EXHIBIT 10.27
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
THIS SECOND AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN
AGREEMENT (the "AGREEMENT") dated as of June 30, 2003, is entered into among
PSYCHIATRIC SOLUTIONS, INC., a Delaware corporation f/k/a PMR Corporation
("PSI"), PSYCHIATRIC SOLUTIONS OF ALABAMA, INC., a Tennessee corporation ("PS
ALABAMA"), PSYCHIATRIC SOLUTIONS OF FLORIDA, INC., a Tennessee corporation ("PS
FLORIDA"), PSYCHIATRIC SOLUTIONS OF TENNESSEE, INC., a Tennessee corporation
("PS TENNESSEE"), SOLUTIONS CENTER OF LITTLE ROCK, INC., a Tennessee corporation
("LITTLE ROCK"), PSYCHIATRIC SOLUTIONS OF NORTH CAROLINA, INC., a Tennessee
corporation ("PS NORTH CAROLINA"), PSI COMMUNITY MENTAL HEALTH AGENCY
MANAGEMENT, INC., a Tennessee corporation ("PSI COMMUNITY"), PSI-EAP, INC., a
Delaware corporation ("PSI-EAP"), SUNSTONE BEHAVIORAL HEALTH, INC., a Tennessee
corporation ("SUNSTONE"), THE COUNSELING CENTER OF MIDDLE TENNESSEE, INC., a
Tennessee corporation ("COUNSELING CENTER"), PSI HOSPITALS, INC., a Delaware
corporation ("PSI HOSPITALS"), PSI TEXAS HOSPITALS, LLC, a Texas limited
liability company ("TEXAS HOSPITALS"), PSYCHIATRIC PRACTICE MANAGEMENT OF
ARKANSAS, INC., a Tennessee corporation ("PPM ARKANSAS"), TEXAS CYPRESS CREEK
HOSPITAL, L.P., a Texas limited partnership ("CYPRESS CREEK"), TEXAS WEST OAKS
HOSPITAL, L.P., a Texas limited partnership ("WEST OAKS"), NEURO INSTITUTE OF
AUSTIN, L.P., a Texas limited partnership ("NEURO INSTITUTE"), AERIES HEALTHCARE
CORPORATION, a Delaware corporation ("AERIES"), AERIES HEALTHCARE OF ILLINOIS,
INC., an Illinois corporation ("AERIES ILLINOIS"), INFOSCRIBER CORPORATION, a
Delaware corporation ("INFOSCRIBER"), COLLABORATIVE CARE CORPORATION, a
Tennessee corporation ("COLLABORATIVE CARE"), PSYCHIATRIC SOLUTIONS HOSPITALS,
INC., a Delaware corporation ("HOSPITALS"), PSYCHIATRIC MANAGEMENT RESOURCES,
INC., a California corporation ("PMR"), PSI CEDAR SPRINGS HOSPITAL, INC., a
Delaware corporation ("PSI CEDAR SPRINGS"), PSYCHIATRIC SOLUTIONS OF OKLAHOMA,
INC., a Delaware corporation ("PS OKLAHOMA"), TEXAS ▇▇▇▇▇▇ ▇▇▇▇▇ HOSPITAL, L.P.,
a Texas limited partnership ("▇▇▇▇▇▇ ▇▇▇▇▇"), TEXAS OAKS PSYCHIATRIC HOSPITAL,
L.P., a Texas limited partnership ("TEXAS OAKS"), TEXAS SAN MARCOS TREATMENT
CENTER, L.P., a Texas limited partnership ("SAN MARCOS"), and THERAPEUTIC SCHOOL
SERVICES, LLC, an Oklahoma limited liability company ("THERAPEUTIC")
(individually and collectively, the "EXISTING BORROWER"); PSYCHIATRIC SOLUTIONS
OF CORAL GABLES, INC., a Delaware corporation "PS CORAL GABLES"), BOUNTIFUL
PSYCHIATRIC HOSPITAL, INC., a Utah corporation ("BOUNTIFUL"), EAST CAROLINA
PSYCHIATRIC SERVICES CORPORATION, a North Carolina corporation ("EAST
CAROLINA"), GREAT PLAINS HOSPITAL, INC., a Missouri corporation ("GREAT
PLAINS"), GULF COAST TREATMENT CENTER, INC., a Florida corporation ("GULF
COAST"), HAVENWYCK HOSPITAL INC., a Michigan corporation ("HAVENWYCK"), H.C.
CORPORATION, an Alabama corporation ("H.C."), H.C. PARTNERSHIP, an Alabama
general partnership ("H.C. PARTNERSHIP"), HSA HILL CREST CORPORATION, an Alabama
corporation ("HSA HILL CREST"), HSA OF OKLAHOMA, INC., an Oklahoma corporation
("HSA OKLAHOMA"), MICHIGAN PSYCHIATRIC SERVICES, INC., a Michigan corporation
("MICHIGAN"),
RAMSAY MANAGED CARE, INC., a Delaware corporation ("MANAGED CARE"), RAMSAY
TREATMENT SERVICES, INC., a Delaware corporation ("TREATMENT SERVICES"), RAMSAY
YOUTH SERVICES OF ALABAMA, INC., a Delaware corporation ("RY ALABAMA"), RAMSAY
YOUTH SERVICES OF FLORIDA, INC., a Delaware corporation ("RY FLORIDA"), RAMSAY
YOUTH SERVICES OF GEORGIA, INC., a Delaware corporation ("RY GEORGIA"), RAMSAY
YOUTH SERVICES OF SOUTH CAROLINA, INC., a Delaware corporation ("RY SOUTH
CAROLINA"), RHCI SAN ANTONIO, INC., a Delaware corporation ("RHCI"),
TRANSITIONAL CARE VENTURES, INC., a Delaware corporation ("TRANSITIONAL CARE"),
TRANSITIONAL CARE VENTURES (TEXAS), INC., a Delaware corporation ("TRANSITIONAL
CARE TEXAS") (individually and collectively, the "NEW BORROWER", and
individually and collectively with the Existing Borrower, the "BORROWER"),
CAPITALSOURCE FINANCE LLC, a Delaware limited liability company
("CAPITALSOURCE"), as administrative agent and collateral agent for Lenders (in
such capacities, the "AGENT"), and the Lenders.
A. WHEREAS, Existing Borrower, Agent and Lenders are party to
that certain Revolving Credit and Term Loan Agreement, dated as of November 30,
2001, as amended by that certain First Amendment to Revolving Credit and Term
Loan Agreement, dated April 30, 2002, that certain Second Amendment to Revolving
Credit and Term Loan Agreement dated as of June 28, 2002, and that certain Third
Amendment to Revolving Credit and Term Loan Agreement dated as of December 31,
2002 (such Revolving Credit and Term Loan Agreement, as the same has been
amended and restated, being hereinafter referred to as the "ORIGINAL LOAN
AGREEMENT");
B. WHEREAS, Existing Borrower, Agent and Lenders are party to
that certain Amended and Restated Revolving Credit and Term Loan Agreement,
dated April 1, 2003 (such Amended and Restated Revolving Credit and Term Loan
Agreement, being hereinafter referred to as the "AMENDED AND RESTATED LOAN
AGREEMENT");
C. WHEREAS, Borrower has requested, among other things, Agent and
the Lenders to amend and restate the Amended and Restated Loan Agreement in
certain respects, including, but not limited to, modifying the amount of the
Obligations to provide credit facilities for Borrower's working capital needs
and acquisitions in connection with its behavioral health business; and
D. WHEREAS, in furtherance of the foregoing and to evidence the
agreements of the parties hereto in relation thereto, the parties hereto desire
to amend and restate the Amended and Restated Loan Agreement as herein provided.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and adequacy of which hereby are
acknowledged, Borrower, Agent and Lenders hereby agree as follows:
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I. DEFINITIONS
1.1 GENERAL TERMS
For purposes of this Agreement, in addition to the definitions
above and elsewhere in this Agreement, the terms listed in Appendix A or Annex I
hereto shall have the meanings given such terms in Appendix A and Annex I,
respectively, which are incorporated herein and made a part hereof. All
capitalized terms used which are not specifically defined shall have meanings
provided in Article 9 of the UCC in effect on the date hereof to the extent the
same are used or defined therein. Unless otherwise specified herein or in
Appendix A or Annex I, any agreement or contract referred to herein or in
Appendix A or Annex I shall mean such agreement as modified, amended or
supplemented from time to time. Unless otherwise specified, as used in the Loan
Documents or in any certificate, report, instrument or other document made or
delivered pursuant to any of the Loan Documents, all accounting terms not
defined in Appendix A or elsewhere in this Agreement shall have the meanings
given to such terms in and shall be interpreted in accordance with GAAP.
II. ADVANCES, PAYMENT AND INTEREST
2.1 THE REVOLVING FACILITY
Subject to the provisions of this Agreement, each Lender
agrees to make available its Pro Rata Share of Advances to Borrower under the
Revolving Facility from time to time during the Revolving Facility Term;
provided, that (i) the Pro Rata Share of the Advances of any Lender shall not at
any time exceed its separate Commitment, and (ii) the aggregate amount of all
Advances at any one time outstanding under the Revolving Facility shall not
exceed the lesser of (A) the Facility Cap and (B) the Availability. The
obligations of Lenders hereunder shall be several and not joint up to the amount
of the Commitments. The Revolving Facility is a revolving credit facility, which
may be drawn, repaid and redrawn, from time to time as permitted under this
Agreement. Any determination as to whether there is Availability for Advances
shall be made by Agent in its sole discretion and is final and binding upon
Borrower. Unless otherwise permitted by Agent, each Advance shall be in an
amount of at least $1,000. Subject to the provisions of this Agreement, Borrower
may request Advances under the Revolving Facility up to and including the value,
in Dollars, of (x) the greater of (A) Borrowing Base Availability, and (B) the
amount such that the Total Leverage Ratio, after giving effect to the requested
Advance, does not exceed the maximum Total Leverage Ratio then allowed under
Annex I for the immediately preceding Leverage Test Period, minus, (y) if
applicable, amounts reserved by Agent from time to time in its sole credit
judgment (such calculated amount being referred to herein as the
"AVAILABILITY"). Advances under the Revolving Facility automatically shall be
made for the payment of interest on the Revolving Notes and other Obligations on
the date when due to the extent available and as provided for herein.
2.2 THE REVOLVING NOTES; MATURITY
(a) All Advances under the Revolving Facility shall be
evidenced by the Revolving Notes, payable to the order of each appropriate
Lender in the aggregate principal amount of the Commitment of such Lender, duly
executed and delivered by Borrower. As of the Closing Date, Borrower has issued
(i) Second Amended and Restated Revolving Note A-1, in the original principal
amount of $4,240,000.00, payable to the order of CapitalSource, duly executed
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and delivered by Borrower and dated the Closing Date (the "REVOLVING NOTE A-1"),
(ii) Second Amended and Restated Revolving Note A-2, in the original principal
amount of $10,760,000.00 payable to the order of CapitalSource, duly executed
and delivered by Borrower and dated the Closing Date (the "REVOLVING NOTE A-2"),
(iii) Second Amended and Restated Revolving Note B, in the original principal
amount of $20,000,000.00 payable to the order of CapitalSource, duly executed
and delivered by Borrower and dated the Closing Date (the "REVOLVING NOTE B")
and (iv) Amended and Restated Revolving Note C, in the original principal amount
of $15,000,000.00 payable to the order of CapitalSource, duly executed and
delivered by Borrower and dated the Closing Date (the "REVOLVING NOTE C" and
collectively with Revolving Note A-1, Revolving Note A-2, and Revolving Note B,
the "REVOLVING NOTES"). The Revolving Notes shall evidence the aggregate
Indebtedness of Borrower to Lenders resulting from Advances under the Revolving
Facility, from time to time. Each Lender hereby is authorized, but is not
obligated, to enter the amount of such Lender's Pro Rata Share of each Advance
under the Revolving Facility and the amount of each payment or prepayment of
principal or interest thereon in the appropriate spaces on the reverse of or on
an attachment to such Lender's Revolving Note(s). Agent will account to Borrower
monthly with a statement of Advances under the Revolving Facility and charges
and payments made pursuant to this Agreement, and in the absence of manifest
error, such accounting rendered by Agent shall be deemed final, binding and
conclusive unless Agent is notified by Borrower in writing to the contrary
within 15 calendar days of Receipt of each accounting, which notice shall be
deemed an objection only to items specifically objected to therein.
(b) All amounts outstanding under the Revolving Notes and
other Obligations under the Revolving Facility shall be due and payable in full,
if not earlier in accordance with this Agreement, on the earlier of (i) the
occurrence of an Event of Default if required pursuant hereto or Agent's demand
upon an Event of Default, and (ii) the last day of the Revolving Facility Term.
2.3 INTEREST
Interest on outstanding Advances under the Revolving Notes
shall be payable monthly in arrears on the first day of each calendar month at
an annual rate of Prime Rate plus 2%, provided, however, that, notwithstanding
any provision of any Loan Document, the interest on outstanding Advances under
the Revolving Notes shall be not less than 6.25%, in each case calculated on the
basis of a 360-day year and for the actual number of calendar days elapsed in
each interest calculation period. Interest accrued on each Advance under the
Revolving Notes shall be due and payable on the first day of each calendar
month, in accordance with the procedures provided for in Section 2.5 and Section
2.9, and continuing until the later of the expiration of the Revolving Facility
Term and the full performance and irrevocable payment in full in cash of the
Obligations and termination of this Agreement. Only for purposes of calculating
interest and fees, Advances under the Revolving Facility shall not be less than
$17,500,000.
2.4 FACILITY DISBURSEMENTS; REQUIREMENT TO DELIVER BORROWING
CERTIFICATE
So long as no Default or Event of Default shall have occurred
and be continuing, Borrower may give Agent irrevocable written notice requesting
an Advance under the Revolving
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Facility by delivering to Agent not later than 11:00 a.m. (New York City Time)
at least two but not more than four Business Days before the proposed borrowing
date of such requested Advance (the "BORROWING DATE"), a completed Borrowing
Certificate and relevant supporting documentation satisfactory to Agent, which
shall (a) specify the proposed Borrowing Date of such Advance which shall be a
Business Day, (b) specify the principal amount of such requested Advance, (c)
certify the matters contained in Section 4.2, and (d) specify the amount of any
Medicare or Medicaid recoupments and/or recoupments of any third-party payor
being sought, requested or claimed, or, to Borrower's knowledge, threatened
against Borrower or Borrower's affiliates. Each time a request for an Advance is
made, and, in any event and regardless of whether an Advance is being requested,
on the second Business Day of each month during the Revolving Facility Term (and
more frequently if Agent shall so request) until the Obligations are
indefeasibly paid in cash in full and this Agreement is terminated, Borrower
shall deliver to Agent a Borrowing Certificate accompanied by such other
documentation as Agent shall reasonably request from a credit or security
perspective or otherwise. On each Borrowing Date, Borrower irrevocably
authorizes Agent to disburse the proceeds of the requested Advance to the
appropriate Borrower's account(s) as set forth on Schedule 2.4, in all cases for
credit to the appropriate Borrower (or to such other account as to which the
appropriate Borrower shall instruct Agent) via Federal funds wire transfer no
later than 4:00 p.m. New York City Time.
2.5 COLLECTIONS; REPAYMENT; BORROWING AVAILABILITY AND LOCKBOX
Each Borrower shall maintain one or more lockbox accounts
(individually and collectively, the "LOCKBOX ACCOUNT") with one or more banks
acceptable to Agent (each, a "LOCKBOX BANK"), and shall execute with each
Lockbox Bank one or more agreements acceptable to Agent (individually and
collectively, the "LOCKBOX AGREEMENT"), and such other agreements related
thereto as Agent may require. Each Borrower shall ensure that all collections of
its respective Accounts and all other cash payments received by such Borrower
are paid and delivered directly from Account Debtors and other Persons into the
appropriate Lockbox Account. The Lockbox Agreements shall provide that the
Lockbox Banks immediately will transfer all funds paid into the Lockbox Accounts
into a depository account or accounts maintained by Agent or an affiliate of
Agent at such bank as Agent may communicate to Borrower from time to time (the
"CONCENTRATION ACCOUNT"), except, with respect only to Accounts payable by
Medicaid/Medicare Account Debtors, the Lockbox Banks will immediately transfer
such funds to the appropriate Account as instructed by the applicable Borrower
to whom such Accounts are payable as permitted pursuant to the applicable
Lockbox Agreement. Notwithstanding and without limiting any other provision of
any Loan Document, Agent shall apply, on a daily basis, all funds transferred
into the Concentration Account pursuant to the Lockbox Agreement and this
Section 2.5 in such order and manner as determined by Agent. To the extent that
any Accounts collections of any Borrower or any other cash payments received by
any Borrower, are not sent directly to the appropriate Lockbox Account but are
received by any Borrower or any of their affiliates, such collections and
proceeds shall be held in trust for the benefit of Agent and Lenders and
immediately remitted (and in any event within two Business Days), in the form
received, to the appropriate Lockbox Account, and if a Default or Event of
Default exists, for immediate transfer to the Concentration Account (except for
Accounts payable by Medicaid/Medicare Account Debtors). Borrower acknowledges
and agrees that compliance with the terms of this Section 2.5 is an essential
term of this Agreement, and that, in addition to and notwithstanding any other
rights Agent may have hereunder, under any other
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Loan Document, under applicable law or at equity, upon each and every failure by
any Borrower or any of their affiliates to comply with any such terms, Agent
shall be entitled to assess a non-compliance fee which shall operate to increase
the Applicable Rate by 2.0% per annum during any period of non-compliance,
whether or not a Default or an Event of Default occurs or is declared; provided,
that nothing shall prevent Agent from considering any failure to comply with the
terms of this Section 2.5 to be a Default or an Event of Default. All funds
transferred to the Concentration Account for application to the Obligations
under the Revolving Facility shall be forwarded to Borrower promptly thereafter,
or if a Default or Event of Default exists or a condition in Section 4.2 is not
then satisfied, such funds shall be applied to reduce the Obligations under the
Revolving Facility (as Agent shall determine in its sole discretion), but, for
purposes of calculating interest hereunder, all such funds shall be subject to a
four Business Day clearance period, whether or not the Obligations are paid. If
as the result of collections of Accounts and/or any other cash payments received
by any Borrower pursuant to this Section 2.5 a credit balance exists with
respect to the Concentration Account, such credit balance shall not accrue
interest in favor of a Borrower, but shall be available to the appropriate
Borrower in accordance with the terms of this Agreement. If applicable, at any
time prior to the execution of all or any of the Lockbox Agreements and
operation of all or any of the Lockbox Accounts, each Borrower and its
affiliates shall direct all collections or proceeds it receives on Accounts or
from other Collateral to the accounts and in the manner specified by Agent in
its sole discretion.
2.6 TERM LOAN
(a) The Term Loan shall be evidenced by Term Notes,
payable to the order of each appropriate Lender in the aggregate principal
amount of the Commitment of the applicable Lender, duly executed and delivered
by Borrower. As of the Closing Date, Borrower has issued (i) Second Amended and
Restated Term Note A, in the original principal amount of $8,224,361.69 payable
to the order of CapitalSource, duly executed and delivered by Borrower and dated
the Closing Date (the "TERM NOTE A") (ii) Second Amended and Restated Term Note
B, in the original principal amount of $8,595,840.63 payable to the order of
CapitalSource, duly executed and delivered by Borrower and dated the Closing
Date (the "TERM NOTE B"), and (iii) Second Amended and Restated Term Note C, in
the original principal amount of $179,797.68 payable to the order of
CapitalSource, duly executed and delivered by Borrower and dated the Closing
Date (the "TERM NOTE C", and collectively with Term Note A and Term Note B, as
amended or restated, the "TERM NOTES"). Subject to the terms and conditions set
forth in this Agreement, each Lender agrees to loan to Borrower on the Closing
Date, the amount necessary to make the aggregate principal amount of the Term
Notes equal to $17,000,000, each in an amount not to exceed its Pro Rata Share,
as a Term Loan to be disbursed to the appropriate Borrower's account(s) as set
forth on Schedule 2.4. The Term Loan is not a revolving credit facility, and any
repayments of principal shall be applied to permanently reduce the Term Loan.
The Term Loan shall be evidenced by the Term Notes.
(b) On the Closing Date, Borrower has repaid the
principal, interest and fees due under the New Term Notes (as defined in the
Amended and Restated Loan Agreement).
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2.7 INTEREST ON THE TERM NOTES
Interest on the outstanding balance of the Term Loan under the
Term Notes shall be payable monthly in arrears on the first day of each calendar
month at an annual rate of Prime Rate plus 4.5%; provided, however, that,
notwithstanding any other provision of any Loan Document, the interest on the
outstanding principal balance of the Term Loan under the Term Notes shall be not
less than 8.75%, in each case calculated on the basis of a 360-day year and for
the actual number of calendar days elapsed in each interest calculation period.
Interest accrued on the Term Loan under the Term Notes shall be due and payable
on the first day of each calendar month commencing August 1, 2003, and
continuing until the later of the expiration of the Term Notes Term and the full
performance and irrevocable payment in full in cash of the Obligations and
termination of this Agreement. Advances under the Revolving Facility shall be
made automatically for the payment of interest on the Term Loan and other
Obligations on the date when due to the extent available and as provided for
herein.
2.8 REPAYMENT OF TERM LOAN; MATURITY
Payment of principal (in addition to the interest payments in
Section 2.7) and all Obligations under the Term Loan shall be due and payable in
full, and the Term Notes shall mature, if not earlier in accordance with this
Agreement, on the earlier of (i) the occurrence of an Event of Default if
required pursuant hereto or Agent's demand upon an Event of Default, and (ii)
the last day of the Term Notes Term (such earlier date being the "TERM LOAN
MATURITY DATE").
2.9 MANNER OF PAYMENT
Any payments made by Borrower (other than payments
automatically paid through Advances under the Revolving Facility as provided
herein), shall be made only by wire transfer on the date when due, without
offset or counterclaim, in Dollars, in immediately available funds to such
account as may be indicated in writing by Agent to Borrower from time to time.
Any such payment received after 2:00 p.m. New York City Time on the date when
due shall be deemed received on the following Business Day. Whenever any payment
hereunder shall be stated to be due or shall become due and payable on a day
other than a Business Day, the due date thereof shall be extended to, and such
payment shall be made on, the next succeeding Business Day, and such extension
of time in such case shall be included in the computation of payment of any
interest (at the interest rate then in effect during such extension) and/or
fees, as the case may be.
2.10 REPAYMENT OF EXCESS ADVANCES
Any balance of Advances under the Revolving Facility
outstanding at any time in excess of the lesser of the Facility Cap or the
Availability shall be immediately due and payable by Borrower without the
necessity of any demand, at the Payment Office, whether or not a Default or
Event of Default has occurred or is continuing and shall be paid in the manner
specified in Section 2.9.
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2.11 OTHER MANDATORY PREPAYMENTS
In addition to and without limiting any provision of any Loan
Document:
(a) if a Change of Control occurs, on or prior to the
first Business Day following the date of such Change of Control, Borrower shall
prepay the Loans, including, without limitation, all outstanding Advances and
all other Obligations, in full in cash together with accrued interest thereon to
the date of prepayment and all other amounts owing to Agent and the Lenders
under the Loan Documents; and
(b) if any Borrower sells any of its assets or
properties, receives any property damage insurance award which is not used to
repair or replace the property covered thereby or incurs any Indebtedness,
except for Permitted Indebtedness, then it shall apply 100% of the proceeds
thereof to the prepayment of the Loans together with accrued interest thereon
and all other Obligations owing to Agent and the Lenders under the Loan
Documents, such payment to be applied at such time and in such manner and order
as Agent shall decide in its sole discretion.
2.12 PAYMENTS BY AGENT
Should any amount required to be paid under any Loan Document
be unpaid, such amount may be paid by Agent, for the account of Lenders, which
payment shall be deemed a request for an Advance under the Revolving Facility as
of the date such payment is due, and Borrower irrevocably authorizes
disbursement of any such funds to Agent, for the benefit of Lenders, by way of
direct payment of the relevant amount, interest or Obligations. No payment or
prepayment of any amount by Agent, Lenders or any other Person shall entitle any
Person to be subrogated to the rights of Agent and/or Lenders under any Loan
Document unless and until the Obligations have been fully performed and paid
irrevocably in cash and this Agreement has been terminated. Any sums expended by
Agent and/or Lenders as a result of Borrower's or any Guarantor's failure to
pay, perform or comply with any Loan Document or any of the Obligations may be
charged to Borrower's account as an Advance under the Revolving Facility and
added to the Obligations.
2.13 COLLATERAL; SECURITY INTEREST
To secure the payment and performance of the Obligations, each
Borrower has granted to Agent, for the benefit of itself and Lenders, a valid,
continuing perfected first priority security interest in and lien upon its
respective Collateral pursuant to the Security Documents to which each is a
party and PSI, PS Tennessee, PSI Hospitals, PS Oklahoma, Aeries, Texas
Hospitals, PS Coral Gables, Michigan, Transitional Care, East Carolina, H.C. and
HSA Hill Crest have pledged to Agent, for the benefit of itself and Lenders,
certain securities pursuant to Stock Pledge Agreements.
2.14 COLLATERAL ADMINISTRATION
(a) All Collateral (except Deposit Accounts) will at all times be kept by
Borrower at the locations set forth on Schedule 5.18B hereto and shall not,
without 30 calendar days prior written notice to Agent, be moved therefrom, and
in any case shall not be moved
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outside the continental United States or, in the case of Ramsay Youth Services
Puerto Rico, Inc., a Puerto Rico corporation ("RY PUERTO RICO"), Puerto Rico.
(b) Borrower shall keep accurate and complete records of
its Accounts and all payments and collections thereon and shall submit such
records to Agent on such periodic bases as Agent may request. In addition, if
Accounts of Borrower in an aggregate face amount in excess of $10,000 become
ineligible because they fall within one of the specified categories of
ineligibility set forth in the definition of Eligible Receivables, Borrower
shall notify Agent 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 Agent, Borrower shall execute and deliver to Agent
formal written assignments of all of its Accounts weekly or daily as Agent may
request, including all Accounts created since the date of the last assignment,
together with copies of claims, invoices and/or other information related
thereto. To the extent that collections from such assigned accounts exceed the
amount of the Obligations, such excess amount shall not accrue interest in favor
of Borrower but shall be available to Borrower upon Borrower's written request.
(c) Whether or not an Event of Default has occurred, any
of the Agent's officers, employees, representatives or agents shall have the
right, at any time during normal business hours, in the name of Agent, any
designee of Agent or Borrower, to verify the validity, amount or any other
matter relating to any Accounts of Borrower. Borrower shall cooperate fully with
Agent 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 Agent, for the account
of Lenders. Agent shall have the right at all times after the occurrence of an
Event of Default to notify (i) Account Debtors owing Accounts to Borrower, other
than Medicaid/Medicare Account Debtors, that their Accounts have been assigned
to Agent, for the benefit of itself and Lenders, and to collect such Accounts
directly in its own name and to charge collection costs and expenses, including
reasonable attorney's fees, to Borrower, and (ii) Medicaid/Medicare Account
Debtors that Borrower has waived any and all defenses and counterclaims it may
have or could interpose in any such action or procedure brought by Agent to
obtain a court order recognizing the assignment or security interest and lien of
Agent, for the benefit of itself and Lenders, in and to any Account or other
Collateral and that Agent is seeking or may seek to obtain a court order
recognizing the assignment or security interest and lien of Agent, for the
benefit of itself and Lenders, in and to all Accounts and other Collateral
payable by Medicaid/Medicare Account Debtors.
(e) As and when determined by Agent in its sole
discretion, Agent will perform the searches described in clauses (i) and (ii)
below against Borrower and Guarantors (the results of which are to be consistent
with Borrower's representations and warranties under this Agreement), all at
Borrower's expense: (i) UCC searches with the Secretary of State and local
filing offices of each jurisdiction where Borrower and/or any Guarantors (A) are
organized and (B) own or lease any real or personal property; and (ii) judgment,
federal tax lien and corporate and partnership tax lien searches, in each
jurisdiction searched under clause (i) above.
(f) Borrower (i) shall, during an Event of Default,
provide prompt written notice to its current bank to transfer all items,
collections and remittances to the Concentration
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Account, (ii) shall provide prompt written notice to each Account Debtor (other
than Medicaid/Medicare Account Debtors) that Agent has been granted a lien and
security interest in, upon and to all Accounts applicable to such Account Debtor
and shall direct each Account Debtor to make payments to the appropriate Lockbox
Account, and Borrower hereby authorizes Agent and/or Lenders, upon any failure
to send such notices and directions within 10 calendar days after the date of
this Agreement (or 10 calendar days after the Person becomes an Account Debtor),
to send any and all similar notices and directions to such Account Debtors, and
(iii) shall do anything further that may be lawfully required by Agent and/or
any Lender to secure Agent, for the benefit of itself and Lenders, and
effectuate the intentions of the Loan Documents. At Agent's request, Borrower
shall immediately deliver to Agent all items for which Agent must receive
possession to obtain a perfected security interest and all notes, certificates,
and documents of title, chattel paper, warehouse receipts, instruments, and any
other similar instruments constituting Collateral.
2.15 POWER OF ATTORNEY
Agent is hereby irrevocably made, constituted and appointed
the true and lawful attorney for Borrower (without requiring any of them to act
as such) with full power of substitution to do the following: (a) endorse the
name of any 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 its or their Accounts; (b) execute and file in the name of
Borrower any financing statements, schedules, assignments, instruments,
documents, and statements that it is or they are obligated to give Agent under
any of the Loan Documents; and (c) do such other and further acts and deeds in
the name of Borrower that Agent may deem necessary or desirable to enforce any
Account or other Collateral or to perfect Agent's, for the benefit of itself and
Lenders, security interest or lien in any Collateral. In addition, if any
Borrower breaches its obligation hereunder to direct payments of Accounts or the
proceeds of any other Collateral to the appropriate Lockbox Account, Agent, 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 Agent's officers or authorized signatories (without requiring any of them to
do so), direct any federal, state or private payor or fiscal intermediary to pay
proceeds of Accounts or any other Collateral to the appropriate Lockbox Account.
III. FEES AND OTHER CHARGES; ALLOCATION OF PURCHASE PRICE
3.1 COMMITMENT AND MODIFICATION FEES
On or before the Closing Date, Borrower shall pay to Agent,
for the ratable benefit of Lenders, $325,000, as a nonrefundable commitment fee.
On the Closing Date, Borrower shall pay to Agent a modification and waiver fee
of $1,850,000 in connection with the execution of this Agreement.
3.2 UNUSED LINE FEE
Borrower shall pay to Agent, for the ratable benefit of
Lenders, an unused line fee (the "UNUSED LINE FEE") in an amount equal to 0.5%
(per annum) of the difference of (a) the Facility Cap minus (b) the daily
average outstanding loan balance under the Revolving Facility
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outstanding during the month. The Unused Line Fee shall be payable monthly in
arrears on the first day of each successive calendar month.
3.3 COLLATERAL MANAGEMENT FEE
Borrower shall pay to Agent, for the ratable benefit of
Lenders, as additional interest, a collateral management fee equal to 0.125%
(per month) on the outstanding balance of the Revolving Facility. The collateral
management fee shall be payable monthly in arrears on the first day of each
successive calendar month.
3.4 EARLY TERMINATION/ FINANCE FEES
(a) If (i) Borrower terminates the Revolving Facility
under Section 11.1 hereof, (ii) Agent demands or Borrower is otherwise required
to make payment in full of the Revolving Facility and/or Obligations relating to
the Revolving Facility upon the occurrence of an Event of Default, (iii) a
voluntary or involuntary Change of Control or payment pursuant to Section 2.11
occurs, (iv) any other voluntary or involuntary prepayment of the Revolving
Facility and/or Obligations relating to the Revolving Facility by Borrower or
any other Person occurs (other than reductions to zero of the outstanding
balance of the Revolving Facility resulting from the ordinary course operation
of the provisions of Section 2.5), whether by virtue of Agent's exercising its
right of set-off or otherwise, (v) any Lender accelerates any Revolving Note or
makes any demand on any Revolving Note, or (vi) any payment or reduction of the
outstanding balance of any Revolving Note and/or the Revolving Facility is made
during a bankruptcy, reorganization or other proceeding or is made pursuant to
any plan of reorganization or liquidation or any Debtor Relief Law, then, at the
effective date of any such termination, Borrower shall pay Agent, for the
account of Lenders (in addition to the then outstanding principal, accrued
interest and other Obligations pursuant to the terms of this Agreement and any
other Loan Document), as yield maintenance for the loss of bargain and not as a
penalty, an amount equal to the applicable Minimum Termination Fee.
(b) If (i) Borrower terminates the Term Loan under
Section 11.1 hereof, (ii) Agent demands or Borrower is otherwise required to
make payment in full of the Obligations relating to the Term Loan upon the
occurrence of an Event of Default, (iii) a voluntary or involuntary Change of
Control or payment pursuant to Section 2.11 occurs, (iv) any other voluntary or
involuntary prepayment of the Obligations relating to the Term Loan by Borrower
or any other Person occurs, whether by virtue of Agent's exercising its right of
set-off or otherwise, (v) any Lender accelerates any Term Note or makes any
demand on any Term Note, (vi) any payment or reduction of the outstanding
balance of any Term Note and/or the Term Loan is made during a bankruptcy,
reorganization or other proceeding or is made pursuant to any plan of
reorganization or liquidation or any Debtor Relief Law or (vii) the unpaid
principal of the Term Loan and all other Obligations under the Term Loan shall
become due and payable in full on the Term Loan Maturity Date (each, a "TERM
TERMINATION"), then, at the effective date of any such termination, Borrower
shall pay Agent, for the account of Lenders (in addition to the then outstanding
principal, accrued interest and other Obligations relating to the Term Loan
owing under the Term Loan pursuant to the terms of this Agreement and any other
Loan Document), as yield maintenance for the loss of bargain and not as a
penalty, an amount equal to the Term Finance Fee;
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(c) Additionally, upon any Term Termination (as defined
in Section 3.4(b)) other than the occurrence of the last day of the Term Notes
Term (in connection with a prepayment of the Term Notes), Borrower shall pay
Agent, for the account of Lenders the Early Termination Fee; provided, that
Borrower shall not be required to pay an Early Termination Fee on the amount
that Borrower pays or reduces the outstanding balance of any Term Note as a
result of a HUD Financing obtained through an affiliate of CapitalSource.
3.5 COMPUTATION OF FEES; LAWFUL LIMITS
All fees hereunder shall be computed on the basis of a year of
360 days and for the actual number of days elapsed in each calculation period,
as applicable. In no contingency or event whatsoever, whether by reason of
acceleration or otherwise, shall the interest and other charges paid or agreed
to be paid to Agent, for the benefit of Lenders, for the use, forbearance or
detention of money hereunder exceed the maximum rate permissible under
applicable law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. If, due to any circumstance whatsoever,
fulfillment of any provision hereof, at the time performance of such provision
shall be due, shall exceed any such limit, then, the obligation to be so
fulfilled shall be reduced to such lawful limit, and, if Lenders shall have
received interest or any other charges of any kind which might be deemed to be
interest under applicable law in excess of the maximum lawful rate, then such
excess shall be applied first to any unpaid fees and charges hereunder, then to
unpaid principal balance owed by Borrower hereunder, and if the then remaining
excess interest is greater than the previously unpaid principal balance, Lenders
shall promptly refund such excess amount to Borrower and the provisions hereof
shall be deemed amended to provide for such permissible rate. The terms and
provisions of this Section 3.5 shall control to the extent any other provision
of any Loan Document is inconsistent herewith.
3.6 DEFAULT RATE OF INTEREST
Upon the occurrence and during the continuation of an Event of
Default, the Applicable Rate of interest in effect at such time with respect to
the Obligations shall be increased by 5.0% per annum (the "DEFAULT RATE").
3.7 ACKNOWLEDGEMENT OF JOINT AND SEVERAL LIABILITY, CROSS-GUARANTY
AND CONTRIBUTION RIGHTS; GUARANTY ENFORCEMENT.
(a) Each Borrower acknowledges that it is jointly and
severally liable for all of the Obligations under the Loan Documents. Each
Borrower expressly understands, agrees and acknowledges that (i) Borrowers are
all entities affiliated by common ownership, (ii) each Borrower desires to have
the availability of one common credit facility instead of separate credit
facilities, (iii) each Borrower has requested that each Lender extend such a
common credit facility on the terms herein provided, (iv) each Lender will be
lending against, and relying on a lien upon, all of Borrowers' assets even
though the proceeds of any particular loan made hereunder may not be advanced
directly to a particular Borrower, (v) each Borrower will nonetheless benefit by
the making of all such loans by each Lender and the availability of a single
credit facility of a size greater than each could independently warrant, and
(vi) all of the representations, warranties, covenants, obligations, conditions,
agreements and other terms
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contained in the Loan Documents shall be applicable to and shall be binding upon
each Borrower.
(b) Each Borrower hereby guarantees the prompt payment and
performance in full of all Obligations. Such guarantee constitutes a guarantee
of payment and not of collection. Each Borrower's obligations under this
Agreement shall, to the fullest extent permitted by law, be unconditional
irrespective of (i) the validity or enforceability, avoidance, or subordination
of the Obligations of any other Borrower or of any promissory note or other
document evidencing all or any part of the Obligations of any other Borrower,
(ii) the absence of any attempt to collect the Obligations from any other
Borrower, any Guarantor, if any, or any other security therefor, or the absence
of any other action to enforce the same, (iii) the waiver, consent, extension,
forbearance, or granting of any indulgence by the Agent and/or any Lender with
respect to any provision of any instrument evidencing the Obligations of any
other Borrower or Guarantor, if any, or any part thereof, or any other agreement
now or hereafter executed by any other Borrower or Guarantor, if any, and
delivered to the Agent and/or any Lender, (iv) the failure by the Agent and/or
any Lender to take any steps to perfect and maintain its security interest in,
or to preserve its rights to, any security or collateral for the Obligations of
any other Borrower or Guarantor, if any, (v) the Agent's and/or any Lender's
election, in any proceeding instituted under the United States Bankruptcy Code
(the "BANKRUPTCY CODE"), of the application of Section 1111(b)(2) of the
Bankruptcy Code, (vi) any borrowing or grant of a security interest by any other
Borrower, as debtor-in-possession under Section 364 of the Bankruptcy Code,
(vii) the disallowance of all or any portion of the Agent's and/or any Lender's
claim(s) for the repayment of the Obligations of any other Borrower under
Section 502 of the Bankruptcy Code, or (viii) any other circumstances which
might constitute a legal or equitable discharge or defense of a guarantor or of
any other Borrower (other than actual indefeasible payment in full in cash).
With respect to any Borrower's Obligations arising as a result of the joint and
several liability of the Borrowers hereunder with respect to Advances or other
extensions of credit made to any of the other Borrowers hereunder, such Borrower
waives, until the Obligations (other than indemnity obligations under the Loan
Documents not then due and payable for any events of claims that would give rise
thereto that are not then pending) shall have been indefeasibly paid in full and
this Agreement shall have been terminated, any right to enforce any right of
subrogation or any remedy which the Agent and/or any Lender now has or may
hereafter have against any other Borrower, any endorser or any Guarantor, if
any, of all or any part of the Obligations, and any benefit of, and any right to
participate in, any security or collateral given to the Agent and/or any Lender
to secure payment of the Obligations or any other liability of any Borrower to
the Agent and/or any Lender. During any Event of Default, the Agent may proceed
directly and at once, without notice, against any Borrower to collect and
recover the full amount, or any portion of the Obligations, without first
proceeding against any other Borrower or any other Person, or against any
security or collateral for the Obligations. Each Borrower consents and agrees
that the Agent shall be under no obligation to marshal any assets in favor of
any Borrower or against or in payment of any or all of the Obligations.
(c) Each Borrower is obligated to repay the Obligations as
joint and several obligors under this Agreement. To the extent that any Borrower
shall, under this Agreement as a joint and several obligor, repay any of the
Obligations constituting Advances made to another Borrower hereunder or other
Obligations incurred directly and primarily by any other Borrower (an
"ACCOMMODATION PAYMENT"), then the Borrower making such Accommodation Payment
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shall be entitled to contribution and indemnification from, and be reimbursed
by, each of the other Borrowers in an amount, for each of such other Borrowers,
equal to a fraction of such Accommodation Payment, the numerator of which
fraction is such other Borrower's Allocable Amount and the denominator of which
is the sum of the Allocable Amounts of all of the Borrowers. As of any date of
determination, the "ALLOCABLE AMOUNT" of each Borrower shall be equal to the
maximum amount of liability for Accommodation Payments which could be asserted
against such Borrower hereunder without (i) rendering such Borrower "insolvent"
within the meaning of Section 101 (31) of the Bankruptcy Code, Section 2 of the
Uniform Fraudulent Transfer Act ("UFTA") or Section 2 of the Uniform Fraudulent
Conveyance Act ("UFCA"), (ii) leaving such Borrower with unreasonably small
capital or assets, within the meaning of Section 548 of the Bankruptcy Code,
Section 4 of the UFTA, or Section 5 of the UFCA, or (iii) leaving such Borrower
unable to pay its debts as they become due within the meaning of Section 548 of
the Bankruptcy Code or Section 4 of the UFTA, or Section 5 of the UFCA. All
rights and claims of contribution, indemnification, and reimbursement under this
Section 3.7 shall be subordinate in right of payment to the prior payment in
full of the Obligations. The provisions of this Section 3.7 shall, to the extent
inconsistent with any provision in any Loan Document, supersede such
inconsistent provision.
(d) If (i) any court holds that the Borrowers are guarantors
and not jointly and severally liable or (ii) bankruptcy or reorganization
proceedings at any time are instituted by or against any Borrower under any
Debtor Relief Law, each Borrower hereby: (A) until indefeasible payment in full
of the Obligations, expressly and irrevocably waives, to the fullest extent
possible, on behalf of such Borrower, any and all rights at law or in equity to
subrogation, to reimbursement, to exoneration, to contribution, to
indemnification, to set-off or to any other rights that could accrue to a surety
against a principal, to a guarantor against a maker or obligor, to an
accommodation party against the party accommodated, to a holder or transferee
against a maker, or to the holder of a claim against any Person, and which such
Borrower may have or hereafter acquire against any Person in connection with or
as a result of such Borrower's execution, delivery and/or performance of this
Agreement, or any other documents to which such Borrower is a party or
otherwise; (B) until indefeasible payment in full of the Obligations, expressly
and irrevocably waives any "claim" (as such term is defined in the Bankruptcy
Code) of any kind against any other Borrower, and further agrees that it shall
not have or assert any such rights against any Person (including any surety),
either directly or as an attempted set-off to any action commenced against such
Borrower by the Agent or a Lender or any other Person; and (C) acknowledges and
agrees (I) that this waiver is intended to benefit the Agent and the Lenders and
shall not limit or otherwise affect such Borrower's liability hereunder or the
enforceability of this Agreement, and (II) that the Agent and the Lenders and
their successors and assigns are intended beneficiaries of this waiver, and
agreements set forth in this Section 3.7 and their rights under this Section 3.7
shall survive payment in full of the Obligations.
(e) This Agreement shall in all respects be continuing,
absolute and unconditional, and shall remain in full force and effect with
respect to each Borrower until all Obligations created or existing before
receipt of such notice shall have been indefeasibly fully paid. No compromise,
settlement, release or discharge of, or indulgence with respect to, or failure,
neglect or omission to enforce or exercise any right against, any one or more
Borrowers shall release or discharge the other Borrowers.
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(f) EACH BORROWER WAIVES THE FILING OF A CLAIM WITH A COURT IN
THE EVENT OF RECEIVERSHIP OR BANKRUPTCY OF ANY OTHER BORROWER, AND WAIVES EVERY
DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR SETOFF WHICH ANY BORROWER MAY NOW HAVE
OR HEREAFTER MAY HAVE TO ANY ACTION BY THE AGENT OR ANY LENDER IN ENFORCING THIS
AGREEMENT UNTIL THE OBLIGATIONS ARE INDEFEASIBLY PAID IN FULL AND LENDERS HAVE
NO COMMITMENT TO LEND HEREUNDER, INCLUDING, WITHOUT LIMITATION, EVERY DEFENSE,
COUNTERCLAIM OR SETOFF WHICH SUCH BORROWER MAY NOW HAVE, OR HEREAFTER MAY HAVE,
AGAINST ANY OTHER BORROWER OR ANY OTHER PARTY LIABLE TO THE AGENT OR ANY LENDER
IN ANY MANNER. AS FURTHER SECURITY, ANY AND ALL DEBTS AND LIABILITIES NOW OR
HEREAFTER ARISING AND OWING TO ANY BORROWER BY ANY OTHER BORROWER, OR TO ANY
OTHER PARTY LIABLE TO THE AGENT OR ANY LENDER, ARE HEREBY SUBORDINATED TO THE
AGENT'S AND ANY SUCH LENDER'S CLAIMS AND UPON THE OCCURRENCE OF AN EVENT OF
DEFAULT ARE ASSIGNED TO THE AGENT FOR THE BENEFIT OF THE LENDERS. EACH BORROWER
HEREBY AGREES THAT IT MAY BE JOINED AS A PARTY DEFENDANT IN ANY LEGAL PROCEEDING
(INCLUDING, BUT NOT LIMITED TO, A FORECLOSURE PROCEEDING) INSTITUTED BY THE
AGENT OR ANY LENDER AGAINST ANY OTHER BORROWER.
(g) Should a claim be made upon the Agent or any Lender at any
time for repayment of any amount rightfully received by the Agent or any Lender
in payment of the Obligations, or any part thereof, whether received from any
Borrower or received by the Agent or any Lender as the proceeds of Collateral,
by reason of: (1) any judgment, decree or order of any court or administrative
body having jurisdiction over the Agent or any Lender or any of their property,
or (2) any settlement or compromise of any such claim effected by the Agent or
any Lender, in its sole discretion, with the claimant (including a Borrower),
each Borrower shall remain liable to the Agent or any such Lender for the amount
so repaid to the same extent as if such amount had never originally been
received by the Agent or any such Lender, notwithstanding any termination hereof
or the cancellation of any note or other instrument evidencing any of the
indebtedness. To the extent the Agent is required to repay any such amount, each
Lender shall, to the extent the Agent previously paid to such Lender a portion
of the amount which must be repaid, upon demand of the Agent, return to the
Agent the amount which had previously been paid by the Agent to such Lender.
(h) To the extent that any payment to, or realization by, the
Lender or the Agent on the Obligations exceeds the limitations of this Section
3.7 and is otherwise subject to avoidance and recovery in any such proceeding,
the amount subject to avoidance shall in all events be limited to the amount by
which such actual payment or realization exceeds such limitation, and this
Agreement as limited shall in all events remain in full force and effect and be
fully enforceable against such Borrower. This Section 3.7 is intended solely to
reserve the rights of the Lenders and the Agent hereunder against each Borrower,
in such proceeding to the maximum extent permitted by applicable Debtor Relief
Laws and neither the Borrowers, any guarantor of the Obligations nor any other
Person shall have any right, claim or defense under this Section 3.7 that would
not otherwise be available under applicable Debtor Relief Laws in such
proceeding.
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3.8 WARRANTS
As additional consideration for the extensions of credit under
the Original Loan Agreement and as more fully described in the Warrant
Agreement, PSI has issued and delivered previously to CapitalSource Holdings LLC
on the Original Closing Date, the Warrant. The Warrant and number of securities
purchasable upon exercise of the Warrant shall be subject to adjustment and
shall be subject to various rights in favor of CapitalSource Holdings LLC as set
forth in the Warrant Agreement.
3.9 ALLOCATION OF PURCHASE PRICE
Under both GAAP consistently applied and the regulations of
the Internal Revenue Service, the issuance to Lenders of Term Notes A, B and C
and to CapitalSource Holdings LLC of the Warrant for an aggregate purchase price
equal to the aggregate principal amount of Term Notes A, B and C being so
purchased results in the creation of "original issue discount" on each Original
Term Note (which original issue discount may also be deemed to constitute the
value of any Warrant issued in connection with the issuance of such Term Notes
A, B and C), and such regulations require the determination of the value of any
warrant so delivered. Pursuant to GAAP consistently applied and applicable
Treasury Regulations, Borrower, Agent and Lenders agree to allocate $16,940,000
of the purchase price to Term Notes A, B and C and the remaining $60,000 of the
purchase price to the Warrant and that such allocation reflects the relative
fair market values of Term Notes A, B and C and the Warrant as of their issue
date. As a result, Term Notes A, B and C will be issued with original issue
discount of $60,000. Borrower, Agent and Lenders agree to recognize and adhere
to the determinations and allocations of original issue discount and valuation
of the Warrant set forth herein for all federal and state income tax purposes.
In the event of any proposed transfer of any of Term Note A, B or C by any
Lender, such Lender shall, prior to such transfer, ▇▇▇▇ such Term Note A, B or C
with a legend pertaining to the original issue discount in the form required by
Treasury Regulation Section 1.1275-3(b)(1).
IV. CONDITIONS PRECEDENT
4.1 CONDITIONS TO INITIAL ADVANCE, FUNDING OF TERM LOAN AND
CLOSING
The obligations of Lenders to consummate the transactions
contemplated herein and to make the initial Advance under the Revolving Facility
(the "INITIAL ADVANCE") and to fund the Term Loan are subject to the
satisfaction, in the sole judgment of Agent, of the following:
(a) Borrower shall have delivered to Agent (i) the Loan
Documents to which it is a party, each duly executed by an authorized officer of
Borrower and the other parties thereto and (ii) a Borrowing Certificate for the
Initial Advance under the Revolving Facility executed by an authorized officer
of Borrower;
(b) all in form and substance satisfactory to Agent in
its sole discretion, Agent shall have received (i) a report of UCC financing
statement, tax and judgment lien searches performed with respect to each
Borrower and Guarantor in each jurisdiction determined by Agent in its sole
discretion, and such report shall show no Liens on the Collateral (other than
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Permitted Liens), (ii) each document (including, without limitation, any UCC
financing statement) required by any Loan Document or under law or requested by
Agent to be filed, registered or recorded to create, in favor of Agent, for the
benefit of itself and the Lenders, a perfected first priority security interest
upon the Collateral, and (iii) evidence of each such filing, registration or
recordation and of the payment by Borrower of any necessary fee, tax or expense
relating thereto;
(c) Agent shall have received (i) the Charter and Good
Standing Documents, all in form and substance acceptable to Agent, (ii) a
certificate of the corporate secretary, assistant secretary or holder of
equivalent office of each Borrower and Guarantor dated the Closing Date, as to
the incumbency and signature of the Persons executing the Loan Documents, in
form and substance acceptable to Agent, (iii) the written legal opinion of
counsel for Borrower, in form and substance satisfactory to Agent and its
counsel; and (iv) a certificate executed by an authorized officer of each
Borrower and Guarantor, which shall constitute a representation and warranty by
such Borrower as of the Closing Date and the applicable Borrowing Date and the
date of funding of the Term Loan that the conditions contained in this Agreement
have been satisfied;
(d) Agent shall have received a certificate of the chief
financial officer (or, in the absence of a chief financial officer, the chief
executive officer) of each Borrower, in form and substance satisfactory to Agent
(each, a "SOLVENCY CERTIFICATE"), certifying (i) the solvency of such Borrower
after giving effect to the transactions and the Indebtedness contemplated by the
Loan Documents, and (ii) as to such Borrower's financial resources and ability
to meet its obligations and liabilities as they become due, to the effect that
as of the Closing Date, the Borrowing Date for the Initial Advance and the date
of funding of the Term Loan and after giving effect to such transactions and
Indebtedness: (A) the assets of such Borrower, at a Fair Valuation, exceed the
total liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) of such Borrower, and (B) no unreasonably small
capital base with which to engage in its anticipated business exists with
respect to such Borrower;
(e) Agent shall have completed examinations, the results
of which shall be satisfactory in form and substance to Agent, of the
Collateral, the financial statements and the books, records, business,
obligations, financial condition and operational state of each Borrower and each
such Borrower shall have demonstrated to Agent's satisfaction that (i) its
operations comply, in all respects deemed material by Agent, in its sole
judgment, with all applicable federal, state, foreign and local laws, statutes
and regulations, (ii) its operations are not the subject of any governmental
investigation, evaluation or any remedial action which could result in any
expenditure or liability deemed material by Agent, in its sole judgment, and
(iii) it has no liability (whether contingent or otherwise) that is deemed
material by Agent, in its sole judgment;
(f) Agent shall have received all fees, charges and
expenses payable to Agent and Lenders on or prior to the Closing Date pursuant
to the Loan Documents;
(g) all in form and substance satisfactory to Agent in
its sole discretion, Agent shall have received such consents, approvals and
agreements, including, without limitation, any applicable Landlord Waivers and
Consents with respect to any and all leases set forth on
17
Schedule 5.4 (except as indicated thereon), from such third parties as Agent and
its counsel shall determine are necessary or desirable with respect to (i) the
Loan Documents and/or the transactions contemplated thereby, and/or (ii) claims
against any Borrower or the Collateral;
(h) Borrower shall be in compliance with Section 5.17 and
Section 6.5, and Agent shall have received (i) certified copies of all such
insurance policies, and (ii) original certificates of such insurance policies
confirming that they are in effect and that the premiums due and owing with
respect thereto have been paid in full and naming Agent, for the benefit of
itself and Lenders, as sole beneficiary or loss payee and additional insured, as
appropriate;
(i) all corporate and other proceedings, documents,
instruments and other legal matters in connection with the transactions
contemplated by the Loan Documents (including, but not limited to, those
relating to corporate and capital structures of Borrower) shall be satisfactory
to Agent;
(j) Agent shall have received a Guaranty in form and
substance acceptable to Agent, duly executed by an authorized officer of RY
Puerto Rico;
(k) no default exists beyond applicable cure periods
pursuant to any of Borrower's obligations under any material contract or
compliance with applicable laws and there will exist no fact or circumstance
which, with the passage of time, the giving of notice, or both, could constitute
a default under any material contract to which Borrower is a party or any law to
which Borrower is subject;
(l) Borrower shall have established a Lockbox Account
pursuant to Section 2.5;
(m) Agent shall have received a mortgagee title insurance
policy or appropriate endorsements reflecting all amendments to each previously
issued mortgagee title insurance policy on the Real Property (or binding
commitment therefor) in form and substance and from Fidelity National Title
Insurance Company or such other title insurer reasonably acceptable to Agent, on
an A.L.T.A. 1970 form designated by Agent, which title insurance policy shall
(i) specifically contain no exception as to survey matters or creditors rights,
(ii) contain affirmative coverage against mechanics', contractors', suppliers'
and/or materialmen's liens, which may be filed or unfiled, (iii) must
affirmatively insure that the mortgage or deed of trust is a valid first lien
against the fee simple, marketable estate, insuring Agent and Lenders for a sum
not less than the maximum principal amount of the Term Loan, (iv) insure any
easements or leases necessary to access the Real Property and such easements or
leases shall not be subject to any prior liens, encumbrances, covenants or
restrictions and (v) contain such endorsements as may be reasonably required by
Agent; provided, however, that such mortgagee title insurance policy may contain
the usual "pending disbursements" clause, if applicable;
(n) Agent shall have received evidence that Borrower has
a fee simple title to the Real Property and to the material fixtures, equipment,
furniture and personal property encumbered by the Loan Documents, and such title
shall be marketable, and free and clear of all defects, liens, encumbrances,
security interests, assessments, restrictions and easements, unless otherwise
approved in writing by Agent;
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(o) if access to the Real Property is by means of
easements or leases, said easements or leases shall be satisfactory in form and
substance to Agent, shall be covered by the mortgagee title insurance policy
pursuant to subsection (m)(iv) above;
(p) all streets necessary to serve the Real Property for
the use represented by Borrower shall have been completed and shall be
serviceable and all streets to be dedicated shall have been dedicated and
accepted for public use and maintenance;
(q) Agent shall have received, in form and substance
reasonably satisfactory to Agent, evidence that the Real Property and all
improvements (to the extent required) (i) comply with applicable codes,
regulations and ordinances, (ii) are zoned for their current use, (iii) are
adequately served by public utilities, (iv) are completed free of mechanics' and
materialmens' liens, (v) are not the subject to any pending or threatened
litigation, (vi) are not the subject of any pending or threatened condemnation
proceeding, (vii) have not been damaged by fire or other casualty and (viii) are
not within a special flood hazard area or, if within a special flood hazard
area, Borrower has obtained flood insurance under the U.S. Flood Disaster
Protection Act of 1973, as amended, or such other flood insurance which in
Agent's reasonable opinion adequately protects against the risk of damage by
flood;
(r) Agent shall have received, in form and substance
reasonably satisfactory to Agent, evidence that all taxes and assessments on all
real property owned by Borrower have currently been paid, settlement copies of
all recent real estate tax bills, with proof of payment, together with evidence
that the mortgaged premises is a separately identifiable tax lot;
(s) Agent shall have received, in form and substance
reasonably satisfactory to Agent, a report of a search of the public records
performed against the Real Property and Borrower in each state and local
jurisdiction, and such report shall show no conditional sales contracts, chattel
mortgages, leases of personalty, financing statements or title retention
agreements filed and/or recorded against the Real Property and Borrower, other
than liens which are specifically permitted under this Agreement;
(t) Agent shall have received, each in form and substance
satisfactory to Agent, any and all property as-built A.L.T.A. surveys,
environmental reports and other third party reports as Agent shall deem
necessary or appropriate; provided, that the environmental report must address
such matters as Agent shall request in its sole and absolute discretion,
including, without limitation, confirmation of the absence of asbestos in any
form that is or could become friable and confirmation of the absence of
underground storage tanks;
(u) Agent shall have received copies of all licenses and
permits required for Borrower to conduct the business in which it is currently
engaged or is contemplated pursuant to the Loan Documents or shall have received
an opinion from licensure counsel verifying that all approvals for licensure
have been granted;
(v) Agent shall have received copies of all material
agreements between Borrower and any healthcare management consultants and/or
agents, including documents relating to borrowed money, capital leases and
occupancy leases;
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(w) Agent shall have received copies of all participation
agreements relating to medical plans of Borrower;
(x) Agent shall have completed its due diligence
examinations of Borrower and each Subsidiary, the results of which shall be
satisfactory in form and substance to Agent;
(y) Borrower shall have delivered the Agreement and Plan
of Merger, duly executed by PSI, PSI Acquisition Sub, Inc., and Ramsay Youth
Services, Inc., and in form and substance satisfactory to Agent;
(z) Agent shall have received the Collateral Assignment
of the Agreement and Plan of Merger, duly executed by PSI and PSI Acquisition
Sub, Inc.;
(aa) Agent shall have received copies of all leases and
subleases entered into by Borrower for the use and occupancy by Borrower of any
real property;
(bb) Agent shall have received, copies of the High Yield
Documents, duly executed by the appropriate parties thereto, and in form and
substance satisfactory to Agent; and
(cc) Borrower shall pay or cause to be paid and discharged
the 1818 Mezzanine Fund Subordinated Indebtedness, other than the Put Price
Notes (as defined in the Securities Purchase Agreement).
4.2 CONDITIONS TO EACH ADVANCE AND FUNDING OF THE TERM LOAN
The obligations of Lenders to make any Advance (including,
without limitation, the Initial Advance) and to fund the Term Loan are subject
to the satisfaction, in the sole judgment of Agent, of the following additional
conditions precedent:
(a) Borrower shall have delivered to Agent a Borrowing
Certificate for the Advance executed by an authorized officer of Borrower, which
shall constitute a representation and warranty by Borrower as of the Borrowing
Date of such Advance that the conditions contained in this Section 4.2 have been
satisfied; provided, however, that any determination as to whether to fund
Advances or extensions of credit shall be made by Agent in its sole discretion;
(b) each of the representations and warranties made by
Borrower in or pursuant to this Agreement shall be accurate, before and after
giving effect to such Advance and/or funding the Term Loan, and no Default or
Event of Default shall have occurred or be continuing or would exist after
giving effect to the Advance or the funding of the Term Loan on such date;
(c) immediately after giving effect to the requested
Advance, the aggregate outstanding principal amount of Advances under the
Revolving Facility shall not exceed the lesser of the Availability and the
Facility Cap and the aggregate outstanding principal amount of the Term Loan
shall not exceed the Maximum Loan Amount;
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(d) except as disclosed in the historical financial
statements, there shall be no liabilities or obligations with respect to
Borrower of any nature whatsoever which, either individually or in the
aggregate, would reasonably be likely to have a Material Adverse Effect;
(e) Agent shall have received all fees, charges and
expenses payable to Agent on or prior to such date pursuant to the Loan
Documents; and
(i) there shall not have occurred any Material
Adverse Change or Material Adverse Effect or Liability Event.
V. REPRESENTATIONS AND WARRANTIES
Each Borrower, jointly and severally, represents and warrants as of the
date hereof, the Closing Date, each Borrowing Date and, if applicable, the date
of funding of the Term Loan as follows:
5.1 ORGANIZATION AND AUTHORITY
Each Borrower is an entity duly organized, validly existing
and in good standing under the laws of its state of formation. Borrower (a) has
all requisite corporate power and authority to own its properties and assets and
to carry on its business as now being conducted and as contemplated in the Loan
Documents, (b) is duly qualified to do business in every jurisdiction in which
failure so to qualify could reasonably be expected to have a Material Adverse
Effect, and (c) has all requisite power and authority (i) to execute, deliver
and perform the Loan Documents to which it is a party, (ii) to borrow hereunder,
(iii) to consummate the transactions contemplated under the Loan Documents, and
(iv) to grant the Liens with regard to the Collateral pursuant to the Security
Documents to which it is a party. No Borrower is an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, or is controlled by such an "investment company."
5.2 LOAN DOCUMENTS
The execution, delivery and performance by Borrower of the
Loan Documents to which it is a party, and the consummation of the transactions
contemplated thereby, (a) have been duly authorized by all requisite action of
each such Person and have been duly executed and delivered by or on behalf of
each such Person; (b) do not violate any provisions of (i) any applicable law,
statute, rule, regulation, ordinance or tariff, (ii) any order of any
Governmental Authority binding on any Borrower or any of their respective
properties, or (iii) the certificate of incorporation or bylaws (or any other
equivalent governing agreement or document) of any Borrower, or any agreement
between any Borrower and its respective shareholders, members, partners or
equity owners or among any such shareholders, members, partners or equity
owners; (c) are not in conflict with, and do not result in a breach or default
of or constitute an event of default, or an event, fact, condition or
circumstance which, with notice or passage of time, or both, would constitute or
result in a conflict, breach, default or event of default under, any indenture,
agreement or other instrument to which any Borrower is a party, or by which the
properties or assets of Borrower are bound, the effect of which could reasonably
be expected to have a Material Adverse Effect; (d) except as set forth therein,
will not result in the creation or imposition of any Lien of any nature upon any
of the properties or assets of any Borrower, and
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(e) except as set forth on Schedule 5.2, do not require the consent, approval or
authorization of, or filing, registration or qualification with, any
Governmental Authority or any other Person. When executed and delivered, each of
the Loan Documents to which Borrower is a party will constitute the legal, valid
and binding obligation of each Borrower, as applicable, enforceable against such
Borrower in accordance with its terms, subject to the effect of any applicable
bankruptcy, moratorium, insolvency, reorganization or other similar law
affecting the enforceability of creditors' rights generally and to the effect of
general principles of equity which may limit the availability of equitable
remedies (whether in a proceeding at law or in equity).
5.3 SUBSIDIARIES, CAPITALIZATION AND OWNERSHIP INTERESTS
Borrower has no Subsidiaries other than those persons listed
as Subsidiaries on Schedule 5.3, and each of such Subsidiaries (except for the
HUD Financing Subsidiaries or as otherwise indicated thereon) have executed this
Agreement and such other Security Documents as required by Agent. Schedule 5.3
states the authorized and issued capitalization of Borrower, the number and
class of equity securities and/or ownership, voting or partnership interests
issued and outstanding of Borrower and the record and beneficial owners thereof
(including options, warrants and other rights to acquire any of the foregoing).
The outstanding equity securities and/or ownership, voting or partnership
interests of Borrower have been duly authorized and validly issued and are fully
paid and nonassessable, and each Person listed on Schedule 5.3 owns beneficially
and of record all the equity securities and/or ownership, voting or partnership
interests it is listed as owning free and clear of any Liens other than Liens
created by the Security Documents. Schedule 5.3 also lists the directors,
members, managers and/or partners of Borrower. Except as listed on Schedule 5.3,
Borrower does not own an interest or participate or engage in any joint venture,
partnership or similar arrangements with any Person.
5.4 PROPERTIES
Borrower (a) is the sole owner and has good, valid and
marketable title to, or a valid leasehold interest in, all of its properties and
assets, including the Collateral, whether personal or real, subject to no
transfer restrictions or Liens of any kind except for Permitted Liens, and (b)
is in compliance in all material respects with each lease to which it is a party
or otherwise bound. Schedule 5.4 lists all real properties (and their locations)
owned or leased by or to, and all other assets or property that are leased or
licensed by, Borrower and all leases (including leases of leased real property)
covering or with respect to such properties and assets. Borrower enjoys peaceful
and undisturbed possession under all such leases and such leases are all the
leases necessary for the operation of such properties and assets, are valid and
subsisting and are in full force and effect.
5.5 OTHER AGREEMENTS
Borrower is not (a) a party to any judgment, order or decree
or any agreement, document or instrument, or subject to any restriction, which
would materially adversely affect its ability to execute and deliver, or perform
under, any Loan Document or to pay the Obligations, (b) in default in the
performance, observance or fulfillment of any obligation, covenant or condition
contained in any agreement, document or instrument to which it is a party or to
which any of its properties or assets are subject, which default, if not
remedied within any applicable
22
grace or cure period, could reasonably be expected to have a Material Adverse
Effect, nor is there any event, fact, condition or circumstance which, with
notice or passage of time or both, would constitute or result in a conflict,
breach, default or event of default under, any of the foregoing which, if not
remedied within any applicable grace or cure period could reasonably be expected
to have a Material Adverse Effect; or (c) a party or subject to any agreement,
document or instrument with respect to, or obligation to pay any, service or
management fee with respect to, the ownership, operation, leasing or performance
of any of its business or any facility, nor is there any manager with respect to
any such facility.
5.6 LITIGATION
There is no action, suit, proceeding or investigation pending
or, to its knowledge, threatened against Borrower that (a) questions or could
prevent the validity of any of the Loan Documents or the right of Borrower to
enter into any Loan Document or to consummate the transactions contemplated
thereby, (b) could reasonably be expected to be or have, either individually or
in the aggregate, any Material Adverse Change or Material Adverse Effect, or (c)
could reasonably be expected to result in any Change of Control or other change
in the current ownership, control or management of Borrower. Borrower is not
aware that there is any basis for the foregoing. Borrower is not a party or
subject to any order, writ, injunction, judgment or decree of any Governmental
Authority. There is no action, suit, proceeding or investigation initiated by
Borrower currently pending. Borrower has no existing accrued and/or unpaid
Indebtedness to any Governmental Authority or any other governmental payor.
5.7 HAZARDOUS MATERIALS
Borrower is in compliance in all material respects with all
applicable Environmental Laws. Borrower has not been notified of any action,
suit, proceeding or investigation (a) relating in any way to compliance by or
liability of Borrower under any Environmental Laws, (b) which otherwise deals
with any Hazardous Substance or any Environmental Law, or (c) which seeks to
suspend, revoke or terminate any license, permit or approval necessary for the
generation, handling, storage, treatment or disposal of any Hazardous Substance.
5.8 TAX RETURNS; GOVERNMENTAL REPORTS
Borrower (a) has filed all federal, state, foreign (if
applicable) and local tax returns and other reports which are required by law to
be filed by Borrower, and (b) has paid all taxes, assessments, fees and other
governmental charges, including, without limitation, payroll and other
employment related taxes, in each case that are due and payable, except only for
items that Borrower is currently contesting in good faith and that are described
on Schedule 5.8.
5.9 FINANCIAL STATEMENTS AND REPORTS
All financial statements and financial information relating to
Borrower that have been or may hereafter be delivered to Agent by Borrower are
accurate and complete and have been prepared in accordance with GAAP
consistently applied with prior periods. Borrower has no material obligations or
liabilities of any kind not disclosed in such financial information or
statements, and since the date of the most recent financial statements submitted
to Agent, there
23
has not occurred any Material Adverse Change, Material Adverse Effect or
Liability Event or, to Borrower's knowledge, any other event or condition that
could reasonably be expected to have a Material Adverse Effect or Liability
Event.
5.10 COMPLIANCE WITH LAW
Borrower (a) is in compliance with all laws, statutes, rules,
regulations, ordinances and tariffs of any Governmental Authority applicable to
Borrower and/or Borrower's business, assets or operations, including, without
limitation, ERISA and Healthcare Laws, and (b) is not in violation of any order
of any Governmental Authority or other board or tribunal, except where
noncompliance or violation could not reasonably be expected to have a Material
Adverse Effect. There is no event, fact, condition or circumstance which, with
notice or passage of time, or both, would constitute or result in any
noncompliance with, or any violation of, any of the foregoing, in each case
except where noncompliance or violation could not reasonably be expected to have
a Material Adverse Effect. Borrower has not received any notice that Borrower is
not in compliance in any respect with any of the requirements of any of the
foregoing. Borrower has (i) not engaged in any Prohibited Transactions as
defined in Section 406 of ERISA and Section 4975 of the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated thereunder, (ii) not
failed to meet any applicable minimum funding requirements under Section 302 of
ERISA in respect of its plans and no funding requirements have been postponed or
delayed, (iii) no knowledge of any event or occurrence which would cause the
Pension Benefit Guaranty Corporation to institute proceedings under Title IV of
ERISA to terminate any of the employee benefit plans, (iv) no fiduciary
responsibility under ERISA for investments with respect to any plan existing for
the benefit of Persons other than its employees or former employees, or (v) not
withdrawn, completely or partially, from any multi-employer pension plans so as
to incur liability under the MultiEmployer Pension Plan Amendments of 1980. With
respect to Borrower, there exists no event described in Section 4043 of ERISA,
excluding Subsections 4043(b)(2) and 4043(b)(3) thereof, for which the 30 day
notice period contained in 12 C.F.R. Section 2615.3 has not been waived.
Borrower has maintained in all material respects all records required to be
maintained by the Joint Commission on Accreditation of Healthcare Organizations,
the Food and Drug Administration, Drug Enforcement Agency and State Boards of
Pharmacy and the federal and state Medicare and Medicaid programs as required by
the Healthcare Laws and, to the best knowledge of Borrower, there are no
presently existing circumstances which likely would result in material
violations of the Healthcare Laws. There is no Liability Event.
5.11 INTELLECTUAL PROPERTY
Except as set forth on Schedule 5.11, Borrower does not own,
license or utilize, and is not a party to, any patents, patent applications,
trademarks, trademark applications, service marks, registered copyrights,
copyright applications, copyrights, trade names, trade secrets, software or
licenses (collectively, the "INTELLECTUAL PROPERTY").
5.12 LICENSES AND PERMITS; LABOR
Borrower is in compliance with and has all Permits and
Intellectual Property necessary or required by applicable law or any
Governmental Authority for the operation of its
24
businesses. All of the foregoing are in full force and effect and not in known
conflict with the rights of others. Borrower is not (a) in breach of or default
under the provisions of any of the foregoing, nor is there any event, fact,
condition or circumstance which, with notice or passage of time or both, would
constitute or result in a conflict, breach, default or event of default under,
any of the foregoing which, if not remedied within any applicable grace or cure
period could reasonably be expected to have a Material Adverse Effect, (b) a
party to or subject to any agreement, instrument or restriction that is so
unusual or burdensome that it might have a Material Adverse Effect, and/or (c)
and has not been involved in any labor dispute, strike, walkout or union
organization which could reasonably be expected to have a Material Adverse
Effect
5.13 NO DEFAULT
There does not exist any Default or Event of Default or any
event, fact, condition or circumstance which, with the giving of notice or
passage of time or both, would constitute or result in a Default or Event of
Default.
5.14 DISCLOSURE
No Loan Document nor any other agreement, document,
certificate, or statement furnished to Agent by or on behalf of Borrower in
connection with the transactions contemplated by the Loan Documents, nor any
representation or warranty made by Borrower in any Loan Document, contains any
untrue statement of material fact or omits to state any fact necessary to make
the statements therein not materially misleading. There is no fact known to
Borrower which has not been disclosed to Agent in writing which could reasonably
be expected to have a Material Adverse Effect.
5.15 EXISTING INDEBTEDNESS; INVESTMENTS, GUARANTEES AND CERTAIN
CONTRACTS
Except as contemplated by the Loan Document or as otherwise
set forth on Schedule 5.15, Borrower (a) has no outstanding Indebtedness, (b) is
not subject or party to any mortgage, deed of trust, note, indenture, indemnity
or guarantee of, with respect to or evidencing any Indebtedness of any other
Person, or (c) does not own or hold any equity or long-term debt investments in,
and does not have any outstanding advances to or any outstanding guarantees for,
the obligations of, or any outstanding borrowings from, any Person. Borrower has
performed all material obligations required to be performed by Borrower pursuant
to or connection with any items listed on Schedule 5.15 and there has occurred
no breach, default or event of default under any document evidencing any such
items or any fact, circumstance, condition or event which, with the giving of
notice or passage of time or both, would constitute or result in a breach,
default or event of default thereunder.
5.16 OTHER AGREEMENTS
Except as set forth on Schedule 5.16, (a) there are no
existing or proposed agreements, arrangements, understandings or transactions
between Borrower and any of Borrower's officers, members, managers, directors,
stockholders, partners, other interest holders, employees or affiliates or any
members of their respective immediate families, and (b) none of the foregoing
Persons are directly or indirectly, indebted to or have any direct or indirect
25
ownership, partnership or voting interest in, to Borrower's knowledge, any
affiliate of Borrower or any Person with which Borrower has a business
relationship or which competes with Borrower (except that any such Persons may
own stock in (but not exceeding 2% of the outstanding capital stock of) any
publicly traded company that may compete with Borrower.
5.17 INSURANCE
Borrower has in full force and effect such insurance policies
as are customary in its industry and as may be required pursuant to Section 6.5
hereof. All such insurance policies are listed and described on Schedule 5.17.
5.18 NAMES; LOCATION OF OFFICES, RECORDS AND COLLATERAL
During the preceding five years, Borrower has not conducted
business under or used any name (whether corporate, partnership or assumed)
other than as shown on Schedule 5.18A. Borrower is the sole owner of all of its
names listed on Schedule 5.18A, 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. Borrower
maintains its places of business and chief executive offices only at the
locations set forth on Schedule 5.18B, and all Accounts of Borrower arise,
originate and are located, and all of the Collateral and all books and records
in connection therewith or in any way relating thereto or evidencing the
Collateral are located and shall be only, in and at such locations. All of the
Collateral is located only in the continental United States and, with respect to
RY Puerto Rico only, Puerto Rico.
5.19 NON-SUBORDINATION
The Obligations are not subordinated in any way to any other
obligations of Borrower or to the rights of any other Person.
5.20 ACCOUNTS
In determining which Accounts are Eligible Receivables, Agent
may rely on all statements and representations made by Borrower with respect to
any Account. Unless otherwise indicated in writing to Agent, each Account of
Borrower (a) is genuine and in all respects what is purports to be and is not
evidenced by a judgment, (b) arises out of a completed, bona fide sale and
delivery of goods or rendering of Services by Borrower in the ordinary course of
business and in accordance with the terms and conditions of all purchase orders,
contracts, certifications, participations, certificates of need and other
documents relating thereto or forming a part of the contract between Borrower
and the Account Debtor, (c) is for a liquidated amount maturing as stated in a
claim or invoice covering such sale of goods or rendering of Services, a copy of
which has been furnished or is available to Agent, (d) together with Agent's
security interest therein, is not and will not be in the future (by voluntary
act or omission by Borrower), subject to any offset, lien, deduction, defense,
dispute, counterclaim or other adverse condition, is absolutely owing to
Borrower and is not contingent in any respect or for any reason (except Accounts
owed or owing by Medicaid/Medicare Account Debtors that may be subject to offset
or deduction under applicable law), (e) there are no facts, events or
occurrences which in any way impair the validity or enforceability thereof or
tend to reduce the amount payable thereunder
26
from the face amount of the claim or invoice and statements delivered to Agent
with respect thereto, (f) to the best of Borrower's knowledge, (i) the Account
Debtor thereunder had the capacity to contract at the time any contract or other
document giving rise thereto was executed and (ii) such Account Debtor is
solvent, (g) to the best of Borrower's knowledge, there are no proceedings or
actions which are threatened or pending against any Account Debtor thereunder
which might result in any material adverse change in such Account Debtor's
financial condition or the collectability thereof, (h) has been billed and
forwarded to the Account Debtor for payment in accordance with applicable laws
and is in compliance and conformance with any requisite procedures, requirements
and regulations governing payment by such Account Debtor with respect to such
Account, and, if due from a Medicaid/Medicare Account Debtor, is properly
payable directly to Borrower, (i) Borrower has obtained and currently has all
Permits necessary in the generation thereof, and (j) Borrower has disclosed to
Agent on each Borrowing Certificate the amount of all Accounts of Borrower for
which Medicare is the Account Debtor and for which payment has been denied and
subsequently appealed pursuant to the procedure described in the definition of
Eligible Receivables hereof, and Borrower is pursuing all available appeals in
respect of such Accounts
5.21 HEALTHCARE
Without limiting or being limited by any other provision of
any Loan Document, Borrower has timely filed or caused to be filed all cost and
other reports of every kind required by law, agreement or otherwise. Except
consistent with past practices, there are no claims, actions or appeals pending
(and Borrower has not filed any claims or reports which could reasonably result
in any such claims, actions or appeals) before any commission, board or agency
or other Governmental Authority, including, without limitation, any intermediary
or carrier, the Provider Reimbursement Review Board or the Administrator of the
Health Care Financing Administration, with respect to any state or federal
Medicare or Medicaid cost reports or claims filed by Borrower, or any
disallowance by any commission, board or agency or other Governmental Authority
in connection with any audit of such cost reports. No validation review or
program integrity review related to Borrower or the consummation of the
transactions contemplated herein or to the Collateral have been conducted by any
commission, board or agency or other Governmental Authority in connection with
the Medicare or Medicaid programs, and to the knowledge of Borrower, no such
reviews are scheduled, pending or threatened against or affecting any of the
providers, any of the Collateral or the consummation of the transactions
contemplated hereby.
5.22 SURVIVAL
Borrower makes the representations and warranties contained
herein with the knowledge and intention that Agent and Lenders are relying and
will rely thereon. All such representations and warranties will survive the
execution and delivery of this Agreement, the making of the Advances and the
funding of the Term Loan.
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VI. AFFIRMATIVE COVENANTS
Each Borrower, jointly and severally, covenants and agrees that, until
full performance and satisfaction, and indefeasible payment in full in cash, of
all the Obligations and termination of this Agreement:
6.1 FINANCIAL STATEMENTS, REPORTS AND OTHER INFORMATION
(a) Financial Reports. Borrower shall furnish to Agent
and each Lender (i) as soon as available and in any event within 90 calendar
days after the end of each fiscal year of Borrower, audited annual consolidated
and consolidating financial statements of Borrower, including the notes thereto,
consisting of a consolidated and consolidating balance sheet at the end of such
completed fiscal year and the related consolidated and consolidating statements
of income, retained earnings, cash flows and owners' equity for such completed
fiscal year, which financial statements shall be prepared and certified without
qualification by an independent certified public accounting firm satisfactory to
Agent and accompanied by related management letters, if available, and (ii) as
soon as available and in any event within 30 calendar days after the end of each
calendar month, unaudited consolidated and consolidating financial statements of
Borrower consisting of a balance sheet and statements of income, retained
earnings, cash flows and owners' equity as of the end of the immediately
preceding calendar month. All such financial statements shall be prepared in
accordance with GAAP consistently applied with prior periods. With each such
financial statement, Borrower shall also deliver a certificate of its chief
financial officer in the form of Exhibit B hereto (the "COMPLIANCE
CERTIFICATE"), stating that (A) such person has reviewed the relevant terms of
the Loan Documents and the condition of Borrower, (B) no Default or Event of
Default has occurred or is continuing, or, if any of the foregoing has occurred
or is continuing, specifying the nature and status and period of existence
thereof and the steps taken or proposed to be taken with respect thereto, (C)
Borrower is in compliance with all financial covenants attached as Annex I
hereto. Such certificate shall be accompanied by the calculations necessary to
show compliance with the financial covenants in a form satisfactory to the
Agent.
(b) Other Materials. Borrower shall furnish to Agent and
each Lender as soon as available, and in any event within 10 calendar days after
the preparation or issuance thereof or at such other time as set forth below:
(i) copies of such financial statements (other than those required to be
delivered pursuant to Section 6.1(a)) prepared by, for or on behalf of Borrower
and any other notes, reports and other materials related thereto, including,
without limitation, any pro forma financial statements, (ii) any reports,
returns, information, notices and other materials that Borrower shall send to
its stockholders, members, partners or other equity owners at any time, (iii)
all Medicare and Medicaid cost reports and other documents and materials filed
by Borrower and any other reports, materials or other information regarding or
otherwise relating to Medicaid or Medicare prepared by, for or on behalf of
Borrower, (iv) any other reports, materials or other information regarding or
otherwise relating to Medicaid or Medicare prepared by, for, or on behalf of,
Borrower or any of its Subsidiaries, including, without limitation, (A) copies
of licenses and permits required by any applicable federal, state, foreign or
local law, statute, ordinance or regulation or Governmental Authority for the
operation of its business, (B) Medicare and Medicaid provider numbers and
agreements, (C) state surveys pertaining to any healthcare facility operated or
owned or leased by Borrower or any of its Affiliates (other than Affiliates who
are holders of the Series A Convertible Preferred Stock of PSI) or Subsidiaries,
and (D) participating agreements relating to medical plans, (v) within 15
calendar days after the
28
end of each calendar month for such month, (A) a report of the status of all
payments, denials and appeals of all Medicare and/or Medicaid Accounts, (B) a
sales and collection report and accounts receivable and accounts payable aging
schedule, including a report of sales, credits issued and collections received,
all such reports showing a reconciliation to the amounts reported in the monthly
financial statements, and (C) a report of census and occupancy percentage by
payor type, (vi) promptly upon receipt thereof, copies of any reports submitted
to Borrower by its independent accountants in connection with any interim audit
of the books of such Person or any of its affiliates and copies of each
management control letter provided by such independent accountants, (vii) by the
second Business Day of each month (and any other time reasonably requested by
Agent), a detailed aging and categorizing of Borrower's accounts receivable, and
(viii) such additional information, documents, statements, reports and other
materials as Agent may reasonably request from a credit or security perspective
or otherwise from time to time.
(c) Notices. Borrower shall promptly, and in any event
within two calendar days after Borrower or any authorized officer of Borrower
obtains knowledge thereof, notify Agent in writing of (i) any pending or
threatened litigation, suit, investigation, arbitration, dispute resolution
proceeding or administrative proceeding brought or initiated by Borrower or
otherwise affecting or involving or relating to Borrower or any of its property
or assets to the extent (A) the amount in controversy exceeds $50,000, or (B) to
the extent any of the foregoing seeks injunctive relief, (ii) any Default or
Event of Default, which notice shall specify the nature and status thereof, the
period of existence thereof and what action is proposed to be taken with respect
thereto, (iii) any other development, event, fact, circumstance or condition
that could reasonably be expected to have a Material Adverse Effect, in each
case describing the nature and status thereof and the action proposed to be
taken with respect thereto, (iv) any notice received by Borrower from any payor
of a claim, suit or other action such payor has, claims or has filed against
Borrower, (v) any matter(s) affecting the value, enforceability or
collectability of any of the Collateral, including, without limitation, claims
or disputes in the amount of $50,000 or more, singly or in the aggregate, in
existence at any one time, (vi) any notice given by Borrower to any other lender
of Borrower and shall furnish to Agent a copy of such notice, (vii) receipt of
any notice or request from any Governmental Authority or governmental payor
regarding any liability or claim of liability, (viii) receipt of any notice by
Borrower regarding termination of any manager of any facility owed, operated or
leased by Borrower, (ix) if any Account becomes evidenced or secured by an
instrument or chattel paper, and/or (x) any default under the High Yield
Documents.
(d) Consents. Borrower shall obtain and deliver from time
to time all required consents, approvals and agreements from such third parties
as Agent shall determine are necessary or desirable in its sole discretion and
that are satisfactory to Agent with respect to (i) the Loan Documents and the
transactions contemplated thereby, (ii) claims against Borrower, or the
Collateral, and/or (iii) any agreements, consents, documents or instruments to
which Borrower is a party or by which any properties or assets of Borrower or
any of the Collateral is or are bound or subject, including, without limitation,
Landlord Waivers and Consents with respect to leases.
(e) Operating Budget. Borrower shall furnish to Agent and
each Lender on or prior to the Closing Date and for each fiscal year of Borrower
thereafter not less than 30 calendar days prior to the commencement of such
fiscal year, consolidated and consolidating month by
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month projected operating budgets, annual projections, profit and loss
statements, balance sheets and cash flow reports of and for Borrower for such
upcoming fiscal year (including an income statement for each month and a balance
sheet as at the end of the last month in each fiscal quarter), in each case
prepared in accordance with GAAP consistently applied with prior periods.
6.2 PAYMENT OF OBLIGATIONS
Borrower shall make full and timely indefeasible payment in
cash of the principal of and interest on the Loans, Advances and all other
Obligations. Simultaneously upon any prepayment of the Revolving Loan and
termination of the Revolving Facility, Borrower shall make full indefeasible
payment in cash of the principal of and interest on the Term Loan and all other
Obligations relating to the Term Loan.
6.3 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE AND ASSETS
Borrower shall (a) conduct its business in accordance with
good business practices customary to the industry, (b) engage principally in the
same or similar lines of business substantially as heretofore conducted, (c)
collect its Accounts in the ordinary course of business, (d) maintain all of its
material properties, assets and equipment used or useful in its business in good
repair, working order and condition (normal wear and tear excepted and except as
may be disposed of in the ordinary course of business and in accordance with the
terms of the Loan Documents), (e) from time to time to make all necessary or
desirable repairs, renewals and replacements thereof, (f) maintain and keep in
full force and effect its existence and all material Permits and qualifications
to do business and good standing in each jurisdiction in which the ownership or
lease of property or the nature of its business makes such Permits or
qualification necessary and in which failure to maintain such Permits or
qualification could reasonably be likely to have a Material Adverse Effect, and
(g) remain in good standing and maintain operations in all jurisdictions in
which Borrower is currently located.
6.4 COMPLIANCE WITH LEGAL AND OTHER OBLIGATIONS
Borrower shall (a) comply with all laws, statutes, rules,
regulations, ordinances and tariffs of all Governmental Authorities applicable
to it or its business, assets or operations, (b) pay all taxes, assessments,
fees, governmental charges, claims for labor, supplies, rent and all other
obligations or liabilities of any kind, except liabilities being contested in
good faith and against which adequate reserves have been established, (c)
perform in accordance with its terms each contract, agreement or other
arrangement to which it is a party or by which it or any of the Collateral is
bound, except where the failure to comply, pay or perform could not reasonably
be expected to have a Material Adverse Effect, (d) maintain and comply with all
Permits necessary to conduct its business and comply with any new or additional
requirements that may be imposed on it or its business, and (e) properly file
all Medicaid and Medicare cost reports, including without limitation the filing
of all termination cost reports (if not otherwise filed by the applicable
sellers) when due.
6.5 INSURANCE
Borrower shall (a) keep all of its insurable properties and
assets adequately insured in all material respects against losses, damages and
hazards as are customarily insured
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against by businesses engaging in similar activities or owning similar assets or
properties and at least the minimum amount required by applicable law,
including, without limitation, medical malpractice and professional liability
insurance, as applicable; (b) maintain general public liability insurance at all
times against liability on account of damage to persons and property having such
limits, deductibles, exclusions and co-insurance and other provisions as are
customary for a business engaged in activities similar to those of Borrower; and
(c) maintain insurance under all applicable workers' compensation laws; all of
the foregoing insurance policies to (i) be reasonably satisfactory in form and
substance to Agent, (ii) name Agent, for the benefit of itself and Lenders, as
loss payee and additional insured thereunder, and (iii) expressly provide that
they cannot be altered, amended, modified or canceled without 30 Business Days
prior written notice to Agent and that they inure to the benefit of Agent, for
the benefit of itself and the Lenders, notwithstanding any action or omission or
negligence of or by Borrower, or any insured thereunder.
6.6 TRUE BOOKS
Borrower shall (a) keep true, complete and accurate books of
record and account in accordance with commercially reasonable business practices
in which true and correct entries are made of all of its and their dealings and
transactions in all material respects; and (b) set up and maintain on its books
such reserves as may be required by GAAP with respect to doubtful accounts and
all taxes, assessments, charges, levies and claims and with respect to its
business, and include such reserves in its quarterly as well as year end
financial statements.
6.7 INSPECTION; PERIODIC AUDITS
Borrower shall permit the representatives of Agent and
Lenders, at the expense of Borrower, from time to time during normal business
hours upon reasonable notice, to (a) visit and inspect any of its offices or
properties or any other place where Collateral is located to inspect the
Collateral and/or to examine or audit all of its books of account, records,
reports and other papers, (b) make copies and extracts therefrom, and (c)
discuss its business, operations, prospects, properties, assets, liabilities,
condition and/or Accounts with its officers and independent public accountants
(and by this provision such officers and accountants are authorized to discuss
the foregoing).
6.8 FURTHER ASSURANCES; POST CLOSING
At Borrower's cost and expense, Borrower shall (a) within five
Business Days after Agent's demand, take such further actions, obtain such
consents and approvals and duly execute and deliver such further agreements,
assignments, instructions or documents as Agent may reasonably request with
respect to the purposes, terms and conditions of the Loan Documents and the
consummation of the transactions contemplated thereby, whether before, at or
after the performance and/or consummation of the transactions contemplated
hereby or the occurrence of a Default or Event of Default, (b) without limiting
and notwithstanding any other provision of any Loan Document, execute and
deliver, or cause to be executed and delivered, such agreements and documents,
and take or cause to be taken such actions, and otherwise perform, observe and
comply with such obligations, as are set forth on Schedule 6.8, and (c) upon the
exercise by Agent, any Lender or any of their affiliates of any power, right,
privilege or
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remedy pursuant to any Loan Document or under applicable law or at equity which
requires any consent, approval, registration, qualification or authorization of
any Governmental Authority, execute and deliver, or cause the execution and
delivery of, all applications, certificates, instruments and other documents
that may be so required for such consent, approval, registration, qualification
or authorization. Without limiting the foregoing, upon the exercise by Agent,
any Lender or any of their affiliates of any right or remedy under any Loan
Document which requires any consent, approval or registration with, consent,
qualification or authorization by any Person, Borrower shall execute and
deliver, or cause the execution and delivery of, all applications, certificates,
instruments and other documents that Agent, any Lender or such affiliate may be
required to obtain for such consent, approval, registration, qualification or
authorization.
6.9 PAYMENT OF INDEBTEDNESS
Except as otherwise prescribed in the Loan Documents, Borrower
shall pay, discharge or otherwise satisfy at or before maturity (subject to
applicable grace periods and, in the case of trade payables, to ordinary course
payment practices) all of its material obligations and liabilities, except when
the amount or validity thereof is being contested in good faith by appropriate
proceedings and such reserves as Agent may deem proper and necessary in its sole
discretion shall have been made.
6.10 LIEN RELEASES
If Liens other than Permitted Liens exist, Borrower
immediately shall take, execute and deliver all actions, documents and
instruments necessary to release and terminate such Liens.
6.11 USE OF PROCEEDS
Borrower shall use the proceeds from the Revolving Facility
and the Term Loan only for the purposes set forth in the recitals to this
Agreement.
6.12 COLLATERAL DOCUMENTS
On demand of Agent or any Lender, Borrower shall make
available to Agent or such Lender copies of any and all documents, instruments,
materials and other items that relate to, secure, evidence, give rise to or
generate or otherwise involve Accounts of such Person.
6.13 RIGHT OF FIRST REFUSAL
(a) If at any time Borrower receives from a third party
an offer, term sheet or commitment or makes a proposal (including without
limitation any application filed in connection with a HUD Financing) accepted by
any Person (each, an "OFFER") which provides for any type of debt financing to
or for Borrower, Borrower shall notify Agent and Lenders of the Offer in writing
(including all material terms of the Offer) and Agent and Lenders shall have 15
Business Days after Receipt of such notice (the "OPTION PERIOD") to agree to
provide similar debt financing in the place of such Person upon substantially
the same terms and conditions (or terms more favorable to such Borrower) as set
forth in the Offer. Agent shall notify Borrower in writing of Agent's and
Lenders' acceptance of the Offer pursuant hereto (the "ACCEPTANCE
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NOTICE"), in which case Borrower shall obtain such debt financing from Agent and
Lenders and shall not accept the Offer from such other Person. If no Acceptance
Notice has been Received from Agent within the Option Period, Borrower may
consummate the Offer with the other Person on the terms and conditions set forth
in the Offer (the "TRANSACTION"); provided, however, that none of foregoing or
any failure by Agent to issue an Acceptance Notice shall be construed as a
waiver of any of the terms, covenants or conditions of any of the Loan
Documents. If the Transaction is not consummated on the terms set forth in the
Offer or with the Person providing the Offer or during the 90 calendar day
period following the expiration of the Option Period, Borrower shall not be
permitted to consummate the Transaction without again complying with this
Section 6.13. The provisions of this Section 6.13 shall survive the payment in
full of the Obligations and termination of this Agreement for a period of six
months. For purposes of this Section 6.13, "Lender" shall include CapitalSource
and any of its parents, Subsidiaries or affiliates.
(b) If, at any time prior to and including the third
anniversary of the last day of the later of the Revolving Facility Term and the
Term Notes Term, Borrower applies for or otherwise seeks financing from any
Person under a program sponsored by the United States Department of Housing and
Urban Development (each application, a "HUD APPLICATION"), Borrower agrees that
CapitalSource Mortgage Finance LLC, an FHA-approved lender, shall have the
exclusive right to provide and arrange Borrower's financing obtained in
connection with such HUD Application.
6.14 TAXES AND OTHER CHARGES
All payments and reimbursements to Agent, for the benefit of
Lenders, made under any Loan Document shall be free and clear of and without
deduction for all taxes, levies, imposts, deductions, assessments, charges or
withholdings, and all liabilities with respect thereto of any nature whatsoever,
excluding taxes to the extent imposed on each Lender's net income. If Borrower
shall be required by law to deduct any such amounts from or in respect of any
sum payable under any Loan Document to Agent, for the benefit of Lenders, then
the sum payable to Agent, for the benefit of Lenders, shall be increased as may
be necessary so that, after making all required deductions, each Lender receives
an amount equal to the sum it would have received had no such deductions been
made. Notwithstanding any other provision of any Loan Document, if at any time
after the Closing (a) any change in any existing law, regulation, treaty or
directive or in the interpretation or application thereof, (b) any new law,
regulation, treaty or directive enacted or any interpretation or application
thereof, or (c) compliance by any Lender with any request or directive (whether
or not having the force of law) from any Governmental Authority: (i) subjects
such Lender to any tax, levy, impost, deduction, assessment, charge or
withholding of any kind whatsoever with respect to any Loan Document, or changes
the basis of taxation of payments to Agent, for the benefit of Lenders, of any
amount payable thereunder (except for net income taxes, or franchise taxes
imposed in lieu of net income taxes, imposed generally by federal, state or
local taxing authorities with respect to interest or commitment fees or other
fees payable hereunder or changes in the rate of tax on the overall net income
of each Lender), or (ii) imposes on Lenders any other condition or increased
cost in connection with the transactions contemplated thereby or participations
therein; and the result of any of the foregoing is to increase the cost to
Lenders of making or continuing any Loan hereunder or to reduce any amount
receivable hereunder, then, in any such case, Borrower shall promptly pay to
Agent, for
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the benefit of itself and the Lenders, any additional amounts necessary to
compensate each Lender, on an after-tax basis, for such additional cost or
reduced amount as determined by such Lender. If any Lender becomes entitled to
claim any additional amounts pursuant to this Section 6.14 it shall promptly
notify Borrower of the event by reason of which such Lender has become so
entitled, and each such notice of additional amounts payable pursuant to this
Section 6.14 submitted by such Lender to Borrower shall, absent manifest error,
be final, conclusive and binding for all purposes. Without limiting or being
limited by any other provision of any Loan Document, Borrower at all times shall
retain and use a Person acceptable to Agent to process, manage and pay its
payroll taxes and shall cause to be delivered to Agent and each Lender within
ten calendar days after the end of each calendar month a report of its payroll
taxes for the immediately preceding calendar month and evidence of payment
thereof.
6.15 PATIENT BILLS
Within three Business Days of discharge of a Patient, Borrower
will deliver a ▇▇▇▇ to the applicable payor(s) for Services rendered to such
Patient. For any Patient who qualifies for billing prior to discharge, Borrower
will deliver a ▇▇▇▇ to the applicable payor(s) for Services rendered to such
Patient, as frequently as allowed; provided, however, no such billing shall be
required more often than twice per month.
6.16 MODIFICATION OF SUBORDINATION AGREEMENTS
On or before the Closing Date, (a) Borrower shall amend and
restate the Subordination Agreement to reference this Agreement, (b) Borrower
shall cause the holder of such Subordinated Debt to otherwise revise such
Subordination Agreement to the satisfaction of Agent and (c) Borrower shall make
such other changes as Agent may request.
6.17 INTERNAL COST REPORTS; RESERVES
(a) Notwithstanding and in addition to Section 6.1 and
the other provisions of this Agreement and the Loan Documents, Borrower shall
prepare and furnish to Agent and Lenders when completed, but in no event more
than 15 calendar days after the end of each calendar quarter, a cost report for
the immediately preceding calendar quarter for Borrower (each individually and
collectively, "INTERNAL COST REPORT") setting forth for Borrower the precise
amount of cumulative cost-year to date accrued Medicare and Medicaid liability
for the Medicare and Medicaid cost-year in which such preceding quarter falls
based on and calculated as the difference between actual reported costs and the
interim reimbursement rate then being used for Medicare and Medicaid, as
applicable (such cumulative cost-year to date amounts being the "ACCRUED
LIABILITIES").
(b) At the expense of Borrower, Borrower agrees and
acknowledges that Agent shall have the right at any time within 90 Business Days
after the Closing and at such other times as Agent deems necessary (provided,
that any such audits other than the initial audit contemplated by this sentence
shall be at the expense of Borrower only if Agent determines as a result of and
based on any such audit that the methods or procedures used by Borrower in
preparing any of the Internal Cost Reports or the amounts or figures contained
in any such reports are incorrect or inaccurate in any material respect), during
normal business hours, to have
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an independent third party expert in reimbursement issues as chosen and
determined by Agent visit and inspect any of the offices or properties of
Borrower and any other place where Collateral is located or Accounts and
receivables are generated to audit the methods and procedures used by Borrower
in preparing the Internal Cost Reports and calculating the amounts and figures
contained in such reports and all of its books of account, records, reports and
other papers relating in any way thereto.
VII. NEGATIVE COVENANTS
Each Borrower, jointly and severally, covenants and agrees that, until
full performance and satisfaction, and indefeasible payment in full in cash, of
all the Obligations and termination of this Agreement:
7.1 FINANCIAL COVENANTS
Borrower shall not violate the financial covenants set forth
on Annex I to this Agreement, which is incorporated herein and made a part
hereof.
7.2 INDEBTEDNESS
Borrower shall not create, incur, assume or suffer to exist
any Indebtedness, except the following (collectively, "PERMITTED INDEBTEDNESS"):
(a) Indebtedness under the Loan Documents; (b) any Indebtedness set forth on
Schedule 7.2; provided, that any refinancing of the Indebtedness set forth on
Schedule 7.2 shall have the following terms: (i) the stated applicable
pre-default or post-default interest rate (or the margin thereon if based on a
variable rate) on such Indebtedness shall not be greater than the stated
applicable pre-default or post-default interest rate (or the margin thereon if
based on a variable rate) as in effect on the date hereof; (ii) the maximum
principal amount outstanding under such Indebtedness as so refinanced does not
exceed the maximum principal amount permitted to be outstanding on the date
hereof; and (iii) no advances under such Indebtedness may be made on or after
the date hereof; (c) Capitalized Lease Obligations incurred after the Closing
Date and Indebtedness incurred pursuant to purchase money Liens permitted by
Section 7.3(e); provided, that the aggregate amount thereof outstanding at any
time shall not exceed $250,000; (d) Indebtedness in connection with advances
made by a stockholder in order to cure any default of the financial covenants
set forth on Annex I; provided, however, that such Indebtedness shall be on an
unsecured basis, subordinated in right of repayment and remedies to all of the
Obligations and to all of Agent's and Lenders' rights and in form and substance
satisfactory to Agent; (e) accounts payable to trade creditors and current
operating expenses (other than for borrowed money) incurred in the ordinary
course of business and paid when due, unless the same are being contested in
good faith and by appropriate and lawful proceedings and such reserves, if any,
with respect thereto as are required by GAAP and deemed adequate by Borrower's
independent accountants shall have been reserved; (f) Indebtedness owing by any
Borrower to another Borrower; provided, that such Indebtedness shall be (i)
evidenced by a note, (ii) on an unsecured basis, subordinated in right of
repayment and remedies to all of the Obligations and to all of Agent's and
Lenders' rights and in form and substance satisfactory to Agent, and (iii)
pledged to Agent, for the benefit of itself and Lenders; (g) borrowings incurred
in the ordinary course of business and not exceeding $100,000 individually or in
the aggregate outstanding at any one time; (h) the Put Price Notes (as defined
35
in the Securities Purchase Agreement; and (i) the High Yield Indebtedness;
provided, however, that such Indebtedness shall be on an unsecured basis,
subordinated in right of repayment and remedies to all of the Obligations and to
all of Agent's and Lenders' rights and in form and substance satisfactory to
Agent. Borrower shall not make prepayments on any existing or future
Indebtedness to any Person other than to Agent, for the benefit of itself and
the Lenders, or to the extent specifically permitted by this Agreement or any
subsequent agreement between Borrower, Agent and Lenders.
7.3 LIENS
Borrower shall not create, incur, assume or suffer to exist
any Lien upon, in or against, or pledge of, any of the Collateral or any of its
properties or assets or any of its shares, securities or other equity or
ownership or partnership interests, whether now owned or hereafter acquired,
except the following (collectively, "PERMITTED LIENS"): (a) Liens under the Loan
Documents or otherwise arising in favor of Agent, for the benefit of itself and
Lenders, (b) Liens imposed by law for taxes, assessments or charges of any
Governmental Authority for claims not yet due or which are being contested in
good faith by appropriate proceedings and with respect to which adequate
reserves or other appropriate provisions are being maintained by Borrower in
accordance with GAAP to the satisfaction of Agent in its sole discretion, (c)
(i) statutory Liens of landlords (provided that any such landlord has executed a
Landlord Waiver and Consent in form and substance satisfactory to Agent) and of
carriers, warehousemen, mechanics and materialmen, and (ii) other Liens imposed
by law or that arise by operation of law in the ordinary course of business from
the date of creation thereof, in each case only for amounts not yet due or which
are being contested in good faith by appropriate proceedings and with respect to
which adequate reserves or other appropriate provisions are being maintained by
Borrower in accordance with GAAP to the satisfaction of Agent in its sole
discretion, (d) Liens (i) incurred or deposits made in the ordinary course of
business (including, without limitation, surety bonds and appeal bonds) in
connection with workers' compensation, unemployment insurance and other types of
social security benefits or to secure the performance of tenders, bids, leases,
contracts (other than for the repayment of Indebtedness), statutory obligations
and other similar obligations, or (ii) arising as a result of progress payments
under government contracts, (e) purchase money Liens (i) securing Indebtedness
permitted under Section 7.2(c), or (ii) in connection with the purchase by
Borrower of equipment in the normal course of business; provided, that such
payables shall not exceed any limits on Indebtedness provided for herein and
shall otherwise be Permitted Indebtedness hereunder, (f) Liens necessary and
desirable for the operation of Borrower's business; provided, that Agent has
consented to such Liens in writing before their creation and existence and the
priority of such Liens and the debt secured thereby are both subject and
subordinate in all respects to the Liens securing the Collateral and to the
Obligations and all of the rights and remedies of Agent and each Lender, all in
form and substance satisfactory to Agent in its sole discretion, (g) Liens shown
on the title policy or survey covering the Real Property and approved by Agent
prior to the date hereof, (h) promptly after the rendition thereof, Liens
imposed by any judgment rendered against Borrower or any of its Subsidiaries in
excess of (A) $250,000, if such amount is covered by insurance or (B) $100,000,
if such amount is not covered by insurance, and (i) Liens disclosed on Schedule
7.3.
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7.4 INVESTMENTS; NEW FACILITIES OR COLLATERAL; SUBSIDIARIES
Borrower, directly or indirectly, shall not (a) purchase, own,
hold, invest in or otherwise acquire obligations or stock or securities of, or
any other interest in, or all or substantially all of the assets of, any Person
or any joint venture, except for those entities listed on Schedule 5.3;
provided, however, Borrower may consummate the Ramsay Acquisition, or (b) make
or permit to exist any loans, advances or guarantees to or for the benefit of
any Person or assume, guarantee, endorse, contingently agree to purchase or
otherwise become liable for or upon or incur any obligation of any Person other
than those created by the Loan Documents and Permitted Indebtedness, and other
than (i) trade credit extended in the ordinary course of business, (ii) advances
for business travel and similar temporary advances made in the ordinary course
of business to officers, directors and employees, and (iii) the endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business; provided, however, Borrower may consummate the
Ramsay Acquisition. Borrower, directly or indirectly, shall not purchase, own,
operate, hold, invest in or otherwise acquire any facility, property or assets
or any Collateral that is not located at the locations set forth on Schedule
5.18B, unless Borrower shall provide to Agent at least 30 Business Days prior
written notice. Notwithstanding anything in this Section 7.4 to the contrary,
Borrower may invest in Permitted Investments at any time. Borrower shall have no
Subsidiaries other than Borrowers hereunder, RY Puerto Rico, HUD Financing
Subsidiaries and PSI Surety.
7.5 DIVIDENDS; REDEMPTIONS
Borrower shall not (a) declare, pay or make any dividend or
distribution on any shares of capital stock or other securities or interests
(other than (i) dividends or distributions payable in its stock, or split-ups or
reclassifications of its stock, and (ii) dividends and distributions payable to
(A) PSI, and (B) wholly-owned Subsidiaries of PSI which are Borrowers), (b)
apply any of its funds, property or assets to the acquisition, redemption or
other retirement of any capital stock or other securities or interests or of any
options to purchase or acquire any of the foregoing (provided, however, that
Borrower may redeem its capital stock from terminated employees pursuant to, but
only to the extent required under, the terms of the related employment
agreements as long as no Default or Event of Default has occurred and is
continuing or would be caused by or result therefrom), (c) otherwise make any
payments or Distributions to any stockholder, member, partner or other equity
owner in such Person's capacity as such, or (d) make any payment of any
management, service or related or similar fee to any Person or with respect to
any facility owned, operated or leased by Borrower; provided, that nothing
contained in this Section 7.5 shall prevent Borrower from making any payments
and/or consummating any transactions permitted pursuant to the Subordination
Agreement with the 1818 Mezzanine Fund.
7.6 TRANSACTIONS WITH AFFILIATES
Borrower shall not enter into or consummate any transaction of any kind with any
of its affiliates or any Guarantor or any of their respective affiliates other
than: (a) salary, bonus, employee stock option and other compensation, and
employment and standard indemnification arrangements with directors or officers
in the ordinary course of business; provided, that no payment of any bonus shall
be permitted if a Default or Event of Default has occurred and remains in effect
or would be
37
caused by or result from such payment, (b) distributions and dividends permitted
pursuant to Section 7.5, (c) transactions on overall terms at least as favorable
to Borrower as would be the case in an arm's-length transaction between
unrelated parties of equal bargaining power, (d) transactions with Agent or
Lenders or any affiliate of Agent or Lenders, (e) payments to any Borrower, (f)
payments to any HUD Financing Subsidiary to pay obligations on a non-accelerated
basis under a HUD Financing which has been approved by Agent, (g) payments to
PSI Surety in the ordinary course of business pursuant to agreements entered
into on arm's length terms which have been disclosed to Agent in writing and
approved by Agent, (h) payments permitted under and pursuant to written
agreements entered into by and between Borrower and one or more of its
affiliates that both (i) reflect and constitute transactions on overall terms at
least as favorable to Borrower as would be the case in an arm's-length
transaction between unrelated parties of equal bargaining power, and (ii) are
subject to such terms and conditions as determined by Agent in its sole
discretion; provided, that notwithstanding the foregoing clauses (i) and (ii) of
this clause (h), Borrower shall not (A) enter into or consummate any transaction
or agreement pursuant to which it becomes a party to any mortgage, note,
indenture or guarantee evidencing any Indebtedness of any of its affiliates or
otherwise to become responsible or liable, as a guarantor, surety or otherwise,
pursuant to any agreement for any Indebtedness of any such affiliate, or (B)
make any payment to any of its affiliates in excess of $10,000 without the prior
written consent of Agent (other than (i) to portfolio companies of the
institutional owners of PSI so long as such payment otherwise complies with
clause (h)(i) [it being understood that clause (ii) shall not apply to such
transactions with portfolio companies satisfying clause (i)], or (ii) pursuant
to the High Yield Documents), (i) transactions pursuant to the Stock Purchase
Agreement dated as of January 6, 2003 between PSI and the purchasers thereunder
(the "Series A Purchasers") and the Registration Rights Agreement dated as of
January 6, 2003, between PSI and the Series A Purchasers, in each case otherwise
complying with this Agreement, and (j) payments and/or transactions permitted
pursuant to the Subordination Agreement with the 1818 Mezzanine Fund.
7.7 CHARTER DOCUMENTS; FISCAL YEAR; DISSOLUTION; USE OF PROCEEDS
Borrower shall not (a) amend, modify, restate or change its
certificate of incorporation or formation or bylaws or similar charter documents
in a manner that would be adverse to Agent or any Lender, (b) change its fiscal
year unless Borrower demonstrates to Agent's satisfaction compliance with the
covenants contained herein for both the fiscal year in effect prior to any
change and the new fiscal year period by delivery to Agent and each Lender of
appropriate interim and annual pro forma, historical and current compliance
certificates for such periods and such other information as Agent may reasonably
request, (c) amend, alter or suspend or terminate or make provisional in any
material way, any Permit without the prior written consent of Agent, which
consent shall not be unreasonably withheld, (d) wind up, liquidate or dissolve
(voluntarily or involuntarily) or commence or suffer any proceedings seeking or
that would result in any of the foregoing, or (e) use any proceeds of any Loans
for "purchasing" or "carrying" "margin stock" as defined in Regulations T, U or
X of the Board of Governors of the Federal Reserve System.
7.8 TRUTH OF STATEMENTS
Borrower shall not furnish to Agent or any Lender any
certificate or other document that contains any untrue statement of a material
fact or that omits to state a material
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fact necessary to make it not misleading in light of the circumstances under
which it was furnished.
7.9 PAYMENT ON SUBORDINATED DEBT
Borrower shall not (a) make any prepayment of any part or all
of any Subordinated Debt, (b) defease, repurchase, redeem or retire any
instrument evidencing any such Subordinated Debt prior to maturity, or (c) enter
into any agreement (oral or written) which could in any way be construed to
amend, modify, alter or terminate any one or more instruments or agreements
evidencing or relating to any Subordinated Debt; provided, however, that
Borrower may make any required payments on any Subordinated Debt in accordance
with the provisions of the note evidencing such Subordinated Debt, or if more
restrictive, the provisions of any Subordination Agreement, each as in effect on
the date hereof. Notwithstanding the foregoing, Borrower shall not make any (i)
payments on any Subordinated Debt if a Default or Event of Default shall have
occurred and be continuing or would occur as a result of any payment on such
Subordinated Debt (unless, with respect to the 1818 Mezzanine Fund Subordinated
Indebtedness, such payment is permitted pursuant to the Subordination Agreement
with the 1818 Mezzanine Fund), or (ii) principal payments on the High Yield
Indebtedness.
7.10 AMENDMENT OF THE HIGH YIELD DOCUMENTS
Borrower shall not, without the prior written consent of
Agent, agree to any amendment, modification or supplement to the High Yield
Documents the effect of which is to (a) increase the maximum principal amount of
the High Yield Indebtedness or rate of interest on any of the High Yield
Indebtedness, (b) change the dates upon which payments of principal or interest
on the High Yield Indebtedness are due, (c) change or add any event of default
or any covenant with respect to the High Yield Indebtedness, (d) change any
redemption or prepayment provisions of the High Yield Indebtedness, (e) alter
the subordination provisions with respect to the High Yield Indebtedness,
including, without limitation, subordinating the High Yield Indebtedness to any
other indebtedness, (f) take any liens or security interests in any assets of
Borrower or any guarantor as security for the High Yield Indebtedness or (g)
change or amend any other term of the High Yield Documents if such change or
amendment would result in an Event of Default, increase the obligations of
Borrower or any guarantor under the High Yield Indebtedness or confer additional
material rights on any other holder of the High Yield Indebtedness in a manner
adverse to Borrower, any such guarantor or Agent. Borrower shall not designate
any indebtedness other than the Obligations as "Designated Senior Debt" (as
defined in the High Yield Documents).
7.11 NON-BORROWERS
Borrower shall not make any investment in or loans to or any
asset transfers to PSI Surety or the HUD Financing Subsidiaries (other than
ordinary course of business transactions entered into on arm's length terms
which have been disclosed to Agent in writing and approved by Agent). Borrower
shall cause PSI Surety and the HUD Financing Subsidiaries to not make any
Distribution other than (a) to a Borrower, and (b) ordinary course of business
transactions entered into on arm's length terms which have been disclosed to
Agent in writing
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and approved by Agent. No HUD Financing Subsidiary may own any material assets,
unless such HUD Financing Subsidiary has completed a HUD Financing.
VIII. EVENTS OF DEFAULT
The occurrence of any one or more of the following shall constitute an
"Event of Default":
(a) Borrower shall fail to pay any amount on the
Obligations or provided for in any Loan Document when due (whether on any
payment date, at maturity, by reason of acceleration, by notice of intention to
prepay, by required prepayment or otherwise); provided, that, if Borrower shall
fail to pay any amount on the Obligations when due, there shall be a one day
grace period after Receipt by Borrower of written notice from Agent of such
nonpayment;
(b) any representation, statement or warranty made or
deemed made by Borrower or any Guarantor in any Loan Document or in any other
certificate, document, report or opinion delivered in conjunction with any Loan
Document or in any other agreement, contract, document or instrument between any
Borrower or Guarantor and Agent or any Lender or affiliate of Agent or any
Lender to which it is a party, shall not be true and correct in all material
respects or shall have been false or misleading in any material respect on the
date when made or deemed to have been made (except to the extent already
qualified by materiality, in which case it shall be true and correct in all
respects and shall not be false or misleading in any respect);
(c) Borrower or any Guarantor or other party thereto,
other than Agent or any Lender, shall be in violation, breach or default of, or
shall fail to perform, observe or comply with any covenant, obligation or
agreement set forth in, any Loan Document and such violation, breach, default or
failure shall not be cured within the applicable period set forth in the
applicable Loan Document; provided, that, with respect to the affirmative
covenants set forth in Article VI (other than Sections 6.2, 6.3(f), 6.9 and 6.11
for which there shall be no cure period, and other than Sections 6.1 and
6.3(a)-(e) and (g) for which there shall be a 15 calendar day cure period),
there shall be a 30 calendar day cure period commencing from the earlier of (i)
Receipt by such Person of written notice of such breach, default, violation or
failure, and (ii) the time at which such Person or any authorized officer
thereof knew or became aware, or should have known or been aware, of such
failure, violation, breach or default;
(d) (i) any of the Loan Documents ceases to be in full
force and effect, or (ii) any Lien created thereunder ceases to constitute a
valid perfected first priority Lien on the Collateral in accordance with the
terms thereof, or Agent, for the benefit of itself and Lenders, ceases to have a
valid perfected first priority security interest in any of the Collateral or any
securities pledged to Agent, for the benefit of itself and Lenders, pursuant to
the Security Documents;
(e) one or more judgments or decrees is rendered against
any Borrower or Guarantor in an amount in excess of (i) $250,000, if such amount
is covered by insurance or (ii) $100,000, if such amount is not covered by
insurance, which is/are not satisfied, stayed, vacated or discharged of record
within 30 calendar days of being rendered;
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(f) (i) any default occurs, which is not cured or waived,
(x) in the payment of any amount with respect to any Indebtedness (other than
the Obligations) of any Borrower or Guarantor in excess of $100,000, (y) in the
performance, observance or fulfillment of any provision contained in any
agreement, contract, document or instrument to which any Borrower or Guarantor
is a party or to which any of their properties or assets are subject or bound
under or pursuant to which any Indebtedness was issued, created, assumed,
guaranteed or secured and such default continues for more than any applicable
grace period or permits the holder of any Indebtedness, in excess of $100,000,
to accelerate the maturity thereof, or (z) in the performance, observance or
fulfillment of any provision contained in any agreement, contract, document or
instrument between any Borrower or Guarantor and Agent or any Lender or
affiliate of Agent or any Lender (other than the Loan Documents), or (ii) any
Indebtedness of any Borrower or Guarantor in excess of $100,000 is declared to
be due and payable or is required to be prepaid (other than by a regularly
scheduled payment) prior to the stated maturity thereof, or any obligation of
such Person for the payment of Indebtedness (other than the Obligations) is not
paid when due or within any applicable grace period, or any such obligation
becomes or is declared to be due and payable before the expressed maturity
thereof, or there occurs 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;
(g) any Borrower or Guarantor shall (i) be unable to pay
its debts generally as they become due, (ii) file a petition under any
insolvency statute, (iii) make a general assignment for the benefit of its
creditors, (iv) commence a proceeding for the appointment of a receiver,
trustee, liquidator or conservator of itself or of the whole or any substantial
part of its property, or (v) file a petition seeking reorganization or
liquidation or similar relief under any Debtor Relief Law or any other
applicable law or statute;
(h) (i) a court of competent jurisdiction shall (A) enter
an order, judgment or decree appointing a custodian, receiver, trustee,
liquidator or conservator of any Borrower or Guarantor or the whole or any
substantial part of any such Person's properties, which shall continue unstayed
and in effect for a period of 60 calendar days, (B) shall approve a petition
filed against any Borrower or Guarantor seeking reorganization, liquidation or
similar relief under the any Debtor Relief Law or any other applicable law or
statute, which is not dismissed within 60 calendar days or, (C) under the
provisions of any Debtor Relief Law or other applicable law or statute, assume
custody or control of any Borrower or Guarantor or of the whole or any
substantial part of any such Person's properties, which is not irrevocably
relinquished within 60 calendar days, or (ii) there is commenced against any
Borrower or Guarantor any proceeding or petition seeking reorganization,
liquidation or similar relief under any Debtor Relief Law or any other
applicable law or statute, which (A) is not unconditionally dismissed within 60
calendar days after the date of commencement, or (B) is with respect to which
such Borrower or Guarantor takes any action to indicate its approval of or
consent to;
(i) (i) any Change of Control occurs or any agreement or
commitment to cause or that may result in any such Change of Control is entered
into, (ii) any Material Adverse Effect, Material Adverse Change occurs, or is
reasonably expected to occur, (iii) any Liability Event occurs or is reasonably
expected to occur, which results or is reasonably expected to result in a
liability of Borrower in excess of $100,000, or (iv) any Borrower or Guarantor
ceases any portion of its business operations as currently conducted;
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(j) Agent or any Lender receives any indication or
evidence that any Borrower or Guarantor may have directly or indirectly been
engaged in any type of activity which, in Agent's judgment, might result in
forfeiture of any property to any Governmental Authority which shall have
continued unremedied for a period of ten calendar days after written notice from
Agent;
(k) an Event of Default occurs under any other Loan
Document;
(l) uninsured damage to, or loss, theft or destruction
of, any portion of the Collateral occurs that exceeds $100,000 in the aggregate;
(m) any Borrower or Guarantor or any of their respective
directors or senior officers is criminally indicted or convicted under any law
that could lead to a forfeiture of any Collateral;
(n) the issuance of any process for levy, attachment or
garnishment or execution upon or prior to any judgment against any Borrower or
Guarantor or any of their property or assets; or
(o) any Borrower or Guarantor does, or enters into or
becomes a party to any agreement or commitment to do, or cause to be done, any
of the things described in this Article VIII or otherwise prohibited by any Loan
Document (subject to any cure periods set forth therein);
then, and in any such event, notwithstanding any other provision of any Loan
Document, Agent may (and at the request of Requisite Lenders, shall), by notice
to Borrower (i) terminate its obligations to make Loans hereunder, whereupon the
same shall immediately terminate, (ii) declare all or any of the Notes, all
interest thereon and all other Obligations to be due and payable immediately
(except in the case of an Event of Default under Section 8(c), (g), (h) or
(i)(iii), in which event all of the foregoing shall automatically and without
further act by Agent or any Lender be due and payable; provided, that, with
respect to non-material breaches or violations that constitute Events of Default
under clause (ii) of Section 8(c), there shall be a three Business Day cure
period commencing from the earlier of (A) Receipt by the applicable Person of
written notice of such breach or violation or of any event, fact or circumstance
constituting or resulting in any of the foregoing, and (B) the time at which
such Person or any authorized officer thereof knew or became aware, or should
have known or been aware, of such breach or violation and resulting Event of
Default or of any event, fact or circumstance constituting or resulting in any
of the foregoing), in each case without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by Borrower, and
(iii) prohibit any action permitted to be taken under Article VII hereof.
IX. RIGHTS AND REMEDIES AFTER DEFAULT
9.1 RIGHTS AND REMEDIES
(a) In addition to the acceleration provisions set forth
in Article VIII above, upon the occurrence and continuation of an Event of
Default, Agent shall have the right to (and at the request of Requisite Lenders,
shall) exercise any and all rights, options and remedies
42
provided for in any Loan Document, under the UCC or at law or in equity,
including, without limitation, the right to (i) apply any property of any
Borrower held by Agent, for the benefit of Lenders, to reduce the Obligations,
(ii) foreclose the Liens created under the Security Documents, (iii) realize
upon, take possession of and/or sell any Collateral or securities pledged (other
than Collateral consisting of Accounts owed or owing by Medicaid/Medicare
Account Debtors absent a court order or compliance with applicable law) with or
without judicial process, (iv) exercise all rights and powers with respect to
the Collateral as any Borrower as applicable, might exercise (other than with
respect to Collateral consisting of Accounts owed or owing by Medicaid/Medicare
Account Debtors absent a court order or compliance with applicable law), (v)
collect and send notices regarding the Collateral (other than with respect to
Collateral consisting of Accounts owed or owing by Medicaid/Medicare Account
Debtors absent a court order or compliance with applicable law), with or without
judicial process, (vi) by its own means or with judicial assistance, enter any
premises at which Collateral and/or pledged securities are located, or render
any of the foregoing unusable or dispose of the Collateral and/or pledged
securities on such premises without any liability for rent, storage, utilities,
or other sums, and no Borrower shall resist or interfere with such action, (vii)
at Borrower's expense, require that all or any part of the Collateral be
assembled and made available to Agent at any place designated by Agent, (viii)
reduce or otherwise change the Facility Cap and/or the Maximum Loan Amount,
and/or (ix) relinquish or abandon any Collateral or securities pledged or any
Lien thereon. Notwithstanding any provision of any Loan Document, Agent, in its
sole discretion, shall have the right, at any time that Borrower fails to do so,
and from time to time, without prior notice, to: (A) obtain insurance covering
any of the Collateral to the extent required hereunder; (B) pay for the
performance of any of Obligations; (C) discharge taxes or Liens on any of the
Collateral that are in violation of any Loan Document unless Borrower is in good
faith with due diligence by appropriate proceedings contesting those items; and
(D) pay for the maintenance and preservation of the Collateral. Such expenses
and advances shall be added to the Obligations until reimbursed to Agent and
shall be secured by the Collateral, and such payments by Agent and/or any Lender
shall not be construed as a waiver by Agent or Lenders of any Event of Default
or any other rights or remedies of Agent and Lenders.
(b) Borrower agrees that notice Received by it at least
ten calendar days before the time of any intended public sale, or the time after
which any private sale or other disposition of 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 Agent without prior notice to Borrower. At any sale or
disposition of Collateral or securities pledged, Agent may (to the extent
permitted by applicable law) purchase all or any part thereof free from any
right of redemption by any Borrower which right is hereby waived and released.
9.2 RIGHTS AND REMEDIES NOT EXCLUSIVE
Agent and Lenders shall have the right in their sole
discretion to determine which rights, Liens and/or remedies Agent or Lenders may
at any time pursue, relinquish, subordinate or modify, and such determination
will not in any way modify or affect any of Agent's or Lenders' rights, Liens or
remedies under any Loan Document, applicable law or equity. The enumeration of
any rights and remedies in any Loan Document is not intended to be exhaustive,
and all rights and remedies of Agent and Lenders described in any Loan Document
are
43
cumulative and are not alternative to or exclusive of any other rights or
remedies which Agent or Lenders otherwise may have. The partial or complete
exercise of any right or remedy shall not preclude any other further exercise of
such or any other right or remedy.
X. WAIVERS AND JUDICIAL PROCEEDINGS
10.1 WAIVERS
Except as expressly provided for herein, Borrower hereby
waives demand, presentment, protest, all defenses with respect to any and all
instruments and all notices and demands of any description, and the pleading of
any statute of limitations as a defense to any demand under any Loan Document.
Borrower hereby waives any and all defenses and counterclaims it may have or
could interpose in any action or procedure brought by Agent or Lenders to obtain
an order of court recognizing the assignment of, or Lien of Agent, for the
benefit of itself and Lenders, in and to, any Collateral, whether or not payable
by a Medicaid/Medicare Account Debtor.
10.2 DELAY; NO WAIVER OF DEFAULTS
No course of action or dealing, renewal, release or extension
of any provision of any Loan Document, or single or partial exercise of any such
provision, or delay, failure or omission on Agent's or Lenders' part in
enforcing any such provision shall affect the liability of any Borrower or
Guarantor or operate as a waiver of such provision or affect the liability of
any Borrower or Guarantor or preclude any other or further exercise of such
provision. No waiver by any party to any Loan Document of any one or more
defaults by any other party in the performance of any of the provisions of any
Loan Document shall operate or be construed as a waiver of any future default,
whether of a like or different nature, and each such waiver shall be limited
solely to the express terms and provisions of such waiver. Notwithstanding any
other provision of any Loan Document, by completing the Closing under this
Agreement and/or by making Advances or funding the Term Loan, neither Agent or
any Lender waives any breach of any representation or warranty of under any Loan
Document, and all of Agent's and Lenders' claims and rights resulting from any
such breach or misrepresentation are specifically reserved.
10.3 JURY WAIVER
EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT
TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION ARISING UNDER THE LOAN
DOCUMENTS OR IN ANY WAY CONNECTED WITH OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES WITH RESPECT TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
THEREBY, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE. EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND
THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES
TO THE WAIVER OF THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY.
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10.4 COOPERATION IN DISCOVERY AND LITIGATION
In any litigation, arbitration or other dispute resolution
proceeding relating to any Loan Document, Borrower waives any and all defenses,
objections and counterclaims it may have or could interpose with respect to (a)
any of its directors, officers, members, managers, partners, employees or agents
being deemed to be employees or managing agents of Borrower for purposes of all
applicable law or court rules regarding the production of witnesses by notice
for testimony (whether in a deposition, at trial or otherwise), (b) Agent's or
any Lender's counsel examining any such individuals as if under
cross-examination and using any discovery deposition of any of them as if it
were an evidence deposition, and/or (c) using all commercially reasonable
efforts to produce in any such dispute resolution proceeding, at the time and in
the manner requested by Agent, all Persons, documents (whether in tangible,
electronic or other form) and/or other things under its control and relating to
the dispute.
10.5 AMENDMENT AND WAIVERS
(a) Except as otherwise provided herein, no amendment,
modification, termination, or waiver of any provision of this Agreement or any
Loan Document, or consent to any departure by Borrower therefrom, shall in any
event be effective unless the same shall be in writing and signed by Requisite
Lenders and Agent; provided, that no amendment, modification, termination, or
waiver shall, unless in writing and signed by each Lender directly affected
thereby, do any of the following: (i) increase the Commitment of any Lender
(which action shall be deemed to directly affect all Lenders); (ii) reduce the
principal of, rate of interest on or fees payable with respect to any Loan;
(iii) extend the scheduled due date, reduce the amount due on any scheduled due
date, of any installment of principal, interest, or fees payable with respect to
any Loan, or waive, forgive, extend, defer or postpone the payment thereof; (iv)
change the percentage of the Commitments, of the aggregate unpaid principal
amount of the Loans, or of Lenders which shall be required for Lenders or any of
them to take any action hereunder (which action shall be deemed to directly
affect all Lenders); (v) except as otherwise permitted herein or in the other
Loan Documents, release any Guaranty or release any material portion of the
Collateral (which action shall be deemed to directly affect all Lenders)
(provided, that consent to such release shall not be required if such release is
made after and during the continuance of an Event of Default in connection with
the sale or disposition of the Collateral by Agent); (vi) amend, modify or waive
this Section 10.5 or the definitions of the terms used in this Section 10.5
insofar as the definitions affect the substance of this Section 10.5 (which
action shall be deemed to directly affect all Lenders); (vii) consent to the
assignment or other transfer by Borrower or any other party (other than any
Lender) to any Loan Documents of any of their rights and obligations under any
Loan Document; and, provided, further, that no amendment, modification,
termination or waiver affecting the rights or duties of Agent under any Loan
Document shall in any event be effective, unless in writing and signed by Agent,
in addition to Lenders required herein above to take such action.
(b) Each amendment, modification, termination or waiver
shall be effective only in the specific instance and for the specific purpose
for which it was given. No amendment, modification, termination or waiver shall
be required for Agent to take additional Collateral pursuant to any Loan
Document.
45
(c) Any amendment, modification, termination, waiver or
consent effected in accordance with this Section 10.5 shall be binding upon each
Lender, and, if signed by Borrower, on Borrower.
XI. EFFECTIVE DATE AND TERMINATION
11.1 EFFECTIVENESS AND TERMINATION
Subject to each Lender's right to terminate and cease making
Loans upon or after any Event of Default, this Agreement shall continue in full
force and effect until the full performance and indefeasible payment in cash of
all Obligations, unless terminated sooner as provided in this Section 11.1.
Borrower may terminate this Agreement at any time upon not less than 30 calendar
days prior written notice to Agent and upon full performance and indefeasible
payment in full in cash of all Obligations on or prior to such 30th calendar day
after Receipt by Agent of such written notice. All of the Obligations shall be
immediately due and payable upon any such termination on the termination date
stated in any notice of termination (the "TERMINATION DATE"); provided, that,
notwithstanding any other provision of any Loan Document, the Termination Date
shall be effective no earlier than the first Business Day of the month following
the expiration of the 30 calendar days prior written notice period.
Notwithstanding any other provision of any Loan Document, no termination of this
Agreement shall affect any Lender's rights or any of the Obligations existing as
of the effective date of such termination, and the provisions of the Loan
Documents shall continue to be fully operative until the Obligations have been
fully performed and indefeasibly paid in cash in full. The Liens granted to
Agent, for the benefit of itself and Lenders, under the Security Documents and
the financing statements filed pursuant thereto and the rights and powers of
Agent and Lenders shall continue in full force and effect notwithstanding the
fact that Borrower's borrowings hereunder may from time to time be in a zero or
credit position until all of the Obligations have been fully performed and
indefeasibly paid in full in cash. Notwithstanding anything contained in this
Agreement, Borrower may not voluntarily terminate the Revolving Facility during
the first six months of the Revolving Facility Term.
11.2 SURVIVAL
All obligations, covenants, agreements, representations,
warranties, waivers and indemnities made by Borrower in any Loan Document shall
survive the execution and delivery of the Loan Documents, the Closing, the
making of the Loans and any termination of this Agreement until all Obligations
are fully performed and indefeasibly paid in full in cash. The obligations and
provisions of Sections 3.5, 3.6, 3.7, 6.13, 10.1, 10.3, 12.3, 12.4, 12.7 and
Article XI shall survive termination of the Loan Documents and any payment, in
full or in part, of the Obligations.
11.3 AGENT
(a) Appointment. Each Lender hereby designates and
appoints CapitalSource as the administrative agent and the collateral agent,
under this Agreement and the other Loan Documents, and each Lender hereby
irrevocably authorizes CapitalSource, as the administrative agent and the
collateral agent for such Lender, to take such action or to refrain from taking
such
46
action on its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties as are expressly
delegated to the Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Agent agrees to act as such on the express conditions contained in this Section
11.3. The provisions of this Section 11.3 are solely for the benefit of Agent
and Lenders, and Borrower shall have no rights as a third-party beneficiary of
any of the provisions hereof. Agent may perform any of its duties hereunder, or
under the Loan Documents, by or through its agents or employees.
(b) Nature of Duties. In performing its functions and
duties under this Agreement, Agent is acting solely on behalf of Lenders and its
duties are administrative in nature and does not assume and shall not be deemed
to have assumed any obligation toward or relationship of agency or trust with or
for Lenders, other than as expressly set forth herein and in the other Loan
Documents, or Borrower. Agent shall have no duties, obligations or
responsibilities except those expressly set forth in this Agreement or in the
other Loan Documents. Agent shall not have by reason of this Agreement a
fiduciary relationship in respect of any Lender. Except for information,
notices, reports, and other documents expressly required to be furnished to
Lenders by the Agent hereunder or given to the Agent for the account of or with
copies for Lenders, each Lender shall make its own independent investigation of
the financial condition and affairs of Borrower in connection with the extension
of credit hereunder and shall make its own appraisal of the creditworthiness of
Borrower, and Agent shall have no duty or responsibility, either initially or on
a continuing basis, to provide any Lender with any credit or other information
with respect thereto, whether coming into its possession before the Closing Date
or at any time or times thereafter. If Agent seeks the consent or approval of
any Lenders to the taking or refraining from taking any action hereunder, then
Agent shall send prior written notice thereof to each Lender. Agent shall
promptly notify (in writing) each Lender any time that the applicable percentage
of Lenders have instructed Agent to act or refrain from acting pursuant hereto.
(c) Rights, Exculpation, Etc. Neither Agent nor any of
its officers, directors, managers, members, employees or agents shall be liable
to any Lender for any action lawfully taken or omitted by them hereunder or
under any of the other Loan Documents, or in connection herewith or therewith,
except that Agent shall be obligated on the terms set forth herein for
performance of its express duties and obligations hereunder, and except that
Agent shall be liable with respect to its or their own gross negligence or
willful misconduct. Agent shall not be liable for any apportionment or
distribution of payments made by it in good faith, and if any such apportionment
or distribution is subsequently determined to have been made in error, the sole
recourse of any Lender to whom payment was due but not made shall be to recover
from other Lenders any payment in excess of the amount to which they are
determined to be entitled (and such other Lenders hereby agree to return to such
Lender any such erroneous payments received by them). In performing its
functions and duties hereunder, Agent shall exercise the same care which it
would in dealing with loans for its own account. Agent shall not be responsible
to any Lender for any recitals, statements, representations or warranties made
by Borrower herein or for the execution, effectiveness, genuineness, validity,
enforceability, collectability, or sufficiency of this Agreement or any of the
other Loan Documents or the transactions contemplated thereby, or for the
financial condition of Borrower. Agent shall not be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions,
or conditions of
47
this Agreement or any of the Loan Documents or the financial condition of
Borrower, or the existence or possible existence of any Default or Event of
Default. Agent may at any time request instructions from Lenders with respect to
any actions or approvals which by the terms of this Agreement or of any of the
other Loan Documents Agent is permitted or required to take or to grant, and
Agent shall be absolutely entitled to refrain from taking any action or to
withhold any approval and shall not be under any liability whatsoever to any
Person for refraining from taking any action or withholding any approval under
any of the Loan Documents until it shall have received such instructions from
the applicable percentage of Lenders. Without limiting the foregoing, no Lender
shall have any right of action whatsoever against Agent as a result of Agent
acting or refraining from acting under this Agreement or any of the other Loan
Documents in accordance with the instructions of the applicable percentage of
Lenders and notwithstanding the instructions of Lenders, Agent shall have no
obligation to take any action if it, in good faith believes that such action
exposes Agent to any personal liability unless Agent receives an indemnification
reasonably satisfactory to it from Lenders with respect to such action.
(d) Reliance. Agent shall be entitled to rely upon any
written notices, statements, certificates, orders or other documents or any
telephone message or other communication (including any writing, telex, telecopy
or telegram) believed by it in good faith to be genuine and correct and to have
been signed, sent or made by the proper Person, and with respect to all matters
pertaining to this Agreement or any of the other Loan Documents and its duties
hereunder or thereunder, upon advice of legal counsel, independent accountants,
and other experts selected by Agent in its sole discretion.
(e) Indemnification. Each Lender, severally and not
jointly, agrees to reimburse and indemnify Agent (to the extent not reimbursed
by Borrower or the Guarantors), ratably according to their respective Pro Rata
Share in effect on the date on which indemnification is sought under this
subsection of the total outstanding obligations (or, if indemnification is
sought after the date upon which the Commitments shall have terminated and the
Loans shall have been paid in full, ratably in accordance with their Pro Rata
Share immediately prior to such date of the total outstanding obligations), from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses, advances, or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by, or asserted
against Agent in any way relating to or arising out of this Agreement or any of
the other Loan Documents or any action taken or omitted by Agent under this
Agreement or any of the other Loan Documents; provided, however, that no Lender
shall be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses, advances
or disbursements resulting from Agent's gross negligence or willful misconduct.
The obligations of Lenders under this Section 11.3(e) shall survive the payment
in full of the Obligations and the termination of this Agreement.
(f) CapitalSource Individually. With respect to the Loans
made by it, and the Notes issued to it, CapitalSource shall have and may
exercise the same rights and powers hereunder and under the other Loan Documents
and is subject to the same obligations and liabilities as and to the extent set
forth herein and the other Loan Documents as any other Lender. The terms
"Lenders" or "Requisite Lenders" or any similar terms shall, unless the context
clearly otherwise indicates, include CapitalSource in its individual capacity as
a Lender or one of the Requisite Lenders. CapitalSource may lend money to, and
generally engage in any kind of
48
banking, trust or other business with Borrower or any subsidiary of Borrower as
if it were not acting as Agent pursuant hereto.
(g) Successor Agent.
(i) Resignation. Agent may resign from the
performance of all its functions and duties hereunder at any time by giving at
least 30 days prior written notice to Borrower and Lenders. Such resignation
shall take effect upon the acceptance by a successor Agent of appointment
pursuant to clause (g)(ii) below or as otherwise provided below.
(ii) Appointment of Successor. Upon any such
notice of resignation pursuant to clause (g)(i) above, Requisite Lenders shall
appoint a successor Agent. If a successor Agent shall not have been so appointed
within said 30 day period, the retiring Agent, upon notice to Borrower, may, on
behalf of Lenders, then appoint a successor Agent who shall serve as Agent until
such time, as Requisite Lenders, appoint a successor Agent as provided above. If
no successor Agent has been appointed pursuant to the foregoing within said 30
day period, the resignation shall become effective and Requisite Lenders shall
thereafter perform all the duties of Agent hereunder, until such time, if any,
as Requisite Lenders appoint a successor Agent as provided above.
(iii) Successor Agent. Upon the acceptance of any
appointment as Agent under the Loan Documents by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and, upon the
earlier of such acceptance or the effective date of the retiring Agent's
resignation, the retiring Agent shall be discharged from its duties and
obligations under the Loan Documents, except that any indemnity rights or other
rights in favor of such retiring Agent shall continue. After any retiring
Agent's resignation as Agent under the Loan Documents, the provisions of this
Section 11.3 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under the Loan Documents.
(h) Collateral Matters.
(i) Collateral. Each Lender agrees that any
action taken by the Agent or the Requisite Lenders (or, where required by the
express terms of this Agreement, a greater proportion of Lenders) in accordance
with the provisions of this Agreement or of the other Loan Documents relating to
the Collateral, and the exercise by the Agent or the Requisite Lenders (or,
where so required, such greater proportion) of the powers set forth herein or
therein, together with such other powers as are reasonably incidental thereto,
shall be authorized and binding upon all of the Lenders and the Agent. Without
limiting the generality of the foregoing, the Agent shall have the sole and
exclusive right and authority to (A) act as the disbursing and collecting agent
for Lenders with respect to all payments and collections arising in connection
herewith and with the Loan Documents in connection with the Collateral; (B)
execute and deliver each Loan Document relating to the Collateral and accept
delivery of each such agreement delivered by Borrower or any of its
Subsidiaries; (C) act as collateral agent for Lenders for purposes of the
perfection of all security interests and Liens created by such agreements and
all other purposes stated therein; (D) manage, supervise and otherwise deal with
the Collateral; (E) take such action as is necessary or desirable to maintain
the perfection and priority of the security interests and
49
Liens created or purported to be created by the Loan Documents relating to the
Collateral, and (F) except as may be otherwise specifically restricted by the
terms hereof or of any other Loan Document, exercise all remedies given to such
Agent and Lenders with respect to the Collateral under the Loan Documents
relating thereto, applicable law or otherwise.
(ii) Release of Collateral. Lenders hereby
irrevocably authorize Agent, at its option and in its discretion, to release any
Lien granted to or held by Agent for the benefit of Lenders upon any property
covered by this Agreement or the Loan Documents (A) upon termination of the
Revolving Facility and payment and satisfaction in full of all Obligations; (B)
constituting property being sold or disposed of if Borrower certifies to Agent
that the sale or disposition is made in compliance with the provisions of this
Agreement (and Agent may rely in good faith conclusively on any such
certificate, without further inquiry); or (C) constituting property leased to
Borrower under a lease which has expired or been terminated in a transaction
permitted under this Agreement or is about to expire and which has not been, and
is not intended by Borrower to be, renewed or extended.
(iii) Confirmation of Authority; Execution of
Releases. Without in any manner limiting Agent's authority to act without any
specific or further authorization or consent by Lenders (as set forth in Section
11.3(h)(i) and (ii)), each Lender agrees to confirm in writing, upon request by
Borrower, the authority to release any property covered by this Agreement or the
Loan Documents conferred upon Agent under Section 11.3(h)(ii). So long as no
Event of Default is then continuing, upon receipt by Agent of confirmation from
the requisite percentage of Lenders, of its authority to release any particular
item or types of property covered by this Agreement or the Loan Documents, and
upon at least five Business Days prior written request by Borrower, Agent shall
(and is hereby irrevocably authorized by Lenders to) execute such documents as
may be necessary to evidence the release of the Liens granted to Agent for the
benefit of Lenders herein or pursuant hereto upon such Collateral; provided,
however, that (A) Agent shall not be required to execute any such document on
terms which, in Agent's opinion, would expose Agent to liability or create any
obligation or entail any consequence other than the release of such Liens
without recourse or warranty, and (B) such release shall not in any manner
discharge, affect or impair the Obligations or any Liens upon (or obligations of
Borrower or any subsidiary of Borrower, in respect of), all interests retained
by Borrower or any subsidiary of Borrower, including, without limitation, the
proceeds of any sale, all of which shall continue to constitute part of the
property covered by this Agreement or the Loan Documents.
(iv) Absence of Duty. Agent shall have no
obligation whatsoever to any Lender or any other Person to assure that the
property covered by this Agreement or the Loan Documents exists or is owned by
Borrower or is cared for, protected or insured or has been encumbered or that
the Liens granted to Agent on behalf of Lenders herein or pursuant hereto have
been properly or sufficiently or lawfully created, perfected, protected or
enforced or are entitled to any particular priority, or to exercise at all or in
any particular manner or under any duty of care, disclosure, or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Agent in this Section 11.3(h) or in any of the Loan Documents, it
being understood and agreed that in respect of the property covered by this
Agreement or the Loan Documents or any act, omission, or event related thereto,
Agent may act in any manner it may deem appropriate, in its discretion, given
Agent's own interest in property covered by this Agreement or the Loan Documents
as one of Lenders and that Agent shall have no duty or
50
liability whatsoever to any of the other Lenders; provided, that Agent shall
exercise the same care which it would in dealing with loans for its own account.
Notwithstanding the foregoing, Agent shall be liable with respect to its own
gross negligence or willful misconduct.
(i) Agency for Perfection. Each Lender hereby appoints
each other Lender as agent for the purpose of perfecting Lenders' security
interest in Collateral which, in accordance with Article 9 of the UCC in any
applicable jurisdiction, can be perfected only by possession. Should any Lender
(other than Agent) obtain possession of any such Collateral, such Lender shall
notify Agent thereof, and, promptly upon Agent's request therefor, shall deliver
such Collateral to Agent or in accordance with Agent's instructions.
(j) Exercise of Remedies. Except as set forth in Section
11.5, each Lender agrees that it will not have any right individually to enforce
or seek to enforce this Agreement or any Loan Document or to realize upon any
collateral security for the Loans, it being understood and agreed that such
rights and remedies may be exercised only by Agent.
11.4 CONSENTS
(a) In the event Agent requests the consent of a Lender
and does not receive a written denial thereof within five Business Days after
such Lender's receipt of such request, then such Lender will be deemed to have
given such consent so long as such request contained a notice stating that such
failure to respond within five Business Days would be deemed to be a consent by
such Lender.
(b) In the event Agent requests the consent of a Lender
in a situation where such Lender's consent would be required and such consent is
denied, then CapitalSource may, at its option, require such Lender to assign its
interest in the Loans to CapitalSource for a price equal to the then outstanding
principal amount thereof plus accrued and unpaid interest and fees due such
Lender (but no prepayment fee with respect thereto, it being agreed that any
prepayment fee is not applicable to such an assignment), which interest and fees
will be paid when collected from Borrower. In the event that CapitalSource
elects to require any Lender to assign its interest to CapitalSource pursuant to
this Section 11.4, CapitalSource will so notify such Lender in writing within 45
calendar days following such Lender's denial, and such Lender will assign its
interest to CapitalSource no later than five calendar days following Receipt of
such notice.
11.5 SET-OFF AND SHARING OF PAYMENTS
In addition to any rights and remedies now or hereafter
granted under applicable law and not by way of limitation of any such rights,
upon the occurrence and during the continuance of any Event of Default, each
Lender is hereby authorized by Borrower at any time or from time to time, to the
fullest extent permitted by law, with reasonably prompt subsequent notice to
Borrower or to any other Person (any prior or contemporaneous notice being
hereby expressly waived) to set-off and to appropriate and to apply any and all
(a) balances (general or special, time or demand, provisional or final) held by
such Lender or such holder at any of its offices for the account of Borrower or
any of its Subsidiaries (regardless of whether such balances are then due to
Borrower or its Subsidiaries), and (b) other property at any time held or
51
owing by such Lender or such holder to or for the credit or for the account of
Borrower or any of its Subsidiaries, against and on account of any of the
Obligations which are not paid when due; except that no Lender or any such
holder shall exercise any such right without prior written notice to Agent;
provided, however, that the failure to give notice to Borrower or to any other
Person shall not affect the validity of such set-off and application. Any Lender
which has exercised its right to set-off or otherwise has received any payment
on account of the Obligations shall, to the extent the amount of any such
set-off or payment exceeds its Pro Rata Share of payments obtained by all of the
Lenders on account of such Obligations, purchase for cash (and the other Lenders
or holders of Loans shall sell) participations in each such other Lender's or
holder's Pro Rata Share of Obligations as would be necessary to cause such
Lender to share such excess with each other Lenders or holders in accordance
with their respective Pro Rata Shares; provided, however, that if all or any
portion of such excess payment or benefits is thereafter recovered from such
purchasing Lender, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery. Borrower agrees, to the
fullest extent permitted by law, that (a) any Lender or holder may exercise its
right to set-off with respect to amounts in excess of its Pro Rata Share of the
Obligations and may sell participations in such excess to other Lenders and
holders, and (b) any Lender or holder so purchasing a participation in the Loans
made or other Obligations held by other Lenders or holders may exercise all
rights of set-off, bankers' lien, counterclaim or similar rights with respect to
such participation as fully as if such Lender or holder were a direct holder of
Loans and other Obligations in the amount of such participation.
11.6 DISBURSEMENT OF FUNDS
Agent may, on behalf of Lenders, disburse funds to Borrower
for Advances requested. Each Lender shall reimburse Agent on demand for its Pro
Rata Share of all funds disbursed on its behalf by Agent, or if Agent so
requests, each Lender will remit to Agent its Pro Rata Share of any Advance
before Agent disburses same to Borrower. If Agent elects to require that funds
be made available prior to disbursement to Borrower, Agent shall advise each
Lender by telephone, telex or telecopy of the amount of such Lender's Pro Rata
Share of such requested Advance no later than one Business Day prior to the
funding date applicable thereto, and each such Lender shall pay Agent such
Lender's Pro Rata Share of such requested Loan, in same day funds, by wire
transfer to Agent's account not later than 3:00 p.m. (Eastern Time). If any
Lender fails to pay the amount of its Pro Rata Share forthwith upon Agent's
demand, Agent shall promptly notify Borrower, and Borrower shall immediately
repay such amount to Agent. Any repayment required pursuant to this Section 11.6
shall be without premium or penalty. Nothing in this Section 11.6 or elsewhere
in this Agreement or the other Loan Documents, including without limitation the
provisions of Section 11.7, shall be deemed to require Agent to advance funds on
behalf of any Lender or to relieve any Lender from its obligation to fulfill its
commitments hereunder or to prejudice any rights that Agent or Borrower may have
against any Lender as a result of any default by such Lender hereunder.
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11.7 SETTLEMENTS; PAYMENTS AND INFORMATION
(a) Advances and Payments; Term Loan Payments; Interest
and Fee Payments.
(i) The amount outstanding pursuant to Advances
may fluctuate from day to day through Agent's disbursement of funds to, and
receipt of funds from, Borrower. In order to minimize the frequency of transfers
of funds between Agent and each Lender notwithstanding terms to the contrary set
forth in Section 11.6, Advances and repayments may be settled according to the
procedures described in Sections 11.7(a)(ii) and 11.7(a)(iii) of this Agreement.
Payments of principal, interest and fees in respect of the Term Loan will be
settled, in accordance with each Lender's Pro Rata Share on the first Business
Day after such payments are received. Notwithstanding these procedures, each
Lender's obligation to fund its Pro Rata Share of any Advances made by Agent to
Borrower will commence on the date such Advances are made by Agent. Such
payments will be made by such Lender without set-off, counterclaim or reduction
of any kind.
(ii) Once each week, or more frequently
(including daily), if Agent so elects (each such day being a "SETTLEMENT DATE"),
Agent will advise each Lender by 1 p.m. (Eastern Time) by telephone, telex, or
telecopy of the amount of each such Lender's Pro Rata Share of the outstanding
Advances. In the event payments are necessary to adjust the amount of such
Lender's share of the Advances to such Lender's Pro Rata Share of the Advances,
the party from which such payment is due will pay the other, in same day funds,
by wire transfer to the other's account not later than 3:00 p.m. (Eastern Time)
on the Business Day following the Settlement Date.
(iii) On the first Business Day of each month
("INTEREST SETTLEMENT DATE"), Agent will advise each Lender by telephone,
telefax or telecopy of the amount of interest and fees charged to and collected
from Borrower for the proceeding month in respect of the Advances. Provided that
such Lender has made all payments required to be made by it under this
Agreement, Agent will pay to such Lender, by wire transfer to such Lender's
account (as specified by such Lender on Schedule 1 of this Agreement as amended
by such Lender from time to time after the date hereof pursuant to the notice
provisions contained herein or in the applicable Lender Addition Agreement) not
later than 3 p.m. (Eastern Time) on the next Business Day following the Interest
Settlement Date such Lender's share of such interest and fees.
(b) Availability of Lenders' Pro Rata Share.
(i) Unless Agent has been notified by a Lender
prior to any proposed funding date of such Lender's intention not to fund its
Pro Rata Share of the Advance amount requested by Borrower, Agent may assume
that such Lender will make such amount available to Agent on the proposed
funding date or the Business Day following the next Settlement Date, as
applicable. If such amount is not, in fact, made available to Agent by such
Lender when due, Agent will be entitled to recover such amount on demand from
such Lender without set-off, counterclaim, or deduction of any kind.
(ii) Nothing contained in this Section 11.7(b)
will be deemed to relieve a Lender of its obligation to fulfill its commitments
or to prejudice any rights Agent or Borrower may have against such Lender as a
result of any default by such Lender under this Agreement.
53
(c) Return of Payments.
(i) If Agent pays an amount to a Lender under
this Agreement in the belief or expectation that a related payment has been or
will be received by Agent from Borrower and such related payment is not received
by Agent, then Agent will be entitled to recover such amount from such Lender
without set-off, counterclaim or deduction of any kind.
(ii) If Agent determines at any time that any
amount received by Agent under this Agreement must be returned to Borrower or
paid to any other person pursuant to any solvency law or otherwise, then,
notwithstanding any other term or condition of this Agreement, Agent will not be
required to distribute any portion thereof to any Lender. In addition, each
Lender will repay to Agent on demand any portion of such amount that Agent has
distributed to such Lender, together with interest at such rate, if any, as
Agent is required to pay to Borrower or such other Person, without set-off,
counterclaim or deduction of any kind.
11.8 DISSEMINATION OF INFORMATION
The Agent will distribute promptly to each Lender copies of
all notices, schedules, reports, projections, financial statements, agreements
and other material and other information, including, but not limited to,
financial and reporting information received from Borrower or its Subsidiaries
or generated by a third party (and excluding only internal information generated
by CapitalSource for its own use as a Lender), as provided for in this Agreement
and the other Loan Documents as received by the Agent. The Agent shall promptly
give notice to Lenders of the receipt or sending of any notice, schedule,
report, projection, financial statement or other document or information
pursuant to this Agreement or any of the other Loan Documents and shall promptly
forward a copy thereof to each Lender. Agent shall request information from
Borrower or its Subsidiaries as Lenders may request from time to time. Agent
shall not be liable to Lenders for any failure to comply with its obligations
under this Section 11.8, except to the extent that such failure is attributable
to Agent's gross negligence or willful misconduct.
XII. MISCELLANEOUS
12.1 GOVERNING LAW; JURISDICTION; SERVICE OF PROCESS; VENUE
The Loan Documents shall be governed by and construed in
accordance with the internal laws of the State of Maryland without giving effect
to its choice of law provisions. Any judicial proceeding against Borrower with
respect to the Obligations, any Loan Document or any related agreement may be
brought in any federal or state court of competent jurisdiction located in the
State of Maryland. By execution and delivery of each Loan Document to which it
is a party, Borrower (i) accepts the non-exclusive jurisdiction of the aforesaid
courts and irrevocably agrees to be bound by any judgment rendered thereby, (ii)
waives personal service of process, (iii) agrees that service of process upon it
may be made by certified or registered mail, return receipt requested, pursuant
to Section 12.5 hereof, and (iv) waives any objection to jurisdiction and venue
of any action instituted hereunder and agrees not to assert any defense based on
lack of jurisdiction, venue or convenience. Nothing shall affect the right of
Agent or any Lender to serve process in any manner permitted by law or shall
limit the right of Agent or any Lender to bring proceedings against Borrower in
the courts of any other jurisdiction having jurisdiction. Any judicial
proceedings against Agent or any Lender involving, directly or indirectly, the
54
Obligations, any Loan Document or any related agreement shall be brought only in
a federal or state court located in the State of Maryland. All parties
acknowledge that they participated in the negotiation and drafting of this
Agreement and that, accordingly, no party shall move or petition a court
construing this Agreement to construe it more stringently against one party than
against any other.
12.2 SUCCESSORS AND ASSIGNS; ASSIGNMENTS AND PARTICIPATIONS
(a) Each Lender may at any time assign all or a portion
of its rights and delegate all or a portion of its obligations under this
Agreement and the other Loan Documents (including all its rights and obligations
with respect to the Loans) to one or more Persons (a "TRANSFEREE"); provided,
that such Transferee and such assigning Lender shall execute and deliver to
Agent for acceptance and recording in the Register, a Lender Addition Agreement,
substantially in the form of Exhibit C. Upon such execution, delivery,
acceptance and recording, from and after the effective date determined pursuant
to such Lender Addition Agreement, (i) the Transferee thereunder shall be a
party hereto and, to the extent provided in such Lender Addition Agreement, have
the same rights, benefits and obligations as it would if it were a Lender
hereunder, (ii) the assigning Lender shall be relieved of its obligations
hereunder with respect to its Commitment or assigned portion thereof, as the
case may be, to the extent that such obligations shall have been expressly
assumed by the Transferee pursuant to such Lender Addition Agreement (and, in
the case of a Lender Addition Agreement covering all or the remaining portion of
an assigning Lender's rights and obligations under this Agreement, such
assigning Lender shall cease to be a party hereto but shall nevertheless
continue to be entitled to the benefits of Section 12.7). Borrower hereby
acknowledges and agrees that any assignment will give rise to a direct
obligation of Borrower to the Transferee and that the Transferee shall be
considered to be a "Lender" hereunder. Borrower may not sell, assign or transfer
any interest in this Agreement, any of the other Loan Documents, or any of the
Obligations, or any portion thereof, including Borrower's rights, title,
interests, remedies, powers, and duties hereunder or thereunder.
(b) Each Lender may at any time sell participations in
all or any part of its rights and obligations under this Agreement and the other
Loan Documents (including all its rights and obligations with respect to the
Loans) to one or more Persons (a "PARTICIPANT"). In the event of any such sale
by a Lender of a participation to a Participant, such Lender's obligations under
this Agreement to the other parties to this Agreement shall remain unchanged,
such Lender shall remain solely responsible for the performance thereof, such
Lender shall remain the holder of any such Loan (and any Note evidencing such
Loan) for all purposes under this Agreement and the other Loan Documents and the
Borrower and the Agent shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement and the other Loan Documents. Any agreement pursuant to which any
Lender shall sell any such participation shall provide that such Lender shall
retain the sole right and responsibility to exercise such Lender's rights and
enforce each of the Borrower's obligations hereunder, including the right to
consent to any amendment, supplement, modification or waiver of any provision of
this Agreement or any of the other Loan Documents; provided, that such
participation agreement may provide that such Lender will not agree, without the
consent of the Participant, to any amendment, supplement, modification or waiver
of: (i) any
55
reduction in the principal amount, interest rate or fees payable with respect to
any Loan in which such holder participates; (ii) any extension of the
termination date of this Agreement or the date fixed for any payment of
principal, interest or fees payable with respect to any Loan in which such
holder participates; and (iii) any release of all or substantially all of the
Collateral (other than in accordance with the terms of this Agreement or the
Loan Documents). Borrower hereby acknowledges and agrees that the Participant
under each participation shall, solely for the purposes of Sections 11.5 and
12.4 of this Agreement be considered to be a "Lender" hereunder.
(c) The Agent, on behalf of the Borrower, shall maintain
at its address referred to in Section 12.5 a copy of each Lender Addition
Agreement delivered to it and a register (the "REGISTER") for the recordation of
the names and addresses of the Lenders and the Commitment of, and the principal
amount of the Loans owing to, and the Notes evidencing such Loans owned by, each
Lender from time to time. Notwithstanding anything in this Agreement to the
contrary, each of the Borrower, the Agent and the Lenders shall treat each
Person whose name is recorded in the Register as the owner of the Loan, the
Notes and the Commitment recorded therein for all purposes of this Agreement.
The Register shall be available for inspection by the Borrower or any Lender at
any reasonable time and from time to time upon reasonable prior notice.
(d) Notwithstanding anything in this Agreement to the
contrary, no assignment under subsection 12.2(a) of any rights or obligations
under or in respect of the Loans or the Notes evidencing such Loans shall be
effective unless and until the Agent shall have recorded the assignment pursuant
to subsection 12.2(c). Upon its receipt of a Lender Addition Agreement executed
by an assigning Lender and a Transferee, the Agent shall (i) promptly accept
such Lender Addition Agreement and (ii) on the effective date determined
pursuant thereto record the information contained therein in the Register and
give prompt notice of such acceptance and recordation to the Lenders and the
Borrower. On or prior to such effective date, the assigning Lender shall
surrender any outstanding Notes held by it all or a portion of which are being
assigned, and the Borrower, at its own expense, shall, upon the request of the
Agent by the assigning Lender or the Transferee, as applicable, execute and
deliver to the Agent new Notes to reflect the interest held by the assigning
Lender and its Transferee.
(e) Except as otherwise provided in this Section 12.2 no
Lender shall, as between Borrower and that Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of participation in, all or any part of the Loans or
other Obligations owed to such Lender. Each Lender may furnish any information
concerning Borrower and its Subsidiaries in the possession of that Lender from
time to time to assignees, Transferees and Participants (including prospective
assignees, Transferees and Participants); provided, that the Persons obtaining
such information agrees to maintain the confidentiality of such information to
the extent required by Section 12.10.
(f) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Loans owing to it and the Notes held by it and the other Loan Documents and
Collateral).
56
(g) Borrower agrees to use its commercially reasonable
best efforts to assist any Lender in assigning or selling participations in all
or any part of any Loans made by such Lender to another Person identified by
such Lender.
(h) Notwithstanding anything in the Loan Documents to the
contrary, (i) CapitalSource and its affiliates shall not be required to execute
and deliver a Lender Addition Agreement in connection with any transaction
involving its affiliates, financing or funding sources or lenders, (ii) no
lender to or financing or funding source of CapitalSource or its affiliates
shall be considered a Transferee and (iii) there shall be no limitation or
restriction on (A) CapitalSource's ability to assign or otherwise transfer any
Loan Document or Obligation to any such affiliate, financing source or lender,
or (B) any such affiliate's, financing source's or lender's ability to assign or
otherwise transfer any Loan Document or Obligation; provided, however,
CapitalSource shall continue to be liable as a "Lender" under the Loan Documents
unless such affiliate or lender executes a Lender Addition Agreement and thereby
becomes a "Lender," in which case such lender shall be required to comply with
the other provisions of this Section 12.2.
(i) The Loan Documents shall inure to the benefit of each
Lender, Agent, Transferees, Participants (to the extent expressly provided
therein only) and all future holders of any Note, the Obligations and/or any of
the Collateral, and each of their respective successors and assigns. Each Loan
Document shall be binding upon the Persons that are parties thereto and their
respective successors and assigns. Except as otherwise permitted herein, no
Person may assign, delegate or transfer any Loan Document or any of its rights
or obligations thereunder without the prior written consent of Agent. No rights
are intended to be created under any Loan Document for the benefit of any third
party donee, creditor or incidental beneficiary of any Borrower or any
Guarantor. Nothing contained in any Loan Document shall be construed as a
delegation to Agent or any Lender of any other Person's duty of performance.
BORROWER ACKNOWLEDGES AND AGREES THAT AGENT OR ANY LENDER AT ANY TIME AND FROM
TIME TO TIME MAY (I) DIVIDE AND REISSUE (WITHOUT SUBSTANTIVE CHANGES OTHER THAN
THOSE RESULTING FROM SUCH DIVISION) THE NOTES, AND/OR (II) PURSUANT TO SECTION
12.2, SELL, ASSIGN OR GRANT PARTICIPATING INTERESTS IN OR TRANSFER ALL OR ANY
PART OF ITS RIGHTS OR OBLIGATIONS UNDER ANY LOAN DOCUMENT, NOTE, THE OBLIGATIONS
AND/OR THE COLLATERAL TO OTHER PERSONS, IN EACH CASE ON THE TERMS AND CONDITIONS
PROVIDED HEREIN. Each Transferee and Participant shall have all of the rights
and benefits with respect to the Obligations, Notes, Collateral and/or Loan
Documents held by it as fully as if the original holder thereof; provided, that,
notwithstanding anything to the contrary in any Loan Document, no Borrower shall
be obligated to pay under this Agreement to any Transferee or Participant any
sum in excess of the sum which it would have been obligated to pay to Lenders
had such participation not been effected. Notwithstanding any other provision of
any Loan Document, Agent and Lenders may disclose to any Transferee or
Participant all information, reports, financial statements, certificates and
documents obtained under any provision of any Loan Document; provided, that
Transferees and Participants shall be subject to the confidentiality provisions
contained herein that are applicable to Agent and Lenders.
57
12.3 APPLICATION OF PAYMENTS
To the extent that any payment made or received with respect
to the Obligations is subsequently invalidated, determined to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver, custodian or any other Person under any Debtor Relief Law,
common law or equitable cause or any other law, then the Obligations intended to
be satisfied by such payment shall be revived and shall continue as if such
payment had not been received by Agent or any Lender. Any payments with respect
to the Obligations received shall be credited and applied in such manner and
order as Agent shall decide in its sole discretion.
12.4 INDEMNITY
Each Borrower jointly and severally shall indemnify Agent and
each Lender, their affiliates and their respective managers, members, officers,
employees, affiliates, agents, representatives, successors, assigns, accountants
and attorneys (collectively, the "INDEMNIFIED PERSONS") from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses and disbursements of any kind or nature whatsoever
(including, without limitation, reasonable fees and disbursements of counsel and
in-house documentation and diligence fees and legal expenses) which may be
imposed on, incurred by or asserted against any Indemnified Person with respect
to or arising out of, or in any litigation, proceeding or investigation
instituted or conducted by any Person with respect to any aspect of, or any
transaction contemplated by or referred to in, or any matter related to, any
Loan Document or any agreement, document or transaction contemplated thereby,
whether or not such Indemnified Person is a party thereto, except to the extent
that any of the foregoing arises out of the gross negligence or willful
misconduct of such Indemnified Person. If any Indemnified Person uses in-house
counsel for any purpose for which any Borrower is responsible to pay or
indemnify, each Borrower expressly agrees that its indemnification obligations
include reasonable charges for such work commensurate with the fees that would
otherwise be charged by outside legal counsel selected by such Indemnified
Person in its sole discretion for the work performed. Agent agrees to give
Borrower reasonable notice of any event of which Agent becomes aware for which
indemnification may be required under this Section 12.4, and Agent may elect
(but is not obligated) to direct the defense thereof; provided, that the
selection of counsel shall be subject to Borrower's consent, which consent shall
not be unreasonably withheld or delayed. Any Indemnified Person may, in its
reasonable discretion, take such actions as it deems necessary and appropriate
to investigate, defend or settle any event or take other remedial or corrective
actions with respect thereto as may be necessary for the protection of such
Indemnified Person or the Collateral. Notwithstanding the foregoing, if any
insurer agrees to undertake the defense of an event (an "INSURED EVENT"), Agent
agrees not to exercise its right to select counsel to defend the event if that
would cause any Borrower's insurer to deny coverage; provided, however, that
Agent reserves the right to retain counsel to represent any Indemnified Person
with respect to an Insured Event at its sole cost and expense. To the extent
that Agent or any Lender obtains recovery from a third party other than an
Indemnified Person of any of the amounts that any Borrower has paid to Agent or
any Lender pursuant to the indemnity set forth in this Section 12.4, then Agent
and/or Lender shall promptly pay to such Borrower the amount of such recovery.
58
12.5 NOTICE
Any notice or request under any Loan Document shall be given
to any party to this Agreement at such party's address set forth beneath its
signature on the signature page to this Agreement, or at such other address as
such party may hereafter specify in a notice given in the manner required under
this Section 12.5. Any notice or request hereunder shall be given only by, and
shall be deemed to have been received upon (each, a "RECEIPT"): (i) registered
or certified mail, return receipt requested, on the date on which such received
as indicated in such return receipt, (ii) delivery by a nationally recognized
overnight courier, one Business Day after deposit with such courier, or (iii)
facsimile or electronic transmission, in each case upon telephone or further
electronic communication from the recipient acknowledging receipt (whether
automatic or manual from recipient), as applicable.
12.6 SEVERABILITY; CAPTIONS; COUNTERPARTS; FACSIMILE SIGNATURES
If any provision of any Loan Document is adjudicated to be
invalid under applicable laws or regulations, such provision shall be
inapplicable to the extent of such invalidity without affecting the validity or
enforceability of the remainder of the Loan Documents which shall be given
effect so far as possible. The captions in the Loan Documents are intended for
convenience and reference only and shall not affect the meaning or
interpretation of the Loan Documents. The Loan Documents may be executed in one
or more counterparts (which taken together, as applicable, shall constitute one
and the same instrument) and by facsimile transmission, which facsimile
signatures shall be considered original executed counterparts. Each party to
this Agreement agrees that it will be bound by its own facsimile signature and
that it accepts the facsimile signature of each other party.
12.7 EXPENSES
Borrower shall pay, whether or not the Closing occurs, all
costs and expenses incurred by Agent, Lenders and/or their affiliates,
including, without limitation, documentation and diligence fees and expenses,
all search, audit, appraisal, recording, professional and filing fees and
expenses and all other out-of-pocket charges and expenses (including, without
limitation, UCC and judgment and tax lien searches and UCC filings and fees for
post-Closing UCC and judgment and tax lien searches and wire transfer fees and
audit expenses), and reasonable attorneys' fees and expenses, (i) in any effort
to enforce, protect or collect payment of any Obligation or to enforce any Loan
Document or any related agreement, document or instrument, (ii) in connection
with entering into, negotiating, preparing, reviewing and executing the Loan
Documents and/or any related agreements, documents or instruments, (iii) arising
in any way out of administration of the Obligations, (iv) in connection with
instituting, maintaining, preserving, enforcing and/or foreclosing on Agent's,
for the benefit of itself and Lenders, Liens in any of the Collateral or
securities pledged under the Loan Documents, whether through judicial
proceedings or otherwise, (v) in defending or prosecuting any actions, claims or
proceedings arising out of or relating to Agent's and Lenders' transactions with
Borrower, (vi) in seeking, obtaining or receiving any advice with respect to its
rights and obligations under any Loan Document and any related agreement,
document or instrument, and/or (vii) in connection with any modification,
restatement, supplement, amendment, waiver or extension of any Loan Document
and/or any related agreement, document or instrument. All of the foregoing shall
be
59
charged to Borrower's account and shall be part of the Obligations. If Agent,
any Lender or any of their affiliates uses in-house counsel for any purpose
under any Loan Document for which Borrower is responsible to pay or indemnify,
Borrower expressly agrees that its Obligations include reasonable charges for
such work commensurate with the fees that would otherwise be charged by outside
legal counsel selected by Agent, such Lender or such affiliate in its sole
discretion for the work performed. Without limiting the foregoing, Borrower
shall pay all taxes (other than taxes based upon or measured by each Lender's
income or revenues or any personal property tax), if any, in connection with the
issuance of any Note and the filing and/or recording of any documents and/or
financing statements.
12.8 ENTIRE AGREEMENT
This Agreement and the other Loan Documents to which Borrower
is a party constitute the entire agreement between Borrower, Agent and Lenders
with respect to the subject matter hereof and thereof, and supersede all prior
agreements and understandings, if any, relating to the subject matter hereof or
thereof. Any promises, representations, warranties or guarantees not herein
contained and hereinafter made shall have no force and effect unless in writing
signed by Borrower, Agent and such Lenders. No provision of this Agreement may
be changed, modified, amended, restated, waived, supplemented, discharged,
canceled or terminated orally or by any course of dealing or in any other manner
other than by an agreement in writing signed by Borrower, Agent and Lenders.
Each party hereto acknowledges that it has been advised by counsel in connection
with the negotiation and execution of this Agreement and is not relying upon
oral representations or statements inconsistent with the terms and provisions
hereof.
12.9 AGENT APPROVALS
Unless expressly provided herein to the contrary, any
approval, consent, waiver or satisfaction of Agent with respect to any matter
that is subject of any Loan Document may be granted or withheld by Agent in its
sole and absolute discretion.
12.10 CONFIDENTIALITY AND PUBLICITY
Borrower agrees, and agrees to cause each of its affiliates,
(i) not to transmit or disclose any provision of any Loan Document to any Person
(other than (A) to the extent required by applicable laws or regulations, (B) to
their respective advisors and officers on a need-to-know basis, and (C) to their
respective owners in connection with reports distributed in the ordinary course
of business) without Agent's prior written consent, (ii) to inform all Persons
of the confidential nature of the Loan Documents and to direct them not to
disclose the same to any other Person and to require each of them to be bound by
these provisions. Agent and each Lender reserve the right to review and approve
all materials that Borrower or any of its affiliates prepares that contain
Agent's or such Lender's name or describe or refer to any Loan Document, any of
the terms thereof or any of the transactions contemplated thereby. Borrower
shall not, and shall not permit any of its affiliates to, use either Agent's or
any Lender's name (or the name of any of Agent's or any Lender's affiliates) in
connection with any of its business operations. Nothing contained in any Loan
Document is intended to permit or authorize Borrower or any of its affiliates to
contract on behalf of Agent or any Lender.
60
12.11 RELEASE OF AGENT AND LENDERS
Notwithstanding any other provision of any Loan Document,
Borrower voluntarily, knowingly, unconditionally and irrevocably, with specific
and express intent, for and on behalf of itself, its managers, members,
directors, officers, employees, shareholders, affiliates, agents,
representatives, accountants, attorneys, successors and assigns and their
respective affiliates (collectively, the "RELEASING PARTIES"), hereby fully and
completely releases and forever discharges the Indemnified Parties and any other
Person or insurer which may be responsible or liable for the acts or omissions
of any of the Indemnified Parties, or who may be liable for the injury or damage
resulting therefrom (collectively, with the Indemnified Parties, the "RELEASED
PARTIES"), of and from any and all actions, causes of action, damages, claims,
obligations, liabilities, costs, expenses and demands of any kind whatsoever, at
law or in equity, matured or unmatured, vested or contingent, that any of the
Releasing Parties has against any of the Released Parties as of the date of the
Closing. Borrower acknowledges that the foregoing release is a material
inducement to Agent's and each Lender's decision to extend to Borrower the
financial accommodations hereunder and has been relied upon by Agent and each
Lender in agreeing to make the Loans.
12.12 AMENDMENT, RESTATEMENT, RENEWAL AND EXTENSION
THIS AGREEMENT IS GIVEN IN AMENDMENT, RESTATEMENT, RENEWAL AND
EXTENSION (BUT NOT IN NOVATION) OF THE HEALTHCARE LOAN AGREEMENT, THE ORIGINAL
LOAN AGREEMENT AND THE AMENDED AND RESTATED LOAN AGREEMENT. BORROWER HEREBY
AGREES THAT, WITH RESPECT TO MATTERS RELATING TO THE PERIOD PRIOR TO THE DATE
HEREOF, ALL PROVISIONS OF THE HEALTHCARE LOAN AGREEMENT, THE ORIGINAL LOAN
AGREEMENT AND THE AMENDED AND RESTATED LOAN AGREEMENT ARE HEREBY RATIFIED AND
CONFIRMED AND SHALL REMAIN IN FULL FORCE AND EFFECT.
12.13 JOINDER
Each of the New Borrowers hereby acknowledges, agrees and
confirms that, by its execution of this Agreement, it will, as if it has
executed the Amended and Restated Loan Agreement and the other Amended and
Restated Loan Documents, be and have all of the obligations of (i) a Borrower
(as defined in the Amended and Restated Loan Agreement) for all purposes of the
Amended and Restated Loan Agreement, (ii) a Debtor (as defined in the Amended
and Restated Security Agreement) for all purposes of the Amended and Restated
Security Agreement, and (iii) a party of identical capacity and obligations as a
Borrower to each of the Amended and Restated Loan Documents. As of the date
hereof, each New Borrower hereby ratifies and agrees to be bound by all of the
terms, provisions and conditions contained in the Amended and Restated Loan
Agreement, the Amended and Restated Security Agreement and the other Amended and
Restated Loan Documents which are binding upon the Borrower, including, without
limitation (a) all of the representations and warranties of the Borrower set
forth in Article V of the Amended and Restated Loan Agreement, as supplemented
from time to time in accordance with the terms thereof, and (b) all of the
covenants set forth in Articles VI and VII of the Amended and Restated Loan
Agreement.
61
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
62
IN WITNESS WHEREOF, each of the parties has duly executed this Second
Amended and Restated Revolving Credit and Term Loan Agreement as of the date
first written above.
BORROWER:
PSYCHIATRIC SOLUTIONS, INC.
AERIES HEALTHCARE CORPORATION
AERIES HEALTHCARE OF ILLINOIS, INC.
BOUNTIFUL PSYCHIATRIC HOSPITAL, INC.
COLLABORATIVE CARE CORPORATION
EAST CAROLINA PSYCHIATRIC SERVICES CORPORATION
GREAT PLAINS HOSPITAL, INC.
GULF COAST TREATMENT CENTER, INC.
HAVENWYCK HOSPITAL INC.
H.C. CORPORATION
HSA HILL CREST CORPORATION
HSA OF OKLAHOMA, INC.
INFOSCRIBER CORPORATION
MICHIGAN PSYCHIATRIC SERVICES, INC.
PSI CEDAR SPRINGS HOSPITAL, INC.
PSI COMMUNITY MENTAL HEALTH AGENCY MANAGEMENT, INC.
PSI-EAP, INC.
PSI HOSPITALS, INC.
PSI TEXAS HOSPITALS, LLC
PSYCHIATRIC MANAGEMENT RESOURCES, INC.
PSYCHIATRIC PRACTICE MANAGEMENT OF ARKANSAS, INC.
PSYCHIATRIC SOLUTIONS HOSPITALS, INC.
PSYCHIATRIC SOLUTIONS OF ALABAMA, INC.
PSYCHIATRIC SOLUTIONS OF CORAL GABLES, INC.
PSYCHIATRIC SOLUTIONS OF FLORIDA, INC.
PSYCHIATRIC SOLUTIONS OF NORTH CAROLINA, INC.
PSYCHIATRIC SOLUTIONS OF OKLAHOMA, INC.
PSYCHIATRIC SOLUTIONS OF TENNESSEE, INC.
RAMSAY MANAGED CARE, INC.
RAMSAY TREATMENT SERVICES, INC.
RAMSAY YOUTH SERVICES OF ALABAMA, INC.
RAMSAY YOUTH SERVICES OF FLORIDA, INC.
RAMSAY YOUTH SERVICES OF GEORGIA, INC.
RAMSAY YOUTH SERVICES OF SOUTH CAROLINA, INC.
RHCI SAN ANTONIO, INC.
SOLUTIONS CENTER OF LITTLE ROCK, INC.
SUNSTONE BEHAVIORAL HEALTH, INC.
THE COUNSELING CENTER OF MIDDLE TENNESSEE, INC.
THERAPEUTIC SCHOOL SERVICES, LLC
TRANSITIONAL CARE VENTURES (TEXAS), INC.
TRANSITIONAL CARE VENTURES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
________________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice President
H.C. PARTNERSHIP
By: H.C. Corporation, its general partner
HSA Hill Crest Corporation, its general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
________________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice President
NEURO INSTITUTE OF AUSTIN, L.P.
TEXAS CYPRESS CREEK HOSPITAL, L.P.
TEXAS ▇▇▇▇▇▇ ▇▇▇▇▇ HOSPITAL, L.P.
TEXAS OAKS PSYCHIATRIC HOSPITAL, L.P.
TEXAS SAN MARCOS TREATMENT CENTER, L.P.
TEXAS WEST OAKS HOSPITAL, L.P.
By: PSI Texas Hospitals, LLC, its general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
_______________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice President
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇-▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President and Chief Executive Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
2
AGENT AND LENDER:
CAPITALSOURCE FINANCE LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
________________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Director
CapitalSource Finance LLC
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Healthcare Finance Group, Portfolio Manager
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
E-Mail: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
3
EXHIBITS
A Borrowing Certificate
B Compliance Certificate
C Lender Addition Agreement
SCHEDULES
1 Lenders/Commitments
2.4 Borrower's Accounts
5.2 Consents, Approvals and Authorizations Required
5.3 Subsidiaries; Authorized and Issued Capital Stock;
Capitalization; Directors, Members, Managers and/or Partners;
Joint Venture and Partnership Arrangements
5.4 Real Properties
5.8 Taxes Contested in Good Faith
5.11 Intellectual Property
5.15 Indebtedness; Material Obligations
5.16 Other Agreements
5.17 Insurance Policies
5.18A Corporate Names
5.18B Place of Business/Chief Executive Officer
6.8 Post Closing Obligations
7.2 Permitted Indebtedness
7.3 Permitted Liens
A-1 Facility Census
A-2 EBITDA Adjustments
ANNEX I
FINANCIAL COVENANTS
1. MINIMUM CENSUS
As of the last day of each Monthly Test Period, (a) the
aggregate combined census levels at the facilities owned, operated or leased by
Borrower and (b) the census level at each such facility, shall be not less than
75% of the census levels for such applicable calendar months for the facilities
listed on Schedule A-1.
2. TOTAL LEVERAGE RATIO (TOTAL DEBT/EBITDA)
As of the last day of each month through and including June
30, 2004, the Total Leverage Ratio shall not exceed 4.95 to 1.00. As of the last
day of each month beginning on July 1, 2004 through and including June 30, 2005,
the Total Leverage Ratio shall not exceed 4.80 to 1.00. As of the last day of
each month after July 1, 2005, the Total Leverage Ratio shall not exceed 4.65 to
1.00.
3. SENIOR LEVERAGE RATIO
As of the last day of each month through and including June
30, 2004, the Senior Leverage Ratio shall not exceed 2.25 to 1.00. As of the
last day of each month beginning on July 1, 2004, through and including June 30,
2005, the Senior Leverage Ratio shall not exceed 2.10 to 1.00. As of the last
day of each month after July 1, 2005, the Senior Leverage Ratio shall not exceed
1.95 to 1.00.
4. Interest Coverage Ratio (EBITDA/Interest Expense)
As of the last day of each Monthly Test Period, through and
including June 30, 2004, the Interest Coverage Ratio shall not be less than
1.50:1.00. As of the last day of each Monthly Test Period beginning on July 1,
2004 through and including June 30, 2005, the Interest Coverage Ratio shall not
be less than 1.65:1.00. As of the last day of each Monthly Test Period after
July 1, 2005, the Interest Coverage Ratio shall not be less than 1.80:1.00.
5. Fixed Charge Ratio (EBITDA/Fixed Charges)
As of the last day of each Monthly Test Period through and
including June 30, 2004, the Fixed Charge Ratio shall not be less than
1.00:1.00. As of the last day of each Monthly Test Period beginning on July 1,
2004 through and including June 30, 2005, the Fixed Charge Ratio shall not be
less than 1.15:1.00. As of the last day of each Monthly Test Period after July
1, 2005, the Fixed Charge Ratio shall not be less than 1.30:1.00. For purposes
of this financial covenant only, the following shall be excluded from
calculation of the Fixed Charge Ratio: (a) the aggregate amount of all principal
payments made (in an aggregate amount not to exceed $2,100,000) by Borrower on
or before April 1, 2003 to The ▇▇▇▇▇ Schools in accordance with the provisions
of the note evidencing such Subordinated Debt, (b) all non-cash interest
expenses related to such Seller Notes and (c) such other non-occurring charges
as Agent may consent to in its sole discretion (e.g., computer conversions).
1
For purposes of the covenants set forth in this Annex I, the
terms listed below shall have the following meanings:
"Capital Expenditures" shall mean, for any Test Period, the
sum (without duplication) of all expenditures (whether paid in cash or accrued
as liabilities) during the Test Period that are or should be treated as capital
expenditures under GAAP.
"Cash Equivalents" shall mean (a) securities issued, or
directly and fully guaranteed or insured, by the United States or any agency or
instrumentality thereof (provided, that the full faith and credit of the United
States is pledged in support thereof) having maturities of not more than six
months from the date of acquisition, (b) U.S. dollar denominated time deposits,
certificates of deposit and bankers' acceptances of (i) any domestic commercial
bank of recognized standing having capital and surplus in excess of
$500,000,000, or (ii) any bank (or the parent company of such bank) whose
short-term commercial paper rating from Standard & Poor's Ratings Services
("S&P") is at least A-2 or the equivalent thereof or from ▇▇▇▇▇'▇ Investors
Service, Inc. ("▇▇▇▇▇'▇") is at least P-2 or the equivalent thereof in each case
with maturities of not more than six months from the date of acquisition (any
bank meeting the qualifications specified in clauses (b)(i) or (ii), an
"Approved Bank"), (c) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (a), above,
entered into with any Approved Bank, (d) commercial paper issued by any Approved
Bank or by the parent company of any Approved Bank and commercial paper issued
by, or guaranteed by, any industrial or financial company with a short-term
commercial paper rating of at least A-2 or the equivalent thereof by S&P or at
least P-2 or the equivalent thereof by Moody's, or guaranteed by any industrial
company with a long term unsecured debt rating of at least A or A-2, or the
equivalent of each thereof, from S&P or Moody's, as the case may be, and in each
case maturing within six months after the date of acquisition and (e)
investments in money market funds substantially all of whose assets are
comprised of securities of the type described in clauses (a) through (d) above.
"EBITDA" shall mean, for any Test Period, the sum, without
duplication, of the following for Borrower, on a consolidated and consolidating
basis: Net Income determined in accordance with GAAP, plus, (a) Interest
Expense, (b) taxes on income, whether paid, payable or accrued, (c) depreciation
expense, (d) amortization expense, (e) all other non-cash, non-recurring charges
and expenses, excluding accruals for cash expenses made in the ordinary course
of business, (f) loss from any sale of assets, other than sales in the ordinary
course of business, and (g) the amounts listed for the applicable periods on
Schedule A-2, minus (h) gains from any sale of assets, other than sales in the
ordinary course of business, and (i) other extraordinary or non-recurring gains,
all of the foregoing determined in accordance with GAAP.
"Fixed Charge Ratio" shall mean, at any date of determination,
for Borrower individually and collectively on a consolidated and consolidating
basis, the ratio of (a) EBITDA for the Monthly Test Period most recently ended
before such date, to (b) Fixed Charges for the Monthly Test Period most recently
ended before such date, in each case taken as one accounting period.
"Fixed Charges" shall mean, on any calculation date, for any
Monthly Test Period, the sum of the following for Borrower, individually and
collectively, on a consolidated
2
and consolidating basis: (a) Total Debt Service for such period, (b) Capital
Expenditures and management and services fees during such period, (c) income
taxes paid in cash or accrued during such period, (d) dividends paid or accrued
or declared during such period and (e) and principal payments made by Borrower
pursuant to a HUD Financing. Any principal payments by Borrower made pursuant to
the Revolving Facility shall be excluded from this definition.
"Interest Coverage Ratio" shall mean, at any date of
determination, for Borrower individually and on a consolidated and consolidating
basis, without duplication, the ratio of (a) EBITDA for the Monthly Test Period
most recently ended before such date (taken as one accounting period), to (b)
Interest Expense for the Monthly Test Period most recently ended before such
date (taken as one accounting period).
"Interest Expense" shall mean, for any Test Period, total
interest expense (including attributable to Capital Leases in accordance with
GAAP) of Borrower individually and collectively, on a consolidated and
consolidating basis with respect to all outstanding Indebtedness, including,
without limitation, (i) the Interest Expense on the aggregate outstanding amount
of the Term Loan on such date, (ii) the Interest Expense on the aggregate amount
of all Advances outstanding under the Revolving Facility on such date, (iii) the
Interest Expense on the aggregate amount of all Capitalized Lease Obligations on
such date, (iv) the Interest Expense on the aggregate outstanding amount of all
High Yield Indebtedness on such date, (v) the Interest Expense on the aggregate
outstanding amount of the Seller Notes, excluding all non-cash interest expenses
related to such Seller Notes, (vi) Interest Expense on any other Indebtedness on
such date, (vii) the Interest Expense on the aggregate outstanding amount of any
HUD Financing and (viii) capitalized interest, but excluding commissions,
discounts and other fees owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements.
"Interest Rate Agreement" shall mean any interest rate swap,
cap or collar agreement or other similar agreement or arrangement designed to
hedge the position with respect to interest rates.
"Leverage Test Period" shall mean a period ending on the last
calendar day of each month, including the twelve most recent calendar months
then ended (taken as one accounting period), or such other period as specified
in the Agreement or any Annex thereto.
"Monthly Test Period" shall mean a period ending on the last
calendar day of each month, including the three most recent calendar months then
ended (taken as one accounting period), or such other period as specified in the
Agreement or any Annex thereto.
"Net Income" shall mean, for any Test Period, the net income
(or loss) of Borrower individually and collectively on a consolidated and
consolidating basis for such period taken as a single accounting period
determined in conformity with GAAP; provided, that there shall be excluded (i)
the income (or loss) of any Person in which any other Person (other than
Borrower) has a joint interest, except to the extent of the amount of dividends
or other distributions actually paid to a Borrower by such Person during such
period, (ii) the income (or loss) of any Person accrued prior to the date it
becomes a Borrower or is merged into or consolidated with a Borrower or that
Person's assets are acquired by a Borrower, (iii) the income
3
of any Subsidiary of Borrower to the extent that the declaration or payment of
dividends or similar distributions of that income by that Subsidiary is not at
the time permitted by operation of the terms of the charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary, (iv) compensation expense resulting from the
issuance of capital stock, stock options or stock appreciation rights issued to
former or current employees, including officers, of a Borrower, or the exercise
of such options or rights, in each case to the extent the obligation (if any)
associated therewith is not expected to be settled by the payment of cash by a
Borrower or any affiliate thereof, and (v) compensation expense resulting from
the repurchase of capital stock, options and rights described in clause (iv) of
this definition of Net Income.
"Senior Leverage Ratio" shall mean, at any date of
determination, for Borrower individually and collectively on a consolidated and
consolidating basis, the ratio of (i) the aggregate outstanding amount of (A)
the aggregate outstanding amount of the Term Loan on such date, (B) the Facility
Cap, (C) the aggregate amount of all Capitalized Lease Obligations on such date,
and (D) the aggregate outstanding amount of all HUD Financings to (ii) EBITDA
for the Leverage Test Period most recently ended before such date.
"Test Period" means, individually and/or collectively, Monthly
Test Period, and Leverage Test Period.
"Total Debt Service" shall mean for any period, for Borrower
individually and collectively on a consolidated and consolidating basis, the sum
of (i) scheduled or other required payments of principal on Indebtedness, and
(ii) Interest Expense, in each case for such period.
"Total Leverage Ratio" shall mean, at any date of
determination, for Borrower individually and collectively on a consolidated and
consolidating basis, the ratio of (i) Indebtedness for borrowed money (including
HUD Financings) and Capitalized Lease Obligations, less cash held on such date
and Cash Equivalents held on such date, to (ii) EBITDA for the Leverage Test
Period most recently ended before such date.
4
APPENDIX A
DEFINITIONS
"1818 Mezzanine Fund" shall mean The 1818 Mezzanine Fund II, L.P., a
Delaware limited partnership.
"1818 Mezzanine Fund Subordinated Indebtedness" shall mean the
subordinated indebtedness owing by Hospitals (and any other Borrower who is a
party or obligor thereunder) to 1818 Mezzanine Fund pursuant to the Securities
Purchase Agreement and related documents.
"Account Debtor" shall mean any Person who is obligated under an
Account.
"Accounts" shall mean all "accounts" (as defined in the UCC) of
Borrower (or, if referring to another Person, of such other Person), including
without limitation, accounts, accounts receivables, monies due or to become due
and obligations in any form (whether arising in connection with contracts,
contract rights, instruments, general intangibles or chattel paper), in each
case whether arising out of goods sold or services rendered or from any other
transaction and whether or not earned by performance, now or hereafter in
existence, and all documents of title or other documents representing any of the
foregoing, and all collateral security and guaranties of any kind, now or
hereafter in existence, given by any Person with respect to any of the
foregoing.
"Accrued Liabilities" shall have the meaning assigned to such term in
Section 6.17(a).
"Advances" shall mean a borrowing under the Revolving Facility. Any
amounts paid by Agent or any Lender on behalf of Borrower or any Guarantor under
any Loan Document shall be an Advance for purposes of the Agreement.
"Agreement and Plan of Merger" shall mean that certain Agreement and
Plan of Merger, dated as of April 8, 2003, duly executed by PSI, PSI Acquisition
Sub, Inc., and Ramsay Youth Services, Inc.
"Amended and Restated Loan Agreement" shall have the meaning assigned
to such term in the recitals.
"Amended and Restated Loan Documents" shall mean, collectively and each
individually, the Amended and Restated Loan Agreement, the notes issued
thereunder, the Security Documents, the Guarantees, the Stock Pledge Agreements,
the Lockbox Agreements, the Participation Agreement, the UCC financing
statements, the Subordination Agreements, the Landlord Waiver and Consents, the
Borrowing Certificates, the Warrant Agreement and the Warrant and all other
agreements, documents, instruments and certificates executed or delivered to
Agent in connection with any loans made pursuant to the Original Loan Agreement,
as the same may have been amended, modified or supplemented from time to time.
"Amended and Restated Security Agreement" shall mean that certain
Security Agreement, by and among the Existing Borrower and Agent, dated April 1,
2003, as the same may have been amended, modified or supplemented from time to
time.
1
"Applicable Rate" shall mean the interest rates applicable from time to
time to Advances under the Agreement.
"Availability" shall have the meaning assigned to such term in Section
2.1.
"Borrowing Base" shall mean, as of any date of determination, the Net
Collectible Value of Eligible Receivables, as determined with reference to the
most recent Borrowing Certificate and otherwise in accordance with the
Agreement; provided, however, that if as of such date the most recent Borrowing
Certificate is of a date more than one month before such date, the Borrowing
Base shall be determined by Agent in its sole discretion.
"Borrowing Base Availability" shall mean 85% of the Borrowing Base, as
may be adjusted by Agent in its sole credit judgment by applying percentages
(known as "LIQUIDITY FACTORS") to Eligible Receivables by payor class based upon
Borrower's actual recent collection history for each such payor class (i.e.,
Medicare, Medicaid, commercial insurance, etc.) in a manner consistent with
Agent's underwriting practices and procedures, including, without limitation,
Agent's review and analysis of, among other things, Borrower's historical
returns, rebates, discounts, credits and allowances; provided, that such
liquidity factors and the advance rate may be adjusted by Agent throughout the
Revolving Facility Term as warranted by Agent's underwriting practices and
procedures in its sole credit judgment.
"Borrowing Certificate" shall mean a Borrowing Certificate
substantially in the form of Exhibit A.
"Borrowing Date" shall have the meaning assigned to such term in
Section 2.4.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which the Federal Reserve or Agent is closed.
"Capital Lease" shall mean, as to any Person, a lease of any interest
in any kind of property or asset by that Person as lessee that is, should be or
should have been recorded as a "capital lease" in accordance with GAAP.
"Capitalized Lease Obligations" shall mean all obligations of any
Person under Capital Leases, in each case, taken at the amount thereof accounted
for as a liability in accordance with GAAP.
"Change of Control" shall mean, with respect to any Borrower or
Guarantor, the occurrence of any of the following: (i) a merger, consolidation,
reorganization, recapitalization or share or interest exchange, sale or transfer
or any other transaction or series of transactions in which its stockholders,
managers, partners or interest holders immediately prior to such transaction or
series of transactions receive, in exchange for the stock or interests owned by
them, cash, property or securities of the resulting or surviving entity or any
affiliate thereof, and, as a result thereof, Persons who, individually or in the
aggregate, were holders of 50% or more of its voting stock, securities or
equity, partnership or ownership interests immediately prior to such transaction
or series of transactions hold less than 50% of the voting stock, securities or
other equity, partnership or ownership interests of the resulting or surviving
entity or such affiliate thereof, calculated on a fully diluted basis, excluding
any sale and issuance of new equity
2
securities by PSI, (ii) a direct or indirect sale, transfer or other conveyance
or disposition, in any single transaction or series of transactions, of all or
substantially all of its assets, (iii) the initial public offering of its
securities, or (iv) any "change in/of control" or "sale" or "disposition" or
similar event as defined in any document governing indebtedness of such Person
which gives the holder of such indebtedness the right to accelerate or otherwise
require payment of such indebtedness prior to the maturity date thereof.
"Charter and Good Standing Documents" shall mean, for each Borrower (i)
a copy of the certificate of incorporation or formation (or other charter
document) certified as of a date not more than three Business Days before the
Closing Date by the applicable Governmental Authority of the jurisdiction of
incorporation or organization of such Borrower, (ii) a copy of the bylaws or
similar organizational documents certified as of a date not more than three
Business Days before the Closing Date by the corporate secretary or assistant
secretary of such Borrower, (iii) an original certificate of good standing as of
a date acceptable to Agent issued by the applicable Governmental Authority of
the jurisdiction of incorporation or organization of such Borrower and of every
other jurisdiction in which such Borrower has an office or conducts business or
is otherwise required to be in good standing, and (iv) copies of the resolutions
of the Board of Directors or managers (or other applicable governing body) and,
if required, stockholders, members or other equity owners authorizing the
execution, delivery and performance of the Loan Documents to which such Borrower
is a party, certified by an authorized officer of such Person as of the Closing
Date.
"Closing" shall mean the satisfaction, or written waiver by Agent and
Lenders, of all of the conditions precedent set forth in the Agreement required
to be satisfied prior to the consummation of the transactions contemplated
hereby and which occurs on a date mutually satisfactory to Agent and Borrower.
"Closing Date" shall mean the date the Closing occurs.
"Collateral" shall mean, collectively and each individually, all
collateral and/or security granted to Agent, for the benefit of itself and
Lenders, by Borrower and/or Guarantors pursuant to the Loan Documents.
"Collateral Assignment" shall mean the Collateral Assignment of the
Agreement and Plan of Merger between Agent and PSI, consented to by Ramsay Youth
Services, Inc., and dated as of the Closing Date.
"Commitment" or "Commitments" shall mean (a) as to any Lender, the
aggregate commitment of such Lender to make Advances and Term Loans, as set
forth on Schedule 1 or in the most recent Lender Addition Agreement executed by
such Lender, and (b) as to all Lenders, the aggregate commitment of all Lenders
to make Advances and Term Loans.
"Compliance Certificate" shall have the meaning assigned to such term
in Section 6.1(a).
"Concentration Account" shall have the meaning assigned to such term in
Section 2.5.
"Debtor Relief Law" shall mean, collectively, the Bankruptcy Code of
the United States of America and all other applicable liquidation,
conservatorship, bankruptcy, moratorium,
3
rearrangement, receivership, insolvency, reorganization or similar debtor relief
laws from time to time in effect affecting the rights of creditors generally, as
amended from time to time.
"Default" shall mean any event, fact, circumstance or condition that,
with the giving of applicable notice or passage of time or both, would
constitute or be or result in an Event of Default.
"Deposit Account" shall mean, collectively, the Lockbox Account and all
bank or other depository accounts of any Borrower.
"Distribution" shall mean any fee, payment, bonus or other remuneration
of any kind, and any repayment of or debt service on loans or other
indebtedness.
"Dollars" shall mean the currency of the United States of America.
"Early Termination Fee" shall mean the amount equal to 1% of the
original principal amount of the Term Notes.
"Eligible Receivables" shall mean (for purposes of calculating the
Borrowing Base in any given month) each Account arising in the ordinary course
of Borrower's business from the sale of goods or rendering of Services which
Agent, in its reasonable discretion, deems an Eligible Receivable unless:
(a) it is not subject to a valid perfected first priority
security interest in favor of Agent, for the benefit of itself and Lenders,
subject to no other Lien of equal or higher priority;
(b) it is not evidenced by an invoice, statement or other
documentary evidence satisfactory to Agent; provided, that Agent in its sole
discretion may from time to time include as Accounts that are not evidenced by
an invoice, statement or other documentary evidence satisfactory to Agent as
Eligible Receivables and determine the advance rate, liquidity factors and
reserves applicable to Advances made on any such Accounts;
(c) it or any portion thereof (in which case only such
portion shall not be an Eligible Receivable) is payable by a beneficiary,
recipient or subscriber individually and not directly by a Medicaid/Medicare
Account Debtor or commercial medical insurance carrier acceptable to Agent;
(d) it arises out of services rendered or a sale made to,
or out of any other transaction between or with, one or more affiliates of any
Borrower;
(e) it remains unpaid for longer than the earlier of (i)
120 calendar days after the first to occur of the claim date or invoice date,
and (ii) 135 calendar days after the applicable Services were rendered;
(f) with respect to all Accounts owed by any particular
Account Debtor and/or its affiliates, if more than 10% of the aggregate balance
of all such Accounts owing from such Account Debtor and/or its affiliates remain
unpaid for longer than the earlier of (i) 120
4
calendar days after the first to occur of the claim date or invoice date, and
(ii) 135 calendar days after the applicable Services were rendered;
(g) with respect to all Accounts owed by any particular
Account Debtor and/or its affiliates, 25% or more of all such Accounts are not
deemed Eligible Receivables for any reason hereunder (which percentage may, in
Agent's sole discretion, be increased or decreased);
(h) with respect to all Accounts owed by any particular
Account Debtor and/or its affiliates (except Medicaid/Medicare Account Debtors),
if such Accounts exceed 20% of the net collectible dollar value of all Eligible
Receivables at any one time (including Accounts from Medicaid/Medicare Account
Debtors) (which percentage may, in Agent's sole discretion, be increased or
decreased); provided, that only the portion of Accounts which exceed 20% shall
be deemed ineligible for purposes of this subsection (h);
(i) any covenant, agreement, representation or warranty
contained in any Loan Document with respect to such Account has been breached
and remains uncured;
(j) the Account Debtor for such Account has commenced a
voluntary case under any Debtor Relief Law or has made an assignment for the
benefit of creditors, or a decree or order for relief has been entered by a
court having jurisdiction in respect of such Account Debtor in an involuntary
case under any Debtor Relief Law, or any other petition or application for
relief under any Debtor Relief Law has been filed against such Account Debtor,
or such Account Debtor has failed, suspended business, ceased to be solvent,
called a meeting of its creditors, or has consented to or suffered a receiver,
trustee, liquidator or custodian to be appointed for it or for all or a
significant portion of its assets or affairs, or Borrower, in the ordinary
course of business, should have known of any of the foregoing;
(k) it arises from the sale of property or services
rendered to one or more Account Debtors outside the continental United States or
that have their principal place of business or chief executive offices outside
the continental United States;
(l) it represents the sale of goods or rendering of
services to an Account Debtor on a ▇▇▇▇-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment or any other repurchase or return
basis or is evidenced by chattel paper or an instrument of any kind or has been
reduced to judgment;
(m) the applicable Account Debtor for such Account is any
Governmental Authority, unless rights to payment of such Account have been
assigned to Agent, for the benefit of itself and Lenders, pursuant to the
Assignment of Claims Act of 1940, as amended (31 U.S.C. Section 3727, et seq.
and 41 U.S.C. Section 15, et seq.), or otherwise all with applicable statutes or
regulations respecting the assignment of government Accounts have been complied
with (for example, with respect to all Account payable directly by a
Medicaid/Medicare Account Debtor);
(n) it is subject to any offset, credit (including any
resource or other income credit or offset), deduction, defense, discount,
chargeback, freight claim, allowance, adjustment, dispute or counterclaim, or is
contingent in any respect or for any reason; provided, however, that such
Account shall be ineligible only to the extent of such offset, credit,
deduction, defense,
5
discount, chargeback, freight claim, allowance, adjustment, dispute,
counterclaim or contingency;
(o) there is any agreement with an Account Debtor for any
deduction from such Account, except for discounts or allowances made in the
ordinary course of business for prompt payment, all of which discounts or
allowances are reflected in the calculation of the face value of each invoice
related thereto, such that only the discounted amount of such Account after
giving effect to such discounts and allowances shall be considered an Eligible
Receivable;
(p) any return, rejection or repossession of goods or
services related to it has occurred;
(q) it is not payable to Borrower;
(r) Borrower has agreed to accept or has accepted any
non-cash payment for such Account;
(s) with respect to any Account arising from the sale of
goods, the goods have not been shipped to the Account Debtor or its designee;
(t) with respect to any Account arising from the
performance of Services, the Services have not been actually performed or the
Services were undertaken in violation of any law; or
(u) it fails to meet such other specifications and
requirements which may from time to time be established by Agent or is not
otherwise satisfactory to Agent, as determined in Agent's reasonable discretion.
"Environmental Laws" shall mean, collectively and each individually,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Superfund Amendment and Reauthorization Act of 1986, the Resource
Conservation and Recovery Act, the Toxic Substances Control Act, the Clean Air
Act, the Clean Water Act, any other "Superfund" or "Superlien" law and all other
federal, state, local and foreign environmental, land use, zoning, health,
chemical use, safety and sanitation laws, statutes, ordinances and codes
relating to the protection of the environment and/or governing the use, storage,
treatment, generation, transportation, processing, handling, production or
disposal of Hazardous Substances, in each case, as amended, and the rules,
regulations, policies, guidelines, interpretations, decisions, orders and
directives of Governmental Authorities with respect thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.
"Event of Default" shall mean the occurrence of any event set forth in
Article VIII.
"Facility Cap" shall mean $50,000,000.
6
"Fair Valuation" shall mean the determination of the value of the
consolidated assets of a Person on the basis of the amount which may be realized
by a willing seller within a reasonable time through collection or sale of such
assets at market value on a going concern basis to an interested buyer who is
willing to purchase under ordinary selling conditions in an arm's length
transaction.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time as applied by nationally
recognized accounting firms.
"Governmental Authority" shall mean any federal, state, municipal,
national, local or other governmental department, court, commission, board,
bureau, agency or instrumentality or political subdivision thereof, or any
entity or officer exercising executive, legislative or judicial, regulatory or
administrative functions of or pertaining to any government or any court, in
each case, whether of the United States or a state, territory or possession
thereof, a foreign sovereign entity or country or jurisdiction or the District
of Columbia.
"Guarantor" shall mean, collectively and each individually, all
guarantors of the Obligations or any part thereof.
"Guaranty" shall mean, collectively and each individually, all
guarantees executed by any Guarantors.
"Hazardous Substances" shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, hazardous wastes, hazardous or toxic substances or
related materials as defined in or subject to any applicable Environmental Law.
"Healthcare Laws" shall mean all applicable statutes, laws, ordinances,
rules and regulations of any Governmental Authority with respect to regulatory
matters primarily relating to patient healthcare, healthcare providers and
healthcare services (including without limitation Section 1128B(b) of the Social
Security Act, as amended, 42 U.S.C. Section 1320a-7(b) (Criminal Penalties
Involving Medicare or State Health Care Programs), commonly referred to as the
"Federal Anti-Kickback Statute," and the Social Security Act, as amended,
Section 1877, 42 U.S.C. Section 1395nn (Prohibition Against Certain Referrals),
commonly referred to as "▇▇▇▇▇ Statute").
"Healthcare Loan Agreement" shall mean that certain Loan and Security
Agreement dated as of May 5, 2000, by and between Healthcare Business Credit
Corporation (formerly known as Copelco/American Healthfund. Inc.) and Borrower
and its Subsidiaries and affiliates named therein, as amended.
"High Yield Documents" shall mean the Indenture among PSI, the
guarantors party thereto and Wachovia Bank, National Association, as trustee,
and all other documents, agreements and instruments pertaining to all or a
portion of the High Yield Indebtedness, each as such exist on the Closing Date.
7
"High Yield Indebtedness" shall mean the senior subordinated
indebtedness in the amount of up to $200,000,000, and in an original amount of
not less than $150,000,000, owing by Borrower as evidenced by Borrower's 10-5/8%
senior subordinated notes due 2013 governed by the terms of the High Yield
Documents.
"HUD Application" shall have the meaning assigned to such term in
Section 6.13(b).
"HUD Financing" shall mean any type of financing to or for Borrower, or
any Subsidiary of Borrower, from the U.S. Department of Housing and Urban
Development.
"HUD Financing Subsidiaries" shall mean ▇▇▇▇▇ ▇▇▇▇ Real Estate, LLC, a
North Carolina limited liability company, PSI Cedar Springs Hospital Real
Estate, Inc., a Colorado corporation, Psychiatric Solutions of Oklahoma Real
Estate, Inc., an Oklahoma corporation, Riveredge Real Estate, Inc., an Illinois
corporation, Cypress Creek Real Estate, L.P., a Texas limited partnership, West
Oaks Real Estate, L.P., a Texas limited partnership, Neuro Rehab Real Estate,
L.P., a Texas limited partnership, Texas ▇▇▇▇▇▇ ▇▇▇▇▇ Hospital Real Estate,
L.P., a Texas limited partnership, Texas Oaks Psychiatric Hospital Real Estate,
L.P., a Texas limited partnership, Texas San Marcos Treatment Center Real
Estate, L.P., a Texas limited partnership, and such other Subsidiaries of
Borrower hereafter disclosed in writing to Agent and approved in writing by
Agent.
"Indebtedness" of any Person shall mean, without duplication, (a) all
items which, in accordance with GAAP, would be included in determining total
liabilities as shown on the liability side of the balance sheet of such Person
as of the date as of which Indebtedness is to be determined, including any lease
which, in accordance with GAAP would constitute Indebtedness, (b) all
indebtedness secured by any mortgage, pledge, security, Lien or conditional sale
or other title retention agreement to which any property or asset owned or held
by such Person is subject, whether or not the indebtedness secured thereby shall
have been assumed, (c) all indebtedness of others which such Person has directly
or indirectly guaranteed, endorsed (otherwise than for collection or deposit in
the ordinary course of business), discounted or sold with recourse or agreed
(contingently or otherwise) to purchase or repurchase or otherwise acquire, or
in respect of which such Person has agreed to supply or advance funds (whether
by way of loan, stock, equity or other ownership interest purchase, capital
contribution or otherwise) or otherwise to become directly or indirectly liable.
"Indemnified Persons" shall have the meaning assigned to such term in
Section 12.4.
"Initial Advance" shall have the meaning assigned to such term in
Section 4.1.
"Insured Event" shall have the meaning assigned to such term in Section
12.4.
"Insurer" shall mean a Person that insures another Person against any
costs incurred in the receipt by such other Person of Services, or that has an
agreement with any Borrower to compensate it for providing Services to such
Person.
"Intellectual Property" shall have the meaning assigned to such term in
Section 5.11.
8
"Interest Settlement Date" shall have the meaning assigned to such term
in Section 11.7(a)(iii).
"Internal Cost Report" shall have the meaning assigned to such term in
Section 6.17(a).
"Inventory" shall mean all "inventory" (as defined in the UCC) of
Borrower (or, if referring to another Person, of such other Person), now owned
or hereafter acquired, and all documents of title or other documents
representing any of the foregoing, and all collateral security and guaranties of
any kind, now or hereafter in existence, given by any Person with respect to any
of the foregoing.
"Landlord Waiver and Consent" shall mean a waiver/consent in form and
substance satisfactory to Agent from the owner/lessor of any premises not owned
by Borrower at which any of the Collateral is now or hereafter located for the
purpose of providing Agent access to such Collateral, in each case as such may
be modified, amended or supplemented from time to time.
"Lender Addition Agreement" shall mean an agreement among Agent, a
Lender and such Lender's assignee regarding their respective rights and
obligations with respect to assignments of the Loans and other interests under
this Agreement and the other Loan Documents substantially in the form of Exhibit
C hereto.
"Lenders" shall mean the financial institutions, from time to time
named on Schedule 1 under the heading "Lenders", their respective successors and
permitted assigns (but not, except as expressly set forth herein, any
participant that is not otherwise a party to this Agreement).
"Liability Event" shall mean any event, fact, condition or circumstance
or series thereof (i) in or for which any Borrower becomes liable or otherwise
responsible for any amount owed or owing to any Medicaid or Medicare program by
a provider under common ownership with such Borrower or any provider owned by
such Borrower pursuant to any applicable law, ordinance, rule, decree, order or
regulation of any Governmental Authority after the failure of any such provider
to pay any such amount when owed or owing, (ii) in which Medicaid or Medicare
payments to any Borrower are lawfully set-off against payments to such or any
other Borrower to satisfy any liability of or for any amounts owed or owing to
any Medicaid or Medicare program by a provider under common ownership with such
Borrower or any provider owned by such Borrower pursuant to any applicable law,
ordinance, rule, decree, order or regulation of any Governmental Authority,
excluding any cost report liability which has been appropriately recorded in
Borrower's financial statements in accordance with GAAP, or (iii) any of the
foregoing under clauses (i) or (ii) in each case pursuant to statutory or
regulatory provisions that are similar to any applicable law, ordinance, rule,
decree, order or regulation of any Governmental Authority referenced in clauses
(i) and (ii) above or successor provisions thereto.
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
restriction, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement or any
lease in the nature thereof), or any other arrangement
9
pursuant to which title to the property is retained by or vested in some other
Person for security purposes.
"Liquidity Factors" shall have the meaning assigned to such term in the
definition of Borrowing Base Availability.
"Loan" or "Loans" shall mean, individually and collectively, the Term
Loan and all Advances.
"Loan Documents" shall mean, collectively and each individually, the
Agreement, the Notes, the Security Documents, the Guarantees, the Stock Pledge
Agreements, the Collateral Assignment, the Lockbox Agreements, the Participation
Agreement, the UCC financing statements, the Subordination Agreements, the
Landlord Waiver and Consents, the Borrowing Certificates, the Warrant Agreement
and the Warrant and all other agreements, documents, instruments and
certificates heretofore or hereafter executed or delivered to Agent in
connection with any of the foregoing or the Loans, as the same may be amended,
modified or supplemented from time to time.
"Lockbox Accounts" shall mean the accounts maintained by Borrower at
the Lockbox Banks into which all collections or payments on their Accounts and
other Collateral are paid.
"Lockbox Agreement" shall have the meaning assigned to such term in
Section 2.5.
"Lockbox Banks" shall mean all banks at which Borrower maintains a
Lockbox Account.
"Material Adverse Effect" or "Material Adverse Change" shall mean any
event, condition or circumstance or set of events, conditions or circumstances
or any change(s) which (i) has or could reasonably be expected to have any
material adverse effect upon or change in the validity or enforceability of any
Loan Document, (ii) has been or could reasonably be expected to be material and
adverse to the value of any material portion of the Collateral or to the
business, operations, prospects, properties, assets, liabilities or condition of
Borrower and Guarantors, in each case taken as a whole, or (iii) has materially
impaired or could reasonably be expected to materially impair the ability of
Borrowers and Guarantors (taken as a whole) to perform the Obligations or to
consummate the transactions under the Loan Documents executed by such Person.
"Maximum Loan Amount" shall mean $17,000,000.
"Medicaid/Medicare Account Debtor" shall mean any Account Debtor which
is (i) the United States of America acting under the Medicaid or Medicare
program established pursuant to the Social Security Act or any other federal
healthcare program, including, without limitation, CHAMPUS, (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 any other state health care program, or
(iii) any agent, carrier, administrator or intermediary for any of the
foregoing.
"Minimum Termination Fee" shall mean (for the time period indicated)
the amount equal to the greater of (a) Yield Maintenance, and (b) (i) 4% of the
Facility Cap, if the date of termination is after the day that is six months
after the Closing Date but before the second
10
anniversary of the Closing Date; or (ii) 3% of the Facility Cap, if the date of
termination is on or after the second anniversary of the Closing Date.
"Mortgages" shall mean, collectively, those certain Mortgages, Deeds of
Trust, Assignments of Rents, Security Agreements and Fixture Filings executed by
Borrower in favor of Agent, for the benefit of itself and Lenders, by which
Borrower granted and conveyed to Agent, for the benefit of itself and Lenders,
as security for the Obligations, a Lien upon the each of the Real Properties.
"Net Collectible Value" shall mean the amount Borrower bills third
party payors less deductible obligations and contractual allowances.
"New Borrower" shall have the meaning assigned to such term in the
recitals.
"Note" shall mean, collectively and each individually, the Revolving
Notes and the Term Notes.
"Obligations" shall mean all shall mean all present and future
obligations, Indebtedness and liabilities of Borrower and/or Guarantors to Agent
or Lenders at any time and from time to time of every kind, nature and
description, direct or indirect, secured or unsecured, joint and several,
absolute or contingent, due or to become due, matured or unmatured, now existing
or hereafter arising, contractual or tortious, liquidated or unliquidated, under
any of the Loan Documents or otherwise relating to Notes and/or Loans,
including, without limitation, all applicable fees, charges and expenses and/or
all amounts paid or advanced by Agent or Lenders on behalf of or for the benefit
of any Borrower and/or Guarantor for any reason at any time, including in each
case obligations of performance as well as obligations of payment and interest
that accrue after the commencement of any proceeding under any Debtor Relief Law
by or against any such Person.
"Original Closing Date" shall mean November 30, 2001.
"Original Loan Amount" shall have the meaning assigned to such term in
the recitals.
"Participant" shall have the meaning assigned to such term in Section
12.2(b).
"Participation Agreement" shall mean that certain Participation
Agreement by and between Agent and Healthcare.
"Patient" shall mean any Person receiving Services from Borrower and
all Persons legally liable to pay Borrower for such Services other than
Insurers.
"Payment Office" shall mean initially the address set forth beneath the
Agent's name on the signature page of the Agreement, and thereafter, such other
office of Agent, if any, which it may designate by notice to Borrower to be the
Payment Office.
"Permit" shall mean collectively all licenses, leases, powers, permits,
franchises, certificates, authorizations, approvals, certificates of need,
provider numbers and other rights.
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"Permitted Indebtedness" shall have the meaning assigned to such term
in Section 7.2.
"Permitted Investments" shall mean:
(a) any investment in PSI or any Subsidiary of PSI to the
extent permitted under Section 7.6 and 7.11;
(b) any investment in Cash Equivalents (as defined in
Annex I);
(c) any investments received in compromise of obligations
of such Persons incurred in the ordinary course of trade creditors or customers
that were incurred in the ordinary course of business, including pursuant to any
plan of reorganization or similar arrangement upon the bankruptcy or insolvency
of any trade creditor or customer; and
(d) investments in prepaid expenses, negotiable
instruments held for collection, utility and workers compensation, performance
and similar deposits made in the ordinary course of business and consistent with
past practices.
"Permitted Liens" shall have the meaning assigned to such term in
Section 7.3.
"Person" shall mean an individual, a partnership, a corporation, a
limited liability company, a business trust, a joint stock company, a trust, an
unincorporated association, a joint venture, a Governmental Authority or any
other entity of whatever nature.
"Prime Rate" shall mean a fluctuating interest rate per annum equal at
all times to the rate of interest announced publicly from time to time by
Citibank, N.A. as its base rate; provided, that such rate is not necessarily the
best rate offered to its customers, and, should Agent be unable to determine
such rate, such other indication of the prevailing prime rate of interest as may
reasonably be chosen by Agent; provided, that each change in the fluctuating
interest rate shall take effect simultaneously with the corresponding change in
the Prime Rate.
"Pro Rata Share" shall mean (a) with respect to matters relating to a
particular Commitment of a Lender, the percentage obtained by dividing (i) such
Commitment of that Lender by (ii) all such Commitments of all Lenders; provided,
however, that if any Commitment is terminated pursuant to the terms hereof, then
"Pro Rata Share" means the percentage obtained by dividing (x) the aggregate
amount of such Lender's outstanding Loans related to such Commitment by (y) the
aggregate amount of all outstanding Loans related to such Commitment, (b) with
respect to matters relating to a particular Term Loan of a Lender, the
percentage obtained by dividing (i) the aggregate amount of such Lender's
outstanding Term Loans by (ii) the aggregate amount of all outstanding Term
Loans, and (c) with respect to all other matters, the percentage obtained by
dividing (i) the aggregate amount of a Lender's Term Loans outstanding and such
Lender's Commitment by (ii) the aggregate amount of all Lenders' Term Loans
outstanding and all Lender's Commitments; in any case as such percentage may be
adjusted by assignments permitted pursuant to Section 12.3.
"PSI Surety" shall mean PSI Surety, Inc., a Montana corporation.
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"Ramsay Acquisition" shall mean the transaction contemplated by the
Agreement and Plan of Merger.
"Real Property" shall mean the owned real property listed on Schedule
5.4.
"Receipt" shall have the meaning assigned to such term in Section 12.5.
"Register" shall have the meaning assigned to such term in Section
12.2(c).
"Released Parties" shall have the meaning assigned to such term in
Section 12.11.
"Releasing Parties" shall have the meaning assigned to such term in
Section 12.11.
"Requisite Lenders" shall mean Lenders holding or being responsible for
51% or more of the sum of (a) all outstanding Loans and (b) all unutilized
Commitments.
"Reserve Percentage" shall mean the maximum effective percentage in
effect on a given day as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum reserve
requirements (including, without limitation, supplemental, marginal and
emergency reserve requirements) for a member bank of the Federal Reserve System
with respect to Eurocurrency funding.
"Revolving Facility" shall mean a revolving credit facility provided by
Lenders to Borrower pursuant to Section 2.1.
"Revolving Facility Term" shall mean the period commencing on the
Closing Date and ending on the date that is three years after the Closing Date
(i.e., the third year anniversary of the Closing Date).
"Revolving Note(s)" shall mean, collectively and each individually, the
Revolving Note A-1, the Revolving Note A-2, the Revolving Note B, the Revolving
Note C and any additional promissory note(s) payable to the order of each Lender
executed by Borrower evidencing the Revolving Facility, as the same may be
modified, amended or supplemented from time to time.
"Securities Purchase Agreement" shall mean that certain Securities
Purchase Agreement, dated as of June 28, 2002 by and between PSI and 1818
Mezzanine Fund, as amended, supplemented, restated or otherwise modified from
time to time as permitted hereunder.
"Security Agreement" shall mean that certain Second Amended and
Restated Security Agreement executed by Borrower in favor of Agent, for the
benefit of itself and Lenders, as such may be modified, amended or supplemented
from time to time.
"Security Documents" shall mean the Notes, Security Agreement,
Mortgages, Guarantees, Stock Pledge Agreements, Lockbox Agreements, UCC
financing statements and all other documents or instruments necessary to create
or perfect the Liens in the Collateral, as such may be modified, amended or
supplemented from time to time.
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"Seller Notes" shall mean the indebtedness owing to The ▇▇▇▇▇ Schools,
Inc. as identified in the Subordination Agreement applicable thereto.
"Services" shall mean medical and health care services provided to a
Person, including, but not limited to, medical and health care services which
are covered by a policy of insurance issued by an Insurer, 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.
"Settlement Date" shall have the meaning assigned to such term in
Section 11.7(a)(ii).
"Stock Pledge Agreement" shall mean, collectively and each
individually, one or more Stock Pledge Agreements, executed by Borrowers and
Guarantors in favor of Agent, for the benefit of itself and Lenders, as the same
may be modified, amended or supplemented from time to time.
"Subordinated Debt" shall mean any Indebtedness of Borrower that is
expressly subordinated to the Obligations, including, without limitation, (i)
the Indebtedness identified in each Subordination Agreement, (ii) the High Yield
Indebtedness and (iii) the Seller Notes.
"Subordination Agreement" shall mean, collectively and each
individually, as each has been and may be amended, revised or restated, (i) that
certain Subordination and Intercreditor Agreement, dated as of June 28, 2002 by
and among CapitalSource, 1818 Mezzanine Fund, PSI (and its Subsidiaries thereof
party thereto), (ii) that certain Amended and Restated Subordination Agreement,
dated as of April 1, 2003 by and among CapitalSource, 1818 Mezzanine Fund,
Hospitals and The ▇▇▇▇▇ Schools, Inc., and (iii) any other subordination
agreements to which Agent or any Lender and other service providers or creditors
of any Borrower are a party.
"Subsidiary" shall mean, (i) as to Borrower, any Person in which more
than 50% of all equity, membership, partnership or other ownership interests is
owned directly or indirectly by Borrower or one or more of its Subsidiaries, and
(ii) as to any other Person, any Person in which more than 50% of all equity,
membership, partnership or other ownership interests is owned directly or
indirectly by such Person or by one or more of such Person's Subsidiaries.
"Term Finance Fee" shall mean the amount equal to 1.0% of the original
principal amount of the Term Notes.
"Termination Date" shall have the meaning assigned to such term in
Section 11.1.
"Term Loan" shall mean a term loan facility provided by Lenders to
Borrower pursuant to Section 2.6.
"Term Loan Extension Fee" shall mean the amount equal to 1.0% of the
result of (a) $17,000,000, minus (b) the portion of the Term Notes paid after
the Closing Date as a result of a HUD Financing obtained through an affiliate of
CapitalSource, payable by Borrower in the event the Term Notes Term is extended
an additional two years.
"Term Loan Maturity Date" shall have the meaning assigned to such term
in Section 2.8.
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"Term Note(s)" shall mean, collectively and each individually, Term
Note A, Term Note B and Term Note C and any additional promissory note(s)
payable to the order of each Lender executed by Borrower evidencing the Term
Loan, as the same may be modified, amended or supplemented from time to time.
"Term Notes Term" shall mean the period commencing on the Original
Closing Date and ending on the date that is two years after the Original Closing
Date; provided, that this period may be extended for an additional two years
(i.e., the fourth year anniversary of the Original Closing Date) upon (i) the
mutual written agreement of the parties hereto and (ii) payment by Borrower of
the Term Loan Extension Fee.
"Term Termination" shall have the meaning assigned to such term in
Section 3.4(b).
"The ▇▇▇▇▇ Schools" shall mean The ▇▇▇▇▇ Schools, Inc., a Delaware
corporation.
"Transferee" shall have the meaning assigned to such term in Section
12.2(a).
"UCC" shall mean the Uniform Commercial Code as in effect in the State
of Maryland from time to time.
"Unused Line Fee" shall have the meaning assigned to such term in
Section 3.2.
"Warrant" shall have the meaning given such term in the Warrant
Agreement.
"Warrant Agreement" shall mean the Common Stock Purchase Warrant dated
as of August 5, 2002, by and between Borrower and CapitalSource, as such may be
modified, restated, amended or supplemented from time to time.
"Yield Maintenance" shall mean the difference between (a) the all-in
effective yield (measured as a percent per annum) on the Revolving Facility for
the six months prior to termination of the Revolving Facility minus (b) the most
recent published ask yield to maturity as quoted in the Wall Street Journal for
United States Treasury Notes or Bills with a maturity date closest to the last
day of the Revolving Facility Term multiplied by (c) the average amount of
Advances outstanding (or amounts deemed to be outstanding under Section 2.3)
under the Revolving Facility for the six months prior to termination of the
Revolving Facility multiplied by (d) the quotient of (x) the number of months
then remaining in the Revolving Facility Term divided by (y) twelve.
15
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
AMONG
PSYCHIATRIC SOLUTIONS, INC.,
AND VARIOUS SUBSIDIARIES THEREOF
AND
CAPITALSOURCE FINANCE LLC
DATED AS OF
JUNE 30, 2003
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
TABLE OF CONTENTS
Page
I. DEFINITIONS.................................................................................... 2
1.1 GENERAL TERMS........................................................................... 3
II. ADVANCES, PAYMENT AND INTEREST................................................................. 3
2.1 THE REVOLVING FACILITY.................................................................. 3
2.2 THE REVOLVING NOTES; MATURITY........................................................... 3
2.3 INTEREST................................................................................ 4
2.4 FACILITY DISBURSEMENTS; REQUIREMENT TO DELIVER BORROWING CERTIFICATE.................... 4
2.5 COLLECTIONS; REPAYMENT; BORROWING AVAILABILITY AND LOCKBOX.............................. 5
2.6 TERM LOAN............................................................................... 6
2.7 INTEREST ON THE TERM NOTES.............................................................. 7
2.8 REPAYMENT OF TERM LOAN; MATURITY........................................................ 7
2.9 MANNER OF PAYMENT....................................................................... 7
2.10 REPAYMENT OF EXCESS ADVANCES............................................................ 7
2.11 OTHER MANDATORY PREPAYMENTS............................................................. 8
2.12 PAYMENTS BY AGENT....................................................................... 8
2.13 COLLATERAL; SECURITY INTEREST........................................................... 8
2.14 COLLATERAL ADMINISTRATION............................................................... 8
2.15 POWER OF ATTORNEY....................................................................... 10
III. FEES AND OTHER CHARGES; ALLOCATION OF PURCHASE PRICE........................................... 10
3.1 COMMITMENT AND MODIFICATION FEES........................................................ 10
3.2 UNUSED LINE FEE......................................................................... 10
3.3 COLLATERAL MANAGEMENT FEE............................................................... 11
3.4 EARLY TERMINATION/ FINANCE FEES......................................................... 11
3.5 COMPUTATION OF FEES; LAWFUL LIMITS...................................................... 12
3.6 DEFAULT RATE OF INTEREST................................................................ 12
3.7 ACKNOWLEDGEMENT OF JOINT AND SEVERAL LIABILITY, CROSS-GUARANTY AND CONTRIBUTION RIGHTS;
GUARANTY ENFORCEMENT................................................................... 12
3.8 WARRANTS................................................................................ 16
3.9 ALLOCATION OF PURCHASE PRICE............................................................ 16
IV. CONDITIONS PRECEDENT........................................................................... 16
4.1 CONDITIONS TO INITIAL ADVANCE, FUNDING OF TERM LOAN AND CLOSING......................... 16
4.2 CONDITIONS TO EACH ADVANCE AND FUNDING OF THE TERM LOAN................................. 20
V. REPRESENTATIONS AND WARRANTIES................................................................. 21
5.1 ORGANIZATION AND AUTHORITY.............................................................. 21
5.2 LOAN DOCUMENTS.......................................................................... 21
5.3 SUBSIDIARIES, CAPITALIZATION AND OWNERSHIP INTERESTS.................................... 22
5.4 PROPERTIES.............................................................................. 22
5.5 OTHER AGREEMENTS........................................................................ 22
5.6 LITIGATION.............................................................................. 23
5.7 HAZARDOUS MATERIALS..................................................................... 23
5.8 TAX RETURNS; GOVERNMENTAL REPORTS....................................................... 23
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5.9 FINANCIAL STATEMENTS AND REPORTS........................................................ 23
5.10 COMPLIANCE WITH LAW..................................................................... 24
5.11 INTELLECTUAL PROPERTY................................................................... 24
5.12 LICENSES AND PERMITS; LABOR............................................................. 24
5.13 NO DEFAULT.............................................................................. 25
5.14 DISCLOSURE.............................................................................. 25
5.15 EXISTING INDEBTEDNESS; INVESTMENTS, GUARANTEES AND CERTAIN CONTRACTS.................... 25
5.16 OTHER AGREEMENTS........................................................................ 25
5.17 INSURANCE............................................................................... 26
5.18 NAMES; LOCATION OF OFFICES, RECORDS AND COLLATERAL...................................... 26
5.19 NON-SUBORDINATION....................................................................... 26
5.20 ACCOUNTS................................................................................ 26
5.21 HEALTHCARE.............................................................................. 27
5.22 SURVIVAL................................................................................ 27
VI. AFFIRMATIVE COVENANTS.......................................................................... 27
6.1 FINANCIAL STATEMENTS, REPORTS AND OTHER INFORMATION..................................... 28
6.2 PAYMENT OF OBLIGATIONS.................................................................. 30
6.3 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE AND ASSETS............................. 30
6.4 COMPLIANCE WITH LEGAL AND OTHER OBLIGATIONS............................................. 30
6.5 INSURANCE............................................................................... 30
6.6 TRUE BOOKS.............................................................................. 31
6.7 INSPECTION; PERIODIC AUDITS............................................................. 31
6.8 FURTHER ASSURANCES; POST CLOSING........................................................ 31
6.9 PAYMENT OF INDEBTEDNESS................................................................. 32
6.10 LIEN RELEASES........................................................................... 32
6.11 USE OF PROCEEDS......................................................................... 32
6.12 COLLATERAL DOCUMENTS.................................................................... 32
6.13 RIGHT OF FIRST REFUSAL.................................................................. 32
6.14 TAXES AND OTHER CHARGES................................................................. 33
6.15 PATIENT BILLS........................................................................... 34
6.16 MODIFICATION OF SUBORDINATION AGREEMENTS................................................ 34
6.17 INTERNAL COST REPORTS; RESERVES......................................................... 34
VII. NEGATIVE COVENANTS............................................................................. 35
7.1 FINANCIAL COVENANTS..................................................................... 35
7.2 INDEBTEDNESS............................................................................ 35
7.3 LIENS................................................................................... 36
7.4 INVESTMENTS; NEW FACILITIES OR COLLATERAL; SUBSIDIARIES................................. 37
7.5 DIVIDENDS; REDEMPTIONS.................................................................. 37
7.6 TRANSACTIONS WITH AFFILIATES............................................................ 37
7.7 CHARTER DOCUMENTS; FISCAL YEAR; DISSOLUTION; USE OF PROCEEDS............................ 38
7.8 TRUTH OF STATEMENTS..................................................................... 38
7.9 PAYMENT ON SUBORDINATED DEBT............................................................ 39
7.10 AMENDMENT OF THE HIGH YIELD DOCUMENTS................................................... 39
7.11 NON-BORROWERS........................................................................... 39
VIII. EVENTS OF DEFAULT.............................................................................. 40
IX. RIGHTS AND REMEDIES AFTER DEFAULT.............................................................. 42
9.1 RIGHTS AND REMEDIES..................................................................... 42
9.2 RIGHTS AND REMEDIES NOT EXCLUSIVE....................................................... 43
ii
X. WAIVERS AND JUDICIAL PROCEEDINGS............................................................... 44
10.1 WAIVERS................................................................................. 44
10.2 DELAY; NO WAIVER OF DEFAULTS............................................................ 44
10.3 JURY WAIVER............................................................................. 44
10.4 COOPERATION IN DISCOVERY AND LITIGATION................................................. 45
10.5 AMENDMENT AND WAIVERS................................................................... 45
XI. EFFECTIVE DATE AND TERMINATION................................................................. 46
11.1 EFFECTIVENESS AND TERMINATION........................................................... 46
11.2 SURVIVAL................................................................................ 46
11.3 AGENT................................................................................... 46
11.4 CONSENTS................................................................................ 51
11.5 SET-OFF AND SHARING OF PAYMENTS......................................................... 51
11.6 DISBURSEMENT OF FUNDS................................................................... 52
11.7 SETTLEMENTS; PAYMENTS AND INFORMATION................................................... 52
11.8 DISSEMINATION OF INFORMATION............................................................ 54
XII. MISCELLANEOUS.................................................................................. 54
12.1 GOVERNING LAW; JURISDICTION; SERVICE OF PROCESS; VENUE.................................. 54
12.2 SUCCESSORS AND ASSIGNS; ASSIGNMENTS AND PARTICIPATIONS.................................. 55
12.3 APPLICATION OF PAYMENTS................................................................. 58
12.4 INDEMNITY............................................................................... 58
12.5 NOTICE.................................................................................. 59
12.6 SEVERABILITY; CAPTIONS; COUNTERPARTS; FACSIMILE SIGNATURES.............................. 59
12.7 EXPENSES................................................................................ 59
12.8 ENTIRE AGREEMENT........................................................................ 60
12.9 AGENT APPROVALS......................................................................... 60
12.10 CONFIDENTIALITY AND PUBLICITY........................................................... 60
12.11 RELEASE OF AGENT AND LENDERS............................................................ 61
12.12 AMENDMENT, RESTATEMENT, RENEWAL AND EXTENSION........................................... 61
12.13 JOINDER................................................................................. 61
iii