Exhibit 10.1
$2,000,000.00
LOAN AND SECURITY AGREEMENT
---------------------------
by and between
STAR MULTI CARE SERVICES, INC. (NY)
AMSERV HEALTH CARE OF OHIO, INC.
AMSERV HEALTH CARE OF NEW JERSEY, INC.
EFCC ACQUISITION CORP.
("Borrower")
and
▇▇▇▇▇▇ HEALTHCARE FINANCE, INC.
("Lender")
August ____ , 2001
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") is made as of August
31, 2001, by and among STAR MULTI CARE SERVICES, INC., a New York
corporation, AMSERV HEALTH CARE OF OHIO, INC., a Delaware corporation, AMSERV
HEALTH CARE OF NEW JERSEY, INC., a Delaware corporation, and EFCC ACQUISITION
CORP., a New York corporation (collectively, "Borrower"), and ▇▇▇▇▇▇ HEALTHCARE
FINANCE, 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. The parties desire to define the terms and conditions of their
relationship and to reduce their agreements to writing.
NOW, THEREFORE, in consideration of the promises and covenants contained
in this Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties covenant and agree
as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, unless otherwise specified, all references to
"Sections" shall be deemed to refer to Sections of this Agreement, and the
following terms shall have the meanings set forth below:
Section 1.1. Account. "Account" means any right to payment of a monetary
obligation, whether or not earned by performance, including, but not limited to,
the right to payment of management fees, but not including proceeds of any tax
refund or exercise of stock options. Without limiting the generality of the
foregoing, the term "Account" shall further include any "account" (as that term
is defined in the Uniform Commercial Code now or hereafter in effect), any
accounts receivable, any "health-care-insurance receivables" (as that term is
defined in the Uniform Commercial Code now or hereafter in effect), any "payment
intangibles" (as that term is defined in the Uniform Commercial Code now or
hereafter in effect) and all other rights to payment of every kind and
description, 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.
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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 or other entity if the Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and business of the
corporation or other entity, whether through the ownership of voting securities,
by contract, or otherwise. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ shall be deemed an Affiliate of
each entity comprising the Borrower regardless of whether he or she meets the
foregoing definition of Affiliate.
Section 1.4. Affiliated Loan Documents. "Affiliated Loan Documents" shall
mean any and all documents evidencing, securing and/or governing any financing
provided by Lender or Lender's Affiliates to Borrower, Guarantor or any
Affiliate of Borrower or Guarantor, as the same may be amended, modified,
increased, renewed or restated from time to time.
Section 1.5. Agreement. "Agreement" means this Loan and Security
Agreement, as it may be amended or supplemented from time to time, together with
all attachments, exhibits, schedules, riders and addenda, all of which are
incorporated herein by this reference and made a part hereof.
Section 1.6. Base Rate. "Base Rate" means a rate of interest equal to one
percent (1.0%) per annum above the "Prime Rate of Interest".
Section 1.7. Borrowed Money. "Borrowed Money" means, with respect to any
Person, without duplication (a) all indebtedness for borrowed money, (b) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, or upon which interest payments are customarily made, (c) that
portion of obligations with respect to capital leases that is properly
classified as a liability on a balance sheet in conformity with GAAP, (d) any
obligations of such Person issued or assumed as the deferred purchase price of
property or services purchased by such Person (other than trade debt incurred in
the ordinary course of business and due within six (6) months of the incurrence
thereof or evidenced by a note or other instrument), (e) all Borrowed Money of
others secured by (or for which the holder of such Borrowed Money has an
existing right, contingent or otherwise, to be secured by) any Lien on, or
payable out of the proceeds of production from, any property or asset owned,
held or acquired by such Person regardless of whether the indebtedness secured
thereby shall have been assumed by that Person or is nonrecourse to the credit
of that Person, (f) all guaranty obligations of such Person in respect of any
Borrowed Money of any other person, (g) the maximum amount of all standby
letters of credit issued or bankers' acceptances facilities created for the
account of such Person and, without duplication, all drafts drawn thereunder (to
the extent unreimbursed), (h) the principal balance outstanding under any
synthetic lease, tax retention operating lease, off-balance sheet loan or
similar off-balance sheet financing product plus any accrued interest thereon,
and (i) the Borrowed Money of any partnership or unincorporated joint venture in
which such Person is a general partner or joint venturer.
Section 1.8. Borrower. "Borrower" has the meaning set forth in the
Preamble.
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Section 1.9. Borrowing Base. "Borrowing Base" has the meaning set forth in
Section 2.1(d).
Section 1.10. 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 1.11 [INTENTIONALLY OMITTED]
Section 1.12. Closing; Closing Date. "Closing" and "Closing Date" have the
meanings set forth in Section 5.3.
Section 1.13. Collateral. "Collateral" has the meaning set forth in
Section 3.1.
Section 1.14. Commitment Fee. "Commitment Fee" has the meaning set forth
in Section 2.4(a).
Section 1.15. Concentration Account. "Concentration Account" has the
meaning set forth in Section 2.3.
Section 1.16. Controlled Group. "Controlled Group" means all businesses
that would be treated as a single employer under Section 401(b) of ERISA.
Section 1.17. Default Rate. "Default Rate" means a rate per annum equal to
five percent (5%) per annum above the then applicable Base Rate.
Section 1.18. ERISA. "ERISA" has the meaning set forth in Section 4.12.
Section 1.19. Event of Default. "Event of Default" and "Events of Default"
have the meanings set forth in Section 8.1.
Section 1.20. [INTENTIONALLY OMITTED]
Section 1.21. GAAP. "GAAP" means generally accepted accounting principles
applied in a consistent manner.
Section 1.22. 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.
Section 1.23. Guarantor. "Guarantor" means any Person who may from time to
time guaranty, pledge assets as security for or otherwise become obligated in
respect of the obligations of Borrower under the Loan Documents.
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Section 1.24. Guaranty. "Guaranty" means any guaranty of the obligations
of Borrower under the Loan Documents from time to time outstanding, as the same
may be amended, modified, or supplemented from time to time.
Section 1.25. 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 applicable to Borrower
or its business, operations or assets.
Section 1.26. Highest Lawful Rate. "Highest Lawful Rate" means the maximum
lawful rate of interest referred to in Section 2.7 that may accrue pursuant to
this Agreement.
Section 1.27. HIPAA. "HIPAA" means the Health Insurance Portability and
Accountability Act of 1996, as the same may be amended, modified or supplemented
from time to time, and any successor statute thereto, and any and all rules or
regulations promulgated from time to time thereunder.
Section 1.28. Insurer. "Insurer" means 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 goods or services to a Patient.
Section 1.29. Lender. "Lender" has the meaning set forth in the Preamble.
Section 1.30. Lien. "Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge or other security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement and any capital lease having substantially the same practical effect
as any of the foregoing).
Section 1.31. Loan. "Loan" has the meaning set forth in Section 2.1(a).
Section 1.32. Loan Documents. "Loan Documents" means and includes this
Agreement, the Note, the Certificate of Validity, any Guaranty and each and
every other document now or hereafter delivered by Borrower or any Guarantor in
connection with this Agreement, as any of them may be amended, modified,
increased, renewed or restated from time to time.
Section 1.33. Loan Management Fee. "Loan Management Fee" has the meaning
set forth in Section 2.4(c).
Section 1.34. Lockbox. "Lockbox" has the meaning set forth in Section 2.3.
Section 1.35. Lockbox Account. "Lockbox Account" means an account or
accounts maintained at the Lockbox Bank into which all collections of Accounts
are paid directly.
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Section 1.36. Lockbox Bank. "Lockbox Bank" has the meaning set forth in
Section 2.3.
Section 1.37. Maximum Loan Amount. "Maximum Loan Amount" has the meaning
set forth in Section 2.1(a).
Section 1.38. Medicaid/Medicare Account Debtor. "Medicaid/ Medicare
Account Debtor" means any Account Debtor which is (a) the United States of
America acting under the Medicaid/Medicare program established pursuant to the
Social Security Act, (b) any state or the District of Columbia acting pursuant
to a health plan adopted pursuant to Title XIX of the Social Security Act or (c)
any agent, carrier, administrator or intermediary for any of the foregoing.
Section 1.39. Medical Services. "Medical Services" means 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 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 1.40. [INTENTIONALLY OMITTED]
Section 1.41. Minimum Net Worth. "Minimum Net Worth" shall mean tangible
net worth of $(200,000.00), i.e., negative $200,000.00. "Tangible net worth"
means assets (excluding intangible assets) less liabilities. "Intangible assets"
means all intangible assets (determined in conformity with GAAP) including,
without limitation, goodwill, intellectual property, licenses, organizational
costs, deferred amounts, covenants not to compete, unearned income and
restricted funds.
Section 1.42. Note. "Note" has the meaning set forth in Section 2.1(c).
Section 1.43. Obligations. "Obligations" has the meaning set forth in
Section 3.1.
Section 1.44. 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 1.45. Permitted Liens. "Permitted Liens" means: (a) deposits or
pledges to secure obligations under workmen's compensation, social security or
similar laws, or under unemployment insurance; (b) 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; (c) 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
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reserves have been made (provided that such proceedings do not, in Lender's sole
discretion, involve any substantial risk of the sale, loss or forfeiture of such
property or assets or any interest therein); (d) Liens and encumbrances in favor
of Lender; and (e) Liens set forth on Schedule 1.45.
Section 1.46. 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 1.47. Plan. "Plan" has the meaning set forth in Section 4.12.
Section 1.48. Premises. "Premises" has the meaning set forth in Section
4.14.
Section 1.49. Prime Rate of Interest. "Prime Rate of Interest" means that
rate of interest designated as such by Citibank, N.A., or any successor thereto,
as the same may from time to time fluctuate.
Section 1.50. 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 that is not exempt under Section 407 or
Section 408 of ERISA or Section 4975(c)(2) or (d) of the Internal Revenue Code
or under a class exemption granted by the U.S. Department of Labor.
Section 1.51. 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 (other than Accounts generated by the
New York or New Jersey operations of Borrower) which Lender, in its sole credit
judgment, deems to be a Qualified Account. Without limiting the generality of
the foregoing, no Account shall be a Qualified Account if: (a) the Account or
any portion of the Account is payable by an individual beneficiary, recipient or
subscriber individually and not directly to Borrower by a Medicaid/Medicare
Account Debtor or commercial medical insurance carrier acceptable to Lender in
its sole discretion or indirectly to Borrower pursuant to a subcontract with
another governmental entity, preferred provider organization, case management
organization, hospice or other healthcare provider in any case acceptable to
Lender in its sole discretion; (b) the Account remains unpaid more than one
hundred fifty (150) days past the claim or invoice date (but in no event more
than one hundred sixty-five days (165) days after the applicable Medical
Services have been rendered); (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 the Account arises from the sale of goods by Borrower, the sale
was not an absolute sale, or the sale was made on consignment or on approval or
on a sale-or-return basis, or the sale was made subject to any other repurchase
or return agreement, or the goods have not been shipped to the Account Debtor or
its designee; (f) if the Account arises from the performance of Medical
Services, the Medical Services have not been actually been performed or the
Medical Services were undertaken in violation of any law; (g) the Account is
subject to a Lien other than a Permitted Lien; (h) Borrower knows or should have
known of the bankruptcy, receivership, reorganization,
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or insolvency of the Account Debtor; (i) the Account is evidenced by chattel
paper or an instrument of any kind, or has been reduced to judgment; (j) the
Account 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 thirty percent (30%) of
the aggregate balance of all Accounts owing from the Account Debtor obligated on
the Account are outstanding more than one hundred eighty (180) days past their
invoice date; (m) fifty percent (50%) or more of the aggregate unpaid Accounts
from any single Account Debtor are not deemed Qualified Accounts under this
Agreement; (n) 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 (including Medicaid/Medicare Account Debtors); (o) any
covenant, representation or warranty contained in the Loan Documents with
respect to such Account has been breached; or (p) the Account fails to meet such
other specifications and requirements which may from time to time be established
by Lender.
Section 1.52. Reportable Event. "Reportable Event" means a "reportable
event" as defined in Section 4043(c) of ERISA for which the notice requirements
of Section 4043(a) of ERISA are not waived.
Section 1.53. Revolving Credit Loan. "Revolving Credit Loan" has the
meaning set forth in Section 2.1(b).
Section 1.54. [INTENTIONALLY OMITTED]
Section 1.55. Term. "Term" has the meaning set forth in Section 2.8.
Section 1.56. Termination Fee. "Termination Fee " shall mean a fee payable
upon termination of the Agreement, as yield maintenance for the loss of bargain
and not as a penalty, equal to either (a) if the date of notice of a termination
is on or before the second anniversary of the Closing Date, the greater of (i)
three percent (3%) of the Maximum Loan Amount and (ii) the Yield Maintenance
Amount, but not to exceed five percent (5%) of the Maximum Loan Amount, or (b)
if the date of a notice of termination is after the second anniversary of the
Closing Date and on or before the third anniversary of the Closing Date, the
greater of (i) two percent (2%) of the Maximum Loan Amount and (ii) the Yield
Maintenance Amount, but not to exceed four percent (4%) of the Maximum Loan
Amount.
Section 1.57. Yield Maintenance Amount. "Yield Maintenance Amount" shall
mean the product obtained by multiplying (a) the difference between (i) the all
in effective yield (measured as a percentage per annum) earned by Lender under
this Agreement during the three (3) full calendar months immediately preceding
the Termination Date minus (ii) ▇▇▇▇▇▇ Financial Inc.'s weighted average cost of
capital (measured as a percentage per annum) for the most recent publicly
disclosed quarterly financial period; times (b) the average principal amount of
outstanding Revolving Credit Loans for the three (3) calendar months immediately
preceding the Termination Date; times (c) the quotient of (i) the number of
months (full or partial) then-remaining in the Term, divided by (ii) twelve
(12).
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ARTICLE II
LOAN
Section 2.1. Terms.
(a) The maximum aggregate principal amount of credit extended by
Lender to Borrower under this Agreement (the "Loan") that will be outstanding at
any time is Two Million and No/100 Dollars ($2,000,000.00) (the "Maximum Loan
Amount").
(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 Borrower from time to time under this Article II (each a
"Revolving Credit Loan") up to the Maximum Loan Amount depending upon the
availability in the Borrowing Base, the requests of Borrower pursuant to the
terms and conditions of Section 2.2, and on such other basis as Lender may
reasonably determine. 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
availability within the Borrowing Base for advances or extensions of credit
shall be made by Lender in its sole 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, in the form of Exhibit A to this Agreement (as amended, modified,
increased, restated or replaced from time to time, the "Note"), dated the date
of this Agreement, payable to the order of Lender in accordance with the terms
thereof. The Note shall bear interest on the outstanding principal balance of
the Note from the date of the Note 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 the occurrence and during the continuance of an
Event of Default such rate shall be equal to the Default Rate. Upon Borrower's
failure to comply with the terms of this Agreement, Lender will be entitled, in
addition to exercising any other rights and remedies available to it, 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, but only as an alternative to the Default Rate. Except in
connection with a breach of Borrower's obligations under Section 2.3 of this
Agreement, Lender shall provide five (5) business days' notice and opportunity
to cure prior to assessing the non-compliance fee. Each Revolving Credit Loan,
advance and other extension of credit shall be deemed evidenced by the Note,
which is deemed incorporated into and made a part of this Agreement by this
reference.
(d) Subject to the terms and conditions of this Agreement, advances
under the Loan shall be made against a borrowing base equal to eighty-five
percent (85%) of Qualified
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Accounts due and owing from any Medicaid/Medicare Account Debtor, Insurer or
other Account Debtor (the "Borrowing Base"). Lender, in its sole credit
judgment, may further adjust the Borrowing Base by applying percentages (known
as "liquidity factors") to Qualified Accounts by payor class based upon
Borrower's actual recent collection history for each such payor class (i.e.,
Medicare, Medicaid, commercial insurance, etc.) in a manner consistent with
Lender's underwriting practices and procedures. Such liquidity factors may be
adjusted by Lender throughout the Term as warranted by Lender's underwriting
practices and procedures and using its sole credit judgment.
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 before 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 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 day following the
due date in the amount required to pay such interest or other Obligation if such
was not paid by Borrower on the due date.
(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 deemed to be 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 one general Obligation
of Borrower, and shall be secured by Lender's Lien upon all of the Collateral.
(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.
(e) Lender will account to Borrower monthly with a statement of
Revolving Credit Loans, charges and payments made pursuant to this Agreement,
and such accounting
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rendered by Lender shall be deemed final, binding and conclusive upon Borrower,
absent manifest error, 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 in the notice.
Section 2.3. Collections, Disbursements, Borrowing Availability, and
Lockbox Account.
(a) Borrower shall maintain a lockbox (the "Lockbox") with Chase
Manhattan Bank (the "Lockbox Bank"), subject to the provisions of this
Agreement, and shall execute with the Lockbox Bank a lockbox agreement in the
form attached as Exhibit B, and such other agreements related to such lockbox
agreement as Lender may require. Borrower shall ensure that all collections of
Accounts are paid directly from Account Debtors into the Lockbox for deposit
into the Lockbox Account, and that all funds deposited into the Lockbox Account
are immediately transferred into a depository account maintained by Lender at
Bank One, N.A., or such other financial institution as determined by Lender in
its sole discretion, by written notice to Borrower and the Lockbox Bank (the
"Concentration Account").
(b) Borrower shall establish and maintain a second lockbox to be
owned by Lender (also herein referred to as the "Lockbox") with the Lockbox
Bank, subject to the provisions of this Agreement, and shall execute with the
Lockbox Bank a second lockbox agreement in the form attached as Exhibit B-2, and
such other agreements related to such lockbox agreement as Lender may require.
Notwithstanding the provisions of Section 2.3(a) to the contrary, Borrower shall
ensure that all collections of Accounts due from Account Debtors other than
Medicaid/Medicare Account Debtors are paid directly from such Account Debtors
into the Lockbox established pursuant to this subsection for deposit into the
Lockbox Account established pursuant to this subsection, and that all funds
deposited into such the Lockbox Account are immediately transferred into the
Concentration Account.
(c) Notwithstanding anything in any lockbox agreement to the
contrary, Borrower agrees that it shall be liable for any fees and charges in
effect from time to time and charged by the Lockbox Bank in connection with the
Lockbox and the Lockbox Account, and that Lender shall have no liability
therefor. Borrower further acknowledges and agrees that, to the extent such fees
and charges are not paid by Borrower directly but are satisfied using
collections in the Lockbox Account, such fees and charges shall be deemed to be
Revolving Credit Loans made by Lender hereunder and, to the extent that the
payment of such fees or charges by Borrower as provided herein results in any
overadvance under this Agreement, Borrower agrees to immediately (upon notice)
repay to Lender the amount of such overadvance. Borrower agrees to indemnify and
hold Lender harmless from any and all liabilities, claims, losses and demands
whatsoever, including reasonable attorney's fees and expenses, arising from or
relating to actions of Lender or the Lockbox Bank pursuant to this Section 2.3
or any lockbox agreement.
(d) 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 (in accordance with Section 2.2(d)), and all future
Revolving Credit Loans, advances
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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 as required by
this Section 2.3 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.
(e) Borrower acknowledges and agrees that its compliance with the
terms of this Section 2.3 is essential, and that Lender will suffer immediate
and irreparable injury and have no adequate remedy at law, if Borrower, through
its acts or omissions, causes or permits Account Debtors to send payments other
than to the Lockbox, or if Borrower fails to immediately deposit collections of
Accounts or proceeds of other Collateral in the Lockbox Account as herein
required. Upon Borrower's failure to comply with the terms of this Section 2.3,
Lender will be entitled, in addition to exercising any other rights and remedies
available to it, 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.
(f) 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, and no fact,
event or circumstance that, with notice or the passage of time (or both), would
constitute an Event of Default, exists.
Section 2.4. Fees.
(a) By executing this Agreement, Borrower agrees unconditionally to
pay to Lender a commitment fee equal to one-half percent (0.50%) of the Maximum
Loan Amount (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 forty-two thousandths of one percent (0.042%) of the average amount by which
the Maximum Loan Amount exceeds the average amount of the outstanding principal
balance of the Revolving Credit Loans during the preceding month. The Usage Fee
shall be payable monthly in arrears on the first Business Day of each successive
calendar month.
(c) For so long as the Loan is available to Borrower, Borrower
unconditionally shall pay to Lender a monthly loan management fee (the "Loan
Management Fee") equal to sixty-two thousandths of one percent (0.062%) of the
average amount of the outstanding principal balance of the Revolving Credit
Loans during the preceding month. The Loan Management Fee shall be payable
monthly in arrears on the first day of each successive calendar month.
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(d) Borrower shall pay to Lender all reasonable fees and expenses in
connection with audits and appraisals of Borrower's books and records and such
other matters as Lender shall deem appropriate, 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.
(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.
Section 2.5. Payments. Principal payable on account of Revolving Credit
Loans shall be payable by Borrower to Lender immediately upon the earliest of
(a) the receipt by Borrower or Lender of any payments on or proceeds from any of
the Collateral, to the extent of such proceeds, (b) the occurrence of an Event
of Default if the Loan and the maturity of the payment of the Obligations are
accelerated, or (c) the termination of this Agreement pursuant to Section 2.8 of
this Agreement; provided, however, that if the outstanding principal balance of
the Revolving Credit Loans is at any time in excess of the Borrowing Base,
Borrower shall, immediately upon demand, repay such excess. Interest accrued on
the Revolving Credit Loans shall be due on the earliest of (x) the first
Business Day of each month (for the immediately preceding month), computed on
the last calendar day of the preceding month, (y) the occurrence of an Event of
Default if the Loan and the maturity of the payment of the Obligations are
accelerated, or (z) the termination of this Agreement pursuant to Section 2.8.
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 under this Agreement, shall be made to Lender to the
Concentration Account, in immediately available funds. All payments shall be
made without deduction for any set-off, recoupment, counterclaim or defense that
Borrower now has or may have in the future.
Section 2.6. Use of Proceeds. The proceeds of Lender's advances under the
Loan shall be used solely for working capital, to repay the entire existing
indebtedness owed by Borrower to Health Care Finance Group, Inc., to pay a
break-up fee owed by Borrower to National Home Health Care Corporation, to repay
the entire existing indebtedness owed by Borrower to National Home Health Care
Corporation, to pay a cost settlement liability payment owed to Medicare
pursuant to a settlement agreement, to pay a settlement amount to the New York
State Attorney General regarding Medicaid, for closing costs relating to the
sale of its New York and New Jersey operations and the Loan and other costs of
Borrower arising in the ordinary course of Borrower's business, all as set forth
in Schedule 2.6 hereto.
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 by this Agreement
would be usurious under such laws, then notwithstanding any other provision of
this Agreement: (a) the aggregate of all interest that is
12
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 (the "Highest Lawful Rate"), 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 under this
Agreement shall be obligated to pay the amount of such interest to the extent
that it is in excess of 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 in this Agreement, 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 amount
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 (x) the lesser of (A) the
amount of interest that would have accrued if the Highest Lawful Rate had at all
times been in effect, or (B) 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 (y) 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 provided in this Section 2.8 (the "Term"), and this Agreement shall be
renewed for one-year periods thereafter upon the mutual written agreement of the
parties.
(b) Notwithstanding anything in this Agreement to the contrary,
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 after
the first annual anniversary of the Closing Date. Consistent with the foregoing,
Borrower has no right to terminate this Agreement until after the six-month
anniversary of the Closing Date.
(d) All of the Obligations shall be immediately due and payable upon
the termination date stated in any notice of termination of this Agreement (the
"Termination Date"); provided that, notwithstanding anything in Section 2.8(c)
to the contrary, the Termination Date
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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. At the effective date of any
termination of this Agreement (whether by voluntary termination by Borrower or
by termination by Lender following the occurrence of an Event of Default),
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 yield maintenance for the loss of bargain and
not as a penalty, an amount equal to the applicable Termination Fee.
(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
constituting Borrower shall be jointly and severally liable for all of the
obligations of Borrower under the Note and this Agreement. Each Borrower,
individually, expressly understands, agrees and acknowledges, that the loan
would not be made available on the terms herein in the absence of the collective
credit of all of the Borrowers, the joint and several liability of all
Borrowers, and the cross collateralization of the collateral of all Borrowers.
Accordingly, each Borrower, individually acknowledges that the benefit to each
of the participants in the facility as a whole constitutes reasonably equivalent
value, regardless of the amount of the loan actually borrowed by, advanced to,
or the amount of collateral provided by, any individual Borrower. 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 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: (a) indebtedness evidenced
under the Note, repayment of Revolving Credit Loans, advances and other
extensions of credit, all fees and charges owing by Borrower, (including without
limitation the Termination Fee) 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, (b) the payment of all amounts advanced by Lender to preserve,
protect, defend, and enforce its rights under this
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Agreement and in the following property in accordance with the terms of this
Agreement, and (c) the payment of all expenses incurred by Lender in connection
therewith (collectively, the "Obligations"), and as further security for the
payment and performance by Borrower, Guarantor and their respective Affiliates
of their respective obligations under the Affiliated Loan Documents, Borrower
hereby assigns and grants to Lender a continuing first priority Lien on and
security interest in, upon, and to the following property whether now owned or
hereafter acquired or arising (the "Collateral"; unless otherwise defined in
this Agreement, all terms used in the following subparagraphs shall have the
meanings given them in the Uniform Commercial Code as now or hereafter in
effect):
(a) All of Borrower's Accounts, and all of Borrower's money,
contract rights, chattel paper, documents, deposit accounts, securities,
investment property and instruments with respect thereto, and all of Borrower's
rights, remedies, security, Liens and supporting obligations, in, to and in
respect of the foregoing, including, without limitation, rights of stoppage in
transit, replevin, repossession and reclamation and other rights and remedies of
an unpaid vendor, lienor or secured party, guaranties or other contracts of
suretyship with respect to the Accounts, deposits or other security for the
obligation of any Account Debtor, and credit and other insurance;
(b) To the extent not listed above, all of Borrower's money,
securities, investment property, deposit accounts, instruments and other
property and the proceeds thereof that are now or hereafter held or received by,
in transit to, in possession of, or under the control of Lender or a bailee or
Affiliate of Lender, whether for safekeeping, pledge, custody, transmission,
collection or otherwise;
(c) To the extent not listed above, all of Borrower's now owned or
hereafter acquired deposit accounts into which Accounts or the proceeds of
Accounts are deposited, including the Lockbox Account;
(d) All of Borrower's right, title and interest in, to and in
respect of all goods relating to, or which by sale have resulted in, Accounts,
including, without limitation, all goods described in invoices or other
documents or instruments with respect to, or otherwise representing or
evidencing, any Account, and all returned, reclaimed or repossessed goods;
(e) All of Borrower's general intangibles (including, but not
limited to, payment intangibles) and other property of every kind and
description with respect to, evidencing or relating to its Accounts, including,
but not limited to, all existing and future customer lists, choses in action,
claims, books, records, ledger cards, contracts, licenses, formulae, tax and
other types of refunds, returned and unearned insurance premiums, rights and
claims under insurance policies, and computer programs, information, software,
records, and data, as the same relates to the Accounts;
(f) All of Borrower's other money, securities, investment property,
deposit accounts, instruments, documents, supporting obligations and chattel
paper;
(g) All of Borrower's letter-of-credit rights and commercial tort
claims;
15
(h) All of Borrower's other general intangibles (including, without
limitation, any proceeds from insurance policies after payment of prior
interests), patents, unpatented inventions, trade secrets, copyrights, contract
rights, goodwill, literary rights, rights to performance, rights under licenses,
choses-in-action, claims, information contained in computer media (such as data
bases, source and object codes, and information therein), things in action,
trademarks and trademarks applied for (together with the goodwill associated
therewith) and derivatives thereof, trade names, including the right to make,
use, and vend goods utilizing any of the foregoing, and permits, licenses,
certifications, authorizations and approvals, and the rights of Borrower
thereunder, issued by any governmental, regulatory, or private authority,
agency, or entity whether now owned or hereafter acquired, together with all
cash and non-cash proceeds and products thereof;
(i) All of Borrower's now owned or hereafter acquired inventory of
every description which is held by Borrower for sale or lease or is furnished by
Borrower under any contract of service or is held by Borrower as raw materials,
work in process or materials used or consumed in a business, wherever located,
and as the same may now and hereafter from time to time be constituted, together
with all cash and non-cash proceeds and products thereof;
(j) All of Borrower's now owned or hereafter acquired machinery,
equipment, computer equipment, tools, tooling, furniture, fixtures, goods,
supplies, materials, work in process, whether now owned or hereafter acquired,
together with all additions, parts, fittings, accessories, special tools,
attachments, and accessions now and hereafter affixed thereto and/or used in
connection therewith, all replacements thereof and substitutions therefor, and
all cash and non-cash proceeds and products thereof;
(k) To the extent not listed above as original collateral, the
proceeds (including, without limitation, insurance proceeds) and products of all
of the foregoing;
provided that the Collateral shall not include any assets used in or derived
from the New York or New Jersey operations of Borrower other than Accounts and
related assets (including the assets listed in clauses (a), (c), (d) and (e)
above) to the extent they were derived prior to the Closing Date.
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) any agreements, documents, instruments, and writings
deemed necessary by Lender or as Lender may otherwise request from time to time
in its sole discretion to evidence, perfect, or protect Lender's Lien and
security interest in the Collateral required under this Agreement. Borrower
hereby authorizes Lender to file one or more financing statements and amendments
thereto describing the Collateral and describing any agricultural liens or other
statutory liens held by Lender.
Section 3.3. Collateral Administration.
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(a) All Collateral (except deposit accounts) shall at all times be
kept by Borrower at its principal office(s) as set forth on Schedule 4.15 and
shall not be moved from such locations without (i) providing prior written
notice to Lender in accordance with Section 6.15, and (ii) obtaining the prior
written consent of Lender, which consent shall not be unreasonably withheld.
(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 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 or 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 shall have the
right at any time to notify Account Debtors (subject to applicable law regarding
Medicaid/Medicare Account Debtors) that Accounts have been assigned to Lender.
(e) Borrower shall bear the risk of loss on all Collateral,
regardless of whether such Collateral is in the possession or control of
Borrower, Lender, a bailee or any other Person.
Section 3.4. Other Actions. In addition to the foregoing, Borrower:
(a) 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 of this Agreement that
Lender has been granted a first priority Lien and security interest in, upon and
to all Accounts applicable to such Insurer and directs each Account Debtor to
make payments into the Lockbox, and hereby authorizes Lender, upon Borrower's
failure to send such notices within ten (10) days after the date of this
Agreement (or ten (10) days after the Insurer becomes an Account Debtor), to
send any and all similar notices to such Insurers;
(b) shall do and hereby authorizes Lender to 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,
17
continuation statements, amendments to financing statements, and any other
documents required under this Agreement;
(c) at Lender's request, shall immediately deliver to Lender all
items for which Lender must receive possession to obtain a perfected security
interest;
(d) 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;
(e) shall, where Collateral is in the possession of a third party,
join with Lender in notifying the third party of Lender's security interests and
obtaining an acknowledgement from the third party that it is holding the
Collateral for the benefit of Lender;
(f) shall cooperate with Lender in obtaining control with respect to
Collateral consisting of deposit accounts, investment property, letter of credit
rights, electronic chattel paper and any other portion of the Collateral for
which control is required in order to perfect a security interest; and
(g) shall not create any chattel paper without placing a legend on
the chattel paper acceptable to Lender indicating that Lender has a security
interest in the chattel paper.
Section 3.5. Searches. Before Closing, and thereafter (as and when
determined by Lender in its sole discretion), Lender will perform the searches
described in clauses (a), (b) and (c) below against Borrower (the results of
which are to be consistent with Borrower's representations and warranties under
this Agreement), all at Borrower's 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 and the jurisdiction in which the
Borrower is organized;
(b) Judgment, federal tax lien and corporate and partnership tax
lien searches, in each jurisdiction searched under clause (a) above; and
(c) Searches of applicable corporate, limited liability company,
partnership and related records to confirm the continued existence, organization
and good standing of Borrower and the exact legal name under which Borrower is
organized.
Section 3.6. Power of Attorney. Each of the officers of Lender is hereby
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 under this Agreement; (c) take any action Borrower is required to
take under Section 3.4 above;
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and (d) 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 represents and warrants to Lender, and
shall be deemed to represent and warrant on each day on which any Obligations
shall be outstanding under this Agreement, 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,
limited liability company or limited liability partnership, as the case may be,
duly organized, validly existing, and in good standing under the laws of its
state of formation, is in good standing as a foreign corporation, limited
liability company or limited liability partnership, as the case may be, in each
jurisdiction in which the character of the properties owned or leased by it
therein or the nature of its business makes such qualification necessary, has
the corporate, limited liability company or limited liability partnership (as
the case may be) 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, all of which are in the name
of Borrower. Borrower's state of organization is listed on Schedule 4.2 and its
exact legal name is as set forth in the first paragraph of this Agreement.
Section 4.3. Authority. Borrower has full corporate, limited liability
company or limited liability partnership (as the case may be) power and
authority to enter into, execute, and deliver this Agreement and to perform its
obligations under this Agreement, 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,
limited liability company or limited liability partnership (as the case may be)
action. No consent or approval of shareholders, members or partners 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 under the Loan
Documents.
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Section 4.4. Binding Agreement. This Agreement and all other Loan
Documents constitute, and the Note, when issued and delivered pursuant to this
Agreement 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 Borrower, could have a material adverse effect on the business,
properties, condition (financial or otherwise) or operations, current or
prospective, of Borrower, or upon its ability to perform its obligations under
the Loan Documents. Borrower specifically represents that, following this
payment of a $250,000 break-up fee on the Closing Date, there will be no
unsatisfied actions or suits, pending or threatened, relating to its
negotiations with National Home Health Care, Inc. in connection with its New
Jersey and New York operations. 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. The execution and delivery by Borrower of this
Agreement and the other Loan Documents do not, and the performance of its
obligations under the Loan Documents will not, violate, conflict with,
constitute a default under, or result in the creation of a Lien or encumbrance
upon the property of Borrower (other than for the benefit of Lender) under: (a)
any provision of Borrower's articles of incorporation or bylaws, certificate of
formation or operating agreement, or certificate of limited liability
partnership or agreement of limited liability partnership, as the case may be,
(b) any provision of any law, rule, or regulation applicable to Borrower, (c)
any indenture or other agreement or instrument to which Borrower is a party or
by which Borrower or its property is bound, or (d) 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 financial statements of Borrower
which have been delivered to Lender fairly present the financial condition of
Borrower 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 Borrower as of the
dates of such financial statements which are not reflected in such financial
statements or in the notes to such financial statements. There has been no
adverse change in the business, properties, condition (financial or otherwise)
or operations (current or prospective) of Borrower since the date of the last
financial statement delivered to Lender. The federal tax identification number
and fiscal year of each entity comprising the Borrower is as described on
Schedule 4.7.
Section 4.8. No Default. 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 that, with the giving of notice or lapse of time, or
both, could become an Event of Default, has occurred and is continuing.
20
Section 4.9. Title to Properties. Borrower has good, marketable and
indefeasible title to, rights in and the power to transfer 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. All of the Collateral, and all
other property and assets of Borrower that are necessary to the conduct of
Borrower's business, is owned by Borrower or the rights to same are held by
Borrower in its name, and none of the Collateral, or any such property or assets
are owned or the rights thereto held in the name of any other entity.
Section 4.10. Taxes. 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 of this Agreement. All tax liabilities
of Borrower are 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 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 under this Agreement 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.
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 to ERISA that is maintained by Borrower or under which Borrower could
have any material liability under ERISA (i) has failed to meet minimum funding
standards established in Section 302 of ERISA, (ii) has failed to substantially
comply with all applicable requirements of ERISA and of the Internal Revenue
Code, including all applicable rulings and regulations thereunder, or (iii) has
engaged in or been involved in a prohibited transaction (as defined in ERISA)
under ERISA or under the Internal Revenue Code. Neither Borrower nor any member
of a Controlled Group that includes Borrower has assumed, or received notice of
a claim asserted against Borrower or another member of the Controlled Group for,
withdrawal liability (as defined in the Multi-Employer Pension Plan Amendments
Act of 1980, as amended) with respect to
21
any multi-employer pension plan. 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 material claim against
Borrower for withdrawal liability with respect to any multi-employer pension
plan in which Borrower participates.
Section 4.13. Compliance with Laws. 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. As of the Closing Date, 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. Borrower's Chief Executive Office is located in the state and at the
address shown in Schedule 4.15.
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 current 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 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.
Borrower is not infringing on any patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, franchises,
licenses, any rights with respect to the foregoing, or any other intellectual
property rights of others and the Borrower is not aware of any infringement by
others of any such rights owned by Borrower.
Section 4.17. Capitalization. The authorized equity securities (whether
capital stock, partnership or membership interests or otherwise) of each entity
comprising Borrower are as set forth in Schedule 4.17. All issued and
outstanding equity securities of the Borrower are duly
22
authorized and validly issued, fully paid, nonassessable, free and clear of all
Liens or pledges other than those in favor of Lender or for the benefit of
Lender, and such equity securities were issued in compliance with all applicable
state, federal and foreign laws concerning the issuance of securities. The
identity of the holders of equity securities in excess of five percent (5%) of
all issued and outstanding equity securities of Borrower on a fully diluted
basis as of August ___, 2001 and the percentage of such holder's fully diluted
ownership of such equity securities are set forth on Schedule 4.17. No shares of
the equity securities of Borrower, other than those described above, are issued
and outstanding. Except as provided in Schedule 4.17, there are no preemptive or
other outstanding rights, options, warrants, conversion rights or similar
agreements or understandings for the purchase or acquisition from Borrower of
any equity securities of Borrower.
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 by this Agreement contains any untrue statement of material fact or
omits to state a material fact necessary to make the statements contained in
this Agreement or other Loan Document 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 corporate restriction, which adversely affects its business.
Section 4.20. Business Interruptions. Within five years before the date of
this Agreement, 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 before the date of this Agreement,
Borrower has not conducted business under or used any other name (whether
corporate, partnership 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 Person 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
23
or Accounts. Unless otherwise indicated in writing to Lender, with respect to
each Qualified Account, Borrower represents that:
(a) The Account is genuine and in all respects what it purports to
be, and is not evidenced by a judgment;
(b) The Account arises out of a completed, bona fide sale and
delivery of goods or rendition of Medical 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 the Account Debtor;
(c) The Account is for a liquidated amount maturing as stated in a
duplicate claim or invoice covering such sale or rendition of Medical Services,
a copy of which has been furnished or is available to Lender;
(d) The Account, and Lender's security interest in such Account, 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, (i) the Account Debtor
under the Account 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 under the
Account which might result in any material adverse change in such Account
Debtor's financial condition or the collectibility of such Account;
(h) The Account 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, and such Account if
due from a Medicaid/Medicare Account Debtor is properly payable directly to
Borrower; and
(i) Borrower has obtained and currently has all certificates of
need, Medicaid and Medicare provider numbers, licenses, permits and
authorizations that are 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,
Borrower (taken as a whole) (a)
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owns property whose fair saleable value is greater than the amount required to
pay all of Borrower's Indebtedness (including contingent debts), (b) was and is
able to pay all of its Indebtedness as such Indebtedness matures, and (c) 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 of this
Agreement, 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. Recoupments. On each Borrowing Base certificate given to
Lender in connection with a request for a Revolving Credit Loan, Borrower has
disclosed to Lender the amount of any Medicare or Medicaid recoupments or
recoupments of any third-party payor being sought, requested or claimed, or, to
Borrower's knowledge, threatened against the Borrower, or any of its Affiliates.
Section 4.26. Reports. Borrower has timely filed or caused to be timely
filed, all cost reports and other reports of every kind whatsoever required by
law or by written or oral contracts or otherwise to have been filed or made with
respect to its businesses and operations. There are no claims, actions or
appeals pending (and Borrower has not filed any claims or reports which should
result in any such claims, actions or appeals) before any commission, board or
agency including without limitation any intermediary or carrier, the Provider
Reimbursement Review Board or the Administrator of the Health Care Financing
Administration, with respect to any state or federal Medicare or Medicaid cost
reports or claims filed by Borrower, or any disallowance by any commission,
board or agency in connection with any audit of such cost reports. No validation
review or program integrity review related to Borrower, or the consummation of
the transactions contemplated herein, or related to the Collateral, have been
conducted by any commission, board or agency in connection with the Medicare or
Medicaid programs, and to the knowledge of Borrower, no such reviews are
scheduled, pending or threatened against or affecting any of the providers, or
any of the Collateral, or the consummation of the transactions contemplated
hereby.
Section 4.27. Compliance With Health Care Laws. Without limiting the
generality of Section 4.13 or any other representation or warranty made herein,
to Borrower's knowledge, Borrower and each of its licensed employees and
contractors (other than contracted agencies) in the exercise of their respective
duties on behalf of Borrower, is in compliance with all applicable statutes,
laws, ordinances, rules and regulations of any governmental authority with
respect to regulatory matters primarily relating to patient healthcare
(including without limitation Section 1128B(b) of the Social Security Act, as
amended, 42 U.S.C. Section 1320a-7(b) (Criminal Penalties Involving Medicare or
State Health Care Programs), commonly referred to as the "Federal Anti-Kickback
Statute," and the Social Security Act, as amended, Section 1877, 42 U.S.C
Section 1395nn (Prohibition Against Certain Referrals), commonly referred to as
"▇▇▇▇▇ Statute" (collectively, "Healthcare Laws")). Borrower has maintained in
all material respects all records required to be maintained by the Joint
Commission on Accreditation of Healthcare Organizations, the Food and Drug
Administration, Drug Enforcement Agency and State Boards of Pharmacy and the
federal and state Medicare and Medicaid programs as required by the
25
Healthcare Laws and, to the knowledge of Borrower, there are no presently
existing circumstances which would result or likely would result in material
violations of the Healthcare Laws. Borrower and its Affiliates and the owners of
the facilities and other businesses managed by the Borrower or its Affiliates
have such permits, licenses, franchises, certificates and other approvals or
authorizations of governmental or regulatory authorities as are necessary under
applicable law to own their respective properties and to conduct their
respective business (including without limitation such permits as are required
under such federal, state and other health care laws, and under such HMO or
similar licensure laws and such insurance laws and regulations, as are
applicable thereto), and with respect to those facilities and other businesses
that participate in Medicare and/or Medicaid, to receive reimbursement under
Medicare and Medicaid. To Borrower's knowledge, there currently exist no
restrictions, deficiencies, required plans of correction actions or other such
remedial measures with respect to federal and state Medicare and Medicaid
certifications or licensure.
Section 4.28. Funds from Restricted Grants. Except as described on
Schedule 4.28, none of the Collateral or the businesses and operations of
Borrower is subject to, and Borrower shall indemnify and hold Lender harmless
from and against, any liability in respect of amounts received by Borrower or
others for the purchase or improvement of the Collateral or business or
operations of Borrower or any part thereof under restricted or conditioned
grants or donations, including, without limitation, monies received under the
Public Health Service Act, 42 U.S.C. Section 291 et seq.
Section 4.29. Participation Agreements. Schedule 4.29 hereto sets forth an
accurate, complete and current list of all participation agreements with health
maintenance organizations, insurance programs, third party payors and preferred
provider organizations with respect to the Collateral or the business and
operations of Borrower.
Section 4.30. HIPAA Compliance. To the extent that and for so long as
Borrower is a "covered entity" within the meaning of HIPAA, Borrower (i) has
undertaken or will promptly undertake all necessary surveys, audits,
inventories, reviews, analyses and/or assessments (including any necessary risk
assessments) of all areas of its business and operations required by HIPAA
and/or that could be adversely affected by the failure of Borrower to be HIPAA
Compliant (as defined below); (ii) has developed or will promptly develop a
detailed plan and time line for becoming HIPAA Compliant (a "HIPAA Compliance
Plan"); and (iii) has implemented or will implement those provisions of such
HIPAA Compliance Plan in all material respects necessary to ensure that Borrower
is or becomes HIPAA Compliant. For purposes hereof, "HIPAA Compliant" shall mean
that Borrower (x) is or will be in compliance with each of the applicable
requirements of the so-called "Administrative Simplification" provisions of
HIPAA on and as of each date that any part thereof, or any final rule or
regulation thereunder, becomes effective in accordance with its or their terms,
as the case may be (each such date, a "HIPAA Compliance Date") and (y) is not
and could not reasonably be expected to become, as of any date following any
such HIPAA Compliance Date, the subject of any civil or criminal penalty,
process, claim, action or proceeding, or any administrative or other regulatory
review, survey, process or proceeding (other than routine surveys or reviews
conducted by any government health plan or other accreditation entity) that
could result in any of the foregoing or that could reasonably be expected to
adversely affect Borrower's business, operations, assets,
26
properties or condition (financial or otherwise), in connection with any actual
or potential violation by Borrower of the then effective provisions of HIPAA.
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,
the Certificate of Validity, any Guaranty and all other Loan Documents required
to be executed and delivered at or before Closing (other than the Note, as to
which Lender shall receive only one (1) original), executed by Borrower and any
other required Persons, as applicable.
(b) Lender shall have received all searches required by Section 3.5.
(c) Borrower and any Guarantor 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 and be continuing no Event of Default
and no event that, 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, consents of members and managers and consents of partners of each
Borrower and Guarantor, and other action taken by Borrower and any Guarantor to
authorize the execution, delivery and performance of the Loan Documents and the
borrowing of the Loan under the Loan Documents, as well as the names and
signatures of the officers of, members and managers of and partners of Borrower
and Guarantor authorized to execute documents on its behalf in connection with
the Loan, all as also certified as of the date of this Agreement by Borrower's
or Guarantor's, as applicable, chief financial officer, or equivalent, and such
other papers as Lender may require.
(g) Lender shall have received (i) copies, certified as true,
correct and complete by the applicable state of organization of each Borrower
and Guarantor, of the certificate of incorporation, certificate of formation or
certificate of limited liability partnership of each Borrower and Guarantor,
with any amendments to any of the foregoing, (ii) copies, certified as true,
correct and complete by an authorized officer, member or partner of each
Borrower and Guarantor, of all other documents necessary for performance of the
obligations of Borrower and Guarantor under this Agreement and the other Loan
Documents, and (iii)
27
certificates of good standing for each Borrower and Guarantor issued by the
state of organization of each Borrower and Guarantor and by each state in which
each Borrower and Guarantor is doing and currently intends to do business for
which qualification is required.
(h) Lender shall have received a written opinion of counsel for
Borrower and any Guarantor, dated the date of this Agreement, 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 under
this Agreement, including without limitation an initial borrowing base
certificate calculating the Borrowing Base.
(j) Lender shall have received the Commitment Fee.
(k) The Lockbox, Lockbox Account and the Concentration Account shall
have been established.
(l) Lender shall have received an estoppel certificate substantially
in the form of Exhibit D from Borrower's landlord or sublandlord, as the case
may be, with respect to each of the facilities identified on Schedule 4.15.
(m) Lender shall have received a certificate of Borrower's chief
financial officer, dated the Closing Date, certifying that all of the conditions
specified in this Section have been fulfilled.
(n) Lender shall have received evidence of that Borrower has
completed the sale of its New Jersey operations and the assignment of its New
York operations to Premier Home Healthcare Services, Inc.
(o) Lender shall have received payoff letters from Health Care
Financing Group, Inc. relating to its asset based revolving loan to Borrower and
National Home Health Care Corp. relating to Borrower's obligations thereto.
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 under this
Agreement unless the following conditions have been satisfied or waived
immediately before such disbursement:
(a) 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).
28
(b) No Event of Default or event that, with the giving of notice or
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.
(c) 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 or any Guarantor since the date of this
Agreement.
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 be mutually agreeable to the parties
upon the execution of this Agreement (the "Closing") at such place as may be
requested by Lender.
Section 5.4. Waiver of Rights. By completing the Closing under this
Agreement, or by making advances under the Loan, Lender does not waive a breach
of any representation or warranty of Borrower under this Agreement 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 entity comprising Borrower covenants and agrees that for so long as
Borrower may borrow under this Agreement 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, which shall include, but not be limited to, a report
of sales, credits issued, and collections received; (b) payables aging schedules
within fifteen (15) days after the end of each calendar month; (c) internally
prepared monthly financial statements for Borrower, certified by the chief
financial officer of Borrower, within forty-five (45) days of the end of each
calendar month, accompanied by management analysis and actual vs. budget
variance reports; (d) 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; (e) internally prepared annual financial
statements for Borrower within sixty (60) days after the end of each of
Borrower's fiscal years; (f) annual audited financial statements for Borrower
prepared by a firm of independent public accountants satisfactory to Lender,
within one hundred thirty-five (135) days after the end of each of Borrower's
fiscal years; (g) promptly upon receipt thereof, copies of any reports submitted
to Borrower by the 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; (h) as soon as available, copies of all
financial statements and notices provided by
29
Borrower to all of its stockholders; (i) on the last business day of every
month, evidence satisfactory to Lender that all federal and state taxes,
including, without limitation payroll taxes, that are due have been paid in
full; 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 Under this Agreement. Borrower will make all
payments of principal, interest, fees, and all other payments required under
this Agreement and 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, limited liability company or limited liability
partnership existence, rights, licenses, permits, certificates of needs,
regulatory approvals, privileges, and franchises (collectively, "Permits") of
Borrower necessary to the ownership of its property or the conduct of its
business, and comply with all applicable current and future laws, ordinances,
rules, regulations, orders and decrees of any Governmental Authority having or
claiming jurisdiction over Borrower; (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; and (c) to maintain all Permits free from restrictions or known
conflicts which could materially impair their use or operation or cause the
Permits to be provisional, probationary or restricted in any way.
Notwithstanding the foregoing, Borrower may cause the dissolution of Amserv
Health Care of New Jersey, Inc. following the discontinuance of its operations
and collection of its Accounts.
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 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 before 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
30
properties or any part thereof of Borrower; provided, however, that 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 Borrower shall have set aside on their books 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, naming Lender as an additional insured, with
responsible companies reasonably 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.
Section 6.8. Information; Visits and Inspections. Borrower shall furnish
to Lender such information as Lender may, from time to time, request with
respect to the business or financial affairs of Borrower. Borrower shall also
permit any officer, employee, agent or representative of Lender to visit and
inspect any of the properties of Borrower, to inspect, audit and make copies of
or prepare extracts from Borrower's 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 the
business affairs, finances and accounts of Borrower with, and be advised as to
the same by, the officers, employees and independent accountants Borrower, all
at such times and as often as Lender may reasonably 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 necessary repairs, renewals, replacements,
betterments and improvements thereto, so that the business carried on in
connection therewith may be properly 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 that, 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 (current or prospective) or which may expose
Borrower to uninsured liability of $30,000.00 or more; (e) any default claimed
by any other creditor for Borrowed Money of Borrower other than Lender; and (f)
any other development in the business or affairs of Borrower which may be
adverse; in each case describing the nature of the event or development. In the
case of notification under clauses (a) and (b)), Borrower should set forth the
action Borrower proposes to take with respect to such event.
31
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 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: (x) upon its receipt of
notice of the assertion against Borrower of a claim for withdrawal liability;
(y) upon the occurrence of any event that could trigger the assertion of a claim
for withdrawal liability against Borrower; and (z) upon the occurrence of any
event that 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-3, and shall cause to be
recorded financing statements on Form UCC-1, 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 by this Agreement) 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
currently 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
before 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
Governmental Authority against or affecting Borrower if the amount claimed is
more than $30,000.00.
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Section 6.18. Bank Accounts. Borrower shall assign to Lender all of its
depository and disbursement accounts into which collections of Accounts are
deposited.
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 currently 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 Medical Services. If required, all
Medicaid/Medicare cost 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 (f) of that
Section, Borrower shall deliver to Lender a certificate of its chief financial
officer, in form and substance satisfactory to Lender:
(a) Setting forth the information (including detailed calculations)
required 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) Stating that such officer has reviewed the relevant terms of
this Agreement, and has made (or caused to be made under such officer's
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 fact, event or circumstance that
constitutes an Event of Default or that 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. Net Worth. Borrower will not at any time allow its tangible
net worth, as computed in accordance with GAAP, to fall below the Minimum Net
Worth.
Section 6.23. [INTENTIONALLY OMITTED]
Section 6.24. Post-Closing Obligations. Borrower shall cause to be
performed and completed, to Lender's satisfaction, all of the obligations set
forth on Schedule 6.24 hereto within the time periods set forth on Schedule
6.24.
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Section 6.25. Right of First Refusal. Borrower hereby agrees that if at
any time Borrower or any subsidiary or Affiliate of Borrower (a "Borrower
Entity") receives from a third party an offer, term sheet or commitment, or any
Borrower Entity makes a proposal substantially acceptable to or accepted by any
person or entity (all of the foregoing being referred to as an "Offer"), which
Offer provides for permanent financing, long term financing, short term
financing, cash flow financing, working capital financing, accounts receivable
financing, real estate financing, inventory or equipment financing, financing
secured in whole or in part by assets (tangible or intangible) or personal
property of any Borrower Entity, or sale/leaseback financing, the applicable
Borrower Entity shall first forward the Offer to the Lender which shall have
fifteen (15) days after receipt thereof (the "Option Period") to agree to
provide similar financing in the place of such person or entity upon the terms
and conditions set forth in the Offer and to notify the applicable Borrower
Entity in writing of the Lender's acceptance of the Offer (the "Acceptance
Notice"). If the Borrower has not received an Acceptance Notice within the
Option Period, the Borrower shall be free to consummate the transaction
described in the Offer with the third party providing the Offer (the
"Transaction"); provided, however, that the foregoing, and Lender's failure to
respond to issue an Acceptance Notice, shall not be construed as a waiver of any
of the terms, covenants or conditions of the Loan Documents. In the event that
the Transaction is not consummated under similar terms with such person or
entity during the ninety (90) day period following the expiration of the Option
Period, or any material term is changed, the applicable Borrower Entity shall
not be permitted to consummate the Transaction without again complying with this
Section. The right of first refusal granted to the Lender hereunder shall expire
one (1) year after the date hereof. For purposes of this Section, "Lender" shall
mean and include either of ▇▇▇▇▇▇ Healthcare Finance, Inc., ▇▇▇▇▇▇ Financial,
Inc., or any other parent company, subsidiary or Affiliate of such entities.
Section 6.26. Capital Adequacy and Other Adjustments. In the event that
Lender shall have determined that the adoption after the date hereof of any law,
treaty, governmental (or quasi-governmental) rule, regulation, guideline or
order regarding capital adequacy, reserve requirements or similar requirements
or compliance by Lender or any corporation controlling Lender with any request
or directive regarding capital adequacy, reserve requirements or similar
requirements (whether or not having the force of law and whether or not failure
to comply therewith would be unlawful) from any central bank or governmental
agency or body having jurisdiction does or shall have the effect of increasing
the amount of capital, reserves or other funds required to be maintained by
Lender or any corporation controlling Lender and thereby reducing the rate of
return on Lender's or such corporation's capital as a consequence of its
obligations hereunder, then Borrower shall from time to time within fifteen (15)
days after notice and demand from Lender pay to Lender additional amounts
sufficient to compensate such Lender for such reduction. A certificate as to the
amount of such cost and showing the basis of the computation of such cost
submitted by such Lender to Borrower shall, absent manifest error, be final,
conclusive and binding for all purposes.
Section 6.27. Taxes.
(a) No Deductions. Any and all payments or reimbursements made under
the Loan Documents shall be made free and clear of and without deduction for any
and all taxes,
34
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto of any nature whatsoever imposed by any taxing authority,
excluding such taxes to the extent imposed on Lender's net income by the
jurisdiction in which Lender is organized. If Borrower shall be required by law
to deduct any such amounts from or in respect of any sum payable hereunder to
Lender, then the sum payable hereunder shall be increased as may be necessary so
that, after making all required deductions, Lender receives an amount equal to
the sum it would have received had no such deductions been made.
(b) Changes in Tax Laws. In the event that, subsequent to the
initial advance under the Loan, (1) any changes in any existing law, regulation,
treaty or directive or in the interpretation or application thereof, (2) any new
law, regulation, treaty or directive enacted or any interpretation or
application thereof, or (3) compliance by Lender with any request or directive
(whether or not having the force of law) from any governmental authority, agency
or instrumentality:
(A) does or shall subject Lender to any tax of any kind
whatsoever with respect to this Agreement or the other Loan Documents, or change
the basis of taxation of payments to Lender of principal, fees, interest or any
other amount payable hereunder (except for net income taxes, or franchise taxes
imposed in lieu of net income taxes, imposed generally by federal, state or
local taxing authorities with respect to interest or commitment fees or other
fees payable hereunder or changes in the rate of tax on the overall net income
of Lender); or
(B) does or shall impose on Lender any other condition or
increased cost in connection with the transactions contemplated hereby or
participations herein;
and the result of any of the foregoing is to increase the cost to Lender of
making or continuing the Loan hereunder, as the case may be, or to reduce any
amount receivable hereunder, then, in any such case, Borrower shall promptly pay
to Lender, upon its demand, any additional amounts necessary to compensate
Lender, on an after-tax basis, for such additional cost or reduced amount
receivable, as determined by Lender with respect to this Agreement or the other
Loan Documents. If Lender becomes entitled to claim any additional amounts
pursuant to this subsection, it shall promptly notify Borrower of the event by
reason of which Lender has become so entitled. A certificate as to any
additional amounts payable pursuant to the foregoing sentence submitted by
Lender to Borrower shall, absent manifest error, be final, conclusive and
binding for all purposes.
Section 6.28. Further Documentation. In the event any further
documentation or information is (a) required by Lender or any prospective
transferee in connection with selling, transferring, delivering, assigning,
securitizing or granting a participation in the Loan (or transferring the
servicing of the Loan), or (b) deemed necessary or appropriate by Lender in the
exercise of its rights under the Loan Documents or to correct patent mistakes in
the Loan Documents, materials relating to mortgagee's land title insurance or
the funding of the Loan, Borrower shall provide, or cause to be provided to
Lender, at Borrower's cost and expense, such documentation or information.
Borrower shall execute and deliver to Lender and/or the prospective transferee
or servicer such documentation, including but not limited to, any amendments,
corrections, deletions or additions to the Loan Documents as is required by
Lender
35
and/or the prospective transferee; provided, however, that Borrower shall not be
required to do anything that has the effect of changing the essential economic
terms of the Loan set forth in the Loan Documents.
Section 6.29. Compliance with Requirements of Prospective Transferee.
Borrower shall do anything necessary to comply with the requirements of any
prospective transferee or servicer of the Loan, in order to enable Lender or
such transferee to sell, transfer, deliver, assign, securitize or grant a
participation in the Loan; provided, however, that Borrower shall not be
required to do anything that has the effect of changing the essential economic
terms of this Agreement.
Section 6.30. Termination/Default of Contracts. Borrower shall notify
Lender within two (2) Business Days of any (a) default or event of default
under, (b) termination of, or (c) failure of any party to renew, any of
Borrower's contracts (unless the default or event of default under, termination
of or failure to renew such contract, as the case may be, could not reasonably
be expected to have an adverse effect on Borrower, including without limitation,
on Borrower's business, the Collateral or the Loan hereunder) as soon as
reasonably possible (other than with respect to any notice of default,
termination or failure to renew that originates with Borrower, which notice
shall be sent concurrently to Lender), including without limitation its
Pennsylvania Medicaid Waiver, its Ohio Medicaid Waiver and its Allegheny County,
Pennsylvania contract. Notwithstanding anything in this Section 6.30 to the
contrary, no provision in this Section 6.30 shall modify, reduce or otherwise
affect Lender's rights hereunder or under any other Loan Document.
Section 6.31. Special Notice Covenants.
(a) Borrower shall notify Lender in the event that Medicare or any
other governmental program or entity commences any collection or recoupment
proceeding or inquiry or makes any contact with Borrower with respect to any
potential liability relating to cost reports from 1998 or any other prior year
in respect of any Facility or subsidiary, whether or not such Facility or
subsidiary is currently active.
(b) Borrower shall notify Lender in the event that an event
described in Section 12.1(c) of the Purchase Agreement dated as of July 3, 2001
by and between Premier Home Healthcare Services, Inc., Star Multi Care Services,
Inc. and Amserv Health Care of New Jersey, Inc. shall occur.
36
ARTICLE VII
NEGATIVE COVENANTS
Each entity comprising Borrower covenants and agrees that so long as
Borrower may borrow under this Agreement and until payment in full of the Note
and performance of all other obligations of 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: (a) indebtedness to Lender;
(b) 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 seventy-five (75) 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; (c) borrowings incurred in
the ordinary course of its business and not exceeding $10,000.00 in the
aggregate outstanding at any one time; (d) indebtedness secured by Permitted
Liens. 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); and (e)
indebtedness set forth of Schedule 7.1 hereto.
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 prior written consent of, Lender, which consent shall not be
unreasonably withheld.
Section 7.3. No Liens and Encumbrances; No Disposition of the Collateral.
Lender does not authorize, and Borrower agrees not to: (a) 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 for Permitted Liens;
(b) make any sale or leases of any of the Collateral; or (c) license any of the
Collateral.
Section 7.4. Restriction on Fundamental Changes [[; No Change in Operation
or Control]]. Borrower will not: (a) enter into any transaction of merger or
consolidation; (b) liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution); (c) convey, sell, lease, sublease, transfer or
otherwise dispose of, in one transaction or a series of transactions, any of its
assets, or the capital stock of any subsidiary of Borrower, whether now owned or
hereafter acquired; or (d) acquire by purchase or otherwise all or any
substantial part of the business or assets of, or stock or other evidence of
beneficial ownership of, any Person. Borrower agrees that compliance with this
Section 7.4 is a material inducement to Lender's advancing credit under this
Agreement and Borrower further agrees that any breach of the terms of this
Section 7.4 shall constitute fraud. Borrower further agrees that in addition to
all other remedies available to Lender, Lender shall be entitled to specific
enforcement of the covenants in this Section 7.4, including injunctive relief.
37
Section 7.5. Sale and Leaseback. 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 prior written notice to and the
prior written consent of Lender, which consent shall not be unreasonably
withheld.
Section 7.6. Distributions and Management Fees. Borrower shall not make
any "Distributions" (as defined below) to any of its Affiliates, to any
shareholder, member, partner or other person holding an equity interest in
Borrower or to any other Person related to or affiliated with any of the
foregoing except normal compensation and bonuses, consistent with past years,
paid to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and repayment of the $100,000 note to ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ in accordance with the terms of such note in effect as of the date
hereof. "Distributions" shall mean management fees, salaries or other fees or
compensation, lease or rental payments, repayments of or debt service on loans
or other indebtedness, dividends (including preferred stock dividends) or other
distributions with respect to any of its stock, partnership or membership
interests (as the case may be) now or hereafter outstanding, the purchase,
redemption or other acquisition for value of any of its stock, partnership or
membership interests (as the case may be) now or hereafter outstanding, or the
return of any capital of its stockholders, partners or members.
Section 7.7. Loans. Borrower will not make loans or advances to any
Person, other than (a) trade credit extended in the ordinary course of its
business, and (b) advances for business travel and similar temporary advances
made in the ordinary course of business to officers, stockholders, directors,
and employees.
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 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 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 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, which
consent shall not be unreasonably withheld.
Section 7.12. Transactions with Affiliates. 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
38
transaction is not otherwise prohibited under this Agreement. 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 contained in this Agreement is
intended to permit or authorize Borrower to make any contract on behalf of
Lender.
Section 7.14. Change in Capital Structure. Without Lender's prior written
consent, (a) there shall occur no change in the legal or beneficial ownership of
the capital stock, partnership interests or membership interests, or in the
capital structure, of Borrower or any Guarantor, from that set forth on Schedule
4.17, (b) there shall occur no pledge, assignment or hypothecation of or Lien or
encumbrance on any of the legal or beneficial equity interests in the Borrower
or any Guarantor, and (c) Borrower shall not consent to or acknowledge any of
the transactions described in the foregoing subparts (a) and (b) of this
sentence.
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.
Section 7.16. Margin Stock. Borrower will not carry or purchase any
"margin security" within the meaning of Regulations U, 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. Confidentiality. Borrower will not disclose the contents of
this Loan Agreement and the other Loan Documents to any third party (including,
without limitation, any financial institution or intermediary) without Lender's
prior written consent, other than to Borrower's officers and advisors on a
need-to-know basis. Borrower agrees to inform all such persons who receive
information concerning this Agreement that such information is confidential and
may not be disclosed to any other person. Lender reserves the right to review
and approve all materials that Borrower prepares that contain Lender's name or
describe this Agreement.
Section 7.19. Certain Fundamental Changes. Borrower will not, without
providing Lender with thirty (30) days' prior written notice, change the state
of its formation or change its legal name.
ARTICLE VIII
39
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 under this Agreement:
(a) A default in the payment of any principal of, or interest upon,
the Note when due and payable, whether at maturity or otherwise, or any breach
of Section 2.3, which default or breach, as applicable, shall have continued
unremedied for a period of five (5) days after written notice of the default or
breach 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 of
the default from Lender to Borrower;
(c) A default in the due observance or performance by Borrower or
any guarantor of the Obligations of any other term, covenant or agreement
contained in any of the Loan Documents, which default shall have continued
unremedied for a period of ten (10) days after written notice of the default
from Lender to Borrower;
(d) Any representation or warranty made by Borrower in this
Agreement 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 with this Agreement or the other Loan Documents proves
to have been incorrect or misleading in any material respect when made;
(e) Any obligation of Borrower (other than its Obligations under
this Agreement) for the payment of Borrowed Money is not paid when due or within
any applicable grace period, or such obligation becomes or is declared to be due
and payable before the expressed maturity of the obligation, or there shall have
occurred an event that, 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) 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) Borrower or any Guarantor (i) files a petition in bankruptcy,
(ii) 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, (iii) 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 any
such proceeding is commenced against Borrower or any Guarantor and such
proceeding remains undismissed for a period of sixty (60) days, (iv) 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
40
Guarantor or any substantial part of its property, or suffers any such
receivership or trusteeship to continue undischarged for a period of sixty (60)
days, or (v) admits in writing its inability to pay its debts as they become
due;
(h) One or more (i) final judgments against Borrower or attachments
against its property shall be rendered by a court, arbitrator, arbitration
panel, mediator or any individual(s) or entity with the authority to issue
binding judgments against Borrower or (ii) final settlements by or on behalf of
Borrower of any pending litigation, arbitration or other claim or otherwise
disputed matter, in any event not fully and unconditionally covered by
insurance, shall remain unpaid, unstayed on appeal, undischarged, unbonded and
undismissed for a period of ten (10) days;
(i) A Reportable Event that 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) Any outstanding equity interest in Borrower is sold or otherwise
transferred by the Person owning such equity interest on the date of this
Agreement;
(k) There shall occur any uninsured damage to or loss, theft or
destruction of any portion of the Collateral that exceeds $25,000 in the
aggregate;
(l) Borrower breaches or violates the terms of, or a default or any
fact, event or circumstance that 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) Borrower ceases any material portion of its business operations
as currently conducted;
(o) 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, may 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
41
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) A default or event of default occurs under any of the Affiliated
Loan Documents;
(t) An Event of Default occurs under any Guaranty;
(u) An event described in Section 12.1(c) of the Purchase Agreement
dated as of July 3, 2001 by and between Premier Home Healthcare Services, Inc.,
Star Multi Care Services, Inc. and Amserv Health Care of New Jersey, Inc. shall
occur; or
(v) The sale of the New York operations of Borrower shall not be
completed before January 31, 2002.
Notwithstanding the foregoing, Borrower's failure to comply with any same
provision of this Agreement two (2) times in any twelve (12) month period shall
effect an immediate default (without the expiration of any applicable cure
period) with respect to all subsequent failures by Borrower to comply with such
provision of this Agreement, and Lender thereupon may exercise any remedy set
forth in this Article VIII without affording Borrower any opportunity to cure
such default.
Section 8.2. Acceleration. Upon the occurrence of any of the foregoing
Events of Default, the Obligations under 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),all Obligations including, without limitation the Termination Fee, shall
be immediately due and payable without declaration or other notice to Borrower.
Section 8.3. Remedies.
(a) Upon the occurrence of and during the continuance of an Event of
Default under this Agreement or the other Loan Documents, Lender, in addition to
all other rights, options, and remedies granted to Lender under this Agreement
or at law or in equity, may take any of the following steps (which list is given
by way of example and is not intended to be an exhaustive list of all such
rights and remedies):
42
(i) Terminate the Loan, whereupon all outstanding Obligations
(including without limitation the Termination Fee) shall be immediately due and
payable;
(ii) Exercise all other rights granted to it under this
Agreement and all rights under the UCC in effect in the applicable
jurisdiction(s) and under any other applicable law; and
(iii) Exercise all rights and remedies under all Loan
Documents now or hereafter in effect, including but not limited to:
(A) The right to take possession of, send notices
regarding, and collect directly the Collateral, with or without judicial
process;
(B) 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 (C) below, without any liability for rent,
storage, utilities, or other sums, and Borrower shall not resist or interfere
with such action;
(C) 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;
(D) 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
(E) The right to enforce Borrower's rights against
Account Debtors and other obligors, including, but not limited to, the right to
collect Accounts directly in Lender's own name and to charge the collection
costs and expenses, including attorneys' fees, to Borrower.
(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 market 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. 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. Lender shall have no obligation to
clean-up or otherwise prepare the Collateral for sale. Lender may comply with
any applicable state or federal law requirements in connection with a
disposition of the Collateral and compliance will not be considered to adversely
affect the commercial reasonableness of any sale of the Collateral. Lender may
sell the Collateral without giving any warranties as to the Collateral. Lender
may specifically
43
disclaim any warranties of title or the like. This procedure will not be
considered to adversely affect the commercial reasonableness of any sale of the
Collateral. If Lender sells any of the Collateral upon credit, Borrower will be
credited only with payments actually made by the purchaser, received by Lender
and applied to the indebtedness of the purchaser. In the event the purchaser
fails to pay for the Collateral, Lender may resell the Collateral and Borrower
shall be credited with the proceeds of the sale.
(c) Lender shall have no obligation to marshal any assets in favor
of Borrower, or against or in payment of the Note, any of the other Obligations
or any other obligation owed to Lender by Borrower or any other person.
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 (a) the
liabilities and Obligations of Borrower or any of its subsidiaries or Affiliates
to Lender or any Affiliate of Lender under this Agreement or any other loan
documents evidencing financings provided to Borrower or (b) the liabilities and
obligations of Borrower, Guarantor and their respective Affiliates to Lender
under the Affiliated Loan Documents. All rights and remedies granted Lender
under this Agreement and under any agreement referred to in this Agreement, 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 Loan, 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. All sums received
from Borrower and/or the Collateral in respect of the Loan may be applied by
Lender to the any other liabilities and obligations of Borrower under the Loan
Documents and the Affiliated Loan Documents in such order of application and in
such amounts as Lender shall deem appropriate in its sole and absolute
discretion. Borrower waives any right it may have to require Lender to pursue
any Person for any of the Obligations.
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 legal, 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, including but not limited to UCC and
judgment lien searches and UCC filings and fees for post-Closing UCC and
judgment lien searches. In addition, Borrower shall pay all such fees associated
with any amendments, modifications and terminations to the Loan Documents
following Closing. If Lender uses in-house counsel for any of these purposes,
Borrower further agrees that its Obligations under the Loan Documents include
reasonable charges for such work commensurate
44
with the fees that would otherwise be charged by outside legal counsel selected
by Lender for the work performed.
(b) Borrower also agrees to pay all out-of-pocket charges and
expenses incurred by Lender (including the fees and expenses of Lender's
counsel) in connection with the enforcement, protection or preservation of any
right or claim of Lender, the termination of this Agreement, the termination of
any Liens of Lender on the Collateral, or the collection of any amounts due
under the Loan Documents. If Lender uses in-house counsel for any of these
purposes (i.e., for any task in connection with the enforcement, protection or
preservation of any right or claim of Lender and the collection of any amounts
due under its Loan Documents), Borrower further agrees that its Obligations
under the Loan Documents include reasonable charges for such work commensurate
with the fees that would otherwise be charged by outside legal counsel selected
by Lender for the work performed.
(c) 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 (c) shall
survive the payment of Borrower's indebtedness under this Agreement 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 to this
Agreement 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 under this Agreement, nor acceptance of partial performance or partial
payment, shall operate as a waiver of such right, power or remedy nor shall any
single or partial exercise of any such right, power or remedy preclude any other
or further exercise of such right, power or remedy or the exercise of any other
right, power or remedy. The remedies provided for in this Agreement are
cumulative and are not exclusive of any remedies that may be available to any
party to this Agreement at law, in equity or otherwise.
Section 9.4. Notices. Any notice or other communication required or
permitted under this Agreement 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 under this
Agreement:
45
(a) If to Lender, at:
▇▇▇▇▇▇ Healthcare Finance, Inc.
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq., Chief Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Borrower, at:
Star Multi Care Services, Inc.
33 ▇▇▇▇ ▇▇▇▇▇▇▇ Road, Suite 302
Huntington Station, New York 11746
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Meritz & ▇▇▇▇▇, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If mailed, notice shall be deemed to be given five (5) days after being sent,
and if sent by personal delivery, telecopier or prepaid courier, notice shall be
deemed to be given when delivered.
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, Lender may, but is not obligated
to, advance funds to Borrower under this Agreement until the parties to this
Agreement amend this Agreement so as to effect the original intent of the
parties as closely as possible in a valid and enforceable 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 and shall bind all
Persons who become bound as a debtor to
46
this Agreement. Notwithstanding the foregoing, Borrower may not assign any of
its rights or delegate any of its obligations under this Agreement 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 under this Agreement without notice to or 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 with this Agreement
shall be considered to have been relied upon by Lender and shall survive the
making by Lender of the Loans contemplated by this Agreement 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. For and in consideration of the Loan and
each advance or other financial accommodation hereunder, each Borrower,
voluntarily, knowingly, unconditionally, and irrevocably, with specific and
express intent, for and on behalf of itself and its agents, attorneys, heirs,
successors, and assigns (collectively the "Releasing Parties") does hereby fully
and completely release, acquit and forever discharge Lender, and its successors,
assigns, heirs, affiliates, subsidiaries, parent companies, principals,
directors, officers, employees, shareholders and agents (hereinafter called the
"Lender Parties"), and any other person, firm, business, corporation, insurer,
or association which may be responsible or liable for the acts or omissions of
the Lender Parties, or who may be liable for the injury or damage resulting
therefrom (collectively the "Released Parties"), of and from any and all
actions, causes of action, suits, debts, disputes, damages, claims, obligations,
liabilities, costs, expenses and demands of any kind whatsoever, at law or in
equity, whether matured or unmatured, liquidated or unliquidated, vested or
contingent, ▇▇▇▇▇▇ or inchoate, known or unknown that the Releasing Parties (or
any of them) have or may have, against the Released Parties or any of them
(whether directly or indirectly) except for such claims involving any
intentional torts by Lender. Each Borrower acknowledges that the foregoing
release is a material inducement to Lender's decision to extend to Borrower the
financial accommodations hereunder and has been relied upon by Lender in
agreeing to make the Loan and in making each advance of Loan proceeds hereunder.
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
47
payment may be made or the act performed on the next 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 under
this Agreement 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 sole
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 under this Agreement; (b) pay for the
performance of any of Borrower's obligations under this Agreement; (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. Any 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 of the Loan, 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 indemnifies and agrees to defend
(with counsel acceptable to Lender) and hold harmless Lender, its partners,
officers, agents and employees (collectively, "Indemnitee") from and against any
liability, loss, cost, expense (including reasonable attorneys' fees and
expenses for both in-house and outside counsel), claim, damage, suit, action or
proceeding ever suffered or incurred by Lender or in which Lender may ever be or
become involved (whether as a party, witness or otherwise) (a) arising from
Borrower's failure to observe, perform or discharge any of its covenants,
obligations, agreements or duties under this Agreement, (b) arising from the
breach of any of the representations or warranties contained in Article IV of
this Agreement, (c) by reason of this Agreement, the other
48
Loan Documents or the transactions contemplated hereby or thereby, or (d)
relating to claims of any Person with respect to the Collateral. Notwithstanding
any contrary 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. Appointment of Agent under this Agreement.
(a) Each of the entities comprising Borrower (other than Star Multi
Care Services, Inc.) hereby irrevocably appoints and constitutes Star Multi Care
Services, Inc. as its agent to request and receive Revolving Credit Loans (and
to otherwise act on behalf of each such entity pursuant to this Agreement and
the other Loan Documents) from Lender in the name or on behalf of each such
entity. Lender may disburse the Revolving Credit Loans to the bank account of
any one or more of such entities without notice to any of the other entities
comprising Borrower or any other Person at any time obligated on or in respect
of the Obligations.
(b) Each of the entities comprising Borrower (other than Star Multi
Care Services, Inc.) hereby irrevocably appoints and constitutes Star Multi Care
Services, Inc. as its agent to receive statements of account and all other
notices from Lender with respect to the Obligations or otherwise under or in
connection with this Agreement and the other Loan Documents.
(c) No purported termination of the appointment of Star Multi Care
Services, Inc. agent shall be effective without the prior written consent of
Lender.
Section 9.18. Lender Approvals. Unless expressly provided herein to the
contrary, any approval, consent, waiver or satisfaction of Lender with respect
to any matter that is the subject of this Agreement, the other Loan Documents
may be granted or withheld by Lender in its sole and absolute discretion.
Section 9.18a. Further Assurances. Borrower hereby agrees that at any time
and from time to time, at the expense of Borrower, Borrower will promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or that Lender may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted
hereby, or to enable Lender or any of its agents to exercise and enforce its
rights and remedies under this Agreement with respect to any portion of such
collateral.
Section 9.19. Choice of Law; Consent to Jurisdiction. EXCEPT TO THE EXTENT
THAT THE UCC PROVIDES FOR THE APPLICATION OF THE LAW OF THE BORROWER'S STATE OF
ORGANIZATION, 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 ACTION ARISING OUT
OF THIS AGREEMENT OR THE NOTE IS COMMENCED BY LENDER IN THE STATE COURTS OF THE
STATE OF MARYLAND OR IN THE U.S. DISTRICT COURT FOR THE DISTRICT OF MARYLAND,
BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH
ACTION AND TO
49
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 BORROWER
AT ITS ADDRESS DESCRIBED IN SECTION 9.4. OR IF SERVED BY ANY OTHER MEANS
PERMITTED BY APPLICABLE LAW.
Section 9.20. Cooperation in Discovery and Litigation. In any litigation,
trial, arbitration or other dispute resolution proceeding relating to this
Agreement or any of the other Loan Documents, all directors, officers, employees
and agents of Borrower or of its Affiliates shall be deemed to be employees or
managing agents of Borrower for purposes of all applicable law or court rules
regarding the production of witnesses by notice for testimony (whether in a
deposition, at trial or otherwise). Borrower agrees that Lender's counsel in any
such dispute resolution proceeding may examine any of these individuals as if
under cross-examination and that any discovery deposition of any of them may be
used in that proceeding as if it were an evidence deposition. Borrower in any
event will use all commercially reasonable efforts to produce in any such
dispute resolution proceeding, at the time and in the manner requested by
Lender, all Persons, documents (whether in tangible, electronic or other form)
or other things under its control and relating to the dispute in any
jurisdiction that recognizes that (or any similar) distinction.
Section 9.21. 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 TO THIS AGREEMENT, 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 9.22. 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 OR 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 REASONABLE ATTORNEYS' FEES, PLUS COURT
COSTS, ALL WITHOUT PRIOR
50
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 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.
[SIGNATURES FOLLOW]
51
IN WITNESS WHEREOF, intending to be legally bound, and intending that this
Agreement constitutes an instrument executed under seal, the parties have caused
this Agreement to be executed under seal as of the date first written above.
LENDER:
▇▇▇▇▇▇ HEALTHCARE FINANCE, INC.
a Delaware corporation
By: ____________________________(SEAL)
Name:
Title:
BORROWER:
STAR MULTI CARE SERVICES, INC.
a New York corporation
By: ____________________________(SEAL)
Name:
Title:
AMSERV HEALTH CARE OF OHIO, INC.
a Delaware corporation
By: ____________________________(SEAL)
Name:
Title:
AMSERV HEALTH CARE OF NEW JERSEY,
INC.
a Delaware corporation
By: ____________________________(SEAL)
Name:
Title:
52
EFCC ACQUISITION CORP.
a New York corporation
By: ____________________________(SEAL)
Name:
Title:
53
LIST OF EXHIBITS
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Lockbox Agreement
Exhibit C - Form of Legal Opinion
Exhibit D - Form of Estoppel Certificate
54
LIST OF SCHEDULES
Schedule 1.45 - Permitted Liens
Schedule 2.6 - Use of Proceeds
Schedule 4.1 - Subsidiaries
Schedule 4.2 - State of Organization
Schedule 4.5 - Litigation
Schedule 4.7 - Tax Identification Numbers; Fiscal Years
Schedule 4.13 - Non-Compliance with Law
Schedule 4.14 - Environmental Matters
Schedule 4.15 - Places of Business; Record Owner; Chief Executive Office
Schedule 4.16 - Intellectual Property
Schedule 4.17 - Capitalization; Ownership
Schedule 4.19 - Borrowings and Guarantees
Schedule 4.21 - Trade Names
Schedule 4.22 - Joint Ventures
Schedule 4.28 - Funds from Restricted Grants
Schedule 4.29 - Participation Agreements
Schedule 4.31 - Exceptions to Licensure
Schedule 6.24 - Post-Closing Obligations
Schedule 7.1 - Borrowing
Schedule 7.12 - Affiliated Transactions
55