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EXHIBIT 10.20
$10,000,000.00
LOAN AND SECURITY AGREEMENT
by and among
RETIREMENT CARE ASSOCIATES, INC.
CAPITOL CARE MANAGEMENT COMPANY, INC.
RETIREMENT MANAGEMENT CORPORATION
(individually, "Borrower" and collectively, "Borrowers")
and
HCFP FUNDING, INC.
("Lender")
December 15, 1997
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (the "Agreement") is made as of this
15th day of December, 1997, by and among RETIREMENT CARE ASSOCIATES, INC., a
Colorado corporation, CAPITOL CARE MANAGEMENT COMPANY, INC., a Georgia
corporation and RETIREMENT MANAGEMENT CORPORATION, a Georgia corporation
(collectively, "Borrowers" and individually, a "Borrower"), and HCFP FUNDING,
INC., a Delaware corporation ("Lender").
RECITALS
A. Borrowers desire 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 Borrowers, 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 consideration, the receipt and
sufficiency of which are acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
SECTION 1.1. ACCOUNT. "Account" means any right to payment for goods
sold or leased or services rendered, whether or not evidenced by an instrument
or chattel paper, and whether or not earned by performance.
SECTION 1.2. ACCOUNT DEBTOR. "Account Debtor" means any Person
obligated on any Account of a Borrower, including without limitation, any
Insurer and any Medicaid/Medicare Account Debtor.
SECTION 1.3. AFFILIATE. "Affiliate" means, with respect to a specified
Person, any Person directly or indirectly controlling, controlled by, or under
common control with the specified Person, including without limitation their
stockholders and any Affiliates thereof. A Person shall be deemed to control a
corporation 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
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corporation or other entity, whether through the ownership of voting securities,
by contract, or otherwise.
SECTION 1.4. AGREEMENT. "Agreement" means this Loan and Security
Agreement, as it may be amended or supplemented from time to time.
SECTION 1.5. BASE RATE. "Base Rate" means a rate of interest equal to
two percent (2.0%) above the "Prime Rate of Interest".
SECTION 1.6. BORROWED MONEY. "Borrowed Money" means any obligation to
repay money, any indebtedness evidenced by notes, bonds, debentures or similar
obligations, any obligation under a conditional sale or other title retention
agreement and the net aggregate rentals under any lease which under GAAP would
be capitalized on the books of a Borrower or which is the substantial equivalent
of the financing of the property so leased.
SECTION 1.7. BORROWER. "Borrower" and "Borrowers" have the meaning set
forth in the Preamble.
SECTION 1.8. BORROWING BASE. "Borrowing Base" has the meaning set forth
in Section 2.1(d).
SECTION 1.9. BUSINESS DAY. "Business Day" means any day on which
financial institutions are open for business in the States of Maryland and
Georgia, excluding Saturdays and Sundays.
SECTION 1.10. CLOSING; CLOSING DATE. "Closing" and "Closing Date" have
the meanings set forth in Section 5.3.
SECTION 1.11. COLLATERAL. "Collateral" has the meaning set forth in
Section 3.1.
SECTION 1.12. COMMITMENT FEE. "Commitment Fee" has the meaning set
forth in Section 2.4(a).
SECTION 1.13. CONCENTRATION ACCOUNT. "Concentration Account" has the
meaning set forth in Section 2.3(a).
SECTION 1.14. CONTROLLED GROUP. "Controlled Group" means a "controlled
group" within the meaning of Section 4001(b) of ERISA.
SECTION 1.15. INTENTIONALLY DELETED.
SECTION 1.16. DEFAULT RATE. "Default Rate" means a rate per annum equal
to three percent (3%) above the then applicable Base Rate.
SECTION 1.17. ERISA. "ERISA" has the meaning set forth in Section 4.12.
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SECTION 1.18. EVENT OF DEFAULT. "Event of Default" and "Events of
Default" have the meanings set forth in Section 8.1 (a), subject to the
additional provisions of Section 8.1 (b) regarding "Limited Events of Default."
SECTION 1.19. GAAP. "GAAP" means generally accepted accounting
principles applied in a matter consistent with the financial statements referred
to in Section 4.7.
SECTION 1.20. GOVERNMENTAL AUTHORITY. "Governmental Authority" means
and includes any federal, state, District of Columbia, county, municipal, or
other government and any department, commission, board, bureau, agency or
instrumentality thereof, whether domestic or foreign.
SECTION 1.21. HAZARDOUS MATERIAL. "Hazardous Material" means any
substances defined or designated as hazardous or toxic waste, hazardous or toxic
material, hazardous or toxic substance, or similar term, by any environmental
statute, rule or regulation or any Governmental Authority.
SECTION 1.22. HIGHEST LAWFUL RATE. "Highest Lawful Rate" means the
maximum lawful rate of interest referred to in Section 2.7 that may accrue
pursuant to this Agreement.
SECTION 1.23. 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 a Borrower to compensate such Borrower
for providing services to a Patient.
SECTION 1.23. A. LEASES AND RENTS. "Leases and Rents" shall mean all
rents, revenues, issues and profits payable to a Borrower with respect to its
ownership of real property, all lease, occupancy or similar agreements relating
to real property owned by a Borrower and any contract for the sale, exchange or
other disposition of any such real property, and all books and records of a
Borrower relating to any of the foregoing.
SECTION 1.24. LENDER. "Lender" has the meaning set forth in the
Preamble.
SECTION 1.24 A. LIMITED EVENT OF DEFAULT. "Limited Event of Default"
has the meaning set forth in Section 8.1 (b).
SECTION 1.25. LOAN. "Loan" has the meaning set forth in Section 2.1(a).
SECTION 1.26. LOAN DOCUMENTS. "Loan Documents" means and includes this
Agreement, the Note, and each and every other document now or hereafter
delivered in connection therewith, as any of them may be amended, modified, or
supplemented from time to time.
SECTION 1.27. LOAN MANAGEMENT FEE. "Loan Management Fee" has the
meaning set forth in Section 2.4(c).
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SECTION 1.28. LOCKBOX. "Lockbox" has the meaning set forth in Section
2.3.
SECTION 1.29. LOCKBOX BANK. "Lockbox Bank" has the meaning set forth in
Section 2.3.
SECTION 1.30. MAXIMUM LOAN AMOUNT. "Maximum Loan Amount" has the
meaning set forth in Section 2.1(a).
SECTION 1.31. MEDICAID/MEDICARE ACCOUNT DEBTOR. "Medicaid/Medicare
Account Debtor" means any Account Debtor which is (i) the United States of
America acting under the Medicaid/Medicare program established pursuant to the
Social Security Act, (ii) any state or the District of Columbia acting pursuant
to a health plan adopted pursuant to Title XIX of the Social Security Act or
(iii) any agent, carrier, administrator or intermediary for any of the
foregoing.
SECTION 1.32. MEDICAL SERVICES. Medical and health care services
provided to a Patient, including, but not limited to, medical and health care
services provided to a Patient and performed by a 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 a Borrower to a
Patient for a necessary or specifically requested valid and proper medical or
health purpose.
SECTION 1.33. NOTE. "Note" has the meaning set forth in Section 2.1(c).
SECTION 1.34. OBLIGATIONS. "Obligations" has the meaning set forth in
Section 3.1.
SECTION 1.35. PATIENT. "Patient" means any Person receiving Medical
Services from a Borrower and all Persons legally liable to pay such Borrower for
such Medical Services other than Insurers.
SECTION 1.36. PERMITTED LIENS. "Permitted Liens" means: (a) any and all
liens, claims and encumbrances whatsoever, so long as the same do not attach to
any portion of the Collateral, (b)statutory and contractual liens of depository
institutions against depository accounts included within the Collateral for
unpaid fees, charges and expenses, so long as a Borrower does not have an
outstanding loan or credit facility with such depository institution and (c)
liens listed on Schedule 1.36 hereto.
SECTION 1.37. PERSON. "Person" means an individual, partnership,
corporation, trust, joint venture, joint stock company, limited liability
company, association, unincorporated organization, Governmental Authority, or
any other entity.
SECTION 1.38. PLAN. "Plan" has the meaning set forth in Section 4.12.
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SECTION 1.39. PREMISES. "Premises" has the meaning set forth in Section
4.14.
SECTION 1.40. PRIME RATE OF INTEREST. "Prime Rate of Interest" means
that rate of interest designated as such by Fleet National Bank of Connecticut,
N.A., or any successor thereto, as the same may from time to time fluctuate.
SECTION 1.41. PROHIBITED TRANSACTION. "Prohibited Transaction" means a
"prohibited transaction" within the meaning of Section 406 of ERISA or Section
4975(c)(1) of the Internal Revenue Code.
SECTION 1.42. QUALIFIED ACCOUNT. "Qualified Account" means an Account
of a Borrower generated in the ordinary course of such Borrower's business from
the sale of goods or rendition of medical services; provided, however, that no
Account shall be a Qualified Account if: (a) the Account or any portion thereof
is payable by an individual beneficiary, recipient or subscriber individually
and not directly to a Borrower by a Medicaid/Medicare Account Debtor or
commercial medical insurance carrier acceptable to Lender in its sole
discretion; (b) the Account remains unpaid more than ninety (90) days past the
claim or invoice date, (provided, however, that no more than fifteen percent
(15%) of such Qualified Accounts at any time shall be between sixty-one (61) and
ninety (90) days past the claim or invoice date); (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 a
Borrower, such sale was not an absolute sale or on consignment or on approval or
on a sale-or-return basis or subject to any other repurchase or return
agreement, or such goods have not been shipped to the Account Debtor or its
designee; (f) if the Account arises from the performance of services, such
services have not been actually been performed or were undertaken in violation
of any law (it may be acknowledged and agreed that accounts payable by Florida
Medicaid and all Medicare Account Debtors shall be deemed Qualified Accounts
prior to billing once the applicable Medicare Services have been performed
and/or goods have been delivered); (g) the Account is subject to a lien other
than a Permitted Lien; (h) a Borrower knows or should reasonably have known of
the bankruptcy, receivership, reorganization, 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 a Borrower; (l) more than ten percent (10%) of the aggregate balance of all
Accounts owing from the Account Debtor, except for a Medicare/Medicaid Account
Debtor, obligated on the Account (excluding any Medicaid/Medicare Account
Debtor) are outstanding more than one hundred twenty (120) days past their
invoice date; (m) fifty percent (50%) or more of the aggregate unpaid Accounts
from any individual Account Debtor except for a Medicare/Medicaid Account
Debtor, are not deemed Qualified Accounts hereunder; (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
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been breached; (p) the Account fails to meet such other reasonable
specifications and requirements which may from time to time be established by
Lender upon not less than ninety (90) days prior written notice to Borrowers, or
(q) the Account ceases to be a Qualified Account pursuant to Section 8.2 (a)
hereof.
SECTION 1.43. REPORTABLE EVENT. "Reportable Event" means a "reportable
event" as defined in Section 4043(b) of ERISA.
SECTION 1.44. REVOLVING CREDIT LOAN. "Revolving Credit Loan" has the
meaning set forth in Section 2.1(b).
SECTION 1.45. TERM. "Term" has the meaning set forth in Section 2.8.
ARTICLE II
LOAN
SECTION 2.1. TERMS.
(a) The maximum aggregate principal amount of credit extended
by Lender to Borrowers hereunder (the "Loan") that will be outstanding at any
time is Ten Million and No/100 Dollars ($10,000,000.00) (the "Maximum Loan
Amount"). Notwithstanding the above, the maximum aggregate principal amount of
Revolving Credit Loans made by Lender to Borrower under this Agreement and to
the Affiliated Borrowers under the Affiliated Loan Agreement (defined in Section
3.1 below) shall not at any time exceed Fourteen Million and No/100 Dollars
($14,000,000.00).
(b) The Loan shall be in the nature of a revolving line of
credit, and shall include sums advanced and other credit extended by Lender to
or for the benefit of Borrowers 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 below, 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 Borrowers
(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 Borrowers, and shall be due and payable in full upon the expiration
of the Term. For purposes of this Agreement, any determination as to whether
there is ability within the Borrowing Base for advances or extensions of credit
shall be made by Lender in its sole discretion and is final and binding upon
Borrowers.
(c) At Closing, Borrowers shall execute and deliver to Lender a
promissory note evidencing Borrowers' 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
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this Agreement (the "Note"), dated the date hereof, payable to the order of
Lender in accordance with the terms thereof. The amounts outstanding under the
Note shall bear interest from the date thereof until repaid, with interest
payable monthly in arrears on the first Business Day of each month, at a rate
per annum (on the basis of the actual number of days elapsed over a year of 360
days) equal to the Base Rate, provided that after the occurrence and during the
continuance of an Event of Default (but not a Limited Event of Default) such
rate shall be equal to the Default Rate. Each Revolving Credit Loan, advance and
other extension of credit shall be deemed evidenced by the Note, which is deemed
incorporated by reference herein and made a part hereof.
(d) Subject to the terms and conditions of this Agreement,
advances under the Loan shall be made against a borrowing base equal to eighty
percent (80%) of Qualified Accounts due and owing from any Medicaid/Medicare
Account Debtor, Insurer or other Account Debtor (the "Borrowing Base").
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) Borrowers may give
Lender notice of their intention to borrow, in which notice Borrowers shall
specify the amount of the proposed borrowing and the proposed borrowing date,
not later than 5:00 p.m. Eastern time one (1) Business Day prior to the proposed
borrowing date; provided, however, that no such request may be made at a time
when there exists an Event of Default (other than a Limited 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 due date in the
amount required to pay such interest or other Obligation. With respect to any
request for a Revolving Credit Loan which is made not later than 10:30 a.m.
Eastern time, Lender shall use its best efforts to advance proceeds of such
Revolving Credit Loan by 4:00 p.m. on the same Business Day.
(b) Borrowers hereby irrevocably authorize 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 Borrowers or Lender from time to time or
elsewhere if pursuant to written direction from Borrowers; and (ii) the
proceeds of each Revolving Credit Loan requested under subsection 2.2(a)(ii)
shall be disbursed by Lender by way of direct payment of the relevant interest
or other Obligation.
(c) All Revolving Credit Loans, advances and other extensions
of credit to or for the benefit of Borrowers shall constitute one general
Obligation of Borrowers, 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 Borrowers and shall also record in said loan
account all payments made by
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Borrowers 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 Borrowers.
(e) Lender will account to Borrowers monthly with a statement
of Revolving Credit Loans, charges and payments made pursuant to this Agreement,
and such account rendered by Lender shall be deemed final, binding and
conclusive upon Borrowers absent manifest error.
SECTION 2.3. COLLECTIONS, DISBURSEMENTS, BORROWING AVAILABILITY, AND
LOCKBOX ACCOUNT. Borrowers shall maintain a lockbox account (the "Lockbox") with
First Union National Bank of Florida, N.A. (Jacksonville Office) (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 thereto as Lender may require. Each Borrower shall
ensure that all collections of Accounts are paid directly from Account Debtors
into the Lockbox, and that all funds paid into the Lockbox are immediately
transferred into a depository account maintained by Lender at Bank One Arizona,
N.A. or U.S. Bank, N.A., as determined by Lender in its sole discretion and
communicated to Borrower (the "Concentration Account"). Lender shall apply, on a
daily basis, all funds transferred into the Concentration Account pursuant to
this Section 2.3 to reduce the outstanding indebtedness under the Loan with
future Revolving Credit Loans, advances and other extensions of credit to be
made by Lender under the conditions set forth in this Article II. To the extent
that any collections of Accounts or proceeds of other Collateral are not sent
directly to the Lockbox but are received by a 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 such Borrower. Each Borrower acknowledges and agrees
that its compliance with the terms of this Section 2.3 is essential, and that
upon its failure to comply with any such terms Lender shall be entitled to
assess a non-compliance fee which shall operate to increase the Base Rate by two
percent (2%) per annum during any period of non-compliance. Lender shall be
entitled to assess such fee whether or not an Event of Default is declared or
otherwise occurs. All funds transferred from the Concentration Account for
application to Borrowers' indebtedness to Lender shall be applied to reduce the
Loan balance but for purposes of calculating interest shall be subject to a
three (3) 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 Borrowers, but shall be available to
Borrowers at any time or times for so long as no Event of Default (other than a
Limited Event of Default) exists.
SECTION 2.4. FEES.
(a) At Closing, Borrower shall unconditionally pay to Lender a
commitment fee equal One Hundred Forty Thousand and No/100 Dollars ($140,000.00)
in the aggregate under this Agreement and the Affiliated Loan Agreement (as
defined in Section 3.1 of this Agreement)(the "Commitment Fee").
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(b) For so long as the Loan is available to Borrowers,
Borrowers unconditionally shall pay to Lender a monthly usage fee (the "Usage
Fee") equal to one twelfth (1/12th) of one percent (1.0%) of the average amount
by which Fourteen Million and No/100 Dollars ($14,000,000.00) exceeds the
aggregate 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 Borrowers,
Borrowers unconditionally shall pay to Lender a monthly loan management fee (the
"Loan Management Fee") equal to Three Thousand Five Hundred and No/100 Dollars
($3,500.00) per month in the aggregate under this Agreement aand the Affiliated
Loan Agreement. The Loan Management Fee shall be payable monthly in arrears on
the first day of each successive calendar month.
(d) Within 30 days after demand by Lender, Borrowers shall pay
to Lender all audit and appraisal fees in connection with audits and appraisals
of any Borrower's books and records and such other matters as Lender shall deem
appropriate; provided, however, that absent the occurrence of an Event of
Default (other than a Limited Event of Default) such fees shall not exceed
Twenty Thousand and No/100 Dollars ($20,000.00) in the aggregate under this
Agreement and the Affiliated Loan Agreement in any twelve month period.
(e) Borrowers 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
Borrowers or any other Person on behalf of Borrowers, by Lender, of proceeds of
Revolving Credit Loans made by Lender to Borrowers 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 Borrowers to Lender immediately upon the earliest of
(i) the receipt by any Borrower of any proceeds of any of the Collateral, to the
extent of such proceeds, (ii) the occurrence of an Event of Default in
consequence of which the Loan and the maturity of the payment of the Obligations
are accelerated, or (iii) the termination of this Agreement pursuant to Section
2.8 hereof; provided, however, that if any advance made by Lender in excess of
the Borrowing Base shall exist at any time, Borrowers shall, immediately upon
demand, repay such overadvance. Interest accrued on the Revolving Credit Loans
shall be due on the earliest of (i) the first Business Day of each month (for
the immediately preceding month), computed on the last calendar day of the
preceding month, (ii) the occurrence of an Event of Default in consequence of
which the Loan and the maturity of the payment of the Obligations are
accelerated, or (iii) the termination of this Agreement pursuant to Section 2.8
hereof. Except to the extent otherwise set forth in this Agreement, all payments
of principal and of interest on the Loan, all other charges and any other
obligations of Borrowers hereunder, shall be made to Lender to the Concentration
Account, in immediately available funds.
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SECTION 2.6. USE OF PROCEEDS. The proceeds of Lender's advances under
the Loan shall be used solely for working capital purposes arising in the
ordinary course of Borrowers' business.
SECTION 2.7. INTEREST RATE LIMITATION. The parties intend to conform
strictly to the applicable usury laws in effect from time to time during the
term of the Loan. Accordingly, if any transaction contemplated hereby would be
usurious under such laws, then notwithstanding any other provision hereof: (i)
the aggregate of all interest that is contracted for, charged, or received under
this Agreement or under any other Loan Document shall not exceed the maximum
amount of interest allowed by applicable law (the "Highest Lawful Rate"), and
any excess shall be promptly credited to Borrowers by Lender (or, to the extent
that such consideration shall have been paid, such excess shall be promptly
refunded to Borrowers by Lender); (ii) neither Borrowers nor any other Person
now or hereafter liable hereunder shall be obligated to pay the amount of such
interest to the extent that it is in excess of the Highest Lawful Rate; and
(iii) 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 Borrowers to Lender shall, to the extent permitted
by applicable law, be allocated throughout the full term of the Note until
payment is made in full so that the actual rate of interest does not exceed the
Highest Lawful Rate in effect at any particular time during the full term
thereof. If at any time the rate of interest under the Note exceeds the Highest
Lawful Rate, the rate of interest to accrue pursuant to this Agreement shall be
limited, notwithstanding anything to the contrary herein, to the Highest Lawful
Rate, but any subsequent reductions in the Base Rate shall not reduce the
interest to accrue pursuant to this Agreement below the Highest Lawful Rate
until the total amount of interest accrued equals the amount of interest that
would have accrued if a varying rate per annum equal to the interest rate under
the Note had at all times been in effect. If the total amount of interest paid
or accrued pursuant to this Agreement under the foregoing provisions is less
than the total 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
Borrowers agree to pay to Lender an amount equal to the difference between (i)
the lesser of (x) the amount of interest that would have accrued if the Highest
Lawful Rate had at all times been in effect, or (y) 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 (ii) 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 Borrowers upon or after the occurrence and during the continuance of
any Event of Default (subject to Section 8.1 (b)), 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.
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(b) Notwithstanding anything herein to the contrary, Lender
may (subject to Section 8.1 (b)) terminate this Agreement without notice upon or
after the occurrence and during the continuance of the occurrence of an Event of
Default.
(c) Upon at least thirty (30) days prior written notice to
Lender, Borrower may terminate this Agreement prior to the third annual
anniversary of the Closing Date, provided that, at the effective date of such
termination, Borrowers shall pay to Lender (in addition to the then outstanding
principal, accrued interest and other Obligations owing under the terms of this
Agreement and any other Loan Documents) as liquidated damages for the loss of
bargain and not as a penalty, an amount equal to One Hundred Forty Thousand and
No/100 Dollars ($140,000.00) in the aggregate under this Agreement and the
Affiliated Loan Agreement.
(d) All of the Obligations shall be immediately due and
payable upon the termination date stated in any notice of termination of this
Agreement. All undertakings, agreements, covenants, warranties, and
representations of Borrowers 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 Borrowers have paid the Obligations to Lender, in full, in
immediately available funds.
SECTION 2.9. JOINT AND SEVERAL LIABILITY; BINDING OBLIGATIONS. Each
Borrower shall be jointly and severally liable for all of the Obligations. In
addition, each 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 Borrower, and shall be binding upon all such entities when
taken together; provided, however, that such representations, warranties and
covenants shall be deemed to be made by each Borrower as to itself, but not as
to any other Borrower despite its binding nature with respect to the other
entities.
ARTICLE III
COLLATERAL
SECTION 3.1. GENERALLY. As security for the payment of all liabilities
of Borrowers to Lender, including without limitation: (i) indebtedness evidenced
under the Note, repayment of Revolving Credit Loans, advances and other
extensions of credit, all fees and charges owing by Borrowers, and all other
liabilities and obligations of every kind or nature whatsoever of Borrowers to
Lender, whether now existing or hereafter incurred, joint or several, matured or
unmatured, direct or indirect, primary or secondary, related or unrelated, due
or to become due, including but not limited to any extensions, modifications,
substitutions, increases and renewals thereof, (ii) the payment of all amounts
advanced by Lender to preserve, protect, defend, and enforce its rights
hereunder and in the following property in accordance with the terms of this
Agreement, and (iii) the payment of all expenses incurred by Lender in
connection therewith (collectively, the "Obligations"), and as further security
for the payment and performance of the
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obligations of Atrium Nursing Home, Inc. and other borrowers (collectively, the
"Affiliated Borrower") under the Loan and Security Agreement dated December 15,
1997, as amended, modified or replaced (the "Affiliated Loan Agreement") each
Borrower hereby assigns and grants to Lender a continuing first priority lien on
and security interest in, upon, and to the following property (the
"Collateral"):
(a) All of such Borrower's now-owned and hereafter acquired or
arising Accounts, accounts receivable and rights to payment of every kind and
description, and any contract rights, chattel paper, documents and instruments
with respect thereto but specifically excluding Leases and Rents;
(b) All of such Borrower's now owned and hereafter acquired or
arising general intangibles of every kind and description pertaining to its
Accounts, accounts receivable and other rights to payment, including, but not
limited to, all existing and future customer lists, choses in action, claims,
books, records, contracts, licenses, formulae, tax and other types of refunds,
returned and unearned insurance premiums, rights and claims under insurance
policies, and computer information, software, records, and data but specifically
excluding Leases and Rents;
(c) All of such Borrower's monies and other property of every
kind and nature now or at any time or times hereafter in the possession of or
under the control of Lender or a bailee or Affiliate of Lender; and
(d) The proceeds (including, without limitation, insurance
proceeds) of all of the foregoing.
SECTION 3.2. LIEN DOCUMENTS. At Closing and thereafter as Lender deems
necessary in its reasonable discretion, each Borrower shall execute and deliver
to Lender, or have executed and delivered (all in form and substance
satisfactory to Lender in its sole discretion):
(a) UCC-1 Financing statements pursuant to the Uniform
Commercial Code in effect in the jurisdiction(s) in which such Borrower
operates, which Lender may file in any jurisdiction where any Collateral is or
may be located and in any other jurisdiction that Lender deems appropriate;
provided that a carbon, photographic, or other reproduction or other copy of
this Agreement or of a financing statement is sufficient as and may be filed in
lieu of a financing statement; and
(b) Any other agreements, documents, instruments, and writings
reasonably 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 hereunder.
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SECTION 3.3. COLLATERAL ADMINISTRATION. (a) All Collateral (except
deposit accounts) will at all times be kept by each Borrower at its principal
office(s) as set forth on Exhibit C hereto and shall not, without the prior
written approval of Lender, be moved therefrom.
(b) Each Borrower shall keep accurate and complete records of
its Accounts and all payments and collections thereon and shall submit to Lender
sales and collections reports with respect thereto as required by Section 6.1
hereof. In addition, if Borrower becomes aware that Accounts in an aggregate
face amount in excess of $100,000.00 have become ineligible since the date of
Borrowers' last Borrowing Base Certificate 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 Borrowers' knowledge of such occurrence and the
Borrowing Base shall thereupon be adjusted to reflect such occurrence.
(c) Whether or not an Event of Default has occurred, any of
Lender's officers, employees or agents shall have the right, at any time or
times hereafter, in the name of Lender, any designee of Lender or Borrowers, to
verify the validity, amount or any other matter relating to any Accounts by
mail, telephone, telegraph or otherwise. Borrowers shall cooperate fully with
Lender in an effort to facilitate and promptly conclude such verification
process.
(d) To expedite collection, each Borrower shall endeavor in
the first instance to make collection of its Accounts for Lender. Lender retains
the right at all times after the occurrence of an Event of Default (other than a
Limited Event of Default), subject to applicable law regarding Medicaid/Medicare
Account Debtors, to notify Account Debtors that Accounts
have been assigned to Lender and to collect Accounts directly in its own name
and to charge the collection costs and expenses, including attorneys' fees, to
Borrowers.
SECTION 3.4. OTHER ACTIONS. In addition to the foregoing, Borrowers (i)
shall provide prompt written notice to each private indemnity, managed care or
other Insurer who either is currently an Account Debtor or becomes an Account
Debtor at any time following the date hereof that Lender has been granted a
first priority lien and security interest in, upon and to all Accounts
applicable to such Insurer, and hereby authorizes Lender to send any and all
similar notices to such Insurers by Lender, and (ii) shall do anything further
that may be lawfully required by Lender to secure Lender and effectuate the
intentions and objects of this Agreement, including but not limited to the
execution and delivery of lockbox agreements, continuation statements,
amendments to financing statements, and any other documents required hereunder.
At Lender's request, Borrowers shall also immediately deliver to Lender all
items for which Lender must receive possession to obtain a perfected security
interest. Borrowers shall, on Lender's demand, deliver to Lender all notes,
certificates, and documents of title, chattel paper, warehouse receipts,
instruments, and any other similar instruments constituting Collateral.
SECTION 3.5. SEARCHES. Prior to Closing, and thereafter if an Event of
Default (other than a Limited Event of Default) or event which with the passing
of time, the giving of notice or both could constitute an Event of Default
(other than a Limited Event of Default) has occurred and is
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continuing, Borrowers shall obtain and deliver to Lender the following searches
against Borrowers (the results of which are to be consistent with Borrowers'
representations and warranties under this Agreement), all at its own expense:
(a) Uniform Commercial Code searches with the Secretary of
State and local filing offices of each jurisdiction where Borrower maintains its
executive offices, a place of business, or assets;
(b) Judgment, federal tax lien and corporate and partnership
tax lien searches, in each jurisdiction searched under clause (a) above; and
(c) Good standing certificates showing Borrower to be in good
standing in its state of formation and in each other state in which it is doing
and presently intends to do business for which qualification is required.
SECTION 3.6. POWER OF ATTORNEY. Each of the officers of Lender is
hereby irrevocably made, constituted and appointed the true and lawful attorney
for each Borrower (without requiring any of them to act as such) with full power
of substitution to, after the occurrence and during the continuance of an Event
of Default (other than a Limited Event of Default), do the following: (i)
endorse the name of such Borrower upon any and all checks, drafts, money orders,
and other instruments for the payment of money that are payable to such Borrower
and constitute collections on Borrower's Accounts; (ii) execute in the name of
such Borrower any financing statements, schedules, assignments, instruments,
documents, and statements that such Borrower is obligated to give Lender
hereunder; and (iii) 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.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each entity comprising the Borrower represents and warrants to
Lender (with respect to itself only, and not with respect to any other
Borrower), and shall be deemed to represent and warrant on each day on which any
Obligations shall be outstanding hereunder, that:
SECTION 4.1. SUBSIDIARIES. Except as set forth in Schedule 4.1,
Borrower has no subsidiaries.
SECTION 4.2. ORGANIZATION AND GOOD STANDING. Borrower is a limited
partnership or corporation (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 limited partnership or corporation (as the case may
be) in each jurisdiction in which the character of the properties owned or
leased
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by it therein or the nature of its business makes such qualification necessary,
has the partnership or corporate power and authority to own its assets and
transact the business in which it is engaged, and has obtained all certificates,
licenses and qualifications required under all laws, regulations, ordinances, or
orders of public authorities necessary for the ownership and operation of all of
its properties and transaction of all of its business.
SECTION 4.3. AUTHORITY. Borrower has full partnership or corporate
power and authority to enter into, execute, and deliver this Agreement and to
perform its obligations hereunder, to borrow the Loan, to execute and deliver
the Note, and to incur and perform the obligations provided for in the Loan
Documents, all of which have been duly authorized by all necessary partnership
or corporate action. No consent or approval of partners or shareholders of, or
lenders to, Borrower and no consent, approval, filing or registration with any
Governmental Authority is required as a condition to the validity of the Loan
Documents or the performance by Borrower of its obligations thereunder.
SECTION 4.4. BINDING AGREEMENT. This Agreement and all other Loan
Documents constitute, and the Note, when issued and delivered pursuant hereto
for value received, will constitute, the valid and legally binding obligations
of Borrower, enforceable against Borrower in accordance with their respective
terms.
SECTION 4.5. LITIGATION. Except as disclosed in Schedule 4.5, there
are no actions, suits, proceedings or investigations pending or threatened
against Borrower before any court or arbitrator or before or by any Governmental
Authority which, in any one case or in the aggregate, if determined adversely to
the interests of Borrower, could have a material adverse effect on the business,
properties, condition (financial or otherwise) or operations, present or
prospective, of Borrower, or upon its ability to perform its obligations under
the Loan Documents. Borrower is not in default with respect to any order of any
court, arbitrator, or Governmental Authority applicable to Borrower or its
properties.
SECTION 4.6. NO CONFLICTS. The execution and delivery by Borrower of
this Agreement and the other Loan Documents do not, and the performance of its
obligations thereunder will not, violate, conflict with, constitute a default
under, or result in the creation of a lien or encumbrance upon the property of
Borrower under: (i) any provision of Borrower's articles of incorporation or
bylaws, or articles of formation, certificate of limited partnership or
operating agreement (as the case may be), (ii) any provision of any law, rule,
or regulation applicable to Borrower, or (iii) any of the following: (A) any
indenture or other agreement or instrument to which Borrower is a party or by
which Borrower or its property is bound; or (B) 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 annual financial statements of
Borrower (prepared on a consolidated basis with the other Borrowers, and
Affiliated Borrowers and its other controlled entities) as of
audited by and the unaudited financial statements of
Borrower as of September 30, 1997, certified by the chief
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financial officer or general partner of Borrower (as the case may be), 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 therein or in the
notes thereto. There has been no material adverse change in the business,
properties, condition (financial or otherwise) or operations (present or
prospective) of Borrower since September 30, 1997. Borrower's fiscal year ends
on . The federal tax identification number of each entity
comprising the Borrower is as described on Schedule 4.15.
SECTION 4.8. NO DEFAULT. Borrower is not in default under or with
respect to any obligation in any respect which could be materially adverse to
its business, operations, property or financial condition, or which could
materially and adversely affect the ability of Borrower to perform its
obligations under the Loan Documents. No Event of Default as to such Borrower or
event which, with the giving of notice or lapse of time, or both, could become
an Event of Default as to such Borrower, has occurred and is continuing.
SECTION 4.9. TITLE TO PROPERTIES. Borrower has good and marketable
title to its properties and assets, including the Collateral and the properties
and assets reflected in the financial statements described in Section 4.7,
subject to no lien, mortgage, pledge, encumbrance or charge of any kind, other
than Permitted Liens. Borrower has not agreed or consented to cause any of its
properties or assets whether owned now or hereafter acquired to be subject in
the future (upon the happening of a contingency or otherwise) to any lien,
mortgage, pledge, encumbrance or charge of any kind other than Permitted Liens.
SECTION 4.10. TAXES. Borrower has filed, or has obtained extensions for
the filing of, all federal, state and other tax returns which are required to be
filed, and has paid all taxes shown as due on those returns and all assessments,
fees and other amounts due as of the date hereof. All tax liabilities of
Borrower were, as of March 31, 1997 and are now, adequately provided for on
Borrower's books. No tax liability has been asserted by the Internal Revenue
Service or other taxing authority against Borrower for taxes in excess of those
already paid.
SECTION 4.11. SECURITIES AND BANKING LAWS AND REGULATIONS.
(a) The use of the proceeds of the Loan and Borrower's
issuance of the Note will not directly or indirectly violate or result in a
violation of the Securities Act of 1933 or the Securities Exchange Act of 1934,
as amended, or any regulations issued pursuant thereto, including without
limitation Regulations U, T, G, or X of the Board of Governors of the Federal
Reserve System. Borrower is not engaged in the business of extending credit for
the purpose of the purchasing or carrying "margin stock" within the meaning of
those regulations. No part of the proceeds of the Loan hereunder will be used to
purchase or carry any margin stock or to extend credit to others for such
purpose.
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(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 thereto that is maintained by Borrower or under which Borrower could
have any liability under ERISA (a) has failed to meet minimum funding standards
established in Section 302 of ERISA, (b) has failed to comply with all
applicable requirements of ERISA and of the Internal Revenue Code, including all
applicable rulings and regulations thereunder, (c) has engaged in or been
involved in a prohibited transaction (as defined in ERISA) under ERISA or under
the Internal Revenue Code, or (d) has been terminated. Borrower has not assumed,
or received notice of a claim asserted against Borrower for, withdrawal
liability (as defined in the Multi-Employer Pension Plan Amendments Act of 1980,
as amended) with respect to any multi-employer pension plan and is not a member
of any Controlled Group (as defined in ERISA). Borrower has timely made when due
all contributions with respect to any multi-employer pension plan in which it
participates and no event has occurred triggering a claim against Borrower for
withdrawal liability with respect to any multi-employer pension plan in which
Borrower participates.
SECTION 4.13. COMPLIANCE WITH LAW. Except as described in Schedule
4.13, Borrower is not in violation of any statute, rule or regulation of any
Governmental Authority (including, without limitation, any statute, rule or
regulation relating to employment practices or to environmental, occupational
and health standards and controls). Borrower has obtained all licenses, permits,
franchises, and other governmental authorizations necessary for the ownership of
its properties and the conduct of its business. Borrower is current with all
reports and documents required to be filed with any state or federal securities
commission or similar Governmental Authority and is in full compliance with all
applicable rules and regulations of such commissions.
SECTION 4.14. ENVIRONMENTAL MATTERS. To Borrower's knowledge, without
independent inquiry 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 or at levels that comply with applicable law.
SECTION 4.15. PLACES OF BUSINESS. The only places of business of
Borrower, and the places where it keeps and intends to keep the Collateral and
records concerning the Collateral, are at the addresses set forth in Schedule
4.15. Schedule 4.15 also lists the owner of record of each such property.
SECTION 4.16. INTELLECTUAL PROPERTY. Borrower exclusively owns or
possesses all the patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, franchises, licenses, and
rights with respect to the foregoing necessary for the present
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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.
SECTION 4.17. STOCK OWNERSHIP. The identity of the stockholders of
record of all classes of the outstanding stock of Borrower, together with the
respective ownership percentages held by such stockholders, are as set forth on
Schedule 4.17.
SECTION 4.18. MATERIAL FACTS. Neither this Agreement nor any other Loan
Document nor any other agreement, document, certificate, or statement furnished
to Lender by or on behalf of Borrower in connection with the transactions
contemplated hereby contains any untrue statement of material fact or omits to
state a material fact necessary in order to make the statements contained herein
or therein not misleading. There is no fact known to Borrower that materially
and adversely affects or in the future may materially and 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
is not a party to any contract or agreement, or subject to any partnership or
corporate restriction, which materially and adversely affects its business.
SECTION 4.20. INTENTIONALLY DELETED.
SECTION 4.21. NAMES. Within five years prior to the date hereof,
Borrower has not conducted business under or used any other name (whether
corporate, 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 INTENTIONALLY DELETED.
SECTION 4.23 ACCOUNTS. Lender may rely, in determining which Accounts
are Qualified Accounts, on all statements and representations made by Borrower
with respect to any Account or Accounts. Unless otherwise indicated in writing
to Lender, with respect to each Account:
(a) It is genuine and in all respects what it purports
to be, and is not evidenced by a judgment;
(b) It arises out of a completed, bona fide sale and delivery
of goods or rendition of services by Borrower in the ordinary course of its
business and substantially in accordance with the terms and conditions of all
purchase orders, contracts, certification,
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participation, certificate of need, or other documents relating thereto and
forming a part of the contract between Borrower and the Account Debtor;
(c) It is for a liquidated amount maturing as stated in a
duplicate claim or invoice covering such sale or rendition of services, a copy
of which has been furnished or is available to Lender (or in the case of
Accounts owed by Florida Medicaid and all Medicare Account Debtors, that Medical
Services have been rendered but have not yet been invoiced as a result of
applicable Medicaid or Medicare billing procedures);
(d) Such Account, and Lender's security interest therein, is
not, and will not (by voluntary act or omission by Borrower), be in the future,
subject to any lien, claim or encumbrance, and each such Account is absolutely
owing to Borrower and is not contingent in any respect or for any reason;
(e) To Borrower's knowledge without independent inquiry, there
are no facts, events or occurrences which in any way impair the validity or
enforceability of any Accounts;
(f) It has been billed and forwarded to the Account Debtor for
payment in accordance with applicable laws and compliance and conformance with
any and requisite procedures, requirements and regulations governing payment by
such Account Debtor with respect to such Account (or in the case of Accounts
owed by Florida Medicaid and all Medicare Account Debtors, that Medical Services
have been rendered but have not yet been invoiced as a result of applicable
Medicaid or Medicare billing procedures), and such Account if due from a
Medicaid/Medicare Account Debtor is properly payable directly to Borrower; and
(g) Borrower has obtained and currently has all certificates
of need, Medicaid and Medicare provider numbers, licenses, permits and
authorizations as necessary in the generation of such Accounts.
ARTICLE V
CLOSING AND CONDITIONS OF LENDING
SECTION 5.1. CONDITIONS PRECEDENT TO AGREEMENT. The obligation of
Lender to enter into and perform this Agreement and to make Revolving Credit
Loans is subject to the following conditions precedent:
(a) Lender shall have received two (2) originals of this
Agreement and all other Loan Documents required to be executed and delivered at
or prior to Closing (other than the Note, as to which Lender shall receive only
one original), executed by Borrowers and any other required Persons, as
applicable.
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(b) Lender shall have received all searches and good standing
certificates required by Section 3.5.
(c) Borrowers shall have complied and shall then be in
compliance with all the terms, covenants and conditions of the Loan Documents.
(d) There shall have occurred no Event of Default and no event
which, with the giving of notice or the lapse of time, or both, could constitute
such an Event of Default.
(e) The representations and warranties contained in Article IV
shall be true and correct in all material respects.
(f) Lender shall have received copies of all board of
directors resolutions of the general partner or other corporate action taken by
Borrowers to authorize the execution, delivery and performance of the Loan
Documents and the borrowing of the Loan thereunder, as well as the names and
signatures of the officers of Borrowers authorized to execute documents on its
behalf in connection herewith, all as also certified as of the date hereof by
each Borrower's chief financial officer or Borrower's general partner (as the
case may be), and such other papers as Lender may require.
(g) Lender shall have received copies, certified as true,
correct and complete by a corporate officer or the corporate officer of the
general partner (as the case may be)of each Borrower, of the articles of
incorporation or formation and bylaws of the general partner, (as the case may
be) of each Borrower, with any amendments to any of the foregoing, and all other
documents necessary for performance of the obligations of Borrower under this
Agreement and the other Loan Documents.
(h) Lender shall have received a written opinion of counsel
for Borrower, dated the date hereof, in the form of Exhibit D.
(i) Lender shall have received such financial statements,
reports, certifications, and other operational information required to be
delivered hereunder, including without limitation an initial borrowing base
certificate calculating the Borrowing Base.
(j) Lender shall have received the first installment of the
Commitment Fee.
(k) The Lockbox and the Concentration Account shall have been
established.
(l) Lender shall have received an estoppel certificate
substantially in the form of Exhibit E attached hereto from Borrower's landlord
or sublandlord, as the case may be, with respect to each of the facilities
identified on Schedule 4.15 which is a leased facility.
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(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.
SECTION 5.2. CONDITIONS PRECEDENT TO ADVANCES. Notwithstanding any
other provision of this Agreement, no Loan proceeds, Revolving Credit Loans,
advances or other extensions of credit under the Loan shall be disbursed
hereunder unless the following conditions have been satisfied or waived
immediately prior to such disbursement:
(a) The representations and warranties on the part of
Borrowers (excluding any Borrower that is then deemed to be a Defaulted Borrower
pursuant to Section 8.1 (b) hereof) contained in Article IV of this Agreement
shall be true and correct in all material respects at and as of the date of
disbursement or advance, as though made on and as of such date, except as
follows (i) to the extent that such representations and warranties expressly
relate solely to an earlier date, (ii) 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 Borrowers furnished to Lender
pursuant to Section 6.1 hereof, (iii) such representations and warranties shall
be deemed to have been supplemented by any written updates pertaining thereto,
as delivered by Borrowers to Lender from time to time and (iv) Borrower's
reaffirmation of Section 4.17 shall be deemed only a representation that any
changes in Borrower's ownership have been in accordance with Section 7.14
hereof.
(b) No Event of Default (other than a Limited Event of
Default) or event which, with the giving of notice of the lapse of time, or
both, could become an Event of Default (other than a Limited Event of Default)
shall have occurred and be continuing or would result from the making of the
disbursement or advance.
(c) No event or events have occurred which have caused a
material adverse change in the condition (financial or otherwise), properties,
business, or operations of Borrowers, taken as a whole, shall have occurred and
be continuing with respect to Borrowers, taken as a whole, since the date
hereof.
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 hereof (the "Closing") at such place as may be requested by
Lender.
SECTION 5.4. WAIVER OF RIGHTS. By completing the Closing hereunder, or
by making advances under the Loan, Lender does not waive a breach of any
representation or warranty of any Borrower hereunder or under any other Loan
Document, and all of Lender's claims and rights resulting from any breach or
misrepresentation by any Borrower are specifically reserved by Lender.
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ARTICLE VI
AFFIRMATIVE COVENANTS
Each Borrower covenants and agrees that for so long as such Borrower
may borrow hereunder and until payment in full of the Note and performance of
all other obligations of Borrowers 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) payable aging schedules
within fifteen (15) days after the end of each calendar month; (c) quarterly
financial statements for Retirement Care Associates, Inc., prepared on a
consolidated basis with Borrowers and any of Retirement Care Associates, Inc.'s
other controlled entities; (d) annual audited financial statements on Form 10K
for Retirement Care Associates, Inc., prepared on a consolidated basis with
Borrowers and any of Retirement Care Associates, Inc.'s other controlled
entities prepared by Retirement Care Associates, Inc., or other independent
public accountants then engaged by Borrower, within one hundred thirty-five
(135) days after the end of each of Borrower's fiscal years; (e) 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; (f) as soon as available, copies of all financial statements and
notices provided by Borrower to all of its stockholders; and (g) such additional
information, reports or statements as Lender may from time to time reasonably
request. Annual financial statements shall set forth in comparative form figures
for the corresponding periods in the prior fiscal year. All financial statements
shall include a balance sheet and statement of earnings and shall be prepared in
accordance with GAAP.
SECTION 6.2. PAYMENTS HEREUNDER. Borrower will make all payments of
principal, interest, fees, and all other payments required hereunder, under the
Loan, and under any other agreements with Lender to which Borrower is a party,
as and when due.
SECTION 6.3. EXISTENCE, GOOD STANDING, AND COMPLIANCE WITH LAWS.
Borrower will do or cause to be done all things necessary (a) to obtain and keep
in full force and effect all corporate or partnership (as the case may be)
existence, rights, licenses, privileges, and franchises of Borrower necessary to
the ownership of its property or the conduct of its business, and comply with
all applicable present and future laws, ordinances, rules, regulations, orders
and decrees of any Governmental Authority having or claiming jurisdiction over
Borrower; and (b) to maintain and protect the properties used or useful in the
conduct of the operations of Borrower, in a prudent manner, including without
limitation the maintenance at all times of such insurance upon its insurable
property and operations as required by law or by Section 6.7 hereof.
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SECTION 6.4. LEGALITY. Borrower will obtain any and all consents,
approvals and authorizations of any Governmental Authority necessary for the
making of each disbursement or advance of the loan.
SECTION 6.5. INTENTIONALLY DELETED.
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 prior to the date on
which penalties attach thereto, as well as all lawful claims for labor,
material, supplies or otherwise which, if unpaid, might become a lien or charge
upon the properties or any part thereof of Borrower; provided, however, that
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 with responsible companies satisfactory to
Lender in such amounts and against such risks as is customarily maintained by
similar businesses and by owners of similar property in the same general area.
SECTION 6.8. GENERAL INFORMATION. Borrower will furnish to Lender such
information as Lender may, from time to time, reasonably request with respect to
the business or financial affairs of Borrower, and, upon reasonable prior notice
and during normal business hours, shall permit any officer, employee or agent of
Lender to visit and inspect any of the properties, to examine the minute books,
books of account and other records, including management letters prepared by
Borrower's auditors, of Borrower, and make copies thereof or extracts therefrom,
and to discuss its and their business affairs, finances and accounts with, and
be advised as to the same by, the accountants and officers of Borrower, all at
such times and as often as Lender may require.
SECTION 6.9. MAINTENANCE OF PROPERTY. Borrower will maintain, keep and
preserve all of its properties in good repair, working order and condition and
from time to time make all needful and proper repairs, renewals, replacements,
betterments and improvements thereto, so that the business carried on in
connection therewith may be properly and advantageously conducted at all times.
SECTION 6.10. NOTIFICATION OF EVENTS OF DEFAULT AND ADVERSE
DEVELOPMENTS. Borrower promptly will notify Lender upon the occurrence of: (a)
any Event of Default; (b) any event which, with the giving of notice or lapse of
time, or both, could constitute an Event of
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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 as of the date of such statements; (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 materially and adversely affect the
condition (financial or otherwise) or operations (present or prospective) of the
Borrowers, taken as a whole, or which may expose Borrower to uninsured liability
of $100,000.00 or more; (e) any default claimed by any other creditor for
Borrowed Money (in excess of $50,000) of Borrower other than Lender; and (f) any
other development in the business or affairs of Borrower which could have a
material and adverse effect on the business operations of Borrowers, taken as a
whole, or on the ability of Borrowers to repay the Loan; in each case describing
the nature thereof and (in the case of notification under clauses (a) and (b))
the action Borrower proposes to take with respect thereto.
SECTION 6.11. EMPLOYEE BENEFIT PLANS. Borrower will (a) comply with the
funding requirements of ERISA with respect to the Plans for its employees, or
will promptly satisfy any accumulated funding deficiency that arises under
Section 302 of ERISA; (b) furnish Lender, promptly after filing the same, with
copies of all reports or other statements filed with the United States
Department of Labor, the Pension Benefit Guaranty Corporation, or the Internal
Revenue Service with respect to all Plans, or which Borrower, or any member of a
Controlled Group, may receive from such Governmental Authority with respect to
any such Plans, and (c) promptly advise Lender of the occurrence of any
Reportable Event or Prohibited Transaction with respect to any such Plan and the
action which Borrower proposes to take with respect thereto. Borrower will make
all contributions when due with respect to any multi-employer pension plan in
which it participates and will promptly advise Lender: (a) upon its receipt of
notice of the assertion against Borrower of a claim for withdrawal liability;
(b) upon the occurrence of any event which could trigger the assertion of a
claim for withdrawal liability against Borrower; and (c) upon the occurrence of
any event which would place Borrower in a Controlled Group as a result of which
any member (including Borrower) thereof may be subject to a claim for withdrawal
liability, whether liquidated or contingent.
SECTION 6.12. FINANCING STATEMENTS. Borrower shall provide to Lender
evidence satisfactory to Lender as to the due recording of termination
statements, releases of collateral, and Forms UCC-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 hereby) and to perfect
and protect Lender's first priority lien and security interest in the
Collateral, as Lender may request.
SECTION 6.13. FINANCIAL RECORDS. Borrower shall keep current and
accurate books of records and accounts in which full and correct entries will be
made of all of its business transactions, and will reflect in its financial
statements adequate accruals and appropriations to reserves, all in accordance
with GAAP.
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SECTION 6.14. COLLECTION OF ACCOUNTS. Borrower shall continue to
collect its Accounts in the ordinary course of business.
SECTION 6.15. PLACES OF BUSINESS. Borrower shall give thirty (30) days'
prior written notice to Lender of any change in the location of any of its
places of business, of the places where its records concerning its Accounts are
kept, of the places where the Collateral is kept, or of the establishment of any
new, or the discontinuance of any existing, places of business.
SECTION 6.16. BUSINESS CONDUCTED. Borrower shall continue in the
business presently conducted by it using its best efforts to maintain its
customers and goodwill.
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 uninsured
portion of the amount claimed is more than
$50,000.00
SECTION 6.18. INTENTIONALLY DELETED.
SECTION 6.19. SUBMISSION OF COLLATERAL DOCUMENTS. After the occurrence
and during the continuance of an Event of Default (other than a Limited Event of
Default), Borrower will, on demand of Lender, make available to Lender copies of
shipping and delivery receipts evidencing the shipment of goods that gave rise
to an Account, medical records, insurance verification forms, assignment of
benefits, in-take forms or other proof of the satisfactory performance of
services that gave rise to an Account, a copy of the claim or invoice for each
Account and copies of any written contract or order from which the Account
arose. Borrower shall promptly notify Lender if an Account becomes evidenced or
secured by an instrument or chattel paper and upon request of Lender, will
promptly deliver any such instrument or chattel paper to Lender.
SECTION 6.20. LICENSURE; MEDICAID/MEDICARE COST REPORTS. Borrower will
maintain all certificates of need, provider numbers and licenses necessary to
conduct its business as presently conducted, and take any steps required to
comply with any such new or additional requirements that may be imposed on
providers of medical products and services. If required, all Medicaid/Medicare
cost reports will be properly filed.
SECTION 6.21. OFFICER'S CERTIFICATES. Together with the quarterly
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
setting forth:
(a) The information (including detailed calculations) required
in order to establish whether Borrower is in compliance with the requirements of
Articles VI and VII as of the end of the period covered by the financial
statements then being furnished; and
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(b) That the signer has reviewed the relevant terms of this
Agreement, and has made (or caused to be made under his supervision) a review of
the transactions and conditions of Borrower from the beginning of the accounting
period covered by the income statements being delivered to the date of the
certificate, and that, other than any then existing Limited Event of Defaults
which have been disclosed to Lender, such review has not disclosed the existence
during such period of any condition or event which constitutes an Event of
Default or which is then, or with the passage of time or giving of notice or
both, could become an Event of Default, and if any such condition or event
existed during such period or now exists, specifying the nature and period of
existence thereof and what action Borrower has taken or proposes to take with
respect thereto.
SECTION 6.22. INTENTIONALLY DELETED.
SECTION 6.23. NET WORTH. Retirement Care Associates, Inc., the ultimate
parent of Borrower, will not at any time allow its net worth, as computed in
accordance with GAAP, to fall below $ .
ARTICLE VII
NEGATIVE COVENANTS
Each Borrower covenants and agrees that so long as Borrowers may borrow
hereunder and until payment in full of the Note and performance of all other
obligations of Borrowers under the Loan Documents:
SECTION 7.1. BORROWING. Borrower shall provide Lender with written
notice of any loan made to such Borrower in excess of $250,000 that is secured
by real property or tangible personal property acquired by such Borrower with
the proceeds of such loan (but Lender's consent shall not be required for any
such loan), and will not incur, assume, or permit to exist or become
contingently liable for any liability for Borrowed Money in excess of
$250,000.00 where the proceeds of the loan are not used by such Borrower to
acquire real property or tangible personal property without Lender's prior
written consent, which shall not be unreasonably withheld or delayed.
SECTION 7.2. INTENTIONALLY DELETED.
SECTION 7.3. LIENS AND ENCUMBRANCES. Borrower will not create, incur,
assume or suffer to exist any mortgage, pledge, lien or other encumbrance of any
kind upon, or any security interest in, any of its Collateral, whether now owned
or hereafter acquired, except for Permitted Liens.
SECTION 7.4. MERGER, ACQUISITION, OR SALE OF ASSETS. Borrower will not
enter into any merger or consolidation with or acquire all or substantially all
of the assets of any Person, unless
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(a) Borrower or any other Borrower is the surviving entity of such transaction
or (b) Retirement Care Associates, Inc. holds a controlling interest in the
surviving entity and (c) the surviving entity executes and delivers to Lender
all documents deemed reasonably necessary by Lender (as determined solely by
Lender in its reasonable commercial judgement) to protect Lender's rights under
this Agreement and the other Loan Documents and with respect to the Collateral,
all at Borrowers' cost (including without limitation, all lien search costs).
Borrower will not sell, lease, or otherwise dispose of substantially all of its
assets. Consistent with the foregoing, until the Obligations are repaid in full,
none of the Borrowers shall transfer, assign, convey or grant to any other
Person (other than another Borrower) the right to operate or control any of the
nursing homes listed on Schedule 4.15, whether by lease, sublease, management
agreement, joint venture agreement or otherwise.
SECTION 7.5. INTENTIONALLY DELETED.
SECTION 7.6. DISTRIBUTIONS AND MANAGEMENT FEES. Following an Event of
Default with respect to such Borrower will not declare or pay any dividends or
other distributions with respect to, purchase, redeem or otherwise acquire for
value any of its outstanding stock or partnership interests (as the case may be)
now or hereafter outstanding, or return any capital of its stockholders, nor
shall such Borrower pay management fees or fees of a similar nature to any
Person following an Event of Default.
SECTION 7.7. INTENTIONALLY DELETED.
SECTION 7.8. INTENTIONALLY DELETED.
SECTION 7.9. INTENTIONALLY DELETED.
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 suspend or
terminate or make provisional in any material way, any required certificate of
need or provider number of any Borrower without the prior written consent of
Lender, which shall not be unreasonably withheld or delayed.
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 transaction is not otherwise prohibited hereunder. For purposes of the
foregoing, Lender consents to the transactions described on Schedule 7.12.
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SECTION 7.13. USE OF LENDER'S NAME. Borrower will not use Lender's name
(or the name of any of Lender's affiliates) in connection with any of its
business operations. Borrower may disclose to third parties that Borrower has a
borrowing relationship with Lender. Nothing herein contained is intended to
permit or authorize Borrower to make any contract on behalf of Lender.
SECTION 7.14. CHANGE IN CAPITAL STRUCTURE. There shall occur no change
in Borrower's capital structure as set forth in Schedule 4.17.which causes a
change in control of Borrower.
SECTION 7.15. CONTRACTS AND AGREEMENTS. Borrower will not become or be
a party to any contract or agreement which would breach this Agreement.
SECTION 7.16. INTENTIONALLY DELETED.
SECTION 7.17. TRUTH OF STATEMENTS AND CERTIFICATES. Borrower will not
furnish to Lender any certificate or other document that contains any untrue
statement of a material fact or that omits to state a material fact necessary to
make it not misleading in light of the circumstances under which it was
furnished.
SECTION 7.18. CENSUS. With respect to any twelve (12) month period
during the Term, Borrower will not allow the average patient census for such
12-month period, for the nursing homes listed on Schedule 4.15 attached hereto
when taken as a whole, to fall below eighty percent (80%) of the aggregate
patient census of such nursing homes as of the Closing Date, as reflected on
Schedule 4.15
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. EVENTS OF DEFAULT.
(a) Subject to the provisions of subparagraph (b) hereof,
Each of the following (individually, an "Event of Default" and collectively, the
"Events of Default") shall constitute an event of default hereunder:
(i) A default in the payment of any installment of principal
of, or interest upon, the Note when due and payable, whether at maturity or
otherwise, which default shall have continued unremedied for a period of five
(5) days after written notice thereof from Lender to Borrower;
(ii) 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
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such payment is due and payable, which default shall have continued unremedied
for a period of ten (10) days after written notice from Lender;
(iii) A default in the due observance or performance by
Borrowers of any other term, covenant or agreement contained in any of the Loan
Documents, which default shall have continued unremedied for a period of twenty
(20) days after written notice from Lender; provided, however, that if such
default is not susceptible to cure within such period, no Event of Default shall
be deemed to have occurred until an additional thirty (30) days have lapsed so
long as Borrower is diligently endeavoring to cure such default throughout the
period;
(iv) If any representation or warranty made by any Borrower
herein or in any of the other Loan Documents, any financial statement, or any
statement or representation made in any other certificate, report or opinion
delivered in connection herewith or therewith proves to have been materially
incorrect or misleading in any material respect when made, which default shall
have continued unremedied for a period of twenty (20) days after written notice
from Lender;
(v) If any obligation of a Borrower (other than its
Obligations hereunder) for the payment of Borrowed Money (the outstanding amount
of which is in excess of $100,000.00) is not paid when due or within any
applicable grace period, or such obligation becomes or is declared to be due and
payable prior to the expressed maturity thereof;
(vi) If a 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 such Borrower;
(vii) If a Borrower files a petition in bankruptcy, is
adjudicated insolvent or bankrupt, petitions or applies to any tribunal for any
receiver of or any trustee for itself or any substantial part of its property,
commences any proceeding relating to itself under any reorganization,
arrangement, readjustment or debt, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect, or there is commenced
against a Borrower any such proceeding which remains undismissed for a period of
sixty (60) days, or any Borrower by any act indicates its consent to, approval
of, or acquiescence in, any such proceeding or the appointment of any receiver
of or any trustee for a Borrower or any substantial part of its property, or
suffers any such receivership or trusteeship to continue undischarged for a
period of sixty (60) days;
(viii) If one or more final judgments against any Borrower or
attachments against its property (the uninsured portion of which is in excess of
$100,000.00) not fully and unconditionally covered by insurance shall be
rendered by a court of record and shall remain unpaid, unstayed on appeal,
undischarged, unbonded and undismissed for a period of thirty (30) days;
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(ix) A Reportable Event which might constitute grounds for
termination of any Plan covered by Title IV of ERISA or for the appointment by
the appropriate United States District Court of a trustee to administer any such
Plan or for the entry of a lien or encumbrance to secure any deficiency, has
occurred and is continuing thirty (30) days after its occurrence, or any such
Plan is terminated, or a trustee is appointed by an appropriate United States
District Court to administer any such Plan, or the Pension Benefit Guaranty
Corporation institutes proceedings to terminate any such Plan or to appoint a
trustee to administer any such Plan, or a lien or encumbrance is entered to
secure any deficiency or claim;
(x) If any outstanding stock or partnership interests of
Borrower is sold or otherwise transferred in violation of Section 7.14;
(xi) Upon the issuance of any execution or distraint process
against any of the Collateral;
(xii) If any indication or evidence is received by Lender that
Borrower may have directly or indirectly been engaged in any type of activity
which, in Lender's reasonable discretion, is reasonably likely to result in the
forfeiture of any property material of Borrower to any Governmental Authority,
which default shall have continued unremedied for a period of ten (10) days
after written notice from Lender;
(xiii) Borrower or any Affiliate of Borrower, shall challenge
or contest, in any action, suit or proceeding, the validity or enforceability of
this Agreement, or any of the other Loan Documents, the legality or the
enforceability of any of the Obligations or the perfection or priority of any
Lien granted to Lender;
(xiv) Borrower shall be criminally convicted under any law
that could lead to a forfeiture of any Collateral.
(xv) There shall occur a material adverse change in the
financial condition or business prospects of a Borrower, or if Lender in good
▇▇▇▇▇ ▇▇▇▇▇ itself insecure as a result of acts or events bearing upon the
financial condition of a 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.
(b) Notwithstanding the foregoing, if an event which
constitutes an Event of Default occurs with respect to three (3) or fewer of the
Borrowers (inclusive of Borrowers under the Affiliate Loan Agreement) (a
"Limited Event of Default"), then (i) the Accounts of each Borrower with respect
to which the Event of Default occurred (each a "Defaulted Borrower") shall
immediately be deemed excluded from Qualified Accounts ("Excluded Accounts")
unless and until the Event of Default with respect to such Defaulted Borrower
has been cured to Lender's reasonable satisfaction and (ii) Borrowers shall,
within two (2) Business Days after the occurrence of the Event of Default ,
repay the Loan in an amount, if any, necessary to reduce the outstanding amount
of the Loan to the Borrowing Base (as adjusted to delete the Accounts which have
been Excluded Accounts pursuant to (i) above). Borrowers' failure to make such
payment
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shall constitute a payment default pursuant to Section 8.1 (a)(i) hereof,
entitling Lender to immediately exercise any and all remedies set forth in
Section 8.2 and 8.3 of the Agreement. Notwithstanding the foregoing, (x) no
Defaulted Borrower shall be released from its obligations hereunder (nor shall
the Collateral owned by such Defaulted Borrower be released from the lien
created hereby) by virtue of such Defaulted Borrower's Accounts being deemed to
be Excluded Accounts, and (y) if the aggregate amount of all Excluded Accounts
exceeds $500,000.00, such event shall constitute an Event of Default and shall
entitle Lender to immediately exercise any and all remedies set forth in
Sections 8.2 and 8.3 of this Agreement.
(xvi) An Event of Default shall have occurred under the
Affiliated Loan Agreement.
SECTION 8.2. ACCELERATION. Subject to the provisions of Section 8.1 (b)
hereof, upon the occurrence of any of the foregoing Events of Default, the Note
shall become and be immediately due and payable upon declaration to that effect
delivered by Lender to Borrower; provided that, upon the happening of any event
specified in Section 8.1(vi) hereof (subject always to Section 8.1 (b)), the
Note shall be immediately due and payable failure to satisfy (i) and (ii) will
be an overall Event of Default without declaration or other notice to Borrowers.
SECTION 8.3. REMEDIES.
(a) In addition to all other rights, options, and remedies
granted to Lender under this Agreement, upon the occurrence of an Event of
Default Lender (other than a Limited Event of Default) may (i) terminate the
Loan, whereupon all outstanding Obligations shall be immediately due and
payable, (ii) exercise all other rights granted to it hereunder and all rights
under the Uniform Commercial Code in effect in the applicable jurisdiction(s)
and under any other applicable law, and (iii) exercise all rights and remedies
under all Loan Documents now or hereafter in effect, including the following
rights and remedies (which list is given by way of example and is not intended
to be an exhaustive list of all such rights and remedies):
(i) The right to take possession of, send notices
regarding, and collect directly the Collateral, with or without judicial
process, and to exercise all rights and remedies available to Lender with
respect to the Collateral under the Uniform Commercial Code in effect in the
jurisdiction(s) in which such Collateral is located;
(ii) The right to (by its own means or with judicial
assistance) enter any of Borrower's premises and take possession of the
Collateral, or render it unusable, or dispose of the Collateral on such premises
in compliance with subsection (b), without any liability for rent, storage,
utilities, or other sums, and Borrowers shall not resist or interfere with such
action;
(iii) The right to require Borrowers at Borrowers'
expense to assemble all or any part of the Collateral and make it available to
Lender at any place designated by Lender;
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(iv) The right to reduce the Maximum Loan Amount or
to use the Collateral and/or funds in the Concentration Account to repay the
then outstanding Obligations for any reason; and
(v) The right to relinquish or abandon any
Collateral or any security interest therein.
(b) Borrowers agree that a notice received by it at least ten
(10) days before the time of any intended public sale, or the time after which
any private sale or other disposition of the Collateral is to be made, shall be
deemed to be reasonable notice of such sale or other disposition. If permitted
by applicable law, any perishable Collateral which threatens to speedily decline
in value or which is sold on a recognized marked may be sold immediately by
Lender without prior notice to Borrower. At any sale or disposition of
Collateral, Lender may (to the extent permitted by applicable law) purchase all
or any part of the Collateral, free from any right of redemption by Borrower,
which right is hereby waived and released. Borrower covenants and agrees not to
interfere with or impose any obstacle to Lender's exercise of its rights and
remedies with respect to the Collateral.
SECTION 8.4. NATURE OF REMEDIES. Lender shall have the right to proceed
against all or any portion of the Collateral to satisfy in any order (i) the
liabilities and Obligations of Borrower to Lender and (ii) upon the occurrence
of an Event of Default under the Affiliated Loan Agreement, the liabilities and
obligations of Affiliated Borrower under the Affiliated Loan Agreement. All
rights and remedies granted Lender hereunder and under any agreement referred to
herein, or otherwise available at law or in equity, shall be deemed concurrent
and cumulative, and not alternative remedies, and Lender may proceed with any
number of remedies at the same time until the Loans, and all other existing and
future liabilities and obligations of Borrower to Lender, are satisfied in full.
The exercise of any one right or remedy shall not be deemed a waiver or release
of any other right or remedy, and Lender, upon the occurrence of an Event of
Default, may proceed against Borrower, and/or the Collateral, at any time, under
any agreement, with any available remedy and in any order.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. EXPENSES AND TAXES.
(a) Borrowers agree to pay, whether or not the Closing occurs,
a reasonable documentation preparation fee, together with actual audit and
appraisal fees and all other out-of-pocket charges and expenses incurred by
Lender in connection with the negotiation, preparation and execution of each of
the Loan Documents, any amendments to the Loan Documents following Closing, and
preparation for Closing. Borrowers also agree to pay all out-of-pocket charges
and expenses incurred by Lender (including the fees and expenses of Lender's
counsel)
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in connection with the enforcement, protection or preservation of any right or
claim of Lender and the collection of any amounts due under the Loan Documents.
(b) Borrowers shall pay all taxes (other than taxes based upon
or measured by Lender's income or revenues or any personal property tax), if
any, in connection with the issuance of the Note and the recording of the
security documents therefor. The obligations of Borrower under this clause (b)
shall survive the payment of Borrowers' indebtedness hereunder and the
termination of this Agreement.
SECTION 9.2. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the other
Loan Documents constitute the full and entire understanding and agreement among
the parties with regard to their subject matter and supersede all prior written
or oral agreements, understandings, representations and warranties made with
respect thereto. No amendment, supplement or modification of this Agreement nor
any waiver of any provision thereof shall be made except in writing executed by
the party against whom enforcement is sought.
SECTION 9.3. NO WAIVER; CUMULATIVE RIGHTS. No waiver by any party
hereto of any one or more defaults by the other party in the performance of any
of the provisions of this Agreement shall operate or be construed as a waiver of
any future default or defaults, whether of a like or different nature. No
failure or delay on the part of any party in exercising any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to any party hereto at law, in equity or
otherwise.
SECTION 9.4. NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and personally delivered, mailed by
registered or certified mail (return receipt requested and postage prepaid),
sent by telecopier (with a confirming copy sent by regular mail), or sent by
prepaid overnight courier service, and addressed to the relevant party at its
address set forth below, or at such other address as such party may, by written
notice, designate as its address for purposes of notice hereunder:
(a) If to Lender, at:
HCFP Funding, Inc.
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Borrower, at:
Retirement Care Associates, Inc.
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▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(c) With a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Vincent, Berg, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
The Lenox Building
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If mailed, notice shall be deemed to be given five (5) days after being sent, if
sent by personal delivery or telecopier, notice shall be deemed to be given when
delivered, and if sent by prepaid courier, notice shall be deemed to be given on
the next Business Day following deposit with the courier.
SECTION 9.5. SEVERABILITY. If any term, covenant or condition of this
Agreement, or the application of such term, covenant or condition to any party
or circumstance shall be found by a court of competent jurisdiction to be, to
any extent, invalid or unenforceable, the remainder of this Agreement and the
application of such term, covenant, or condition to parties or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term, covenant or condition shall be valid and
enforced to the fullest extent permitted by law. Upon determination that any
such term is invalid, illegal or unenforceable, the parties hereto shall amend
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner.
SECTION 9.6. SUCCESSORS AND ASSIGNS. This Agreement, the Note, and the
other Loan Documents shall be binding upon and inure to the benefit of Borrower
and Lender and their respective successors and assigns. Notwithstanding the
foregoing, Borrower may not assign any of its rights or delegate any of its
obligations hereunder without the prior written consent of Lender, which may be
withheld in its sole discretion. Lender may sell, assign, transfer, or
participate any or all of its rights or obligations hereunder 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.
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SECTION 9.8. INTERPRETATION. No provision of this Agreement or any
other Loan Document shall be interpreted or construed against any party because
that party or its legal representative drafted that provision. The titles of the
paragraphs of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement. Any pronoun used in this
Agreement shall be deemed to include singular and plural and masculine, feminine
and neuter gender as the case may be. The words "herein," "hereof," and
"hereunder" shall be deemed to refer to this entire Agreement, except as the
context otherwise requires.
SECTION 9.9. SURVIVAL OF TERMS. All covenants, agreements,
representations and warranties made in this Agreement, any other Loan Document,
and in any certificates and other instruments delivered in connection therewith
shall be considered to have been relied upon by Lender and shall survive the
making by Lender of the Loans herein contemplated and the execution and delivery
to Lender of the Note, and shall continue in full force and effect until all
liabilities and obligations of Borrower to Lender are satisfied in full.
SECTION 9.10. RELEASE OF LENDER. Borrower releases Lender, its
officers, employees, and agents, of and from any claims for loss or damage
resulting from acts or conduct of any or all of them, unless caused by Lender's
recklessness, gross negligence, or willful misconduct.
SECTION 9.11. TIME. Whenever Borrower is required to make any payment
or perform any act on a Saturday, Sunday, or a legal holiday under the laws of
the State of Maryland (or other jurisdiction where Borrower is required to make
the payment or perform the act), the payment may be made or the act performed on
the next Business Day. Time is of the essence in Borrower's performance under
this Agreement and all other Loan Documents.
SECTION 9.12. COMMISSIONS. The transaction contemplated by this
Agreement was brought about by Lender and Borrower acting as principals and
without any brokers, agents, or finders being the effective procuring cause.
Borrower represents that it has not committed Lender to the payment of any
brokerage fee, commission, or charge in connection with this transaction. If any
such claim is made on Lender by any broker, finder, or agent or other person,
Borrower will indemnify, defend, and hold Lender harmless from and against the
claim and will defend any action to recover on that claim, at Borrower's cost
and expense, including Lender's counsel fees. Borrower further agrees that until
any such claim or demand is adjudicated in Lender's favor, the amount demanded
will be deemed a liability of Borrower under this Agreement, secured by the
Collateral.
SECTION 9.13. THIRD PARTIES. No rights are intended to be created
hereunder or under any other Loan Document for the benefit of any third party
donee, creditor, or incidental beneficiary of Borrower. Nothing contained in
this Agreement shall be construed as a delegation to Lender of Borrower's duty
of performance, including without limitation Borrower's duties under any account
or contract in which Lender has a security interest.
SECTION 9.14. DISCHARGE OF BORROWER'S OBLIGATIONS. Lender, in its sole
discretion, shall have the right at any time, and from time to time, without
prior notice to Borrower if
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Borrower fails to do so, to: (a) obtain insurance covering any of the Collateral
as required hereunder; (b) pay for the performance of any of Borrower's
obligations hereunder; (c) discharge taxes, liens, security interests, or other
encumbrances at any time levied or placed on any of the Collateral in violation
of this Agreement unless Borrower is in good faith with due diligence by
appropriate proceedings contesting those items; and (d) pay for the maintenance
and preservation of any of the Collateral. Expenses and advances shall be added
to the Loan, until reimbursed to Lender and shall be secured by the Collateral.
Such payments and advances by Lender shall not be construed as a waiver by
Lender of an Event of Default.
SECTION 9.15. INFORMATION TO PARTICIPANTS. Lender may divulge to any
participant it may obtain in the Loan, or any portion thereof, all information,
and furnish to such participant copies of reports, financial statements,
certificates, and documents obtained under any provision of this Agreement or
any other Loan Document.
SECTION 9.16. INTENTIONALLY DELETED.
SECTION 9.17. CHOICE OF LAW; CONSENT TO JURISDICTION. THIS AGREEMENT
AND THE NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF MARYLAND, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE PRINCIPLES OF
CONFLICTS OF LAWS. IF ANY ACTION ARISING OUT OF THIS AGREEMENT OR THE NOTE IS
COMMENCED BY LENDER IN THE STATE OF MARYLAND OR FEDERAL COURT LOCATED IN THE
STATE OF MARYLAND, BORROWER HEREBY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF
ANY SUCH COURT IN ANY SUCH ACTION AND TO THE LAYING OF VENUE IN THE STATE OF
MARYLAND. ANY PROCESS IN ANY SUCH ACTION SHALL BE DULY SERVED IF MAILED BY
REGISTERED MAIL, POSTAGE PREPAID, TO BORROWER AT ITS ADDRESS DESCRIBED IN
SECTION 9.4 HEREOF.
SECTION 9.18. WAIVER OF TRIAL BY JURY. BORROWER HEREBY (A) COVENANTS
AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY,
AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH
RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY BORROWER, AND THIS WAIVER IS
INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE
RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED AND
REQUESTED TO SUBMIT THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE
SUBJECT MATTER AND THE PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF
BORROWER'S WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, BORROWER HEREBY CERTIFIES
THAT NO REPRESENTATIVE OR AGENT OF LENDER (INCLUDING LENDER'S COUNSEL) HAS
REPRESENTED,
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EXPRESSLY OR OTHERWISE, TO BORROWER THAT LENDER WILL NOT SEEK TO ENFORCE THIS
WAIVER OF RIGHT TO JURY TRIAL PROVISION.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first written above.
LENDER:
ATTEST: HCFP FUNDING, INC.
a Delaware corporation
By: By: [SEAL]
------------------------------ -----------------------------
Name: Name:
Title: Title:
BORROWER:
ATTEST: RETIREMENT CARE ASSOCIATES, INC.,
a Colorado corporation
By: By: [SEAL]
------------------------------ -----------------------------
Name: Name:
Title: Title:
ATTEST: CAPITOL CARE MANAGEMENT
COMPANY, INC.
a Georgia corporation
By: By: [SEAL]
------------------------------ -----------------------------
Name: Name:
Title: Title:
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[Additional Signature Follows]
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ATTEST: RETIREMENT MANAGEMENT
CORPORATION
a Georgia corporation
By: By: [SEAL]
------------------------------ ----------------------------
Name: Name:
Title: Title:
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LIST OF EXHIBITS
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Lockbox Agreement
Exhibit C - Locations of Collateral
Exhibit D - Form of Legal Opinion
Exhibit E - Form of Estoppel Certificate
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LIST OF SCHEDULES
Schedule 1.36 - Permitted Liens
Schedule 4.1 - Subsidiaries
Schedule 4.5 - Litigation
Schedule 4.7 - Tax Identification Numbers
Schedule 4.13 - Non-Compliance with Law
Schedule 4.14 - Environmental Matters
Schedule 4.15 - Places of Business with patient census
Schedule 4.16 - Licenses
Schedule 4.17 - Stock Ownership
Schedule 4.19 - Borrowings and Guarantees
Schedule 4.21 - Trade Names
Schedule 4.22 - Joint Ventures
Schedule 7.12 - Transactions with Affiliates
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