EXHIBIT
10.1
ATC REVOLVING CREDIT
LOAN AND SECURITY AGREEMENT
_________________
MELLON BANK, N.A.
AS LENDER
_____________________
ATC HEALTHCARE SERVICES, INC.
and
ATC STAFFING SERVICES, INC.
AS BORROWERS
______________________
JUNE 16, 1999
ATC REVOLVING CREDIT
LOAN AND SECURITY AGREEMENT
This ATC Revolving Credit Loan and Security Agreement
("Agreement"), dated June 16, 1999, is entered into by and
among ATC Healthcare Services, Inc., a Georgia corporation
("ATC Healthcare"), and ATC Staffing Services, Inc., a
Delaware corporation ("ATC Staffing")(each of the foregoing
individually, a "Borrower" and collectively, "Borrowers"),
and Mellon Bank, N.A. ("Lender").
Background
A. Borrowers and the Home Healthcare Group (as defined below)
(collectively, "Existing Borrowers") and Lender entered into a
certain Amended and Restated Loan and Security Agreement, dated
January 8, 1997 ("Existing Loan Agreement"), and related
instruments, agreements, and documents with Lender to reflect
certain financing arrangements between the parties. The Existing
Loan Agreement, as amended, and all other instruments, documents,
and agreements related thereto or executed in connection therewith,
are sometimes referred to herein collectively as the "Existing Loan
Documents."
B. Borrowers and Lender entered into a certain First Amendment
to Amended and Restated Loan and Security Agreement, dated April
27, 1998, pursuant to which certain terms and provisions of the
Existing Loan Agreement were modified and certain subsidiaries of
Staff Builders were joined in the loan facilities as Co-Borrowers.
C. Borrowers and Lender entered into a certain Second
Amendment to Amended and Restated Loan and Security Agreement,
dated June 30, 1998, pursuant to which certain terms and provisions
of the Existing Loan Agreement were modified and certain
subsidiaries of Staff Builders were joined in the loan facilities
as Co-Borrowers.
D. Pursuant to a letter from Lender to Borrowers, dated
January 14, 1999, Lender advised Borrowers that certain events of
default had occurred and continued under the Existing Loan
Agreement.
E. Pursuant to a letter from Lender to Borrowers, dated
March 26, 1999, Lender imposed certain additional conditions to
continued advances under the Existing Loan Agreement.
F. Contemporaneously with the execution of this Agreement, the
Existing Borrowers and Lender shall enter into a certain Amendment
and Forbearance Agreement, pursuant to which Lender shall @ consent
to a plan approved by the Board of Directors of Staff Builders to
separate its home healthcare business from its temporary staffing
business and to create two separate, publicly traded companies, one
engaged exclusively in providing home healthcare services and the
other engaged exclusively in providing temporary staffing services,
and (ii) temporarily forbear from the exercising certain of
Lender's rights and remedies with respect to certain existing
events of default under the Existing Loan Documents, as more fully
set forth therein.
G. Lender and Borrowers desire to define the terms and
conditions of their relationship in writing.
NOW, THEREFORE, with the foregoing background hereinafter
deemed incorporated by reference herein and made a part hereof, the
parties hereto, intending to be legally bound hereby, promise and
agree as follows:
SECTION 1 - DEFINITIONS AND INTERPRETATION
1.1 Terms Defined: As used in this Agreement, the
following terms shall have the following respective meanings:
Account - Any right to payment for goods sold or leased
or for services rendered which is not evidenced by an instrument or
chattel paper, whether or not it has been earned by performance.
Account Debtor - Any Person obligated on any Account
owing to Borrower.
Advances - Any monies advanced or credit extended to
Borrower by Lender 0
under the Revolving Credit.
Affiliate - Any entity (other than a Subsidiary), which
directly or indirectly through one or more intermediates controls
or is controlled by or is under common control with any Borrower.
Control may be by ownership, contract, or otherwise.
ATC Allocated Amount - Section 2. 1 (a).
ATC Revolving Credit Note - Section 2. 1 (b).
Business Day - Any day other than a Saturday, Sunday or
legal holiday on which Lender is not open, for business in
Philadelphia, PA.
Cash Flow Coverage Ratio -For the fiscal period, the
ratio of (a) the sum of (i) Net Income plus (ii) depreciation plus
(iii) amortization to (b) the sum of (i) the Unfunded Capital
Expenditures plus (ii) the long term indebtedness repaid.
Chelsea Group - Collectively, Chelsea Computer
Consultants, Inc., a New York corporation and Millenium Computer
Systems, Inc., a New York corporation.
Closing - Section 4.6.
Closing Date - Section 4.6.
Collateral - Section 3. 1.
Collateral Management Fee - Section 2.6(b).
Contract Term - Section 2. 1 (c).
Default - An election by Lender to declare Borrowers in
default upon the occurrence of an Event of Default under Section
8 herein.
Distribution -
(1) Dividends or other distributions on capital stock
of any of the Borrowers; and
(2) The redemption, repurchase or acquisition of such
stock or of warrants, rights or other options to purchase such
stock other than for securities of any Borrower.
ERISA - The Employee Retirement Income Security Act of
1974, as the same may be amended, from time to time.
Event of Default - Section 8. 1.
Expenses - Section 9.5.
GAAP - Generally accepted accounting principles applied
in a manner consistent with the most recent audited consolidated
financial statements of Borrowers furnished to Lender under
Section 5 herein.
Hazardous Substance - Section 5.16.
Home Healthcare Group - Collectively, each of those
entities listed on Exhibit attached hereto and made part hereof
Lender's Cash Collateral Account - Section 2.4(a).
Lender's Lockbox - Section 2.4(a).
Liabilities - All liabilities of every kind of
Borrowers as would be shown on a
consolidated balance sheet of Borrowers prepared in accordance
with GAAP.
Lien - Any interest in Property securing an obligation
owed to, or a claim by, a Person other than the owner of the
Property, whether such interest is based on the common law, statute
or contract, and including, but not limited to, the security
interest or lien arising from a mortgage, encumbrance, pledge,
conditional sale or trust receipt or a lease, consignment or
bailment for security purposes. The term "Lien" shall include
reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting Property other than those
which would not materially interfere with Borrowers' use of the
Property or would not materially detract from the value of the
Property. For the purposes of this Agreement, Borrowers shall be
deemed to be the owners of any Property which they have acquired or
hold subject to a conditional sale agreement or other arrangement
pursuant to which title to the Property has been retained by or
vested in some other Person for security purposes. If
Loan Documents - This Agreement, the ATC Revolving Credit
Note, the Stock Pledge Agreements, the Surety Agreements, the
Lockbox Agreement, the Trademark Security Agreement, and each other
document, instrument or agreement required to be executed and/or
delivered hereby, as amended from time to time.
Loans - All advances and extensions of credit under
the Revolving Credit.
Lockbox Agreement - Section 2.4(a).
Material Adverse Effect - A material adverse effect on
the business, Property, financial condition or results of
operations of any Borrower, or the ability of any Borrower to
perform under this Agreement.
Maximum Revolving Credit Amount - Section 2.1(a).
Net Income - The net income after taxes of Borrowers, as
such would appear on a consolidated profit and loss statement of
Borrowers, prepared in accordance with GAAP.
Obligations - All existing and future liabilities of
Borrowers to Lender, including, without limitation, indebtedness
evidenced under the ATC Revolving Credit Note issued pursuant
hereto, the Loans, repayment of cash advances, all fees and charges
owing by Borrowers, and all other liabilities and obligations of
every kind or nature whatsoever of Borrowers to Lender, whether
hereunder or otherwise, whether now existing or hereafter incurred,
joint or several, matured or unmatured, direct or indirect, primary
or secondary, related or unrelated, due or to become due,
including, without limitation, any extensions, modifications,
substitutions, increases and renewals thereof, and substitutions
therefor; the payment of all amounts advanced by Lender to
preserve, protect, defend, and enforce its rights hereunder and in
the Collateral in accordance with the terms of this Agreement; and
the payment of all Expenses incurred by Lender in connection
therewith, and all liabilities and obligations now existing or
hereafter incurred under the Existing Loan Documents by each
Borrower and the Home Healthcare Group.
Person - An individual, partnership, corporation, trust,
unincorporated association or organization, joint venture or any
other entity.
Prime Rate - That per annum rate designated or announced
by Lender at its principal office from time to time as its prime
rate of interest, which may be greater or less than other interest
rates charged by Lender to other borrowers and is not solely based
or dependent upon the interest rate which Lender may charge any
particular borrower or class of borrowers.
Property - Any interest of any Borrower in any kind of
property or asset, whether real, personal or mixed, or tangible or
intangible.
Qualified Accounts -All Accounts of Borrowers meeting all
of the following specifications as determined by Lender in its
reasonable discretion: (i) the Account is lawfully and exclusively
owned by any Borrower and subject to no Lien other than Liens of
Lender for the benefit of Lenders, and such Borrower has the
unconditional right, power and authority to grant a security
interest therein; (ii) the Account is valid and enforceable
representing the undisputed indebtedness of an Account Debtor not
more than one hundred twenty (120) days past the original invoice
date; (iii) the Account is not subject to any defense, set-off,
counterclaim, dispute, deduction, discount, credit, chargeback,
freight claim, allowance or adjustment of any kind; (iv) no part
of any goods, the sale or lease of which has given rise to the
Account, has been returned, rejected, lost or damaged; (v) if the
Account arises from the sale of goods by any Borrower, such sale
was an absolute sale and not on consignment or on approval or on a
sale-or-return basis or subject to any other repurchase or return
agreement, and such goods have been shipped to the Account Debtor
or its designee; (vi) if the Account arises from the performance of
services, such services have actually been performed; (vii) the
Account arose in the ordinary course of business of any Borrower;
(viii) no notice of the bankruptcy, receivership, reorganization,
liquidation, dissolution, or insolvency of the Account Debtor has
been received by Lender or any Borrower; (ix) the Account Debtor is
not a Subsidiary, Affiliate (including, without limitation, any
member of the Home Healthcare Group or the Chelsea Group) or
employee of any Borrower and does not control any Borrower and is
not under the control of or under common control with any Borrower;
(x) it is not an Account of an Account Debtor having its principal
place of business or executive office outside of the United States
unless such Account is guaranteed in full by an irrevocable letter
of credit satisfactory to Lender and assigned and delivered to
Lender; (xi) the Account of any Borrower does not represent a sale
to the government of the United States or any subdivision thereof
unless such Borrower has complied, for the benefit of Lender, with
the Federal Assignment of Claims Act; (xii) the portion of the
Account, that together with all other Accounts owing from the same
Account Debtor, does not represent more than twenty-five percent
(25%) of all of the Accounts of any Borrower; (xiii) not more than
fifty percent (50%) of the aggregate balance of all Accounts owing
from the Account Debtor obligated on the Account are outstanding
more than one hundred twenty (120) days past their invoice date;
(xiv) the Account is payable in lawful money of the United States;
and (xv) the Account meets such other reasonable specifications and
requirements which may from time to time be established by Lender.
Qualified Accounts shall not include that portion of an Account
representing interest or late charges for past due balances, debit
memos (other than for corrected Invoices), or retainage. No Account
arising from services provided by any Borrower as part of a joint
venture between such Borrower and any Person shall be a Qualified
Account. In the event of any dispute concerning the foregoing
criteria as to whether an Account is, or has ceased to be, a
Qualified Account, the decision of Lender in the exercise of its
sole discretion, shall control.
Revolving Credit - Section 2. 1 (a).
Revolving Credit Borrowing Base - Section 2.2.
Revolving Credit Maturity Date - July 31, 1999.
Revolving Credit Note - Section 2. 1 (b).
Revolving Credit Prime Based Rate - Prime Rate plus
two percent (2.0%).
Staff Builders - Staff Builders, Inc., a Delaware
corporation.
Stock Pledge Agreements - Section 3.2(b).
Subsidiary- Any corporation more than fifty percent (50%)
of whose voting stock is legally and beneficially owned by any of
the Borrowers or owned by a corporation more than fifty percent
(50%) of whose voting stock is legally and beneficially owned by
any of the Borrowers.
Support Agreements - Section 3.8.
Surety Agreements - Section 4. 1 (n).
Termination Fee - Section 2.6(c).
Trademark Security Agreement - Section 4. 1 (n).
UCC - Uniform Commercial Code.
Unfunded Capital Expenditures- Any expenditure that would
be classified as a capital expenditure on a consolidated statement
of cash flows of Borrowers prepared in accordance with GAAP.
Usage Fee - Section 2.6(a).
1.2 Accounting Principles: Where the character or
amount of any asset or liability or item of income or
expense is required to be determined or any consolidation
or other accounting computation is required to be made for
the purposes of this Agreement, this shall be done in
accordance with GAAP, to the extent applicable, except
where such principles are inconsistent with the
requirements of this Agreement.
SECTION 2 - THE LOANS
2.1 Revolving Credit - Description:
(a) Lender hereby establishes for the benefit of
Borrowers a Revolving Line of Credit ('Revolving Credit")
which shall include cash sums advanced and other credit
extended by Lender to or for the benefit of Borrowers from
time to time hereunder up to the maximum principal sum of
Fourteen Million Five Hundred Thousand Dollars
($14,500,000) ("Maximum Revolving Credit Amount") at any
one time outstanding, depending upon the requests of
Borrowers, and the availability of Borrowers' Qualified
Accounts and, based upon the Revolving Credit Borrowing
Base, or on such other basis as Lender may determine in
its sole discretion. The outstanding balance under the
Revolving Credit may fluctuate from time to time, to be
reduced by repayments made by Borrowers, and to be
increased by future advances and extensions of credit
which may be made by Lender to or for the benefit of
Borrowers. For the purposes of this Agreement, any
determination as to whether there is availability within
the Revolving Credit Borrowing Base for advances or
extensions of credit shall be determined by Lender in
accordance with the provisions of Section 2.2 hereof and
shall be final and binding upon Borrowers. Subject to
availability under the Revolving Credit Borrowing Base,
the fulfillment of any other conditions to borrowing
contained in this Agreement and the absence of a
continuing Event of Default or any event which with the
giving of notice or passage of time or both would become
an Event of Default, Borrowers may borrow, repay and
reborrow from time to time during the Contract Term.
Lender shall have the right to establish reserves against
the Revolving Credit Borrowing Base in such amounts and
with respect to such matters as Lender in its sole
discretion, deems appropriate. Borrowers and Lender have
agreed that the initial outstanding indebtedness under the
Revolving Credit shall be $13,351,423.93, such amounts
representing a portion of the principal obligations
outstanding under the revolving credit facility
established under the Existing Loan Agreement made to or
for the benefit of Borrowers which Lender and Borrowers
and the Home Healthcare Group have agreed to allocate to
Borrowers as Loans hereunder CATC Allocated Amount").
(b) At Closing, Borrowers shall execute and
deliver a promissory note to Lender in form and substance
acceptable to Lender ("ATC Revolving Credit Note") to
evidence its joint and several unconditional obligation to
repay Lender for loans, advances, and extensions of credit
made under the Revolving Credit and for the ATC Allocated
Amount, with interest as herein and therein provided. Each
borrowing and extension of credit under the Revolving
Credit shall be deemed evidenced by the ATC Revolving
Credit Note, which is deemed incorporated herein by
reference and made part hereof With respect to the ATC
Allocated Amount, the ATC Revolving Credit Note shall
amend and restate in part (but does not extinguish the
absolute and unconditional obligation of Borrowers to
repay the entire indebtedness evidenced by) that certain
Revolving Credit Note, dated as of January 8, 1997,
executed by Existing Borrowers to Lender.
(c) The term ("Contract Term") of the Revolving
Credit shall expire on the Revolving Credit Maturity
Date. On such date, all Obligations of Borrowers to
Lender of every kind whatsoever in connection with the
Revolving Credit, unless sooner accelerated by Lender in
accordance with Section 8 below, shall be due and payable
in full and after which date no further advances or
extensions of credit shall be available from Lender.
2.2 Revolving Credit - Borrowing Base: Subject to the terms and
conditions of this Agreement, Advances to Borrowers under the
Revolving Credit shall be considered against and shall at no time
exceed up to the lesser of @ seventy five percent (75%) of
Qualified Accounts, or (ii) the Maximum Revolving Credit Amount
('Revolving Credit Borrowing Base").
2.3 Revolving Credit - Termination by Borrowers: Borrowers may, at
any time prior to the last day of the Contract Term and on not less
than ten (10) days prior written notice to Lender, terminate the
Revolving Credit; provided however, that on such termination date:
(a)Borrowers satisfy all outstanding Obligations;
and
(b) Borrowers also pay to Lender a Termination
Fee pursuant to Section 2.6(d) below.
2.4 Collections, Disbursements and Borrowing Availability
(a) Borrowers shall maintain a lockbox account(s)
("Lender's Lockbox") with Lender and a depository account(s)
("Lender's Cash Collateral Account") with Lender subject to the
provisions of this subparagraph, and shall execute a lockbox
agreement ("Lockbox Agreement") in form and substance acceptable
to Lender, and such other agreements related thereto as Lender may
require. Unless otherwise prohibited by applicable law, all
collections of Accounts shall be paid directly from an Account
Debtor into Lender's Lockbox from which funds shall be transferred
to Lender's Cash Collateral Account, and from which funds shall be
applied by Lender, daily, to reduce the outstanding indebtedness
under the Revolving Credit with future advances and extensions of
credit to be made by Lender under the conditions set forth in this
Section 2. In the event that proceeds of other Collateral are
received by Borrowers, such collections shall be held in trust for
the benefit of Lender and remitted, in the form received, to Lender
for deposit in Lender's Cash Collateral Account immediately upon
receipt by Borrowers. All funds transferred from Lender's Cash
Collateral Account shall, upon application to Borrowers'
indebtedness to Lender, reduce the Revolving Credit loan balance,
but for the purpose of calculating interest, shall be subject to a
one (1) day clearance period. Interest shall be calculated to
reflect such clearance period on the last day of the month based on
the average daily cleared collections in Lender's Cash Collateral
Account for such month. Borrower shall have no right of access to
or withdrawal from the Lender's Lockbox or Lender's Cash Collateral
Account.
(b) Advances made by Lender under the Revolving Credit
shall be made available to Borrowers by crediting such proceeds to
the operating account of ATC Healthcare with Lender. Advances will
be made available to Borrowers on any Business Day after a
telephonic request on behalf of any Borrower to Lender (made before
11:00 A.M. Philadelphia time) on such Business Day. If requested by
Lender, at its option, Borrowers will confirm such request, in
writing, within one (1) Business Day of any such telephonic
request. Lender reserves its right to require Borrowers to provide
a borrowing base certificate contemporaneously with each loan
request. Lender may rely upon any and all telephonic and written
requests purported to be made by any of the Borrowers through any
of its authorized officers which have been authorized in writing by
such Borrower for such purpose to Lender.
(c) Lender may, in its sole discretion, charge the
operating account of any or all of the Borrowers with Lender for
all of Borrowers' Obligations to Lender as they become due from
time to time under this Agreement including without limitation,
interest, principal, fees and reimbursement of Expenses. Lender may
further charge the Revolving Credit, at Lender's option, for any
and all of Borrowers' Obligations to Lender as they become due from
time to time.
2.5 Interest:
(a) Revolving Credit - The unpaid principal balance of
Advances under the Revolving Credit shall bear interest, subject to
the terms hereof, at the Revolving Credit Prime Based Rate.
Interest shall be payable monthly, in arrears, on the first day of
each calendar month.
(b) Calculation of Interest - Interest shall be computed
daily for the actual number of days elapsed, but calculated on the
basis of a year of 360 days. Changes in the Prime Based Rate shall
become effective on the same day as Lender announces a change in
its Prime Rate.
(c) Default Rate - After the occurrence and during the
continuance of an Event of Default hereunder, interest shall accrue
on the outstanding principal balance of the Loans at a per annum
rate equal to two percent (2%) in excess of the contract rate.
(d) Post judgment Interest - Despite the entry of a
judgment or judgments against any Borrower with respect to any of
the Obligations, such Obligations will continue to earn interest at
the applicable rate as set forth in this Section 2.5.
(e) Applicable Interest Limitations - In no contingency
or event whatsoever shall the aggregate of all amounts, deemed
interest hereunder and charged and collected pursuant to the terms
of the Agreement exceed the highest rate permissible under any law
which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. In the event that such court
determines Lender has charged or received interest hereunder in
excess of the highest applicable rate, Lender shall promptly refund
such excess interest to the Borrowers and such rate shall
automatically be reduced to the maximum rate permitted by law.
2.6 Fees:
(a) Usage Fee - So long as the Revolving Credit is
outstanding and has not been terminated, and the Obligations are
not satisfied in full, Borrowers shall unconditionally pay to
Lender a fee ("Usage Fee") equal to Three Hundred Seventy-Five
Thousandths percent (0.375%) per annum of the daily unused portion
of the Revolving Credit, which fee shall be computed on a monthly
basis in arrears and shall be due and payable on the first day of
each month commencing on the first day of the first full month
after Closing.
(b) Collateral Management Fee - So long as the Revolving
Credit has not been terminated pursuant to the terms hereof, and
the Obligations are not satisfied in full, Borrowers shall
unconditionally pay to Lender a non-refundable monthly collateral
management fee ("Collateral Management Fee") of Three Thousand Five
Hundred Dollars ($3,500) payable monthly, in advance, beginning on
the Closing Date and thereafter, on the first day of each
successive month.
(c) Termination Fee - Subject to the provisions of
Section 2.3, if prior to the last day of the Contract Term,
Borrowers terminate the Revolving Credit, then Borrowers shall pay
to Lender a prepayment premium ("Termination Fee") in an amount
equal to three percent (30/6) of the aggregate of the initial
Maximum Revolving Credit Amount.
2.7 Capital Adequacy: If any present or future law, governmental
rule, regulation, policy, guideline, directive or similar
requirement (whether or not having the force of law) imposes,
modifies, or deems applicable any additional capital adequacy,
capital maintenance or similar requirement which affects the manner
in which Lender allocates capital resources to its commitments
(including any commitments hereunder), and as a result thereof, in
the opinion of Lender, the rate of return on Lender's capital with
regard to the Revolving Credit is reduced to a level below that
which Lender could have achieved but for such circumstances, then
in such case and upon notice from Lender to Borrowers, from time to
time, Borrowers shall pay Lender on demand such additional amount
or amounts as shall compensate Lender for such reduction in
Lender's rate of return. Such notice shall contain the statement of
Lender with regard to any such amount or amounts which shall, in
the absence of manifest error, be binding upon Borrowers. In
determining such amount, Lender may use any method of averaging and
attribution that it deems applicable, in its sole discretion.
2.8 Payments: Except to the extent otherwise set forth in this
Agreement, or as may be otherwise designated by Lender in writing,
all payments of principal and of interest on the Revolving Credit,
the Collateral Management Fee, the Usage Fee, the Termination Fee,
all other charges and any other obligations of Borrowers hereunder,
shall be made to Lender at Mellon Bank Center, 1735 Market Street,
Philadelphia, Pennsylvania, in lawful currency of the United States
and in immediately available funds. Any and all payments received
by Lender may be applied to the Obligations in such order as Lender
may determine.
2.9 Use of Proceeds: The extension of credit hereunder and
proceeds of the Loans shall be used to refinance Borrowers'
existing borrowed indebtedness and to provide working capital.
2.10 Nature of Liabili1y: All Obligations of Borrowers are
expressly agreed by each of them to be joint and several.
SECTION 3 - COLLATERAL
3.1 Description: As security for the payment of the Obligations,
and satisfaction by Borrowers of all covenants and undertakings
contained in this Agreement and the other Loan Documents,
(a) each Borrower hereby assigns and grants to Lender a
continuing first (other than as described in Section 5.4 hereof
lien on and security interest in, upon and to the following
Property ("Collateral"):
(i) Accounts, Contract Rights, Etc. - All of such
Borrower's now owned and hereafter acquired or arising accounts,
accounts receivable, notes receivable, contract rights, chattel
paper, documents (including documents of title), instruments,
invoices;
(ii) Inventory - All of such Borrower's now owned
or hereafter acquired inventory of every nature and kind,
wherever located;
(iii) General Intangibles - All of such Borrower's
now owned and hereafter acquired or arising general intangibles of
every kind and description, including, but not limited, to all
existing and future customer lists, choses in action, claims,
books, records, patents and patent applications, copyrights,
trademarks, trade names, trade styles, trademark applications,
blueprints, drawings, designs and plans, trade secrets, contracts,
licenses, license agreements, franchises, franchise agreements,
formulae, tax and any other types of refunds, returned and unearned
insurance premiums, rights and claims under insurance policies
including without limitation, credit insurance policies, and
computer information, software, records, data;
(iv) Equipment - All of such Borrower's now owned
and hereafter acquired equipment, including without limitation,
machinery, vehicles, furniture and fixtures, wherever located, and
all replacements, parts, accessories, substitutions and additions
thereto;
(v) Deposit Accounts - All of such Borrower's now
existing and hereafter acquired or arising deposit accounts of
every nature, wherever located, and all documents and records
associated therewith;
(vi) Property in Lender's Possession - All Property
of such Borrower, now or hereafter in Lender's possession;
(vii) Investment Property - All Investment Property
of such Borrower now existing or hereafter acquired; and
(viii) Proceeds - The proceeds (including, without
limitation, insurance proceeds) of all of the foregoing.
(b) Lender shall receive a pledge of all of the issued
and outstanding capital stock owned by Staff Builders in ATC
Healthcare and all of the issued and outstanding capital stock
owned by ATC Healthcare in ATC Staffing, and in all distributions,
and proceeds with respect to each such pledge of capital stock.
3.2 Lien Documents: At Closing and thereafter as Lender reasonably
deems necessary, Borrowers shall execute and deliver to Lender, or
have executed and delivered (all in form and substance satisfactory
to Lender):
(a) Financing Statements - Financing statements pursuant
to the UCC, which Lender may file in any jurisdiction where any
Collateral is or may be located and in any other jurisdiction that
Lender deems appropriate; and
(b) Stock Pledge Agreements with Stock Certificates and
Blank Stock Powers - Stock pledge agreements ("Stock Pledge
Agreements") covering the stock described in Section 3.1 above
accompanied by delivery of original stock certificates representing
all stock of every kind and nature of each Borrower, together with
stock powers, duly executed in blank by each Borrower and Staff
Builders for the stock of any Borrower which it owns.
(c) Other Agreements - Any other agreements, documents,
instruments and writings required to evidence, perfect or protect
Lender's lien and security interest in the Collateral required
hereunder or as Lender may reasonably request from time to time.
3.3 Other Actions: In addition to the foregoing, Borrowers shall
do anything further that may be lawfully and reasonably required by
Lender to secure Lender and effectuate the intentions and objects
of this Agreement, including, but not limited to, the execution and
delivery of lockbox agreements, continuation statements, amendments
to financing statements, security agreements, contracts and any
other documents required hereunder. At Lender's request, Borrowers
shall also immediately deliver to Lender all items for which Lender
must receive possession to obtain a perfected security interest,
including without limitation, all notes, stock certificates, other
certificates and documents of title, chattel paper, warehouse
receipts, instruments, and any other similar instruments
constituting Collateral.
3.4 Searches: Lender shall, prior to or at Closing, and thereafter
as Lender may determine from time to time at Borrowers' expense,
obtain the following searches (the results of which are to be
consistent with the warranties made by Borrowers in this
Agreement):
(a) UCC searches with the Secretary of State and local
filing office of each state where any Borrower maintains its
executive offices, a place of business, or assets;
(b) judgment, federal tax lien and corporate tax lien
searches, in each county of each state searched under subparagraph
(a) above.
Borrowers shall, prior. to or at Closing and at their
expense, obtain and deliver to Lender good standing certificates
showing each Borrower to be in good standing in its state of
incorporation and in each other state in which it is doing and
presently intends to do business for which qualification is
required, except where the failure to be so qualified or in good
standing does not have a Material Adverse Effect.
3.5 Landlord's Waivers: Borrowers shall use its good faith efforts
to cause the owner of the premises occupied by or to be occupied by
each Borrower to execute and deliver to Lender an instrument, in
form and substance satisfactory to Lender, under which such
owner(s) agrees to allow Lender to remain on such premises to
dispose of or deal with any Collateral located thereon.
3.6 Filing Security Agreement: A carbon, photographic or other
reproduction or other copy of this Agreement or of a financing
statement is sufficient as and may be filed in lieu of a financing
statement.
3.7 Power of Attorney: Each of the officers of Lender is hereby
irrevocably made, constituted and appointed the true and lawful
attorney for each of the Borrowers (without requiring any of them
to act as such) with full power of substitution to do the
following: (1) endorse the name of any Borrower upon any and all
checks, drafts, money orders and other instruments for the payment
of monies that are payable to any Borrower and constitute
collections on such Borrowers' Accounts; (2) execute in the name of
any Borrower any financing statements, schedules, assignments,
instruments, documents and statements that any Borrower is
obligated to give Lender hereunder; and (3) do such other and
further acts and deeds in the name of Borrowers that Lender may
reasonably deem necessary or desirable to enforce any Account or
other Collateral or perfect Lender's security interest or lien in
the Collateral.
3.8 Management Support Agreements and Fraud Guarantees: A
management support agreement and fraud guarantee ("Support
Agreement"), each in favor of and in form and substance acceptable
to Lender, shall be executed and delivered to Lender by ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
3.9 Application of Collateral Proceeds. Except to the extent
otherwise agreed by Lender in writing, all collections and proceeds
of Collateral at any time and from time to time generated from the
Collateral which may at any time be received by any Borrower are to
be held in trust for Lender and immediately paid to Lender for
application to the Obligations.
3.10 Nature of Collateral: Borrowers confirm and agree that all
security interests and liens granted to Lender hereunder shall be
deemed continuing unimpaired and in full force and effect until all
Obligations hereunder and under the Existing Loan Documents are
satisfied in full.
SECTION 4 - CLOSING AND CONDITIONS PRECEDENT TO ADVANCES
Closing is subject to the following conditions precedent (all
documents to be in form and substance satisfactory to Lender and
Lender's counsel):
4.1 Resolutions, Opinions, and Other Documents: Borrowers shall
have delivered to Lender the following:
(a) this Agreement and the ATC Revolving Credit Note
all properly executed by each Borrower;
(b) each Loan Document including, without limitation, the
Stock Pledge Agreements, required to be executed by Borrowers or by
any other Person under any provision of this Agreement or any
related agreement;
(c) certified copies of (i) resolutions of the board of
directors of each Borrower, Staff Builders, each member of the Home
Healthcare Group authorizing the execution and performance of each
of the Loan Documents to which each is a party which is required to
be delivered by any Section hereof and (ii) the certificate or
articles of incorporation and bylaws of each Borrower, Staff
Builders, each member of the Home Healthcare Group;
(d) an incumbency certificate for each Borrower;
(e) a good standing certificate for each Borrower;
(f) a written opinion of Borrowers' independent
counsel addressed to Lender;
(g) such financial statements, reports, certifications
and other operational information required to be delivered
hereunder, including, without limitation, an initial borrowing base
certificate calculating the Revolving Credit Borrowing Base and a
draft of the audited financial statement for the fiscal year ending
February 28, 1999.
(h) updated projections, on a monthly and consolidated
basis, for the period beginning March 1, 1999 through February 28,
2001, including profit and loss statements, cash flow statements
and balance sheets.
(i) certification by the chief financial officer of each
Borrower that there has not occurred any material adverse change,
since February 28, 1999, in the operations, condition (financial or
otherwise) and business prospects of such Borrower as a whole;
(j) payment of the Collateral Management Fee;
(k) all documents and agreements required with respect
to the Collateral, including without limitation, financing
statements;
(l) executed Support Agreements;
(m) surety agreements ("Surety Agreements"), in form and
substance satisfactory to Lender, executed by Staff Builders and
each member of the Home Healthcare Group in favor of Lender;
(n) trademark security agreement ("Trademark Security
Agreement"), in form and substance satisfactory to Lender,
executed by Borrowers in favor of Lender; and
(o) evidence that Borrowers have a minimum borrowing
availability of Five Hundred Thousand Dollars ($500,000) under the
Revolving Credit Borrowing Base, which shall be confirmed by
Lender's pre-Closing field examination and calculated in a manner
reasonably acceptable to Lender.
4.2 Absence of Certain Events: At the Closing Date, no Event of
Default hereunder shall have occurred and be continuing, and no
event shall have occurred and be continuing which, with the passage
of time, or the giving of notice, or both, would constitute an
Event of Default hereunder.
4.3 Warranties and Representations at Closing The warranties and
representations contained in Section 5 as well as any other Section
of this Agreement shall be true and correct on the Closing Date
with the same effect as though made on and as of that date.
4.4 Compliance with this Agreement: Borrowers shall have performed
and complied with all agreements, covenants and conditions
contained herein which are required to be performed or complied
with by Borrowers before or at the Closing Date, including, without
limitation, the provisions of Section -6 hereof.
4.5 Officer's Certificate: Each Borrower shall provide Lender
with an officer's certificate signed by its chief executive
officer certifying that all conditions to Closing contained in
this Agreement have been fulfilled.
4.6 Closing: Subject to the conditions of this Section, the Loans
shall be made available on such date ("Closing Date") and at such
time as may be mutually agreeable to the parties contemporaneously
with the execution hereof ("Closing") at such place as may be
requested by Lender.
4.7 Waiver of Rights: By completing the Closing hereunder, or by
making advances hereunder, Lender does not thereby waive a breach
of any warranty or representation made by Borrowers hereunder or
any agreement, document, or instrument delivered to Lender or
otherwise referred to herein, and all of Lender's claims and rights
resulting from any breach or misrepresentation by Borrowers are
specifically reserved by Lender.
SECTION 5 - REPRESENTATIONS AND WARRANTIES
Borrowers warrant and represent to Lender that:
5.1 Corporate Organization and Validity:
(a) Except as set forth on Exhibit "5.1", each of the
Borrowers is a corporation duly organized and is validly existing
under the laws of its state of incorporation, is duly qualified, is
in good standing and has lawful power and authority to engage in
business in each state where the nature and extent of its business
requires qualification, except where the failure to be so qualified
or in good standing does not have a Material Adverse Effect. A list
of all states and other jurisdictions where Borrowers are qualified
to do business is attached hereto as Exhibit "5.1" and made a part
hereof.
(b) The making and performance of this Agreement and each
Loan Document required by any section hereof will not violate any
law, government rule or regulation, or the charter, minutes or
bylaw provisions of any of the Borrowers or violate or result in a
default (immediately or with the passage of time) under any
contract, agreement or instrument to which any of the Borrowers is
a party, or by which they are bound, except for violations or
defaults which would not have a Material Adverse Effect. None of
the Borrowers is in violation of any term of any agreement or
instrument to which it is a party or by which it may be bound or of
its charter, minutes or its bylaws, except for violations which
would not have a Material Adverse Effect.
(c) Each of the Borrowers has all requisite corporate
power and authority to enter into and perform this Agreement and to
incur the obligations herein provided for, and has taken all proper
and necessary corporate action to authorize the execution, delivery
and performance of this Agreement, and the other Loan Documents.
(d) This Agreement, the ATC Revolving Credit Note to be
issued hereunder, and all other Loan Documents, when delivered,
will be valid and binding upon Borrowers and enforceable in
accordance with their respective terms.
5.2 Place of Business: The only places of business of each of the
Borrowers, and the place where they keep and intend to keep their
Property and records concerning their Property, are at the
addresses listed in Exhibit "5.2" attached hereto and made part
hereof.
5.3 Pending Litigation: Except as set forth on Exhibit "5.3"
attached hereto and made part hereof, there are no judgments or
judicial or administrative orders or proceedings pending, or to the
knowledge of any of the Borrowers, threatened against or affecting
any of the Borrowers in any court or before any governmental
authority or arbitration board or tribunal. None of the Borrowers
is in default with respect to any order of any court, governmental
authority, regulatory agency or arbitration board or tribunal.
5.4 Title to Properties: Each Borrower has exclusive title to all
Property it purports to own in fee simple (or its equivalent under
applicable law) free from Liens and free from the claims of any
other Person, except for (i) those Liens set forth on Exhibit "5.4"
attached hereto and made part hereof, (ii) Liens of the type
permitted in section 7.3, and (iii) Liens to be released or
discharged contemporaneously with the Closing.
5.5 Patents and Trademarks: Each Borrower owns or has the
unconditional right to use all the patents, patent applications,
trademarks, trademark applications, service marks, trade names, and
copyrights, that are material for the present and planned future
conduct of its business, without any known conflict with the rights
of others. A list of all such patents, patent applications,
trademarks, trademark applications and copyrights owned or
otherwise possessed by Borrowers (indicating the nature of each
Borrower's interest) is attached hereto as Exhibit "5.5", and made
a part hereof. No Borrower is in default of any obligation or
undertaking with respect to such Property or rights.
5.6 Governmental Consent: Neither the nature of any Borrower or of
its business or Property, nor any relationship between any or all
Borrowers and any other Person, nor any circumstance affecting each
Borrower in connection with the issuance or delivery of the ATC
Revolving Credit Note, is such as to require a consent, approval or
authorization of, or filing (other than filing of UCC-1 financing
statements), registration or qualification with, any governmental
authority on the part of Borrowers in conjunction with the
execution and delivery of this Agreement or the issuance or
delivery of the ATC Revolving Credit Note, or other Loan Documents.
5.7 Taxes: All tax returns required to be filed by any Borrower in
any jurisdiction have in fact been filed, and all taxes,
assessments, fees and other governmental charges upon Borrowers, or
upon any of its Property, income or franchises, which are due. and
payable have been paid, except for those taxes being contested in
good faith with due diligence by appropriate proceedings for which
appropriate reserves have been maintained under GAAP. None of the
Borrowers are aware of any proposed additional tax assessment or
tax to be assessed against or applicable to any of the Borrowers.
5.8 Financial Statements: The fiscal year of each of the Borrowers
ends on the last day of February. Each Borrower's federal tax
identification number is listed on Exhibit "5.8" attached hereto
and made a part hereof.
5.9 Full Disclosure: Neither the financial statements referred to
in Section 5.8, nor this Agreement or related agreements and
documents or any written statement furnished by Borrowers to Lender
in connection with the negotiation of the Loans and contained in
any financial statements or documents relating to the Collateral
contain any untrue statement of a material fact or omit a material
fact necessary to make the statements contained therein or herein
not misleading. There is no fact known to any officer of any of the
Borrowers which any of the Borrowers have not disclosed to Lender
in writing, which materially affects adversely or may materially
affect adversely all or any of the Borrowers' Property, business or
financial condition or the ability of Borrowers to perform this
Agreement.
5.10 Subsidiaries and Affiliates: All Subsidiaries and Affiliates
of Borrowers are listed on Exhibit 5.10.
5.11 Guarantees, Contracts, etc.:
(a) None of the Borrowers owns or holds any equity or
long term debt investments in, have any outstanding advances to,
have any outstanding guarantees for the obligations of, or have any
outstanding borrowings from, any Person other than a Borrower or a
Subsidiary of a Borrower, except as described in Exhibit "5.11",
attached hereto and made part hereof.
(b) No Borrower is a party to any contract or agreement,
or subject to any charter or other corporate restriction, which has
a Material Adverse Effect.
(c) Except as otherwise specifically provided in this
Agreement, none of the Borrowers has agreed or consented to cause
or permit any of its Property whether now owned or hereafter
acquired to be subject in the future (upon the happening of a
contingency or otherwise) to a Lien not permitted by this
Agreement, other than Liens that are being released or discharged
contemporaneously with the Closing.
5.12 Government Regulations:
(a) The use of the proceeds of the Loans and Borrowers'
issuance of the ATC Revolving Credit Note, will not directly or
indirectly violate or result in a violation of the Securities Act
of 1933 or the Securities Exchange Act of 1934, as amended, or any
regulations issued pursuant thereto, including, without limitation,
Regulations U, T, G and X of the Board of Governors of the Federal
Reserve System, 12 C.F.R., Chapter 11. No Borrower owns or intends
to carry or purchase any "margin security" within the meaning of
said Regulations.
(b) To the best of Borrowers' knowledge, except as
disclosed on Exhibit 5.12(b), @ each Employee Benefit Plan, as
defined in Section 3(3) of ERISA, (other than a multi-employer plan
described in Section 3(37) of ERISA) maintained by a Borrower or in
which any Borrower is a participating employer has been maintained
in all material respects in accordance with its terms and with
applicable law, and (ii) each such Employee Benefit Plan which is
intended to be tax-qualified currently satisfies to the extent
required by applicable law, and for all years subsequent to the
establishment of such Plan and with respect to which Borrowers'
income tax returns are open to audit, has satisfied, the
requirements of Section 401 (a) of the Code, except that if any
such requirement has not been satisfied, the failure to satisfy
such requirements has not had, and in the future will not have, a
Material Adverse Effect (assuming the continued conduct of the
Borrowers' business is substantially consistent with past
practice), (iii) no such Employee Benefit Plan has engaged in or
been involved in a non-exempt Prohibited Transaction (as defined in
ERISA) under ERISA or the Internal Revenue Code, and (iv) no such
Employee Benefit Plan has been terminated, which termination would
have a Material Adverse Effect. Borrowers or any member of a
Controlled Group (as defined in ERISA) including Borrowers, have
not received notice of a claim asserted against Borrowers or other
members of the Controlled Group for withdrawal liability (as
defined in the Multiemployer Pension Plan Amendments Act of 1980,
as amended) with respect to any multiemployer pension plan.
Borrowers have timely made all contributions when due with respect
to any multiemployer pension plan in which any of them participate
and, no event has occurred triggering a claim against Borrowers or
any member of a Controlled Group including Borrowers for withdrawal
liability with respect to any multi-employer pension plan. All
Employee Benefit Plans maintained by and multi-employer plans
contributed to by any Borrower are listed on Exhibit 5.12(b)
attached hereto and made a part hereof.
(c) No Borrower is in violation of any applicable material
statute, regulation or ordinance of the United States of America,
or of any state, city, town, municipality, county or of any other
jurisdiction, or of any agency thereof, (including without
limitation, environmental laws and regulations) and all Borrowers
possess all material licenses, permits and governmental approvals
needed to operate their business, except where such violation or
failure to possess would not have a Material Adverse Effect.
(d) Borrowers are current with all reports and documents
required to be filed with any state or federal securities
commission or similar agency and is in full compliance in all
material respects with all applicable rules and regulations of such
commissions.
5.13 Business Interruptions: Within one (1) year prior to the date
hereof, neither the business, Property or operations of any of the
Borrowers have been materially and adversely affected in any way by
any casualty, strike, lockout, combination of workers, order of the
United States of America, or any state or local government, or any
political subdivision or agency thereof, directed against any of
the Borrowers. There are no pending or, to the Borrowers'
knowledge, threatened labor disputes, strikes, lockouts or similar
occurrences or grievances against the business being operated by
any of the Borrowers, other than disputes with individual
employees, except as set forth on Exhibit "5.13".
5.14 Names: Except as provided in Exhibit "5.14", none of the
Borrowers have conducted business under or used any other names
(whether corporate or assumed) except for their present corporate
names. Each Borrower is the sole owner of its name, and any and all
business done and all invoices represent sales and business of each
respective Borrower conducted in such Borrowers' name.
5.15 Other Associations: None of the Borrowers is engaged in any
joint venture or partnership with any other Person or, is a party
to any franchise agreement or other arrangement except as listed on
Exhibit 5.15 attached hereto and made part hereof
5.16 Environmental Matters: None of the Borrowers has knowledge,
except as disclosed on Exhibit "5.16" attached hereto and made part
hereof.
(a) of the presence of any Hazardous Substances on
any of the real property on which the Collateral is located, or
(b) of any on-site spills, releases, discharges,
disposal or storage of Hazardous Substances that have occurred or
are presently occurring on any of such real property, or
(c) of any spills, releases, discharges or disposal of
Hazardous Substances that have occurred, are presently occurring
off such real properties or as a result of the activities of any of
the Borrowers, or
(d) of any notice, summons, citation or other
communication sent to any Borrower from any state or federal agency
concerning any intentional or unintentional action or conduct,
inaction or omission, past or present which is or may be in
violation of any state or federal environmental law, rule or
regulation.
As used herein, the term "Hazardous Substances" means any
substances defined or designated as hazardous or toxic waste,
hazardous or toxic material, hazardous or toxic substance or
similar term, by any environmental statute, rule or regulation of
any governmental entity presently in effect and applicable to such
real property.
5.17 Regulation O: No director, executive officer or principal
shareholder of any of the Borrowers is a director, executive
officer or principal shareholder of Lender. For the purposes hereof
the terms "director" (when used with reference to Lender),
"executive officer" and "principal shareholder" have the
respective meanings assigned thereto in Regulation 0 issued by the
Board of Governors of the Federal Reserve System.
5.18 Capital Stock: The authorized and outstanding capital stock of
each of the Borrowers is as set forth on Exhibit "5-18 " attached
hereto and made part hereof. To the best of Borrowers' knowledge,
all of the capital stock of each of the Borrowers has been duly and
validly authorized and issued and is fully paid and nonassessable
and has been sold and delivered to the holders thereof in
compliance with, or under valid exemption from, all Federal and
state laws and the rules and regulations of all regulatory bodies
thereof governing the sale and delivery of securities. Except as
provided in Exhibit 5.18, there are no subscriptions warrants,
options, calls, commitments, rights or agreements by which any of
the Borrowers or any of the shareholders of any of the Borrowers
are bound relating to the issuance, transfer, voting or redemption
of shares of its capital stock or any pre-emptive rights held by
any Person with respect to the pre-emptive rights held by any party
with respect to the shares of capital stock of any Borrower. Except
as provided in Schedule 5.18, no Borrower has issued and currently
has outstanding any securities convertible into or exchangeable for
shares of its capital stock or any options, warrants or other
rights to acquire such shares or securities convertible into or
exchangeable for such shares.
5.19 Interrelationship of Borrowers: Borrowers have common
corporate purposes and interrelated business operations which
compliment each other. The creation and implementation of the
Revolving Credit will provide direct and indirect benefit, economic
and otherwise, to all Borrowers regardless of which particular
Borrower may receive from time to time advances from Lender under
the Revolving Credit.
5.20 Solvency: Each Borrower is able to pay its debts as they
become due, has sufficient capital to carry on its business
operations, and presently owns property having a fair salable value
which is greater than the amount required to pay all of such
Borrower's debts as they become due.
5.21 Year 2000 Compliance: Each Borrower has reviewed the areas
within its business and operations which could be adversely
affected by, and have developed or is developing a program to
address on a timely basis, the risk that certain computer
applications used by such Borrower may be unable to recognize and
perform properly sensitive functions prior to and after December
31, 1999 ("Year 2000 Problem"). The Year 2000 Problem is not
reasonably expected to result in any Material Adverse Effect.
SECTION 6 - BORROWERS'AFFIRMATIVE COVENANTS
Borrowers covenant that until all of Borrowers' Obligations to
Lender are paid and satisfied in full and the Revolving Credit has
been terminated:
6.1 Payment of Taxes and Claims: Borrowers shall pay, before
they become delinquent,
(a) all taxes, assessments and governmental charges
or levies imposed upon any of them or upon the Collateral, and
(b) all claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons, which, if
unpaid, might result in the imposition of a Lien upon its Property;
Provided, however, that Borrowers shall not be required to pay any
such tax, assessment, charge, levy , claim or demand if the amount,
applicability or validity thereof shall at the time be contested in
good faith and by appropriate proceedings by Borrowers, and if
Borrowers shall have set aside on its books adequate reserves in
respect thereof, if so required in accordance with GAA.P; which
deferment of payment is permissible so long as Borrowers' title to,
and its right to use, the Collateral are not materially adversely
affected thereby and Lender's lien and priority on the Collateral
are not materially and adversely affected, altered or impaired
thereby.
6.2 Maintenance of Properties, Collateral and Corporate
Existence:
(a) Property - Each of the Borrowers shall maintain its
Property in good condition in all material respects and make all
renewals, replacements, additions, betterments and improvements
thereto in the ordinary course of such Borrowers' business, as
Borrowers deem reasonably necessary in good faith in the exercise
of its business judgment, and will pay and discharge when due the
cost of repairs and maintenance to its Property.
(b) Insurance - Borrowers shall maintain insurance on all
insurable tangible Collateral against fire, flood, casualty and
such other hazards as may be reasonably acceptable to Lender in
such amounts, with such deductibles and with such insurers as may
be acceptable to Lender in its reasonable judgment. The policies
of all such casualty insurance shall contain standard Lender's Loss
Payable Clauses issued in favor of Lender under which all losses
thereunder shall be paid to Lender as Lender's interest may appear.
Such policies shall expressly provide that the requisite insurance
cannot be altered or canceled without thirty (30) days prior
written notice to Lender and shall insure Lender notwithstanding
the act or neglect of Borrowers. At or prior to Closing, Borrowers
shall furnish Lender with duplicate original policies of insurance
or such other evidence of insurance as Lender may reasonably
require. In the event Borrowers fail to procure or cause to be
procured any such insurance or to timely pay or cause to be paid
the premium(s) on any such insurance, Lender may do so for
Borrowers, but Borrowers shall continue to be liable for the same.
Each of the Borrowers hereby appoints Lender as such Borrowers'
attorney-in-fact, exercisable at Lender's option, upon the
occurrence and continuation of an Event of Default to endorse any
check which may be payable to Borrowers in order to collect the
proceeds of such insurance and any amount or amounts collected by
Lender pursuant to the provisions of this paragraph may be applied
by Lender to any liabilities owing by Borrowers to Lender or to
repair, reconstruct or replace the loss of or damage to Collateral
as Lender in its sole judgment may from time to time determine.
(c) Public and Products Liability Insurance - Borrowers
shall maintain, and upon Lender's request, shall deliver to Lender
evidence of, general liability and professional liability insurance
in such amounts as is customary for companies in the same or
similar businesses located in the same or similar area.
(d) Financial Records - Borrowers shall keep current and
accurate books of records and accounts in which full and correct
entries will be made of all of its business transactions, and will
reflect in their consolidated financial statements adequate
accruals and appropriations to reserves, all in accordance with
GAAP. Borrowers shall backup its records of accounts daily, and its
entire computer system weekly, and shall store such weekly
information at a secure off-site facility acceptable to Lender.
(e) Corporate Existence and Rights - Borrowers shall do
(or cause to be done) all things necessary to preserve and keep in
full force and effect their existence, good standing, rights and
franchises, provided however, that any Borrower or Subsidiary of
any Borrower may merge into another Borrower or dissolve and
distribute its assets to another Borrower.
(f) Compliance with Law - No Borrower shall be in
violation of any laws, ordinances, governmental rules and
regulations to which it is subject, and will not fail to obtain any
licenses, permits, franchises or other governmental authorizations,
necessary to the ownership of its Property or to the conduct of its
businesses, which violation or failure to obtain would have a
Material Adverse Effect on the business, prospects, Property or
financial condition of Borrowers collectively or the ability of
Borrowers as a whole to perform under this Agreement.
(g) Collection of Accounts - Each of the Borrowers
shall continue to collect their Accounts in the ordinary course
of their business subject to the provisions hereof
6.3 Places of Business: Each of the Borrowers shall give thirty
(30) days prior written notice to Lender of any change in the
location of any of their respective places of business (other than
a move of any office other than the corporate office to a location
within the same county), of the places where their records
concerning their Accounts are kept, of the places where the
Collateral is kept, or of the establishment of any new, or the
discontinuance of any, existing places of businesses.
6.4 Business Conducted: Each of the Borrowers shall continue in
the business presently operated by them using their best efforts to
maintain their customers and goodwill, provided however, that any
Borrower or a Subsidiary of any Borrower may merge into another
Borrower or dissolve and distribute its assets to another Borrower.
None of the Borrowers shall engage, directly or indirectly, in any
line of business substantially different from the business con-
ducted by it immediately prior to the Closing Date, or engage in
business or lines of business which are not reasonably related
thereto. No Subsidiary which is not a Borrower shall conduct any
business.
6.5 Litigation: Borrowers shall give prompt written notice to
Lender of any litigation pending, or to their knowledge threatened
or affecting Borrowers or any of them if the amount claimed is more
than $50,000 unless fully covered by insurance less a deductible
not to exceed $50)000.
6.6 Issue Taxes: Borrowers shall pay all taxes (other than taxes
based upon or measured by Lender's income or revenues or any
personal property tax), if any, in connection with the issuance of
the ATC Revolving Credit Note, and the recording of any Lien
documents. The obligations of Borrowers under this Section 6.6
shall survive the payment of Borrowers' indebtedness hereunder and
the termination of this Agreement.
6.7 Bank Accounts: Each the Borrowers shall maintain their major
depository and disbursement account(s) with Lender and shall notify
Lender, in writing, prior to opening any. account(s) subsequent to
the Closing Date at any bank or financial institution other than
Lender.
6.8 Employee Benefit Plans: Each Borrower will (a) fund all its
Employee Benefit Plans in a manner that will satisfy the minimum
funding standards of Section 302 of ERISA, or will promptly satisfy
any accumulated funding deficiency that arises under Section 302 of
ERISA, (b) furnish Lender, promptly after the filing of the same,
with copies of all annual reports (Form 5500) or other material
statements filed with the United States Department of Labor, the
Pension Benefit Guaranty Corporation ("PBGC") or the Internal
Revenue Service ("IRS") with respect to all Employee Benefit Plans
that are defined benefit plans, or which any of the Borrowers, or
any material notices, any member of a Controlled Group, may receive
from the United States Department of Labor, the IRS or the PBGC,
with respect to all such Employee Benefit Plans, and (c) promptly
advise Lender of the occurrence of any Reportable Event (as defined
in Section 4043 of ERISA other than the type of event with respect
to which the PBGC has waived the 30-day notice requirement of
Section 4043 of ERISA) or non-exempt Prohibited Transaction with
respect to any such Employee Benefit Plan(s) and the action which
Borrowers proposes to take with respect thereto. Borrowers will
make all contributions when due with respect to any multi-employer
pension plan in which any of them participates and will promptly
advise Lender @ upon its receipt of notice of the assertion against
any of the Borrowers of 'a claim for withdrawal liability, (ii)
upon the occurrence of any event which, to the best of Borrowers'
knowledge, would trigger the assertion of a claim for withdrawal
liability against Borrowers, and (iii) upon the occurrence of any
event which, to the best of Borrowers' knowledge, would place
Borrowers in a Controlled Group (other than those Controlled Groups
in which any of the Borrowers is a member as of the Closing Date)
as a result of which any member (including any of the Borrowers)
thereof may be subject to a claim for withdrawal liability, whether
liquidated or contingent which would result in a Material Adverse
Effect.
6.9 Submission of Collateral Documents: Borrowers will, on
demand of Lender, make available to Lender copies of proof of the
satisfactory performance of services that gave rise to an Account,
a copy of the invoice for each Account and copies of any written
contract or order from which an Account arose. Borrowers shall
promptly notify Lender if an Account becomes evidenced or secured
by an instrument or chattel paper and upon request of Lender, will
promptly deliver any such instrument or chattel paper to Lender.
6.10 Other Governmental Contracts: Borrowers will immediately
notify Lender if any Account arises out of contracts with the
United States or any department, agency or instrumentality thereof,
and to the extent permitted under applicable law will execute any
instruments and take any steps required by Lender so that all
monies due and to become due under such contract shall be assigned
to Lender and notice thereof given to and acknowledged by the
appropriate government agency or authority under the Federal
Assignment of Claims Act.
6.11 Warranties for Future Advances: Each request by any of the
Borrowers for an advance under the Revolving Credit in any form
following the Closing Date shall constitute an automatic
representation and warranty by Borrowers to the effect that:
(a) No Event of Default, or event or condition which
with the giving of notice or passage of time, or both, would
constitute an Event of Default, then exists;
(b) Each advance is within and complies with the
terms and conditions of this Agreement; and
(c) Each representation and warranty set forth in Section
5 of this Agreement is then true and correct in all material
respects, as though made on the funding date for such advance,
except for changes otherwise permitted by this Agreement or which
are consented to by Lender in writing.
6.12 Financial Covenants: Borrowers shall maintain and comply with
the following financial covenants:
(a) Cash Flow Coverage Ratio - Borrowers shall have and
maintain a Cash Flow Coverage Ratio, measured at the end of each
month on a cumulative basis, of not less than 1.00 to 1.00.
6.13 Financial and Business Information: So long as Borrowers are
indebted to Lender and the Revolving Credit has not been
terminated, Borrowers shall deliver to Lender the following:
(a) Financial Statements and Collateral Reports - in
addition to such other data, reports, statements and information,
financial or other-wise, as are already prepared in the ordinary
course of Borrowers' business, as Lender may request, Borrowers
shall provide the following: (i) a borrowing base certificate in a
form acceptable to Lender no less than once a week, or more
frequently as Lender may request, which shall include, but not be
limited to, a report of sales, credits issued and collections
received; (ii) reports of sales, collections, adjustments and all
other information pertaining to Accounts, no less than once a week
(iii) monthly accounts receivable and payable aging schedules
within fifteen (15) days of the end of each calendar month,
including reports of sales, credits issued, and collections
received; and (iv) internally prepared monthly financial statements
for Borrowers on a consolidated basis, certified by each Borrower's
chief financial officer within thirty (30) days of the end of each
calendar month; (v) annual projections which shall include profit
and loss statements, balance sheets and cash flow reports on a
consolidated basis (presented on a monthly basis) for the
succeeding fiscal year within thirty (30) days before the end of
each of Borrowers' fiscal years; (vi) annual certified financial
statements for Borrowers from their independent certified public
accountants on a consolidated basis, acceptable to Lender within
ninety (90) days after the end of each of Borrowers' fiscal years;
and (vii) an annual management letter prepared by Borrowers'
independent certified public accountants and acceptable to Lende4
within ninety (90) days after the end of each of Borrowers' fiscal
years. Annual statements shall set forth in comparative form
figures for the corresponding periods in the prior fiscal year. All
financial statements shall include a consolidated balance sheet and
statement of consolidated operations and consolidated cash flows
and shall be prepared in accordance with GAAP;
(b) Notice of Event of Default - promptly upon becoming
aware of the existence of any condition or event which constitutes
an Event of Default under this Agreement, or which with the passage
of time or the giving of notice, or both, would become an Event of
Default hereunder, a written notice specifying the nature and
period of existence thereof and what action Borrowers is taking
(and proposes to take) with respect thereto;
(c) Notice of Claimed Default - promptly upon receipt by
Borrowers, a copy of any notice of default given to Borrowers by
any creditor for borrowed money of Borrowers other than Lender;
(d) Securities and Other Reports - promptly upon its
becoming available, one copy of each financial statement, report,
notice or proxy statement sent by Borrowers to stockholders, and,
a copy of each regular or periodic report, (including without
limitation all 10-K and 10-Q reports), registration statement, or
prospectus in respect thereof filed by Borrowers with any
securities exchange or with any federal or state securities and
exchange commissions or any successor agency.
6.14 Officers Certificates: Within thirty (30) days of the end of
each month and along with the set of financial statements delivered
to Lender at the end of each fiscal year pursuant to Section 6.13
(a) hereof, Borrowers shall deliver to Lender a certificate from
Borrowers, executed by each Borrower's Chief Financial Officer in
form and substance reasonably satisfactory to Lender setting forth:
(a) Covenant Compliance - the information (including
detailed calculations) required in order to establish whether
Borrowers are in compliance with the requirements of Sections 6
and 7 as of the end of the period covered by the financial
statements then being furnished and any exhibits appended to such
financial statements under Section 6.13; and
(b) Event of Default - that the signer has reviewed the
relevant terms of this Agreement, and has made (or caused to be
made under his supervision) a review of the transactions and
conditions of Borrowers from the beginning of the accounting period
covered by the income statements being delivered therewith to the
date of the certificate, and that such review has not disclosed the
existence during such period of any condition or event which
constitutes an Event of Default or which is then, or with the
passage of time or giving of notice, or both, would become an Event
of Default hereunder, and if any such condition or event existed
during such period or now exists, specifying the nature and period
of existence thereof and what action Borrowers have taken or
proposes to take with respect thereto.
6.15 Inspection: So long as Borrowers are indebted to Lender, each
of the Borrowers will permit any of Lender's officers or other
representatives to visit and inspect any of the Collateral of
Borrowers, to examine and audit all of Borrowers' books of account,
records, reports and other papers, to make copies and extracts
therefrom and to discuss its affairs, finances and accounts with
its officers, employees and independent public accountants. Upon
Lender's request, Borrowers shall request all such accountants and
auditors to exhibit and deliver to Lender copies of any and all of
any Borrower's financial statements or other accounting records of
any sort in the accountant's or auditor's possession. All such
inspections shall be at Borrowers' expense (in addition to the
Collateral Management Fee) at the rate of $650 per person per day
plus out-of-pocket costs and expenses for such activities.
6.16 Tax Returns and Reports: At Lender's request from time to
time, Borrowers shall promptly furnish Lender with copies of the
annual federal and state income tax returns of Borrowers. Borrowers
further agree that if requested by Lender, it shall promptly
furnish Lender with copies of all reports filed with any federal,
state or local governmental authority or agency, board or
commission.
6.17 Information to Participant: Lender may divulge to any
participant or unless prohibited by applicable law, prospective
participant it may obtain in the Loans, or any portion thereof, all
information in its possession concerning Borrowers, their Property
and financial condition, and furnish to such participant copies of
reports, financial statements, projections, certificates, and
documents obtained under any provision of this Agreement, or
related agreements and documents.
6.18 Material Adverse Developments: Each of the Borrowers agree
that promptly upon becoming aware of any development or other
information outside the ordinary course of business (excluding
matters of a general economic, financial or political nature) which
would have a Material Adverse Effect, or of Lender's failure to
perform any of its obligations to Borrowers under this Agreement it
shall give to Lender telephonic or telegraphic notice specifying
the nature of such development or information and such anticipated
effect. In addition, such verbal communication shall be confirmed
by written notice thereof to Lender on the same day such verbal
communication is made.
6.19 Year 2000 Compliance: Each Borrower hereby agrees to take all
action necessary to assure that all times the computer-based
systems utilized by such Borrower and each of its Subsidiaries, if
any, are able to effectively interpret, process and manipulate
data, including dates before, on and after December 31, 1999. At
Lender's request, each Borrower shall provide to Lender assurance
satisfactory to Lender that the computer-based systems utilized by
such Borrower and each of its Subsidiaries, if any, are able to
recognize and perform without error functions involving dates
before, on and after December 31, 1999.
6.20 Accounts: Each Borrower hereby agrees to apply all outstanding
credits as of the date of this Agreement against the applicable
Account(s) of such Borrower by June 30, 1999. Each Borrower further
agrees and covenants that such Borrower shall apply all future
credits against the applicable Account(s) of such Borrower in a
timely manner.
SECTION 7 - BORROWERS'NEGATIVE COVENANTS
Borrowers covenant that until all of Borrowers' liabilities
and obligations to Lender are paid and satisfied in full and the
Revolving Credit has been terminated, that without Lender's prior
consent:
7.1 Merger, Consolidation, Dissolution or Liquidation.:
(a) None of the Borrowers shall sell, lease, license,
transfer or otherwise dispose of its Property, other than (i)
inventory sold in the ordinary course of such Borrower's business,
(ii) obsolete equipment office furniture or vehicles, (iii) to
another Borrower, (iv) equipment or office furniture or vehicles
with a value of less than $5,000 and (y) the sublease of office
space, and the sale of a franchise consistent with Borrowers'
current business practices.
(b) None of the Borrowers shall merge or consolidate with
any other Person, or commence a dissolution or liquidation,
provided, however, that any Borrower or Subsidiary of any Borrower
may merge into another Borrower or dissolve and distribute its
assets to another Borrower.
(c) None of the Borrowers shall permit their names to
be changed without at least thirty (30) days prior written notice
to Lender.
7.2 Acquisitions: Neither Borrowers nor any Subsidiaries shall
acquire all or a material portion to the stock, securities or
assets of any Person in any transaction or in any series of related
transactions or enter into any sale or leaseback transaction
without prior written approval of Lender.
7.3 Liens and Encumbrances: None of the Borrowers or Subsidiaries
shall (i) cause or permit or (ii) agree or consent to cause or
permit in the future (upon the happening of a contingency or
otherwise), its Property (including, without limitation, the
Collateral), whether now owned or hereafter acquired, to be subject
to a Lien except:
(a) Liens securing taxes, assessments or governmental
charges or levies or the claims or demands of materialmen,
repairmen, mechanics, carriers, warehousemen, landlords, and other
like persons, provided the payment thereof is not at the time
required by Section 6. 1;
(b) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation,
unemployment insurance, social security and other like laws and in
connection with leases or trade contracts;
(c) Existing liens described in Section 5.4 and on
Exhibit "5.4" hereto; and
(d) Purchase money security interests or
capital leases of:
(i) equipment and computer software to be used by
Borrowers to assist in the development of a program to address the
Year 2000 Problem, the indebtedness secured by which shall not
exceed $1,000,000 in the aggregate; and
(ii) equipment, office furniture, or vehicles, the
indebtedness secured by which shall not exceed $ 100,000 in the
aggregate in any one fiscal year on a non-cumulative basis.
7.4 Transactions With Affiliates or Subsidiaries:
(a) None of the Borrowers shall enter into any
transaction, including, without limitation, the purchase, sale, or
exchange of Property, or the loaning or giving of funds (including,
without limitation, the payment of management fees) to or with any
Subsidiary or Affiliate (including, without limitation, any other
Borrower, any member of the Chelsea Group, or any member of the
Home Healthcare Group), except for (i) transactions with another
Borrower in the ordinary course of Borrower's business, and (ii)
those transactions set forth on Exhibit "7.4(a)" attached hereto
and made part hereof
(b) None of the Borrowers shall create or acquire any
Subsidiary without Lender's prior written consent (except by
merger with an existing Subsidiary).
7.5 Guarantees: Excepting the endorsement in the ordinary course
of business of negotiable instruments for deposit or collection,
none of the Borrowers or Subsidiaries shall become or be liable,
directly or indirectly, primary or secondary, matured or
contingent, in any manner, whether as guarantor, surety,
accommodation maker, or otherwise, for the existing or nature
indebtedness of any kind of any Person except existing guarantees.
7.6 Distributions, Redemptions and Other Indebtedness: None of
the Borrowers shall other than in connection with the Closing:
(a) declare, pay or make any forms of Distribution to
its shareholders, their successors and assigns;
(b) make any payments on any existing or future
indebtedness for borrowed money to any Person other than a Borrower
(including subordinated indebtedness) except for payments to the
holders of the indebtedness listed on Exhibit 7.6 in accordance
with the existing terms of such indebtedness; or
(c) hereafter borrow money from any Person other than
Lender or, if in the ordinary course, another Borrower.
7.7 Loans and Investments: None of the Borrowers shall make or
have outstanding loans, advances, or extensions of credit to, or
capital contributions or investments in, any Person other than
another Borrower in the ordinary course of such Borrower's
business, or ownership of an inactive Subsidiary, including without
limitation, any officers and directors of any Borrower.
7.8 Use of Lender's Name: Borrowers shall not use Lender's name
(or the name of any of Lender's affiliates) in connection with any
of their business operations, provided that Borrowers may disclose
to third parties that Borrowers have a deposit and borrowing
relationship with Lender. Nothing herein contained is intended to
permit or authorize Borrowers to make any contract on behalf of
Lender.
7.9 Change in Capital Stock: There shall occur no change in the
ownership of any of the capital stock of any of the Borrowers,
except with respect to any merger by any Borrower or a Subsidiary
of any Borrower into another Borrower or the dissolution and
distribution of the assets of any Borrower or Subsidiary of any
Borrower to a Borrower.
7.10 Miscellaneous Covenants:
(a) None of the Borrowers shall become or be a party to
any contract or agreement which would breach this Agreement, or
breach, any other instrument, agreement or document to which any of
the Borrowers are a party or by which they are or may be bound
which breach would have a Material Adverse Effect.
(b) None of the Borrowers shall carry or purchase any
"margin security" within the meaning of Regulations U, G, T or X of
the Board of Governors of the Federal Reserve System, 12 C.F.R.,
Chapter 11.
7.11 Publicity Lender (or Agent, if it is a syndicated deal), in
and using its reasonable discretion, may disclose the existence of
the credit facilities under this Agreement to a public forum,
including, without limitation, "tombstone" announcements in the
print media; provided however, Lender shall provide Borrowers with
at least five (5) days notice of such disclosure, and, at
Borrower's request, shall provide Borrowers with a copy of such
disclosure.
SECTION 8 - DEFAULT
8.1 Events of Default: Each of the following events shall
constitute an event of default ("Event of Default") and Lender
shall thereupon have the option to declare Borrowers in default
under this Agreement, and all other existing and future agreements
of any kind (related or unrelated) with Lender, and declare all
Obligations of Borrowers to Lender, whether joint or several,
matured or contingent, related or unrelated, due or to become due,
(including, without limitation, liabilities on the Revolving
Credit) immediately due and payable including, but not limited to,
accrued and unpaid interest, outstanding principal, Expenses,
advances to protect Lender's position and all of Lender's rights
hereunder and thereunder, all without demand, notice, presentment
or protest or further action of any kind (it also being understood
that the occurrence of any of the Events of Default set forth in
subparagraphs; (j), (k) or (l) shall automatically place Borrowers
in default and cause an acceleration of Borrowers' indebtedness to
Lender):
(a) Payments -
(i) if any of the Borrowers fails to make any
payment of principal or interest under the Loans when such
payment is due and payable, or
(ii) if at any time the outstanding principal
balance of the Revolving Credit exceeds the Revolving Credit
Borrowing Base or the Maximum Revolving Credit Amount.
(b) Other Charges - if any of the Borrowers fails to pay
any other charges, fees or other monetary obligations owing to
Lender arising out of or incurred in connection with this Agreement
within five (5) days after the date when such payment is due and
payable; or
(c) Particular Covenant Defaults - if any of the
Borrowers fails to perform or observe any covenant, conditio n- or
undertaking contained in this Agreement and such failure, with
respect to sections 6.2(a), 6.2(e) and 6.6 only, continues for more
than thirty (30) days after an executive officer of Borrowers
obtains knowledge thereof; or
(d) Financial Information - if any statement, report,
financial statement, or certificate made or delivered by any of the
Borrowers or any of its officers, employees or agents, to Lender is
not true and correct, in all material respects when made; or
(e) Uninsured Loss - if there shall occur any
uninsured damage to or loss, theft, or destruction of a material
portion of the Collateral; or
(f) Warranties or Representations - if any warranty,
representation or other statement by or on behalf of any of the
Borrowers contained in this Agreement, or in any other Loan
Document, or in any other existing or future agreement between any
of the Borrowers and Lender, is false, erroneous, or misleading in
any material respect when made; or
(g) Agreements with Others - if any of the Borrowers
shall default beyond any grace period under any agreement with
any other creditor for borrowed money (including the subordinated
indebtedness) of any of the Borrowers, if as a result of such
default the holder of such Borrowers' obligations declares or is
permitted to declare any such obligation of such Borrower to
become due prior to its maturity date or prior to its regularly
scheduled date of payment; or
(h) Other Agreements with Lender - if any of the
Borrowers breaches or violates any material term of, or if a
default or an Event of Default, occurs under, any other existing or
future agreement (related or unrelated) between any of the
Borrowers and Lender (subject to any applicable grace or cure
period which may be contained in any such other agreement); or
(i) Judgments - if any final judgment or judgments (in
the aggregate) for the payment of money in excess of $50,000 shall
be rendered by any court of record against any of the Borrowers
unless satisfied or discharged within forty-five (45) days thereof;
or
(j) Assignment for Benefit of Creditors, etc. - if any of
the Borrowers makes an assignment for the benefit of creditors
generally, offers a composition or extension to creditors, or makes
or sends notice of an intended bulk sale of any business or assets
now or hereafter conducted by any of the Borrowers; or
(k) Bankruptcy. Dissolution, etc. - upon the commencement
of any action for the dissolution or liquidation of any of the
Borrowers, or the commencement of any proceeding to avoid any
transaction entered into by any of the Borrowers, or the
commencement of any case or proceeding for reorganization or
liquidation of any of the Borrowers' debts under the Bankruptcy
Code or any other state or federal law, now or hereafter enacted
for the relief of debtors, whether instituted by or against any of
the Borrowers; provided however, that Borrowers shall have
forty-five (45) days to obtain the dismissal or discharge of an
involuntary proceeding filed against any Borrower, it being
understood that during such forty-five (45) day period, Lender
shall not be obligated to make Advances hereunder and Lender may
seek adequate protection in any bankruptcy proceeding; or ,
(l) Receiver - upon the appointment of a receiver,
liquidator, custodian, trustee or similar official or fiduciary
for any of the Borrowers or for any of the Borrowers' Property;
or
(m) Execution Process, etc. - the issuance of any
execution or distraint process against any of the Borrowers, or
any of their Property; or
(n) Tax Liens - if a notice of a Lien, levy or assessment
is filed of record with respect to any or all of any Borrower's
assets by the United States government, or any department, agency
or instrumentality thereof, or by any state, county, municipal or
other government agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a Lien,
whether ▇▇▇▇▇▇ or otherwise, upon any or all of any Borrower's
assets except with respect to liens for state, county and municipal
taxes only, which do not exceed $5,000 in the aggregate with all
other such liens; or
(o) Termination of Business - if any Borrower is
enjoined, restrained or in any way prevented by court order or
administrative proceeding from continuing to conduct, or any
Borrower otherwise ceases to conduct, all or a material part of its
business affairs except as permitted hereunder the results of which
would have a Material Adverse Effect; or
(p) Pension Benefits, etc. - if any of the Borrowers
fails to comply with ERISA, with the result that grounds exist for
the PBGC to commence proceedings to appoint a trustee under ERISA
to administer Borrowers' employee benefit plans or to allow the
Pension Benefit Guaranty Corporation to institute proceedings to
appoint a trustee to administer such plan(s), or to permit the
entry of a Lien to secure any deficiency or claim; or
(q) Support Agreements - if any Support Agreement shall
for any reason cease to be in full force and effect and if the
reason is due to the death, disability or termination of employment
of one of the parties to such Support Agreement after 90 days has
elapsed and Lender has sent Borrower notice of such event, or a
default shall otherwise occur under such Support Agreement; or
(r) Sale of Stock - if the stock of any of the
Borrowers is sold or otherwise transferred other than in
connection with a permitted merger; or
(s) Investigations - any indication or evidence received
by Lender that any of the Borrowers may have directly or indirectly
been engaged in any type of activity which, in Lender's reasonable
discretion may result in the forfeiture of any material Property to
any governmental entity, federal, state or local; or
(t) Change in Management - if any of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall cease to
have an active role in the management of Borrowers or such
individuals collectively shall cease to exercise management control
over Borrowers, provided however, that if any one or more of such
individuals cease to be active in management or participation in
exercising management control, Borrowers shall have forty-five (45)
days to replace such individual with a replacement reasonably
acceptable to Lender.
8.2 Rights and Remedies on Default:
(a) In addition to all other rights, options and remedies
granted to Lender under this Agreement, Lender may, upon or at any
time after the occurrence of an Event of Default, terminate the
Revolving Credit, cease making advances or extensions of credit
thereunder, and exercise all other rights granted to it hereunder
and all rights under the UCC and any other applicable law or in
equity, and under all Loan Documents permitted to be exercised
after the occurrence of an Event of Default, including the
following rights and remedies (which list is given by way of
example and is not intended to be an exhaustive list of all such
rights and remedies):
(i) the right to take possession of, send notices
regarding and collect directly, the Collateral, with or without
judicial process (including without limitation the right to notify
the United States postal authorities to redirect mail addressed to
any Borrower to an address designated by Lender);
(ii) by its own means or with judicial assistance,
enter any of the Borrowers' premises and take possession of the
Collateral, or render it unusable, or dispose of the Collateral on
such premises in compliance with subsection (b), below, without any
liability for rent, storage, utilities or other sums, and Borrowers
shall not resist or interfere with such action;
(iii) require any of the Borrowers at Borrowers'
expense to assemble all or any part of the Collateral (other than
real estate or fixtures) and make it available to Lender at any
place designated by Lender;
(iv) the right to reduce the Maximum Revolving
Credit Amount, modify the Revolving Credit Borrowing Base or any
portion thereof or the advance rates or to modify the terms and
conditions upon which Lender is willing to consider making advances
under the Revolving Credit or to take additional reserves in the
Revolving Credit Borrowing Base for any reason; and
(b) Each of the Borrowers acknowledge that any Borrower's
failure to cause all collections of Accounts to be paid directly to
a lockbox and/or deposited into a cash collateral account as
specified herein in Section 2.4, will result in the dissipation of
Lender's Collateral and other irreparable harm to Lender for which
money damages could not adequately compensate Lender. In the event
of such a breach, Lender shall be entitled, in addition to all
other rights and remedies which Lender may have at law or equity,
to have an injunction issued by any court of Lender's choosing,
enjoining and restraining Borrowers and any agents and employees
thereof, from continuing such breach.
(c) Each of the Borrowers hereby agrees that a notice
received by it at least even (7) days before the time of any
intended public sale or of the time after which any private sale
or other disposition of the Collateral is to be made after the
occurrence of an Event of Default hereunder, shall be deemed to
be reasonable notice of such sale or other disposition. If
permitted by applicable law, any perishable inventory or
Collateral which threatens to speedily decline in value or which
is sold on a recognized market may be sold immediately by Lender
without prior notice to Borrowers after the occurrence of an
Event of Default hereunder. Borrowers covenant and agree not to
interfere with or impose any obstacle to Lender's exercise of its
rights and remedies with respect to the Collateral, after the
occurrence of an Event of Default hereunder.
8.3 Nature of Remedies: After the occurrence of an Event of
Default Lender shall have the right to proceed against all or any
portion of the Collateral in any order and may apply such
Collateral to the liabilities and obligations of Borrowers to
Lender in any order. All rights and remedies granted Lender
hereunder and under any agreement referred to herein, or otherwise
available at law or in equity, shall be deemed concurrent and
cumulative, and not alternative remedies, and Lender may proceed
with any number of remedies at the same time until the Loans, and
all other existing and future liabilities and obligations of
Borrowers to Lender, are satisfied in full. The exercise of any one
right or remedy shall not be deemed a waiver or release of any
other right or remedy, and Lender, upon the occurrence of an Event
of Default, may proceed against Borrowers, and/or the Collateral,
at any time, under any agreement, with any available remedy and in
any order. Notwithstanding the foregoing, Lender may, at any time
in its sole discretion, relinquish or abandon any Collateral,
interest therein, or portion thereof, for any reason whatsoever.
8.4 Set-Off. If any bank account of any of the Borrowers with
Lender or with any participant is attached or otherwise liened or
levied upon by any third party, Lender (and any participant) need
not await the running of any applicable grace period hereunder, but
Lender (and such participant as agent for Lender) shall have and be
deemed to have the immediate right of set-off and may apply the
funds or amount thus set-off against any of the Borrowers'
liabilities hereunder.
SECTION 9 - MISCELLANEOUS
9.1 Governing Law: This Agreement, and all related agreements and
documents shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania, without regard to its
otherwise applicable principles of conflicts of laws. The
provisions of this Agreement and other agreements and documents
referred to herein are to be deemed severable, and the invalidity
or unenforceability of any provision shall not affect or impair the
remaining provisions which shall continue in full force and effect.
9.2 Integrated Agreement: The ATC Revolving Credit Note, this
Agreement, and all other Loan Documents shall be construed as
integrated and complementary of each other, and as augmenting and
not restricting Lender's rights, remedies and security. If, after
applying the foregoing, an inconsistency still exists, the
provisions of this Agreement shall constitute an amendment thereto
and shall control.
9.3 Waiver:
(a) No omission or delay by Lender in exercising any
right or power under this Agreement or any other Loan Document will
impair such right or power or be construed to be a waiver of any
default, or Event of Default or an acquiescence therein, and any
single or partial exercise of any such right or power will not
preclude other or further exercise thereof or the exercise of any
other right, and no waiver of Lender's rights hereunder will be
valid unless in writing and signed by Lender, and then only to the
extent specified.
(b) Borrowers release Lender, its officers, employees and
agents, of and from any claims for loss or damage resulting from
acts or conduct of any or all of them arising through the date
hereof, unless caused by willful misconduct or gross negligence.
9.4 Time:
(a) Whenever Borrowers shall be required to make any
payment, or perform any act on a Saturday, Sunday or a legal
holiday under the Laws of the Commonwealth of Pennsylvania or such
other jurisdiction where Borrowers may be required to make any
payment or perform any act, such payment may be made, or such act
may be performed, on the next succeeding Business Day.
(b) Time is of the essence in Borrowers' performance
under all provisions of this Agreement and all other Loan
Documents.
9.5 Expenses of Lender:
(a) At Closing and from time to time thereafter,
Borrowers will pay, on demand, all accrued and unpaid expenses
(including the reasonable fees and expenses of legal counsel for
Lender) relating to this Agreement, and all related agreements and
documents, including, without limitation, expenses incurred in the
analysis, negotiation, preparation, closing, administration, audit
and enforcement of this Agreement, and all related agreements and
documents, the enforcement, protection and defense of the rights of
Lender in connection with the Revolving Credit, the Collateral or
otherwise hereunder, including the right to take possession of any
Collateral and the proceeds thereof and to hold, collect, prepare
for sale, sell and dispose of any Collateral, and any reasonable
expenses relating to extensions, amendments, waivers or consents
pursuant to the provisions hereof, or any related agreements and
documents or relating to agreements with other creditors, or
termination of this Agreement (collectively, the "Expenses").
(b) Expenses shall also include but not be limited to
(i) cost of reproducing this
agreement and related agreements and documents; (ii) filing and
recording fees; and (iii) searches.
9.6 Brokerage: Except as otherwise provided herein, this
transaction was brought about and entered into by Lender and
Borrowers acting as principals and without any brokers, agents or
finders being the effective procuring cause hereof. Borrowers
represent that they have not committed Lender to the payment of any
brokerage fee, commission or charge in connection with this
transaction. If any such claim is made on Lender by any broker,
finder or agent or other person, Borrowers will indemnify, defend
and save Lender harmless against such claim and further will defend
any action or actions to recover on such claim, at Borrowers' own
cost and expense, including Lender's counsel fees. Borrowers
further agree that until any such claim or demand is adjudicated in
Lender's favor, the amount demanded shall be deemed a liability of
Borrowers under this Agreement, secured by the Collateral.
9.7 Notices:
(a) Any notices or consents required or permitted by this
Agreement shall be in writing and shall be deemed given if
delivered in person, or sent by nationally recognized overnight
courier service, or sent by certified or registered mail postage
prepaid, return receipt requested, as follows, unless such address
is changed by written notice hereunder:
If to Lender to: Mellon Business Credit
Mellon Bank Center
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
with copies to:Blank Rome ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 11, Esquire
If to Borrowers:ATC Healthcare Services, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
with copies to:Kronish ▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esquire
Staff Builders, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇▇▇▇▇▇
(b) All notices sent by Lender or Borrowers shall be
deemed to be given when so received.
(c) All notices and deliveries received by Lender from
either Borrower shall be deemed to have been received from all
Borrowers and all notices received by ATC Healthcare shall be
deemed to have been received by all Borrowers.
9.8 Headings: The headings of any paragraph or Section of this
Agreement are for convenience only and shall not be used to
interpret any provision of this Agreement.
9.9 Survival: All warranties, representations, and covenants made
by Borrowers herein, or in any other Loan Document or on any
certificate, document or other instrument delivered by it or on its
behalf under this Agreement, shall be considered to have been
relied upon by Lender, and shall survive the delivery to Lender of
the ATC Revolving Credit Note, regardless of any investigation made
by Lender or on its behalf. All statements made by Borrower in any
Loan Document such certificate or other instrument prepared and/or
delivered for the benefit of Lender shall constitute warranties and
representations by Borrowers hereunder. Except as otherwise
expressly provided herein, all covenants made by Borrowers
hereunder or under any other agreement or instrument shall be
deemed continuing until all liabilities and obligations of
Borrowers to Lender are satisfied in full.
9.10 Successors and Assigns: This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns
of each of the parties. Lender may participate any or all of its
rights or obligations hereunder with notice to, but without consent
of Borrowers to any commercial lender, financial institution, or
other entity not engaged in the same business as Borrowers. Except
as expressly provided herein, Borrowers may not transfer, assign or
delegate any of its duties or obligations hereunder. Lender may
assign the Revolving Note, this Agreement and other Loan Documents
to another financial institution as Lender in its discretion may
determine.
9.11 Duplicate Originals Two or more duplicate originals of this
Agreement may be signed by the parties, each of which shall be an
original but all of which together shall constitute one and the
same instrument.
9.12 Modification: No modification hereof or any agreement referred
to herein shall be binding or enforceable unless in writing and
signed on behalf of the party against whom enforcement is sought.
9.13 Signatories: Each individual signatory hereto represents and
warrants that he is duly authorized to execute this Agreement on
behalf of his principal and that he executes the Agreement in such
capacity and not as a party.
9.14 Third Parties: No rights are intended to be created hereunder,
or under any related agreements or documents for the benefit of any
third party donee, creditor or incidental beneficiary of Borrowers.
Nothing contained in this Agreement shall be construed as a
delegation to Lender of Borrowers' duty of performance, including,
without limitation Borrowers' duties under any account or contract
in which Lender has a security interest.
9.15 Discharge of Taxes, Borrowers' Obligations, Etc.: Lender, in
its discretion, shall have the right at any time, and from time to
time, if Borrowers fail to do so, after reasonable notice, to (a)
obtain insurance covering any of the Collateral as required
hereunder (b) pay for the performance of any of Borrowers'
obligations hereunder, (c) discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on any
of the Collateral in violation of this Agreement unless Borrowers
are in good faith with due diligence by appropriate proceedings
contesting such taxes, liens, etc., and (d) pay for the maintenance
and preservation of any of the Collateral. Expenses and advances by
Lender under this paragraph shall be deemed advances under the
Revolving Credit, bear interest at the same rate applied to the
Revolving Credit, until reimbursed to Lender and shall be secured
by the Collateral. Such payments and advances made by Lender shall
not be construed as a waiver by Lender of an Event of Default under
this Agreement.
9.16 Withholding and Other Tax Liabilities: Lender shall have the
right to refuse to make any advances from time to time unless
Borrowers shall, at Lender's request, have given to Lender
evidence, reasonably satisfactory to Lender, that Borrowers have
properly deposited or paid, as required by applicable law, all
withholding taxes and all federal, state, city, county or other
taxes due up to and including the date of the loan. Until all of
Borrowers' liabilities and obligations to Lender have been paid in
full, Lender shall be entitled to continue to hold any and all of
the Collateral until Borrowers have given to Lender evidence,
reasonably satisfactory to Lender, that Borrowers have properly
deposited or paid, as required by law, all federal withholding
taxes due up to and including the date of such expiration or
termination. Copies of deposit slips showing payment shall likewise
constitute satisfactory evidence for such purpose. In the event
that any lien, assessment or tax liability against Borrowers shall
arise in favor of any taxing authority, whether or not notice
thereof shall be filed or recorded as may be required by law,
Lender shall have the right (but shall not be obligated, nor shall
Lender hereby assume the duty) upon reasonable prior notice to
Borrowers to pay any such lien, assessment or tax liability by
virtue of which such charge shall have arisen; provided, however,
that Lender shall not pay any such tax, assessment or lien if the
amount, applicability or validity thereof is being contested in
good faith and by appropriate proceedings by Borrowers and further
provided that by Borrowers' title to and its right to use, the
Collateral are not materially adversely affected and Lender's lien
and priority in the Collateral are not adversely affected, altered
or impaired thereby. In order to pay any such lien, assessment or
tax liability, Lender shall not be obliged to wait until said lien,
assessment or tax liability is filed before taking such action as
hereinabove set forth. Any sum or sums which Lender shall have paid
for the discharge of any such lien shall be added to the Revolving
Credit and shall be paid by Borrowers to Lender with interest
thereon, upon demand, and Lender shall be subrogated to all rights
of such taxing authority against Borrowers.
9.17 Consent to Jurisdiction: Each of the Borrowers irrevocably
consents to the jurisdiction of the Courts of Common Pleas of
Philadelphia, Commonwealth of Pennsylvania or the United States
District Court for the Eastern District of Pennsylvania in any
and all actions and proceedings whether arising hereunder or
under any other agreement or undertaking and irrevocably agrees
to service of process as set forth in Section 9.7 hereof, to the
address of Borrowers set forth herein.
9.18 WAIVER OF JURY TRIAL: EACH OF THE BORROWERS HEREBY WAIVES ANY
AND ALL RIGHTS IT MAY HAVE TO A JURY TRIAL IN ,CONNECTION WITH ANY
LITIGATION COMMENCED BY OR AGAINST LENDER WITH RESPECT TO RIGHTS
AND OBLIGATIONS OF THE PARTIES HERETO.
9.19 Future Commitments: Except as expressly set forth in this
Agreement, Lender has made no agreement or commitment to lend money
or extend credit to Borrowers, or any of them, and has made no
agreement or commitment to Borrowers, or any of them, to modify or
consider any modification of any nature whatsoever of the terms of
this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned have executed this
Agreement on the date first written above.
LENDER:
Mellon Bank, N.A.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Vice President
BORROWERS:
ATC Healthcare Services. Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
ATC Staffing Services, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
ATC Revolving Credit/kl