provisions is less than the total mount of interest that would have
accrued if a varying rate per annum equal to the interest rate under the Note
had been in effect, then Borrower agrees to pay to Lender an amount equal to the
difference between (a) the lesser of (i) the amount of interest that would have
accrued if the Highest Lawful Rate had at all times been in effect, or (ii) the
amount of interest that would have accrued if a varying rate per annum equal to
the interest rate under the Note had at all times been in effect, and (b) the
amount of interest accrued in accordance with the other provisions of this
Agreement.
SECTION 2.8. TERM.
(a) Subject to Lender's right to cease making Revolving Credit Loans to
Borrower upon or after any Event of Default, this Agreement shall be in effect
for a period of three (3) years from the Closing Date, unless terminated as
12
provided in this Section 2.8 (the "Term"), and this Agreement may be renewed for
one-year periods thereafter upon the mutual written agreement of the parties.
(b) Upon at least thirty (30) days prior written notice to Borrower,
Lender may terminate this Agreement as of the end of the Term. In all events,
however, Lender may terminate this Agreement without notice upon or after the
occurrence of an Event of Default.
(c) Upon at least thirty (30) days prior written notice to Lender (the
"Termination Notice Period"), Borrower may terminate this Agreement before the
third annual anniversary of the Closing Date, provided that, at the effective
date of such termination, Borrower shall pay to Lender (in addition to the then
outstanding principal, accrued interest and other Obligations owing under the
terms of this Agreement and any other Loan Documents) as liquidated damages for
the loss of bargain and not as a penalty, an amount equal to (i) two percent
(2%) of the Maximum Loan Amount if the effective date of such termination by
Borrower is on or before the first annual anniversary of the Closing Date, (ii)
one percent (1%) of the Maximum Loan Amount if the effective date of such
termination by Borrower is after the first annual anniversary of the Closing
Date and before the second annual anniversary of the Closing Date, and (iii) one
percent (1%) of the Maximum Loan Amount if the effective date of such
termination by Borrower is after the second annual anniversary of the Closing
Date and before the third annual anniversary of the Closing Date.
(d) All of the Obligations shall be immediately due and payable upon the
termination date of this Agreement (the "Termination Date"); provided that,
notwithstanding anything in Section 2.8(c) to the contrary, the Termination Date
shall be effective no earlier than the first Business Day of the month following
the expiration of the Termination Notice Period. All undertakings, agreements,
covenants, warranties, and representations of Borrower contained in the Loan
Documents shall survive any such termination and Lender shall retain its liens
in the Collateral and all of its rights and remedies under the Loan Documents
notwithstanding such termination until Borrower has paid the Obligations to
Lender, in full, in immediately available funds.
(e) Notwithstanding any provision of this Agreement which makes reference
to the continuance of an Event of Default, nothing in this Agreement shall be
construed to permit Borrower to cure an Event of Default following the lapse of
the applicable cure period, and Borrower shall have no such right in any
instance unless specifically granted in writing by Lender.
SECTION 2.9. JOINT AND SEVERAL LIABILITY; BINDING OBLIGATIONS. Each entity
comprising Borrower and executing this Agreement on behalf of Borrower shall be
jointly and severally liable for all of the Obligations. In addition, each
entity comprising Borrower hereby acknowledges and agrees that all of the
representations, warranties, covenants, obligations, conditions, agreements and
other terms contained in this Agreement shall be applicable to and shall be
binding upon each individual entity comprising Borrower, and shall be binding
upon all such entities when taken together.
ARTICLE III
COLLATERAL
SECTION 3.1. GENERALLY. As security for the payment of all liabilities of
Borrower to Lender, including without limitation: (i) indebtedness evidenced
13
under the Note, repayment of Revolving Credit Loans, advances and other
extensions of credit, all fees and charges owing by Borrower, and all other
liabilities and obligations of every kind or nature whatsoever of Borrower to
Lender, whether now existing or hereafter incurred, joint or several, matured or
unmatured, direct or indirect, primary or secondary, related or unrelated, due
or to become due, including but not limited to any extensions, modifications,
substitutions, increases and renewals thereof, (ii) the payment of all amounts
advanced by Lender to preserve, protect, defend, and enforce its rights
hereunder and in the following property in accordance with the terms of this
Agreement, and (iii) the payment of all expenses incurred by Lender in
connection therewith (collectively, the "Obligations"), Borrower hereby assigns
and grants to Lender a continuing first priority lien on and security interest
in, upon, and to the following property (the "Collateral"):
(a) All of Borrower's now-owned and hereafter acquired or arising
Accounts, accounts receivable and rights to payment of every kind and
description, and any contract rights, chattel paper, documents and instruments
with respect thereto, together with all fees and other payments due Borrower in
connection with its management of nursing homes and other healthcare facilities;
(b) All of Borrower's now owned and hereafter acquired or arising general
intangibles of every kind and description pertaining to its Accounts, accounts
receivable and other rights to payment, including, but not limited to, all
existing and future customer lists, choses in action, claims, books, records,
contracts, licenses, formulae, tax and other types of refunds, returned and
unearned insurance premiums, rights and claims under insurance policies relating
to any of the Collateral, and computer information, software, records, and data;
(c) All of Borrower's now or hereafter acquired deposit accounts into
which Accounts are deposited, including the Lockbox Account;
(d) All of Borrower's monies and other property of every kind and nature
now or at any time or times hereafter in the possession of or under the control
of Lender or a bailee or Affiliate of Lender; and
(e) The proceeds (including, without limitation, insurance proceeds) of
all of the foregoing.
Notwithstanding anything in this Agreement to the contrary, the parties agree
that if (i) Lender has extended credit hereunder equal to the Maximum Loan
Amount, and (ii) thereafter Borrower receives an offer, term sheet or commitment
(for purposes of the Section, an "Offer") from any Person to provide permanent,
long term, short term or any other financing (for purposes of this Section,
"Additional Financing") with respect to Borrower, Borrower shall first forward
the Offer to the Lender, and the Lender shall have thirty (30) days after
14
receipt (the "Option Period") to agree to provide the Additional Financing in
place of such third party upon the terms and conditions set forth in the Offer
and to notify Borrower in writing of the Lender's acceptance of the Offer (the
"Acceptance Notice"). If Borrower has not received an Acceptance Notice within
the Option Period, then Borrower shall be free to consummate the transaction
described in the Offer with the third party providing the Offer (the
"Transaction"), provided that (a) any liens on Collateral granted to such third
party shall be generated solely and exclusively through the operation of one or
more nursing homes or other healthcare facilities not owned, operated or managed
by any of the entities comprising Borrower as of the Closing Date, and (b)
Lender shall obtain signed documentation from such third party financing source
confirming (in form and substance satisfactory to Lender, in its sole
discretion) that such third party has no security interest in any of the
Collateral generated at any nursing home or other healthcare facility owned,
operated or managed by any of the entities comprising Borrower as of the Closing
Date. If the Transaction is not consummated with such third party during the
longer of (i) the one hundred twenty (120) day period following the expiration
of the Option Period, and (ii) the period (if any) proposed in the Offer for
completion of the Transaction, then Borrower shall not be permitted to
consummate the Transaction without again complying with this Section. For
purposes of this Section only, the "Lender" shall mean and include either of
HCFP Funding, Inc., HCFP Funding II, Inc., HealthCare Financial Partners REIT, a
Maryland corporation, or any other parent company, subsidiary or Affiliate of
HCFP Funding, Inc. or the parent company or subsidiaries of any of such
entities.
SECTION 3.2. LIEN DOCUMENTS. At Closing and thereafter as Lender deems necessary
in its sole discretion, Borrower shall execute and deliver to Lender, or have
executed and delivered (all in form and substance satisfactory to Lender in its
sole discretion):
(a) UCC-1 Financing statements pursuant to the Uniform Commercial Code in
effect in the jurisdictions in which Borrower operates, which Lender may file in
any State where any Collateral is or may be located and in any other
jurisdiction that Lender deems appropriate; PROVIDED that a carbon,
photographic, or other reproduction or other copy of this Agreement or of a
financing statement is sufficient as and may be filed in lieu of a financing
statement;
(b) Any other agreements, documents, instruments, and writings deemed
necessary by Lender or as Lender may otherwise request from time to time in its
reasonable discretion to evidence, perfect, or protect Lender's liens and
security interests in the Collateral required hereunder.
SECTION 3.3. COLLATERAL ADMINISTRATION.
(a) All Collateral (except deposit accounts) will at all times be kept by
Borrower at its principal office(s) as set forth on SCHEDULE 4.15 hereto and
shall not, without the prior written approval of Lender, be moved therefrom.
15
(b) Borrower shall keep accurate and complete records of its Accounts and
all payments and collections thereon and shall submit to Lender on such periodic
basis as Lender shall request a sales and collections report for the preceding
period, in form satisfactory to Lender. In addition, if Accounts in an aggregate
face amount in excess of $50,000.00 become ineligible because they fall within
one of the specified categories of ineligibility set forth in the definition of
Qualified Accounts or otherwise, Borrower shall notify Lender of such occurrence
on the first Business Day following such occurrence (or immediately upon
Borrower's preparation of a monthly aging schedule if the reason for
ineligibility is that the Account has remained unpaid for longer than the
applicable period for Qualified Accounts), and the Borrowing Base shall
thereupon be adjusted to reflect such occurrence. If requested by Lender,
Borrower shall execute and deliver to Lender formal written assignments of all
of its Accounts weekly or daily, which shall include all Accounts that have been
created since the date of the last assignment, together with copies of claims,
invoices or other information related thereto.
(c) Whether or not an Event of Default has occurred, any of Lender's
officers, employees or agents shall have the right, at any time or times
hereafter, in the name of Lender, any designee of Lender or Borrower, to verify
the validity, amount or any other matter relating to any Accounts by mail,
telephone, telegraph or otherwise. Borrower shall cooperate fully with Lender in
an effort to facilitate and promptly conclude such verification process.
(d) To expedite collection, Borrower shall endeavor in the first instance
to make collection of its Accounts for Lender. Lender retains the right at all
times after the occurrence and during the continuance of an Event of Default,
subject to applicable law regarding Medicaid/Medicare Account Debtors, to notify
Account Debtors that Accounts have been assigned to Lender and to collect
Accounts directly in its own name and to charge the collection costs and
expenses, including attorneys' fees to Borrower.
SECTION 3.4. OTHER ACTIONS. In addition to the foregoing, Borrower (i) shall
provide prompt written notice to each private indemnity, managed care or other
Insurer who either is currently an Account Debtor or becomes an Account Debtor
at any time following the date hereof that the Lender has been granted a first
priority lien and security interest in, upon and to all Accounts applicable to
such Insurer, and hereby authorizes Lender to send any and all similar notices
to such Insurers by Lender, and (ii) shall do anything further that may be
lawfully required by Lender to secure Lender and effectuate the intentions and
objects of this Agreement, including but not limited to the execution and
delivery of lockbox agreements, continuation statements, amendments to financing
statements, and any other documents required hereunder. At Lender's request,
Borrower shall also immediately deliver to Lender all items for which Lender
must receive possession to obtain a perfected security interest. Borrower shall,
on Lender's demand, deliver to Lender all notes, certificates, and documents of
title, chattel paper, warehouse receipts, instruments, and any other similar
instruments constituting Collateral.
SECTION 3.5. SEARCHES. Prior to Closing, and thereafter (as and when requested
by Lender in its reasonable discretion), Borrower shall obtain and deliver to
Lender the following searches against Borrower (the results of which are to be
16
consistent with Borrower's representations and warranties under this Agreement),
all at its own expense:
(a) Uniform Commercial Code searches with the Secretary of State and local
filing offices of each jurisdiction where Borrower maintains its executive
offices, a place of business, or assets;
(b) Judgment, federal tax lien and corporate tax lien searches, in each
jurisdiction searched under clause (a) above; and
(c) Good standing certificates showing Borrower to be in good standing in
its state of formation and in each other state in which it is doing and
presently intends to do business for which qualification is required.
SECTION 3.6. POWER OF ATTORNEY. To the extent permitted by applicable bankruptcy
law, each of the officers of Lender is hereby, or, if required, upon application
to the bankruptcy court, may be, irrevocably made, constituted and appointed the
true and lawful attorney for Borrower (without requiring any of them to act as
such) with full power of substitution to do the following: (a) endorse the name
of Borrower upon any and all checks, drafts, money orders, and other instruments
for the payment of money that are payable to Borrower and constitute collections
on Borrower's Accounts; (b) execute in the name of Borrower any financing
statements, schedules, assignments, instruments, documents, and statements that
Borrower is obligated to give Lender hereunder; and (c) do such other and
further acts and deeds in the name of Borrower that Lender may deem necessary or
desirable to enforce any Account or other Collateral or perfect Lender's
security interest or lien in any Collateral. In addition, if Borrower breaches
its obligation to direct payments of the proceeds of the Collateral to the
Lockbox Account, Lender, as the irrevocably made, constituted and appointed true
and lawful attorney for Borrower pursuant to this paragraph, may, by the
signature or other act of any of Lender's officers (without requiring any of
them to do so), direct any federal, state or private payor or fiscal
intermediary to pay proceeds of the Collateral to Borrower by directing payment
to the Lockbox Account.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each entity comprising Borrower, jointly and severally, represents and
warrants to Lender, and shall be deemed to represent and warrant on each day on
which any Obligations shall be outstanding hereunder, that:
SECTION 4.1. SUBSIDIARIES. Except as set forth in SCHEDULE 4.1, Borrower has
no subsidiaries.
SECTION 4.2. ORGANIZATION AND GOOD STANDING. Borrower is a corporation duly
organized, validly existing, and in good standing under the laws of its state of
incorporation, is in good standing as a foreign corporation in each jurisdiction
in which the character of the properties owned or leased by it therein or the
17
nature of its business makes such qualification necessary, has the corporate
power and authority to own its assets and transact the business in which it is
engaged, and has obtained all certificates, licenses and qualifications required
under all laws, regulations, ordinances, or orders of public authorities
necessary for the ownership and operation of all of its properties and
transaction of all of its business.
SECTION 4.3. AUTHORITY. Borrower has full corporate power and authority to enter
into, execute, and deliver this Agreement and to perform its obligations
hereunder, to borrow the Loan, to execute and deliver the Note, and to incur and
perform the obligations provided for in the Loan Documents, all of which have
been duly authorized by all necessary corporate action. No consent or approval
of shareholders of, or lenders to, Borrower and no consent, approval, filing or
registration with any Governmental Authority is required as a condition to the
validity of the Loan Documents or the performance by Borrower of its obligations
thereunder.
SECTION 4.4. BINDING AGREEMENT. This Agreement and all other Loan Documents
constitute, and the Note, when issued and delivered pursuant hereto for value
received, will constitute, the valid and legally binding obligations of
Borrower, enforceable against Borrower in accordance with their respective
terms.
SECTION 4.5. LITIGATION. Except as disclosed in SCHEDULE 4.5, there are no
actions, suits, proceedings or investigations pending or threatened against
Borrower before any court or arbitrator or before or by any Governmental
Authority which, in any one case or in the aggregate, if determined adversely to
the interests of the Borrower, could have a material adverse effect on the
business, properties, condition (financial or otherwise) or operations, present
or prospective, of Borrower, or upon its ability to perform its obligations
under the Loan Documents. Borrower is not in default with respect to any order
of any court, arbitrator, or Governmental Authority applicable to Borrower or
its properties.
SECTION 4.6. NO CONFLICTS. Except as disclosed in SCHEDULE 4.6, the execution
and delivery by Borrower of this Agreement and the other Loan Documents do not,
and the performance of its obligations thereunder will not, violate, conflict
with, constitute a default under, or result in the creation of a lien or
encumbrance upon the property of Borrower under: (a) any provision of Borrower's
articles of incorporation or its bylaws, (b) any provision of any law, rule, or
regulation applicable to Borrower, or (c) any of the following: (i) any lease,
indenture or other agreement or instrument to which Borrower is a party or by
which Borrower or its property is bound; or (ii) any judgment, order or decree
of any court, arbitration tribunal, or Governmental Authority having
jurisdiction over Borrower which is applicable to Borrower.
SECTION 4.7. FINANCIAL CONDITION. The audited financial statements of Unison
Healthcare Corporation and its subsidiaries (including the entities comprising
the Borrower) (collectively, the "Consolidated Company") as of December 31,
1997, certified by Ernst & Young, and the unaudited financial statements of the
Consolidated Company as of November 30, 1998, certified by an officer of the
Consolidated Company, which have been delivered to Lender, fairly present the
18
financial condition of the Consolidated Company and the results of its
operations and changes in financial condition as of the dates and for the
periods referred to, and have been prepared in accordance with GAAP. There are
no material unrealized or anticipated liabilities, direct or indirect, fixed or
contingent, of the Consolidated Company as of the dates of such financial
statements which are not reflected therein or in the notes thereto, except as
otherwise disclosed in the disclosure statement with respect to the
Reorganization Plan filed by the Debtors in the Bankruptcy Cases. The
Consolidated Company's fiscal year ends on December 31. The federal tax
identification numbers for the entities comprising the Borrower are listed on
SCHEDULE 4.7.
SECTION 4.8. NO DEFAULT. Except as disclosed in SCHEDULE 4.6, Borrower is not
in default under or with respect to any obligation in any respect which could be
adverse to its business, operations, property or financial condition, or which
could adversely affect the ability of Borrower to perform its obligations under
the Loan Documents. No Event of Default or event which, with the giving of
notice or lapse of time, or both, could become an Event of Default, has occurred
and is continuing.
SECTION 4.9. TITLE TO PROPERTIES. Borrower has good and marketable title to its
properties and assets, including the Collateral and the properties and assets
reflected in the financial statements described in Section 4.7, subject to no
lien, mortgage, pledge, encumbrance or charge of any kind, other than Permitted
Liens. Borrower has not agreed or consented to cause any of its properties or
assets whether owned now or hereafter acquired to be subject in the future (upon
the happening of a contingency or otherwise) to any lien, mortgage, pledge,
encumbrance or charge of any kind other than Permitted Liens.
SECTION 4.10. TAXES. Except as disclosed on SCHEDULE 4.10, Borrower has filed,
or has obtained extensions for the filing of, all federal, state and other tax
returns which are required to be filed, and has paid all taxes shown as due on
those returns and all assessments, fees and other amounts due as of the date
hereof. All tax liabilities of Borrower were, as of November 30, 1998, and are
now, adequately provided for on Borrower's books. No tax liability has been
asserted by the Internal Revenue Service or other taxing authority against
Borrower for taxes in excess of those already paid.
SECTION 4.11. SECURITIES AND BANKING LAWS AND REGULATIONS.
(a) The use of the proceeds of the Loan and Borrower's issuance of the
Note will not directly or indirectly violate or result in a violation of the
Securities Act of 1933 or the Securities Exchange Act of 1934, as amended, or
any regulations issued pursuant thereto, including without limitation
Regulations U, T, G, or X of the Board of Governors of the Federal Reserve
System. Borrower is not engaged in the business of extending credit for the
purpose of the purchasing or carrying "margin stock" within the meaning of those
regulations. No part of the proceeds of the Loan hereunder will be used to
purchase or carry any margin stock or to extend credit to others for such
purpose.
(b) Borrower is not an investment company within the meaning of the
Investment Company Act of 1940, as amended, nor is it, directly or indirectly,
controlled by or acting on behalf of any Person which is an investment company
within the meaning of that Act.
19
SECTION 4.12. ERISA. No employee benefit plan (a "Plan") subject to the Employee
Retirement Income Security Act of 1974 ("ERISA") and regulations issued pursuant
thereto that is maintained by Borrower or under which Borrower could have any
liability under ERISA (a) has failed to meet minimum funding standards
established in Section 302 of ERISA, (b) has failed to comply with all
applicable requirements of ERISA and of the Internal Revenue Code, including all
applicable rulings and regulations thereunder, (c) has engaged in or been
involved in a prohibited transaction (as defined in ERISA) under ERISA or under
the Internal Revenue Code, or (d) has been terminated. Borrower has not assumed,
or received notice of a claim asserted against Borrower for, withdrawal
liability (as defined in the Multi-Employer Pension Plan Amendments Act of 1980,
as amended) with respect to any multi-employer pension plan and is not a member
of any Controlled Group (as defined in ERISA). Borrower has timely made when due
all contributions with respect to any multi-employer pension plan in which it
participates and no event has occurred triggering a claim against Borrower for
withdrawal liability with respect to any multi-employer pension plan in which
Borrower participates.
SECTION 4.13. COMPLIANCE WITH LAW. Except as described in SCHEDULE 4.13,
Borrower is not in violation of any statute, rule or regulation of any
Governmental Authority (including, without limitation, any statute, rule or
regulation relating to employment practices or to environmental, occupational
and health standards and controls). Borrower has obtained all licenses, permits,
franchises, and other governmental authorizations necessary for the ownership of
its properties and the conduct of its business. Borrower is current with all
reports and documents required to be filed with any state or federal securities
commission or similar Governmental Authority and is in full compliance with all
applicable rules and regulations of such commissions.
SECTION 4.14. ENVIRONMENTAL MATTERS. No use, exposure, release, generation,
manufacture, storage, treatment, transportation or disposal of Hazardous
Material has occurred or is occurring on or from any real property on which the
Collateral is located or which is owned, leased or otherwise occupied by
Borrower (the "Premises"), or off the Premises as a result of any action of
Borrower, except as described in SCHEDULE 4.14. All Hazardous Material used,
treated, stored, transported to or from, generated or handled on the Premises,
or off the Premises by Borrower, has been disposed of on or off the Premises by
or on behalf of Borrower in a lawful manner. There are no underground storage
tanks present on or under the Premises owned or leased by Borrower. No other
environmental, public health or safety hazards exist with respect to the
Premises.
SECTION 4.15. PLACES OF BUSINESS. The only places of business of Borrower, and
the places where it keeps and intends to keep the Collateral and records
concerning the Collateral, are at the addresses set forth in SCHEDULE 4.15.
SCHEDULE 4.15 also lists the owner of record of each such property.
SECTION 4.16. INTELLECTUAL PROPERTY. Borrower exclusively owns or possesses all
the patents, patent applications trademarks trademark applications, service
marks, trade names, copyrights, franchises, licenses, and rights with respect to
the foregoing necessary for the present and planned future conduct of its
business, without any conflict with the rights of others. A list of all such
intellectual property (indicating the nature of Borrower's interest), as well as
20
all outstanding franchises and licenses given by or held by Borrower, is
attached as SCHEDULE 4.16. Borrower is not in default of any obligation or
undertaking with respect to such intellectual property or rights.
SECTION 4.17. STOCK OWNERSHIP. The identity of the stockholders of all classes
of the outstanding stock of each entity comprising Borrower, together with the
respective ownership percentages held by such stockholders, are as set forth on
SCHEDULE 4.17.
SECTION 4.18. MATERIAL FACTS. Neither this Agreement nor any other Loan Document
nor any other agreement, document, certificate, or statement furnished to Lender
by or on behalf of Borrower in connection with the transactions contemplated
hereby contains any untrue statement of material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading. There is no fact known to Borrower that adversely
affects or in the future may adversely affect the business, operations, affairs
or financial condition of Borrower, or any of its properties or assets.
SECTION 4.19. INVESTMENTS, GUARANTEES, AND CERTAIN CONTRACTS. Borrower does not
own or hold any equity or long-term debt investments in, have any outstanding
advances to, have any outstanding guarantees for the obligations of, or have any
outstanding borrowings from, any Person, except as described on SCHEDULE 4.19.
Borrower is not a party to any contract or agreement, or subject to any charter
or other corporate restriction, which adversely affects its business.
SECTION 4.20. BUSINESS INTERRUPTIONS. Within five years prior to the date
hereof, neither the business, property or assets, or operations of Borrower has
been adversely affected in any way by any casualty, strike, lockout, combination
of workers, or order of the United States of America or other Governmental
Authority, directed against Borrower. There are no pending or threatened labor
disputes, strikes, lockouts, or similar occurrences or grievances against
Borrower or its business.
SECTION 4.21. NAMES. Within five years prior to the date hereof, Borrower has
not conducted business under or used any other name (whether corporate or
assumed) other than as shown on SCHEDULE 4.21. Borrower is the sole owner of all
names listed on that Schedule and any and all business done and invoices issued
in such names are Borrower's sales, business, and invoices. Each trade name of
Borrower represents a division or trading style of Borrower and not a separate
corporate subsidiary or independent Affiliate.
SECTION 4.22. JOINT VENTURES. Borrower is not engaged in any joint venture or
partnership with any other Person, except as set forth on SCHEDULE 4.22.
SECTION 4.23. ACCOUNTS. Lender may rely, in determining which Accounts are
Qualified Accounts, on all statements and representations made by Borrower with
respect to any Account or Accounts. Unless otherwise indicated in writing to
Lender, with respect to each Account:
(a) It is genuine and in all respects what it purports to be, and is not
evidenced by a judgment;
21
(b) It arises out of a completed, BONA FIDE sale and delivery of (or, in
the case of an Account relating to individual recipients of Medical Services, a
BONA FIDE pre-billing for) goods or rendition of services by Borrower in the
ordinary course of its business and in accordance with the terms and conditions
of all purchase orders, contracts, certification, participation, certificate of
need, or other documents relating thereto and forming a part of the contract
between Borrower and Account Debtor (provided, however, that in the case only of
pre-billed Accounts to individual recipients of Medical Services covered by such
Account, the services will be rendered in full within thirty (30) days following
the claim or invoice date);
(c) It is for a liquidated amount maturing as stated in a duplicate claim
or invoice covering such sale or rendition of services, a copy of which has been
furnished or is available to Lender (or in the case only of Accounts owed by
Medicaid/Medicare Account Debtors, Borrower has furnished Lender with evidence
reasonably satisfactory to Lender that the Medical Services have been rendered
but have not yet been invoiced solely as a result of applicable
Medicaid/Medicare billing procedures);
(d) Such Account, and Lender's security interest therein, is not, and will
not (by voluntary act or omission by Borrower), be in the future, subject to any
offset, lien, deduction, defense, dispute, counterclaim or any other adverse
condition, and each such Account is absolutely owing to Borrower and is not
contingent in any respect or for any reason;
(e) There are no facts, events or occurrences which in any way impair the
validity or enforceability of any Accounts or tend to reduce the amount payable
thereunder from the face amount of the claim or invoice and statements delivered
to Lender with respect thereto;
(f) To the best of Borrower's knowledge, the Account Debtor thereunder (i)
had the capacity to contract at the time any contract or other document giving
rise to the Account was executed and (ii) such Account Debtor is solvent;
(g) To the best of Borrower's knowledge, there are no proceedings or
actions which are threatened or pending against any Account Debtor thereunder
which might result in any material adverse change in such Account Debtor's
financial condition or the collectibility of such Account;
(h) It has been billed and forwarded to the Account Debtor for payment in
accordance with applicable laws and compliance and conformance with any and
requisite procedures, requirements and regulations governing payment by such
Account Debtor with respect to such Account (or in the case only of Accounts
owed by Medicaid/Medicare Account Debtors, Borrower has furnished Lender with
evidence reasonably satisfactory to Lender that the Medical Services have been
rendered but have not yet been invoiced solely as a result of applicable
Medicaid/Medicare billing procedures), and such Account if due from a
Medicaid/Medicare Account Debtor is properly payable directly to Borrower; and
22
(i) Borrower has obtained and currently has all certificates of need,
Medicaid and Medicare provider numbers, licenses, permits and authorizations as
necessary in the generation of such Accounts.
SECTION 4.24. SOLVENCY. Both before and after giving effect to the transactions
contemplated by the terms and provisions of this Agreement (and following the
effective date of the Reorganization Plan): (i) Borrower (taken as a whole) owns
property whose fair saleable value is greater than the amount required to pay
all of Borrower's Indebtedness (including contingent debts), (ii) Borrower
(taken as a whole) was and is able to pay all of its Indebtedness as such
Indebtedness matures, and (iii) Borrower (taken as a whole) had and has capital
sufficient to carry on its business and transactions and all business and
transactions in which it about to engage. For purposes hereof, the term
"Indebtedness" means, without duplication (x) all items which in accordance with
GAAP would be included in determining total liabilities as shown on the
liability side of a balance sheet of such Borrower as of the date on which
Indebtedness is to be determined, (y) all obligations of any other person or
entity which such Borrower has guaranteed, and (z) the Obligations.
SECTION 4.25. NO APPROVALS, ETC. No approval, authorization, bond, consent,
certificate, franchise, license, permit, registration, qualification, or other
action or grant by or filing with any Governmental Authority or other Person is
required in connection with the execution, delivery, or performance (other than
performance which is not yet due) by any Borrower of the Loan Documents.
SECTION 4.26. PURPOSE OF ADVANCES. The purpose of each advance under the Loan is
a business purpose, and the proceeds of each advance will be used solely for
working capital and for other costs of Borrower arising in the ordinary course
of Borrower's business.
SECTION 4.27. APPROVALS AND PERMITS; ASSETS AND PROPERTY. To the best knowledge
of Borrower, Borrower has obtained and there are in full force and effect all
approvals and permits presently necessary for the conduct of the business of
each Borrower, and each Borrower owns, leases, or licenses all assets and
property necessary for conduct of the business and operations of such Borrower,
except as otherwise permitted pursuant to this Agreement, except for any failure
to own, lease or license such assets and property that would not, individually
or in the aggregate, be materially adverse to the business, properties, assets,
operations, prospects, or condition (financial or otherwise) of Borrower.
SECTION 4.28. GOVERNMENTAL REGULATION. Borrower is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, and
Investment Company Act of 1940, the Interstate Commerce Act (as any of the
preceding have been amended), or any other law which regulates the incurring by
Borrower of indebtedness, including but not limited to laws relating to common
or contract carriers or the sale of electricity, gas, steam, water, or other
public utility services.
SECTION 4.29. YEAR 2000 COMPLIANCE. Borrower will use its best efforts to insure
that all devices, systems, machinery, information technology, computer software
and hardware, and other date sensitive technology (jointly and severally, the
"Systems") necessary for Borrower to carry on its business as presently
23
conducted and as contemplated to be conducted in the future are Year 2000
Compliant or will be Year 2000 Compliant within a period of time calculated to
result in no material disruption of any of Borrower's business operations. For
purposes of these provisions, "Year 2000 Compliant" means that such Systems are
designed to be used prior to, during and after the Gregorian calendar year 2000
A.D. and will operate during each such time period without error relating to
date data, specifically including any error relating to, or the product of, date
data which represents or references different centuries or more than one
century.
ARTICLE V
CLOSING AND CONDITIONS OF LENDING
SECTION 5.1. CONDITIONS PRECEDENT TO AGREEMENT. The obligation of Lender to
enter into and perform this Agreement and to make Revolving Credit Loans is
subject to the following conditions precedent:
(a) Lender shall have received two (2) originals of this Agreement and all
other Loan Documents required to be executed and delivered at or prior to
Closing (other than the Note, as to which Lender shall receive only one
original), executed by Borrower and any other required Persons, as applicable.
(b) Lender shall have received all searches and good standing certificates
required by section 3.5.
(c) Borrower shall have complied and shall then be in compliance with all
the terms, covenants and conditions of the Loan Documents.
(d) There shall have occurred no Event of Default and no event which, with
the giving of notice or the lapse of time, or both, could constitute such an
Event of Default.
(e) The representations and warranties contained in Article IV shall be
true and correct.
(f) Lender shall have received copies of all board of directors
resolutions and other corporate action taken by Borrower to authorize the
execution, delivery and performance of the Loan Documents and the borrowing of
the Loan thereunder, as well as the names and signatures of the officers of
Borrower authorized to execute documents on its behalf in connection herewith,
all as also certified as of the date hereof by an officer of Borrower, and such
other papers as Lender may require.
(g) Lender shall have received copies, certified as true, correct and
complete by a corporate officer of Borrower, of the articles of incorporation
and bylaws of Borrower, with any amendments thereto, and all other documents
necessary for performance of the obligations of Borrower under this Agreement
and the other Loan Documents.
24
(h) Lender shall have received a written opinion of counsel for Borrower,
dated the date hereof, substantially in the form of EXHIBIT C.
(i) Lender shall have received such financial statements, reports,
certifications, and other operational information required to be delivered
hereunder, including without limitation an initial borrowing base certificate
calculating the Borrowing Base.
(j) Lender shall have received the Commitment Fee.
(k) The Lockbox and the Concentration Account shall have been established.
(l) INTENTIONALLY OMITTED.
(m) Lender shall have received a certificate of Borrower's chief financial
officer, dated the Closing Date, certifying that (i) all of the conditions
specified in this Section have been fulfilled, (ii) no Event of Default has
occurred, and that no event has occurred which, with the giving of notice or the
lapse of time, or both, could constitute an Event of Default, and (iii) the
representations and warranties contained in Article IV are true and correct..
(n) Lender shall have received copies of certificates of insurance that
show that the insurance requirements stated in Section 6.7 of this Agreement
have been satisfied, and that the insurance is in full force and effect.
SECTION 5.2. CONDITIONS PRECEDENT TO ADVANCES. Notwithstanding any other
provision of this Agreement, no Loan proceeds, Revolving Credit Loans, advances
or other extensions of credit under the Loan shall be disbursed hereunder unless
the following conditions have been satisfied or waived immediately prior to such
disbursement:
(a) Lender shall have received from Borrower a Borrowing Base Report and
Compliance Certificate in a form acceptable to Lender in its sole discretion.
(b) The representations and warranties on the part of Borrower contained
in Article IV of this Agreement shall be true and correct in all respects at and
as of the date of disbursement or advance, as though made on and as of such date
(except to the extent that such representations and warranties expressly relate
solely to an earlier date and except that the references in Section 4.7 to
financial statements shall be deemed to be a reference to the then most recent
annual and interim financial statements of Borrower furnished to Lender pursuant
to Section 6.1 hereof).
(c) No Event of Default or event which, with the giving of notice of the
lapse of time, or both, could become an Event of Default shall have occurred and
be continuing or would result from the making of the disbursement or advance.
25
(d) No adverse change in the condition (financial or otherwise),
properties, business, or operations of Borrower shall have occurred and be
continuing with respect to Borrower since the date hereof.
(e) Borrower shall have used its best efforts to obtain and provide to
Lender an estoppel certificate substantially in the form of EXHIBIT D attached
hereto from Borrower's landlord or sublandlord, as the case may be, with respect
to each of the facilities identified on SCHEDULE 4.15.
SECTION 5.3. CLOSING. Subject to the conditions of this Article V, the Loan
shall be made available on the date as is mutually agreed by the parties (the
"Closing Date") at such time as may by mutually agreeable to the parties upon
the execution hereof (the "Closing") at such place as may be requested by
Lender.
SECTION 5.4. WAIVER OF RIGHTS. By completing the Closing hereunder, or by making
advances under the Loan, Lender does not waive a breach of any representation or
warranty of Borrower hereunder or under any other Loan Document, and all of
Lender's claims and rights resulting from any breach or misrepresentation by
Borrower are specifically reserved by Lender.
ARTICLE VI
AFFIRMATIVE COVENANTS
Each Borrower covenants and agrees that for so long as Borrower may borrow
hereunder and until payment in full of the Note and performance of all other
obligations of Borrower under the Loan Documents:
SECTION 6.1. FINANCIAL STATEMENTS AND COLLATERAL REPORTS. Borrower will furnish
to Lender (a) a sales and collections report and accounts receivable aging
schedule on a form acceptable to Lender within fifteen (15) days after the end
of each calendar month; (b) payable aging schedules within fifteen (15) days
after the end of each calendar month; (c) internally prepared monthly financial
statements for the Consolidated Company (as such term is defined in Section
4.7), certified by a duly authorized officer of Borrower, within forty-five (45)
days of the end of each calendar month; (d) quarterly financial statements for
the Consolidated Company on Form 10-Q, certified by a duly authorized officer of
Borrower, within forty-five (45) days of the end of each fiscal quarter of
Borrower; (e) to the extent prepared by Borrower, annual projections, profit and
loss statements, balance sheets, and cash flow reports (prepared on a monthly
basis) for the succeeding fiscal year within thirty (30) days before the end of
each of Borrower's fiscal years; (f) internally prepared annual financial
statements for Borrower within sixty (60) days after the end of each of
Borrower's fiscal years; (g) annual audited financial statements for the
Consolidated Company prepared by Ernst & Young or a firm of independent public
26
accountants satisfactory to Lender, within ninety (90) days after the end of
each of Borrower's fiscal years; (h) promptly upon receipt thereof, copies of
any reports submitted to Borrower by independent accountants in connection with
any interim audit of the books of Borrower and copies of each management control
letter provided to Borrower by independent accountants; (i) as soon as
available, copies of all financial statements and notices provided by Borrower
to all of its stockholders; and (j) such additional information, reports or
statements as Lender may from time to time request. Annual financial statements
shall set forth in comparative form figures for the corresponding periods in the
prior fiscal year. All financial statements shall include a balance sheet and
statement of earnings and shall be prepared in accordance with GAAP.
SECTION 6.2. PAYMENTS HEREUNDER. Borrower will make all payments of principal,
interest, fees, and all other payments required hereunder, under the Loan, and
under any other agreements with Lender to which Borrower is a party, as and when
due.
SECTION 6.3. EXISTENCE, GOOD STANDING, AND COMPLIANCE WITH LAWS. Borrower will
do or cause to be done all things necessary (a) to obtain and keep in full force
and effect all corporate existence, rights, licenses, privileges, and franchises
of Borrower necessary to the ownership of its property or the conduct of its
business, and comply with all applicable present and future laws, ordinances,
rules, regulations, orders and decrees of any Governmental Authority having or
claiming jurisdiction over Borrower; and (b) to maintain and protect the
properties used or useful in the conduct of the operations of Borrower, in a
prudent manner, including without limitation the maintenance at all times of
such insurance upon its insurable property and operations as required by law or
by Section 6.7 hereof.
SECTION 6.4. LEGALITY. The making of the Loan and each disbursement or advance
under the Loan shall not be subject to any penalty or special tax, shall not be
prohibited by any governmental order or regulation applicable to Borrower, and
shall not violate any rule or regulation of any Governmental Authority, and
necessary consents, approvals and authorizations of any Governmental Authority
to or of any such disbursement or advance shall have been obtained.
SECTION 6.5. LENDER'S SATISFACTION. All instruments and legal documents and
proceedings in connection with the transactions contemplated by this Agreement
shall be satisfactory in form and substance to Lender and its counsel, and
Lender shall have received all documents, including records of corporate
proceedings and opinions of counsel, which Lender may have requested in
connection therewith.
SECTION 6.6. TAXES AND CHARGES. Borrower will timely file all tax reports and
pay and discharge all post-petition taxes, assessments and governmental charges
or levies imposed upon Borrower, or its income or profits or upon its properties
or any part thereof, before the same shall be in default and prior to the date
on which penalties attach thereto, as well as all lawful claims for labor,
material, supplies or otherwise which, if unpaid, might become a lien or charge
upon the properties or any part thereof of Borrower; PROVIDED, HOWEVER, that the
Borrower shall not be required to pay and discharge or cause to be paid and
discharged any such tax, assessment, charge, levy or claim so long as the
validity or amount thereof shall be contested in good faith and by appropriate
proceedings by Borrower, and the Borrower shall have set aside on their books
27
adequate reserve therefor; and PROVIDED FURTHER, that such deferment of payment
is permissible only so long as Borrower's title to, and its right to use, the
Collateral is not adversely affected thereby and Lender's lien and priority on
the Collateral are not adversely affected, altered or impaired thereby.
SECTION 6.7. INSURANCE. Borrower will carry adequate public liability and
professional liability insurance with responsible companies satisfactory to
Lender in such amounts and against such risks as is customarily maintained by
similar businesses and by owners of similar property in the same general area,
including without limitation insurance on the Collateral covering such risks and
in such form and amount as may be required by Lender from time to time, with
loss payable to Lender as its interests may appear. Upon request, Borrower will
deliver certificates of insurance regarding such insurance, or copies of the
insurance policy or policies, to Lender.
SECTION 6.8. GENERAL INFORMATION. Borrower will furnish to Lender such
information as Lender may, from time to time, request with respect to the
business or financial affairs of Borrower, and permit any officer, employee or
agent of Lender to visit and inspect any of the properties, to examine the
minute books, books of account and other records, including management letters
prepared by Borrower's auditors, of Borrower, and make copies thereof or
extracts therefrom, and to discuss its and their business affairs, finances and
accounts with, and be advised as to the same by, the accountants and officers of
Borrower, all at such times and as often as Lender may require.
SECTION 6.9. MAINTENANCE OF PROPERTY. Borrower will maintain, keep and preserve
all of its properties in good repair, working order and condition and from time
to time make all needful and proper repairs, renewals, replacements, betterments
and improvements thereto, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times.
SECTION 6.10. NOTIFICATION OF EVENTS OF DEFAULT AND ADVERSE DEVELOPMENTS.
Borrower promptly will notify Lender upon the occurrence of: (a) any Event of
Default; (b) any event which, with the giving of notice or lapse of time, or
both, could constitute an Event of Default; (c) any event, development or
circumstance whereby the financial statements previously furnished to Lender
fail in any material respect to present fairly, in accordance with GAAP, the
financial condition and operational results of Borrower; (d) any judicial,
administrative or arbitration proceeding pending against Borrower, and any
judicial or administrative proceeding known by Borrower to be threatened against
it which, if adversely decided, could adversely affect its condition (financial
or otherwise) or operations (present or prospective) or which may expose
Borrower to uninsured liability of $25,000.00 or more; (e) any default claimed
by any other creditor for borrowed money of Borrower other than Lender, or any
lessor; and (f) any other development in the business or affairs of Borrower
which may be materially adverse; in each case describing the nature thereof and
(in the case of notification under clauses (a) and (b)) the action Borrower
proposes to take with respect thereto.
SECTION 6.11. EMPLOYEE BENEFIT PLANS. Borrower will (a) comply with the funding
requirements of ERISA with respect to the Plans for its employees, or will
promptly satisfy any accumulated funding deficiency that arises under Section
302 of ERISA; (b) furnish Lender, promptly after filing the same, with copies of
all reports or other statements filed with the United States Department of
Labor, the Pension Benefit Guaranty Corporation, or the Internal Revenue Service
28
with respect to all Plans, or which Borrower, or any member of a Controlled
Group, may receive from such Governmental Authority with respect to any such
Plans, and (c) promptly advise Lender of the occurrence of any Reportable Event
or Prohibited Transaction with respect to any such Plan and the action which
Borrower proposes to take with respect thereto. Borrower will make all
contributions when due with respect to any multi-employer pension plan in which
it participates and will promptly advise Lender: (a) upon its receipt of notice
of the assertion against Borrower of a claim for withdrawal liability; (b) upon
the occurrence of any event which could trigger the assertion of a claim for
withdrawal liability against Borrower; and (c) upon the occurrence of any event
which would place Borrower in a Controlled Group as a result of which any member
(including Borrower) thereof may be subject to a claim for withdrawal liability,
whether liquidated or contingent.
SECTION 6.12. FINANCING STATEMENTS. Borrower shall provide to Lender evidence
satisfactory to Lender as to the due recording of termination statements,
releases of collateral, and Forms UCC-2 and UCC-3 (as applicable), and shall
cause to be recorded financing statements on Form UCC-1 and/or UCC-3, duly
executed by Borrower and Lender, in all places necessary to release all existing
security interests and other liens in the Collateral (other than as permitted
hereby) and to perfect and protect Lender's first priority lien and security
interest in the Collateral, as Lender may request.
SECTION 6.13. FINANCIAL RECORDS. Borrower shall keep current and accurate books
of records and accounts in which full and correct entries will be made of all of
its business transactions, and will reflect in its financial statements adequate
accruals and appropriations to reserves, all in accordance with GAAP.
SECTION 6.14. COLLECTION OF ACCOUNTS. Borrower shall continue to collect its
Accounts in the ordinary course of business.
SECTION 6.15. PLACES OF BUSINESS. Borrower shall give thirty (30) days' prior
written notice to Lender of any change in the location of any of its places of
business, of the places where its records concerning its Accounts are kept, of
the places where the Collateral is kept, or of the establishment of any new, or
the discontinuance of any existing, places of business.
SECTION 6.16. BUSINESS CONDUCTED. Borrower shall continue in the business
presently conducted by it using its best efforts to maintain its customers and
goodwill. Borrower shall not engage, directly or indirectly, in any line of
business substantially different from the business conducted by it immediately
prior to the Closing Date, or engage in business or lines of business which are
not reasonably related thereto.
SECTION 6.17. LITIGATION AND OTHER PROCEEDINGS. Borrower shall give prompt
notice to Lender of any litigation, arbitration, or other proceeding before any
court, arbitrator (or arbitration panel), or Governmental Authority against or
affecting Borrower if the amount claimed is more than $50,000.00.
SECTION 6.18. BANK ACCOUNTS. Borrower shall assign all of its depository (which
shall not include Borrower's operating account) and disbursement accounts to
Lender.
29
SECTION 6.19. SUBMISSION OF COLLATERAL DOCUMENTS. Borrower will, on demand of
Lender, make available to Lender copies of shipping and delivery receipts
evidencing the shipment of goods that gave rise to an Account, medical records,
insurance verification forms, assignment of benefits, in-take forms or other
proof of the satisfactory performance of services that gave rise to an Account,
a copy of the claim or invoice for each Account and copies of any written
contract or order from which the Account arose. Borrower shall promptly notify
Lender if an Account becomes evidenced or secured by an instrument or chattel
paper and upon request of Lender, will promptly deliver any such instrument or
chattel paper to Lender.
SECTION 6.20. LICENSURE; MEDICAID/MEDICARE COST REPORTS. Borrower will maintain
all certificates of need, provider numbers and licenses necessary to conduct its
business as presently conducted, and take any steps required to comply with any
such new or additional requirements that may be imposed on providers of medical
products and services. If required, all Medicaid/Medicare costs reports will be
properly filed.
SECTION 6.21. OFFICER'S CERTIFICATES. Together with the monthly financial
statements delivered pursuant to clause (c) of Section 6.1, and together with
the audited annual financial statements delivered pursuant to clause (g) of that
Section, Borrower shall deliver to Lender a certificate of a duly authorized
officer in form and substance satisfactory to Lender setting forth:
(a) The information (including detailed calculations), to the best of
Borrower's knowledge, required in order to establish whether Borrower is in
compliance with the requirements of Articles VI and VII as of the end of the
period covered by the financial statements then being furnished; and
(b) That the signer has reviewed the relevant terms of this Agreement, and
has made (or caused to be made under his supervision) a review of the
transactions and conditions of Borrower from the beginning of the accounting
period covered by the income statements being delivered to the date of the
certificate, and that such review has not disclosed the existence during such
period of any condition or event which constitutes an Event of Default or which
is then, or with the passage of time or giving of notice or both, could become
an Event of Default, and if any such condition or event existed during such
period or now exists, specifying the nature and period of existence thereof and
what action Borrower has taken or proposes to take with respect thereto.
SECTION 6.22. VISITS AND INSPECTIONS. Borrower will permit representatives of
Lender, from time to time, as often as may be reasonably requested, but only
during normal business hours, to visit and inspect the properties of Borrower,
and to inspect, audit and make extracts from its books and records, and discuss
with its officers, its employees and its independent accountants, Borrower's
business, assets, liabilities, financial condition, business prospects and
results of operations. All inspections by representatives of Lender are for the
sole purpose of protecting the rights and interests of Lender and are not to be
construed as a representation by Lender that there has been compliance with any
of the requirements of this Agreement. Borrower may make or cause to be made
such other independent inspections as Borrower may desire for its own
protection.
30
SECTION 6.23. DEFENSE OF TITLE.
(a) Borrower will defend the Collateral and the title and interest therein
of Borrower against all matters, including, without limitation, (a) any
attachment, levy, or other seizure by legal process or otherwise of any or all
the Collateral; (b) any lien or encumbrance or claim thereof on any or all of
the Collateral; and (c) any attempt to foreclose or otherwise realize upon any
or all of the Collateral under any lien or encumbrance. Borrower will notify
Lender promptly in writing of any of the foregoing and will provide such
information with respect thereto as Lender may from time to time request.
(b) Borrower will defend all assets other than Collateral and the title
and interest therein of Borrower against all matters, including, without
limitation, (a) any attachment, levy, or other seizure by legal process or
otherwise of any or all of such assets; (b) any lien or encumbrance or claim
thereof on any or all of such assets; and (c) any attempt to foreclose, conduct
a trustee's sale, or otherwise realize upon any or all of such assets under any
lien or encumbrance or claim thereof on any of all of such assets. Borrower will
notify Lender promptly in writing of any of the foregoing and will provide such
information with respect thereto as Lender may from time to time request.
SECTION 6.24. YEAR 2000 COMPLIANCE. Borrower covenants and agrees with Lender
that, while any Loan Document is in effect, Borrower will furnish such
additional information, statements and other reports with respect to Borrower's
activities, course of action and progress towards becoming Year 2000 Compliant
as Lender may request from time to time.
ARTICLE VII
NEGATIVE COVENANTS
Each Borrower covenants and agrees that so long as Borrower may borrow hereunder
and until payment in full of the Note and performance of all other obligations
of the Borrower under the Loan Documents:
SECTION 7.1. BORROWING. Borrower will not create, incur, assume or suffer to
exist any liability for Borrowed Money except: (i) indebtedness to Lender; (ii)
indebtedness of Borrower secured by mortgages, encumbrances or liens expressly
permitted by Section 7.3 hereof; (iii) accounts payable to trade creditors and
current operating expenses (other than for borrowed money) which are not aged
more than one hundred twenty (120) days from the billing date or more than
thirty (30) days from the due date, in each case incurred in the ordinary course
of business and paid within such time period, unless the same are being
contested in good faith and by appropriate and lawful proceedings, and Borrower
shall have set aside such reserves, if any, with respect thereto as are required
by GAAP and deemed adequate by Borrower and its independent accountants; and
(iv) borrowings incurred in the ordinary course of its business and not
exceeding $250,000.00 in the aggregate outstanding at any one time. Borrower
will not make prepayments on any existing or future indebtedness for Borrowed
Money to any Person (other than Lender, to the extent permitted by this
Agreement or any subsequent agreement between Borrower and Lender).
31
SECTION 7.2. JOINT VENTURES. Borrower will not invest directly or indirectly in
any joint venture for any purpose without the prior written notice to, and the
express written consent of, Lender, which consent may be withheld in Lender's
sole discretion.
SECTION 7.3. LIENS AND ENCUMBRANCES. Borrower will not create, incur, assume or
suffer to exist any mortgage, pledge, lien or other encumbrance of any kind
(including the charge upon property purchased under a conditional sale or other
title retention agreement) upon, or any security interest in, any of its
Collateral, whether now owned or hereafter acquired, except as described on
SCHEDULE 1.36 and SCHEDULE 4.19.
SECTION 7.4. RESTRICTION ON FUNDAMENTAL CHANGES. Borrower will not (a) enter
into any merger or consolidation with any Person without the prior written
consent of the Lender, which consent shall not be unreasonably withheld, (b)
acquire all or substantially all of the assets of any Person, unless such
acquisition is done for a commercially reasonable price, and with the purpose of
expanding Borrower's existing business or entering into new businesses that are
reasonably related to Borrower's existing business, or (c) sell, lease, or
otherwise dispose of any of its assets except in the ordinary course of its
business (such prohibition to include, without limitation, the transfer of any
nursing home or other healthcare facility from any entity comprising Borrower to
any other entity comprising Borrower or any other Affiliate of Unison Healthcare
Corporation) without the prior written consent of the Lender, which consent
shall not be unreasonably withheld. Consistent with the foregoing, until the
Obligations are repaid in full none of the entities comprising Borrower shall
transfer, assign, convey or grant to any other Person the right to operate or
control any of the nursing homes listed on SCHEDULE 4.15, whether by lease,
sublease, management agreement, joint venture agreement or otherwise.
SECTION 7.5. SALE AND LEASEBACK. Except to the extent permitted by Section 7.1,
Borrower will not, directly or indirectly, enter into any arrangement whereby
Borrower sells or transfers all or any part of its assets and thereupon and
within one year thereafter rents or leases the assets so sold or transferred
without the prior written notice to, and the express written consent of, Lender,
which consent may be withheld in Lender's sole discretion.
SECTION 7.6. DIVIDENDS AND MANAGEMENT FEES. Except under the circumstances
described in SCHEDULE 7.6, Borrower will not declare or pay any dividends,
purchase, redeem or otherwise acquire for value any of its outstanding stock, or
return any capital of its stockholders, nor shall Borrower pay or become
obligated to pay management fees or fees of a similar nature to any Person;
PROVIDED, HOWEVER, that so long as no Event of Default has occurred hereunder,
Borrower may make any such dividends or purchase, redeem or otherwise acquire
such outstanding stock, return any such capital, or pay any such management
fees, so long as doing so would not violate any of the other terms and
conditions of this Agreement.
SECTION 7.7. LOANS. Borrower will not make loans or advances to any Person,
other than (i) trade credit extended in the ordinary course of its business,
(ii) advances for business travel and similar temporary advances in the ordinary
course of business to officers, stockholders, directors, and employees, or (iii)
32
loans or advances in the ordinary course of business from one entity comprising
Borrower to another entity comprising Borrower.
SECTION 7.8. CONTINGENT LIABILITIES. Borrower will not assume, guarantee,
endorse, contingently agree to purchase or otherwise become liable upon the
obligation of any Person, except (a) for guarantees of indebtedness otherwise
permitted by Section 7.1, or (b) by the endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
business.
SECTION 7.9. SUBSIDIARIES. Borrower will not form any subsidiary or other Person
except for the purpose of expanding Borrower's existing business or entering
into new businesses that are reasonably related to Borrower's business, and will
not make any investment in or any loan in the nature of an investment to, any
other Person.
SECTION 7.10. COMPLIANCE WITH ERISA. Borrower will not permit with respect to
any Plan covered by Title IV of ERISA any Prohibited Transaction or any
Reportable Event.
SECTION 7.11. CERTIFICATES OF NEED. Borrower will not seek to, or otherwise,
amend, alter or suspend or terminate or make provisional in any material way,
any certificate of need or provider number without the prior written consent of
Lender.
SECTION 7.12. TRANSACTIONS WITH AFFILIATES. Except as otherwise expressly
permitted by this Agreement, Borrower will not enter into any transaction,
including without limitation the purchase, sale, or exchange of property, or the
loaning or giving of funds to any Affiliate or subsidiary, except in the
ordinary course of business and pursuant to the reasonable requirements of
Borrower's business and upon terms substantially the same and no less favorable
to Borrower as it would obtain in a comparable arm's length transaction with any
Person not an Affiliate or subsidiary, and so long as the transaction is not
otherwise prohibited hereunder. For purposes of the foregoing, Lender consents
to the transactions described on SCHEDULE 7.12.
SECTION 7.13. USE OF LENDER'S NAME. Borrower will not use Lender's name (or the
name of any of Lender's affiliates) in connection with any of its business
operations. Borrower may disclose to third parties that Borrower has a borrowing
relationship with Lender. Nothing herein contained is intended to permit or
authorize Borrower to make any contract on behalf of Lender.
SECTION 7.14. CHANGE IN CAPITAL STRUCTURE. There shall occur no change in the
Borrower's capital structure, or change in control of Borrower through a change
in the ownership of Borrower's capital stock, both as set forth in SCHEDULE
4.17. For so long as this Agreement remains in effect ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall be
engaged full-time in the management and operation of Borrower's business.
SECTION 7.15. CONTRACTS AND AGREEMENTS. Borrower will not become or be a party
to any contract or agreement which would breach this Agreement, or breach any
other instrument, agreement, or document to which Borrower is a party or by
which it is or may be bound.
33
SECTION 7.16. MARGIN STOCK. Borrower will not carry or purchase any "margin
security" within the meaning of Regulations U, G, T or X of the Board of
Governors of the Federal Reserve System.
SECTION 7.17. TRUTH OF STATEMENTS AND CERTIFICATES. Borrower will not furnish to
Lender any certificate or other document that contains any untrue statement of a
material fact or that omits to state a material fact necessary to make it not
misleading in light of the circumstances under which it was furnished.
SECTION 7.18. CENSUS. With respect to any twelve (12) month period during the
Term, Borrower will not allow the average patient census for such 12-month
period, on an aggregate basis at all facilities listed in SCHEDULE 4.15 attached
hereto and made a part hereof, to fall below ninety percent (90%) of the overall
patient occupancy rate at all facilities listed in SCHEDULE 4.15 as of the
Closing Date.
SECTION 7.19. PROHIBITION ON AMENDMENTS TO ORGANIZATIONAL DOCUMENTS. No Borrower
will amend, modify, restate, supplement, or terminate its respective certificate
of incorporation or bylaws (or other organizational documents) in any manner
that would materially affect the validity and enforceability of the Obligations
or such Borrower's ability to borrow hereunder, or that would materially impair
any security for the Obligations.
SECTION 7.20. NAME, FISCAL YEAR AND ACCOUNTING METHOD. No Borrower shall change
its name, fiscal year or accounting methods except as required by GAAP.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. EVENTS OF DEFAULT. Each of the following (individually, an "Event
of Default" and collectively, the "Events of Default") shall constitute an event
of default hereunder:
(a) A default in the payment of any installment of principal of, or
interest upon, the Note when due and payable, whether at maturity or otherwise,
which default shall have continued unremedied for a period of five (5) days
after written notice thereof from Lender to Borrower;
(b) A default in the payment of any other charges, fees, or other monetary
obligations owing to Lender arising out of or incurred in connection with this
Agreement when such payment is due and payable, which default shall have
continued unremedied for a period of five (5) days after written notice from
Lender;
(c) A default in the due observance or performance by Borrower of any
other term, covenant or agreement contained in any of the Loan Documents, which
default shall have continued unremedied for a period of thirty (30) days after
written notice from Lender;
34
(d) If any representation or warranty made by Borrower herein or in any of
the other Loan Documents, any financial statement, or any statement or
representation made in any other certificate, report or opinion delivered in
connection herewith or therewith proves to have been incorrect or misleading in
any material respect when made, which default shall have continued unremedied
for a period of thirty (30) days after written notice from Lender;
(e) If any obligation of Borrower (other than its Obligations hereunder)
for the payment of Borrowed Money in excess of $50,000.00 is not paid when due
or within any applicable grace period, or such obligation becomes or is declared
to be due and payable prior to the expressed maturity thereof, or there shall
have occurred a monetary default which, with the giving of notice or lapse of
time, or both, would cause any such obligation to become, or allow any such
obligation to be declared to be, due and payable;
(f) If Borrower makes an assignment for the benefit of creditors, offers a
composition or extension to creditors, or makes or sends notice of an intended
bulk sale of any business or assets now or hereafter conducted by Borrower;
(g) If Borrower files a petition in bankruptcy, is adjudicated insolvent
or bankrupt, petitions or applies to any tribunal for any receiver of or any
trustee for itself or any substantial part of its property, commences any
proceeding relating to itself under any reorganization, arrangement,
readjustment or debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect, or there is commenced against
Borrower any such proceeding which remains undismissed for a period of sixty
(60) days, or any Borrower by any act indicates its consent to, approval of, or
acquiescence in, any such proceeding or the appointment of any receiver of or
any trustee for a Borrower or any substantial part of its property, or suffers
any such receivership or trusteeship to continue undischarged for a period of
sixty (60) days;
(h) If one or more final judgments against Borrower or attachments against
its property not fully and unconditionally covered by insurance shall be
rendered by a court of record and shall remain unpaid, unstayed on appeal,
undischarged, unbonded and undismissed for a period of ten (10) days;
(i) A Reportable Event which might constitute grounds for termination of
any Plan covered by Title IV of ERISA or for the appointment by the appropriate
United States District Court of a trustee to administer any such Plan or for the
entry of a lien or encumbrance to secure any deficiency, has occurred and is
continuing thirty (30) days after its occurrence, or any such Plan is
terminated, or a trustee is appointed by an appropriate United States District
Court to administer any such Plan, or the Pension Benefit Guaranty Corporation
institutes proceedings to terminate any such Plan or to appoint a trustee to
administer any such Plan, or a lien or encumbrance is entered to secure any
deficiency or claim;
(j) If any outstanding stock of Borrower is sold or otherwise transferred
by the Person owning such stock on the date hereof, PROVIDED, HOWEVER, THAT this
provision will not be violated such that an Event of Default has occurred if
publicly traded stock of Borrower Unison Healthcare Corporation is bought and
sold in ordinary course by non-insider stockholders of that entity;
35
(k) If there shall occur any uninsured damage to or loss, theft or
destruction of any portion of the Collateral;
(l) If Borrower breaches or violates the terms of, or if a default or an
event which could, whether with notice or the passage of time, or both,
constitute a default, occurs under any other existing or future agreement
(related or unrelated) between Borrower and Lender;
(m) Upon the issuance of any execution or distraint process against
Borrower or any of its property or assets;
(n) If Borrower ceases any material portion of its business operations as
presently conducted;
(o) If any indication or evidence is received by Lender that Borrower may
have directly or indirectly been engaged in any type of activity which, in
Lender's discretion, might result in the forfeiture of any property of Borrower
to any Governmental Authority, which default shall have continued unremedied for
a period of ten (10) days after written notice from Lender;
(p) Borrower or any Affiliate of Borrower, shall challenge or contest, in
any action, suit or proceeding, the validity or enforceability of this
Agreement, or any of the other Loan Documents, the legality or the
enforceability of any of the Obligations or the perfection or priority of any
Lien granted to Lender;
(q) Borrower shall be criminally indicted or convicted under any law that
could lead to a forfeiture of any Collateral.
(r) There shall occur a material adverse change in the financial condition
or business prospects of Borrower, or if Lender in good ▇▇▇▇▇ ▇▇▇▇▇ itself
insecure as a result of acts or events bearing upon the financial condition of
Borrower or the repayment of the Note, which default shall have continued
unremedied for a period of ten (10) days after written notice from Lender.
(s) The occurrence of any event of default under the New LOC I Agreement
or related loan and security documents.
(t) If Borrower fails to pay all amounts owing under Section 2.1(e) with
respect to any draw on a Letter of Credit within five (5) Business Days after
receiving written notice from Lender of the draw on the Letter of Credit,
provided, however, that Borrower may use a Revolving Credit Loan to fund any
such payments to Lender if and to the extent credit is otherwise available to
Borrower under the terms and conditions of this Agreement.
SECTION 8.2. ACCELERATION. Upon the occurrence of any of the foregoing Events of
Default, the Note shall become and be immediately due and payable upon
declaration to that effect delivered by Lender to Borrower; provided that, upon
the happening of any event specified in Section 8.1.(g) hereof, the Note shall
36
be immediately due and payable without declaration or other notice to Borrower.
SECTION 8.3. REMEDIES.
(a) In addition to all other rights, options, and remedies granted to
Lender under this Agreement, upon the occurrence of an Event of Default Lender
may (i) suspend, or halt forever, any of its obligations under this Agreement to
make advances to Borrower, (ii) terminate this Agreement, whereupon all
outstanding Obligations shall be immediately due and payable, (iii) exercise all
other rights granted to it hereunder and all rights under the Uniform Commercial
Code in effect in the applicable jurisdiction(s) and under any other applicable
law, and/or (iv) exercise all rights and remedies under all Loan Documents now
or hereafter in effect, including the following rights and remedies (which list
is given by way of example and is not intended to be an exhaustive list of all
such rights and remedies):
(i) The right to take possession of, send notices regarding, and
collect directly the Collateral, with or without judicial process, and to
exercise all rights and remedies available to Lender with respect to the
Collateral under the Uniform Commercial Code in effect in the jurisdiction(s) in
which such Collateral is located;
(ii) Subject to applicable law regarding Medicaid/Medicare Account
Debtors, Lender shall have the additional rights and remedies with respect to
the Accounts, all of which may be exercised with or without further notice to
Borrower: to notify any and all parties to any of the Accounts that the same
have been assigned to Lender and that all performance thereunder shall
thereafter be rendered to Lender; to renew, extend, modify, amend, accelerate,
accept partial performance on, release, settle, compromise, compound, collect or
otherwise liquidate or deal with, on terms acceptable to Lender, in whole or in
part, the Accounts and all of Borrower's rights or interests therein; to enter
into any other agreement relating to or affecting the Accounts; to enforce
performance and prosecute any action or proceeding with respect to any and all
of the Accounts, and take or bring, in Lender's name or in the name of Borrower,
all steps, actions, suits or proceedings deemed by Lender necessary or desirable
with respect to the Accounts; and to exercise all other rights, powers and
remedies of Lender with respect to the Accounts; provided, however, that Lender
shall have no liability or responsibility for any act or omission taken with
respect thereto. Borrower hereby nominates and appoints Lender as
attorney-in-fact to perform all acts and execute all documents deemed necessary
by Lender in furtherance of the terms hereof;
(iii) The right to (by its own means or with judicial assistance)
enter any of Borrower's premises and take possession of the Collateral, or
render it unusable, or dispose of the Collateral on such premises in compliance
with subsection (b), without any liability for rent, storage, utilities, or
other sums, and Borrower shall not resist or interfere with such action;
(iv) The right to require Borrower at Borrower's expense to assemble
all or any part of the Collateral and make it available to Lender at any place
designated by Lender;
37
(v) The right to reduce the Maximum Loan Amount or to use the
Collateral and/or funds in the Concentration Account in amounts up to the
Maximum Loan Amount for any reason; and
(vi) The right to relinquish or abandon any Collateral or any security
interest therein.
(b) Borrower agrees that a notice received by it at least five (5) days
before the time of any intended public sale, or the time after which any private
sale or other disposition of the Collateral is to be made, shall be deemed to be
reasonable notice of such sale or other disposition. If permitted by applicable
law, any perishable Collateral which threatens to speedily decline in value or
which is sold on a recognized marked may be sold immediately by Lender without
prior notice to Borrower. At any sale or disposition of Collateral, Lender may
(to the extent permitted by applicable law) purchase all or any part of the
Collateral, free from any right of redemption by Borrower, which right is hereby
waived and released. At any sale or disposition of Collateral, Lender may (to
the extent permitted by applicable law) purchase all or any part of the
Collateral, free from any right of redemption by Borrower, which right is hereby
waived and released. Borrower covenants and agrees not to interfere with or
impose any obstacle to Lender's exercise of its rights and remedies with respect
to the Collateral.
SECTION 8.4. NATURE OF REMEDIES. Lender shall have the right to proceed against
all or any portion of the Collateral to satisfy in any order the liabilities and
Obligations of Borrower to Lender. All rights and remedies granted Lender
hereunder and under any agreement referred to herein, or otherwise available at
law or in equity, shall be deemed concurrent and cumulative, and not alternative
remedies, and Lender may proceed with any number of remedies at the same time
until the Loans, and all other existing and future liabilities and obligations
of Borrower to Lender, are satisfied in full. The exercise of any one right or
remedy shall not be deemed a waiver or release of any other right or remedy, and
Lender, upon the occurrence of an Event of Default, may proceed against
Borrower, and/or the Collateral, at any time, under any agreement, with any
available remedy and in any order.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. EXPENSES AND TAXES.
(a) Borrower agrees to pay, whether or not the Closing occurs, a
reasonable documentation preparation fee, together with actual audit and
appraisal fees and all other out-of-pocket charges and expenses incurred by
Lender in connection with the negotiation, preparation, legal review and
execution of each of the Loan Documents. In addition, Borrower shall pay all
such fees associated with any amendments to the Loan Documents following
Closing.
38
(b) Borrower shall pay all taxes (other than taxes based upon or measured
by Lender's income or revenues or any personal property tax), if any, in
connection with the issuance of the Note and the recording of the security
documents therefor. The obligations of Borrower under this clause (b) shall
survive the payment of Borrower's indebtedness hereunder and the termination of
this Agreement.
SECTION 9.2. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the other Loan
Documents constitute the full and entire understanding and agreement among the
parties with regard to their subject matter and supersede all prior written or
oral agreements, understandings, representations and warranties made with
respect thereto. No amendment, supplement or modification of this Agreement nor
any waiver of any provision thereof shall be made except in writing executed by
the party against whom enforcement is sought.
SECTION 9.3. NO WAIVER; CUMULATIVE RIGHTS. No waiver by any party hereto of any
one or more defaults by the other party in the performance of any of the
provisions of this Agreement shall operate or be construed as a waiver of any
future default or defaults, whether of a like or different nature. No failure or
delay on the part of any party in exercising any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to any party hereto at law, in equity or
otherwise.
SECTION 9.4. NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and personally delivered, mailed by registered or
certified mail (return receipt requested and postage prepaid), sent by
telecopier (with a confirming copy sent by regular mail), or sent by prepaid
overnight courier service, and addressed to the relevant party at its address
set forth below, or at such other address as such party may, by written notice,
designate as its address for purposes of notice hereunder:
39
(a) If to Lender, at:
HCFP Funding, Inc.
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
and a copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ Lang, P.A.
Renaissance ▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Borrower, at:
c/o RainTree HealthCare Corporation
▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Treasurer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
And a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Jordan ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If mailed, notice shall be deemed to be given five (5) days after being sent, if
sent by personal delivery or telecopier, notice shall be deemed to be given when
delivered, and if sent by prepaid courier, notice shall be deemed to be given on
the next Business Day following deposit with the courier.
40
SECTION 9.5. SEVERABILITY. If any term, covenant or condition of this Agreement,
or the application of such term, covenant or condition to any party or
circumstance shall be found by a court of competent jurisdiction to be, to any
extent, invalid or unenforceable, the remainder of this Agreement and the
application of such term, covenant, or condition to parties or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term, covenant or condition shall be valid and
enforced to the fullest extent permitted by law. Upon determination that any
such term is invalid, illegal or unenforceable, the parties hereto shall amend
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner.
SECTION 9.6. SUCCESSORS AND ASSIGNS. This Agreement, the Note, and the other
Loan Documents shall be binding upon and inure to the benefit of Borrower and
Lender and their respective successors and assigns. Notwithstanding the
foregoing, Borrower may not assign any of its rights or delegate any of its
obligations hereunder without the prior written consent of Lender, which may be
withheld in its sole discretion. Lender may sell, assign, transfer, or
participate any or all of its rights or obligations hereunder with ten calendar
days' notice to, but without requiring the consent of, Borrower.
SECTION 9.7. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one instrument.
SECTION 9.8. INTERPRETATION. No provision of this Agreement or any other Loan
Document shall be interpreted or construed against any party because that party
or its legal representative drafted that provision. The titles of the paragraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement. Any pronoun used in this Agreement
shall be deemed to include singular and plural and masculine, feminine and
neuter gender as the case may be. The words "herein," "hereof," and "hereunder"
shall be deemed to refer to this entire Agreement, except as the context
otherwise requires.
SECTION 9.9. SURVIVAL OF TERMS. All covenants, agreements, representations and
warranties made in this Agreement, any other Loan Document, and in any
certificates and other instruments delivered in connection therewith shall be
considered to have been relied upon by Lender and shall survive the making by
Lender of the Loans herein contemplated and the execution and delivery to Lender
of the Note, and shall continue in full force and effect until all liabilities
and obligations of Borrower to Lender are satisfied in full.
SECTION 9.10. RELEASE OF LENDER. Borrower releases Lender, its officers,
employees, and agents, of and from any claims for loss or damage resulting from
acts or conduct of any or all of them, unless caused by Lender's recklessness,
gross negligence, or willful misconduct.
SECTION 9.11. TIME. Whenever Borrower is required to make any payment or perform
any act on a Saturday, Sunday, or a legal holiday under the laws of the State of
Maryland (or other jurisdiction where Borrower is required to make the payment
or perform the act), the payment may be made or the act performed on the next
41
Business Day. Time is of the essence in Borrower's performance under this
Agreement and all other Loan Documents.
SECTION 9.12. COMMISSIONS. The transaction contemplated by this Agreement was
brought about by Lender and Borrower acting as principals and without any
brokers, agents, or finders being the effective procuring cause. Borrower
represents that it has not committed Lender to the payment of any brokerage fee,
commission, or charge in connection with this transaction. If any such claim is
made on Lender by any broker, finder, or agent or other person, Borrower will
indemnify, defend, and hold Lender harmless from and against the claim and will
defend any action to recover on that claim, at Borrower's cost and expense,
including Lender's counsel fees. Borrower further agrees that until any such
claim or demand is adjudicated in Lender's favor, the amount demanded will be
deemed a liability of Borrower under this Agreement, secured by the Collateral.
SECTION 9.13. THIRD PARTIES. No rights are intended to be created hereunder or
under any other Loan Document for the benefit of any third party donee,
creditor, or incidental beneficiary of Borrower. Nothing contained in this
Agreement shall be construed as a delegation to Lender of Borrower's duty of
performance, including without limitation Borrower's duties under any account or
contract in which Lender has a security interest.
SECTION 9.14. DISCHARGE OF BORROWER'S OBLIGATIONS. Lender, in its reasonable
discretion, shall have the right at any time, and from time to time, without
prior notice to Borrower if Borrower fails to do so, to: (a) obtain insurance
covering any of the Collateral as required hereunder; (b) pay for the
performance of any of Borrower's obligations hereunder; (c) discharge taxes,
liens, security interests, or other encumbrances at any time levied or placed on
any of the Collateral in violation of this Agreement unless Borrower is in good
faith with due diligence by appropriate proceedings contesting those items; and
(d) pay for the maintenance and preservation of any of the Collateral. Expenses
and advances shall be added to the Loan, until reimbursed to Lender and shall be
secured by the Collateral. Such payments and advances by Lender shall not be
construed as a waiver by Lender of an Event of Default.
SECTION 9.15. INFORMATION TO PARTICIPANTS. Lender may divulge to any participant
it may obtain in the Loan, or any portion thereof, all information, and furnish
to such participant copies of reports, financial statements, certificates, and
documents obtained under any provision of this Agreement or any other Loan
Document.
SECTION 9.16. INDEMNITY. Borrower hereby agrees to indemnify and hold harmless
Lender, its partners, officers, agents and employees (collectively,
"Indemnitee") from and against any liability, loss, cost, expense, claim,
damage, suit, action or proceeding ever suffered or incurred by Lender
(including reasonable attorneys' fees and expenses) arising from Borrower's
failure to observe, perform or discharge any of its covenants, obligations,
agreements or duties hereunder, or from the breach of any of the representations
or warranties contained in Article IV hereof. In addition, with the exception of
claims asserted in the motion for approval of debtor in possession financing,
Borrower shall defend Indemnitee against and save it harmless from all claims of
any Person with respect to the Collateral. Notwithstanding any contrary
42
provision in this Agreement, the obligation of Borrower under this Section 9.16
shall survive the payment in full of the Obligations and the termination of this
Agreement.
SECTION 9.17. CHOICE OF LAW; CONSENT TO JURISDICTION. THIS AGREEMENT AND THE
NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF MARYLAND, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE PRINCIPLES OF
CONFLICTS OF LAWS. IF ANY COLLECTION ACTION ARISING OUT OF THIS AGREEMENT OR THE
NOTE IS COMMENCED BY LENDER IN THE STATE OF MARYLAND OR FEDERAL COURT LOCATED IN
THE STATE OF MARYLAND, BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY SUCH
COURT IN ANY SUCH ACTION AND TO THE LAYING OF VENUE IN THE STATE OF MARYLAND.
ANY PROCESS IN ANY SUCH ACTION SHALL BE DULY SERVED IF MAILED BY REGISTERED
MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS DESCRIBED IN SECTION 9.4
HEREOF.
SECTION 9.18. WAIVER OF TRIAL BY JURY. BORROWER HEREBY (A) COVENANTS AND AGREES
NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (B)
WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL
NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY
GIVEN, KNOWINGLY AND VOLUNTARILY, BY BORROWER, AND THIS WAIVER IS INTENDED TO
ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A
JURY TRIAL WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED AND REQUESTED TO
SUBMIT THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER
AND THE PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF BORROWER'S
WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, BORROWER HEREBY CERTIFIES THAT NO
REPRESENTATIVE OR AGENT OF LENDER (INCLUDING LENDER'S COUNSEL) HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, TO BORROWER THAT LENDER WILL NOT SEEK TO ENFORCE THIS
WAIVER OF RIGHT TO JURY TRIAL PROVISION.
SECTION 9.19. CONFESSION OF JUDGMENT. BORROWER AUTHORIZES ANY ATTORNEY ADMITTED
TO PRACTICE BEFORE ANY COURT OF RECORD IN THE UNITED STATES OR THE CLERK OF SUCH
COURT TO APPEAR ON BEHALF OF BORROWER IN ANY COURT IN ONE OR MORE PROCEEDINGS,
OR BEFORE ANY CLERK THEREOF OF PROTHONOTARY OR OTHER COURT OFFICIAL, AND TO
CONFESS JUDGMENT AGAINST BORROWER IN FAVOR OF LENDER IN THE FULL AMOUNT DUE ON
THIS AGREEMENT (INCLUDING PRINCIPAL, ACCRUED INTEREST AND ANY AND ALL CHARGES,
FEES AND COSTS) PLUS ATTORNEYS' FEES EQUAL TO FIFTEEN PERCENT (15%) OF THE
AMOUNT DUE, PLUS COURT COSTS, ALL WITHOUT PRIOR NOTICE OR OPPORTUNITY OF
BORROWER FOR PRIOR HEARING. BORROWER AGREES AND CONSENTS THAT VENUE AND
JURISDICTION SHALL BE PROPER IN THE CIRCUIT COURT OF ANY COUNTY OF THE STATE OF
MARYLAND OR OF BALTIMORE CITY, MARYLAND, OR IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND. BORROWER WAIVES THE BENEFIT OF ANY AND EVERY
43
STATUTE, ORDINANCE, OR RULE OF COURT WHICH MAY BE LAWFULLY WAIVED CONFERRING
UPON BORROWER ANY RIGHT OR PRIVILEGE OF EXEMPTION, HOMESTEAD RIGHTS, STAY OF
EXECUTION, OR SUPPLEMENTARY PROCEEDINGS, OR OTHER RELIEF FROM THE ENFORCEMENT OR
IMMEDIATE ENFORCEMENT OF A JUDGMENT OR RELATED PROCEEDINGS ON A JUDGMENT. THE
AUTHORITY AND POWER TO APPEAR FOR AND ENTER JUDGMENT AGAINST BORROWER SHALL NOT
BE EXHAUSTED BY ONE OR MORE EXERCISES THEREOF, OR BY ANY IMPERFECT EXERCISE
THEREOF, AND SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT ENTERED PURSUANT THERETO;
SUCH AUTHORITY AND POWER MAY BE EXERCISED ON ONE OR MORE OCCASIONS FROM TIME TO
TIME, IN THE SAME OR DIFFERENT JURISDICTIONS, AS OFTEN AS LENDER SHALL DEEM
NECESSARY, CONVENIENT, OR PROPER.
44
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first written above.
ATTEST: HCFP FUNDING, INC.,
a Delaware corporation
By: By:
---------------------------- --------------------------------
Name: Name:
Title: Title:
ATTEST: RAINTREE HEALTHCARE CORPORATION,
a Delaware corporation
By: By:
---------------------------- --------------------------------
Name: Name:
Title: Title:
ATTEST: BRITWILL HEALTHCARE COMPANY, a
Delaware corporation
By: By:
---------------------------- --------------------------------
Name: Name:
Title: Title:
ATTEST: BRITWILL FUNDING CORPORATION,
a Delaware corporation
By: By:
---------------------------- --------------------------------
Name: Name:
Title: Title:
45
ATTEST: CEDAR CARE, INC., an Indiana corporation
By: By:
---------------------------- --------------------------------
Name: Name:
Title: Title:
ATTEST: SHERWOOD HEALTHCARE CORP., an
Indiana corporation
By: By:
---------------------------- --------------------------------
Name: Name:
Title: Title:
ATTEST: BRITWILL INVESTMENTS-I, INC.,
a Delaware corporation
By: By:
---------------------------- --------------------------------
Name: Name:
Title: Title:
ATTEST: BRITWILL INVESTMENTS-II, INC.,
a Delaware corporation
By: By:
---------------------------- --------------------------------
Name: Name:
Title: Title:
ATTEST: BRITWILL INDIANA PARTNERSHIP.,
an Arizona general partnership
By: By:
---------------------------- --------------------------------
Name: Name:
Title: Title:
46
ATTEST: ▇▇▇▇▇▇▇▇▇▇ HOUSE, INC., a Colorado
corporation (f/k/a ▇▇▇▇▇▇ Circle, Inc.)
By: By:
---------------------------- --------------------------------
Name: Name:
Title: Title:
ATTEST: ▇▇▇▇▇▇▇▇▇▇▇ NURSING CENTER, INC., a
Colorado corporation
By: By:
---------------------------- --------------------------------
Name: Name:
Title: Title:
ATTEST: AMBERWOOD COURT, INC., a Colorado
corporation (f/k/a Valley Hi, Inc.)
By: By:
---------------------------- --------------------------------
Name: Name:
Title: Title:
ATTEST: THE ARBORS HEALTH CARE
CORPORATION, an Arizona corporation
By: By:
---------------------------- --------------------------------
Name: Name:
Title: Title:
ATTEST: LOS ▇▇▇▇▇, INC., a Colorado corporation
By: By:
---------------------------- --------------------------------
Name: Name:
Title: Title:
47
ATTEST: PUEBLO NORTE, INC., a Colorado
corporation (f/k/a Signature Health
Care of California Corporation)
By: By:
---------------------------- --------------------------------
Name: Name:
Title: Title:
ATTEST: RIO VERDE NURSING CENTER, INC., a
Colorado corporation
By: By:
---------------------------- --------------------------------
Name: Name:
Title: Title:
ATTEST: SIGNATURE HEALTH CARE CORPORATION, a
Delaware corporation
By: By:
---------------------------- --------------------------------
Name: Name:
Title: Title:
ATTEST: SIGNATURE MANAGEMENT GROUP, INC., a
Colorado corporation
By: By:
---------------------------- --------------------------------
Name: Name:
Title: Title:
48
LIST OF EXHIBITS
Exhibit A - Form of Revolving Credit Note
Exhibit B - INTENTIONALLY DELETED
Exhibit C - Opinion Letter from Borrower's Counsel
Exhibit D - Form of Estoppel Certificate
49
LIST OF SCHEDULES
Schedule 1.36 - Permitted Liens
Schedule 4.1 - Subsidiaries
Schedule 4.5 - Litigation
Schedule 4.6 - Loan Defaults to be Discharged
Schedule 4.7 - Tax Identification Numbers
Schedule 4.10 - Taxes
Schedule 4.13 - Non-Compliance with Law
Schedule 4.14 - Environmental Matters
Schedule 4.15 - Places of Business with patient census
Schedule 4.16 - Licenses
Schedule 4.17 - Stock Ownership
Schedule 4.19 - Borrowings and Guarantees
Schedule 4.21 - Trade Names
Schedule 4.22 - Joint Ventures
Schedule 7.6 - Dividends and Management Fees
Schedule 7.12 - Transactions with Affiliates
50