Exhibit 10.1
LOAN AND SECURITY AGREEMENT
THE PROVIDENCE SERVICE CORPORATION
And each of the Additional Borrowers Listed on Exhibit A,
as Borrowers
with
HEALTHCARE BUSINESS CREDIT CORPORATION
as Lender
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS AND INTERPRETATION................................. 1
1.1 Terms Defined.................................................. 1
1.2 Matters of Construction........................................ 15
1.3 Accounting Principles.......................................... 15
1.4 Uniform Commercial Code........................................ 156
SECTION 2. THE CREDIT FACILITIES.......................................... 16
2.1 The Revolving Credit........................................... 16
2.2 Funding Procedures............................................. 16
2.3 Term Loan A.................................................... 17
2.4 Term Loan B.................................................... 17
2.5 Interest and Fees.............................................. 19
2.6 Additional Interest Provisions................................. 21
2.7 Payments....................................................... 22
2.8 Use of Proceeds................................................ 23
2.9 Lockboxes and Collections...................................... 23
2.10 Joint and Several Liability; Appointment of Borrower Agent..... 23
SECTION 3. COLLATERAL..................................................... 24
3.1 Grant of Security.............................................. 24
3.2 Lien Documents................................................. 27
3.3 Other Actions.................................................. 29
3.4 Searches....................................................... 29
3.5 Filing Security Agreement...................................... 29
3.6 Power of Attorney.............................................. 29
SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO THE LOANS.................. 30
4.1 Closing Date................................................... 30
4.2 Conditions to each Loan........................................ 32
4.3 Closing........................................................ 32
4.4 Non-Waiver of Rights........................................... 33
SECTION 5. REPRESENTATIONS AND WARRANTIES................................. 33
5.1 Organization and Validity...................................... 33
5.2 Places of Business............................................. 34
5.3 Operation of Business.......................................... 35
5.4 Pending Litigation............................................. 35
5.5 Medicaid and Medicare Cost Reporting........................... 35
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5.6 Title to Collateral............................................ 35
5.7 Governmental Consent........................................... 37
5.8 Taxes.......................................................... 37
5.9 Financial Statements........................................... 37
5.10 Full Disclosure................................................ 37
5.11 Guarantees, Contracts, etc..................................... 37
5.12 Compliance with Laws........................................... 38
5.13 Environmental Matters.......................................... 38
5.14 Capital Stock and Equity Interests............................. 38
5.15 Lockboxes...................................................... 37
5.16 Borrowing Base Reports......................................... 37
5.17 Security Interest.............................................. 37
5.18 Accounts....................................................... 37
5.19 Pension Plans.................................................. 38
5.20 Representations and Warranties for each Loan................... 39
5.21 Commercial Tort Claims......................................... 41
5.22 Letter of Credit Rights........................................ 41
5.23 Intellectual Property.......................................... 41
SECTION 6. BORROWER'S AFFIRMATIVE COVENANTS............................... 42
6.1 Payment of Taxes and Claims.................................... 42
6.2 Maintenance of Insurance, Financial Records and Corporate
Existence..................................................... 42
6.3 Business Conducted............................................. 43
6.4 Litigation..................................................... 43
6.5 Taxes.......................................................... 43
6.6 Financial Covenants............................................ 43
6.7 Financial and Business Information............................. 44
6.8 Officers' Certificates......................................... 45
6.9 Inspection..................................................... 45
6.10 Tax Returns and Reports........................................ 46
6.11 Material Adverse Developments.................................. 46
6.12 Places of Business............................................. 46
6.13 Notice of Action............................................... 46
6.14 Verification of Information.................................... 46
6.15 Value Track System(TM)......................................... 47
6.16 Commercial Tort Claims......................................... 47
SECTION 7. BORROWER'S NEGATIVE COVENANTS.................................. 47
7.1 Merger, Consolidation, Dissolution or Liquidation.............. 47
7.2 Liens and Encumbrances......................................... 48
7.3 Negative Pledge................................................ 48
7.4 Transactions With Affiliates or Subsidiaries................... 48
7.5 Guarantees..................................................... 49
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7.6 Indebtedness................................................... 49
7.7 Loans to Other Persons......................................... 47
7.8 Withdrawals.................................................... 47
7.9 Payments on Account of Subordinated Debt....................... 48
SECTION 8. DEFAULT........................................................ 50
8.1 Events of Default.............................................. 50
8.2 Cure........................................................... 52
8.3 Rights and Remedies on Default................................. 52
8.4 Nature of Remedies............................................. 53
8.5 Set-Off........................................................ 54
SECTION 9. MISCELLANEOUS.................................................. 54
9.1 GOVERNING LAW.................................................. 54
9.2 Integrated Agreement........................................... 54
9.3 Waiver and Indemnity........................................... 54
9.4 Time........................................................... 55
9.5 Expenses of Lender............................................. 55
9.6 Confidentiality................................................ 55
9.7 Notices........................................................ 56
9.8 Headings....................................................... 57
9.9 Survival....................................................... 57
9.10 Successors and Assigns......................................... 57
9.11 Duplicate Originals............................................ 58
9.12 Modification................................................... 58
9.13 Third Parties.................................................. 58
9.14 Waivers........................................................ 58
9.15 CONSENT TO JURISDICTION........................................ 57
9.16 WAIVER OF JURY TRIAL........................................... 59
9.17 Publication.................................................... 59
9.18 Discharge of Taxes, Borrowers's Obligations, Etc............... 59
9.19 Injunctive Relief.............................................. 57
9.20 Privacy of Patient Information................................. 57
9.21 Non-Profit Borrowers........................................... 58
9.22 Obligations Constitute Senior Debt............................. 58
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EXHIBITS AND SCHEDULES
Exhibit A -- Additional Borrowers
Exhibit 2.1(b) -- Form of Revolving Credit Note
Exhibit 2.2(b) -- Form of Borrowing Base Report
Exhibit 2.2(c) -- Form of Advance Request
Exhibit 2.3(a) -- Form of Term Note A
Exhibit 2.4(c) -- Form of Term Note B
Exhibit 4.1A -- Form of Opinion of Counsel of ▇▇▇▇▇ & ▇▇▇▇, P.C.
Exhibit 4.1B -- Form of Opinion of Counsel of O'Melveny & ▇▇▇▇▇ LLP
Exhibit 4.2 -- Form of Notice Letter Re: Obligors
Exhibit 6.8 -- Form of Officer's Certificates
Exhibit 7.4 -- Form of Joinder Agreement
Schedule 1 -- Ineligible Obligors and Concentration Limits
Schedule 2 -- Borrowers' States of Qualifications
-- Chief Executive Office
Places of Business/Other Names
-- Provider Identification Numbers
-- Pending Litigation
-- Permitted Liens
-- Fiscal Year End
-- Tax I.D. Numbers
-- Existing Transactions and Arrangements with Affiliates
-- Existing Guaranties, Investments and Borrowings
-- Other Associations
-- Environmental Matters
-- Capital Stock
-- Commercial Tort Claims
-- Letter of Credit Rights
-- Intellectual Property
Schedule 3 -- List of Junior Subordinated Notes
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LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement ("Agreement") is dated this 9th day of
January, 2003, by and among The Providence Service Corporation, a Delaware
corporation ("Providence"), each of the Persons listed on Exhibit A attached
hereto (together with Providence, each individually a "Borrower", and
collectively, the "Borrowers"), and Healthcare Business Credit Corporation, a
Delaware corporation, as lender ("Lender").
BACKGROUND
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A. The Borrowers have requested that Lender make available to them credit
facilities in the maximum amount of $21,000,000 which will be secured by a first
priority perfected security interest in the Accounts and certain other Property
of the Borrowers. Lender is willing to make the Credit Facilities available to
Borrowers pursuant to the terms and provisions hereinafter set forth.
B. The parties desire to set forth the terms and conditions of their
relationship in writing.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
SECTION 1. DEFINITIONS AND INTERPRETATION
1.1 Terms Defined. As used in this Agreement, the following terms have the
following respective meanings:
"Account" means: (a) all payments and all rights to receive payments
owing to a Borrower from an Obligor, together with all unbilled work-in-process
for services rendered or goods delivered, arising in connection with the
Borrowers' Business (whether such services are supplied by Borrowers or a third
party), including without limitation, all health-care insurance receivables and
other rights to reimbursement and/or payment under any agreements with an
Obligor; (b) all accounts, general intangibles, rights, remedies, guarantees,
supporting obligations, letter of credit rights and security interests in
respect of the foregoing, all rights of enforcement and collection, all books
and records evidencing or related to the foregoing, and all rights under this
Agreement in respect of the foregoing; (c) all information and data compiled or
derived by Borrowers or to which Borrowers are entitled in respect of the
foregoing (other than any such information and data subject to legal
restrictions of patient confidentiality); and (d) all products and proceeds of
any of the foregoing.
"Accounts Detail File" has the meaning set forth in Section 2.2(b)
hereof.
"Acquisition" means the purchase or acquisition of all or
substantially all of the assets or Capital Stock of any Person, or all or
substantially all of an operating division or business unit of any Person, or
the merger or consolidation of any Person with (i) a Borrower, or
(ii) a Subsidiary or Affiliate of a Borrower which becomes a Borrower hereunder
pursuant to a Joinder Agreement in form and substance satisfactory to the
Lender.
"Advance(s)" means any monies advanced or credit extended (including
without limitation the Loans) to or for the benefit of Borrowers by Lender,
under the Revolving Credit.
"Advance Rate" means with respect to all Eligible Accounts, 85%.
"Advance Request" has the meaning set forth in Section 2.2(c) hereof.
"Affiliate" means with respect to any Person (the "Specified Person"),
(a) any Person which directly or indirectly controls, or is controlled by, or is
under common control with, the Specified Person, and (b) any director or officer
(or, in the case of a Person which is not a corporation, any individual having
analogous powers) of the Specified Person or of a Person who is an Affiliate of
the Specified Person within the meaning of the preceding clause (a). For
purposes of the preceding sentence, "control" of a Person shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, or direct or indirect
ownership (beneficially or of record) of, or direct or indirect power to vote,
ten percent (10.0%) or more of the outstanding shares of any class of capital
stock of such Person (or in the case of a Person that is not a corporation, ten
percent (10.0%) or more of any class of equity interest).
"Agreement" has the meaning set forth in the preamble to this
Agreement.
"AmSouth Depository Agreement" means that certain Depository
Agreement, dated as of the date hereof, among AmSouth Bank, the Borrowers, and
the Lender.
"Applicable Margin" means (i) with respect to amounts outstanding
under the Revolving Credit, two percent (2.0%), and (ii) with respect to amounts
outstanding under Term Loan A and Term Loan B, two and one half percent (2.50%).
"Authorized Officer" means the chairman, chief executive officer,
president, chief financial officer, secretary, treasurer, and any additional
officer, employee, member or partner of Borrower Agent authorized by specific
resolution of the Borrower Agent to request Loans, as set forth in the
incumbency certificate of the Borrower Agent referred to in Section 4.1(d) of
this Agreement.
"Bank of Tucson Provider Account Agreement" means that certain
Provider Account Agreement, dated as of the date hereof, among Bank of Tucson,
the Borrowers, and the Lender.
"Billing Date" means with respect to an Account, the date on which the
applicable Borrower bills the Obligor for the goods and/or the services that
gave rise to such Account.
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"Borrower Agent" has the meaning set forth in Section 2.10(b).
"Borrowers" means (i) each of the Persons named in the preamble hereto
as a Borrower, and (ii) each other Person that may be joined as a Borrower
hereunder pursuant to a Joinder Agreement.
"Borrowing Base" means, at any date, an amount equal to the product of
(i) the Estimated Net Value of all Eligible Accounts as of such date times (ii)
the Advance Rate; provided, however, that the maximum amount included in the
Borrowing Base attributable to Unbilled Accounts shall at no time exceed
$250,000.
"Borrowing Base Deficiency" means, as of any date, the amount, if any,
by which (a) the aggregate outstanding principal amount of all Advances
outstanding as of such date exceeds (b) the Maximum Revolving Credit as of such
date.
"Borrowing Base Excess" means, as of any date, the amount, if any, by
which (a) the Borrowing Base as of such date exceeds (b) the sum of the
aggregate outstanding principal amount of all Advances outstanding as of such
date.
"Borrowing Base Report" has the meaning set forth in Section 2.2(b)
hereof.
"Business" means the Borrowers' business, which consists of providing
a variety of human services, including, without limitation, behavioral health
care services, ▇▇▇▇▇▇ care, network management, case management, home-based and
community-based counseling, school-based services, and substance abuse
treatment.
"Business Day" means any day other than a Saturday, Sunday or any day
on which banking institutions in Philadelphia, Pennsylvania are permitted or
required by law, executive order or governmental decree to remain closed or a
day on which Lender is closed for business.
"Camelot Pledge Agreement" means that certain Pledge and Security
Agreement, dated as of the date hereof, made by Camelot Care Corporation, as
pledgor, in favor of the Lender, as secured party, relating to all of the
outstanding Capital Stock of such pledgor's directly owned Subsidiaries as of
the Closing Date, in form and substance reasonably satisfactory to the Lender.
"Camelot Management Agreement Assignment" means that certain
Collateral Assignment of Management Agreement, dated as of the date hereof, made
by Providence, as assignor, in favor of the Lender, as secured party, relating
to the Management Agreement dated as of January 1, 2002, between Providence and
Camelot Community Care, Inc., in form and substance reasonably satisfactory to
the Lender.
"Capitalized Lease" means, as applied to any Person, any lease of
property (whether real, personal or mixed) by such Person as lessee that, in
conformity with GAAP, is
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accounted for as a capital lease on the balance sheet of such Person. The amount
of the lessee's obligation under a Capital Lease for purposes of this Agreement
shall be the amount required to be accounted for as indebtedness on the balance
sheet of the lessee in accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person other than a corporation, and
any and all warrants or options to purchase any of the foregoing.
"CHAMPUS" means the Civilian Health and Medical Program of the
Uniformed Services, a part of TRICARE, a medical benefits program supervised by
the U.S. Department of Defense.
"Change of Control" means the time at which:
(a) Any Person (other than a Person who is or becomes a Borrower
hereunder and other than the owners of Capital Stock (or warrants, options,
convertible notes or other securities or instruments convertible into or
exchangeable for Capital Stock) of Providence on the Closing Date) or group
(within the meaning of Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934) becomes the beneficial owner (as defined in Rule
13d-3 under the Securities Exchange Act of 1934) of at least twenty-five
percent (25%) of the Voting Stock (based on voting power, in the event
different classes of stock shall have different voting powers) of any
Borrower, or such Person or group shall otherwise obtain the power to
control the election of the Board of Directors of such Borrower;
(b) There shall be consummated any consolidation or merger of any
Borrower pursuant to which such Borrower's common stock (or other Capital
Stock) would be converted into cash, securities or other property, other
than a merger or consolidation (i) of a Borrower with or into another
Borrower or a Person who becomes a Borrower hereunder, or (ii) in which the
holders of such common stock (or other Capital Stock) immediately prior to
the merger have the same proportionate ownership, directly or indirectly,
of common stock of the surviving corporation immediately after the merger
as they had of the applicable Borrower's common stock (or other Capital
Stock) immediately prior to such merger, or (iii) which shall constitute or
be a part of a Permitted Acquisition, or (iv) in connection with the
Cypress Transaction;
(c) All or substantially all of a Borrower's assets shall be sold,
leased, conveyed or otherwise disposed of as an entirety or substantially
as an entirety to any Person (other than a Person who is or becomes a
Borrower hereunder) in one or a series of transactions; or
(d) ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ shall cease for any reason to serve actively
as chairman or chief executive officer in the day-to-day management of each
of the Borrowers other than Family Preservation Services of S.C., Inc., and
(i) within thirty (30)
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days after the date of such cessation, Borrowers shall have failed to
retain an executive search firm reasonably acceptable to Lender (which
acceptance shall not be unreasonably withheld or delayed) to identify a
candidate for the position of chief executive officer (or chairman, as the
case may be) of the relevant Borrowers, or (ii) within one hundred twenty
(120) days after the date of such cessation, the relevant Borrowers shall
not have appointed a new chief executive officer reasonably acceptable to
lender (which acceptance shall not be unreasonably withheld or delayed).
"Closing" has the meaning set forth in Section 4.3 hereof.
"Closing Date" has the meaning set forth in Section 4.3 hereof.
"Collateral" means (i) with respect to all Borrowers other than
Non-Profit Borrowers, all For-Profit Collateral, and (ii) with respect to each
Non-Profit Borrower, all Non-Profit Collateral.
"Collections" means with respect to any Account, all cash collections
or collections of instruments on such Account.
"Collection Account" has the meaning set forth in Section 2.9(a)
hereof.
"Commitment(s)" means individually, the Revolving Credit Commitment,
the Term Loan A Commitment and the Term Loan B Commitment, and collectively, all
of them.
"Commitment Fee" has the meaning set forth in Section 2.5(d) hereof.
"Concentration Limits" means the various financial tests, expressed as
percentages of the then current ENV of all Eligible Accounts, described on
Schedule 1 as in effect from time to time.
"Contract" means an agreement by which an Obligor is obligated to pay
Borrowers for services rendered in connection with Borrowers' Business.
"Credit Facility(ies)" means each of the Revolving Credit, Term Loan
A, Term Loan B, and any other credit facility extended hereunder by Lender to
Borrowers.
"Cypress Management Agreement Assignment" means that certain
Collateral Assignment of Management Agreement, dated as of the date hereof, made
by Providence, as assignor, in favor of the Lender, as secured party, relating
to the Management Services Agreement dated as of the date of this Agreement,
between Providence and Intervention Services, Inc., in form and substance
reasonably satisfactory to the Lender.
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"Cypress Note" means that certain Promissory Note to be executed by
Providence to the order of ▇▇. ▇▇▇ ▇▇▇▇▇▇▇ in the maximum principal amount of
$1,000,000, to be in substantially the form delivered by Providence to Lender
contemporaneously with the Closing (with such changes thereto as shall be
reasonably acceptable to the Lender (which acceptance shall not be unreasonably
withheld or delayed)), and which shall constitute Subordinated Debt hereunder.
"Cypress Transaction" means the acquisition by Providence of all of
the issued and outstanding Capital Stock of Cypress Management Services, Inc.,
pursuant to the terms of the Stock Purchase Agreement entered into by and
between Providence and ▇▇. ▇▇▇ ▇▇▇▇▇▇▇ in substantially the form delivered by
Providence to Lender contemporaneously with the Closing (with such changes
thereto as shall be reasonably acceptable to the Lender (which acceptance shall
not be unreasonably withheld or delayed)), the performance of such agreement,
and the consummation of the transactions contemplated thereby.
"Debt Service Coverage Ratio" means, for any period, the ratio of (a)
EBIDA, to (b) the sum of (i) interest expense, plus (ii) the current portion of
long-term debt (exclusive of any amounts in respect of the Revolving Credit),
plus (iii) the current portion of lease payments under Capitalized Leases, plus
(iv) all cash payments of principal or premium on account of Subordinated Debt,
in each case, during such period, plus (v) Withdrawals paid in cash during such
period, all as determined for the Borrowers on a consolidated basis in
accordance with GAAP, provided that in determining the Debt Service Coverage
Ratio, there shall be excluded from such calculation any amounts attributable to
any Subsidiary which is not a Borrower hereunder. For any measurement period
hereunder during which any Borrower may have consummated a Permitted Acquisition
or other merger, consolidation, or acquisition permitted under Section 7.1(b)
below, the EBIDA of the Borrowers shall be determined on a pro forma basis as
though such transaction had occurred on the first day of such measurement
period, and such adjustments to EBIDA shall be made prior to measuring EBIDA for
any such period.
"Default Rate" means 300 basis points above the interest rate
otherwise applicable on the Loans.
"Defaulted Account" means an Account (a) as to which the initial ENV
has not been received in full as Collections within (i) 150 days of the Billing
Date, and (ii) 180 days of the date of service, or (b) which has not been billed
to the applicable Obligor within 30 days of the date of service and remains
unbilled at the date of determination, or (c) which was not billed to the
applicable Obligor within 60 days of the date of service, regardless of whether
it has been billed subsequently, or (d) which Lender deems uncollectible in the
reasonable exercise of its credit judgment because of the bankruptcy or
insolvency of, or other adverse event impacting, the applicable Obligor.
"Download Date" has the meaning set forth in Section 2.2(b) hereof.
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"EBIDA" means, for any fiscal period for the Borrowers and their
Subsidiaries, the sum of (i) net income, plus (ii) interest expense, plus (iii)
depreciation and amortization expense, all as determined on a consolidated basis
in accordance with GAAP.
"Eligible Account" means an Account of Borrowers:
(a) Which is a liability of an Obligor which is (i) a commercial
insurance company acceptable to Lender, organized under the laws of or
authorized to do business as a commercial insurance company in, any jurisdiction
in the United States, having its principal office in the United States, other
than those listed on Schedule 1 as ineligible, or (ii) a Blue Cross/Blue Shield
Plan, other than those listed on Schedule 1 as ineligible, or (iii) CHAMPUS, or
(iv) a HMO, PPO, POS or other health care plan acceptable to Lender, other than
those listed on Schedule 1 as ineligible, or (v) a federal, state or local
governmental unit or any intermediary for a federal, state or local governmental
unit or an institutional Obligor acceptable to Lender, other than those listed
on Schedule 1 as ineligible, or (vi) any other type of Obligor not included in
the categories of Obligors listed in the foregoing clauses (i) through (v),
which is organized under the laws of any jurisdiction in the United States,
having its principal office in the United States (unless Lender shall consent
(which consent shall not be unreasonably withheld or delayed) and Lender shall
reasonably determine that its lien on such Account is perfected and Lender would
be able to pursue collection of such Account under applicable local law), and
which is not listed on Schedule 1 as an ineligible Obligor;
(b) The Obligor of which is not an Affiliate of Borrowers;
(c) The Obligor of which has received a letter substantially in the
form of Exhibit 4.2;
(d) As to which the representations and warranties of Section 5.20
hereof are true;
(e) Which is not payable by an Obligor who is the individual patient
or person who received the goods or services rendered;
(f) Which is not outstanding more than (i) 150 days past the Billing
Date in the case of Accounts that have been billed, and (ii) 30 days past the
date the corresponding services and/or goods were provided in the case of
Accounts that have not been billed; provided that in no event may the Account be
outstanding more than 180 days past the date the corresponding services and/or
goods were provided;
(g) The Obligor on which, at the time of determination, does not have
more than fifty (50%) percent of the Estimated Net Value of its Accounts owing
to Borrowers constituting Defaulted Accounts; and
(h) Which complies with such other criteria and requirements as may
be specified from time to time by Lender in the reasonable exercise of its
credit judgment.
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In calculating the amount of any Eligible Account, there shall be excluded
the portion of such Account constituting late charges or finance charges, if
any.
"Equipment" means all of Borrowers' now owned or hereafter acquired
equipment, wherever located, including machinery, data processing and computer
equipment, including vehicles, tools, furniture, fixtures, all attachments,
accessions and property now or hereafter affixed thereto or used in connection
therewith, and all substitutions and replacements therefor, wherever located,
and further including, without limitation, all computer hardware and software
(including embedded software) and all rights with respect thereto, including any
and all licenses, options, warranties, service contracts, program services, test
rights, maintenance rights, support rights, improvement rights, renewal rights
and indemnifications.
"Estimated Net Value" or "ENV" means on any date of calculation with
respect to any Account an amount equal to the anticipated cash collections as
calculated by Lender using the Value Track System(TM) (which system periodically
adjusts such amount to reflect Lender's reasonable evaluation of the performance
of similar Accounts and to reflect payments received with respect thereto),
except that if Lender reasonably determines that all Obligor payments with
respect to an Account have been made or if an Account has become a Defaulted
Account, the ENV of such Account shall be zero.
"Event of Default" has the meaning set forth in Section 8.1 hereof.
"Expenses" has the meaning set forth in Section 9.5 hereof.
"First Union Provider Account Agreement" means that certain Provider
Account Agreement, dated as of the date hereof, among First Union National Bank,
the Borrowers, and the Lender.
"For-Profit Borrower" means any Borrower which is not a Non-Profit
Borrower.
"For-Profit Collateral" has the meaning set forth in Section 3.1(a).
"FPS Management Agreement Assignment" means that certain Collateral
Assignment of Management Agreement, dated as of the date hereof, made by Family
Preservation Services, Inc., as assignor, in favor of the Lender, as secured
party, relating to the Management Services Agreement dated as of July 1, 2001,
between Family Preservation Services, Inc. and Family Preservation Services of
S.C., Inc., in form and substance reasonably satisfactory to the Lender.
"Funding Date" has the meaning set forth in Section 2.2(a) hereof.
"GAAP" means generally accepted accounting principles, applied
consistently with the financial statements required to be delivered hereunder,
except to the extent provided otherwise in Section 1.3 hereof.
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"Governmental Authority" means any federal, state, local or other
governmental department, commission, board, bureau, agency, central bank, court,
tribunal or other instrumentality or authority or subdivision thereof, domestic
or foreign, exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Hazardous Substances" means any substances defined or designated as
hazardous or toxic waste, hazardous or toxic material, hazardous or toxic
substance or similar term, by any environmental statute, rule or regulation of
any governmental entity presently in effect and applicable to such real
property.
"HIPAA" has the meaning set forth in Section 9.21.
"Indebtedness" of a Person at a particular date shall mean, without
duplication, all indebtedness, debt and other similar monetary obligations of
such Person whether direct or guaranteed (including principal, interest, fees
and charges), in each case, for borrowed money or for the deferred purchase
price of property or services (other than trade payables and accrued expenses
arising in the ordinary course of business), and all premiums, if any, due at
the required prepayment dates of such indebtedness, the maximum amount available
to be drawn under all letters of credit issued for the account of such Person,
all obligations of such Person under Capitalized Leases, all obligations of such
Person to pay a specified purchase price for goods or services whether or not
delivered or accepted (i.e., take-or-pay and similar obligations), all
obligations of such Person under interest rate protection agreements and other
hedging agreements, all obligations of such Person guaranteeing or intended to
guarantee any Indebtedness, leases, dividends, distributions or other
obligations of any other Person in any manner, and all indebtedness secured by a
lien on assets owned by such Person, whether or not such indebtedness actually
shall have been created, assumed or incurred by such Person. Any Indebtedness of
such Person resulting from the acquisition by such Person of any assets subject
to any lien shall be deemed, for the purposes hereof, to be the equivalent of
the creation, assumption and incurring of the Indebtedness secured thereby,
whether or not actually so created, assumed or incurred.
"Initial Revolving Credit Term" has the meaning set forth in Section
2.1(c).
"Inventory" means all of Borrowers' now owned or hereafter existing or
acquired goods, wherever located, that (a) are leased by a Borrower as lessor,
(b) are held by a Borrower for sale or lease or to be furnished under a contract
of service, or (c) consist of raw materials, work in process, finished goods or
materials used or consumed in its business.
"Joinder Agreement" shall mean a Joinder Agreement in substantially
the form attached hereto as Exhibit 7.4, pursuant to which a Person shall become
a Borrower hereunder in connection with an Acquisition or otherwise.
"Lender" has the meaning set forth in the preamble to this Agreement.
9
"Leverage Ratio" means, for any period, the ratio of (a) Senior Debt,
to (b) EBIDA, as determined for Borrowers on a consolidated basis in accordance
with GAAP, provided that in determining the Leverage Ratio, there shall be
excluded from such calculation any amounts attributable to any Subsidiary which
is not a Borrower hereunder. For any measurement period hereunder during which
any Borrower may have consummated a Permitted Acquisition or other merger,
consolidation, or acquisition permitted under Section 7.1(b) below, the EBIDA of
the Borrowers shall be determined on a pro forma basis as though such
transaction had occurred on the first day of such measurement period, and such
adjustments to EBIDA shall be made prior to measuring EBIDA for any such period.
"Lien" means any lien, encumbrance, mortgage, deed of trust, pledge,
security interest, hypothecation, assignment, deposit arrangement or other
preferential arrangement, or charge (including, any conditional sale or other
title retention agreement, or finance lease) of any kind.
"Loan(s)" means each advance of funds by the Lender to the Borrowers
hereunder, specifically including, without limitation, the Advances, Term Loan A
and Term Loan B (including all Term Advances made thereunder).
"Loan Documents" means this Agreement, the Revolving Credit Note, the
Term Notes, the Provider Account Agreements and all agreements relating to the
Lockboxes, the Pledge Agreements, the Subordination Agreements, the Management
Agreement Assignments, all financing statements, and any other agreements,
instruments, documents and certificates delivered in connection with this
Agreement.
"Lockbox" means each lockbox bank account in the name of one or more
of the Borrowers maintained at the Lockbox Bank, or such other bank as is
acceptable to Lender, to which Collections on all Accounts are sent.
"Lockbox Bank" means AmSouth Bank, Bank of Tucson, First Union
National Bank, SunTrust Banks, Inc., or such other bank that is acceptable to
Lender.
"Management Agreement Assignment(s)" means collectively, the Camelot
Management Agreement Assignment, the Cypress Management Agreement Assignment,
and the FPS Management Agreement Assignment.
"Material Adverse Effect" means a material adverse effect on (i) the
business, assets, condition (financial or otherwise), or results of operations
of the Borrowers taken as a whole; (ii) the ability of the Borrowers to perform
their obligations under this Agreement and the other Loan Documents (including,
without limitation, repayment of the Obligations as they come due); (iii) the
validity or enforceability of this Agreement, the other Loan Documents, or the
rights or remedies of Lender hereunder and thereunder (including, without
limitation, the ability of Lender to enforce the Obligations or realize upon any
material portion of the Collateral); (iv) the value of the Collateral; or (v)
the priority of Lender's Liens with respect to the Collateral.
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"Maximum Revolving Credit" means as of any date, the lesser of (i) the
Revolving Credit Commitment, or (ii) the Borrowing Base.
"Non-Profit Borrower(s)" means each of (i) Camelot Community Care,
Inc., (ii) Family Preservation Services of S.C., Inc., (iii) Intervention
Services, Inc., and (iv) any other Person from time to time joined hereunder as
a Borrower which is organized as a not-for-profit entity exempt from federal
taxation under Section 501(a) of the Internal Revenue Code and which is
designated by Lender in writing as a Non-Profit Borrower hereunder.
"Non-Profit Collateral" has the meaning set forth in Section 3.1(b).
"Obligations" means all now existing or hereafter arising debts,
obligations, covenants, and duties of payment or performance of every kind,
matured or unmatured, direct or contingent, owing, arising, due, or payable to
Lender, by or from Borrowers, whether arising out of this Agreement or any other
Loan Document or otherwise, including, without limitation, all obligations to
repay principal of and interest on all the Loans, and to pay interest, fees,
costs, charges, expenses, professional fees, and all sums chargeable to
Borrowers under the Loan Documents, whether or not evidenced by any note or
other instrument.
"Obligor" means the party primarily obligated to pay an Account.
"Person" means any individual, corporation, partnership, limited
liability partnership, limited liability company, association, trust,
unincorporated organization, joint venture, court or government or political
subdivision or agency thereof, or other entity.
"Permitted Acquisition" means (i) an Acquisition financed with the
proceeds of a Term Advance made by Lender pursuant to Section 2.4 hereof, or
(ii) any of the following:
(a) the acquisition by a Borrower of all of the outstanding Capital
Stock, or all or a substantial portion of the assets, or all or substantially
all of an operating division or business unit, of any other entity;
(b) a merger or consolidation of a Borrower with any other entity in
which such Borrower is the surviving corporation or such surviving corporation
becomes a Borrower and executes a Joinder Agreement and such other documents as
reasonably requested by Lender; or
(c) the lending to or other investment in any corporation,
partnership, joint venture, limited liability company or other business
organization, or the purchase of any debt or equity securities or instruments
issued by any such entity;
so long as, in the case of any such transaction referred to in this clause
(ii), (w) such other entity is engaged in a line of business substantially
similar to that permitted pursuant to Section 6.3 hereof, (x) promptly after the
consummation of such transaction, Lender has a perfected, first priority
security interest in the assets and equity interests acquired by the Borrowers
in the
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transaction (subject to Permitted Liens), (y) no Unmatured Event of
Default or Event of Default exists and is continuing immediately prior to or
immediately after the consummation of such transaction and, after giving effect
to such transaction, the Borrowers are in pro forma compliance with the
provisions of Section 6.6 hereof, and (z) the fair market value of the
consideration exchanged in such transaction does not exceed (A) $1,000,000 with
respect to such transaction, or (B) $2,500,000 in the aggregate with respect to
such transaction and any other Permitted Acquisitions consummated during the
preceding twelve (12) months.
"Permitted Liens" has the meaning set forth in Section 5.6.
"Petra Loan Agreement" means that certain Loan and Security Agreement
dated as of March 1, 2002, by and among certain of the Borrowers, Harbinger
Mezzanine Partners, L.P. and Petra Mezzanine Fund, L.P., individually and as
agent for the lenders thereunder, together with all documents, instruments and
agreements executed in connection therewith, in each case, as amended, restated,
modified, supplemented or replaced from time to time.
"Pledge Agreement(s)" means collectively, the Providence Pledge
Agreement and the Camelot Pledge Agreement.
"Prime Rate" means the highest per annum rate of interest referenced
as the "Prime Rate" as reported in the Money Rates Section of The Wall Street
Journal, on the date of determination. If The Wall Street Journal is not
published on such Business Day or does not report such rate, such rate shall be
as reported by such other publication or source as Lender may select.
"Property" means an interest of Borrowers in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Providence Pledge Agreement" means that certain Pledge and Security
Agreement, dated as of the date hereof, made by Providence, as pledgor, in favor
of the Lender, as secured party, relating to all of the outstanding Capital
Stock of Providence's directly owned Subsidiaries as of the Closing Date, in
form and substance reasonably satisfactory to the Lender.
"Provider Account Agreements" means, collectively, the AmSouth
Depository Agreement, the Bank of Tucson Provider Account Agreement, the First
Union Provider Account Agreement, the SunTrust Provider Account Agreement, and
each other provider account agreement among the Borrowers, the Lender, and a
Lockbox Bank, relating to a Lockbox that may be entered into from time to time
in connection with this Agreement.
"Providence" has the meaning set forth in the preamble to this
Agreement.
"Repayment Date" has the meaning set forth in Section 2.4(d) hereof
"Revolving Credit" has the meaning set forth in Section 2.1(a).
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"Revolving Credit Commitment" means an amount equal to $10,000,000 or
such lesser amount as determined from time to time after giving effect to any
voluntary reductions by the Borrowers under Section 2.5(c).
"Revolving Credit Maturity Date" has the meaning set forth in Section
2.1(c).
"Revolving Credit Note" has the meaning set forth in Section 2.1(b).
"Securities" has the meaning set forth in Section 6.14 hereof.
"Senior Debt" means all Indebtedness of the Borrowers and their
Subsidiaries on a consolidated basis, excluding Subordinated Debt.
"Shareholder" means, as applicable, a shareholder, member or partner
of the Borrowers.
"Subordinated Debt" means the Indebtedness due a Subordinating
Creditor (and the note(s) evidencing such) which has been subordinated, by a
Subordination Agreement, to the prior payment and satisfaction of the
Obligations.
"Subordinating Creditor" means (i) Harbinger Mezzanine Partners, L.P.
and Petra Mezzanine Fund, L.P., (ii) each of the holders of the instruments
listed on Schedule 3 to this Agreement, and (iii) any other Person hereafter
executing a Subordination Agreement and, in each case, their respective
successors and assigns.
"Subordination Agreement" means each agreement executed by or
otherwise binding upon a Subordinating Creditor, pursuant to which Subordinated
Debt is subordinated to the prior payment and satisfaction of the Obligations,
in form and substance reasonably satisfactory to Lender; it being understood
that the subordination provisions contained in the instruments listed on
Schedule 3 attached hereto are in form and substance satisfactory to Lender.
"SunTrust Provider Account Agreement" means that certain Provider
Account Agreement, dated as of the date hereof, among SunTrust Banks, Inc., the
Borrowers and the Lender.
"Subsidiary" shall mean any Person (other than an individual or a
court or governmental or political subdivision or agency thereof) of which the
designated parent shall at any time own, directly or indirectly through a
Subsidiary or Subsidiaries, at least a majority (by number of votes) of the
outstanding Voting Stock.
"Term Advance(s)" has the meaning set forth in Section 2.4(a).
"Term Advance Request" has the meaning set forth in Section 2.4(b).
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"Term Loan A" means the term loan made by Lender to the Borrowers as
provided in Section 2.3 hereof.
"Term Loan A Commitment" means the commitment of the Lender to make
Term Loan A to the Borrowers, in the maximum principal amount equal to
$1,000,000.
"Term Loan B" means the term loans to be made by the Lender to the
Borrowers in the form of one or more Term Advances as provided in Section 2.4
hereof.
"Term Loan B Commitment" means the commitment of the Lender to make
Term Loan B to the Borrowers, in the maximum principal amount equal to
$10,000,000 or such lesser amount as determined from time to time after giving
effect to any voluntary reductions by the Borrowers under Section 2.5(c).
"Term Loan Maturity Date" means January 1, 2006.
"Term Loan(s)" means collectively, Term Loan A and Term Loan B.
"Term Note A" has the meaning set forth in Section 2.3(a) hereof.
"Term Note B" has the meaning set forth in Section 2.4(c) hereof.
"Term Notes" means, collectively, Term Note A and Term Note B.
"Termination Fee" has the meaning set forth in Section 2.5(c).
"Termination Fee Percentage" means, with respect to any Termination
Payment: (A) three percent (3.0%), if the first prepayment of the applicable
Term Loan during the six (6) month period ending on the date of such Termination
Payment occurred on or prior to the first anniversary of the date of this
Agreement; (B) two and one-half percent (2.5%) if the first prepayment of the
applicable Term Loan during the six (6) month period ending on the date of such
Termination Payment occurred after the first anniversary of the date of this
Agreement, but on or prior to the second anniversary of the date of this
Agreement; (C) two percent (2.0%) if the first prepayment of the applicable Term
Loan during the six (6) month period ending on the date of such Termination
Payment occurred after the second anniversary of the date of this Agreement but
on or prior to the third anniversary of the date of this Agreement; and (D) one
percent (1%) if the first prepayment of the applicable Term Loan during the six
(6) month period ending on the date of such Termination Payment occurred after
the third anniversary of the date of this Agreement but prior to the Term Loan
Maturity Date.
"Termination Payment" has the meaning set forth in Section 2.5(c).
"TRICARE" means the medical program for active duty members, qualified
family members, CHAMPUS eligible retirees and their family members and
survivors, of all uniformed services.
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"Unbilled Accounts" mean Accounts relating to services rendered in the
ordinary course of Borrowers' business for which an invoice has not yet been
sent.
"Uniform Commercial Code" or "UCC" means the Uniform Commercial Code
as in effect from time to time in the State of New Jersey.
"Unmatured Event of Default" means an event which with the passage of
time, giving of notice or both, would become an Event of Default.
"Unused Line Fee" has the meaning set forth in Section 2.3(e).
"Value Track System(TM)" means the proprietary business system used by
Lender to value and record the status of Accounts.
"Voting Stock" shall mean Capital Stock having ordinary voting power
to elect a majority of the board of directors (or Persons holding similar
functions) of the Person involved, whether or not the right so to vote exists by
reason of the happening of a contingency.
"Withdrawal" means payments made in respect of: (a) dividends or other
distributions on Capital Stock of the Borrowers; (b) the redemption, repurchase
or acquisition of Capital Stock or of warrants, rights or other options to
purchase Capital Stock; and (c) loans and advances made to any officers,
Affiliates and Shareholders.
1.2 Matters of Construction. The terms "herein," "hereof" and "hereunder"
and other words of similar import refer to this Agreement as a whole and not to
any particular section, paragraph or subdivision. Any pronoun used shall be
deemed to cover all genders. Wherever appropriate in the context, terms used
herein in the singular also include the plural and vice versa. All references to
statutes and related regulations shall include any amendments of same and any
successor statutes and regulations. Unless otherwise provided, all references to
any instruments or agreements to which Lender is a party, including, without
limitation, references to any of the Loan Documents, shall include any and all
modifications or amendments thereto and any and all extensions or renewals
thereof.
1.3 Accounting Principles. Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, this shall be done in accordance with GAAP, to the
extent applicable, except as otherwise expressly provided in this Agreement.
Financial statements and other information required to be delivered by Borrowers
to Lender shall be prepared in accordance with GAAP as in effect at the time of
such preparation. Calculations in connection with the definitions, covenants and
other provisions of this Agreement shall utilize GAAP as in effect on the date
of determination, applied in a manner consistent with that used in preparing
financial statements referred to in subsection 4.1(m); provided, however, that,
if at any time any change in GAAP would affect the computation of any financial
ratio or requirement set forth in any Loan Document, and Borrowers or Lender
shall so request, Lender and Borrowers shall negotiate in good faith to amend
such ratio or requirement
15
to preserve the original intent thereof in light of such change in GAAP, and
until so amended, such ratio or requirement shall continue to be computed in
accordance with GAAP as in effect prior to such change therein.
1.4 Uniform Commercial Code. All financing terms or terms related to the
Collateral, not otherwise specifically defined, shall have the meanings, if any,
accorded to them under the UCC.
SECTION 2. THE CREDIT FACILITIES
2.1 Revolving Credit Facility.
(a) Subject to the terms and conditions of this Agreement, Lender
hereby establishes for the benefit of Borrowers a line of credit facility (the
"Revolving Credit") pursuant to which Lender shall, from time to time, make
Advances to the Borrowers in the form of revolving credit loans. The aggregate
outstanding amount of all Advances shall not at any time exceed the Maximum
Revolving Credit. In no event shall the initial principal amount of any Advance
be less than $25,000. Subject to such limitation, the aggregate outstanding
balance of all Advances may fluctuate from time to time, to be reduced by
repayments and prepayments made by Borrowers, to be increased by future Advances
which may be made by Lender. If at any time there exists a Borrowing Base
Deficiency, Borrowers shall immediately repay such Borrowing Base Deficiency in
full. Lender has the right at any time, and from time to time, in its reasonable
discretion (but without any obligation) to set aside reasonable reserves against
the Borrowing Base in such amounts as it may deem appropriate. The Obligations
of Borrowers under the Revolving Credit and this Agreement shall at all times be
absolute and unconditional.
(b) At Closing, Borrowers shall execute and deliver a promissory note
to Lender in the stated principal amount of Ten Million Dollars ($10,000,000)
and payable in the principal amount of the Advances evidenced thereby (as may be
amended, modified or replaced from time to time, the "Revolving Credit Note").
The Revolving Credit Note shall evidence Borrowers' absolute and unconditional
obligation to repay Lender for all Advances made by Lender under the Revolving
Credit, with interest as herein and therein provided. Each and every Advance
under the Revolving Credit shall be deemed evidenced by the Revolving Credit
Note, which is deemed incorporated herein by reference and made a part hereof.
The Revolving Credit Note shall be substantially in the form set forth in
Exhibit 2.1(b) attached hereto and made a part hereof.
(c) The term of the Revolving Credit ("Initial Revolving Credit
Term") shall expire on December 31, 2006. All Advances shall be repaid on or
before the earlier of the last day of the Initial Revolving Credit Term or upon
termination of the Revolving Credit or termination of this Agreement ("Revolving
Credit Maturity Date"). After the Revolving Credit Maturity Date no further
Advances shall be available from Lender.
2.2 Funding Procedures.
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(a) Subject to the terms and conditions of this Agreement and so long
as no Event of Default or Unmatured Event of Default has occurred hereunder,
Lender will make Advances to Borrowers (i) on Monday of each week (or such other
day as mutually agreed by Borrowers and Lender, but no earlier than three (3)
Business Days after the Download Date) (such day is referred to herein as the
"Funding Date", whether or not Borrowers have requested an Advance to be made on
such date), and (ii) any other Business Day prior to the next week's Funding
Date, as Borrowers may request.
(b) Not later than 2:00 P.M. (Eastern Time) on Wednesday of each week
(or such other day as mutually agreed by Lender and Borrowers) (such day is
referred to herein as the "Download Date"), Borrowers will deliver to Lender the
computer file data associated with the Accounts, which shall include, without
limitation, changes in the Obligor reimbursement rates as well as other
information reasonably required by Lender to enable Lender to process and value
the outstanding Accounts of Borrowers on Lender's Value Track System(TM) (as
well as, following and during the continuation of an Event of Default, to ▇▇▇▇
and collect such Accounts) (the "Accounts Detail File"). Upon completion of the
processing of the data with respect to such Accounts, Lender will prepare and
deliver to Borrowers by no later than 5:00 p.m. (Eastern Time) on the first
Business Day following the Download Date (or if such Accounts Detail File is not
delivered until after 2:00 P.M. (Eastern Time) on the Download Date, the second
Business Day following the Download Date), a report regarding the Borrowing Base
then in effect, which shall be substantially in the form of Exhibit 2.2(b) (a
"Borrowing Base Report").
(c) On the Funding Date of each week, if Borrowers are in agreement
with the facts stated in the Borrowing Base Report, Borrowers will sign and
return the Borrowing Base Report to Lender. With respect to each Advance to be
made on a date other than a Funding Date, Borrowers shall notify Lender by
telephone, electronic mail, facsimile or in writing (such notice to be delivered
no later than 11:00 a.m. (Eastern Time) if Borrowers desire an Advance to be
made on the date of such request), specifying the amount and date (which shall
be a Business Day) of the proposed Advance; such notice to be confirmed in
writing by Borrowers providing to Lender, concurrently with the signed Borrowing
Base Report relating to such Advance, a written request for such Advance
substantially in the form of Exhibit 2.2(c) (an "Advance Request"). Upon receipt
of any such request relating to a proposed Advance, Lender shall prepare and
deliver to Borrower by no later than 2:00 p.m. (Eastern Time) on the date of
Lender's receipt of such request (or if Borrower notified Lender after 11:00
a.m. (Eastern Time) on such date, by 2:00 p.m. (Eastern Time) on the first
Business Day following the Lender's receipt of such notice), a revised Borrowing
Base Report reconciling the Accounts included in the Borrowing Base for
Collections received since the date of the last Borrowing Base Report signed by
Borrowers. Borrowers shall verify and sign such Borrowing Base Report (provided
the Borrowers are in agreement with the facts stated therein) and return the
same to Lender.
(d) Subject to the terms and conditions of this Agreement, if the
signed Borrowing Base Report and Advance Request are delivered to Lender before
3:00 P.M. (Eastern Time) on the Funding Date or the date of any requested
Advance, Lender shall make an Advance on the such date (or the next Business Day
if the signed Borrowing Base Report and Advance
17
Request are delivered after 3:00 P.M. (Eastern Time)), in an amount equal to the
lesser of (i) the amount of the Advance requested by Borrowers in the applicable
Advance Request, or (ii) the Borrowing Base Excess as of such date.
(e) Each Borrowing Base Report and Advance Request may be delivered
via telecopy and Borrowers acknowledge that Lender may rely on Borrowers'
signature by facsimile, which shall be legally binding upon Borrowers. In no
event will Lender make any Advance on any Funding Date or other date of
requested Advances unless Lender shall have received a signed Borrowing Base
Report and Advance Request.
(f) Any Advances made by Lender hereunder shall bear interest at the
rate applicable to Advances hereunder and under the Revolving Credit Note, shall
be treated for all purposes as Loans hereunder, and shall be secured by all of
the Collateral.
(g) The Lender's determination of the Estimated Net Value of the
Eligible Accounts and other amounts to be determined or calculated under this
Agreement shall, in the absence of manifest error, be binding and conclusive.
2.3 Term Loan A.
(a) The Lender agrees, upon the terms and subject to the conditions
hereof, to make the Term Loan A to the Borrowers at the Closing in the original
principal amount of $1,000,000. Any portion of Term Loan A not borrowed at the
Closing may not be borrowed hereunder. At Closing, Borrowers shall execute and
deliver a promissory note to Lender in the principal amount of Term Loan A (as
may be amended, modified or replaced from time to time, "Term Note A"). Term
Note A shall evidence Borrowers' absolute and unconditional obligation to repay
Lender the full amount of Term Loan A, with interest as herein and therein
provided. Term Note A shall be substantially in the form set forth in Exhibit
2.3(a) attached hereto and made a part hereof. Term Loan A shall be secured by
all of the Collateral.
(b) The principal balance of Term Loan A shall be repaid to the
Lender by the Borrowers in thirty-five (35) equal monthly principal installments
of $27,777.00 each, due and payable on the first Business Day of each month,
commencing on February 3, 2003, and a final installment in the amount of the
entire unpaid balance of Term Loan A (including principal, interest, unpaid fees
and Expenses and any other amounts then due and payable), due on the Term Loan
Maturity Date.
2.4 Term Loan B.
(a) The Lender agrees, upon the terms and subject to the conditions
hereof, to make Term Loan B to the Borrowers in a maximum principal amount not
to exceed the Term Loan B Commitment. Term Loan B shall be available to the
Borrowers in multiple advances from the Closing Date to the Term Loan Maturity
Date (the "Term Advances"). Term Advances shall be used by the Borrowers solely
to fund Acquisitions permitted hereunder. The making of any Term Advance with
respect to any Acquisition and the amount thereof, shall be
18
within Lender's sole discretion (except that the amount of a Term Advance may
not exceed the amount requested by the relevant Borrower). Lender is under no
obligation to make any Term Advance. Term Loan B (including all Term Advances)
shall be secured by all of the Collateral. Notwithstanding anything to the
contrary contained in the preceding three sentences, Lender agrees that it has
approved the Cypress Transaction, and Lender shall make a Term Advance on the
Closing Date in the amount of $1,700,000 to fund the Cypress Transaction.
(b) Each request by a Borrower for a Term Advance (a "Term Advance
Request") shall be submitted to Lender in writing, signed by an Authorized
Officer of Borrower Agent, no less than thirty (30) days in advance of the
proposed funding date for such Term Advance. Each Term Advance Request shall
specify (i) the amount of the requested Term Advance, (ii) the proposed funding
date (which shall be a Business Day), (iii) the proposed Acquisition, and (iv)
the anticipated owner of the business to be acquired (which may be a Borrower or
an Affiliate of a Borrower which, concurrently with the funding of such Term
Advance and the closing of such Acquisition shall become a Borrower hereunder
pursuant to a Joinder Agreement). In order to allow Lender to conduct its due
diligence with respect to any proposed Acquisition, Borrowers shall deliver to
Lender with the Term Advance Request (or as soon thereafter as reasonably
practicable) such financial statements, reports and other information relative
to the business proposed to be acquired, its assets, principals and such other
matters relative to such business and the proposed Acquisition as Lender shall
request. In the event of any material change in the proposed amount, funding
date, transaction structure or any other matter relevant to a proposed
Acquisition or Term Advance, Borrowers shall notify Lender as soon as
practicable and provide to Lender any information required by Lender in order to
evaluate the change in circumstances. Lender shall hold such financial
statements, reports and other information confidential in accordance with the
terms of any confidentiality agreement executed by Borrowers and disclosed to
Lender and, upon the request of Borrowers, Lender shall execute counterparts to
such confidentiality agreement and authorize the delivery of such counterparts
to such Persons as Borrowers may reasonably request.
(c) At Closing, Borrowers shall execute and deliver a promissory note
to Lender in the stated amount of the Term Loan B Commitment and payable in the
amount of the Term Advances evidenced thereby (as may be amended, modified or
replaced from time to time, "Term Note B"). Term Note B shall evidence
Borrowers' absolute and unconditional obligation to repay Lender the full amount
of Term Loan B (including all Term Advances made by Lender thereunder), with
interest as herein and therein provided. Term Note B shall be substantially in
the form set forth in Exhibit 2.4(c) attached hereto and made a part hereof.
Term Loan B and all Term Advances thereunder shall be secured by all of the
Collateral.
(d) The principal balance of Term Loan B shall be paid in thirty-six
(36) consecutive monthly installments of principal payable on the first Business
Day of each month (each such date, a "Repayment Date"), commencing with the
first Repayment Date following the initial Term Advance hereunder. The monthly
principal payment amount shall be set forth on a schedule to be prepared or
updated by Lender and delivered to Borrowers on each date when a Term Advance is
funded. Lender shall prepare or update such schedule (i) by reflecting
19
the amount of the monthly principal payment due on each Repayment Date occurring
prior to the Term Loan Maturity Date as the quotient obtained by dividing the
sum of the original principal amounts of all Term Advances made by the Lender by
sixty (60), and by reflecting the amount of the principal payment due on the
Term Loan Maturity Date as the outstanding principal balance of Term Loan B as
of the Term Loan Maturity Date. The entire outstanding balance of Term Loan B
(including principal, unpaid interest, unpaid fees and Expenses) shall be due
and payable on the Term Loan Maturity Date. The amount of Term Loan B (including
each Term Advance) and all payments of principal, interest, and fees and
expenses due to be received by Lender in respect of Term Loan B shall be
recorded in the books and records of Lender, which books and records shall, in
the absence of manifest error, be conclusive as to the outstanding balance
and/or other information related to Term Loan B. Upon request (which request may
not be made more frequently than once per calendar quarter, Lender will provide
to Borrowers copies of its books and records relevant to the balance of Term
Loan B.
2.5 Interest and Fees.
(a) Interest. Each Loan shall bear interest on the outstanding
principal amount thereof from the date made until such Loan is paid in full.
Interest shall accrue on amounts outstanding under the Credit Facilities at a
per annum rate equal to the Prime Rate plus the Applicable Margin, with any
change in the Prime Rate effective immediately.
(b) Default Rate. If any Event of Default shall occur and be
continuing, the rate of interest applicable to each Loan then outstanding shall
be the Default Rate. The Default Rate shall apply from the date of the Event of
Default until the date such Event of Default is waived, and interest accruing at
the Default Rate shall be payable upon demand.
(c) Termination Fee.
(i) Borrowers may prepay the outstanding balance of Term
Loan A and/or Term Loan B in whole or in part at any time upon not less
than ten (10) days' prior written notice to Lender, provided that (x) any
such prepayment shall be accompanied by accrued interest on the amount so
prepaid to the date of such prepayment, and (y) in the case of any
prepayment of Term Loan A and/or Term Loan B in whole (a "Termination
Payment"), Borrowers shall unconditionally be obligated to pay at the time
of such Termination Payment, a fee (the "Termination Fee") in an amount
equal to the applicable Termination Fee Percentage of the aggregate of the
amount of such Termination Payment plus all other prepayments of principal
on account of the applicable Term Loan during the six (6) month period
ending on the date of such Termination Payment. Borrowers acknowledge that
the Termination Fee is an estimate of Lender's damages in the event of
early payment of the Term Loans and is not a penalty. Any amounts prepaid
on account of the Term Loans may not be reborrowed hereunder.
(ii) The Borrowers shall have the right to reduce or terminate,
in whole or in part, either or both of the Revolving Credit Commitment and
the Term Loan B
20
Commitment voluntarily at any time and from time to time, upon not less
than ten (10) days prior written notice to Lender, provided that, in the
case of a reduction in the Revolving Credit Commitment, Borrowers shall
unconditionally be obligated to pay on the effective date of any such
reduction or termination, a Termination Fee in an amount equal to the
following percentage of the amount of the reduction in the Revolving Credit
Commitment: (A) three percent (3.0%), if such reduction or termination
occurs on or prior to the first anniversary of the date of this Agreement;
(B) two and one-half percent (2.5%) if such reduction or termination occurs
after the first anniversary of the date of this Agreement, but on or prior
to the second anniversary of the date of this Agreement; (C) two percent
(2.0%) if such reduction or termination occurs after the second anniversary
of the date of this Agreement but on or prior to the third anniversary of
the date of this Agreement; and (D) one percent (1%) if such reduction or
termination occurs after the third anniversary of the date of this
Agreement but prior to the Revolving Credit Maturity Date. Any such
voluntary reduction or termination shall be effective on the date set forth
in the notice provided by Borrowers to Lender and the applicable
Termination Fee (if any) is paid by Borrowers to the Lender. If the
Borrowers reduce the Revolving Credit Commitment to an amount that is less
than the outstanding principal amount of the Advances outstanding on the
date of such reduction, then Borrowers shall repay the Advances in the
amount of such excess, together with accrued interest on the principal
amount so repaid. If the Borrowers reduce the Term Loan B Commitment to an
amount that is less than the outstanding principal amount of the Term
Advances outstanding on the date of such reduction, then Borrowers shall
repay the Term Advances in the amount of such excess, together with accrued
interest on the principal amount so repaid, and the applicable Termination
Fee (if any) payable pursuant to Section 2.5(c)(i).
(iii) In the event that Borrowers shall elect to terminate the
Credit Facilities in whole prior to the Revolving Credit Maturity Date, all
Obligations shall be immediately due and payable upon the termination date
stated in any notice of termination. Lender shall retain its liens in the
Collateral and all of its rights and remedies under the Loan Documents
notwithstanding such termination until Borrowers have paid the Obligations
to Lender, in full (other than contingent indemnity and expense
reimbursement obligations for which no claim has been made), in immediately
available funds, together with the applicable Termination Fee, if any. In
connection with any termination of the Credit Facilities in whole, the
Lender may, in its reasonable discretion, (i) require a written agreement
executed by Borrowers indemnifying Lender from any loss or damage Lender
may incur as a result of dishonored checks or other items of payment
received by lender from Borrowers or any Obligor and applied to the
Obligations, or (ii) retain such monetary reserves for such period of time
as Lender, in its reasonable discretion, may deem necessary to protect
Lender from any such loss or damage.
(d) Commitment Fee. As of the Closing, Lender shall have fully earned
a non-refundable commitment fee equal to Two Hundred Ten Thousand Dollars
($210,000) (the "Commitment Fee"). Lender acknowledges receipt of a portion of
the Commitment Fee in the
21
amount of $70,000, and Borrowers acknowledge that the balance of the Commitment
Fee shall be due and payable at the Closing.
(e) Unused Line Fee. Commencing on Closing Date, Borrowers shall
unconditionally pay to Lender a fee (the "Unused Line Fee") equal to one-half of
one percent (.50%) per annum of the aggregate unused portion of the Revolving
Credit and Term Loan B, calculated based upon the difference between (i) the sum
of the average daily amount of the Revolving Credit Commitment and the Term Loan
B Commitment, and (ii) the average daily outstanding balance of the Advances and
the Term Advances during the preceding month (or portion thereof). The Unused
Line Fee shall be calculated and payable monthly, in arrears, on the first
Business Day of each calendar month and on the Revolving Credit Maturity Date.
2.6 Additional Interest Provisions.
(a) Calculation of Interest. Interest on the Loans shall be based on
a year of three hundred sixty (360) days and charged for the actual number of
days elapsed.
(b) Continuation of Interest Charges. All contractual rates of
interest chargeable on outstanding Loans shall continue to accrue and be paid
even after default, maturity, acceleration, judgment, bankruptcy, insolvency
proceedings of any kind or the happening of any event or occurrence similar or
dissimilar.
(c) Applicable Interest Limitations. In no contingency or event
whatsoever shall the aggregate of all amounts deemed interest hereunder and
charged or collected pursuant to the terms of this Agreement exceed the highest
rate permissible under any law which a court of competent jurisdiction shall, in
a final determination, deem applicable hereto. In the event that such court
determines Lender has charged or received interest hereunder in excess of the
highest applicable rate, Lender shall, in its sole discretion, apply and set off
such excess interest received by Lender against other Obligations due or to
become due and such rate shall automatically be reduced to the maximum rate
permitted by such law.
2.7 Payments.
(a) Interest shall be payable on all amounts outstanding under the
Revolving Credit weekly as of each Funding Date. Interest shall be payable on
all amounts outstanding under Term Loan A and Term Loan B monthly with each
installment of principal. Any Termination Fee, the Commitment Fee, and all
Unused Line Fees shall be due and payable in accordance with Section 2.5 of this
Agreement. Any other fees, costs and Expenses shall be due and payable on
demand.
(b) If at any time there exists a Borrowing Base Deficiency,
Borrowers shall immediately make such principal repayments of the Advances as is
necessary to eliminate such Borrowing Base Deficiency. Until paid in full, the
portion of the Advances constituting the Borrowing Base Deficiency shall bear
interest at the Default Rate.
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(c) The entire principal balance of all of the Advances, together
with all unpaid accrued interest thereon and any unpaid fees, costs and Expenses
shall be due and payable on the Revolving Credit Maturity Date. The entire
principal balance of the Term Loans, together with all unpaid accrued interest
thereon and any unpaid fees, costs and Expenses shall be due and payable on the
Term Loan Maturity Date.
(d) Subject to the terms of Section 2.5(c) above, Borrowers may
prepay the principal of the Loans on any Business Day by giving Lender written
notice of the proposed prepayment ten (10) days prior to the proposed date of
prepayment.
(e) Prior to the occurrence of an Event of Default hereunder, All
payments and prepayments shall be applied in the following order of priority
(other than payments of principal and interest and prepayments of principal on
the Term Loans, which payments and prepayments shall be applied to outstanding
amounts under the applicable Term Loan):
(i) to Lender, the amount of any costs, fees and Expenses of
Lender required to be paid or reimbursed by Borrowers under this Agreement
or under any of the other Loan Documents;
(ii) to Lender, an amount equal to the unpaid accrued interest
on the aggregate outstanding Advances;
(iii) to Lender, an amount equal to the unpaid accrued interest
on the Term Loans then due and payable;
(iv) to Lender, the amount of any Borrowing Base Deficiency, if
any;
(v) to Lender, the aggregate outstanding amount of the
Advances; and
(vi) to Lender, an amount equal to any installment of principal
on the Term Loans then due and payable.
All prepayments on account of the Term Loans shall be applied by Lender to
scheduled installments of principal on the Term Loans in the inverse order of
maturity. Except as otherwise provided herein, all payments of principal,
interest, fees, Expenses, or other amounts payable by Borrowers hereunder shall
be remitted to Lender in immediately available funds not later than 3:00 p.m.
(Eastern Time) on the day due. Whenever any payment is stated as due on a day
which is not a Business Day, the maturity of such payment shall be extended to
the next succeeding Business Day and interest shall continue to accrue during
such extension.
2.8 Use of Proceeds. The extensions of credit under and proceeds of the
Credit Facilities shall be used to repay outstanding Indebtedness of the
Borrowers approved by the Lender, for working capital, Acquisitions permitted
under Section 7.1, and general corporate purposes.
2.9 Lockboxes and Collections.
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(a) Borrowers will enter into a lockbox agreement in respect of each
Lockbox with the relevant Lockbox Bank in such form as is acceptable to Lender.
Borrowers shall instruct the bank or banks maintaining the Lockboxes to initiate
(or, in the case of the Lockbox accounts receiving only proceeds of
non-governmental Accounts, to accept an initiation from Lender which
effectuates) a daily transfer of all available funds to an account of Lender in
the United States to be designated by Lender in a notice in writing to the
Borrowers (the "Collection Account").
(b) Borrowers will cause all Collections with respect to all of the
Accounts to be sent directly to the applicable Lockbox. In the event that
Borrowers receive any Collections that should have been sent to a Lockbox,
Borrowers will, promptly upon receipt and in any event within two (2) Business
Days of receipt, forward such Collections directly to the applicable Lockbox in
the form received, and if requested by Lender, promptly notify Lender of such
event. Until so forwarded, such Collections shall be held in trust for the
benefit of Lender.
(c) Borrowers shall not withdraw any amounts from the accounts into
which the Collections remitted to the Lockboxes are deposited, nor shall
Borrowers change the procedures under the agreements governing the Lockboxes and
related accounts.
(d) Borrowers will cooperate with Lender in the identification and
reconciliation on a daily basis of all amounts received in the Lockboxes. If
more than ten percent (10.0%) of the Collections since the most recent Funding
Date is not identified or reconciled to the reasonable satisfaction of Lender
within ten (10) Business Days of receipt, Lender shall not be obligated to make
further Loans until such amount is identified or is reconciled to the reasonable
satisfaction of Lender, as the case may be. In addition, if any such amount
cannot be identified or reconciled to the satisfaction of Lender, Lender may
utilize its own staff or, if it reasonably deems necessary, engage an outside
auditor, in either case at Borrowers' expense (which in the case of Lender's own
staff shall be in accordance with Lender's then prevailing customary charges
plus out-of-pocket expenses), to make such examination and report as may be
necessary to identify and reconcile such amount.
(e) Borrowers will not send to or deposit in the Lockboxes any funds
other than payments made with respect to Accounts.
(f) Prior to the occurrence of an Event of Default, on each Funding
Date (or in Lender's discretion, more frequently), Lender shall cause all
Collections which have been deposited in the Collection Account since the last
Funding Date to be disbursed in the order of priority required by Section
2.7(e). In addition, promptly upon request of Borrowers, so long as no Event of
Default or Unmatured Event of Default shall have occurred and be continuing,
Lender shall disburse to Borrowers the amount, if any, by which the collected
balance in the Collection Account exceeds the aggregate outstanding principal
amount of the Advances and all interest and other amounts that will be payable
on the next Funding Date. Following the occurrence and during the continuation
of an Event of Default, Lender may apply all Collections to Borrowers'
Obligations in such order as Lender may in its sole discretion determine.
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2.10 Joint and Several Liability; Appointment of Borrower Agent.
(a) Subject to the provisions of Section 9.21 hereof, 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) the For-Profit Borrowers are all affiliated entities 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 the Borrowers' assets (other than assets of the Non-Profit
Borrowers not included in the Non-Profit Collateral) 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) subject to the
provisions of Section 9.21 hereof, 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.
(b) Each of the Borrowers hereby irrevocably designates and
authorizes Providence to act as its agent generally for purposes of this
Agreement and the other Loan Documents (Providence, in such capacity, is
referred to herein as the "Borrower Agent"). Each Borrower agrees (i) that
Borrower Agent may exercise any right, or perform any obligation, specified by
this Agreement on such Borrower's behalf, (ii) that all documents and
instruments executed by the Borrower Agent on such Borrower's behalf will,
subject to the provisions of Section 9.21 hereof, jointly and severally bind
such Borrower, and (iii) to be bound by any communication or request delivered
by the Borrower Agent to Lender or its agents. Each Borrower grants to Borrower
Agent a power of attorney to act on its behalf as provided herein, including,
without limitation, with respect to executing documents and instruments,
requesting Advances hereunder, and providing notices, reports, certificates and
statements to, and receiving the same from, Lender hereunder and under the other
Loan Documents. This appointment as attorney-in-fact is durable and irrevocable
as long as any Obligations are outstanding, and will not be affected by any
disability or incapacity of any Borrower or any of its employees, agents or
representatives, or the lapse of time. The Lender shall be entitled to rely on
any such communication or request delivered by the Borrower Agent.
SECTION 3. COLLATERAL
3.1 Grant of Security.
(a) For-Profit Borrowers. To secure the prompt payment when due, and
the punctual performance of all of the Obligations, each Borrower that is not a
Non-Profit Borrower assigns to Lender, and grants to Lender a security interest
in and to all of its right, title and interest, in and to the following Property
(collectively, the "For-Profit Collateral"):
25
(i) all accounts, healthcare receivables, payment intangibles,
instruments and other rights to receive payments of such Borrowers
(including, without limitation, the Accounts), whether now existing or
hereafter arising or acquired;
(ii) all documents and instruments (including all promissory
notes), chattel paper (whether tangible or electronic chattel paper),
guarantees, letters of credit (whether or not the letter of credit is
evidenced by a writing), banker's acceptances and similar instruments,
including all letter of credit rights;
(iii) all Lockboxes, all Collection Accounts and other deposit
accounts, all funds received thereby or deposited therein, and any checks
or instruments from time to time representing or evidencing the same, and
all rights with respect thereto;
(iv) all goods, including without limitation all Inventory and
Equipment;
(v) all commercial tort claims;
(vi) all general intangibles including, without limitation,
contract rights, payment intangibles, any disproportionate share
settlements, risk share settlements, cost report settlements, capitation
settlement payments or other distributions related to the For-Profit
Collateral or any portion thereof of the related contracts, all trademarks,
trademark applications and registrations, copyrights, trade names, patents,
service marks and other intellectual property and associated goodwill and
the right, exercisable only upon the occurrence and during the continuation
of an Event of Default, to ▇▇▇ for past, present and future infringement
thereof throughout the world;
(vii) all investment property, including securities (whether
certificated or uncertificated), and all cash, monies, credit balances,
supporting obligations, and deposits;
(viii) all books and records of such Borrowers evidencing or
relating to or associated with any of the foregoing;
(ix) all information and data compiled or derived by such
Borrowers with respect to any of the foregoing (other than any such
information and data subject to legal restrictions of patient
confidentiality), and all rights, remedies, guarantees and collateral
evidencing, securing or otherwise relating to or associated with, any of
the foregoing, including without limitation all rights of enforcement and
collection; and
(x) all collections, receipts, insurance proceeds, and other
proceeds (cash and noncash) derived from any of the foregoing.
(b) Non-Profit Borrowers. To secure the prompt payment when due, and
the punctual performance of all of the Obligations, subject to the provisions of
Section 9.21
26
below, each Non-Profit Borrower assigns to Lender, and grants to Lender a
security interest in and to all of its right, title and interest, in and to the
following Property (collectively, the "Non-Profit Collateral"):
(i) all accounts, healthcare receivables, payment intangibles,
instruments payable in respect of the foregoing and other rights to receive
payments in respect of the foregoing of such Non-Profit Borrowers
(including, without limitation, the Accounts), whether now existing or
hereafter arising or acquired;
(ii) all Lockboxes, all Collection Accounts, all funds received
thereby or deposited therein, and any checks or instruments from time to
time representing or evidencing the same, and all rights with respect
thereto;
(iii) to the extent that the following items evidence or
constitute supporting obligations for one or more items of Non-Profit
Collateral described in clause (i) or (ii) above: all documents and
instruments (including all promissory notes), chattel paper (whether
tangible or electronic chattel paper), guarantees, letters of credit
(whether or not the letter of credit is evidenced by a writing), banker's
acceptances and similar instruments, including all letter of credit rights
arising from or relating to the foregoing, all rights, remedies, guarantees
and collateral evidencing, securing or otherwise relating to or associated
with, any of the foregoing, including without limitation all rights of
enforcement and collection;
(iv) all collections, receipts, insurance proceeds, and other
proceeds (cash and noncash) derived from any of the foregoing.
(v) all books and records of such Non-Profit Borrowers
evidencing or relating to or associated with any of the foregoing;
provided, that such Non-Profit Borrowers shall have the right to retain
copies of such books and records at their own expense in the event that the
Lender takes possession of the originals, whether via foreclosure or
otherwise; and
(vi) all information and data compiled or derived by such
Non-Profit Borrowers with respect to any of the foregoing (other than any
such information and data subject to legal restrictions of patient
confidentiality); provided, that such Non-Profit Borrowers shall have the
right to retain copies of such information and data at their own expense in
the event that the Lender takes possession of the originals, whether via
foreclosure or otherwise.
(c) Limitations on Grant of Security. Notwithstanding anything
contained in this Agreement to the contrary, in no event shall the Collateral
include, and no Borrower shall be deemed to have granted a security interest in,
any of such Borrower's right, title or interest in or to any license, contract
or agreement to which such Borrower is party as of the date hereof or any of its
right, title or interest thereunder to the extent that such a grant would, under
the terms of such license, contract or agreement, result in a breach of the
terms of, or constitute a default
27
under any license, contract or agreement to which such Borrower is party (other
than to the extent that any such term would be rendered ineffective pursuant to
Sections 9-406 to 9-409 of the UCC or any other applicable law (including the
Bankruptcy Code) or principles of equity); provided, however, that immediately
upon the ineffectiveness, lapse or termination of any such provision, the
Collateral shall include, and such Borrower shall be deemed to have granted a
security interest in, all rights and interests as if such provision had never
been in effect. Notwithstanding anything contained in this Agreement to the
contrary, in no event shall the Collateral include, and no Borrower shall be
deemed to have granted a security interest in, any of such Borrower's right,
title or interest in or to any item to the extent that granting a security
interest in such item would either (i) in the case of each Non-Profit Borrower,
jeopardize its ability to maintain its status as a not-for-profit entity
qualified as exempt from the payment of federal taxes under Section 501(a) of
the Internal Revenue Code, or (ii) in the case of each For-Profit Borrower party
to a management agreement with a Non-Profit Borrower, either (x) jeopardize the
ability of the Non-Profit Borrower party to such management agreement to
maintain its status as a not-for-profit entity qualified as exempt from the
payment of federal taxes under Section 501(a) of the Internal Revenue Code, or
(y) cause the For-Profit Borrower to breach any fiduciary duties that it may
have with respect to such Non-Profit Borrower.
3.2 Lien Documents. At Closing and thereafter as Lender deems necessary,
Borrowers shall execute (if required) and deliver to Lender, or shall have
executed (if required) and delivered (all in form and substance reasonably
satisfactory to Lender):
(a) Financing Statements. Financing statements pursuant to the UCC,
which Lender may file in the jurisdiction where Borrowers are organized and in
any jurisdiction where a financing statement must be filed in order to perfect a
security interest in any Collateral; and
(b) Other Agreements. Any other agreements, documents, instruments
and writings, including, without limitation, security agreements, deposit
account control agreements (but only with respect to deposit accounts other than
Lockboxes in which the proceeds of governmental Accounts are deposited), deeds
of trust and assignment agreements, reasonably required by Lender to evidence,
perfect or protect Lender's liens and security interest in the Collateral or as
Lender may reasonably request from time to time, including, without limitation,
a waiver agreement from each landlord with respect to the Borrowers' offices
located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, Arizona, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, and ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, in form
and substance reasonably satisfactory to Lender.
3.3 Other Actions.
(a) In addition to the foregoing, Borrowers shall do anything further
that may be lawfully and reasonably required by Lender to perfect Lender's
security interests and to effectuate the intentions and objectives of this
Agreement, including, but not limited to, the execution (if required) and
delivery of continuation statements, amendments to financing statements,
security agreements, contracts and any other documents required hereunder. At
28
Lender's reasonable request, Borrowers shall also immediately deliver (with
execution by Borrowers of all necessary documents or forms to reflect Lender's
security interest therein) to Lender, all items for which Lender must or may
receive possession to obtain a perfected security interest.
(b) Lender may at any time and from time to time, file financing
statements, continuation statements and amendments thereto that describe the
Collateral and which contain any other information required by the UCC for the
sufficiency or filing office acceptance of any financing statement, continuation
statement or amendment, including whether any Borrower is an organization, the
type of organization and any organization identification number issued to any
Borrower. Borrowers agree to furnish any such information to Lender promptly
upon request. Any such financing statements, continuation statements or
amendments may be signed by Lender on behalf of each Borrower (if a signature is
required) and may be filed at any time in any jurisdictions by Lender. So long
as no Unmatured Event of Default or Event of Default has occurred and is
continuing, Lender shall give Borrowers and their counsel a reasonable
opportunity to review and comment on each such financing statement, continuation
statements and amendment prior to filing.
3.4 Searches. Lender shall, prior to or at Closing, and thereafter as
Lender may reasonably request from time to time, at Borrowers' expense, obtain
the following searches:
(a) UCC Searches. With respect to each Borrower, UCC searches with
the Secretary of State and, where applicable, local filing office, of each state
where each Borrower is organized, maintains its chief executive office, a place
of business, or assets;
(b) Judgments, Etc. Judgment, federal and state tax lien searches
against the Borrowers, in all applicable filing offices of each state searched
under subparagraph (a) above.
3.5 Filing Security Agreement. A carbon, photographic or other
reproduction or other copy of this Agreement or of a financing statement is
sufficient as and may be filed in lieu of a financing statement.
3.6 Power of Attorney. Each of the officers of Lender is hereby
irrevocably made, constituted and appointed the true and lawful attorney for
Borrowers (without requiring any of them to act as such) with full power of
substitution to do the following (such power to be deemed coupled with an
interest): (a) endorse the name of Borrowers upon any and all checks, drafts,
money orders and other instruments for the payment of monies that are payable to
Borrowers and constitute collections on the Collateral for purpose of depositing
the same in the applicable Lockbox; (b) execute in the name of Borrowers any
financing statements, schedules, assignments, instruments, documents and
statements that Borrowers are obligated to give Lender hereunder or is necessary
to perfect Lender's security interest or lien in the Collateral (but only with
respect to deposit accounts other than Lockboxes in which the proceeds of
governmental Accounts are deposited) (provided that, so long as no Unmatured
Event of Default or Event of Default has occurred and is continuing, Lender
shall give Borrowers and their counsel a
29
reasonable opportunity to review and comment on each such item prior to filing
such item or delivering such item to any third party); (c) to verify validity,
amount or any other matter relating to the Collateral by mail, telephone,
telecopy or otherwise; and (d) effective upon the occurrence and during the
continuance of an Event of Default, do such other and further acts and deeds in
the name of Borrowers that Lender may reasonably deem necessary or desirable to
enforce its right with respect to any Collateral; provided, however, that such
power of attorney shall be effective and shall be exercised only to the extent
that such effectiveness and such exercise would not violate, or cause any
Borrower to violate, the provisions of 42 U.S.C. Section 1395g(c), 42 U.S.C.
Section 1396a(a)(32), any state law, or any state plan enacted in accordance
with 42 U.S.C. Section 1396a(a)(32).
SECTION 4. CLOSING AND CONDITIONS PRECEDENT TO THE LOANS
4.1 Closing Date. The Closing under this Agreement and the obligation of
the Lender to make the initial Loan(s) hereunder are subject to the satisfaction
of the following conditions precedent on or before the Closing Date (all
documents to be in form and substance satisfactory to Lender and Lender's
counsel):
(a) Loan Documents. The Lender shall have received this Agreement,
the Revolving Credit Note, Term Note A, Term Note B, the Pledge Agreements, the
Management Agreement Assignments, and any other required Loan Documents, all
properly executed;
(b) Additional Documents. The Lender shall have received each
additional document and agreement required to be executed under any provision of
this Agreement or any of the other Loan Documents;
(c) Organizational Documents. The Lender shall have received (i)
certified copies of resolutions of the board of directors, general partners, or
managers, as applicable, of each of the Borrowers, authorizing the execution of
this Agreement and the other Loan Documents and each document required to be
delivered by any Section hereof, and (ii) copies of the Articles of
Incorporation and By-laws, Certificate of Organization and Operating Agreement
or partnership agreement, as applicable, of each of the Borrowers (certified, as
applicable, by the Secretary of State of each Borrower's state of organization
or formation or the clerk, secretary, managing member or general partner of such
Borrower), (iii) good standing or equivalent certificates showing each Borrower
to be in good standing in its respective state of incorporation or organization;
(d) Incumbency. The Lender shall have received incumbency
certificates identifying all Authorized Officers of Borrower Agent and all other
officers of the Borrowers that are authorized to sign this Agreement on behalf
of such Borrowers, with specimen signatures;
(e) Opinion of Counsel. The Lender shall have received (i) a written
opinion of ▇▇▇▇▇ & ▇▇▇▇, P.C., addressed to Lender in the form attached hereto
as Exhibit 4.1A, and (ii) a written opinion of O'Melveny & ▇▇▇▇▇ LLP in the form
attached hereto as Exhibit 4.1B;
30
(f) Fees and Expenses. The Borrowers shall have paid (i) all Expenses
associated with the Credit Facilities incurred to the Closing Date, and (ii) the
balance of the Commitment Fee;
(g) Lockbox Matters. The Lender shall have received the AmSouth
Depository Agreement, the Bank of Tucson Provider Account Agreement, the First
Union Provider Account Agreement, and the SunTrust Provider Account Agreement,
in each case properly executed by all parties thereto (other than the Lender);
(h) Lien Searches. The Lender shall have received the results of
Uniform Commercial Code, judgment, federal and state tax lien
searches pursuant to Section 3.4 above, all in form and substance satisfactory
to Lender;
(i) Collateral Releases. Lender shall have received releases from all
Persons having a security interest or other interest in the Collateral (other
than the Subordinating Creditors), together with all UCC-3 terminations
necessary to terminate such Persons' interests in the Collateral;
(j) Licenses, Permits, etc. Lender shall have received copies of each
of the accreditations, licenses, certifications and provider agreements required
by Sections 5.3 and 5.20 below, and all Contracts requested by Lender or the
certificates described in Section 5.20(j);
(k) Evidence of Insurance. Lender shall have received evidence of
Borrowers' insurance coverage in accordance with the provisions of Section 6.2
hereof satisfactory to Lender in its sole discretion, together with all
certificates, endorsements and other items required to be delivered under
Section 6.2(a) and (b);
(l) Landlord Waivers. The Lender shall have received landlord waivers
with respect to the Borrowers' offices located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇, Arizona, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, and ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇;
(m) Borrowers' Financial Statements. Lender shall have received (i)
the audited financial statements of Providence and its Subsidiaries for the
fiscal year ended June 30, 2002, including balance sheets, income statements and
statements of cash flow; and (ii) the unaudited financial statements of
Providence and its Subsidiaries for the most recently ended fiscal monthly and
quarterly periods, together with year to date information, including balance
sheets, income statements and statements of cash flow;
(n) Collateral. The Lender shall have received:
(i) evidence satisfactory to the Lender of the filing of UCC-1
Financing Statements naming each of the Borrowers as "debtor" and the Lender as
"secured party" and describing the applicable Collateral in the respective
jurisdiction of organization or formation of each Borrower; and
31
(ii) evidence satisfactory to the Lender of the compliance by
Providence and any other Borrower executing a Pledge Agreement of its
obligations under such Agreement (including, without limitation, its obligations
to authorize the filing of and deliver UCC financing statements, originals of
securities, and stock powers).
(o) Closing Certificate. Lender shall have received a certificate
dated the Closing Date and signed by the chief financial officer of each
Borrower certifying that all of the conditions specified in this Section 4.1
have been fulfilled in all material respects (except to the extent that
fulfillment of any such condition depends on the acceptability of any item to
the Lender or on the Lender's satisfaction with any of the matters described in
Section 4.1 of the Loan Agreement) and that there has not occurred any material
adverse change in the operations and conditions (financial or otherwise) of the
Borrowers and their Subsidiaries (excluding Cypress Management Services, Inc.
and Intervention Services, Inc.) since June 30, 2002;
(p) Background Checks. Lender shall have received completed reference
checks with respect to the senior management of the Borrowers, the results of
which are satisfactory to Lender in its sole discretion;
(q) Value Track System(TM). Borrowers shall have taken all actions
necessary to permit Lender to record all of the Eligible Accounts in Lender's
Value Track System(TM); and
(r) Additional Items. The Lender shall have received all other
documents, information and reports required or requested to be executed and/or
delivered by Borrowers under any provision of this Agreement or any of the Loan
Documents.
4.2 Conditions to Each Loan. The obligation of the Lender to make any Loan
hereunder (including the initial Loan(s) to be made on the Closing Date) is
subject to the satisfaction of the following conditions precedent on or before
the date of making of the relevant Loan (all documents to be in form and
substance satisfactory to Lender and Lender's counsel):
(a) In the case of Advances, after giving effect to such Advance:
(i) the aggregate principal amount of all Advances outstanding
shall not exceed the Maximum Revolving Credit then in effect; and
(ii) the ENV of all Eligible Accounts shall not exceed any of
the Concentration Limits;
(b) In the case of Term Advances, Borrowers shall have complied with
the provisions of Section 2.4 hereof with respect to the applicable Acquisition
and Term Advance; and, if required by Lender, any entity acquired in connection
with such Acquisition or any Subsidiary of the Borrowers formed in connection
with such Acquisition, shall be joined as a Borrower under this Agreement
pursuant to a Joinder Agreement in form and substance satisfactory to Lender;
32
(c) As of the date of the making of such Loan, (i) all
representations and warranties of Borrowers shall be true and correct in all
material respects on and as of that date (it being understood that any
representation or warranty made as of a specific date shall be true and correct
in all material respects as of such date), (ii) without limiting the foregoing,
the representations and warranties set forth in Section 5.20 shall be true and
correct with respect to each Eligible Account included in the Borrowing Base,
(iii) Borrowers shall be in compliance with this Agreement and the other Loan
Documents and no Event of Default or Unmatured Event of Default shall have
occurred and be continuing, and (iv) Borrowers shall have certified such matters
to Lender, in the case of an Advance, pursuant to the form of Borrowing Base
Report or Advance Request relating to such Loan;
(d) Borrowers shall have signed and delivered to Lender copies of
notices in the form of Exhibit 4.2 with respect to any new Obligors which have
not previously received such notice, directing such Obligors to make payment to
a Lockbox;
(e) The lockbox arrangements required by Section 2.9 hereof shall be
in effect, and the amounts received in the Lockboxes shall have been identified
or reconciled to Lender's reasonable satisfaction, as required by Section 2.9(d)
hereof; and
(f) Borrowers shall have taken such other actions, including the
delivery of documents (including, without limitation, in the case of Advances,
an Advance Request and Borrowing Base Report), as Lender may reasonably and in
good faith request.
4.3 Closing. Subject to the conditions of Sections 4.1 and 4.2, the Credit
Facilities shall be made available on the date ("Closing Date") this Agreement
is executed and all of the conditions contained in Sections 4.1 and 4.2 hereof
are completed (the "Closing").
4.4 Non-Waiver of Rights. By completing the Closing hereunder, or by
making Loans hereunder, Lender does not thereby waive a breach of any warranty,
representation or covenant made by Borrowers hereunder or under any agreement,
document, or instrument delivered to Lender or otherwise referred to herein, and
any claims and rights of Lender resulting from any breach or misrepresentation
by Borrowers are specifically reserved by Lender.
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce Lender to complete the Closing and make the Loans under the
Credit Facilities to Borrowers, Borrowers warrant and represent to Lender that:
5.1 Organization and Validity.
(a) Each of the Borrowers: (i) is duly organized as either a
corporation or limited liability company and validly existing under the laws of
its state of incorporation or formation, as the case may be; and (ii) is duly
qualified, validly existing and in good standing, and has lawful power and
authority to engage in the business it conducts in each state and other
jurisdiction where the nature and extent of its business requires qualification,
except where the
33
failure to so qualify would not have a Material Adverse Effect. A list of all
states and other jurisdictions where each Borrower is qualified to do business
as of the Closing Date is attached hereto as Schedule 2 and made a part hereof.
(b) The making and performance of this Agreement and the related Loan
Documents will not: (i) violate any law, government rule or regulation, or the
charter, minutes, partnership agreement, operating agreement or bylaw provisions
of any of the Borrowers; or (ii) violate or result in a default (immediately or
with the passage of time) under any contract, agreement or instrument to which
any Borrower is a party, or by which any of the Borrowers is bound. None of the
Borrowers is in violation of, or has knowingly caused any Person to violate any
term of any agreement or instrument to which it or such Person is a party or by
which it may be bound, or of its charter, minutes, partnership agreement,
operating agreement or bylaws, which violation could reasonably be expected to
have a Material Adverse Effect.
(c) Each of the Borrowers has all requisite power and authority to
enter into and perform this Agreement and the other Loan Documents and to incur
the obligations herein provided for, and has taken all proper and necessary
corporate action to authorize the execution, delivery and performance of this
Agreement and the other Loan Documents.
(d) This Agreement, the Revolving Credit Note, Term Note A, Term Note
B, and the other Loan Documents, when delivered, will be valid and binding upon
Borrowers and enforceable in accordance with their respective terms, except as
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or affecting creditors' rights generally (including, without
limitation, fraudulent conveyance laws) and by general principles of equity,
including, without limitation, concepts of materiality, reasonableness, good
faith and fair dealing and the possible unavailability of specific performance
or injunctive relief, regardless of whether considered in a proceeding in equity
or at law.
5.2 Places of Business. As of the Closing Date, the jurisdiction of
organization, the address of the chief executive office and all other places of
business of each of the Borrowers are as set forth on Schedule 2. As of the
Closing Date, except as disclosed on Schedule 2: (i) no Borrower has been
organized in any other jurisdiction nor has changed any location in the five
years preceding the Closing Date; (ii) no Borrower has changed its name in the
five years preceding the Closing Date; and (iii) during such period, none of the
Borrowers has used any fictitious or trade name. As of the Closing Date, all
material books and records of the Borrowers are located at the Borrowers'
offices located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, Arizona, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, Arizona, ▇▇▇▇ ▇▇▇▇ ▇/▇▇/ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, and ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇.
5.3 Operation of Business. Each of the Borrowers (a) maintains, to the
extent applicable, Medicare and Medicaid provider status and is the holder of
the provider identification numbers identified on Schedule 2 hereto (as
supplemented or modified from time to time by written notice by Borrower to
Lender), all of which are current and valid; and the Borrowers have not
34
allowed, permitted, authorized or caused any other Person to use any such
provider identification number, and (b) has obtained all material licenses,
accreditations, certificates of need and approvals of governmental authorities
and all other Persons necessary for such Borrower to own its assets, to carry on
its business, to execute, deliver and perform the Loan Documents, and to receive
payments from the Obligors and, if organized as a not-for-profit entity, has and
maintains its status, if any, as an organization exempt from federal taxation
under Section 501(a) of the Internal Revenue Code. As of the Closing Date, none
of the Borrowers has been notified by any such governmental authority or other
Person during the immediately preceding twenty-four month period that such party
has rescinded or not renewed, or intends to rescind or not renew, any such
material license or approval.
5.4 Pending Litigation. Except as set forth on Schedule 2 hereto and for
other matters disclosed by Borrowers to Lender from time to time as required
hereby, there are no judgments or judicial or administrative orders, proceedings
or investigations (civil or criminal) pending, or to the knowledge of the
Borrowers, threatened, against any of the Borrowers in any court or before any
governmental authority or arbitration board or tribunal, that, if adversely
determined, could reasonably be expected to have a Material Adverse Effect. None
of the Borrowers is in default with respect to any order of any court,
governmental authority, regulatory agency or arbitration board or tribunal,
except for any such matters which individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect. No executive officer
of Providence has been indicted or convicted in connection with or is engaging
in any criminal conduct, or is currently subject to any material lawsuit or
proceeding or (to the knowledge of Borrowers) under investigation in connection
with any anti-racketeering or other conduct or activity.
5.5 Medicaid and Medicare Cost Reporting. To the extent applicable, the
Medicaid and Medicare cost reports of each facility and of the home office of
each of the Borrowers for all cost reporting periods have been submitted when
and as required to (i) as to Medicaid, the state agency, or other
HCFA-designated agent of such state agency, charged with such responsibility or
(ii) as to Medicare, the Medicare intermediary or other HCFA-designated agent
charged with such responsibility.
5.6 Title to Collateral. Each of the Borrowers has good and marketable
title to all the Collateral, free from Liens, except for the following
(collectively, "Permitted Liens"):
(a) Liens in favor of Lender;
(b) Liens for taxes which are not yet overdue or the validity of
which is being contested in good faith by appropriate proceedings diligently
pursued and for which reserves or other appropriate provision as shall be
required by GAAP have been made on Borrowers' books and records;
35
(c) Liens securing Indebtedness described in Section 7.6(iv) hereof,
provided that such Liens attach only to such real or personal property acquired
with the proceeds of such Indebtedness and the proceeds thereof;
(d) Deposits or pledges under ▇▇▇▇▇▇▇'▇ compensation, unemployment
insurance, social security and similar laws, or to secure the performance of
bids, tenders or contracts (other than for the repayment of borrowed money) or
leases or to secure indemnity, performance or similar bonds for the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure statutory obligations or surety or appeal bonds;
(e) Mechanics', materialmen's, workmen's, artisans' and other
non-consensual statutory Liens arising in the ordinary course of business to the
extent such Liens secure Indebtedness (i) which is not overdue, or (ii) relating
to claims or liabilities which are fully insured, or (iii) which are being
contested in good faith by appropriate proceedings and for which the applicable
Borrower has taken a reserve on its books in accordance with GAAP;
(f) Reservations, exceptions, encroachments, easements, rights of
way, covenants running with the land, and other similar title exceptions or
encumbrances affecting any real estate owned or leased by Borrowers, provided
that they do not in the aggregate materially detract from the value of the real
estate or materially interfere with its use in the ordinary course of the
applicable Borrower's business;
(g) Leases or subleases granted to others not interfering in any
material respect with the Business of the Borrowers;
(h) Liens granted in connection with the extension, renewal or
refinancing of the Indebtedness secured by Liens of the type described above,
provided that any extension, renewal or replacement Lien is limited to the
property encumbered by the existing Lien and the principal amount of the
Indebtedness being extended, renewed or replaced does not increase;
(i) Liens in favor of Petra Mezzanine Fund, L.P., as agent for
certain Subordinating Creditors, granted pursuant to the Petra Loan Agreement,
as the same is in effect on the Closing Date, or as the same may be amended,
restated, supplemented, replaced, or otherwise modified, in each case with the
consent of the Lender hereunder (which consent shall not be unreasonably
withheld or delayed), provided that such liens are subordinate and junior at all
times to the liens granted to Lender in the Collateral pursuant to the terms of
the Subordination Agreement applicable thereto; and
(j) Liens existing as of the Closing Date that are described on
Schedule 2 attached hereto.
5.7 Governmental Consent. Neither the nature of Borrowers or of Borrowers'
Business or Property, nor any relationship between any of the Borrowers and any
other Person, nor any circumstance affecting Borrowers in connection with the
execution and delivery of this Agreement and the other Loan Documents is such as
to require a consent, approval or
36
authorization of, or filing, registration or qualification with, any
Governmental Authority on the part of the Borrowers that has not been obtained
or made, except for any of the same the failure of which to obtain or make could
not reasonably be expected to have a Material Adverse Effect.
5.8 Taxes. All tax returns required to be filed by each of the Borrowers
in any jurisdiction have in fact been filed, and all taxes, assessments, fees
and other governmental charges upon the Borrowers or upon any of their
respective Properties, income or franchises, which are shown to be due and
payable on such returns have been paid, except for those taxes being contested
in good faith with due diligence by appropriate proceedings and for which
reserves or other appropriate provision as required by GAAP have been made
therefor on Borrowers' books and records. Borrowers are not aware of any
proposed additional tax assessment or tax to be assessed against or applicable
to any of the Borrowers that could reasonably be expected to have a Material
Adverse Effect.
5.9 Financial Statements. All financial statements delivered by the
Borrowers to the Lender in connection with the negotiation of this Agreement and
Lender's due diligence have been prepared in accordance with GAAP (subject to
the absence of footnotes and normal year end adjustments in the case of
unaudited financial statements), and are true, complete and correct in all
material respects. As of the Closing Date, the fiscal year for Borrowers ends on
the date set forth on Schedule 2 hereto, and the federal tax identification
number and any applicable state tax or identification number for each of the
Borrowers is as set forth on Schedule 2 hereto.
5.10 Full Disclosure. Neither the financial statements referred to in
Section 5.9, nor any documents or any written statement furnished by or on
behalf of Borrowers to Lender in connection with the negotiation of the Credit
Facilities, or contained in any financial statements or documents relating to
the Borrowers, contain any untrue statement of a material fact or omit a
material fact (known to the Borrowers in the case of any document not furnished
by them) necessary to make the statements contained therein or herein not
misleading in light of the circumstances in which the same were made.
5.11 Guarantees, Contracts, etc..
(a) Except as described in Schedule 2 hereto and for items arising
after the Closing Date permitted under the terms of this Agreement, none of the
Borrowers owns or holds equity or long term debt investments in, has any
outstanding advances to, or serves as guarantor, surety or accommodation maker
for the obligations of, or have any outstanding borrowings from, any Person.
(b) Except as described on Schedule 2 hereto and for items arising
after the Closing Date permitted under the terms of this Agreement, none of the
Borrowers is engaged in, nor does it have an interest in any joint venture or
partnership with any other Person, or has any Subsidiaries.
37
(c) None of the Borrowers is subject to any charter or other
restriction in its governing documents, which materially and adversely affects
its business, financial condition, Property or prospects.
(d) Except as otherwise specifically provided in this Agreement, none
of the Borrowers has agreed or consented to cause or permit any of the
Collateral, whether now owned or hereafter acquired, to be subject in the future
(upon the happening of a contingency or otherwise) to a Lien not permitted by
this Agreement.
5.12 Compliance with Laws.
(a) None of the Borrowers is in violation of, has received written
notice that it is in violation of, or has knowingly caused any Person to
violate, any applicable statute, regulation or ordinance of any Governmental
Authority (including without limitation, environmental laws and regulations),
which could have a Material Adverse Effect.
(b) Each of the Borrowers is current with all reports and documents
required to be filed with any Governmental Authority and is in full compliance
in all material respects with all applicable rules and regulations of such
Governmental Authorities, except where such failure to file or such
non-compliance could reasonably be expected to have a Material Adverse Effect.
5.13 Environmental Matters. Except as disclosed on Schedule 2 hereto, and
except, in each case as could not reasonably be expected to have a Material
Adverse Effect, none of the Borrowers has knowledge:
(a) of the presence of any Hazardous Substances on any real property
where any of the Borrowers conducts operations or has its personal property; or
(b) of any on-site spills, releases, discharges, disposal or storage
of Hazardous Substances that have occurred or are presently occurring on any
such real property or where any Collateral is located; or
(c) of any spills, releases, discharges or disposal of Hazardous
Substances that have occurred, are presently occurring on any other real
property as a result of the conduct, action or activities of any of the
Borrowers.
5.14 Capital Stock and Equity Interests. As of the Closing Date, the
authorized and outstanding shares of capital stock and other equity interests of
each of the Borrowers is as set forth on Schedule 2 hereto. All of the shares of
capital stock and other equity interests of each Borrower have been duly and
validly authorized and issued and are fully paid and non-assessable, and have
been sold and delivered to the holders thereof in compliance with, or under
valid exemption from, all Federal and state laws and the rules and regulations
of all regulatory bodies thereof governing the sale and delivery of securities.
As of the Closing Date, except as set forth on Schedule 2, there are no
subscriptions, warrants, options, calls, commitments, rights
38
or agreements by which any of the Borrowers is bound relating to the issuance,
transfer, voting or redemption of shares of its capital stock, membership units
or any pre-emptive rights held by any Person with respect to the shares of
capital stock or membership units of the Borrowers. As of the Closing Date,
except as set forth in Schedule 2, none of the Borrowers has issued any
securities convertible into or exchangeable for shares of its capital stock or
membership units or any options, warrants or other rights to acquire such shares
or membership units or securities convertible into or exchangeable for such
shares.
5.15 Lockboxes. The Lockboxes are the only lockbox accounts maintained by
Borrowers, and each Obligor of an Eligible Account has been directed by a notice
in the form attached as Exhibit 4.2 to this Agreement to remit all payments with
respect to such Account for deposit in the applicable Lockbox.
5.16 Borrowing Base Reports. Each Borrowing Base Report signed by Borrowers
or Borrower Agent contains an accurate summary of all Eligible Accounts of the
Borrowers contained in the Borrowing Base as of its date.
5.17 Security Interest. Each of the Borrowers has granted to Lender a
valid, perfected, first priority security interest in the Accounts and the other
Collateral subject to no other Liens, except for Permitted Liens.
5.18 Accounts.
(a) None of the Borrowers has done anything to interfere with the
collection of the Accounts, and the Borrowers have not amended or waived the
terms or conditions of any Account or any related Contract in any material
adverse manner without Lender's prior written consent.
(b) Each of the Borrowers has made all payments to Obligors necessary
to prevent any Obligor from offsetting any earlier overpayment to Borrowers
against any amounts such Obligor owes on an Account.
5.19 Pension Plans. Each pension or profit sharing plan, if any, to which
any Borrower is a party has been funded in accordance with the obligations of
Borrowers set forth in such plan.
5.20 Representations and Warranties for each Loan. As of each date that
Borrowers shall request any Loan, and as of each Funding Date, Borrowers shall
be deemed to make, with respect to each Eligible Account included in the
Borrowing Base, each of the following representations and warranties:
(a) Such Account satisfies each of the conditions of an Eligible
Account.
(b) All information relating to such Account that has been delivered
to Lender is true and correct in all material respects. With respect to each
such Account that has been billed, Borrowers have delivered to the Obligor all
reasonably requested supporting claim
39
documents, and all information set forth in the ▇▇▇▇ and supporting claim
documents is true, complete and correct in all material respects.
(c) There is no Lien or material adverse claim in favor of any third
party, nor any filing against any Borrower, as debtor, covering or purporting to
cover any interest in such Account.
(d) Such Account is (i) payable in an amount not less than its
Estimated Net Value by the Obligor identified by Borrowers as being obligated to
do so, and Borrowers have not received notice from the applicable Obligor to the
contrary, (ii) the legally enforceable obligation of such Obligor, and (iii) an
account receivable or general intangible within the meaning of the Uniform
Commercial Code of the state in which the applicable Borrower is organized, and
is not evidenced by any instrument or chattel paper. Except for co-payment
obligations, there is no payor other than the Obligor identified by Borrowers as
the payor primarily liable on such Account.
(e) No such Account (i) requires the approval of any third Person for
such Account to be subject to Lender's security interest hereunder, (ii) is
subject to any legal action, proceeding or investigation (pending or
threatened), dispute, set-off, counterclaim, defense, abatement, suspension,
deferment, deductible, reduction or termination by the Obligor, except in each
case as arising under applicable law, or (iii) is past, or within 180 days of,
the statutory limit for collection applicable to the Obligor.
(f) Borrowers do not have any guaranty of, letter of credit support
for, or collateral security for, such Account, other than any such guaranty,
letter of credit or collateral security in which the Lender has a security
interest.
(g) The Obligor with respect to such Account is located in the United
States, and is (i) an entity organized under the laws of any jurisdiction in the
United States and has its principal office in the United States, or (ii) a state
or agency, instrumentality or political subdivision of the United States or a
state.
(h) The insurance policy or Contract obligating an Obligor to make
payment is and was in full force and effect and applicable to the Obligor at the
time the services constituting the basis for such Account were performed.
(i) If requested by Lender, a copy of each related Contract and
provider agreement to which any Borrower is a party has been delivered to Lender
unless Borrowers shall have, prior to the related Funding Date, delivered a
certificate of an Authorized Officer that such delivery is prohibited by the
terms of the Contract or by law, and the circumstances of such prohibition.
(j) If such Account has not been billed, the services giving rise to
such Account have been properly recorded in Borrowers' accounting system.
40
(k) If such Account has not been billed, no more than 30 days have
elapsed after the date the services or goods giving rise to such Account were
rendered or provided, as applicable, and each ▇▇▇▇ contains an express direction
requiring the Obligor to remit payments to a Lockbox.
(l) Such Account has an Estimated Net Value which, when added to the
Estimated Net Value of all other Accounts owing by the same Obligor and which
constitute Eligible Accounts hereunder, does not exceed any applicable
Concentration Limit.
(m) Neither such Account nor the related Contract contravenes any
laws, rules or regulations applicable thereto (including, without limitation,
laws, rules and regulations relating to usury, consumer protection,
truth-in-lending, fair credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy) and no party to such
related Contract is in violation of any such law, rule or regulation in
connection with such Contract.
(n) As of the applicable Funding Date, to the best of Borrowers'
knowledge, (i) no Obligor on such Account is bankrupt, insolvent, or is unable
to make payment of its obligations when due, and (ii) except as disclosed to the
Lender in writing, no other fact exists which would cause Borrowers reasonably
to expect that the amount billed to the related Obligor for such Account will
not be paid in full when due or in accordance with its terms.
5.21 Commercial Tort Claims. As of the Closing Date, none of the Borrowers
has any commercial tort claims except as shown on Schedule 2 hereto.
5.22 Letter of Credit Rights. As of the Closing Date, Borrowers have no
letter of credit rights except as shown on Schedule 2 hereto.
5.23 Intellectual Property. As of the Closing Date, all trademarks, service
marks, patents or copyrights which any Borrower uses, plans to use or has a
right to use are shown on Schedule 2 attached hereto, and each applicable
Borrower is the sole owner of such Property, except for such rights or claims of
others in such Property shown on Schedule 2. None of the Borrowers is in knowing
violation of any rights of any other Person with respect to such Property,
except for such violations which individually or in the aggregate could not
reasonably be expected to result in a Material Adverse Effect. Except as shown
on Schedule 2, as of the Closing Date, (i) none of the Borrowers requires any
copyrights, patents, trademarks or other intellectual property, or any
license(s) to use any patents, trademarks or other intellectual property in
order to provide services to its customers or to ▇▇▇▇ Obligors and collect
therefrom, in the ordinary course of business, and (ii) Lender will not require
any copyrights, patents, trademarks or other intellectual property or any
licenses to use the same in order to provide such services or ▇▇▇▇ and collect
the Accounts, after the occurrence of an Event of Default.
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SECTION 6. BORROWERS' AFFIRMATIVE COVENANTS
Borrowers covenant that until all of Borrowers' Obligations to Lender are
paid and satisfied in full and the Credit Facilities have been terminated:
6.1 Payment of Taxes and Claims. Borrowers shall pay, before they become
delinquent, all taxes, assessments and governmental charges or levies imposed
upon them or upon Borrowers' Property, except for those being contested in good
faith with due diligence by appropriate proceedings and for which appropriate
reserves have been maintained under GAAP.
6.2 Maintenance of Insurance, Financial Records and Corporate Existence.
(a) Property Insurance. Borrowers shall maintain or cause to be
maintained insurance on their Properties against fire, flood, casualty and such
other hazards in such amounts, with such deductibles and with such insurers as
are customarily used under similar circumstances by companies operating similar
businesses in the same industry as Borrowers. The policies of all such casualty
insurance shall contain standard loss payable and additional insured clauses
issued in favor of Lender with respect to Property included in the Collateral,
pursuant to which all losses thereunder shall be paid to Lender as Lender's
interests may appear. Such policies shall expressly provide that the requisite
insurance cannot be altered or canceled without thirty (30) days prior written
notice to Lender, and shall insure Lender notwithstanding the act or neglect of
the insured. At or prior to Closing, Borrowers shall furnish Lender with
insurance certificates on Accord Form 27 certified as true and correct and being
in full force and effect as of the Closing Date or such other evidence of
insurance as Lender may reasonably require. In the event Borrowers fail to
procure or cause to be procured any such insurance or to timely pay or cause to
be paid the premium(s) on any such insurance, Lender may do so for Borrowers,
but Borrowers shall continue to be liable for the same. Each Borrower hereby
appoints Lender as its attorney-in-fact, exercisable at Lender's option, to
endorse any check which may be payable to Borrowers in order to collect the
proceeds of such insurance that is due to Lender. Any insurance proceeds
received by Lender shall promptly be applied by Lender to the Obligations of the
Borrowers in the order of priority set forth in Section 2.7(e) hereof.
(b) Liability Insurance. Borrowers shall maintain, and shall deliver
to Lender upon Lender's request evidence of, general and professional liability
insurance in such amounts as is customary for companies in the same or similar
businesses located in the same or similar area.
(c) Financial Records. Borrowers shall keep current and accurate
books of records and accounts in which full and correct entries will be made of
all of Borrowers' business transactions, and will reflect in their financial
statements adequate accruals and appropriations to reserves, all in accordance
with GAAP. Borrowers shall not change their fiscal year end date without prior
written notice to Lender.
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(d) Existence and Rights. Each Borrower shall do (or cause to be
done) all things necessary to preserve and keep in full force and effect its
legal existence, good standing, rights and franchises, except as permitted to do
otherwise pursuant to Section 7.1 hereof.
(e) Compliance with Laws. Each Borrower shall be in compliance with
any and all laws, ordinances, governmental rules and regulations, and court or
administrative orders or decrees to which it is subject, whether federal, state
or local (including without limitation environmental or environmental-related
laws, statutes, ordinances, rules, regulations and notices), and shall obtain
and maintain any and all licenses, permits, franchises, certificates of need, or
other governmental authorizations necessary to the ownership of its Property or
to the conduct of its businesses, except for such violations or failures to
obtain which could not reasonably be expected to have a Material Adverse Effect.
6.3 Business Conducted. Borrowers shall continue in the businesses
presently conducted by Borrowers. Borrowers shall not engage, directly or
indirectly, in any material respect in any line of business substantially
different from the businesses conducted by the Borrowers immediately prior to
the Closing Date and businesses reasonably associated therewith.
6.4 Litigation. Borrowers shall give prompt notice to Lender of any
litigation pending or threatened against Borrowers claiming damages in excess of
$100,000 from Borrowers or which may otherwise have a Material Adverse Effect.
6.5 Taxes. Borrowers shall pay all taxes (other than taxes based upon or
measured by Lender's income or revenues), if any, in connection with the Loans
and/or the recording of any financing statements or other Loan Documents. The
Obligations of Borrowers under this Section 6.5 shall survive the payment of
Borrowers' Obligations under this Agreement and the termination of this
Agreement.
6.6 Financial Covenants. Borrowers shall perform and comply with each of
the following financial covenants as reflected and computed from their financial
statements:
(a) Debt Service Coverage Ratio. As at the end of each fiscal quarter
of the Borrowers, commencing with the fiscal quarter ending March 31, 2003,
Borrowers shall maintain a Debt Service Coverage Ratio of at least 1.25:1,
measured (i) with respect to the fiscal quarters ending March 31, 2003, and June
30, 2003, on an annualized cumulative basis for the nine months and twelve
months (respectively) ending on such dates, and (ii) with respect to each fiscal
quarter thereafter, on a rolling four quarter basis.
(b) Leverage Ratio. As at the end of each fiscal quarter of the
Borrowers, commencing with the fiscal quarter ending March 31, 2003, Borrowers
shall maintain a Leverage Ratio of no more than 3.0:1, measured (i) with respect
to the fiscal quarters ending March 31, 2003, and June 30, 2003, on an
annualized cumulative basis for the nine months and twelve months (respectively)
ending on such dates, and (ii) with respect to each fiscal quarter thereafter,
on a rolling four quarter basis.
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For the avoidance of doubt, when computing the financial ratios
referred to in Sections 6.6(a) and (b) for the nine month period ending March
31, 2003, all income statement items used in computing such ratios shall be
divided by 0.75, and the actual amount of all balance sheet items as of March
31, 2003, shall be used.
6.7 Financial and Business Information. Borrowers shall deliver and cause
to be delivered to Lender the following (all to be in form and substance
reasonably satisfactory to Lender):
(a) Financial Statements and Collateral Reports.
(i) Audited Financial Statements. As soon as available but in
any event, within one hundred thirty-five (135) days after the end of each
fiscal year of Borrowers, financial statements of Borrowers for such year
which present fairly the Borrowers' financial condition, including the
balance sheet of Borrowers as at the end of such fiscal year and a
statement of cash flows and income statement for such fiscal year, all on a
consolidated and consolidating basis, setting forth in the consolidated
statements in comparative form, the corresponding figures as at the end of
and for the previous fiscal year, all in reasonable detail, including all
supporting schedules, and audited by independent public accountants of
recognized standing, selected by Borrowers and reasonably satisfactory to
Lender, and prepared in accordance with GAAP; and
(ii) Interim Financial Statements.
(A) As soon as available but in any event within forty-
five (45) days after the end of each fiscal quarter, internally
prepared quarterly consolidated and consolidating financial
statements for the Borrowers, along with year to date
information, including balance sheet, income statement and
statements of cash flows with respect to the periods measured;
and
(B) As soon as available but in any event within forty-
five (45) days after the end of each fiscal month end, internally
prepared monthly consolidated and consolidating financial
statements for the Borrowers, along with year to date
information, including balance sheet, income statement and
statements of cash flows with respect to the periods measured;
(iii) Additional Information. Promptly upon request, deliver such
other information concerning the Borrowers and the Collateral as Lender may
from time to time reasonably request, including Medicare and Medicaid cost
reports and audits, annual reports, security law filings and reports to any
security holders;
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(iv) Projections. No later than sixty (60) days after the
beginning of each fiscal year, an annual consolidated budget for the
Borrowers for the next succeeding fiscal year;
(v) Good Standing Certificates. Contemporaneously with delivery
of the annual financial statements referred to in clause (i) above, a good
standing certificate from Borrowers' respective states of organization
evidencing that each of the Borrowers remains in good standing in, and
continues to be organized under the laws of, such state.
(vi) Change in Fiscal Year. No later than thirty (30) days prior
to the effective date thereof, written notice of any change in Borrowers'
fiscal year end.
(b) Notice of Event of Default. Promptly upon an Authorized Officer
becoming aware of the existence of any condition or event which constitutes an
Event of Default or Unmatured Event of Default under this Agreement, a written
notice specifying the nature and period of existence thereof and what action
Borrowers are taking (and propose to take) with respect thereto;
(c) Notice of Claimed Default. Promptly upon receipt by Borrowers,
notice of default, oral or written, given to Borrowers by any creditor for
borrowed money in excess of $100,000.
6.8 Officers' Certificates. Along with the sets of financial statements
delivered to Lender by Borrowers at the end of each fiscal quarter and fiscal
year pursuant to Section 6.7(a) hereof, Borrowers shall deliver to Lender a
certificate (in the form of Exhibit 6.8 attached hereto and made a part hereof)
signed on behalf of each Borrower by the chief financial officer of such
Borrower setting forth:
(a) Covenant Compliance. The information (including detailed
calculations) required in order to establish whether Borrowers are in compliance
with the requirements of Section 6.6 as of the end of the period covered by the
financial statements then being furnished (and any exhibits appended thereto)
under Section 6.7; and
(b) Event of Default. That the signer in his capacity as an officer
of Borrowers has reviewed the relevant terms of this Agreement, and has made (or
caused to be made under his supervision) a review of the transactions and
conditions of Borrowers from the beginning of the accounting period covered by
the financial statements being delivered therewith to the date of the
certificate, and that such review has not disclosed the existence during such
period of any condition or event which constitutes an Event of Default or
Unmatured Event of Default or if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action Borrowers
have taken or propose to take with respect thereto.
6.9 Inspection. Borrowers will permit any of Lender's officers or other
representatives to visit and inspect Borrowers' location(s) or where any
Collateral is kept during regular business hours to examine and audit all of
Borrowers' books of account, records, reports and other
45
papers, to make copies and extracts therefrom and to discuss Borrowers' affairs,
finances and accounts with Borrowers' officers, employees and independent
certified public accountants and attorneys. Borrowers shall pay to Lender all
reasonable fees based on standard rates for such inspections, currently at the
rate of $850 per day, per person (plus out-of-pocket expenses). So long as no
Event of Default has occurred and is continuing, (i) Lender shall provide
Borrowers with reasonable notice of any intended inspection, and (ii) Lender
shall not conduct more than one such inspection in any fiscal quarter of the
Borrowers.
6.10 Tax Returns and Reports. At Lender's request from time to time,
Borrowers shall promptly furnish Lender with copies of the annual federal and
state income tax returns of Borrowers.
6.11 Material Adverse Developments. Borrowers agree that promptly upon
Borrowers or any of their officers becoming aware of any development or other
information which could reasonably be expected to have a Material Adverse
Effect, Borrowers shall give Lender telephonic or facsimile notice specifying
the nature of such development or information and such anticipated effect. In
addition, such verbal communication shall be confirmed by written notice thereof
to Lender on the next Business Day after such verbal notice is given.
6.12 Places of Business. Borrowers shall give ten (10) days prior written
notice to Lender of any changes in the location of any of the chief executive
office or any other places of business of each Borrower, or the establishment of
any new, or the discontinuance of any existing place of business.
6.13 Notice of Action. Borrowers will promptly notify Lender in the event
of any legal action, dispute, setoff, counterclaim, defense or reduction that is
or which is reasonably expected to be asserted by an Obligor with respect to any
Account(s) that may have a material adverse effect on the collectibility of
Accounts representing more than one percent (1.0%) of the value of all Eligible
Accounts included in the Borrowing Base.
6.14 Verification of Information. At the request of Lender, Borrowers will
use commercially reasonable efforts to provide and verify to the Lender the
accuracy of information concerning Borrowers of the type provided to Lender in
connection with Lender's decision to enter into this Agreement and such other
information concerning Borrowers as Lender may reasonably request in connection
with any offering documents with respect to the contemplated securitization of,
and sale of securities backed by, the Eligible Accounts pooled together with
collateral from other loans in the Lender's portfolio (the "Securities"),
including, without limitation, all information necessary to provide full and
complete disclosure to the Lender of all material facts pertaining to an
investment in the Securities in compliance with federal and state securities and
blue sky laws, and such information may be published in such offering documents
and relied upon by Lender and any party arranging the offering of such
Securities by Lender or its assignee. No such information provided by the
Borrowers to the Lender shall contain any untrue statement of a material fact or
omit a material fact (known to the Borrowers in the case of
46
any document not furnished by them) necessary to make the statements contained
therein not misleading in light of the circumstances in which the same were
made.
6.15 Value Track System(TM): Borrowers shall permit Lender to interface its
Value Track System(TM) to Borrowers' data files and will assist Lender in
completing and maintaining such interface such that the interface can interpret,
track and reconcile the Accounts Detail File provided by Borrowers.
6.16 Commercial Tort Claims. Borrowers shall provide written notice to
Lender of any material commercial tort claim to which any Borrower is or becomes
a party or which otherwise inures to the benefit of Borrowers and which relates,
directly or indirectly, to any Collateral. Such notice shall contain a
sufficient description of the commercial tort claim including the parties, the
court in which the claim was commenced (if applicable), the docket number
assigned to the case (if applicable), and a detailed explanation of the events
giving rise to such claim. Borrowers hereby grant Lender a security interest in
such commercial tort claim to secure payment of the Obligations. Borrowers shall
execute and deliver such instruments, documents and agreements as Lender may
reasonably require in order to obtain and perfect such security interest
including, without limitation, a security agreement or amendment to this
Agreement all in form and substance satisfactory to Lender. Each Borrower
authorizes Lender to file (without such Borrower's signature) financing
statements or amendments to existing financing statements as Lender reasonably
deems necessary to perfect the security interest; provided, that so long as no
Event of Default or Unmatured Event of Default has occurred and is continuing,
Lender shall give Borrowers and their counsel a reasonable opportunity to review
and comment on each such financing statement or amendment prior to filing.
SECTION 7. BORROWERS' NEGATIVE COVENANTS
Borrowers covenant that, until all of Borrowers' Obligations to Lender are
paid and satisfied in full and the Credit Facilities have been terminated:
7.1 Merger, Consolidation, Dissolution or Liquidation.
(a) The Borrowers shall not sell, lease, license, transfer or
otherwise dispose of any of their Property, other than: (i) Property sold,
leased, licensed, transferred or otherwise disposed of in the ordinary course or
ordinary operation of Borrowers' business; (ii) Property sold, leased, licensed,
transferred or otherwise conveyed by a Borrower to a For-Profit Borrower, or by
a Non-Profit Borrower to another Non-Profit Borrower; and (iii) sales, leases,
licenses, transfers and other dispositions of Property in an amount not to
exceed $100,000 in any calendar year, in each case, without Lender's prior
written consent, which consent will not be unreasonably withheld.
(b) The Borrowers shall not merge or consolidate with, or acquire,
any Person other than a Borrower, without Lender's prior written consent, except
that (i) the For-Profit Borrowers may consummate Permitted Acquisitions, (ii)
the For-Profit Borrowers may consummate the Cypress Transaction, and (iii) the
Borrowers may consummate transactions
47
excluded from clauses (a), (b) or (c) of the definition of "Change of Control",
provided that in the case of transactions excluded from clause (b) of such
definition, the surviving Person from any such merger or consolidation shall be
a For-Profit Borrower.
(c) No Borrower shall commence a dissolution or liquidation without
Lender's prior written consent, except for the dissolution or liquidation of a
Borrower into another Borrower.
7.2 Liens and Encumbrances. The Borrowers shall not: (a) execute a
negative pledge agreement with any Person covering any of the Collateral, except
for (i) Section 4.15 of the Petra Loan Agreement, (ii) negative pledges relating
to assets acquired under lease or financed with Indebtedness permitted under
clause (iv) of Section 7.6, and (iii) negative pledges relating to rights under
proposed merger or acquisition agreements pending the closing of the subject
transactions; or (b) cause or permit or agree or consent to cause or permit in
the future (upon the happening of a contingency or otherwise) the Collateral,
whether now owned or hereafter acquired, to be subject to any Lien other than
Permitted Liens.
7.3 Negative Pledge. The Borrowers shall not pledge, grant or permit any
Lien to exist on the Capital Stock of any of their respective Subsidiaries,
other than Permitted Liens.
7.4 Transactions With Affiliates or Subsidiaries.
(a) Except for the existing transactions and arrangements described
on Schedule 2 hereto, the Borrowers shall not enter into any transaction with
any Subsidiary or other Affiliate of any Borrower (other than another Borrower),
including, without limitation, the purchase, sale, lease or exchange of
Property, or the lending, capitalization or giving of funds (other than as
specifically permitted hereunder) to any such Affiliate or Subsidiary, unless
(i) the transaction is in the ordinary course of and pursuant to the reasonable
requirements of Borrowers' business and upon terms no less favorable to
Borrowers as they would obtain in a comparable arm's-length transaction with any
Person not an Affiliate or a Subsidiary, and (ii) such transaction is not
otherwise prohibited hereunder. Notwithstanding the foregoing, to the extent not
otherwise prohibited hereunder, (x) Providence may raise equity capital from
Affiliates, and (y) the Borrowers shall be permitted to incur additional
Subordinated Debt on terms and conditions reasonably satisfactory to the Lender.
(b) Subject in any event to the limitations of Section 7.4(a) above,
except with the prior written consent of Lender (which consent shall not be
unreasonably withheld), Borrowers shall not create or acquire any Subsidiary
unless such Subsidiary engages in a business substantially related to the
business of Borrowers as conducted immediately prior to the Closing Date, and if
required by Lender, such Subsidiary becomes a Borrower hereunder pursuant to the
terms of a Joinder Agreement in substantially the form of Exhibit 7.4 attached
hereto.
(c) Notwithstanding anything to the contrary contained herein, no
For-Profit Borrower shall make loans or advances to, or transfers of Property
to, any Non-Profit Borrower
48
in an amount (for all such loans, advances or transfers at any time outstanding
in favor of any Non-Profit Borrower) in excess of 125% of the ENV of the
Eligible Accounts of such Non-Profit Borrower included in the Borrowing Base. In
calculating the amount of loans, advances and transfers outstanding at any time,
there shall be included the total amount of management fees owing by a
Non-Profit Borrower to For-Profit Borrowers which have been deferred or
forgiven.
7.5 Guarantees. Borrowers shall not become or be liable, directly or
indirectly, primary or secondary, matured or contingent, in any manner, whether
as guarantor, surety, accommodation maker, or otherwise, for the existing or
future Indebtedness of any kind of any other Person, except: (i) as set forth on
Schedule 2 hereto; (ii) for the endorsement in the ordinary course of business
of negotiable instruments for deposit or collection; (iii) guaranties of
Indebtedness permitted under Section 7.6 hereof; (iv) guaranties of leases
permitted hereunder of which a Borrower is the lessee; and (v) guaranties of
Subordinated Debt, provided that such guaranty is subordinated to the
Obligations pursuant to a Subordination Agreement.
7.6 Indebtedness. Without Lender's prior written consent, Borrowers shall
not create, incur, assume or suffer to exist any Indebtedness (exclusive of
trade debt), except: (i) Indebtedness in favor of Lender; (ii) Subordinated
Debt; (iii) additional Indebtedness outstanding as of the Closing Date and
reflected on Schedule 2 hereto; (iv) Indebtedness incurred in connection with
the acquisition of any real or personal Property by the Borrowers, and
obligations under Capitalized Leases, provided that as of any date of
determination, the amount thereof shall not exceed the sum of $400,000, and
provided further, that no such obligation shall be incurred at any time during
which an Event of Default or Unmatured Event of Default has occurred and is
continuing hereunder; (v) obligations permitted pursuant to Section 7.5; (vi)
intercompany Indebtedness owing to any other Borrower; (vii) Indebtedness
evidenced by the Cypress Note; and (viii) provided that no Event of Default or
Unmatured Event of Default has occurred and is continuing hereunder at the time
of incurrence, additional Indebtedness in an aggregate amount not to exceed
$500,000 at any time outstanding.
7.7 Loans to Other Persons. Borrowers shall not make or be permitted to
have outstanding any loans, advances or extensions of credit to any Person,
except for (i) subject to the provisions of Section 7.4(c), loans and advances
in favor of other Borrowers made in the ordinary course of business, and (ii)
transactions permitted under Section 7.4(a).
7.8 Withdrawals. Borrowers shall not declare or pay or make any
Withdrawals to their Shareholders or their successors or assigns (other than
Withdrawals by a Subsidiary to its parent which is a Borrower hereunder), if,
prior to or after giving effect to the applicable Withdrawal, an Event of
Default or Unmatured Event of Default has or would occur and be continuing.
7.9 Payments on Account of Subordinated Debt. Borrowers shall not make any
payment on account of any Subordinated Debt if, prior to or after giving effect
to the applicable payment, the relevant Subordination Agreement would be
breached.
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7.10 No Interference with Collections. Borrowers shall not take any action
to interfere with the collection of the Accounts, and Borrowers shall not amend
or waive the terms and conditions of any Account or any related Contract in any
material adverse manner without Lender's prior written consent. Borrowers will
continue to make all payments to Obligors necessary to prevent any Obligor
offsetting any earlier overpayment to Borrowers against any amounts such Obligor
owes on an Account.
SECTION 8. DEFAULT
8.1 Events of Default: Each of the following events shall constitute an
event of default ("Event of Default") and Lender shall thereupon have the option
to declare the Obligations immediately due and payable, all without demand,
notice, presentment or protest or further action of any kind (it also being
understood that the occurrence of any of the events or conditions set forth in
subparagraphs (j), (k), (l) or (r) shall automatically cause an acceleration of
the Obligations):
(a) Payments - if Borrowers fail to make any payment of principal or
interest on the date when such payment is due and payable and such failure
continues for a period of two (2) Business Days; provided however, that the two
(2) Business Days grace period shall not be applicable if such payments are due
and payable due to maturity, acceleration or demand, whether following an Event
of Default or otherwise; or
(b) Other Charges - if Borrowers fail to pay any other charges, fees,
Expenses or other monetary obligations owing to Lender, arising out of or
incurred in connection with this Agreement on the date when such payment is due
and payable, whether upon maturity, acceleration, demand or otherwise, and such
failure continues for a period of five (5) Business Days after the earlier of
Borrowers becoming aware of such failure or Borrowers receipt of written notice
of such failure from Lender; provided however, that the five (5) Business Day
grace period shall not be applicable if such payments are due and payable due to
maturity, acceleration or demand, whether following an Event of Default, or
otherwise; or
(c) Particular Covenant Defaults - if Borrowers fail to perform,
comply with or observe any covenant or undertaking contained in this Agreement
not otherwise described in this Section 8.1, and such failure continues for a
period of ten (10) Business Days after the earlier of Borrowers becoming aware
of such failure or Borrowers receipt of written notice of such failure from
Lender; or
(d) Change in Control - a Change in Control shall occur; or
(e) Uninsured Loss - if there shall occur any uninsured damage to or
loss, theft, or destruction in excess of $250,000 with respect to any portion of
the Property of a Borrower (excluding Non-Profit Borrowers); or
(f) Warranties or Representations - if any warranty, representation
or other statement by or on behalf of Borrowers, contained in or pursuant to
this Agreement, or in any
50
document, agreement or instrument furnished in compliance with, relating to, or
in reference to this Agreement, is false, erroneous, or misleading in any
material respect when made; or
(g) Agreements with Others - if any For-Profit Borrower shall default
beyond any grace period under any agreement in respect of any Indebtedness for
borrowed money in an amount in excess of $250,000 and (i) such default consists
of the failure to pay any principal, premium or interest with respect to such
Indebtedness, or (ii) such default consists of the failure to perform any
covenant or agreement with respect to such Indebtedness, in each case, if the
effect of such default is to cause or permit such Borrowers' obligations which
are the subject thereof to become due prior to the scheduled maturity date or
prior to the regularly scheduled date of payment; or
(h) Other Agreements with Lender - if an event of default occurs
under any other existing or future agreement (related or unrelated) between or
among Borrowers and Lender, including without limitation, any other Loan
Documents or any lease agreements or finance agreements with any affiliate of
Lender; or
(i) Judgments - if any final judgment for the payment of money in
excess of $500,000 shall be rendered against any of the Borrowers which is not
fully and unconditionally covered by insurance or an appeal bond, or for which
Borrowers have not established a cash or cash equivalent reserve in the amount
of such judgment; or
(j) Assignment for Benefit of Creditors, etc. - if any Borrower makes
or proposes an assignment for the benefit of creditors generally, offers a
composition or extension to creditors, or makes or sends notice of an intended
bulk sale of any business or assets now or hereafter owned or conducted by such
Borrower which could reasonably be expected to have a Material Adverse Effect;
or
(k) Bankruptcy, Dissolution, etc. - upon the commencement of any
action for the dissolution or liquidation of any of the Borrowers, or the
commencement of any proceeding to avoid any transaction entered into by any of
the Borrowers, or the commencement of any case or proceeding for reorganization
or liquidation of any Borrower's debts under the Bankruptcy Code or any other
state or federal law now or hereafter enacted for the relief of debtors, whether
instituted by or against Borrowers; provided, however, that the Borrowers shall
have forty-five (45) days to obtain the dismissal or discharge of involuntary
proceedings filed against them, it being understood that during such forty-five
(45) day period, Lender shall be not obligated to make Advances or Term Advances
hereunder and Lender may seek adequate protection in any bankruptcy proceeding;
or
(l) Receiver - upon the appointment of a receiver, liquidator,
custodian, trustee or similar official or fiduciary for any of the Borrowers or
for any of their Property; provided, however, that the Borrowers shall have
forty-five (45) days to obtain the rescission of the appointment of such an
official or fiduciary without the consent of the Borrowers, it being understood
that during such forty-five (45) day period, Lender shall not be obligated to
make
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Advances of Term Advances hereunder, and Lender may seek adequate protection in
any relevant proceeding; or
(m) Execution Process, Seizure, etc. - the issuance of any execution
or distraint process against any of the Borrowers which could result in a
Material Adverse Effect, or any Property of Borrowers is seized without
compensation by any governmental entity, federal, state or local; or
(n) Termination of Business - if Borrowers cease any material portion
of their business operations as presently conducted; or
(o) Pension Benefits, etc. - if Borrowers fail to comply with ERISA,
so that grounds exist to permit the appointment of a trustee under ERISA to
administer their employee plans or to allow the Pension Benefit Guaranty
Corporation to institute proceedings to appoint a trustee to administer such
plan(s), or to permit the entry of a Lien to secure any deficiency or claim; or
(p) Investigations - Lender reasonably determines, based on evidence
received by Lender, that there is reasonable cause to believe that Borrowers may
have directly or indirectly been engaged in any type of activity which would be
reasonably likely to result in the forfeiture of any Property of Borrowers to
any governmental entity, federal, state or local; or
(q) Material Adverse Events -
(i) Lender reasonably determines that an event which materially
and adversely affects the likelihood of collection of a material portion of the
Accounts has occurred; or
(ii) There shall occur any Material Adverse Effect or a material
adverse change occurs in the business or condition of Borrowers.
(r) Lockbox Instructions - any instruction or agreement regarding a
Lockbox or the bank accounts related thereto is amended or terminated without
the written consent of Lender, or if Borrowers fail, within two (2) Business
Days of receipt, to forward Collections it receives with respect to any Accounts
to the applicable Lockbox.
8.2 Cure. Nothing contained in this Agreement or the Loan Documents shall
be deemed to compel Lender to accept a cure of any Event of Default hereunder.
8.3 Rights and Remedies on Default.
(a) In addition to all other rights, options and remedies granted or
available to Lender under this Agreement or the Loan Documents, or otherwise
available at law or in equity, upon or at any time after the occurrence and
during the continuance of an Event of Default or
52
Unmatured Event of Default, Lender may, in its discretion, withhold or cease
making Advances and Term Advances under the Credit Facilities.
(b) In addition to all other rights, options and remedies granted or
available to Lender under this Agreement or the Loan Documents (each of which is
also then exercisable by Lender), Lender may, in its discretion, upon or at any
time after the occurrence and during the continuance of an Event of Default,
terminate the Credit Facilities.
(c) In addition to all other rights, options and remedies granted or
available to Lender under this Agreement or the Loan Documents (each of which is
also then exercisable by Lender), Lender may, upon or at any time after the
occurrence and during the continuance of an Event of Default, exercise all
rights under the UCC and any other applicable law or in equity, and under all
Loan Documents permitted to be exercised after the occurrence and during the
continuance of an Event of Default, including the following rights and remedies
(which list is given by way of example and is not intended to be an exhaustive
list of all such rights and remedies):
(i) Subject to all applicable laws and regulations governing
payment of Medicare and Medicaid receivables, the right to "take possession" of
the Collateral, and notify all Obligors of Lender's security interest in the
Collateral and require payment under the Accounts to be made directly to Lender,
and Lender may, in its own name or in the name of the applicable Borrowers,
exercise all rights of a secured party with respect to the Collateral and
collect, ▇▇▇ for and receive payment on all Accounts, and settle, compromise and
adjust the same on any terms as may be satisfactory to Lender, in its sole and
absolute discretion for any reason or without reason and Lender may do all of
the foregoing with or without judicial process (including without limitation
notifying the United States postal authorities to redirect mail addressed to
Borrowers, to an address designated by Lender); or
(ii) Require Borrowers, at Borrowers' expense, to assemble all
or any part of the Collateral and make it available to Lender at any place
designated by Lender, which may include providing Lender or any entity
designated by Lender with access (either remote or direct) to Borrowers'
information system for purposes of monitoring, posting payments and rebilling
Accounts to the extent deemed desirable by Lender in its sole discretion; or
(iii) The right to reduce or modify the Commitments, the
Borrowing Base or any portion thereof, or the Advance Rate, or to modify the
terms and conditions upon which Lender may be willing to consider making Loans
under the Credit Facilities or to take additional reserves in the Borrowing Base
for any reason.
(d) Borrowers hereby agree that a notice received at least ten (10)
days before the time of any intended public sale or before the time after which
any private sale or other disposition of the Collateral is to be made, shall be
deemed to be reasonable notice of such sale or other disposition. If permitted
by applicable law, any Collateral which threatens to speedily decline in value
or which is sold on a recognized market may be sold immediately by Lender
53
without prior notice to Borrowers. Borrowers covenant and agree not to interfere
with or impose any obstacle to Lender's exercise of its rights and remedies with
respect to the Collateral.
8.4 Nature of Remedies. All rights and remedies granted Lender hereunder
and under the Loan Documents, or otherwise available at law or in equity, shall
be deemed concurrent and cumulative, and not alternative remedies, and Lender
may proceed with any number of remedies at the same time until all Obligations
are satisfied in full. The exercise of any one right or remedy shall not be
deemed a waiver or release of any other right or remedy, and Lender, upon or at
any time after the occurrence of an Event of Default, may proceed against
Borrowers, at any time, under any agreement, with any available remedy and in
any order.
8.5 Set-Off If any bank account or other Property held by or with Lender,
or any Affiliate of Lender, or any participant is attached or otherwise liened
or levied upon by any third party, Lender (and such participant) shall have and
be deemed to have, without notice to Borrowers, the immediate right of set-off
and may apply the funds or other amounts or property thus set off against any of
Borrowers' Obligations hereunder.
SECTION 9. MISCELLANEOUS
9.1 GOVERNING LAW. THIS AGREEMENT, AND ALL RELATED AGREEMENTS AND
DOCUMENTS, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE
LAWS OF THE STATE OF NEW JERSEY. THE PROVISIONS OF THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO HEREIN ARE TO
BE DEEMED SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION
SHALL NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL CONTINUE IN FULL
FORCE AND EFFECT.
9.2 Integrated Agreement. This Agreement, the Revolving Credit Note, Term
Note A, Term Note B, the other Loan Documents and all related agreements, and
shall be construed as integrated and complementary of each other, and as
augmenting and not restricting Lender's rights and remedies. If, after applying
the foregoing, an inconsistency still exists, the provisions of this Agreement
shall constitute an amendment thereto and shall control.
9.3 Waiver and Indemnity.
(a) No omission or delay by Lender in exercising any right or power
under this Agreement or any related agreements and documents will impair such
right or power or be construed to be a waiver of any default, or Event of
Default or an acquiescence therein, and any single or partial exercise of any
such right or power will not preclude other or further exercise thereof or the
exercise of any other right, and as to Borrowers no waiver will be valid unless
in writing and signed by Lender and then only to the extent specified.
(b) Borrowers release and shall indemnify, defend and hold harmless
Lender, and its officers, directors, employees and agents, of and from any
claims, demands, liabilities,
54
obligations, judgments, injuries, losses, damages and costs and expenses
(including, without limitation, reasonable legal fees) resulting from (i) acts
or conduct of Borrowers under, pursuant or related to this Agreement and the
other Loan Documents, (ii) Borrowers' breach, or alleged breach, or violation of
any representation, warranty, covenant or undertaking contained in this
Agreement or the other Loan Documents, and (iii) Borrowers' failure, or alleged
failure, to comply with any or all laws, statutes, ordinances, governmental
rules, regulations or standards, whether federal, state or local, or court or
administrative orders or decrees (including without limitation environmental
laws, etc.), and all costs, expenses, fines, penalties or other damages
resulting therefrom, unless resulting from acts or conduct of Lender
constituting willful misconduct or gross negligence.
(c) Lender shall not be liable for, and Borrowers hereby agree that
Lender's liability in the event of a breach by Lender of this Agreement shall be
limited to Borrowers' direct damages suffered and shall not extend to, any
consequential or incidental damages. In the event Borrowers bring suit against
Lender in connection with the transactions contemplated hereunder, and Lender is
found not to be liable, Borrowers shall indemnify and hold Lender harmless from
all costs and expenses, including attorneys' fees, incurred by Lender in
connection with such suit.
9.4 Time. Whenever Borrowers shall be required to make any payment, or
perform any act, on a day which is not a Business Day, such payment may be made,
or such act may be performed, on the next succeeding Business Day. Time is of
the essence in Borrowers' performance under all provisions of this Agreement and
all related agreements and documents.
9.5 Expenses of Lender.
(a) At Closing and from time to time thereafter, Borrowers will pay
all reasonable expenses of Lender on demand (including, without limitation,
search costs, audit fees, appraisal fees, and the fees and expenses of legal
counsel for Lender) relating to this Agreement, and all related agreements and
documents, including, without limitation, expenses incurred in the analysis,
negotiation, preparation, closing, administration and enforcement of this
Agreement and the other Loan Documents, the enforcement, protection and defense
of the rights of Lender in and to the Loans and Collateral or otherwise
hereunder, and any reasonable expenses relating to extensions, amendments,
waivers or consents pursuant to the provisions hereof, or any related agreements
and documents or relating to agreements with other creditors, or termination of
this Agreement (collectively, the "Expenses"). The Lender acknowledges receipt
of a deposit in the amount of $20,000, which shall be applied to pay a portion
of the Expenses due on the Closing Date. Any Expenses not paid upon demand by
Lender shall bear interest at the per annum rate equal to the highest interest
rate then applicable to the Loans.
(b) In addition, if at any time following the date of this Agreement,
Borrowers effect any change which results in a change in the format or sequence
of Borrowers' data, Borrowers shall pay to Lender its reasonable charge for
implementing such changes as are
55
necessary to accommodate the changes in the format or sequence of the data such
that the Value Track System(TM) is capable of importing such data, including an
hourly fee of $125.
9.6 Confidentiality. Except as provided in Section 9.17 hereof or to the
extent required by law or applicable regulations, Borrowers and Lender agree to
maintain the confidentiality of this Agreement and not to disclose the contents
hereof or provide a copy hereof to any third party, except (i) accountants,
lawyers and financial advisers of the parties who are informed of and agree to
be bound by this Section 9.6, and (ii) that copies hereof may be provided to any
assignee or participant (or potential assignee or participant) of Lender's
interests herein, any investors or prospective investors who acquire or may
acquire Securities backed by Accounts and any parties which facilitate the
issuance of such Securities, including rating agencies, guarantors and insurers
who are informed of and agree to be bound by this Section 9.6. Subject to
disclosures required pursuant to subpoena or under applicable law, Lender agrees
to maintain the confidentiality of patient information obtained as a result of
its interests in, or duties with respect to, the Accounts. In addition to the
foregoing, Lender shall hold all non-public information relating to any Borrower
obtained in connection with this Agreement (including, without limitation,
information received in the context of matters described in Sections 6.9, 6.10
and 6.11 hereof), any other Loan Document or other documents delivered in
connection herewith or therewith as confidential in accordance with customary
procedures for handling confidential information of its nature. Unless
specifically prohibited by applicable law or court order, the Lender shall
notify the Borrowers of any request by any governmental authority or
representative thereof for disclosure of any such non-public information prior
to disclosure of such information.
9.7 Notices.
(a) Any notices or consents required or permitted by this Agreement
shall be in writing and shall be deemed given if delivered in person or if sent
by telecopy or by nationally recognized overnight courier, or via first class,
Certified or Registered mail, postage prepaid, to the address of such party set
forth below, unless such address is changed by written notice hereunder:
Notices to Borrowers: The Providence Service Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Executive
Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: O'Melveny & ▇▇▇▇▇ LLP
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. Nissan, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
56
Notices to Lender: Healthcare Business Credit Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇▇ Traurig, LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) Any notice sent by Lender or Borrowers, by any of the above
methods shall be deemed to be given when so received.
(c) Lender shall be fully entitled to rely upon any facsimile
transmission or other writing purported to be sent by any Authorized Officer
(whether requesting an Advance or otherwise) as being genuine and authorized.
9.8 Headings. The headings of any paragraph or Section of this Agreement
are for convenience only and shall not be used to interpret any provision of
this Agreement.
9.9 Survival. All warranties, representations, and covenants made by any
or all Borrowers and/herein, or in any agreement referred to herein or on any
certificate, document or other instrument delivered by it or on its behalf under
this Agreement, shall be considered to have been relied upon by Lender, and
shall survive the delivery to Lender of the Notes and the other Loan Documents,
regardless of any investigation made by Lender or on its behalf. All statements
in any such certificate or other instrument prepared and/or delivered for the
benefit of Lender shall constitute warranties and representations by Borrowers
hereunder. Except as otherwise expressly provided herein, all covenants made by
Borrowers hereunder or under any other agreement or instrument shall be deemed
continuing until all Obligations are satisfied in full.
9.10 Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties. Borrowers
may not transfer, assign or delegate any of their duties or obligations
hereunder. Lender shall have the right at any time or times to assign all or any
portion of the Credit Facilities and the Commitments and/or grant participations
in the Obligations, provided, however, that so long as no Unmatured Event of
Default or Event of Default has occurred and is continuing, (i) Lender shall
notify the Borrower Agent of any proposed assignment and Borrowers shall have
the right to approve the
57
applicable assignee (which approval shall not be unreasonably withheld or
delayed), and (ii) the Lender shall negotiate in good faith with the Borrowers
to amend this Agreement and the other Loan Documents to add reasonable and
customary language relating to multiple lenders. Notwithstanding the foregoing,
the Borrowers shall not have the right to approve (x) an assignment of the
rights of Lender with respect to the Loans as collateral security to Lender's
funding sources, (y) any assignment by Lender in connection with the
consummation of any securitization or sale of Securities contemplated by Section
9.14 hereof, or (z) a sale of the Lender or all or a substantial portion of its
portfolio of loans.
9.11 Duplicate Originals. Two or more duplicate originals of this Agreement
may be signed by the parties, each of which shall be an original but all of
which together shall constitute one and the same instrument. This Agreement may
be executed in counterparts, all of which counterparts taken together shall
constitute one completed fully executed document.
9.12 Modification. No modification hereof or any agreement referred to
herein shall be binding or enforceable unless in writing and signed by Borrowers
and Lender.
9.13 Third Parties. No rights are intended to be created hereunder, or
under any related agreements or documents for the benefit of any third party
donee, creditor or incidental beneficiary of Borrowers. Nothing contained in
this Agreement shall be construed as a delegation to Lender of Borrowers' duty
of performance, including, without limitation, Borrowers' duties under any
account or contract with any other Person.
9.14 Waivers.
(a) Borrowers hereby consent and agree that Lender, at any time or
from time to time in its discretion may: (i) settle, compromise or grant
releases for liabilities of Borrowers, and/or any other Person or Persons liable
for any Obligations; (ii) following the occurrence of an Event of Default,
exchange, release, surrender, sell, subordinate or compromise any Collateral of
any party now or hereafter securing any of the Obligations; and (iii) following
an Event of Default, apply any and all payments received at any time against the
Obligations in any order as Lender may determine; all of the foregoing in such
manner and upon such terms as Lender may see fit, without notice to or further
consent from Borrowers who hereby agree and shall remain bound upon this
Agreement notwithstanding any such action on Lender's part.
(b) The liability of Borrowers hereunder is absolute and
unconditional and shall not be reduced, impaired or affected in any way by
reason of (i) any failure to obtain, retain or preserve, or the lack of prior
enforcement of, any rights against any Person or Persons, or in any Property,
(ii) the invalidity or unenforceability of any Obligations or rights in any
Collateral, (iii) any delay in making demand upon Borrowers or any delay in
enforcing, or any failure to enforce, any rights against Borrowers or in any
Collateral even if such rights are thereby lost, (iv) any failure, neglect or
omission to obtain, perfect or retain any lien upon, protect, exercise rights
against, or realize on, any Property of Borrowers, or any other party securing
the Obligations, (v) the existence or non-existence of any defenses which may be
available to the Borrowers with
58
respect to the Obligations, or (vi) the commencement of any bankruptcy,
reorganization, liquidation, dissolution or receivership proceeding or case
filed by or against any of Borrowers.
9.15 CONSENT TO JURISDICTION. BORROWERS AND LENDER HEREBY IRREVOCABLY
CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN THE STATE
OF NEW JERSEY IN ANY AND ALL ACTIONS AND PROCEEDINGS WHETHER ARISING HEREUNDER
OR UNDER ANY OTHER AGREEMENT OR UNDERTAKING. BORROWERS WAIVE ANY OBJECTION TO
IMPROPER VENUE AND FORUM NON-CONVENIENS TO PROCEEDINGS IN ANY SUCH COURT AND ALL
RIGHTS TO TRANSFER FOR ANY REASON. BORROWERS IRREVOCABLY AGREE TO SERVICE OF
PROCESS BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED TO THE ADDRESS OF THE
APPROPRIATE PARTY SET FORTH HEREIN.
9.16 WAIVER OF JURY TRIAL. BORROWERS AND LENDER HEREBY WAIVE ANY AND ALL
RIGHTS THEY MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION COMMENCED
BY OR AGAINST LENDER WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE PARTIES
HERETO OR UNDER THE LOAN DOCUMENTS, WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE.
9.17 Publication. Borrowers grant Lender the right to publish and/or
advertise information to the effect that this transaction has closed, which
information may include, without limit, (i) the names of Borrowers and Lender,
(ii) the size of the transaction and (iii) those items of information commonly
included within a "tombstone advertisement" of the type customarily published in
financial or business periodicals.
9.18 Discharge of Taxes, Borrowers' Obligations, Etc.. Lender, in its sole
discretion, shall have the right at any time, and from time to time, with prior
notice to Borrowers, if Borrowers fail to do so five (5) Business Days after
requested in writing to do so by Lender, to: (a) pay for the performance of any
of Borrowers' Obligations hereunder, and (b) discharge taxes or liens, at any
time levied or placed on any of Borrowers' Property in violation of this
Agreement unless Borrowers are in good faith with due diligence by appropriate
proceedings contesting such taxes or liens. Lender may, in its discretion, upon
five (5) Business Days' notice to Borrower Agent (unless an Event of Default
shall have occurred, in which case no such notice shall be required), fund an
Advance to pay Expenses hereunder. Lender shall have no obligation to make any
such payment or Advance, and such payments and Advances made by Lender shall not
be construed as a waiver by Lender of an Event of Default under this Agreement.
9.19 Injunctive Relief. The parties acknowledge and agree that, in the
event of a breach or threatened breach of Borrowers' Obligations hereunder,
Lender may have no adequate remedy in money damages and, accordingly, shall be
entitled to an injunction (including without limitation, a temporary restraining
order, preliminary injunction, writ of attachment, or order compelling an audit)
against such breach or threatened breach, including without limitation,
maintaining the cash management and collection procedure described herein.
However, no
59
specification in this Agreement of a specific legal or equitable remedy shall be
construed as a waiver or prohibition against any other legal or equitable
remedies in the event of a breach or threatened breach of any provision of this
Agreement.
9.20 Privacy of Patient Information. Lender acknowledges and agrees that
Borrowers may be required to adhere to certain restrictions and conditions
regarding the use and/or disclosure of the patient health information to which
Lender has access under this Agreement in order to comply with applicable
federal and state laws and/or regulations governing the security, integrity and
confidentiality of patient health information, including, but not limited to,
regulations, standards or rules promulgated under the Health Insurance
Portability and Accountability Act of 1996 ("HIPAA") (collectively, "Privacy
Laws"). In the event any Privacy Laws are interpreted by Borrowers to require,
or any Covered Entity (as defined under HIPAA) requires, the parties to amend
their business practices regarding the use and/or disclosure of patient health
information hereunder, Lender agrees, at Borrowers' sole cost and expense, to
take, or cause to be taken, all reasonable actions, and to do, or cause to be
done, all things reasonably necessary, proper or advisable under the Privacy
Laws to assure that the patient health information to which Lender has access
under this Agreement is used and disclosed solely as permitted under the Privacy
Laws, including but not limited to, amendment of this Agreement; provided,
however, that if Lender reasonably determines that any such compliance or action
would have a material adverse effect on the Collateral, the ability of Lender to
enforce its rights and remedies under this Agreement as a whole or Lender's
ability to monitor the Collateral to the extent required to enable the Lender to
make accurate determinations concerning the face amount, balance and Estimated
Net Value of Accounts, the extent to which Accounts constitute Eligible
Accounts, the extent to which Accounts constitute Defaulted Accounts, and the
amount of Collections in respect of Accounts, then Lender may, upon 180 days
prior notice, terminate the Credit Facilities and upon such termination
Borrowers shall immediately repay all outstanding Obligations. Lender
acknowledges and agrees that Borrowers shall not be obligated to pay a
Termination Fee in the event that the Credit Facility is terminated by Lender
under this Section 9.20.
9.21 Non-Profit Borrowers. Notwithstanding anything to the contrary
contained herein or in any of the other Loan Documents, so long as any
Non-Profit Borrower maintains its status as a not-for-profit entity qualified as
exempt from the payment of federal taxes under Section 501(a) of the Internal
Revenue Code, (i) the Obligations shall be non-recourse to such Non-Profit
Borrower except to the extent of the Collateral pledged and assigned by such
Non-Profit Borrower in favor of the Lender, and (ii) to the extent that any of
the terms or conditions of this Agreement or the other Loan Documents would, or
would require a Borrower to take or omit to take action that would, jeopardize
the status of any Non-Profit Borrower as a not-for-profit entity qualified as
exempt from the payment of federal taxes under Section 501(a) of the Internal
Revenue Code, such term or condition shall be deemed modified to the extent
necessary to protect such status.
9.22 Obligations Constitute Senior Debt. The Obligations are intended to be
classified as and shall constitute (i) "Senior Lender Obligations" under, and as
that term is defined in, the
60
Subordination Agreement of even date herewith, delivered by Harbinger Mezzanine
Partners, L.P., a Delaware limited partnership, and Petra Mezzanine Fund, L.P.,
a Delaware limited partnership, in favor of the Lender, and (ii) "Senior Debt"
under, and as that term is defined in, each of the junior subordinated
promissory notes referred to on Schedule 3 hereto.
[Signatures on the Following Pages]
61
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year first above written.
Borrowers:
THE PROVIDENCE SERVICE PROVIDENCE OF ARIZONA, INC.
CORPORATION, individually and as
Borrower Agent
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------- ---------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chairman/CEO Title: Chairman
PROVIDENCE SERVICE PROVIDENCE SERVICE
CORPORATION OF TEXAS CORPORATION OF OKLAHOMA
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------- ---------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chairman Title: Chairman
FAMILY PRESERVATION SERVICES, PROVIDENCE SERVICE
INC. CORPORATION OF MAINE
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------- ---------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chairman Title: Chairman
FAMILY PRESERVATION SERVICES FAMILY PRESERVATION SERVICES
OF FLORIDA, INC. OF NORTH CAROLINA, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------- ---------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chairman Title: Chairman
FAMILY PRESERVATION SERVICES CAMELOT CARE CORPORATION
OF WEST VIRGINIA, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chairman Title: Chairman
CAMELOT CARE CENTERS, INC. FAMILY PRESERVATION SERVICES
OF S.C., INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman Title: Secretary/Treasurer
CAMELOT COMMUNITY CARE, INC. CYPRESS MANAGEMENT SERVICES,
INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chairman Title: Chairman
INTERVENTION SERVICES, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chairman
Lender:
HEALTHCARE BUSINESS CREDIT
CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
SCHEDULE 1
Ineligible Obligors and Concentration Limits
SCHEDULE 2
Section
Disclosure Reference
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Borrowers' States of Qualifications 5.1
Chief Executive Offices/Places of Business 5.2
Additional Names 5.2
Provider Identification Numbers 5.3
Litigation Matters 5.4
Permitted Liens 5.6
Fiscal Year End 5.9
Tax I.D. Numbers 5.9
Guaranties, Investments and Borrowings 5.11
Joint Ventures, Partnerships and Subsidiaries 5.11
Environmental Matters 5.13
Capital Stock 5.14
Commercial Tort Claims 5.21
Letter of Credit Rights 5.22
Intellectual Property 5.23
Transactions with Affiliates or Subsidiaries 7.4
Guarantees 7.5
Indebtedness 7.6
SCHEDULE 3
Junior Subordinated Promissory Notes
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1. Convertible Promissory Note, dated March 25, 1999, issued by The Providence
Service Corporation, a Delaware corporation, to the order of Mr. ▇▇▇▇▇▇▇
▇▇▇▇▇▇, in the original principal amount of $457,500.00.
2. Convertible Promissory Note, dated March 25, 1999, issued by The Providence
Service Corporation, a Delaware corporation, to the order of ▇▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇, in the original principal amount of $50,000.00.
3. Convertible Promissory Note, dated March 25, 1999, issued by The Providence
Service Corporation, a Delaware corporation, to the order of ▇▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, in the original principal amount of $50,000.00.
4. Convertible Promissory Note, dated March 25, 1999, issued by The Providence
Service Corporation, a Delaware corporation, to the order of Ms. ▇▇▇▇▇
▇▇▇▇▇, in the original principal amount of $22,500.00.
5. Convertible Promissory Note, dated March 1, 2002, issued by The Providence
Service Corporation, a Delaware corporation, to the order of ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, in the original principal amount of $14,602.00.
6. Convertible Promissory Note, dated March 1, 2002, issued by The Providence
Service Corporation, a Delaware corporation, to the order of ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇, in the original principal amount of
$1,818,312.00.
7. Convertible Promissory Note, dated March 1, 2002, issued by The Providence
Service Corporation, a Delaware corporation, to the order of ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, in the original principal amount of $180,796.00.
8. Convertible Promissory Note, dated March 1, 2002, issued by The Providence
Service Corporation, a Delaware corporation, to the order of ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, in the original principal amount of $65,864.00.
9. Convertible Promissory Note, dated March 1, 2002, issued by The Providence
Service Corporation, a Delaware corporation, to the order of ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, in the original principal amount of $210,001.00.
10. Convertible Promissory Note, dated March 1, 2002, issued by The Providence
Service Corporation, a Delaware corporation, to the order of ▇▇▇▇▇ ▇▇▇▇▇▇▇
Family Trust, in the original principal amount of $65,864.00.
11. Convertible Promissory Note, dated March 1, 2002, issued by The Providence
Service Corporation, a Delaware corporation, to the order of ▇▇▇▇▇▇▇▇
Family Trust, in the
original principal amount of $131,249.00.
12. Convertible Promissory Note, dated March 1, 2002, issued by The Providence
Service Corporation, a Delaware corporation, to the order of ▇▇▇▇▇ ▇.
▇▇▇▇▇▇ Family Trust, in the original principal amount of $395,593.00.
13. Convertible Promissory Note, dated March 1, 2002, issued by The Providence
Service Corporation, a Delaware corporation, to the order of ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, in the original principal amount of 65,864.00.
14. Convertible Promissory Note, dated March 1, 2002, issued by The Providence
Service Corporation, a Delaware corporation, to the order of ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, in the original principal amount of $90,398.00.
15. Convertible Promissory Note, dated March 1, 2002, issued by The Providence
Service Corporation, a Delaware corporation, to the order of ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ Family Trust, in the original principal amount of $395,593.00.
16. Convertible Promissory Note, dated March 1, 2002, issued by The Providence
Service Corporation, a Delaware corporation, to the order of ▇▇▇▇ ▇.
▇▇▇▇▇▇▇, in the original principal amount of $65,864.00.
17. Promissory Note, of even date herewith, issued by The Providence Service
Corporation, a Delaware corporation, to the order of ▇▇▇ ▇▇▇▇▇▇▇, in the
original principal amount of $1,000,000.00.