EXHIBIT 10.3
$5,000,000.00
LOAN AND SECURITY AGREEMENT
by and between
LTC HEALTHCARE ACQUISITION COMPANY, INC.
LTC HEALTHCARE OF ATLANTA, INC.
LTC HEALTHCARE OF ▇▇▇▇▇▇ SPRINGS, INC.
LTC HEALTHCARE OF CHICOPEE, INC.
LTC HEALTHCARE OF COFFEYVILLE, INC.
LTC HEALTHCARE OF CONVERSE, INC.
LTC HEALTHCARE OF FORT VALLEY, INC.
LTC HEALTHCARE OF ▇▇▇▇▇▇▇, INC.
LTC HEALTHCARE OF HOLYOKE, INC.
LTC HEALTHCARE OF ▇▇▇▇▇▇, INC.
LTC HEALTHCARE OF NEW PORT ▇▇▇▇▇▇, INC.
LTC HEALTHCARE OF SALINA, INC.
LTC HEALTHCARE OF ▇▇▇▇▇▇▇, INC.
LTC HEALTHCARE OF SOUTH ▇▇▇▇▇▇, INC.
LTC HEALTHCARE OF SPRINGFIELD, INC.
LTC HEALTHCARE OF STATESBORO, INC.
LTC HEALTHCARE OF TYLER, INC.
LTC HEALTHCARE OF ▇▇▇▇▇▇▇, INC.
LTC HEALTHCARE RECEIVABLES, INC.
(collectively, "Borrower")
and
▇▇▇▇▇▇ HEALTHCARE FINANCE, INC.
("Lender")
September 30, 1999
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (the "Agreement") is made as of
September 30, 1999, by and among LTC HEALTHCARE ACQUISITION COMPANY, INC. a
Nevada corporation, LTC HEALTHCARE OF ATLANTA, INC., a Nevada corporation,
LTC HEALTHCARE OF ▇▇▇▇▇▇ SPRINGS, INC., a Nevada corporation, LTC HEALTHCARE
OF CHICOPEE, INC., a Nevada corporation, LTC HEALTHCARE OF COFFEYVILLE, INC.,
a Nevada corporation, LTC HEALTHCARE OF CONVERSE, INC., a Nevada corporation,
LTC HEALTHCARE OF FORT VALLEY, INC., a Nevada corporation, LTC HEALTHCARE OF
▇▇▇▇▇▇▇, INC., a Nevada corporation, LTC HEALTHCARE OF HOLYOKE, INC., a
Nevada corporation, LTC HEALTHCARE OF ▇▇▇▇▇▇, INC., a Nevada corporation, LTC
HEALTHCARE OF NEW PORT ▇▇▇▇▇▇, INC., a Nevada corporation, LTC HEALTHCARE OF
SALINA, INC., a Nevada corporation, LTC HEALTHCARE OF ▇▇▇▇▇▇▇, INC., a Nevada
corporation, LTC HEALTHCARE OF SOUTH ▇▇▇▇▇▇, INC., a Nevada corporation, LTC
HEALTHCARE OF SPRINGFIELD, INC., a Nevada corporation, LTC HEALTHCARE OF
STATESBORO, INC., a Nevada corporation, LTC HEALTHCARE OF TYLER, INC., a
Nevada corporation, LTC HEALTHCARE OF ▇▇▇▇▇▇▇, INC., a Nevada corporation,
LTC HEALTHCARE RECEIVABLES, INC., a Nevada corporation (collectively,
"BORROWER"), and ▇▇▇▇▇▇ HEALTHCARE FINANCE, INC., a Delaware corporation
("Lender").
RECITALS
A. Borrower desires to establish certain financing arrangements with
and borrow funds from Lender, and Lender is willing to establish such
arrangements for and make loans and extensions of credit to Borrower, on the
terms and conditions set forth below.
B. The parties desire to define the terms and conditions of their
relationship and to reduce their agreements to writing.
NOW, THEREFORE, in consideration of the promises and covenants
contained in this Agreement, and for other consideration, the receipt and
sufficiency of which are acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, unless otherwise specified, all
references to "Sections" shall be deemed to refer to Sections of this
Agreement, and the following terms shall have the meanings set forth below:
SECTION 1.1. ACCOUNT. "Account" means any right to payment 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,
including, without limitation, the right to payment of management fees.
SECTION 1.2. ACCOUNT DEBTOR. "Account Debtor" means any Person
obligated on any Account of Borrower, including without limitation, any
Insurer and any Medicaid/Medicare Account Debtor.
SECTION 1.3. AFFILIATE. "Affiliate" means, with respect to a
specified Person, any Person directly or indirectly controlling, controlled
by, or under common control with the specified Person, including without
limitation their stockholders and any Affiliates thereof. A Person shall be
deemed to control a corporation or other entity if the Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and business of the corporation or other entity, whether through
the ownership of voting securities, by contract, or otherwise.
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 three and three quarters percent (3.75%) above the "Prime Rate of
Interest" (provided, however, that in no event shall the Base Rate fall below
twelve percent ( 12%) so long as this Agreement remains in effect).
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 Borrower or which is the
substantial equivalent of the financing of the property so leased.
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SECTION 1.7. BORROWER. "Borrower" has 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 State of Maryland,
excluding Saturdays and Sundays.
SECTION 1.10. CLOSING; CLOSING DATE. "Closing" and "Closing Date"
have the meanings set forth in Section 5.3.
SECTION 1.11. COLLATERAL. "Collateral" has the meaning set forth in
Section 3.1.
SECTION 1.12. INTENTIONALLY DELETED.
SECTION 1.13. CONCENTRATION ACCOUNT. "Concentration Account" has the
meaning set forth in Section 2.3.
SECTION 1.14. CONTROLLED GROUP. "Controlled Group" means all
businesses that would be treated as a single employer under Section 4001(b)
of ERISA.
SECTION 1.15. COST REPORT SETTLEMENT ACCOUNT. "Cost Report
Settlement Account" means an "Account" owed to Borrower by a
Medicaid/Medicare Account Debtor pursuant to any cost report, either interim,
filed or audited, as the context may require.
SECTION 1.16. DEFAULT RATE. "Default Rate" means a rate per annum
equal to two percent (2%) above the then applicable Base Rate.
SECTION 1.16A. EXCESS CASH FLOW. "Excess Cash Flow" means the
following, as determined in accordance with GAAP: (i) net income (after
deducting management fees permitted under the terms of this Agreement), plus
(ii) depreciation and amortization, less (iii) actual capital expenditures
reasonably approved by Lender (except that capital expenditures less than
$250 in the aggregate per bed per year and capital expenditures required by
governmental authorities shall not require Lender's approval but Borrower
shall provide Lender with prior written notice of capital expenditure
required by governmental authorities); provided however, that gains or losses
relating to proceeds of the sale of a Released Asset (as defined in the Term
Note) shall not be included in the calculation of Excess Cash Flow.
SECTION 1.16B. ENVIRONMENTAL INDEMNITIES. "Environmental
Indemnities" means those certain Environmental Indemnity Agreements of even
date herewith made by each Borrower in favor of Lender.
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.
SECTION 1.19. GAAP. "GAAP" means generally accepted accounting
principles applied in a consistent manner.
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 1.20A. GUARANTY. "Guaranty" means that certain Unconditional
Guaranty of Payment and Performance made by parties listed on SCHEDULE 1
hereof ("GUARANTOR" or "MANAGER") in favor of Lender and dated as of even
date with this Agreement.
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
applicable to Borrower or its business, operations or assets.
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 Borrower to compensate
Borrower for providing services to a Patient.
SECTION 1.24. LENDER. "Lender" means ▇▇▇▇▇▇ Healthcare Finance,
Inc., a Delaware corporation.
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, the Certificate of Validity, the Guaranty, the
Borrower Guaranty, the Environmental Indemnity, the Pledge Agreement, the
Mortgages and each and every other document now or hereafter delivered in
connection with this Agreement, as any of them may be amended, modified, or
supplemented from time to time.
SECTION 1.27. INTENTIONALLY DELETED.
SECTION 1.28. LOCKBOX. "Lockbox" has the meaning set forth in
Section 2.3.
SECTION 1.28 A. LOCKBOX ACCOUNT. "Lockbox Account" means an account
maintained by Borrower at the Lockbox Bank into which all collections of
Accounts are paid directly.
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SECTION 1.29. LOCKBOX BANK. "Lockbox Bank" has the meaning set forth
in Section 2.3.
SECTION 1.29A. MATURITY DATE. "Maturity Date" has the meaning set
forth in Section 2.8.
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 Services" means Medical and
health care services provided to a Patient, including, but not limited to,
medical and health care services provided to a Patient and performed by
Borrower which are covered by a policy of insurance issued by an Insurer, and
includes physician services, nurse and therapist services, dental services,
hospital services, skilled nursing facility services, comprehensive
outpatient rehabilitation services, home health care services, residential
and out-patient behavioral healthcare services, and medicine or health care
equipment provided by Borrower to a Patient for a necessary or specifically
requested valid and proper medical or health purpose.
SECTION 1.32A. MORTGAGES. "Mortgages" means those certain Mortgages,
Deeds of Trust and Deeds to Secure Debt, of even date herewith made by each
Borrower in favor of Lender.
SECTION 1.32B. NEWCARE. "NewCare" means NewCare Health Corporation
and its affiliates.
SECTION 1.33. NOTE. "Note" has the meaning set forth in Section
2.1(c).
SECTION 1.34. OBLIGATIONS. "Obligations" has the meaning set forth
in Section 3.1.
SECTION 1.35. PATIENT. "Patient" means any Person receiving Medical
Services from Borrower and all Persons legally liable to pay Borrower for
such Medical Services other than Insurers.
SECTION 1.36. PERMITTED LIENS. "Permitted Liens" means: (i) deposits
or pledges to secure obligations under workmen's compensation, social
security or similar laws, or under unemployment insurance; (ii) deposits or
pledges to secure bids, tenders, contracts (other than contracts for the
payment of money), leases, statutory obligations, surety and appeal bonds and
other obligations of like nature arising in the ordinary course of business;
(iii) mechanic's,
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workmen's, materialmen's or other like liens arising in the ordinary course
of business with respect to obligations which are not due, or which are being
contested in good faith by appropriate proceedings which suspend the
collection thereof and in respect of which adequate reserves have been made
(provided that such proceedings do not, in Lender's sole discretion, involve
any substantial risk of the sale, loss or forfeiture of such property or
assets or any interest therein); (iv) liens and encumbrances in favor of
Lender; and (v) liens set forth on SCHEDULE 1.36.
SECTION 1.37. PERSON. "Person" means an individual, partnership,
corporation, trust, joint venture, joint stock company, limited liability
company, association, unincorporated organization, Governmental Authority, or
any other entity.
SECTION 1.38. PLAN. "Plan" has the meaning set forth in Section 4.12.
SECTION 1.38A. PLEDGE AGREEMENT "Pledge Agreement" means that
certain Security Agreement, Pledge and Assignment of Partnership Interests of
even date herewith made by LTC Healthcare of Tyler, Inc. in favor of Lender.
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 Citibank, 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 that is not exempt under
Section 407 or Section 408 of ERISA or Section 4975(c)(2) or (d) of the
Internal Revenue code or under a class exemption granted by the U.S.
Department of Labor.
SECTION 1.42. QUALIFIED ACCOUNT. "Qualified Account" means an
Account of Borrower generated in the ordinary course of Borrower's business
from the sale of goods or rendition of Medical Services which Lender, in its
sole credit judgment, deems to be a Qualified Account. Without limiting the
generality of the foregoing, no Account shall be a Qualified Account if: (a)
the Account or any portion of the Account is payable by an individual
beneficiary, recipient or subscriber individually and not directly to
Borrower by a Medicaid/Medicare Account Debtor or commercial medical
insurance carrier acceptable to Lender in its sole discretion; (b) the
Account remains unpaid more than ninety (90) days past the claim or invoice
date (but in no event more than one hundred and five (105) days after the
applicable Medical Services have been rendered); (c) the Account is subject
to any defense, set-off, counterclaim, deduction, discount, credit,
chargeback, freight claim, allowance, or adjustment of any kind; (d) any part
of any goods the sale of which has given rise to the Account has been
returned, rejected, lost, or damaged; (e) if the Account arises from the sale
of goods by Borrower, the sale was not an absolute sale, or the sale was made
on consignment or on approval or on a sale-or-return basis, or the sale was
made subject to any other repurchase or return agreement, or the goods have
not been shipped to the
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Account Debtor or its designee; (f) if the Account arises from the
performance of Medical Services, the Medical Services have not been actually
been performed or the Medical Services were undertaken in violation of any
law; (g) the Account is subject to a lien other than a Permitted Lien; (h)
Borrower knows or should have known of the bankruptcy, receivership,
reorganization, or insolvency of the Account Debtor; (i) the Account is
evidenced by chattel paper or an instrument of any kind, or has been reduced
to judgment; (j) the Account is an Account of an Account Debtor having its
principal place of business or executive office outside the United States;
(k) the Account Debtor is an Affiliate or Subsidiary of Borrower; (l) more
than ten percent (10%) of the aggregate balance of all Accounts owing from
the Account Debtor obligated on the Account are outstanding more than one
hundred and five (105) days past their invoice date; (m) fifty percent (50%)
or more of the aggregate unpaid Accounts from any single Account Debtor are
not deemed Qualified Accounts under this Agreement; (n) the total unpaid
Accounts of the Account Debtor, except for a Medicaid/Medicare Account
Debtor, exceed twenty percent (20%) of the net amount of all Qualified
Accounts (including Medicaid/Medicare Account Debtors); (o) any covenant,
representation or warranty contained in the Loan Documents with respect to
such Account has been breached; or (p) the Account fails to meet such other
specifications and requirements which may from time to time be established by
Lender.
SECTION 1.43. REPORTABLE EVENT. "Reportable Event" means a
"reportable event" as defined in Section 4043(c) of ERISA for which the
notice requirements of Section 4043(a) of ERISA are not waived..
SECTION 1.44. REVOLVING CREDIT LOAN. "Revolving Credit Loan" has the
meaning set forth in Section 2.1(b).
SECTION 1.45. TERM. "Term" has the meaning set forth in Section 2.8.
SECTION 1.46. TERM LOAN DOCUMENTS. "Term Loan Documents" means and
includes, the Term Note, the Guaranty, the Borrower Guaranty, the Mortgages,
the Environmental Indemnity, the Pledge Agreement and each and every other
document now or hereafter delivered in connection with Term Note, as any of
them may be amended, modified, or supplemented from time to time.
SECTION 1.47. TERM NOTE. "Term Note" means that Secured Term Note,
of even date herewith, in the principal amount of $13,675,000.00]made by
Borrower in favor of Lender.
ARTICLE II
LOAN
SECTION 2.1. TERMS.
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(a) The maximum aggregate principal amount of credit
extended by Lender to Borrower under this Agreement (the "Loan") that will be
outstanding at any time is Five Million and No/100 Dollars ($5,000,000.00)
(the "Maximum Loan Amount").
(b) The Loan shall be in the nature of a revolving line of
credit, and shall include sums advanced and other credit extended by Lender
to or for the benefit of Borrower from time to time under this Article II
(each a "Revolving Credit Loan") up to the Maximum Loan Amount depending upon
the availability in the Borrowing Base, the requests of Borrower pursuant to
the terms and conditions of Section 2.2, and on such other basis as Lender
may reasonably determine. The outstanding principal balance of the Loan may
fluctuate from time to time, to be reduced by repayments made by Borrower
(which may be made without penalty or premium), and to be increased by future
Revolving Credit Loans, advances and other extensions of credit to or for the
benefit of Borrower, and shall be due and payable in full upon the expiration
of the Term. For purposes of this Agreement, any determination as to whether
there is availability within the Borrowing Base for advances or extensions of
credit shall be made by Lender in its sole discretion and is final and
binding upon Borrower.
(c) At Closing, Borrower shall execute and deliver to
Lender a promissory note evidencing Borrower's unconditional obligation to
repay Lender for Revolving Credit Loans, advances, and other extensions of
credit made under the Loan, in the form of EXHIBIT A to this Agreement (as
amended, modified, restated or replaced from time to time, the "Note"), dated
the date of this Agreement, payable to the order of Lender in accordance with
the terms thereof. The Note shall bear interest on the outstanding principal
balance of the Note from the date of the Note until repaid, with interest
payable monthly in arrears on the first Business Day of each month, at a rate
per annum (on the basis of the actual number of days elapsed over a year of
360 days) equal to the Base Rate, provided that after the occurrence and
during the continuance of an Event of Default such rate shall be equal to the
Default Rate. Each Revolving Credit Loan, advance and other extension of
credit shall be deemed evidenced by the Note, which is deemed incorporated
into and made a part of this Agreement by this reference.
(d) Subject to the terms and conditions of this Agreement,
advances under the Loan shall be made against a borrowing base equal to
eighty percent (80%) of QualifiedAccounts due and owing from any
Medicaid/Medicare, 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) Borrower may give
Lender notice of its intention to borrow, in which notice Borrower shall
specify the amount of the proposed borrowing and the proposed borrowing date,
not later than 2:00 p.m. Eastern time two (2) Business Days before the
proposed borrowing date; PROVIDED, HOWEVER, that no such request may be made
at a time when there exists an Event of Default; and (ii) the becoming due of
any amount required to be paid under this Agreement, whether as interest or
for any other Obligation, shall be deemed
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irrevocably to be a request for a Revolving Credit Loan on the day following
the due date in the amount required to pay such interest or other Obligation
if such was not paid by Borrower on the due date.
(b) Borrower hereby irrevocably authorizes Lender to
disburse the proceeds of each Revolving Credit Loan requested, or deemed to
be requested, as follows: (i) the proceeds of each Revolving Credit Loan
requested under subsection 2.2(a)(i) shall be disbursed by Lender by wire
transfer to such bank account as may be agreed upon by Borrower and Lender
from time to time or elsewhere if pursuant to written direction from
Borrower; and (ii) the proceeds of each Revolving Credit Loan deemed to be
requested under subsection 2.2(a)(ii) shall be disbursed by Lender by way of
direct payment of the relevant interest or other Obligation.
(c) Lender will account to Borrower monthly with a
statement of Revolving Credit Loans, charges and payments made pursuant to
this Agreement, and such accounting rendered by Lender shall be deemed final,
binding and conclusive upon Borrower, absent manifest error, unless Lender is
notified by Borrower in writing to the contrary within thirty (30) days of
the date each accounting is mailed to Borrower. Such notice shall be deemed
an objection to those items specifically objected to in the notice.
(d) All Revolving Credit Loans, advances and other
extensions of credit to or for the benefit of Borrower shall constitute one
general Obligation of Borrower, and shall be secured by Lender's lien upon
all of the Collateral.
(e) Lender shall enter all Revolving Credit Loans as debits
to a loan account in the name of Borrower and shall also record in said loan
account all payments made by Borrower on any Obligations and all proceeds of
Collateral which are indefeasibly paid to Lender, and may record therein, in
accordance with customary accounting practice, other debits and credits,
including interest and all charges and expenses properly chargeable to
Borrower. All collections into the Concentration Account pursuant to Section
2.3 shall be applied first to fees agreed upon under the Loan Documents,
costs and expenses due and owing under the Loan Documents, then to interest
due and owing under the Loan Documents, and then to principal outstanding
with respect to Revolving Credit Loans.
SECTION 2.3. COLLECTIONS, DISBURSEMENTS, BORROWING
AVAILABILITY, AND LOCKBOX ACCOUNT. Borrower shall maintain a lockbox account
(the "Lockbox") with Bank One Arizona, N.A. (the "Lockbox Bank"), subject to
the provisions of this Agreement, and shall execute with the Lockbox Bank a
Lockbox Agreement in the form attached as EXHIBIT B, and such other
agreements related to the Lockbox Agreement as Lender may require. Borrower
shall ensure that all collections of Accounts are paid directly from Account
Debtors into the Lockbox, and that all funds paid into the Lockbox are
immediately transferred into a depository account maintained by Lender at
Bank One, N.A., or such other financial institution 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 (in accordance
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with Section 2.2(d)), and all future Revolving Credit Loans, advances and
other extensions of credit to be made by Lender under the conditions set
forth in this Article II. To the extent that any collections of Accounts or
proceeds of other Collateral are not sent directly to the Lockbox but are
received by Borrower, such collections shall be held in trust for the benefit
of Lender and immediately remitted, in the form received, to the Lockbox Bank
for transfer to the Concentration Account immediately upon receipt by
Borrower. Borrower acknowledges and agrees that its compliance with the terms
of this Section 2.3 is essential, and that upon its failure to comply with
any such terms Lender shall be entitled to assess a non-compliance fee which
shall operate to increase the Base Rate by two percent (2%) per annum during
any period of non-compliance. Lender shall be entitled to assess such fee
whether or not an Event of Default is declared or otherwise occurs. All funds
transferred from the Concentration Account for application to Borrower's
indebtedness to Lender shall be applied to reduce the Loan balance. If as the
result of collections of Accounts pursuant to the terms and conditions of
this Section 2.3 a credit balance exists with respect to the Concentration
Account, such credit balance shall not accrue interest in favor of Borrower,
but shall be available to Borrower at any time or times for so long as no
Event of Default exists.
SECTION 2.4. FEES.
(a) Intentionally Deleted.
(b) Intentionally Deleted.
(c) Intentionally Deleted.
(d) Borrower shall pay to Lender all out-of-pocket audit
fees in connection with audits of Borrower's books and records and such other
matters as Lender shall deem appropriate, which shall be due and payable on
the first Business Day of the month following the date of issuance by Lender
of a request for payment thereof to Borrower. Upon Lender's request,
Borrower, at its sole cost and expense, shall obtain appraisals in form
satisfactory to Lender.
(e) Borrower shall pay to Lender, on demand, any and all
fees, costs or expenses which Lender or any participant pays to a bank or
other similar institution (including, without limitation, any fees paid by
Lender to any participant) arising out of or in connection with (i) the
forwarding to Borrower or any other Person on behalf of Borrower, by Lender,
of proceeds of Revolving Credit Loans made by Lender to Borrower pursuant to
this Agreement, and (ii) the depositing for collection, by Lender or any
participant, of any check or item of payment received or delivered to Lender
or any participant on account of Obligations.
SECTION 2.5. PAYMENTS.
(a) Principal payable on account of Revolving Credit Loans
shall be payable by Borrower to Lender immediately upon the earliest of (i)
the receipt by Borrower or Lender of any payments on or proceeds from any of
the Collateral, to the extent of such proceeds, (ii) the
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occurrence of an Event of Default if 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 of this Agreement; PROVIDED, HOWEVER, that
if any advance made by Lender in excess of the Borrowing Base shall exist at
any time, Borrower shall, immediately upon demand, repay such overadvance.
Interest accrued on the Revolving Credit Loans shall be due on the earliest
of (i) the first Business Day of each month (for the immediately preceding
month), computed on the last calendar day of the preceding month, (ii) the
occurrence of an Event of Default if 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. Except to the extent otherwise set forth
in this Agreement, all payments of principal and of interest on the Loan, all
other charges and any other obligations of Borrower under this Agreement,
shall be made to Lender to the Concentration Account, in immediately
available funds.
(b) In addition, beginning on the first anniversary of the
Closing Date and at the end of each fiscal quarter thereafter, Borrower shall
deliver to Lender within thirty (30) days thereafter an amount equal to fifty
percent (50%) of Excess Cash Flow for the past fiscal quarter, to be applied
first, to pay any advances made under this Loan in excess of Borrower's
availability, if any, and then, to pay accrued interest and outstanding
principal under the Term Note . Borrower shall have the right to retain fifty
(50%) of Excess Cash Flow to be used entirely for working capital or other
operating expenses or capital improvements relating to the nursing home
facilities of Borrower.
SECTION 2.6. USE OF PROCEEDS. The proceeds of Lender's advances
under the Loan shall be used solely for working capital and for other costs
of Borrower arising in the ordinary course of Borrower's business.
SECTION 2.7. INTEREST RATE LIMITATION. The parties intend to conform
strictly to the applicable usury laws in effect from time to time during the
term of the Loan. Accordingly, if any transaction contemplated by this
Agreement would be usurious under such laws, then notwithstanding any other
provision of this Agreement: (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 Borrower by Lender (or, to the extent that such consideration
shall have been paid, such excess shall be promptly refunded to Borrower by
Lender); (ii) neither Borrower nor any other Person now or hereafter liable
under this Agreement shall be obligated to pay the amount of such interest to
the extent that it is in excess of the Highest Lawful Rate; and (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 Borrower to Lender shall, to the extent permitted by
applicable law, be allocated throughout the full term of the Note until
payment is made in full so that the actual rate of interest does not exceed
the Highest Lawful Rate in effect at any particular time during the full term
thereof. If at any time the rate of interest under the Note exceeds the
Highest Lawful Rate, the rate of interest to accrue pursuant to this
Agreement shall be limited, notwithstanding
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anything to the contrary in this Agreement, to the Highest Lawful Rate, but
any subsequent reductions in the Base Rate shall not reduce the interest to
accrue pursuant to this Agreement below the Highest Lawful Rate until the
total amount of interest accrued equals the amount of interest that would
have accrued if a varying rate per annum equal to the interest rate under the
Note had at all times been in effect. If the total amount of interest paid or
accrued pursuant to this Agreement under the foregoing provisions is less
than the total amount of interest that would have accrued if a varying rate
per annum equal to the interest rate under the Note had been in effect, then
Borrower agrees to pay to Lender an amount equal to the difference between
(x) the lesser of (A) the amount of interest that would have accrued if the
Highest Lawful Rate had at all times been in effect, or (B) the amount of
interest that would have accrued if a varying rate per annum equal to the
interest rate under the Note had at all times been in effect, and (y) the
amount of interest accrued in accordance with the other provisions of this
Agreement.
SECTION 2.8. TERM.
(a) Subject to Lender's right to cease making Revolving
Credit Loans to Borrower upon or after any Event of Default, this Agreement
shall be in effect from the Closing Date to September 27, 2002 (the "Maturity
Date"), unless terminated as provided in this Section 2.8 (the "Term"), and
this Agreement shall be renewed for one-year periods thereafter upon the
mutual written agreement of the parties.
(b) Notwithstanding anything in this Agreement to the
contrary, Lender may terminate this Agreement without notice upon or after
the occurrence of an Event of Default.
(c) Upon at least thirty (30) days prior written notice to
Lender (the "Termination Notice Period"), Borrower may terminate this
Agreement before the Maturity Date, provided that, at the effective date of
such termination, Borrower shall pay to Lender the then outstanding
principal, accrued interest and other Obligations owing under the terms of
this Agreement, the Term Note, the Borrower Guaranty and any other Loan
Documents.
(d) All of the Obligations shall be immediately due and
payable upon the termination date stated in any notice of termination of this
Agreement (the "Termination Date"); provided that, notwithstanding anything
in Section 2.8(c) to the contrary, the Termination Date shall be effective no
earlier than the first Business Day of the month following the expiration of
the Termination Notice Period. All undertakings, agreements, covenants,
warranties, and representations of Borrower contained in the Loan Documents
shall survive any such termination and Lender shall retain its liens in the
Collateral and all of its rights and remedies under the Loan Documents
notwithstanding such termination until Borrower has paid the Obligations to
Lender, in full, in immediately available funds.
(e) Notwithstanding any provision of this Agreement which
makes reference to the continuance of an Event of Default, nothing in this
Agreement shall be construed to permit Borrower to cure an Event of Default
following the lapse of the applicable cure period, and
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Borrower shall have no such right in any instance unless specifically granted
in writing by Lender.
SECTION 2.9. JOINT AND SEVERAL LIABILITY; BINDING OBLIGATIONS. EACH
ENTITY CONSTITUTING BORROWER SHALL BE JOINTLY AND SEVERALLY LIABLE FOR ALL OF
THE OBLIGATIONS OF BORROWER UNDER THIS NOTE. IN ADDITION, EACH ENTITY
COMPRISING BORROWER HEREBY ACKNOWLEDGES AND AGREES THAT ALL OF THE
REPRESENTATIONS, WARRANTIES, COVENANTS, OBLIGATIONS, CONDITIONS, AGREEMENTS
AND OTHER TERMS CONTAINED IN THIS AGREEMENT SHALL BE APPLICABLE TO AND SHALL
BE BINDING UPON EACH ENTITY COMPRISING BORROWER, AND SHALL BE BINDING UPON
ALL SUCH ENTITIES WHEN TAKEN TOGETHER. EACH BORROWER, INDIVIDUALLY, EXPRESSLY
UNDERSTANDS, AGREES AND ACKNOWLEDGES, THAT THE LOAN WOULD NOT BE MADE
AVAILABLE ON THE TERMS HEREIN IN THE ABSENCE OF THE COLLECTIVE CREDIT OF ALL
OF THE BORROWERS, THE JOINT AND SEVERAL LIABILITY OF ALL BORROWERS, AND THE
CROSS COLLATERALIZATION OF THE COLLATERAL OF ALL BORROWERS. ACCORDINGLY, EACH
BORROWER, INDIVIDUALLY ACKNOWLEDGES THAT THE BENEFIT TO EACH OF THE
PARTICIPANTS IN THE FACILITY AS A WHOLE CONSTITUTES REASONABLY EQUIVALENT
VALUE, REGARDLESS OF THE AMOUNT OF THE LOAN ACTUALLY BORROWED BY, ADVANCED
TO, OR THE AMOUNT OF COLLATERAL PROVIDED BY, ANY INDIVIDUAL BORROWER.
ARTICLE III
COLLATERAL
SECTION 3.1. GENERALLY. As security for the payment of all
liabilities of Borrower to Lender, including without limitation: (i)
indebtedness evidenced under the Note, repayment of Revolving Credit Loans,
advances and other extensions of credit, all fees and charges owing by
Borrower, and all other liabilities and obligations of every kind or nature
whatsoever of Borrower to Lender, whether now existing or hereafter incurred,
joint or several, matured or unmatured, direct or indirect, primary or
secondary, related or unrelated, due or to become due, including but not
limited to any extensions, modifications, substitutions, increases and
renewals thereof, (ii) the payment of all amounts advanced by Lender to
preserve, protect, defend, and enforce its rights under this Agreement 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 (iv) the
payment and performance of obligations of Borrwer under any and all loan and
security agreements, secured bridge or term notes or other loan documents
evidencing indebtedness of Borrower or any of its Affiliates to Lender or any
of its Affiliates including without limitation, the Term Note and the Term
Loan Documents, Borrower hereby assigns and grants to Lender a continuing
first priority lien on and security interest in, upon, and to the following
property (the "Collateral"):
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(a) All of Borrower's now-owned and hereafter acquired or
arising Accounts, accounts receivable and rights to payment of every kind and
description, and all of Borrower's contract rights, chattel paper, documents and
instruments with respect thereto, and all of Borrower's rights, remedies,
security and liens, in, to and in respect of the Accounts, including, without
limitation, rights of stoppage in transit, replevin, repossession and
reclamation and other rights and remedies of an unpaid vendor, lienor or secured
party, guaranties or other contracts of suretyship with respect to the Accounts,
deposits or other security for the obligation of any Account Debtor, and credit
and other insurance;
(b) All moneys, securities and other property and the proceeds
thereof, now or hereafter held or received by, in transit to, in possession of,
or under the control of Lender or a bailee or Affiliate of Lender, from or for
Borrower, whether for safekeeping, pledge, custody, transmission, collection or
otherwise, and all of Borrower's deposits (general or special), balances, sums
and credits with Lender at any time existing;
(c) All of Borrower's right, title and interest in, to and in
respect of all goods relating to, or which by sale have resulted in, Accounts,
including, without limitation, all goods described in invoices or other
documents or instruments with respect to, or otherwise representing or
evidencing, any Account, and all returned, reclaimed or repossessed goods;
(d) All of Borrower's now owned or hereafter acquired deposit
accounts into which Accounts are deposited, including the Lockbox Account;
(e) All of Borrower's now owned and hereafter acquired or
arising general intangibles and other property of every kind and description
with respect to, evidencing or relating 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, ledger cards,
contracts, licenses, formulae, tax and other types of refunds, returned and
unearned insurance premiums, rights and claims under insurance policies, and
computer programs, information, software, records, and data, as the same relates
to the Accounts;
(f) All of Borrower's other general intangibles (including,
without limitation, any proceeds from insurance policies after payment of prior
interests), patents, unpatented inventions, trade secrets, copyrights, contract
rights, goodwill, literary rights, rights to performance, rights under licenses,
choses-in-action, claims, information contained in computer media (such as data
bases, source and object codes, and information therein), things in action,
trademarks and trademarks applied for (together with the goodwill associated
therewith) and derivatives thereof, trade names (excluding, however, the name
"LTC Healthcare" and derivations thereof), including the right to make, use, and
vend goods utilizing any of the foregoing, and permits, licenses,
certifications, authorizations and approvals, and the rights of Borrower
thereunder, issued by any governmental, regulatory, or private authority,
agency, or entity whether now owned or hereafter acquired, together with all
cash and non-cash proceeds and products thereof;
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(g) All of Borrower's now owned or hereafter acquired
inventory of every description which is held by Borrower for sale or lease or is
furnished by Borrower under any contract of service or is held by Borrower as
raw materials, work in process or materials used or consumed in a business,
wherever located, and as the same may now and hereafter from time to time be
constituted, together with all cash and non-cash proceeds and products thereof;
(h) All of Borrower's now owned or hereafter acquired
machinery, equipment, computer equipment, tools, tooling, furniture, fixtures,
goods, supplies, materials, work in process, whether now owned or hereafter
acquired, together with all additions, parts, fittings, accessories, special
tools, attachments, and accessions now and hereafter affixed thereto and/or used
in connection therewith, all replacements thereof and substitutions therefor,
and all cash and non-cash proceeds and products thereof; and
(i) The Property and/or Mortgaged Property (as defined in
the Mortgages); and
(j) 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 sole discretion, Borrower shall execute and deliver to Lender,
or have executed and delivered (all in form and substance satisfactory to Lender
in its sole discretion):
(a) UCC-1 Financing Statements pursuant to the Uniform
Commercial Code in effect in the jurisdiction(s) in which 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
deemed necessary by Lender or as Lender may otherwise request from time to time
in its sole discretion to evidence, perfect, or protect Lender's lien and
security interest in the Collateral required under this Agreement.
SECTION 3.3. COLLATERAL ADMINISTRATION.
(a) All Collateral (except deposit accounts) will at all times
be kept by Borrower at its principal office(s) as set forth on SCHEDULE 4.15 and
shall not be moved from such locations without the prior written consent of
Lender, which consent shall not be unreasonably withheld or delayed.
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(b) Borrower shall keep accurate and complete records of its
Accounts and all payments and collections thereon and shall submit to Lender on
such periodic basis as Lender shall request a sales and collections report for
the preceding period, in form satisfactory to Lender. In addition, if Accounts
in an aggregate face amount in excess of $200,000.00 become ineligible because
they fall within one of the specified categories of ineligibility set forth in
the definition of Qualified Accounts or otherwise, Borrower shall notify Lender
of such occurrence on the first Business Day following such occurrence and the
Borrowing Base shall thereupon be adjusted to reflect such occurrence. If
requested by Lender, Borrower shall execute and deliver to Lender formal written
assignments of all of its Accounts weekly or daily, which shall include all
Accounts that have been created since the date of the last assignment, together
with copies of claims, invoices or other information related thereto.
(c) Whether or not an Event of Default has occurred, any of
Lender's officers, employees or agents shall have the right, at any time or
times hereafter, in the name of Lender or any designee of Lender or Borrower, to
verify the validity, amount or any other matter relating to any Accounts by
mail, telephone, telegraph or otherwise. Borrower shall cooperate fully with
Lender in an effort to facilitate and promptly conclude such verification
process.
(d) To expedite collection, Borrower shall endeavor in the
first instance to make collection of its Accounts for Lender. Lender retains
the right at all times after the occurrence and during the continuance of an
Event of Default, subject to applicable law regarding Medicaid/Medicare
Account Debtors, to notify Account Debtors that Accounts have been assigned
to Lender and to collect Accounts directly in its own name and to charge the
collection costs and expenses, including attorneys' fees, to Borrower.
SECTION 3.4. OTHER ACTIONS. In addition to the foregoing, Borrower (i)
shall provide prompt written notice to each private indemnity, managed care or
other Insurer who either is currently an Account Debtor or becomes an Account
Debtor at any time following the date of this Agreement that Lender has been
granted a first priority lien and security interest in, upon and to all Accounts
applicable to such Insurer and directs each Account Debtor to make payments into
the Lockbox, and hereby authorizes Lender, upon Borrower's failure to send such
notices within ten (10) days after the date of this Agreement (or ten (10) days
after the Insurer becomes an Account Debtor), to send any and all similar
notices to such Insurers, 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 under this Agreement. At Lender's
request, Borrower shall also immediately deliver to Lender all items for which
Lender must receive possession to obtain a perfected security interest. Borrower
shall, on Lender's demand, deliver to Lender all notes, certificates, and
documents of title, chattel paper, warehouse receipts, instruments, and any
other similar instruments constituting Collateral.
SECTION 3.5. SEARCHES. Before Closing, and thereafter (as and when
determined by Lender in its sole discretion), Lender will perform the searches
described in clauses (a) and (b)
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below against Borrower (the results of which are to be consistent with
Borrower's representations and warranties under this Agreement), all at
Borrower's expense:
(a) Uniform Commercial Code searches with the Secretary of
State and local filing offices of each jurisdiction where Borrower maintains its
executive offices, a place of business, or assets;
(b) Judgment, federal tax lien and corporate and partnership
tax lien searches, in each jurisdiction searched under clause (a) above; and
In addition, prior to Closing, at Borrower's expense, Borrower shall
obtain and deliver to Lender 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 currently 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 Borrower (without requiring any of them to act as such) with
full power of substitution to do the following if Borrower has failed to
deliver the same within ten (10) days written request from Lender or to
object in writing thereto (specifying in detail the grounds for Borrower's
objection): (i) endorse the name of Borrower upon any and all checks, drafts,
money orders, and other instruments for the payment of money that are payable
to Borrower and constitute collections on Borrower's Accounts; (ii) execute
in the name of Borrower any financing statements, schedules, assignments,
instruments, documents, and statements that Borrower is obligated to give
Lender under this Agreement; 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. In addition, if Borrower breaches its obligation
to direct payments of the proceeds of the Collateral to the Lockbox Account,
Lender, as the irrevocably made, constituted and appointed true and lawful
attorney for Borrower pursuant to this paragraph, may, by the signature or
other act of any of Lender's officers (without requiring any of them to do
so), direct any federal, state or private payor or fiscal intermediary to pay
proceeds of the Collateral to Borrower by directing payment to the Lockbox
Account.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each entity comprising Borrower represents and warrants to Lender, and
shall be deemed to represent and warrant on each day on which any Obligations
shall be outstanding under this Agreement, that:
SECTION 4.1. SUBSIDIARIES. Except as set forth in SCHEDULE 4.1,
Borrower has no subsidiaries.
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SECTION 4.2. ORGANIZATION AND GOOD STANDING. Borrower is a corporation
duly organized, validly existing, and in good standing under the laws of its
state of incorporation, is (or within thirty (30) days from the date hereof,
shall be) in good standing as a foreign corporation in each jurisdiction in
which the character of the properties owned or leased by it therein or the
nature of its business makes such qualification necessary, has the corporate
power and authority to own its assets and transact the business in which it is
engaged, and has obtained all certificates, licenses (directly or through a
management agreement with NewCare) and qualifications required under all laws,
regulations, ordinances, or orders of public authorities necessary for the
ownership and operation of all of its properties and transaction of all of its
business.
SECTION 4.3. AUTHORITY. Borrower has full corporate power and
authority to enter into, execute, and deliver this Agreement and to perform
its obligations under this Agreement, to borrow the Loan, to execute and
deliver the Note, and to incur and perform the obligations provided for in
the Loan Documents, all of which have been duly authorized by all necessary
corporate. No consent or approval of shareholders of, or lenders to, Borrower
and no consent, approval, filing or registration with any Governmental
Authority is required as a condition to the validity of the Loan Documents or
the performance by Borrower of its obligations under the Loan Documents.
SECTION 4.4. BINDING AGREEMENT. This Agreement and all other Loan
Documents constitute, and the Note, when issued and delivered pursuant to this
Agreement for value received, will constitute, the valid and legally binding
obligations of Borrower, enforceable against Borrower in accordance with their
respective terms.
SECTION 4.5. LITIGATION. Except as disclosed in SCHEDULE 4.5, there are
no actions, suits, proceedings or investigations pending or threatened against
Borrower before any court or arbitrator or before or by any Governmental
Authority which, in any one case or in the aggregate, if determined adversely to
the interests of Borrower, could have a material adverse effect on the business,
properties, condition (financial or otherwise) or operations, current or
prospective, of Borrower, or upon its ability to perform its obligations under
the Loan Documents. Borrower is not in default with respect to any order of any
court, arbitrator, or Governmental Authority applicable to Borrower or its
properties.
SECTION 4.6. NO CONFLICTS. The execution and delivery by Borrower of
this Agreement and the other Loan Documents do not, and the performance of its
obligations under the Loan Documents will not, violate, conflict with,
constitute a default under, or result in the creation of a lien or encumbrance
upon the property of Borrower (other than for the benefit of Lender) under: (i)
any provision of Borrower's certificate of incorporation, (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.
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SECTION 4.7. FINANCIAL CONDITION. The most recent annual financial
statements of Borrower audited by Ernst & Young and the most recent unaudited
financial statements of Borrower, certified by the chief financial officer of
Borrower, which have been delivered to Lender, fairly present the financial
condition of Borrower and the results of its operations and changes in financial
condition as of the dates and for the periods referred to, and have been
prepared in accordance with GAAP. There are no material unrealized or
anticipated liabilities, direct or indirect, fixed or contingent, of Borrower as
of the dates of such financial statements which are not reflected in such
financial statements or in the notes to such financial statements. There has
been no adverse change in the business, properties, condition (financial or
otherwise) or operations (present or prospective) of Borrower since the date of
the most recent unaudited financial statements. Borrower's fiscal year ends on
December 31. The federal tax identification number of each entity comprising
Borrower is as described on SCHEDULE 4.7.
SECTION 4.8. NO DEFAULT. Borrower is not in default under or with
respect to any obligation in any respect which could be adverse to its
business, operations, property or financial condition, or which could
adversely affect the ability of Borrower to perform its obligations under the
Loan Documents. No Event of Default or event which, with the giving of notice
or lapse of time, or both, could become an Event of Default, has occurred and
is continuing.
SECTION 4.9. TITLE TO PROPERTIES. Borrower has good and marketable
title to its properties and assets, including the Collateral and the properties
and assets reflected in the financial statements described in Section 4.7,
subject to no lien, mortgage, pledge, encumbrance or charge of any kind, other
than Permitted Liens. Borrower has not agreed or consented to cause any of its
properties or assets whether owned now or hereafter acquired to be subject in
the future (upon the happening of a contingency or otherwise) to any lien,
mortgage, pledge, encumbrance or charge of any kind other than Permitted Liens
or as otherwise disclosed to Lender prior to the date hereof.
SECTION 4.10. TAXES. Borrower has filed, or has obtained extensions for
the filing of, all federal, state and other tax returns which are required to be
filed, and has paid all taxes shown as due on those returns and all assessments,
fees and other amounts due as of the date of this Agreement. All tax liabilities
of Borrower are adequately provided for on Borrower's books. No tax liability
has been asserted by the Internal Revenue Service or other taxing authority
against Borrower for taxes in excess of those already paid.
SECTION 4.11. SECURITIES AND BANKING LAWS AND REGULATIONS.
(a) The use of the proceeds of the Loan and Borrower's
issuance of the Note will not directly or indirectly violate or result in a
violation of the Securities Act of 1933 or the Securities Exchange Act of 1934,
as amended, or any regulations issued pursuant thereto, including without
limitation Regulations U, T or X of the Board of Governors of the Federal
Reserve System. Borrower is not engaged in the business of extending credit for
the purpose of the purchasing or carrying "margin stock" within the meaning of
those regulations. No part of
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the proceeds of the Loan under this Agreement will be used to purchase or
carry any margin stock or to extend credit to others for such purpose.
(b) Borrower is not an investment company within the meaning
of the Investment Company Act of 1940, as amended, nor is it, directly or
indirectly, controlled by or acting on behalf of any Person which is an
investment company within the meaning of that Act.
SECTION 4.12. ERISA. No employee benefit plan (a "Plan") subject to
the Employee Retirement Income Security Act of 1974 ("ERISA") and regulations
issued pursuant to ERISA that is maintained by Borrower or under which
Borrower could have any material liability under ERISA (i) has failed to meet
minimum funding standards established in Section 302 of ERISA, (ii) has
failed to substantially comply with all applicable requirements of ERISA and
of the Internal Revenue Code, including all applicable rulings and
regulations thereunder, or (iii) has engaged in or been involved in a
prohibited transaction (as defined in ERISA) under ERISA or under the
Internal Revenue Code. Neither Borrower nor any member of a Controlled Group
that includes Borrower has not assumed, or received notice of a claim
asserted against Borrower or another member of the Controlled Group for,
withdrawal liability (as defined in the Multi- Employer Pension Plan
Amendments Act of 1980, as amended) with respect to any multi-employer
pension plan. Borrower has timely made when due all contributions with
respect to any multi-employer pension plan in which it participates and no
event has occurred triggering a material claim against Borrower for
withdrawal liability with respect to any multi-employer pension plan in which
Borrower participates.
SECTION 4.13. COMPLIANCE WITH 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 (directly
or through a management agreement with NewCare), 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 the best of Borrower's
knowledge, no use, exposure, release, generation, manufacture, storage,
treatment, transportation or disposal of Hazardous Material has occurred or is
occurring on or from any real property on which the Collateral is located or
which is owned, leased or otherwise occupied by Borrower (the "Premises"), or
off the Premises as a result of any action of Borrower, except as described in
SCHEDULE 4.14. All Hazardous Material used, treated, stored, transported to or
from, generated or handled on the Premises, or off the Premises by Borrower, has
been disposed of on or off the Premises by or on behalf of Borrower in a lawful
manner. There are no underground storage tanks present on or under the Premises
owned or leased by Borrower. No other environmental, public health or safety
hazards exist with respect to the Premises.
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SECTION 4.15. PLACES OF BUSINESS. As of the Closing Date, the only
places of business of Borrower, and the places where it keeps and intends to
keep the Collateral and records concerning the Collateral, are at the addresses
set forth in SCHEDULE 4.15. SCHEDULE 4.15 also lists the owner of record of each
such property.
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
(directly or through a management agreement with NewCare), and rights with
respect to the foregoing necessary for the current and planned future conduct of
its business, without any conflict with the rights of others. Borrower is not in
default of any obligation or undertaking with respect to such intellectual
property or rights. Borrower is not infringing on any patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, franchises, licenses, any rights with respect to the foregoing, or
any other intellectual property rights of others and the Borrower is not aware
of any infringement by others of any such rights owned by Borrower.
SECTION 4.17. 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 by this Agreement contains any untrue statement of material fact or
omits to state a material fact necessary to make the statements contained in
this Agreement or other Loan Document not misleading. There is no fact known to
Borrower that adversely affects or in the future may adversely affect the
business, operations, affairs or financial condition of Borrower, or any of its
properties or assets.
SECTION 4.19. INVESTMENTS, GUARANTEES, AND CERTAIN CONTRACTS. Borrower
does not own or hold any equity or long-term debt investments in, have any
outstanding advances to, have any outstanding guarantees for the obligations of,
or have any outstanding borrowings from, any Person, except as described on
SCHEDULE 4.19. Borrower is not a party to any contract or agreement, or subject
to any corporate restriction, which adversely affects its business.
SECTION 4.20. BUSINESS INTERRUPTIONS. Within five years before the date
of this Agreement, neither the business, property or assets, or operations of
Borrower has been adversely affected in any way by any casualty, strike,
lockout, combination of workers, or order of the United States of America or
other Governmental Authority, directed against Borrower. There are no pending or
threatened labor disputes, strikes, lockouts, or similar occurrences or
grievances against Borrower or its business.
SECTION 4.21. NAMES. Within five years before the date of this
Agreement, Borrower has not conducted business under or used any other name
(whether corporate, partnership or assumed) other than as shown on SCHEDULE
4.21. Borrower is the sole owner of all names listed
21
on that Schedule and any and all business done and invoices issued in such
names are Borrower's sales, business, and invoices. Each trade name of
Borrower represents a division or trading style of Borrower and not a
separate Person or independent Affiliate.
SECTION 4.22 JOINT VENTURES. Borrower is not engaged in any joint
venture or partnership with any other Person, except as set forth on SCHEDULE
4.22.
SECTION 4.23 ACCOUNTS. Lender may rely, in determining which Accounts
are Qualified Accounts, on all statements and representations made by Borrower
with respect to any Account or Accounts. Unless otherwise indicated in writing
to Lender, with respect to each Qualified Account, Borrower represents that:
(a) The Account is genuine and in all respects what it
purports to be, and is not evidenced by a judgment;
(b) The Account arises out of a completed, BONA FIDE sale and
delivery of goods or rendition of Medical Services by Borrower in the ordinary
course of its business and in accordance with the terms and conditions of all
purchase orders, contracts, certification, participation, certificate of need,
or other documents relating thereto and forming a part of the contract between
Borrower and the Account Debtor;
(c) The Account is for a liquidated amount maturing as stated
in a duplicate claim or invoice covering such sale or rendition of Medical
Services, a copy of which has been furnished or is available to Lender;
(d) The Account, and Lender's security interest in such
Account, is not, and will not (by voluntary act or omission by Borrower), be in
the future, subject to any offset, lien, deduction, defense, dispute,
counterclaim or any other adverse condition, and each such Account is absolutely
owing to Borrower and is not contingent in any respect or for any reason;
(e) There are no facts, events or occurrences which in any way
impair the validity or enforceability of any Accounts or tend to reduce the
amount payable thereunder from the face amount of the claim or invoice and
statements delivered to Lender with respect thereto;
(f) To the best of Borrower's knowledge, (i) the Account
Debtor under the Account had the capacity to contract at the time any contract
or other document giving rise to the Account was executed and (ii) such Account
Debtor is solvent;
(g) To the best of Borrower's knowledge, there are no
proceedings or actions which are threatened or pending against any Account
Debtor under the Account which might result in any material adverse change in
such Account Debtor's financial condition or the collectibility of such Account;
22
(h) The Account has been billed and forwarded to the Account
Debtor for payment in accordance with applicable laws and compliance and
conformance with any and requisite procedures, requirements and regulations
governing payment by such Account Debtor with respect to such Account, and such
Account if due from a Medicaid/Medicare Account Debtor is properly payable
directly to Borrower; and
(i) Borrower has obtained and currently has all certificates
of need, Medicaid and Medicare provider numbers, licenses (directly or through a
management agreement with NewCare), permits and authorizations that are
necessary in the generation of such Accounts.
SECTION 4.24. INTENTIONALLY DELETED.
SECTION 4.25. YEAR 2000 COMPLIANCE.
(a) All devices, systems, machinery, information technology,
computer software and hardware, and other date sensitive technology
(collectively, the "Systems") necessary for Borrower to carry on its business as
currently conducted and as expected to be conducted in the future are Year 2000
Compliant or will be Year 2000 Compliant within a period of time calculated to
result in no material disruption of any of Borrower's business operations. For
purposes of these provisions, "Year 2000 Compliant" means that such Systems are
designed to be used before, during and after the Gregorian calendar year 2000
A.D. and will operate during each such time period without error related to date
data, specifically including any error relating to, or the product of, date data
that represents or refers to different centuries or more than one century.
(b) Borrower has: (i) undertaken a detailed inventory, review,
and assessment of all areas within its business and operations that could be
adversely affected by the failure of Borrower to be Year 2000 Compliant on a
timely basis; (ii) developed a detailed plan and time line for becoming Year
2000 Compliant on a timely basis; and (iii) to date, implemented that plan in
accordance with the timetable in all material respects.
ARTICLE V
CLOSING AND CONDITIONS OF LENDING
SECTION 5.1. CONDITIONS PRECEDENT TO AGREEMENT. The obligation of
Lender to enter into and perform this Agreement and to make Revolving Credit
Loans is subject to the following conditions precedent:
(a) Lender shall have received two (2) originals of this
Agreement, the Certificate of Validity, the Guaranty, the Environmental
Indemnity, the Mortgages, the Pledge Agreement and all other Loan Documents and
Term Loan Documents required to be executed and delivered at or before Closing
(other than the Note and the Term Note, as to which Lender
23
shall receive only one original), executed by Borrower and any other required
Persons, as applicable.
(b) Lender shall have received all searches and good standing
certificates required by Section 3.5.
(c) Borrower shall have complied and shall then be in
compliance with all the terms, covenants and conditions of the Loan Documents.
(d) There shall have occurred and be continuing no Event of
Default and no event which, with the giving of notice or the lapse of time, or
both, could constitute such an Event of Default.
(e) The representations and warranties contained in Article IV
shall be true and correct.
(f) Lender shall have received copies of all consents of
shareholders, and other action taken by Borrower to authorize the execution,
delivery and performance of the Loan Documents and the borrowing of the Loan
under the Loan Documents, as well as the names and signatures of the
shareholders and officers of Borrower authorized to execute documents on its
behalf in connection with the Loan, all as also certified as of the date of this
Agreement by Borrower's chief financial officer, or equivalent, and such other
papers as Lender may require.
(g) Lender shall have received copies, certified as true,
correct and complete by a corporate officer of each Borrower, of the certificate
of formation 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 of this Agreement, substantially in the form of
EXHIBIT C.
(i) Lender shall have received such financial statements,
reports, certifications, and other operational information required to be
delivered under this Agreement, including without limitation an initial
borrowing base certificate calculating the Borrowing Base.
(j) The Lockbox, Lockbox Account and the Concentration Account
shall have been established.
(k) Lender shall have received two (2) originals of that
certain Secured Unconditional Guaranty of Payment and Performance of even date
herewith made by Borrower in favor of Lender (the "BORROWER GUARANTY");
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(l) 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.;
(m) Entry of a Bankruptcy Court order satisfactory to Lender
which contains the provisions set forth in paragraph 10 of the commitment letter
dated as of September 29, 1999 between Lender, Borrower and Lenox Healthcare,
Inc;
(n) Borrower shall have paid to Lender the purchase price, in
cash, to be applied to satisfy NewCare's outstanding obligations to Lender; and
(o) Borrower shall have entered into (x) management agreements
with Manager, and (y) interim management agreements with NewCare, in form and
substance satisfactory to Lender.
SECTION 5.2. CONDITIONS PRECEDENT TO ADVANCES. Notwithstanding any
other provision of this Agreement, no Loan proceeds, Revolving Credit Loans,
advances or other extensions of credit under the Loan shall be disbursed under
this Agreement unless the following conditions have been satisfied or waived
immediately before such disbursement:
(a) The representations and warranties on the part of Borrower
contained in Article IV of this Agreement shall be true and correct in all
respects at and as of the date of disbursement or advance, as though made on and
as of such date (except to the extent that such representations and warranties
expressly relate solely to an earlier date and except that the references in
Section 4.7 to financial statements shall be deemed to be a reference to the
then most recent annual and interim financial statements of Borrower furnished
to Lender pursuant to Section 6.1).
(b) No Event of Default or event which, with the giving of
notice of the lapse of time, or both, could become an Event of Default shall
have occurred and be continuing or would result from the making of the
disbursement or advance.
(c) No adverse change in the condition (financial or
otherwise), properties, business, or operations of Borrower shall have occurred
and be continuing with respect to Borrower since the date of this Agreement.
SECTION 5.3. CLOSING. Subject to the conditions of this Article V, the
Loan shall be made available on the date as is mutually agreed by the parties
(the "Closing Date") at such time as may be mutually agreeable to the parties
upon the execution of this Agreement (the "Closing") at such place as may be
requested by Lender.
SECTION 5.4. WAIVER OF RIGHTS. By completing the Closing under this
Agreement, or by making advances under the Loan, Lender does not waive a breach
of any representation or warranty of Borrower under this Agreement or under any
other Loan Document, and all of
25
Lender's claims and rights resulting from any breach or misrepresentation by
Borrower are specifically reserved by Lender.
ARTICLE VI
AFFIRMATIVE COVENANTS
Each entity comprising Borrower covenants and agrees that for so long
as Borrower may borrow under this Agreement and until payment in full of the
Note and performance of all other obligations of Borrower under the Loan
Documents:
[SECTION 6.1. FINANCIAL STATEMENTS AND COLLATERAL REPORTS. Borrower
will furnish to Lender (i) 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;
(ii) payables aging schedules within fifteen (15) days after the end of each
calendar month; (iii) internally prepared monthly financial statements for
Borrower, certified by the chief financial officer of Borrower, within
forty-five (45) days of the end of each calendar month, accompanied by
management analysis and actual vs. budget variance reports for each nursing
home generating Accounts; (iv) to the extent prepared by Borrower, annual
projections, profit and loss statements, balance sheets, and cash flow reports
(prepared on a monthly basis) for the succeeding fiscal year within thirty
(30) days before the end of each of Borrower's fiscal years; (v) i4nternally
prepared annual financial statements for Borrower within sixty (60)
days after the end of each of Borrower's fiscal years; (vi) annual audited
financial statements for Borrower prepared by ___________________, or another
firm of independent public accountants satisfactory to Lender, within one
hundred thirty-five (135) days after the end of each of Borrower's fiscal years;
(vii) 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; (viii) as soon as available, copies of all financial
statements and notices provided by Borrower to all of its stockholders; and (ix)
such additional information, reports or statements as Lender may from time to
time request. Annual financial statements shall set forth in comparative form
figures for the corresponding periods in the prior fiscal year. All financial
statements shall include a balance sheet and statement of earnings and shall be
prepared in accordance with GAAP.] The financial reporting required pursuant to
this Section 6.1 shall satisfy the financial reporting requirements set forth in
the Mortgages.
SECTION 6.2. PAYMENTS UNDER THIS AGREEMENT. Borrower will make all
payments of principal, interest, fees, and all other payments required under
this Agreement and under the Loan, and under any other agreements with Lender to
which Borrower is a party, as and when due.
26
SECTION 6.3. EXISTENCE, GOOD STANDING, AND COMPLIANCE WITH LAWS.
Borrower will do or cause to be done all things necessary (i) to obtain and keep
in full force and effect a corporate existence, rights, licenses (directly or
through a management agreement with Newcare), privileges, and franchises of
Borrower necessary to the ownership of its property or the conduct of its
business, and comply with all applicable current and future laws, ordinances,
rules, regulations, orders and decrees of any Governmental Authority having or
claiming jurisdiction over Borrower; and (ii) 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.
SECTION 6.4. LEGALITY. The making of the Loan and each disbursement
or advance under the Loan shall not be subject to any penalty or special tax,
shall not be prohibited by any governmental order or regulation applicable to
Borrower, and shall not violate any rule or regulation of any Governmental
Authority, and necessary consents, approvals and authorizations of any
Governmental Authority to or of any such disbursement or advance shall have
been obtained.
SECTION 6.5. LENDER'S SATISFACTION. All instruments and legal documents
and proceedings in connection with the transactions contemplated by this
Agreement shall be satisfactory in form and substance to Lender and its counsel,
and Lender shall have received all documents, including records of corporate
proceedings and opinions of counsel, which Lender may have requested in
connection therewith.
SECTION 6.6. TAXES AND CHARGES. Borrower will timely file all tax
reports and pay and discharge all taxes, assessments and governmental charges or
levies imposed upon Borrower, or its income or profits or upon its properties or
any part thereof, before the same shall be in default and before the date on
which penalties attach thereto, as well as all lawful claims for labor,
material, supplies or otherwise which, if unpaid, might become a lien or charge
upon the 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 reasonably
satisfactory to Lender in such amounts and against such risks as is customarily
maintained by similar businesses and by owners of similar property in the same
general area. In the event of a casualty or loss in excess of $500,000 at a
facility owned or leased by Borrower, all insurance proceeds shall be disbursed
to Lender
27
and shall be applied, at Lender's discretion, to the Obligations or to
the reconstruction of the damaged facility.
SECTION 6.8. GENERAL INFORMATION. Borrower will furnish to Lender such
information as Lender may, from time to time, request with respect to the
business or financial affairs of Borrower, and permit any officer, employee or
agent of Lender to visit and inspect any of the properties, to examine the
minute books, books of account and other records, including management letters
prepared by Borrower's auditors, of Borrower, and make copies thereof or
extracts therefrom, and to discuss its and their business affairs, finances and
accounts with, and be advised as to the same by, the accountants and officers of
Borrower, all at such times and as often as Lender may reasonably require.
SECTION 6.9. MAINTENANCE OF PROPERTY. Borrower will maintain, keep
and preserve all of its properties in good repair, working order and
condition and from time to time make all necessary repairs, renewals,
replacements, betterments and improvements thereto, so that the business
carried on in connection therewith may be properly conducted at all times.
SECTION 6.10. NOTIFICATION OF EVENTS OF DEFAULT AND ADVERSE
DEVELOPMENTS. Borrower promptly will notify Lender upon the occurrence of: (i)
any Event of Default; (ii) any event which, with the giving of notice or lapse
of time, or both, could constitute an Event of Default; (iii) 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; (iv) any judicial, administrative or arbitration proceeding pending
against Borrower, and any judicial or administrative proceeding known by
Borrower to be threatened against it which, if adversely decided, could
adversely affect its condition (financial or otherwise) or operations (present
or prospective) or which may expose Borrower to uninsured liability of
$25,000.00 or more; (v) any default claimed by any other creditor for Borrowed
Money of Borrower other than Lender; and (vi) any other development in the
business or affairs of Borrower which may be adverse; in each case describing
the nature of the event or development. In the case of notification under
clauses (i) and (ii)), Borrower should set forth the action Borrower proposes to
take with respect to such event.
SECTION 6.11. EMPLOYEE BENEFIT PLANS. Borrower will (i) 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; (ii) 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 (iii) promptly advise Lender of the occurrence of any
Reportable Event or Prohibited Transaction with respect to any such Plan and the
action which Borrower proposes to take with respect thereto. Borrower will make
all contributions when due with respect to any multi-employer pension plan in
which it participates and will promptly advise Lender: (x) upon its receipt of
notice of the assertion
28
against Borrower of a claim for withdrawal liability; (y) upon the occurrence
of any event which could trigger the assertion of a claim for withdrawal
liability against Borrower; and (z) 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 by this Agreement) and to
perfect and protect Lender's first priority lien and security interest in the
Collateral, as Lender may request.
SECTION 6.13. FINANCIAL RECORDS. Borrower shall keep current and
accurate books of records and accounts in which full and correct entries will be
made of all of its business transactions, and will reflect in its financial
statements adequate accruals and appropriations to reserves, all in accordance
with GAAP.
SECTION 6.14. COLLECTION OF ACCOUNTS. Borrower shall continue to
collect its Accounts in the ordinary course of business.
SECTION 6.15. PLACES OF BUSINESS. Borrower shall give thirty (30) days'
prior written notice to Lender of any change in the location of any of its
places of business, of the places where its records concerning its Accounts are
kept, of the places where the Collateral is kept, or of the establishment of any
new, or the discontinuance of any existing, places of business.
SECTION 6.16. BUSINESS CONDUCTED. Borrower shall continue in the
business currently conducted by it using its best efforts to maintain its
customers and goodwill. Borrower shall not engage, directly or indirectly, in
any line of business substantially different from the business conducted by it
immediately before the Closing Date, or engage in business or lines of business
which are not reasonably related thereto.
SECTION 6.17. LITIGATION AND OTHER PROCEEDINGS. Borrower shall give
prompt notice to Lender of any litigation, arbitration, or other proceeding
before any Governmental Authority against or affecting Borrower if the amount
claimed is more than $25,000.00.
SECTION 6.18. BANK ACCOUNTS. Borrower shall assign to Lender all of its
depository and disbursement accounts into which collections of Accounts are
deposited.
SECTION 6.19. SUBMISSION OF COLLATERAL DOCUMENTS. Borrower will, on
demand of Lender, make available to Lender copies of shipping and delivery
receipts evidencing the shipment of goods that gave rise to an Account, medical
records, insurance verification forms, assignment of benefits, in-take forms or
other proof of the satisfactory performance of services that gave rise to an
Account, a copy of the claim or invoice for each Account and copies of any
29
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 (directly or through a management agreement with Newcare) all
certificates of need, provider numbers and licenses necessary to conduct its
business as currently conducted, and take any steps required to comply with any
such new or additional requirements that may be imposed on providers of medical
products and Medical Services. If required, all Medicaid/Medicare cost reports
will be properly filed. Borrower shall obtain all such certificates of need,
provider numbers and licenses issued in its name on or before March 29, 2000.
SECTION 6.21. OFFICER'S CERTIFICATES. Together with the monthly
financial statements delivered pursuant to clause (iii) of Section 6.1, and
together with the audited annual financial statements delivered pursuant to
clause (vi) of that Section, Borrower shall deliver to Lender a certificate of
its chief financial officer, in form and substance satisfactory to Lender:
(a) Setting forth the information (including detailed
calculations) required to establish whether Borrower is in compliance with the
requirements of Articles VI and VII as of the end of the period covered by the
financial statements then being furnished; and
(b) Stating that the signer has reviewed the relevant terms of
this Agreement, and has made (or caused to be made under his supervision) a
review of the transactions and conditions of Borrower from the beginning of the
accounting period covered by the income statements being delivered to the date
of the certificate, and that such review has not disclosed the existence during
such period of any condition or event which constitutes an Event of Default or
which is then, or with the passage of time or giving of notice or both, could
become an Event of Default, and if any such condition or event existed during
such period or now exists, specifying the nature and period of existence thereof
and what action Borrower has taken or proposes to take with respect thereto.
SECTION 6.22. VISITS AND INSPECTIONS. Borrower agrees to permit
representatives of Lender, from time to time, as often as may be reasonably
requested, but only during normal business hours, to visit and inspect the
properties of Borrower, and to inspect, audit and make extracts from its books
and records, and discuss with its officers, its employees and its independent
accountants, Borrower's business, assets, liabilities, financial condition,
business prospects and results of operations.
ARTICLE VII
NEGATIVE COVENANTS
Each entity comprising Borrower covenants and agrees that so long as
Borrower may borrow under this Agreement and until payment in full of the Note
and performance of all other obligations of Borrower under the Loan Documents:
SECTION 7.1. BORROWING. Borrower will not create, incur, assume or
suffer to exist any liability for Borrowed Money except: (i) indebtedness to
Lender; (ii) indebtedness of Borrower secured by mortgages, encumbrances or
liens expressly permitted by Section 7.3; (iii) accounts payable to trade
creditors and current operating expenses (other than for borrowed money)
which are recognized in Borrower's accounting system and not aged more than
one hundred twenty (120) days from the billing date or more than thirty (30)
days from the due date, in each case incurred in the ordinary course of
business and paid within such time period, unless the same are being
contested in good faith and by appropriate and lawful proceedings, and
Borrower shall have set aside such reserves, if any, with respect thereto as
are required by GAAP and deemed adequate by Borrower and its independent
accountants; and (iv) borrowings incurred in the ordinary course of its
business and not exceeding $200,000.00 in the aggregate outstanding at any
one time. Borrower will not make prepayments on any existing or future
indebtedness for Borrowed Money in excess of $200,000.00 to any Person (other
than Lender, to the extent permitted by this Agreement or any subsequent
agreement between Borrower and Lender).
SECTION 7.2. JOINT VENTURES. Borrower will not invest directly or
indirectly in any joint venture for any purpose without the prior written notice
to, and the prior written consent of, Lender, which consent shall not be
unreasonably withheld.
SECTION 7.3. LIENS AND ENCUMBRANCES. Borrower will not create, incur,
assume or suffer to exist any mortgage, pledge, lien or other encumbrance of any
kind (including the charge upon property purchased under a conditional sale or
other title retention agreement) upon, or any security interest in, any of its
Collateral, whether now owned or hereafter acquired, except for Permitted Liens.
SECTION 7.4. RESTRICTION ON FUNDAMENTAL CHANGES; NO CHANGE IN OPERATION
OR CONTROL. Except as permitted pursuant to Paragraph 27 of the Term Note,
Borrower will not, without prior written notice to, and the prior written
consent of Lender: (i) enter into any transaction of merger or consolidation;
(ii) liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution); (iii) convey, sell, lease, sublease, transfer or otherwise dispose
of, in one transaction or a series of transactions, any of its assets, or the
capital stock of any subsidiary of Borrower, whether now owned or hereafter
acquired; or (iv) acquire by purchase or otherwise all or any substantial part
of the business or assets of, or stock or other evidence of beneficial ownership
of, any Person. Borrower agrees that in addition to all other remedies available
to Lender, Lender shall be entitled to specific enforcement of the covenants in
this Section 7.4, including injunctive relief. Consistent with the foregoing,
until the Obligations are repaid in full, none of the entities comprising
Borrower shall transfer, assign, convey or grant to any other Person the right
to operate or control any of the nursing homes listed on SCHEDULE 4.15, whether
by lease, sublease, management agreement, joint venture agreement or otherwise.
31
SECTION 7.5. SALE AND LEASEBACK. Except as permitted pursuant to
Paragraph 27 of the Term Note, Borrower will not, directly or indirectly, enter
into any arrangement whereby Borrower sells or transfers all or any part of its
assets and thereupon and within one year thereafter rents or leases the assets
so sold or transferred without prior written notice to and the prior written
consent of Lender, which consent shall not be unreasonably withheld.
SECTION 7.6. DIVIDENDS, DISTRIBUTIONS AND MANAGEMENT FEES. Borrower
will not make, declare or pay any dividends or distributions with respect to,
purchase, redeem or otherwise acquire for value any of its outstanding stock
now or hereafter outstanding, or return any capital of its stockholders,
other than Excess Proceeds (as defined in the Term Note) and such other
amounts as may be approved by Lender. Borrower will not pay management fees
or fees of a similar nature to any person other than a management fee to
Guarantor equal to (i) five percent (5%) of revenues prior to the existence
of a monetary Event of Default or a material Event of Default and (ii) the
lesser of (x) Guarantor's actual costs to operate the facilities and (y) two
and one half percent (2.5%) of revenues of the facilities following any such
default. Neither Borrower nor Manager shall terminate any management
agreement without Lender's consent (and the termination of any such
management agreement shall not be effective until Lender has consented
thereto).
SECTION 7.7. LOANS. Borrower will not make loans or advances to any
Person, other than (i) trade credit extended in the ordinary course of its
business, and (ii) advances for business travel and similar temporary advances
made in the ordinary course of business to officers, stockholders, directors,
and employees.
SECTION 7.8. CONTINGENT LIABILITIES. Borrower will not assume,
guarantee, endorse, contingently agree to purchase or otherwise become liable
upon the obligation of any Person, except by the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business.
SECTION 7.9. SUBSIDIARIES. Borrower will not form any subsidiary, or
make any investment in or any loan in the nature of an investment to, any other
Person.
SECTION 7.10. COMPLIANCE WITH ERISA. Borrower will not permit with
respect to any Plan covered by Title IV of ERISA any Prohibited Transaction or
any Reportable Event.
SECTION 7.11. CERTIFICATES OF NEED. Borrower will not amend, alter or
suspend or terminate or make provisional in any material way, any certificate of
need or provider number other than in connection with the closing of the Elms
Nursing Home, the Oak Manor Nursing Home and the Pine Manor Nursing Home (the
"Closed Homes") without the prior written consent of Lender, which consent shall
not be unreasonably withheld.
SECTION 7.12. TRANSACTIONS WITH AFFILIATES. Borrower will not enter
into any transaction, including without limitation the purchase, sale, or
exchange of property, or the loaning or giving of funds to any Affiliate or
subsidiary, except in the ordinary course of business
32
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 under this Agreement. For purposes of the foregoing, Lender
consents to the transactions described on SCHEDULE 7.12.
SECTION 7.13. USE OF LENDER'S NAME. Borrower will not use Lender's
name (or the name of any of Lender's affiliates) in connection with any of
its business operations. Borrower may disclose to third parties that Borrower
has a borrowing relationship with Lender. Nothing contained in this Agreement
is intended to permit or authorize Borrower to make any contract on behalf of
Lender.
SECTION 7.14. CHANGE IN CAPITAL STRUCTURE. There shall occur no change
in the ownership of Borrower's stock or in Borrower's capital structure, both as
set forth in SCHEDULE 4.17.
SECTION 7.15. CONTRACTS AND AGREEMENTS. Borrower will not become or be
a party to any contract or agreement which would breach this Agreement, or
breach any other instrument, agreement, or document to which Borrower is a party
or by which it is or may be bound.
SECTION 7.16. MARGIN STOCK. Borrower will not carry or purchase any
"margin security" within the meaning of Regulations U, T or X of the Board of
Governors of the Federal Reserve System.
SECTION 7.17. TRUTH OF STATEMENTS AND CERTIFICATES. Borrower will not
furnish to Lender any certificate or other document that contains any untrue
statement of a material fact or that omits to state a material fact necessary to
make it not misleading in light of the circumstances under which it was
furnished.
SECTION 7.18. 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 when taken as a
whole, to fall below ninety percent (90%) 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
33
SECTION 8.1. EVENTS OF DEFAULT. Each of the following (individually, an
"Event of Default" and collectively, the "Events of Default") shall constitute
an event of default under this Agreement:
(a) A default in the payment of any installment of principal
of, or interest upon, the Note when due and payable, whether at maturity or
otherwise, or any breach of Section 2.3, which default or breach, as applicable,
shall have continued unremedied for a period of five (5) days after written
notice of the default or breach from Lender to Borrower;
(b) A default in the payment of any other charges, fees, or
other monetary obligations owing to Lender arising out of or incurred in
connection with this Agreement when such payment is due and payable, which
default shall have continued unremedied for a period of five (5) days after
written notice of the default from Lender to Borrower, provided, however, that
with respect to any payments which are being disputed by Borrower, the failure
to make such payment shall not constitute a default hereunder so long as the
disputed amount is placed in an escrow acceptable to Borrower and Lender;
(c) A default in the due observance or performance by Borrower
of any other term, covenant or agreement contained in any of the Loan Documents,
which default shall have continued unremedied for a period of ten (10) days
after written notice of the default from Lender to Borrower;
(d) Any representation or warranty made by Borrower in this
Agreement or in any of the other Loan Documents, any financial statement, or any
statement or representation made in any other certificate, report or opinion
delivered in connection with this Agreement or the other Loan Documents proves
to have been incorrect or misleading in any material respect when made, which
default shall have continued unremedied for a period of ten (10) days after
written notice of the default from Lender to Borrower, provided, however, that
with respect to asserted liens or security interests in the Collateral which
arose or accrued prior to the date hereof, the Borrower shall have a cure period
of 60 days after written notice from Lender of such default;
(e) Any obligation of Borrower (other than its Obligations
under this Agreement) for the payment of Borrowed Money in excess of $200,000 in
the aggregate is not paid when due or within any applicable grace period, or
such obligation becomes or is declared to be due and payable before the
expressed maturity of the obligation, or there shall have occurred an event
which, with the giving of notice or lapse of time, or both, would cause any such
obligation to become, or allow any such obligation to be declared to be, due and
payable;
(f) Borrower makes an assignment for the benefit of creditors,
offers a composition or extension to creditors, or makes or sends notice of an
intended bulk sale of any business or assets now or hereafter conducted by
Borrower;
34
(g) (i) Borrower files a petition in bankruptcy, (ii)
Borrower is adjudicated insolvent or bankrupt, petitions or applies to any
tribunal for any receiver of or any trustee for itself or any substantial
part of its property, (iii) Borrower 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, (iv) any such proceeding is commenced against Borrower
and such proceeding remains undismissed for a period of sixty (60) days, (v)
Borrower by any act indicates its consent to, approval of, or acquiescence
in, any such proceeding or the appointment of any receiver of or any trustee
for a Borrower or any substantial part of its property, or suffers any such
receivership or trusteeship to continue undischarged for a period of sixty
(60) days;
(h) One or more final judgments against Borrower or
attachments against its property not fully and unconditionally covered by
insurance in excess of $200,000 in the aggregate shall be rendered by a court of
record and shall remain unpaid, unstayed on appeal, undischarged, unbonded and
undismissed for a period of ten (10) days;
(i) A Reportable Event which might constitute grounds for
termination of any Plan covered by Title IV of ERISA or for the appointment by
the appropriate United States District Court of a trustee to administer any such
Plan or for the entry of a lien or encumbrance to secure any deficiency, has
occurred and is continuing thirty (30) days after its occurrence, or any such
Plan is terminated, or a trustee is appointed by an appropriate United States
District Court to administer any such Plan, or the Pension Benefit Guaranty
Corporation institutes proceedings to terminate any such Plan or to appoint a
trustee to administer any such Plan, or a lien or encumbrance is entered to
secure any deficiency or claim;
(j) Any outstanding stock in Borrower is sold or otherwise
transferred by the Person owning such stock on the date of this Agreement;
(k) Intentionally Deleted;
(l) Borrower breaches or violates the terms of, or a default
or an event which could, whether with notice or the passage of time, or both,
constitute a default, occurs under any other existing or future agreement
(related or unrelated) between Borrower and Lender;
(m) Upon the issuance of any execution or distraint process
against Borrower or any of its property or assets which has a material adverse
effect thereon;
(n) Borrower ceases any material portion of its business
operations as currently conducted other than as permitted in Paragraph 27 of the
Term Note and in connection with the closing of the Closed Homes;
(o) Any indication or evidence is received by Lender that
Borrower may have directly or indirectly been engaged in any type of activity
which, in Lender's reasonably business judgement, may result in the forfeiture
of any property of Borrower to any Governmental
35
Authority, which default shall have continued unremedied for a period of ten
(10) days after written notice from Lender;
(p) Borrower or any Affiliate of Borrower, shall challenge or
contest, in any action, suit or proceeding, the validity or enforceability of
this Agreement, or any of the other Loan Documents, the legality or the
enforceability of any of the Obligations or the perfection or priority of any
Lien granted to Lender;
(q) Borrower shall be criminally convicted under any law that
could lead to a forfeiture of any Collateral; or
(r) There shall occur a material adverse change in the
financial condition or business prospects of Borrower, or if Lender in good
▇▇▇▇▇ ▇▇▇▇▇ itself insecure as a result of acts or events bearing upon the
financial condition of Borrower or the repayment of the Note, which default
shall have continued unremedied for a period of ten (10) days after written
notice from Lender.
(s) An Event of Default shall have occurred under the Term
Note or any other Term Loan Documents.
(t) An Event of Default shall have occurred under any
Mortgage, Environmental Indemnity, Guaranty, or the Pledge Agreement.
(u) A default or event of default occurs under any other note,
instrument, deed of trust, mortgage, loan agreement, security agreement, letter
agreement or other document executed and delivered by any Borrower or Guarantor,
or any Affiliate of Borrower or Guarantor, in connection with any financing
provided by Lender or Lender's Affiliate to any such parties.
SECTION 8.2. ACCELERATION. Upon the occurrence of any of the foregoing
Events of Default, the Note shall become and be immediately due and payable upon
declaration to that effect delivered by Lender to Borrower; provided that, upon
the happening of any event specified in Section 8.1(g), the Note shall be
immediately due and payable without declaration or other notice to Borrower.
SECTION 8.3. REMEDIES.
(a) Upon the occurrence of and during the continuance of an
Event of Default under this Agreement or the other Loan Documents, Lender, in
addition to all other rights, options, and remedies granted to Lender under this
Agreement or at law or in equity, may take any of the following steps (which
list is given by way of example and is not intended to be an exhaustive list of
all such rights and remedies):
(i) Terminate the Loan, whereupon all
outstanding Obligations shall be immediately due and payable;
36
(ii) Exercise all other rights granted to it
under this Agreement and all rights under the UCC in effect in the applicable
jurisdiction(s) and under any other applicable law; and
(iii) Exercise all rights and remedies under all
Loan Documents now or hereafter in effect, including but not limited to:
(A) The right to take possession of,
send notices regarding, and collect directly the Collateral, with or without
judicial process;
(B) The right to (by its own means or
with judicial assistance) enter any of Borrower's premises and take possession
of the Collateral, or render it unusable, or dispose of the Collateral on such
premises in compliance with subsection (C) below, without any liability for
rent, storage, utilities, or other sums, and Borrower shall not resist or
interfere with such action;
(C) The right to require Borrower at
Borrower's expense to assemble all or any part of the Collateral and make it
available to Lender at any place designated by Lender; and
(D) The right to reduce the Maximum
Loan Amount or to use the Collateral and/or funds in the Concentration Account
in amounts up to the Maximum Loan Amount for any reason.
(b) Borrower agrees that a notice received by it at least five
(5) business days before the time of any intended public sale, or the time after
which any private sale or other disposition of the Collateral is to be made,
shall be deemed to be reasonable notice of such sale or other disposition. If
permitted by applicable law, any perishable Collateral which threatens to
speedily decline in value or which is sold on a recognized market may be sold
immediately by Lender without prior notice to Borrower. At any sale or
disposition of Collateral, Lender may (to the extent permitted by applicable
law) purchase all or any part of the Collateral, free from any right of
redemption by Borrower, which right is hereby waived and released. Borrower
covenants and agrees not to interfere with or impose any obstacle to Lender's
exercise of its rights and remedies with respect to the Collateral.
SECTION 8.4. NATURE OF REMEDIES. Lender shall have the right to proceed
against all or any portion of the Collateral to satisfy (i) the liabilities and
Obligations of Borrower to Lender or (ii) upon the occurrence of an Event of
Default under the Term Note or Term Loan Documents, the liabilities and
obligations of Borrower under the Term Note or Term Loan Documents.
All rights and remedies granted Lender under this Agreement and under any
agreement referred to in this Agreement, or otherwise available at law or in
equity, shall be deemed concurrent and cumulative, and not alternative remedies,
and Lender may proceed with any number of remedies at the same time until the
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
37
deemed a waiver or release of any other right or remedy, and Lender, upon the
occurrence of an Event of Default, may proceed against Borrower, and/or the
Collateral, at any time, under any agreement, with any available remedy and
in any order.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. EXPENSES AND TAXES.
(a) Borrower agrees to pay, whether or not the Closing occurs,
a reasonable documentation preparation fee, together with actual audit and
appraisal fees and all other out-of-pocket charges and expenses incurred by
Lender in connection with the negotiation, preparation, legal review and
execution of each of the Loan Documents, including but not limited to UCC and
judgment lien searches and UCC filings and fees for post-Closing UCC and
judgment lien searches. In addition, Borrower shall pay all such fees associated
with any amendments to the Loan Documents following Closing.
(b) Borrower also agrees to pay all out-of-pocket charges and
expenses incurred by Lender (including the fees and expenses of Lender's
counsel) in connection with the enforcement, protection or preservation of any
right or claim of Lender and the collection of any amounts due under the Loan
Documents. If Lender uses in-house counsel for any of these purposes (i.e., for
any task in connection with the enforcement, protection or preservation of any
right or claim of Lender and the collection of any amounts due under its Loan
Documents), Borrower further agrees that its Obligations under the Loan
Documents include reasonable charges for such work commensurate with the fees
that would otherwise be charged by outside legal counsel selected by Lender for
the work performed.
(c) Borrower shall pay all taxes (other than taxes based upon
or measured by Lender's income or revenues or any personal property tax), if
any, in connection with the issuance of the Note and the recording of the
security documents therefor. The obligations of Borrower under this clause (c)
shall survive the payment of Borrower's indebtedness under this Agreement and
the termination of this Agreement.
SECTION 9.2. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the other
Loan Documents constitute the full and entire understanding and agreement among
the parties with regard to their subject matter and supersede all prior written
or oral agreements, understandings, representations and warranties made with
respect thereto. No amendment, supplement or modification of this Agreement nor
any waiver of any provision thereof shall be made except in writing executed by
the party against whom enforcement is sought.
SECTION 9.3. NO WAIVER; CUMULATIVE RIGHTS. No waiver by any party to
this Agreement of any one or more defaults by the other party in the performance
of any of the
38
provisions of this Agreement shall operate or be construed as a waiver of any
future default or defaults, whether of a like or different nature. No failure
or delay on the part of any party in exercising any right, power or remedy
under this Agreement shall operate as a waiver of such right, power or remedy
nor shall any single or partial exercise of any such right, power or remedy
preclude any other or further exercise of such right, power or remedy or the
exercise of any other right, power or remedy. The remedies provided for in
this Agreement are cumulative and are not exclusive of any remedies that may
be available to any party to this Agreement at law, in equity or otherwise.
SECTION 9.4. NOTICES. Any notice or other communication required or
permitted under this Agreement shall be in writing and personally delivered,
mailed by registered or certified mail (return receipt requested and postage
prepaid), sent by telecopier (with a confirming copy sent by regular mail), or
sent by prepaid overnight courier service, and addressed to the relevant party
at its address set forth below, or at such other address as such party may, by
written notice, designate as its address for purposes of notice under this
Agreement:
(a) If to Lender, at:
▇▇▇▇▇▇ Healthcare Finance, Inc.
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Deputy General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Borrower, at:
LTC Healthcare Acquisition Company, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇ & Kelakos, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. Kelakos, Esq.
39
If mailed, notice shall be deemed to be given five (5) days after being sent,
and if sent by personal delivery, telecopier or prepaid courier, notice shall be
deemed to be given when delivered.
SECTION 9.5. SEVERABILITY. If any term, covenant or condition of this
Agreement, or the application of such term, covenant or condition to any party
or circumstance shall be found by a court of competent jurisdiction to be, to
any extent, invalid or unenforceable, the remainder of this Agreement and the
application of such term, covenant, or condition to parties or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term, covenant or condition shall be valid and
enforced to the fullest extent permitted by law. Upon determination that any
such term is invalid, illegal or unenforceable, Lender may, but is not obligated
to, advance funds to Borrower under this Agreement until the parties to this
Agreement amend this Agreement so as to effect the original intent of the
parties as closely as possible in a valid and enforceable manner.
SECTION 9.6. SUCCESSORS AND ASSIGNS. This Agreement, the Note, and the
other Loan Documents shall be binding upon and inure to the benefit of Borrower
and Lender and their respective successors and assigns. Notwithstanding the
foregoing, Borrower may not assign any of its rights or delegate any of its
obligations under this Agreement without the prior written consent of Lender,
which may be withheld in its sole discretion. Lender may sell, assign, transfer,
or participate any or all of its rights or obligations under this Agreement
without notice to or consent of Borrower.
SECTION 9.7. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one instrument.
SECTION 9.8. INTERPRETATION. No provision of this Agreement or any
other Loan Document shall be interpreted or construed against any party because
that party or its legal representative drafted that provision. The titles of the
paragraphs of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement. Any pronoun used in this
Agreement shall be deemed to include singular and plural and masculine, feminine
and neuter gender as the case may be. The words "herein," "hereof," and
"hereunder" shall be deemed to refer to this entire Agreement, except as the
context otherwise requires.
SECTION 9.9. SURVIVAL OF TERMS. All covenants, agreements,
representations and warranties made in this Agreement, any other Loan Document,
and in any certificates and other instruments delivered in connection with this
Agreement shall be considered to have been relied upon by Lender and shall
survive the making by Lender of the Loans contemplated by this Agreement and the
execution and delivery to Lender of the Note, and shall continue in full force
and effect until all liabilities and obligations of Borrower to Lender are
satisfied in full.
40
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 under
this Agreement or under any other Loan Document for the benefit of any third
party donee, creditor, or incidental beneficiary of Borrower. Nothing contained
in this Agreement shall be construed as a delegation to Lender of Borrower's
duty of performance, including without limitation Borrower's duties under any
account or contract in which Lender has a security interest.
SECTION 9.14. DISCHARGE OF BORROWER'S OBLIGATIONS. Lender, in its sole
discretion, shall have the right at any time, and from time to time, without
prior notice to Borrower if Borrower fails to do so, to: (i) obtain insurance
covering any of the Collateral as required under this Agreement; (ii) pay for
the performance of any of Borrower's obligations under this Agreement; (iii)
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 (iv) pay for the maintenance and preservation of any
of the Collateral. Expenses and advances shall be added to the Loan, until
reimbursed to Lender and shall be secured by the Collateral. Any such payments
and advances by Lender shall not be construed as a waiver by Lender of an Event
of Default.
SECTION 9.15. INFORMATION TO PARTICIPANTS. Lender may divulge to any
participant it may obtain in the Loan, or any portion of the Loan, all
information, and furnish to such participant copies of reports, financial
statements, certificates, and documents obtained under any provision of this
Agreement or any other Loan Document.
41
SECTION 9.16. INDEMNITY. Borrower hereby agrees to indemnify and hold
harmless Lender, its partners, officers, agents and employees (collectively,
"Indemnitee") from and against any liability, loss, cost, expense, claim,
damage, suit, action or proceeding ever suffered or incurred by Lender
(including reasonable attorneys' fees and expenses) arising from Borrower's
failure to observe, perform or discharge any of its covenants, obligations,
agreements or duties under this Agreement, or from the breach of any of the
representations or warranties contained in Article IV of this Agreement. In
addition, Borrower shall defend Indemnitee against and save it harmless from all
claims of any Person with respect to the Collateral. Notwithstanding any
contrary provision in this Agreement, the obligation of Borrower under this
Section 9.16 shall survive the payment in full of the Obligations and the
termination of this Agreement.
SECTION 9.17. 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 COURTS OF THE STATE OF MARYLAND OR IN THE U.S.
DISTRICT COURT FOR THE DISTRICT OF MARYLAND, BORROWER HEREBY CONSENTS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUCH ACTION AND TO 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.
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 TO THIS AGREEMENT, SO AS TO SERVE AS CONCLUSIVE
EVIDENCE OF BORROWER'S WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, BORROWER
HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF LENDER (INCLUDING LENDER'S
COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO BORROWER THAT LENDER WILL
NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.
9.19 NO LIABILITY OF BORROWER'S AFFILIATES. No affiliate of Borrower,
including all parents, subsidiaries and other affiliates of Borrower (the
"Affiliates"), including all officers and directors of the Borrower or of the
Affiliates shall have any responsibility or liability for the
42
payment or performance of any obligations or duties under this Agreement, the
Borrower Guaranty or any other agreement or transaction provided or
contemplated in the Loan Documents or the Term Loan Documents.
9.20. RELEASE. (a) So long as no monetary Event of Default or material
Event of Default has occurred under this Loan Agreement, the Term Note, the Loan
Documents or the Term Loan Documents, Collateral listed on SCHEDULE 3 shall be
released from Lender's lien (a "RELEASED ASSET") upon payment by Borrower of (a)
an amount equal to one hundred percent (100%) of the value allocated to such
item on SCHEDULE 3, and (b) if the sale price for the Released Asset exceeds the
Release Price (the "EXCESS PROCEEDS"), an amount equal to portion of the Excess
Proceeds Lender is entitled to as set forth below ((a) and (b) being referred to
herein as the "RELEASE PRICE"). The Excess Proceeds shall be distributed as
follows: (i) an amount equal to taxes owed by Borrower in connection with the
sale of such Released Asset (the "Tax Payment"), shall be paid to Borrower to be
used exclusively to pay for such taxes, and (ii) the balance of the Excess
Proceeds less the Tax Payment (the "Balance") shall be distributed as follows:
(x) if the Released Asset is sold during the first nine (9) months following the
Closing Date, seventy five percent (75%) of the Excess Proceeds shall be paid to
Lender, fifteen percent (15%) shall be retained by Borrower to be used
exclusively for working capital or other operating expenses or capital
improvements relating to the nursing home facilities of Borrower, five percent
(5%) shall be paid to Manager, and five percent (5%) shall be paid to LTC
Healthcare, Inc.; and (y) if the Released Asset is sold after the first nine (9)
months following the Closing Date, seventy five percent (75%) of the Excess
Proceeds shall be paid to Lender and twenty five percent (25%) of the Excess
Proceeds shall be retained by Borrower to be used exclusively for working
capital or other operating expenses or capital improvements relating to the
nursing home facilities of Borrower. The Release Price received by Lender shall
be applied to pay down the outstanding principal sum under the Term Note.
(b) On or after July 1, 2000, upon payment of all of the outstanding
principal, accrued interest and other Obligations owing under the Term Note
(including any Obligations arising in connection with the Borrower Guaranty),
provided no Event of Default has occurred under the Loan Documents or the Term
Loan Documents and no advances have been made under the Loan which currently
exceed Borrower's availability thereunder, Lender shall release its interest in
(i) the Collateral described in Paragraph 3(f) through (i) of this Agreement,
(ii) the Collateral described in the Pledge Agreement, and (iii) in the Property
or Mortgaged Property set forth in: (w) that certain Deed to Secured Debt of
even date herewith made by LTC Healthcare of Fort Valley, Inc. in favor of
Lender, (x) that certain Deed to Secure Debt of even date herewith made by LTC
Healthcare of ▇▇▇▇▇▇, Inc. in favor of Lender, (y) that certain Deed to Secure
Debt of even date herewith made by LTC Healthcare of Atlanta, Inc. in favor of
Lender, (z) that certain Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filings of even date herewith made by LTC Healthcare of
▇▇▇▇▇▇▇, Inc. in favor of Lender, and any other Mortgages granted by Borrower to
Lender under the Term Note. In no event however, shall Lender release its
interest in the Collateral described in Paragraph 3(a) through (e) and (j) of
this Agreement.
43
44
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the date first written above.
LENDER:
▇▇▇▇▇▇ HEALTHCARE FINANCE, INC.
a Delaware corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------
Name:
Title: Vice President
BORROWER:
LTC HEALTHCARE ACQUISITION COMPANY,
INC.,
a Nevada corporation
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Treasurer
LTC HEALTHCARE OF ATLANTA, INC.,
a Nevada corporation
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Treasurer
LTC HEALTHCARE OF ▇▇▇▇▇▇ SPRINGS, INC.,
a Nevada corporation
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Treasurer
LTC HEALTHCARE OF CHICOPEE, INC.,
a Nevada corporation
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Treasurer
LTC HEALTHCARE OF COFFEYVILLE, INC.,
45
a Nevada corporation
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Treasurer
LTC HEALTHCARE OF CONVERSE, INC.,
a Nevada corporation
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Treasurer
LTC HEALTHCARE OF FORT VALLEY, INC.,
a Nevada corporation
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Treasurer
LTC HEALTHCARE OF ▇▇▇▇▇▇▇, INC.,
a Nevada corporation
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Treasurer
LTC HEALTHCARE OF HOLYOKE, INC.,
a Nevada corporation
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Treasurer
46
LTC HEALTHCARE OF ▇▇▇▇▇▇, INC.,
a Nevada corporation
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Treasurer
LTC HEALTHCARE OF NEW PORT ▇▇▇▇▇▇, INC.,
a Nevada corporation
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Treasurer
LTC HEALTHCARE OF SALINA, INC.,
a Nevada corporation
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Treasurer
LTC HEALTHCARE OF ▇▇▇▇▇▇▇, INC.,
a Nevada corporation
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Treasurer
LTC HEALTHCARE OF SOUTH ▇▇▇▇▇▇, INC.,
a Nevada corporation
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Treasurer
47
LTC HEALTHCARE OF SPRINGFIELD, INC.,
a Nevada corporation
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Treasurer
LTC HEALTHCARE OF STATESBORO, INC.,
a Nevada corporation
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Treasurer
LTC HEALTHCARE OF TYLER, INC.,
a Nevada corporation
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Treasurer
LTC HEALTHCARE OF ▇▇▇▇▇▇▇, INC.,
a Nevada corporation
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Treasurer
LTC HEALTHCARE RECEIVABLES, INC.,
a Nevada corporation
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Treasurer
48
LIST OF EXHIBITS
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Lockbox Agreement
Exhibit C - Form of Legal Opinion
49
LIST OF SCHEDULES
Schedule 1 - Guarantors
Schedule 1.36 - Permitted Liens
Schedule 3 - List of Released Assets
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 4.17 - 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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SCHEDULE 1 - LIST OF GUARANTORS
LENOX HEALTHCARE, INC., a Delaware corporation,
LENOX HEALTHCARE OF MILL VALLEY, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF ▇▇▇▇▇▇▇▇▇▇, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF SAN LEANDRO, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF HAYWARD, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF SACRAMENTO, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF ANAHEIM, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF WOODLAND, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF CONCORD, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF SAN ▇▇▇▇▇▇, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF SAN BERNARDINO, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF ROSEVILLE, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF CLAREMONT, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF SAN PABLO, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF SANTA ▇▇▇▇▇-HEALTHCARE, LLC, a Delaware limited
liability company,
LENOX HEALTHCARE OF OAKLAND, LLC, a Delaware limited liability company, and
LENOX HEALTHCARE OF MODESTO, LLC, a Delaware limited liability company,
GREYLOCK HEALTH OF JOPLIN-MANOR, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF ST. CHARLES, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF SPRINGFIELD, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF BALLWIN, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF COLUMBIA, L.P., a Missouri limited partnership,
GREYLOCK HEALTH CORPORATION OF SEDGWICK, L.P., a Kansas limited partnership,
GREYLOCK HEALTH CORPORATION OF HAYSVILLE, L.P., a Kansas limited partnership,
GREYLOCK HEALTH CORPORATION OF COUNCIL GROVE, L.P., a Kansas limited
partnership,
GREYLOCK HEALTH CORPORATION OF CHANUTE, L.P., a Kansas limited partnership,
GREYLOCK HEALTH CORPORATION OF ▇▇▇▇▇▇, ▇.▇., a Kansas limited partnership,
LENOX HEALTHCARE OF SALEM, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF BROCKTON, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF BARTLESVILLE, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF KAILUA-KONA, L.P., a Delaware limited partnership,
LENOX HEALTHCARE OF ▇▇▇▇▇▇, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF LURAY, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF YUMA, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF CHANUTE, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF COUNCIL GROVE, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF HAYSVILLE, LLC, a Delaware limited liability company,
LENOX HEALTHCARE OF LARNED, LLC, a Delaware limited liability company, and
51
LENOX HEALTHCARE OF SEDGWICK, LLC, a Delaware limited liability company,
GREYLOCK HEALTH CORPORATION OF INDEPENDENCE TERRACE, L.P., a Kansas
limited partnership,
GREYLOCK HEALTH CORPORATION OF INDEPENDENCE LODGE, L.P., a Kansas
limited partnership,
GREYLOCK HEALTH CORPORATION OF WICHITA, L.P., a Kansas limited partnership,
GREYLOCK HEALTH CORPORATION OF TOPEKA, L.P., a Kansas limited partnership,
GREYLOCK HEALTH OF LAMAR, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF AVA, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF ▇▇▇▇▇▇▇, ▇.▇., a Missouri limited partnership,
GREYLOCK HEALTH OF KANSAS CITY-BHM, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF KANSAS CITY, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF JOPLIN-HEALTHCARE, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF JEFFERSON CITY, L.P., a Missouri limited partnership,
GREYLOCK HEALTH OF ▇▇▇▇▇▇, ▇.▇., a Missouri limited partnership,
GREYLOCK HEALTH OF DES ▇▇▇▇▇, ▇.▇., a Missouri limited partnership,
GREYLOCK HEALTH OF CRANE, L.P., a Missouri limited partnership and
GREYLOCK HEALTH OF ▇▇▇▇▇▇▇▇▇▇ CITY-MANOR, L.P., a Missouri limited
partnership,
LENOX HEALTHCARE REALTY OF JOPLIN, L.L.C., a Delaware limited liability company,
LENOX HEALTHCARE REALTY OF BROCKTON, L.L.C., a Delaware limited liability
company,
LENOX HEALTHCARE REALTY OF WOODLAND, L.L.C., a Delaware limited liability
company,
LENOX HEALTHCARE OF GOLDSBORO, L.L.C., a Delaware limited liability company,
LENOX HEALTHCARE OF EVANSVILLE, L.L.C., a Delaware limited liability company,
LENOX HEALTHCARE OF LOGANSPORT, L.L.C., a Delaware limited liability company,
LENOX HEALTHCARE OF WESTFIELD, L.L.C., a Delaware limited liability company, and
LENOX HEALTHCARE REALTY OF ▇▇▇▇▇▇▇▇▇▇, L.L.C., a Delaware limited liability
company
52