Exhibit 10.28
AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
between
PHC, INC. AND SUBSIDIANRIES
and
CAPITALSOURCE FINANCE LLC
Dated as of
June 13, 2007
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AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
THIS REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT (the "Agreement")
dated as of June 13, 2007, is entered into between PHC, INC, a Massachusetts
corporation, PHC OF MICHIGAN, INC., a Massachusetts corporation, PHC OF NEVADA,
INC., a Massachusetts corporation, PHC OF UTAH, INC., a Massachusetts
corporation, PHC OF VIRGINIA, INC., a Massachusetts corporation, WELLPLACE,
INC., a Massachusetts corporation, DETROIT BEHAVIORAL INSTITUTE, INC., a
Massachusetts corporation, NORTH POINT - PIONEER, INC., a Massachusetts
corporation and SEVEN HILLS HOSPITAL, INC., a Delaware corporation
(individually, collectively and jointly and severally, the "Borrower") and
CAPITALSOURCE FINANCE LLC, a Delaware limited liability company (the "Lender").
WHEREAS, pursuant to a certain Revolving Credit, Term Loan and Security
Agreement by and between Borrower and Lender dated as of October 19, 2004 (the
"Existing Credit Agreement"), Lender made available to Borrower a revolving
credit facility (the "Revolving Facility") in a maximum principal amount at any
time outstanding of up to Three Million Five Hundred Thousand and No/100 Dollars
($3,500,000) (the "Facility Cap") and a term loan in a maximum principal amount
of One Million Four Hundred Thousand and No/100 Dollars ($1,400,000) (the
"Existing Term Loan"); and
WHEREAS, Borrower has requested that Lender amend and restate the Existing
Credit Agreement to continue the Revolving Facility and the outstanding
principal amount of the Existing Term Loan as provided herein and to make
available to Borrower a multi-draw term loan (the "Term Loan") in an initial
principal amount of Three Million and No/100 Dollars ($3,000,000) (the "Initial
Term Loan Amount") to consist of (a) the Existing Term Loan outstanding
immediately prior to the effectiveness of this Agreement (in other words, the
Existing Term Loan shall be continued as part of the Term Loan) and (b)
additional term loan draws which Lender agrees to make to Borrower from time to
time following the Restatement Date; and
WHEREAS, Lender is willing to amend and restate the terms and conditions of
the Existing Credit Agreement to continue the Revolving Facility and make the
Term Loan available to Borrower upon the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which hereby are
acknowledged, Borrower and Lender hereby agree that the Existing Credit
Agreement shall be amended and restated as follows:
I. DEFINITIONS
1.1 General Terms
For purposes of this Agreement, in addition to the definitions above and
elsewhere in this Agreement, the terms listed in Appendix A hereto shall have
the meanings given such terms in Appendix A, which is incorporated herein and
made a part hereof. All capitalized terms used which are not specifically
defined shall have meanings provided in Article 9 of the UCC in effect on the
date hereof to the extent the same are used or defined therein. Unless otherwise
specified herein or in Appendix A, any agreement or contract referred to herein
or in Appendix A shall mean such agreement as modified, amended or supplemented
from time to time. Unless otherwise specified, as used in the Loan Documents or
in any certificate, report, instrument or other document made or delivered
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pursuant to any of the Loan Documents, all accounting terms not defined in
Appendix A elsewhere in this Agreement shall have the meanings given to such
terms in and shall be interpreted in accordance with GAAP.
II. ADVANCES, PAYMENT AND INTEREST
2.1 The Revolving Facility
(a) Subject to the provisions of this Agreement, Lender shall continue the
Existing Advances and make Advances to Borrower under the Revolving Facility
from time to time during the Term, provided that, notwithstanding any other
provision of this Agreement, the aggregate amount of all Advances at any one
time outstanding under the Revolving Facility shall not exceed either of (a) the
Facility Cap and (b) the Availability. The Revolving Facility is a revolving
credit facility, which may be drawn, repaid and redrawn, from time to time as
permitted under this Agreement. Any determination as to whether there is
availability within the Borrowing Base for Advances shall be made by Lender in
its sole discretion and is final and binding upon Borrower. Unless otherwise
permitted by Lender, each Advance shall be in an amount of at least $1,000.
Subject to the provisions of this Agreement, Borrower may request Advances under
the Revolving Facility up to and including the value, in U.S. Dollars, in an
amount equal to the Applicable Advance Rate of the Borrowing Base, minus, if
applicable, amounts reserved pursuant to this Agreement (such calculated amount
being referred to herein as the "Availability"). Advances under the Revolving
Facility automatically shall be made for the payment of interest on the
Revolving Facility and the Term Loan and other Obligations on the date when due
to the extent available and as provided for herein.
(b) Lender has established the above-referenced advance rate for
Availability and, in its sole credit judgment, may further adjust the
Availability and such advance rate by applying percentages (known as "liquidity
factors") to Eligible Receivables by payor class based upon Borrower's actual
recent collection history for each such payor class (i.e., Medicare, Medicaid,
commercial insurance, etc.) in a manner consistent with Lender's underwriting
practices and procedures, including without limitation Lender's review and
analysis of, among other things, Borrower's historical returns, rebates,
discounts, credits and allowances (collectively, the "Dilution Items"). Such
liquidity factors and the advance rate for Availability may be adjusted by
Lender throughout the Term as warranted by Lender's underwriting practices and
procedures in its sole credit judgment. Also, Lender shall have the right to
establish from time to time, in its sole credit judgment, reserves against the
Borrowing Base, which reserves shall have the effect of reducing the amounts
otherwise eligible to be disbursed to Borrower under the Revolving Facility
pursuant to this Agreement.
2.2 Revolving Facility Maturity Date
All amounts outstanding under the Revolving Facility and other Revolving
Facility Obligations shall be due and payable in full, if not earlier in
accordance with this Agreement, on the earlier of (i) the occurrence of an Event
of Default if required pursuant hereto or Lender's demand upon an Event of
Default, and (ii) October 19, 2011 (such earlier date being the "Revolving
Facility Maturity Date"). The Revolving Facility shall be subject to two (2) one
(1) year extensions, exercisable by written notice to Lender no less than ninety
(90) days prior to the then current Revolving Facility Maturity Date; provided
that no Default or Event of Default has occurred or is continuing. In
consideration for each extension of the Revolving Facility Maturity Date and as
a condition thereof exercised by Borrower, Borrower agrees to pay to Lender a
nonrefundable extension fee in the amount of $20,000.00.
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2.3 Revolving Facility Disbursements; Requirement to Deliver Borrowing
Certificate
So long as no Default or Event of Default shall have occurred and be
continuing, Borrower Agent may give Lender irrevocable written notice requesting
an Advance under the Revolving Facility by delivering to Lender not later than
11:00 a.m. (New York City time) at least one but not more than four Business
Days before the proposed borrowing date of such requested Advance (the
"Borrowing Date"), a completed Borrowing Certificate and relevant supporting
documentation satisfactory to Lender, which shall (i) specify the proposed
Borrowing Date of such Advance which shall be a Business Day, (ii) specify the
principal amount of such requested Advance, (iii) certify the matters contained
in Section 4.2, and (iv) specify the amount of any Medicare or Medicaid
recoupments and/or recoupments of any third-party payor being sought, requested
or claimed, or, to Borrower's knowledge, threatened against Borrower or
Borrower's Affiliates. Each time a request for an Advance is made, and, in any
event and regardless of whether an Advance is being requested, on Tuesday of
each week during the Term (and more frequently if Lender shall so request) until
the Obligations are indefeasibly paid in cash in full and this Agreement is
terminated, Borrower Agent shall deliver to Lender a Borrowing Certificate
accompanied by (A) a separate detailed aging and categorizing of Borrower's (i)
accounts receivable and (ii) if requested by Lender, accounts payable and (B)
such other supporting documentation with respect to the figures and information
in the Borrowing Certificate as Lender shall reasonably request from a credit or
security perspective or otherwise. On each Borrowing Date, Borrower irrevocably
authorizes Lender to disburse the proceeds of the requested Advance to the
appropriate Borrower's account(s) as set forth on Schedule 2.3, in all cases for
credit to the appropriate Borrower (or to such other account as to which the
Borrower Agent shall instruct Lender) via Federal funds wire transfer no later
than 4:00 p.m. (New York City time).
2.4 Revolving Facility Collections; Repayment; Borrowing Availability and
Lockbox
Each of PHC-Michigan and PHC-Utah (and each other Borrower whose Accounts
may be included at any time in the future within the Borrowing Base, and all
Borrowers at the direction of Lender following the occurrence of an Event of
Default) shall maintain one or more lockbox accounts (individually and
collectively, the "Lockbox Account") with one or more banks acceptable to Lender
(each, a "Lockbox Bank"), and shall execute with each Lockbox Bank one or more
agreements acceptable to Lender (individually and collectively, the "Lockbox
Agreement"), and such other agreements related thereto as Lender may require.
Each such Borrower shall ensure that all collections of their respective
Accounts (other than accounts due from Private Payors and any amounts received
under contracts held by PHC-Michigan or PHC-Utah but for which the services
relating thereto are performed by Wellplace) are paid and delivered directly
from Account Debtors and other Persons into the appropriate Lockbox Account. The
Lockbox Agreements shall provide that the Lockbox Banks immediately will
transfer all funds paid into the Lockbox Accounts into a depository account or
accounts maintained by Lender or an Affiliate of Lender at such bank as Lender
may communicate to each such Borrower from time to time (the "Concentration
Account"), except, with respect only to Accounts payable by Medicaid/Medicare
Account Debtors, as instructed by the applicable Borrower to whom such Accounts
are payable as permitted pursuant to the applicable Lockbox Agreement and
provided that the Lockbox Banks shall not transfer the funds paid into the
Lockbox Account of Seven Hills to the Concentration Account until the date on
which Lender notifies the Lockbox Bank and Borrower that a Default or Event of
Default has occurred. Notwithstanding and without limiting any other provision
of any Loan Document, Lender shall apply, on a daily basis, all funds
transferred into the Concentration Account pursuant to the Lockbox Agreement and
this Section 2.4 in such order and manner as determined by Lender. To the extent
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that any Accounts collections of any such Borrower or any other cash payments
received by any such Borrower are not sent directly to the appropriate Lockbox
Account as required in this Section 2.4 but are received by any such Borrower or
any of their Affiliates, such collections and proceeds shall be held in trust
for the benefit of Lender and immediately remitted (and in any event within two
(2) Business Days), in the form received, to the appropriate Lockbox Account for
immediate transfer to the Concentration Account. Each Borrower acknowledges and
agrees that compliance with the terms of this Section 2.4 is an essential term
of this Agreement, and that, in addition to and notwithstanding any other rights
Lender may have hereunder, under any other Loan Document, under applicable law
or at equity, upon each and every failure by any Borrower or any of their
Affiliates to comply with any such terms Lender shall be entitled to assess a
non-compliance fee which shall operate to increase the Applicable Rate by two
percent (2.0%) per annum during any period of non-compliance, whether or not a
Default or an Event of Default occurs or is declared, provided that nothing
shall prevent Lender from considering any failure to comply with the terms of
this Section 2.4 to be a Default or an Event of Default. All funds transferred
to the Concentration Account for application to the Obligations under the
Revolving Facility shall be applied to reduce the Obligations under the
Revolving Facility, but, for purposes of calculating interest hereunder, shall
be subject to a four (4) Business Day clearance period. If as the result of
collections of Accounts and/or any other cash payments received by any Borrower
pursuant to this Section 2.4 a credit balance exists with respect to the
Concentration Account, such credit balance shall not accrue interest in favor of
any Borrower, but shall be available to the appropriate Borrower in accordance
with the terms of this Agreement. If applicable, at any time prior to the
execution of all or any of the Lockbox Agreements and operation of all or any of
the Lockbox Accounts, each Borrower and their Affiliates shall direct all
collections or proceeds it receives on Accounts or from other Collateral to the
accounts(s) and in the manner specified by Lender in its sole discretion.
2.5 The Term Loan
Subject to the terms and conditions set forth in this Agreement, Lender
agrees to make the Term Loan available to Borrower in the original principal
amount of the Term Loan Amount by continuing the outstanding principal amount of
the Existing Term Loan made by Lender under the Existing Credit Agreement and
advancing additional funds as provided in this Agreement, so that as long as no
Default or Event of Default has occurred or is continuing, Borrower may,
commencing as of the Restatement Date from time to time prior to the close of
business on the Term Loan Maturity Date, borrow, in one or more Term Loan Draws,
an amount which, when aggregated with the outstanding principal amount of the
Existing Term Loan continued hereunder, does not exceed in the aggregate the
Term Loan Amount in effect from time to time. The Term Loan is a revolving
credit facility, which may be drawn, repaid and redrawn, from time to time as
permitted under this Agreement. So long as no Default or Event of Default shall
have occurred and be continuing, Borrower Agent may give Lender irrevocable
written notice requesting a Term Loan Draw by delivering to Lender not later
than 11:00 a.m. (Eastern Standard Time) at least one (1) but not more than four
(4) Business Days before the proposed borrowing date of such requested Term Loan
Draw (the "Term Loan Borrowing Date"), a completed Borrowing Certificate and
relevant supporting documentation satisfactory to Lender, which shall (i)
specify the proposed Term Loan Borrowing Date which shall be a Business Day,
(ii) specify the principal amount of such requested Term Loan Draw, (iii)
certify the matters contained in Section 4.2 and Section 4.3. Subject to
contrary written instructions from Borrower Agent, each Term Loan Draw shall be
disbursed on the applicable Term Loan Borrowing Date to the Borrower's
account(s) as set forth on Schedule 2.3.
2.6 Repayment of Term Loan; Maturity
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Payment of the outstanding principal balance of the Term Loan (in addition
to the interest payments in Section 3.2) and all other amounts (other than
interest) outstanding under the Term Loan shall be made as follows:
(a) All Term Loan Obligations shall be due and payable in full, if
not earlier in accordance with this Agreement, on the earlier of
(i) the occurrence and continuance of an Event of Default if
required pursuant hereto or Lender's demand upon the occurrence
and continuance of an Event of Default, (ii) a Revolver
Termination and (iii) the last day of the Term, the earlier of
the foregoing (i), (ii) or (iii) being the "Term Loan Maturity
Date".
(b) The principal balance of the Term Loan outstanding at any time in
excess of the Term Loan Amount in effect from time to time shall
be immediately due and payable by Borrower without the necessity
of any demand, at the Payment Office, whether or not a Default or
Event of Default has occurred or is continuing and shall be paid
in the manner specified in Section 2.7. Advances shall be
automatically made under the Revolving Facility to pay any such
excess amounts to the extent available and as provided for
herein.
2.7 Promise to Pay; Manner of Payment
Borrower absolutely and unconditionally promises to pay principal, interest
and all other amounts payable hereunder, or under any other Loan Document,
without any right of rescission and without any deduction whatsoever, including
any deduction for any setoff, counterclaim or recoupment, and notwithstanding
any damage to, defects in or destruction of the Collateral or any other event,
including obsolescence of any property or improvements. All payments made by
Borrower (other than payments automatically paid through Advances under the
Revolving Facility as provided herein), shall be made only by wire transfer on
the date when due, without offset or counterclaim, in U.S. Dollars, in
immediately available funds to such account as may be indicated in writing by
Lender to Borrower from time to time. Any such payment received after 2:00 p.m.
(New York City time) on the date when due shall be deemed received on the
following Business Day. Whenever any payment hereunder shall be stated to be due
or shall become due and payable on a day other than a Business Day, the due date
thereof shall be extended to, and such payment shall be made on, the next
succeeding Business Day, and such extension of time in such case shall be
included in the computation of payment of any interest (at the interest rate
then in effect during such extension) and/or fees, as the case may be.
2.8 Repayment of Excess Advances
Any balance of Advances under the Revolving Facility outstanding at any
time in excess of the lesser of the Facility Cap or the Availability shall be
immediately due and payable by Borrower without the necessity of any demand, at
the Payment Office, whether or not a Default or Event of Default has occurred or
is continuing and shall be paid in the manner specified in Section 2.7.
2.9 Other Mandatory Prepayments
In addition to and without limiting any provision of any Loan Document:
(a) if a Change of Control occurs, on or prior to the first Business Day
following the date of such Change of Control, Borrower shall prepay the Loans,
including, without limitation, all outstanding Advances and all other
Obligations, in full in cash together with accrued interest thereon to the date
of prepayment and all other amounts owing to Lender under the Loan Documents;
and
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(b) if any Borrower sells any of its assets or properties, sells or issues
any securities (debt or equity)(other than private placements for equity of PHC,
Inc. the terms and conditions of which do not violate any terms or conditions of
this Agreement or the other Loan Documents, employee stock purchase plans,
warrants issued for services and stock and stock options issued to employees in
the ordinary course of business (including shares of stock issued upon the
exercise of such stock options)), capital stock or ownership interests, receives
any capital contributions, receives any property damage insurance award which is
not used to repair or replace the property covered thereby or incurs any
Indebtedness except for Permitted Indebtedness, then it shall apply 100% of the
proceeds thereof to the prepayment of the Loans together with accrued interest
thereon and all other Obligations owing to Lender under the Loan Documents, such
payment to be applied at such time and in such manner and order as Lender shall
decide in its sole discretion.
2.10 Payments by Lender
Should any amount required to be paid under any Loan Document be unpaid,
such amount may be paid by Lender, which payment shall be deemed a request for
an Advance under the Revolving Facility as of the date such payment is due, and
Borrower irrevocably authorizes disbursement of any such funds to Lender by way
of direct payment of the relevant amount, interest or Obligations. No payment or
prepayment of any amount by Lender or any other Person shall entitle any Person
to be subrogated to the rights of Lender under any Loan Document unless and
until the Obligations have been fully performed and paid irrevocably in cash and
this Agreement has been terminated. Any sums expended by Lender as a result of
any Borrower's or any Guarantor's failure to pay, perform or comply with any
Loan Document or any of the Obligations may be charged to Borrower's account as
an Advance under the Revolving Facility and added to the Obligations.
2.11 Evidence of Loans
(a) Lender shall maintain, in accordance with its usual practice,
electronic or written records evidencing the Indebtedness and Obligations to
Lender resulting from each Loan made by Lender from time to time, including
without limitation, the amounts of principal and interest payable and paid to
Lender from time to time under this Agreement. Lender and Borrower acknowledge
and agree that the Existing Advances under the Revolving Facility have been
evidenced by certain Revolving Note dated October 19, 2004 in the aggregate
principal amount of Three Million Five Hundred Thousand Dollars ($3,500,000)
(the "Existing Revolving Note") and that the Existing Term Loan has been
evidenced by a certain Term Note dated October 19, 2004 (the "Existing Term
Note"). Lender and Borrower acknowledge and agree that (i) the Existing
Revolving Note and the Existing Term Note shall be cancelled by Lender and
returned to Borrower as of the Restatement Date but that the cancellation of the
Existing Revolving Notes shall not constitute a novation of the Existing
Advances and the Existing Term Loan or any other amounts evidenced thereby and
(ii) all Advances (including the Existing Advances) and the Term Loan shall as
of the Restatement Date be evidenced as provided in this Section 2.11(a).
(b) The entries made in the electronic or written records maintained
pursuant to subsection (a) of this Section 2.11 (the "Register") shall be prima
facie evidence, absent manifest error, of the existence and amounts of the
Obligations and Indebtedness therein recorded; provided however, that the
failure of Lender to maintain such records or any error therein shall not in any
manner affect the joint and several obligations of Credit Parties to repay the
Loans or Obligations in accordance with their terms.
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(c) Lender will account to Borrower monthly with a statement of Advances
under the Revolving Facility, and any charges and payments made pursuant to this
Agreement, and in the absence of manifest error, such accounting rendered by
Lender shall be deemed final, binding and conclusive unless Lender is notified
by Borrower in writing to the contrary within fifteen calendar days of Receipt
of such accounting, which notice shall be deemed an objection only to items
specifically objected to therein.
(d) Borrower agrees that:
(i) upon written notice by Lender to Borrower that a Note or other evidence
of Indebtedness is requested by Lender to evidence the Loans and other
Obligations owing or payable to, or to be made by, Lender, Borrower shall
promptly (and in any event within three (3) Business Days of any such request)
execute and deliver to Lender an appropriate Note or Notes in form and substance
reasonably acceptable to Lender and Borrower;
(ii) all references to Notes in the Loan Documents shall mean Notes, if
any, to the extent issued (and not returned to Borrower for cancellation)
hereunder, as the same may be amended, modified, divided, supplemented, extended
or restated from time to time; and
(iii) upon Lender's written request, and in any event within three (3)
Business Days of any such request, Borrower shall execute and deliver to Lender
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new Notes and divide the Notes in exchange for then existing Notes in such
smaller amounts or denominations as Lender shall specify in its sole and
absolute discretion; provided, that the aggregate principal amount of such new
Notes shall not exceed the aggregate principal amount of the Notes outstanding
at the time such request is made; and provided, further, that such Notes that
are to be replaced shall then be deemed no longer outstanding hereunder and
replaced by such new Notes and returned to Borrower within a reasonable period
of time after Lender's receipt of the replacement Notes.
2.12 Grant of Security Interest; Collateral
(a) To secure the payment and performance of the Obligations, each
Borrower, each Guarantor, hereby grants to Lender a continuing security interest
in and Lien upon, and pledges to Lender, all of its right, title and interest in
and to the following (collectively and each individually, the "Collateral"),
which security interest is intended to be a first priority security interest:
(i) all of such Borrower's and Guarantor's tangible personal property,
including without limitation all present and future Inventory and Equipment
(including items of equipment which are or become Fixtures), now owned or
hereafter acquired;
(ii) all of such Borrower's and Guarantor's intangible personal property,
including without limitation all present and future Accounts, securities,
contract rights, Permits, General Intangibles, Chattel Paper, Documents,
Instruments and Deposit Accounts, Letter-of-Credit Rights and Supporting
Obligations, rights to the payment of money or other forms of consideration of
any kind, tax refunds, insurance proceeds, now owned or hereafter acquired, and
all intangible and tangible personal property relating to or arising out of any
of the foregoing;
(iii) all of such Borrower's and Guarantor's present and future Government
Contracts and rights thereunder and the related Government Accounts and proceeds
thereof, now or hereafter owned or acquired by such Borrower and Guarantor;
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provided, however, that Lender shall not have a security interest in any rights
under any Government Contract of such Borrower and Guarantor or in the related
Government Account where the taking of such security interest would be a
violation of an express prohibition contained in the Government Contract (for
purposes of this limitation, the fact that a Government Contract is subject to,
or otherwise refers to, Title 31, Section 203 or Title ▇▇, ▇▇▇▇▇▇▇ ▇▇ ▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ Code shall not be deemed an express prohibition against assignment
thereof) or is prohibited by applicable law; and
(iv) any and all additions to any of the foregoing, and any and all
replacements, products and proceeds (including insurance proceeds) of any of the
foregoing.
(b) Notwithstanding the foregoing provisions of this Section 2.13, such
grant of a security interest shall not extend to, and the term "Collateral"
shall not include, any General Intangibles of Borrower or such Guarantor to the
extent that (i) such General Intangibles are not assignable or capable of being
encumbered as a matter of law or under the terms of any license or other
agreement applicable thereto (but solely to the extent that any such restriction
shall be enforceable under applicable law) without the consent of the licensor
thereof or other applicable party thereto, and (ii) such consent has not been
obtained; provided, however, that the foregoing grant of a security interest
shall extend to, and the term "Collateral" shall include, each of the following:
(a) any General Intangible which is in the nature of an Account or a right to
the payment of money or a proceed of, or otherwise related to the enforcement or
collection of, any Account or right to the payment of money, or goods which are
the subject of any Account or right to the payment of money, (b) any and all
proceeds of any General Intangible that is otherwise excluded to the extent that
the assignment, pledge or encumbrance of such proceeds is not so restricted, and
(c) upon obtaining the consent of any such licensor or other applicable party
with respect to any such otherwise excluded General Intangible, such General
Intangible as well as any and all proceeds thereof that might theretofore have
been excluded from such grant of a security interest and from the term
"Collateral."
(c) The payment and performance of the Obligations shall also secured by
the provisions of, and the property described in, the Security Documents,
including, but not being limited to, (i) a mortgage deed or a deed of trust
dated the Closing Date and amended and restated as of the Restatement Date from
each of PHC-Michigan and PHC-Virginia with respect to the Real Estate, a
leasehold mortgage or leasehold deed of trust dated the Closing Date and amended
and restated as of the Restatement Date from PHC-Utah with respect to the Utah
Leasehold and a leasehold mortgage or leasehold deed of trust dated the
Restatement Date from Seven Hills Hospital with respect to the Seven Hills
Leasehold (each, as such may be modified, amended or supplemented from time to
time, individually and collectively, a "Mortgage"), (ii) a collateral assignment
of leases, rentals and property income dated the Closing Date and amended and
restated as of the Restatement Date from each of PHC-Michigan and PHC-Virginia
to Lender (each, as such may be modified, amended or supplemented from time to
time, individually and collectively, an "Assignment of Rents") and (iii) an
assignment of permits and licenses dated the Closing Date from each of
PHC-Michigan and PHC-Virginia to Lender with respect to the Real Estate (each,
as such may be modified, amended or supplemented from time to time, individually
and collectively, a "Permit Assignment").
(d) The payment and performance of the Obligations shall be
cross-guaranteed by each Borrower pursuant to a cross guaranty agreement dated
the Closing Date or, in the case of Seven Hills Hospital, a joinder thereto
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dated the Restatement Date executed by each Borrower (each, as such may be
modified, amended or supplemented from time to time, individually and
collectively, a "Cross Guaranty").
(e) Reserved.
(f) In addition to the foregoing, to secure the payment and performance of
the Obligations, PHC shall pledge to Lender all of the securities which it owns
in its Subsidiaries pursuant, in the case of all Subsidiaries other than
Pivotal, to the Stock Pledge Agreement.
(g) Upon the execution and delivery of this Agreement, and upon the proper
filing of the necessary financing statements, the recordation of the Patent,
Trademark and Copyright Assignment in the United States Patent and Trademark
Office and/or the United States Copyright Office, and proper delivery of the
necessary stock and membership interest certificates, without any further
action, Lender will have a good, valid and perfected first priority Lien and
security interest in the Collateral, subject to no transfer or other
restrictions or Liens of any kind in favor of any other Person except for
Permitted Liens. No financing statement relating to any of the Collateral is on
file in any public office except those (i) on behalf of Lender, and/or (ii) in
connection with Permitted Liens.
2.13 Collateral Administration
(a) All Collateral (except Deposit Accounts) will at all times be kept by
each Borrower at the locations set forth on Schedule 5.18B hereto and shall not,
without thirty (30) calendar days prior written notice to Lender, be moved
therefrom, and in any case shall not be moved outside the continental United
States.
(b) Each Borrower shall keep accurate and complete records of its Accounts
and all payments and collections thereon and shall submit such records to Lender
on such periodic bases as Lender may request. In addition, if Accounts of
PHC-Michigan or PHC-Utah (or any other Borrower whose Accounts may be included
at any time in the future within the Borrowing Base) in an aggregate face amount
in excess of $10,000 become ineligible because they fall within one of the
specified categories of ineligibility set forth in the definition of Eligible
Receivables, each such Borrower shall notify Lender of such occurrence on the
first Business Day following the discovery of such occurrence and the Borrowing
Base shall thereupon be adjusted to reflect such occurrence. If requested by
Lender, each Borrower shall execute and deliver to Lender formal written
assignments of all of its Accounts weekly or daily as Lender may request,
including all Accounts created since the date of the last assignment, together
with copies of claims, invoices and/or other information related thereto. To the
extent that collections from such assigned accounts exceed the amount of the
Obligations, such excess amount shall not accrue interest in favor of Borrower,
but shall be available to the Borrower upon Borrower's written request.
(c) Whether or not an Event of Default has occurred, upon prior written
notice to Borrower, any of Lender's officers, employees, representatives or
agents shall have the right, at any time during normal business hours, in the
name of Lender, any designee of Lender or any Borrower, to verify the validity,
amount or any other matter relating to any Accounts of any Borrower; provided
that such prior written notice to Borrower is not required if a Default or Event
of Default has occurred and be continuing. Each Borrower shall cooperate fully
with Lender in an effort to facilitate and promptly conclude such verification
process.
(d) To expedite collection, each Borrower shall endeavor in the first
instance to make collection of its Accounts for Lender. Lender shall have the
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right at all times after the occurrence and during the continuance of an Event
of Default to notify (i) Account Debtors owing Accounts to any Borrower other
than Medicaid/Medicare Account Debtors that their Accounts have been assigned to
Lender and to collect such Accounts directly in its own name and to charge
collection costs and expenses, including reasonable attorney's fees, to
Borrower, and (ii) Medicaid/Medicare Account Debtors that such Borrower has
waived any and all defenses and counterclaims it may have or could interpose in
any such action or procedure brought by Lender to obtain a court order
recognizing the collateral assignment or security interest and lien of Lender in
and to any Account or other Collateral and that Lender is seeking or may seek to
obtain a court order recognizing the collateral assignment or security interest
and lien of Lender in and to all Accounts and other Collateral payable by
Medicaid/Medicare Account Debtors.
(e) As and when determined by Lender in its sole discretion, Lender will
perform the searches described in clauses (i) and (ii) below against each
Borrower and Guarantor (the results of which are to be consistent with
Borrower's representations and warranties under this Agreement), all at
Borrower's expense: (i) UCC searches with the Secretary of State and local
filing offices of each jurisdiction where any Borrower and/or Guarantor
maintains their respective executive offices, a place of business or assets; and
(ii) judgment, federal tax lien and corporate and partnership tax lien searches,
in each jurisdiction searched under clause (i) above. UCC searches shall be
conducted at the expense of Borrower on a quarterly basis; provided, that Lender
shall have the right to conduct such searches more frequently at its expense
and, if a Default or Event of Default shall have occurred, at the expense of
Borrower.
(f) Each of PHC-Michigan and PHC-Utah (and any other Borrower whose
Accounts may be included at any time in the future within the Borrowing Base)
(i) shall provide prompt written notice to its current bank to transfer all
items, collections and remittances to the Concentration Account, (ii) shall
provide prompt written notice to each Account Debtor (other than
Medicaid/Medicare Account Debtors) that Lender has been granted a lien and
security interest in, upon and to all Accounts applicable to such Account Debtor
and shall direct each Account Debtor to make payments to the appropriate Lockbox
Account, and each such Borrower hereby authorizes Lender, upon any failure to
send such notices and directions within ten (10) calendar days after the date of
this Agreement (or ten (10) calendar days after the Person becomes an Account
Debtor), to send any and all similar notices and directions to such Account
Debtors, and (iii) shall do anything further that may be lawfully required by
Lender to secure Lender and effectuate the intentions of the Loan Documents. At
Lender's request, each such Borrower shall immediately deliver to Lender all
items for which Lender must receive possession to obtain a perfected security
interest and all notes, certificates, and documents of title, Chattel Paper,
warehouse receipts, Instruments, and any other similar instruments constituting
Collateral. Notwithstanding any provision of this subsection (f) to the
contrary, following the occurrence of an Event of Default each Borrower shall
comply with the provisions of this subsection (f) if directed by Lender.
2.14 Power of Attorney
Lender is hereby irrevocably made, constituted and appointed the true and
lawful attorney for each Borrower (without requiring any of them to act as such)
with full power of substitution to do the following: (i) endorse the name of any
such Person upon any and all checks, drafts, money orders, and other instruments
for the payment of money that are payable to such Person and constitute
collections on its or their Accounts; (ii) execute in the name of such Person
any financing statements, schedules, assignments, instruments, documents, and
statements that it is or they or are obligated to give Lender under any of the
Loan Documents to enable Lender to preserve or exercise any rights or remedies
in any Collateral; and (iii) do such other and further acts and deeds in the
name of such Person that Lender may deem necessary or desirable to enforce any
Account or other Collateral or to perfect Lender's security interest or lien in
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any Collateral. In addition, if any such Person breaches its obligation
hereunder to direct payments of Accounts or the proceeds of any other Collateral
to the appropriate Lockbox Account, Lender, as the irrevocably made, constituted
and appointed true and lawful attorney for such Person pursuant to this
paragraph, may, by the signature or other act of any of Lender's officers or
authorized signatories (without requiring any of them to do so), direct any
federal, state or private payor or fiscal intermediary to pay proceeds of
Accounts or any other Collateral to the appropriate Lockbox Account.
2.15 Acknowledgement of Joint and Several Liability
Each Borrower acknowledges that it is jointly and severally liable for all
of the Obligations under the Loan Documents. Each Borrower expressly
understands, agrees and acknowledges that (i) Borrowers are all entities
affiliated by common ownership, (ii) each Borrower desires to have the
availability of one common credit facility instead of separate credit
facilities, (iii) each Borrower has requested that Lender extend such a common
credit facility on the terms herein provided, (iv) Lender will be lending
against, and relying on a lien upon, all of Borrowers' assets even though the
proceeds of any particular loan made hereunder may not be advanced directly to a
particular Borrower, (v) each Borrower will nonetheless benefit by the making of
all such loans by Lender and the availability of a single credit facility of a
size greater than each could independently warrant, and (vi) all of the
representations, warranties, covenants, obligations, conditions, agreements and
other terms contained in the Loan Documents shall be applicable to and shall be
binding upon each Borrower. Each Borrower hereby appoints PHC (in such capacity,
"Borrower Agent") to act as agent on behalf of each Borrower and to deliver any
statement, notice, authorization or other writing required or permitted
hereunder or under any of the Loan Documents. Lender shall be entitled to rely
upon any statement, notice, authorization or other writing received from
Borrower Agent without investigation and each Borrower agrees that any such
statement, notice, authorization or other writing shall be binding on it.
III. INTEREST, FEES AND OTHER CHARGES; ALLOCATION OF PURCHASE PRICE
3.1 Interest on the Revolving Facility
Commencing July 1, 2007, and continuing until the later of the expiration
of the Term and the Payment in Full and full performance of all of the
Obligations and termination of this Agreement interest on outstanding Advances
under the Revolving Facility shall be payable monthly in arrears on the first
day of each calendar month at an annual rate of Prime Rate plus one-quarter of
one percentage point (.25%) in accordance with the procedures provided for in
Section 2.7 and Section 2.4, provided however, that, notwithstanding any
provision of any Loan Document, for the purpose of calculating interest at any
time hereunder, the Prime Rate shall be not less than 4.5%, in each case
calculated on the basis of a 360-day year and for the actual number of calendar
days elapsed in each interest calculation period. The payment due under this
Section 3.1 on July 1, 2007 shall include any accrued and unpaid interest on
outstanding Advances under the Revolving Facility existing under the Existing
Credit Agreement.
3.2 Interest on the Term Loan
Commencing July 1, 2007, and continuing until the later of the expiration
of the Term and the Payment in Full and full performance of all of the
Obligations and termination of this Agreement interest on the outstanding
principal balance of the Term Loan shall be payable monthly in arrears on the
first day of each calendar month at an annual rate of Prime Rate plus
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three-quarters of one percentage point (.75%) in accordance with the procedures
provided for in Section 2.7 and Section 2.4., provided however, that,
notwithstanding any provision of any Loan Document, for the purpose of
calculating interest at any time hereunder, the Prime Rate shall be not less
than 5.5%, in each case calculated on the basis of a 360-day year and for the
actual number of calendar days elapsed in each interest calculation period.
Advances under the Revolving Facility shall be made automatically for the
payment of Obligations under the Term Loan on the date when due to the extent
available and as provided for herein. The payment due under this Section 3.2 on
July 1, 2007 shall include any accrued and unpaid interest on outstanding
principal amount of the Existing Term Loan under the Existing Credit Agreement.
3.3 Commitment Fee
On or before the Restatement Date, Borrower shall pay to Lender the
following as a nonrefundable commitment fees:
(a) .5% of the Facility Cap in respect of the Revolving Facility;
(b) .5% of the Initial Term Loan Amount; and
3.4 Collateral Management Fee and Unused Line Fee
Borrower shall pay Lender as additional interest a monthly collateral
management fee (the "Collateral Management Fee") equal to 0.042% per month
calculated on the basis of the daily average amount of the balances under the
Revolving Facility outstanding during the preceding month. The Collateral
Management Fee shall be payable monthly in arrears on the first day of each
successive calendar month (starting with the month in which the Restatement Date
occurs). The payment due under this Section 3.4 on July 1, 2007 shall include
any accrued and unpaid Collateral Management Fee due and payable under the
Existing Credit Agreement as well as any accrued and unpaid Unused Line Fee (as
such term is defined in the Existing Credit Agreement) due and payable under the
Existing Credit Agreement (which Unused Line Fee shall not be charged under this
Agreement commencing as of the Restatement Date).
3.5 Finance Fee
If Borrower makes any final prepayment or any payment in full of the
principal amount of the Term Loan or other satisfaction of the outstanding
balance of the Term Loan and/or the Term Loan is otherwise terminated, in each
case for any reason, then, on such date, Borrower shall pay Lender (in addition
to any other Obligations relating to the Term Loan pursuant to the terms of this
Agreement and any other Loan Document), an amount equal to the Term Loan Finance
Fee Amount; provided, however, that no fee shall be due and payable under this
subsection (a) if the Term Loan Termination results from the refinancing of the
Term Loan with the proceeds from a financing under a program sponsored by the
United States Department of Housing and Urban Development. Lender hereby
acknowledges that the Finance Fee (as such term is defined in Section 3.4 of the
Existing Credit Agreement) due and payable under the Existing Credit Agreement
in respect of the Existing Term Loan is hereby waived (the "Waived Finance Fee")
and Borrower shall have no further obligation to pay the Waived Finance Fee.
3.6 Computation of Fees; Lawful Limits
All fees hereunder shall be computed on the basis of a year of 360 days and
for the actual number of days elapsed in each calculation period, as applicable.
In no contingency or event whatsoever, whether by reason of acceleration or
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otherwise, shall the interest and other charges paid or agreed to be paid to
Lender for the use, forbearance or detention of money hereunder exceed the
maximum rate permissible under applicable law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. If, due to
any circumstance whatsoever, fulfillment of any provision hereof, at the time
performance of such provision shall be due, shall exceed any such limit, then,
the obligation to be so fulfilled shall be reduced to such lawful limit, and, if
Lender shall have received interest or any other charges of any kind which might
be deemed to be interest under applicable law in excess of the maximum lawful
rate, then such excess shall be applied first to any unpaid fees and charges
hereunder, then to unpaid principal balance owed by Borrower hereunder, and if
the then remaining excess interest is greater than the previously unpaid
principal balance, Lender shall promptly refund such excess amount to Borrower
and the provisions hereof shall be deemed amended to provide for such
permissible rate. The terms and provisions of this Section 3.6 shall control to
the extent any other provision of any Loan Document is inconsistent herewith.
3.7 Default Rate of Interest
Upon the occurrence and during the continuation of an Event of Default, the
Applicable Rate of interest in effect at such time with respect to the
Obligations shall be increased by 5.0% per annum (the "Default Rate").
3.8 Reserved
3.9 Debt Service Reserve
Borrower and Lender acknowledge that Borrower deposited with Lender on the
Closing Date the amount of $30,000 in order to fund the Debt Service Reserve
Amount to be held by Lender in escrow. Upon the full performance and
satisfaction and indefeasible payment in full in cash of all the Obligations and
the termination of this Agreement, Lender shall return to Borrower that portion
of the Debt Service Reserve Amount not already used by Lender to make payments
of principal or interest pursuant to this Agreement. Notwithstanding and without
limiting or being limited by any other provision of this Agreement, upon the
occurrence and continuation of an Event of Default, Lender shall have the right,
in its sole discretion, to use all or any portion of the Debt Service Reserve
Amount to pay any amount or Obligation hereunder and/or under the Loans, Notes
and other Loan Documents, to be applied at such time and in such manner and
order as Lender shall decide in its sole discretion. After any cure of any Event
of Default, if amounts from the Debt Service Reserve Amount have been used by
Lender pursuant to the immediately preceding sentence, Borrower shall deposit
such additional cash with Lender to be held by Lender in escrow in a
non-interest bearing account to restore the full amount of the Debt Service
Reserve Amount in such account.
3.10 Minimum Balance
Notwithstanding any provision of this Agreement to the contrary, if the
consolidated average daily amount of the balances under the Revolving Facility
and the Term Loan for any calendar month is less than One Million Five Hundred
Thousand Dollars ($1,500,000) Borrower acknowledges and agrees that Lender shall
be entitled to calculate interest and fees under Sections 2.4, 3.1 and 3.4 for
such calendar month as if the average daily outstanding balance of the Revolving
Facility for such calendar month was One Million Five Hundred Thousand Dollars
($1,500,000). Notwithstanding the foregoing, if for any calendar month the sum
of the average daily Availability for such month (as calculated by reference to
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the Borrowing Certificates submitted to Lender and effective during such month)
plus the Term Loan Amount in effect for such month (such sum being referred to
as the "Average Availability Amount") is less than $1,500,000, then Lender shall
calculate interest and fees under this Section 3.10 for such month as if the
average daily outstanding balance of the Revolving Facility was the Average
Availability Amount.
IV. CONDITIONS PRECEDENT
4.1 Conditions to Amendment and Restatement, Continuation of Loans and
Closing
The obligations of Lender to consummate the transactions contemplated
herein and to amend and restate the Existing Credit Agreement and continue the
Existing Advances and the Existing Term Loan and make available the Term Loan
are subject to the satisfaction, in the sole judgment of Lender, of the
following:
(a) (i) Each Borrower or Borrower Agent on behalf of Borrower shall have
delivered to Lender (A) the Loan Documents to which it is a party, each duly
executed by an authorized officer of Borrower and the other parties thereto, and
(B) a Borrowing Certificate for any Advance under the Revolving Facility or Term
Loan Draw to be requested on the Restatement Date executed by an authorized
officer of Borrower Agent, and (ii) each Guarantor shall have delivered to
Lender the Loan Documents to which such Guarantor is a party, each duly executed
and delivered by such Guarantor or an authorized officer of such Guarantor, as
applicable, and the other parties thereto;
(b) all in form and substance satisfactory to Lender in its sole
discretion, Lender shall have received (i) a report of Uniform Commercial Code
financing statement, tax and judgment lien searches performed with respect to
each Borrower and Guarantor in each jurisdiction determined by Lender in its
sole discretion, and such report shall show no Liens on the Collateral (other
than Permitted Liens), (ii) each document (including, without limitation, any
Uniform Commercial Code financing statement) required by any Loan Document or
under law or requested by Lender to be filed, registered or recorded to create
in favor of Lender, a perfected first priority security interest upon the
Collateral and first priority Lien (second priority in the case of the Real
Estate owned by PHC-Virginia) on the Real Estate and the Utah Leasehold, (iii)
evidence of each such filing, registration or recordation and of the payment by
Borrower of any necessary fee, tax or expense relating thereto, (iv) objective
evidence that no part of the Real Estate or the Utah Leasehold is located in a
flood hazard zone, (v) such surveys, environmental reports, engineering and
inspection reports and appraisals as Lender may require in its sole discretion
with respect to the Real Estate or the Leasehold, (vi) evidence satisfactory to
Lender that the Real Estate and the Utah Leasehold complies with applicable
codes and ordinances, is zoned for its current use, is served by adequate public
utilities, is free of mechanics and materialsman's liens and is not subject to
condemnation, and (vii) an endorsement to each ALTA title insurance policy
insuring each Mortgage in form and substance satisfactory to Lender in its sole
discretion;
(c) Lender shall have received (i) the Charter and Good Standing Documents,
all in form and substance acceptable to Lender, (ii) a certificate of the
corporate secretary or assistant secretary of each Borrower and Guarantor dated
the Restatement Date, as to the incumbency and signature of the Persons
executing the Loan Documents, in form and substance acceptable to Lender, and
(iii) the written legal opinion of counsel for each Borrower and Guarantor, in
form and substance satisfactory to Lender and its counsel;
(d) Lender shall have received a certificate of the chief financial officer
(or, in the absence of a chief financial officer, the chief executive officer)
for each of PHC-Michigan and PHC-Utah and for PHC and its Subsidiaries on a
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consolidated basis, in form and substance satisfactory to Lender (each, a
"Solvency Certificate"), certifying (i) the solvency of such Person after giving
effect to the transactions and the Indebtedness contemplated by the Loan
Documents as of the Restatement Date, and (ii) as to such Person's financial
resources and ability to meet its obligations and liabilities as they become
due, to the effect that as of the Restatement Date and after giving effect to
any funding under this Agreement on the Restatement Date: (A) the assets of such
Person, at a Fair Valuation, exceed the total liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities) of such Person, and (B) no
unreasonably small capital base with which to engage in its anticipated business
exists with respect to such Person;
(e) Lender shall have completed examinations, the results of which shall be
satisfactory in form and substance to Lender, of the Collateral, the financial
statements and the books, records, business, obligations, financial condition
and operational state of each Borrower and Guarantor, and each such Person shall
have demonstrated to Lender's satisfaction that (i) its operations comply, in
all respects deemed material by Lender, in its sole judgment, with all
applicable federal, state, foreign and local laws, statutes and regulations,
(ii) its operations are not the subject of any governmental investigation,
evaluation or any remedial action which could result in any expenditure or
liability deemed material by Lender, in its sole judgment, and (iii) it has no
liability (whether contingent or otherwise) that is deemed material by Lender,
in its sole judgment;
(f) Lender shall have received all fees, charges, expenses and other
amounts payable to Lender on or prior to the Restatement Date pursuant to the
Loan Documents;
(g) Lender shall have received true and correct copies of any and all
leases set forth on Schedule 5.4, and such consents, approvals, estoppel
certificates and agreements, including, without limitation, any applicable
Landlord Waivers and Consents with respect to any and all leases set forth on
Schedule 5.4, from such third parties as Lender and its counsel shall determine
are necessary or desirable with respect to (i) the Loan Documents and/or the
transactions contemplated thereby, and/or (ii) claims against any Borrower or
Guarantor, the Collateral or the Real Estate;
(h) each Borrower shall be in compliance with Section 7.13(b) and Section
6.5, and Lender shall have received original certificates of all insurance
policies of each Borrower confirming that they are in effect and that the
premiums due and owing with respect thereto have been paid in full and naming
Lender as sole beneficiary or loss payee and additional insured, as appropriate;
(i) all corporate and other proceedings, documents, instruments and other
legal matters in connection with the transactions contemplated by the Loan
Documents (including, but not limited to, those relating to corporate and
capital structures of each Borrower) shall be satisfactory to Lender;
(j) Lender shall have received, in form and substance satisfactory to
Lender, (i) evidence of the repayment in full and termination of all
Indebtedness of Borrower to be repaid on the Restatement Date, if any, and all
related documents, agreements and instruments and of all Liens, security
interests and Uniform Commercial Code financing statements relating thereto, and
(ii) release and termination of any and all Liens, security interest and/or
Uniform Commercial Code financing statements in, on, against or with respect to
any of the Collateral, the Real Estate or the Leasehold (other than Permitted
Liens and the existing first priority Lien against the Real Estate owned by
PHC-Virginia);
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(k) Each Borrower and each Guarantor shall have executed and filed IRS Form
8821 with the appropriate office of the Internal Revenue Service to include
Lender as an appointee thereon for all tax matters;
(l) PHC shall have issued the Warrant to CSE Equity Holdings LLC in form
and substance satisfactory to Lender;
(m) Lender shall have received true and correct copies of any amendments or
modifications to the Pivotal Acquisition Documents executed or delivered since
the Closing Date, certified by a duly authorized officer of PHC; and
(n) Lender shall have received such other documents, certificates,
information or legal opinions as Lender may reasonably request, all in form and
substance reasonably satisfactory to Lender.
4.2 Conditions to Each Advance
The obligations of Lender to make any Advance are subject to the
satisfaction, in the sole judgment of Lender, of the following additional
conditions precedent:
(a) Borrower Agent shall have delivered to Lender a Borrowing Certificate
for the Advance executed by an authorized officer of Borrower Agent, which shall
constitute a representation and warranty by Borrower as of the Borrowing Date of
such Advance that the conditions contained in this Section 4.2 have been
satisfied; provided, however, that any determination as to whether to fund
Advances or extensions of credit shall be made by Lender in its sole discretion;
(b) each of the representation and warranties made by Borrower in or
pursuant to this Agreement shall be accurate, before and after giving effect to
such Advance;
(c) no Default or Event of Default shall have occurred or be continuing or
would exist after giving effect to the Advance under the Revolving Facility on
such date;
(d) immediately after giving effect to the requested Advance under the
Revolving Facility , the aggregate outstanding principal amount of Advances
under the Revolving Facility shall not exceed either the Availability and the
Facility Cap;
(e) except as disclosed in the historical financial statements, there shall
be no liabilities or obligations with respect to Borrower of any nature
whatsoever which, either individually or in the aggregate, would reasonably be
likely to have a Material Adverse Effect; and
(f) Lender shall have received all fees, charges and expenses payable to
Lender on or prior to such date pursuant to the Loan Documents.
4.3 Conditions to Term Loan Draws
In addition to the satisfaction of the conditions set forth in Section 4.1
hereof, the obligation of the Lender to make any Term Loan Draw is subject to
the satisfaction of the following conditions precedent:
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(a) Borrower Agent shall have delivered to Lender a Borrowing Certificate
for the Term Loan Draw executed by an authorized officer of Borrower Agent,
which shall constitute a representation and warranty by Borrower as of the Term
Loan Borrowing Date for such Term Loan Draw that the conditions contained in
this Section 4.3 have been satisfied; provided, however, that any determination
as to whether the conditions contained in this Section 4.3 and the other
conditions set forth in this Agreement to Lender's obligation to make Term Loan
Draw have been satisfied shall be made by Lender in its sole discretion;
(b) each of the representations and warranties made by Borrower in or
pursuant to this Agreement shall be accurate, before and after giving effect to
such Term Loan Draw;
(c) no Default or Event of Default shall have occurred or be continuing or
would exist after giving effect to the Term Loan Draw on such date;
(d) immediately after giving effect to the requested Term Loan Draw, the
aggregate outstanding principal amount of the Term Loan shall not exceed the
Term Loan Amount in effect from time to time;
(e) except as disclosed in the historical financial statements, there shall
be no liabilities or obligations with respect to Borrower of any nature
whatsoever which, either individually or in the aggregate, would reasonably be
likely to have a Material Adverse Effect; and
(f) Lender shall have received all fees, charges and expenses payable to
Lender on or prior to such date pursuant to the Loan Documents.
V. REPRESENTATIONS AND WARRANTIES
Each Borrower and Guarantor, jointly and severally, represents and warrants
as of the date hereof, the Restatement Date, each Borrowing Date and, if
applicable, the date of any funding of the Loans as follows:
5.1 Organization and Authority
Each Borrower and Guarantor is a corporation or limited liability company
duly organized, validly existing and in good standing under the laws of its
state of formation. Each Borrower and Guarantor (i) has all requisite corporate
power and authority to own its properties and assets and to carry on its
business as now being conducted and as contemplated in the Loan Documents, (ii)
is duly qualified to do business in every jurisdiction in which failure so to
qualify could reasonably be expected to have a Material Adverse Effect, and
(iii) has all requisite power and authority (A) to execute, deliver and perform
the Loan Documents to which it is a party, (B) to borrow hereunder, (C) to
consummate the transactions contemplated under the Loan Documents, and (D) to
grant the Liens with regard to the Collateral pursuant to the Security Documents
to which it is a party. No Borrower or Guarantor is an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, or is controlled by such an "investment company."
5.2 Loan Documents
The execution, delivery and performance by each Borrower and Guarantor of
the Loan Documents to which it is a party, and the consummation of the
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transactions contemplated thereby, (i) have been duly authorized by all
requisite action of each such Person and have been duly executed and delivered
by or on behalf of each such Person; (ii) do not violate any provisions of (A)
applicable law, statute, rule, regulation, ordinance or tariff, (B) any order of
any Governmental Authority binding on any such Person or any of their respective
properties, or (C) the certificate of incorporation or bylaws (or any other
equivalent governing agreement or document) of any such Person, or any agreement
between any such Person and its respective stockholders, members, partners or
equity owners or among any such stockholders, members, partners or equity
owners; (iii) are not in conflict with, and do not result in a breach or default
of or constitute an event of default, or an event, fact, condition or
circumstance which, with notice or passage of time, or both, would constitute or
result in a conflict, breach, default or event of default under, any indenture,
agreement or other instrument to which any such Person is a party, or by which
the properties or assets of such Person are bound, the effect of which could
reasonably be expected to have a Material Adverse Effect; (iv) except as set
forth herein, will not result in the creation or imposition of any Lien of any
nature upon any of the properties or assets of any such Person, and (v) except
as set forth on Schedule 5.2, do not require the consent, approval or
authorization of, or filing, registration or qualification with, any
Governmental Authority or any other Person. When executed and delivered, each of
the Loan Documents to which each Borrower or Guarantor is a party will
constitute the legal, valid and binding obligation of each such Borrower or
Guarantor, enforceable against such Borrower or Guarantor in accordance with its
terms, subject to the effect of any applicable bankruptcy, moratorium,
insolvency, reorganization or other similar law affecting the enforceability of
creditors' rights generally and to the effect of general principles of equity
which may limit the availability of equitable remedies (whether in a proceeding
at law or in equity).
5.3 Subsidiaries, Capitalization and Ownership Interests
Schedule 5.3 states the authorized and issued capitalization of each
Borrower and Guarantor, the number and class of equity securities and/or
ownership, voting or partnership or membership interests issued and outstanding
of each Borrower and Guarantor and, for each Borrower and Guarantor other than
PHC, the record and beneficial owners thereof (including options, warrants and
other rights to acquire any of the foregoing) and, for PHC, the holders of 5% or
more of any class of equity securities thereof. The outstanding equity
securities and/or ownership, voting or membership interests of each Borrower and
Guarantor have been duly authorized and validly issued and are fully paid and
nonassessable. Each Person listed on Schedule 5.3 owns beneficially and of
record all the equity securities and/or ownership, voting or partnership
interests of each Borrower and Guarantor (other than PHC) such Person is listed
as owning free and clear of any Liens other than Liens created by the Security
Documents. Schedule 5.3 also lists the directors, members, managers and/or
partners of each Borrower and Guarantor. Except as listed on Schedule 5.3, no
Borrower or Guarantor owns an interest or participates or engages in any joint
venture, partnership or similar arrangements with any Person.
5.4 Properties
Except as set forth on Schedule 5.4, each Borrower and Guarantor (i) is the
sole owner and has good, valid and marketable title to, or a valid leasehold
interest in, all of its properties and assets, including the Collateral and the
Real Estate, whether personal or real, subject to no transfer restrictions or
Liens of any kind except for Permitted Liens, and (ii) is in compliance in all
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material respects with each lease to which it is a party or otherwise bound.
Schedule 5.4 lists all real properties (and their locations) owned or leased by
or to, and all other assets or property that are leased or licensed by, such
Borrower or Guarantor and all leases (including leases of leased real property)
covering or with respect to such properties and assets. Each Borrower and
Guarantor enjoys peaceful and undisturbed possession under all such leases and
such leases are all the leases necessary for the operation of such properties
and assets, are valid and subsisting and are in full force and effect.
5.5 Other Agreements
Except as set forth on Schedule 5.5, no Borrower or Guarantor is (i) a
party to any judgment, order or decree or any agreement, document or instrument,
or subject to any restriction, which would have a Material Adverse Effect on its
ability to execute and deliver, or perform under, any Loan Document or to pay
the Obligations, (ii) in default in the performance, observance or fulfillment
of any obligation, covenant or condition contained in any agreement, document or
instrument to which it is a party or to which any of its properties or assets
are subject, which default, if not remedied within any applicable grace or cure
period could reasonably be expected to have a Material Adverse Effect, nor is
there any event, fact, condition or circumstance which, with notice or passage
of time or both, would constitute or result in a conflict, breach, default or
event of default under, any of the foregoing which, if not remedied within any
applicable grace or cure period could reasonably be expected to have a Material
Adverse Effect; or (iii) a party or subject to any agreement, document or
instrument with respect to, or obligation to pay any, service or management fee
with respect to, the ownership, operation, leasing or performance of any of its
business or any facility, nor is there any manager with respect to any such
facility.
5.6 Litigation
Except as set forth on Schedule 5.6, there is no action, suit, proceeding
or investigation pending or, to their knowledge, threatened against any Borrower
or any Guarantor that (i) questions or could prevent the validity of any of the
Loan Documents or the right of any Borrower or any Guarantor to enter into any
Loan Document, or to consummate the transactions contemplated thereby, (ii)
could reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect, or (iii) could reasonably be expected to result in any
Change of Control or other change in the current ownership, control or
management of any Borrower or any Guarantor. Except as set forth on Schedule
5.6, no Borrower is aware that there is any basis for the foregoing. No Borrower
or Guarantor is a party or subject to any order, writ, injunction, judgment or
decree of any Governmental Authority except as set forth on Schedule 5.6. There
is no action, suit, proceeding or investigation initiated by any Borrower or any
Guarantor currently pending. No Borrower or Guarantor has any existing accrued
and/or unpaid Indebtedness to any Governmental Authority or any other
governmental payor.
5.7 Hazardous Materials
Each Borrower and Guarantor is in compliance in all material respects with
all applicable Environmental Laws. No Borrower or Guarantor has been notified of
any action, suit, proceeding or investigation (i) relating in any way to
compliance by or liability of any Borrower or any Guarantor under any
Environmental Laws, (ii) which otherwise deals with any Hazardous Substance or
any Environmental Law, or (iii) which seeks to suspend, revoke or terminate any
license, permit or approval necessary for the generation, handling, storage,
treatment or disposal of any Hazardous Substance.
5.8 Tax Returns; Governmental Reports
Each Borrower and Guarantor (i) has filed all federal, state, foreign (if
applicable) and local tax returns and other reports which are required by law to
be filed by such Borrower or Guarantor, and (ii) has paid all taxes,
assessments, fees and other governmental charges, including, without limitation,
payroll and other employment related taxes, in each case that are due and
payable, except only for items that a Borrower or Guarantor is currently
contesting in good faith and that are described on Schedule 5.8.
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5.9 Financial Statements and Reports
All financial statements and financial information relating to each
Borrower and Guarantor that have been or may hereafter be delivered to Lender by
any Borrower or Guarantor are accurate and complete and have been prepared in
accordance with GAAP consistently applied with prior periods. No Borrower or
Guarantor has any material obligations or liabilities of any kind not disclosed
in such financial information or statements, and since the date of the most
recent financial statements submitted to Lender, there has not occurred any
Material Adverse Change, Material Adverse Effect or Liability Event or, to any
Borrower's or Guarantor's knowledge, any other event or condition that could
reasonably be expected to have a Material Adverse Effect or Liability Event.
5.10 Compliance with Law
Each Borrower and Guarantor (i) is in compliance with all laws, statutes,
rules, regulations, ordinances and tariffs of any Governmental Authority
applicable to such Borrower or Guarantor and/or such Borrower's or Guarantor's
business, assets or operations, including, without limitation, applicable
requirements of the Standards for Privacy of Individually Identifiable Health
Information which were promulgated pursuant to the Health Insurance Portability
and Accountability Act of 1996 ("HIPAA"), ERISA and Healthcare Laws, and (ii) is
not in violation of any order of any Governmental Authority or other board or
tribunal, except where noncompliance or violation could not reasonably be
expected to have a Material Adverse Effect. There is no event, fact, condition
or circumstance which, with notice or passage of time, or both, would constitute
or result in any noncompliance with, or any violation of, any of the foregoing,
in each case except where noncompliance or violation could not reasonably be
expected to have a Material Adverse Effect. No Borrower or Guarantor has
received any notice that such Borrower or Guarantor is not in compliance in any
respect with any of the requirements of any of the foregoing. No Borrower or
Guarantor has (a) engaged in any Prohibited Transactions as defined in Section
406 of ERISA and Section 4975 of the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder, (b) failed to meet any
applicable minimum funding requirements under Section 302 of ERISA in respect of
its plans and no funding requirements have been postponed or delayed, (c)
knowledge of any event or occurrence which would cause the Pension Benefit
Guaranty Corporation to institute proceedings under Title IV of ERISA to
terminate any of the employee benefit plans, (d) fiduciary responsibility under
ERISA for investments with respect to any plan existing for the benefit of
Persons other than its employees or former employees, or (e) withdrawn,
completely or partially, from any multi-employer pension plans so as to incur
liability under the MultiEmployer Pension Plan Amendments of 1980. With respect
to each Borrower, there exists no event described in Section 4043 of ERISA,
excluding Subsections 4043(b)(2) and 4043(b)(3) thereof, for which the thirty
(30) day notice period contained in 12 C.F.R. Section 2615.3 has not been
waived. Each Borrower and Guarantor has maintained in all material respects all
records required to be maintained by the Joint Commission on Accreditation of
Healthcare Organizations, the Food and Drug Administration, Drug Enforcement
Agency and State Boards of Pharmacy and the federal and state Medicare and
Medicaid programs as required by the Healthcare Laws and, to the best knowledge
of each such Borrower or Guarantor, there are no presently existing
circumstances which likely would result in material violations of the Healthcare
Laws. There is no Liability Event.
5.11 Intellectual Property
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Except as set forth on Schedule 5.11, no Borrower or Guarantor owns,
licenses or utilizes, and is a party to, any patents, patent applications,
trademarks, trademark applications, service marks, registered copyrights,
copyright applications, copyrights, trade names, trade secrets, software or
licenses (collectively, the "Intellectual Property").
5.12 Licenses and Permits; Labor
Each Borrower and Guarantor is in compliance with and owns, or is licensed
or otherwise authorized to use, all Permits and Intellectual Property necessary
or required by applicable law or Governmental Authority for the operation of its
businesses. All of the foregoing are in full force and effect and not in known
conflict with the rights of others. No Borrower or Guarantor is (i) in breach of
or default under the provisions of any of the foregoing, nor is there any event,
fact, condition or circumstance which, with notice or passage of time or both,
would constitute or result in a conflict, breach, default or event of default
under, any of the foregoing which, if not remedied within any applicable grace
or cure period could reasonably be expected to have a Material Adverse Effect,
(ii) a party to or subject to any agreement, instrument or restriction that is
so unusual or burdensome that it might have a Material Adverse Effect, and/or
(ii) and has been involved in any labor dispute, strike, walkout or union
organization which could reasonably be expected to have a Material Adverse
Effect
5.13 No Default
There does not exist any Default or Event of Default.
5.14 Disclosure
Neither any Loan Document nor any other agreement, document, certificate,
or statement furnished to Lender by or on behalf of any Borrower or Guarantor in
connection with the transactions contemplated by the Loan Documents, nor any
representation or warranty made by any Borrower or Guarantor in any Loan
Document, contains any untrue statement of material fact or omits to state any
fact necessary to make the statements therein not materially misleading. There
is no fact known to any Borrower which has not been disclosed to Lender in
writing which could reasonably be expected to have a Material Adverse Effect.
5.15 Existing Indebtedness; Investments, Guarantees and Certain Contracts
Except as contemplated by the Loan Documents or as otherwise set forth on
Schedule 5.15, no Borrower or Guarantor (i) has outstanding Indebtedness, (ii)
is subject or party to any mortgage, note, indenture, indemnity or guarantee of,
with respect to or evidencing any Indebtedness of any other Person, or (iii)
owns or holds any equity or long-term debt investments in, and does not have any
outstanding advances to or any outstanding guarantees for the obligations of, or
any outstanding borrowings from, any Person. Each Borrower and Guarantor has
performed all material obligations required to be performed by Borrower and
Guarantor pursuant to or connection with any items listed on Schedule 5.15 and
there has occurred no breach, default or event of default under any document
evidencing any such items or any fact, circumstance, condition or event which,
with the giving of notice or passage of time or both, would constitute or result
in a breach, default or event of default thereunder.
5.16 Other Agreements
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Except as set forth on Schedule 5.16, (i) there are no existing or proposed
agreements, arrangements, understandings or transactions between any Borrower or
Guarantor and any of such Borrower's or Guarantor's officers, members, managers,
directors, stockholders, partners, other interest holders, employees or
Affiliates or any members of their respective immediate families, and (ii) none
of the foregoing Persons are directly or indirectly, indebted to or have any
direct or indirect ownership, partnership or voting interest in, to any such
Borrower's or Guarantor's knowledge, any Affiliate of any Borrower or any Person
that competes with any Borrower or Guarantor (except that any such Persons may
own stock in (but not exceeding two (2%) percent of the outstanding capital
stock of) any publicly traded company that may compete with any Borrower or
Guarantor.
5.17 Insurance
Each Borrower and Guarantor has in full force and effect such insurance
policies as are customary in its industry and as may be required pursuant to
Section 6.5 hereof. All such insurance policies are listed and described on
Schedule 5.17.
5.18 Names; Location of Offices, Records and Collateral
During the preceding five years, no Borrower or Guarantor has conducted
business under or used any name (whether corporate, partnership or assumed)
other than as shown on Schedule 5.18A. Each Borrower and Guarantor is the sole
owner of all of its names listed on Schedule 5.18A, and any and all business
done and invoices issued in such names are such Borrower's or Guarantor's sales,
business and invoices. Each trade name of a Borrower represents a division or
trading style of such Borrower or Guarantor. Each Borrower and Guarantor
maintains its places of business and chief executive offices only at the
locations set forth on Schedule 5.18B, and all Accounts of each such Borrower
and Guarantor arise, originate and are located, and all of the Collateral and
all books and records in connection therewith or in any way relating thereto or
evidence the Collateral are located and shall be only, in and at such locations.
All of the Collateral is located only in the continental United States.
5.19 Non-Subordination
The Obligations are not subordinated in any way to any other obligations of
any Borrower or Guarantor or to the rights of any other Person.
5.20 Accounts
In determining which Accounts are Eligible Receivables, Lender may rely on
all statements and representations made by a Borrower with respect to any
Account. Unless otherwise indicated in writing to Lender, each Account of a
Borrower (i) is genuine and in all respects what is purports to be and is not
evidenced by a judgment, (ii) arises out of a completed, bona fide sale and
delivery of goods or rendering of Services by such Borrower in the ordinary
course of business and in accordance with the terms and conditions of all
purchase orders, contracts, certifications, participations, certificates of need
and other documents relating thereto or forming a part of the contract between
such Borrower and the Account Debtor, (iii) is for a liquidated amount maturing
as stated in a claim or invoice covering such sale of goods or rendering of
Services, a copy of which has been furnished or is available to Lender, (iv)
together with Lender's security interest therein, is not and will not be in the
future (by voluntary act or omission by any such Borrower), subject to any
offset, lien, deduction, defense, dispute, counterclaim or other adverse
condition, is absolutely owing to such Borrower and is not contingent in any
respect or for any reason (except Accounts owed or owing by Medicaid/Medicare
Account Debtors that may be subject to offset or deduction under applicable
law), (v) there are no facts, events or occurrences which in any way impair the
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validity or enforceability thereof or tend to reduce the amount payable
thereunder from the face amount of the claim or invoice and statements delivered
to Lender with respect thereto, (vi) to the best of each such Borrower's
knowledge, (A) the Account Debtor thereunder had the capacity to contract at the
time any contract or other document giving rise thereto was executed and (B)
such Account Debtor is solvent, (vii) to the best of each such Borrower's
knowledge, subject to subsection (x) below, there are no proceedings or actions
which are threatened or pending against any Account Debtor thereunder which
might result in any Material Adverse Change in such Account Debtor's financial
condition or the collectability thereof, (viii) has been billed and forwarded to
the Account Debtor for payment in accordance with applicable laws and is in
compliance and conformance with any requisite procedures, requirements and
regulations governing payment by such Account Debtor with respect to such
Account, and, if due from a Medicaid/Medicare Account Debtor, is properly
payable directly to Borrower, (ix) each such Borrower has obtained and currently
has all Permits necessary in the generation thereof, and (x) each such Borrower
has disclosed to Lender on each Borrowing Certificate the amount of all Accounts
of such Borrower for which Medicare is the Account Debtor and for which payment
has been denied and subsequently appealed pursuant to the procedure described in
the definition of Eligible Receivables hereof, and such Borrower is, except
where the failure to do so would not have a Material Adverse Effect, pursuing
all available appeals in respect of such Accounts.
5.21 Healthcare
Without limiting or being limited by any other provision of any Loan
Document, each Borrower and Guarantor has timely filed or caused to be filed all
cost and other reports of every kind required by law, agreement or otherwise.
Subject to subsection (x) of Section 5.20, there are no claims, actions or
appeals pending (and no Borrower or Guarantor has filed any claims or reports
which could reasonably result in any such claims, actions or appeals) before any
commission, board or agency or other Governmental Authority, including, without
limitation, any intermediary or carrier, the Provider Reimbursement Review Board
or the Administrator of the Centers for Medicare and Medicaid Services, with
respect to any state or federal Medicare or Medicaid cost reports or claims
filed by such Borrower, or any disallowance by any commission, board or agency
or other Governmental Authority in connection with any audit of such cost
reports. No validation review or program integrity review related to any
Borrower or the consummation of the transactions contemplated herein or to the
Collateral have been conducted by any commission, board or agency or other
Governmental Authority in connection with the Medicare or Medicaid programs, and
to the knowledge of each Borrower and Guarantor, no such reviews are scheduled,
pending or threatened against or affecting any of the providers, any of the
Collateral or the consummation of the transactions contemplated hereby.
5.22 Survival
Each Borrower and Guarantor makes the representations and warranties
contained herein with the knowledge and intention that Lender is relying and
will rely thereon. All such representations and warranties will survive the
execution and delivery of this Agreement, the making of the Advances under the
Revolving Facility and the funding of the Term Loan.
VI. AFFIRMATIVE COVENANTS
Each Borrower and Guarantor, jointly and severally, covenants and agrees
that, until full performance and satisfaction, and indefeasible payment in full
in cash, of all the Obligations and termination of this Agreement:
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6.1 Financial Statements, Borrowing Certificate, Reports and Other
Information
(a) Financial Reports. In addition to providing the Borrowing Certificate
in accordance with Section 2.3, PHC shall furnish to Lender (i) as soon as
available and in any event within the earlier of ninety (90) calendar days after
the end of each fiscal year of PHC and its Subsidiaries or the date upon which
PHC files its report on Form 10-K with the United States Securities and Exchange
Commission, audited annual consolidated and consolidating financial statements
of PHC and its Subsidiaries, including the notes thereto, consisting of a
consolidated and consolidating balance sheet at the end of such completed fiscal
year and the related consolidated and consolidating statements of income,
retained earnings, cash flows and owners' equity for such completed fiscal year,
which financial statements shall be prepared and certified without qualification
by an independent certified public accounting firm satisfactory to Lender and
accompanied by related management letters, if available, and (ii) as soon as
available and in any event within thirty-five (35) calendar days after the end
of each calendar month or earlier or in the case of any calendar month which
coincides with the end of a fiscal quarter of PHC, the date upon which PHC files
its report on Form 10-Q with the United States Securities and Exchange
Commission, unaudited consolidated and consolidating financial statements of PHC
and its Subsidiaries consisting of a balance sheet and statements of income,
retained earnings, cash flows and owners' equity as of the end of the
immediately preceding calendar month. All such financial statements shall be
prepared in accordance with GAAP consistently applied with prior periods. With
each such financial statement, PHC shall also deliver a certificate of its chief
financial officer in the form of Exhibit B attached hereto (the "Monthly
Compliance Certificate") stating (A)(i) that such person has reviewed the
relevant terms of the Loan Documents and the condition of Borrower, (ii) that no
Default or Event of Default has occurred or is continuing, or, if any of the
foregoing has occurred or is continuing, specifying the nature and status and
period of existence thereof and the steps taken or proposed to be taken with
respect thereto, and (iii) that Borrower is in compliance with all financial
covenants attached as Annex I hereto and (B) the Average Census at Harbor Oaks
and Highland Ridge, Borrower's EBITDAM, Cash Velocity of Harbor Oaks and
Highland Ridge, and Borrower's Available Cash. Such certificate shall be
accompanied by the calculations necessary to show compliance with the financial
covenants in a form satisfactory to Lender.
(b) Other Materials. Each Borrower and Guarantor shall furnish to Lender as
soon as available, and in any event within ten (10) calendar days after the
preparation or issuance thereof or at such other time as set forth below: (i)
copies of such financial statements (other than those required to be delivered
pursuant to Section 6.1(a)) prepared by, for or on behalf of such Borrower or
Guarantor and any other notes, reports and other materials related thereto,
including, without limitation, any pro forma financial statements, (ii) any
reports, returns, information, notices and other materials that any Borrower or
Guarantor shall send to its stockholders, members, partners or other equity
owners at any time or file with the United States Securities and Exchange
Commission, (iii) all Medicare and Medicaid cost reports and other document and
materials filed by Borrower and any other reports, materials or other
information regarding or otherwise relating to Medicaid or Medicare prepared by,
for or on behalf of Borrower, (iv) all reports, materials or other information
filed with or pertaining to any Account Debtor which could reasonably have a
Material Adverse Effect, (v) promptly upon receipt thereof, copies of any
reports submitted to any Borrower or Guarantor by its independent accountants in
connection with any interim audit of the books of such Person or any of its
Affiliates and copies of each management control letter provided by such
independent accountants, and (vi) such additional information, documents,
statements, reports and other materials as Lender may reasonably request from a
credit or security perspective or otherwise from time to time.
(c) Notices. Each Borrower and Guarantor shall promptly, and in any event
within two (2) calendar days after any such Borrower or Guarantor or any
authorized officer of such Borrower or Guarantor obtains knowledge thereof,
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notify Lender in writing of (i) any pending or threatened litigation, suit,
investigation, arbitration, dispute resolution proceeding or administrative
proceeding brought or initiated by such Borrower or Guarantor or otherwise
affecting or involving or relating to Borrower or any of its property or assets
to the extent (A) the amount in controversy exceeds $10,000, or (B) to the
extent any of the foregoing seeks injunctive relief, (ii) any Default or Event
of Default, which notice shall specify the nature and status thereof, the period
of existence thereof and what action is proposed to be taken with respect
thereto, (iii) any other development, event, fact, circumstance or condition
that could reasonably be expected to have a Material Adverse Effect, in each
case describing the nature and status thereof and the action proposed to be
taken with respect thereto, (iv) any notice received by such Borrower or
Guarantor from any payor of a claim, suit or other action such payor has, claims
or has filed against such Borrower or Guarantor, (v) any matter(s) affecting the
value, enforceability or collectability of any of the Collateral or Real Estate,
including, without limitation, claims or disputes in the amount of $25,000 or
more, singly or in the aggregate, in existence at any one time, (vi) any notice
given by such Borrower or Guarantor to any other lender of such Borrower or
Guarantor and shall furnish to Lender a copy of such notice, (vii) receipt of
any notice or request from any Governmental Authority or governmental payor
regarding any liability or claim of liability, (viii) receipt of any notice by
such Borrower or Guarantor regarding termination of any manager of any facility
owed, operated or leased by Borrower, and/or (ix) if any Account becomes
evidenced or secured by an Instrument or Chattel Paper.
(d) Consents. Each Borrower and Guarantor shall obtain and deliver from
time to time all required consents, approvals and agreements from such third
parties as Lender shall determine are necessary or desirable in its sole
discretion and that are satisfactory to Lender with respect to (i) the Loan
Documents and the transactions contemplated thereby, (ii) claims against such
Borrower or Guarantor, the Collateral or the Real Estate, and/or (iii) any
agreements, consents, documents or instruments to which such Borrower or
Guarantor is a party or by which any properties or assets of such Borrower or
Guarantor or any of the Collateral or Real Estate is or are bound or subject,
including, without limitation, Landlord Waivers and Consents with respect to
leases.
(e) Operating Budget. PHC shall furnish to Lender on or prior to the
Restatement Date and for each fiscal year of PHC and its Subsidiaries thereafter
not less than thirty (30) calendar days prior to the commencement of such fiscal
year, consolidated and consolidating month by month projected operating budgets,
annual projections, profit and loss statements, balance sheets and cash flow
reports of and for PHC and its Subsidiaries for such upcoming fiscal year
(including an income statement for each month and a balance sheet as at the end
of the last month in each fiscal quarter), in each case prepared in accordance
with GAAP consistently applied with prior periods.
(f) Non-Compliance Fee. To the extent any of the foregoing items in this
Section 6.1 are not delivered to Lender on a timely basis, Borrower shall be
obligated to Lender for a daily fee equal to the greater of (i) $500, or (ii)
five one-hundredths of one percent (0.05%) of the then current outstanding
principal balance of the Obligations, for each day until such item is delivered
to Lender, whether or not a Default or Event of Default occurs or is declared,
provided that nothing shall prevent Lender from considering any failure to
comply with the terms of this Section 6.1 to be a Default or an Event of
Default.
6.2 Payment of Obligations
Borrower shall make full and timely indefeasible payment in cash of the
principal of and interest on the Loans, Advances and all other Obligations.
Simultaneously upon any prepayment of the Revolving Loan and termination of the
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Revolving Facility, Borrower shall make full indefeasible payment in cash of the
principal of and interest on the Term Loan and all other Obligations relating to
the Term Loan.
6.3 Conduct of Business and Maintenance of Existence and Assets
Each Borrower and Guarantor shall (i) conduct its business in accordance
with good business practices customary to the industry, (ii) engage principally
in the same or similar lines of business substantially as heretofore conducted,
(iii) collect its Accounts in the ordinary course of business, (iv) maintain all
of its material properties, assets and equipment used or useful in its business
in good repair, working order and condition (normal wear and tear excepted and
except as may be disposed of in the ordinary course of business and in
accordance with the terms of the Loan Documents and otherwise as determined by
each such Borrower and Guarantor using commercially reasonable business
judgment), (v) from time to time to make all necessary or desirable repairs,
renewals and replacements thereof, as determined by each such Borrower and
Guarantor using commercially reasonable business judgment, (vi) maintain and
keep in full force and effect its existence and all material Permits and
qualifications to do business and good standing in each jurisdiction in which
the ownership or lease of property or the nature of its business makes such
Permits or qualification necessary and in which failure to maintain such Permits
or qualification could reasonably be likely to have a Material Adverse Effect;
and (vii) remain in good standing and maintain operations in all jurisdictions
in which currently located.
6.4 Compliance with Legal and Other Obligations
Each Borrower and Guarantor shall (i) comply with all material laws,
statutes, rules, regulations, ordinances and tariffs of all Governmental
Authorities applicable to it or its business, assets or operations, including
applicable requirements of the Standards for Privacy of Individually
Identifiable Health Information which were promulgated pursuant to HIPAA; (ii)
pay all taxes, assessments, fees, governmental charges, claims for labor,
supplies, rent and all other obligations or liabilities of any kind, except
liabilities being contested in good faith and against which adequate reserves
have been established in accordance with GAAP, (iii) perform in accordance with
its terms each contract, agreement or other arrangement to which it is a party
or by which it or any of the Collateral or the Real Property is bound, except
where the failure to comply, pay or perform could not reasonably be expected to
have a Material Adverse Effect, (iv) maintain and comply with all Permits
necessary to conduct its business and comply with any new or additional
requirements that may be imposed on it or its business, and (v) properly file
all Medicaid/Medicare cost reports.
6.5 Insurance
Each Borrower and Guarantor shall keep all of its insurable properties and
assets adequately insured in all material respects against losses, damages and
hazards as are customarily insured against by businesses engaging in similar
activities or owning similar assets or properties and at least the minimum
amount required by applicable law, including, without limitation, medical
malpractice and professional liability insurance, as applicable; and maintain
general public liability insurance at all times against liability on account of
damage to persons and property having such limits, deductibles, exclusions and
co-insurance and other provisions as are customary for a business engaged in
activities similar to those of such Borrower or Guarantor; and (iii) maintain
insurance under all applicable workers' compensation laws; all of the foregoing
insurance policies to (A) be satisfactory in form and substance to Lender, (B)
name Lender as loss payee and additional insured thereunder, and (C) expressly
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provide that they cannot be altered, amended, modified or canceled without
thirty (30) Business Days prior written notice to Lender and that they inure to
the benefit of Lender notwithstanding any action or omission or negligence of or
by any such Borrower or Guarantor or any insured thereunder.
6.6 True Books
Each Borrower and Guarantor shall (i) keep true, complete and accurate
books of record and account in accordance with commercially reasonable business
practices in which true and correct entries are made of all of its and their
dealings and transactions in all material respects; and (ii) set up and maintain
on its books such reserves as may be required by GAAP with respect to doubtful
accounts and all taxes, assessments, charges, levies and claims and with respect
to its business, and include such reserves in its quarterly as well as year end
financial statements.
6.7 Inspection; Periodic Audits
Each Borrower and Guarantor shall permit the representatives of Lender, at
the expense of such Borrower or Guarantor, from time to time during normal
business hours upon reasonable notice, to (i) visit and inspect any of its
offices or properties or any other place where Collateral is located to inspect
the Collateral and/or to examine or audit all of its books of account, records,
reports and other papers, (ii) make copies and extracts therefrom, and (iii)
discuss its business, operations, prospects, properties, assets, liabilities,
condition and/or Accounts with its officers and independent public accountants
(and by this provision such officers and accountants are authorized to discuss
the foregoing); provided, however, that as long as no Default or Event of
Default has occurred and is continuing, Lender (i) shall not conduct more than
three (3) audits and inspections during any twelve (12) month period and (ii)
shall limit the cost of each such audit and inspection to not more than $15,000
plus out-of-pocket expenses.
6.8 Further Assurances; Post Closing
At Borrower's cost and expense, each Borrower and Guarantor shall (i)
within five (5) Business Days after Lender's demand, take such further actions,
obtain such consents and approvals and duly execute and deliver such further
agreements, assignments, instructions or documents as Lender may request with
respect to the purposes, terms and conditions of the Loan Documents and the
consummation of the transactions contemplated thereby, whether before, at or
after the performance and/or consummation of the transactions contemplated
hereby or the occurrence of a Default or Event of Default, (ii) without limiting
and notwithstanding any other provision of any Loan Document, execute and
deliver, or cause to be executed and delivered, such agreements and documents,
and take or cause to be taken such actions, and otherwise perform, observe and
comply with such obligations, as are set forth on Schedule 6.8, and (iii) upon
the exercise by Lender or any of its Affiliates of any power, right, privilege
or remedy pursuant to any Loan Document or under applicable law or at equity
which requires any consent, approval, registration, qualification or
authorization of any Governmental Authority, execute and deliver, or cause the
execution and delivery of, all applications, certificates, instruments and other
documents that may be so required for such consent, approval, registration,
qualification or authorization. Without limiting the foregoing, upon the
exercise by Lender or any of its Affiliates of any right or remedy under any
Loan Document which requires any consent, approval or registration with,
consent, qualification or authorization by, any Person, each Borrower and
Guarantor shall execute and deliver, or cause the execution and delivery of, all
applications, certificates, instruments and other documents that Lender or its
Affiliate may be required to obtain for such consent, approval, registration,
qualification or authorization.
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6.9 Payment of Indebtedness
Except as otherwise prescribed in the Loan Documents, each Borrower or
Guarantor shall pay, discharge or otherwise satisfy at or before maturity
(subject to applicable grace periods and, in the case of trade payables, to
ordinary course payment practices) all of its material obligations and
liabilities, except when the amount or validity thereof is being contested in
good faith by appropriate proceedings and such reserves as Lender may deem
proper and necessary in its sole discretion shall have been made.
6.10 Lien Searches
If Liens other than Permitted Liens exist, each Borrower and Guarantor
immediately shall take, execute and deliver all actions, documents and
instruments necessary to release and terminate such Liens.
6.11 Use of Proceeds
Borrower shall use the proceeds from the Revolving Facility and the Term
Loan only for the purposes set forth in the first "WHEREAS" clause of this
Agreement. No part of such proceeds shall be used to finance the business and
operations of Pivotal or to pay any obligations of PHC or its subsidiaries under
the Pivotal Acquisition Documents or the Pivotal Seller Notes; although PHC may
use monies of Borrower (other than PHC-Michigan and PHC-Utah) collected in the
normal course of business for such purposes.
6.12 Collateral Documents; Security Interest in Collateral
Each Borrower and Guarantor shall (i) execute, obtain, deliver, file,
register and/or record any and all financing statements, continuation
statements, stock powers, instruments and other documents, or cause the
execution, filing, registration, recording or delivery of any and all of the
foregoing, that are necessary or required under law or otherwise or reasonably
requested by Lender to be executed, filed, registered, obtained, delivered or
recorded to create, maintain, perfect, preserve, validate or otherwise protect
the pledge of the Collateral to Lender and Lender's perfected first priority
Lien on the Collateral, the Real Estate and the Utah Leasehold (second priority
Lien in the case of the Real Estate owned by PHC-Virginia) (and each Borrower
and Guarantor irrevocably grants Lender the right, at Lender's option, to file
any or all of the foregoing), (ii) immediately upon learning thereof, report to
Lender any reclamation, return or repossession of goods in excess of $10,000.00
(individually or in the aggregate), and (iii) defend the Collateral, the Real
Estate and the Utah Leasehold, and Lender's perfected first (or second in the
case of the Real Estate owned by PHC-Virginia) priority Lien thereon, against
all claims and demands of all Persons at any time claiming the same or any
interest therein adverse to Lender, and pay all reasonable costs and expenses
(including, without limitation, in-house documentation and diligence fees and
legal expenses and reasonable attorneys' fees and expenses) in connection with
such defense, which may at Lender's discretion be added to the Obligations.
6.13 Right of First Refusal
(a) If at any time any Borrower or Guarantor or any of its Subsidiaries or
Affiliates (including Pivotal) receives from a third party an offer, term sheet
or commitment or makes a proposal accepted by any Person (each, an "Offer")
which provides for any type of financing (except for the financing of insurance
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policies in the ordinary course and in accordance with historical business
practices) to or for such Borrower or Guarantor or any of its Affiliates, each
such Borrower, Guarantor, Subsidiary or Affiliate shall notify Lender of the
Offer in writing (including all material terms of the Offer) and Lender shall
have thirty (30) calendar days after Receipt of such notice (the "Option
Period") to agree to provide similar financing in the place of such Person upon
substantially the same terms and conditions (or terms more favorable to such
Borrower or Affiliate) as set forth in the Offer. Lender shall notify each such
Borrower, Guarantor, Subsidiary or Affiliate in writing of Lender's acceptance
of the Offer pursuant hereto (the "Acceptance Notice"), in which case such
Borrower, Guarantor, Subsidiary or Affiliate shall obtain such financing from
Lender and shall not accept the Offer from such other Person. If no Acceptance
Notice has been received from Lender within the Option Period, such Borrower,
Guarantor, Subsidiary or Affiliate may consummate the Offer with the other
Person on the terms and conditions set forth in the Offer (the "Transaction");
provided, however, that none of foregoing or any failure by Lender to issue an
Acceptance Notice shall be construed as a waiver of any of the terms, covenants
or conditions of any of the Loan Documents. If the Transaction is not
consummated on the terms set forth in the Offer or with the Person providing the
Offer or during the ninety (90) calendar day period following the expiration of
the Option Period, such Borrower, Guarantor, Subsidiary or Affiliate shall not
be permitted to consummate the Transaction without again complying with this
Section 6.13. The provisions of this Section 6.13 shall survive the payment in
full of the Obligations and termination of this Agreement for a period of six
(6) months. For purposes of this Section 6.13, "Lender" shall include
CapitalSource Finance LLC and any of its parents, subsidiaries or Affiliates.
(b) If at any time during the Term, any Borrower, Guarantor, Subsidiary or
Affiliate applies or otherwise seeks financing from any Person under a program
sponsored by the United States Housing and Urban Development (each a "HUD
Application"), each such Borrower, Guarantor, Subsidiary or Affiliate agrees
that Lender and/or its Affiliates shall have the exclusive right to provide and
arrange the financing obtained in connection with such HUD Application.
6.14 Taxes and Other Charges
All payments and reimbursements to Lender made under any Loan Document
shall be free and clear of and without deduction for all taxes, levies, imposts,
deductions, assessments, charges or withholdings, and all liabilities with
respect thereto of any nature whatsoever, excluding taxes to the extent imposed
on Lender's net income. If any Borrower shall be required by law to deduct any
such amounts from or in respect of any sum payable under any Loan Document to
Lender, then the sum payable to Lender shall be increased as may be necessary so
that, after making all required deductions, Lender receives an amount equal to
the sum it would have received had no such deductions been made. Notwithstanding
any other provision of any Loan Document, if at any time after the Closing (i)
any change in any existing law, regulation, treaty or directive or in the
interpretation or application thereof, (ii) any new law, regulation, treaty or
directive enacted or any interpretation or application thereof, or (iii)
compliance by Lender with any request or directive (whether or not having the
force of law) from any Governmental Authority: (A) subjects Lender to any tax,
levy, impost, deduction, assessment, charge or withholding of any kind
whatsoever with respect to any Loan Document, or changes the basis of taxation
of payments to Lender of any amount payable thereunder (except for net income
taxes, or franchise taxes imposed in lieu of net income taxes, imposed generally
by federal, state or local taxing authorities with respect to interest or
commitment fees or other fees payable hereunder or changes in the rate of tax on
the overall net income of Lender), or (B) imposes on Lender any other condition
or increased cost in connection with the transactions contemplated thereby or
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participations therein; and the result of any of the foregoing is to increase
the cost to Lender of making or continuing any Loan hereunder or to reduce any
amount receivable hereunder, then, in any such case, Borrower shall promptly pay
to Lender any additional amounts necessary to compensate Lender, on an after-tax
basis, for such additional cost or reduced amount as determined by Lender. If
Lender becomes entitled to claim any additional amounts pursuant to this Section
6.14 it shall promptly notify Borrower of the event by reason of which Lender
has become so entitled, and each such notice of additional amounts payable
pursuant to this Section 6.14 submitted by Lender to Borrower shall, absent
manifest error, be final, conclusive and binding for all purposes. Without
limiting or being limited by any other provision of any Loan Document, each
Borrower at all times shall retain and use a Person acceptable to Lender to
process, manage and pay its payroll taxes and shall cause to be delivered to
Lender within ten (10) calendar days after the end of each calendar month a
report of its payroll taxes for the immediately preceding calendar month and
evidence of payment thereof.
(b) Borrower shall promptly, and in any event within five (5) Business Days
after Borrower or any authorized officer of Borrower obtains knowledge thereof,
notify Lender in writing of any oral or written communication from the Internal
Revenue Service or otherwise with respect to any (i) tax investigations,
relating to the Borrower directly, or relating to any consolidated tax return
which was filed on behalf of Borrower, (ii) notices of tax assessment or
possible tax assessment, (iii) years that are designated open pending tax
examination or audit, and (iv) information that could give rise to an IRS tax
liability or assessment.
VII. NEGATIVE COVENANTS
Each Borrower and Guarantor, jointly and severally, covenants and agrees
that, until full performance and satisfaction, and indefeasible payment in full
in cash, of all the Obligations and termination of this Agreement:
7.1 Financial Covenants
Borrower shall not violate the financial covenants set forth on Annex I to
this Agreement, which is incorporated herein and made a part hereof.
7.2 Permitted Indebtedness
No Borrower or Guarantor shall create, incur, assume or suffer to exist (or
permit any of its Subsidiaries to create, incur, assume or suffer to exist) any
Indebtedness, except the following (collectively, "Permitted Indebtedness"): (i)
Indebtedness under the Loan Documents and under the Pivotal Seller Notes in
accordance with the is Agreement, (ii) any Indebtedness set forth on Schedule
7.2, (iii) Capitalized Lease Obligations incurred after the Closing Date and
Indebtedness incurred pursuant to purchase money Liens permitted by Section
7.3(v), provided that the aggregate amount thereof outstanding at any time shall
not exceed $75,000, (iv) Indebtedness in connection with advances made by a
stockholder in order to cure any default of the financial covenants set forth on
Annex I; provided, however, that such Indebtedness shall be on an unsecured
basis, subordinated in right of repayment and remedies to all of the Obligations
and to all of Lender's rights and in form and substance satisfactory to Lender;
(v) accounts payable to trade creditors and current operating expenses (other
than for borrowed money) which are not aged more than 120 calendar days from the
billing date or more than thirty (30) days from the due date, in each case
incurred in the ordinary course of business and paid within such time period,
unless the same are being contested in good faith and by appropriate and lawful
proceedings and such reserves, if any, with respect thereto as are required by
GAAP and deemed adequate by Borrower's independent accountants shall have been
reserved; and (vi) borrowings incurred in the ordinary course of business and
not exceeding $10,000 individually or in the aggregate outstanding at any one
time; provided, however, that such Indebtedness shall be on an unsecured basis,
subordinated in right of repayment and remedies to all of the Obligations and to
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all of Lender's rights and in form and substance satisfactory to Lender; and
(vii) the Permitted Subordinated or Deferred Debt. No Borrower or Guarantor
shall make prepayments on any existing or future Indebtedness to any Person
other than to Lender or to the extent specifically permitted by this Agreement
or any subsequent agreement between any such Borrower or Guarantor and Lender.
7.3 Permitted Liens
No Borrower or Guarantor shall create, incur, assume or suffer to exist (or
permit any of its Subsidiaries to create, incur, assume or suffer to exist) any
Lien upon, in or against, or pledge of, any of the Collateral or any of its
properties or assets or any of its shares, securities or other equity or
ownership or partnership interests, whether now owned or hereafter acquired,
except the following (collectively, "Permitted Liens"): (i) Liens under the Loan
Documents or otherwise arising in favor of Lender, (ii) Liens imposed by law for
taxes (other than payroll taxes), assessments or charges of any Governmental
Authority for claims not yet due or which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves or other
appropriate provisions are being maintained by such Person in accordance with
GAAP to the satisfaction of Lender in its sole discretion, (iii) (A) statutory
Liens of landlords (provided that any such landlord has executed a Landlord
Waiver and Consent in form and substance satisfactory to Lender) and of
carriers, warehousemen, mechanics, materialmen, and (B) other Liens imposed by
law or that arise by operation of law in the ordinary course of business from
the date of creation thereof, in each case only for amounts not yet due or which
are being contested in good faith by appropriate proceedings and with respect to
which adequate reserves or other appropriate provisions are being maintained by
such Person in accordance with GAAP to the satisfaction of Lender in its sole
discretion, (iv) Liens (A) incurred or deposits made in the ordinary course of
business (including, without limitation, surety bonds and appeal bonds) in
connection with workers' compensation, unemployment insurance and other types of
social security benefits or to secure the performance of tenders, bids, leases,
contracts (other than for the repayment of Indebtedness), statutory obligations
and other similar obligations, or (B) arising as a result of progress payments
under government contracts, (v) purchase money Liens (A) securing Indebtedness
permitted under Section 7.2(iii), or (B) in connection with the purchase by such
Person of equipment in the normal course of business, provided that such
payables shall not exceed any limits on Indebtedness provided for herein and
shall otherwise be Permitted Indebtedness hereunder, (vi) Liens necessary and
desirable for the operation of such Person's business, provided Lender has
consented to such Liens in writing before their creation and existence and the
priority of such Liens and the debt secured thereby are both subject and
subordinate in all respects to the Liens securing the Collateral and to the
Obligations and all of the rights and remedies of Lender, all in form and
substance satisfactory to Lender in its sole discretion; (vii) Liens pursuant to
Permitted Subordinated Debt; (viii) Liens securing the Pivotal Seller Notes as
in existence on the Closing Date; and (ix) Liens disclosed on Schedule 7.3.
7.4 Investments; New Facilities or Collateral; Subsidiaries
No Borrower or Guarantor nor any of their Subsidiaries, directly or
indirectly, shall (i) purchase, own, hold, invest in or otherwise acquire
obligations or stock or securities of, or any other interest in, or all or
substantially all of the assets of, any Person or any joint venture, or (ii)
make or permit to exist any loans, advances or guarantees to or for the benefit
of any Person or assume, guarantee, endorse, contingently agree to purchase or
otherwise become liable for or upon or incur any obligation of any Person (other
than those created by the Loan Documents and Permitted Indebtedness and other
than (A) trade credit extended in the ordinary course of business, (B) advances
for business travel and similar temporary advances made in the ordinary course
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of business to officers, directors and employees, and (C) the endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business. No Borrower or Guarantor nor any of their
Subsidiaries, directly or indirectly, shall purchase, own, operate, hold, invest
in or otherwise acquire any facility, property or assets or any Collateral that
is not located at the locations set forth on Schedule 5.18B unless such Borrower
or Guarantor shall provide to Lender at least thirty (30) Business Days prior
written notice. No Borrower or Guarantor shall have any Subsidiaries other than
such Subsidiaries existing at Closing and as result from the Pivotal
Acquisition.
7.5 Dividends; Redemptions
No Borrower or Guarantor shall (i) declare, pay or make any dividend or
distribution on any shares of capital stock or other securities or interests
(other than dividends or distributions payable in its stock, or split-ups or
reclassifications of its stock or dividends and distributions to PHC by its
Subsidiaries), (ii) apply any of its funds, property or assets to the
acquisition, redemption or other retirement of any capital stock or other
securities or interests or of any options to purchase or acquire any of the
foregoing (provided, however, that a Borrower or Guarantor may redeem its
capital stock from terminated employees pursuant to, but only to the extent
required under, the terms of the related employment agreements as long as no
Default or Event of Default has occurred and is continuing or would be caused by
or result therefrom), (iii) otherwise make any payments or Distributions to any
stockholder, member, partner or other equity owner in such Person's capacity as
such, or (iv) make any payment of any management or service fee or similar fee
to any Person or with respect to any facility owned, operated or leased by any
Borrower or Guarantor provided further that no Borrower or Guarantor shall make
or suffer to exist any Distribution or payment hereunder if a Default of Event
of Default has occurred and is continuing or would result therefrom.
7.6 Transactions with Affiliates
Neither any Borrower, any Guarantor nor Pivotal shall enter into or
consummate any transaction of any kind with any of its Affiliates or any
Guarantor or any of their respective Affiliates other than: (i) salary, bonus,
employee stock option and other compensation and employment arrangements with
directors or officers in the ordinary course of business, provided, that no
payment of any bonus shall be permitted if a Default or Event of Default has
occurred and remains in effect or would be caused by or result from such
payment, (ii) distributions and dividends permitted pursuant to Section 7.5,
(iii) transactions with Lender or any Affiliate of Lender, and (iv) payments
permitted under and pursuant to written agreements entered into by and between a
Borrower or a Guarantor and one or more of its Affiliates that both (A) reflect
and constitute transactions on overall terms at least as favorable to such
Borrower or Guarantor or Pivotal as would be the case in an arm's-length
transaction between unrelated parties of equal bargaining power, and (B) are
subject to such terms and conditions as determined by Lender in its sole
discretion; provided, that notwithstanding the foregoing neither any Borrower,
any Guarantor nor Pivotal shall (Y) enter into or consummate any transaction or
agreement pursuant to which it becomes a party to any mortgage, note, indenture
or guarantee evidencing any Indebtedness of any of its Affiliates or otherwise
to become responsible or liable, as a guarantor, surety or otherwise, pursuant
to agreement for any Indebtedness of any such Affiliate, or (Z) make any payment
to any of its Affiliates in excess of $10,000 without the prior written consent
of Lender. Borrower shall not use the proceeds from the Revolving Facility and
the Term Loan to finance the business and operations of Pivotal or to pay any
obligations of PHC or its subsidiaries under the Pivotal Acquisition Documents
or the Pivotal Seller Notes; although PHC may use monies of Borrower (other than
(i) any proceeds from the Revolving Facility or the Term Loan or (ii) amounts
which are required to be collected by PHC-Michigan and PHC-Utah through the
Lockbox Account under this Agreement) collected in the normal course of business
for such purposes.
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7.7 Charter Documents; Fiscal Year; Dissolution; Use of Proceeds
No Borrower or Guarantor shall (i) amend, modify, restate or change its
certificate of incorporation or formation or bylaws or similar charter documents
in a manner that would be adverse to Lender, (ii) change its fiscal year unless
such Borrower or Guarantor demonstrates to Lender's satisfaction compliance with
the covenants contained herein for both the fiscal year in effect prior to any
change and the new fiscal year period by delivery to Lender of appropriate
interim and annual pro forma, historical and current compliance certificates for
such periods and such other information as Lender may reasonably request, (iii)
amend, alter or suspend or terminate or make provisional in any material way,
any Permit without the prior written consent of Lender, which consent shall not
be unreasonably withheld, (iv) wind up, liquidate or dissolve (voluntarily or
involuntarily) or commence or suffer any proceedings seeking or that would
result in any of the foregoing, or (v) use any proceeds of any Advance for
"purchasing" or "carrying" "margin stock" as defined in Regulations U, T or X of
the Board of Governors of the Federal Reserve System.
7.8 Truth of Statements
No Borrower, Guarantor or Subsidiary shall furnish to Lender any
certificate or other document that contains any untrue statement of a material
fact or that omits to state a material fact necessary to make it not misleading
in light of the circumstances under which it was furnished.
7.9 IRS Form 8821
No Borrower or Guarantor shall alter, amend, restate, or otherwise modify,
or withdraw, terminate or re-file the IRS Form 8821 required to be filed
pursuant to the Conditions Precedent in Section 4.1 hereof, except to include
notice or access to our payroll service, which may change from time to time (but
which shall not have the effect of terminating or withdrawing Lender's status as
an appointee thereunder or to limit Lender's access for tax matters).
7.10 Payment on Subordinated or Deferred Debt
No Borrower, Guarantor or Subsidiary shall (i) make any prepayment of any
part or all of any Permitted Subordinated, Deferred Debt or the Pivotal Seller
Notes, (ii) repurchase, redeem or retire any instrument evidencing any such
Permitted Subordinated, Deferred Debt or the Pivotal Seller Notes prior to
maturity, or (iii) enter into any agreement (oral or written) which could in any
way be construed to amend, modify, alter or terminate any one or more
instruments or agreements evidencing or relating to any Permitted Subordinated,
Deferred Debt or the Pivotal Seller Notes in a manner adverse to Lender, as
determined by Lender in its Permitted Discretion.
7.11 Reserved
7.12 Transfer of Assets
Notwithstanding any other provision of this Agreement or any other Loan
Document, no Borrower, Guarantor or Subsidiary shall sell, lease, transfer,
assign or otherwise dispose of any interest in any properties or assets (other
than obsolete equipment or excess equipment no longer needed in the conduct of
the business in the ordinary course of business), or agree to do any of the
foregoing at any future time, except that:
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(a) any such Person may lease (as lessee) real or personal property or
surrender all or a portion of a lease of the same, in each case in the ordinary
course of business (so long as such lease does not create or result in and is
not otherwise a Capitalized Lease Obligation prohibited under this Agreement),
provided that a Landlord Waiver and Consent and such other consents as are
required by Lender are signed and delivered to Lender with respect to any lease
of real or other property, as applicable;
(b) any such Person may license or sublicense Intellectual Property or
customer lists from third parties in the ordinary course of business, provided,
that such licenses or sublicenses shall not interfere with the business or other
operations of such Person and that such Person's rights, title and/or interest
in or to such Intellectual Property and customer lists and interests therein are
pledged to Lender as further security for the Obligations and included as part
of the Collateral; and
(c) any such Person may consummate such other sales or dispositions of
property or assets (including any sale or transfer or disposition of all or any
part of its assets and thereupon and within one year thereafter rent or lease
the assets so sold or transferred) only to the extent prior written notice has
been given to Lender and to the extent Lender has given its prior written
consent thereto, subject in each case to such conditions as may be set forth in
such consent.
In addition, neither PHC-Michigan nor PHC-Utah shall sell, lease, transfer,
assign or otherwise dispose of any properties or assets to Pivotal.
VIII. EVENTS OF DEFAULT
The occurrence of any one or more of the following shall constitute an
"Event of Default:"
(a) Borrower shall fail to pay any amount on the Obligations or provided
for in any Loan Document when due (whether on any payment date, at maturity, by
reason of acceleration, by notice of intention to prepay, by required prepayment
or otherwise);
(b) any representation, statement or warranty made or deemed made by any
Borrower, any Guarantor or any Subsidiary in any Loan Document or in any other
certificate, document, report or opinion delivered in conjunction with any Loan
Document to which it is a party, shall not be true and correct in all material
respects or shall have been false or misleading in any material respect on the
date when made or deemed to have been made (except to the extent already
qualified by materiality, in which case it shall be true and correct in all
respects and shall not be false or misleading in any respect);
(c) any Borrower, any Guarantor, any Subsidiary or other party thereto
other than Lender shall be in violation, breach or default of, or shall fail to
perform, observe or comply with any covenant, obligation or agreement set forth
in, any Loan Document and such violation, breach, default or failure shall not
be cured within the applicable period set forth in the applicable Loan Document;
provided that, with respect to the affirmative covenants set forth in Article VI
(other than Sections 6.2, 6.3, 6.8, 6.9 and 6.11 for which there shall be no
cure period), there shall be a fifteen (15) calendar day cure period commencing
from the earlier of (i) Receipt by such Person of written notice of such breach,
default, violation or failure, and (ii) the time at which such Person or any
authorized officer thereof knew or became aware, or should have known or been
aware, of such failure, violation, breach or default;
(d) (i) any of the Loan Documents ceases to be in full force and effect,
(ii) any Lien created thereunder ceases to constitute a valid perfected first
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priority Lien on the Collateral in accordance with the terms thereof, or Lender
ceases to have a valid perfected first priority security interest in any of the
Collateral or any securities pledged to Lender pursuant to the Security
Documents, or (iii) any Lien created under any Mortgage ceases to constitute a
valid perfected first priority (second priority in the case of the Real Property
owned by PHC-Virginia) Lien in the Real Estate or the Utah Leasehold;
(e) one or more tax assessments, judgments or decrees is rendered against
any Borrower, any Guarantor or any Subsidiary in an amount in excess of $10,000
individually or $50,000 in the aggregate, which is/are not satisfied, stayed,
vacated or discharged of record within thirty (30) calendar days of being
rendered;
(f) (i) any default occurs, which is not cured or waived, (x) in the
payment of any amount with respect to any Indebtedness (other than the
Obligations) of any Borrower, any Guarantor or any Subsidiary in excess of
$25,000, (y) in the performance, observance or fulfillment of any provision
contained in any agreement, contract, document or instrument to which any
Borrower, any Guarantor or any Subsidiary is a party or to which any of their
properties or assets are subject or bound under or pursuant to which any
Indebtedness was issued, created, assumed, guaranteed or secured and such
default continues for more than any applicable grace period or permits the
holder of any Indebtedness to accelerate the maturity thereof, or (z) in the
performance, observance or fulfillment of any provision contained in any
agreement, contract, document or instrument between any Borrower, any Guarantor
or any Subsidiary and Lender or Affiliate of Lender (other than the Loan
Documents), or (ii) any Indebtedness of any Borrower, or any Guarantor or any
Subsidiary is declared to be due and payable or is required to be prepaid (other
than by a regularly scheduled payment) prior to the stated maturity thereof, or
any obligation of such Person for the payment of Indebtedness (other than the
Obligations) is not paid when due or within any applicable grace period, or any
such obligation becomes or is declared to be due and payable before the
expressed maturity thereof, or there occurs an event which, with the giving of
notice or lapse of time, or both, would cause any such obligation to become, or
allow any such obligation to be declared to be, due and payable;
(g) any Borrower, any Guarantor or any Subsidiary shall (i) be unable to
pay its debts generally as they become due, (ii) file a petition under any
insolvency statute, (iii) make a general assignment for the benefit of its
creditors, (iv) commence a proceeding for the appointment of a receiver,
trustee, liquidator or conservator of itself or of the whole or any substantial
part of its property, or (v) file a petition seeking reorganization or
liquidation or similar relief under any Debtor Relief Law or any other
applicable law or statute;
(h) (i) a court of competent jurisdiction shall (A) enter an order,
judgment or decree appointing a custodian, receiver, trustee, liquidator or
conservator of any Borrower, any Guarantor or any Subsidiary, or the whole or
any substantial part of any such Person's properties, which shall continue
unstayed and in effect for a period of sixty (60) calendar days, (B) shall
approve a petition filed against any Borrower, any Guarantor or any Subsidiary
seeking reorganization, liquidation or similar relief under the any Debtor
Relief Law or any other applicable law or statute, which is not dismissed within
sixty (60) calendar days or, (C) under the provisions of any Debtor Relief Law
or other applicable law or statute, assume custody or control of any Borrower,
any Guarantor or any Subsidiary, or of the whole or any substantial part of any
such Person's properties, which is not irrevocably relinquished within sixty
(60) calendar days, or (ii) there is commenced against any Borrower, any
Guarantor or any Subsidiary any proceeding or petition seeking reorganization,
liquidation or similar relief under any Debtor Relief Law or any other
applicable law or statute, which (A) is not unconditionally dismissed within
sixty (60) calendar days after the date of commencement, or (B) is with respect
to which such Borrower, Guarantor or Subsidiary takes any action to indicate its
approval of or consent to;
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(i) (i) any Change of Control occurs or any agreement or commitment to
cause or that may result in any such Change of Control is entered into, (ii) any
Material Adverse Effect, Material Adverse Change occurs or is reasonably
expected to occur, (iii) any Liability Event occurs or is reasonably expected to
occur, or (iv) any Borrower or Guarantor ceases any portion of its business
operations as currently conducted;
(j) Lender receives any indication or evidence that any Borrower, any
Guarantor or any Subsidiary may have directly or indirectly been engaged in any
type of activity which, in Lender's judgment, might result in forfeiture of any
property to any Governmental Authority which shall have continued unremedied for
a period of ten (10) calendar days after written notice from Lender;
(k) an Event of Default occurs under any other Loan Document;
(l) uninsured damage to, or loss, theft or destruction of, any portion of
the Collateral or the Real Estate occurs that exceeds $10,000 in the aggregate;
(m) any Borrower or any Guarantor or any of their respective directors or
senior officers is criminally indicted or convicted under any law that could
lead to a forfeiture of any Collateral;
(n) the issuance of any process for levy, attachment or garnishment or
execution upon or prior to any judgment against any Borrower, any Guarantor or
any Subsidiary or any of their property or assets;
(o) any Borrower, any Guarantor or any Subsidiary does, or enters into or
becomes a party to any agreement or commitment to do, or cause to be done, any
of the things described in this Article VIII or otherwise prohibited by any Loan
Document (subject to any cure periods set forth therein); or
(p) any Borrower, any Guarantor or Pivotal shall default under the Pivotal
Acquisition Documents;
then, and in any such event, notwithstanding any other provision of any Loan
Document, Lender may, by notice to Borrower (i) terminate its obligations to
make Loans hereunder, whereupon the same shall immediately terminate, (ii)
declare all or any of the Notes, all interest thereon and all other Obligations
to be due and payable immediately (except in the case of an Event of Default
under Section 8(d), (g), (h) or (i)(iii), in which event all of the foregoing
shall automatically and without further act by Lender be due and payable,
provided that, with respect to non-material breaches or violations that
constitute Events of Default under clause (ii) of Section 8(d), there shall be a
three (3) Business Day cure period commencing from the earlier of (A) Receipt by
the applicable Person of written notice of such breach or violation or of any
event, fact or circumstance constituting or resulting in any of the foregoing,
and (B) the time at which such Person or any authorized officer thereof knew or
became aware, or should have known or been aware, of such breach or violation
and resulting Event of Default or of any event, fact or circumstance
constituting or resulting in any of the foregoing)), in each case without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by Borrower, and (iii) prohibit any action permitted to
be taken under Article VII hereof.
IX. RIGHTS AND REMEDIES AFTER DEFAULT
9.1 Rights and Remedies
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(a) In addition to the acceleration provisions set forth in Article VIII
above, upon the occurrence and continuation of an Event of Default, Lender shall
have the right to exercise any and all rights, options and remedies provided for
in any Loan Document, under the UCC or at law or in equity, including, without
limitation, the right to (i) apply any property of any Borrower held by Lender
to reduce the Obligations, (ii) foreclose the Liens created under the Security
Documents, (iii) realize upon, take possession of and/or sell any Collateral or
securities pledged (other than Collateral consisting of Accounts owed or owing
by Medicaid/Medicare Account Debtors absent a court order or compliance with
applicable law) with or without judicial process, (iv) exercise all rights and
powers with respect to the Collateral as any Borrower, as applicable, might
exercise (other than with respect to Collateral consisting of Accounts owed or
owing by Medicaid/Medicare Account Debtors absent a court order or compliance
with applicable law), (v) collect and send notices regarding the Collateral
(other than with respect to Collateral consisting of Accounts owed or owing by
Medicaid/Medicare Account Debtors absent a court order or compliance with
applicable law), with or without judicial process, (vi) by its own means or with
judicial assistance, enter any premises at which Collateral and/or pledged
securities are located, or render any of the foregoing unusable or dispose of
the Collateral and/or pledged securities on such premises without any liability
for rent, storage, utilities, or other sums, and no Borrower shall resist or
interfere with such action, (vii) at Borrower's expense, require that all or any
part of the Collateral be assembled and made available to Lender at any place
designated by Lender, (viii) reduce or otherwise change the Facility Cap, the
Term Loan Amount, and/or (ix) relinquish or abandon any Collateral or securities
pledged or any Lien thereon. Notwithstanding any provision of any Loan Document,
Lender, in its sole discretion, shall have the right, at any time that Borrower
fails to do so, and from time to time, without prior notice, to: (i) obtain
insurance covering any of the Collateral to the extent required hereunder; (ii)
pay for the performance of any of Obligations; (iii) discharge taxes or Liens on
any of the Collateral that are in violation of any Loan document unless Borrower
is in good faith with due diligence by appropriate proceedings contesting those
items; and (iv) pay for the maintenance and preservation of the Collateral. Such
expenses and advances shall be added to the Obligations until reimbursed to
Lender and shall be secured by the Collateral, and such payments by Lender shall
not be construed as a waiver by Lender of any Event of Default or any other
rights or remedies of Lender.
(b) Borrower agrees that notice received by Borrower Agent at least ten
(10) calendar days before the time of any intended public sale, or the time
after which any private sale or other disposition of Collateral is to be made,
shall be deemed to be reasonable notice of such sale or other disposition. If
permitted by applicable law, any perishable Collateral which threatens to
speedily decline in value or which is sold on a recognized market may be sold
immediately by Lender without prior notice to Borrower. At any sale or
disposition of Collateral or securities pledged, Lender may (to the extent
permitted by applicable law) purchase all or any part thereof free from any
right of redemption by any Borrower which right is hereby waived and released.
Borrower covenants and agrees not to, and not to permit or cause any of its
Subsidiaries to, interfere with or impose any obstacle to Lender's exercise of
its rights and remedies with respect to the Collateral. Lender, in dealing with
or disposing of the Collateral or any part thereof, shall not be required to
give priority or preference to any item of Collateral or otherwise to marshal
assets or to take possession or sell any Collateral with judicial process.
9.2 Application of Proceeds
In addition to any other rights, options and remedies Lender has under the
Loan Documents, the UCC, at law or in equity, all dividends, interest, rents,
issues, profits, fees, revenues, income and other proceeds collected or received
from collecting, holding, managing, renting, selling, or otherwise disposing of
all or any part of the Collateral or any proceeds thereof upon exercise of its
remedies hereunder shall be applied in the following order of priority: (i)
first, to the payment of all costs and expenses of such collection, storage,
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lease, holding, operation, management, sale, disposition or delivery and of
conducting Borrower's business and of maintenance, repairs, replacements,
alterations, additions and improvements of or to the Collateral, and to the
payment of all sums which Lender may be required or may elect to pay, if any,
for taxes, assessments, insurance and other charges upon the Collateral or any
part thereof, and all other payments that Lender may be required or authorized
to make under any provision of this Agreement (including, without limitation, in
each such case, in-house documentation and diligence fees and legal expenses,
search, audit, recording, professional and filing fees and expenses and
reasonable attorneys' fees and all expenses, liabilities and advances made or
incurred in connection therewith); (ii) second, to the payment of all
Obligations as provided herein; (iii) third, to the satisfaction of Indebtedness
secured by any subordinate security interest of record in the Collateral if
written notification of demand therefor is received before distribution of the
proceeds is completed, provided, that, if requested by Lender, the holder of a
subordinate security interest shall furnish reasonable proof of its interest,
and unless it does so, Lender need not address its claims; and (iv) fourth, to
the payment of any surplus then remaining to Borrower, unless otherwise provided
by law or directed by a court of competent jurisdiction, provided that Borrower
shall be liable for any deficiency if such proceeds are insufficient to satisfy
the Obligations or any of the other items referred to in this section.
9.3 Rights of Lender to Appoint Receiver
Without limiting and in addition to any other rights, options and remedies
Lender has under the Loan Documents, the UCC, at law or in equity, upon the
occurrence and continuation of an Event of Default, Lender shall have the right
to apply for and have a receiver appointed by a court of competent jurisdiction
in any action taken by Lender to enforce its rights and remedies in order to
manage, protect and preserve the Collateral and continue the operation of the
business of Borrower and to collect all revenues and profits thereof and apply
the same to the payment of all expenses and other charges of such receivership
including the compensation of the receiver and to the payments as aforesaid
until a sale or other disposition of such Collateral shall be finally made and
consummated.
9.4 Rights and Remedies not Exclusive
Lender shall have the right in its sole discretion to determine which
rights, Liens and/or remedies Lender may at any time pursue, relinquish,
subordinate or modify, and such determination will not in any way modify or
affect any of Lender's rights, Liens or remedies under any Loan Document,
applicable law or equity. The enumeration of any rights and remedies in any Loan
Document is not intended to be exhaustive, and all rights and remedies of Lender
described in any Loan Document are cumulative and are not alternative to or
exclusive of any other rights or remedies which Lender otherwise may have. The
partial or complete exercise of any right or remedy shall not preclude any other
further exercise of such or any other right or remedy.
X. WAIVERS AND JUDICIAL PROCEEDINGS
10.1 Waivers
Except as expressly provided for herein, each Borrower and Guarantor hereby
waives setoff, counterclaim, demand, presentment, protest, all defenses with
respect to any and all instruments and all notices and demands of any
description, and the pleading of any statute of limitations as a defense to any
demand under any Loan Document. Each Borrower and Guarantor hereby waives any
and all defenses and counterclaims it may have or could interpose in any action
or procedure brought by Lender to obtain an order of court recognizing the
assignment of, or Lien of Lender in and to, any Collateral, whether or not
payable by a Medicaid/Medicare Account Debtor. With respect to any action
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hereunder, Lender conclusively may rely upon, and shall incur no liability to
any Borrower or Guarantor in acting upon, any request or other communication
that Lender reasonably believes to have been given or made by a person
authorized on any such Borrower's or Guarantor's behalf, whether or not such
person is listed on the incumbency certificate delivered pursuant to Section 4.1
hereof. In each such case, each Borrower and Guarantor hereby waives the right
to dispute Lender's action based upon such request or other communication,
absent manifest error.
10.2 Delay; No Waiver of Defaults
No course of action or dealing, renewal, release or extension of any
provision of any Loan Document, or single or partial exercise of any such
provision, or delay, failure or omission on Lender's part in enforcing any such
provision shall affect the liability of any Borrower or Guarantor or operate as
a waiver of such provision or affect the liability of any Borrower or Guarantor
or preclude any other or further exercise of such provision. No waiver by any
party to any Loan Document of any one or more defaults by any other party in the
performance of any of the provisions of any Loan Document shall operate or be
construed as a waiver of any future default, whether of a like or different
nature, and each such waiver shall be limited solely to the express terms and
provisions of such waiver. Notwithstanding any other provision of any Loan
Document, by completing the Closing under this Agreement and/or by making
Advances or funding the Term Loan, Lender does not waive any breach of any
representation or warranty of under any Loan Document, and all of Lender's
claims and rights resulting from any such breach or misrepresentation are
specifically reserved.
10.3 Jury Waiver
EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION ARISING UNDER THE LOAN DOCUMENTS OR IN ANY
WAY CONNECTED WITH OR INCIDENTAL TO THE DEALINGS OF THE PARTIES WITH RESPECT TO
THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY, WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE. EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO
THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES TO THE WAIVER OF
THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY.
10.4 Cooperation in Discovery and Litigation
In any litigation, arbitration or other dispute resolution proceeding
relating to any Loan Document, each Borrower and Guarantor waives any and all
defenses, objections and counterclaims it may have or could interpose with
respect to (i) any of its directors, officers, employees or agents being deemed
to be employees or managing agents of such Borrower or Guarantor for purposes of
all applicable law or court rules regarding the production of witnesses by
notice for testimony (whether in a deposition, at trial or otherwise), (ii)
Lender's counsel examining any such individuals as if under cross-examination
and using any discovery deposition of any of them as if it were an evidence
deposition, and/or (iii) using all commercially reasonable efforts to produce in
any such dispute resolution proceeding, at the time and in the manner requested
by Lender, all Persons, documents (whether in tangible, electronic or other
form) and/or other things under its control and relating to the dispute.
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XI. EFFECTIVE DATE AND TERMINATION
11.1 Effectiveness and Termination
(a) Subject to Lender's right to terminate and cease making Loans upon or
after any Event of Default, this Agreement shall continue in full force and
effect until the full performance and indefeasible payment in cash of all
Obligations, unless terminated sooner as provided in this Section 11.1. Borrower
may terminate this Agreement at any time upon not less than thirty (30) calendar
days' prior written notice to Lender and upon full performance and indefeasible
payment in full in cash of all Obligations on or prior to such 30th calendar day
after Receipt by Lender of such written notice. All of the Obligations shall be
immediately due and payable upon any such termination on the termination date
stated in any notice of termination (the "Termination Date"); provided that,
notwithstanding any other provision of any Loan Document, the Termination Date
shall be effective no earlier than the first Business Day of the month following
the expiration of the thirty (30) calendar days' prior written notice period.
Notwithstanding any other provision of any Loan Document, no termination of this
Agreement shall affect Lender's rights or any of the Obligations existing as of
the effective date of such termination, and the provisions of the Loan Documents
shall continue to be fully operative until the Obligations have been fully
performed and indefeasibly paid in cash in full. The Liens granted to Lender
under the Security Documents and the financing statements filed pursuant thereto
and the rights and powers of Lender shall continue in full force and effect
notwithstanding the fact that Borrower's borrowings hereunder may from time to
time be in a zero or credit position until all of the Obligations have been
fully performed and indefeasibly paid in full in cash.
(b) If (i) Borrower terminates the Revolving Facility under Section 11.1(a)
above, (ii) Lender demands or Borrower is otherwise required to make payment in
full of the Revolving Facility and/or Obligations relating to the Revolving
Facility upon the occurrence of an Event of Default, (iii) a Change of Control
or payment pursuant to Section 2.11 occurs, (iv) any other voluntary or
involuntary prepayment of the Revolving Facility and/or Obligations relating to
the Revolving Facility by Borrower or any other Person occurs (other than
reductions to zero of the outstanding balance of the Revolving Facility
resulting from the ordinary course operation of the provisions of Section 2.5),
whether by virtue of Lender's exercising its right of set-off or otherwise, (v)
Lender accelerates the Revolving Facility or makes any demand on the Revolving
Facility, or (vi) any payment or reduction of the outstanding balance of the
Revolving Facility is made during a bankruptcy, reorganization or other
proceeding or is made pursuant to any plan of reorganization or liquidation or
any Debtor Relief Law, (each, a "Revolver Termination"), then, at the effective
date of any such Revolver Termination, Borrower shall pay Lender (in addition to
the then outstanding principal, accrued interest and other Obligations relating
to the Revolving Facility pursuant to the terms of this Agreement and any other
Loan Document), as yield maintenance for the loss of bargain and not as a
penalty, an amount equal to the greater of (1) the applicable Minimum
Termination Fee, and (2) the Yield Maintenance Amount.
11.2 Survival
All obligations, covenants, agreements, representations, warranties,
waivers and indemnities made by any Borrower or Guarantor in any Loan Document
shall survive the execution and delivery of the Loan Documents, the Closing, the
making of the Loans and any termination of this Agreement until all Obligations
are fully performed and indefeasibly paid in full in cash. The obligations and
provisions of Sections 3.5, 3.7, 6.13, 10.1, 10.3, 11.1, 11.2, 12.4, 12.7 and
12.9 shall survive termination of the Loan Documents and any payment, in full or
in part, of the Obligations.
XII. MISCELLANEOUS
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12.1 Governing Law; Jurisdiction; Service of Process; Venue
The Loan Documents shall be governed by and construed in accordance with
the internal laws of the State of Maryland without giving effect to its choice
of law provisions. Any judicial proceeding against any Borrower or Guarantor
with respect to the Obligations, any Loan Document or any related agreement may
be brought in any federal or state court of competent jurisdiction located in
the State of Maryland. By execution and delivery of each Loan Document to which
it is a party, each Borrower and Guarantor (i) accepts the non-exclusive
jurisdiction of the aforesaid courts and irrevocably agrees to be bound by any
judgment rendered thereby, (ii) waives personal service of process, (iii) agrees
that service of process upon it may be made by certified or registered mail,
return receipt requested, pursuant to Section 12.5 hereof, (iv) waives any
objection to jurisdiction and venue of any action instituted hereunder and
agrees not to assert any defense based on lack of jurisdiction, venue or
convenience, and (v) agrees that the Loans were made in Maryland, that Lender
has accepted in Maryland all of the Loan Documents executed by Borrower and each
Guarantor and has disbursed Advances under the Loan Documents in Maryland.
Nothing shall affect the right of Lender to serve process in any manner
permitted by law or shall limit the right of Lender to bring proceedings against
any Borrower or Guarantor in the courts of any other jurisdiction having
jurisdiction. Any judicial proceedings against Lender involving, directly or
indirectly, the Obligations, any Loan Document or any related agreement shall be
brought only in a federal or state court located in the State of Maryland. All
parties acknowledge that they participated in the negotiation and drafting of
this Agreement and that, accordingly, no party shall move or petition a court
construing this Agreement to construe it more stringently against one party than
against any other.
12.2 Successors and Assigns; Participations; New Lenders
The Loan Documents shall inure to the benefit of Lender, Transferees and
all future holders of any Note, the Obligations and/or any of the Collateral or
Security Documents, and each of their respective successors and assigns. Each
Loan Document shall be binding upon the Persons' other than Lender that are
parties thereto and their respective successors and assigns, and no such Person
may assign, delegate or transfer any Loan Document or any of its rights or
obligations thereunder without the prior written consent of Lender. No rights
are intended to be created under any Loan Document for the benefit of any third
party donee, creditor or incidental beneficiary of any Borrower or Guarantor.
Nothing contained in any Loan Document shall be construed as a delegation to
Lender of any other Person's duty of performance. EACH BORROWER AND GUARANTOR
ACKNOWLEDGES AND AGREES THAT LENDER AT ANY TIME AND FROM TIME TO TIME MAY (I)
DIVIDE AND RESTATE ANY NOTE, AND/OR (II) SELL, ASSIGN OR GRANT PARTICIPATING
INTERESTS IN OR TRANSFER ALL OR ANY PART OF ITS RIGHTS OR OBLIGATIONS UNDER ANY
LOAN DOCUMENT, NOTE, THE OBLIGATIONS AND/OR THE COLLATERAL TO OTHER PERSONS
(EACH SUCH TRANSFEREE, ASSIGNEE OR PURCHASER, A "TRANSFEREE"). Each Transferee
shall have all of the rights and benefits with respect to the Obligations,
Notes, Collateral and/or Loan Documents held by it as fully as if the original
holder thereof, and either Lender or any Transferee may be designated as the
sole agent to manage the transactions and obligations contemplated therein;
provided that, notwithstanding anything to the contrary in any Loan Document,
Borrower shall not be obligated to pay under this Agreement to any Transferee
any sum in excess of the sum which Borrower would have been obligated to pay to
Lender had such participation not been effected. Notwithstanding any other
provision of any Loan Document, Lender may disclose to any Transferee all
information, reports, financial statements, certificates and documents obtained
under any provision of any Loan Document.
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12.3 Application of Payments
To the extent that any payment made or received with respect to the
Obligations is subsequently invalidated, determined to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver, custodian or any other Person under any Debtor Relief Law,
common law or equitable cause or any other law, then the Obligations intended to
be satisfied by such payment shall be revived and shall continue as if such
payment had not been received by Lender. Any payments with respect to the
Obligations received shall be credited and applied in such manner and order as
Lender shall decide in its sole discretion.
12.4 Indemnity
Each Borrower and Guarantor jointly and severally shall indemnify Lender,
its Affiliates and its and their respective managers, members, officers,
employees, Affiliates, agents, representatives, successors, assigns, accountants
and attorneys (collectively, the "Indemnified Persons") from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses and disbursements of any kind or nature whatsoever
(including, without limitation, reasonable fees and disbursements of counsel and
in-house documentation and diligence fees and legal expenses) which may be
imposed on, incurred by or asserted against any Indemnified Person with respect
to or arising out of, or in any litigation, proceeding or investigation
instituted or conducted by any Person with respect to any aspect of, or any
transaction contemplated by or referred to in, or any matter related to, any
Loan Document or any agreement, document or transaction contemplated thereby,
whether or not such Indemnified Person is a party thereto, except to the extent
that any of the foregoing arises out of the gross negligence or willful
misconduct of such Indemnified Person. If any Indemnified Person uses in-house
counsel for any purpose for which any Borrower is responsible to pay or
indemnify, each Borrower and Guarantor expressly agrees that its indemnification
obligations include reasonable charges for such work commensurate with the fees
that would otherwise be charged by outside legal counsel selected by such
Indemnified Person in its sole discretion for the work performed. Lender agrees
to give each Borrower and Guarantor reasonable notice of any event of which
Lender becomes aware for which indemnification may be required under this
Section 12.4, and Lender may elect (but is not obligated) to direct the defense
thereof, provided that the selection of counsel shall be subject to Borrower's
and or Guarantor's consent, which consent shall not be unreasonably withheld or
delayed. Any Indemnified Person may, in its reasonable discretion, take such
actions as it deems necessary and appropriate to investigate, defend or settle
any event or take other remedial or corrective actions with respect thereto as
may be necessary for the protection of such Indemnified Person or the
Collateral. Notwithstanding the foregoing, if any insurer agrees to undertake
the defense of an event (an "Insured Event"), Lender agrees not to exercise its
right to select counsel to defend the event if that would cause any Borrower's
or Guarantor's insurer to deny coverage; provided, however, that Lender reserves
the right to retain counsel to represent any Indemnified Person with respect to
an Insured Event at its sole cost and expense. To the extent that Lender obtains
recovery from a third party other than an Indemnified Person of any of the
amounts that any Borrower has paid to Lender pursuant to the indemnity set forth
in this Section 12.4, then Lender shall promptly pay to such Borrower or
Guarantor the amount of such recovery.
12.5 Notice
Any notice or request under any Loan Document shall be given to any party
to this Agreement at such party's address set forth beneath its signature on the
signature page to this Agreement, or at such other address as such party may
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hereafter specify in a notice given in the manner required under this Section
12.5; provided, that notices to Borrower shall be given to the Borrower Agent at
the address set forth beneath its signature on the signature page to this
Agreement. Any notice or request hereunder shall be given only by, and shall be
deemed to have been received upon (each, a "Receipt"): (i) registered or
certified mail, return receipt requested, on the date on which such received as
indicated in such return receipt, (ii) delivery by a nationally recognized
overnight courier, one (1) Business Day after deposit with such courier, or
(iii) facsimile or electronic transmission, in each case upon telephone or
further electronic communication from the recipient affirmatively acknowledging
receipt (whether automatic or manual from recipient), as applicable.
12.6 Severability; Captions; Counterparts; Facsimile Signatures
If any provision of any Loan Document is adjudicated to be invalid under
applicable laws or regulations, such provision shall be inapplicable to the
extent of such invalidity without affecting the validity or enforceability of
the remainder of the Loan Documents which shall be given effect so far as
possible. The captions in the Loan Documents are intended for convenience and
reference only and shall not affect the meaning or interpretation of the Loan
Documents. The Loan Documents may be executed in one or more counterparts (which
taken together, as applicable, shall constitute one and the same instrument) and
by facsimile transmission, which facsimile signatures shall be considered
original executed counterparts. Each party to this Agreement agrees that it will
be bound by its own facsimile signature and that it accepts the facsimile
signature of each other party.
12.7 Expenses
Borrower shall pay, whether or not the Closing occurs, all costs and
expenses incurred by Lender and/or its Affiliates, including, without
limitation, documentation and diligence fees and expenses, all search, audit,
appraisal, recording, professional and filing fees and expenses and all other
out-of-pocket charges and expenses (including, without limitation, UCC and
judgment and tax lien searches and UCC filings and fees for post-Closing UCC and
judgment and tax lien searches and wire transfer fees and audit expenses), and
reasonable attorneys' fees and expenses, (i) in any effort to enforce, protect
or collect payment of any Obligation or to enforce any Loan Document or any
related agreement, document or instrument, (ii) in connection with entering
into, negotiating, preparing, reviewing and executing the Loan Documents and/or
any related agreements, documents or instruments, (iii) arising in any way out
of administration of the Obligations, (iv) in connection with instituting,
maintaining, preserving, enforcing and/or foreclosing on Lender's Liens in any
of the Collateral, the Real Estate or the securities pledged under the Loan
Documents, whether through judicial proceedings or otherwise, (v) in defending
or prosecuting any actions, claims or proceedings arising out of or relating to
Lender's transactions with any Borrower or Guarantor, (vi) in seeking, obtaining
or receiving any advice with respect to its rights and obligations under any
Loan Document and any related agreement, document or instrument, and/or (vii) in
connection with any modification, restatement, supplement, amendment, waiver or
extension of any Loan Document and/or any related agreement, document or
instrument. All of the foregoing shall be charged to Borrower's account and
shall be part of the Obligations. If Lender or any of its Affiliates uses
in-house counsel for any purpose under any Loan Document for which Borrower or
any Guarantor is responsible to pay or indemnify, Borrower and any such
Guarantor expressly agree that its Obligations include reasonable charges for
such work commensurate with the fees that would otherwise be charged by outside
legal counsel selected by Lender or such Affiliate in its sole discretion for
the work performed. Without limiting the foregoing, Borrower shall pay all taxes
(other than taxes based upon or measured by Lender's income or revenues or any
personal property tax), if any, in connection with the issuance of any Note and
the filing and/or recording of any documents and/or financing statements.
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12.8 Entire Agreement
This Agreement and the other Loan Documents to which any Borrower or
Guarantor is a party constitute the entire agreement between Borrower, any such
Guarantor and Lender with respect to the subject matter hereof and thereof, and
supersede all prior agreements and understandings, if any, relating to the
subject matter hereof or thereof. Any promises, representations, warranties or
guarantees not herein contained and hereinafter made shall have no force and
effect unless in writing signed by Borrower or any such Guarantor, as
applicable, and Lender. No provision of this Agreement may be changed, modified,
amended, restated, waived, supplemented, discharged, canceled or terminated
orally or by any course of dealing or in any other manner other than by an
agreement in writing signed by Lender and Borrower and any such Guarantor. Each
party hereto acknowledges that it has been advised by counsel in connection with
the negotiation and execution of this Agreement and is not relying upon oral
representations or statements inconsistent with the terms and provisions hereof.
12.9 Lender Approvals
Unless expressly provided herein to the contrary, any approval, consent,
waiver or satisfaction of Lender with respect to any matter that is subject of
any Loan Document may be granted or withheld by Lender in its sole and absolute
discretion.
12.10 Confidentiality and Publicity
Each Borrower and Guarantor agrees, and agrees to cause each of its
Subsidiaries and Affiliates, (i) not to transmit or disclose provision of any
Loan Document to any Person (other than to Borrower's and Guarantor's advisors
and officers on a need-to-know basis) without Lender's prior written consent,
(ii) to inform all Persons of the confidential nature of the Loan Documents and
to direct them not to disclose the same to any other Person and to require each
of them to be bound by these provisions. Lender reserves the right to review and
approve all materials that any Borrower or Guarantor or any of its or
Subsidiaries or Affiliates prepares that contain Lender's name or describe or
refer to any Loan Document, any of the terms thereof or any of the transactions
contemplated thereby. No Borrower or Guarantor shall, and shall not permit any
of its Subsidiaries or Affiliates to, use Lender's name (or the name of any of
157
Lender's Affiliates) in connection with any of its business operations. Nothing
contained in any Loan Document is intended to permit or authorize any Borrower
or Guarantor or any of its Subsidiaries or Affiliates to contract on behalf of
Lender. Further, each Borrower and Guarantor hereby agrees that Lender or any
Affiliate of Lender may (i) disclose a general description of transactions
arising under the Loan Documents for advertising, marketing or other similar
purposes and (ii) use any Borrower's, any Guarantor's or any Subsidiary's name,
logo or other indicia germane to such party in connection with such advertising,
marketing or other similar purposes.
12.11 Release of Lender
Notwithstanding any other provision of any Loan Document, each Borrower,
each Guarantor and each Subsidiary voluntarily, knowingly, unconditionally and
irrevocably, with specific and express intent, for and on behalf of itself, it
managers, members, directors, officers, employees, stockholders, Affiliates,
agents, representatives, accountants, attorneys, successors and assigns and
their respective Affiliates (collectively, the "Releasing Parties"), hereby
fully and completely releases and forever discharges the Indemnified Parties and
any other Person or insurer which may be responsible or liable for the acts or
omissions of any of the Indemnified Parties, or who may be liable for the injury
or damage resulting therefrom (collectively, with the Indemnified Parties, the
161
"Released Parties"), of and from any and all actions, causes of action, damages,
claims, obligations, liabilities, costs, expenses and demands of any kind
whatsoever, at law or in equity, matured or unmatured, vested or contingent,
that any of the Releasing Parties has against any of the Released Parties as of
the date of the Closing. Each Borrower, each Guarantor and each Subsidiary
acknowledges that the foregoing release is a material inducement to Lender's
decision to extend to Borrower the financial accommodations hereunder and has
been relied upon by Lender in agreeing to make the Loans.
12.12 Agent
Lender and its successors and assigns hereby (i) designate and appoint
CapitalSource Finance LLC, a Delaware limited liability company, and its
successors and assigns ("CapitalSource"), to act as agent for Lender and its
successors and assigns under this Agreement and all other Loan Documents, (ii)
irrevocably authorize CapitalSource to take all actions on its behalf under the
provision of this Loan Agreement and all other Loan Documents, and (iii) to
exercise all such powers and rights, and to perform all such duties and
obligations hereunder and thereunder. CapitalSource, on behalf of Lender, shall
hold all Collateral, payments of principal and interest, fees, charges and
collections received pursuant to this Agreement and all other Loan Documents.
Each Borrower and Guarantor acknowledges that Lender and its successors and
assigns transfer and assign to CapitalSource the right to act as Lender's agent
to enforce all rights and perform all obligations of Lender contained herein and
in all of the other Loan Documents. Each Borrower and Guarantor shall within ten
(10) Business Days after Lender's reasonable request, take such further actions,
obtain such consents and approvals and duly execute and deliver such further
agreements, amendments, assignments, instructions or documents as Lender may
request to evidence the appointment and designation of CapitalSource as agent
for Lender and other financial institutions from time to time party hereto and
to the other Loan Documents.
12.13 Amendment and Restatement
On the Restatement Date, the Existing Credit Agreement shall be amended and
restated in its entirety by this Agreement and (i) all references to the
Existing Credit Agreement in any Loan Document other than this Agreement
(including in any amendment, waiver or consent) shall be deemed to refer to the
Existing Credit Agreement as amended and restated hereby, (ii) all references to
any section (or subsection) of the Existing Credit Agreement in any Loan
Document (but not herein) shall be amended to be, mutatis mutandis, references
to the corresponding provisions of this Agreement and (iii) except as the
context otherwise provides, all references to this Agreement herein (including
for purposes of indemnification and reimbursement of fees) shall be deemed to be
reference to the Existing Credit Agreement as amended and restated hereby. This
Agreement is not intended to constitute, and does not constitute, a novation of
the obligations and liabilities under the Existing Credit Agreement (including
the Existing Term Loans and the Existing Revolving Loans it being agreed that
the outstanding Existing Term Loans and Existing Revolving Loans are being
continued under this Agreement) or to evidence payment of all or any portion of
such obligations and liabilities.
On and after the Restatement Date, (i) the Existing Credit Agreement shall
be of no further force and effect except as amended and restated hereby and
except to evidence (1) the incurrence by any Credit Party of the "Obligations"
under and as defined therein (whether or not such "Obligations" are contingent
as of the Restatement Date), (2) the representations and warranties made by any
Credit Party prior to the Restatement Date, and (3) any action or omission
performed or required to be performed pursuant to such Existing Credit Agreement
prior to the Restatement Date (including any failure, prior to the Restatement
Date, to comply with the covenants contained in such Existing Credit Agreement),
and (ii) the terms and conditions of this Agreement and the Lenders' rights and
remedies under the Loan Documents, shall apply to all Obligations incurred under
the Existing Credit Agreement.
162
Except as expressly provided in any Loan Documents, this Agreement (x)
shall not cure any breach of the Existing Credit Agreement or any "Default" or
"Event of Default" thereunder existing prior to the date hereof and (y) is
limited as written and is not a consent to any other modification of any term or
condition of any Loan Document, each of which shall remain in full force and
effect.
Each of the Credit Parties reaffirms the Liens granted pursuant to the Loan
Documents (as applicable) to Lender, which Liens shall continue in full force
and effect during the term of this Agreement and any renewals or extensions
hereof and shall continue to secure the Obligations.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
163
IN WITNESS WHEREOF, each of the parties has duly executed this Amended and
Restated Revolving Credit, Term Loan and Security Agreement as of the date first
written above.
PHC, INC.
By: /s/ ▇▇▇▇▇ ▇. Shear
Name: ▇▇▇▇▇ ▇▇▇▇▇
Its: President
PHC, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
FAX: ▇▇▇-▇▇▇-▇▇▇▇
E-Mail: ▇▇▇▇▇▇@▇▇▇-▇▇▇.▇▇▇
▇▇▇▇▇▇@▇▇▇-▇▇▇.▇▇▇
PHC OF MICHIGAN, INC.
By: /s/ ▇▇▇▇▇ ▇. Shear
Name: ▇▇▇▇▇ ▇▇▇▇▇
Its: President
PHC OF NEVADA, INC.
By: /s/ ▇▇▇▇▇ ▇. Shear
Name: ▇▇▇▇▇ ▇▇▇▇▇
Its: President
PHC OF UTAH, INC.
By: /s/ ▇▇▇▇▇ ▇. Shear
Name: ▇▇▇▇▇ ▇▇▇▇▇
Its: President
165
[signature page to Amended and Restated Revolving Credit, Term Loan and Security
Agreement]
PHC OF VIRGINIA, INC.
By: /s/ ▇▇▇▇▇ ▇. Shear
Name: ▇▇▇▇▇ ▇▇▇▇▇
Its: President
WELLPLACE, INC.
By: /s/ ▇▇▇▇▇ ▇. Shear
Name: ▇▇▇▇▇ ▇▇▇▇▇
Its: President
DETROIT BEHAVIORAL INSTITUTE, INC.
By: /s/ ▇▇▇▇▇ ▇. Shear
Name: ▇▇▇▇▇ ▇▇▇▇▇
Its: President
NORTH POINT - PIONEER, INC.
By: /s/ ▇▇▇▇▇ ▇. Shear
Name: ▇▇▇▇▇ ▇▇▇▇▇
Its: President
SEVEN HILLS HOSPITAL, INC.
By: /s/ ▇▇▇▇▇ ▇. Shear
Name: ▇▇▇▇▇ ▇▇▇▇▇
Its: President
166
[signature page to Amended and Restated Revolving Credit, Term Loan and Security
Agreement]
CAPITALSOURCE FINANCE LLC
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Director - Healthcare & Speciality Finance
CapitalSource Finance LLC
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Healthcare Finance Group, Portfolio Manager
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
167
ANNEX I
FINANCIAL COVENANTS
1) Minimum EBITDA
Borrower shall not permit EBITDA for any Test Period to be less than the
following at the end of each Test Period ending as of the last day of each of
the following months, calculated on a consolidated and consolidating basis:
Test Period Minimum EBITDA
January $705,000 ($795,000 following the occurrence of the
Seven Hills Phase-In Date)
February $725,000 ($825,000 following the occurrence of the
Seven Hills Phase-In Date)
March $745,000 ($855,000 following the occurrence the of
Seven Hills Phase-In Date)
April through October $765,000 ($885,000 following the occurrence of the
Seven Hills Phase-In Date)
November $745,000 ($855,000 following the occurrence of the
Seven Hills Phase-In Date)
December $725,000 ($825,000 following the occurrence of the
Seven Hills Phase-In Date)
For purposes of this Minimum EBITDA Covenant, the term "Seven Hills Phase-In
Date" means the first day of the seventh (7th) month following the month in
which Seven Hills Hospital has received all necessary permits and licenses to
become operational and admits its first patient.
2) Fixed Charge Ratio (EBITDA/Fixed Charges)
The Fixed Charge Ratio shall not be less than the following as at the end
of the following calendar months:
Calendar Month Ending Ratio
April 30, 2007 through June 30, 2007 1.0 to 1.0
July 31, 2007 through October 31, 2007 1.25 to 1.0
November 30, 2007 through January 31, 2008 1.05 to 1.0
Annex I - i
168
February 28, 2008 and March 31, 2008 1.1 to 1.0
April 30, 2008 and May 31, 2008 1.25 to 1.0
June 30, 2008 through October 31, 2008 1.5 to 1.0
November 30, 2008 through January 31, 2009 1.25 to 1.0
Each February 28 through October 31 commencing February 1.50 to 1.0
28, 2009 and thereafter
Each November 30 through January 31 commencing November 1.25 to 1.0
30, 2009 and thereafter
For purposes of the covenants set forth in this Annex I, the terms listed
below shall have the following meanings:
"Cash Equivalents" shall mean (a) securities issued, or directly and fully
guaranteed or insured, by the United States or any agency or instrumentality
thereof (provided that the full faith and credit of the United States is pledged
in support thereof) having maturities of not more than six months from the date
of acquisition, (b) U.S. dollar denominated time deposits, certificates of
deposit and bankers' acceptances of (i) any domestic commercial bank of
recognized standing having capital and surplus in excess of $500,000,000, or
(ii) any bank (or the parent company of such bank) whose short-term commercial
paper rating from Standard & Poor's Ratings Services ("S&P") is at least A-2 or
the equivalent thereof or from ▇▇▇▇▇'▇ Investors Service, Inc. ("▇▇▇▇▇'▇") is at
least P-2 or the equivalent thereof in each case with maturities of not more
than six months from the date of acquisition (any bank meeting the
qualifications specified in clauses (b)(i) or (ii), an "Approved Bank"), (c)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (a), above, entered into with any
Approved Bank, (d) commercial paper issued by any Approved Bank or by the parent
company of any Approved Bank and commercial paper issued by, or guaranteed by,
any industrial or financial company with a short-term commercial paper rating of
at least A-2 or the equivalent thereof by S&P or at least P-2 or the equivalent
thereof by Moody's, or guaranteed by any industrial company with a long term
unsecured debt rating of at least A or A2, or the equivalent of each thereof,
from S&P or Moody's, as the case may be, and in each case maturing within six
months after the date of acquisition and (e) investments in money market funds
substantially all of whose assets are comprised of securities of the type
described in clauses (a) through (d) above.
"EBITDA" shall mean, for any Test Period, the sum, without duplication, of
the following: Net Income determined in accordance with GAAP, plus, (a) Interest
Expense, (b) taxes on income, whether paid, payable or accrued, (c) depreciation
expense, (d) amortization expense, (e) all other non-cash, non-recurring charges
and expenses, excluding accruals for cash expenses made in the ordinary course
of business, and (f) loss from any sale of assets, other than sales in the
ordinary course of business, all of the foregoing determined in accordance with
GAAP, minus (a) gains from any sale of assets, other than sales in the ordinary
course of business and (b) other extraordinary or non-recurring gains.
"Fixed Charge Ratio" shall mean, for PHC and its Subsidiaries on a
consolidated and consolidating basis, the ratio of (a) EBITDA for the Test
Period, to (b) Fixed Charges for the Test Period.
Annex I - ii
169
"Fixed Charges" shall mean, for PHC and its Subsidiaries on a consolidated
and consolidating basis, the sum of the following: (a) Total Debt Service, (b)
Capital Expenditures, (c) income taxes paid in cash or accrued, and (d)
dividends paid or accrued or declared.
"Interest Expense" shall mean with respect to PHC and its Subsidiaries on a
consolidated and consolidating basis, for any Test Period, total interest
expense (including attributable to Capital Leases in accordance with GAAP) and
fees with respect to all outstanding Indebtedness including capitalized interest
but excluding commissions, discounts and other fees owed with respect to letters
of credit and bankers' acceptance financing and net costs under Interest Rate
Agreements.
"Interest Rate Agreement" shall mean any interest rate swap, cap or collar
agreement or other similar agreement or arrangement designed to hedge the
position with respect to interest rates.
"Net Income" shall mean, for any Test Period, with respect to PHC and its
Subsidiaries on a consolidated and consolidating basis, the net income (or loss)
determined in conformity with GAAP, provided that there shall be excluded (i)
the income (or loss) of any Person in which any other Person (other than any
Borrower) has a joint interest, except to the extent of the amount of dividends
or other distributions actually paid to a Borrower by such Person, (ii) the
income (or loss) of any Person accrued prior to the date it becomes a Borrower
or is merged into or consolidated with a Borrower or that Person's assets are
acquired by a Borrower, (iii) the income of any Subsidiary of Borrower to the
extent that the declaration or payment of dividends or similar distributions of
that income by that Subsidiary is not at the time permitted by operation of the
terms of the charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary, (iv)
compensation expense resulting from the issuance of capital stock, stock options
or stock appreciation rights issued to former or current employees, including
officers, of a Borrower, or the exercise of such options or rights, in each case
to the extent the obligation (if any) associated therewith is not expected to be
settled by the payment of cash by a Borrower or any affiliate thereof, and (v)
compensation expense resulting from the repurchase of capital stock, options and
rights described in clause (iv) of this definition of Net Income.
"Test Period" shall mean the three most recent calendar months then ended
(taken as one accounting period), or such other period as specified in the
Agreement or any Annex thereto.
"Total Debt" shall mean, at any date of determination, for PHC and its
Subsidiaries on a consolidated and consolidating basis, the total Indebtedness
for borrowed money and under Capital Leases on such date less cash and Cash
Equivalents held on such date.
"Total Debt Service" shall mean, for any Test Period, for PHC and its
Subsidiaries on a consolidated and consolidating basis the sum of (i) scheduled
or other required payments of principal on Indebtedness, and (ii) Interest
Expense, in each case for such period.
Annex I - iii
170
APPENDIX A
DEFINITIONS
"Acceptance Notice" shall have the meaning given such term in Section 6.13.
"Accounts" shall mean all "accounts" (as defined in the UCC) of a Borrower
(or, if referring to another Person, of such other Person), including without
limitation, accounts, accounts receivables, monies due or to become due and
obligations in any form (whether arising in connection with contracts, contract
rights, Instruments, General Intangibles or Chattel Paper), in each case whether
arising out of goods sold or services rendered or from any other transaction and
whether or not earned by performance, now or hereafter in existence, and all
documents of title or other documents representing any of the foregoing, and all
collateral security and guaranties of any kind, now or hereafter in existence,
given by any Person with respect to any of the foregoing.
"Account Debtor" shall mean any Person who is obligated under an Account.
"Advance" shall mean a borrowing under the Revolving Facility. Any amounts
paid by Lender on behalf of any Borrower or any Guarantor under any Loan
Document shall be an Advance for purposes of the Agreement.
"Affiliate" shall mean, as to any Person, any other Person (a) that,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person, (b) who is a
director or officer (i) of such Person, (ii) of any Subsidiary of such Person,
or (iii) of any Person described in clause (a) above with respect to such
Person, or (c) which, directly or indirectly through one or more intermediaries,
is the beneficial or record owner (as defined in Rule 13d-3 of the Securities
Exchange Act of 1934, as amended, as the same is in effect on the date hereof)
of five percent (5%) or more of any class of the outstanding voting stock,
securities or other equity or ownership interests of such Person. For purposes
of this definition, the term "control" (and the correlative terms, "controlled
by" and "under common control with") shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies, whether through ownership of securities or other interests, by
contract or otherwise. "Affiliate" shall include any Subsidiary.
"Applicable Advance Rate" shall mean (i) 80% (or such other percentage
determined by Lender pursuant to Section 2.1(b) hereof) with respect to Eligible
Receivables from third party payors outstanding less than 120 calendar days
after the claim or invoice date and (ii) 60% (or such other percentage
determined by Lender pursuant to Section 2.1(b) hereof) with respect to all
other Eligible Receivables of PHC.
"Applicable Rate" shall mean the interest rates applicable from time to
time to Advances under the Agreement.
"Assignment of Rents" shall have the meaning ascribed to such term in
Section 2.13(c).
"Availability" shall have the meaning given such term in Section 2.1(a).
"Available Cash" shall mean, for and on any date, the sum without
duplication of the following for PHC and its Subsidiaries on a consolidated and
consolidating basis: (a) unrestricted cash on hand on such date, (b) Cash
Equivalents held on such date, and (c) the unborrowed Availability on and as of
such date.
Appendix A - 1
171
"Average Census" shall mean, for any period for each of Harbor Oaks and
Highland Ridge, the average aggregate census levels for the Test Period (as such
term is defined in Annex I) then ending at each of Harbor Oaks and Highland
Ridge, expressed, in each case, as a percentage of the applicable facilities
licensed bed capacity.
"Borrower Agent" shall have the meaning assigned to it in Section 2.15.
"Borrowing Base" shall mean, as of any date of determination, the sum of
the net collectible U.S. Dollar value of the Eligible Receivables of
PHC-Michigan arising from the operation of Harbor Oaks and PHC-Utah arising from
the operation of Highland Ridge, as determined with reference to the most recent
Borrowing Certificate and otherwise in accordance with the Agreement; provided,
however, that if as of such date the most recent Borrowing Certificate is of a
date more than four (4) Business Days before or after such date, the Borrowing
Base shall be determined by Lender in its sole discretion.
"Borrowing Date" shall have the meaning given such term in Section 2.3.
"Borrowing Certificate" shall mean a Borrowing Certificate substantially in
the form of Exhibit A.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which the Federal Reserve or Lender is closed.
"Capital Expenditures" shall mean, for any Test Period, the sum (without
duplication) of all expenditures (whether paid in cash or accrued as
liabilities) during the Test Period that are or should be treated as capital
expenditures under GAAP.
"Capital Lease" shall mean, as to any Person, a lease of any interest in
any kind of property or asset by that Person as lessee that is, should be or
should have been recorded as a "capital lease" in accordance with GAAP.
"Capitalized Lease Obligations" shall mean all obligations of any Person
under Capital Leases, in each case, taken at the amount thereof accounted for as
a liability in accordance with GAAP.
"Cash Equivalents" shall mean (a) securities issued, or directly and fully
guaranteed or insured, by the United States or any agency or instrumentality
thereof (provided that the full faith and credit of the United States is pledged
in support thereof) having maturities of not more than six months from the date
of acquisition, (b) U.S. dollar denominated time deposits, certificates of
deposit and bankers' acceptances of (i) any domestic commercial bank of
recognized standing having capital and surplus in excess of $500,000,000, or
(ii) any bank (or the parent company of such bank) whose short-term commercial
paper rating from Standard & Poor's Ratings Services ("S&P") is at least A-2 or
the equivalent thereof or from ▇▇▇▇▇'▇ Investors Service, Inc. ("▇▇▇▇▇'▇") is at
least P-2 or the equivalent thereof in each case with maturities of not more
than six months from the date of acquisition (any bank meeting the
qualifications specified in clauses (b)(i) or (ii), an "Approved Bank"), (c)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (a), above, entered into with any
Approved Bank, (d) commercial paper issued by any Approved Bank or by the parent
company of any Approved Bank and commercial paper issued by, or guaranteed by,
any industrial or financial company with a short-term commercial paper rating of
at least A-2 or the equivalent thereof by S&P or at least P-2 or the equivalent
thereof by Moody's, or guaranteed by any industrial company with a long term
Appendix A - 2
172
unsecured debt rating of at least A or A2, or the equivalent of each thereof,
from S&P or Moody's, as the case may be, and in each case maturing within six
months after the date of acquisition and (e) investments in money market funds
substantially all of whose assets are comprised of securities of the type
described in clauses (a) through (d) above.
"Cash Velocity" shall mean, for any period, collections of the Accounts of
PHC-Michigan in respect of Harbor Oaks and PHC-Utah in respect of Highland Ridge
during such period, calculated on a consolidated basis as of the end of each
calendar month for the Test Period (as such term is defined in Annex I) then
ending.
"Change of Control" shall mean, with respect to any Borrower or Guarantor,
the occurrence of any of the following: (i) a merger, consolidation,
reorganization, recapitalization or share or interest exchange, sale or transfer
or any other transaction or series of transactions in which its stockholders,
managers, partners or interest holders immediately prior to such transaction or
series of transactions receive, in exchange for the stock or interests owned by
them, cash, property or securities of the resulting or surviving entity or any
Affiliate thereof, and, as a result thereof, Persons who, individually or in the
aggregate, were holders of 50% or more of its voting stock, securities or
equity, partnership or ownership interests immediately prior to such transaction
or series of transactions hold less than 50% of the voting stock, securities or
other equity, partnership or ownership interests of the resulting or surviving
entity or such Affiliate thereof, calculated on a fully diluted basis, (ii) a
direct or indirect sale, transfer or other conveyance or disposition, in any
single transaction or series of transactions, of all or substantially all of its
assets, or (iii) any "change in/of control" or "sale" or "disposition" or
similar event as defined in any document governing indebtedness of such Person
which gives the holder of such indebtedness the right to accelerate or otherwise
require payment of such indebtedness prior to the maturity date thereof.
"Charter and Good Standing Documents" shall mean, for each Borrower or
Guarantor (i) a copy of the certificate of incorporation or formation (or other
charter document) certified as of a date satisfactory to Lender before the
Restatement Date by the applicable Governmental Authority of the jurisdiction of
incorporation or organization of such Borrower or Guarantor, (ii) a copy of the
bylaws or similar organizational documents of certified as of a date
satisfactory to Lender before the Restatement Date by the corporate secretary or
assistant secretary of such Borrower or Guarantor, (iii) an original certificate
of good standing as of a date acceptable to Lender issued by the applicable
Governmental Authority of the jurisdiction of incorporation or organization of
such Borrower or Guarantor and of every other jurisdiction in which such
Borrower or Guarantor has an office or conducts business or is otherwise
required to be in good standing, and (iv) copies of the resolutions of the Board
of Directors or managers (or other applicable governing body) and, if required,
stockholders, members or other equity owners authorizing the execution, delivery
and performance of the Loan Documents to which such Borrower or Guarantor is a
party, certified by an authorized officer of such Person as of the Restatement
Date.
"Closing" shall mean the satisfaction, or written waiver by Lender, of all
of the conditions precedent set forth in this Agreement required to be satisfied
prior to the consummation of the transactions contemplated hereby.
"Closing Date" shall have the meaning given such term in the Preamble.
"Collateral" shall mean, collectively and each individually, all collateral
and/or security granted to Lender by any Borrower and/or Guarantor pursuant to
the Loan Documents.
"Collateral Management Fee" shall have the meaning given such term in
Section 3.4.
Appendix A - 3
173
"Collateral Patent, Trademark, Copyright Assignment" shall mean the
Collateral, any patent, trademark or copyright assignment or acknowledgement
executed by and between any Borrower or Guarantor, as applicable, and Lender, as
such may be modified, amended or supplemented from time to time.
"Concentration Account" shall have the meaning given such term in Section
2.5.
"Cross Guaranty" shall have the meaning assigned to such term in Section
2.13(b).
"Credit Party" or "Credit Parties" shall mean any Borrower and any
Guarantor, individually or collectively, as the context may require.
"Debtor Relief Law" shall mean, collectively, the Bankruptcy Code of the
United States of America and all other applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization
or similar debtor relief laws from time to time in effect affecting the rights
of creditors generally, as amended from time to time.
"Debt Service Reserve Amount" shall mean an amount equal to $30,000.
"Default" shall mean any event, fact, circumstance or condition that, with
the giving of applicable notice or passage of time or both, would constitute or
be or result in an Event of Default.
"Dilution Items" shall have the meaning given such term in Section 2.1(b).
"Distribution" shall mean any fee, payment, bonus or other remuneration of
any kind, and any repayment of or debt service on loans or other indebtedness.
"EBITDAM" shall mean the sum, without duplication, of the following for any
Test Period (as such term is defined in Annex I): (a) EBITDA (as such term is
defined in Annex I) for Harbor Oaks and (b) Management Fees, whether paid,
payable or accrued.
"Eligible Receivables" shall mean each Account arising in the ordinary
course of Harbor Oaks's and Highland Ridge's business (or the business of any
other Borrower whose Accounts may be included at any time in the future within
the Borrowing Base) from the sale of goods or rendering of Services which
Lender, in its sole discretion, deems an Eligible Receivable unless:
(a) it is not subject to a valid perfected first priority security interest in
favor of Lender, subject to no other Lien;
(b) it is not collected through the Lockbox Accounts;
(c) it is not evidenced by an invoice, statement or other documentary
evidence satisfactory to Lender; provided, that Lender in its sole discretion
may from time to time include as Accounts that are not evidenced by an invoice,
statement or other documentary evidence satisfactory to Lender as Eligible
Receivables and determine the advance rate, liquidity factors and reserves
applicable to Advances made on any such Accounts;
(d) it or any portion thereof (in which case only such portion shall not be
an Eligible Receivable) is payable by a beneficiary, recipient or subscriber
individually and not directly by a Medicaid/Medicare Account Debtor or
commercial medical insurance carrier acceptable to Lender;
Appendix A - 4
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(e) it arises out of services rendered or a sale made to, or out of any
other transaction between with , one or more Affiliates of any such Borrower;
(f) it remains unpaid for longer than the earlier of (i) 150 calendar days
after the first to occur of the claim date or invoice date, and (ii) 165
calendar days after the applicable Services were rendered;
(g) with respect to all Accounts owed by any particular Account Debtor
and/or its Affiliates, if more than 50% of the aggregate balance of all such
Accounts owing from such Account Debtor and/or its Affiliates remain unpaid for
longer than the earlier of (i) 150 calendar days after the first to occur of the
claim date or invoice date, and (ii) 165 calendar days after the applicable
Services were rendered;
(h) with respect to all Accounts owed by any particular Account Debtor
and/or its Affiliates, 50% or more of all such Accounts are not deemed Eligible
Receivables for any reason hereunder (which percentage may, in Lender's sole
discretion, be increased or decreased);
(i) with respect to all Accounts owed by any particular Account Debtor
and/or its Affiliates, if such Accounts exceed 20% of the net collectible dollar
value of all Eligible Receivables at any one time (including Accounts from
Medicaid/Medicare Account Debtors) (which percentage may, in Lender's sole
discretion, be increased or decreased);
(j) any covenant, agreement, representation or warranty contained in any
Loan Document with respect to such Account has been breached and remains
uncured;
(k) the Account Debtor for such Account has commenced a voluntary case
under any Debtor Relief Law or has made an assignment for the benefit of
creditors, or a decree or order for relief has been entered by a court having
jurisdiction in respect of such Account Debtor in an involuntary case under any
Debtor Relief Law, or any other petition or application for relief under any
Debtor Relief Law has been filed against such Account Debtor, or such Account
Debtor has failed, suspended business, ceased to be solvent, called a meeting of
its creditors, or has consented to or suffered a receiver, trustee, liquidator
or custodian to be appointed for it or for all or a significant portion of its
assets or affairs, or Borrower, in the ordinary course of business, should have
known of any of the foregoing;
(l) it arises from the sale of property or services rendered to one or more
Account Debtors outside the continental United States or that have their
principal place of business or chief executive offices outside the continental
United States;
(m) it represents the sale of goods or rendering of services to an Account
Debtor on a ▇▇▇▇-and-hold, guaranteed sale, sale-and-return, sale on approval,
consignment or any other repurchase or return basis or is evidenced by Chattel
Paper or an Instrument of any kind or has been reduced to judgment;
(n) the applicable Account Debtor for such Account is any Governmental
Authority, unless rights to payment of such Account have been assigned to Lender
pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C. Section
3727, et seq. and 41 U.S.C. Section 15, et seq.), or otherwise all with
applicable statutes or regulations respecting the assignment of Government
Accounts have been complied with (for example, with respect to all Account
payable directly by a Medicaid/Medicare Account Debtor);
Appendix A - 5
175
(o) it is subject to any offset, credit (including any resource or other
income credit or offset) deduction, defense, discount, chargeback, freight
claim, allowance, adjustment, dispute or counterclaim, or is contingent in any
respect or for any reason;
(p) there is any agreement with an Account Debtor for any deduction from
such Account, except for discounts or allowances made in the ordinary course of
business for prompt payment, all of which discounts or allowances are reflected
in the calculation of the face value of each invoice related thereto, such that
only the discounted amount of such Account after giving effect to such discounts
and allowances shall be considered an Eligible Receivable;
(q) any return, rejection or repossession of goods or services related to
it has occurred;
(r) it is not payable to such Borrower;
(s) such Borrower has agreed to accept or has accepted any non-cash payment
for such Account;
(t) with respect to any Account arising from the sale of goods, the goods
have not been shipped to the Account Debtor or its designee;
(u) with respect to any Account arising from the performance of Services,
the Services have not been actually performed or the Services were undertaken in
violation of any law; or
(v) such account fails to meet such other specifications and requirements
which may from time to time be established by Lender or is not otherwise
satisfactory to Lender, as determined in Lender's sole discretion.
"Environmental Laws" shall mean, collectively and each individually ,the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Superfund Amendment and Reauthorization Act of 1986, the Resource
Conservation and Recovery Act, the Toxic Substances Control Act, the Clean Air
Act, the Clean Water Act, any other "Superfund" or "Superlien" law and all other
federal, state and local and foreign environmental, land use, zoning, health,
chemical use, safety and sanitation laws, statutes, ordinances and codes
relating to the protection of the environment and/or governing the use, storage,
treatment, generation, transportation, processing, handling, production or
disposal of Hazardous Substances, in each case, as amended, and the rules,
regulations, policies, guidelines, interpretations, decisions, orders and
directives of Governmental Authorities with respect thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"Event of Default" shall mean the occurrence of any event set forth in
Article VIII.
"Excess Cash Flow" shall mean, for any fiscal year, without duplication, an
amount equal to the sum of (i) consolidated net income or loss of PHC and its
Subsidiaries for such period, plus (ii) an amount equal to the amount of
depreciation expenses, amortization expense (including the amortization of
goodwill), accrued non-cash interest expense and all other non-cash charges
deducted in arriving at such consolidated net income or loss, plus (iii) an
amount equal to the aggregate net cash proceeds of the sale, lease, transfer or
Appendix A - 6
176
other disposition of assets by PHC and its Subsidiaries during such period to
the extent not required to be applied to mandatory prepayments or payments on
the Loans, plus (iv) an amount equal to the net loss on the sale, lease,
transfer or other disposition of assets by PHC and its Subsidiaries during such
period to the extent deducted in arriving at such consolidated net income or
loss, plus (v) without duplication of other items included in this definition,
an amount equal to any tax refunds or credits received by PHC and its
Subsidiaries during such period, less (vi) an amount equal to the permitted
Capital Expenditures of PHC and its Subsidiaries for such period, less (vii) an
amount equal to the sum of all regularly scheduled payments and optional and
mandatory prepayments of principal on Indebtedness for money borrower of PHC and
its Subsidiaries (other than on the Loans) actually made during such period to
the extent permitted hereunder, less (viii) an amount equal to the net gain on
the sale, lease, transfer or other disposition of assets by PHC and its
Subsidiaries during such period to the extent included in arriving at such
consolidated net income or loss.
"Existing Advances" shall mean all outstanding loans and advances made by
Lender to Borrower under the Existing Credit Agreement in respect of the
Revolving Facility.
"Existing Credit Agreement" shall have the meaning given the term in the
Recitals of this Agreement.
"Existing Revolving Notes" shall have the meaning given the term in Section
2.11(a).
"Existing Term Loan" shall have the meaning given the term in. the Recitals
of this Agreement.
"Existing Term Note" shall have the meaning given the term in Section
2.11(a).
"Facility Cap" shall have the meaning given the term in the Recitals of
this Agreement.
"Fair Valuation" shall mean the determination of the value of the
consolidated assets of a Person on the basis of the amount which may be realized
by a willing seller within a reasonable time through collection or sale of such
assets at market value on a going concern basis to an interested buyer who is
willing to purchase under ordinary selling conditions in an arm's length
transaction.
"GAAP" shall mean generally accepted accounting principles in the United
States of America in effect from time to time as applied by nationally
recognized accounting firms.
"Government Account" shall be defined to mean all Accounts arising out of
or with respect to any Government Contract.
"Government Contract" shall be defined to mean all contracts with the
United States Government or with any agency thereof, and all amendments thereto.
"Governmental Authority" shall mean any federal, state, municipal,
national, local or other governmental department, court, commission, board,
bureau, agency or instrumentality or political subdivision thereof, or any
entity or officer exercising executive, legislative or judicial, regulatory or
administrative functions of or pertaining to any government or any court, in
each case, whether of the United States or a state, territory or possession
thereof, a foreign sovereign entity or country or jurisdiction or the District
of Columbia.
"Guarantor" shall mean, collectively and each individually all guarantors
of the Obligations or any part thereof (but shall not include any Borrower that
executes a Cross Guaranty).
Appendix A - 7
177
"Guaranty" shall mean, collectively and each individually, all guarantees
(other than any Cross Guaranty) executed by any Guarantors.
"Harbor Oaks" shall mean that certain 64-bed psychiatric hospital owned and
operated by PHC of Michigan, Inc. under the name "Harbor Oaks Hospital" and
located in New Baltimore, Michigan.
"Hazardous Substances" shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, hazardous wastes, hazardous or toxic substances or
related materials as defined in or subject to any applicable Environmental Law.
"Healthcare Laws" shall mean all applicable statutes, laws, ordinances,
rules and regulations of any Governmental Authority with respect to regulatory
matters primarily relating to patient healthcare, healthcare providers and
healthcare services (including without limitation Section 1128B(b) of the Social
Security Act, as amended, 42 U.S.C. Section 1320a-7(b) (Criminal Penalties
Involving Medicare or State Health Care Programs), commonly referred to as the
"Federal Anti-Kickback Statute," and the Social Security Act, as amended,
Section 1877, 42 U.S.C. Section 1395nn (Prohibition Against Certain Referrals),
commonly referred to as "▇▇▇▇▇ Statute").
"Highland Ridge" shall mean that certain 41-bed substance abuse treatment
facility leased and operated by PHC of Utah, Inc. under the name "Highland Ridge
Hospital" and located in Midvale, Utah.
"Indebtedness" of any Person shall mean, without duplication, (a) all items
which, in accordance with GAAP, would be included in determining total
liabilities as shown on the liability side of the balance sheet of such Person
as of the date as of which Indebtedness is to be determined, including any lease
which, in accordance with GAAP would constitute Indebtedness, (b) all
indebtedness secured by any mortgage, pledge, security, Lien or conditional sale
or other title retention agreement to which any property or asset owned or held
by such Person is subject, whether or not the indebtedness secured thereby shall
have been assumed, (c) all indebtedness of others which such Person has directly
or indirectly guaranteed, endorsed (otherwise than for collection or deposit in
the ordinary course of business), discounted or sold with recourse or agreed
(contingently or otherwise) to purchase or repurchase or otherwise acquire, or
in respect of which such Person has agreed to supply or advance funds (whether
by way of loan, stock, equity or other ownership interest purchase, capital
contribution or otherwise) or otherwise to become directly or indirectly liable.
"Indemnified Person" shall have the meaning given such term in Section
12.4.
"Initial Term Loan Amount" shall have the meaning given such term in the
third recital hereof.
"Insured Event" shall have the meaning given such term in Section 12.4.
"Insurer" shall mean a Person that insures another Person against any costs
incurred in the receipt by such other Person of Services, or that has an
agreement with any Borrower to compensate it for providing Services to such
Person.
"Inventory" shall mean all "inventory" (as defined in the UCC) of Borrower
(or, if referring to another Person, of such other Person), now owned or
hereafter acquired, and all documents of title or other documents representing
Appendix A - 8
178
any of the foregoing, and all collateral security and guaranties of any kind,
now or hereafter in existence, given by any Person with respect to any of the
foregoing.
"Landlord Waiver and Consent" shall mean a waiver/consent in form and
substance satisfactory to Lender from the owner/lessor of any premises not owned
by Borrower at which any of the Collateral is now or hereafter located for the
purpose of providing Lender access to such Collateral, in each case as such may
be modified, amended or supplemented from time to time.
"Leasehold" shall mean the Seven Hills Leasehold and the Utah
Leasehold, individually or collectively.
"Liability Event" shall mean any event, fact, condition or circumstance or
series thereof (i) in or for which any Borrower becomes liable or otherwise
responsible for any amount owed or owing to any Medicaid or Medicare program by
a provider under common ownership with such Borrower or any provider owned by
such Borrower pursuant to any applicable law, ordinance, rule, decree, order or
regulation of any Governmental Authority after the failure of any such provider
to pay any such amount when owed or owing, (ii) in which Medicaid or Medicare
payments to any Borrower are lawfully set-off against payments to such or any
other Borrower to satisfy any liability of or for any amounts owed or owing to
any Medicaid or Medicare program by a provider under common ownership with such
Borrower or any provider owned by such Borrower pursuant to any applicable law,
ordinance, rule, decree, order or regulation of any Governmental Authority, or
(iii) any of the foregoing under clauses (i) or (ii) in each case pursuant to
statutory or regulatory provisions that are similar to any applicable law,
ordinance, rule, decree, order or regulation of any Governmental Authority
referenced in clauses (i) and (ii) above or successor provisions thereto.
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
restriction, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement or any
lease in the nature thereof), or any other arrangement pursuant to which title
to the property is retained by or vested in some other Person for security
purposes.
"Loan" or "Loans" shall mean, individually and collectively, the Term Loan
and all Advances under the Revolving Facility.
"Loan Documents" shall mean, collectively and each individually, this
Agreement, the Notes, the Security Documents, the Lockbox Agreements, the
Uniform Commercial Code Financing Statements, the Subordination Agreements, the
Landlord Waiver and Consents, the Borrowing Certificates, and the Warrant and
all other agreements, documents, instruments and certificates heretofore or
hereafter executed or delivered to Lender in connection with any of the
foregoing or the Loans, as the same may be amended, modified or supplemented
from time to time.
"Lockbox Accounts" shall mean the accounts maintained by Borrower at the
Lockbox Banks into which all collections or payments on their Accounts and other
Collateral are paid.
"Lockbox Agreement" shall have the meaning given such term in Section 2.5.
"Lockbox Bank" shall have the meaning given such term in Section 2.5.
"Management Fees" shall mean collectively any and all management and other
fees, all charges, expenses and/or payments, and payables of any kind at any
time owing, owed or payable, by Harbor Oaks to PHC or any of its Subsidiaries
other than Harbor Oaks.
Appendix A - 9
179
"Material Adverse Effect" or "Material Adverse Change" shall mean any
event, condition or circumstance or set of events, conditions or circumstances
or any change(s) which (i) has, had or could reasonably be expected to have any
material adverse effect upon or change in the validity or enforceability of any
Loan Document, (ii) has been or could reasonably be expected to be material and
adverse to the value of any of the Collateral or to the business, operations,
prospects, properties, assets, liabilities or condition of Borrower and/or
Guarantors, either individually in the case of PHC or PHC-Michigan, or, in the
case of each Borrower and Guarantor, taken as a whole, or (iii) has materially
impaired or could reasonably be expected to materially impair the ability of any
Borrower or Guarantor to perform the Obligations or to consummate the
transactions under the Loan Documents executed by such Person.
"Medicaid/Medicare Account Debtor" shall mean any Account Debtor which is
(i) the United States of America acting under the Medicaid or Medicare program
established pursuant to the Social Security Act or any other federal healthcare
program, including, without limitation, CHAMPUS, (ii) any state or the District
of Columbia acting pursuant to a health plan adopted pursuant to Title XIX of
the Social Security Act or any other state health care program, or (iii) any
agent, carrier, administrator or intermediary for any of the foregoing.
"Minimum Termination Fee" shall mean (for the time period indicated) the
amount equal to (i) three percent (3%) of the Facility Cap, if the date of
notice of such termination by Borrower is after the Restatement Date but before
the first anniversary of the Restatement Date; and (ii) two percent (2%) of the
Facility Cap, if the date of notice of such termination by Borrower is on or
after the first anniversary of the Restatement Date.
"Monthly Compliance Certificate" shall have the meaning ascribed to such
term in Section 6.1(a).
"Mortgage" shall have the meaning ascribed to such term in Section 2.13(c).
"Mount Regis" shall mean that certain 25-bed substance abuse treatment
facility owned and operated by PHC of Virginia, Inc. under the name "Mount Regis
Center" and located in Salem, Virginia.
"Note" shall mean any promissory note or notes issued pursuant to Section
2.11.
"Obligations" shall mean all shall mean all present and future obligations,
Indebtedness and liabilities of Borrower and/or Guarantors to Lender at any time
and from time to time of every kind, nature and description, direct or indirect,
secured or unsecured, joint and several, absolute or contingent, due or to
become due, matured or unmatured, now existing or hereafter arising, contractual
or tortious, liquidated or unliquidated, under any of the Loan Documents or
otherwise relating to Notes and/or Loans, including, without limitation, all
applicable fees, charges and expenses and/or all amounts paid or advanced by
Lender on behalf of or for the benefit of any Borrower and/or Guarantor for any
reason at any time, including in each case obligations of performance as well as
obligations of payment and interest that accrue after the commencement of any
proceeding under any Debtor Relief Law by or against any such Person.
"Offer" shall have the meaning given such term in Section 6.13.
"Option Period" shall have the meaning given such term in Section 6.13.
Appendix A - 10
180
"Payment Office" shall mean initially the address set forth beneath
Lender's name on the signature page of the Agreement, and thereafter, such other
office of Lender, if any, which it may designate by notice to Borrower to be the
Payment Office.
"Permit" shall mean collectively all licenses, leases, powers, permits,
franchises, certificates, authorizations, approvals, certificates of need,
provider numbers and other rights.
"Permit Assignment" shall have the meaning ascribed to such term in Section
2.13(c).
"Permitted Discretion" shall mean a determination or judgment made by
Lender in good faith in the exercise of reasonable (from the perspective of a
secured lender) business judgment.
"Permitted Indebtedness" shall have the meaning given such term in Section
7.2.
"Permitted Liens" shall have the meaning ascribed to such term in Section
7.3.
"Permitted Subordinated Debt" shall have the meaning ascribed to such term
in Section 7.2.
"Person" shall mean an individual, a partnership, a corporation, a limited
liability company, a business trust, a joint stock company, a trust, an
unincorporated association, a joint venture, a Governmental Authority or any
other entity of whatever nature.
"PHC" means PHC, Inc., a Massachusetts corporation.
"PHC-Michigan" means PHC of Michigan, Inc., a Massachusetts corporation.
"PHC-Utah" means PHC of Utah, Inc., a Massachusetts corporation.
"PHC-Virginia" means PHC of Utah, Inc., a Massachusetts corporation.
"Pivotal" means Pivotal Research Centers, L.L.C., an Arizona limited
liability company.
"Pivotal Acquisition" means the acquisition of the membership interests of
Pivotal Research Centers, L.L.C. by PHC, Inc.
"Pivotal Acquisition Documents" means the documents and agreements executed
and delivered by PHC or its Subsidiaries and the Pivotal Sellers in connection
with the Pivotal Acquisition.
"Pivotal Sellers" shall mean the holders of the membership interests of
Pivotal prior to the consummation of the Pivotal Acquisition.
"Pivotal Seller Notes" shall mean each promissory note issued by PHC to the
Pivotal Sellers in connection with the Pivotal Acquisition.
"Prime Rate" shall mean a fluctuating interest rate per annum equal at all
times to the rate of interest announced publicly from time to time by Citibank,
N.A. as its base rate; provided, that such rate is not necessarily the best rate
offered to its customers, and, should Lender be unable to determine such rate,
such other indication of the prevailing prime rate of interest as may reasonably
be chosen by Lender; provided, that each change in the fluctuating interest rate
shall take effect simultaneously with the corresponding change in the Prime
Rate.
Appendix A - 11
181
"Private Payors" shall mean Account Debtors other than Medicaid/Medicare
Account Debtors, any other governmental payor and any commercial insurers.
"Real Estate" shall mean the following described real property, together
with all building, structures and improvements located thereon:
▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and known as Harbor Oaks
Psychiatric Hospital
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and known as Mount Regis Center
"Receipt" shall have the meaning given such term in Section 12.5.
"Released Parties" shall have the meaning given such term in Section 12.11.
"Releasing Parties" shall have the meaning given such term in Section
12.11.
"Restatement Date" shall mean the date the Closing occurs.
"Revolver Termination" shall have the meaning given such term in Section
11.1(b).
"Revolving Facility Maturity Date" shall have the meaning assigned to such
term in Section 2.2(b).
"Revolving Facility Obligations" shall mean all of the Obligations related
to the Revolving Facility.
"Security Documents" shall mean any Notes, this Agreement, any Guaranty,
Stock Pledge Agreement, Collateral Patent, Trademark and Copyright
Assignment, each Mortgage, each Assignment of Rents, each Permit
Assignment, the Purchase Document Assignment, each Cross Guaranty, Lockbox
Agreements, Uniform Commercial Code Financing Statements and all other
documents or instruments necessary to create or perfect the Liens in the
Collateral, as such may be modified, amended or supplemented from time to
time.
"Services" shall mean medical and health care services provided to a
Person, including, but not limited to, medical and health care services
which are covered by a policy of insurance issued by an Insurer, physician
services, nurse and therapist services, dental services, hospital services,
skilled nursing facility services, comprehensive outpatient rehabilitation
services, home health care services, residential and out- patient
behavioral healthcare services.
"Seven Hills Hospital" means Seven Hills Hospital, Inc., a Massachusetts
corporation.
"Seven Hills" shall mean that certain 60-bed substance abuse treatment
facility leased and operated by Seven Hills Hospital, Inc. under the name
"Seven Hills Hospital" and located in Las Vegas, Nevada.
"Seven Hills Leasehold" shall mean the real property, together with all
buildings, structures, and improvements located thereon, leased by Seven
Hills Hospital for the operation of Seven Hills.
"Solvency Certificate" shall have the meaning given such term in Section
4.1(d).
Appendix A - 12
182
"Stock Pledge Agreement" shall mean, collectively and each individually,
(i) that certain Stock Pledge Agreement by and between PHC and Lender
executed in connection herewith, and (ii) if applicable, all stock pledge
agreements executed by and between Lender and any other Borrower or any
Guarantor, in each case as such may be modified, amended or supplemented
from time to time.
"Subsidiary" shall mean, (i) as to any Borrower, any Person in which more
than 50% of all equity, membership, partnership or other ownership
interests is owned directly or indirectly by such Borrower or one or more
of its Subsidiaries, and (ii) as to any other Person, any Person in which
more than 50% of all equity, membership, partnership or other ownership
interests is owned directly or indirectly by such Person or by one or more
of such Person's Subsidiaries.
"Term" shall mean the period commencing on the Restatement Date and ending
on October __, 2011; provided that in the case of the Revolving Facility,
the Term is subject to extension for up to two (2) additional periods of
one (1) year in duration as provided in Section 2.2(b).
"Term Loan" shall have the meaning given such term in the third recital
hereof.
"Term Loan Amount" shall mean during the period commencing as of the
Restatement Date and continuing through June 30, 2007, the Initial Term
Loan Amount. Commencing July 1, 2007, and continuing on the same day of
each calendar month thereafter, the Term Loan Amount shall be reduced on a
cumulative basis by the following amounts during the following time
periods:
Time Period Monthly Reduction Amount
July 1, 2007 through June 30, 2009 $50,000
July 1, 2009 and each month thereafter $62,500
"Term Loan Borrowing Date" shall have the meaning given such term in
Section 2.5.
"Term Loan Draw(s)" shall mean a borrowing or borrowings under the Term
Loan.
"Term Loan Maturity Date" shall have the meaning assigned to such term in
Section 2.6(a).
"Term Loan Obligations" shall mean all of the Obligations related to the
Term Loan.
"Term Loan Finance Fee Amount" shall mean the amount equal to one-half of
one percent (.5%) of the Initial Term Loan Amount.
"Termination Date" shall have the meaning ascribed to such term in Section
11.1(a).
"Transferee" shall have the meaning given such term in Section 12.2.
"Transaction" shall have the meaning given such term in Section 6.13.
"UCC" shall mean the Uniform Commercial Code as in effect in the State of
Maryland from time to time.
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183
"Utah Leasehold" shall mean the real property, together with all buildings,
structures, and improvements located thereon, leased by PHC-Utah for the
operation of Highland Ridge.
"Warrant" shall mean the Warrant dated as of the Restatement Date issued by
PHC to CSE Equity Holdings LLC, as such may be modified, restated, amended
or supplemented from time to time.
"Waived Finance Fee" shall have the meaning given such term in Section 3.5.
"Wellplace" shall mean Wellplace, Inc., a Massachusetts corporation.
"Yield Maintenance Amount" shall mean an amount equal to the future value
at the last day of the Term, discounted to the present value as of the
later of the Termination Date or the date of prepayment using the most
recently published asked yield to maturity as quoted in the Wall Street
Journal for the United States Treasury Notes or Bills with a maturity date
closest to the last day of the Term, of the product of (A) the all in
effective yield (measured as a percentage per annum) on the Revolving
Facility for the six (6) months prior to the Termination Date; (B) the
Facility Cap; and (C) the quotient of (i) the number of months remaining in
the Term, and (ii) twelve (12).
Appendix A - 14
184